BHP Billiton plans to make further big cuts in spending, blaming a sharp fall in profits on the plummeting price of oil and other commodities.
The world’s biggest mining company said it had cut its original spending plans by 15% to $12.6bn (£8.2bn) for this year and to $10.8bn for the 2016 financial year.
Andrew Mackenzie, BHP Biliton chief executive, said: “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.
“We are confident that we can maintain our progressive dividend policy and continue to selectively invest in projects that offer compelling returns.”
Lower iron ore and petroleum prices contributed to a 31% fall in pre-tax profits to $8.6bn in the six months to 31 December, while group revenue fell to $29.9bn from $33.9bn.
The Anglo-Australian company said its petroleum business had responded quickly to lower oil prices, as it confirmed it would reduce its US onshore rig count by 40% by the end of its current financial year in June.
BHP said it was pressing ahead with plans to spin off its aluminium, manganese and nickel business, as well as some coal and silver assets, into an independent company called South32.
“Once simplified, BHP Billiton will be almost exclusively focused on its exceptionally large, long-life iron ore, copper, coal, petroleum and potash basins, retaining full exposure to the early, middle and late stages of the economic development cycle,” it said.
“With fewer assets and a greater upstream focus, BHP Billiton will be able to reduce costs and further improve the productivity of its largest businesses.”
The company was the FTSE 100’s biggest riser, with its shares up almost 6% because the results were better than expected against a difficult business backdrop.
Ric Ronge, a portfolio manager at Pengana Capital, said: “They are doing better than the market’s expecting, so that’s a great outcome.”
BHP said: “We expect sustained growth in China, stronger consumer spending in the US and lower energy prices to support an improvement in global economic activity over the course of the 2015 calendar year. However, some commodity prices will remain relatively volatile and oversupply in many of our markets will continue to moderate prices.
“In the medium term, the structural requirement to induce new supply to meet demand should be supportive for prices in some of our core commodities, most notably in copper and oil.”
