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BHP Boosts Payout On Commodities Surge

22 February 2017

BHP Billiton (BHP +1.1%) is higher after reporting a $3.2B net profit for H2 2016 after posting a $5.7B loss in the year-ago period, with H2 revenues rising 20% Y/Y to $18.8B and EBITDA soaring 60% to $9.9B.

An underlying profit of US$3.14 billion is the median of six analyst forecasts compiled by The Wall Street Journal.

A resurgent BHP Billiton has made almost three times as much profit in the December half as it made in the entire 2015-16 year, rewarding investors with a dividend that was more than 30 per cent higher than analysts had expected. Directors lifted the half-year payout to 40 USA cents a share from 16 cents this time previous year, beating market expectations.

What a difference a year has made for the world's biggest miner.

Billiton Ltd. swung back to a profit and more than doubled its half-year dividend, even as it warned of heightened economic uncertainty in the near term.

"Clearly they're reasonably confident on where iron ore prices are at the moment".

The share price of BHP Billiton Limited (NYSE:BHP) was up +0.62% during the last trading session, with a day high of 40.60.

The latest results included charges of $40 million, while prior year's exceptional charges were $6.13 billion, mainly on impairment of Onshore US assets and Samarco dam failure. The Iron Ore segment is engaged in mining of iron ore. The labour action forced the company to declare force majeure at the operation earlier this month.

The price of some commodities has risen, in part because of increased demand from China.

The improved results reflect a resurgence in commodity prices, especially iron ore, coal and copper, and the company's recovery following write offs linked to its expansion into USA shale oil and gas and the Samarco disaster in Brazil.

"Iron ore prices have been highly volatile, starting the 2016 calendar year at low levels before recovering strongly in the Chinese spring".

Similarly, developments in China could pressure coal prices. In fact coal prices have fallen steeply from their peaks of close to $US300 a tonne for hard coking coal to under $US200 a tonne, while thermal coal prices are also weaker as China allows its mines to produce more coal during the winter. Total copper production decreased 7 percent, while total iron ore production increased 4 percent. "We expect emerging markets such as India will provide long-term seaborne demand growth, while high-quality metallurgical coals will continue to offer steel makers value-in-use benefits". The company had Year Ago Sales of 30.91 Billion.

Unsurprisingly, the petroleum division saw a decline, dropping to $US2 billion from $US2.2 billion, due to the decision earlier to curtail production in the United States amid weak prices.