SYDNEY // The Anglo-Australian diversified mining concern BHP Billiton, which is a locked in a bid to take over rival Rio Tinto in what would be the world's second-biggest takeover, yesterday announced record profits boosted by Chinese demand.
The world's biggest mining corporation said cost controls and its emphasis on high-margin growth projects had propelled its bottom line to record profits of $15.4 billion (Dh56.5bn) for the full year to June 30. But BHP also warned of weaker global economic growth in the short term.
"Our results were outstanding in the context of a challenging supply environment, which was characterised by unexpected disruptions, rising input prices, skills shortages and the further devaluation of the US dollar," the company said.
BHP said higher operating costs, such as fuel, staff and equipment replacement, had inflated costs across the group by $1.18bn for the year.
"Strong global demand for resources continues to provide cost challenges for the whole industry. This is mainly due to rising prices for inputs such as diesel, (steelmaking) coke and explosives, and shortages of skilled labour," it said.
Cost inflation has emerged as an Achilles heel for the mining industry reaping big profits from global demand for minerals such as copper and iron ore.
Rising costs are also expected to cut into Rio Tinto's first-half earnings, which are due next week. Rio operates in many of the same sectors and insists BHP's unsolicited all-share offer, worth around $123bn, is too low.
The EU is due to give its anti-competition ruling on Dec 9, a key date in the long-running takeover saga.
Marius Kloppers, the chief executive of BHP, said he believed the proposed takeover offer for Rio Tinto made more sense than ever.
Mr Kloppers refused to comment on speculation that BHP could be interested in bidding for platinum producers Lonmin or Impala Platinum Holdings and said the Rio Tinto deal was the best M&A opportunity the miner could see at the moment.
"In the context of the longer-term growth, the demand challenges that the world will deliver and the supply challenges that I have described, the combination of BHP Billiton and Rio makes more sense than ever," he said.
Mr Kloppers said weaker nickel prices may force some high cost operations to close, but that BHP's Ravensthorpe laterite nickel operation in Western Australia state would remain profitable and the company saw a "manageable" supply and demand balance for the commodity.
The 45-year-old head of BHP has pledged to spend at least $90bn to expand output. BHP, which set records for annual production of seven commodities, said the effects of current weakness in developed economies on demand should be minimal.
"The key drivers of this performance are volume growth and higher prices in base metals such as copper, petroleum and iron ore, as well as very strong manganese prices," said Kieran Daly and Rebecca O'Dwyer, analysts at Investec Securities in London, in a report last week.
BHP shares climbed 62 cents, or 1.6 per cent, to 38.60 Australian dollars on the Australian stock exchange in Sydney.
"In the short term, we expect prices to remain high relative to historical levels, albeit with higher volatility," BHP said. "Looking to the longer term, demand for our commodities is expected to remain strong."
* With agencies
@Email:business@thenational.ae
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Joker: Folie a Deux
Starring: Joaquin Phoenix, Lady Gaga, Brendan Gleeson
Director: Todd Phillips
Rating: 2/5
Unresolved crisis
Russia and Ukraine have been locked in a bitter conflict since 2014, when Ukraine’s Kremlin-friendly president was ousted, Moscow annexed Crimea and then backed a separatist insurgency in the east.
Fighting between the Russia-backed rebels and Ukrainian forces has killed more than 14,000 people. In 2015, France and Germany helped broker a peace deal, known as the Minsk agreements, that ended large-scale hostilities but failed to bring a political settlement of the conflict.
The Kremlin has repeatedly accused Kiev of sabotaging the deal, and Ukrainian officials in recent weeks said that implementing it in full would hurt Ukraine.
SPECS
Engine: 4-litre V8 twin-turbo
Power: 630hp
Torque: 850Nm
Transmission: 8-speed Tiptronic automatic
Price: From Dh599,000
On sale: Now
The specs
Engine: 4-litre twin-turbo V8
Transmission: eight-speed PDK
Power: 630bhp
Torque: 820Nm
Price: Dh683,200
On sale: now
Red Joan
Director: Trevor Nunn
Starring: Judi Dench, Sophie Cookson, Tereza Srbova
Rating: 3/5 stars
Moon Music
Artist: Coldplay
Label: Parlophone/Atlantic
Number of tracks: 10
Rating: 3/5
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Ibrahim's play list
Completed an electrical diploma at the Adnoc Technical Institute
Works as a public relations officer with Adnoc
Apart from the piano, he plays the accordion, oud and guitar
His favourite composer is Johann Sebastian Bach
Also enjoys listening to Mozart
Likes all genres of music including Arabic music and jazz
Enjoys rock groups Scorpions and Metallica
Other musicians he likes are Syrian-American pianist Malek Jandali and Lebanese oud player Rabih Abou Khalil
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COMPANY%20PROFILE%20
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Jigra
Starring: Alia Bhatt, Vedang Raina, Manoj Pahwa, Harsh Singh
WHAT IS A BLACK HOLE?
1. Black holes are objects whose gravity is so strong not even light can escape their pull
2. They can be created when massive stars collapse under their own weight
3. Large black holes can also be formed when smaller ones collide and merge
4. The biggest black holes lurk at the centre of many galaxies, including our own
5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed
UAE currency: the story behind the money in your pockets
Fire and Fury
By Michael Wolff,
Henry Holt
The biog
Name: Younis Al Balooshi
Nationality: Emirati
Education: Doctorate degree in forensic medicine at the University of Bonn
Hobbies: Drawing and reading books about graphic design
The specs
Engine: 1.5-litre turbo
Power: 181hp
Torque: 230Nm
Transmission: 6-speed automatic
Starting price: Dh79,000
On sale: Now
The specs
Engine: 2.0-litre four-cylinder turbo
Power: 268hp at 5,600rpm
Torque: 380Nm at 4,800rpm
Transmission: CVT auto
Fuel consumption: 9.5L/100km
On sale: now
Price: from Dh195,000
COMPANY PROFILE
Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding
The specs
Engine: 2.4-litre 4-cylinder
Transmission: CVT auto
Power: 181bhp
Torque: 244Nm
Price: Dh122,900