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BHP Billiton is changing its chief, but won't change its game plan.
That’s the message from the mining giant’s chairman, Jac Nasser, following the announcement this morning that BHP Billiton’s chief executive Marius Kloppers will make way for Andrew Mackenzie, the 56-year-old head of its non-ferrous business.
“We’ve chosen a new leader - that doesn’t mean we’ve chosen a new strategy,” Mr Nasser said at a press conference today.
While the timing of the announcement, just minutes before BHP Billiton reported its first-half profits for the 2012-13 financial year, took some analysts by surprise, they said the leadership change was not unexpected and could signal a gradual shift in the company’s focus towards oil and gas.
Shift in focus?
Much has been made of Mr Mackenzie’s illustrious academic background and decades-long experience in blue-chip companies.
Mr Mackenzie has a bachelor of science in geology, a PhD in chemistry and has published more than 50 research papers. He spent more than 20 years at BP in senior technology and petrochemical positions before heading up Rio Tinto’s industrial minerals division in 2004.
His depth of experience in oil and gas and base metals meant he was the ''right appointment'' for BHP, Paul Young of Deutsche Bank said.
“The key going forward for BHP, if you look at their growth beyond iron ore and [metallurgical] coal, is their growth in petroleum and base metals and potash,” Mr Young said.
“So therefore if the incremental dollar for the company beyond iron ore and met coal is going into petroleum and the non-ferrous division, then he is the right appointment to deliver on the growth beyond that.
“He has great understanding of the US onshore business and of the more difficult technical assets in the portfolio - growth assets such as Olympic Dam and Jansen.”
The reality is commodity prices are no longer rising, so he needs to be much more focused on removing costs out of the business.
But Mr Nasser was quick to point out that Mr Mackenzie’s background should not be interpreted as a change in strategy.
“Andrew’s got an extremely unique perspective because he spent 30 years in the overall resources sector, of which a big piece of it was upstream, a big piece of it was downstream, and a rare blend of mining with oil and gas.
“So I wouldn’t interpret his background into a strategy change.”
His message was shared by National Australia Bank strategist Michael Bush, who said Mr Mackenzie’s diverse background would have been one of the reasons why he was picked for the top job ahead of Alberto Calderon and Mick Yeager.
“I think it’s the broad mix that Mackenzie brings which perhaps some of the others don’t have in terms of product oversight,” Mr Bush said.
“The company is evolving and … petroleum will be a greater focus for them over the next few years.
“These are gradual evolutionary-type incremental developments rather than any particularly major change that has occurred over the last three months and that would have precipitated the management change.”
Mr Bush said while oil and gas would become more of a focus for BHP in the next few years, Mr Kloppers had actually started the wheels turning by acquiring US assets such as gas producer Petrohawk.
Timing of the change
Both Mr Nasser and Mr Kloppers stressed that the time of the change was not influenced by Tom Albanese’s departure from rival Rio Tinto last month after weak results.
They instead emphasised that the passing of the baton was part of the company’s succession planning process and started the day after Mr Kloppers took on the top job in 2007.
“I can say from a board perspective it was interesting to note, but [it] certainly didn’t influence the timing of our decision process,” Mr Nasser said of Mr Albanese’s ouster from Rio.
“There is no such thing as the perfect time,” Mr Nasser said. “If you wait for the perfect time, you will miss it.”
Mr Kloppers added that he did not regret the failed bid to takeover Rio Tinto. “The strength of character is shown when conditions change and you change your mind,” he quipped.
In a special in-house video outlining the change in command, Mr Kloppers said former BHP chief, Paul Anderson, had told Kloppers upon his promotion to the top position to start thinking of his successor immediately.
‘‘That was good advice,’’ Mr Kloppers said. ‘‘One of the first decisions I made was to recruit Andrew,’’ making his role in the selection of his successor clear.
Hayden Bairstow of CLSA Asia-Pacific Markets said the change had come at a time when mining companies were focusing on keeping costs down amid weaker commodity prices.
''I think he was the best man for the job internally. He's familiar with the business having been there for a while.
"The reality is commodity prices are no longer rising, so he needs to be much more focused on removing costs out of the business and making more conservative growth decisions, which in his role ... as the head of the copper business has had its own cost issues in the past."