(Recasts, adds CEO and analyst comment)
MELBOURNE Feb 20 (Reuters) - Global miner BHP Billiton reported a 25 percent rise in underlying half-year profit on Tuesday, helped by robust metals prices, and handed an extra $800 million to shareholders as it forecast rising cash flows in the second half.
The payout echoes a similar move by rival Rio Tinto earlier this month as big miners recovering from the commodity crash two years ago look to cut debt and reward investors rather than spend.
Chief Executive Andrew Mackenzie said the miner expected to boost free cash flow to around $7 billion in the second half, up from $5 billion in the first half if spot prices for its commodities stay at current levels.
"These are very strong foundations and position us well for the remainder of the 2018 financial year," he told a media call.
Underlying profit for the half year ended Dec. 31 rose to $4.05 billion from $3.24 billion a year ago, but was below market forecasts of about $4.3 billion, according to Thomson Reuters I/B/E/S.
The interim dividend of $0.55 per share, equivalent to a 72 percent payout ratio, was well up on $0.40 a share a year ago.
"The dividend is better than what we expected, so that was certainly a positive surprise," said Andy Forster, senior investment officer at Argo Investments, a top 20 shareholder in BHP's Australian shares.
"But definitely we see cost pressures starting to emerge in the business. Some of them are one-off in nature (but) more generally across the industry cost pressures are starting to re-emerge."
Costs rose at BHP's coal, petroleum and copper operations, but the increases were mostly single events, said Chief Financial Officer Peter Beaven, partly reflecting maintenance at the Olympic dam copper mine and supply snags at Australian coal mines.
"All of those one-off features are now behind us," Mackenzie said. "Certainly as we look out to the medium term we expect further significant reduction in the unit costs, particularly for iron ore and coal."
SHALE SALE ON TRACK
BHP, facing calls from activist investor Elliott Advisors to make changes to its business, said the sale of its onshore U.S. shale assets, which it has on its books at $14 billion, was on track with initial bids expected in the June quarter.
"We have people who are interested in the whole lot and people who are interest in just parts of it ... We have strong interest at both ends of the spectrum," Mackenzie said.
Mackenzie, who plans to meet with Elliott among other investors later this week, said the miner was also open to changing its structure, with listings in both Britain and Australia, but the costs and risks of collapsing the dual listed structure currently outweigh potential benefits.
BHP cut net debt by 23 percent to $15.4 billion during the period, and said it was on track to reach its $10 billion to $15 billion target before year-end.
Revenue rose 16 percent during the half year to $21.78 billion, with copper revenues jumping nearly 52 percent, backed by stronger prices and higher production from the Escondida mine in Chile.
Revenue from iron ore mining, BHP's biggest division, rose 4.2 percent, while oil was up 8.5 percent.
Including a previously flagged $1.8 billion exceptional charge arising from a change in U.S. corporate taxes, net profit fell to $2.02 billion.
(Reporting Melanie Burton and Sonali Paul in MELBOURNE. Additional reporting by Rushil Dutta in Bengaluru; editing by Richard Pullin)