BHP'S decrease in earnings is credit negative

Global rating agency Moody's says BHP Billiton's decrease in earnings for the first half of FY13 ( July - December 2012) is credit negative and reduces the cushion within the rating, but has no immediate impact on its A1/P1 ratings and stable outlook.

"While earnings and cash flow in the period were negatively impacted primarily by lower commodity prices we still expect BHP Billiton's credit metrics to remain within tolerance levels for the rating", says Matthew Moore, a Moody's AVP-Analyst.

BHP Billiton's underlying EBITDA declined around 30% and cash flow from operations decreased about 35%, which combined with incremental debt, led to an increase in adjusted Gross debt-to-EBITDA to around 1.3x, based on the last twelve months to 31 December 2012. This com- pares with the tolerance for the rating of 1.5x on a consistent basis. This does not take into account the company's around $5.1 billion of cash on hand, which supports its solid liquidity position.

"The results represent a significant decrease when compared to the prior period, and illustrates the challenging conditions faced by global resources companies during the second half of 2012. Nevertheless, BHP Billiton's commodity diversity, low cost position and success with cost cutting initiatives have resulted in the underlying EBIT margins remaining in excess of 30%, which supports its rating", added Moore.

The company also announced the retirement of CEO Mr. Marius Kloppers, who will be replaced as CEO by Mr. Andrew McKenzie, previously the head of the company's Non-Ferrous division.