Sydney: Global mining giant BHP Billiton yesterday posted an 86.2 percent slump in annual net profit despite slashing costs, as a collapse in Chinese demand for key raw materials hit hard.
The $1.91bn result in the 12 months to June 30 compared to $13.83bn a year earlier, as the prices of key commodities —including iron ore, coal and oil — plunged over the year.
Underlying earnings which exclude one-off writedowns were down 52 percent to $6.4bn, below analyst expectations.
As expected, the result included numerous impairments, including an already announced $2bn after-tax writedown against its US shale division as falling oil prices hit shale gas.
BHP’s share price, which has been trending down in recent months, closed 1.97 percent higher at A$23.34 before the results were announced.
Despite the profit slump the company maintained its final dividend at 62 US cents per share, and said capital spending would fall from $11bn in the 2014-15 financial year to $7bn by 2016-17.
The miner has been cutting jobs and trimming operating expenses, which reduced net debt, to try to counter sliding commodity prices and this helped offset some of the damage.
“We will cut costs further and exercise our growing capital flexibility to improve our competitiveness and support our progressive dividend policy,” chief executive Andrew Mackenzie said.
But he admitted uncertain times lay ahead, notably with its largest customer China amid global fears the world’s second-largest economy is weaker than thought.
The fears have left its stock market and other Asian and world bourses reeling this week.
“In the short term we expect ongoing economic reforms in China to contribute to periods of market volatility,” he said, with the price of steel-making commodity iron ore under pressure.
“And, while we remain confident in the long-term outlook for commodities demand as emerging economies continue to urbanise and industrialise, we have lowered our forecast of peak Chinese steel demand.”
BHP now forecasts Chinese steel production will peak between 935m and 985m tonnes in the mid-2020s, but Mackenzie said this would “favour low-cost producers with economies of scale” such as BHP.
“Longer term, in emerging economies other than China, the continuing rise of population, creation of wealth and urbanisation will increase demand for all of our commodities,” he added.
During the year BHP spun off non-core assets into a new independent company, South32, to help simplify its operations.
South32 now operates assets including aluminium, coal, nickel, manganese, silver, lead and zinc, leaving BHP to focus on its most profitable core long-life operations —i ron ore, copper, petroleum, coal and potash.
AFP
