Profit at world’s biggest miner BHP jump, but warns on costs, savings

BHP’s revenue from copper surged by nearly 60 percent backed by higher production from its Escondida mine in Chile, above. (Reuters)
Updated 21 August 2018
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Profit at world’s biggest miner BHP jump, but warns on costs, savings

  • The world’s biggest miner said it expected its strong momentum to continue into the medium term
  • BHP paid out a record final dividend of $0.63 a share, up from $0.43 a year ago, on the back of free cashflow of $12.5 billion
MELBOURNE: Global miner BHP posted a 33 percent jump in annual underlying profit and a record final dividend on Tuesday, but flagged a delay in future savings as well as cost pressures at some of its operations.
The world’s biggest miner, which has been focusing on simplifying its business and driving returns to shareholders, said it expected its strong momentum to continue into the medium term.
However, BHP Chief Executive Andrew Mackenzie said the miner was “a little more apprehensive” on the short-term outlook, given trade ructions between China and the United States, and analysts flagged concerns over rising costs.
For the year ended June 30, underlying profit, which excludes one-time gains and losses, rose to $8.93 billion from $6.73 billion, just below an estimate of $9.27 billion according to 15 analysts polled by Thomson Reuters.
BHP paid out a record final dividend of $0.63 a share, up from $0.43 a year ago, on the back of free cashflow of $12.5 billion from a strong operating performance and higher commodity prices. “A pretty solid result really. I think largely in line with what the market expected,” said portfolio manager Andy Forster of Argo Investments in Melbourne. “Definitely the cash flow was strong, the dividend probably a bit stronger than what we expected.”
However, a cut in productivity gains expected in fiscal 2019 — to $1 billion from a previously promised $2 billion — “slightly took the gloss off the results,” he added, although the miner pledged to make the additional savings in 2020.
BHP also noted some cost creep due to geotechnical issues at its Queensland coal operations, rising fuel costs, and pockets of inflation in labor.
“The dividend was better than expected, but the slight fiscal 2018 (earnings) miss and fiscal 2019 cost guidance is likely to cause us to take down estimates modestly,” broker Clarkson Platou said in a report
Shares in BHP fell 1.8 percent in afternoon trading, compared with a 1 percent fall in the broader Australian market and a 0.8 percent dip in rival Rio Tinto.
Including one-time charges, BHP’s profit fell 37 percent to $3.71 billion.
These included a $2.8 billion post-tax charge from the sale of BHP’s US shale oil and gas assets in July which ended a disastrous seven-year foray into shale.
BHP said that it would not make a decision on how to return profits from the sale to investors until it was finalized.
The company also took a $650 million charge for the 2015 Samarco dam failure in Brazil that killed 19 people.
Total revenue rose 20 percent to $45.81 billion. Revenue from iron ore mining, BHP’s biggest division, edged up 1.3 percent, while copper surged by nearly 60 percent backed by higher production from its Escondida mine in Chile.
Revenue from its petroleum division grew 14.5 percent on surging oil prices.
BHP said it cut net debt to $10.9 billion, at the lower end of its $10-15 billion target.


Dubai property developer Damac on hunt for land in Saudi Arabia

Hussain Sajwani
Updated 18 March 2019
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Dubai property developer Damac on hunt for land in Saudi Arabia

  • Brexit a “concern” for UK property market says Sajwani
  • Developer mulls investing “up to £500 million” on London project

LONDON: The Dubai-listed developer Damac says it is scouting for additional plots of land in Saudi Arabia, both in established cities and the Kingdom’s emerging giga-projects such as Neom.
Hussain Sajwani, chairman of Damac Properties, also said the company would look to invest up to £500 million ($660 million) on a second development in the UK, and that it is on track to deliver a record 7,000 or more units this year.
Amid a slowing property market in Dubai, Damac’s base, the developer is eying Saudi Arabia as a potential ground for expansion for its high-spec residential projects.
Damac has one development in Jeddah, and a twin-tower project in Riyadh — and Sajwani said it is looking for additional plots in the Kingdom.
“It’s a big market. It is changing, it is opening up, so we see a potential there … We are looking,” he said.
“In the Middle East, Saudi Arabia is the biggest economy … They have some very ambitious projects, like the Neom city and other large projects. We’re watching those and studying them very carefully.”
The $500 billion Neom project, which was announced in 2017, is set to be a huge economic zone with residential, commercial and tourist facilities on the Red Sea coast.
Sajwani said doing business in Saudi Arabia was “a bit more difficult or complicated” that the UAE, but said the country is opening up, citing moves to allow women to drive and reopen cinemas.
He was speaking to Arab News in Damac’s London sales office, opposite the Harrods department store in Knightsbridge. The office, kitted out in plush Versace furnishings, is selling units at Damac’s first development in the UK, the Damac Tower Nine Elms London.
The 50-storey development is in a new urban district south of the River Thames, which is also home to the US Embassy and the famous Battersea Power Station, which is being redeveloped as a residential and commercial property.
Work on Damac's tower is underway and is due to complete in late 2020 or early 2021, Sajwani said.
“We have sold more than 60 percent of the project,” he said. “It’s very mixed, we have (buyers) from the UK, from Asia, the Middle East.”
Damac’s first London project was launched in 2015, the year before the referendum on the UK exiting the EU — the result of which has had a knock-on effect on the London property market.
“Definitely Brexit has cause a lot of concern, people are not clear where the situation will go. Overall, the market has suffered because of Brexit,” Sajwani said.
“It’s going to be difficult for the coming two years at least … unless (the UK decides) to stay in the EU.”
Despite the ongoing uncertainty over Brexit, Sajwani said Damac was looking for additional plots of land in London, both in the “golden triangle” — the pricey areas of Mayfair, Belgravia and Knightsbridge, which are popular with Gulf investors — and new residential districts like Nine Elms.
Sajwani is considering an investment of “up to £500 million” on a new project in the UK capital.
“We are looking aggressively, and spending a lot of time … finding other opportunities,” he said. “Our appetite for London is there.”
Damac is also considering other international property markets for expansion, including parts of Europe and North American cities like Toronto, Boston, New York and Miami, Sajwani said.
The international drive by Damac comes, however, amid a tough property market in the developer’s home market of Dubai.
Damac in February reported that its 2018 profits fell by nearly 60 percent, with its fourth-quarter profit tumbling by 87 percent, according to Reuters calculations.
Sajwani — whose company attracted headlines for its partnership with the Trump Organization for two golf courses in Dubai — does not see any immediate recovery in the emirate’s property market, or Damac’s financial results.
“(With) the market being soft, prices being under pressure, we are part of the market — we are not going to do better than last year,” he said. “This year and next year are going to be difficult years. But it’s a great opportunity for the buyers.”
But the developer said Dubai was “very strong fundamentally,” citing factors like its advanced infrastructure, safety and security, and low taxes.
In 2018, Damac delivered over 4,100 units — a record for the company — and this year, despite the difficult market, it plans to hand over even more.
“We’re expecting north of 7,000,” Sajwani said. “This year will be another record.”