BHP reports rare fall in earnings

BHP Billiton, the world's biggest miner, reported a rare fall in earnings today, as it took a hit from labour battles and lower commodity prices. However, according to results it was still in a different league from its would-be rival: Glencore-Xstrata.

The 6 per cent drop in half-year profit notwithstanding, at $9.94 billion, BHP made more cash profits from far fewer revenues in six months than the $90-billion marriage of commodity trader Glencore and miner Xstrata would have made in all of 2011.

That was mostly due to BHP's hugely profitable iron ore business, a strength it shared with its main rival, Rio Tinto, which separately unveiled a $3.4-billion expansion of its Australian iron ore mines today (See: Rio Tinto to spend $3.4 billion on iron ore expansion).

"The capacity for this organisation to redirect, adapt and steer things while keeping the overall cash investment and cash generated at relatively stable levels, we believe, is unparalleled in the industry," BHP chief executive Marius Kloppers told analysts in a results briefing.

The company's relatively low cost base as also a diverse range of high-quality, long-life assets have thus far managed to keep concerns over the global economic outlook in the background, despite BHP again warning today, of volatile prices until at least year-end.

In the short term, Kloppers said that he had to worry less now than late last year over Europe, where a sovereign debt crisis had threatened to affect trade finance. He also said he continued to have faith in China, though BHP said in a statement, "In the longer term, we expect the rate of growth in steelmaking raw materials demand, particularly in China, to decelerate as underlying economic growth rates revert to a more sustainable level."