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SYDNEY–BHP Billiton Ltd. (BHP) said Tuesday its first-half profit rose, as it cut spending and squeezed more from assets including its vast Australian iron ore pits to offset a decline in global commodity prices.
BHP-the world’s largest mining company by output-reported a net profit of US$8.11 billion in the six months through Dec. 31, up from a profit of US$4.43 billion in the year earlier period. The result beat an average US$7.04 billion of seven analysts’ forecasts compiled by The Wall Street Journal.
Melbourne-based BHP increased its interim dividend by 3.5% to 59 U.S. cents a share, reflecting Chief Executive Andrew Mackenzie’s strategy of focusing more on boosting returns for shareholders and less on costly acquisitions or funding major new projects.
Miners like BHP and Rio Tinto PLC (RIO), which invested billions of dollars in new projects over the past decade as an Asia-led boom in demand for raw materials like coal and iron ore, are being forced to overhaul their strategies as prices of those commodities fall. An economic slowdown in China-the world’s biggest buyer of commodities-and several big new mines starting up have left the world awash with too much supply.
BHP has scaled back or postponed tens of billions of dollars of investments in recent years, including an expansion of the huge Olympic Dam copper-uranium mine in southern Australia. It has taken hefty impairment charges against assets bought just as commodity prices peaked, including on U.S. shale gas fields, while executives say future spending on new projects will be far below the US$21.7 billion spent in the year through June.
On Tuesday, BHP said it had reduced net debt to US$27.1 billion, from US$29.1 billion at June 30, and had slashed operating costs by US$4.9 billion over the past 18 months.
BHP isn’t alone in cutting back. Last week, Rio Tinto said it returned to an annual profit after selling assets such as Australian coal and copper mines and taking an ax to costs. Rio Tinto also wrote down the value of another $3.4 billion in assets in 2013, including at its giant copper project in Mongolia and at a Canadian aluminum smelter.
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