[Bhpbilliton] BHP means Bloody Huge Profit in 2010 !!

[Andy Whitmore]

BHP means Bloody Huge Profit in 2010

Simon Benson, The Daily Telegraph - 
http://www.dailytelegraph.com.au/news/national/bhp-means-bloody-huge-profit/story-e6freuzr-1226007202210

17 February 2011

MINING giant BHP gave a $10.6 billion boost to Julia Gillard's plans for 
a mining tax after posting a staggering half-year profit yesterday.

The miner's earnings soared by a record 72 per cent in just six months - 
but yesterday its share price dipped less than 1 per cent.

Treasurer Wayne Swan said the result effectively buried fears the big 
mining companies did not have the capacity to absorb the Federal 
Government's planned 30 per cent minerals resource rent tax (MRRT).

But Prime Minister Julia Gillard now faces the threat of a campaign by 
the Greens in the Senate to force the Government to lift the tax rate 
back up to 40 per cent, as first flagged when proposed by Kevin Rudd.

And Opposition Leader Tony Abbott has maintained the Coalition's 
position that the mining industry pays too much tax.

The profit result was announced as the Government was forced to defend 
the deal between Ms Gillard and the three major miners last July, in 
which they agreed to drop their campaign against the tax in return for a 
revised rate of 30 per cent. Treasury forecasts have suggested that the 
new deal would leave the Government $60 billion worse off in revenue 
over 10 years than it otherwise would have been had it maintained a rate 
of 40 per cent.

Greens leader Bob Brown, whose party will have the balance of power in 
the Senate after July, said he would pressure the Government for the 
original resource super profits tax to be reinstated.

"The big mining companies will effectively take $60 billion out of 
Australian taxpayers' pockets as they gouge profits out of Australian 
soil and ship it offshore," he said.

But Ms Gillard, speaking from New Zealand, said she would not welch on 
the deal with miners and would not budge on the 30 per cent rate.

"We will not be compromising that agreement to secure the legislation," 
she said.

The Greens are also unlikely to get any amendments into the legislation, 
due in the second half of the year, as the Coalition is opposed to any 
tax at all and would not support the Greens push in the upper house.

BHP CEO Marius Kloppers had originally stated that the company was not 
opposed to a profits-based tax to replace the blunt instrument of 
state-based royalties. However, BHP had argued against the model being 
proposed by the Federal Government as it had not indemnified companies 
from future royalty rises by the states, for which the Commonwealth 
would not compensate miners.

Mr Swan said BHP's profit demonstrated why the Government had fought 
hard for the tax. "It was pretty clear that we were not going to get the 
original proposal through, it was very clear that we needed to design a 
tax with different features, which did raise less revenue," he said.

----------------------

Keeping BHP’s powder dry

Stephen Bartholomeusz, Business Spectator - 
http://www.businessspectator.com.au/bs.nsf/Article/BHP-Billiton-Marius-Kloppers-buyback-iron-ore-copp-pd20110216-E4VC5?OpenDocument&src=sph&src=rot

16 February 2011

While it might appear odd to say that a company that has just expanded 
its capital management program by $5.8 billion, increased its dividends 
and announced plans to spend more than $US80 billion expanding 
production is keeping its powder dry, that is a conclusion one could 
draw from the remarkable result BHP Billiton produced today.

BHP Billiton produced a record $US14.5 billion profit, up 59.2 per cent, 
with record margins (an underlying overall earnings before interest and 
tax margin of 46 per cent), a record on capital of 48 per cent and 
near-record net operating cash flow of $US12.2 billion.

That’s despite the hiatus in production well drilling in the Gulf of 
Mexico as a result of the Deepwater Horizon disaster (which BHP Billiton 
says cost it $US464 million as a result of lost volume) the disruption 
to its Queensland coal operations caused by floods and an effective 
increase in costs of more than $US1 billion as a result of the weak US 
dollar.

The most striking aspect of BHP Billiton’s result is that, as a 
consequence of those surging cash flows, and despite reinvesting more 
than $US5.6 billion in its business during the half, BHP Billiton is now 
sitting on $US16.1 billion of cash. Its balance sheet contains no net 
debt – it has about $US200 million of net cash.

Marius Kloppers talked down the prospect of another attempt at a major 
acquisition by saying that there were very few targets that met BHP 
Billiton’s tier one criteria and that the owners of those few that did 
tended, in the current environment, to have an inflated view of what 
their assets were worth.

Even with the continued ramping up of BHP Billiton’s capital expenditure 
– at the moment it has about $US11 billion of projects under development 
but the plan to spend more than $US80 billion from this year until 2015 
implies a very significant acceleration in its spending – if it 
continues to generate the cash flows it is capable of generating while 
commodity prices remain at current levels, BHP Billiton would have a 
massive amount of balance sheet capacity.

The expansion of its capital management from $US4.2 billion to $US10 
billion is somewhat more aggressive than it appears, given that it is 
scheduled to be completed by the end of this year. Rival Rio Tinto’s 
$US5 billion buy-back program is, by comparison, spread over two years. 
BHP also continues to ratchet up its dividends, with the 46 US cents a 
share interim dividend absorbing $US2.6 billion.

Even if all its financial settings remained static for the next five 
years, however – which they won’t, given the continuous pipeline of new 
projects that will be brought into operation over the period – BHP 
Billiton would still probably have about $US10 billion of extra net cash 
at bank in 2015 if it doesn’t continue to buy back large slabs of its 
capital or make a major acquisition.

Kloppers made the point this morning that those expecting a supply-side 
response to the high commodity prices to kick in and undermine those 
prices are probably underestimating the impact of the financial crisis 
on the capital expenditure programs of its rivals. BHP Billiton was the 
only major miner to continue to invest heavily, indeed to expand its 
investment program, during the worst of the crisis.

If he is right, it could take another couple of years, if not longer, 
before the anticipated flood of new production materially impacts the 
markets for the commodities BHP Billiton produces.

To provide some perspective on the embarrassment of riches Kloppers 
faces if the boom in commodity prices does persist over the next few 
years it is worth noting that BHP Billiton has returned, through 
dividends and buy-backs, almost $US30 billion to its shareholders over 
the past five years – and still emerged with a balance sheet that has no 
net debt.

The amounts of cash BHP Billiton does generate over the next few years 
is, of course, dependent on commodity prices and a continuation of the 
growth in the Chinese and Indian economies in particular, although the 
slowly improving condition of the developed economies will also be helpful.

In the latest half the impact of higher prices alone, at $US8.5 billion, 
matched the earnings BHP Billiton generated in the previous 
corresponding half.

There are some pressures – the weak US dollar and rising input costs, 
particular for labour – but the unique strength of BHP Billiton’s 
diversified portfolio of resources, and the consistently strong cash 
flows and margins that portfolio generates provides a lot of headroom to 
absorb them as well as a lot of insulation against volatility in 
particular commodity prices.

----------------

BHP announces $10bn share buy back, renewed focus on expansions

BHP Billiton announced an almost doubling of half year profit and said 
it will pour money into expansions, rather than chase ambitious takeovers

Sonali Paul, Reuters - 
http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=120688&sn=Detail&pid=92730

16 February 2011

MELBOURNE - BHP Billiton , the world's biggest miner, bowed to investors 
with plans to hand back $10 billion and pour money into expansions 
rather than chase ambitious takeovers, after nearly doubling its 
first-half profit to a record.

The Anglo-Australian giant, flush with cash, said it plans to spend $80 
billion on development and expansion projects over the next five years, 
playing down the near term chances of a major acquisition.

"The biggest surprise is the commitment to spend $80 billion over the 
next five years," said James Bruce, portfolio manager at Perpetual 
Investments, one of BHP's top 10 Australian shareholders.

"We think that this demonstrates the challenges that the industry is 
having satisfying rising demand, while replacing declining production 
from mature operations," he said.

BHP Chief Executive Marius Kloppers said the company's acquisitions 
sights remained focused on snaring long-life, low-cost, expandable assets.

But he said in light of the difficulties it faced on the three big deals 
it had to ditch over the past three years and the high price of 
potential targets, acquisitions may be too hard.

"While I can't rule out anything... if you put those couple of things 
together, you have a clear takeaway of our priorities, particularly in 
the light of the emphasis of the capital investment programme today," he 
told reporters on Wednesday.

BHP forecast a strong outlook for commodities markets, due to tight 
supplies, but like its rival Rio Tinto , it warned that prices could be 
volatile.

"While we expect a slowdown in the growth rate of global commodity 
demand in calendar year 2011, the economic environment still underpins a 
robust near term outlook for our products," Kloppers said.

Kloppers said industry observers had long overestimated supplies, and he 
predicted that over the next one to two years supplies would remain 
tight, with few new large expansions or projects coming on line.

BIG BUYBACK

Investors had high hopes for a big share buyback as the miner is nearly 
debt free, its cashflow is booming and its failure to complete major 
takeovers limit its expansion options.

In the two weeks leading up to the result, its shares rallied 9 percent 
to a 33-month high in expectations of a buyback, and as expected, its 
shares retreated once the buyback was announced.

BHP shares last traded down 1.8 percent at A$46.50, lagging a 0.3 
percent fall in the broader market.

Despite the recent rally, BHP shares are trading on a cheap forward 
earnings multiple of 11.9, which has 13 out of 16 analysts rating it a 
buy or strong buy.

The $10 billion buyback follows Rio Tinto's plan to return $5 billion to 
shareholders over the next two years, which some investors considered 
too little.

Kloppers said the company was most likely to follow the pattern it has 
for previous buybacks, buying its UK shares on market and buying its 
Australian shares off-market, but said no decisions had been made yet.

It is already in the midst of conducting a $4.2 billion buyback of its 
UK shares.

BHP's attributable profit before exceptional items soared to $10.7 
billion for July-December from $5.7 billion a year ago, beating an 
average forecast of $10.3 billion from 14 analysts.

"It looks to be a pretty robust set of numbers. I think it's ahead of 
market expectations and I think the $10 billion capital management 
initiative will be well received," said Neil Boyd-Clark, portfolio 
manager at Arnhem Investment Management, another BHP shareholder.

BHP stepped up its interim dividend by 10 percent to 46 cents a share, 
compared with broker forecasts of around 49 cents.

First-half earnings from iron ore nearly tripled, while earnings from 
base metals, including copper, jumped 45 percent.

Petroleum earnings, which set BHP apart from its mining peers, rose 23 
percent.

BHP added that sharp cost increases cut its earnings by $521 million.

Kloppers said while materials cost increases were offset by price 
increases on BHP's key products, labour shortages were starting to bite, 
particularly in engineering jobs in Western Australia where billions of 
dollars of iron ore and oil and gas projects are competing for manpower. 
(Editing by Ed Davies and Balazs Koranyi)

------------------------

BHP posts $10.5B profit

Colin Jacoby - http://www.miningnews.net/StoryView.asp?StoryID=2382043

16 February 2011

BHP Billiton has reported a better-than-expected first-half profit on 
the back of soaring commodity prices and has joined Rio Tinto in 
boosting shareholder returns.

The big Australian today reported earnings of $US10.5 billion ($A10.5 
billion), a 71.5% jump on the previous corresponding period’s profit of 
$6.1 billion, and underlying earnings of $10.7 billion, compared to $5.7 
billion a year earlier.

The result beat expectations from Macquarie analysts of underlying 
earnings of $10.5 billion and a consensus estimate of $10.3 billion.

Revenue for the period grew 39% to $34.17 billion while underlying 
earnings before interest, tax, depreciation and amortisation (EBITDA) 
jumped 60% to $17.3 billion and underlying earnings before interest and 
tax (EBIT) gained 74% to $14.8 billion thanks to stronger realised 
prices during the period.

Underlying EBIT margin and underlying return on capital came in at 46% 
and 41% respectively.

“The group’s ongoing commitment to invest through the cycle has ideally 
positioned BHP Billiton to deliver consistent and high-value production 
growth into generally tight and growing commodity markets,” BHP said.

“In that context, robust operating performance was reported across the 
portfolio with three commodities and five businesses achieving 
production records in the December 2010 half year.”

Operating cash flow for the half year has more than doubled from $5.5 
million reported in the previous corresponding period to $12.2 billion.

“This balance-sheet strength affords BHP Billiton substantial 
flexibility as it embarks on significant investment in organic growth 
that is expected to exceed $US80 billion over the five years to the end 
of the 2015 financial year,” BHP said.

However, the miner also noted a devaluation of the US dollar and 
inflationary pressures reduced underlying EBIT by a combined $1.4 billion.

Exploration and capital spending during the half year totalled $5.6 
billion, of that spending on minerals projects was $3.5 billion.

In its iron ore division, revenue gained 109.5% year-on-year to $9.4 
billion while underlying EBIT gained 178% year-on-year to $5.8 billion 
thanks to Western Australian Iron Ore achieving record production and sales.

Base metals also had a stellar half year with revenue up 29% to $7.1 
billion and underlying EBIT up 45.4% to $3.6 billion on the back of 
higher average realised prices for its core commodities.

BHP said stronger production at Olympic Dam, Cannington and Pampa Norte 
increased underlying EBIT by $141 million.

At Olympic Dam, record hoisting rates for the half year were reported 
following the repair of the Clark Shaft while record milling rates 
increased production for Pampa Norte.

Shareholder returns

BHP also today followed in the footsteps of Rio Tinto in boosting 
shareholder returns, announcing a 10% increase in its interim dividend 
to US46c per share and a boost to its capital management program to $10 
billion.

“BHP Billiton will continue to consider both on and off-market execution 
for the $10 billion program and, subject to market conditions, expects 
to largely complete the initiative by the end of the 2011 calendar 
year,” BHP said.

Once the $10 billion capital management program has been completed, BHP 
would have repurchased $22.6 billion in shares since 2004, representing 
15% of issued capital.

This comes after rival Rio announced a 20% increase in its dividend to 
$1.08/share and capital management program, comprising a $5 billion 
share buyback by the end of 2012, in half-year results last week.

Cautiously optimistic

BHP chief executive officer Marius Kloppers said the company remains 
“cautiously optimistic for the short-term outlook for the global economy”.

This was based on emerging market growth and positive signs of a 
recovery in major developed economies including the United States.

However, Kloppers warned of the ongoing risk of European sovereign debt.

“Despite the short-term risks, we remain positive on the longer term 
outlook for the global economy,” he said.

“We expect markets to be volatile and event-driven, however, the 
continuing urbanisation and industrialisation of emerging economies, 
which is still in its early stages, should provide strong structural 
support over the long term.”

On the commodities front, Kloppers said bad weather conditions in 
Australia, Brazil, Columbia, South Africa and Indonesia have had a major 
impact on supply and has led to tighter market fundamentals and higher 
prices for coal, iron ore and copper.

“There will likely be a lag effect before normal levels of production 
flow through to the supply chain,” he said.

Looking ahead, he expects a slowdown in the growth of worldwide 
commodity demand in 2011, but economic environment still underpins a 
robust near-term outlook for its products.

“The publication and implementation of China’s twelfth five-year plan in 
March 2011 will have important implications for commodity demand in the 
medium term,” he said.

“We expect a slower but more sustainable economic growth model to lead 
to a reduction in resource intensity per unit of [gross domestic 
product], however, absolute demand for our commodities is likely to 
remain strong.”

In the longer term, Kloppers believes BHP’s core commodities will still 
be buoyed by growth in the emerging markets.

Shares in BHP were trading 82c lower at $46.54.