BHP Billiton's result was headlined by the large (but not unexpected) asset writedowns, and provisions including for the Brazilian mine incident - these are reflected in the statutory profit. Underlying profit was down 10-fold, as a result of the decline in commodity prices since the pcp.
Allowing for a more prolonged period of depressed commodity prices (and because the old dividend policy was unsustainable, although the company didn't use these specific words!), the dividend policy has been set to be a minimum of 50% of underlying profit. For H1, the declared dividend is US16cps fully franked (to be paid in AUD).
Gearing (ND / ND+E) has increased to 29.7% from 25.7% in the six-month period. The lower dividend, combined with further reduction in capital expenditure and operational efficiency / productivity measures, should see the gearing stabilise or even decline in H2.
The company flagged its intention to invest in growth projects for the future, using its strong cash generation (post paying the dividend, and subject to it being the best use of capital e.g as compared to debt reduction or share buybacks). We consider this to be a positive - there are a lot of stressed assets and opportunities in the world at the moment. A lot are rubbish, but some are good assets in, for instance, the hands of stressed owners - now is the time to start to buy or develop the quality assets of the future (top quartile cost curve etc).
Overall, the result is in-line with expectations. We are very comfortable with the investment in BHP - we assess it to be cheap on a medium-term view.