BHP finds another $4.9bn in savings

The group beat market forecasts with a 16 per cent rise in underlying cash profits to $16.5bn (£9.9bn), but the focus remains on effective capital management. BHP has been postponing projects and hiving off non-core assets in a bid to free up cash for shareholders, while also reviewing group operating costs. Chief executive Andrew Mackenzie confirmed that BHP has pared back annual costs by $4.9bn, while trimming net debt by $422m since the end of June to $27.1bn.

If anything, the Anglo-Australian miner's operational progress has probably trumped that of its chief rival Rio Tinto (RIO). But it's worth remembering that this has been achieved during a period when iron-ore prices have averaged $135 a tonne. With global capacity on the rise and growing uncertainties over Chinese industrial demand, it is likely that BHP will have to contend with a less favourable pricing environment sooner or later.

However, even if Chinese steelmaking trails off, Mr Mackenzie believes BHP has further scope to trim costs. This would help insulate it from prices falls and bring scale benefits as output expands. Indeed, BHP delivered record production at its iron-ore operations in Western Australia, its coal business in Queensland and its aluminium unit. Rising from essentially break-even levels a year ago, BHP's coal business posted an underlying profit of $510m, while its petroleum operations achieved a 9 per cent increase in output to 50m barrels over the half-year period. The group also reported encouraging results from its manganese, nickel and aluminium mines; this last metal was previously a particular source of frustration.