BHP Share Price Slips on News of Falling Profit

BHP Billiton Limited [ASX:BHP] share price fell 1.48% immediately upon opening, following an announcement revealing a 37% fall in profit for the 2018 financial year.

The company reported a net profit of US$3.7 billion with a loss of $5.2 billion, in comparison to last year’s profit of $5.9 billion, including a loss of $842 million.

Despite the loss, BHP announced a record fully-franked dividend of 63 cents per share.

Why did BHP’s profit fall?

The decrease in profit is a result of heavy write-downs, including its onshore US shale oil and gas assets, which are being sold for $10.8 billion to British Petroleum giant BP and US Merit Energy.

The write-downs also included the US company tax changes and costs and compensation related to the Samarco Dam failure in Brazil.

Although, excluding these significant losses, BHP’s underlying profit increased by 33%, from $6.7 billion last year to $8.93 billion.

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What’s the reason behind BHP’s record dividend?

In its preliminary results, BHP stated that the board had decided to pay an additional 17 cents per share, or $0.09 billion, on top of its minimum 46 cents for the June half of 2018.

BHP’s final dividend of 63 cents is due to a strong balance sheet and reduction in company debt.

Andrew Mackenzie, BHP chief executive said:

We have announced a record final dividend for shareholders which reflects strong operating performance, solid prices and capital discipline.

Our balance sheet is strong, with net debt at the lower end of our target range, and our investment plans on track across iron ore, copper, coal and petroleum.

In addition, BHP have stated that they plan to return funds to shareholders once the proceeds from the sale of its US onshore oil and gas assets have been received.

Regards,
Matt Hibbard

For Money Morning

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Matt Hibbard is Money Morning’s income specialist. With nearly three decades in the markets, Matt has traded just about every asset class there is. The one thing that has stuck with him over this time is a very simple premise. That is, it’s the cash a company generates that ultimately determines its value. Sure, some stocks might fly away to multi-digit gains. But unless these companies can convert the ‘story’ into real money, the market will eventually find them out. And when that happens, the share price quickly falls back to Earth. Matt is also the editor of Options Trader, where he shows subscribers how to use basic options strategies to generate income. This is income they can generate on top of regular dividend payments. Matt doesn’t play the prediction game, where the aim is to be proven ‘right’. Instead, his goal is to generate as much income as he can for his subscribers, irrespective of whether the market is going up or down.


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