BHP profits surge to record highs

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Global mining giant BHP Billiton said Wednesday its full-year net profit almost doubled to a mammoth US$23.6 billion, citing robust demand from China and India for what is Australia's biggest ever result.

BHP said the performance, which included unprecedented revenues of US$71.7 billion and record output in four key commodities including iron ore, reflected strong growth in developing economies.

"Robust demand, industry-wide cost pressures and persistent supply side constraints continued to support the fundamentals for the majority of BHP Billitons core commodities," the Anglo-Australian miner said.

"Another strong year of growth in Chinese crude steel production ensured steelmaking material prices were the major contributing factor to the US$17.2 billion price-related increase in underlying earnings."

The result in the year to June 30 was up 86 percent from the previous 12 months.

BHP, the world's biggest miner, said commodities had remained "an asset of choice" in 2011 and it expected robust demand in the short and medium term, despite some monetary policy tightening in India and China dampening growth.

"The fundamentals for iron ore and metallurgical coal remain compelling as the supply response is expected to remain constrained and capital costs are expected to rise," it said.

"Over the longer term, we expect strong demand for our core commodities to be underpinned by the industrialisation and urbanisation of China, India and other emerging economies.

"We expect robust demand in the short and medium term, supported by commodities-intensive emerging economic growth," it added.

But the resources giant warned of global skills shortages and said supply-side tightness was expected to begin easing in "several commodities", also sounding a warning on worldwide instability.

"Global imbalances and high levels of sovereign debt continue to create uncertainty and a protracted recovery remains our base case assumption for the developed world," BHP said.

"However, a coordinated policy response has the potential to engender confidence and ease the volatility that has been the dominant theme of recent years."

The company said its investment in its flagship Australian iron ore operations through the depths of the global financial crisis had delivered an 11th consecutive year of production growth "as prices continued to test new highs".

Booming average prices for the key steelmaking ingredient boosted earnings by US$8.5 billion following the transition to shorter-term market-based pricing, it said.

Record production was also achieved at its Australian thermal coal operations, and was accompanied by a 13 percent boost in coal output in South Africa, adding US$177 million to earnings.

It said steelmaking coal output was disrupted by persistent flooding in northern Australia, with total production falling 13 percent from the previous year, though higher prices meant the business was more profitable overall.

Permit delays in the Gulf Of Mexico had affected worldwide oil volumes, but BHP said its petroleum earnings were up 38 percent at US$6.3 billion due to surges in the average price of oil (28 percent) LNG (22 percent) and natural gas (17 percent).

The miner reported some $12.4 billion in investments across the year and said it had "the capacity to comfortably fund its extensive organic growth programme and the US$15.1 billion acquisition of Petrohawk Energy Corporation."

Surging prices boosted earnings by US$18.6 billion overall, but the slump in the US dollar had shaved off US$3.2 billion.

© 2011 AFP

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