The Rising Influence of Rising Affluence

[DewDiligence]

More on BHP’s financial results... please see http://www.bhpbilliton.com/bbContentRepository/docs/090812BhpBillitonPreliminaryResultsNewsRelease.pdf
for the company's own PR.

http://www.ft.com/cms/s/0/23e09ac0-8711-11de-9280-00144feabdc0.html

›BHP Is Bullish on Emerging Markets

By Peter Smith in Sydney
August 12 2009 09:01 (local time)

BHP Billiton on Wednesday said full-year pre-tax profits halved to $11.6bn as the global economic downturn triggered a collapse in demand and the prices of commodities sold by the Anglo-Australian miner fell by up to 90 per cent.

However, the mining group said it was encouraged by the brighter outlook emerging from developing markets in recent months, particularly in China and India, where there was evidence customers were re-stocking commodities.

“In China … re-stocking coupled with stimulus package spending, fuelled strong real demand in key commodity-intensive industries such as infrastructure, construction and real estate,” it said.

As the largest mining group by market value, the improvement in BHP’s performance as its financial year progressed will add weight to expectations that the world will soon return to economic growth.

In January, BHP sacked workers, shut down mines and cut back production in the face of slumping commodity markets.

Although spot prices for the commodities that BHP sells fell between 50 and 90 per cent early in its financial year, the group said prices later rebounded by 90 per cent in the second half when compared to their 2008 lows.

However, BHP added that demand in developed markets remained “constrained”, adding that the global economies would likely emerge from the downturn “less rapidly” than in previous recessions.

Marius Kloppers, BHP chief executive, said the latest financial year had been the most challenging in memory.

“There was rampant demand that could not be satisfied [followed by] one where it evaporated.”

Mr Kloppers declined to comment on whether BHP’s business in China had suffered following the detention of Rio Tinto employees over allegations they stole trade secrets.

“We are operating as normal. It is business as usual, “ he said.

He added that BHP was not having any trouble selling its iron ore amid reports China is sourcing more from Brazil.

“We are selling every gram of iron ore we can produce at this time,” Mr Kloppers added.

He said that lower demand and lower prices had reduced 2008-09 earnings, which were further cut by one-off charges relating to mine closures. Attributable profit dropped 62 per cent to $5.88bn, but were down 30 per cent to $10.7bn excluding exceptional items.

Sales in the year ended June fell 16 per cent to just over $50bn, while net debt stood at $5.59bn.

Including the $5.8bn that BHP plans to invest in its Pilbara iron ore joint venture with Rio Tinto, Mr Kloppers said the miner “had spoken” for $17bn worth of capital spending in the next 12 months.

BHP’s total dividend for the year rose from 70 cents to 82 cents. Since BHP’s acquisition of Billiton in 2001, the mining group had returned $32bn to shareholders via dividends and share buy-backs, Mr Kloppers added.‹