BHP profit falls for first time in 3 yrs

8 Feb 2012, 6:40 pm   -   Source: AAP
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BHP Billiton's $US9.941 billion first half profit is historically high, but analysts were expecting more.

The world's biggest miner BHP Billiton has reported its first profit fall in three years because of lower global prices for iron, copper and coal.

However, the global miner remains confident about the world economy and continuing mining boom.

The $US9.94 billion ($A9.3 billion) first half profit was down 5.5 per cent on its prior corresponding interim result of $US10.5 billion ($A9.83 billion).

Analysts had forecast a net profit for the six months to December 31 of between $US10 billion and $US10.5 billion.

BHP Billiton chief executive Marius Kloppers said the result was still robust and that mining giant was positive about the long-term outlook for the global economy, driven by China and India.

"This strong and predictable performance reflects our strategic positioning as a more diversified company by geography by product and by market," he said.

He said the outlook for the aluminium, nickel and manganese alloy industries remained challenging while demand for steelmaking raw materials, particularly in China, would decrease to more sustainable levels in the longer term.

Mr Kloppers said the base case for the shorter term was a protracted recovery for the developed world with the disorderly unwinding of European government debt remaining one of the key downside risks.

"I am still cautious," Mr Kloppers told journalists at a briefing on Wednesday.

He said demand growth or BHP Billiton's products would remain robust, with copper and iron ore expected to remain supported by compelling fundamentals.

Record iron ore production in Western Australia and stronger bulk commodity and petroleum product prices boosted underlying earnings, BHP Billiton said in a statement.

However, a series of operational woes constrained margins across the broader portfolio as strikes and wet weather-related production interruptions at the Escondida copper mine in Chile and Queensland coal operations exacerbated cost of production pressures.

Morningstar analyst Mark Taylor singled out copper and coking coal as under-performers, with copper earnings before interest and tax (EBIT) down 46 per cent and coking coal earnings steady.

Mr Taylor said Morningstar would likely revise its near-term earnings forecasts for BHP Billiton although though the impact to its valuation and recommendation would probably only be minor.

Other poor performers were aluminium, base metals, nickel and diamonds.

It was the key iron ore and petroleum divisions that shone, representing more than 75 per cent of $US15.7 billion ($A14.58 billion) in total group earnings.

The petroleum division surprised with a better than expected EBIT of $US3.9 billion ($A3.62 billion) despite low US domestic gas prices.

Mr Kloppers would not say whether BHP Billiton would write down its US gas assets but he expected improvements in oil production to provide an offset.

BHP Billiton plans to increase iron ore production in Western Australia's Pilbara to 350 million tonnes per annum (Mtpa) by 2020, from 178Mtpa currently, and expand port facilities in the state.

A fully franked interim dividend of 55 US cents (A51.47 cents) was declared, up from 46 US cents at the same time last year but unchanged from the previous half, which disappointed some investors.

City Index analyst Peter Esho described the overall result as solid but noted increased net debt of $US21.5 billion ($A19.97 billion), up from $US15.6 billion ($A14.49 billion) previously.

BHP Billiton shares closed down 15 cents, or 0.4 pe r cent, at $37.75 compared to gains in the broader market of about 0.4 per cent.

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