BHP Billiton Returns to Profit, but Cautions Against Growing Protectionism -- Update
February 21 2017 - 5:55AM
Dow Jones News
By Rhiannon Hoyle
SYDNEY-- BHP Billiton Ltd. swung back to a profit and more than
doubled its half-year dividend, even as it warned of heightened
economic uncertainty in the near term.
The world's largest mining company by market value said the
threat of rising protectionism risks derailing a recovery in global
commodity markets that has pulled the resources industry out of one
of the deepest downturns in decades.
In particular, BHP said the policy platform of President Donald
Trump's administration could spark trade wars that weigh on
business confidence, hurt investment and lead to higher inflation
in the U.S. BHP's remarks are stronger than recent statements of
other mining executives, some of whom have hailed Mr. Trump's
policies as mining-friendly.
BHP and rivals including Rio Tinto PLC have rebuilt their
profits on selling commodities like iron ore that form the backbone
of infrastructure from highways to high-rise apartment blocks. They
have also invested more in copper, anticipating that rising incomes
in China and elsewhere will spur demand for a commodity used in
consumer products such as saucepans and iPads.
On Tuesday, BHP reported a net profit of US$3.20 billion for the
six months through December, compared with a loss of US$5.67
billion in the same period a year earlier when its bottom line was
weighed by large write-downs against its U.S. energy assets.
Directors lifted the half-year payout to 40 U.S. cents a share from
16 cents this time last year, beating market expectations.
However, BHP Chief Executive Andrew Mackenzie was wary of the
protectionist rhetoric coming from the White House, even though a
separate campaign pledge by Mr. Trump to unlock US$1 trillion in
infrastructure spending could be good for commodity demand.
"Whilst there may be some short-term winners from some policies
of protection and increased trade wars, most of us will be losers,
and certainly the future demand for our products could potentially
suffer if that were to spread," Mr. Mackenzie said.
Mr. Trump has criticized the trade policy of previous presidents
and blamed prior trade deals for job losses. One of his first
actions as president was to withdraw formally from the 12-nation
Pacific trade agreement that had been a flagship policy of the
former Obama administration.
Mr. Trump has singled out China for criticism, accusing it of
keeping its currency artificially weak to support local
manufacturers. BHP said China's exports could be challenged by
rising protectionism, which would be a problem for mining companies
as Beijing is the top buyer of many commodities including iron
ore.
Mark Cutifani, chief executive of London mining giant Anglo
American PLC, has cautioned Mr. Trump against pushing the world
toward protectionism. Anglo reported on Tuesday that it had
returned to profit in 2016.
BHP said it expects global growth to remain between 3% and 3.5%
in 2017--with any improvement beyond that level delayed by what Mr.
Mackenzie described as "quite a marked rise in geopolitical
uncertainty or forecastability."
Mr. Mackenzie said it is too early to comment on how White House
policy may affect its investments in the U.S.
BHP's U.S. business centers on oil-and-gas assets, though, that
are quicker to ramp up and down than mining operations, he said.
"We can respond relatively quickly when the policy outlook is a
little bit clearer," Mr. Mackenzie said.
He and BHP Chairman Jac Nasser met with Mr. Trump, then
President-elect, in January, during which they discussed the impact
the U.S. policy direction could have on resources markets, Mr.
Mackenzie said.
He said he also pressed the importance of the international
climate-change agreement reached in Paris, which BHP supports,
although he declined to comment on Mr. Trump's responses in the
meeting.
In contrast to the hawkish U.S. trade policy adopted by Mr.
Trump, Asian governments were moving toward increasingly liberal
trade regimes, which could be positive for resources demand in many
key markets.
BHP's underlying profit--which strips out one-off
items--increased to US$3.24 billion in its fiscal first half from
US$412 million a year earlier, as it rode the recovery in global
commodity markets. The price of iron ore roughly doubled last year
from a more than decade low, while commodities including coal and
copper also rose.
Mr. Mackenzie said BHP is confident in the long-term outlook for
the commodities it produces, particularly oil. Still, the mining
company promised to satisfy yield-hungry investors rather than
chase expensive acquisitions.
"We were very keen to signal to our shareholders our commitment
to strong cash returns," Mr. Mackenzie said.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
(END) Dow Jones Newswires
February 21, 2017 05:40 ET (10:40 GMT)
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