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BHP shares slump in Australia after demerger plans

© BHP Billiton/AFP | A BHP Billiton copper/uranium/gold/silver processing plant near the Olympic Dam mine in South Australia, undated handout photo released on February 9, 2012A BHP Billiton copper/uranium/gold/silver processing plant near the Olympic Dam mine in South Australia, undated handout photo released on February 9, 2012

Investors in Australia Wednesday gave the thumbs down to BHP Billiton's annual profit result and plans to spin off parts of its business, with its shares slumping more than four percent at the open.

The sell-off followed a similar scenario in London, where the firm is also listed, after the world's biggest miner reported weaker-than-expected underlying earnings of US$13.4 billion and a net profit of US$13.8 billion.

It also outlined a proposal to create a new independent company by demerging non-core assets, including some of its aluminium, coal, manganese, nickel and silver operations.

The Anglo-Australian resource giant also failed to announce the share buyback that some analysts had been expecting.

Combined, the news sent the stock down 4.13 percent to Aus$38.04 in opening trade on the Australian stock exchange.

BHP Billiton chief executive Andrew Mackenzie told reporters he did not believe the sell-off in London was a rejection of the demerger option, instead pointing to the absence of a share buyback and the complex nature of the proposal.

"No, I don't think so," he was quoted as saying by Fairfax Media when asked if the falling share price was a sign the demerger was unpopular.

"We've had a number of pre-announcements of this over time and those were very much related to an outline of this transaction."

Mackenzie noted that the absence of a share buyback could be a possible factor.

"Expectations for (a) large capital management event were playing in peoples' minds," he said.

By spinning off some assets into a new company, BHP said its business would be able to focus more intensively on its core long-life operations -- iron ore, copper, petroleum, coal and potash.

The new entity, to be named NewCo, is expected to list in the first half of the 2015 calendar year.