Concerns over rising costs and the impact of trade tensions between the United States and China weighed on shares of leading miner BHP on Tuesday after a 33 per cent jump in annual underlying profit still missed forecasts.
But the miner paid a record final dividend and said it expected to hand more money to shareholders on completion of a sale of US shale assets to oil major BP.
Other miners, which have recovered from the commodity price crash of 2015-2016, have been handing back chunks of money to shareholders, under pressure not to repeat the reckless purchases of the commodity boom, but also because of the difficulty of finding suitable opportunities for growth.
Many miners are also struggling to make themselves an attractive prospect to investors concerned about sustainability and climate change.
In 2017 BHP came under pressure for change from activist investor Elliott Advisors, which listed a series of demands to raise shareholder returns, including selling off unprofitable shale assets. Elliott on Tuesday declined to comment.
BHP, which said it was seeking reform of its own accord, in July announced BP would buy US shale oil and gas assets from it for $10.5 billion.
The miner said it would make a decision on how to return profits from the sale to investors once the deal was finalised.
Portfolio manager Andy Forster of Argo Investments in Melbourne said Tuesday’s results were solid and the dividend stronger than he had expected.
But the cut in productivity gains expected in the 2019 fiscal year – to $1 billion from a previously promised $2 billion – “slightly took the gloss off the results”, he said, although the miner pledged to make additional savings in 2020.
Outlook
BHP’s share price in London fell more than 2 per cent before recovering slightly to stand 1 per cent lower, while the broader mining index was up 0.03 percent.
BHP chief executive Andrew Mackenzie, meanwhile, said the company was “a little more apprehensive” on the short-term outlook, given trade relations between China and the United States.
Escalating tensions between China, the biggest commodity consumer, and the US have spooked metals markets and raised the prospect of reduced Chinese demand. Copper prices on the London Metal Exchange have fallen about 18 per cent from a four-year high touched on June 7th.
BMO Capital Markets, which rates BHP “market perform” said the results were “a touch light” versus estimates and flagged rising costs. – Bloomberg
