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Global resources giant BHP Billiton (BIL) on Wednesday reported record results for the six months ended December 2010, with basic earnings per share up 71.5% to 189.2 US cents from 110.3 cents a year ago, excluding exceptional items, EPS grew 87.7% to 192.4 cents.

The group also announced it plans to repurchase $10 billion of its shares by the end of the year.

Attributable profit was 71.5% higher at $10.524 billion, while excluding exceptional items attributable profit was up 87.7% to US$10.7 billion.

Underlying earnings before interest, tax, depreciation and amortization (EBITDA) was up 60% to US$17.304 billion, while underlying EBIT grew 74.4% to US$14.829 billion.

An interim dividend of 46.0 cents per share was declared - up 9.5% from the previous year's 46.0 cents.

The group said its ongoing commitment to invest through the cycle has ideally positioned BHP Billiton to deliver consistent and high value production growth into generally tight and growing commodity markets. Robust operating performance was reported across the portfolio with three commodities and five businesses achieving production records in the December 2010 half year.

Western Australia Iron Ore (Australia) shipments rose to an annualised rate of 148 million tonnes per annum in the December 2010 quarter, while first production was achieved for the Hunter Valley Energy Coal (Australia) MAC20 project.

An improving economic backdrop and broader supply constraints continued to support the fundamentals for the majority of BHP Billiton's core commodities. Stronger realised prices in the December 2010 half year increased underlying EBIT by US$8.531 billion, net of price linked costs.

Industry wide operating and capital cost pressures are, however, being experienced across a range of businesses and BHP Billiton is not immune from that trend, it noted.

Operating cash flow of US$12.193 billion resulted in the group ending the December 2010 half year in a net cash position.

“This balance sheet strength affords BHP Billiton substantial flexibility as it embarks on significant investment in organic growth that is expected to exceed US$80 billion over the five years to the end of the 2015 financial year. Major projects, including those in iron ore and metallurgical coal, are at an advanced stage of the approvals process and should result in a substantial increase in sanctioned project capital expenditure,” it said.

Notwithstanding the significant commitment towards growth, BHP Billiton has announced an expanded US$10 billion capital management program. It will continue to consider both on and off-market execution for the US$10 billion program and, subject to market conditions, expects to largely complete the initiative by the end of the 2011 calendar year.

“Today's announcement continues BHP Billiton's strong track record of returning excess capital to shareholders. On completion of the US$10 billion capital management program, BHP Billiton will have repurchased a cumulative US$22.6 billion of BHP Billiton Limited (Ltd) and BHP Billiton Plc (Plc) shares since 2004, representing 15 per cent of then issued capital,” it said.

Looking ahead, BHP Billiton is cautiously optimistic on the short term outlook for the global economy given the continuation of robust growth in emerging markets and further positive signs of a sustainable recovery in major developed economies such as the United States.

In the 2010 calendar year, Chinese Gross Domestic Product (GDP) grew by more than ten per cent, with fourth quarter growth accelerating from the third quarter level, while India's GDP growth approximated nine per cent.

Calendar year 2011 GDP and capital spending growth in China is expected to remain strong in absolute terms, despite growth rates decelerating from 2010 calendar year levels.

“Despite the short term risks, we remain positive on the longer term outlook for the global economy. We expect markets to be volatile and event driven, however the continuing urbanisation and industrialisation of emerging economies, which is still in its early stages, should provide strong structural support over the long term,” it said.

Turning to the outlook for commodities, the group said the increase in prices across the majority of BHP Billiton's core commodities during the December 2010 half year has been driven by a combination of robust emerging market demand, stronger than expected developed market growth and ongoing supply constraints. Adverse weather patterns in many producing countries, such as Australia, Brazil, Colombia, South Africa and Indonesia have had a substantial impact on supply, leading to tighter market fundamentals and stronger prices for commodities such as coal, iron ore and copper.

There will likely be a lag effect before normal levels of production flow through to the supply chain, it said.

Macroeconomic themes are still a dominant influence on short term price movements and sentiment. “While we expect a slowdown in the growth rate of global commodity demand in calendar year 2011, the economic environment still underpins a robust near term outlook for our products.”

The publication and implementation of China's twelfth five year plan in March 2011 will have important implications for commodity demand in the medium term. “We expect a slower but more sustainable economic growth model to lead to a reduction in resource intensity per unit of GDP, however absolute demand for our commodities is likely to remain strong,” it added.

“Longer term, we remain confident in the outlook for our core commodities based on emerging markets being the principal drivers of growth. Prices will ultimately be determined by the marginal cost of supply, with the quality of our tier one assets well positioned to sustainably deliver strong margins and investment returns through the cycle,” the group concluded. - I-Net Bridge