'Big Australian' turns around - but some shadows lie ahead

It is so closely associated with this country that it is often called ''the big Australian.'' The Broken Hill Proprietary Company Ltd. (BHP), based here, is the largest industrial concern in Australia. It has mining operations all around the country. It's a significant oil and gas producer. And it virtually single-handedly constitutes the Australian steel industry.

Just as the economic story of Australia as a whole this year has been one of dramatic, though somewhat fragile, recovery, the story of BHP has also been one of strong rebound - with a few shadows along the path. Speaking specifically of the long-troubled steel operations, Brian T. Loton, BHP's managing director, says, ''We've seen a turnaround, but we're not out of the woods yet.''

But the company has revitalized to the point where it has been able to bring off the biggest corporate takeover in Australian history - the $2.4 billion purchase from General Electric of Utah International, whose interests include important coal mines in Queensland.

''It's been an astronomical turnaround,'' said Geoffrey Howard, senior partner in the Sydney office of J. B. Were & Co., stockbrokers, just minutes after the release of earnings figures for the quarter and for the nine months ending Feb. 29. Quarterly net profits attributable to shareholders were $159.7 million, as compared with $13.1 million for the corresponding period a year earlier. The latest nine months' figure was $441.9 million, compared with $134.3 million.

But last year's profits were off some 31 percent for 1983 over the year before, and the good news comes after a period of considerable retrenchment, notably in steel, where capacity has been cut back one-third. Indeed, the latest quarterly profit for the steel division, $16.9 million, compares with a $53.1 million loss for the corresponding quarter last year.

Maurice Newman, senior partner for equities at Bain & Co., brokers, in Sydney , says the company has shed some 15,000 employees in the last 18 to 24 months, and notes, ''The costs of redundancy have been borne by the industry up front, but the benefits won't be felt till later.''

Speaking of the Utah acquisition, Mr. Newman says, ''GE were pretty smart'' to unload the mines, given the poor short-term outlook for profits.

But for BHP, the deal means getting very attractive low-cost coal operations in Queensland, and very attractive profits from some overseas properties.

''And this deal will mean that when Australia negotiates coal prices with the Japanese, it will be as 'Australia Inc.' '' That is to say the Utah mines, which represent a sizable chunk of Queensland coal, will no longer be controlled by American interests and tending to undercut the Australian-owned mines - ''Not that they've been doing it consciously,'' Mr. Newman hastens to say.

Says John Bartley, an analyst with Potter Partners, brokers in Melbourne: ''The Utah acquisition is a good move (by BHP) to give them some good product diversification. The outlook on coal is not particularly brilliant, but I think this will prove to be a good move. . . . It took a fair amount of guts to do it.''

The Utah acquisition, which has involved setting up the Queensland coal mines as joint ventures, has been seen as a BHP move back to its ''roots'' in mining and away from the steel business.

But the company has put a lot of energy into making it clear that it will not abandon steel. Mr. Loton, BHP's silver-haired and pin-striped managing director, explains it thus: ''At the present time, BHP's total sales are about $5 billion a year, and our profits (last June through November) were $280-odd million. And of the sales, about half, or $2.5 billion, was in our steel and steel-related businesses;, only about $37 million of our profits were in the steel business. After the Utah acquisition, our total sales will go up to about $6 billion, so (steel) will be a smaller proportion of a larger operation.''

Despite the Hawke government's pronouncements against protectionism, the Australian steel industry - that is, BHP's steel division - has been identified as clearly a strategic industry. As one official puts it, ''If you're an island nation out there all by yourself, you can't not have a steel industry.''

A new steel industry plan, effective this past Jan. 1, involves steps to increase BHP's cost efficiencies in return for a guarantee of 80 percent of the domestic steel market. If BHP's share falls below this level, secondary processors - BHP customers - get government backing to ''compensate them for the relatively higher costs that the domestic steel industry incurs at those lower volumes,'' as Mr. Loton puts it.

Under the plan, the unions are committed to improved productivity and the company to continued investment.

''What we're seeing now is cyclical recovery, not structural adjustment,'' says Mr. Loton. The structural adjustment ''is in process, but I don't think the process is complete yet.''