REPORTING SEASON: BHP Billiton (BHP)
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Figure 1: BHP Billiton 12 month chart
BHP battles falling iron ore and oil prices
Price declines for BHP’s two key commodities have been central to wiping $6.5 billion off the diversified miner’s bottom line. The production for the key commodity of iron, increased by 16% in the half year ending December 2014 to a record 113 Mt, the average realised price for iron ore fell by 38% from US$112.00 per tonne to US$70 per tonne. Oil, the second most lucrative product for the group, saw the average realised price fall by 17%, which meant that underlying earnings for the Petroleum unit fell by almost 14.5% to $2.14 billion.
Notwithstanding the substantial fall in profit, the underlying NPAT was ahead of market expectations. In a challenging environment where commodity prices remain under pressure, expense management remained a priority for the miner with costs falling across all the major business units. Cash costs reduced by 29% at Western Australia Iron Ore (WAIO), 15% at Queensland Coal, 13% at Escondida and 8% at Onshore US.
This theme continued through reduced capital and exploration expenditure which fell by 23% to US$6.4 billion over the period. In coming years the group expects to invest a total of US$12.6 billion in the 2015 financial year and US$10.8 billion in the 2016 financial year.
BHP declared an interim dividend of 62 US cents per share, which represents an increase of 5% from 59 cents previously. The record date is Friday March 13, 2015 with a payment date of Tuesday March 31, 2015