BHP Billiton reports record net profit

An Australian record net profit of US$6.17bn ($7.93bn), a share buyback and the retirement of chief executive Chip Goodyear by the end of the calendar year were the highlights of BHP Billiton’s interim results released today (Wednesday, February 7). Iron ore, much of it from Australia, performed solidly. &#8220Underlying EBIT [earnings before interest and tax&#93 was US$1,406m up US$163m or 13.1% from the same period last year,&#8221 the company said. &#8220Sales volumes were also 6% higher, reflecting record production levels at Western Australia Iron Ore and a number of business improvement initiatives implemented to promote increased shipping efficiency.&#8221 Cost increases &#8211 including for labour, contractors, raw materials, fuel and energy &#8211 came to US$530m, with Australia again to the fore. &#8220Specific areas of cost increases include changed mining conditions particularly at Ekati where we are mining a lower grade zone and higher strip ratios at Queensland Coal,&#8221 the company said However, its metallurgical coal operations suffered, falling 30% or US$288m to US$659m. &#8220This was attributable mostly to lower prices for all products at Queensland Coal where benchmark prices will again decrease for the 12 months commencing April 2007,&#8221 the company said. &#8220Operating costs rose due to the first longwall change out at the Broadmeadow mine, which was commissioned during 2006 and higher strip ratios at open-cut mines. &#8220A stronger A$&#47US$ exchange rate had an unfavourable impact as did Australian inflationary pressures. &#8220This was offset partially by increased production and sales at both Queensland Coal and Illawarra Coal. &#8220The ramp up of expanded capacity supported by increased throughput at our Hay Point Coal terminal contributed to the higher sales at Queensland Coal.&#8221 The view was brighter in the energy coals sector, with an 18.5% or US$38m increase to US$243m, mostly driven by South Africa. &#8220Higher production volumes and cost efficiencies at Hunter Valley Coal (Australia) and Cerrejon Coal (Colombia) had a favourable impact,&#8221 the company said. More generally, the drive from China was expected to continue and the outlook for the world economy for the year was bright. "China is set to continue as the main driver of demand, but more mature markets may also lend support, especially Europe and Japan,&#8221 the company said. Chairman Don Argus hailed Mr Goodyear’s &#8220key role in the transformation of BHP Billiton since 1999&#8221. For his part, Mr Goodyear said: "It has been a privilege and a pleasure to work with an outstanding team of people at BHP Billiton during a tremendous period in the company’s history.&#8224But after nine years with the company, and what will be five years as chief executive, I have decided it is an appropriate time for the organisation to transition to the next generation of leadership. Meanwhile, in New York, Diana Shipping confirmed it would acquire for US$98m a capsize bulk carrier under construction in China as its third vessel on charter to BHP Billiton Marketing for four years, with one-year optional extensions. Total charter revenue during the four years would be US$57.4m, the company said. Diana Shipping chairman Simeon Palios said: &#8220With this fixture, Diana Shipping enhances its relationship with BHP Billiton and at the same time improves the visibility of its earnings.&#8221

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