MELBOURNE, Feb 20 (Reuters): Global miner BHP reported a 25 per cent rise in underlying half-year profit on Tuesday, and handed an extra $800 million to shareholders, but it fell short of analyst forecasts and rising costs also dragged down the shares.
All the major miners have recovered strongly as commodity prices have rebounded from the 2015-16 crash.
BHP's closest rival Rio Tinto, however, has the best balance sheet, analysts say, and it last week doled out a record dividend as it announced full-year results.
BHP is also battling with activist investor Elliott Advisors, which has made a series of demands that it says would increase shareholder returns.
BHP Chief Executive Andrew Mackenzie said the miner expected to boost free cash flow to around $7.0 billion in the second half, up from $5.0 billion in the first half if spot prices for its commodities stay at current levels.
"These are very strong foundations and position us well for the remainder of the 2018 financial year," he told a media call.
Underlying profit for the half year ended Dec 31 rose to $4.05 billion from $3.24 billion a year ago, but was below market forecasts of about $4.3 billion, compiled by Thomson Reuters I/B/E/S.
BHP's share price fell more than 3.0 per cent in early London trade.
The interim dividend of $0.55 per share, equivalent to a 72 per cent payout ratio, was well up on $0.40 a share a year ago.
"The dividend is better than what we expected, so that was certainly a positive surprise," said Andy Forster, senior investment officer at Argo Investments, a top 20 shareholder in BHP's Australian shares.
"But definitely we see cost pressures starting to emerge in the business. Some of them are one-off in nature (but) more generally across the industry cost pressures are starting to re-emerge."
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