BHP Billiton posts higher profit (November 07, 2001)

Vancouver – Strong prices for iron ore and increased coal sales in Asia propelled the world’s biggest mining company to a profit of US$608 million, or 10 cents per share in the fiscal first quarter ended Sept. 30.

In the first full quarter since its US$11.6-billion takeover of Billiton, BHP Billiton (BHP-N) saw profits jump 3.2% when compared to the US$589 million, or 10 cents per share tallied in the corresponding period of 2000.

“This is a solid result,” says the company’s CEO, Paul Anderson, ” that was achieved despite the slowdown in the global economy.”

Dragging down an otherwise solid performance was the base metals unit, which saw a US$83-million drop in profits because of lower copper, silver and zinc prices, and the steel division, which added US$78 million less to its bottom line when compared to the year-ago period. Lower commodity prices cut earnings before interest and tax by US$185 million.

BHP Billiton is aiming to slash US$270 million of annual costs and idling production as metals prices slide because slowing economies worldwide are crimping demand.

“Reducing costs remains a prime area of focus,” stated Deputy CEO, Brian Gilbertson.

New and acquired businesses, such as Colombian coal mines, boosted pre-tax earnings by US$125 million, while cost-cutting added US$15 million.

“Since the announcement of the merger in March, BHP Billiton has invested about US$1.6 billion in capital and growth activities,” added Anderson.

The company’s carbon steel materials division, the largest exporter of coking coal and the number three producer of iron ore, recorded earnings before interest and tax of US$292 million, a 38% increase over a year ago. Iron exports from BHP Billiton’s mines in Western Australia rose 7% to a record during the quarter because of higher demand from China.

The company’s steaming coal unit, which exports coal used in power generation, saw earnings more than double to US$149 million. The increase is attributed to a 20% rise in contract prices and the inclusion of new mines. Responding to the sudden decrease in prices, the major along with partner Duiker Mining announced that they will close the 4-million-ton-a-year Rietspruit steaming coal mine in South Africa.

The company has launched a detailed review of the potential impact of the global economic slowdon on its businesses.

“If these conditions persist our earnings will not escape the impact,” says Gilbertson. “However, the quality, size and diversity of the BHP Billiton portfolio provides us with more options for responding to the slowdown.”