BHP Billiton made better progress on cost reductions in 2013/14 than in any year over the past decade

John Robertson

PortfolioDirect

BHP Billiton made better progress on cost reductions in 2013/14 than in any year over the past decade. However, since 2004/05, costs have risen $8.9 billion while volume gains have contributed just $6.0 billion to EBIT suggesting persist productivity deterioration through the cycle until markets forced a change. Much of the most recent cost reductions came from a 40% cut in Queensland coal cash costs from their peak according to CFO Graham Kerr. At one level, this is a good outcome but, at another, it begs an important question about the management of the company through the cycle. Clawing back old mistakes is less inspiring management than preventing the problems in the first instance. One of the challenges for the new BHP is to show that it is in better operational control than it has been in the past.


John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...

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