BHP Billiton to post $15bn British record earnings

By Louise Armitstead
13 Feb 2011, 11:55AM GMT

BHP Billiton is set to reveal earnings of more than $15bn (£9.4bn) this week – putting the resources company on track to generate among the biggest ever profits by a UK company in a single year.
The Anglo-Australian miner is expected to reveal the benefits of the commodities boom at its half-year results on Wednesday and confirm that it is likely to make pre-tax profits of more than $30bn at its full-year results in June.
The expected total, which is more than a third bigger than BHP's pre-tax profits of $19.6bn for the full year in 2009, would beat the previous highest total held by Royal Dutch Shell.
The oil major, which has broken the record for the biggest profits in Britain in the past, unveiled pre-tax profits of $28.8bn for 2010 two weeks ago. Three year's ago when Shell unveiled profits of $27.5bn, Tony Woodley of Unite, Britain's biggest union, described the margins as "obscene".
BHP is expected to announce that it will return billions of dollars of its profits back to shareholders. The money is likely to include a significant rise in the dividend payments and a share buy-back of as much as $10bn.

The company has been under pressure from institutional investors in recent months who have been calling for a significant return of capital.
The shareholders have been concerned that Marius Kloppers, the chief executive of BHP, has ambitions to make a significant acquisition instead. In November BHP announced a buy-back of $4.3bn in the London-listed stock. Analysts expect the bulk of future buy-backs to be in Australian shares. A tax-credit associated with Australian stock offers is a more efficient way of returning capital than other options, such as a special dividend, the analysts said.
BHP is also likely to explain plans for significant investment in its businesses around the world. Analysts said capital expenditure in the future could be more than $15bn.
The investments will be in developing mines around the world which are experiencing high-demand, particularly from emerging markets.
For example, demand from China has fuelled a soaring commodities boom which has sparked record profits across the resources sector.
Last week BHP's rival, Rio Tinto, posted a 161pc increase in 2010 profits to $14bn and more than doubled its dividend.

Rising commodity prices - particularly iron ore - produced a record cash flow from the group's operations, which rose 70pc to $23.5bn. The company said cash flowing from Rio's operations was equal to $64m a day – that's $1m every 23 minutes.
The company unveiled a $5bn share buyback. However the mining giant's shares fell on the day because investors had expected even more.
On Tuesday, Xstrata reported pre-tax profits of $6.61bn - up from $1.53bn in 2009. The company said its net operating cash flow had doubled from 2009 to $8.2bn.
The companies announced that they plan to invest significant amounts in the business - Rio plans to spend $13bn on new mines this year alone. Mick Davis's Xstrata has a $23bn budget for investing in new mines.

However, there are concerns that the boom behind the profits is not sustainable. There have been investor worries over a slowdown in China hitting mining companies after the country's central bank raised interest rates for a third time in fourth months this week. (sourced:telegraph.co.uk)