BHP Billiton Limited's (ASX: BHP) interim results, which were released on Tuesday, were well received by investors around the globe with the Australian-listed stock rising 2.93%, while the London-listed stock jumped 4.83% overnight.
Here are 10 key things you need to know from BHP Billiton's first-half results…
- Profits. Net profit fell by 47.4% to US$4.27 billion while its underlying attributable profit fell 31% to US$5.4 billion. The latter result was far better than the US$4.9 billion analysts had expected, according to Bloomberg.
- Revenues. Revenue declined by 11.9% to US$29.9 billion.
- Iron ore. The miner's most important commodity acted as a key drag on earnings. BHP Billiton's average realised price fell 38% to US$70 a tonne during the period.
- Oil. The miner's second most important commodity, oil, has also plummeted in price with BHP Billiton realising an average US$85 per barrel during the period. Its US$26.33 billion in onshore US shale gas assets created EBITDA (earnings before interest, tax, depreciation and amortisation) of just US$1.38 billion – well below its capital expenditure of US$1.92 billion in the division.
- Further falls. Iron ore and oil have both fallen in value considerably over the last six months, meaning that the price BHP Billiton will realise this period could be well below the prices recognised in the first half. Iron ore is trading at a six-year low around US$64 a tonne, according to the Metal Bulletin, while Brent oil is now trading at US$59 a barrel.
- Capital and Exploration. Spending fell 23% in the first half to US$6.4 billion. Capital spending for the full year will be roughly US$12.6 billion, while further cuts will be made in 2016, with spending down to US$10.8 billion.
- Costs of Production. US$2.4 billion in productivity gains were achieved during the period. BHP Billiton is aiming for US$4 billion in productivity gains by the end of the 2017 financial year.
- Free Cash Flow. BHP Billiton managed to achieve US$4.1 billion in free cash flow.
- Dividends. The miner still increased its dividend by 5% to US 62 cents, fully franked, with a total payout of roughly US$3.2 billion.
- Net Debt. Given that free cash flow exceeded the payout, BHP Billiton also managed to significantly reduce its net debt to US$24.9 billion, which was a far greater improvement than what most analysts had been expecting.
BHP Billiton's report was far from strong, yet the shares rose because the results weren't as bad as what the market expected. As is the case with all miners, including Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG), falling commodity prices will continue to pile pressure on future earnings which could mean further pain for their shares.
