Mining Giant BHP's First-Half Profit Soars 83%

Mining Giant BHP's First-Half Profit Soars 83%

BHP chief executive Andrew Mackenzie said the bumper performance was driven by improvements in productivity and extra volume from its assets. He said the company, which has scaled back or postponed tens of billions of dollars of investments in recent years as commodity prices slumped, had slashed operating costs by $4.9 billion in the past 18 months.

SYDNEY, Australia -- Global mining giant BHP Billiton (IW 1000/54) said today that first-half net profit soared 83% to $8.1 billion on the back of spending cuts and strong production across its iron ore and coal businesses.

The result for the six months ended Dec. 31 was above expectations and compared to $4.2 billion in the previous corresponding period, with revenues climbing 5.9% to $33.95 billion.

Underlying earnings -- which exclude one-off writedowns -- rose 31% to a higher than forecast $7.8 billion, with the world's biggest miner declaring an interim dividend of 59 cents a share, up 3.5% from a year ago.

The result helped push BHP's share price 1.6% higher at the open of Australian trade to $38.63.

BHP chief executive Andrew Mackenzie said the bumper performance was driven by improvements in productivity and extra volume from its assets.

He said the company, which has scaled back or postponed tens of billions of dollars of investments in recent years as commodity prices slumped, had slashed operating costs by $4.9 billion in the past 18 months.

"The commitment we made 18 months ago to deliver more tons and more barrels from our existing infrastructure at a lower unit cost is delivering tangible results," Mackenzie said. "Annualized productivity led volume and cost efficiencies totalling $4.9 billion are now embedded, and this is expected to increase to $5.5 billion by the end of the 2014 financial year.

"With strong free cash flow, selective investment and continued simplification, we are well placed to extend our strong track record of capital management," he added.

The company said there had been strong operating performances across its diversified portfolio, delivering a 10% increase in production, with records achieved across three commodities and 10 operations.

Iron ore production from the resource-rich Pilbara region in Western Australia achieved record production of 108 million tons in the first half, benefiting from the early delivery of first production from its Jimblebar mine.

This helped boost iron ore earnings by more than 35% to $US6.5 billion, despite weather-related downtime and an increase in planned maintenance.

Fellow mining major Rio Tinto (IW 1000/352) last week unveiled production and shipment records for the key steel-making ingredient in the same area.

BHP's Queensland coal operations also achieved record output while petroleum liquids production increased 9% to 50 million barrels of oil equivalent. Copper production also jumped 6% to 843,000 tons.

The Anglo-Australian miner said the global economy was expected to strengthen over the rest of the 2014 financial year, which would provide continued support for commodities demand, "albeit at more moderate rates of growth."

"In the longer term, the fundamentals of wealth creation and urbanization should benefit general commodities demand, although the transition to consumption-led growth in the emerging economies should provide particular support for industrial metals, energy and fertilizers," BHP added.

Copyright Agence France-Presse, 2014

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