BHP Billiton (BHP) Chief Executive Charles "Chip" Goodyear unexpectedly announced on Feb. 7 that he will step down at the end of the year. At the same time, the Texas-born head of the world's biggest mining company made sure that investors will remember him fondly by announcing that first-half net profits for the period ending Dec. 31 jumped 41.3% to a record $6.16 billion, from $4.36 billion a year ago, thanks to soaring commodity prices.
But what really caught investors' attention was BHP's plan to return a whopping $10 billion to shareholders over the next 18 months in a stock buyback plan. And as if that weren't enough, BHP also said it is raising its interim dividend to $0.20 per share from $0.18 per share in the year-earlier period.
"We think it is fair to say BHP stunned the market with the sheer scale of its latest capital-management initiative," Credit Suisse (CS) analysts said in a research note. Stunned, perhaps, but also pleased—in early afternoon trading on the New York Stock Exchange, BHP shares rose $2.36, or 5.6%, to $44.07.
Record Profits, Rising Gains
Behind the extraordinarily strong results, of course, were soaring commodity prices. Annual average prices of commodities such as copper and nickel hit their highest levels since the 1970s last year. That has turned into a bonanza for mining companies such as BHP, which said it expects prices to remain high as China's voracious need for commodities helps offset a possible U.S. economic slowdown.
In addition to the record profits, sales for the company's first half rose 21.7% to $22.1 billion, from $18.2 billion a year earlier. The base metals unit, which accounted for one-third of BHP's operating profit, posted a 53% gain over the previous year to $2.9 billion. The rise in the price of copper to $3.34 a pound, from $1.84 in the year-ago period, accounted for most of the gain, BHP said. "We do not anticipate a return of prices to longer-run averages over the medium term," the company said in a statement.
The 49-year-old Goodyear, who joined BHP in 1998 and became CEO five years ago, said in a statement that he was leaving because he decided "it is an appropriate time for the organization to transition to the next generation of leadership." After delivering profits for the company over seven straight half-year periods, there is little doubt he'll be missed.