BHP Billiton posts record $16.7bn profit

THE world's biggest miner BHP Billiton has posted a 28.4 per cent rise in annual profit, another record, and say the global economy remains robust. Net profit for the year ended June 30 rose to $US13.416 billion ($16.76 billion), from $US10.450 billion ($13.06 billion) in fiscal 2006. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) rose 27.1 per cent to $US22.950 billion ($28.68 billion). The mining giant also declared a dividend of 27 US cents, taking total for the year to 47 cents, up 30.6 per cent from fiscal 2006. While commodity prices are likely to stay relatively high, the company also says labour markets remain constrained and that wages are rising. "The global economy remains robust, driven by solid activity in Asia and Europe," BHP Billiton said. "Economic fundamentals remain relatively strong. "Unemployment remains low and the supply of labour is still constrained. "This is resulting in rising wages and increased household consumption." BHP Billiton said Asian economies, led by China, continue to demonstrate growth, with India's economy continuing to gather pace. "In Europe, solid growth is being supported by accommodative monetary conditions, rebounding consumption and strong German industrial activity," BHP Billiton said. "The US economy continues to soften, with the housing sector acting as a drag on activity. "The Japanese household sector is also experiencing weakness, increasing risks of deflation later in the year." It also said that the rate of growth in the Chinese economy shows no sign of abating, with economic growth expected to be maintained or perhaps accelerate over the second half of calendar 2007. "Despite moderating US economic growth, global economic fundamentals remain strong and the ongoing strength shown by emerging Asian economies (including China) should support global growth," the miner said. "Moreover, the competitiveness of open Asian economies is likely to continue to place downward pressure on inflation, which should in turn provide greater flexibility for accommodative monetary policy stances taken by key central banks." BHP Billiton said 2007 real prices for its major commodities remain at or near the highest levels since the 1970s, driven by continuing Chinese demand for raw materials. It said the good days are set to continue. "Recent discussions with our customers have indicated that they do not expect the volatility in the US and European credit markets to have a material impact on raw material demand," it said. "In particular, our customers in China and India believe domestic supply and demand criteria are much more important factors in their markets. "We will continue to assess impacts from this recent volatility." While the company does expect commodity prices to move towards long run marginal costs of supply, given strong demand and supply side constraints, this is only likely over the medium-term. In the interim, prices are likely to stay high relative to historical levels, albeit with increased volatility. In fiscal 2007, BHP Billiton achieved record annual production in natural gas, alumina, aluminium, copper, nickel, iron ore, manganese ore and metallurgical coal. For this year, it is predicting significant volume growth in oil, copper, iron ore and nickel. Its project pipeline includes 33 projects in either execution or feasibility stage, representing an expected capital investment of $US20.9 billion ($26.12 billion). "Exploration continues to be an important focus," the company added. "In our minerals businesses we are undertaking exploration in 28 countries, while petroleum exploration is underway in eight countries." Revenue for the year rose 22.8 per cent to $US39.50 billion ($49.36 billion).