The BHP Billiton Limited (ASX: BHP) share price will be one to watch on Wednesday after the mining giant released its half-year results after the market closed.
Here are key highlights from the six months ending December 31 (All figures throughout are in USD unless otherwise stated):
- Half-year revenue increased 16% on the prior corresponding period to $21,779 million.
- Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) up 14% to $11,238 million.
- Underlying attributable profit after tax increased 25% to $4,100 million.
- Reported profit after tax fell 37% to $2,015 million due to charges related to U.S. tax reform ($1,800 million) and the Samarco disaster ($200 million).
- Underlying basic earnings per share of 76.1 cents.
- Interim dividend per share of 55 U.S. cents, up 38% on the prior corresponding period.
- Free cash flow of $4,900 million.
The main driver of this strong first-half result was BHP's Copper segment. Although costs increased 17% to $1.27/lb, improved copper prices and production meant segment EBITDA rose a massive 83% to $3,200 million. This led to copper accounting for 28% of total first-half EBITDA.
Its Iron Ore segment was the biggest contributor to EBITDA during the period. Thanks to a record production run rate in the second-quarter and a reduction in costs to $14.90/tonne, segment EBITDA rose 3% to $4,300 million. This equates to 38% of total company EBITDA during the half.
Elsewhere, its Petroleum and Coal segments delivered a 2% and 11% increase, respectively, in EBITDA compared to the prior corresponding period despite rising costs of production.
The biggest disappointment for the miner during the half was arguably its negative productivity of $496 million. This was largely due to the Olympic Dam planned shutdown and geotechnical issues at its BMA operation. Pleasingly, though, management is confident it can make $2 billion in productivity gains by the end of FY 2019.
How does this result compare to expectations?
According to a note out of Goldman Sachs earlier this month, the broker had been expecting BHP Billiton to deliver half-year sales of $21,200 million, underlying EBITDA of $12,300 million, underlying net profit after tax of $5,150 million, earnings per share of 97 cents, and an interim dividend of 48 U.S. cents per share.
BHP appears to have fallen well short of Goldman's targets on all but its dividend. Though it is worth noting that Goldman is one of the more bullish brokers. The consensus EBITDA estimate was for $11,530 million, a touch ahead of BHP's actual result.
Should you invest?
With the global economy looking strong and the outlook for economic growth positive, I think BHP Billiton is a great pick for investors looking for exposure to the resources sector alongside the likes of Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG).
And any post-earnings decline that presents itself tomorrow could be an opportunity to snap up shares at a better price.
