By Robb M. Stewart 
 

MELBOURNE--BHP Billiton Ltd.'s (BHP) goal of retaining a solid single A credit rating hasn't been affected by the mining company's first fall in profit in three years, and its plans to hold off approving any new major capital spending until at least mid-2013 is credit positive, Moody's Investors Service said Thursday.

The sovereign debt crisis in Europe and slowing economic growth in China mean near-term risk remains, but Moody's in emailed comments said it still expects BHP to continue to generate solid earnings given its focus on low-cost producing assets.

Moody's said that over the medium to longer term it expects the company's strong positions in iron ore, metallurgical coal, copper and energy to provide it with opportunities to benefit from ongoing industrialization in China and India.

BHP on Wednesday said its net profit fell 35% to US$15.42 billion in the year through June from a record US$23.65 billion in fiscal 2011 thanks largely to weaker commodity prices and increased costs. The Melbourne-based company also shelved plans to greatly expand its Olympic Dam copper and uranium mine in South Australia, and postponed approval for plans to expand its iron ore export facilities in Western Australia and build a potash mine in Canada.

"The decline in earnings and operating cash flow--combined with a material increase in year-on-year debt levels--negatively impacts the company's debt coverage ratios," said Matthew Moore, an assistant vice president and analyst at Moody's. "But BHP Billiton's credit metrics are still well within Moody's tolerance level for its A1 rating."

He said BHP's announcement it won't approve major expansion projects this financial year demonstrates a focus on capital discipline and commitment to maintaining a conservative financial profile.

Mr. Moore said the rating could face pressure longer term if debt levels rise significantly or BHP's operating performance declines beyond Moody's expectations.

Write to Robb M. Stewart at robb.stewart@wsj.com

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