BHP Billiton Ltd., the world's biggest miner, on Wednesday posted a 5.5 percent slide in first-half profit to $9.9 billion and blamed lower commodity prices as well as production constraints.
Analysts had been expecting the Anglo-Australian company to achieve a net profit of about $10 billion for the six months to Dec. 31, 2011.
Australian mining companies' burgeoning profits in the past decade have prompted the government to introduce a new tax on iron ore and coal revenue from July 2012 which is expected to add almost $9 billion to the nation's coffers in two years.
BHP Billiton's $10.5 billion half-year profit to Dec. 31, 2010, was a 71.5 percent improvement on the result for the same period a year earlier. Annual profit to June 30, 2011, was $23.6 billion, a rise of almost 86 percent amid soaring prices for iron ore and copper.
The company said in a statement Wednesday that concerns about Europe's economic problems resulted in a general deterioration in demand for commodities during the first half, resulting in lower prices for most of BHP Billiton's products.
Despite record production of iron ore and natural gas in the six months through December, BHP Billiton's total volumes were down on the previous corresponding period.
Industrial action impacted on copper production, while wet weather affected the company's Australian coal business.
The company said it expected volatility in commodity markets to persist, due to the European sovereign debt crisis and weakness in manufacturing and construction sectors.
"However, we expect underlying demand growth rates to remain robust, so long as the macro-economic policy setting of the developing world retains a growth bias," it said.
Copper and iron ore prices were expected to be supported by compelling supply and demand fundamentals, while Chinese demand for metallurgical coal was also expected to remain strong, it said.
Crude oil pricing was expected to be influenced by geopolitical factors, BHP Billiton said.
The outlook for the aluminium, nickel and manganese alloy industries remained challenging and had led to significant margin compression for most producers, it added.
BHP Billiton said economic activity slowed in China and India in the first half of the current financial year, but the United States and Japan showed stronger levels of growth.
The United States and Japan were likely to post modest growth in the coming quarters, BHP Billiton said.
China was expected to pursue moderate measures to support balanced economic growth, providing there were no large external shocks, it said.
Indian inflation had started to slow, which was expected to increase the scope for the relaxation of monetary policy there, it said.
BHP Billiton said it expected a protracted recovery for the developed world, adding that the disorderly unwinding of European government debt was a key downside risk to its forecasts. .