Mining giant BHP Billiton H1 net profit almost halves

SYDNEY (AFP) - Global mining giant BHP Billiton Tuesday said its first-half net profit almost halved to US$4.26 billion on the back of collapsing commodity prices as it reiterated a plan to demerge non-core assets.

The 47.4 per cent slump in the six months to December 31 compared to US$8.1 billion in the previous corresponding period, with revenues dropping 11.9 per cent to US$29.9 billion.

Underlying earnings - which exclude one-off writedowns - were down 31 per cent to US$5.35 billion, slightly better than analyst expectations.

The world's biggest miner has been hard hit by falling prices for its two main commodities, iron ore and oil, with a 23 per cent reduction in capital and exploration expenditure helping offset some of the damage.

Despite the downbeat data, the company boosted its interim dividend by 5.1 per cent to 62 cents with chief executive Andrew Mackenzie saying the firm had been preparing for sliding prices by reining in spending and scaling back investments in recent years.

"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," he said, adding that net debt had been reduced to US$24.9 billion.

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

"We started to prepare for a sustained period of lower prices almost three years ago by increasing our focus on efficiency and lowering our investment," added Mackenzie.

"Since then, we have achieved annualised productivity gains approaching US$10 billion and reduced capital spending by almost 40 per cent."

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 per cent 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 per cent, but copper fell by two percent and aluminium, manganese and nickel were broadly unchanged.

In August, BHP announced plans to demerge parts of its business, including aluminium, manganese, silver and selected coal and nickel operations, into a company called South32.

This will allow it to focus exclusively on its core long-life operations - iron ore, copper, petroleum, coal and potash, with the new entity to be listed in Sydney, London, and Johannesburg with its headquarters in Perth, Australia.

Mackenzie reiterated that the spin-off was crucial to simplify the business and cut costs moving forward.

The company said the spin-off remains on track to be completed in the first half of 2015 with a shareholder vote in May.

"The demerger will allow us to continue the process of building an organisation that is truly unique in our sector, and one that is well positioned for success in the face of ever increasing volatility," added Mackenzie.