Posted on Sunday, 31st January 2010 by admin
THE aftermath of the global financial crisis is forecast to have wiped more than $US1 billion ($A1.13 billion) from BHP Billiton’s December-half profit, which the world’s biggest miner is due to report on February 10.
Market consensus – covering the best estimates of 20 analysts – is that BHP’s December-half profit (attributable profit on a pre-exceptional basis) will weigh in at a bruised $US5.1 billion.
This would be down 16.6 per cent on the $US6.12 billion for the December 2008 half-year, which included the initial hit on commodity prices from the mid-September 2008 start of the financial crisis.
The recovery in commodity prices that gathered strength in the December 2009 quarter – and a broad range of production increases in key commodities – is expected to have come in the latest December half to offset the impact of commodity price weakness and exchange rate effects.
BHP’s underlying earnings before interest and tax is expected to be $US7.9 billion – down from $US11.89 billion in the previous corresponding period. Despite the expected December-half profit fall, BHP’s interim dividend is expected at least to match the US41¢ a share paid in March.
But because the US exchange rate that was applied to that payment was 63.12¢, Australian shareholders could well receive a smaller dividend this time due to the higher Australian dollar (US88.33¢ yesterday).
BHP’s ability to generate strong cash flows, and its pristine balance sheet despite the price and volume pressures felt in the December half, have recently fuelled speculation that it could resume its share buyback program, in the absence of a big takeover deal being announced.
But opinion is divided on whether a resumption of the buyback will be announced at the release of the December-half profit.
The program was suspended during the failed Rio Tinto takeover bid and had $US4.2 billion left to run.
UBS recently suggested the buyback program could return as BHP had the potential to generate $US7 billion in surplus cash over the next 18 months.
But Macquarie’s equity desk has told clients in a research note that it is not convinced that a ”large-scale initiative is likely to coincide” with the release of the December-half results.
Macquarie noted that as it is, BHP is already increasing its expenditure. BHP has previously pointed to $US21 billion in commitments for the 2010 financial year – $US10 billion in capital expenditure, $US5 billion in dividends and $US6 billion to the proposed iron ore joint venture with Rio Tinto.
Since then, BHP has announced another $US3 billion in commitments to the expansion of its Pilbara iron ore business and the acquisition of a potash group in Canada. ”And there is more to come,” Macquarie said.
It said a significant investment was likely at the BHP-managed joint venture with Rio Tinto and others at the Escondida copper project in Chile, potentially up to $US3.5 billion on a 100 per cent basis.
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Tags: 1b Profit, Profit
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