BHP Billiton Ltd, the world’s biggest mining company, plans a spinoff of a company to include assets from aluminum smelters to South African energy as it simplifies its operations.
The new company is to be based in Perth with Graham Kerr, BHP’s chief financial officer since 2011, as its chief executive, the Melbourne-based company said yesterday in a statement when announcing a 10 percent jump in underlying profit.
“In a single step, we will significantly increase BHP Billiton’s focus on the exceptionally large resource basins that underpin its competitive advantage,” chief executive Andrew Mackenzie said in the statement.
Focusing on the iron ore, copper, coal and petroleum units that generated about 85 percent of its sales last year will raise free cash flow, help boost production growth and deliver stronger return on investment, Mackenzie said in May.
The restructuring would be BHP’s largest since the A$3.3 billion (US$3.1 billion) spinoff of its steel unit in 2002.
“Investors will have a lot to contend with, not only with the remaining BHP business, but the outlook for the de-merged entity as well,” Pengana Capital Ltd portfolio manager Tim Schroeders said yesterday in an interview on Bloomberg Television.
BHP posted a 23.2 percent jump in annual net profit to US$13.83 billion yesterday, as spending cuts and productivity gains offset weaker commodity prices.
The annual result is the first time BHP has posted a year-on-year increase in net profit since 2011, when it reported a record profit of US$23.65 billion.
The boost saw underlying profit rise by 10 percent to US$13.4 billion as the miner booked US$2.9 billion in cost savings.
It declared a final dividend of US$1.21, a 4 percent year-on-year increase.
“With robust volume growth and further productivity gains expected, we remain confident in the outlook for the group,” Mackenzie said. “Our operational performance continued to improve, enabling us to exceed production guidance for a number of our core commodities including iron ore, metallurgical coal and petroleum liquids.”
BHP said a balanced global economic outlook would support for its commodities, although “with more moderate rates of demand growth.”
“In the longer term, wealth creation and urbanization will remain the primary drivers of commodities demand, although the transition to consumption-led growth in emerging economies should provide particular support for industrial metals, energy and fertilizers,” BHP said.
BHP shares closed 1.35 percent higher at A$39.68 on the Australian Securities Exchange ahead of the profit announcement.
Additional reporting by AFP
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