BHP slashes spending as commodity prices slip
KNIFE-wielding bean counters are going nowhere fast at Queensland's largest mining operations, with BHP Billiton's annual report revealing the devastation caused by slipping prices.
The multi-national resources Goliath's forensic crackdown on spending saved it $9.4 billion across its entire portfolio, which spans six continents.
But a simultaneous eroding of commodity prices has still delivered a 22% hit to earnings, reducing its profit to $11.5 billion. Just two years ago, that figure was more than double at $25 billion.
Management is vowing to apply pressure to ease the haemorrhaging, while it waits for healthier prices.
BHP is not the only one facing gloomy times, with more than 10,000 jobs lost across the coal industry in Queensland and New South Wales.
Chief executive Andrew Mackenzie said that, in the meantime, BHP would keep sharpening its focus on productivity.
"We continue to find ways of working smarter to obtain the most from our assets, ore bodies, plant and machinery," he said.
At the Central Queensland steel-making coal operations that BHP owns with Mitsubishi, spending has been cut by 30% mainly through contractor cuts.
But price is still the main event for the resources industry.
BHP estimates that for every US$1 per tonne that its coal price shifts either up or down, the company's after-tax profit is affected by $25 million.
Since 2011, the price of its metallurgical coal fell by an estimated US$90 a tonne, a painful blow to its nine Queensland operations.
So while its Peak Downs and South Walker Creek mines produced more coal than ever before, it was not enough to offset the falling price.
In this latest financial year alone, earnings for its Queensland coal mines fell by $2.2 billion to $795 million.
BHP Billiton's annual general meeting in London will be held on October 24.BY THE NUMBERS
$11.5b global profit for 2012-13
$262m community contributions
$29% fall in profit in the past 12 months.
150 years BHP has existed.
6 continents where it operates