BHP Billiton spin-off a bright spot in commodities gloom – by Sonali Paul (Reuters U.S. – February 23, 2014)

MELBOURNE – (Reuters) – When global miner BHP Billiton reports its half-year results on Tuesday, the only parts of the company that are likely to report profit growth are some of the unloved assets it aims to spin off by June.

Commentators had dubbed the company BHP plans to hand to shareholders “DudCo” before it was christened South32, as the aluminum, manganese, nickel, some coal and silver businesses barely contributed to BHP’s earnings.

But now those businesses are looking rosier as prices for aluminum and manganese are improving in a world where prices for BHP’s four biggest products, iron ore, petroleum, copper and coal, have all collapsed to near six-year lows.

Despite the improvement, BHP wants to shed the smaller assets so it can focus on its four core commodities, and still believes that shareholders will gain more if South32 is freed to develop assets that were starved of capital amid an iron ore and coal boom.

The world’s biggest miner is expected to report a 34 percent slide in half-year underlying attributable profit to $5.1 billion, but within that, Deutsche Bank sees earnings from aluminum nearly tripling while manganese earnings are seen improving by around 45 percent.

“These divisions will get a bit more attention than usual given their importance in South32,” said Brenton Saunders, an analyst at BT Investment Management.

Aluminum and manganese are expected to contribute $551 million, or just under 7 percent of BHP’s first-half earnings before interest and tax (EBIT), Deutsche estimated, compared with about 2.5 percent a year earlier.

Analysts estimate the aluminum and manganese businesses will account for around 70 percent of the roughly $13 billion value of South32, which is expected to carry net debt of $1.5 billion.

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