BHP PROFIT UP 23.2% TO $US13.832 BILLION, COMPANY DEMERGER CONFIRMED

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After some technical difficulties BHP Billiton’s results are finally out.

The miner posted attributable profit of $US13.832 billion, up 23.2% year-on-year.

BHP will pay a final dividend of $US.62 cents a share fully franked.

The company said improved productivity was behind its stellar results with cost efficiencies of $US2.9 billion achieved in the past 12 months with CEO Andrew Mackenzie at the helm.

“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,” Mackenzie said.

Flagging big structural changes on Friday, BHP said it is looking to divest non-core assets through a demerger.

Mackenzie today said a demerger should simplify its portfolio to focus on iron ore, copper, coal, petroleum and potash as well as help deliver at least another $US3.5 billion of productivity-related gains over the next two years.

“BHP Billiton is becoming a simpler, more productive company and the demerger proposal we have announced today is an important step forward,” he said.

“We plan to create an independent global metals and mining company based on a selection of high-quality aluminium, coal, manganese, nickel and silver assets.”

If the demerger is rubber stamped BHP expects capital and exploration expenditure to fall to no more than $US14 billion in the 2015 financial year. Without the demerger capital expenditure is forecast to sit at $US14.8 billion.

Assets earmarked for the demerger which BHP is calling “NewCo” include Cerro Matoso Nickel, Energy Coal South Africa, Illawarra metallurgical coal and Cannington silver-lead-zinc mines.

“Together they would form a global metals and mining company with assets in five countries and a dedicated board,” BHP said, adding existing shareholders would be entitled to 100 per cent of the shares in the new company which would be listed on the ASX and have a secondary listing on the Johannesburg Stock Exchange.

The newly formed company’s chairman would be David Crawford who is due to retire from his current position in November after nearly 20 years on BHP’s board. Meanwhile, BHP’s current CFO Graham Kerr would step up to be the demerged company’s CEO and current investment relations head Brendan Harris would be CFO.

Subject to board and shareholder approval the demerger is expected to be completed in the first half of 2015. It would employ about 24,000 people and be headquartered in Perth, Western Australia.

A further $US8.1 billion increase in cash flow was also recorded as of June 30, despite weaker commodity prices hitting some operations, including iron ore and coal, over the financial year.

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