BHP Billiton Plc announced on Monday a sharp fall in first-half profit as the worlds biggest miner is struggling to cope with plunging commodity prices.
The Anglo-Australian company reported a net profit of $4.27 billion in the six months ended December, down 47% compared to the $8.11 billion it stated a year earlier, but better than the average estimate of $3.59 million complied by six analysts surveyed by The Wall Street Journal.
Underlying earnings before interest and tax for the first-half dropped 25% to $9.2 billion, mostly due to lower commodity prices, which reduced the overall figure by $6.1 billion, BHP said.
However, the company said it is on track with its plan to deliver at least $4 billion in productivity gains by the end of fiscal 2017.
The company said it realized an average price of $85 per oil barrel compared to $103 in the previous year, while iron ore prices fell from $112 in 2013 to $70 in the reported period. Those are the two most important commodities for BHP.
However, the company managed to lower its unit costs by 29% at its iron ore operations in Western Australia and by 8% in its US onshore oil production.
Additionally, BHP said that it will reduce the number of oil rigs it operates at its US onshore project by around 40% by the end of fiscal 2015 as a counter measure to the recent plunge of oil prices.
The company also said it would reduce it spending on new projects this fiscal year with projections the figure to stand 15% lower than initially estimated at $12.6 billion and $10.8 billion in financial 2016, also lower from the companys previous target of $13 billion.
Despite the lower profit BHP said it will stick to its progressive dividend policy and proposed a dividend of $0.62 a share, up 5% compared to the same period a year earlier.
Net debt slipped $837 million and stood at $24.9 billion at the end of December.
Additionally, the company restated its plan to spin-off its nickel and aluminum operations into a stand-alone company, named South32, during the first half of this year.
“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,” said Chief Executive Andrew Mackenzie.
BHP lost 2.15% on Monday and closed at GBX 1 547 in London. On Tuesday the stock gained 4.65% to GBX 1 619 at 12:29 GMT, marking a one-year decrease of 17.42%. The company is valued at £85.83 billion. In Sydney the stock climbed 2.93% and closed at A$33.06.