Mining giant BHP pays record dividend, but flags global growth headwinds
* Announces 78 cents a share dividend, or $3.9 billion
* Returns come from shale sale, iron ore price windfall
* Profit hits $9.12 bln, just under Vuma consensus of $9.42
* But flags headwinds to global economy such as Sino-U.S
(Adds fund manager comment, further detail)
By Melanie Burton
MELBOURNE, Aug 20 (Reuters) - BHP Group posted its largest
annual profit in five years and record full-year dividends, but
its share price eased as the world's biggest miner flagged
global economic headwinds that could hit demand for its key
commodities, iron ore and copper.
Both profit and dividends slightly undershot expectations as
BHP kept cash in its coffers in the face of risks to
global economic growth such as the Sino-U.S. trade war and as
costs rise at some of its operations.
BHP shares edged down 0.4 cents to A$36.10 ($24.43) on
Tuesday, while the broader Australian market was up slightly
"As a BHP shareholder you can't be too disappointed. It's
been a great year for the company, they have made a lot of
money," said Brenton Saunders of Pendal Group in Sydney, a fund
management firm that holds shares in the miner.
"That's in a large part a function of commodity markets and
less so a function of the specifics of managing and running a
business like this."
BHP on Tuesday announced a 78 cent dividend, meaning that
it will hand back $3.9 billion to investors in addition to $17
billion already announced for the financial year that ended in
That stemmed from the sale of its shale gas business and was
helped by surging iron ore prices following supply outages in
Brazil and Australia.
"Most people were thinking around this level on dividends,
but a lack of any additional returns may disappoint some," said
analyst Glyn Lawcock at UBS in Sydney.
While the trade dispute between Washington and Beijing has
dampened global economic growth, it has not yet affected Chinese
demand for BHP's commodities such as iron ore, copper and coal,
said Chief Executive Andrew Mackenzie.
"There's obviously been a slight cooling in appetite based
on some of the concerns we have seen in the short-term for the
global economy. We are not without some consideration as to what
might be around the corner," he said, in reference to BHP's lack
of special dividend.
Reports of stimulus efforts in China and Germany calmed
fears of a severe downturn in the global economy on Tuesday that
were stoked last week as bond yields fell.
Mackenzie is six years into the top job at BHP and is
expected to step down in the next year, leaving the next
management team with a number of challenges.
He said he did not expect Chinese steel demand to grow next
year given already robust infrastructure spending and softening
economic signals from developed economies.
He also cited rising cost pressures, which were seen in
petroleum as well as BHP's Queensland coal division where costs
rose by 2% over the financial year partly due to wet weather.
"We believe capital returns from BHP have peaked for this
cycle due to rising costs, gradually rising capex, lower
realised prices, and a lack of proceeds from asset sales," said
Jefferies, which recently downgraded BHP to hold, in a report.
Iron ore prices have tumbled this month as global supply has
normalised, after outages and strong Chinese appetite for the
steelmaking raw material caused the Dalian iron benchmark to
more than double in the first-half of 2019.
Mackenzie also said that BHP had its thermal coal operations
under review. There has been some speculation in markets that
the company could look to sell these operations.
Underlying profit for the 12 months ended June 30 rose to
$9.12 billion from $8.93 billion a year earlier, but still
undershot expectations of $9.4 billion from a Vuma consensus of
Underlying profit is a measure of the company's core
performance excluding one-time gains and losses.
But the company recorded $1 billion in productivity losses
for fiscal 2019 on disruptions to production at its copper and
iron ore operations.
($1 = 1.4775 Australian dollars)
(Reporting Melanie Burton in Melbourne; Additional reporting by
Rushil Dutta in Bengaluru; Editing by Shounak Dasgupta, Bernard
Orr and Joseph Radford)
First Published: 2019-08-20 00:29:15
Updated 2019-08-20 05:38:25
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