Skills shortages impact BHP profit

RISING COSTS associated with labour shortages have impacted negatively upon BHP Billiton’s strong December half-year result

RISING COSTS associated with labour shortages have impacted negatively upon BHP Billiton’s strong December half-year result.

“An increased level of activity across the resources industry has led to shortages and rising costs for labour,” the company said, leading to increased group costs of US$795 ($1,075) million.

Strong market demand for raw materials over the last couple of years has led to significant increases in project activities across the resources sector, according to a BHP Billiton spokesperson.

“Competing projects in Australia and overseas have put considerable pressure on Australian labour markets, particularly skilled labour. This is true for most states, but is most keenly felt in WA and Queensland,” they said.

“The increased project activity makes a shortage of skilled labour more challenging. This issue has not been unexpected and we have been working to mitigate these effects wherever possible.”

The company’s interim results (six months ending 31 December 2005) released on 15 February, showed that in a number of operations contractors have been used to accelerate or maintain production to take advantage of the high price environment for the resources sector.

“This is more expensive than hiring employees, but this cost can also be more easily taken out of the business in the event of a downturn, which gives us greater flexibility,” the spokesperson said.

“It’s important to note that this is largely an Australian issue. Our geographic diversification helps protect us against the full impact of this –remember that we operate in more than 25 countries around the world.”

Don Larkin, CEO of The Australasian Institute of Mining and Metallurgy, said skill shortages were acute at the trades and tertiary qualified levels of the mining sector.

While skills shortages probably have not impacted company profits in the short-term, Larkin said they would affect the future of new operations and new mines in order to cope with current demand.

“I think the demand will continue unabated. The supply side needs to keep up with that and skill shortages are starting to impact on our ability to meet that demand,” he said.

“The minerals sector is a very cyclical industry. It will have very large peaks and troughs, so it’s essential that employers plan ahead so that when the downturns come they don’t put off qualified people.”

In December 2005, the BHP Billiton Mitsubishi Alliance (BMA) announced a $50 million Skills for Growth program, to attract, develop and retain a skilled pool of people, in line with planned growth in the company’s export coal business.

The BHP Billiton spokesperson said that in 2006, BMA will increase its investment in training and education programs to almost $19 million – a 50 per cent increase on current year expenditure. By the end of 2008, the company will have invested more than $50 million in these programs over a three-year period.

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