BHP shareholders, analysts react to Marius Kloppers's exit

DEAL Journal Australia jumped on the phone to shareholders and analysts to hear their reactions to Marius Kloppers's retirement.

DEAL Journal Australia jumped on the phone to shareholders and analysts to hear their reactions to the news BHP Billiton chief executive Marius Kloppers will retire, and is being replaced by Andrew Mackenzie, the head of BHP's non-ferrous metals division. BHP is Australia's largest company by market value.

BT Investment Management resources analyst Tim Barker said the management change had been rumoured for a long time and didn't come as a great surprise.

"The incumbent is very well-regarded and certainly has the right experience to take over ... he was one of the obvious internal candidates," Mr Barker said.

Reflecting on Mr Kloppers's tenure, Mr Barker said many decisions were stonewalled by factors outside the departing chief executive's control.

"If the merger with Rio Tinto had happened, maybe there would be a bit more pain on the balance sheet now but there's no doubt the combined iron ore operation would have been a strong competitor," he said.

"The jury's still out on the [Petrohawk] shale deal; that's an asset that will take time to grow."

Alleron Investment Management senior investment manager Steve Robinson said he was not surprised by the announcement.

"He's kept up a longstanding tradition of BHP chief executives that haven't significantly added value through merger and acquisition activity; that dates back to Brian Gilbertson and John Prescott," Mr Robinson said.

Merlon Capital Partners principal Ben Goodwin, who was on a site tour of BHP's copper assets with Mr Mackenzie in Chile late last year, believes the incoming chief executive's background makes him highly suitable to run the diversified miner.

"It was clear that Andrew and his team had done well in managing the assets given the production turnaround we've seen recently. Like many major copper assets globally, Escondida was facing declining grades and ore hardness issues," Mr Goodwin said.

"Through their investment in the mine and processing infrastructure, we see them clearly able to run the asset to produce more than a million tonnes of copper per annum over the medium to long term."

Sydney-based CLSA analyst Hugh Moore, who has an Outperform recommendation and price target of $41 on BHP, said the timing of Mr Kloppers's departure was earlier than expected. The broker had anticipated the announcement of his exit at BHP's annual general meeting in May.

"The replacement of Kloppers for Mackenzie as chief executive does not change our view on BHP Billiton," Mr Moore said in a note to clients.

Goldman Sachs analyst Craig Sainsbury told clients that since Mr Mackenzie is an internal hire, "we do not see any significant shift in BHP's direction due to the new management".