Such is the erratic nature of Mr Market that BHP Billiton’s share price has been edging higher recently despite projections that financial results to end June would be its worst in a decade and a half. But the Melbourne-based mining group’s executives have managed expectations well, with actual underlying profit released this morning beating that forecast by investment analysts. As a result, shocking as the figures are in reality, pundits will interpret them favourably and spin a narrative to further lift Mr Market’s animal spirits. That’s the nature of speculation – manage down expectations and profit when you jump over the low bar. Pretty sick, isn’t it? Investors, on the other hand, would either have invested months back when the share price truly was cheap, or seek more suitable options elsewhere. – Alec Hogg
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(Bloomberg) — BHP Billiton Ltd., the world’s biggest mining company, reported full-year underlying profit declined 81 percent for the worst result since 2001 after raw materials tumbled to a 25-year low in January.
Underlying profit was $1.2 billion in the year ended June 30, from $6.4 billion a year earlier, Melbourne-based BHP said Tuesday in a statement. That beat the $1.04 billion average estimate among 19 analyst forecasts compiled by Bloomberg.
BHP follows rival Rio Tinto Group in posting lower profits after prices, including of its top earner iron ore, plunged to about half their 2011 peak on oversupply and slower growth in China, the biggest commodities buyer. The result will likely mark a nadir for BHP, with a rebound in prices and higher output to lift profits this fiscal year, according to Morgans Financial Ltd.
“It was always going to be a very tough year operationally,” Adrian Prendergast, a Melbourne-based Morgans analyst, said before the results. The current year has “volumes flat to recovering across the divisions, along with much better prices in some of their markets, it’s really going to see that recovery in earnings,” he said.
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BHP has advanced 13 percent in Sydney trading since touching an 11-year low on Jan. 21. The 98-member Bloomberg World Mining Index has advanced about 40 percent after commodities surged the most in the first half since the 2008 financial crisis as China’s economy stabilized and policy makers backed growth.
Long-Term Outlook
“While commodity prices are expected to remain low and volatile in the short to medium term, we are confident in the long-term outlook for our commodities, particularly oil and copper,” Chief Executive Officer Andrew Mackenzie said in the statement.
BHP recorded a full-year net loss of $6.4 billion, the producer said in its statement. That’s the first annual loss since the company was formed in the 2001 merger of BHP Ltd. and Billiton Plc, according to data compiled by Bloomberg. Underlying profits were the lowest since fiscal 2001, according to the data.
The producer booked after-tax charges of $7.7 billion on costs related to the deadly dam spill at its Samarco iron ore joint venture in Brazil and against its U.S. shale assets amid weaker oil prices, BHP said. The Nov. 5 dam collapse in Brazil’s Minas Gerais state released billions of gallons of mining waste through a valley, leaving as many as 19 people dead and hundreds more homeless.
BHP’s full-year dividend fell 76 percent to 30 cents a share, under a policy set out in February that links the payment to profits.
The average prices that BHP receives for every key product fell in the past fiscal year, it said in the statement. Oil prices plunged 43 percent in the 12 months ended June 30, as iron ore declined 28 percent and copper dropped by 23 percent.
