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BHP Billiton announces 58% drop in profits for H2 2012

World Coal,

Following its rivals, Anglo American and Rio Tinto, BHP Billiton has announced a significant drop in profits in the six months to December 2012. But unlike its two smaller rivals, it remained in the black. The company recorded a 57.8% drop in profits to US$ 4.231 billion after revenue dropped by 14.1%.

“The December 2012 half year was more challenging for the global resources industry as substantially lower commodity prices and resilient producer currencies, such as the Australian dollar and the Chilean peso, weighed on margins and profitability,” the company said in a statement.

The company also announced asset sales had totaled US$ 4.3 billion for the period, with further sales expected through 2013.

Looking ahead, the company was broadly positive, in line with general industry expectations. The company said it expected the global economy to “strengthen over the next 12 months, providing support for commodities demand and pricing”. Long-term, the outlook remained “robust”.

Metallurgical coal

Weak metallurgical coal prices saw the company’s metallurgical coal business drop to a loss of US$ 106 million as EBIT dropped by US$ 1.6 billion, despite a 5% increase in total metallurgical coal sales in the six months to December 2012. Production was also hit by planned wash plant outages at South Walker Creek and Goonyella, the closure of high-cost capacity at the Gregory and Norwich Park mines in Australia, and planned longwall moves at llawarra Coal.

The group’s five major metallurgical coal projects remain on schedule and budget. The Daunia development is forecast to deliver first production in H1 2013, while commissioning of the Caval Ridge mine is expected to commence the following year. In aggregate, these projects will add 10 million tpa (of metallurgical coal production capacity by the end of the 2014.

Energy coal

A 7% increase in production in the H2 2012 was underpinned by record production at New South Wales Energy Coal, which continued to benefit from the ramp-up of the RX1 project. However, earnings dropped by US$ 541 million to US$ 246 million on the back of lower export coal prices, inflation and a stronger Australian dollar.

Written by Jonathan Rowland.

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