BHP explains the benefits of a simpler portfolio

A simpler portfolio will enable BHP Billiton to maximise value and shareholder returns, the company said at an investor briefing event, by reducing operating costs and improving capital efficiency.

“We are confident that our productivity drive will be accelerated by the demerger proposal we announced in August,” said CEO, Andrew Mackenzie. “A simpler portfolio, focused on our 19 core assets, will retain an optimal level of diversification while generating even stronger growth and margins.”

According to the company, production from the core portfolio is expected to grow by 23% over the two years to the end of June 2016, as it completes high-return, brownfield projects and embeds productivity-led volume gains.

Unit costs have also been cut across all businesses. For example, at the company’s Queensland coal operations, a 24% reduction in operating costs has been achieved with a further drop of 10% to below US$90/t expected by June 2016.

Similar reduction in costs has also been achieved in the company’s iron ore and copper operations. As a result, BHP Billiton expects to embed a minimum of US$3.5 billion in annualised productivity gains by the end of June 2018 – more than US$2.3 billion of which will come from cash cost savings.

“Our strategy, including our commitment to a strong balance sheet, has worked well for our owners,” concluded Mackenzie. “We have delivered a total shareholder return of 394% over the last decade, including US$64 billion in dividends and buy-backs. By safely improving operating and capital efficiency we will maximise value and increase cash returns to our shareholders. Improving our competitiveness will benefit shareholders and the local communities and economies in which we operate.”

Written by Jonathan Rowland.

Read the article online at: https://www.worldcoal.com/mining/27102014/bhp-billiton-will-continue-to-target-shareholder-value-with-simplified-portfolio/