By Tony D’Altorio on November 6, 2009 | More Posts By Tony D’Altorio | Author's Website
Some companies just stand out - both in their own sectors and in the larger market.
Australian firm BHP Billiton (BHP: 68.15 +0.32 +0.47%) is one of them.
As the largest and most diversified commodities producer in the world, BHP has leading positions in most key, low-cost, metal and mineral deposits in the world.
And as if that weren’t enough, it also has a solid position in oil, thanks to its petroleum division, which had operating profits of $4 billion last year.
Impressively, that total only made the petroleum division BHP’s third-best performer in 2008. Its iron ore segment scooped up $6.23 billion, while base metals enjoyed a $4.62 billion operating profit.
Crucially, that sets BHP’s oil division apart from its competitors. Not only does it bring in extra revenue, it’s also not overly reliant on the commodity fuel its operations.
So what does this mean for investors?
BHP’s Big Three: Profits, Cash, Growth
Thanks to BHP’s highly disciplined management team, investors have seen consistent profitability. And with $5.6 billion in net debt, that’s significantly less than many fellow mining companies.
In addition, with BHP sitting on almost $11 billion in cash, rumors are swirling that it’s chasing acquisitions, especially in oil and potash.
However, it has no need to rush out and buy anything right away. Thanks in part to a recent $116 billion deal with Rio Tinto plc (RTP: 193.77 +3.20 +1.68%) to merge the Pilbara iron ore operations in Western Australia, BHP is already well positioned with what it has.
Including the $5.8 billion it plans to sink into the Pilbara venture, BHP has a total of $17 billion already set aside for pre-existing projects over the next 12 months, highlighting the fact that it can grow simply by developing its own rich global asset portfolio.
BHP is Perfectly Poised in Emerging Markets
Like many other companies, BHP knows the strategic importance of establishing a strong base in emerging markets.
And deals like the one with Rio Tinto build strong, long-term shareholder value and help BHP fulfill its long-term mandate of capitalizing on booming emerging market demand.
The rise in consumer purchasing power in China, India, Brazil and other emerging economies will lead to a sharp spike in electricity consumption, as wealthier consumers buy televisions, refrigerators, washing machines and other consumer electronic items.
BHP sees energy demand alone growing at an annual 8% pace in China and 7% in India… and it has positioned itself perfectly to capitalize on those trends.
Coal: This still accounts for about 40% of global energy production, which suits BHP just fine, since it’s one of the largest producers of thermal coal in the world. Even better, the company produces copious amounts of coking coal, a commodity the steel industry depends on and one that emerging economies need vast quantities of.
Nuclear: Both China and India have plans to build numerous nuclear power plants over the coming decades. And BHP is already poised to take advantage through its Olympic Dam project in Australia, the world’s largest uranium deposit.
With a strong grasp on not only the commodities market, but also the countries most likely to need them, BHP is a must-have for any investor interested in taking advantage of the commodities markets and fast-growing global economies.
No comments:
Post a Comment