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BHP to spin off assets as annual net profit soars

SYDNEY--Global mining giant BHP Billiton posted a 23.2 percent jump in annual net profit Tuesday and said it will create a new independent company by spinning off non-core assets to reduce costs and boost productivity.

The US$13.83 billion result in the year to June 30 — the first time BHP has posted a year-on-year increase in net profit since 2011 — came as spending cuts and strong production numbers offset weaker commodity prices.

“With robust volume growth and further productivity gains expected, we remain confident in the outlook for the group,” chief executive Andrew Mackenzie said.

BHP had reported a record net profit of US$23.65 billion in 2011.

The world's biggest miner said to maintain its dominant position it planned to demerge parts of its business to focus exclusively on its core long-life operations — iron ore, copper, petroleum, coal and potash.

The new entity, to be named NewCo, will include some of its aluminum, coal, manganese, nickel and silver assets, with the demerger expected to be completed in the first half of the 2015 calendar year.

“For over a century, BHP Billiton has progressively reshaped its business to maintain its industry leadership,” chairman Jac Nasser said.

“We believe the proposed demerger, if implemented, will accelerate the simplification of the Group's portfolio, provide investors with choice and unlock value in both companies.

“Our shareholders will have the opportunity to vote on this proposal once the necessary approvals are in place.”

Productivity Gains

This year's annual profit was slightly higher than the US$13.6 billion forecast by analysts.

The productivity boost saw underlying profit rise by 10 percent to US$13.4 billion as the miner booked US$2.9 billion in cost savings. BHP's balance sheet strengthened during the period, with net debt falling by US$1.7 billion to US$25.8 billion.

The miner declared a final dividend of US$1.21, a four percent year-on-year increase.

Shares in BHP closed 1.35 percent higher at AU$39.68 (US$37.06) on the Australian Securities Exchange ahead of the profit announcement, with Mackenzie saying the results showed the company had “delivered on its commitments.”

“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,” he added.

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