BHP Billiton now has a new CEO, in an announcement which which surprised many observers. The early CEO changeover could keep the momentum at BHP Billiton Limited (NYSE:BHP) (ASX:BHP). According to analysts from BaML, the market has been focused on 3 key issues, which was expected to be addressed: cost out; capital management & management succession. BHP Billiton Limited (NYSE:BHP) (ASX:BHP) has confirmed succession, with the CEO to be replaced internally by an internal low profile (at least with investors for the past 5 years) candidate, Andrew Mackenzie. On cost-out, BHP Billiton Limited (NYSE:BHP) (ASX:BHP) claims the focus will be on “delivery not aspirations” citing $1.9bn cost-out achieved in 1H13. The analysts note that of this only ~$87m was in overhead reduction and $397m opex, with majority EE&D (discretionary capital?).”
Analysts at Credit Suisse seemed to be indifferent, noting in a research noted, “Andrew Mackenzie the new CEO with Marius Kloppers to step down from 10 May. Andrew is ex Rio (3 yrs) and ex BP (22 yrs). He has a petroleum background as well as mining so is a good CEO fit for BHP.”
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Analysts at Morgan Stanley note that Mackenzie, being an internal candidate, will provide a few months of direct cross-over with Mr. Kloppers. Mr Mackenzie’s experience in Petroleum (with BP), Copper (with BHP) and industrial minerals (with RIO) should provide a sound platform for leading BHP. the are interested to see what modifications to strategy might be implemented under his tenure – although with capital committed in the next two years, Morgan Stanley analysts do not anticipate a divergence from the current path in the short term.
Additionally, BHP Billiton Limited (NYSE:BHP) (ASX:BHP) delivered 1H13 results broadly in line with expectations at the NPAT & DPS line and slightly ahead at the underlying EBIT line (underlying EBIT was also impacted by -$547 in one-off items). Underlying EBIT of US$9.8bn -38% YoY, +3% above consensus. Underlying EPS US$1.07/sh -43% YoY was in line with consensus. Exceptional items of -$1.445bn (Worsley and Nickel West impairments offset asset sales). 1H DPS US$0.57 in line with consensus estimates.
Divisional EBIT: Petroleum ahead, Met coal Al & Ni weaker Iron Ore EBIT of $4.81bn -39% YoY but +2% vs. consensus. Petroleum was a key upside surprise with EBIT $3.16bn -20% YoY but above expectations +4% vs. +12% vs. consesnus. Base metals EBIT of $1.97bn +20% YoY, in line was -6% compared to consensus estimates.
Aluminium and Nickel of -$285m a turnaround +332% YoY, +32% vs. consensus Met coal EBIT of -$101m -107% YoY and missed market expectations, consensus expected $73m. Energy coal EBIT $246m -69% YoY, -1% vs. consensus.
Underlying EBIT for the half came in at US$9.8bn (consensus was at $9.5bn). The primary differences were too low copper costs on consensus models (major maintenance projects reduced EBIT by $144m) and too high O&G costs for consensus.
NPAT of $5.7bn for BHP Billiton Limited (NYSE:BHP) (ASX:BHP) was in line with consensus, with the major contributors higher net interest costs ($150mn) and higher taxes ($150mn) relating to a partial reversal of the booked MRRT deferred tax asset and reflects lower iron ore prices in 1H FY13. With iron ore prices now up again, it is likely that there were be a 2H reversal to see a lower 2H tax rate.