BHP Billiton Limited (ADR) (NYSE:BHP) recently revealed its plans to drastically cut down costs by 2016 as the company looks to maintain dividends as well as maximizing profits.
Based on projected future conditions, BHP Billiton wants to rearrange itself so as to be in a better position to maintain good performance even with unfavorable commodity prices. The mining company announced that it would shed costs at its Australian iron mining trade by 21% by next year. The anticipated price will be around $16 per metric ton.
This is not the first time the company is employing such a strategy. It had also resulted to cost reduction which saw the company bring down its cost values by 29% in the second half of 2014. BHP Billiton is not placing all its eggs in one basket. The company will also focus on cutting down the costs of the costs from its Chilean mine in Escondida by at least 16%. Additionally it will focus or reducing costs in its Black Hawk mine fields located in the USA by a margin of about 20%.
Part of the company’s strategy is to shed cost to extremes beyond those of its competitive firms. Andrew Mackenzie who is the company’s current acting Chief executive stated that BHP Billiton Limited (ADR) (NYSE:BHP) expects the expenses to drop by about $3.6 billion with the next financial year.
In a press briefing about a week ago, Mackenzie claimed that his mining firm is focused on improving its dividend yield. At the same time, there are plans to improve the ratings as well as the standards.
A few days ago, the firm also stated that it has a few other tricks up its sleeves that it plans on using in an attempt to protect its dividends and other productive aspects. Plans have been set in place to surpass the 2017 target of about $4 billion. The main cost-shedding strategy might be a viable solution for the company but alternatives should also be considered as a contingency and strengthening factor.
