By Jason Fittler
Their result came in at US$10.7bn which was above our estimate of US$10.5bn but we were at the top end of market expectations.
There was an increase in exceptional items, the bulk of which related to write-down's and losses in the stainless steel materials division. The final dividend was US$0.41c bringing the full year to US$0.82 which was in line with our estimate.
Their net operating cash flow was US$18.6bn, and looks like they will spend another 9.5bn in 2010, their gearing level was 12%
The divisional results
1. Petroleum - US$4.08bn, better than our forecast due to lower operating costs
2. Aluminium - US$192m which was worse on the cost front despite booking a US$170m redit for embedded derivative in power
3. Base metals - blew the lights out with US$1.2bn, we had already included the benefit from the positive provisional pricing, costs were better than forecast, we had thought the lower production would have had a bigger impact on unit costs
4. Diamonds & specialty products - US$0.1bn, revenues were in line, and costs a touch higher than forecast
5. Stainless steel materials - loss of US$0.8bn revenues made up 60% of the difference between our forecast of EBIT for the division and costs were the balance
6. Iron ore - US$6.2bn, revenues were US$200m less than we forecast which is a bit surprising but probably not bad for our first time at predicting revenues when there was a much larger proportion of non-benchmark sales.
7. Manganese - US$1.3bn - surprisingly they did better on the revenue front, presumably from sales booked before the collapse but costs were higher due to the cuts in production and redundancies
8. Metallurgical coal - US$4.7bn, with prices received being US$60m less than forecast and costs were a touch of US$100m more than forecasts, probably related to the slower flow through of diesel and explosive costs
9. Energy coal - US$1.4bn, this was worse than our forecast due to revenue which we think reflects BHP swap out benchmark contracts into the index market, in this case they achieved prices less than benchmark for some of the period and felt the downturn in the thermal coal price, this half should see a reversal as indices have outperformed benchmarks
No capital management initiatives announced the company is investing through the cycle and paying out progressive dividends, the company is still cautious about the outlook for commodities and is uncertain if the demand we are seeing from China is real demand or more related to restocking.
It also appears that there is some concern the rally in commodity prices will lead to capacity restarts prior to any improvement in demand (seems like aluminium is a prime example of this). They do not believe that the real demand picture will be apparent until the back-end of 2010. Hence, keeping the powder dry for opportunities.
Please call me on 07 4771 4577 if you would like more information on BHP.