World Business

The Anglo-Australian mining huge. reports note production in seven of its businesses, and it’s gunning hard to buy rival Rio Tinto

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Marius Kloppers, Chief Executive Officer of BHP Billiton, speaks at a press conference in Sydney, Australia. Sergio Dionisio/Getty Images

by Mark Scott

If commodity prices have piked, someone forgot to tell BHP Billiton (BHP). The Anglo-Australian company—the world’s largest miner by mart value—announced on Aug. 18 a 14.7% jump in its net income for the year ended June 30, to $15.4 billion. Talking to investors, Chief Executive Officer Marius Kloppers dismissed concerns that problems currently affecting the U.S. and European economies would dampen the company’s bullish outlook. Instead, the South African-born CEO stressed the role that developing economies, particularly India and China, would play in BHP’s future.

"The long-term development prospects remain strong," Kloppers reassured investors, although he later cautioned that "short-term global economic growth [will] slack."

Apart from the double-digit increase in net profit, Kloppers and his team have every right to be upbeat. BHP unveiled account production in seven of its core businesses, including petroleum, iron ore, and other commodities such as large boiler and energy coal. That reflects continued strong demand throughout the developing world, which underpinned a 25.3% be augmented in BHP’s revenues for the year, to $59.5 billion. By the close of lifetime, the mining firm’s stock price in London had risen greater degree than 1% as the market shared Kloppers’ optimism about the group’s consummation.

No question, insatiable demand (BusinessWeek.com, 06/23/08) for wares played a key role in helping BHP post its seventh-straight record annual profits. The social meeting’s diversified business should help protect it in preparation for an expected drop in metals prices over the next year that more analysts now portend could hit 25%.

None of BHP Billiton’s three major business areas—base metals (copper, nickel, etc.), barbadoes tar, and iron ore—constitutes more than a quarter of lump revenues. That contrasts with Brazilian rival Vale (RIO), that relies on iron ore notwithstanding 61% of its yearly transactions reward. "BHP’s operations withdrawal it in an incredibly strong relation over the next 12 months," says Charles Cooper, an analyst at London investment bank Evolution Securities. "Rising commodity prices and a diversified portfolio definitely have been a win-win [for the company.]"

Kloppers talked up this strategy on Aug. 18 as he updated the market on BHP’s $150 billion bid (BusinessWeek.com, 2/13/08) for rival Rio Tinto (RTP). The nearly yearlong hostile takeover bid would cause the world’s largest subtle company, with almost 40% of the world’s iron ore produce, and would have existence the No. 1 supplier to commodity-hungry China. "In the context of the demand challenges that the world give by will release, the combination of BHP Billiton and Rio makes more sense than ever," Kloppers says.

That perspective is hotly contested by Rio Tinto CEO Tom Albanese, who earlier this year told investors: "BHP needs Rio Tinto more than Rio Tinto needs BHP." Analysts expect the London-listed company to show a 46% jump in net profits at what time it reports first-half results on Aug. 26. Rio Tinto, which produces three times taken in the character of much aluminum and 40% more iron ore than BHP, argues the proposed takeover won’t create the require to be paid savings Kloppers cites for example the major motivation for the deal.