BHP Billiton chairman Jac Nasser has made a strong sales pitch regarding the company’s proposed demerger, telling shareholders in London that it would be “another step in our evolution”.

The mining giant revealed in August it’s spinning off its aluminium, coal, manganese, nickel and silver assets into a new company dubbed NewCo.

Nasser told BHP’s London annual general meeting the proposed demerger would see benefits for both companies and all shareholders.

“For BHP Billiton we can reduce costs and improve the productivity of our largest businesses more quickly,” the chairman said.

“This means we should generate stronger growth in free cash flow and a superior return on investment.

“The new company will benefit from its own strategy and own systems and processes specifically tailored for a business of its scale.

“This, along with greater focus on the new company, should see its assets perform even more strongly.”

The chairman said the split was “another step in our evolution and demonstrates our willingness and ability to continually reshape our business”.

He said BHP’s strategy would remain unchanged. Nasser acknowledged David Crawford who is retiring from the board next month to become chairman of the new company once the demerger is approved.

“We know there is no better person to guide the new company through its early years,” Nasser told shareholders.

BHP this year lifted its full year profit 23 per cent to $US13.8 billion ($A15 billion) as the world’s biggest mining company achieved a 15th straight year of record iron ore production.

Chief executive Andrew Mackenzie told the meeting that by the end of the 2017 financial year BHP was targeting at least $US3.5 billion ($A3.79 billion) of additional annualised productivity gains beyond those already reported.

“The demerger proposal is an important step forward to go beyond this promise and further strengthen your already financially strong company,” the Scottish businessman told shareholders.

Mackenzie said for more than a decade BHP’s strategy had been to operate large, long-life, low-cost, expandable upstream diversified assets.

“Today we have 41 assets worldwide 19 of which generate a large percentage of our earnings,” he said.

“We see a future concentrated exclusively on these core minerals and petroleum assets – a 50 per cent reduction from today and only 12 of the 19 will be operated by BHP Billiton.”

The chief executive said this would be a “stunningly simple portfolio for a company of our size”.

“The increased focus on our major businesses will unleash more productivity increases, faster and with greater certainty, and the new company will also be one of global significance,” he said.

“The new company’s assets, which are spread across the southern hemisphere form a portfolio that, in the 2014 financial year, generated almost $US1.8 billion ($A1.95 billion) of EBITDA.”

Nasser told shareholders BHP expected demand for its commodities to remain strong particularly in China.

“In China the property sector is slowing but other sectors are showing resilience,” the chairman said, adding growth was still expected to come in above seven per cent.

“In the mid-term the rate of growth will see a gradual decline from current levels as China’s economy continues to mature.

“(But) Chinese economic activity is still expected to grow faster than developed economies for the foreseeable future.”

Nasser said China, together with other emerging markets, would remain a major driver of global growth.

“Based on this, we believe demand for our commodities continues to be strong, underpinning the long-term outlook for our portfolio of products.”

The European economy remained “soft”, the chairman said.

“Germany, France and Italy have no growth and prospects are not encouraging.

“Short-term, we expect policy makers to continue to use stimulus measures to support these economies. Longer-term, economic reform will be necessary to deal with Europe’s structural issues.”

Mackenzie told the AGM that during a year in which the majority of commodity prices fell BHP increased profitability significantly.

“We will continue to maximise value, maintain financial discipline and return excess cash to shareholders,” he said.

“Our commitment to drive increased productivity across the organisation has the potential to create more value than anything else that we can do today.”