All change at the top.
His replacement - BHP’s base metals head Andrew Mackenzie - takes over at a time when industry majors are re-focusing on operational efficiencies at the expense of big capital projects. In fact, all five of the world’s leading mining companies have now announced a change at the helm since the global financial crisis began.
Mr Kloppers’ departure will be unlamented by some shareholders due to his inability to see through a number of high-profile takeover bids, including the aborted $40bn (£26bn) deal for Canada’s Potash Corp. He did eventually manage to secure around $20bn in US shale gas/oil assets, but the group has since booked substantial write-downs on these assets after the Henry Hub price tanked in the US.
Mr Mackenzie, like Sam Walsh - his new counterpart at Rio Tinto - has been chosen for his ability to drive through operational reforms and cost savings. It’s no doubt coincidental, but Mr Mackenzie’s base metals division was the only part of the business to record revenue growth during the period. Elsewhere the picture was hardly inspiring.
Underlying group profits (ex accounting and one-off items) fell by 38 per cent to $9.78bn. Despite improved production volumes, falling commodity prices reduced profitability by $5.4bn, with diminished contributions from the iron ore and metallurgical coal segments particularly noticeable. BHP’s net operating cash-flow shrank by 48 per cent to $6.4bn over the half-year. But Mr Mackenzie will take some heart from the fact BHP pared back controllable cash costs by $944m.
|BHP BILLITON (BLT)|
|ORD PRICE:||2,205p||MARKET VALUE:||£130bn|
|TOUCH:||2,205-2,206p||12-MONTH HIGH:||2,252p||LOW: 1,651p|
|DIVIDEND YIELD:||3.4%||PE RATIO:||19|
|NET ASSET VALUE:||1,257¢*||NET DEBT:||45%|
|Half-year to 31 Dec||Turnover ($bn)||Pre-tax profit ($bn)||Earnings per share (¢)||Dividend per share (¢)|
Ex-div: 6 Mar
Payment: 28 Mar
£1 = $1.54 *Reflects both Australian and UK listed shares
Mr Mackenzie has operational challenges ahead, and he will also probably have to do some bridge building with institutional shareholders. Big expansion projects such as South Australia's Olympic Dam have been put on ice, so shareholders will now be hoping that, in addition to the focus on margin improvements, BHP might be now more inclined to return capital to investors, especially given that the group's divestment programme garnered $4.3bn during the first half. The shares trade at 11 times forecast earnings, which is broadly in line with other sector heavyweights with the exception of Rio Tinto. Hold
Last IC view: Hold, 1,951p, 23 August 2012