South32 chief executive Graham Kerr says he is confident the diversified mining company will be ready to operate as an independent entity later this month, after BHP Billiton shareholders strongly endorsed the demerger.
South32 chief executive Graham Kerr says he is confident the diversified mining company will be ready to operate as an independent entity later this month, after BHP Billiton shareholders strongly endorsed the demerger.
About 98 per cent of BHP shares were voted in favour of the demerger of South32 at meetings held simultaneously in Perth and London yesterday evening.
Mr Kerr, who has spent the past month briefing investors on the demerger and the new business, said "we start life in a good position".
"The vote today gives us a strong opportunity to go forward but we've been working on the demerger for a long period of time," he said.
"We've been preparing for day one.
"On the 25th (of May) when we become a separate legal entity, we have to stand up on our own from that day onwards.
"Implementation is well in train."
BHP chief executive Andrew Mackenzie said he was confident South32 would get off to a smooth start, since it has been run operationally as a stand-alone division since the start of February, with Mr Kerr reporting direct to him.
"They've been getting ready to be an independent entity since that point; now they will be their own public company, but in all other operational senses they are together as one team," Mr Mackenzie said.
South32 will own a diverse collection of alumina, nickel, manganese, coal and base metal assets, mainly in Australia and South Africa.
The demerger will allow BHP to focus on its four core sectors – iron ore, copper, coal and petroleum, with potash as a potential fifth pillar.
South32 is expected to have a lean operating model with less jobs, though Mr Kerr also sees opportunities.
"We do think we start day one with the right balance sheet, we start day one with a high quality set of assets that is well maintained, well capitalised and comes with great people.
"We do believe, because of the size of our assets, by running them in a distinctively different way, with their own structure, own board, own management, there is a great opportunity to unlock the potential of these assets."
"The regional (operating) model will be a big enabler for that. We would expect that to be finalised and put in place by the end of this calendar year."
Mr Kerr said South32 would always take an opportunistic approach to M&A opportunities.
"It's not a strategy. Where we will create most of the value is by implementing the regional model, embedding the culture we want, which allows us to strip away levels of management, reduce complexity, drive productivity harder and faster."
Mr Kerr said a second key aspect was that South32 has a large resource base that hasn't been able to compete with the large BHP assets.
"One of the most value accretive things we can do is convert the resources to reserves."
Mr Mackenzie believes both companies will benefit from the demerger.
"I am convinced that both companies will be able to pursue a trajectory of increased efficiency, increased productivity at a faster rate by being separate than we would have been able to do if we remained together."
"Who knows? Markets move in mysterious ways. They send very opaque signals."
