BHP Continues Climb with 1.42% Increase in Share Price

At time of writing, BHP Billiton Limited [ASX:BHP] is trading at $32.86, which marks a 1.42% increase from yesterday’s figures.

This climb for the world’s top mining company seems to align with the release of the 2018 Annual report on Tuesday, 18 September.

The initiative to develop a long-term profit strategy, outlined in the report, highlights the greater future potential of this Aussie mining stock.

BHP planning the road ahead

As is stated in the latest report, BHP’s company strategy is to ‘…position BHP to leverage our values, capabilities and competitive resources to meet to evolving needs of markets and to create sustainable long-term value.’

This strategy has five focus areas:

  • Cost efficiency — simple and streamlined approaches alongside a large-scale workforce foresees the company delivering about US$1 billion in productivity gains by FY19 end. This momentum is sure to be carried into FY20.
  • Technology — their diverse portfolio gives them the means to adapt technology in different ways to better suit each commodity extracted.
  • Latent capacity — unlocking each sector’s potential is unlocked to its fullest, while keeping risk at a minimum. A recent example is the developing CRSC project in Queensland’s Bowen basin.
  • Future Options — potential projects in conventional oil, copper and coal can add decent shareholder value in the long term.
  • Exploration — seeking out new deposits of copper and oil, as these commodities are decreasing in production even though their demand is set to increase.

BHP show a keen eye for detail and a clear understanding of the future trajectory of the mining sector, and investors are no doubt impressed.

Free Report: 10 ASX mining stocks that could make you huge money in the next 12 months and beyond. Learn More.

Areas of loss

Of course, it wasn’t all forward-thinking and planning in the report. BHP were forced to admit their minor shortcomings in FY18, too.

The attributable profit for this period was valued at US$3.7 billion, which marks a downward turn from the prior period’s figure of US$5.9 billion. However, BHP identified areas where unforeseen loss can be located, including:

  • The impairment of Onshore US Assets due to significantly weak oil and gas markets. This reduced the value of these assets by nearly USS$4.9 billion.
  • US tax reform, resulting in an unexpected income tax expense of US$1.8 billion.
  • The failed Samarco dam venture, where BHP have had to fork out funds to cover for repair and restoration of the collapsed dam.

Each of these costs have been calculated as exceptional losses, which total to US$5.2 billion. This is because of the arguably unavoidable nature of the costs. Although, it’s been said that BHP had predicted the dam collapse in a prior risk assessment.

Where to go from here

Despite this substantial loss, the company’s net debt has decreased by US$5.4 billion, and free cash flow came to US$12.5 billion.

The attention with which they are planning for future growth does look reassuring for investors, which is likely why the share price is responding so favourably.

Time will tell if this upward climb continues.


Ryan Clarkson-Ledward,
For Money Morning

PS: As the largest contributor to the Aussie economy, the mining sector of the market can be a potentially lucrative area to invest in. Check out this free report, ‘The Top 10 Australian Mining Stocks’, which outlines the ASX mining stocks that resource analyst Jason Stevenson believes could potentially make you huge money in the next 12 months and beyond. Learn More.

Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

Ryan is also the Editor of Australian Small-Cap Investigator, a stock tipping newsletter that hunts down promising small-cap stocks by dissecting the latest events affecting the world.

To find out more about the publications Ryan works on and how you can subscribe, please click on the corresponding link here:

Money Morning Australia