BHP Billiton’s results are out and it has posted a profit of $13.832 billion, up 23.2% year-on-year, a slight beat on expectations.
It’s a solid result for the Australian mining giant after years of declining profits, and with CEO Andrew Mackenzie in his first full year in the job.
One of the major themes for the mining industry in recent years, particularly in Australia as we come to the end of the sector’s investment boom, has been consolidation and simplification. The company announced $US2.9 billion in cost efficiencies in its latest results as part of this.
But BHP also announced it would be continuing the process in a more dramatic way, by spinning out part of its business into a new independent global company based on some of its assets including aluminium, manganese, and nickel.
BHP said this meant it would be “almost exclusively focused on its exceptionally large, long-life iron ore, copper, coal, petroleum and potash basins”.
In the shareholder presentation there are three maps that show how BHP has transformed in the past decade as the investments in iron ore capacity in Western Australia have come on stream, and also with its decisions to start exiting smaller operations that complicated its mission by requiring vast spreads of expertise and operations reporting across the business. It’s a good visual representation of what simplification of a complex company looks like in action.
In 2005… BHP had 50 assets with each contributing a small amount to EBITDA…
A decade later, WA iron ore the heart of the business, followed closely by its copper operations in South America and petroleum in the Gulf of Mexico
In future, BHP forsees a much cleaner structure to its earnings as it continues to focus on core business
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