Led by BHP Billiton, another solid profit reporting season seems to be lifting sentiment in the local markets.
Most companies have met or beaten expectations, many have issued quite strong outlook statements and costs seem to be under control, especially among some of the resource majors.
The US-led sub-prime morass will continue to shake and surprise confidence levels minus the Reserve Bank Governor's attitude expressed a week ago; that Australia seemed OK with solid growth, a 6.5% interest rate and corporate balance sheets in good condition, is being borne out by the bevy of profit reports this week.
And there's confirmation of that in the BHP Billiton profit statement and accompanying statements and commentary.
The commodities supercycle is alive and well: in the BHP growth plans and in its very confident outlook, even though the company's most important commodity, copper prices, have taken a thumping this month.
The market certainly regained belief yesterday, pushing BHP shares up $2.30 to $37.70 on more than 28 million shares, worth around $1 billion.
It would seem only a very sharp slowdown in China could knock the company (and Australia) off the growth track it and we are now locked into.
That could always happen, I know, but it would have to be an awfully mighty whack to knock the world's third and fastest growing economy off track.
BHP's retiring CEO, Chip Goodyear, was very positive about the outlook for the group.
He said the company had contacted its customers in recent days and found that "the US is slowing down, as it has been for the last year – no surprise there – but in developing economies like China, India and others it's essentially business as usual".
BHP said in its outlook that "the rate of growth of the Chinese economy has shown no signs of abating" and it expected GDP growth of close to 10 per cent in China this year.
He said that the company had seen real prices for all the group's main commodities at or near their highest levels since the 1970s because of the continuing strong demand for raw materials from China.
And his replacement, Marius Kloppers, was equally upbeat.
He said that while many commodity prices had fallen sharply this month (Copper, lead, zinc, lead, tin, aluminium, nickel, oil and US natural gas) there was an "undiminished appetite" for BHP's production.
BHP lifted its final dividend by 46% to 27 USc a share, and Mr Goodyear and the company seemed to signal a more active dividend policy by describing it as 'progressive', which analysts took to mean it would be changed more often. Since earnings would be rising, the only direction would be up.
Mr Goodyear said the higher final payout was a signal of "our confidence in the long-term outlook for the business."
And then it got interesting. The profit report contained its usual extensive information about how the group and its businesses traveled during the year and its commentary on the outlook and new projects.
But that seemed to be more detailed than before and it was Mr Kloppers who made the running (because he's going to be 'the man').
He said BHP had 33 projects either under development or the subject of feasibility studies, which together would cost $US21 billion in capital expenditure. A further $US50 billion of projects were being considered for the longer-term (that's out past 2013).
Spending this year would rise to around $8 billion on a list of a dozen or so projects.
The group's earnings before interest and tax rose from $US 5.3 billion to $US20.1 billion: the main drivers were higher sales volumes contributed $US348 million, while higher prices accounted for $US7.1 billion (much of that coming from the booming price of nickel, which has now faded).
Higher costs had a negative impact of $US1.84 billion, exchange rates were also adverse. But costs overall were kept to an increase of just 3.6% which for a company of such a size, is a heroic effort.
The current share buyback will be finished in a year's time, for the 2008 report. That's probably when shareholders will find out what next is planned for the surplus cash the company is generating.
If cash keeps pouring in the pressure will be for Mr Kloppers and the board to further reward shareholders sooner rather than later.
A Confident Outlook
This is what BHP said in its commentary about the outlook:
"The global economy remains robust, driven by solid activity in Asia and Europe. Economic fundamentals remain relatively strong. Unemployment remains low and the supply of labour is still constrained. This is resulting in rising wages and increased household consumption.
"Asian economies, led by China, continue to demonstrate strong growth. India's economy continues to gather pace, recently recording its fastest economic growth rate in 18 years. In Europe, solid growth is being supported by accommodative monetary conditions, rebounding consumption and strong German industrial activity.
"The US economy continues to soften, with the housing sector acting as a drag on activity.
"The Japanese household sector is also experiencing weakness, increasing risks of deflation later in the year. Key central banks have reacted to recent global financial market instability by injecting liquidity, in an attempt to calm markets.
"The rate of growth of the Chinese economy has shown no signs of abating with economic growth expected to be maintained or perhaps accelerate over the second half of 2007. This has largely been driven by strong demand, domestic retail sales, healthy investment growth and exports.
"Continued monetary tightening, new export taxes and cuts in value added tax rebates have had a minimal effect on econom
