Last week, mining and commodities giant Glencore said profit fell after demand from China had been “a lot weaker than anyone had expected”.
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Both Antofagasta and BHP’s shares were lifted higher – up 3% and 6% respectively – in the wider market rally despite the poor profits performance, which were described as “ugly” by one City analyst.
BHP maintained its final dividend at 62 US cents per share, and said capital expenditure would fall from US11 billion in the 2014-15 financial year to US7 billion by 2016-17.
Iron ore prices for Tianjin delivery hit a 10-year low of $US44.10 a tonne in July and are struggling to break above the mid-$US50 range, while metallurgical coal and copper, also core BHP products, are languishing at multi-year lows.
The figure compares with US$13.2bn from a year earlier and does not include contributions from its metals operations, which BHP spun off as a separate listing, South32 (ASX: S32) in late May. “Together with the reduction in capex, the company remains in a good position to meet its ongoing dividend requirements, depending on where commodity prices settle”.
Shares of BHP Billiton have been in a strong downtrend since the beginning of the year. The momentum indicators for the stock have given a sell signal which is pointing towards a shift of momentum towards the sell side and is bearish.
“And while we recorded a sector-leading EBITDA margin of 50 per cent, we will cut costs further and exercise our growing capital flexibility to improve our competitiveness and support our progressive dividend policy through the cycle”, Mackenzie said. “And, while we remain confident in the long-term outlook for commodities demand as emerging economies continue to urbanize and industrialize, we have lowered our forecast of peak Chinese steel demand”, he said.
South32 reported a maiden net profit on Monday of $28m for the year to 30 June.
A number of miners like BHP have got affected by a slowdown in China’s economy.
Instead, South32 is focused cutting costs by at least $350 million a year, or around 8 percent of its controllable cost base, through the 2018 financial year.
Wall Street had stayed in s narrow range for much of 2015, but volatility jumped this month as investors became increasingly concerned about a potential stumble in China’s economy and after Beijing surprisingly devalued its currency.
“We expect moderate but sustainable growth in Chinese steel production over the next decade”, BHP said in the earnings statement. The company increased its full-year dividend by 2% to $1.24 per share.
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BHP Billiton Limited (NYSE:BHP): According to 2 Analysts, The short term target price has been estimated at $ 52.01.The target price could deviate by a maximum of $2.81 from the forecast price.
