BHP drops as record dividend payout still disappoints

Chart Yahoo Finance

Chart Yahoo Finance

"We enter the 2020 financial year with positive momentum and a strong outlook for both volume and cost", said Chief Executive Andrew Mackenzie.

The company announced a dividend of 78 cents a share, meaning that it will hand back $3.9bn to investors in addition to $17bn already announced.

The results and dividend were in line with expectations, and while such performance was welcomed by analysts, they also picked up on the fact that productivity fell by $1bn, in contrast to the $1bn improvement in productivity that was expected.

Net debt was cut by US$1.7bn to US$9.2bn, below the long-term target range of US$10bn-US$15bn.

After the approval this month of a US$500 million oil and gas field development in Trinidad and Tobago, the company now has six new resources projects under way, which Mackenzie said "sets us up to deliver strong returns over the long term".

"Our transformation programs have the potential to unlock significant value through more productive and table operations, as we embrace new ways of working and harness new technology", Mackenzie said.

Analyst Nicholas Hyett at Hargreaves Lansdown said increasing global trade tensions and a slowing Chinese economy were major headwinds for natural resource groups.

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The Australian group mainly benefited from an increase in iron ore prices. Still, it expects net debt to remain at the lower end of this range in the near term.

"We increasingly have concluded that this is not a business that is going to offer the prospects for growth and would compete for capital. compared to our other businesses", Mackenzie said today during BHP's full-year earnings conference call.

Mining giant BHP achieved the highest profit in five years in its broken financial year.

Iron ore prices have staged a dramatic rally this year, with the Dalian iron ore benchmark more than doubling, amid supply outages from Brazil and Australia earlier this year and more Chinese appetite for the steel-making ingredient.

In July, BHP said its own iron-ore production was flat during its fiscal year as record output at one mine was offset by setbacks from a cyclone and a train derailment.

BHP's ASX-listed shares dropped by 1.6 per cent to $35.67 within the first 30 minutes of trade on Tuesday, still 7.5 per cent higher than $33.17 a year ago.

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