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30% drop in BHP profits

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Mining giant BHP Billiton reported a 30 per cent drop in full-year profits, with the company saying it had dodged a bullet on a damaging acquisition due to Canadian politics.

BHP reported an 8.7 per cent dip in revenues to just under $66 billion while profit dropped to $11.8 billion, The Guardian reported.

The company was pleased with the healthy performance following “a period characterised by slowing global growth and volatile commodity markets”.

Analysts have predicted BHP Billiton will increase its dividend payout at its annual result despite the drop in profits.

It is expected the company will raise its final dividend seven per cent to US61c.

Company CEO Andrew Mackenzie also took the opportunity to chart out a plan for BHP’s potash fertiliser venture.

But it was done with some wariness and caution after its potash project hit a snag under previous CEO Maruis Kloppers.

BHP is proposing to invest $2.6 billion by 2017 on infrastructure and shafts at its own Jansen potash deposit in Canada, meaning mining would not begin until 2020.

It said it was investing in the mine with some caution and was looking at collaborating with minority partners.

“It gives us flexibility to enter the potash market only when the time is right,” Mackenzie said.

It originally wanted to start production in 2015 at the site.

Cost cutting measures under BHP’s new CEO cast doubt over the company’s planned expansion projects. This included the Jansen potash project and the mega-pot at the Carrington silver and base metals mine near McKinlay in northwest Queensland.

Mackenzie took a 25 per cent pay cut per year compared with Kloppers.

Kloppers planned to pay $US39 billion ($42.89 billion) for world’s biggest fertiliser company Canada’s Potash Corporation of Saskatchewan. But this came undone by Canadian competition regulators and politicians.

The fertiliser’s bonds face threat with the market conjecturing a break up of one of the two marketing groups for the fertiliser will mean considerably lower prices.

Mackenzie was asked if the unsuccessful potash bid was a positive outcome in the end.

“Water has gone under the bridge on that. I don’t want to comment too much on that.”

Kloppers was commended for the way he handled the company during the global financial crisis but was under fire for his costly proposal for shale gas assets in the United States.

The consequence of that was $2.8 billion in writedowns, dumping of the potash bid and a loss of bonus for Kloppers in 2012.

Mackenzie took over the reins of BHP in May and signalled cost cutting measures for the mining giant and said it would focus on increased productivity and less investment.

BHP said it would cut spending by 18 per cent in the 2014 budget and signalled further cuts in 2015 and 2016.

Between them, BHP and Rio Tinto is expected to slash spending by $10 billion between them over the next two years.

It comes as companies tackle dropping commodity prices and increased investor demand for larger returns.

Mackenzie recently said global demand for Australian resources will remain but warned the country risks losing its competitive edge if tax regimes, workplace relations and regulatory red tape are not mended.

''The question is not if Asia's demand for commodities will be met but rather which countries will deliver the supply,” Mackenzie said.

"There are even greater opportunities ahead. Global demand for commodities is expected to grow by up to 75 per cent over the next 15 years.”

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