BHP BHP Group Limited

By Rhiannon Hoyle 

SYDNEY-- BHP Billiton Ltd. said fiscal-year net profit fell 37% because of one-time charges, but the world's biggest miner by market value recorded a 33% rise in underlying profit and a record final dividend, aided by higher prices and production for most of its commodities.

The result from BHP on Tuesday caps a mainly positive earnings season from the world's top mining companies, which are showering investors with billions of dollars after a turnaround in commodity prices and an industrywide campaign to cut costs and work mines harder. For BHP, a big shipper of iron ore, oil, copper and coal, it was the best underlying profit since 2014.

"We will build momentum in 2019 and beyond," said Chief Executive Andrew Mackenzie. "There's a good chance a significant amount of that cash will now find its way back into shareholders' pockets."

BHP reported a net profit of US$3.71 billion for the year through June, down from US$5.89 billion in the 12 months prior. Weighing on the company's bottom line were US$5.2 billion in impairment charges, mainly tied to the company's U.S. onshore oil-and-gas assets, which it has struck deals to sell.

But stripping out one-time charges, underlying attributable profit increased to US$8.93 billion, or US$9.62 billion from continuing operations.

Directors declared a final dividend of 63 U.S. cents a share, taking BHP's full-year payout to US$1.18 a share, up from 83 cents the year before.

In July, BHP said BP PLC would buy the bulk of its U.S. onshore oil-and-gas unit for US$10.5 billion, while it also penned a separate US$300 million agreement to sell its Fayetteville shale business in Arkansas to closely held Merit Energy Co. The company says it will also use that cash for dividends or share buy backs once the deals are completed in October.

BHP's top ranks didn't deem a buy back a sensible way to spend last year's earnings, Chief Financial Officer Peter Beaven told analysts. "The $10 billion is a different kettle of fish," said Mr. Beaven, referring to proceeds from the U.S. onshore business sale.

BHP isn't alone in lifting returns to investors. Rio Tinto PLC earlier this month pledged US$7.2 billion in shareholder returns, including a record interim dividend.

Iron-ore giant Vale SA, after also reporting a jump in first-half underlying earnings, said it would give shareholders $2.1 billion in dividends and buy back $1 billion worth of shares.

Like its rivals, BHP has been enjoying tailwinds from stronger commodity prices. Average prices for its oil, copper and steelmaking coal were up 26%, 23% and 9%, respectively. Iron ore prices were slightly weaker during the 12-month period, down 3%.

The company has also been producing more. Full-year output of copper jumped 32%, while production of iron ore was 3% higher and steelmaking coal was up 7%. Its petroleum division was the outlier, with an 8% fall in output.

The industry has been facing pressure from cost inflation, however, including rising bills for energy and other necessities.

BHP has also stumbled in meeting its productivity targets, effectively halving its goal for this fiscal year, partly tied to setbacks at its Australian coal operations. "We have consistently said productivity gains would be lumpy," said Mr. Beaven.

Shares were down 1% intraday in Sydney, alongside a broader fall in mining stocks.

BHP joined the chorus of miners cautioning that a deepening trade conflict between the U.S. and China is an increasing risk to global growth.

While Chinese and U.S. negotiators are mapping out talks to try to end their trade standoff, Mr. Mackenzie said he was apprehensive about the short-term outlook.

"Things are so volatile, I am not going to take that to the bank," he said.

The miner also forecast China's growth to slow modestly in 2018. Commodity producers face challenges from an easing economy in China, the top buyer of a lot of natural resources, where spending on fixed assets such as factory machinery has fallen to its lowest in nearly two decades.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

(END) Dow Jones Newswires

August 20, 2018 21:46 ET (01:46 GMT)

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