BHP Billiton Ltd. (BHP), the world’s biggest mining company, named copper unit head Andrew Mackenzie as chief executive officer to succeed Marius Kloppers, who failed to deliver on about $200 billion of potential takeovers.
Mackenzie, 56, will take over on May 10, the Melbourne- based company said today in a statement when reporting a 58 percent decline in first-half profit. Under Kloppers, who became CEO in 2007, the aborted or rejected deals included hostile bids for Rio Tinto Group and Potash Corp. of Saskatchewan Inc.
Kloppers, 50, is the third head of a global mining company to step down since October as producers struggle with project writedowns, escalating costs and the aftermath of failed deals. The appointment of Mackenzie, a former 22-year veteran of BP Plc (BP/) who speaks five languages and joined BHP from Rio Tinto Group in 2007, won’t change BHP’s strategy, Chairman Jac Nasser said today at a media conference in Sydney.
“Mackenzie is pretty well regarded, quite an experienced executive, but perhaps he’s going to be a little bit more focused on running the operations and expecting the best out of the operations, not that Marius wasn’t previously,” said Paul Xiradis, chief executive officer at fund manager Ausbil Dexia Ltd., which holds BHP stock. “That’s going to be the focus rather than expanding so it’s a new era.”
BHP slipped 2.4 percent to 2,183.5 pence by the close in London. The shares fell 0.9 percent to A$38.65 in Sydney, trimming the gain for the past six months to 17 percent. Rio Tinto lost 1.6 percent in Sydney today and Fortescue Metals Group Ltd. (FMG) declined 5 percent.
“There are some quite powerful synergies that you can unlock between mining and petroleum,” Mackenzie told the conference. “Petroleum has a fundamental part to play in our company and we’re one of the few, possibly the only company, that can create value through unlocking those synergies.”
South Africa-born Kloppers, who has a materials science Ph.D. from the Massachusetts Institute of Technology, gave up his fiscal 2012 bonus after booking a $2.84 billion charge in August to write down the value of shale gas assets in the U.S.
BHP’s decision to abandon the bid for Rio Tinto during the depths of the global financial crisis laid the foundations for the company’s growth since then, Kloppers told reporters, adding that its returns to shareholders had “dwarfed” its peer group of global mining companies.
The company returned $36 billion to shareholders in the past five years - more than any of its peers, Nasser told reporters.
BHP had started looking for a successor as soon as Kloppers joined, with the process stepping up in the past six months, a person familiar with the selection process said today. The appointment of Mackenzie, who grew up near Glasgow, is a result of a planned and considered process, Nasser who backed Kloppers after the August result, said today in the statement.
“Andrew brings a unique combination of deep industry knowledge and global management experience to the CEO role,” he said in the statement. “He has led our non-ferrous division for the last five years working across four continents with responsibility for over half of our 100,000 people.”
Mackenzie, who has a doctorate in chemistry from the University of Bristol, and has published more than 50 research papers, pioneered extraction techniques in the North Sea for BP, Europe’s second-largest energy company, according to the statement. He joined Rio in 2004 and as chief executive of industrial minerals he built a $5 billion titanium mine in Madagascar.
“Mackenzie has been with the company for a long time - it seems like a logical appointment,” Chris Weston, a Melbourne- based chief market strategist at IG Markets, said by phone. “Right now BHP’s earnings before interest and tax is 50-odd percent from iron ore, but that’s going to change because of the company’s petrochemicals focus.”
BHP’s petrochemical unit is the company’s second-biggest earner, according to today’s earnings statement.
The cost of protecting BHP debt was little changed, with five-year credit-default swaps at 65 basis points as of 4:58 p.m. in Sydney, Westpac Banking Corp. (WBC) prices showed. The contracts closed yesterday at 66 basis points, according to data provider CMA.
Mining company executives and shareholders are paying the price for a $1.1 trillion mergers and acquisitions binge over a decade. Failed deals in aluminum and coal caused $14 billion in writedowns at Rio and cost CEO Tom Albanese his job. Cost overruns contributed to Cynthia Carroll’s departure as CEO of Anglo American, which slashed $4 billion off the value of an iron ore project in Brazil. She leaves in April.
Investor confidence in his leadership was below average, according to the Corporate Confidentiality Index, an anonymous survey of analysts and fund managers, the Australian Financial Review reported last year.
Net income was $4.2 billion, including $1.4 billion in one- time charges, in the six months ended Dec. 31, from $9.9 billion a year ago, BHP said in a separate statement. This missed the $5.6 billion median estimate of five analysts surveyed by Bloomberg.
BHP joins Rio and Anglo American in reporting a drop in earnings as waning global growth last year prompted lower prices and some global miners to slow expansion. Kloppers, holds a bachelor’s degree in chemical engineering from the University of Pretoria in South Africa and an MBA from Insead in Fontainebleau, France, sold $4.3 billion of assets in the half and put about $68 billion of projects on hold.
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