UPDATE 2-BHP promotes energy expert to CEO as profit slumps

Tue Feb 19, 2013 6:40pm EST

* Incoming CEO Mackenzie has 22 years oil, gas experience

* H1 profit before one-offs drops 43 pct to $5.68 bln

* Takes $3 bln charge on alumina, nickel assets

* BHP sees iron ore, coal prices dampened by new supply

* Shares touch 17-month high

By Sonali Paul

MELBOURNE, Feb 20 (Reuters) - Global miner BHP Billiton appointed the head of its non-ferrous business as its new chief executive on Wednesday to replace Marius Kloppers, as it reported an expected 43 percent drop in half-year profit.

Andrew Mackenzie, 56, whom Kloppers wooed from rival Rio Tinto in 2008, will move into the top job in May, taking the reins at a time when the company is battling to protect margins by cutting costs amid weaker commodity prices.

The announcement came as BHP reported its profit before one-off items tumbled to $5.68 billion for July-December 2012 from $10 billion a year earlier and took $3 billion in writedowns on its aluminium and nickel businesses.

BHP's shares rose nearly 1 percent to a 17-month high of A$39.34 after Mackenzie's appointment before dipping slightly in a flat overall market.

Analysts said the change of CEO was not comparable with rival Rio Tinto Ltd, which sacked former CEO Tom Albanese last month for misjudged deals in aluminium and coal.

"It's a tenure thing," said Hayden Bairstow, a CLSA mining analyst. "Tom Albanese was taken out for performance, but this is different."

Mackenzie, a prize-winning scientist who grew up in an industrial town near Glasgow, was at oil and gas giant BP before he entered the mining industry, giving him crucial experience in the key commodities BHP has targeted for growth as it looks to make itself less dependent on iron ore.

"He's a rare executive because he has experience in both the oil and gas, petrochemicals and minerals area of this business. And that fits us perfectly," BHP Chairman Jac Nasser told reporters.

Investors and analysts hailed the appointment of Mackenzie, who headed the company's base metals and energy coal operations, saying the market would welcome his expertise in energy.

"The new CEO is coming from a very long career in oil and gas and minerals, especially oil and gas. And oil and gas is a growing proportion of BHP's business. So I think it will be well received by the market," said Mark Taylor, senior resources analyst at Morningstar.

CHANGE OF GUARD

The timing of Kloppers' exit was a bit sooner than expected, even though the company flagged last November that it was looking for a new CEO. Kloppers, 50, has been in the job for nearly six years and said retiring was a tough decision.

He joins the fallen chiefs at BHP's rivals Rio Tinto, Anglo American and Xstrata, which have all chopped heads after they splashed out on expensive projects and acquisitions and allowed costs to get out of control in the boom years.

Kloppers won kudos for leading BHP through the global financial crisis in much better shape than its peers, but disappointed investors with his expensive bid for shale gas assets in the United States, which led to $2.8 billion in writedowns and cost him his bonus last year.

Nasser praised Kloppers for making the company stronger and safer, and his role in overhauling the global iron ore market to market-based pricing rather than annual contract talks.

"We actually returned more capital to our shareholders during this period than all of the rest of our peers combined," he said, pointing to $36 billion in gains to shareholders, including $24 billion in dividends.

Kloppers also led the company in three failed takeover tilts at Rio Tinto, Rio Tinto's iron ore business and Potash Corp , three deals that fell apart largely as the company had underestimated the concerns of regulators.

COST PRESSURES

BHP said it expects global commodity prices to remain under pressure as new low-cost supplies come into production, even through demand is expected to improve over the next 12 months.

The key challenge for Mackenzie will be to manage the business in those tougher conditions.

"There's an enormous latent capacity within the company to improve margins and adjust the portfolio to the current world we live in," said Tim Schroeders, a portfolio manager at Pengana Capital, which owns BHP shares.

Net profit fell to $4.2 billion with the aluminium and nickel writedowns offset by gains from the sales of its Richards Bay minerals stake, its Browse gas stake, its diamonds business, and Yeelirie uranium deposit.

BHP raised its interim dividend by 3.6 percent to 57 cents, also in line with analysts' forecasts.

Rio last week surprised investors with a 15 percent rise in its dividend despite reporting its first ever loss, hit by $14.4 billion in writedowns on its aluminium business and Mozambican coal assets, which cost Albanese his job.

BHP last year shelved $40 billion in projects and shut some loss-making coal mines, as the whole industry battled with soaring costs, a strong Aussie dollar and sliding commodity prices.

In further moves to protect its margins, it said on Wednesday it had cut $944 million in costs over the past half year, but it did not outline a broader target for cost cuts.

That is in contrast with rival Rio Tinto, which plans to cut $5 billion in costs by the end of 2014.

Senior executives at BHP who were passed over for the top job include the head of ferrous Marcus Randolph, petroleum chief Mike Yeager and chief of aluminium, nickel and corporate development, Alberto Calderon.