BHP Billiton has reported a 10 per cent rise in underlying attributable profit to $US13.4 billion and says it will be able to achieve another $US3.5 billion of productivity-related gain once it spins off unwanted base metals such as nickel and alumina.
The profit, announced this afternoon, was overshadowed by confirmation the world’s biggest miner would spin off a selection of what it referred to as “high-quality” aluminium, coal, manganese, nickel and silver assets that did not fit into a four-pillar strategy focused largely on iron ore, coking coal, copper and petroleum.
BHP shareholders will receive shares in the spin-off, which will be headlined by the Worsley alumina business in WA and the Cannington lead-zinc-silver mine in Queensland.
Nickel West is not included in the spin-off though BHP said it would continue to review the WA asset.
The spin-off is to be structured as an in-specie distribution to BHP shareholders, under which they will receive shares in the spin-off based on their pro-rata shareholding in the BHP parent company.
It appears that BHP will not retain a stake in the spin-off.
BHP’s Perth-born and raised chief financial officer Graham Kerr will become chief executive of the spin-off company, which has been given the working title, NewCo.
Mr Kerr and his NewCo management team will be based in Perth, in a clear break with BHP’s Melbourne headquarters.
BHP said it expected the spin-off to happen in the first half of next year, subject to board, shareholder and other approvals.
“With fewer assets and a greater upstream focus, the group will be able to reduce costs and improve the productivity of its largest businesses more quickly,” BHP chief executive Andrew Mackenzie said about the slimmed-down BHP.
BHP said the NewCo portfolio “is cash flow positive today with assets competitively positioned in the first or second quartile of their industry cost curves”.
“In the 2014 financial year, its underlying EBITDA margin was 21 per cent and over the past decade it generated robust earnings through the cycle with an average underlying EBITDA margin of 34 per cent,” BHP said.
By comparison, BHP said, the underlying EBITDA margin of its four-pillars portfolio, headlined by Pilbara iron ore, was 42 per cent.
BHP today also declared a final dividend of US62¢ a share, for a 4 per cent increase in the full-year return to $US1.12 a share. The final dividend will be payable on September 23.
ASX-listed BHP shares closed up 53 cents, or 1.35 per cent, at $39.68. The profit results and details about the spin-off were released after market close.