Sliding prices take a toll on mining profits

By AAP

CommSec chief economist Craig James said while it was the first fall in gross profits in six quarters, operating profits rose nearly eight per cent to a record $270. 8 billion for the year to June. "We've had some good growth over the previous five quarters so I wouldn't be reading too much into it," he said.

The overall slide in mining sector profits helped dragged company gross operating profits down 6. 9 per cent in the June quarter compared to the previous three months.

JP Morgan economist Ben Jarman said the sector actually lifted sales during the quarter, but that was offset by a slide in commodity prices. "The issue doesn't seem to be a lack of demand in real terms… rather, the bottom line appears to have been hammered by terms of trade weakness," he said.

But BHP and Rio Tinto have a much lower cost base and have seen their profits climb as increased iron ore production offsets the price slide. BHP unveiled a $US13. 8 billion full year profit in August, while Rio made a $US5. 1 billion profit for the year to June 30.

Company profits in the mining sector fell 15. 2 per cent during the June quarter, according to figures released by the Australian Bureau of Statistics.

But he said the result had been eclipsed by the recent annual company reporting season. "Our analysis of the reporting season is that companies have been reporting some very strong profits," he said. * Gross operating profits down 6. * Transport, postal and warehousing profits down 0.

Read more here: Business Spectator

    

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