BHP BILLITON LIMITED
Author: Geoffrey Hill, Geoffrey Hill is presenter of ABC News Radio's daily afternoon finance report and is an independent private client adviser. Email gh@ghill.com.au
Date: 15/01/2003
Words: 445
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Publication: Sydney Morning Herald
Section: Money
Page: 2
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Price movement The all-time adjusted high of $12.50 was achieved last
March. Since then its share price has tested an $8.90 low and has been hovering
in the $10 region. Investors have yet to make up their minds on the resignation
of Brian Gilbertson and the appointment of Chip Goodyear as chief executive
officer. Goodyear is the fourth CEO in as many years.
Profile BHP Billiton Limited is the largest mining company (but not the
largest resource company) in the world. It is listed on both the Australian and
British stock exchanges and has a combined market worth of $60 billion. The
company's earlier growth was founded on steel manufacturing, which it has now
exited, floating its steel interests off into separate companies BHP Steel last
year and OneSteel three years ago. Its future over the next five years will be
driven by its petroleum sector, which has the ability to generate high growth
opportunities.
Current details The sudden resignation of Gilbertson came as a shock to the
sharemarket so early after the BHP and Billiton merger. Dating from Robert
Holmes a Court's failed tilt at BHP in 1986 there had been criticism that the
BHP board was run by the conservative elements of the Melbourne establishment.
This perception has abated after American Paul Anderson's three years at BHP,
which culminated in the Billiton merger. Anderson laid down the company's
strategy until 2006, which is to achieve 15 per cent or better return on assets
and cut costs by $1 billion. Also during his tenure Anderson appointed Goodyear
chief financial officer and therefore the established strategies are likely to
be continued.
Sector Large resource companies continually need to discover and develop
large mineral deposits. BHP Billiton will be able to do this with less risk as
its oil and gas division will be able to bankroll new mineral developments.
Ongoing uncertainties as to whether the world economy contracts, plus the Iraq
situation, are the major influences to suppress the outlook for mining
companies. An orderly depreciation in the US dollar could be the key to
reinvigorating non-US world growth. A weaker US dollar will make mineral
commodities cheaper.
Worth buying? There will probably be additional changes in senior management
appointed by Gilbertson. This may also undermine or unsettle the perceived
performance of the company. In the short-term this weakness will be an
opportunity for long-term investors to buy shares between $9 and $9.50.
Declaration of Interests: The writer owns BHP Billiton January put options.
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