BHPBill interim results December 2011
Revenue increased to USD37.5 billion (USD34.2 billion). Profit from operations rose to USD15.7 billion (USD14.5 billion). Net attributable profit declined to USD9.9 billion (USD10.5 billion). In addition, headline earnings per share fell to USD185.8c (USD194.4cps).
An ordinary interim dividend of USD55cps has been declared.
The first half of the 2012 financial year had its challenges in terms of global economic growth reflecting continued difficulties in Europe and slowing levels of activity in the high growth economies of China and India. Two bright spots were the United States, which saw stronger growth on the back of robust performance in the manufacturing sector, and Japan, which saw a rebound in activity following the impacts of the March 2011 tsunami. Barring an acceleration of activity in the United States housing market, both of these developed economies are likely to see modest growth in the coming quarters as the challenging global economic environment and generally weak consumer confidence is expected to weigh on underlying activity. The group's base case is a protracted recovery for the developed world with the disorderly unwinding of European government debt remaining one of the key downside risks.
In China, after an extended period of policy tightening, the expected slowdown in fixed asset investment and industrial production is now occurring. As a result, growth rates are weaker although there is evidence that monetary policy is becoming more accommodating. Providing there are no large external shocks, it is expected that China will pursue targeted, albeit moderate measures to support balanced growth in its economy. While Indian growth contracted more quickly than anticipated as inflation forced policy makers to tighten aggressively, inflation has started to slow, which in time is expected to increase the scope for the relaxation of monetary policy. In the longer term, BHPBill remains positive on the outlook for the global economy as the drivers of urbanisation and industrialisation in China, India and other emerging economies are expected to underpin global growth and robust commodities demand.
Prices for many of BHPBill's products declined during the latter part of the 2011 calendar year as concerns surrounding broader European liquidity culminated in a general deterioration in commodities demand. The group expects 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.
However, BHPBill expects underlying demand growth rates to remain robust, so long as the macroeconomic policy setting of the developing world retains a growth bias. Of the commodities, copper and iron ore are expected to remain supported by their compelling supply-demand fundamentals while the structural shift in Chinese demand for metallurgical coal remains well entrenched. Geopolitical factors are once again likely to influence crude oil pricing. In contrast, the outlook for the aluminium, nickel and manganese alloy industries remains challenging and has led to significant margin compression for most producers, almost irrespective of their position on the various global cost curves.
In the longer term, management expects the rate of growth in steelmaking raw materials demand, particularly in China, to decelerate as underlying economic growth rates revert to a more sustainable level. Slowing activity in the steel intensive construction and infrastructure sectors is, however, expected to be partially offset by robust growth in consumption related sectors such as machinery and transportation, thereby supporting the fundamentals for iron ore and metallurgical coal. More broadly, higher cost sources of new supply will be required in an expanding market which, in turn, are expected to support long run margins for the incumbent low cost producers such as BHPBill.