Dahlman Rose Gives BHP Billiton Production Report Overview

BHP Billiton BHP reported record iron ore production in its 2Q11 production report, but indicated that Queensland flooding will have a significant impact on met coal production for the fiscal year. Dahlman Rose is maintaining its FY2011 earnings estimate for the time being until it can gain further clarity. In BHP Billiton's 2Q11 production report, the company reported record quarterly and half year iron ore production, with output increasing 5% q/q to 33.7 MM mt. The company also reported record quarterly production at some of its thermal coal, alumina and copper operations. BHP indicated that strong growth in developing economies remains the primary driver of commodity demand and that positive signs in the US economy continue to emerge. Dahlman now expects met coal and petroleum production in FY2011 to be lower than our the forecast, but is increasing its iron ore output estimate for the fiscal year. It also anticipates a $430 MM earnings benefit from provisionally priced copper sold in 1H11, in addition to the $667 MM benefit the company indicated it would receive from provisionally priced copper sold in FY2010. Dahlman is maintaining its FY2011 earnings estimate until it gains more quantitative clarity on the Queensland floods' impact, which it expects the company to provide in its 1H11 earnings conference call next month. Dahlman has a Buy rating and $119 PT on BHP BHP closed Thursday at $88.08