Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


First take on the BHP number and new CEO

First take on the BHP number and new CEO

On first glance, the surprise this morning will be the appointment of Andrew Mackenzie to the new CEO position. It is very aggressive from a timing point-of-view; we knew it was coming, but this shows BHP is looking to get onto the front foot with a division is has been keen to invest in over the last few years - petroleum. The expected candidate for the role was Mike Yaeger, who is currently the Chief Executive of BHP’s non-ferrous business. However, Mr Mackenzie’s credentials do speak for themselves, with over 30 years of experience in oil and gas as well as petroleum through appointments with the likes of BP and Rio Tinto. He joined BHP in 2008 and is expected to be more investor friendly. What is also interesting is that he will be based in Melbourne and not London, showing that management is looking to be closer to the action with core assets being in the Pilbara and Queensland.

Turning to the numbers and on first blush they look strong compared to consensus. As expected year-on-year the results are down, however stripping out impairments and lower commodity prices the forecast figures should be used for comparison, not the corresponding half.

Headline figures show underlying EBIT was US$9.8 billion, well ahead of consensus of US$9.5 billion with underlying net profit coming bang in line with consensus at $5.7 billion. The declared dividend was also right in line at $0.57, with cash flow coming in at $6.4 billion as management states project are on time and on budget and thus should not bite into this figure too much over the coming half.

What is very pleasing is the breakdown numbers. With 51% of EBIT coming from the lucrative iron ore division and after delivering a record production report last month, BHP has managed to pull out a good beat on consensus here at $4.81 billion versus $4.716 billion expected - this is impressive considering the iron price over the last half of the year dropped. What is now even more exciting is if the company can extract profit from the current iron prices on a longer-term basis. Petroleum (29% of EBIT) also beat at $3.161 billion versus $2.814 billion predicted and with the appointment of Andrew Mackenzie we can expect this figure to improve over the coming years.

One of the key themes for this result was going to be impairments. Management has announced that no impairments are to be recorded for this half. This is a massive beat on peers; even with aluminium and nickel underperforming, the company seems happy with the current goodwill of both metals. More importantly, US shale assets that have disappointed in the past have been left untouched.

The other major theme from this report was going to be cash cost. BHP is looking to strip itself down into a leaner and meaner operation and the $1.9 billion cash cost reduction on an annualised basis should impress analysts in particular.

The question for the market will be whether it concentrates on the fact that year-on-year BHP is down on headline figures by up to 50% in the case of cash flow, whether the appointment of Andrew Mackenzie over others is the right move, and if the aggressiveness of the appointment is a downside surprise. Or, will the market jump at the fact that core assets delivered ahead of expectations, production continues to be at record levels, there is now a quality investor-friendly CEO and costs look to be back on track. BHP is well positioned to take advantage of the Asian expansion that is currently taking hold and is solidly placed to continue to expand into the ever-demanding energy space. This is a good result; it’s up to the market now to see if it thinks so too.

© Scoop Media

Business Headlines | Sci-Tech Headlines


Oceans: NOAA Declares Third Ever Global Coral Bleaching Event

As record ocean temperatures cause widespread coral bleaching across Hawaii, NOAA scientists confirm the same stressful conditions are expanding to the Caribbean and may last into the new year, prompting the declaration of the third global coral bleaching event ever on record. More>>

Scoop Business: A Decade Of Government Pre-Seed Investment

More publicly-funded science is being commercialised after a decade of government ‘pre-see’d investment, according to an independent review. More>>


Solid Energy: Plan To Shut Unprofitable Huntly East Mine

Solid Energy, the state-owned coal miner in voluntary administration, plans to shut down its unprofitable Huntly East mine and lay off 65 staff after deciding the site stands "no chance whatsoever" of finding a buyer. More>>


E Tū: Merger Creates NZ's Biggest Private Sector Union

E tū has been created by the merger of the Engineering, Printing and Manufacturing Union and Service and Food Workers’ Union. It represents more than 50,000 working New Zealanders in industries as diverse as aviation, construction, journalism, food manufacturing, mining and cleaning. More>>


Internet: NZ Govt Lifts Target Speeds For Rural Broadband

The government has lifted its expectations on faster broadband speeds for rural New Zealand as it targets increased spending on research and development in the country's information and communications technology sector, which it sees as a key driver for export growth. More>>


Banks: Westpac Keeps Core Government Transactions Contract

The local arm of Westpac Banking Corp has kept its contract with the New Zealand government to provide core transactions, but will have to share peripheral services with its rivals. More>>


Science Investment Plan: Universities Welcome Statement

Universities New Zealand has welcomed the National Statement of Science Investment released by the Government today... this is a critical document as it sets out the Government’s ten-year strategic direction that will guide future investment in New Zealand’s science system. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news