Compared to the previous financial year, the metallurgical coal division increased its earnings before interest and taxes by 402.8% to $US4.7 billion.

The performance was on the back of a 125% gain in hard coking coal prices and 121% gain in weak coking coal prices.

This was achieved despite estimated losses of $122 million caused by flooding in Queensland and $144 million from the new higher royalty structures in Queensland and New South Wales.

Exports to China represented 20% of the miner’s revenue in the 2008-09 financial year, with metallurgical coal exports soaring in the second half, offsetting falling exports to the country for most of BHP’s other commodities.

BHP’s energy coal division increased EBIT by 38% to $1.46 billion from the previous financial year as thermal coal prices rose 17%.

The company also enjoyed favourable exchange-rate movements along with record sales volumes from its Hunter Valley operations and from its share of the Cerrejon Coal operation in Colombia.

Well down from its 2007-08 financial year earnings of $15.4 billion before the worldwide economic downturn, BHP was hit by a variety of exceptional items in its latest annual earnings, including a $2.53 billion after-tax writedown following the closure of the Ravensthorpe nickel mine.

Other impairments stemmed from the sale of the Yabulu nickel refinery and the lapse of the takeover offer for Rio Tinto.

Profit excluding these exceptional items was $10.7 billion, down 30% on last year.

BHP posted revenue of $50.2 billion for the year, down 15.6% on the previous period, while earnings before interest, taxes, depreciation and amortisation dropped 20.5% to $22.2 billion and EBIT decreased 25% to $18.2 billion.

However, the company posted a record net operating cash flow after interest and tax of $18.9 billion, an increase of 5.9%.

Aside from its strong performance in coal, the iron ore segment held up strongly, improving EBIT by 34.5% to $6.2 billion.

While still expecting strong growth in its commodities over the long term, bolstered by falling capital investment in mining projects around the world during the past year, BHP is less positive about the near-term picture.

“Although economic data over recent months indicates a stabilisation across many key indicators, in general economic indicators remain weak by past standards and any assumption of a quick return to historical trend growth may be premature,” the company said.

BHP noted commodities demand from China and India returned earlier from the onset of the global financial crisis than many expected as the two countries started to restock.

“In China in particular, restocking coupled with stimulus package spending fuelled strong real demand in key commodity-intensive industries, such as infrastructure, construction and real estate.”

The miner said in the first half of this calendar year, spot prices for its commodities increased by up to 90% from the December 2008 lows, but prices by the end of June were still generally 20-60% lower than 12 months ago.

“The commodity restocking in China now appears largely complete with substantial inventory build in specific commodities over the last three months at end-user level and in strategic stockpiles,” BHP said.

“We expect Chinese demand to more accurately reflect real end-user purchasing in the near term.

“After intensive destocking, there is emerging evidence of demand improving in North America, Europe and Japan.

“It is too early to tell whether this improvement is driven only by a restocking or a combination of restocking and real demand.

“Real demand following the stimulus spending will be the key to a sustainable price recovery.

“However, further improvements in commodity prices in the short term should be viewed in the context of the likely supply responses from latent capacity across the industry.”

During the year, six growth projects were completed – five in petroleum and one in manganese – costing $4.09 billion.

Overall, capital and exploration expenditure amounted to $10.7 billion.

The company said it had maintained a strong balance sheet with net debt of $5.6 billion and gearing of 12.1%.

BHP shares closed up A39c to $37.99 yesterday.