BHP Billiton's saw its full year net profit fall by nearly a third and below analyst expectations, however still managed to rake in just over $12 billion. The mining giant posted a 29.5 per cent fall in its full year post tax take of $12.03 billion, including an 8.7 per cent drop in revenue, and will pay a fully franked final dividend of $US1.16. In his first profit announcement since taking on the role of chief executive in May, Andrew Mackenzie revealed the company's bottom line was hit by a 9 per cent fall in revenue, as commodity pricing retreated from previous highs. Underlying profit fell by 32 per cent to $10.65 billion, its lowest in three years and about $800 million shy of analyst expectations. BHP blamed the miss on a temporary increase in the group's effective tax rate as well as financing charges related to some recently issued debt securities. Part of the higher tax rate was attributable to the Minerals resource rent tax, to which the company says it has paid around $376 million so far.
In the face of falling prices and the profit slide, a defiant BHP will proceed with a $2.87 billion spend to complete the excavation and lining of its Jansen potash project in Canada, which it expects to be complete by 2016. The miner expects West Australian iron ore output to increase by 10 per cent this year, with copper and energy coal expected to remain steady.
Arnhem Asset Management fund manager Neil Boyd-Clark says the result, despite the miss, was reasonable as the lines that matter most, such as EBITDA, were close to what the market was looking for. According to Mr Mackenzie; “We reported a strong financial result in what I believe are challenging times... as well as substantial sustainable annual cost savings of $US2.7 billion, with a lot more to come.” Capex in fiscal 2013 was $US16.2 billion, down from $US22 billion in 2012 and not far shy of the $US15 billion stated two-three year target of Mackenzie.
Economic news
China’s HSBC manufacturing purchasing manager’s index hit a four month high in August, indicative of stabilising growth. The index rose to 50.1 in the month, from 47.7 in July.
Commentary
FNN asked AMP Limited
(ASX:AMP) Capital Chief Economist Shane Oliver if the time for exposure to commodities has passed for investors:
“The time to build an exposure to commodity prices in a longer term strategic sense was about a decade or so ago, around about the turn of the century- around about 2000- that would’ve been the ideal time. Now I think we’re in a situation where the supply of commodities is catching up to demand, so one of the big drivers of the surge in commodity prices through the last decade was strong growth coming out of China and other emerging industrialising countries, at a time when supply was constrained. Now you’ve got a situation where the supply is picking up, as a result of a massive pick up in mining and resource investment, at a time when the growth in the emerging world- led by China- has slowed down at the margin. Chinese growth; you’re talking about 7 per cent and no longer 10 per cent. India, Brazil- all recording slower economic growth then we’ve got used to through the last decade. So my feeling is the great time for commodities is probably over.”
Profit report cards
Atlas Iron Limited
(ASX:AGO) widened its annual loss to $242 million as weaker iron ore prices and asset write downs outweighed record export volumes. Atlas says it received on average $US105.84 a tonne for its iron ore, down from $US125.17 a tonne the previous year, however remains upbeat on the price outlook.
Fortescue Metals Group Limited
(ASX:FMG) exceeded the expectations of analysts in delivering a full year net profit of $US1.74 billion. Fortescue plans to decrease capex and improve operating margins in the coming year, moving towards the commencement of debt repayments. The iron ore giant will pay a 10 cent dividend to shareholders, and says it will retain the option to sell down a stake in its infrastructure assets should a satisfactory offer emerge.
Alumina Limited
(ASX:AWC) narrowed its first half net loss to $US2.4 million, from $US3.8 million in the previous corresponding period, and says the outlook for Aluminium and alumina remains tough. Despite this, CEO John Bevan says the recent strengthening of the US dollar against the Australian dollar and Brazilian real provides a welcome tailwind following a long period of sustained weakness.
Woodside Petroleum Limited
(ASX:WPL) generated a first half net profit of $US873 million, a 7.5 per cent increase on last year. First half production of 41.9 million barrels of oil equivalent was a first half record for the company, however its production target for the full year has been revised to a range of 85 to 89 million barrels of oil equivalent.
Arrium Limited
(ASX:ARI) slumped to a $694.7 million full year loss on the back of over $1 billion in impairment and restructuring costs, with investors warming to forecasts of significant earnings growth and ongoing demand from China in fiscal 2014.
Oil Search Limited
(ASX:OSH) posted a 5.6 per cent increase in its first half net profit of $US113.5 million, driven by lower exploration and tax expenses, and reaffirmed its full year production guidance.
Monadelphous Group Limited
(ASX:MND) says a contract surge that drove profits in fiscal 2013 is unlikely to continue in the current financial year. The diversified resources services company posted a 14 per cent rise in its full year profit of $156.31 million.
Nickel miner Mincor Resources NL
(ASX:MCR) extended its annual net loss to $22.5 million but spruiked a strong outlook for the year ahead, boosted by new growth initiatives in Western Australia.
