BHP Billiton net profit slumps 29.5pc on slowing growth

PUBLISHED : Tuesday, 20 August, 2013, 5:22pm
UPDATED : Wednesday, 21 August, 2013, 3:59am

Anglo-Australian mining giant BHP Billiton on Tuesday reported a 29.5 per cent slump in net profit to US$10.88 billion in the year to June, due to slowing global growth and commodity price volatility.

The world’s biggest miner said lower prices for its key resources, including a 17 per cent dive in iron ore, wiped US$8.9 billion from underlying earnings of US$28.4 billion.

“BHP Billiton delivered robust financial results in the 2013 financial year, a period characterised by slowing global growth and volatile commodity markets,” the miner said in a statement to the Australian stock exchange.

“Economic conditions over the second half of 2013 financial year were affected by lower-than-expected growth in emerging economies,” it added.

“Weaker trade and soft manufacturing activity pulled growth rates slightly below expectations in China.”

The results fell short of market expectations of a US$12.9 billion profit.

“BHP looks in-line but underwhelming versus consensus on headline numbers,” said Chris Weston from IG Markets.

BHP said it had managed to cut costs by US$2.7 billion in the year ended June 30, but that was more than offset by the significant fall in commodity prices.

It saw a seven per cent increase in total production across its businesses, including a 13th consecutive annual output record at its flagship Pilbara iron ore operation in Western Australia. But the company said the value of its products was “substantially” down over the year.

Iron ore prices were 17 per cent lower, costing BHP US$4.1 billion, and steelmaking and energy coal both declined, wiping a further US$3.7 billion off the bottom line.

Oversupply in the nickel and aluminium markets and concerns of a near-term rebalancing in the copper sector had weighed on metals prices, reducing earnings by around US$1.0 billion.

BHP said it expected increased supply across the commodities market to continue pushing down prices in the short term, but the balance should right itself “in time”.

“The growth rates for steel demand in Asia are expected to moderate as the Chinese economy gradually rebalances. This rebalancing should support growth in demand for other industrial metals, energy and agricultural products,” it said.

“We expect the rebalancing of the Chinese economy to be significant in terms of the nature of domestic demand as well as the types of goods and services the economy will produce,” BHP added.

“We also see India and Southeast Asia as significant sources of economic growth in the long term.”

The remarks came as BHP separately unveiled a US$2.6 billion investment in its Jansen potash project in Canada, underscoring efforts to diversify its portfolio as the Asia-driven mining boom slows.

Following last year’s 34.8 per cent slump in annual profit to US$15.42 billion, BHP said it had approved no major growth projects this year and was targeting a cut in capital expenditure to US$16.2 billion next year.

BHP’s petroleum production grew six per cent to 236 million barrels of oil equivalent, and was forecast to increase to 250 million barrels next year.

Western Australia iron ore output expanded seven per cent to 187 million tonnes and BHP forecast that would rise another 10 per cent next year to 207 million tonnes.

Steelmaking coal output was 38 million tonnes – an increase of 13 per cent – while energy coal was up three per cent at 73 million tonnes. Forecasts for next year were, respectively, 41 million and 73 million tonnes.

BHP declared a final dividend of 116 US cents, a four per cent increase year on year.