Tuesday 22 August 2017 by Mary Anne Low Company updates

BHP Billiton Limited – strong FY17 results despite large exceptional losses

A summary of FY17 results:


Source: BHP, FIIG Securities


Results summary:

  • Underlying EBITDA increased 64% at USD20.3bn per corresponding period (pcp) – primarily attributable to higher commodity prices – and recorded margins of 55% compared to 41% pcp
  • Underlying attributable profit increased materially by 454% pcp to USD6.7bn, which excludes an exceptional loss of USD842m (after tax). Exceptional loss for FY17 relates to the Samarco dam failure, Escondida industrial action and Chilean withholding tax paid at a concessional rate, partially offset by the reimbursement received on cancellation of the Caroona exploration licence
  • All of BHP’s business segments reported positive underlying EBITDA as shown in Figure 1 below, in particular the coal segment which was driven by higher coal prices:

Figure 1. Source: BHP
  • Net operating cash flow was up by 58% pcp to USD16.8bn, underpinned by higher commodity prices, strong operating performance and improved capital productivity (resulting in a lower 32% pcp of capital and exploration expenditure to USD5.2bn). As such, free cash flow materially improved by 274% pcp to USD12.6bn (the second highest achieved since FY08)
  • BHP continues to strengthen its balance sheet, and supported by its strong free cash flow generation, decreased its net debt by 37% to USD16.3bn at 30 June 2017 (from USD26.1bn at 30 June 2016), resulting in a lower gearing of 20.6% at 30 June 2017 (30.3% at 30 June 2016)
  • The company’s USD4.4bn in total dividend for FY17 is equivalent to a 66% payout ratio (and maintained a minimum 50% dividend payout policy) 

Outlook

Key highlights from BHP’s guidance for the group:

  • Expects USD2bn productivity gains by end FY19
  • Net debt range of between USD10-15bn over the medium term
  • Identified onshore US assets as non-core and actively looking to exit for value
  • Next three years’ capital and exploration expenditure of less than USD8bn per annum

A link to the results is available here.