BHP confident of profitable future

Press, 24 September 1987, Page 28

BHP confident of profitable future

NZPA Sydney Shareholders in Australian resources giant BHP should look to the medium and long-term future with some confidence, chairman Sir James Balderstone said on Tuesday. “In aU, your company is performing better than almost all its competitors and has built up a momentum which should warrant the confidence in it you have demonstrated by your investments,” he told the company’s annual meeting in Melbourne. Last Friday, BHP reported a 31 per cent rise in net profit to sAust233.4 million ($NZ265.2M) for the first quarter to August 31, despite the slump in the steel division. In steel, the quarter’s result of sAust4o.sM (SNZ46M) was 34 per cent down on the same period last year. However, minerals, with an sAustB2.7M (SNZ94M) profit, was up 8 per cent, while petroleum, with sAustloo.sM

(5NZ114.2M), jumped 315 per cent Sir James said BHP this year expected higher average petroleum prices than last year and benefits from the lifting of Australian Government market controls. He said the Government had reduced the maximum excise rate from 87 to 80 per cent of the selling price, with agreement to reduce it further in stages over three years to 75 per cent — “which is still high by world standards”. "In addition, the Government agreed to allow a free market for crude oil from January 1, 1988. “Since 11 per cent of all (Government) revenue comes from oil and petroluem products, the decisions demonstrated a commendable confidence in the industry.”

Sir James said the recent significant weakening of the U.S. dollar had meant mineral products priced in that currency had become extremely

cheap for BHP’s customers, while the strength of the Australian dollar had penalised the company as a producer. • “Consequently, prices for some mineral products have already moved upward and we believe that others will participate in this trend in the course of future price discussions,” he said. “This, coupled with cost cutting and increased volumes in coal, iron ore and gold, will hold us in good stead.” In steel, Sir James said BHP believed it would be able to operate at 100 per cent capacity and what could not be sold in Australia would be sold profitably overseas. He said growth was an objective in BHP’s steel business, but it had been subservient to consolidating the large investments of the past four years to create improved profits in the short term. “BHP next year will have virtually completed a modernisation programme to give us a

strong international position,” he said. “All steel produced at Port Kembla and Newcastle will be continuous cast, which will produce higher yields along with lower labour and energy costs.” Sir James said BHP was looking to increase its visibility internationally. It listed on the New York Stock Exchange in May, would list on stock exchanges in Switzerland and West Germany next month, and would seek listing on the Tokyo exchange early next year. BHP earlier announced an sAustB2o.3M (SNZ93I.9M) net profit for the year ended May 1987, a 17 per cent drop on the previous year’s record of sAust9BB.2 million (SNZU22.7M). The directors on Friday declared a dividend of 15c a share for the November half-year, representing an increase of 3 per cent, when adjustments for increased share capital are made.