BHP Billiton Plc (LON:BLT) chief executive Andrew Mackenzie urged investors to remain calm despite the dramatic slump in company profits and the discontinuation of the progressive dividend policy, which has been a cornerstone of BHP’s investor offering for more than two decades.
"Hang on in there would be my message. We have done an awful lot of work to allow ourselves to survive and prosper in current conditions," Mr Mackenzie told the ABC's AM program, adding that BHP is “incredibly well run” and “very competitive”.
Mackenzie argued that the mining boom is over and the world has to adjust to a “new era” of lower commodity prices and “less spectacular” growth.
Conceding that he does not know if the worst was over, Mackenzie noted that BHP is ready for “a period where prices will be low for a prolonged period and quite volatile”.
Significantly, he said the company’s new payout ratio policy, which replaced the progressive dividend policy that has been in place since the creation of the company in 2001, is part of the answer to the commodity slump and could potentially last longer than the progressive one.
"This new era demands a change of policy and a policy that will endure for at least as long as the progressive dividend policy has endured and possibly a lot longer, and I think now is the right time to change," he said.
BHP ditched its progressive dividend and cut the interim payout to 16p from 62p. The company plans to pay out 50 percent of underlying attributable profit as dividend from now on, though it also flagged potential for special dividends and other irregular returns to shareholders.
The size of the dividend cut was larger than most analysts had expected, but Pengana Capital resources fund manager Tim Schroeders said he believed it was the right move.
"I think it is actually very prudent, it is better than to be in the same position in six to 12 months’ time if they have not done enough. I think it's a positive that they have taken a hard decision," Schroeders said as quoted by The Sydney Morning Herald.
BHP’s share price was well on the downside following the interim results from yesterday, with the stock closing six percent down in London at 746.90p. Shares closed today’s session in Sydney 8.22 percent in the red.