BHP Billiton Limited
) reported impressive results for fiscal year 2014 (ended Jun 30).
The company's net income grew 18.8% year over year with earnings
coming in at $5.18 per American Depositary Share (ADS). The
bottom-line reflects an increase of 23.3% over the year-ago
earnings of $4.20, but lagged the Zacks Consensus Estimate of
BHP Billiton Limited generated revenues of $67.2 billion, climbing
1.9% year over year due to a 9% increase in the yearly production
volumes. While production of iron ore, copper, petroleum, coal,
alumina and manganese alloys increased, output of manganese ore,
nickel and aluminium declined year over year.
Iron ore and metallurgical coal production increased 20% year over
year to 203.6 million tons and 45.1 million tons, respectively.
Also, copper production increased 2% to 1.7 million tons. However,
nickel and manganese ores production slipped 7% and 3% year over
year to 0.143 million tons and 8.3 million tons, respectively.
In fiscal 2014, BHP Billiton completed six major projects, with two
of its other projects accomplishing their first production. The
company's Caval Ridge coal mine, which was completed ahead of
schedule and within budget, achieved its first production in June
this year. Exiting fiscal 2014, BHP Billiton had eight low-risk,
brownfield major projects under development, worth $14.1 billion.
Costs and Margins
Expenses, excluding finance costs, were $46.5 billion, down 7% year
over year and representing 69.2% of total revenues. Net finance
costs amounted to $1.2 billion, roughly flat year over year.
Underlying earnings before interest and tax (EBIT) was recorded at
$22.9 billion, down 0.3% year over year.
Exiting fiscal 2014, BHP Billiton Limited had cash and cash
equivalents of $8.8 billion versus $10.9 billion recorded at the
end of first-half fiscal 2014. Interest-bearing liabilities were
$30.3 million, down from $31.7 billion as of Dec 2013.
BHP Billiton Limited generated net cash of $25.4 billion from its
operating activities in fiscal 2014 as against $20.2 billion in
fiscal 2013. Capital spent on purchases of property, plant and
equipment dropped 28.1% year over year to $16 billion. Exploration
expenditure amounted to $1 billion versus $1.4 billion in fiscal
In the reported period, BHP Billiton Limited paid dividends
totaling $6.4 billion, compared with $6.2 billion in fiscal 2013.
In addition, a final dividend payment of 62 cents per share was
approved by the company's board of directors. Total dividend for
fiscal 2014 presently stands at $1.21, increasing four cents from
the prior annual rate.
Concurrent with the earnings release, BHP Billiton Limited also
communicated plans to trim down its asset portfolio by demerging
its high-quality nickel, manganese, aluminium, coal and silver
assets. The separation will create a new global metals and mining
BHP Billiton Limited's aluminium business includes Hillside,
Bayside and Mozal smelters in South Africa, integrated bauxite mine
and alumina refinery in Western Australia, and aluminium refinery
and smelter in South America. The company's manganese assets are
located in Australia and South America, while its nickel assets
include Nickel West in Australia and Cerro Matoso in Colombia.
Silver assets include Cannington (Australia), the world's largest
The restructuring will enable BHP Billiton Limited to concentrate
on its iron-ore, copper, coal, petroleum and potash businesses,
which generate a major chunk of its profit. In fiscal 2014, the
company sourced nearly 88% of its total revenue from these five
Over the last few years, BHP Billiton has been streamlining its
businesses by hiving off non-profitable assets to improve
productivity. Consequently, the company aims at achieving gains of
approximately $3.5 billion by fiscal 2017 end.
BHP Billiton expects the economy to continue reviving in the coming
quarters, mainly in China. In fiscal 2015, the company estimates
capital and exploration expenditure at roughly $14.8 billion.
However, if the proposed demerger is implemented, the same may
remain restricted to $14 billion.
With a market capitalization of $186.3 billion, BHP Billiton
Limited currently carries a Zacks Rank #3 (Hold). Some
better-ranked stocks in the industry include Impala Platinum
Holdings Ltd. (
), U.S. Silica Holdings, Inc. (
) and Dominion Diamond Corporation (
). While Impala Platinum Holdings and U.S. Silica Holdings sport a
Zacks Rank #1 (Strong Buy), Dominion Diamond Corp. holds a Zacks
Rank #2 (Buy).
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