BHP Profit Rises 30% on Oil, Metals Prices, Output

Aug. 18 (Bloomberg) -- BHP Billiton Ltd., the world's biggest mining company, posted a 30 percent gain in second-half profit after boosting production of crude oil and metals to benefit from rising prices driven by demand from China. Net income was $9.4 billion for the six months ended June 30, from $7.25 billion a year earlier, according to figures derived by subtracting first-half from full-year results released today. ``Our long-term outlook remains strong,'' Chief Executive Officer Marius Kloppers said today at an analyst presentation from London. While a global economic slowdown may lead to ``higher volatility'' in prices in the short term, commodity demand from China remains ``resilient,'' he said Kloppers, 45, who's pursuing a takeover of Rio Tinto Group in the world's biggest mining industry acquisition, delivered record earnings for oil, base metals, iron ore, manganese and energy coal. The pressure is on his Rio counterpart Tom Albanese to post better profit growth when the London-based company reports next week. ``They are doing really well on the base metal front, copper is a power house for them, and oil has started to come good,'' Peter Arden, an analyst at Ord Minnett Ltd., an affiliate of JPMorgan Chase & Co., said from Melbourne today. ``Rio now needs to make sure its iron ore division absolutely powers away.'' Dividend Raised BHP rose 8 pence, or 0.5 percent to 1,537 pence at the close on the London Stock Exchange. The stock has lost 0.6 percent this year compared with a 16 percent drop in the Bloomberg Europe Metals & Mining Index. Full-year profit rose for a seventh successive year, gaining 15 percent to $15.4 billion and matching the mean estimate based on 11 analyst forecasts for full-year profit compiled by Bloomberg. BHP raised its full-year dividend 49 percent to 70 cents a share. BHP, which set records for annual production of seven commodities and has pledged to spend at least $90 billion to expand output, said the effects of weakness in developed economies on demand should be minimal. Commodity prices in July fell 10 percent, the biggest monthly decline since March 1980, as measured by the Reuters/Jefferies CRB Index, after their best first half in 35 years. Cia. Vale do Rio Doce, the world's biggest iron ore producer, increased second-quarter profit by 22 percent to a record $5.01 billion on Aug. 7, beating analysts' estimates. Revenue from its iron ore unit surged 72 percent in the quarter. Iron Ore, Aluminum Rio, which produces 40 percent more iron ore and three times more aluminum than BHP, may report a 46 percent gain in profit for the June half, according to Austock Securities Ltd. Prices for iron ore, coal, copper and aluminum reached all- time highs during the half. BHP reported record consecutive quarterly iron ore production records along with record fourth- quarter output of alumina, copper and manganese ore. BHP increased output of petroleum products by 19 percent in the six months ended June 30, compared with a year earlier, after starting up fields in the Gulf of Mexico and Australia. It wants to raise oil and gas output by 10 percent a year through to 2011. The oil price gained 24 percent in the half. Production of iron ore also increased 19 percent in the half. This compares with Rio's 14 percent growth for the same period. Iron ore prices have increased fivefold since 2001 and this year BHP and Rio won price gains of as much as 97 percent. BHP predicts its production of the steelmaking material will increase 23 percent this fiscal year to 137 million tons. Power Cuts Underlying earnings for aluminum fell 21 percent for the full year because of a weaker dollar and as output of the lightweight metal in South Africa dropped 8 percent after power cuts in the country curbed production at BHP's three smelters. Stainless steel dropped 65 percent after nickel prices declined and coking coal, used by steelmakers, dropped 25 percent after rain flooded mines in Australia, the company said in the statement. Output of so-called coking coal was ``almost back to normal'' after the floods with a further $70 million in costs expected this fiscal year to restore production, Chief Financial Officer Alex Vanselow said in an analyst presentation from Sydney. The results were ``poor'' due to ``disappointing earnings'' in coking coal, Nick Hatch, an analyst at ING Bank NV in London, said today in a report. While BHP remains ``confident on outlook,'' the statement gave an ``understandable note of caution on short-term outlook,'' he said. Net income rose to $15.4 billion, or 275.3 cents per share, for the 12 months ended June 30, from $13.4 billion, or 229 cents, a year earlier, the Melbourne-based company said today in a Regulatory News Service statement. That matched the mean of 11 analyst estimates compiled by Bloomberg. Rio's profit for the 12 months ending Dec. 31 may rise 76 percent to $12.9 billion, according to analysts. --By Rebecca Keenan and Brett Foley