- Aluminium, coal, manganese, nickel and silver assets to be spun off
- Focus remains on iron ore, copper, coal, petroleum and potash
- Annual underlying profits up 10%, revenues rise 2%
Details of BHP Billiton's hotly-anticipated "portfolio simplification" were unveiled on Tuesday morning with the miner announcing plans to create an independent company comprising its aluminium, coal, manganese, nickel and silver assets.
BHP also released its annual results for the year to 30 June, reporting a 10% improvement in underlying profits on the back of a "significant improvement in productivity".
The company, which wants to focus on iron ore, copper, coal, petroleum and potash, said that separating its non-core businesses via a demerger before June 2015 "has the potential to unlock shareholder value by significantly simplifying the BHP Billiton Group and creating two portfolios of complementary assets".
BHP Billiton's 19 core iron ore, copper, coal, petroleum and potash assets are expected to generate 96% of group underlying earnings in 2014.
The company reckons that with fewer assets and a greater upstream focus, it will be able to cut costs and improve productivity of the larger businesses more quickly. As such, it anticipates stronger free cash flow growth and a superior return on investment than previously.
"By concentrating on what we do best, the development and operation of major basins, we can improve our productivity further, faster and with greater certainty," BHP said, estimating productivity-led gains of at least $3.5bn per annum by the end of 2017.
Meanwhile the new entity, which will be led by a new management team headed by current BHP chief financial officer Graham Kerr, is expected to be listed on the Australian stock market with an inward secondary listing in South Africa.
BHP Billiton Limited and Plc shareholders would be entitled to 100% of the shares
of the new company through a pro-rata distribution of shares.
Underlying profits grow 10%
BHP also released its full-year results on Tuesday, reporting a 10% rise in underlying attributable profit to $13.4bn on revenues that rose 2% to $67.2bn.
"Our operational performance continued to improve, enabling us to exceed production guidance for a number of our core commodities including iron ore, metallurgical coal and petroleum liquids," said chief executive Andrew Mackenzie.
The group also raised its dividend by 4% to 121 US cents, representing an underlying payout ratio of 48% which is expects will steadily increase following the demerger.
The stock was down 4% at 1,984p by 09:37.
According to analysts at Investec, the "market may be disappointed [with the results] regarding no mention of special dividend", though annual numbers were broadly in line with consensus forecasts.