BP dives to a pounds 711m loss and halves dividend

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BRITISH Petroleum, one of Britain's biggest companies, yesterday lived up to the stock market's worst fears with a pounds 711m net loss for the first half to 30 June, following a pounds 253m profit last year.

The result, prepared under the historic cost method, was accompanied by a halving of the second-quarter dividend to 2.1p and a pounds 1bn provision against a massive redundancy programme and write-down in asset values.

A total of 11,500 jobs will be lost worldwide this year, representing 10 per cent of the workforce. About 80 per cent will be lost in Europe.

BP has already laid off about 2,000 staff in the UK and yesterday another 1,500 job cuts were announced at its research and engineering department.

The company is providing pounds 472m against the costs of the redundancies. Another pounds 544m is being set aside for asset write-downs.

The company said the measure would produce annual cost savings of about pounds 500m in a full year and improve profit margins.

The dividend cut, the first since the First World War, had been widely expected by the market but still stunned the City.

David Stedman of Daiwa Securities said: 'Although we had all expected the dividend would be cut it has still come as a shock.'

Although some dealers feared a collapse in the share price, the fall was modest. They lost 10p to 196.5p, but over the past 12 months they have collapsed by almost 50 per cent.

The results follow the sudden departure of Robert Horton as BP's chairman and chief executive last month in a boardroom coup over his abrasive management style.

The company said the dividend had been cut because of difficult trading conditions and 'to retain sufficient capital to grow the business and deliver long-term returns to shareholders'.

The move is also designed to stem a massive cash outflow, which BP estimates will top pounds 1bn this year. The group's net debt is expected to reach dollars 16bn this year, representing about 90 per cent of shareholders' funds.

The results also reflect the impact of the recession on the group's refining and marketing operations, where profits fell from pounds 651m to pounds 155m. Overcapacity and weak demand in chemicals pushed the division from a pounds 62m profit to a pounds 21m loss in the first half.

However, nutrition, which was formally put up for sale yesterday, improved its contribution from pounds 12m to pounds 27m. Oil exploration and production profits dropped from pounds 883m to pounds 835m.

The company aims to tackle its problems by accelerating its programme of disposals, and to raise up to dollars 2bn this year and next from the sale of unwanted businesses in nutrition and chemicals.

In addition, it plans a sharp reduction in capital expenditure from dollars 6.5bn to dollars 5bn next year, the bulk to maintain its existing assets.

The company said that the action was aimed at doubling underlying profits to dollars 500m each quarter in the next three years. 'I am prepared to be judged on the company's results,' said David Simon, who took over as chief executive from Mr Horton.

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