BHP profit dives but beats expectations, dividend up, BHP Billiton has assured shareholders they will enjoy higher dividend yields as a result of the company's looming demerger, despite the process costing $US45 million in fees, taxes and costs.
BHP restated its commitment to demerge a group of non-core assets at its half-year profit results on Tuesday, where it posted a $US5.35 billion ($6.86 billion) underlying profit.
A collapse in iron ore and oil prices ensure the result was well below the $US7.8 billion half year profit posted in February 2014, but it was still better than the $US4.89 billion that a concensus of analysts were expecting.
Despite significant falls in the prices of our main commodities over the last six months, group margins remain healthy," said BHP chief executive Andrew Mackenzie.
The slumping commodity prices prompted some analysts, including those at RBC Capital Markets, to say the time was not right for the demerger, given the non-core assets were still produced reasonable profits.
The demerger will simplify the job of running BHP, but shareholders will effectively own the same assets they have always owned.
BHP paid a $US0.62 interim dividend on Tuesday morning, and told shareholders they would get effectively larger dividends under the demerger.
"Should the proposed demerger of South32 be approved, we do not plan to rebase our progressive dividend downwards, implying a higher underlying payout ratio," the company said in a statement.
"Following the demerger, BHP Billiton will maintain its progressive dividend policy, and any dividends from South32 will represent additional cash returns to shareholders."
Investment bank Goldman Sachs is the lead adviser on the demerger, and BHP said it would spend $US45 million on "professional fees", stamp duty, separation and establishment costs.
Other analysts, including those at Deutche Bank, believe BHP can easily cover its costs and dividend obligations if the demerger proceeds, while ratings agency Standard & Poors has said it expects no change to BHP's A+ credit rating after the demerger takes place.
BHP was able to claw back some of the damage caused by low commodity prices by cutting capital spending and exploration by 23 per cent, and the company plans to spend even less on those areas during the next six months.
BHP originally forecast that it would spend $US14 billion on capital and exploration spending during the 2015 financial year, but the company has today reduced that forecast to $US12.6 billion, and it will fall further in the 2016 financial year to $US10.8 billion.
One major factor in that reduction was January's changes to the US shale division, where rig numbers were cut by 40 per cent in response to the lower oil price.
BHP confirmed today that spending on the shale division would fall from $US4 billion this financial year to $US3.4 billion and then to $US2.2 billion in 2016.
But despite those cuts, BHP retained its full year petroleum production guidance at 255 million barrels of oil equivalent.
BHP wore $US328 million of non-cash charges against its petroleum division, including some against the Permian field in west Texas that has been largely idled under the shale cuts.
The miner also revealed it had not been able to sell the Fayetteville shale acreage in Arkansas, and so will keep the asset.
BHP has retained full year production guidance in all other commodity groups except copper, where full year guidance is "under review" in the wake of a six month outage at Olympic Dam. Copper guidance will be updated in March.
Net debt was suprisingly low at $US24.9 billion; more than $US2 billion below what many local analysts had expected.
Shareholders will get a $0.62 interim dividend, compared to the $US0.59 cent dividend in February 2014.
Shares in the miner last traded on the ASX at $32.12, after a year in which the share price rose as high as $39.68 and fell as low as $26.90.
BHP restated its commitment to demerge a group of non-core assets at its half-year profit results on Tuesday, where it posted a $US5.35 billion ($6.86 billion) underlying profit.
A collapse in iron ore and oil prices ensure the result was well below the $US7.8 billion half year profit posted in February 2014, but it was still better than the $US4.89 billion that a concensus of analysts were expecting.
Despite significant falls in the prices of our main commodities over the last six months, group margins remain healthy," said BHP chief executive Andrew Mackenzie.
The slumping commodity prices prompted some analysts, including those at RBC Capital Markets, to say the time was not right for the demerger, given the non-core assets were still produced reasonable profits.
The demerger will simplify the job of running BHP, but shareholders will effectively own the same assets they have always owned.
BHP paid a $US0.62 interim dividend on Tuesday morning, and told shareholders they would get effectively larger dividends under the demerger.
"Should the proposed demerger of South32 be approved, we do not plan to rebase our progressive dividend downwards, implying a higher underlying payout ratio," the company said in a statement.
"Following the demerger, BHP Billiton will maintain its progressive dividend policy, and any dividends from South32 will represent additional cash returns to shareholders."
Investment bank Goldman Sachs is the lead adviser on the demerger, and BHP said it would spend $US45 million on "professional fees", stamp duty, separation and establishment costs.
Other analysts, including those at Deutche Bank, believe BHP can easily cover its costs and dividend obligations if the demerger proceeds, while ratings agency Standard & Poors has said it expects no change to BHP's A+ credit rating after the demerger takes place.
BHP was able to claw back some of the damage caused by low commodity prices by cutting capital spending and exploration by 23 per cent, and the company plans to spend even less on those areas during the next six months.
BHP originally forecast that it would spend $US14 billion on capital and exploration spending during the 2015 financial year, but the company has today reduced that forecast to $US12.6 billion, and it will fall further in the 2016 financial year to $US10.8 billion.
One major factor in that reduction was January's changes to the US shale division, where rig numbers were cut by 40 per cent in response to the lower oil price.
BHP confirmed today that spending on the shale division would fall from $US4 billion this financial year to $US3.4 billion and then to $US2.2 billion in 2016.
But despite those cuts, BHP retained its full year petroleum production guidance at 255 million barrels of oil equivalent.
BHP wore $US328 million of non-cash charges against its petroleum division, including some against the Permian field in west Texas that has been largely idled under the shale cuts.
The miner also revealed it had not been able to sell the Fayetteville shale acreage in Arkansas, and so will keep the asset.
BHP has retained full year production guidance in all other commodity groups except copper, where full year guidance is "under review" in the wake of a six month outage at Olympic Dam. Copper guidance will be updated in March.
Net debt was suprisingly low at $US24.9 billion; more than $US2 billion below what many local analysts had expected.
Shareholders will get a $0.62 interim dividend, compared to the $US0.59 cent dividend in February 2014.
Shares in the miner last traded on the ASX at $32.12, after a year in which the share price rose as high as $39.68 and fell as low as $26.90.
