Net profits sag at BHP

Management estimates that around $1.6bn in underlying cash profit was lost through the residual effects of flooding at its Queensland coking coal sites, together with the negative impact of lower ore grades and labour disruptions at its majority-owned Escondida copper mine in Chile. Moreover, profits at BHP's base metals and stainless steel businesses suffered a $857m hit from falling realised prices during the latter part of 2011. Management points out that these declines were largely attributable to the weakness of the European economy, whereas demand from emerging economies remained strong.

The relative strength of these emerging markets is reflected in the revenues generated by BHP's key iron ore and coking coal segments, which rose 29.5 per cent and 11.1 per cent, respectively, during the period. The coking coal unit's performance - weather permitting - should continue to improve during the second half, too, while the iron ore business will benefit from an ongoing expansion of operations in Australia's Pilbara region. Between them, these two segments account for just under half of group revenues.

Production within BHP's oil & gas division increased by over a third during the period which, along with improved realisations for petroleum prices, helped boost underlying operating profit at the division by 38 per cent in the period to $3.9bn. The energy businesses are set to gain in prominence as BHP intends to double its exploration budget over the course of the year, primarily as the result of the successful acquisition of Petrohawk Energy for $12.1bn - that mainly explains the hefty $15.6bn hike in net debt since the end of June.

Prior to these figures, RBC Capital had been forecasting full-year EPS of 349¢ (429¢ in 2011).