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Crash diet for overweight BHP pays off

By Phil Boeyen, ShareChat Business News Editor

Thursday 27th July 2000

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Aussie mining behemoth BHP can look at itself in the mirror again after announcing a record operating profit for the 13 months to the end of June.

The company says the operating profit of more than A$2 billion is a jump of A$1.667 billion dollars compared with last year.

It is also the highest-ever annual profit in the company's 115-year history, on a 12-months adjusted basis.

The company is certainly rather pleased with itself, with BHP boss Paul Anderson calling it a "tremendous result".

"Going into 2000 we were clearly under pressure, we have now turned the corner and established momentum to take BHP to a new level of performance."

The huge profit hike was helped by the company shedding such loss-making operations as the Hartley platinum mine and North American copper operations.

Overall the company says "decisions related to ceased, sold and discontinuing operations" improved profits by A$325 million (after tax) compared to the 1999 financial year.

Better oil and copper prices added A$230 million to the profit, more than offsetting lower coal and iron ore prices, and cost cutting also helped the record result, contributing A$330 million after tax

The company says much of this came from reduced interest charges, driven by a focus to pay down debt.

Mr Anderson says new petroleum operations and the strong performance of its Ekati diamond mine contributedA$125 million to profit, although this was offset by losses from the Western Australia HBI plant.

"As previously announced, we will bring that issue to a head and make a decision on the future of that operation within the next six months."

Including abnormals, the result for the 13 months ended 30 June 2000 was a record profit of A$1.627 billion, an improvement of $3.9 billion compared with the 1999 financial year. This includes a A$794 million write-off in the carrying value of BHP's Western Australia HBI operations following continued commissioning difficulties, and a A$223 million loss on the sale of US west coast steel assets.

Mr Anderson says the decision to aggressively clean-up the company's asset base has provided the foundation for a solid operating result, with the profit impact from closing non-performing operations greater than the contribution from higher prices, compared to last financial year.

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