[BHPLF] BHP 2nd-Qtr Profit Seen Rising 7.6% on Crude Oil Price: Outlook
By Dudley White
Melbourne, Feb. 5 (Bloomberg) -- BHP Ltd., Australia's No. 1 resources company, is expected to report higher second-quarter profit on Feb. 8.
Expected Earnings:
BHP will likely report profit rose to A$727.5 million ($403 million) in the three months ended Dec. 31, from a restated A$676 million in the corresponding period, according to a Bloomberg News survey of 11 analysts.
Analysts' estimates for the second quarter ranged from A$690 million to $770 million.
The year-ago figure is restated because BHP last year moved its reporting period to a year ending June 30 from a year ending May 31. BHP's reported second-quarter figure last year, for the three months to Nov. 30, was A$455 million.
Time:
The results are due Feb. 8 at around 8:30 a.m. local time.
Behind the Numbers:
Melbourne-based BHP is expected by analysts to benefit from higher oil production and prices, rising iron ore shipments and an increase in copper output.
The company said oil production rose to 20.1 million barrels in the three months to Dec. 31, from 19.1 million barrels a year earlier. Crude oil prices in New York averaged $31.89 a barrel during the quarter, compared with $24.49 a barrel a year ago.
Production increased as BHP pumped more oil from the Laminaria/Corrallina, Buffalo and Griffin fields off Australia's northern coast, offsetting declining output from the Bass Strait.
Among other commodities, iron ore output from BHP's mines in Western Australia state rose to 13.7 million tons from 11.1 million tons a year earlier. BHP is the world's third-largest iron ore producer.
Production of copper rose to 190,000 tons from 169,000 tons a year earlier because of better grades of ore from the Ok Tedi mine in Papua New Guinea. Ok Tedi, which BHP has said it wants to close early, produced 55,900 tons of concentrate, compared with 38,800 tons a year earlier.
Copper prices on the London Metal Exchange averaged $1,868 a ton during the second quarter, compared with $1,771 a ton a year earlier.
Coal output rose to 14.9 million tons from 13 million tons, reflecting a higher share of production from two joint ventures in Queensland state, following the A$895 million ($489 million) purchase of QCT Resources Ltd., with Mitsubishi Development Pty.
Production of diamonds from BHP's Ekati mine in Canada was little changed at 318,000 carats, compared with 316,000 carats during the year-earlier quarter, the company said. Silver output was 8,194,000 ounces, up 19 percent from a year earlier, it said.
Still, BHP's profit is likely to be weakened by continuing problems at the company's hot briquetted iron plants in Western Australia and Venezuela.
While output from the Western Australian HBI plant doubled, demand was weak for the product, used to make steel in electric arc furnaces, analysts said. BHP said last month it will keep the plant open after a review showed it will make money in 2003.
The Orinoco HBI plant in Venezuela, which began producing briquettes in August, had significant difficulties during its start-up phase, BHP said in its production report. Losses at the Orinoco plant may exceed the A$10 million lost before interest, tax and depreciation, during the first quarter, analysts said.
Demand for the BHP's flat steel products was probably weaker because of a slowdown in construction activity in Australia, analysts said. During the quarter, BHP spun off its OneSteel Ltd. steel long products business.
BHP will also benefit from the weak Australian dollar. Most of the commodities the company sells are priced in U.S. dollars while most of its costs are in local currency. The company said in December it will reduce currency speculation.
It may also benefit from cost cutting, including disposing of half the company's steel assets.
What the Expert's Say:
``We had a strong contribution from petroleum, though we are looking closely at the steel business,'' said Marcus Lun, an analyst at Morgan Stanley Dean Witter.
``Iron ore shipments were better than expected,'' said Nick Raffan, who helps manage about A$1.7 billion in Australian equities with Scudder Investments in Sydney, the day the quarterly report was published.
``BHP themselves were hosing down the profit forecasts,'' Raffan said, adding, ``It really depends on the cost side'' as to what the figure is.
``It was a good report,'' Peter Chapman, a resources analyst at Burdett Buckeridge Young, said, referring to the quarterly production report. ``The (Western Australia) HBI plant was a bit of a worry. That will have sounded a few alarm bells.''
Previous Market Reaction:
BHP shares rose 1.4 percent on Nov. 2, the day the company said first-quarter profit rose 34 percent. The result was in line with analysts' estimates.
Market Trend:
BHP shares have risen more than 6 percent in the past year, compared with a 7.9 percent gain in the Australian benchmark S&P/ASX 200 Index. Rio Tinto Ltd. shares, the Australian stock of the world's second-biggest mining company, rose 8 percent during the same period. Anglo American Plc, the
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