SYDNEY (AFP) – Global mining giant BHP Billiton Tuesday said its first-half net profit almost halved to $4.26 billion on the back of collapsing commodity prices as it reiterated a plan to spin off non-core assets.
The 47.4 per cent slump in the six months to December 31 compared to $8.1 billion in the previous corresponding period, with revenues dropping 11.9 per cent to US$29.9 billion.
Underlying earnings – which exclude one-off writedowns – were down 31 per cent to US$5.35 billion, slightly better than analyst expectations which helped the share price rise more than two per cent to Aus$32.94 in early afternoon trade.
The world’s biggest miner has been hard hit by falling prices for its two main commodities, iron ore and oil, with a 23 per cent reduction in capital and exploration expenditure helping offset some of the damage.
Despite this, the company boosted its interim dividend by 5.1 per cent to 62 cents with chief executive Andrew Mackenzie saying the firm had prepared for sliding prices by reining in spending and scaling back investments in recent years.
“Despite significant falls in the prices of our main commodities over the last six months, group margins remain healthy, free cash flow has increased and we have strengthened our balance sheet,” he said, adding that net debt had been reduced to $24.9 billion.
“We started to prepare for a sustained period of lower prices almost three years ago by increasing our focus on efficiency and lowering our investment.
“Since then, we have achieved annualised productivity gains approaching $10 billion and reduced capital spending by almost 40 per cent.”
The company said there had been stellar performances across its diversified portfolio with records achieved for eight operations, but this was partially offset by prices tumbling as demand was outpaced by a supply surge for some commodities.
Iron ore – the steel-making ingredient – is BHP’s most lucrative product and production from its key Western Australian operations jumped 15 per cent in the half year to 124 million tonnes.
But the boost came with the economy of major customer China slowing and demand dropping due to weakness in its property sector.
Mackenzie said BHP was positioning itself to weather the iron ore weakness, with the price crashing nearly 50 per cent over the past year.
“We’re quickly advancing towards our objective of becoming the lowest all-in cost supplier to China,” he said, referring to the price once freight and royalties are factored in.
Petroleum production increased nine per cent and metallurgical coal output jumped 21 per cent, but copper fell by two per cent and aluminium, manganese and nickel were broadly unchanged.