Zacks_Analysts' Blog : BHP Revs Up on Diversified Business - Analyst Blog

BHP Billiton Ltd. (BHP) has reported financial results for half year ended December 31, 2011 with net income of $9.9 billion (excluding exceptional items), down 7.1% from $10.7 billion for half year ended December 31, 2010. Diluted earnings per ordinary share were recorded at $1.86 ($3.72 per ADS).

Revenues increased 9.7% to $37.5 billion from $34.2 billion for half year ended December 31, 2010. Underlying EBIT and EBIDTA were recorded at $15.7 billion and $18.7 billion, up 5.8% and 8.3% respectively, from the year-ago comparable period.

The increase is attributable to BHP Billiton’s diversified portfolio of world class minerals and energy assets, alongside a robust demand driven by the emerging economies. Moreover, the company’s strategic investment throughout the economic cycle delivered record volume growth during the reported period.

Net operating cash flows increased marginally to $12.3 billion from $12.2 billion in the corresponding period of the previous year. Such a cash position is expected to comfortably fund strategic acquisitions as well as extensive organic growth program.

Capital and exploration expenditure totaled $9.0 billion for the half year ended December 31, 2011. Expenditure on major growth projects was $6.8 billion, which includes $1.9 billion on Petroleum projects and $4.9 billion on Minerals projects. Capital expenditure on sustaining and other items was recorded at $1.1 billion. Exploration expenditure was $1.1 billion, which includes $716 million classified within net operating cash flows.

Net financing cash flows included proceeds from borrowings of $7.3 billion, dividend payments of $2.9 billion and debt repayments of $1.7 billion. Net debt, comprising interest bearing liabilities less cash, was $21.5 billion, up $15.6 billion compared to its net debt position as of 30 June 2011. Cash and cash equivalent, net of overdrafts, at the end of the period, was recorded at $3.6 billion, down from $16.1 billion a year ago.

BHP Billiton maintains a progressive dividend policy, upholding shareholder sentiments and confidence. On 8 February 2012, BHP Billiton declared an interim dividend of 55 cents per share payable on 22 March 2012.

BHP Billiton has approved five major projects during the reported period ended December 31, 2011 for a total investment of $4.0 billion. Moreover, growth projects in the Metallurgical Coal and Energy Coal businesses moved into execution. Moreover, pre-commitment expenditure of US$1.2 billion for the first phase of the Olympic Dam Project in Australia was activated during the reported period. BHP Billiton also announced the approval of $779 million in pre-commitment funding for the first phase of the Western Australia Iron Ore (WAIO) Outer Harbor Development.

Of late, BHP Billiton reported to have exercised an option to sell its 37% non-operated interest in Richards Bay Minerals (RBM) to Rio Tinto plc (RIO), thereby exiting the titanium minerals industry.

BHP Billiton is one of the world’s largest diversified resource companies operating in mineral exploration, production and processing, oil and gas exploration and development, and steel production and merchandising. The company competes directly with its peers, such as Alcoa Inc (AA), Vale S.A (VALE) and remains positive on the outlook for an improving global economy driven by urbanization and industrialization, in the future ahead.