Iron ore boom lifts BHP to nation's largest profit

Surging profits at its Western Australian iron ore mines have enabled BHP Billiton to beat analyst expectations and deliver Australia's highest-ever annual profit result.

Net profit for the 12 months to June 30 was $US23.6 billion ($A22.5 billion), up 85.9 per cent, Melbourne-based BHP Billiton said in a statement.

Analysts were tipping a net profit for 2010-11 of $US22 billion.

Revenue increased 35.9 per cent to $US71.7 billion.

BHP Billiton also reported record underlying earnings before interest, tax, depreciation and amortisation (EBITDA), up 51 per cent to $US37.1 billion.

The largest contributor to this figure was the WA-focused iron ore business, which enjoyed record production volumes and selling prices. The iron ore division lifted its underlying earnings by 122 per cent to US$13.3 billion.

Other strong contributors were base metals (such as copper), up 46 per cent to US$6.8 billion, and petroleum, up 38 per cent to US$6.3 billion.

Stainless steel materials, which includes the WA-based nickel business, suffered a fall in underlyig earnings to US$588 million,

Record operating cashflow of $US30.1 billion and gearing (debt to equity) of nine per cent confirmed the miner's capacity to "comfortably fund" its $US15.1 billion acquisition of US shale gas play Petrohawk Energy as well as BHP Billiton's extensive organic growth plans, the company said.

Records were also broken for production across four commodities and 10 operations.

BHP Billiton said its focus on large, low cost and expandable assets had once again delivered record financial performance and returns.

However, it warned that it was not immune to tight labour and raw materials markets, which were currently presenting a challenge for the miner and its peers.

"Costs tend to lag the commodity price cycle as consumable, labour and contractor costs are broadly correlated with the mining industry's level of activity," the company said.

The devaluation of the US dollar and inflation had reduced underlying EBIT by $US3.2 billion.

BHP Billiton said it expected robust demand for commodities in the short and medium term, driven by emerging economies.

It also remained positive on the longer term outlook for the global economy, with recent economic data suggesting monetary policy in China and India was "having the intended effect".

This followed a slow down in global economic growth during the second half of 2010/11 as tightened monetary policy in emerging markets, the tsunami in Japan and fiscal austerity measures dented commodities demand.

The company said its confidence in the outlook for its core commodity markets and a recent share buyback had enabled the board to declare a 22 per cent "rebasing" of the final dividend, increasing the full year payout to 101 US cents per share.