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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: JAG who wrote (2743)	12/11/1997 5:19:00 AM
From: Thomas Haegin	Respond to of 78601

Re: Value idea: BHP of Australia - Reuters repost ---------Start------------- BHPanalysts see no Christmas joy in profit Reuters Story - December 10, 1997 19:27 %AU %JP %US %GB %MET %STL %ENR %RESF %CL %PG %FCAST BHPX FBGX V%REUTER P%RTR By Mark Bendeich MELBOURNE, Dec 11 (Reuters) - Australian steel, mining and oil giant The Broken Hill Pty Co Ltd (BHP) faces a bleak Christmas with investors expecting it to announce another steep fall in half-year profit next week. BHP, which could once be counted upon to fill investors Christmas stockings with strong earnings and a growing share price, is tipped to report net profit before abnormals of around A$600 million for the half-year ended November 30. The expected result compares with A$683 million a year ago and could include a second-quarter loss for the group's troubled copper division, the world's second-biggest copper producer. "The macro environment is going against them at the moment with the Asian slowdown and the copper price heading south and domestic demand still pretty flat," a fund manager said. "I can't see much joy anywhere." Apart from copper, BHP's divisions should actually report a stronger second quarter, with a weaker Australian dollar coming to their aid, BHP analysts told Reuters on Wednesday. Analysts' half-year forecasts range from A$580 million to A$620 million, the fund manager said. A result of A$600 million would be 12 percent down on a year ago, but imply that, overall, second-quarter earnings were ahead of the first quarter. BHP reported first-quarter earnings of A$284 million before an abnormal gain of A$73 million from the sale of shares it held in Foster's Brewing Group . The group will book as an abnormal gain another A$25 million in the second quarter from the sale of its remaining Foster's stake, said Merrill Lynch analyst Elaine Prior. Prior forecast BHP to report half-year earnings of A$581 million before the abnormal gains. She sees the copper division breaking even in the second quarter. "It could make a loss. It's a struggle," Prior said. She declined to give forecasts for each of the BHP divisions. BHP's copper business includes 57.5 percent of the low-cost Escondida mine in Chile, but is struggling with high operating costs at its North American operations. Its Ok Tedi mine in Papua New Guinea has been crippled by drought since August 11, and three-month copper fell to 85 U.S. cents per pound from almost US$1 over BHP's half-year. A Sydney-based analyst said he expected copper division's half-year earnings to collapse to A$58 million, including a A$4 million second-quarter loss. Ok Tedi alone lost the division about A$50 million in earnings in the second quarter. The best performer in the second quarter was the petroleum division, he said, forecasting a 31 percent profit surge in the final three months to reach a half-year total of A$358 million. "There will be improvements (in second-quarter earnings) in all of the divisions apart from copper at the end of the day," the analyst said. The average of analysts' full-year forecasts for BHP suggests a flat result of about A$1.3 billion in 1997/98, rising to A$1.64 billion in 1998/99, the fund manager said. BHP's bottom-line profit and share price have mainly fallen for the past 18 months, raising serious doubts among investors about the ability of management to turn its performance around. BHP's share price has suffered more than most in the recent sell-off of resources stocks in the Australian market. It came under attack again on Wednesday, closing 37 cents lower at A$13.95. "Unless you see some more convincing numbers and that returns are lifting across the board, the market is still going to be sceptical," the fund manager said. "For the first time there's recognisable value there (in the share price) but no-one's prepared to step up to the plate yet." -- Melbourne bureau 613-9286-1421 email: melbourne.newsroom reuters.com ------End-------------