BHP says good times will roll on

BHP Billiton has pushed aside lingering concerns that the China-led boom in commodity prices is about to be choked by the fallout in financial markets from the subprime credit crisis in the United States.

Strong commodity prices powered BHP to a record Australian corporate profit of US$13.41 billion (NZ$19.2 billion) in the year to June, a 28 per cent increase on last year.

And, according to managing director Chip Goodyear, the good times will continue to roll.

BHP has backed its optimism by increasing dividend payments to shareholders and by revealing that it sees the potential to invest more than US$70 billion in near and medium-term growth projects, with US$8 billion committed for projects this year.

Arguing that the equities and commodities sale in response to the subprime crisis did not reflect the "fundamental or physical world", Mr Goodyear declared that the "next couple of decades are going to be very strong".

While there would be "little bumps along the way", the big message was that BHP remained optimistic that a secular change was under way, with China and India moving 2.5 billion inhabitants into developed-economy status.

BHP has been polling its customers in recent weeks to gauge their reaction to the subprime crisis in the US. "The outcome was as you would suspect. That is, the US is slowing down, as it has for the last year or so. No surprise there. But in our developing economies – China, India and other economies around the world – it's essentially business as usual. The fundamentals are intact."

Despite the common perception that strong commodity prices were dependent on happy US consumers, he said the high-growth developing economies were focused on strong internal demand.

"Many people look at China as an export economy," he said. "But if you look at growth in China, the domestic component of gdp, something like 94 per cent of it is actually domestic.

"Export markets are going to have an important role to play, but if you take a look at what is happening in China it is quite domestic. If you look at gdp in absolute terms (not percentage terms), this year China and India are going to be bigger than the US. That's the first time that has ever happened."

BHP's declared profit was a little shy of market consensus for a US$13.5 billion result. The final dividend for the June year is US27c a share.

- © Fairfax NZ News