BHP Billiton profit hurt by strong rand

MELBOURNE: Diversified mining giant BHP Billiton Ltd/Plc reported a 19.4% fall in first-half profit yesterday as a strong South African rand boosted its debt costs and offset solid demand from China. 

The company, which last month shook investors with the surprise resignation of chief executive Brian Gilbertson, said that if not for foreign currency movements, it profit actually rose. Its diverse portfolio of mineral products had evened out swings in commodity prices, and analysts applauded the earnings. 

Charles Goodyear

“It was a nice, solid result in difficult times,” JP Morgan analyst Richard Rossiter said. 

High oil prices should boost BHP Billiton’s fiscal third quarter ending March 31 and a typical seasonal rise in coal prices should benefit earnings in the second half, analysts said. 

The producer of copper, nickel, iron ore, coal, petroleum, aluminium and alumina said its net profit for the half to Dec 31, 2002, came in at US$931mil, down from US$1.155bil a year earlier excluding discontinued businesses. 

BHP Billiton’s new CEO, Charles ‘Chip’ Goodyear, said at a briefing he would not make a major shift in company direction.  

Goodyear, a former Kidder, Peabody executive who joined BHP as chief financial officer in 1999, said he was looking at acquisition opportunities, an area believed to have contributed to tension between the board and entrepreneurial former CEO Gilbertson, but said the company would not pay inflated prices. 

“You can be sure we are very active in this area,” he said. “But the key is what do we bring, or what do they bring to our situation.” 

Goodyear said BHP Billiton was boosting its trading activities in China, where demand was soaring and leading to business from Japan, Taiwan and South Korea. 

“They will continue to be an important driver and the World Trade Organisation entry by China will continue to push that along,” he said. “We have moved from doing business with China to doing business in China.” 

For its fiscal first half, BHP Billiton's revenues rose 5% and earnings before interest and tax (EBIT) gained 4%, but the bottom line was hit by a 16% rise in the rand versus the US dollar, which led to a foreign exchange loss on its South African debt compared with a big gain a year earlier. 

“If we isolate the underlying business, attributable profit actually increased by US$341bil rather than the US$224mil reduction shown in the headline figure,” chief financial officer Chris Lynch said. – Reuters  

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