BHP earnings drop on weaker greenback, prices
BHP Billiton Limited (BHP) said lower commodity prices and a weak US dollar adversely impacted earnings for the six months to 31 December 2009 compared to the prior corresponding period. The mining giant reported a 7% drop in net profit excluding exceptional items for the half year to US$5.7 billion on a 17.5% fall in revenue to US$24.6 billion.
Analysts' consensus for the mining giant was a result of US$5.1 billion.
However, the company said net profit including exceptional items jumped 134.4% to US$6.14 billion.
Underlying EBIT was 28.5% lower at US$8.5 billion, while the company said its balance sheet remains strong, with net gearing of 15.1%, net debt of US$7.9 billion, and Underlying EBITDA interest cover of 42 times.
BHP said government stimulus measures appear to have supported the restocking activities in the developed economies and a gradual return to normalised global trade.
”Despite this positive momentum, we remain cautious about the speed and strength of the global economic recovery across the developed world,” the company said.
”It appears that stimulus measures that supported the recovery have not fully addressed structural issues such as weak labour markets and excess production capacity in developed economies.”
BHP also said the impact of any measures to control loan growth in China would be a key factor.
”It is evident that in the short term, the Chinese Government will focus on containing asset inflation,” the company said.
”Notwithstanding our caution in the short term, over the long term we continue to expect emerging economies’ growth to strongly outperform the developed economies as they follow a path of continued urbanisation and industrialization.”
Looking at the outlook for commodities, BHP expects markets to continue to be largely dependent on Chinese and Indian demand.
“In the short term, it is critical to monitor the pace of monetary tightening and the rate of loan growth for commodity intensive sectors in China,” the company said.
"We do not expect China to stop lending, however, reduced credit liquidity in key segments of the commodity market may have a flow-on impact on prices.”
In the long term, BHP forecasts strong demand for its commodities.
”Any effects on commodity demand due to potential weakness in developed countries are likely to be offset over time by continuing growth as China and India urbanise and industrialise,” the company said.
”However, with reduced capital investment in new mining capacity since 2007, supply may struggle to keep pace with demand in the medium and longer term.”
BHP’s board declared an interim dividend of 42 USc per share, an increase of 1 USc per share.
At the close of trade Tuesday, BHP shares were trading at $39.85.
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