Another set of bumper results for BHPB, cautious on short term

Finance

BHP Billiton has reported a 16% increase in attributable profits for the year to end-June, but the company said it remained cautious on the short-term outlook for the global economy.

“Uncertainty continues to surround the developed world as governments adjust fiscal policies following a period of significant stimulus and subsequent increase in sovereign debt levels,” said the company in its results report.

Higher commodity prices and price-linked costs added US$1 billion to underlying earnings before interest and tax (EBIT), with greater volumes adding US$1.9 billion compared with financial 2009.

Delving into those numbers shows that higher iron ore and precious metals prices contributed US$5.27 billion to EBIT, while lower coal and manganese prices reduced underlying EBIT by US$4.4 billion.

Referring to the increased volumes, the company said: “…our strategy to maximise production from our low cost assets at all points in the cycle ideally positioned our metallurgical coal and manganese businesses to capitalise on the improvement in market demand.”

Net operating cash flow remained strong, but was down 5% to US$17.9 billion, driven by changes in working capital balances partly offset by higher operating cashflow and lower taxes.

The company spent US$10.7 billion on capital and exploration expenditure, and US$4.6 billion on dividend payments.

Net debt decreased by 41% to US$3.3 billion, lowering the net gearing to 6% from 12% a year earlier. Last week, the company launched a US$40 billion bid for Potash Corporation of Saskatchewan Inc. Commitments for US$45 billion of debt have been secured for the transaction.

Overall the company reported an attributable profit of US$12.7 billion from revenue of US$52.8 billion. A final dividend of US$0.45/share has been declared.