BHP Billiton profit slides on commodities slump, pledges more spending cuts

Global miner BHP Billiton posted a 31 percent drop in half-year profit as prices for all its main products collapsed, but beat market forecasts and flagged further belt tightening to withstand the tough conditions. The company again cut its targets for capital spending and said it would reap savings of $4 billion in the next two years, shoring up cash flows so it could stick to its policy of not cutting dividends. The world’s biggest miner has been hard hit by falling prices for its two main commodities, iron ore and oil, with a 23 percent reduction in capital and exploration expenditure helping offset some of the damage.

We are confident that we can maintain our progressive dividend policy and continue to selectively invest in projects that offer compelling returns.

Andrew Mackenzie, Chief Executive of BHP Billiton

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 commodity and production from its key Western Australian operations jumped 15 percent 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. Petroleum production increased nine percent and metallurgical coal output jumped 21 percent, but copper fell by two percent and aluminium, manganese and nickel were broadly unchanged.

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.

Andrew Mackenzie

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