BHP Billiton PLC (LON:BLT) saw its shares gain this morning after the miner unveiled a commitment to quit its underperforming US shale oil and gas business as it posted a jump in annual profit and tripled its final dividend.
The world’s biggest miner reported an underlying attributable profit of US$6.7bn, up from US$1.2bn a year ago, albeit below forecasts for US$7.4bn, as net operating cashflow rose by 58% to US$16.80bn.
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BHP Billiton’s headline attributable profit was US$5.89bn, a big turnaround from a record US$6.39bn loss a year earlier which had been impacted by US$7.7bn in write-downs, helped by a 32% rise in iron ore prices over the year thanks to increased demand from top metals consumer China.
The FTSE 100-listed firm, which has been under pressure from some shareholders to sell the US shale oil and gas business it bought at the height of the oil boom, said it has “determined that our Onshore US assets are non-core and we are actively pursuing options to exit these assets for value.”
The move is one of the strategic changes urged earlier this year by activist investor Elliott Management - which last week revealed it has hiked its holding in BHP Billiton to 5%.
READ: Elliott Management raises stake in BHP Billiton to 5%, stepping up the pressure for strategic change
The miner also pleased shareholders by cutting its net debt by 37% to US $16.3bn and tripling its final dividend to US$0.43 a share.
BHP Billiton’s chief executive Andrew Mackenzie said: "We had a very strong financial year. Free cash flow was US$12.6 billion, our second highest on record.”
He added: “This strong momentum will be carried into the 2018 financial year, with volume growth of seven per cent and further productivity gains expected. Our relentless focus on cash flow, capital discipline and value creation should allow us to significantly increase our return on capital by the 2022 financial year."
Shares up, but Liberum says sell
In early trading, BHP Billiton shares were 3.2%, or 43.5p higher at 1,409.5p.
In an initial note to clients, analysts at Liberum Capital said: “A good set of numbers from BHP and one that also shows it is listening to shareholders in relation to its unconventional oil business and Jansen.”
But the broker still repeated a ‘sell’ rating and 800p price target on BHP Billiton’s shares.
Its analyst said the negative stance reflected BHP Billiton’s “reliance on steel raw materials, where we remain bearish, given our expectation of slowing Chinese credit growth into the back end of the year.”
-- Adds share price, broker comment --