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BHP Billiton profits slide on weaker commodity prices

Keywords: Tags  BHP Billiton, capital expenditures, Andrew Mackenzie, nickel, copper, aluminum, iron ore, metallurgical coal Shivani Singh

SINGAPORE — BHP Billiton Ltd. cited slowing global growth and volatile commodity markets for a slump in its fiscal-year earnings.

The world’s largest miner posted attributable profit of $10.88 billion for the 12 months ended June 30, down 29.5 percent from $15.42 billion the previous fiscal year on revenue that fell 8.7 percent to $65.97 billion.

Weaker commodity prices hurt earnings by $8.9 billion, and the company took exceptional charges of $922 million, including impairment charges related to its Nickel West and Worsley assets in Australia.

The miner, which has been on a major cost-cutting drive, expects capital expenditures to total $16.2 billion in fiscal 2014, down 29 percent from $22.9 billion in the fiscal year just ended. Of its 18 major projects in execution, about 70 percent are expected to deliver their first production by the end of the 2014 calendar year, the company said, adding that a majority of its development projects are brownfield, which are inherently lower risk.

"I have no targets for asset sales. Despite difficult markets ... I am not under any pressure to sell," chief executive officer Andrew Mackenzie said. "We continue to believe that the urbanization of China and 250 million people moving from the countryside to the cities in 10 to 15 years will be a significant spur to demand for many of the commodities we produce."

In the short- and medium-term there are "reasonably positive" signs that China will achieve its forecasts of 7- to 8-percent annual growth, he said.

The growth rates for steel demand in Asia are expected to moderate as the Chinese economy gradually rebalances, BHP said. "We expect overcapacity in the aluminum and nickel industries to persist, while robust near-term supply in copper and U.S. domestic gas should, over time, give way to market conditions more influenced by resource decline."

BHP expects iron ore output to increase 11 percent to 188 million tonnes in fiscal 2014 year, while metallurgical coal production is forecast to rise 9 percent to 41 million tonnes.

The company expects its copper production to remain unchanged at 1.2 million tonnes. The Escondida copper mine in Chile remains on track to deliver 1.3 million tonnes of copper in fiscal 2015, BHP said.

A version of this article was first published by AMM sister publication Metal Bulletin.

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