Shares in FTSE 100 mining giant BHP (BHP) dropped 1.6% to £18.11 after it cut its dividend and reported lower annual revenue and profit.
The company highlighted challenges resulting from the coronavirus pandemic, as well as social unrest in Chile and commodity price volatility, as it also missed expectations on revenue.
Looking forward, BHP gave a gloomy assessment of the global economy, warning of near-term uncertainty as it said it expects ‘most major economies will contract heavily in 2020’, with China being the exception, adding that recovery will ‘vary considerably by country.’
DIVIDEND CUT DISAPPOINTS
BHP’s board declared a final dividend of 55 cents per share, taking its total dividend for the year to 30 June 2020 to $1.20 per share, down 10% from $1.30 per share a year ago.
This cut disappointed analysts, with Link Group calling it ‘unalloyed bad news’ for shareholders, though it pointed out the cut will save BHP around £800 million in 2020 alone.
Pre-tax profit for the year dropped 10% to $13.51 billion, with revenue declining 4.3% to $42.39 billion and missing company-compiled expectations of $43.07 billion.
Net debt came in at $12 billion, right at the bottom of the company’s target range of $12billion-to-$17 billion, while net cash flows from continuing operations remained resilient at $15.7 billion.
BHP EXITS THERMAL COAL AFTER INVESTOR PRESSURE
Under pressure from investors, BHP also announced it has committed to exiting thermal coal production within two years, looking to sell its thermal coalmines as it transitions to commodities for a low carbon future.
The move will satisfy investment criteria laid down by Norway’s Government Pension Fund Global, which owns around 3.8% of BHP’s London-listed shares.
BHP chief executive Mike Henry said, ‘We are moving to concentrate our coal portfolio on high quality coking coals, with greatest potential upside for quality premiums as steel makers seek to improve blast furnace utilisation and reduce emissions intensity.’
