In its year-end report for FY 2015, BHP Billiton reported that after-profits for continuing operations (excluding the contribution from the demerged South32 assets) fell 86.2% to $1.9 billion. The company delivered productivity gains of $4.1 billion, two years ahead of target, and they expect to reduce costs further in the 2016 across all businesses. During FY 2015, the company decreased capital and exploration spending by 24% to $11 billion and that figure is expected to decline to $8.5 billion in 2016.

“In the short term, we expect ongoing economic reforms in China to contribute to periods of market volatility,” said Andrew Mackenzie, CEO, BHP Billiton. “And, while we remain confident in the long-term outlook for commodities demand as emerging economies continue to urbanize and industrialize, we have lowered our forecast of peak Chinese steel demand to between 935 million metric tons (mt) and 985 million mt in the mid-2020s. This backdrop will favor low-cost producers with economies of scale.

“Importantly, we do not require the same level of investment to grow as in the past,” Mackenzie said. “Improved productivity can further stretch the capacity of our existing operations to increase volumes at very low cost. For example, in Western Australia Iron Ore, we can increase the capacity of our system from 254 million mt/y today to 290 million mt/y over time with minimal investment, while making more than $20/mt margin at today’s prices. Beyond this, we continue to reduce development costs within our project portfolio. However, we remain focused on value and will only approve projects when the time is right.”

The company said it reduced costs faster than expected in all of its major businesses, with unit cash costs down by 31% at Western Australia Iron Ore, 23% at Queensland Coal, and 8% at Escondida. At Escondida, the company’s three-concentrator strategy with the commissioning of the desalination plant, is expected to offset grade decline and support a strong recovery in production post FY 2016.

Following the demerger of South32, BHP Billiton said it is now focused on its large, long-life copper, iron ore, coal and potash assets. “With a significantly simpler portfolio, we are even better placed to achieve further productivity improvements in the assets that underpin the value of the company,” Mackenzie said. South32’s after-tax contribution to BHP Billion’s FY 2015 would have been a profit of $753 million.