BHP Billiton expected to cut costs as profits tumble on low prices

 
Caitlin Morrison
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MINING giant BHP Billiton is set to slash its capital expenditure for the next year as volatility in the commodities sector continues to drag global markets, analysts have warned.

The company will announce its results for the 2015 financial year tomorrow, and analysts expect the firm’s income to have tumbled over the 12 months. Meanwhile, analysts at Liberum have forecast that the group will make “aggressive capital cuts”, bringing its current $9bn (£5.7bn) capex plan to below $7bn.

This would bring BHP’s capex guidance for the 2016 financial year to nearly half its original value – until November last year, expected capex for next year was $13bn. However, since that last capex cut, copper prices have fallen by 21 per cent, recently hitting six-year lows.

The analysts warned that unless BHP makes cuts to its capex plan, it will be unable to cover its dividend in 2016.

Miners led the FTSE downwards last week, with BHP rival Glencore dropping farthest after it revealed a 29 per cent reduction in core first-half earnings on the back of falling commodity prices.

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