Significant increase in returns for BHP over past two years
Published by Claire Cuddihy,
Global Mining Review,
On 15 May 2018, speaking at the Bank of America Merrill Lynch Global Metals Mining & Steel conference in Florida, BHP Billiton’s (BHP) CEO, Andrew Mackenzie, said that the successful delivery of the company’s strategy to grow long-term shareholder value, together with stronger commodity prices, has underpinned a significant increase in return on capital employed and delivered a 30% increase in BHP’s base value over the past two years.
He added: “We have maximised operating cash flow as we have lowered costs through productivity; we have been disciplined and transparent in capital allocation; and we have identified new options to increase value and returns.”
Mackenzie said over the past two years, through six key value drivers, the Anglo-Australian mining giant has:
- Reduced unit costs by more than 15%;
- Accelerated their technology and innovation programme;
- Progressed five high-return, latent capacity projects;
- Sanctioned two major projects in copper and oil;
- Made discoveries at four petroleum exploration prospects; and
- Improved the performance of their Onshore US acreage in preparation for exit into a supportive price environment.
“Alongside this, we have reduced net debt by over US$10 billion, returned US$8 billion to shareholders and, crucially, replenished our pipeline with new opportunities."
“This pipeline has the potential to add a further 40% to the value of BHP, subject to our strict capital allocation processes.”
Looking ahead, Mackenzie noted that BHP:
- Continues to target a further US$2 billion in productivity gains by the end of the 2019 financial year, on top of the more than US$12 billion achieved since 2012;
- Would leverage its scale and simplicity to capitalise on the benefits of new technology to reinforce our position in safety and productivity and deliver a step-change in company performance;
- Has renewed its suite of latent capacity opportunities which have the potential to generate average returns in excess of 100%;
- Continues to enhance its pipeline of future options, diversified across commodities and timeframes, which have an unrisked value of more than US$15 billion and the potential to deliver average returns of 17%;
- Would continue to push its ongoing exploration programme, focused on copper and petroleum, in line with favourable outlooks for these commodities; and
- Is making good progress with the exit from its Onshore US business, with the quality of acreage, higher oil prices, a lower US corporate tax rate and positive results from recent well trials all contributing to encouraging interest from potential bidders.
“BHP is set-up for future success. We have a simple, unique portfolio of the very best assets, diversified across attractive commodities.”
“Our relentless pursuit of productivity, aided by a more agile and connected culture, will make sure we realise the full potential of our assets and capitalise on strong prices. On top of this, we have built an attractive suite of opportunities to drive further improvement. But, as always, we will remain disciplined in the allocation of capital with all investments weighed against cash returns to shareholders.”
“Our path is deliberate, and we remain firm in our resolve to increase value and returns.”
Read the article online at: https://www.globalminingreview.com/finance-business/17052018/significant-increase-in-returns-for-bhp/
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