BHP Pitches Demerger Plan 1

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Friday, November 21st, 2014
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BHP Billiton chairman Jac Nasser has talked up the benefits of a multi-billion dollar plan to spin off some of the mining giant’s less profitable assets.

Addressing shareholders at BHP’s annual general meeting, Mr Nassar said demerging the aluminium, nickel, silver and coal assets would benefit other parts of its global operations.

The rationale for the split was BHP’s portfolio had evolved into what the company saw as two distinct companies, he said.

BHP’s focus was on the key businesses of copper, petroleum, iron ore and metallurgical coal.

“Our strategy was to direct capital to projects in businesses that delivered the highest returns. This strategy has served our shareholders well,” Mr Nasser said.

“$US1,000 invested by you in BHP Billiton 10 years ago is worth $US3,600 today.

“We see benefits for both companies and for all shareholders.”

BHP announced the demerger plan in August.

It wants its aluminium, coal, manganese, nickel and silver assets spun off into a new company dubbed NewCo.

Some of BHP’s British based shareholders have expressed concern about the move.

But Mr Nasser said BHP can reduce costs and improve the productivity of its largest businesses faster if the demerger goes ahead.

An extraordinary general meeting will be held in May 2015 for shareholders to vote on the demerger.

They will receive documents with full details of the demerger in March.

Mr Nasser also highlighted to shareholders the importance of the resources sector to the Australian economy, despite the end of the mining investment boom.

Mining remained the key contributor to economic growth in 2013/14, he said, with the industry’s $US195 billion in export earnings representing more than half of Australia’s total.

“There are very few industries in Australia that have world scale and are globally competitive. The resources industry is one of them; an industry that is ready to lead Australia’s prosperity for decades to come.”

China would remain a major driver of global growth and BHP’s resources, but its rate of growth was gradually declining as its economy continued to mature, Mr Nasser said.

Chief executive Andrew Mackenzie focused on the importance of lifting productivity, which he said was a major driver of BHP lifting profit by 10 per cent to $US13.4 billion in 2013/14, despite falls in commodity prices.

He also defended BHP’s payment of taxes, saying it paid its fair share – $US9.9 billion in taxes and royalties in 2013/14.

Protesters outside the meeting criticised BHP’s use of fly-in fly-out workers instead of locals at two new coal mines in central Queensland.

The move was squarely aimed at controlling the workforce, the Construction, Forestry, Mining and Energy Union said.

By Greg Roberts
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  1. Robert Taylor

    Call me old fashioned, but I see no point whatsoever in staying in business lines in which you are not focused, unless these are part of some kind of wrap-around service you are providing to your customer.

    Since the company's focus is on areas other than the to be spun off commodities, the company is doing the right thing in hiving these assets off.