A range of projects were swallowing cash. [But] the tap has now been turned. Cash is coming out

Brian Gilbertson, Billiton

Billiton made a number of acquisitions in the period including the $1.75bn (�1.21bn) takeover of Canadian copper group Rio Algom.

Chief executive Brian Gilbertson said the acquisitions gave the company a solid basis for continued growth and would help it weather a slowdown in the US economy.

He said future plans included increasing production of iron ore but the company would be cautious about more spending.

"In an industry that is consolidating, opportunities may arise, but we do not want to pour too much water into the Billiton whisky," he said.

Aluminium and nickel weakness

Mr Gilbertson said there had been "growing evidence" of a slowdown in July-December 2000 - the first half of Billiton's financial year - which was affecting aluminium and nickel prices in particular.

Stainless steel and ferroalloys were also weakening, he said.

Mr Gilbertson said the integration of Rio Algom was now well advanced and should be completed by the end of the company's financial year in June.

Efficiency and cost savings would slice 38% off annual corporate costs at Rio Algom in future.

"We have moved from a position where a range of projects were swallowing cash, to a position where the tap has now been turned the other way and cash is coming out," Mr Gilbertson said.

Takeover target?

Although Billiton's profits were modestly better than analyst forecasts, the shares have been unpopular, underperforming UK-listed mining groups by about 8% in the past 12 months.

Billiton shares were 8.25 pence down at 303.75p in late morning trade in London, having traded in a range of 227-388.75p in 2000.

Analysts said investors were taking the view that mining stocks have had a decent run in the past few months but that weakening commodity prices were now clouding the profits outlook.

Some market watchers have speculated that Billiton may itself become a takeover target of the likes of Australia's BHP, Anglo-Australian Rio Tinto or London-listed peer Anglo American, which already owns about 7% of Billiton.

However, Anglo American's recent move to take over sister company De Beers, the South Africa-based diamond giant, would reduce its scope for another large corporate action in the near term.