China sales drive up BHP profit
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CEO Goodyear says he expects strong demand from China to continue.
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MELBOURNE, Australia (Reuters) -- The world's largest diversified miner, BHP Billiton, says its first-half profit jumped 30 percent to $1.2 billion, driven by surging sales in China and rising metals prices.
The result was at the top of analysts' expectations, with a big jump in contributions from base metals and stainless steel materials as copper and nickel prices soared to multi-year highs.
BHP Billiton said it would accelerate smaller-scale expansions and bring forward bigger projects for commodities in demand, as it was seeing strong orders for its products and a continued recovery in global economies.
Chief Executive Chip Goodyear said China contributed $1.1 billion toward total six-month revenues of $10.9 billion, almost equalling its previous full-year contribution.
The company said China's growth was driving a recovery in other Asian economies, which was expected to continue.
"At the current time we see no slowdown in terms of product demand from our end," Goodyear said.
Analysts said the results reflected a better-than-expected improvement in price rises and the miner was poised for an exceptional 2004-05 off the back of continued demand in China, which made up 10 percent of the group's first-half sales.
"We think commodity prices, such as for copper and nickel, will continue to hold up but importantly BHP has recently secured large price increases for both coal and iron ore," said Commonweath Securities analyst Peter Harris.
BHP Billiton's net profit of $1.213 billion, excluding exceptional items, for the six months ended December 31 was up from $931 million a year ago.
Including exceptional items, involving a legal settlement and a tax restatement, BHP Billiton posted a net profit $1.339 billion, compared with $912 million a year earlier.
A Reuters survey of analysts in Britain and Australia had forecast earnings, excluding one-off items, of $1.063 billion, within a range of $991 million to $1.212 billion.
BHP Billiton's shares are 0.6 percent higher to A$12.10 in Thursday afternoon trade in a flat overall market. Its shares have gained about 40 percent from the end of June, well ahead of an 11 percent gain in the wider market.
BHP Billiton said base metals earnings before interest and tax (EBIT) rose fourfold to $333 million due to increased output and higher copper prices, which rose 39 percent on world markets during the second half of 2003.
Stainless steel materials earnings more than tripled to $193 million on higher nickel prices, which doubled in the second half of 2003.
Its major carbon steel division, which includes iron ore and coking coal, posted flat earnings despite record iron ore shipments and higher prices due to an adverse currency impact.
Smelter expansions and higher prices boosted the aluminium division's earnings by 15 percent to $307 million.
Earnings from its major petroleum division fell nine percent to $602 million as oil and condensate production slipped.
BHP Billiton said the strength of the Australian dollar and South African rand curtailed earnings growth.
The Australian dollar rallied about 34 percent over the 12 months ended December 31 to 75 U.S. cents. The volatile rand rallied about 28 percent over the year.
"If we adjust for these currency items, the underlying profit performance was up a little over $500 million, or 52 percent from the prior period," Goodyear said.
About half of BHP Billiton's operations are in Australia and South Africa and the rise in the local currencies increased operating costs in U.S. dollar terms.
Non-U.S. denominated debt, tax liabilities and other provisions are also inflated by the stronger local currencies.
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Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
