Anglo-Australian mining giant BHP Billiton has seen its annual net profits almost wiped out as China seems to have lost its hunger for raw materials, causing commodities prices to tumble across the world.
BHP Billiton unveiled a dismal result for its fiscal 2014 ending June 30, showing a decline in its net profit of a whopping 86.2 percent.
The Anglo-Australian mining company earned $1.91 billion (1.64 billion euro) in the period, compared with $13.83 billion a year earlier.
Overall revenues had dropped by about a fifth to $52.3 billion, the company said, as demand for its main commodities such as iron ore, coal and oil had plunged over the year.
Mining companies across the world are suffering from a commodities price slump mainly caused by reduced demand from China. The world’s second largest economy has slowed as it is trying to deflate a massive bubble in its housing market.
Moreover, Chinese Communist rulers aim to curb the country’s investment and export-driven boom of the past two decades, by fostering a more sustainable path of growth.
“In the short term we expect ongoing economic reforms in China to contribute to periods of market volatility,” BHP Chief Executive Andrew Mackenzie said in a statement, adding that the price of its main staple, iron ore, would remain under pressure.
BHP Billiton is among the world’s biggest iron ore producer alongside London-based Rio Tinto, Fortescue Metals from Australia and Brazil’s Vale. Bottom line profits of all of them have been hit by weaker Chinese demand, with Rio Tinto profits slumping by 82 percent and Fortescue’s down by 88 percent, according to latest figures.
Amid the uncertainty, BHP Billiton has resorted to job cuts and trimming operating expenses to offset the damage from the price slide.
Looking ahead, CEO Mackenzie said that he remained confident about commodities’ demand as “emerging economies continue to urbanize and industrialize.” For China, however, he lowered the forecast for steel demand.
Nevertheless, BHP maintained its final dividend at 62 US cents per share. But it wants to invest less, with capital expenditure set to fall from $11 billion in the 2014-15 financial year to $7 billion next year.
uhe/cjc (dpa, AFP)