Charlotte Mathews
23 August 2007
Johannesburg — GLOBAL mining group BHP Billiton demonstrated its confidence in the outlook for its business many years into the future by hiking its final dividend 46% to U.S. 27c a share, said CEO Chip Goodyear yesterday in a teleconference call to media and analysts.
This was Goodyear's last presentation of the group's results.
On October 1, he will be succeeded by South African Marius Kloppers, who said there would be no change in group strategy under the new leadership.
The focus would be on running the businesses at their full potential and accelerating development options, particularly larger projects.
The sharp increase in the final dividend, which raises the total dividend for the year 30,6% to 47c, establishes a higher base for future dividend payments.
The group is also busy with a $13bn share buyback programme to be completed by next August.
Group revenue rose 21,4% to $47,5bn on higher prices and volumes of production for the group's commodities. These include iron ore, coal, petroleum, manganese, aluminium and copper. Kloppers said that in the current financial year Billiton planned to grow volumes 9% on last year's. The group had a $20,9bn pipeline of near- to mid-term projects, and was looking at longer-term development options across a range of commodities with a potential cost of about $50bn, much of which would involve iron ore.
"We can continue to invest $8bn or more a year, investing in value-adding organic growth projects," said Kloppers.
Goodyear said record production was achieved for eight of the group's commodities in the past year.
The strong operating performance reflected not only better prices and volumes but also better management of the group's portfolio of assets, he said.
Management had sold some businesses and focused on improving margins in core businesses. Costs had also been tightly controlled. Costs in the past year, excluding noncash items such as depreciation, rose only 3,6%.
The share buyback programme meant the 39,1% rise in basic earnings per share to 233,9c, excluding exceptional items, for the year to June outstripped the 34,7% increase in attributable profits to $13,7bn.
Numis Securities analyst Simon Toyne said yesterday the growth in Billiton's net profit was almost in line with market consensus, but the dividend was better than expected. He said the containment of cost increases to 3,6% was impressive.
In SA, Billiton's interests include coal, aluminium, titanium and manganese. Goodyear said the group was continuing to restructure its South African businesses. It was considering the feasibility of the Corridor Sands mineral sands and titanium project in Mozambique, which was likely to be developed through a joint venture.
The ore body appeared to be sufficient to sustain a big operation for many decades, and the current study focused on the size of the first phase. The project was likely to be about a quarter or half the size of its current joint venture, Richards Bay Minerals, in SA.
The sale of Billiton's Koornfontein and Optimum collieries and closure of the Douglas underground coal mine would affect the earnings of the group's energy coal businesses in the current financial year, said Goodyear.
Kloppers said that in SA the group would focus on long-life, low-cost coal assets. Projects in the pipeline - Klipspruit and Doug-las/Middelburg Optimisation - would sustain volumes but Billiton did not expect these projects would grow its South African coal business.
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