The world’s largest mining group, BHP Billiton (LON:BLT), has been forced to scale back its investment levels after its full-year profit fell by more than a third.
For the year to 30 June 2012, the firm’s attributable profit was $15.4 billion (£9.7 billion), down 35 per cent from $23.6 billion (£14.9 billion) in the equivalent period a year earlier.
In a statement, the group warned investors not to expect an immediate respite. ‘In the short term’, it said, ‘we expect volatility in commodity markets to persist as temporary weakness in the manufacturing and construction sectors across all key markets is expected to weigh on market sentiment.’
As a result, BHP Billiton has had to delay its $20 billion (£12.7 billion) Olympic Dam project to expand a copper and uranium mine in South Australia. The decision reflects the fact that the price of copper has crumbled by a quarter since the start of 2011.
Marius Kloppers, the group’s chief executive, explained that ‘it became clear that the right decision for the company and its shareholders was to continue studies to develop a less capital-intensive option to replace the underground mine at Olympic Dam’.
The company added that ‘no major project approvals are expected’ until June 2013.
The stock market seemed relieved despite the collapse in profit, as BHP Billiton’s share price slipped less than 2 per cent to £19.48. Shareholders had long been clamouring for the company to return cash to them rather than commit to massive projects.
BHP Billiton has duly increased its dividend by 10.9 per cent to $1.12 (71p).
Based on this, Joshua Raymond, chief market strategist at City Index, was sanguine about the performance. ‘Investors had expected a heavier fall in earnings’, he observed, ‘and so the result was in fact better than expected’.