BHP Billiton profits soar amid Potash battle
BHP Billiton revealed Wednesday that annual profits more than doubled, as the world's biggest miner faced having to hike its 40-billion-dollar takeover offer for fertiliser giant Potash Corp.
BHP said profits after tax soared to nearly 13 billion dollars in 2009/2010, as commodity prices rebounded on renewed demand for raw materials from emerging markets, notably China, amid global economic recovery.
The Anglo-Australian miner last week launched a mammoth hostile all-cash takeover bid for Canada's Potash Corp, which values the world's largest fertiliser producer at 40 billion US dollars.
However Potash on Monday formally rejected the bid as "wholly inadequate" and said it was exploring other offers. A report Wednesday said Chinese energy giant Sinochem Group was "evaluating" the possibility of launching a rival bid.
BHP's cash offer was pitched at 130 dollars per Potash share and analysts expect the group will have to increase this to secure a deal.
However the company has shown itself willing to walk away from mega deals after abandoning a hostile 150 billion-dollar bid for rival Rio Tinto in late 2008.
BHP Billiton's chief executive Marius Kloppers, who had launched the pursuit of Rio Tinto, said Wednesday that the company would apply discipline over Potash.
"I will be as disciplined on this bid as I have been," Kloppers told reporters in a conference call.
BHP wants to buy Potash Corp to enable it to expand in the agricultural sector amid soaring wheat prices and strong food demand to meet the needs of the world's growing population.
Potash is a fertiliser widely used in farming to replenish nutrients in soils and increase crop yields.
"BHP will inevitably end up paying more for Potash Corp. and we are at the beginning of a process that will last some time," said analyst Peter Davey at brokers Ambrian.
BHP meanwhile announced on Wednesday that its net profits for the 12 months to June rocketed to 12.722 billion US dollars (10.062 billion euros) from 5.877 billion dollars in 2008/2009.
Excluding exceptional items, underlying net profit was up 16 percent at 12.47 billion dollars, which was however below analysts' consensus forecast for earnings of 12.6 billion dollars, according to Dow Jones newswires.
Profits would have been higher had BHP not suffered 59 million-dollar charge owing to a deepwater drilling moratorium in the Gulf of Mexico in the wake of the recent huge oil spill there.
"BHP Billiton delivered another strong set of results despite significant volatility in the macro economic environment," the group said in its earnings statement.
"Record sales volumes were achieved in three of our major commodities as our focus on efficiency and productivity at all points in the cycle ensured we were well positioned to capitalise on the recovery in demand and prices," it added.
BHP Billiton said that revenue rose by 5.2 percent to 52.798 billion dollars in 2009/2010. The group's share price gained early on, but was down 0.28 percent at 1,798 pence in afternoon trade on London's falling FTSE 100 index.
BHP added that it remained cautious on the short term outlook for the global economy.
"After a period of rapid recovery in the developing world, economies such as Brazil and India have returned to full output and the focus has now shifted away from supporting growth, towards controlling inflation," it said.
It noted that commodity-hungry China had implemented "meaningful measures aimed at controlling rapid economic expansion and asset inflation".
BHP added that following a broad recovery in prices for the majority of its products, the short term outlook for commodities was mixed.
"There is strong physical demand for some commodities, such as copper, where consumers are restocking and premiums continue to rise. Elsewhere, there is weaker demand."
© 2010 AFP