Updated

Mining giant BHP Billiton has almost doubled its profit in a year on the back of record sales for iron ore, coal and petroleum.

Source: Lateline Business | Duration: 4min 57sec

Topics: company-news, mining-industry, australia

Transcript

BRIGID GLANVILLE, PRESENTER: Rising commodity prices have helped the world's biggest miner BHP Billiton more than double its profit to $14 billion.

It's a result that'll help BHP in its $43 billion takeover bid for Canadian-based fertiliser company Potash.

In a joint announcement in both London and Sydney tonight, the company said record sales volumes in iron ore, coal for steel-making and petroleum products were among the key drivers of the result.

Reporter Andrew Robertson has been looking at the numbers and he joins me now in the studio.

Andrew, a year of recovery for BHP after it took a battering at the hands of the global financial crisis?

ANDREW ROBERTSON, CHIEF REPORTER: Well, Brigid, companies like BHP are very much beholden to global commodity prices and BHP Billiton's profit tonight reflects a recovery in the price of many commodities from the depths of last year.

So for example revenue from things like base metals was up - which includes copper - was up 47 per cent, petroleum products rose 22 per cent, iron ore up 11 per cent, and in the smaller divisions, things like stainless steel-making materials, up 54 per cent, diamonds and specialty products rose 42 per cent.

It wasn't all good news, though. Revenue from coal for those steel-making and energy was down substantially because of a big fall in the price of coal.

Now the future of commodity prices - and in fact BHP's earnings depends very much on the outlook for the global economy and the company's chief executive Marius Kloppers sees some challenging times ahead.

MARIUS KLOPPERS, CEO, BHP BILLITON: We remain cautious on the short-term outlook and believe recent volatility, triggered by sovereign debt fears in Europe, as well as the government tightening policies in China will continue in the near term.

Looking ahead, the key question for the oeCD will be the impact of growth - on growth of governments withdrawing the unsustainable stimulus packages that they were forced to introduce during the recent financial crisis.

ANDREW ROBERTSON: Now, Brigid, as a sign of BHP Billiton's confidence in the longer term, the company spent $12 billion last year on capital investment and exploration.

BRIGID GLANVILLE: And of course, Andrew, the $43 billion bid for Canadia's Potash Corporation is in the uppermost of everybody's minds. What did Marius Kloppers have to say about that tonight?

ANDREW ROBERTSON: Well that hostile all-cash bid for Potash has been rejected out of hand by the Canadians who've sought the help of a white knight to try and fend off BHP Billiton's bid.

What BHP Billiton's strong profit tonight says - it sends a message to potential rivals who may also be considering bidding for Potash that BHP has the ability to substantially raise its offer.

Now BHP Billiton shareholders are not that impressed with the company's bid for Potash. They're concerned that owning a fertiliser company will take BHP away from its core businesses of mining.

And they're also concerned that 70 per cent of takeovers add no value to the acquiring company. Now, BHP boss Marius Kloppers has sought to reassure those shareholders that he knows what he's doing.

MARIUS KLOPPERS: What I can tell you is that I will be as disciplined on this bid as I've been on every other endeavour that we've been on because ultimately the shareholders own this company and it's my job to create more value for them, not to do anything - any one thing at any costs.

BRIGID GLANVILLE: Now, Andrew, some commentators have been saying that the political uncertainty is bad for business and also bad for investment. Did Marius Kloppers have any reassuring words tonight?

ANDREW ROBERTSON: Well as Julia Gillard and Tony Abbott negotiate with the independents in Canberra, what everybody is hoping that any deal the former government actually holds for a lengthy period of time.

Business is very concerned about prolonged instability and uncertainty. But Marius Kloppers has a more sanguine view. He says the biggest issue that BHP Billiton has faced in Australia over the last year is the resources super-profits tax and he's confident that nothing will change in Australia for BHP Billiton despite the election result.

MARIUS KLOPPERS: I'm not a good political commentator, but I can tell you that whether the Government in Australia is formed tomorrow, next week or whatever happens, other than that, what we are doing today is we are diligently working on the investment opportunities that are going to make us put more money into Australia.

ANDREW ROBERTSON: And just finally, Brigid, as I was preparing this report tonight it occurred to me that Woolworths, Australia's biggest retailer, is reporting tomorrow and Michael Luscombe the boss there must wish he was a miner.

Both Woolies and BHP Billiton bring about $50 billion a year each in revenue. BHP Billiton's profit tonight: $14 billion; Woolies' profit tomorrow: probably around $2 billion.

BRIGID GLANVILLE: We'll find out; we've got Michael Uscombe on the program. Thanks for joining us.

ANDREW ROBERTSON: OK.