BHP Billiton slashes costs as profit almost halves

BHP Billiton's half-year profit has almost halved to $US4.27 billion ($5.5 billion) on slumping commodity prices.

The company's net profit was down more than 47 per cent, however the world's biggest miner has chosen to continue bumping up its dividend to 62 US cents (79.5 cents), fully-franked.

The company's pre-tax and pre-interest earnings (EBIT) were also down 32 per cent to $US8.8 billion.

BHP Billiton's underlying profit, excluding one-off costs and gains, was 31 per cent lower at $US5.35 billion.

However, the company has attempted to meet the challenge of slumping prices for many of its key commodities - such as a halving of iron ore and oil prices over the past year - by slashing its capital and exploration expenditure.

BHP Billiton spent $US6.4 billion on finding new deposits and developing them, and expanding exisiting ones, over the six months to December, but that was down 23 per cent from the $US8.3 billion it spent in the same six-month period a year earlier.

The miner said it has also focused its capital expenditure more on improving efficiency and reducing costs at its existing projects, rather than developing new ones.

"For example, in the last six months alone we have cut unit costs at Western Australia iron ore by 29 per cent to nearly $US20 per tonne, achieving an underlying EBIT margin of 49 per cent despite the structural shift in prices," noted the company's chief executive Andrew Mackenzie in the report.

In an analyst briefing, Mr Mackenzie said the company was putting itself in the best position to weather iron ore price weakness.

"We're quickly advancing towards our objective of becoming the lowest all-in cost supplier to China," he said.

BHP Billiton's boss said the company had foreseen substantial commodity price falls and moved to act three years ago.

"In less than three years we've improved the efficiency of our operations and investments by 30 per cent," he said.

BHP Billiton said it has achieved productivity gains approaching $US10 billion a year and a 40 per cent reduction in capital spending.

Mr Mackenzie said the company is planning to cut a further $US5.4 billion in capital expenditure over the next two financial years, including a $US2 billion reduction in developing North American shale oil and gas.

Mr Mackenzie said this cost cutting had increased BHP Billiton's free cash flow and allowed it to raise dividend payments now and into the future.

"We remain committed to steadily increasing, or at least maintaining, this dividend per share," he said.

"In fact, if our shareholders approve the demerger, we do not plan to rebase or lower this dividend, which implies, all other things being equal, a higher payout ratio and that's before you consider that South32 will be set up to deliver additional cash returns through dividends."

BHP Billiton investors have reacted positively to the promise of increasing dividends, pushing its shares up 2.6 per cent to $32.95 by 1:26pm (AEDT).