Record Quarterly Profit and Write-off of HBI
Broken Hill Proprietary Co Ld
4 May 2000
BHP ANNOUNCES RECORD QUARTERLY PROFIT AND WRITE-OFF OF HBI
The Broken Hill Proprietary Company Limited (BHP) today announced a record
quarterly operating profit of $558 million, excluding abnormals, for the
quarter ended 31 March 2000. The result is an increase of $512 million
compared with the quarter ending February 1999 and is the highest-ever
quarterly profit, excluding abnormals, in the Company's 115 year history.
BHP Managing Director and CEO Paul Anderson said: 'This is a good quarterly
operating result which is a tribute to our people and a strong organisational
focus on improving the fundamental performance of our business. This focus has
driven a number of factors contributing to the quarterly result including
improved cost savings, volumes and the contribution from new operations.'
Including abnormals the result for the quarter was a loss of $46 million, a
decrease of $464 million compared with the corresponding period in 1999. The
result includes a $794 million write-off in the carrying value of BHP's
Western Australia HBI operations following continued commissioning
difficulties. This follows a review of the carrying value which is, in part,
offset by an associated tax benefit of $190 million arising from funding
arrangements.
'While we are now clearly focused on optimising the performance of all our
operations, some portfolio challenges remain,' Mr Anderson said. 'The
performance of our Western Australia HBI operation is extremely disappointing
and we have put in place a defined work program to determine the technical
viability of the plant. A decision on the future of the operation is expected
at the end of this calendar year.'
Mr Anderson said: 'While higher commodity prices provided a net benefit of
approximately $180 million (after tax) to the result, the commissioning of new
Petroleum operations and continuing strong performance from our EKATI (TM)
diamond mine contributed over $100 million (after tax) to the third quarter
improvement.'
The exit from loss-making operations such as the Hartley platinum mine and
North American copper operations positively impacted the profit result by
approximately $80 million (after tax) compared to the quarter ended February
1999. In addition, results from discontinuing Steel operations improved by
approximately $40 million (after tax) compared to the corresponding period.
Mr Anderson said: 'The improvement in the performance of our discontinuing
Steel operations reflects, in part, the extensive restructuring of our
domestic long products business. The improved result comes despite higher
international hot-rolled coil prices which, although favourable to our steel
mill at Delta, Ohio, are placing pressure on margins for our United States
coated steel business.'
Lower costs have contributed approximately $330 million (after tax) for the
year to date compared to the same period last year. Contributions from lower
costs for this quarter period were $45 million after tax versus $90 million
for the November quarter.
'It's clear that the most significant short term cost reductions have now been
implemented,' Mr Anderson said. 'We remain committed to continuing improvement
and reducing costs but major programs such as the establishment of Shared
Business Services and e-commerce purchasing will require time to be
implemented and have their effects felt.'
'Despite our obvious disappointment with the HBI operation, I am encouraged by
the third quarter result. It demonstrates that we are establishing a solid
base upon which we can pursue our strategic direction and achieve the
financial goals we recently announced to the marketplace,' Mr Anderson said.
'Over the next few years, our Minerals business will deliver high value growth
opportunities mainly through brownfield expansions and also through
disciplined, value-driven exploration, as well as opportunistic acquisitions.
For Petroleum, our upstream focus will remain based on high value potential
strategies in deepwater, gas commercialisation and opportunity captures in
North Africa and the Middle East.
'For Steel, the business will be focussed around the Australian and Asia flat
product markets with a low cost steel making position, meeting its cost of
capital. Steel will be a consistent net cash flow generator for the
corporation and this quarterly result again underlines the advantages or being
a natural resources Company with a regional steel focus,' Mr Anderson said.
NB: The BHP Board will consider a dividend at its next meeting in May 2000.
Any such dividend would be paid in early July 2000.
Contact:
Media Relations: Mandy Frostick, Manager Media Relations
(BH) (61 3) 9609 4157
Mobile (61) 419 546 245
E-mail: frostick.mandy.mj@bhp.com.au
Investor Relations: Robert Porter, Vice President Investor Relations
(BH) (61 3) 9609 3540
Mobile (61) 419 587 456
E-mail: porter.robert.r@bhp.com.au
Pierre Hirsch, Investor Relations Manager, North America
Tel: +1 415 774 2030
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