BHP Billiton (LON:BLT) has updated investors on its half-year performance this morning.
Highlights from the company statement:
· Despite improvements in our safety performance indicators, tragically there was a fatality at Escondida.
· Attributable profit of US$3.2 billion, Underlying EBITDA(1) of US$9.9 billion and an Underlying EBITDA margin(2) of 54% for the December 2016 half year.
· Productivity gains(3) of US$1.2 billion achieved for the period, including the benefit from the increase in estimated recoverable copper contained in the Escondida sulphide leach pad. We remain on track for US$1.8 billion of gains for the 2017 financial year, excluding any impact of industrial action at Escondida.
· Unit cash costs(4) declined at our major assets compared to the December 2015 half year. Full year unit cost guidance has been adjusted to reflect unfavourable exchange rate movements.
· Capital and exploration expenditure(5) decreased by 38% to US$2.7 billion. We now expect to invest US$5.6 billion in the 2017 financial year and US$6.3 billion in the 2018 financial year, reflecting an increase in exploration spend in both years following the successful bid for Trion in Mexico and positive drilling results at LeClerc and Caicos.
· Strong operating performance and improving capital productivity supported free cash flow(2) of US$5.8 billion.
· We strengthened our balance sheet, with net debt(2) of US$20.1 billion significantly reduced from US$26.1 billion at 30 June 2016 reflecting strong free cash flow generation and a favourable fair value adjustment of US$2.0 billion related to interest rate and exchange rate movements.
· The Board has determined to pay an interim dividend of 40 US cents per share which is covered by free cash flow. This comprises the minimum payout of 30 US cents per share and an additional amount of 10 US cents per share.
· Total copper production guidance for the 2017 financial year is under review as a result of ongoing industrial action at Escondida.
· At Samarco, substantial progress is being made on the social and environmental remediation programs. A Preliminary Agreement has been entered into with the Federal Prosecutors' Office. Restart of operations remains a focus but will only occur if it is safe, economically viable and has community support.
BHP Billiton Chief Executive Officer, Andrew Mackenzie, said: "This is a strong result that follows several years of a considered and deliberate approach to improve productivity and redesign our portfolio and operating model. Our steadfast commitment to this plan has positioned us to take full advantage in a period of higher prices with Underlying EBITDA up 65 per cent to US$9.9 billion.
The demerger of South32 and over US$7 billion of asset sales have shaped a portfolio that is now true to its strategy. Our assets are large, long-life and low-cost and provide exposure to a diverse mix of commodities with an attractive outlook. Our new operating model has sharpened the focus of our operations on the things that matter most: safety, volume and cost. A decline in unit costs at our major assets supported US$1.2 billion of productivity gains in the half, which follows the US$11 billion of annualised gains embedded over the last four years.
Greater productivity and increased capital efficiency supported strong free cash flow generation of US$5.8 billion. Strict adherence to our capital allocation framework has maximised the use of this cash. We have strengthened our balance sheet, with net debt falling sharply to close the period at US$20.1 billion. As we further strengthen the balance sheet our ability to invest counter-cyclically will only be enhanced. Our minimum 50 per cent dividend payout policy equates to 30 US cents per share. In recognition of the importance of shareholder returns and confidence in the Company's performance, the Board has determined to pay an additional amount of 10 US cents per share, taking the overall interim dividend to 40 US cents per share.
We are confident in the long-term outlook for our commodities, particularly oil, with markets expected to rebalance in the near-term, and copper where we expect a deficit to emerge in the early 2020s. We have the right settings in place to substantially grow shareholder value.