BHP Billiton – Profits and dividends surge, but costs an issue

New figures show

Higher commodity prices saw BHP’s revenues climb 16 per cent in the first half to $21.8bn, with operating expenses up 15 per cent to $15.4bn.

Underlying profits hit $4.1bn, a 25 per cent improvement on the previous year – falling to $2bn once the effects of US tax changes and charges associated with the Samarco Dam failure are accounted for.

The group announced an interim dividend of $0.55 per share, up 38 per cent on the previous year and $0.17 above the 50 per cent of earnings target.

The shares fell 2.5 per cent in early trading. 

Nicholas Hyett, Equity Analyst at Hargreaves Lansdown:

“It feels harsh to be criticising BHP this morning, profits are increasing rapidly, debt is falling, and the interim dividend is well ahead of market expectations.

But investors were expecting more. BHP’s better performance is being driven by improved commodity prices, which are out of the company’s hands, while productivity, which it can control, is heading in the wrong direction. 

To be fair full year guidance remains largely unchanged, with management expecting to make up the lost ground in the second half and deliver some substantial improvements in productivity next year. That’s easier said than done though, and this morning’s results are not the start the group would have wanted.”