New chairman of BHP Billiton promises ‘fresh’ look at business
Ken MacKenzie seeks to keep investors onside including activist Elliott Advisors
The new chairman of BHP Billiton has promised to bring a “fresh perspective” to its portfolio of mines and assets as the Anglo-Australian group faces calls from shareholders, including activist investor Elliott Advisors, to deliver better returns.
In his first public comments since taking over the role this month, Ken MacKenzie also pledged to work with management to improve the way BHP allocates capital and to review the composition of its board, issues that are among Elliott’s main bugbears.
“One of my priorities is to bring a fresh perspective to the existing review process,” Mr MacKenzie said in the company’s annual report, published on Wednesday.
BHP bowed to pressure from investors last month, putting its lossmaking US shale oil business up for sale and delaying a move into potash. But the debate about performance, strategy and whether the company has the right mix of assets continues to rumble on.
BHP’s $20bn bet on US shale oil and gas six years ago turned the company into a top-10 producer in the country, but the oil market downturn that followed led to billions of dollars of impairments and writedowns.
Investors have broadly welcomed the appointment of Mr MacKenzie, former head of packaging group Amcor. Elliott, which holds 5 per cent of the company, called it a “constructive step”.
Mr MacKenzie said the way BHP invested its cash would be an “important determinant of how much shareholder value is created” and revealed that work to strengthen the capital allocation framework put in place by chief executive Andrew Mackenzie [no relation] was “ongoing”.
He said “board refreshment” had been a topic of conversation with investors during a recent “listening tour” and BHP was reviewing the metrics it uses to pick non-executive directors in light of “technological and other changes”.
“As incoming chairman, I spent much of the past three months engaging with shareholders and other stakeholders around the world in order to better understand their perspective,” he said. “I plan to engage with investors on a regular basis.”
His comments came as a leading analyst called on Mr MacKenzie to either sack or back chief executive Andrew Mackenzie.
In a report, Paul Gait of Bernstein Research, said Mr MacKenzie should either support a long-term mandate for BHP’s chief or outline a succession plan “as a matter of urgency”.
“Until that happens there will also be a sense that a ‘lame duck’ administration is making capital commitments that have the potential to bind future management to sub-optimal courses of action”, said Mr Gait, flagging Nev Power, the outgoing chief executive of Fortescue Metals Group, as a potential successor.
Wednesday’s annual report showed Mr Mackenzie’s “actual total remuneration” under UK reporting standards had rebounded to $4.55m in the year to the end of June, up from $3.2m a year earlier, when bonuses were cut after a deadly waste spill at a Brazilian mine co-owned by BHP.
The next highest paid executive in the company was Mike Henry, who heads the Australian mining division. His pay lifted 16.5 per cent to $4.5m.