BHP to cop $1b hit to profits
Sydney Morning Herald
Tuesday February 2, 2010
THE aftermath of the global financial crisis is forecast to have wiped more than $US1 billion ($1.13 billion) from BHP Billiton's December half profit, due to be reported by the world's biggest miner on February 10.Market profit consensus - covering the best estimates of 20 analysts - is that BHP's December half profit (attributable profit on a pre-exceptional basis) will be a bruised $US5.1 billion. That would be down 16.6 per cent on the $US6.12 billion reported for the December 2008 half-year, a period that included the initial hit on commodity prices from the mid-September 2008 start to the financial crisis.The recovery in commodity prices that gathered strength in the December 2009 quarter, and a broad range of production increases in the group's key commodities, is expected to have come too late to offset the impact in the latest December half of commodity price weakness and exchange rate impacts.BHP's underlying earnings before interest and tax is forecast to be $US7.9 billion, which is down from $US11.89 billion in the previous corresponding period.However, BHP's interim dividend is expected to at least match the US41c a share paid in March 2009.But because the US exchange rate that was applied to that payment was 63.12c, Australian shareholders could well find a smaller dividend cheque in the postbox due to the advance in the dollar (88c yesterday).BHP's ability to generate strong cashflows and its pristine balance sheet despite the price and volume pressures felt in the December half have recently fuelled speculation that it could resume its share buyback program, in the absence of a big takeover deal being announced.But opinion is divided on whether a resumption of the share buyback will be announced at the release of the December half profit.The program was suspended during the failed Rio Tinto takeover bid and had $US4.2 billion left to run. UBS recently suggested the buyback program could return, given BHP had the potential to generate $US7 billion in surplus cash over the next 18 months.But Macquarie's equity desk has told clients in a research note it is not convinced a "large-scale initiative is likely to coincide" with the release of BHP's December half results.Macquarie noted that as it is, BHP is already ramping up its expenditure. BHP has previously pointed to $US21 billion in commitments for the 2010 financial year - $US10 billion in capital expenditure, $US5 billion in dividends and $US6 billion to the proposed iron ore joint venture with Rio Tinto.Since then BHP has announced another $US3 billion in commitments to the expansion of its Pilbara iron ore business and the acquisition of a potash group in Canada. "And there is more to come," Macquarie said.
© 2010 Sydney Morning Herald