BP investors hit by dividend cut

SHAREHOLDERS in BP are facing a cut in their quarterly dividend despite soaring profits at the privatised oil giant led by chief executive Lord Browne.

Britain's second-largest company after banking giant HSBC, today reported a 44% increase in net profits to $2.4bn (£1.42bn) for the third quarter of this year compared with the second. That takes the nine-month surplus up to $13.5bn from $9.4bn in 2002.

However, the payout to British shareholders is set to fall to 3.86p a share for the third quarter, against 4.04p in the second quarter and 3.9p in the third quarter of last year.

The drop will affect BP's army of private shareholders, many of whom have stayed loyal since its privatisation in 1987.

The dividend cut stems from the impact of a weak dollar, which has dived 10 cents to about $1.69 against sterling in the past few months. As BP declares its results in the US currency, this will lead to a real cut in income for British investors when converting into sterling.

But foreign shareholders remain unaffected as the 6.5 cents payout is unchanged from the second quarter.

Over the first nine months of this year, the dollar payout has been improved by 8.5% but is virtually unchanged in sterling terms at 11.84p. Thanks to soaring oil prices, profits from the group's exploration and production business climbed to $3.5bn in the third quarter, against $1.6bn in the same period last year.

Refining and market profits rose to $455m, against $237m, but the result was sharply lower than the $889m in the second quarter, due to $318m of write offs, including environmental costs. Browne warned that refining margins were set to fall in the fourth quarter.