BHP Billiton uses higher commodity prices, productivity push to increase profit

BHP Billiton has delivered a significant rise in profit during the first half of the 2017 financial year, helped by a resurgence in commodity prices and a company push to lift productivity.

The diversified resources company recorded an underlying profit of $US3.24 billion ($4.22 billion) for the six months to the end of December 2016, an improvement on the $US412 million it reported in the same period a year earlier.

Net profit for the period reached $US3.2 billion, a massive turnaround on the $US5.7 billion loss in the first half of the 2016 financial year.

BHP chief executive officer Andrew McKenzie said the strong result followed several years of a considered and deliberate approach to improve productivity and redesign the company’s portfolio and operating model.

“Our steadfast commitment to this plan has positioned us to take full advantage in a period of higher prices with underlying EBITDA up 65 per cent to $US9.9 billion,” McKenzie said.

He added that the demerger of South32 and over $US7 billion of asset sales had shaped a portfolio that was now true to the company’s strategy.

“A decline in unit costs at our major assets supported $US1.2 billion of productivity gains in the half, which follows the $US11 billion of annualised gains embedded over the last four years,” McKenzie said.

Last year’s result was hurt by low commodity prices, with key drivers for the company like petroleum, coal and iron ore all struggling. However, improvements in the value of all three are now delivering benefits for BHP, with revenues rising by 20 per cent to $US18.8 billion.

McKenzie was optimistic about the future of the commodities marketplace.

“We are confident in the long-term outlook for commodities, particularly oil, with markets expected to rebalance in the near-term, and copper where we expect a deficit to emerge in the early 2020s,” he said.

“We have the right settings in place to substantially grow shareholder value.”

Investors will receive a dividend payout of US40 cents a share, which is up on the US16 cents a share in the corresponding period of 2016.