Vancouver — Mining and resources giant BHP Billiton (BHP-N) managed to defy low commodity prices by posting a solid profit during the first six months of its fiscal year but warned investors of difficult times in the immediate future.
The major posted a record attributable profit of US$1.2 billion, or US$0.20 per share for the half year ended 31 December 2001. This marks a jump of US$40 million or 3.5% compared to the combined figure in the corresponding period last year.
Boosting the result was a US$242-million windfall from foreign exchange gains, acquisitions and increased returns from iron ore and coal.
Dragging down the bottom line was markedly lower prices for copper, aluminum, oil, nickel, chrome and steel, which sliced US$ 405 million from revenue and US$280 million from pre-tax earnings.
"This earnings improvement was achieved despite difficult market conditions," says BHP Billiton’s Chief Executive officer, Paul Anderson. "The result was delivered in the face of markedly lower prices for many of our major commodity businesses including base metals, crude oil, aluminium, steel and stainless steel materials.”
BHP Billiton committed over US$1.8 billion to new capital projects and other investment activities since the beginning of the fiscal year. Slated as growth projects for the company include the Mozal II aluminium expansion in Mozambique; the Mount Arthur North energy coal development, THE Dendrobium metallurgical coal mine and the Bream Gas Pipeline in Bass Strait, all in Australia.
The company also recently approved the phased development of the Mad Dog oil and gas field in the Gulf of Mexico; the expansion of the Hillside aluminium smelter in South Africa and the Yandi iron ore lump project in Australia.
"We are making significant progress in bringing to fruition one of the value propositions of the merger – delivery of the deep inventory of high quality growth options within the Group’s portfolio. The focus is now on sequencing those major growth opportunities,” added Anderson.
During the half year, BHP Billiton completed the sale of its 80% interest in the PT Arutmin Indonesia energy coal mining operations in Kalimantan and the sell down of its interests in Columbus Stainless Steel in South Africa. Just this month, the company announced the completion of its withdrawal from the Ok Tedi copper mining operations in Papua New Guinea.
"In the first six months the merged entity incurred expected one-off expenditures for re-location, retrenchment and establishment of new functions," say Brian Gilbertson, the Deputy Chief Executive Officer of the company. "We are on-track for the delivery of merger synergies with a range of programs underway including a reduction in the number of offices globally, from 32 to 14 offices, planned for completion by the end of this financial year.”
Despite the synergies being realized with the merger, BHP Billiton sees some rocky patches going forward.
"There is little evidence yet of a recovery in the major economies," adds Gilbertson. "Though demand and prices remain strong for some of our products and in certain markets, others are experiencing challenging conditions."
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