BHP profits more than double as Potash battle looms
BHP Billiton's annual profits more than doubled on the back of surging commodities demand, it said Wednesday, one week after launching a 40-billion-dollar hostile bid for Canadian fertiliser firm Potash.
Profits after tax soared to nearly 13 billion dollars in its year to June 2010 as commodity prices rebounded on renewed demand for raw materials from emerging markets, notably China, amid the global economic recovery.
The world's biggest miner added that it enjoyed record sales volumes for key commodities iron ore, metallurgical coal used in steelmaking, and petroleum.
However, BHP sounded a note of caution about the outlook for its products which also include iron, nickel and a host of other metals and commodities, along with oil and gas.
The Anglo-Australian group last Wednesday launched a mammoth hostile all-cash takeover bid for Canada's Potash Corp, which values the world's largest fertiliser producer at 40 billion dollars.
Potash has rejected the bid as "wholly inadequate" and said it was exploring other offers. A report meanwhile 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 many analysts expect the group will have to increase it to secure a deal.
The company has however shown itself willing to walk away from mega deals after abandoning a hostile 150 billion-dollar bid for rival Rio Tinto in 2008.
BHP Billiton 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 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 from 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 said its net profit for the 12 months to June rocketed to 12.72 billion dollars (10.06 billion euros) from 5.88 billion dollars in 2008/09.
Excluding exceptional items, underlying net profit was up 16 percent at 12.47 billion dollars, which was however below analyst consensus forecasts for 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.
"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."
BHP Billiton said revenue rose 5.2 percent to 52.80 billion dollars.
Its shares were higher earlier on the results but then slipped to close 2.0 percent down at 1,767 pence on London's FTSE 100 index, which finished 0.90 percent lower.
The group 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: ""Following a broad recovery in prices for the majority of BHP Billiton's products, the short-term outlook for commodities is 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."
- Dow Jones Newswires contributed to this report -
© 2010 AFP