BHP interim results December 2018

Revenue for the interim period increased to USD20.742 billion (2017: USD20.526 billion), profit from operations rose to USD7.333 billion (2017: USD7.165 billion), profit attributable to BHP shareholders jumped to USD3.764 billion (2017: USD2.015 billion), while headline earnings per share more than doubled to USD82.1 cents per share (2017: USD40.7 cents per share).

The BHP board determined to pay an interim dividend of USD55 cents per share (USD2.8 billion).

Company outlook
Economic outlook
The global economy grew around 3 3/4 per cent in the 2018 calendar year, with a notable pick up in the US economy and resilient growth in China. We expect world growth to sit in the range of 3 1/4 per cent to 3 3/4 per cent for the 2019 calendar year. Further escalation in trade protection is a downside risk.

We expect China's economic growth to slow modestly in the 2019 calendar year. The negative impact of weaker exports will be partially offset by easier monetary and fiscal policy. In our view, China's policymakers will continue to seek a balance between the pursuit of reform and maintenance of macroeconomic and financial stability. Over the longer term, we expect China's economic growth rate to decelerate as the working age population falls and the capital stock matures.

The US performed strongly in the 2018 calendar year but near-term prospects are less certain. The expansionary impact of tax cuts will progressively fade and trade policies remain unpredictable. In Europe and Japan, we believe business confidence and manufacturing momentum peaked in the 2018 calendar year. In India, growth prospects are solid. The general election, timed for the first half of the 2019 calendar year, is a key milestone for the country's reform trajectory.

Commodities outlook
Crude oil prices were volatile in the second half of the 2018 calendar year. Brent Crude hit a four year high ahead of US sanctions on Iran taking effect. Prices then fell sharply towards the end of the 2018 calendar year on mounting oversupply concerns, despite OPEC "Plus" announcing further production cuts in December 2018. The fundamental outlook remains positive, underpinned by rising demand from the developing world and natural field decline in supply.

The Japan-Korea Marker price for LNG was higher on average compared to the previous calendar year, reflecting strong demand and slower than expected ramp-ups. A material amount of new supply is expected to come online in 2019. Longer term, the demand outlook for gas remains positive. Depleting domestic gas supplies in some major consuming markets will help LNG to grow faster than overall gas demand.

Copper prices have maintained a relatively tight range for much of the December 2018 half year. This period of stability followed a sharp drop associated with the trade tensions that escalated in the June quarter of 2018. Against this backdrop, we believe underlying fundamentals remain sound. Copper demand should grow steadily. Grade decline, rising input costs, water constraints and a scarcity of high-quality future development opportunities continue to constrain the industry's ability to cheaply meet this growing demand and provide support for our positive outlook.

Global steel production has maintained healthy growth in the 2018 calendar year. Growth is expected to slow in the 2019 calendar year, along with the global economy. Margins have begun to normalise from the extremes seen in the initial stages of steel Supply Side Reform in China. That is an anticipated development. We expect quality differentiation to remain a durable element in price formation for steel-making raw materials.

The Platts 62% Fe Iron Ore Fines index performed solidly in the December 2018 half year, driven by firm pig iron production and unanticipated supply disruptions. The lump premium has been strong. In the short term, the supply picture is uncertain following the tragedy in Brazil. Total demand in the 2019 calendar year is expected to be similar to last year.

The Platts premium low-volatility metallurgical coal price index finished the 2018 calendar year strongly, with healthy demand conditions, especially in India, set against a modest recovery in seaborne supply. China's import policies remain a source of uncertainty. Over the longer term, India is expected to sustain strong demand growth, while high quality metallurgical coals are expected to continue to offer steelmakers value-in-use benefits in mature markets.

Potash prices have performed strongly over the last year, despite several major capacity additions coming online. Demand lifted again in the 2018 calendar year, following a record in 2017 calendar year. We expect annual demand growth of between two and three per cent over the next decade, resulting in demand exceeding available supply from existing and forthcoming capacity by the mid-to-late 2020s.

2019-02-19 09:07:59