Samarco dam disaster pushes BHP Billiton to $6.4bn loss
And lo, it came to pass (almost): miner BHP Billiton unveiled a multi-billion dollar loss for the year, after a series of unfortunate events.
The figures
BHP said it had made an attributable loss of $6.4bn (£5bn) in the year to the end up June, down from a profit of $1.9bn last year.
That was driven by $7.7bn of exceptional items, including a $4.9bn impairment charge on the value of its onshore US assets, a $2.2bn charge for the financial impacts of the Samarco dam disaster, and $570m for "global taxation matters".
Underlying profits, which strip out those one-off costs, hit $1.2bn, down 81 per cent. Meanwhile, net operating cash flow fell to $10.6bn, 45 per cent lower than last year's $19.3bn.
Not surprisingly, capital expenditure fell 40 per cent to $7.7bn, while net debt rose seven per cent to $26.1bn.
It still managed to pay a dividend of 30 cents – although that is down 76 per cent from the same period last year.
Shares were up 3.1 per cent at 1,074p in mid-morning trading.
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Why it's interesting
The figures aren't good – but they're also not quite as bad as thought. Analysts had expected a $7bn loss – hence that bounce in shares.
The Samarco dam disaster, in which dozens of people were killed when a dam in Brazil which was owned by the company burst last year, is continuing to take its toll. In March it reported it had agreed to pay at least $1.1bn in compensation – although today it reported twice that figure.
But the company was also cautiously optimistic when it came to crude oil (which hit a one-month high yesterday). In its statement, it suggested the market had begun to rebalance thanks to falling production in the US, unplanned supply outages and strong demand outside the OECD.
"The long-term outlook remains healthy, underpinned by rising demand from the petrochemical industry, a growing transport sector in developing countries and natural field decline," it added.
It was less optimistic when it came to iron ore: "The appetite of mills to build iron ore inventories will remain low in the near term due to the availability of port stocks," it said.
What BHP Billiton said
Chief executive Andrew Mackenzie said:
The last 12 months have been challenging for both BHP Billiton and the resources industry. Nevertheless, our results demonstrate the resilience of our portfolio and the diverse ways in which we can create value for shareholders despite low commodity prices.
What analysts said
Naeem Aslam, chief market analyst at Think Markets, said:
Tough time for miners and more to come and this was reflected in BHP. Under this environment, it is appropriate to cut capex further and we think it is the right decision made by management. The thing is that until we see the demand picking up in China, the pressure will remain for these mining stocks. However, it is vital to keep in mind that the commodity situation has improved vastly and we do see some improvement in copper demand but it is nowhere close where we can see that we have a balance between supply and demand.
In short
A tough year for one of London's largest listed miners, although the commodity situation is improving.