Melbourne, Australia — MININGREVIEW.COM — 04 February 2009 – BHP Billiton Limited – the world’s largest mining company – reports that its first-half profits have dropped 57% because of costs involved in closing mines and plants after metal prices slumped.
In a statement issued here today the company revealed that net income had fallen to US$2.6 billion (R26 billion) in the six months ended 31 December 2008 – the lowest since 2004. That compares with the average estimate of US$4.4 billion (R44 billion) of six analysts surveyed by Bloomberg News. BHP booked US$3.5 billion (R35 billion) in one-time charges, including US$2.7 billion (R27 billion) for mine closures.
CEO Marius Kloppers commented that slower demand for steel would have a pronounced impact, and that a weak outlook for the global economy would affect earnings this half. BHP – which booked a US$386 million (R3.9 billion) charge for its failed takeover bid for Rio Tinto Group – has joined Xstrata Plc and Rio in closing mines and cutting jobs as the worldwide recession curbs demand.
BHP abandoned its hostile US$66 billion (R660 billion) takeover bid for Rio Tinto last year, citing Rio’s high level of debt and declining commodity prices. Buying Rio would have increased BHP’s net debt to US$78 billion (R780 billion), when the combined company would have had a market value of US$84 billion (R840 billion), according to Kloppers.
BHP lowered its planned spending by 13% to US$9.8 billion (R98 billion) in the next financial year. The company has held off making major capital spending cuts, while rivals including Rio Tinto plan to more than halve investments to US$5 billion (R50 billion) as prices for raw materials plummet.
BHP may also make further reductions to output if demand slows, said Kloppers. “We will continue to take actions that are required,” Kloppers told newsmen. “It is difficult to predict when this particular business cycle will turn up.”