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BHP’s December Production Results Were Mixed

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Jan. 21 2016, Updated 1:12 p.m. ET

Production numbers were a mixed bag

BHP Billiton (BHP) (BBL) reported mixed production results for the second quarter of its fiscal 2016 on January 20, 2016. Its fiscal year ends on June 30.

While copper production was better than expected, coal results were mixed. Iron ore numbers came in below the run rate of guidance, mainly because of one-offs such as train derailment and a power outage at the port. BHP maintained the production guidance for all its commodities except iron ore.

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Write-downs

BHP also announced write-downs amounting to $300–$450 million related mainly to the following:

  • Redundancies associated with business simplifications such as rig terminations and closure of the Crinum mine
  • Inventory write-downs, which reflect weaker commodity (DBC) prices
  • Global royalty and taxation matters

These factors will negatively impact the company’s fiscal 1H16 earnings.

BHP’s peers

Rio Tinto (RIO) reported in-line 4Q15 production results on January 19, 2016. Cliffs Natural Resources (CLF) will announce its results for the year ending December 2015 on January 27, 2016. Plus, Freeport-McMoRan (FCX) will report its results for the year ending December 2015 on January 26, 2016.

Investors can consider the Materials Select Sector SPDR ETF (XLB) in order to gain diversified exposure to the materials sector. Metal producers currently form ~9% of XLB’s portfolio.

Continue to the subsequent parts of this series, where we’ll discuss BHP’s fiscal 1H16 production numbers for various commodities in greater detail and evaluate its management team’s outlook on the business.

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