Mining giant BHP Billiton posted a 30 per cent rise in half-year profit today in line with market forecasts, boosted by Chinese demand.
The world's biggest miner said cost controls and its emphasis on high-margin growth projects had propelled its bottom line to a record profit of $15.4 billion for the full year to June 30th, but also warned of weaker global economic growth in the short term.
Second-half profit rose to $9.37 billion, and BHP raised its final dividend by 52 per cent, which fund managers said was a sign of the company's confidence in its longer term outlook.
BHP Chief Executive Marius Kloppers said industry observers did not fully appreciate the extent of supply side problems, therefore they were underestimating commodity price increases.
HP said higher operating costs, such as fuel, staff and equipment replacement, had inflated costs across the group by $1.18 billion for the year.
"Strong global demand for resources continues to provide cost challenges for the whole industry. This is mainly due to rising prices for inputs such as diesel, (steel-making) coke and explosives, and shortages of skilled labour," it said.
Cost inflation has emerged as an achilles heel for miners reaping big profits from global demand for minerals such as copper and iron ore.
BHP increased its final dividend to 41 U.S. cents per share for a full-year payout of 70 cents, up from 47 cents a year ago.
The company said Chinese investment in infrastructure using steel was holding up well despite a downturn in export-oriented sectors and in the West. It said that the Chinese outlook was weaker in nickel and aluminium used in finished goods.
"For the domestically driven, investment-driven sectors, such as the steel sector ... we see these businesses performing well," Mr Kloppers said at a presentation.
"Having just spent time in Beijing ... in interaction with our customers over the past week, they absolutely support this outlook."
The bulk of the downturn in China is occurring in export-led light manufacturing, but this only accounts for a modest portion of the overall economy and GDP is likely to dip only slightly from recent levels around 10 per cent, he said.
Reuters