Global miner BHP Billiton topped market forecasts with a 31 percent rise in first-half profit on Tuesday and hinted it may launch a share buyback in August, despite a cautious outlook on Chinese growth. After achieving annualised cost savings of $4.9 billion, slashing capital spending and trimming debt, the world's biggest miner pointed to strong cash flows that would put it in a position to consider a big dividend hike and capital return to investors.
BHP and its rivals have been shelving projects, cutting costs and selling assets over the past 18 months to satisfy shareholders wanting a bigger share of spoils from the mining boom, with Rio Tinto surprising investors with a 15 percent dividend hike last week.
BHP said it expected to generate strong free cash flow which would help it pare net debt to around $25 billion by June 2014, a level at which Chief Executive Andrew Mackenzie has said the company would be willing to look at a capital return for shareholders.
"If we deliver that level of indebtedness towards the end of this financial year, I'll come back to you at the full year with the authority of our board to talk about future capital management that may be possible," Mackenzie told reporters. BHP shares rose 2.2 percent to a one-year high at A$38.88, outpacing a 0.2 percent rise in the broader market.
Mackenzie gave a cautious outlook, saying Chinese steel output had started slow this year at 730 million tonnes on an annualised basis and said new iron ore supply from the likes of BHP and Rio would outstrip demand growth in China and elsewhere. Net debt fell to $27.1 billion, down $422 million from June 30, 2013. While some analysts suggested BHP may need to sell more assets to bring down debt, Mackenzie said that was not the case. Profit from iron ore, its biggest business, rose 60 percent on the back of mine expansions, while petroleum earnings fell 16 percent, which analysts said was disappointing. Copper earnings rose just 0.4 percent.
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