The Australian
BHP set to write down its nickel and aluminium assets
Edited by : AL CIRCLE
2 min read
BHP Billiton is likely to write down the value of its Australian aluminium and nickel assets by about $US4 billion ($3.8bn) next month, as the strong dollar and weak prices extinguish any hope of a rebound in returns in the short term.
Analysts estimate the two businesses are likely to rack up losses of about $US600 million this financial year.
BHP, the world's biggest mining company, yesterday delivered a sound first-quarter production report yesterday that showed strong performances across its major commodities businesses - iron ore, coking coal, copper and petroleum - and meeting most of a wide range of analyst expectations.
The solid production report, which analysts said was not expected to significantly change market expectations of $US6bn in first-half underlying earnings, sent shares 48c, or 1.3 per cent, higher to $37.06 on a day when rival Rio Tinto fell 0.7 per cent.
Despite a strong production result from BHP's least profitable businesses, nickel and aluminium, there was no suggestion they had turned a corner.
"The strong Australian dollar and weak pricing environment continued to place pressure on the group's Australian alumina and nickel operations," BHP said.
Pengana Capital fund manager Tim Schroeders said it was a strong quarter for BHP, with good performances in copper, aluminium and petroleum.
"The aluminium and alumina performance probably isn't going to prevent a possible writedown," Mr Schroeders said.
"I don't think those assets are making money."
UBS analysts are predicting the aluminium business will lose $US363m of earnings before interest and tax this financial year and the nickel business will lose $US230m.
"The bearish commentary on aluminium and nickel will surprise few in the wake of Rio's recent writedowns," Macquarie analyst Adrian Wood said.
For the past year, BHP chief executive Marius Kloppers has been saying loss-making BHP assets would be rationalised, meaning there could be further cuts, or sales if buyers could be found, for aluminium and nickel assets.
Analysts estimate the two businesses are likely to rack up losses of about $US600 million this financial year.
BHP, the world's biggest mining company, yesterday delivered a sound first-quarter production report yesterday that showed strong performances across its major commodities businesses - iron ore, coking coal, copper and petroleum - and meeting most of a wide range of analyst expectations.
The solid production report, which analysts said was not expected to significantly change market expectations of $US6bn in first-half underlying earnings, sent shares 48c, or 1.3 per cent, higher to $37.06 on a day when rival Rio Tinto fell 0.7 per cent.
Despite a strong production result from BHP's least profitable businesses, nickel and aluminium, there was no suggestion they had turned a corner.
"The strong Australian dollar and weak pricing environment continued to place pressure on the group's Australian alumina and nickel operations," BHP said.
Pengana Capital fund manager Tim Schroeders said it was a strong quarter for BHP, with good performances in copper, aluminium and petroleum.
"The aluminium and alumina performance probably isn't going to prevent a possible writedown," Mr Schroeders said.
"I don't think those assets are making money."
UBS analysts are predicting the aluminium business will lose $US363m of earnings before interest and tax this financial year and the nickel business will lose $US230m.
"The bearish commentary on aluminium and nickel will surprise few in the wake of Rio's recent writedowns," Macquarie analyst Adrian Wood said.
For the past year, BHP chief executive Marius Kloppers has been saying loss-making BHP assets would be rationalised, meaning there could be further cuts, or sales if buyers could be found, for aluminium and nickel assets.
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