Diversified mining giant
The Australian digger swung to a loss of $6.39bn during the 12 months to June, a stark comparison with profits of $1.91bn generated a year earlier.
And BHP Billiton expects the environment to remain difficult in the immediate future, the firm commenting that "global growth over the remainder of the 2016 calendar year is expected to remain modest and subject to downside risks, including the uncertain economic consequences of 'Brexit'."
Commodities Crushed
As a consequence, BHP Billiton chief executive Andrew Mackenzie expects raw materials prices to remain "low and volatile in the short to medium term." The company remains positive over the long term prospects for its commodities like copper and oil, however.
BHP was hammered by a 43% decline in oil values last year, but this was not the firm's only headache -- prices of thermal coal, copper and iron ore fell 17%, 23% and 28% respectively during fiscal 2016, the mining play noted.
And a series of expensive asset write-downs compounded BHP Billiton's problems last year. The business swallowed a $4.9bn impairment at its US shale oil assets; took a $2.2bn hit following the dam collapse at its Samarco iron ore facility in Brazil; and was dealt $570m worth of tax-related impairments.
Dividend Diced
BHP Billiton had warned earlier in 2016 that its progressive dividend policy was in the crosshairs given the challenging market landscape.
And so it has come to pass. The company has shelled out a final dividend of 16 US cents per share for the second half of 2016, adding to the 14-cent reward in the prior six months.
While a final dividend of 30 cents per share came in line with analyst forecasts, the payment marked a huge reduction from the 2015 dividend of 124 cents.
BHP's has finally grasped the nettle and canned its programme of generous shareholder payouts, a necessary step given the firm's rapidly-deteriorating financial health and expectations of further revenues troubles. Net debt jumped 7% during 2016 to $26.1bn, up from $24.4bn a year earlier.
A Risk Too Far
Today's disappointing results could not stop BHP's share price punching further share price gains, however. Indeed, a 4% advance as of the time of writing has taken the metals mammoth to fresh 10-month peaks above £10.70 per share.
A modest recovery in commodity prices has encouraged investors to pile back into the world's metals and energy stocks in recent months.
But this uptick is built on extremely fragile foundations, in my opinion. Patchy trade data from China, combined with reports of bulging commodity stockpiles at the country's ports, suggests that a significant demand improvement remains some way off.
And production ramp-ups at many of the world's colossal mining projects, such as Antofagasta's Los Pelambres copper facility, allied with new production from major new mines like Rio Tinto's Oyu Tolgoi promise to keep BHP Billiton's key markets well supplied long into the future.
Recent share price rises leave BHP Billiton dealing on a huge forward P/E rating of 81.6 times, an unfathomably-high figure in my opinion given the likelihood of prolonged earnings woes.
I reckon the commodities colossus is far too risky for savvy investors.
