SUSTAINABLE demand for ’s commodities was likely to resume next year but price gains would be restrained by the amount of mothballed capacity across the industry that could return to production quickly, CEO Marius Kloppers in London said yesterday.
Billiton’s commodity portfolio includes energy and metallurgical coal, petroleum, base metals, iron-ore and aluminium. In SA, the group produces energy coal, manganese, aluminium and titanium.
Kloppers said the world seemed to have averted a full-blown economic crisis. In the past six months commodity prices had rebounded as China rebuilt depleted stocks and, while this process was largely complete, there was growing evidence of improving commodity demand from North America, Europe and Japan.
Although conditions were difficult, with a sharp drop in commodities prices in the six months to December followed by a partial recovery in demand and prices in the six months to June, Billiton maintained its progressive dividend policy, unlike other major resources groups such as American and Rio Tinto.
Billiton declared a total dividend of 0,82 a share for the full year, 17% higher than last year’s dividend of 0,70. Group revenue declined 16% to 50,2bn, reflecting lower prices and volumes, and basic earnings a share, excluding exceptional items, dropped 30% to 1,927 a share from 2,749.
Despite spending 10,7bn on capital projects and exploration, the group ended June with net gearing of only 12% as record net operating cash of 18,9bn was generated.
BHP Billiton rose 18,5p, or 1,2%, to 1546p before midday in London trading yesterday. It has gained 18% this year, compared with a 5,3% rally in the FTSE 100. It rose 1% to close at A37,99 in Sydney.
Chief financial officer Alex Vanselow said Billiton’s financial priorities were to maintain the strength of its balance sheet, invest in the business and return excess cash to shareholders. In the past year Billiton had brought six new projects on stream, of which five were in the petroleum sector, and had approved another four new projects, of which three were petroleum.
It also entered into a joint venture with Rio Tinto on the companies’ Western Australian iron-ore assets, which Kloppers said should be completed by the middle of next year after regulatory approvals were secured.
Kloppers said the downturn reinforced the importance of focusing on “tier one” or first-class assets, and disposing of assets that were not in that category at the appropriate time.
Amongst Billiton’s South African assets, there were two major new energy coal capital projects under way at Klipspruit and Douglas-Middelburg, which would make the division a long-term, tier-one asset able to take advantage of growing Indian demand for South African energy coal. Although no other new projects were planned in SA, Billiton’s coal, titanium, aluminium and manganese were “all on the strategic fairway and we are happy to have these businesses”.
mathewsc@bdfm.co.za