SYDNEY • Top global miner BHP Billiton slashed its interim dividend by 75 per cent yesterday, abandoning a long-held policy of steady or higher payouts as it braces itself for a longer-than-expected commodities downturn.
The end to BHP's so-called progressive dividend policy came as the world's biggest diversified miner slumped to a net loss of US$5.67 billion (S$8 billion) for the six months to Dec 31, its first loss in more than 16 years.
"We need to recognise we are in a new era, a new world, and we need a different dividend policy to handle that," chief executive Andrew Mackenzie said on a media call, warning of a prolonged period of weaker prices and higher volatility.
The dividend cut to 16 US cents was more severe than market expectations for a payout as high as 35 US cents. BHP pledged a minimum 50 per cent payout of underlying profit going forward.
"Given months of anguish and market debate regarding the dividend, we expect that 16 cents while disappointing, is a cash flow positive and, therefore, will likely be absorbed by the market," said Shaw and Partners analyst Peter O'Connor.
Mr Mackenzie said the shift was part of a broader strategy to help BHP Billiton manage volatility.
"The financial flexibility we will gain as a company from this move... will allow us to invest counter cyclically," he said. "It will allow us to look at tier one assets in distress."
Standard & Poor's cut BHP's credit rating to A from A+ this month and warned it might downgrade again if the company failed to take more steps to preserve cash and review its dividend policy.
Mr Mackenzie also announced a revamp of BHP's corporate structure in a bid to simplify operations, creating US and Australian mineral divisions in a move that will see its iron ore chief Jimmy Wilson and petroleum head Tim Cutt depart.
Underlying attributable profit plunged to US$412 million from US$4.89 billion a year earlier, missing analysts' forecasts for around US$585 million, as commodities prices plummeted to multi-year lows. "While the miss looks big in percentage terms, the numbers are quite frankly disappointingly low anyway," said Mr O'Connor, pointing to BHP's US$100 billion asset base.
BHP's results included an after-tax charge of US$858 million following a dam disaster in Brazil at its Samarco joint venture with Vale, which killed 17 people in that country's worst environmental disaster.
A total of US$6.1 billion of exceptional items included an impairment charge of US$4.9 billion against the carrying value of its US onshore oil and gas assets, and US$390 million for global taxation matters.