By Rhiannon Hoyle
SYDNEY-- BHP Billiton Ltd. reported a 47% decline in first-half
profit amid a downturn in world commodity markets, and said it had
further deepened cost-cutting to counter weaker prices as a
decadelong resources boom fades.
BHP--the world's biggest mining company by market value--said it
recorded a net profit of US$4.27 billion for the six months through
December, down from a US$8.11 billion profit a year earlier. The
result was higher than the median US$3.59 billion forecast of six
analysts polled by The Wall Street Journal.
Prices of two of BHP's most important commodities, iron ore and
oil, halved in value last year. Iron ore alone previously accounted
for nearly half of the group's earnings.
Demand has been outpaced by a supply surge from projects planned
when prices were booming. New production has come at a time when
China's economy is slowing and concerns about global growth are
rattling confidence.
The company said noncash charges against assets including some
oil fields in North Louisiana reduced its earnings by US$938
million.
Still, BHP said it would lift its interim dividend 5% to US$0.62
a share. It also said it had no plan to rebase its dividend lower
following a proposed demerger later this year, implying a higher
underlying payout ratio is on the horizon, it said.
"While revenues were marginally below expectations, a strong
cost performance, in particular in iron ore, has seen BHP come in
ahead of expectations" on profit, said Sydney-based RBC Capital
Markets analyst Chris Drew.
BHP said it continued to squeeze costs across all its
businesses, and had cut unit costs in its iron-ore business in
Western Australia by 29% over the past six months. Costs in its
coal business in Australia's Queensland state were down 15%, it
said.
"We continue to surprise ourselves" in terms of the scale of
cost reduction and productivity gains being achieved across the
business, Chief Executive Andrew Mackenzie said on a conference
call.
The miner expects to record more than US$4 billion in annual
productivity gains by mid-2017, it said.
Net debt was lowered by US$847 million over the six-month
period, to US$24.9 billion.
The company meanwhile lowered its projections on future capital
expenditure. It now forecasts a budget of US$12.6 billion in the
current year through June, 15% below earlier estimates. It expects
that to fall to US$10.8 billion in the following year.
BHP is overhauling its strategy to focus on producing iron ore,
copper, coking coal and petroleum. It intends to spin off assets
including nickel pits and aluminum smelters into a separately
listed company, named South32, by midyear.
Management separately said they expected sustained growth in
China, stronger consumer spending in the U.S. and lower energy
prices to underpin an improvement in global economic activity over
the remainder of 2015.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
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