By David Stringer and James Paton Nov 24, 2014
Bloomberg
BHP Billiton Ltd. (BHP) reassured investors that billions of dollars of planned capital spending and cost cuts will help allow the world’s biggest miner to maintain dividends as iron ore and crude oil prices plunge.
Capital outlays will drop to $13 billion in fiscal 2016, down more than 40 percent from 2012, the company said today. BHP also increased its annual target for productivity gains by 2017 by $500 million.
“We are able to drive productivity both in capital and in our operations at a pace that we can more than counteract the impact of price and ensure that our dividend is covered,” Chief Executive Officer Andrew Mackenzie said today in an interview in Sydney. The dividend, its credit rating and select investments had priority over buybacks, he said.
The tumbling commodity markets meant investors were seeking assurances over dividend payments and the prospect for additional returns, Sydney-based UBS AG analyst Glyn Lawcock said before the briefing.
“They are having to really ramp up their productivity drive a lot faster than I believe they were willing to do,” Evan Lucas, markets strategist at IG Ltd. in Melbourne, said by phone. “They were already looking for a good amount of cost savings, so it shows how much pressure that price is having.”
Spending on projects and exploration will be trimmed to $14.2 billion in the 12 months to June, from a previous company estimate of $14.8 billion. The producer allocated $22.7 billion in fiscal 2012, according its 2012 annual report.
Efforts to lower costs in its iron ore unit have “barely scratched the surface,” Mackenzie told investors and analysts earlier today at a presentation in Sydney.
Biggest Miners
The biggest miners are trimming spending after a decade-long $623 billion investment spree was followed by asset writedowns and management clear-outs. Rio Tinto Group, the second biggest miner, is targeting a further $1 billion in savings by the end of next year, after stripping out $3.2 billion of expenses since 2012, it said in August.
BHP rose 3.8 percent to close at A$32.90 in Sydney, the most in almost three years, as Asian miners surged following China’s decision to cut interest rates for the first time since 2012.
“We always felt that certain interventions would come forward to maintain a decent level of growth in China, so this is pretty much along the lines that we predicted,” Mackenzie said in the interview. He wouldn’t be drawn on whether further rate cuts may be implemented.
The producer raised its full-year dividend for the 12 months through June by 4 percent to $1.21 a share, it said in an August filing. Over the past decade, BHP had returned a total of $64 billion to shareholders through dividends and buybacks, the company said in August.
Investment Assurances
“We will strike the right balance between investment in high-return opportunities and returning cash to shareholders,” Mackenzie said today in a statement.
Oil has dropped about 30 percent from a June peak as the U.S. pumps at the fastest rate in more than three decades, while iron ore is trading around five-year lows as BHP.
Each $1 dollar fall in the price of iron ore cuts net profit after tax by $135 million, while a similar fall in the oil price has a $50 million impact, according to filings.
“In almost any circumstances we can see, we are very comfortable and very confident in our ability to continue to meet that basic commitment we have to our shareholders,” Chief Financial Officer Peter Beaven told investors.
BHP will seek to continue to “run a strong balance sheet, to make sure that we selectively invest for good and importantly keep that progressive dividend intact,” he said.
Trimming Spending
Rio CEO Sam Walsh said in August that the world’s second-largest mining company is on its way to becoming a “cash machine” for investors as an 18-month cost-cutting drive starts to bear fruit.
Iron ore fell on Nov. 19 to the lowest level since June 2009 and has declined 48 percent this year as the biggest exporters, including BHP and Vale SA, have raised output just as demand from China has waned.
BHP said today it’s seeking to raise output at its copper unit, including at Escondida, the world’s biggest copper mine. Constraints on power and water supplies in several countries will probably lead to a significant supply deficit by 2018, the producer said.
Output at the Olympic Dam copper mine in South Australia will increase by about 50,000 metric tons a year in the 12 months through June 2018, it said in the statement.
Dean Dalle Valle, currently president of the coal division will switch roles with Mike Henry, HSE, Marketing and Technology President, next year, the company said.
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Bloomberg
BHP Billiton Ltd. (BHP) reassured investors that billions of dollars of planned capital spending and cost cuts will help allow the world’s biggest miner to maintain dividends as iron ore and crude oil prices plunge.
Capital outlays will drop to $13 billion in fiscal 2016, down more than 40 percent from 2012, the company said today. BHP also increased its annual target for productivity gains by 2017 by $500 million.
“We are able to drive productivity both in capital and in our operations at a pace that we can more than counteract the impact of price and ensure that our dividend is covered,” Chief Executive Officer Andrew Mackenzie said today in an interview in Sydney. The dividend, its credit rating and select investments had priority over buybacks, he said.
The tumbling commodity markets meant investors were seeking assurances over dividend payments and the prospect for additional returns, Sydney-based UBS AG analyst Glyn Lawcock said before the briefing.
“They are having to really ramp up their productivity drive a lot faster than I believe they were willing to do,” Evan Lucas, markets strategist at IG Ltd. in Melbourne, said by phone. “They were already looking for a good amount of cost savings, so it shows how much pressure that price is having.”
Spending on projects and exploration will be trimmed to $14.2 billion in the 12 months to June, from a previous company estimate of $14.8 billion. The producer allocated $22.7 billion in fiscal 2012, according its 2012 annual report.
Efforts to lower costs in its iron ore unit have “barely scratched the surface,” Mackenzie told investors and analysts earlier today at a presentation in Sydney.
Biggest Miners
The biggest miners are trimming spending after a decade-long $623 billion investment spree was followed by asset writedowns and management clear-outs. Rio Tinto Group, the second biggest miner, is targeting a further $1 billion in savings by the end of next year, after stripping out $3.2 billion of expenses since 2012, it said in August.
BHP rose 3.8 percent to close at A$32.90 in Sydney, the most in almost three years, as Asian miners surged following China’s decision to cut interest rates for the first time since 2012.
“We always felt that certain interventions would come forward to maintain a decent level of growth in China, so this is pretty much along the lines that we predicted,” Mackenzie said in the interview. He wouldn’t be drawn on whether further rate cuts may be implemented.
The producer raised its full-year dividend for the 12 months through June by 4 percent to $1.21 a share, it said in an August filing. Over the past decade, BHP had returned a total of $64 billion to shareholders through dividends and buybacks, the company said in August.
Investment Assurances
“We will strike the right balance between investment in high-return opportunities and returning cash to shareholders,” Mackenzie said today in a statement.
Oil has dropped about 30 percent from a June peak as the U.S. pumps at the fastest rate in more than three decades, while iron ore is trading around five-year lows as BHP.
Each $1 dollar fall in the price of iron ore cuts net profit after tax by $135 million, while a similar fall in the oil price has a $50 million impact, according to filings.
“In almost any circumstances we can see, we are very comfortable and very confident in our ability to continue to meet that basic commitment we have to our shareholders,” Chief Financial Officer Peter Beaven told investors.
BHP will seek to continue to “run a strong balance sheet, to make sure that we selectively invest for good and importantly keep that progressive dividend intact,” he said.
Trimming Spending
Rio CEO Sam Walsh said in August that the world’s second-largest mining company is on its way to becoming a “cash machine” for investors as an 18-month cost-cutting drive starts to bear fruit.
Iron ore fell on Nov. 19 to the lowest level since June 2009 and has declined 48 percent this year as the biggest exporters, including BHP and Vale SA, have raised output just as demand from China has waned.
BHP said today it’s seeking to raise output at its copper unit, including at Escondida, the world’s biggest copper mine. Constraints on power and water supplies in several countries will probably lead to a significant supply deficit by 2018, the producer said.
Output at the Olympic Dam copper mine in South Australia will increase by about 50,000 metric tons a year in the 12 months through June 2018, it said in the statement.
Dean Dalle Valle, currently president of the coal division will switch roles with Mike Henry, HSE, Marketing and Technology President, next year, the company said.
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