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BHP dividend to rise despite profit fall

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Analysts are predicting BHP Billiton will increase its dividend payout at its annual result even as its profit takes a sharp hit.

The company is forecast to report a net profit of $US12.6 billion ($13.7 billion) for the year to June tomorrow in its 2013 financial year results, which is a 26 per cent slump.

Despite this the company will be raising its final dividend seven per cent to US61c. This brings the full-year dividend to $US1.18, up from $US1.12, the Herald Sun reported.

According to Fat Prophets analyst David Lennox, investors would want to make the most from the company’s speeding up of production of major commodities and the declining Australian dollar.

He added investors would also keep track of further cost cuts or asset sales BHP Billiton decides to do.

“Softer (commodity) pricing will cost them a couple of billion but volumes will be positive. The currency will also help.

Rio Tinto raised its dividend by 15 per cent to 83.5c when it delivered its half-year results recently.

“They (BHP) will up their dividend in line with their progressive dividend policy. If Rio could do it, then I can’t see BHP pulling back,” Lennox said.

BHP CEO Andrew Mackenzie announced spending cuts of 18 per cent in the 2014 budget when he was appointed as the company’s head.

BHP and Rio Tinto announced cost cuts of $10 billion between them.

The results are also an opportunity to get an update on BHP’s $US12 billion Jansen potash project in Canada.

While the company had touted the project as the “fifth pillar” of the company, it was recently put in doubt when the world’s biggest potash producer, Russia’s Uralkali, vacated from a joint venture partnership.

The partnership reined over more than 40 per cent of the world’s potash exports.

Announcements of cost cuts cast doubt over BHP’s last remaining planned expansion projects, including potash and the mega-pot at the Cannington silver and base metals mine near McKinlay in northwest Queensland.

Mackenzie is also expected to inform investors on the $US18 billion in capital expenditure the company has allotted for this financial year.

This will slide to $US15 billion next financial year.

Macjenzie recently said global demand for Australian resources will remain but warned the country risks losing its competitive edge if tax regimes, workplace relations and regulatory red tape are not mended.

''The question is not if Asia's demand for commodities will be met but rather which countries will deliver the supply,” Mackenzie said.

"There are even greater opportunities ahead. Global demand for commodities is expected to grow by up to 75 per cent over the next 15 years.”

Research by JPMorgan Chase has shown BHP’s net present value, or its cash flow, would increase by three percent if the carbon tax is abolished under a Liberal government if it gets elected at the Federal election.

Rio Tinto would benefit the most with its valuation increasing six per cent while Fortescue Metals’ value would climb by one per cent, the research found.   

Mackenzie took a 25 per cent pay cut compared to his predecessor Marius Kloppers when he took over the reins at BHP. He indicated the company would focus on productivity improvements and less investment since he took charge.

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