BHP Billiton has announced additional capital spending cuts of more than $US3 billion after its half year net profit dived 47.4 per cent.

However, the resources giant says its margins are still healthy because of $US10 billion in productivity gains already achieved.

Half year net profit fell to $US4.3 billion ($A5.52 billion) from $US8.1 billion after a period in which iron ore and petroleum prices dived.

Capital and exploration expenditure was slashed by 23 per cent to $US6.4 billion in the half year, with this year’s expected spend cut to $US12.6 billion from $US14.2 billion, and tipped to fall further to $US10.8 billion in 2016.

Chief executive said Andrew Mackenzie said the group had strengthened its balance sheet despite the lower prices, with net debt falling $US847 million to $US24.9 billion, gearing of 22 per cent and free cash flow up to $US4.1 billion.

Underlying pre-tax earnings margins were 32 per cent for the period.

“We started to prepare for a sustained period of lower prices almost three years ago by increasing our focus on efficiency and lowering our investment,” he said.

“Since then, we have achieved annualised productivity gains approaching $US10 billion and reduced capital spending by almost 40 per cent.”

Unlike Rio Tinto and its recent share buyback, no extra returns to shareholders were given, apart from a five per cent dividend rise.

However, BHP said shareholders would still be better off following the proposed demerger of South32 and its various unwanted mining assets, with its dividend to be maintained and the new company to have its own dividend policy.

A 31 per cent fall in underlying profit to $US5.35 billion was better than the 36 per cent decline predicted by analysts.

The company wore $US938 million in non-cash charges that reduced the bottom line, associated with the sale of some US petroleum assets and impairments to its copper business.

Lower commodity prices ripped out $US6.6 billion from pre-tax earnings, BHP said.

A stronger US dollar only added $US626 million.

More than two-thirds of that was due to a 38 per cent fall in realised iron ore prices and the rest was due to weaker oil and coal prices.

The company blamed strong supply growth, particularly in iron ore and petroleum, for reducing profit and said it expected continued volatility but overall improvement in 2015.

China was being managed well and would continue to grow at seven per cent a year even as it moved to more of a consumption driven economy, auguring well for demand for BHP’s products, Mr Mackenzie said.

BHP PROFIT DIVES ON LOWER COMMODITY PRICES

• Interim net profit of $US4.3b, down 47.4 pct from $US8.1b in 2013/14
• Revenue of $US29.9b, down 11.9 pct from $US33.9b
• Fully-franked dividend of 62 US cents a share, up from 59 US cents.