By Samantha James
BHP Billiton has been forced to cut dividends by more than half and rearrange executive ranks after its underlying profits slumped to their lowest in decades in the second half of 2015.
The company reported a net loss of US$5.7 billion and its underlying profit slumped to US$412 million for the reporting period ending December 2015 – well below market expectations of US$720 million profit.
It also slashed its dividend to US$0.16 under a new policy that would pay out 50 per cent of underlying attributable profits each half.
At this time last year the company’s dividend was US$0.62; it is the first time BHP has cut its dividend since 1988 and the lowest payout it has made since February 2005.
The company’s attributable loss was posted at US$5.7 billion, with net operating cash flow for the period at a 45 per cent deficient.
The company stated that while it was prepared for lower prices across its commodities, it didn’t anticipate the prolonged period of weaker prices and higher volatility.
“We have not made these changes lightly,” BHP Billiton chairman Jac Nasser said.
“They are a determined response to changing markets that will also help us take advantage of the significant opportunities ahead.
“While the continued development of emerging economies will underpin longer-term demand growth for commodities, we now believe the period of weaker prices and higher volatility will be prolonged.
“The adoption of a dividend payout ratio will further support BHP Billiton’s financial strength, while providing flexibility at the bottom of the cycle and ensuring discipline at the top.”
Mr Nassar said the company would reassess the possibility of returning additional cash above the fixed ratio each reporting period.
BHP’s investment in Samarco was written down to nil at 31 December 2015 following the tailings disaster which cost the company a total after tax charge of US$858 million.