BHP posts 86 percent profit drop as commodity prices tumble

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SYDNEY (AP) — BHP Billiton, the world's biggest miner, reported an 86 percent drop in annual profit on Tuesday amid plummeting commodity prices, as the company warned that China's slowing economy would lead to further market volatility.

BHP saw a net profit of $1.9 billion for the 12 months to June 30, down from $13.8 billion a year ago, the Melbourne, Australia-based company said in a statement. Revenue was down 22 percent to $52 billion.

In response, the mining giant said it would cut costs, lowering its target for capital spending in the next financial year from $9 billion to $8.5 billion.

Miners such as BHP are under increasing pressure as a slowdown in China's economy results in lower demand for key commodities such as iron ore and coal.

In a statement, BHP noted that commodity prices were "notably lower" going into the new financial year.

"In the short term we expect ongoing economic reforms in China to contribute to periods of market volatility," BHP's CEO Andrew Mackenzie said. "While we remain confident in the long-term outlook for commodities demand as emerging economies continue to urbanise and industrialise, we have lowered our forecast of peak Chinese steel demand."

The company declared a final dividend of 62 cents per share.