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.


www.igmarkets.com


© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Media: Julian Wilcox Leaves Māori TV

Māori Television has confirmed the resignation of Head of News and Production Julian Wilcox. Mr Maxwell acknowledged Mr Wilcox’s significant contribution to Māori Television since joining the organisation in 2004. More>>

ALSO:

Genetics: New Heat Tolerant Cow Developed

Hamilton, New Zealand-based Dairy Solutionz Ltd has led an expert genetics team to develop a new dairy cow breed conditioned to thrive in lower elevation tropical climates and achieve high milk production under heat stress. More>>

Fractals: Thousands More Business Cards Needed To Build Giant Sponge

New Zealand is taking part in a global event this weekend to build a Menger Sponge using 15 million business cards but local organisers say they are thousands of business cards short. More>>

Scoop Business: NZ Net Migration Rises To Annual Record In September

New Zealand’s annual net migration rose to a record in September, beating government forecasts, as the inflow was spurred by student arrivals from India and Kiwis returning home from Australia. More>>

ALSO:

Scoop Business: Fletcher To Close Its Christchurch Insulation Plant, Cut 29 Jobs

Fletcher Building, New Zealand’s largest listed company, will close its Christchurch insulation factory, as it consolidates its Tasman Insulations operations in a “highly competitive market”. More>>

ALSO:

Scoop Business: Novartis Adds Nine New Treatments Under Pharmac Deal

Novartis New Zealand, the local unit of the global pharmaceuticals firm, has added nine new treatments in a far-ranging agreement with government drug buying agency, Pharmac. More>>

ALSO:

Crown Accounts: English Wary On Tax Take, Could Threaten Surplus

Finance Minister Bill English is warning the tax take may come in below forecast in the current financial year, as figures released today confirm it was short by nearly $1 billion in the year to June 30 and English warned of the potential impact of slumping receipts from agricultural exports. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand

Mosh Social Media
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news