How BHP Billiton plc Is Changing

What does the future hold for investors in BHP Billiton plc (LON:BLT)?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Successful companies don’t stand still. They’re always evolving. Today, I’m looking at the changes taking place at FTSE 100 mining giant BHP Billiton (LSE: BLT) (NYSE: BBL.US) — and what they mean for investors.

Focus, capital discipline and productivity

BHP Billiton announced the appointment of a new chief executive, Andrew Mackenzie, this time last year. Mackenzie has increased concentration on capital discipline and productivity at the group’s largest, longest-life, lowest-cost assets where there are economies of scale and a competitive advantage.

A shake-up of senior executives upped the focus on operational excellence: five business leadership roles were filled by executives with deep operational experience. BHP Billiton’s five reporting segments and their latest contribution to group revenue are shown in the table below.

Segment Contribution to group revenue
Iron Ore 32%
Petroleum and Potash 21%
Copper 21%
Coal 14%
Aluminium, Manganese and Nickel 12%

At his first AGM, in October last year, Mackenzie told shareholders he would be increasing the focus on the group’s ‘four pillars’ of iron ore, petroleum, copper and coal, while merely continuing to operate the aluminium, manganese and nickel businesses “as efficiently as possible”.

BHP BillitonLooking to the future

While focus, capital discipline and productivity improvements are good news for shareholder returns, a more dramatic change for the future will come from the company’s huge commitment to potash, which could become the group’s fifth pillar.

BHP Billiton has exploration rights to over 14,500 square kilometres of highly prospective ground in Canada’s Saskatchewan potash basin; and is progressing its most advanced project in the region with an average annual spend of $800m.

Management expects demand for potash, a fertiliser that improves the yield and quality of agricultural production, to grow at about 2-3% a year to 2030. If its projections are right, potash could start to add significantly to earnings from around 2020.

Rumbling concerns of late about growth in China have BHP Billiton’s shares trading at 1790p — a modest 11 times current year forecast earnings with a prospective income of over 4%. That looks good value to me for investors with a long-term horizon — even without the potential for potash to become BHP Billiton’s ‘fifth pillar’.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

G A Chester does not own any shares mentioned in this article.

More on Investing Articles

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

Buying 8,617 Legal & General shares would give me a stunning income of £1,840 a year

Legal & General shares offer one of the highest dividend yields on the entire FTSE 100. Harvey Jones wants to…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

£25k to invest? Here’s how I’d try to turn that into a second income of £12,578 a year!

If Harvey Jones had a lump sum to invest today he'd go flat out buying top FTSE 100 second income…

Read more »

Union Jack flag in a castle shaped sandcastle on a beautiful beach in brilliant sunshine
Investing Articles

2 lesser-known dividend stocks to consider this summer

Summer is here and global markets could be heading for a period of subdued trading. But our writer thinks there…

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

Here’s how I’d aim to build a £50K SIPP into a £250K retirement fund

Our writer outlines the approach he would take to try and increase the value of his SIPP multiple times in…

Read more »

Investing Articles

9.4%+ yields! 3 proven FTSE 100 dividend payers I’d buy for my Stocks and Shares ISA

Our writer highlights a trio of FTSE 100 shares with yields close to 10%. He'd happily pop them into his…

Read more »

Mixed-race female couple enjoying themselves on a walk
Investing Articles

Are Raspberry Pi shares a once-in-a-lifetime chance to get rich?

With Raspberry Pi shares surging after a successful IPO, could this UK tech startup offer a long-term wealth creation opportunity…

Read more »

Newspaper and direction sign with investment options
Investing Articles

Huge gains and 9% yields: why now’s an amazing time to be a stock market investor

The stock market’s generating fantastic returns in 2024. Whether you're looking for gains or income, it’s a great time to…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

This steady dividend payer looks like one of the best bargain stocks in the FTSE 100

A yield of 4.7% and a consistent dividend record make this FTSE 100 company look like good value in an…

Read more »