The Week Ahead: City pencils in record results from BHP Billiton

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The Independent Online

The past few weeks have proved just how dangerous an occupation mining still is, with 11 miners killed in West Virginia and 72 narrowly escaping the same fate in Saskatchewan.

Owning mining stocks does not carry quite the same level of risk, as the sector has outperformed all expectations in the past 12 months, on the back of a sharp rise in underlying commodities prices.

BHP Billiton, the world's largest mining company by market capitalisation, is due to report half-year figures on Wednesday, and most analysts have pencilled in record results. BHP is highly diversified, with large operations in iron ore, petroleum, diamonds, aluminium and other base metals. Consensus forecasts indicate the company should make profits after tax of $4.4bn (£2.5bn).

The BHP analyst Nick Hatch, of Investec Securities, says investors should look for three key indicators from BHP. Firstly, he expects the company to announce a capital-management programme because of its huge cash flows, either in the form of a share buy-back scheme or special dividend. BHP is the only one of the four major UK diversified mining stocks not to have introduced a capital-management programme.

Secondly, he warns of the "potentially significant" cost increases across the industry, in the form of human and industrial capital as well as energy prices. Demand for energy and metal commodities is such that there are too few qualified mining professionals to meet demand, a shortfall matched in heavy mining equipment. Energy costs are rising at an even faster rate. Mr Hatch said: "This is a function of some petroleum industry-specific issues and BHP's aggressive growth strategy. We could be in for a nasty surprise."

Finally, investors should look out for BHP's take on the ongoing demand situation, with particular reference to China's economy.

BHP has a dual listing, in London and Sydney, and a market capitalisation of about £65bn. Given the sector's outperformance and the fact that the market has priced in record profits, the company will have to do something special to exceed the market's expectations.

TODAY: Results: Full year - Electric World; Royal Blue; St Mowden Properties. First half - Hargreaves Services; Haynes Publishing. Third quarter - Workspace.

TOMORROW: It has been a mixed year for Stephen Hester, the chief executive of British Land, the UK's second-largest landlord after Land Securities. Despite the excellent first-half results reported by the group in November, three board members resigned in quick succession. It was always going to be difficult for Mr Hester to fill John Ritblat's boots, but the group's shares have risen threefold since early 2003 and investors hope for more of the same.

British Land announces its debut quarterly numbers today. The broker Cazenove expectsa 5 per cent rise in net asset value to 1,313p a share, as well as more updates on the integration of Pillar Property, purchased in May for £811m.

Brewing sector watchers will be looking out for results from Russia'sBBH, which is 50 per cent-owned by Scottish & Newcastle. The emerging markets have been a growth area for brewing and S&N's partner in BBH, Carlsberg, may consider selling its stake. Anheuser-Busch, the world's No 1 brewer, has long sought an emerging-markets acquisition and may bid for BBH.

Results: Full year - Matrix Communications. Third quarter - British Land.

WEDNESDAY: Results: - Full year: ARC International; Heavitree Brewery; Liberty International. First half - BHP Billiton.

THURSDAY: The extension of licensing hours in the UK does not seem to have had the impact many observers expected; crime rates are down and pubs appear to be having difficulty cashing in. Not so for Diageo, which is expected to report first-half pre-tax profits of about £1.2bn.

The company has 25 per cent of the US spirits market and is taking an increasing hold of emerging markets. Analysts expect the company's global focus to create an increased foreign currency hit, but its investment in dedicated brand sales teams in the US is a step forward and the company is not expected to unveil any nasty shocks.

November's poor third-quarter numbers from the publisher Reed Elsevier have lowered expectations for full-year numbers. Consensus analysts anticipate full-year profits of a little more than £1bn.

Meanwhile, retail sector investors will be on the lookout for a trading statement from Kingfisher. The owner of B&Q has been under pressure, with some traders expecting a weak trading environment and possibly a profits warning from the group.

Results: Full year - Reed Elsevier; Xpertise Group. First half - Diageo.

FRIDAY: Results: First half - Go-Ahead; Isotron.