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BHP set for another profit fall

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AAP

2013-02-17

Resources giant BHP Billiton is expected to post a third consecutive profit fall on Wednesday due largely to last year's massive slump in iron ore prices.

Consensus estimates among analysts for the December 2012 half year is for a net profit (excluding exceptional items) of $US5.69 billion ($A5.53 billion).

That represents a 43 per cent fall from $US9.9 billion ($A9.62 billion) for the December 2011 half, which itself was a 5.5 per cent fall and the company's first profit fall in three years.

Thankfully for BHP and other iron ore miners, the commodity's price has jumped almost 80 per cent to $US150 a tonne since last September's low of $US87.

Analysts are predicting underlying earnings before interest and tax (EBIT) of $US9.52 billion ($A9.25 billion), a 40 per cent fall from $US15.7 billion ($A15.26 billion) for the prior corresponding period.

However dividend payments are tipped to increase to US 57 cents a share from 55 US cents, in a nod to the calls of vocal and influential shareholders to invest less and return more to them.

BHP's diversification makes it less exposed to iron ore's earnings than Rio Tinto or Fortescue Metals but the commodity is still its biggest earner.

Morningstar equities analyst Mark Taylor is predicting a 38 per cent drop in iron ore EBIT from $US7.9 billion ($A7.68 billion) to $US4.9 billion ($A4.76 billion).

In contrast, he has forecast big jumps in petroleum and base metals earnings, which is consistent with BHP's oft-repeated public view that energy and copper will soon play a greater role than iron ore in China as its standards of living rise.

Mr Taylor forecast a 26 per cent increase in petroleum earnings to $US4.12 billion ($A4 billion) - less than 20 per cent behind iron ore's profits - on the back of better production and oil and gas prices.

Chief executive Marius Kloppers was sharply criticised when BHP wrote down the value of its US shale assets by more than $US2.8 billion ($A2.72 billion) last August, but those losses could be soon reversed.

"There is a chance they might have some `write ups' on their shale gas assets due to price improvements and resources being proven up to reserve status on leases they bought that they couldn't capture before," Mr Taylor told AAP.

"We are expecting some improvement in copper, there has been a turnaround with high grades starting to feature again after a period of a few years of low-grade ore.

The company's share price has gained about 30 per cent in the past 12 months.

Greg Roberts