A 25% increase in earnings has done little to alleviate the pressure BHP is feeling from activist investor Elliott, after the miner fell short of market forecasts in its half year report.
The major ASX-lister miner announced its interim results on Tuesday, saying its underlying EBIT had risen 15% to US$6.9 billion in the first half.
But a 15% rise in underlying profit, to US$4.05 billion, fell short of a market forecast compiled by Thomson Reuters of roughly US$4.3 billion.
The miner declared a $0.55 a share dividend, up from $0.40 this time last year.
BHP’s ASX shares fell from a Tuesday close (45 minutes before the announcement) of $31.26, to an opening price of $29.80 on Wednesday morning.
The company said improved earnings, which were thanks to higher commodity prices and volume productivity, were somewhat offset by higher costs, unfavourable exchange rate movements, inflation and “other net movements”.
The news will likely spur on the efforts of troublemaking advisory firm Elliott, which owns 5% of BHP’s London operation, and has called for the miner to eliminate its dual-listed structure.
Nonetheless, BHP chief executive Andrew Mackenzie hailed the result as a positive one.
“Higher commodity prices and a solid operating performance delivered free cash flow of US$4.9 billion,” he said.
“We used this cash to further reduce net debt and increase returns to shareholders through higher dividends.”
BHP’s net debt is US$15.4 billion, down from US$20.1 billion a year ago.
“We are on track to deliver further productivity gains of US$2 billion by the end of the 2019 financial year as we secure improvements in both operating and capital productivity, aided by smarter technology application across our value chain.”
Mackenzie said the miner’s capital expenditure program would remain focused on “high-return, low risk development opportunities in commodities where we see greatest potential”.
He also said the sale of BHP’s US shale assets – a move spurred on by earlier Elliott efforts – was on track.
BHP has the assets on its books for US$14 billion.
“We have people who are interested in the whole lot and people who are interested in just parts of it,” Mackenzie told the press. “We have strong interest at both ends of the spectrum.”