* 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 BHP Billiton Ltd
appointed the head of its non-ferrous business as its CEO to
replace Marius Kloppers, the fourth global miner this year to
change its top brass as the industry enters a new era of
Miners are now focusing on squeezing the most out of their
best assets after coming under pressure from investors for
splashing out on expensive projects and acquisitions and
allowing costs to spiral out of control in the boom years.
BHP's appointment of Andrew Mackenzie, 56, as its CEO is a
sign that miners are turning to men with strong operational
credentials to focus on capital discipline, rather than deal
makers, as commodity prices wane. Rival Rio Tinto
appointed former iron ore chief Sam Walsh as its CEO last month.
"The era where these big mining companies such as BHP go out
and engage in these expensive corporate deals is over. Mackenzie
and Walsh prove that," said Gavin Wendt, an analyst for MineLife
in Australia. "They can no longer go out and spend and spend as
their investors stand on the side and watch in bemusement."
Mackenzie, wooed by Kloppers from Rio Tinto in 2007, will
move into the top job in May.
The appointment was announced as BHP reported a 43 percent
slump in first-half profit to $5.68 billion, its worst profit
drop in more than a decade, and took $3 billion in writedowns on
its aluminium and nickel assets, in line with market forecasts.
BHP flagged last November it was looking for a new CEO, but
Kloppers, 50, picked his own retirement date after nearly six
years in the job and admitted retiring was a tough decision.
BHP's shares rose nearly 1 percent to a 17-month high of
A$39.34 after Mackenzie's appointment before dipping in a
slightly firmer overall market.
Analysts said Mackenzie's appointment was not comparable
with the sacking of Rio Tinto chief executive Tom Albanese last
month for misjudged deals in aluminium and coal.
CHANGE OF GUARD
Mackenzie, a prize-winning scientist who grew up in an
industrial town near Glasgow, worked for oil and gas giant BP
for 22 years before he entered the mining industry,
giving him crucial experience in the key commodities BHP has
targeted for growth as it aims to ease its reliance 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
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.
Kloppers joins the fallen chiefs at Rio Tinto, Anglo
American and Xstrata.
He 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.
BHP's shares have fallen 12 percent since Kloppers took over
in October 2007, outperforming Rio Tinto's 18 percent decline
over the same period, and a fall of 38 percent at Xstrata and 41
percent at Anglo American.
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.
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
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.