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BHP Billiton Limited shares push higher on first-half update

BHP Billiton logo
Credit: Lucas Walters

In morning trade the BHP Billiton Limited (ASX: BHP) share price has bounced back from yesterday’s decline with a 1.5% mover higher to $31.24.

The catalyst for this was the release of its first-half operational review this morning. Highlights from the half include:

  • Copper production increased 7% on the prior corresponding period to 833kt thanks to increased volumes at Escondida supported by the ramp-up of its Los Colorados Extension project.
  • Iron ore production was flat at 117Mt as a result of maintenance and lower opening stockpile levels following the Mt Whaleback fire in June 2017.
  • Energy coal production lifted 4% to 14Mt due to a strong performance from its New South Wales Energy Coal business.
  • Metallurgical coal production was down 4% to 20Mt despite record production at four Queensland coal mines. That was offset by lower volumes at its Broadmeadow and Blackwater sites.
  • Petroleum production fell 7% to 99MMboe largely as a result of the impact of Hurricanes Harvey and Nate on its U.S. petroleum assets.
  • First-half underlying EBIT is expected to include impairment charges, predominately related to conveyors at Escondida, in the range of US$250 million to US$350 million.
  • First-half adjusted effective tax rate expected to be below previous full-year guidance of 32% to 37%.

What now?

Overall I don’t think there were many surprises here and this strong performance was largely in line with market expectations.

Looking ahead, management has reaffirmed its full-year production and unit cost guidance for its petroleum, copper, iron ore, and energy coal operations.

However, production guidance for metallurgical coal has been reduced to between 41Mt and 43 Mt as a result of challenging roof conditions at its Broadmeadow operation.

Management has also advised that it continues to look at a number of alternatives to divest its onshore U.S. assets. I think this divestment is a good move and expect it to create a lot of value for shareholders.

Which could make BHP Billiton worth considering as an investment today in my opinion. Especially with favourable commodity prices and the forecast for strong global growth this year.

As a result, I would put it up there ahead of industry peers Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) following its recent pull-back.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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