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Financial Highlights: Group revenue declined by 14.1% to $32.2 billion Attributable profit excluding exceptional items fell by 43.4% to $5.68 billion The half year dividend payment was increased by 3.6%
Half year results: Lower commodity prices, undermined by economic uncertainty, impacted on revenues and profits during the period. In particular, the uncertain outlook for China and the resultant decline in iron ore prices reduced the company's underlying earnings by $3.2 billion. Currency movements also played their part, with currencies backed by commodity resources such as the Australian dollar and the Chilean peso strong against the weaker US dollar, where Quantitative Easing or the printing of money had been extended. As a result, profitability was reduced by over $550 million. Finally, write-downs in the value of both nickel and alumina operations caused an impairment charge to be taken. The share price was down by around 2% in early morning trade. In addition, and partially overshadowing the results, BHP announced that its Chief Executive Marius Kloppers will resign in May (2013). Current executive Andrew Mackenzie will succeed him. Mr Mackenzie is currently the Chief Executive of its Non-Ferrous operations. He has over thirty years experience in oil and gas, petrochemicals and minerals. He joined BHP Billiton back in November 2008. In all, the mining giant remains something of a cyclical investment play on the health of the global economy and China in particular. Accompanying management comments noted that "the global economy is expected to strengthen over the next 12 months, providing support for commodities demand and pricing. The longer term outlook remains robust, although supply is now better placed to keep pace with demand for some commodities. BHP Billiton's low cost, upstream strategy and broader level of diversification ensures the company is well positioned for this ongoing transition."
Chief Executive Marius Kloppers is likely to point out cost-cutting and tighter spending strategies, Canaccord added. "We expect management to highlight cost improvements and turnaround plans in the aluminium, manganese, metallurgical coal and nickel operations given the losses expected in these units," the analyst said as it issued a 'hold' rating for stocks and target price of 2,155p. "We will also look for status updates on the Jansen potash project and iron ore expansion plans."
BHP Billiton is expected to announce a sharp decline in profits for the last half of 2012 on Wednesday. All eyes will be on the mining giant as it releases its half-year results. Canaccord Genuity analysts predict a 43% fall in underlying earnings to $5.65bn, excluding exceptional one-off costs, as a result of falling iron and coal prices in the second half. The Anglo-Australian group may also reorganise impairment charges against its Australian aluminium and nickel business, which have been hit by the strong domestic currency and weak prices. However, Canaccord said it does not expect impairments large enough to swing the results to a loss. The broker predicted dividend growth and estimated an underlying earnings before interest and taxes of $9.65bn, down from $15.68bn reported for the same period a year earlier.
Mining giant BHP Billiton (BLT) has seen its share price simply go with the flow along with fellow constituents in the fiscal cliff resolution inspired 2013 relief rally, also supported by data from its number one customer China, which indicated a soft landing for the world’s second largest economy. More Billiton specific news came with January’s two year target of compound annual growth rate of 10% in copper equivalent terms, which has provided enough momentum to drive the share price back towards the best levels of the past year near 2,200p. However, given patchy growth across its major markets, the Finals will need to reassure the markets over levels of demand.
BHP Billiton: HSBC takes target price from 1980p to 2250p, while leaving its neutral rating unchanged.
WTF has that got to do with BHP ?
BHP Billiton: Deutsche Bank ups target price from 2335p to 2380p and leaves its buy rating unaltered.
Hey fellow investors! I have three positions in blue-chip mining businesses; BHP, RIO & VALE. Of BHP Billition & RIO, would you invest slightly more in BHP over RIO, or wait until Mr Kloppers relinquishes his position to?
BHP Billiton: Deutsche Bank shifts target price from 2325p to 2335p, while its buy recommendation is unaltered.
Alumina production grew 17% to a record 2.4m tonnes in the first half, while aluminium and nickel output fell 10% and 2.0%, respectively. BHP warned that a strong Australian dollar and a weak pricing environment "continued to place pressure on the group's Australian alumina and nickel operations". As for the base metals, copper (+14%), zinc (+1.0%) and uranium oxide concentrate (+8.0%) all registered growth in production year-on-year, while lead (-20%) and silver (-12%) slipped. Elsewhere, manganese ore (+11%) and energy coal (+7.0%) production increase, while metallurgical coal output was flat. BHP's diamonds business, which it has agreed to sell to Harry Winston Diamond Mines for $500m, continued to struggle, with output down 35% on the year before. The company said that the disposal of this division is expected in the first half of 2013.
Diversified mining giant BHP Billiton expects to deliver a compound annual growth rate of 10 per cent in copper equivalent terms over the next two years, the group said on Wednesday. The firm said that this was due to the release of latent capacity at a number of its highest margin businesses and strong growth across our broader portfolio. In its production report for the first six months of its fiscal year, the company said that iron ore production and sales reached a record high for the 12th consecutive half year. Iron ore output rose to 81.96m tonnes in the half year to December 31st 2012, up 2% year-on-year "as the business continued to benefit from the company's decade long investment in supply chain capacity". The company reiterated its guidance of producing 183m tonnes of iron ore for the full year, up 5.0%. Full-year petroleum production guidance also remains unchanged at 240m barrels of oil equivalent, after the company produced 121m barrels of oil equivalent in the first half, up 11% year-on-year.
Positive Points: Key production guidance was reiterated by management, meaning that BHP remains on track to deliver its targeted 10% of annual growth. BHP Billiton approved eight major projects during the 2012 financial year for a total investment commitment of US$7.5 billion. The board has recently placed a greater emphasis on controlling costs. An assessment of more non-core products and operations continues to be made by management. BHP benefits from a uniquely diversified portfolio that reduces its exposure to any one commodity or currency. The company is a potential beneficiary of any broad recovery of the global economy. Melbourne, Australia headquartered BHP Billiton is the world's largest mining company measured by revenues.
Negative Points: Cost pressures for both BHP and the wider industry continue to be seen. Higher fuel and energy prices (of which BHP Billiton is a net beneficiary), together with increased maintenance, labour and contractor expenses continue to provide cost pressures. Natural events such as the recent floods in Australia could impact on production. Currency movements provide potential headwinds. Attempts to substantially expand the company have failed, including a proposed merger with giant rival Rio Tinto. As such, the opportunity to remove significant costs has been lost. Costs in relation to each failed deal, including potential fees to investment bank advisers, have been suffered.
Half year production report: Mining giant BHP Billiton said it was on track to deliver 10% annual volume growth this year and next across its portfolio of commodities. BHP beat analysts' expectations with iron ore production of 42.19 million tonnes to 31 December, up 3% on the corresponding period a year earlier. Iron ore is BHP's biggest business, accounting for over half of operating income last year and a commodity in demand from China. In Oil and Gas, BHP's output of 59.9m barrels of oil equivalent in the December quarter topped market forecasts. The company also revealed that its US onshore business had produced 48,000 barrels of natural gas liquids per day, a 13% increase on the same quarter a year ago. Copper production was broadly in line with analysts' expectations as was coking coal, where the group identified a substantial reduction in costs following the closure of two unprofitable mines. Elsewhere, BHP's production of metallurgical coal, used in steel-making, climbed 5% in the latest quarter. On balance, market consensus opinion remains a buy for the time being.
BHP Billiton: JP Morgan takes target price from 2245p to 2300p and keeps a neutral rating. Goldman Sachs ups target price from 2400p to 2450p, while its buy recommendation remains unchanged.
BHP Billiton: Deutsche Bank lowers target price from 2370p to 2325p, while maintaining a buy rating.
Diversified resources giant BHP Billiton has given the green light for a half-a-billion-dollar investment in its Longford Gas Conditioning Plant (LGCP) project in Australia, necessary to its production plans. The company announced on Thursday the approval for a $520m investment in the PGCP project as part of the Gippsland Basin Joint Venture in Victoria with Esso Australia Resources Pty (operator). Each company owns a 50% interest in the partnership. "The LGCP is a necessary extension of Bass Strait infrastructure to enable valuable hydrocarbon liquids production and domestic gas supply for years to come," said J Michael Yeager, the Chief Executive of BHP's Petroleum division. The new conditioning plant will add carbon dioxide removal capacity to the Longford Gas Plant, which is necessary to condition production from the Turrum offshore development project. It will process around 400m standard cubic feet of gas per day and will cut CO2 content of treated gas to less than 3%. BHP said that saleable gas production will start in 2016
BHP Billiton Chief Executive Petroleum, J Michael Yeager, said: "The Longford Gas Conditioning Plant is a necessary extension of Bass Strait infrastructure to enable valuable hydrocarbon liquids production and domestic gas supply for years to come." BHP Billiton and Esso Australia Resources Pty Ltd (operator) each have a 50 per cent interest in the Gippsland Basin Joint Venture. Further information on BHP Billiton can be found at: www.bhpbilliton.com.
LONGFORD GAS CONDITIONING PLANT PROJECT APPROVAL BHP Billiton today announced approval for a US$520 million (BHP Billiton share) investment in the Longford Gas Conditioning Plant (LGCP) Project as part of the Gippsland Basin Joint Venture located in Victoria, Australia. The LGCP will add carbon dioxide (CO2) removal capacity to the Longford Gas Plant which is necessary to condition production from the Turrum offshore development project. The LGCP will be designed to process approximately 400 million standard cubic feet of gas per day and will reduce the CO2 content of treated gas to less than three per cent. Saleable gas production will commence in calendar year 2016.
BHP Billiton: Nomura raises target price from 2000p to 2350p and reiterates its buy recommendation.
Nomura has labelled BHP Billiton as its preferred name in the global metals and mining industry, reiterating its 'buy' recommendation and 2,350p target price for the shares. "We believe it is time for a change of mindset in terms of how many in the market view the sector. Although we think trading short-term beta rallies will still be a way to achieve returns, these will tend to be short-term directional trades. Looking through these, we believe those stocks that can reliably generate alpha will be the winners over the longer term."