BHP set for record $13.5bn profit

BHP Billiton is expected to post a record full year profit on Wednesday and analysts will be looking for guidance from the world's biggest miner on the prospects of a slow down in the US and cost pressures at its Australian operations. The company has collected profit forecasts from analysts and says consensus is for underlying net profit of US$13.5bn, up 32% on the US$10.2bn it posted last year and an Australian corporate record. UBS analysts said the biggest drivers of the uplift in profit will be a 300% increase in earnings in the stainless steel materials group thanks to higher nickel prices along with a 48% rise in aluminium earnings on the back of higher prices and record production. The miner's outlook on the global economy and commodity markets is always carefully scrutinised at results time, and UBS said there will be even more interest this year. "Given recent instability in global equity markets and the growing concerns of a US recession, we think there will be even more focus than usual on BHP's comments regarding the outlook for commodities and the potential impact from a slowing US economy," UBS analysts said in a client note. The soaring costs of mining projects in Australia was a focus of the Rio Tinto result three weeks ago and JPMorgan said the market will be watching closely to see how BHP is faring at its iron ore and nickel operations in the booming mining state of Western Australia. What does JPMorgan expect? JPMorgan expects BHP to post a US29c per share final dividend, while Macquarie Research Equities is forecasting 24.5c and Merrill Lynch 23c. Macquarie describes BHP's free cash generating capacity as "incredible" but is not convinced the miner will announce any extension of its share buyback program. Merrill Lynch agrees that a further buyback is unlikely, as BHP still has more than US$6.5bn of its US$10bn buyback program to complete. The results will be presided over by outgoing chief executive Chip Goodyear and his replacement Marius Kloppers. Kloppers, tipped to bring a more aggressive approach to the miner, may face questions on his attitude to acquisitions in the wake of recent rumours of a bid for aluminium giant Alcoa.