BHP Billiton Ltd has posted a strong lift in first-half profit as improved productivity and additional volume pushed the mining giant's interim results well beyond analysts' expectations.
In the six months to December 31, BHP posted an underlying net profit of $7.761 billion, a 30.6% increase on the $5.941 billion recorded in the first half of the previous year.
The result topped analyst expectations. A survey of seven analysts by Bloomberg delivered a median forecast for the miner's net profit of $US6.9 billion.
Attributable profit surged 82.9% $US8.107 billion from $US4.4333 in the previous corresponding period.
In the same period revenue was $US33.948 billion, a 5.9% lift on the $US32.066 billion in the previous corresponding period.
The miner will pay a fully-franked interim dividend of 59 US cents on March 26 to shareholders on the register at March 7.
Bloomberg estimates centred on an interim dividend of 60 US cents.
Debt reduction progressing
BHP said net debt was $US27.1 billion, which is nearing the $US25 billion level chief executive officer Andrew Mackenzie has previously said he is targeting in order to give the miner’s balance sheet the flexibility to consider capital management.
Mr Mackenzie said the strong performance was driven by a substantial improvement in productivity and additional volume from the group’s low-risk, largely brownfield investment program.
"The commitment we made 18 months ago to deliver more tonnes and more barrels from our existing infrastructure at a lower unit cost is delivering tangible results," he said.
"Annualised productivity led volume and cost efficiencies totalling $US4.9 billion are now embedded and this is expected to increase to $US5.5 billion by the end of the 2014 financial year."
A 65% increase in net operating cash flow and a 25% reduction in cash outflows from investing activities also drove a $US7.8 billion increase in free cash flow during the period.
Iron ore earnings lift
The profit was marked by a large jump in iron ore earnings and a fall in petroleum profit.
Iron ore earnings jumped by more than 35% to $US6.5 billion on the back of higher production and prices.
There was a 16% fall in earnings in the petroleum and potash division to $US2.5 billion despite higher sales volumes.
Despite higher sales volumes the business was affected by $US400 million in charges related to the development of its US onshore shale assets including drill rig termination costs.
Mr Mackenzie was positive about the prospects for the global economy this year and what that would mean for iron ore demand for steel production and commodities generally.
"The balance of risk to global growth is skewed to the upside, particularly given the broad based alignment of macro-economic indicators in the major developed economies," he said.
"In the longer term, the fundamentals of wealth creation and urbanisation should benefit general commodities demand, although the transition to consumption led growth in the emerging economies should provide particular support for industrial metals, energy and fertilisers."
Last week, BHP's chief rival Rio Tinto Ltd swung to a full-year profit of $US3.67 billion and said it was making progress to transform its business after beating forecasts on underlying earnings and dividend.