BHP Billiton share price falls as it announces more impairment charges and iron ore production guidance

Jessica Morris
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BHP Billiton Announces Record Financial Results
BHP already announced a $7.2bn impairment charge (Source: Getty)

BHP Billiton languished towards the bottom of the FTSE today, after the mining giant's first half operational review laid bare the impact of plunging global commodity prices on its balance sheet.

The company said it would take an additional $300m (£211.6m) to $450m in impairment charges from its first-half earnings, due to redundancies, inventory write-downs as well as royalty and taxation matters.

This comes in the wake of a $7.2bn impairment charge booked on its energy assets, which have been ravaged by plummeting oil prices.

Its shares closed down 7.72 per cent to 578.70p per share this afternoon.

"Commodity prices fell substantially in the first half of the 2016 financial year putting pressure on the whole resources sector. We continue to cut costs and remain focused on safely improving our operational performance to enhance the resilience of our business," BHP chief executive, Andrew Mackenzie, said.

Read more: Commodity prices - Low point for investors? Wait until 2017

Average prices for BHP's commodities slumped between 20 and 51 per cent in the first half of its financial year compared to a year earlier, with crude oil worst hit.

BHP also reduced its full year guidance for iron ore output by 10m tonnes to 237m tonnes, due to the closure of its Samarco venture in Brazil following the tailings dam disaster. It kept production guidance for petroleum, copper and coal unchanged.

BHP produced 57m tonnes of iron ore in the December quarter, up one per cent from a year earlier. However, quarterly copper output fell nine percent to 400,000 tonnes because of lower grade ores at the Escondida mine in Chile.

BHP didn't provide any answers to mounting speculation that it could cut its dividend payout amid the global commodities rout. But Mackenzie did say that the company remains committed to protecting its balance sheet.

"A dividend cut could be on the cards (perhaps disguised as a precautionary measure given the undetermined potential liability at Samarco)," Nick Hatch, analyst at Canaccord Genuity, said.

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