BHP Billiton breaks earnings record; will up nickel, copper output in 2008

BHP Billiton forecasts that its production of nickel, copper, iron ore and oil will show "significant volume growth" in 2008 after a year in which the leading commodity company posted record profits and production. "Over time we expect commodity prices to move towards long run marginal costs of supply. However, given strong demand and supply side constraints, this is only likely over the medium-term and, in the interim, prices are likely to stay high relative to historical levels, albeit with increased volatility," the company said. BHP Billiton posted a 35% increase in attributable profits at $13.7bn and record net operating cash flow up nearly 50% at $15.6bn. The company increased its final dividend by 46% to $0.27 a share, bringing the total dividend for 2007 to $0.47. "Today's declaration represents our eleventh consecutive dividend increase and signals both our confidence in the outlook and our ability to consistently deliver future earnings and cash flow to underpin this increased dividend," it said. BHP Billiton achieved record output in eight major commodities, including copper, nickel, manganese, aluminium and metallurgical coal. "Our continued focus on growing production from high returning assets throughout the cycle has allowed us to take advantage of strong global market conditions and underpins the financial results we have announced today," BHP Billiton said in a statement. South Africa-born Marius Kloppers takes over as chief executive of the company in October when Chip Goodyear steps down. Kloppers gave analysts a clear commitment to keep BHP Billiton on a steady course, with no changes to its strategy. It will continue to look for opportunistic mergers and acquisitions, while at the same time accelerating its internal projects to step up volume growth he said. BHP Billiton has $21bn worth of projects that it are either executing or in the feasibility stage. There are a further $50bn worth of projects in the medium term. There are 19 projects worth $14bn being constructed and another 14 worth $6.6bn undergoing feasibility studies. Unusually, BHP Billiton showed investors a projection of some 44 projects for the longer term beyond 2013, but Kloppers warned they might not all come to fruition as currently envisaged. The company wants to increase its iron ore production from 100 million tonnes to 300 million tonnes, he said. "We are expecting to deliver further significant growth in the next financial year, with new projects commissioning or ramping up across our petroleum, base metals, iron ore and stainless steel materials," it said. BHP Billiton has grown at nine percent a year over the past five years and 2008 is expected to match or improve on that trend, Kloppers said. "Our expectation is that we will maintain or exceed growth rates achieved over the past six years." Prices for the major commodities it produces are around their highest levels in 30 years because of Chinese demand. India is becoming increasingly important to BHP Billiton, accounting for four percent of its sales, placing it in the same position China was in 2002, said Kloppers. India, unlike China, has resources that the company would like to invest in such as iron ore and bauxite, and given the vertical integration the government there focuses on and the increased importance the sub-continent is playing in BHP Billiton's sales it would take an opportunity if one arose, he said. Platinum group metals is another sector where there was "no reason to exclude it", said Kloppers. There were rumours in Johannesburg BHP Billiton was sniffing around Eland Platinum ahead of the Xstrata offer for the junior developer in South Africa. Goodyear declined to offer any comment on Eland. The subprime crisis rocking the financial markets is not thought to have much impact on demand for commodities, it said. "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. In particular, our customers in China and India believe domestic supply and demand criteria are much more important factors in their markets." The strong financial position of the company and its strong cash generation meant there should be no problems in funding its growth projects, Kloppers said. "We don't think financing will be a constraint."