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Weak dollar drags on BHP result
MELBOURNE, Australia (Reuters) -- The world's largest diversified miner, BHP Billiton, says its September quarterly profit fell nine percent from a year earlier on the weak U.S. dollar. But it forecast robust demand from China and a pick-up from the recovering Japanese and U.S. economies this year. BHP Billiton, which books most of its sales in U.S. dollars, said Wednesday profit was $518 million in the first quarter ended September 30, compared with $572 million a year ago. Revenue jumped 23 percent to $4.826 billion. The result was below analysts' median forecast of $553.9 million. BHP Billiton and rival Rio Tinto are benefiting from strong commodities demand from China and increased optimism for a turnaround in the U.S. economy, which has driven metals prices higher. But a 25 percent rise in the Australian dollar and a 34 percent jump in the South African rand hiked operating costs in the September quarter, offsetting higher prices for copper, nickel and iron ore. BHP Billiton said economic activity in Europe was weak but the general outlook for sales volumes looked "pretty strong" as conditions in the U.S. and Japan improved and Chinese demand keeps growing. "The producers are now quoting direct evidence of increased physical demand for the vast majority of their commodities, and that is a new development," J.P. Morgan analyst Richard Rossiter said. Chief Financial Officer Chris Lynch told a briefing sales to China in the first quarter were about $440 million -- about nine percent of total revenue -- and on track on an annualized basis to rise about 50 percent from last year to $1.8 billion. BHP Billiton said that profit would have jumped 36 percent excluding the impact of currency movements, which it estimated at $215 million. Its commodities—petroleum, iron ore, coal, aluminium, copper and nickel—are mostly priced in U.S. dollars, but production costs are in Australian dollars and South African rand. About 51 percent of the company's net operating assets are in Australia and southern Africa, causing costs to increase when currencies in those countries rise against the U.S. dollar. The strong currency also increases servicing costs for non-U.S. dollar-denominated debt. BHP Billiton shares are down 1.16 percent to A$11.12 in afternoon trade Wednesday. The wider Australian market is up 0.7 percent. The stock has gained about 10 percent this year. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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