Leadership & Communication

BHP profits benefit from efficiency and productivity gains

3 Mar 2014, by Test Test

Andrew Mackenzie
Andrew Mackenzie

BHP Billiton has helped to drastically increase profit margins through targeted efficiency improvements and productivity gains.

The miner released its latest half-year financial results in February, which showed an 82.9 per cent rise in profits for the six months to December 2013, when compared with the same period the previous year.

This was despite revenues only increasing 5.9 per cent to US$33.9 billion (AU$37.8 billion). The company saw profit advance from US$4.4 billion in H2 of 2012 to US$8.1 billion in 2013.

The news comes soon after Rio Tinto reported record productivity levels in the final quarter of 2013. Rio highlighted infrastructure improvements at its Pilbara operations in Western Australia as the primary driver for the results.

New BHP chief Andrew Mackenzie was brought in to streamline processes and the firm claimed cost-cutting measures were proceeding as planned.

“A substantial improvement in productivity and additional volume from our low-risk, largely brownfield investment program contributed to a significant increase in profitability in the December 2013 half year,” BHP said.

“There is no better example of the renewed discipline that we are applying at an operational level than Queensland Coal, where our focus on contractor and maintenance costs significantly improved the profitability of the operation.”

Global Iron OreOverall, profits from operations climbed 62.3 per cent year on year, and the company enjoyed a 65.3 per cent rise in net operating cash flow to US$11.8 billion.

“By maintaining strict financial discipline and increasing international competition for capital we intend to further differentiate ourselves by creating a more capital efficient organisation,” the company stated.

BHP said capital and exploration expenditure had been slashed by a third, suggesting fewer mining engineering projects could be on the horizon.

The company also benefited from deductions to its tax obligations, which resulted in expenses dropping by US$491 million in Australia.

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