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BHP tipped to boost production, but profit to be down on lower prices

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Production and sales at BHP Billiton’s key iron ore division are expected to have risen in the quarter to June 30 but falling commodity prices will mean overall net profit will be down.

The global mining giant reports its June quarter production results on Wednesday.

This will allow analysts to determine whether profits have fallen again, further cementing the market view that the BHP Billiton’s record run of super profits is over for the time being as resources demand from Asia, primarily China, cools.

February’s first half net profit for BHP Billiton was the first drop after three years of record profits.

A year ago BHP Billiton reported Australia’s highest corporate financial result, with a full year net profit of $US23.6 billion.

Investment bank UBS has forecast a net profit of $US16.61 billion ($A16.26 billion) this financial year for BHP Billiton because of the effect of softer commodity prices.

UBS also said that BHP Billiton should report increased sales of iron ore in three months to June 30 following a weather-affected March quarter.

UBS said overall iron ore exports at Port Hedland in Western Australia were 17 per cent higher in the June quarter from the March quarter, with BHP Billiton’s own iron ore exports tipped to be up more than nine per cent to 45 million tonnes.

Iron ore has represented more than 40 per cent of the company’s earnings in recent years as prices soared to record highs.

However, prices have come back from a record $US180 per tonne during 2011 to about $US130 currently, with UBS forecasting further falls to an average $US125 next year.

Petroleum volumes are forecast to increase by four per cent on the previous quarter to 59 million barrels of oil equivalent, with the company’s troubled onshore US shale and Australian production offsetting closures in the Gulf of Mexico.

Copper production should also increase slightly, driven by better grades out of Chile.

BHP Billiton had previously said its production of copper, oil, gas and potash would supply to later phases of Chinese economic development when more consumer products and energy were wanted.

Coking coal production and exports are tipped to drop, due to strike action at the company’s BHP Billiton Mitsubishi Alliance joint venture project in central Queensland.

UBS has lowered its share price target for BHP Billiton to $42 from $47, with its stocks dropping to three-year lows in the past few weeks.

BHP was up three cents at $30.80 at 1450 AEST.