BHP First-Half Profit Surges 72% as Prices Rise

BHP Billiton Ltd., the world’s largest mining company, said first-half profit surged 72 percent, driven by an almost threefold gain in iron ore earnings and spurring a doubling of its share buyback to $10 billion.

Net income was $10.5 billion, or 188.6 cents a share, in the six months ended Dec. 31, from $6.1 billion, or 109.8 cents a share, a year earlier, Melbourne-based BHP said today in a statement. That compares with the $10.2 billion median estimate of nine analysts surveyed by Bloomberg News.

Chief Executive Officer Marius Kloppers joins Rio Tinto Group and Xstrata Plc in raising shareholder returns as China’s demand boosts metal prices. Photographer: Tony Ashby/Bloomberg

Chief Executive Officer Marius Kloppers joins Rio Tinto Group and Xstrata Plc in raising shareholder returns as China’s demand boosts metal prices. BHP, which plans to spend more than $80 billion by 2015 on mines and oilfields, said today global economic fundamentals are improving with further positive signs in developed countries such as the U.S.

“The strength in the iron ore, base metal and coal prices are why all the miners like BHP, Rio and Xstrata are doing well,” Cameron Peacock, market analyst at IG Markets Ltd. in Melbourne, said by phone today. “They’ve been expanding volumes, whereas two years ago there were bottlenecks and they struggled to meet demand from China, they can now meet that demand.

BHP shares declined 1.6 percent to A$46.61 at 10:29 a.m. Sydney time. The Sydney-traded stock has 15 “buy”， five “hold” and no “sell” recommendations, according to data compiled by Bloomberg. Rio fell 0.5 percent.

‘Event Driven’

China’s economic growth accelerated to 9.8 percent in the fourth-quarter as industrial production and retail sales picked up. GDP and capital spending growth this year in China is expected to remain strong in absolute terms, despite growth rates slowing from 2010 levels, BHP said.

“Longer term, we remain confident in the outlook for our core commodities based on emerging markets being the principal drivers of growth,” Kloppers, 48, said in the statement today. “We expect markets to be volatile and event driven, however the continuing urbanization and industrialization of emerging economies, which is still in its early stages, should provide strong structural support over the long term.”

BHP will pay a first-half dividend of 46 cents, up from 42 cents a year earlier. That’s lower than the projected dividend of 48 cents, according to data compiled by Bloomberg. Rio Tinto raised its final dividend to 63 cents from 45 cents, beating a Bloomberg forecast of 55 cents.

Hostile Bid

The company expanded its existing share buyback program to $10 billion, from $4.2 billion in November. That was higher than a forecast $5 billion increase by Citigroup Inc. and met UBS AG’s expectations. BHP revived the buyback plan in November after it scrapped a $40 billion hostile bid for Potash Corp. of Saskatchewan Inc.

BHP recorded a $314 million one-time charge for its failed bid for Potash Corp., the company said. The deal was rejected by Canada because it didn’t meet a requirement to bring the country “net benefits.”

BHP Chairman Jac Nasser is encouraging Kloppers to persist with considering acquisitions, he said Nov. 16. The company has a net cash position of $200 million and has $16.1 billion of cash on hand, it said.

BHP is only interested in “tier one” assets, Kloppers said today on a call with reporters. BHP is considering takeovers in the energy industry, J. Michael Yeager, CEO of the company’s oil and gas division, said in September.

The company’s petroleum unit is the third-largest by sales, Iron ore is the biggest unit, followed by base metals. Earnings from iron ore nearly tripled to $5.8 billion in the half.

Record Copper

First-half sales increased 39 percent to $34.2 billion, the company said in the statement. Profit, excluding one-time items, rose 88 percent to $10.7 billion. Metal prices, as measured by the London Metals Index, gained 44 percent in the half. The price of iron ore delivered to China rose 26 percent in the half, according to The Steel Index.

Rising costs for labor, maintenance and raw materials reduced underlying earnings by $521 million, BHP said.

Copper rose to a record this week after China, the world’s biggest metal consumer, increased its imports as the global economic recovery gathers pace.

Net cash flow more than doubled to $12.2 billion. The weaker dollar against BHP’s main operating currencies cut underlying earnings by $1.1 billion, the company said. The Australian dollar averaged 94 cents in the first half, compared with 87 cents a year earlier, it said.

Earnings from the coking coal unit gained 88 percent to $1.5 billion as supply constraints pushed prices higher. Record rainfall in Queensland forced BHP and other miners including Rio Tinto to close some mines. Force majeure, a legal clause that allows a company to miss deliveries because of circumstances beyond its control, remains in place for some products, it said today.

（source from：Bloomberg）