BHP Billiton's Output Rises - Analyst Blog

Australian largest miner, BHP Billiton Ltd. (BHP), recently reported production highlights for the first half of fiscal 2011. BHP Billiton reported a 5% year-over-year increase in its iron ore production for the first half of fiscal 2011 ending December 31, 2010.

The company's oil and natural-gas production remained stable, while copper production stretched 7% year over year. Alumina production was 14% higher than the comparable period due to the ongoing ramp up of the Alumar refinery.

For the first half year of fiscal 2011, BHP Billiton spent $279 million on minerals exploration and $173 million on petroleum exploration. BHP Billiton also provided guidance of $900 million for petroleum exploration expenditures in fiscal 2011. Coal production fell owing to the floods in Queensland.

BHP Billiton is expected to suffer losses due to the heavy rains and floods in Australia. However, BHP Billiton's commitment to long-term growth through its key investment strategy looks promising with 20 projects on hand. During fiscal 2010, BHP delivered five growth projects and approved two major schemes with a total budget of $695 million.

Further, we believe that the ongoing industrialization in China, the largest iron-ore importer, will improve the demand and prices of its products in future. Fiscal 2010 bears evidence of the fact that both demand and prices improved due to strong growth in China and India.

BHP Billiton maintains a progressive dividend policy with fiscal 2010 dividend of 87 cents per share, up from 82 cents in fiscal 2009, which represented an increase of 17.1% from fiscal 2008.

A continuous growth in dividend raises shareholder sentiments and confidence, which inspire our optimism about the stock. Thus, the stock at present retains a Zacks #2 Rank, equivalent to a short-term Buy rating.