By being freed from its least productive businesses, Mr Mackenzie said BHP would be able to improve productivity faster at its best assets. “With a simpler portfolio we are targeting at least another $US3. 5 billion in productivity-related gains by the end of the 2017 financial year,” he said.
The process is expected to be completed in the first half of 2015. “BHP Billiton is becoming a simpler, more productive company and the demerger we have announced today is an important step forward,â€™â€™ he said.
No buybacks were announced, but Mr Mackenzie said he wanted the company to be in a position of strength before it started a major round of shareholder rewards. “By ensuring that we start from a position of strength we will be well placed to implement an enduring program that can be managed in a more consistent and predictable manager,” he said.
But the focus of the result was the demerger, which BHP dubbed “Newco”. “For over a century, BHP Billiton has progressively reshaped its business to maintain its industry leadership. “We believe the proposed demerger, if implemented will accelerate the simplification of the groupâ€™s portfolio, provide investors will choice and unlock value in both companies.
Investors were also disappointed with the lack of a widely expected buyback of up to $US3 billion from the mining giant, and a profit result that came in below the $US13. 58 billion predicted by a consensus of analysts surveyed by Bloomberg, but was more than 10 per cent better than last yearâ€™s result.
CLSA analyst David Radclyffe said the inclusion of Australian coal assets and Cannington should hold the spun-out entity in good stead. “It looks a bit better than we thought it would be coming into the results.
Mr Mackenzie said the assets in the spun-out company may not have the quality of BHPâ€™s “pillars” but they were built to BHPâ€™s high standards.
Read more here: SMH