BHP Billiton says strong balance sheet is priority

BHP Billiton's top priority was to maintain a strong balance sheet, chairman Jac Nasser told shareholders at the miner's annual meeting in Perth, Australia on Thursday

“The dividend is an outcome of appropriate capital management. Our starting point is to maintain the strength of the balance sheet through the cycle. The balance sheet must always come first,” he said in response to questions about the company's progressive dividend policy.

Nasser pointed out that the board board reviews the level of dividend on a regular basis, against the background of the external environment, the company’s progress on capital and operating productivity and the need to invest to ensure profitable long-term growth.

“In the context of this challenging global economy, we have seen a significant drop in the share price of resource companies this year, including our own share price. Like you, we are disappointed in our current share price performance. However, the resources business is cyclical,” he said.

Investec said Nasser’s comments are being seen as a way for BHP to revise its dividend policy, particularly if ratings agencies raise the prospect of any change to credit ratings.

“When a host of investors start to question a company on the sustainability of its dividend policy, it’s certainly time for a rethink. Maintaining a progressive dividend in a cyclical business is a difficult ask, particularly when that business went through a supercycle that lifted the dividend beyond what is now sustainable,” said Investec.”

“As we have stated before, BHP may be forgiven for doing what is prudent, especially given the additional Samarco issue.”

Two dams burst earlier this month at BHP's Samarco joint mining venture in Brazil, killing 11 people.

At 0930 GMT, BHP Billiton shares were up 3% to 906.40p.