Global miner BHP Billiton topped market forecasts with a 31% rise in first-half profit and hinted it may launch a share buyback in August, despite giving a cautious outlook on Chinese growth.

After saving an annualised $4.9bn in costs, cutting capital spending and trimming debt, the world’s biggest miner pointed to strong cash flows that would put it in a position to consider a big dividend hike and capital return to investors.

BHP shares in Australia rose 2.3% to a one-year high while shares in London were up almost 2%, after hitting their highest in more than three months, outperforming the mining sector.

Underlying attributable profit rose to $7.76bn for the six months to December, up from $5.94bn last time. Forecasts were $6.925bn and analysts said BHP beat that partly on cost cutting and on a lower-than-expected tax rate. Net debt fell to $27.1bn, down $422mn from June 30, 2013.

Profit from iron ore, its biggest business, rose 60% on mine expansions, while petroleum earnings fell 16%, disappointing analysts, and copper rose just 0.4%. BHP raised its interim dividend by 3.5% to $0.59 a share.