23rd Oct 2014 11:19
LONDON (Alliance News) - BHP Billiton PLC Thursday said it will have increased production by 16% over two years by the end of 2015 and will make USD3.5 billion in productivity gains by the end of the 2017, as it pushes forward with its proposed demerger to focus on four commodities.
"We will continue to deliver record production in a sustainable way, so that we achieve a 16% increase over the two years to the end of financial year 2015. We have already made significant cost savings, and we will continue to drive costs down even further, targeting another USD3.5 billion in annualised productivity gains by the end of the 2017 financial year. We reduced our capital expenditure by a third in financial year 2014. We will reduce it again this year, and we will only invest where we see a solid return," Chief Executive Andrew Mackenzie told the miner's annual general meeting Thursday.
BHP Billiton?s strategy will remain unchanged in 2015, continuing to own and operate large, long-life, low-cost, expandable, upstream assets diversified by commodity, geography and market to provide the energy and minerals that support global economic growth and development, BHP said in a statement.
"Together our four pillars, iron ore, coal, copper, and petroleum, with potash as a potential fifth, are the building blocks of your company?s future," the company said.
BHP highlighted that America is growing, with its energy markets being transformed, whilst the economy in Europe remains soft with Germany, France and Italy forecasting no growth. BHP noted the UK economy has been showing signs of improvement since 2013, whilst Asia has grown slowly, with China's economy expected to continue to mature, resulting in slower growth. China and other emerging markets will be a major driver for global growth, BHP commented in its statement.
In August, BHP said it will simplify the company through a demerger of its aluminium, coal, manganese, nickel and silver assets.
"Over the past decade, demand for commodities grew significantly. Our strategy was to direct capital to projects in businesses that delivered the highest returns. This strategy has served our shareholders well," said Chairman Jac Nasser. "Our portfolio has evolved into what we see as two distinct companies, both with world class assets. In one group is our large, upstream business. In the other group are assets that are not as large, despite being some of the biggest in their industries. It is this second group of high quality assets which we propose to separate into an independent company."
Nasser added: "The proposed demerger is another step in our evolution and demonstrates our willingness and ability to continually reshape our business. In a volatile and uncertain world, our strategy continues to deliver benefits for our shareholders and our communities...For BHP Billiton, we can reduce costs and improve the productivity of our largest businesses more quickly. This means we should generate stronger growth in free cash flow and a superior return on investment."
Shareholders are due to vote on the demerger in the first half of 2015, with BHP arguing that shareholders get to keep their BHP shares, benefiting from its dividend payments, while being entitled to shares in the new spin-off company.
"Our balance sheet is strong, and we have maintained our solid ?A? credit rating. Reflecting this solid base, the board has increased the full-year dividend by 4% to USD1.21 a share. We seek to progressively increase, or at least maintain, the dividend per share in US dollar terms, at each half-year," Nasser said.
BHP shares were down 1.1% to 1,647.00 pence per share Thursday midday.
By Joshua Warner; [email protected]; @JoshAlliance
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