BHP profit drops 5.5%

It is the first decline for the world’s biggest mining firm since 2009, as rising costs and lower output and prices halved base metals earnings

SYDNEY: BHP Billiton, the world’s biggest mining company, reported a 5.5 per cent drop in firsthalf profit, the first decline since 2009, as rising costs and lower output and prices halved base metals earnings.

Net income was $9.9 billion in the six months ended December 31, from $10.5 billion, a year earlier, the Melbourne-based company said yesterday in a statement. That compares with the $10 billion average estimate of seven analysts.

Metal prices in London declined 20 per cent in the half on reduced demand in Europe and slowing industrial production in China, the world’s largest metals buyer. BHP, which is spending $80 billion over the next five years to boost output of iron ore, copper and coal, remains ‘cautious’ on the market outlook, Marius Kloppers, chief executive, told a conference call.

“Their first half was characterised by a lot of interruptions to production and that has an impact, not only on volumes, but also in terms of cost so you would incur a higher fixed cost,” Ray Chantry, a Melbourne-based resources analyst at EL&C Baillieu Stockbroking said by phone.

Persisting volatility

The company may post full-year net income of $20.6 billion in fiscal 2012, according to the median of 22 estimates.

“We expect volatility in commodity markets to persist as the European sovereign debt crisis and general weakness in the manufacturing and construction sectors across key markets are expected to weigh on customer behaviour and sentiment,” BHP said.

“We expect underlying demand growth rates to remain robust, so long as the macroeconomic policy setting of the developing world retains a growth bias.”

Lower production at BHP’S Australian coal operations was due to floods and strikes and lower copper output.