BHP Billiton Group (BHP,BHP.AX,BBL,BLT.L), the world's largest mining company, on Tuesday reported a profit for the first half of fiscal year 2010 that more than doubled from last year, boosted by strong sales volume growth and cost control. The results were also helped by the reversal of an impairment charge recorded in the year-ago period. However, profit excluding exceptional items, declined 7% from last year.
Looking ahead, the company said it remained cautious about the short-term outlook. The company also announced an increase in the interim dividend.
The Melbourne, Australia-based company reported attributable profit of US$6.14 billion for the first half, up from US$2.62 billion in the same period last year. Basic earnings per share for the half year rose to US$1.103 from US$0.47 a year ago.
The company noted that strong sales volume growth on the back of demand recovery, particularly in steelmaking raw materials and cost control across the business helped partially offset lower prices and stronger producers' currencies.
Exceptional items for the latest half-year period include reversal of impairment charge relating the suspension of Ravensthorpe nickel operations of US$433 million. The company said in early December that it signed a deal to sell the Ravensthorpe Nickel Operation. As a result of the this, impairment charges recorded in the financial year ended June 30, 2009 were partially reversed.
The results for the year-ago period primarily included US$3.36 billion of impairment charge and other items.
Excluding exceptional items, attributable profit for the first-half declined 7% to US$5.70 billion from US$6.13 billion in the prior-year period. Basic earnings per share for the half year were US$1.025, down 6.9% from US$1.101 a year earlier. BHP Billiton's revenues for the first half declined 17.5% to US$24.58 billion from US$29.78 billion in the same period last year. Revenue from group production was US$22.20 billion, lower than US$25.43 billion recorded in the previous year.
While commodity prices recovered during the latest half-year period from the preceding six months, driven by the rapid economic recovery of China and restocking across the developed economies, realized prices for most of the company's products were lower than the prices achieved during the same period of the prior year. The strength of operating currencies against a weak U.S. dollar negatively impacted costs.
For the first half, iron ore revenues declined 25.6% to US$4.48 billion, petroleum revenues declined 0.8% to US$4.18 billion, energy coal revenues dropped 50.9% to US$2.14 billion, metallurgical coal revenues dipped 44.7% to US$2.72 billion and manganese revenues fell 53.7% to US$888 million. Aluminum revenues were down 20.4% to US$2.00 billion.
Meanwhile, base metal revenues surged up 66.55% from last year to US$5.47 billion, stainless steel material revenues rose 50.3% to US$1.66 billion and revenues from diamonds and specialty products climbed 23.9% to US$566 million.
Underlying EBIT for the period declined 28.5% from the comparable period last year to US$8.50 billion. The weaker U.S. dollar against BHP Billiton's main operating currencies cut underlying earnings by US$1.54 billion, the company said. EBIT margin for the period was 37.9%, compared to 45.6% in the prior-year period.
Underlying EBIT for the iron ore segment dropped 4.95% from the year-ago period to US$2.09 billion, primarily due to lower average realized prices. Underlying EBIT for the petroleum segment declined 13% to US$2.33 billion.
Profit from operations for the half-year period rose to US$9.12 billion from US$7.22 billion in the prior-year period. Operating costs, excluding the impact of exchange rates and inflation, were US$745 million lower than the same period last year.
Net operating cash flow after interest and tax for the half-year period fell 56.3% to US$5.72 billion, primarily due to decreased cash generated from operating activities and the favorable impact on prior period cash flows from the collection of trade receivables, partly offset by other working capital movements.
The company ended the first half with cash and cash equivalents, net of overdrafts, of US$8.38 billion, compared to US$7.15 billion at end of the year-ago period.
Capital expenditures for the half year were US$4.75 billion, down from US$5.15 billion in the same period last year. The company also reported net gearing of 15.1% and net debt of US$7.9 billion at the end of the half year.
Looking ahead, BHP Billiton noted that global economic conditions have improved over the past six months as the U.S. and Europe lifted industrial output from previously depressed levels, China returned to double digit growth and India proved resilient. Government stimulus measures appear to have supported restocking activities in the developed economies and a gradual return to normalized global trade, the company said.
Despite the positive momentum, the company said it remained cautious about the speed and strength of the global economic recovery across the developed world.
"It appears that stimulus measures that supported the recovery have not fully addressed structural issues such as weak labor markets and excess production capacity in developed economies. A further variable will be the impact of any measures to control loan growth in China," the company said.
However, in the long term, BHP Billiton said it continues to expect emerging economies' growth to strongly outperform the developed economies as they follow a path of continued urbanization and industrialization.
The company's board declared an interim dividend of US$0.42 per share, an increase of US$0.01 per share from the year-ago period.
In Wednesday's regular trading session on the Australian Securities Exchange, BHP.AX is trading at A$39.65, down A$0.20 or 0.50% on a volume of 14.77 million shares.
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