Vancouver — Despite a drop in sales,
This marks a significant increase from the US$1.69 billion, or US28 per share, tallied in 2002. However, sales fell to US$17.51 billion, down from US$17.78 billion reported last year. Profits from continuing operations before exceptional items rose 2.9% to US$1.92 billion from US$1.87 billion a year ago. Cash flow came in at a steady US$3.59 billion.
Earnings before interest and tax came in at US$3.48 billion, up from US$3.1 billion in the previous year. The increase stems from three factors: higher production volumes, higher realized prices and cost savings.
The petroleum group contributed US$1.18 billion of the earnings, up slightly from last year, while aluminum operations added US$581 million, up from US$492 million last year. The diamond and specialty products division generated US$370 million, up from US$342 million a year ago. However, the base metals division showed the best improvement, adding US$286 million in earnings (before interest and taxes) to the company’s total, up 49% over last year’s total of US$192 million.
Denting the bottom line was the coal products division, which generated only US$190 million in earnings, down from the US$536 million tallied last year.
Driving the overall earnings growth was strong demand from China. The company’s direct sales to the world’s most populous nation jumped by 120% to US$1.2 billion and accounted for 7% of the total turnover of US$17.5 billion. China accounted for 32% of the group’s iron ore turnover.
“Looking forward in China, we are getting increasingly confident that there is sustainability to these things,” says CEO Chip Goodyear. “It won’t be a straight line up in China, there will be bumps and bruises and changes along the way, but we are seeing continued encouraging signs of activity there.”
Overall, the diversified miner states that the outlook for other key commodity markets remains “fragile, although there are some promising early signs that the more expansionary fiscal policies in some markets are starting to create increased demand for our products.”
On the copper front, the major is looking into restarting some of its idled production capacity which was sidelined in response to slowing demand.
“We continue to monitor the situation at Escondida,” adds Goodyear “Inventories have been dropping in copper … but what we’d like to see is fundamental demand growth.”
The Melbourne-based company also managed to reduce its debt during the course of the year to US$5.77 billion, from US$7.3 billion some two years ago at the time of the original merger of BHP and Billiton.
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