BHP’s results important for ASX miners

Published at Feb 24, 2016, in Features

Today’s release of BHP’s half year results is a somewhat important event for ASX listed miners, given that BHP two largest commodities have been significant price pressure, and that as one of the largest and lowest cost producers, its results are something of a bell-weather for the performance of listed companies in the Materials and Energy sectors.

Sam Green advisor at Options Educator, Traders Circle reports.

Of the headline numbers, revenue was down 37%, to $US15,712M, and the profit fell 233% to a $US5,669M loss. As a result, BHP cut their dividend to $US0.16, from $US0.62 for the prior period; a reduction of almost 75%.

Whilst this result appears poor, it is worth noting that the loss figure includes exceptional impairment and loss items. These include $US6,132M of exceptional losses, comprised primarily of impairment to US based oil projects ($US4,884M) and losses associated with the Samarco dam failure (US$858M). The underlying profit for BHP (excluding these exceptional loss items) came in at $US415M.

Other highlights include a 20% cost reduction per tonne of iron ore extracted (now a cost of $US15 per tonne). With reductions across the cost of production of most of BHP’s commodities:

These cost reductions helped to partially offset dramatic falls in realised prices for BHP’s commodity sales:

The Copper and Iron Ore divisions were the best performers, showing underlying profits despite large price reductions, whilst the Coal and Petroleum division were the worst performers, showing large underlying losses, even before the large asset impairments.

If BHP’s results can be extrapolated to the rest of the market, they would indicate that low cost iron ore and copper producers may be good buys at the current level. And of the energy producers, those with more of a natural gas focus are probably the best picks.

The other thing that BHP’s results highlight is the strength of Rio Tinto’s report from 10 days earlier, which showed underlying profits (totalling $US4,540M) across all of their major dividsions. They also held their dividend unchanged from the prior year.

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