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When Andrew Mackenzie was winning science prizes at school in Scotland, or even when completing his doctorate in steroidal molecular maturity parameters (oil and gas exploration), did he ever think he would one day head the world's biggest mining group by revenues? An award-winning geologist who can charm investors in five languages, has the right credentials, on paper, to lead BHP Billiton. But in which direction?
All the big miners have been working to a template recently: Take writedowns, cut costs, change chief executive and try to move on. On Wednesday BHP took a further $3.1-billion against various projects but its overall tone stressed continuity, not change. It can afford for now to avoid the level of contrition shown by Rio Tinto last week, having begun cost-cutting earlier and replaced its chief executive long before speculation over a handover really weighed on investor mood. And while its overpayments and overestimates in the boom years were severe – almost $7-billion in various impairments have been taken in the past two years – they are a third those taken by its big rival Rio.
Then again, putting an oil expert in charge of a mining group might suggest a change of focus at least. (It is also ironic considering it was not long ago BHP was under pressure to explain why it was in the petroleum game at all.) But such a view would be wrong: BHP had been increasing its oil operations under Mr. Kloppers – who after all, hired Mr. Mackenzie. Petroleum's contribution to operating profits has risen twice as fast as BHP's group-wide growth in the past five years and now accounts for almost a third of operating profits. Oil, where prices are still hot, is an attractive business compared with the volatile yet cooling prices of other commodities. But this is still BHP, not BP. Those falling prices and a weaker dollar knocked two-fifths off the company's underlying half-year earnings. The numbers were expected, but pushed BHP's shares lower. That gave Mr. Mackenzie a cooler reception than his résumé implies he deserves.