BHP's result was down considerably, as expected given the considerably lower commodity prices. The writeoffs (principally the Samarco dam failure, oil and gas assets in the US being written down, and tax provisions) were also in line with expectations.
The lower commodity prices flowed through to lower revenue, which in turn flowed through to profit and dividends, as can be seen in the underlying numbers in the table below. The numbers were broadly in line with market expectations, excepting the dividend and free cash flow which were a little lower than market expectations (not our expectations though).
Balance sheet debt remained acceptable at 28.4% but did go up (as it will do when dividends > earnings, but importantly the dividend payment was lower than free cash flow). We expect reduction in debt to be a focus in coming periods.
Productions volumes were good overall, and the company reduced unit cash costs 16% as compared to FY-15 - an excellent outcome over the period of a year.
BHP remains well positioned in relation to a recovery in commodity prices. With operations that are well placed on the production cost curve, it has significant leverage to a recovery. We remain comfortable investing in it on our 3 year time horizon.