For BHP's Kloppers, there's safety in numbers

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A year ago, after a string of high-profile defeats on the deal front, there was talk that BHP Billiton CEO Marius Kloppers was not long for his job.

At the time, BHP, the world's biggest resources company, had abandoned its pursuit of Potash Corp. of Saskatchewan after wildly miscalculating the political resistance to the proposed takeover. Shortly before the Potash Corp. bid was ditched, the huge iron ore joint venture in Western Australia between BHP and Rio Tinto collapsed, victim of the two companies' inability to convince regulators that the tie-up would not harm competition.

In 2008, a year after Mr. Kloppers became CEO, BHP dropped its all-share offer for Rio. Pitched in the autumn of 2007, the deal would have valued the merged company at $360-billion (U.S.). In retrospect, letting Rio go was a mistake. Commodity prices have soared since the depths of the global financial crisis.

But Mr. Kloppers has proved immune to the three-strikes-and-you're-out rule. For that he can credit record results, and Wednesday's set of numbers of was no exception. For the year to the end of June, BHP's net profit almost doubled to $23.7-billion on revenue that rose 36 per cent to $71.7-billion. Excluding one-off items, underlying profit before interest and tax came to $32-billion, up 62 per cent and slightly ahead of analysts' forecasts.

The results were driven by stellar performance in the iron ore, coal, oil and base metals divisions. The figures would have been even stronger were it not for the devaluation of the dollar and inflation, which reduced underlying earnings by $3.2-billion. The half-year results also set records and the full-year dividend was raised by a dime to 55 cents.

You don't get rid of a boss who is pumping out record results. Doubts raised last year by some investors and hedgies about Mr. Kloppers' longevity have all but vanished even though the shares lost momentum in recent months as fears of a double-dip recession intensified. Prices for commodities such as oil, nickel and copper are well off their peaks, though still relatively robust, especially iron ore.

In spite of the recession fears, Mr. Kloppers is optimistic about the company's future because he does not expect commodity prices to collapse, as they did in 2008. In a conference call from Melbourne, where BHP is based, he said that continued urbanization and industrialization in China and other high-growth countries "will continue to drive demand."

Where will BHP go next on the deal front? With Potash Corp. out of the picture, energy seems to be Mr. Kloppers' latest obsession. The company recently bought American shale gas producer Petrohawk Energy for $15.1-billion and there are rumours that a big-bang oil company purchase may be next.

What's certain is that, for the sake of his job, Mr. Kloppers will never allow himself to get into another Potash Corp. situation (whose bid withdrawal fees cost BHP a fat $314-million). That means he is unlikely to take big risks or engage in a bidding war. He will play to win, as he did with Petrohawk. That may or may not be good news for shareholders. Sometimes CEOs have to take extraordinary risks to get the juiciest prizes. For now, at least, Mr. Kloppers is playing it safe.