From CIMB this morning on the BHP result:
Tax of US$3.7b versus US$4.7b implied by consensus and CIMB of US$4.5b. Hence, the large beat at the bottom line. Looks like they beat the tax man.
Underlying earnings of US$7.8b, 10% higher than consensus of US$7.1b and 16% higher than our estimate of US$6.7b.
Iron ore EBIT of US$6.5b, 52% of Group EBIT Of US$12.4b.
Operating cashflow of US$11.9b and free cashflow of US$3.4b.
No material one-offs. Only US$346m gain on sale of Pinto Valley Copper mine.
Expect this will lead to upward revisions to FY14 earnings – current consensus is US$14.2b.
Div of US59c in line with policy of 2H FY13 div.
Market should receive result very well.
And it has. BHP also said in its presentation:
Chinese steel production growth rates are expected to decelerate to levels considerably below GDP growth in the short term as the economy matures following a period of steel-intensive, infrastructure-led growth. In this context, a more balanced iron ore market is anticipated with substantial new supply from the high quality, low cost basins of Western Australia and Brazil expected to exceed demand growth. Increasing mill utilisation rates and the continued closure of sinter capacity, both of which are associated with more demanding environmental regulations within China, should support a preference for high quality lump iron units.
This is the perfect time to do the opposite.
