Currency shifts bite into BHP Billiton

The group's profit slipped 19 per cent from $US1.15 billion to $US931 million ($1.56 billion).

The result was better than most in the market were expecting and could have been substantially higher if the value of the South African rand had not come storming back in the period.

The latest result was after a negative (non-cash) $US138 million restatement of liabilities brought on by the rand's sharp appreciation, compared with a $US427 million benefit in the previous corresponding period.

BHP Billiton said that in a period of global weakness and despite cutbacks at some of its operations, profit had remained solid and cash-flow generation strong. That was reflected in free cash flow remaining at more than $US1.2 billion for the sixth quarter in a row.

BHP Billiton chief executive Chip Goodyear said the resources sector's outlook remained clouded by the world's ``difficult geopolitical situation".

``That situation is certainly impacting consumer demand," he said. ``It is certainly impacting business demand.

``We are seeing weak equity markets. Those items and high oil prices although they benefit us certainly have an impact on economic activity around the world.

``While that uncertainty is in place, it is going to be difficult to be very excited about what's happening in the future with regards to economic activity."

Mr Goodyear said that despite the uncertain outlook, the group's diversified portfolio and mix of quality assets would continue to provide relatively stable cash flows.

The company was well placed to ``continue to invest in value-adding opportunities and to prosper from any uptick in economic activity".

The market responded to the result by moving the shares 25c higher to $9.34, a move that had some distance on that achieved by the other leading resources groups in the local market.

Like the rest of the resources sector, China is seen as the great hope in offsetting other major markets.

``China has a huge impact on the demand for metals and bulk commodities," Mr Goodyear said, noting that BHP Billiton had $US430 million in direct sales to the country in the December half.

``In the last three to four years, you have seen increased direct foreign investment driven by higher local growth as well as relatively cheap labour which then exports end product into the outside world," Mr Goodyear said. ``We expect this to continue. It will continue to be an important driver."

How much for Gilbo Page 24