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BHP Announces Record First Half Profit
BHP has just announced a record first half profit of US $10 Billion.
Interestingly, the CEO said that they were not looking at major acquisitions given that they were having to pay “top dollar” for assets. They also said they were going to pump Billions into developing the assets they already own as way of keeping the supply of their product flowing.
There is no doubt that the emerging economies are growing and as the Western World continues to recover from the GFC we will no doubt see further demand for oil, coal and other commodities. However, the question becomes how is the demand and supply equation balanced, especially in light of the very high prices these commodities are now trading at? Where is the potential risk? Is it to “surprising” the market with good news or indeed disappointing news?
I would argue the latter so, ceteris paribus (buyer beware) for investors that blindly following the commodities train. Remember, it is the amount of profit over the long term that will ultimately determine a company’s value, hence share price.
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