BHP shares tumble in London

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,’’ 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 group’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 year’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 BHP’s “pillars” but they were built to BHP’s high standards.

Read more here: SMH


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