BHP Billiton Gets Mouthy with Everyone. This Board let it Happen. $BHP

BHP Billiton (NYSE:BHP) is in a number of public relations debacles. They have been held accountable for serious mining safety problems. People die working for these guys.

Supervisors at one of BHP’s coal mines in eastern Australia are planning to strike this week over an ongoing pay dispute involving base pay and overtime hours. This is the second strike in the past few months, after workers picketed for two weeks at BHP’s nearby Appin coal mine.

 BHP strongly criticizing the government of Papua New Guinea over an immigration ban and it has also publicly criticized its own Australian prime minister about newly adopted executive pay disclosure laws.

Sounds like they just take everyone on. This type of combative culture comes from board influence. So lets take a look at the board make-up.

Jacques Nasser is the former director, ceo, president of Ford. He also sits on the board of News Corp British Sky Broadcasting. He surely has signed off on the fisticuffs. Or he is defaulting into it without realizing which is even worse.

John Gordon St Clair Buchanan previously deputy chair of Vodafone, non executive director of AstraZeneca and Group CFO and Executive Director of BP PLC. Phone company, a drug company and one of the seven sisters. Surely he would have some insights into public fist fights and how not to get into them.

Carlos AS Cordeiro is a former managing director and partner of Goldman Sachs. Not an organization known for its public relations savvy.

David Alexander Crawford puts on his résumé the chairmanship of Australia Pacific Airports, Lendlease, National Foods, Fosters. non executive director of Westpac and national chair of KPMG. OK so we got public travel, food, beer and accounting. Engage the customer do not attack him usually works in these lines of work. The Senior KPMG guy rarely would counsel a war of words.

John Michael Schubert  chairs G2 Therapies and lists on his résumé independent non executive directorship Quantas, CEO and Managing Director of Pioneer, Chair of Commonwealth Bank, Chair and Managing director of Esso Australia.

Shriti Vadera is an independent non executive director of AstraZeneca.

Lawrence Patrick Adrian Davies is CEO of SASOL

Kieth Christopher Rumble was the CEO of RIOTinto Iron and Titanium as well as other mining companies. Surely he would understand how resource companies should portray themselves in the public eye.

Carolyn Judith Hewson is the Chairman of Westpac Foundation and former executive director of Schroeders Australia. From the investment world to a charitable organization she should know a thing or two about public and government relations.

Malcolm William Broomhead is the Chair of Asciano and formerly was CEO and Managing director of both Orica and North.

Lindsay Philip Maxsted former CEO of KPMG Australia and Westpac Banking.

So in reviwing the resumes of the board several things stand out.

  1. They all have had senior experience and should understand the public relations process. Somehow this ability is not translating into practical leadership from the board.
  2. No one has any substantive experience in safety culture. Dangerous business need to manage risks. Death is not acceptable. no one on the board seems to have his game.
  3. A lot of a accountants, investment and commercial bankers abound. This probably creates a hyper focus on numbers. Safety and public relations are not understood.
  4. A flavour of AstraZeneca manifests. Watch this hookup.

Regardless of individual expertise getting into a public war of words with the Prime Minister is just plain bad politics. Resource extraction needs to practice RealPolitik with a very heavy dose of Machiavelli. So far we get the opposite. Despite the value of the properties this may not be the correct leadership team at the board level to maximize shareholder wealth.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti or maybe follow his evil twin who is writing a Wall Street Murder Thriller at twitter@georgegutowski


Peabody Energy Drowns Q1 Forecast $BTU $BHP

Image representing Peabody Energy as depicted ...

Image via CrunchBase

Peabody Body Energy (NYSE:BTU) the world’s single largest coal company announced their Q1 guidance would probably come in at the very low-end of the guidance range. Peabody which provides 10% of US coal supplies and 2% of global coal supplies is citing torrential rains and later flooding in Queensland Australia. The extreme weather events are negatively impacting everything. Port and rail operations, surface mines and underground mines.

OK so when everyone is swimming around operations are not a smooth as anticipated. Not good news but investors get that. One quarter due to weather, hmm! At the same time  Peabody Energy Chairman and Chief Executive Officer Gregory H. Boyce said  “Peabody continues to target significant increases in its Australia coal exports in 2012 to serve rising global demand for both metallurgical and thermal coal products.” So that means in the next three-quarters Peabody will make up the shortfall? Yes no. Just what did that macro strategic comment really mean? But if you cannot get existing operations to run smoothly just what is it that you are targeting that will create a positive impact in the next nine months. Baby its got to be Big to even out the numbers.

Oh by the way the stock is trading at 52 week lows. Interesting to note that the guidance adjustment came after the stock dropped about 10% in the past few days. Just saying. But the weather in Queensland is not just one little cloud burst. Three days before the guidance adjustment Queensland did have some extreme weather. So why did it take Peabody three days to adjust guidance? The press release threw out a nice round number of $50 million for early estimates of impacts. We all know that early estimates tend to be underestimates.

CEO  Gregory H. Boyce. did comment about the supply disruption saying it  all points to the tight supply demand balance  for seaborne metallurgical and thermal coal. So is this a set up comment? Will Peabody continue to have reduced earnings as Queensland tries to dry itself up? Is the weather event causing the spot price of coal to increase? Has Peabody which claims to have trading capability been able to capitalize and mitigate some of the earnings losses.

Last but not least what disruption to client deliveries are anticipated. If your rail and harbour facilities are completely shut more than one boat load has been interrupted.

Assessing impacts after an extreme weather event are always difficult. But management should not take three days to realize they are flooded and facilities are inoperable. The next earnings call should prove to be very interesting. They have set the tone for negative earnings consequences.

In the mean time other mega commodity companies show no particular impact. BHP Billiton (NYSE:BHP) admittedly a very diversified commodities player possessing significant coal interests seems to be unaffected or at least is keeping quiet like a church mouse. Anglo-American which has five mines in Queensland also is not reporting any substantive problems. Anglo-America trades in London, Johannesburg as well as pink sheets. While their facilities may not have experienced the same extreme weather event/consequences if supply balance is being affected their share prices would have been affected. So far it seems like a pure Peabody problem.

George Gutowski writes from a caveat emptor perspective.

Potash Lawsuits Pending

Former Billiton corporate logo.

Image via Wikipedia

Potash (POT) takeover by BHP Billiton (BHP) has been quashed by Tony Clements Canada’s Industry Minister and Steve Harper Federal Prime Minister. The move is a surprise but some say reflects local political realities. Investors who were promised a better takeover offer which now seems to be a non event are about to lose billions of dollars of valuation.

BHP you have 30 days to improve the net benefits. stop thinking like business men and start thinking like politicians. This has become a political decision. The next question is who will shareholders sue. The premium will evaporate. why should investors be penalized.

Lawyers start your engines.

Disclosure: George Gutowski writes from a caveat emptor perspective. I do not hold any positions in stocks mentioned in this post.

Potash Takeover Approval Now Political

Potash Corporation of Saskatchewan

Image via Wikipedia

Potash Corp (POT) is trying to fend off a takeover offer from BHP Billiton (BHP). Powerful provincial governments are campaigning to turn aside BHP’s offer. Investment Canada a Canadian Federal Regulator has ruled OK on the deal. No one can think of a sound economic reason to say no. Left wing oriented provincial governments are trying to disrupt a deal the average citizen does not truly understand.

My message to the Marxist Leninists: The Potash cannot be moved until it is extracted and sold. Production jobs will not be affected by this deal. Production jobs will be affected by levels of world demand. Investors who own the resource should be allowed to sell it if they want. Those are the rights of ownership. Resources are there to be extracted and sold.

The Canadian Federal Prime Minister Steve Harper who wants a majority government is facing a public populist swell insisting that the resource stay in Canadian Hands. Privately the economic world is warning against left-wing resource grabs which have hurt Canada in the past.

If I was BHP I would allow myself to enter into a political deal showing huge supposed benefits for the local population. If the deal is not agreed to the benefits do not occur. Potash Corp controls some 22% of world supply. Populist thinking assumes a near monopoly. 22% can be made to suffer as other deposits are favoured. Where will the left wingers be as local production employees suffer and other potash suppliers thrive?

Tony Clement, the federal Minister of Industry, is expected to announce this week his decision whether a BHP takeover.

Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post.