More on BHP Billiton
BHP Billiton: Q1 2006 production report
BHP Billiton, the world’s largest miner reported record production figures for nickel, copper, natural gas and aluminium in Q1 with output up by 122%, 25%, 6% and 1% respectively.
Output would have been even better if not for bad weather in Australia and South Africa. The company said petroleum, iron ore and nickel operations based in Western Australia were disrupted by cyclone activity and continuing wet weather while production in South Africa was also impacted by higher than average rainfall.
The mining giant is the world’s second largest producer of copper, third largest producer of nickel, fourth largest producer of uranium and sixth largest producer of aluminium. It is also a significant producer of oil and gas and has substantial interests in diamonds, silver and titanium.
The company earns around 33% of its EBIT from carbon steel materials, base metals earn 27% and petroleum contributes 21%. The rest is split roughly evenly between aluminium, stainless steel materials, diamonds/speciality products and coal.
The company complained that there was “no easing of the industry wide pressures that have been placing constraints on the supply side’s response to continued strong global demand for raw materials”.
A shortage of manpower, equipment and supplies has resulted in tight labour markets and difficulty in sourcing construction and drilling plant and machinery, leading to rising input costs. These pressures have been most keenly felt in Australia and the Gulf of Mexico.
This is the crucial problem facing all resource based companies – difficulties in increasing output. The medium term outlook for most commodities is still fairly strong but the real winners in the sector will be the companies that can crank up output to meet demand.
In its attempts to increase production the company has increasingly widened its exploration programme to include such hostile territories as the Congo. While this adds to the level of risk faced by the company, it is common to many in the sector.
Overall prospects still look good. The share trades at 1169p, on a prospective PE (2007 earnings) of 12.3x, in line with the sector with a yield of 1.9%.
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