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BHP to Increase Capital Spending 63%, Leaves Door Open for Acquisitions

by on February 10, 2010

By Rebecca Keenan and Jesse Riseborough Feb. 10 (Bloomberg) — BHP Billiton Ltd. , the world’s largest mining company, will increase capital spending 63 percent next year to meet surging demand in China and India, and has left the door open to acquisitions. Capital spending on projects including iron ore mines and oil fields, will rise to $20.8 billion from $12.8 billion this year, the Melbourne-based company said today in an presentation after reporting first-half net income more than doubled, beating analyst estimates. Global economic conditions have improved over the past six months as the U.S. and Europe lifted industrial output and China returned to double digit growth, BHP said today. The company has the capacity to make “opportunistic” acquisitions , Chief Executive Officer Marius Kloppers said today. “That is one of their options,” said Tim Barker , who helps manage more than $54 billion in assets at BT Financial Group, including BHP shares. “I have no problems with opportunistic situations or well-planned strategy.” BHP shares gained 0.1 percent to A$39.88 at the 4:10 p.m. Sydney time close on the Australian stock exchange. They’ve declined 7.5 percent this year. The company may be interested in buying BG Group Plc, the U.K.’s third-largest natural-gas producer, the Guardian newspaper said yesterday, citing unnamed traders. BHP spokeswoman Samantha Evans declined to comment today. BG Bid? Any possible bid for BG Group implied a deal size of more than $80 billion and would need to be at least 40 percent debt- funded to boost BHP’s earnings, Citigroup Inc. analyst Clarke Wilkins said today in a report. “There is still plenty of M&A firepower if the trigger is ever pulled,” he said. BHP suspended a $10 billion buyback of its London-traded shares in December 2007, when it made an offer for Rio Tinto Group . It abandoned the proposal the following year. Brokers including UBS AG and Citigroup Inc. flagged BHP may have announced a restart of the program today. A share buyback is “never off the cards, it is just a question of are they going to be able to deploy the cash elsewhere,” said Tim Schroeders , who helps manage $1.1 billion at Pengana Capital Ltd. in Melbourne, including BHP shares. “The market will immediately jump to corporate, will there be an acquisition?” BHP would consider acquisitions of large, long-life, low- cost assets that could be expanded, Kloppers said today on a call with reporters. Though his first priority is to invest in existing operations and assets, he said. Low Cost “If an opportunistic opportunity comes up to procure something which is long life, low cost, all those strategic elements, we have got the capacity to do that,” he said on a Web cast. BHP agreed last month to buy Canada’s Athabasca Potash Inc. for about C$341 million ($319 million). BHP could boost profit and by buying Potash Corp. of Saskatchewan Inc. at a 30 percent premium to the share price, Bank of America Merrill Lynch said in October. BHP is expanding its Worsley aluminum operation in Western Australia, developing six oil and gas projects, adding extra capacity to its iron ore mines in Western Australia and doing initial work on its Jansen potash mine in Canada. It’s studying further coal, iron ore and alumina projects. Cash Spend “There is plenty of opportunities available to them to spend the cash,” BT Financial’s Barker said. Net income was $6.1 billion, or 109.8 cents a share, in the six months ended Dec. 31, from $2.6 billion, or 47 cents a share, a year earlier, BHP said today in a statement. That compares with the $5.5 billion median estimate of eight analysts surveyed by Bloomberg News. Xstrata Plc reinstated its dividend this week and said the outlook for commodities demand was “very promising.” Citigroup commodity analyst Alan Heap said last week demand may turn positive in coming months. “Physical demand for bulk commodities continues to be very strong in most regions,” BHP said in the statement. “Commodity markets will continue to be largely dependent on Chinese and Indian demand. In the short term, it is critical to monitor the pace of monetary tightening and the rate of loan growth for commodity intensive sectors in China.” Chinese regulators, aiming to stem rising inflationary pressures, moved last month to slow a credit boom with measures to restrict lending. Their efforts to stem inflationary pressures came as the nation’s economic growth accelerated to a 10.7 percent year-on-year pace in the last three months of 2009. China is the world’s largest consumer of all industrial metals. BHP will pay a first-half dividend of 42 cents, up from 41 cents a year earlier. That’s lower than the projected dividend of 44 cents, according to Bloomberg data. To contact the reporters on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net Jesse Riseborough in Melbourne at jriseborough@bloomberg.net .

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BHP to Increase Capital Spending 63%, Leaves Door Open for Acquisitions

BHP Billiton’s First-Half Net Income More Than Doubles, Beating Estimates

by on February 9, 2010

By Rebecca Keenan and Jesse Riseborough Feb. 10 (Bloomberg) — BHP Billiton Ltd. , the world’s largest mining company, said first-half profit more than doubled, beating analyst expectations as demand for commodities surged in China and India. Net income was $6.1 billion, or 109.8 cents a share, in the six months ended Dec. 31, from $2.6 billion, or 47 cents a share, a year earlier, Melbourne-based BHP said today in a statement. That compares with the $5.5 billion median estimate of eight analysts surveyed by Bloomberg News. Global economic conditions have improved over the past six months as the United States and Europe lifted industrial output and China returned to double digit growth, BHP said today. Xstrata Plc reinstated its dividend this week and said the outlook for commodities demand was “very promising.” “Mining companies are on a much firmer footing than what they were last year,” said Tim Schroeders , who helps manage $1.1 billion at Pengana Capital Ltd. including BHP shares. “Overall, an excellent result and cash-flow wise it was at the top end of expectations.” BHP shares rose 3.2 percent to A$41.11 at 10:01 a.m. Sydney time. They gained 24 percent for the half-year ended Dec. 31. The company approved a $1.93 billion iron ore expansion last month after reporting a strong recovery in the fourth quarter in commodity prices, driven by China. Citigroup Inc. commodity analyst Alan Heap said last week demand may turn positive in coming months. Global Conditions “Physical demand for bulk commodities continues to be very strong in most regions,” BHP said in the statement. “Commodity markets will continue to be largely dependent on Chinese and Indian demand. In the short term, it is critical to monitor the pace of monetary tightening and the rate of loan growth for commodity intensive sectors in China.” Chinese regulators, aiming to stem rising inflationary pressures, moved last month to slow a credit boom with measures to restrict lending. Their efforts to stem inflationary pressures came as the nation’s economic growth accelerated to a 10.7 percent year-on-year pace in the last three months of 2009. China is the world’s largest consumer of all industrial metals. BHP will pay a first-half dividend of 42 cents, up from 41 cents a year earlier. That’s lower than the projected dividend of 44 cents, according to Bloomberg data. BHP booked $2.7 billion in charges in the first half of 2009 after metal prices slid because of the global financial crisis. Cash Flow First-half sales decreased 18 percent to $24.6 billion, the company said in the statement. Profit, excluding one-time items, fell 7 percent to $5.7 billion. That compares with the $5.1 billion average of 20 analyst estimates supplied by BHP. Cash flow from operations fell 56 percent to $5.7 billion. The weaker dollar against BHP’s main operating currencies cut underlying earnings by $1.5 billion, the company said. The Australian dollar averaged 87 cents in the first half, compared with 78 cents a year earlier, it said. Underlying earnings before interest and tax at BHP’s iron unit dropped 50 percent to $2.09 billion after the global recession forced miners to slash prices by 33 percent in 2009, the first reduction in seven years. The unit was last year the company’s biggest earner and has now become the third-biggest behind base metals and petroleum. BHP’s output of ore increased 6 percent to a record 62.5 million metric tons. Contract prices may climb 31 percent to the second highest on record for the year starting April 1, according to the mean estimate of 17 analysts surveyed by Bloomberg last month. The demand revival will benefit BHP, Rio Tinto Group and Vale SA, the three largest suppliers of iron ore. Rio and BHP in December agreed to an Australian iron ore joint venture that they say will save them at least $10 billion. The plan, announced in June, will combine mines, rail, ports and workforces in the Pilbara region. The venture is expected to be completed in the second half, Rio said last month. The year-earlier charges included costs for closing the Ravensthorpe nickel mine in Western Australia and the Pinto Valley copper plant in the U.S. as well as for abandoning the proposed Rio Tinto takeover. To contact the reporters on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net Jesse Riseborough in Melbourne at jriseborough@bloomberg.net .

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BHP Billiton’s First-Half Net Income More Than Doubles, Beating Estimates

China’s Industrial Production Growth Accelerates on Record Loans, Stimulus

August 10, 2009

By Bloomberg News Aug. 11 (Bloomberg) — China’s industrial output growth accelerated on record loans and stimulus spending. Industrial production climbed 10.8 percent in July from a year earlier after a 10.7 percent advance in June. Urban fixed- asset investment for the seven months to July 31 rose 32.9 percent. Consumer prices fell 1.8 percent last month. The statistics bureau released the figures at a briefing today in Beijing. China’s economy will grow 9.4 percent this year, topping the government’s 8 percent target, Goldman Sachs Group Inc. said yesterday. Policy makers are wrestling with how to avert property and stock bubbles and bad loans after first-half lending tripled to $1.1 trillion as banks backed the government’s stimulus package. “A lot of officials fear a significant slowdown if they withdraw stimulus too early,” said Ma Jun , chief China economist at Deutsche Bank AG in Hong Kong. The government will “fine tune” monetary policy in the short term by selling central bank bills to mop up excess liquidity, and guiding loan growth, Ma said. Interest-rate increases and lending quotas are not likely until there are “more serious signals of inflation and overheating,” he added. The gain in industrial output was less than the 11.5 percent median estimate of 23 economists. Retail Sales The rise in urban fixed-asset investment compared with a 33.6 percent gain through June and a 34 percent median estimate . Retail sales rose 15.2 percent in July, more than the 15 percent expansion in June. Producer prices dropped a record 8.2 percent, compared with a 7.8 percent fall in the previous month. The credit boom and a 4 trillion yuan ($585 billion) stimulus package drove an acceleration to 7.9 percent economic growth in the second quarter from a year earlier and helped General Motors Co. to report a 78 percent increase in vehicle sales in China in July. Infrastructure spending also aids companies including BBMG Corp. , Beijing’s biggest cement supplier, which saw its shares surge 56 percent on its first day of trading in Hong Kong on July 29 on expectations China’s stimulus will spur asset investments and housing demand. The Shanghai Composite Index has rallied almost 80 percent in 2009 and real-estate prices have rebounded, fueling concern that loans meant for infrastructure projects are being used for speculation. The measure fell by the most in eight months on July 29 amid concern that the central bank would rein in liquidity. The central bank said Aug. 5 that it will use “dynamic fine-tuning” and guide “appropriate” lending growth. China will maintain its current macroeconomic policy stance aimed at bolstering domestic spending as the nation continues to face difficulties including an export slump and industrial overcapacity, Premier Wen Jiabao said Aug. 9. To contact the Bloomberg News staff on this story: Kevin Hamlin in Beijing at khamlin@bloomberg.net ;

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