BHP profit doubles on metals demand
February 17, 2005
By James Regan and Ben Harding
Sydney and London - BHP Billiton, the world's biggest mining company, said first-half profit more than doubled on Chinese-led metals demand, but forecast that a global shortage of refined copper would ease in the next year.
"It looked promising for the next year or so, which is what the market is really expecting," said Don Hamson, the head of active Australian equities at State Street Global Advisers.
BHP Billiton, whose products range from copper and iron ore to oil, said it expected demand to outstrip supply over 2005. After that, world appetite for key revenue earners such as copper was likely to back off as more metal found its way to users.
The refined copper shortage - which has pushed prices up 40 percent to about $3 150 (R18 870) a ton in the past year - should ease as more smelters came on line, said BHP Billiton chief commercial officer Marius Kloppers.
Profit excluding exceptional items for the six months to December rose to $2.76 billion from $1.2 billion a year earlier.
Even before the results, analysts had expected BHP Billiton would earn more than $5 billion for the year - the highest profit ever for an Australian-listed company.
"We've got it closer to $6 billion now," said Macquarie Bank analyst Ben Lyons, who had previously pegged a full-year profit of $5.79 billion.
Comments by chief executive Chip Goodyear that growth in China's appetite for commodities was likely to taper next year did little to dampen expectations that profits will swell further.
"We expect to see continued strong growth in China for 2005, although we expect it to be somewhat lower than what is was in 2004," Goodyear said.
Globally, Goodyear said, growth prospects in calendar 2005 were strong but "below the spectacular performance of 2004".
"They seem to be more bullish on the [commodities] cycle than they suggested three months ago," said one analyst.
He added that this might make the company more open to acquisitions in the base-metal sector, such as copper.
BHP Billiton, along with other big mining houses, has been mentioned by analysts as a potential counterbidder for Australia's WMC Resources, which is fighting a hostile offer from Xstrata.
Goodyear declined to say whether BHP was interested in WMC.
Copper prices jumped 19 percent in the second half of 2004, while aluminium prices rose 13 percent.
Higher coal, iron ore, nickel and oil prices also boosted BHP's bottom line.
"The industry is at its full capacity in most significant commodities. We don't see much flex at all in the system," Goodyear said.
The full-year profit should get a boost from higher prices for the iron ore and coal that BHP Billiton mines from vast deposits in the Australian outback.
Jonathan Battershill, a mining analyst at stockbroker Hartleys, said iron ore prices would rise at least 50 to 75 percent after increasing 18.6 percent last year.
Every $1 rise in the price of iron ore adds about $60 million to BHP Billiton's full-year net profit. The same increase in coking, or metallurgical, coal prices adds $25 million to the bottom line.
|
|
