SYDNEY: Higher commodity prices helped global mining giant BHP report a first-half net profit of US$2.02 billion on Tuesday, but the result was weighed down by a hefty charge from US tax reforms.
The result for the six months to December 31 was 37 percent lower than the US$3.20 billion recorded in the previous corresponding period.
BHP announced last week it would recognise a US$1.8 billion charge from US tax reforms, although the miner said the lower corporate tax rate would have a positive impact on its American profits in the long-term.
“Higher commodity prices and a solid operating performance delivered free cash flow of US$4.9 billion,” BHP chief executive Andrew Mackenzie said in a statement.
“We used this cash to further reduce net debt and increase returns to shareholders through higher dividends… We remain firm in our resolve to maximise cash flow, maintain discipline and increase shareholder value and returns.”
Underlying profit, a measure preferred by the world’s largest miner, was US$4.05 billion, a 25 percent jump from the prior period, but below analysts’ expectations.
BHP declared a 55 US cents dividend per share, up from 40 cents previously.
“It’s not a good result,” Fat Prophets resources analyst David Lennox told AFP, adding that BHP had lost about US$800 million in cost savings in their operations for the period.
“I believe where the market has got caught is their costs across two of their divisions — petroleum and copper — are higher than the market would have expected.
“The market is so used to BHP saving on its cost structures that a US$800 million turnaround is something that wasn’t expected.”
The Anglo-Australian firm knocked back a renewed demand from New York-based Elliott Advisors, a significant shareholder, for it to dissolve its dual-listed structure.
Elliott said in early February that BHP would reap US$22 billion in value for shareholders if it restructures into one Australian entity and scraps its dual-listing.
But the miner said in its profit report that the “costs and risks of collapsing the DLC (dual-listed company) outweigh the potential benefits”.
“We have considered unification of the DLC structure a number of times over the past years, and will keep it under review,” BHP added.
The company recorded a charge of US$210 million from the fatal Samarco mine collapse in Brazil in 2015, a tragedy that left 19 people dead in one of the South American nation’s worst environmental disasters.
It said “significant progress” was being made on social and environmental recovery programs after the dam failure at Samarco, which is co-owned with Brazil’s Vale.
A plan announced last August to sell BHP’s US shale assets was progressing, the miner added, with initial bids expected to be received in the June quarter.
BHP spent US$20 billion in 2011 on US shale oil and gas assets, but the sector later experienced a fall in prices, hammering profits and prompting the company to announce plans to exit the business.
Shares in BHP closed 0.41 percent lower at Aus$31.30 in Sydney ahead of the results announcement.