BHP H1 earnings up 8% on record iron ore, gas production

According to BHP, Western Australia iron ore production rose, on an annualized basis,  to a record 178 million tonnes per annum during the December 2011 quarter, reflecting the ramp up of Ore Handling Plant 3 at Yandi, dual tracking of the company’s rail infrastructure and additional ship loading capacity at Port Hedland.

The growth in iron ore volumes increased Underlying EBIT by US$1.2 billion in H1 of 2011. In thermal coal, stronger volumes and a higher proportion of export sales, largely associated with the expansion  BHP’s New South Wales Energy Coal business in Australia increased Underlying EBIT by US$65 million in the period.

On the downside, a temporary reduction in copper at BHP’s 57%-owned Escondida copper mine in Chile due to lower ore grades and labour unrest — the world’s largest copper mine was forced to declare force majeure due to the strike in July — caused a loss of US$484 million EBIT during the half-year, BHP said. Another factor was wet weather affecting its Queensland coal business.

BHP is predicting continuing robust demand in copper, iron ore and coal, but called the outlook “challenging” for aluminum, nickel and manganese alloy.

It also expects the demand for steelmaking materials in China to decelerate, though this is expected to be offset by consumption-related sectors such as machinery and transportation.

Highlights:

• Strong financial results with Underlying EBITDA  up 8% to US$18.7 billion and Underlying EBIT up 6% to US$15.7 billion. Attributable profit down 6% and Attributable profit excluding exceptional items down 7% to US$9.9 billion.
• Underlying EBIT margin remained in excess of 40% despite significant volatility across many of our core markets while Underlying return on capital was 28%.
• Record production for two commodities and six operations.
• Robust operating cash flowof US$12.3 billion and a rigorous project approvals process underpin our fundamental commitment to a solid A credit rating.
• Gearing increased to 25% following the successful acquisition of Petrohawk Energy Corporation. We will continue to focus efforts on the most productive areas of our high quality Onshore US acreage as we strive to maximise economic returns from our investment program.
• Interim dividend of 55 US cents per share, up 20%

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