Photo by: Bloomberg
JOHANNESBURG (miningweekly.com) – While observing that the last 12 months had been economically volatile and uncertain, BHP Billiton chairperson Jac Nasser has described the resources group as “robust and resilient”, remaining well positioned to ride out the inevitably cyclical nature of the commodity markets in which it remains active.
“Our sector – the resources sector – is cyclical by nature, which means that our business is exposed to factors largely beyond our control, such as commodity prices and foreign exchange rates.
“It also means that, as commodity prices have fallen, resource shares have come under pressure. In many ways, this volatility is very much business as usual for BHP. Throughout our long history, we have operated in cyclical and challenging economic conditions . . . but our focus is always on the long term,” he told shareholders at the company’s annual general meeting on Thursday.
BHP’s portfolio of large, long-life assets, combined with a “strong” balance sheet, allowed the group to focus on the fundamentals of its business, Nasser asserted, enabling it to generate cumulative growth in total shareholder returns of some 115% – an average return of 8% a year – over the last decade.
Reflecting on the company’s 2015 fiscal performance, he added that, in a year in which falling commodity prices had reduced company earnings by over $15-billion, BHP’s focus on productivity, simplification and low-cost capacity expansion had seen it maintain sector-leading margins, generating free cash flow of $6.3-billion and reducing net debt by 5% to around $24-billion.
“We are driven by the long term and a fundamental belief that, as economies adjust, global growth will return to higher levels.
“This growth will depend on the successful rebalancing of China to a consumption and services economy, a recovery of growth in developing nations, a healthy US economy and the stabilisation of the Eurozone,” said Nasser.
In line with BHP’s progressive dividend policy, he noted that the group had lifted the 2015 full-year dividend by $0.02 apiece to $1.24 apiece, bringing the amount returned to shareholders in the last 12 months to $6.6-billion.
“We have the best long-life assets. We are the most efficient operator. We have sector-leading margins and a strong balance sheet and we are committed to being a leader in sustainability in our industry,” Nasser maintained.
CEO Andrew Mackenzie added in a later address to shareholders that, while well positioned to operate in the depressed commodity price environment, the group had not emerged from the 2015 financial year unscathed, suffering a 52% decrease in underlying attributable profit to $6.4-billion.
Free cash flow fell by 26% to $6.3-billion over the period, despite increased efficiency in the iron-ore business, which underpinned free cash flow generation and “outstanding” margins.
He added that the group delivered productivity gains of $4.1-billion in 2015 and had succeeded in reducing yearly capital and exploration costs by 24% to $11-billion for the year.
“The 2015 financial year was one of productivity, simplification and disciplined capital management. We’ve created a diversified portfolio of low-cost assets unrivalled in scale and quality and combined it with the right systems and processes . . . to become one of the most efficient suppliers of our chosen commodities.
“By delivering sector-leading productivity, we’ve secured a solid balance sheet, which we never put at risk, buttressed our progressive dividend and increased our capacity to grow the company through the investment in, development of, exploration for and acquisition of high-return options for growth,” Mackenzie concluded.