Incoming BHP chief executive Mike Henry. Photo / BHP
Incoming BHP chief executive Mike Henry. Photo / BHP
COMMENT:
For most new CEOs, the elevation to the top job is a chance to make a big splash and leave their mark on the company. They rejig business units, pursue a new strategic direction and make big ego-boosting acquisitions which usually end poorly for investors and workers.
Mike Henrywill play a different game when he takes over the reins of Australia's biggest miner BHP, instead pursing the strategy set out by his predecessor Andrew Mackenzie.
Mackenzie's strategy was to "shrink BHP to greatness" as one commentator said a few years ago. He spun off second tier assets into a new company, South 32, and sold its lossmaking US shale mining operations.
BHP, once affectionately known as "The Big Australian", was left with a core set of quality resource assets in coal, iron ore and petroleum among others in different spots around the world. Mackenzie's key focus was to make sure they worked hard.
The company had become lax in its cost control and capital management as the soaring commodity prices of the resources boom induced miners to dig coal and iron ore out of the earth at any price.
Mackenzie set about having the company transform itself into a low-cost resources producer. And the man leading the effort was Henry, who took over the core Australian operations in 2016.
The results of that effort show Henry, 53, has left his mark on the company even before he takes his seat at the chief executive's desk in January, at BHP's headquarters on Melbourne's chic Collins Street. For instance, he has overseen record results from the Pilbara iron ore operations in West Australia, where the bulk of BHP's profits are generated.
Production at Pilbara has risen 20 per cent since 2014 financial year, while costs have fallen by a hugely impressive 50 per cent. The majority of those gains have been delivered since 2016, when Henry took over responsibility for the business.
These are magic numbers for a mining company. They mean BHP will be able to turn a profit from lower commodity prices, so they set the company won't be a badly affected by the inevitable dips in the commodity price cycle.
Henry has signalled he will continue with the strategy cost reductions and productivity improvements, saying BHP "will unlock even greater value from our ore bodies and petroleum basins by enabling our people with the capability, data and technology to innovate and improve".
Data and technology are key focuses of the Canadian CEO, a 15-year veteran of the company.
People close to Henry say he is shy and reserved, a deep thinker with an almost encyclopaedic knowledge of BHP's internal workings.
Departing BHP chief executive Andrew Mackenzie. Photo / BHP
BHP has long occupied a place in Australians' hearts. The Broken Hill Proprietary Company Limited (BHP) was founded by seven prospectors in August 1885 to mine silver and lead in Broken Hill in Western NSW and over the years it expanded into other commodities and branched offshore. On and off it has been Australia's largest company.
But in 2001 it merged with miner Billiton - originally Dutch, then South African owned - and listed in the UK. Arguably this is the point at which the miner diversified too much and lost focus on costs. Certainly as a globally-owned miner, Australians no longer felt such a sense of ownership of the company.
While Henry is Canadian, he is said to have a great understanding of the history of BHP and will ensure it retains the support of the Australian people. But it won't all be steady as she goes.
Mackenzie did a great job of ensuring BHP had a "social licence to operate", by taking stands on emissions, gender diversity and indigenous rights, but company under Henry will have to continue to address changing investor and community expectations.
At some point in his tenure, he will have to make a decision about the extent to which the company remains invested in coal. Does he for instance, divest the company of thermal coal –used for power generation – but keep coking coal, which is used for steel production?
He will also have to decide whether or not to proceed with the massive and hugely expensive development of a potash mine in Canada's Saskatchewan province.
Finally, to what extent will Henry pursue new opportunities and project developments? He won't be rushing at acquisitions and developments like some former CEOs have, but will need to be mindful of opportunities, because productivity improvements only get you so far.
In the meantime, however, he has made it clear what his focus will be.
"That's one of the exciting things about taking up the role, that there is still further opportunity to grow value in the company," Henry said in Melbourne on Thursday, after his appointment was announced.
This is great news for shareholders, who can expect more steady returns than in the past and will also know that Henry won't be making any reckless bets with the company's future.
