Global (Chicago Options: ^RJSGTRUSD - news) mining giant BHP Billiton (Hamburg: BHP1.HM - news) on Wednesday posted a 5.5 percent fall in first-half profits to US$9.94 billion, largely due to volatility in commodity prices which it expects to persist.
The interim result in the six months to December 31 was nevertheless one of the largest in Australian corporate history and compared to the record US$10.5 billion it booked in the previous corresponding period.
Despite the drop-off in earnings, which was slightly below analyst expectations and its first fall in two years, revenue increased 9.7 percent to US$37.48 billion from US$34.17 billion previously.
Iron ore and petroleum were the standout performers with aluminium, base metals, nickel and diamonds among the worst.
Chief executive Marius Kloppers described the result as "robust and predictable" considering global sentiment, and emphasised the company's diversification.
"This strong and predictable performance reflects our strategic positioning as a more diversified company by geography, by product, and by market," he told reporters.
Concerns about Europe (Chicago Options: ^REURUSD - news) 's debt crisis saw a general deterioration in demand for commodities during the first half, resulting in lower prices for most of BHP's products, the company said.
"Prices for many of BHP Billiton?s products declined during the latter part of the 2011 calendar year as concerns surrounding broader European liquidity culminated in a general deterioration in commodities demand," BHP said.
"We expect volatility in commodity markets to persist as the European sovereign debt crisis and general weakness in the manufacturing and construction sectors across key markets are expected to weigh on customer behaviour and sentiment."
"However, we expect underlying demand growth rates to remain robust, so long as the macroeconomic policy setting of the developing world retains a growth bias," it added.
The fate of BHP, the world's biggest miner and Australia's largest company, is closely tied to the strength of China and the company said iron ore, its key steelmaking raw material, remained well supported by strong demand from emerging economies.
"In the longer term, we expect the rate of growth in steelmaking raw materials demand, particularly in China, to decelerate as underlying economic growth rates revert to a more sustainable level," it said.
"Slowing activity in the steel intensive construction and infrastructure sectors is, however, expected to be partially offset by robust growth in consumption-related sectors such as machinery and transportation."
This, it added, would support the fundamentals for iron ore and metallurgical coal.
Copper was also well-supported but BHP said crude oil prices were at the mercy of geopolitical factors, while the outlook for aluminium, nickel and manganese alloy industries remained challenging.
"The good news is BHP has delivered a solid result in light of difficult market circumstances," said City Index analyst Peter Esho.
"The bad news, for some, is that the US$9.9 billion after tax earnings number is below market expectations."
The company declared an interim dividend of 55 US cents, up from 46 US cents at the same time last year. Its (Euronext: ALITS.NX - news) share price was down 0.71 percent at Aus$37.63 in afternoon trade.
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