BHP to use its cash to expand further
biz.yahoo.com
FT.com
Wednesday August 24, 1:20 pm ET
By Rebecca Bream in London and Tim Johnston in Sydney
Chip Goodyear, chief executive of BHP Billiton (NYSE:BHP), said on Wednesday that he would use the group's heavy cashflow primarily to fund expansion opportunities, including acquisitions and organic growth projects.Investors expecting a special dividend or a new round of share buy-backs were disappointed and, in spite of BHP's unveiling of record full-year profits, the stock dropped 3.5 per cent to 805p.Turnover at BHP Billiton, the world's largest mining company, rose 27.5 per cent to $31.8bn in the year ending June 30, due to higher volumes in many of its products and rising commodity prices. Pre-tax profit for the year was $8.9bn, up 79 per cent, in line with expectations.Mr Goodyear said he would use most of the group's healthy cashflow to invest in growth opportunities, either through acquisitions or through new mining projects.The second priority would be preserving a stable balance sheet, with gearing between 35 and 40 per cent, and the third priority was returning cash to shareholders. This disappointed some investors, who were hoping BHP would return the cash to shareholders.Chris Lynch, chief financial officer, defended the company's record in rewarding shareholders. "We led the way in buy-backs," he said. BHP purchased $1.8bn of its Australia-listed shares in a discounted off-market buy-back last November. BHP also rebased its dividend at its half-year results in February, said Mr Lynch. The group on Wednesday declared a total dividend for the year of 28 cents, up 7.7 per cent.Profits at BHP have been driven by strong demand for iron ore, coal and copper from China, where rapid industrialisation is taking place. China is now BHP's largest customer, with 12.6 per cent of sales, and Mr Goodyear said he expected the Chinese economy to remain strong. BHP's carbon steel materials division, which includes its iron ore operations, was the company's star performer with profits rising 148 per cent to $2.8bn. The results include two months of the new iron ore contract price, which is 71.5 per cent higher than the previous contract, so the division is expected to yield even better profits in the coming year.The figures also included a one-month contribution from WMC Resources (NYSE:WMC), the Melbourne-based mining company which BHP bought for A$9.2bn (US$6.95bn) this summer after outbidding smaller rival Xstrata. The purchase of WMC has allowed BHP to enter the uranium market, which is booming following a revival of interest in nuclear power |
