BHP Billiton Reports 86.2-percent Drop in After-tax Net Profit

BHP Billiton Ltd. (ASX:BHP,LSE:BLT,NYSE:BHP) released its results for the year ended June 30, 2015, commenting that its after-tax profit fell 86.2 percent, to US$1.91 billion.
Other key points from the release include:

• Underlying EBITDA of US$21.9 billion and an Underlying EBITDA margin of 50% for the 2015 financial year demonstrate the quality of our portfolio and its resilience in challenging markets. Underlying EBIT declined by 46% to US$11.9 billion.
• Our focus on best-in-class performance delivered productivity gains of US$4.1 billion, two years ahead of target. We expect further cost reductions in the 2016 financial year across all businesses.
• Capital and exploration expenditure decreased by 24% to US$11.0 billion in the period and is expected to decline to US$8.5 billion in the 2016 financial year and US$7.0 billion in the 2017 financial year.
• Improved operating and capital productivity combined with the flexibility of our investment program supported free cash flow of US$6.3 billion.
• We maintained our solid A credit rating and finished the period with net debt of US$24.4 billion, a decline of US$1.4 billion.
• Our commitment to the progressive dividend is unchanged. Our full-year dividend increased by 2% to 124 US cents per share.

Andrew Mackenzie, CEO of BHP, commented:

The success of our productivity initiatives generated strong cash flow which supported our dividend commitment, funded continued investment in growth and enabled a reduction in net debt, despite the dramatic fall in commodity prices. And while we recorded a sector-leading EBITDA margin of 50 per cent, we will cut costs further and exercise our growing capital flexibility to improve our competitiveness and support our progressive dividend policy through the cycle.
Importantly, we do not require the same level of investment to grow as in the past. Improved productivity can further stretch the capacity of our existing operations to increase volumes at very low cost. For example, in Western Australia Iron Ore we can increase the capacity of our system from 254 million tonnes today to 290 million tonnes over time with minimal investment, while making more than US$20 per tonne margin at today’s prices. Beyond this, we continue to reduce development costs within our project portfolio. However, we remain focused on value and will only approve projects when the time is right.

Mackenzie also appeared on CNBC after the release of the results, and spoke about the Chinese economy, the success of which BHP depends on. “We believe that the headline figures that China talks about, 7-percent growth this year, is about correct,” he said. When asked why he’s so confident, he noted, “I don’t think I’m bullish, I’m just mixed. I think it’s steady as she goes. I think the second half of the year will be a bit stronger than the first half. And this is based on — we have a lot of people on the ground in China.”
Click here to read the full BHP Billiton Ltd. (ASX:BHP,LSE:BLT,NYSE:BHP) press release.