BHP Billiton (BHP) Reports 1H FY 2017 Operating Results

Premium basic materials company, BHP Billiton LimitedBHP reported moderate operating results for first-half fiscal 2017 (ended Dec 31, 2016).

The company is poised to grow on the back of higher commodity prices, improved productivity, meaningful restructuring moves and lower costs. Notably, BHP Billiton is aimed at delivering higher value to its shareholders in the near term through a strategic capital allocation framework.

Inside the Headlines

Aggregate iron ore output was 118 million tons (Mt) at the end of first half of fiscal 2017, up 4% year over year. The upside came on the back of record output generated from the Western Australia Iron Ore ('WAIO') mines. The company stated that the mines' productivity had increased due to continued ramp-up activities conducted in the additional capacity of the Jimblebar mine.

Metallurgical coal output came in at 21 Mt in first-half fiscal 2017, inching up 1% year over year. Robust output accrued from the company's four Queensland mines marginally offset the impact of the termination of the Crinum mine operation.

However, energy coal output at the end of first-half fiscal 2017 was 14 Mt, down 4% year over year. The downside was witnessed due to reduced productivity of the company's NSWEC mine.

In first-half fiscal 2017, aggregate petroleum output totaled 105.9 million barrels of oil equivalent (MMboe), down 15% year over year. The downside was stemmed by the sluggish development activities in Onshore U.S. due to natural field and value decline in Conventional assets.

Gross output of copper came in at 712 thousand tons (kt), down 7% from the value recorded in first-half fiscal 2016. Maintenance activities conducted in the Pampa Norte mine, lower volumes accrued from the Olympic Dam and reduced copper grades generated from the Antamina mine were the key factors behind the year-over-year decline.

BHP Billiton mentioned that its underlying attributable profit in first-half fiscal 2017 would include gains roughly within the range of $150-$200 million, from asset divestments.

Existing Scenario

The global mining industry is highly competitive in nature. Apart from BHP Billiton, bigwigs like Rio Tinto plc RIO , Vale S.A. VALE and Teck Resources Limited TECK currently dominate the global mining business. The industry has been facing oversupply and dismal pricing conditions, of late.

However, we believe that President Donald Trump's market-friendly policies, steady U.S. economy and gradual economic recovery of China would boost global industrial and infrastructure spending, going ahead. This, in turn, would augment demand for core metal products offered by mining companies like BHP Billiton.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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