BHP Billiton Ltd. (BHP.AU) said Wednesday its full year net profit fell 61.8% to US$5.88 billion from US$15.39 billion last year, breaking a run of six consecutive record annual results for the world's biggest miner as a slump in commodity prices took its toll.

However, the profit came in slightly ahead of market expectations and the mining giant has eschewed any capital management to retain the balance sheet strength that marks it out from its peers.

BHP posted attributable profit excluding exceptional items for the 12 months ended June 30 of US$10.72 billion, down from US$15.37 billion in fiscal 2008 but ahead of average analyst forecasts for US$10.2 billion.

Despite enduring what Chief Executive Marius Kloppers described as the most challenging year he could recall, the miner posted a record cash flow of US$18.9 billion, achieved margins of 40% on earnings before interest and tax basis and now has net gearing of 12%.

"The scale and financial clout that BHP enjoys over its peer group is clearly evident when you compare its result to that of its smaller rival Xstrata (XTA.LN)," IG Markets analyst Cameron Peacock said.

Some investors have been agitating for BHP to use its balance sheet muscle to go on an acquisition spree while asset prices are low and have expressed concerns the miner has missed the bottom of the market.

Kloppers said BHP's strong cash flow has allowed it to continue to spend on growth projects and pay dividends when its peers were making cuts, and that the miner also remains on the lookout for acquisition opportunities.

Despite the recent uptick in commodity prices, BHP maintained a cautious tone in its outlook statements, saying that while the stimulus policies of the Chinese government have provided strong support to short-term economic growth there remains uncertainty over global economic growth.

"It is our view that the global economy is likely to emerge from this recession less rapidly than in previous cycles," Kloppers told reporters.

Commodity restocking in China appears to be complete and demand from China is now expected to more accurately reflect real end-user purchasing, BHP said.

There was emerging evidence of demand improving in North America, Europe and Japan although it was too early to tell if this was due to restocking or real demand.

In the long term, BHP said it continues to expect strong growth in demand for the commodities it produces.

"With reduced capital investment over the past year, supply may struggle to keep pace with demand in the medium term when growth recovers," the miner said.

BHP's revenue for the year fell 15.6% to US$50.21 billion from US$59.47 billion in 2008 and BHP posted a final dividend of 41 U.S. cents a share, in line with last year and with analyst expectations.

Macquarie analyst Brendan Harris said the result was solid and slightly ahead of expectations.

"The company is well positioned for any recovery in the global economy," he said.

Sagging prices cut the miner's earnings before interest and tax, or EBIT, by US$3.99 billion compared to last year.

Base metals underlying EBIT fell 83.8% on year to US$1.29 billion, aluminum earnings slumped 86.9% to US$192 million and stainless steel materials recorded a loss of US$854 million from earnings of US$1.28 billion previously.

But this was partially offset by higher prices won for bulk materials, with iron ore earnings rising 34.5% to US$6.23 billion and metallurgical coal earnings rising five-fold to US$4.71 billion.

Weaker nickel prices have prompted BHP to close its Ravensthorpe nickel laterite operation in Western Australia and to sell its Yabulu refiner in Queensland state, and there has been speculation it could also move to exit its Nickel West business, acquired in the takeover of WMC Resources in 2005.

However, Kloppers scotched these rumors, saying BHP is sticking with its nickel assets despite changes in the market.

New nickel pig iron production in China has meant there is now a large amount of installed capacity that can kick in when demand picks up, which Kloppers said could cap the upside for nickel prices.

"I don't think that that changes our commitment to the product at all and we believe that the portfolio, reconfigured, is one that we have committed to and in due course we want to grow," he said.

Asked about any impact on BHP's dealing with China as a result of the arrest of four Rio Tinto Ltd. (RTP) executives, Kloppers said the miner was operating as normal in China and selling every ton of iron ore it could produce.

He wouldn't say if Chinese steel mills were among those who had moved from benchmark pricing for iron ore to BHP's preferred indexed pricing mechanism, but said he expects most of BHP's iron ore markets will evolve towards market-clearing mechanisms over time.

BHP has had contact with the European Union over its planned iron ore joint venture with Rio Tinto, Kloppers said, but declined to elaborate.

The miner's costs increased by US$2.5 billion on the prior year and Kloppers said there could be a lag of about 12 months before lower commodity prices flowed through to lower costs.

Significant items ate into the headline profit, including an impairment charge of US$3.62 billion on the discontinued Ravensthorpe operation.

-By Alex Wilson, Dow Jones Newswires; 61-3-9292-2094; alex.wilson@dowjones.com