BHP Billiton | Productivity gains to offset headwinds
Rising costs and negative productivity gains plagued BHP's H1 '18 results. Despite the setback in productivity gains in H1 '18, BHP continues to target c.USD2bn of productivity gains by the end of FY ‘19f. The Group remains confident that further productivity improvements should help offset inflationary pressure.BHP continues to prioritise balance sheet strength with its excess cash generated. However, we believe the priority could change. We estimate that net debt could continue its downward trajectory which could lead to increased shareholder returns. BHP believes that commodity prices are currently above their long-term real values. Thus, we believe BHP could favour dividends as the preferred method to return cash to shareholders in the short-term.
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