BHP Billiton posts worst loss since 2001

BHP BILLITON flagged that it was emerging from the worst price collapse in a generation with renewed impetus after reporting its full-year underlying profit declined 81 percent for the worst result since 2001 after raw materials tumbled to a 25year low in January.

Shares increased 2.37 percent yesterday to R182.29.

“There is some sense that prices have stopped falling,” said the chief executive, Andrew Mackenzie, yesterday. “We start this new financial year with real momentum.”

Underlying profit was $1.2billion (R16bn) in the year to June from $6.4bn a year earlier, BHP said in a statement yesterday. That beat the $1.04bn average estimate among 19 analyst forecasts compiled by Bloomberg.

BHP follows rival Rio Tinto Group in posting lower profits after prices, including of its top earner iron ore, plunged to about half their 2011 peak on oversupply and slower growth in China. The result would probably mark a low point for BHP, with a rebound in prices and higher output to lift profits this fiscal year, according to Shaw and Partners.

BHP’s full-year dividend fell 76percent to 30c a share, under a policy set out in February that linked the payment to profits. Capital expenditure fell 42percent to $6.4bn and would be cut further to $5bn in the current fiscal year, BHP said.

“I’m confident this is the earnings nadir,” said Peter O’Connor, an analyst with Shaw and Partners after the result was announced. “The direction for earnings from here is higher.”

Underlying profit jumped 95 percent to $803 million in the six months to June 30, from $412m in the preceding half, according to Bloomberg calculations based on BHP’s full-year earnings published yesterday.

“Commodity markets are no longer getting worse,” said Colin Hamilton, an analyst with Macquarie Group,

“Chinese demand has actually surprised on the upside for the first time in a few years. The question is the sustainability,” Hamilton added.

A recovery in prices and volumes was seen lifting BHP’s profit from the record low.

The producer’s underlying profit would rise to $2.4bn this fiscal year and to $3.6bn in the following 12 months, according to analysts’ estimates. – Bloomberg page 19