| Wed 7 Aug 2002, 0:00 | | Bhp Billiton - Full Year Results For The Year End |
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Click CODE for more details on the companyBHP Billiton - Full Year Results For The Year Ended 30 June 2002
EBITDA robust at US$4.9 billion despite lower revenues.
Operating cash flow (after interest and tax) maintained at US$3.9
billion despite difficult conditions.
EBIT US$3.2 billion, attributable profit US$1.9 billion, earnings per
ordinary share 32.1 US cents (all excluding exceptional items).
Merger benefits of US$220 million delivered (before one-off costs).
Steel demerger completed.
Exploration successes for Petroleum.
Quality portfolio offers more stable cash flows in uncertain world
economy.
2002 2001 Change
Year ended 30 June US$M US$M %
Turnover (1) 17 778 19 079 -6.8%
EBITDA (1)(2)(5) 4 915 5 299 -7.2%
EBIT (1)(3)(5) 3 188 3 627 -12.1%
Attributable profit
- excluding exceptional items 1 934 2 189 -11.6%
- including exceptional items 1 690 1 529 10.5%
Operating cash flow including
dividends from joint
ventures and associates and after 3 918 3 837 2.1%
net interest and tax
Basic earnings per share (US
cents)
- excluding exceptional items 32.1 36.8 -12.8%
- including exceptional items 28.0 25.7 8.9%
EBITDA interest coverage (times) 11.0 8.5 29.4%
(4)(5)
(1) Including the Group`s share of joint ventures and associates.
EBITDA is profit before net interest, taxation, and depreciation and
amortisation (excluding impairments).
(3) EBIT is profit before net interest and taxation.
(4) For this purpose, net interest includes capitalised interest and
excludes the effect of discounting on provisions and exchange
differences arising from net debt.
(5) Excluding exceptional items.
The above financial results are prepared in accordance with UK generally
accepted accounting principles (GAAP). Financial results prepared under
Australian GAAP are provided on page 26.
All references to the corresponding period are to the year ended 30 June
2001.
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 30 JUNE 2002
CHIEF EXECUTIVE`S REVIEW
The Merger
The merger of BHP Limited and Billiton Plc on 29th June 2001 established
a new leader in the global resources sector, one seeking superior
shareholder returns as the world`s premier supplier of natural resources
and related products and services. Merger integration via the "Dual
Listed Companies" structure was swift, with the key business units being
organised immediately into 6 Customer Sector Groups, supported by 2
marketing hubs - one in The Hague, and one in Singapore. Virtually from
the outset, the executive group functioned as a unified team, and
performed effectively in the challenging market conditions of the past
year.
Along with the smooth integration, five highlights stand out:
the successful demerger of BHP Steel;
the approval of 12 new projects involving aggregated capital investments
of US$2.9 billion;
a string of remarkable successes by our Petroleum exploration teams;
the delivery of merger benefits of $220 million (before one-off costs);
and
the publication of our Strategic Framework in April this year, which
detailed the key value drivers which distinguish us from our
competitors, the strategic imperatives which will realise our full
potential, and 8 performance measures against which we have invited the
market to judge us.
The financial results achieved by the management team during the 2002
financial year, BHP Billiton`s first as a combined group, are set out
below.
Stability and Growth
The central tenet of the BHP Billiton business model is that its
diversified portfolio of high quality assets provides more stable cash
flows and greater capacity to drive growth than the traditional resource
cyclicals. The results of the past year provide striking support for
that thesis. Despite price weakness in many of our products, despite
currency fluctuations, and canny cut-backs at some of our major
operations, our Earnings before Interest, Tax, Depreciation and
Amortisation (EBITDA) held steady at around US$1.2 billion in every
quarter. Aggregated over the year, EBITDA was US$4,915 million, down
only 7.2% on last year`s record level notwithstanding much weaker
commodity markets.
Even more dramatic was the underlying stability of our operating cash
flows (after interest and tax) which held steady at US$3,918 million,
despite the generally lower prices.
These strong financials were reflected in other measures: EBITDA
interest cover rose from 8.5 times in 2001 to 11.0 times in the
reporting year; gearing (net debt to net debt plus equity) declined from
38.4% to 35.0%; and net debt at 30 June 2002 was US$6,822 million, a
reduction of US$499 million over the year.
Our robust cash flows left us well placed to proceed methodically with
the new growth projects that we flagged to shareholders at the time of
the merger. A full list of projects approved this year, totalling
US$2.9 billion, is attached.
The Income Statement
The difficult market conditions that prevailed throughout the year were
reflected in Group turnover, which fell by 6.8% to US$17,778 million,
due to lower commodity prices (for crude oil, aluminium, copper, nickel,
chrome, alumina, silver and zinc), lower sales volumes (from Escondida
(Chile), Tintaya (Peru), energy coal, crude oil at Bass Strait
(Australia), Laminaria (Australia), Griffin (Australia), Samarco
(Brazil), manganese and titanium minerals) and lower contributions from
ceased and sold operations. These factors were partly offset by
contributions from new and acquired operations (including the first full
year`s results from the various Rio Algom businesses, the energy coal
operations in Colombia, the additional 29% interest in Ekati(TM) diamond
mine (Canada) and the additional 56% interest in Worsley alumina
refinery (Australia)).
Earnings before interest and tax (EBIT), excluding exceptional items,
was US$3,188 million compared with US$3,627 million last year, a
reduction of 12.1%. This decline was caused by the lower commodity
prices, lower profits from ceased, sold and discontinuing operations,
increased exploration expenditure, and the impact of inflation on
operating costs. Offsetting factors were profits from new and acquired
operations, the favourable effect of exchange rate movements, lower
price-linked costs, and increased profits from asset sales.
Net interest expense (before exchange gains on net debt) fell to US$429
million from US$625 million in the corresponding period. In fact, net
interest including capitalised interest and excluding discounting on
provisions, fell from US$625 million to US$445 million. That reduction
of US$180 million (28.8%) was principally driven by an improved credit
rating, lower average debt levels and lower market interest rates.
Exchange gains on net debt were US$180 million compared with US$149
million in the corresponding period, arising primarily on the year end
translation of Rand denominated debt of companies which account in US
dollars as their functional currency. The Rand depreciated by 21%
during the current period compared with the 16% depreciation in the
corresponding period. Approximately Rand 2.9 billion of debt was repaid
during the year.
The tax charge for the year (excluding exceptional items) was US$958
million, representing an effective rate of 32.6%. Excluding the impact
on tax of non tax-effected foreign currency gains and other functional
currency translation adjustments, the effective rate was 32.7%. This
rate is above the nominal rate of 30% mainly due to non tax-effected
losses in the current year, non-deductible accounting depreciation and
amortisation, and secondary taxes on dividends paid and payable by South
African entities, partly offset by the recognition of prior year tax
losses.
Attributable profit (excluding exceptional items) was US$1,934 million,
down 11.6% from the US$2,189 million of last year. Basic earnings per
share was 12.8% lower at 32.1 US cents.
Exceptional Items
Exceptional items totalling US$212 million (before tax) were expensed at
year end. These included one-off costs of US$80 million relating to the
merger and restructuring of the Group during the year.
Following a reassessment of the Group`s asset disposal and closure plans
relating to its South West Copper business in the US (where the Group
ceased operations in 1999), impairment provisions, principally related
to the San Manuel smelter, were increased by US$171 million. This was
offset by a reduction of US$70 million in provisions relating to the
expected timing of site restoration expenditure.
Sulphide operations at Tintaya (Peru) have been suspended until at least
January 2003. An exceptional charge of US$31 million recognised the
costs of the suspension and a write-down of obsolete equipment.
In June 2002 a change in legislation increased the corporation taxation
rate for oil and gas companies in the United Kingdom from 30% to 40%,
resulting in deferred taxation balances being restated, with an adverse
impact of US$56 million on the full year`s results. The tax effects of
other exceptional items were a benefit of US$24 million.
After accounting for these exceptional items, the remaining attributable
profit was US$1,690 million, 10.5% higher than the US$1,529 million of
last year. Basic earnings per share, including exceptional items, was
28.0 US cents, 8.9% higher than the 25.7 US cents of the corresponding
period.
Cash Flows
Capital expenditures and financial investment totalled US$2,621 million
for the year. Expenditure on growth projects amounted to US$1,622
million, including Escondida Phase IV, the ROD oil and Ohanet wet gas
projects in Algeria, Mozal II and Petroleum projects in the Gulf of
Mexico. Maintenance capital expenditure of US$859 million was US$31
million lower than in the previous year. Exploration expenditure was
US$390 million, an increase of US$49 million.
Net cash outflow from acquisitions and disposals was US$38 million,
including additional investments in Colombian coal assets and EkatiT,
less the proceeds from the sale of PT Arutmin (Indonesia).
After dividend payments of US$811 million (up from US$751 million in the
prior year) net cash flow (before management of liquid resources and
financing) amounted to US$448 million. This inflow compares to an
outflow of US$1,977 million in the corresponding period, which included
the acquisitions of Rio Algom and the additional 56% interest in the
Worsley alumina refinery.
Dividends
An interim dividend of 6.5 US cents per fully paid ordinary share was
paid in December 2001 and a final dividend of 6.5 US cents per fully
paid ordinary share was paid in July 2002, bringing the total for the
year to 13.0 US cents. The BHP Billiton Limited dividends were fully
franked for Australian taxation purposes.
The corresponding period for BHP Billiton Limited shareholders included
an unfranked interim dividend of 12.1 Australian cents per fully paid
share (adjusted for merger bonus issue) and a fully franked final
dividend of 12.6 Australian cents per fully paid share (adjusted for
merger bonus issue).
The corresponding period for BHP Billiton Plc shareholders included an
interim dividend of 4.0 US cents per share and a final dividend of 8.0
US cents per share.
Dividends for the BHP Billiton group are determined and declared in US
dollars. However, BHP Billiton Limited dividends are mainly paid in
Australian dollars and BHP Billiton Plc dividends are mainly paid in
pounds sterling to shareholders on the UK section of the register and
South African Rand to shareholders on the South African section of the
register. The rates of exchange applicable two business days before the
declaration date were used for conversion.
Portfolio Management
The demerger of BHP Steel in July 2002 was a landmark event, severing a
link of many decades. The outcome was embraced by both organisations,
launching BHP Steel as an independent, world class steel business and
releasing BHP Billiton to focus on its upstream interests. Strong
demand for the BHP Steel shares; which were sold through the Sale
Facility to participants under the Retail and Institutional offers, took
the final price to A$2.80 per BHP Steel share. The 6% retained by BHP
Billiton and sold through the Sale Facility brought a cash benefit of
US$75 million in July 2002. Accounting rules will see the difference
between this selling price and the book value - some US$19 million -
appear as a loss in the 2003 financial statements. BHP Billiton Plc
shareholders received approximately 149 million bonus shares to match
the demerger value distributed to BHP Billiton Limited shareholders.
During the year, we also finalised our responsible exit from the Ok Tedi
copper mine in Papua New Guinea, in the process establishing a fund to
support the future social and economic development of the people of
Papua New Guinea and, in particular of the Western Province. We also
announced the sale of our interest in the PT Arutmin Indonesia energy
coal operations, and the acquisition, in conjunction with our partners,
of the 50% interest in Cerrejon Zona Norte energy coal mine in Colombia,
bringing our interest to 33%.
Capital Management
A US$2.5 billion syndicated multi-currency revolving facility was
completed in September 2001. This facility replaced the US$1.2 billion
credit facility of BHP Billiton Limited and the US$1.5 billion and
US$1.25 billion credit facilities of BHP Billiton Plc. The facility
includes a US$1.25 billion 364-day revolving credit component, and a
US$1.25 billion five-year revolving credit component.
In October 2001, BHP Billiton increased its A$ Commercial Paper Program
limit from A$1 billion to A$2 billion. During November 2001, the Group
issued A$1 billion in debt securities in two tranches: A$750 million of
7 year, 6.25% notes maturing August 2008; and A$250 million of 3 year,
floating rate notes maturing November 2004. In addition a US$1.5
billion Euro Medium Term Note (EMTN) programme was established during
June 2002.
In accordance with the announced share buyback program, BHP Billiton
Limited re-purchased 4,134,622 shares during the year at a weighted
average price of A$8.83 per share. The buyback program allows for the
purchase of either BHP Billliton Limited or BHP Billiton PLC shares, up
to a limit of 186 million shares.
Merger Benefits and Further Cost Savings
An important target announced at the time of the merger was the pursuit
of ongoing benefits of US$270 million (before one-off costs) by the end
of financial year 2003. Good progress was made towards this goal, with
US$220 million being delivered in the year ended 30 June 2002. These
benefits arose in a number of different areas, including Operating
Excellence initiatives, strategic sourcing, changes to our marketing
activities, access to lower cost finance and widespread operational
savings. One-off costs of US$115 million were incurred to deliver the
benefits, of which US$80 million has been expensed as an exceptional
item.
A further target of US$500 million of cost savings and efficiency gains
has been set for the next three years. A major part of this is expected
to be delivered through the continuance of our Operating Excellence
initiatives, together with savings from simplified structure and
processes, economies of scale from centrally-focused marketing
activities, and from productivity improvements from ongoing operations.
Exploration Progress for Petroleum
Our Petroleum exploration shows particular promise. We invested US$287
million in exploration and appraisal activities during the year, and
were rewarded with a finding cost of US$1.59 per barrel of oil
equivalent and a capitalisation rate of 47.4%. Both represent top tier
performance.
In the Gulf of Mexico, appraisal wells at Mad Dog and Atlantis were
successfully completed, leading to sanction of both projects. The near
field discovery at Boris will be tied back to the Typhoon facility.
Encouraging discoveries were made at Cascade and Neptune, and will now
be further appraised.
In Trinidad, the Kairi and Canteen wells built on our original
exploration success in the Angostura field and development work is well
advanced to sanction this project during the coming year.
Further leases were acquired in both the Gulf of Mexico and Trinidad
whilst new leases were obtained offshore Brunei, South Africa and
Brazil.
Corporate Governance
From 1 July 2002, I assumed the role of CEO and Managing Director,
replacing Paul Anderson who retired from his executive role on the same
date but remains on the Board until completion of the Annual General
Meeting in November 2002. The Board will pay him tribute at an
appropriate function for his outstanding service to this Group.
Messrs. Ben Alberts, John Conde, Derek Keys and Barry Romeril retired
from the Board at the end of June 2002. All four contributed much to
the decisions of the Group, and particularly to those related to the
merger.
The Annual General Meetings of BHP Billiton Limited and BHP Billiton Plc
will both be held on Monday 4 November 2002. The meetings will be held
in Melbourne and in London simultaneously and will be linked by video.
Outlook
There is cause for concern about the global economy. Although OECD
industrial production continues to post small monthly rises, it remains
below the levels of a year ago. After some early gains, the US economy
is struggling to maintain momentum; growth prospects across Europe
remain subdued; and a rising Yen threatens to derail Japan`s export led
recovery. Business investment and non-residential construction remain
weak in the developed economies. Only across Asia does production
continue to improve, particularly in South Korea and China where annual
growth is approaching eight percent.
In recent weeks extreme volatility in equity markets, falling business
and consumer confidence, and heightened risk aversion have cast a pall
over the global economic outlook. In reaction, the prices of many
traded commodities have fallen to or near multi-month lows. In these
circumstances, the executive team will concentrate on the sound
management of our businesses, while remaining alert for opportunities
that might arise from the turmoil.
Whilst our short-run profits may show volatility due to movements in
foreign exchange rates, our accounting practices provide balance sheet
stability and proper management of our costs over the long-run.
Additionally our diversified portfolio of high quality assets provides
more stable cash flows, leaving us well placed to prosper where others
might not.
TRADING REVIEW
EBIT
The following table details the approximate impact of major factors
affecting EBIT for the year ended 30 June 2002 compared with the
corresponding period.
Merger benefits
Total included
US$M US$M
EBIT for the year ended 30 June 2001 3,627
Change in sales prices (665) 20
Change in volumes (165) 5
Price linked costs 270
Inflation on costs (210)
Costs 80 110 (a)
New and acquired operations 185 15
Ceased, sold and discontinued operations (255)
Exchange rates 375
Asset sales 45
Exploration (45)
Other items (54)
EBIT for the year ended 30 June 2002 3,188 150 (b)
( a ) Gross savings of US$145 million, net of one-off costs of
US$35 million
( b ) Other non-EBIT merger benefits totaling US$35 million were achieved
during the year.
Prices
Lower prices for crude oil, aluminium, copper, nickel, chrome, alumina,
diamonds, silver and zinc decreased turnover by approximately US$1,035
million. This decrease was partly offset by higher prices for
metallurgical coal, energy coal, and gas prices which increased turnover
by approximately US$370 million.
Volumes
Lower sales volumes from Base Metals, Carbon Steel Materials, petroleum
products, Energy Coal and Titanium Minerals businesses were partly
offset by higher sales volumes from the Stainless Steel Materials
businesses, resulting in a net volume impact on EBIT of a loss of
approximately US$165 million.
Costs
Cost reductions increased EBIT by approximately US$350 million compared
with the corresponding period. Lower price linked costs of
approximately US$270 million were mainly due to lower royalties and
taxes for petroleum products together with lower costs for London Metals
Exchange (LME) listed commodities partially offset by increased royalty
costs at metallurgical coal operations mainly reflecting higher
metallurgical coal prices.
Merger benefit initiatives generated net cost savings of approximately
US$110 million during the year.
Costs increased at Escondida (Chile) mainly reflecting the decision to
reduce production in response to weaker base metals markets and
increased costs at metallurgical coal operations (Australia) and energy
coal operations (New Mexico) were due to operational issues. These
factors were partly offset by lower operating costs at Liverpool Bay
(UK) and Hillside (South Africa), primarily reflecting higher
maintenance activities in the corresponding period, cost reductions at
the Gulf of Mexico (US) petroleum operations mainly due to increased
productivity, and savings at WA Iron Ore operations (Australia) due to
lower port and rail costs.
Inflation increased costs by approximately US$210 million.
New and acquired operations
New and acquired operations increased EBIT by approximately
US$185 million compared with the corresponding period mainly due to,
commencement of production of petroleum from Typhoon (America), Zamzama
(Pakistan) and Keith (North Sea), increased ownership interests in the
Worsley alumina refinery (Australia) together with the fully
commissioned Mozal aluminium smelter (Mozambique), the acquisition of an
additional 29% interest in the EkatiTM diamond business, a full years
contribution from Rio Algom base metals businesses and the first full
year contribution from Carbones del Cerrejon and Cerrejon Zona Norte
Coal (Colombia). These factors were partially offset by a downturn in
the Integris (formerly Metals Distribution) (US) business compared with
the corresponding period.
Ceased, sold and discontinued operations
Steel profits (excluding OneSteel Limited) reduced by approximately
US$130 million. The corresponding period included contribution to EBIT
of approximately US$125 million from a higher ownership interest in
metallurgical coal (Queensland), the sale of Buffalo oilfield
(Australia), spun-out steel operations (OneSteel Limited), and the Ok
Tedi copper mine (PNG), partly offset by losses from HBI Venezuela. The
current period included a lower contribution from PT Arutmin Indonesian
energy coal operations due to sale of the business in November 2001.
Foreign exchange
Foreign currency fluctuations had a favourable effect of approximately
US$375 million mainly due to the impact of lower Rand/US$ (US$265
million) and A$/US$ (US$85 million) exchange rates on related operating
costs and the conversion of monetary assets and liabilities, including
provision balances, and reduced losses on legacy A$/US$ currency
hedging.
Asset sales
Profits from asset sales were approximately US$45 million higher than
the corresponding period mainly due to the profit on sale of PT Arutmin
Energy Coal operations in Indonesia.
Exploration
Exploration charged to profit was approximately US$45 million higher
than the corresponding period mainly due to the write-off of La Granja
copper exploration activities (Peru), together with increased petroleum
activity in the Gulf of Mexico.
CUSTOMER SECTOR GROUP SUMMARY
A detailed explanation of the factors influencing EBIT, including joint
ventures and associates (excluding exceptional items) by Customer Sector
Group, is as follows:
Aluminium
Aluminium contributed EBIT of US$492 million, down from US$523 million,
a decrease of 5.9% compared with the corresponding period.
The EBIT reduction was mainly attributable to the lower average LME
price for aluminium, down US$180 per tonne or 11.7%, and the decline in
production from Alumar and Valesul (Brazil) due to power curtailments.
These factors were partially offset by higher alumina production from
Worsley (Australia) following the acquisition of an additional 56%
interest in January 2001 together with increased production and profits
from the fully commissioned Mozal (Mozambique) aluminium smelter. Lower
operating costs were mainly due to the decrease in LME linked production
costs together with the favourable effect on related operating costs due
to US dollar exchange rate movements against the South African Rand and
Brazilian Real.
Base Metals
Base Metals contributed EBIT of US$200 million, down from
US$462 million, a decrease of 56.7% compared with the corresponding
period.
The EBIT reduction was mainly due to a significant decline in the
average realised copper price to US$0.69/lb compared to US$0.78/lb in
the corresponding period together with lower volumes at Escondida and
Tintaya, reflecting the decision to temporarily reduce production in
reaction to the global deterioration of base metals markets. In
addition, the current period was adversely impacted by the write-off of
the La Granja (Peru) exploration activities.
These factors were partly offset by a full year`s contribution from the
various Rio Algom operations (Cerro Colorado, Antamina and Highland
Valley Copper) which were acquired in October 2000, as well as higher
silver and lead volumes at the Cannington (Australia) silver mine
resulting from a revision of the mine`s production strategy.
Carbon Steel Materials
Carbon Steel Materials contributed EBIT of US$1,084 million, up from
US$918 million, an increase of 18.1% compared with the corresponding
period.
The increase in EBIT was attributable to increased volumes and higher
prices for metallurgical coal, lower operating costs at Mt Whaleback
(Australia) iron ore operations due to improved waste ore ratios, and
improved operating performance over the year and lower capital
expenditure (which is charged to profit) at BoodarieTM Iron (Australia).
Operating costs across West Australian iron ore operations were further
reduced by improved ship loading rates at Port Hedland (Australia),
reflecting the successful application of the Operating Excellence
methodology. The favourable effect of the lower A$/US$ and Rand/US$
exchange rates reduced related operating costs.
These factors were partially offset by higher costs at metallurgical
coal operations in Queensland due to increased stripping costs at
Goonyella, Blackwater, Saraji and Peak Downs, adverse roof conditions at
Crinum between August 2001 and December 2001, together with higher
royalty costs and higher demurrage costs. Reduced market demand for
manganese ore and alloy products, as well as Samarco pellets, resulted
in lower sales and prices for these commodities compared with the
corresponding period.
On 26 March BHP Billiton declared "force majeure" on sales contracts and
some supply contracts at the BoodarieTM Iron Plant. The declaration
followed the temporary suspension of work at the plant following a tube
failure in a gas re-heating furnace. Production re-commenced in one
train on 18 July 2002, with the remaining three trains planned being
progressively back on line during the September 2002 quarter.
Agreement was reached in May 2002 with Nippon Steel Corporation (Japan)
and Kawasaki Steel Corporation (Japan) for the prices of Mt Newman (West
Australia) Iron Ore from the period commencing 1 April 2002. The agreed
prices are :-
Mt Newman Fines - 28.28 US cents per dry long ton unit - a decrease of
2.4%.
Mt Newman Lump - 36.13 US cents per dry long ton unit - a decrease of
5.0%.
Commercial terms have been settled for the majority of annually priced
coking coal contracts relating to the BHP Billiton Mitsubishi Alliance
(BMA) and BHP Billiton Mitsui coal operations in Queensland (Australia)
and the BHP Billiton Illawarra coal operations (Australia):
FOB prices for premium hard coking coals have increased to a range of
US$48.00 - US$50.00/t across all markets, reflecting strong
supply/demand fundamentals following the reduction in export volumes
from a number of US operations in 2001/02.
FOB prices for semi-soft and PCI coals have decreased to a range of
US$32.00 - US$33.00/t across all markets. The lower prices largely
reflect pressure from Chinese supply and a weaker thermal coal market.
Volumes are expected to remain steady.
The majority of prices settled with customers are retrospective to 1
April 2002.
Stainless Steel Materials
Stainless Steel Materials contributed EBIT of US$3 million, down from
US$72 million, compared with the corresponding period.
The EBIT reduction was driven by lower realised prices for nickel and
cobalt by-product, down 17% and 33% respectively, together with lower
prices for ferrochrome products due to producers liquidating stock
holdings to reduce inventory levels. Ferrochrome prices were also
adversely impacted by the devaluation of the South African Rand against
the US dollar.
These factors were partly offset by the favourable effect of the lower
Rand/US$ exchange rate on related operating costs and the favourable
impact from nickel due to increases in production, mainly from the
continued ramp-up of Cerro Matoso Line 2, which commenced production on
1 January 2001.
Energy Coal
Energy Coal contributed EBIT of US$536 million, up from US$382 million,
an increase of 40.3% compared with the corresponding period.
The increase in EBIT was attributable to a significant increase in
export market prices during the first six months of the year, with
annual average prices well above prior periods despite a downturn in
market conditions in the second half of the year. The benefit of higher
priced longer term contracts offset the weakness in spot prices. The
current period included the profit on disposal of PT Arutmin (Indonesia)
effective 30 November 2001 together with the inclusion of profits from
Cerrejon operations (Colombia). An overall reduction in unit cash costs
were achieved through cost improvement initiatives despite inflationary
pressure in South Africa and reduced production volumes predominantly in
South Africa and the United States. In addition, a benefit was derived
from the favourable effect of lower Rand/US$ exchange rates on related
operating costs and net monetary liabilities.
These factors were partially offset by lower export volumes due to the
disposal of PT Arutmin together with weakening of European markets after
an unseasonably warm winter and low natural gas prices.
Diamonds and Specialty Products
Diamonds and Specialty Products contributed EBIT of US$272 million, up
from US$188 million, an increase of 44.7% compared with the
corresponding period.
The increase in EBIT was primarily due to increased profits from EkatiTM
diamond mine (Canada) mainly reflecting the acquisition of an additional
29% interest in June 2001 together with increased production due to
higher ore grade and higher recoveries of lower quality diamonds. The
increase in carat production has been driven by the introduction of the
Misery Pipe (higher grade and lower value stones) and the continued
optimisation of the process plant. These factors were partially offset
by lower diamond prices mainly due to a general downturn in the global
economy and lower volumes from the titanium minerals operations
primarily reflecting weaker market conditions in the US and Japan.
Petroleum
Petroleum contributed EBIT of US$1,073 million, down from US$1,407
million a decrease of 23.7% compared with the corresponding period.
The reduction in EBIT was due to a lower average realised oil price of
US$22.58 per barrel compared to US$28.04 per barrel in the corresponding
period together with a lower average realised liquefied petroleum gas
(LPG) price US$214.62 per tonne compared to US$299.18 per tonne in the
corresponding period. The current period was impacted by reduced crude
oil volumes primarily due to natural field decline in the Laminaria,
Bass Strait and Griffin oil fields, which were partially offset by
infill programs in Bass Strait and Griffin. The corresponding period
benefited from a gain on the sale of the Buffalo oil field in March
2001.
These factors were partly offset by inclusion of profits from the
Typhoon (US) oil field and the Zamzama gas field (Pakistan), which
commenced operations in July 2001 and March 2001 respectively. Natural
gas volumes were higher than the corresponding period due to improved
performance at Liverpool Bay (UK) together with the commencement of
Zamzama operations.
During the year, BHP Billiton sanctioned two oil and gas projects in the
Gulf of Mexico (US). The Mad Dog development (BHP Billiton 23.9%) will
have a gross design capacity of 80,000 barrels of oil per day and 40
million standard cubic feet of gas per day and contains estimated
reserves in the range 200 to 450 million barrels of oil equivalent
(mmboe) gross. First production is expected by the end of 2004 calendar
year. The Atlantis development (BHP Billiton 44%) has estimated gross
proven and probable reserves of 575mmboe making it the third largest
field in the Gulf of Mexico deepwater. First production is expected by
the end of calendar year 2005.
Steel (Discontinued)
BHP Steel Limited (BHP Steel) legally separated from the BHP Billiton
Group on 22 July 2002, having listed on the Australian Stock Exchange on
15 July 2002.
As at 30 June 2002, BHP Steel was a business unit of the BHP Billiton
Group and its 2002 and comparative financial results are reflected in
the BHP Billiton combined group results. However, the Steel Segment
reported does not reflect the demerged BHP Steel results due to the
Steel Segment being reported under UK GAAP, in US dollars.
Steel contributed EBIT of US$101 million, down from US$270 million, a
decrease of 62.6% compared with the corresponding period.
The EBIT reduction was mainly due to lower international prices for
steel products and the exclusion of operating profits from disposed
businesses (primarily OneSteel Limited) which were included in the
corresponding period.
These factors were partly offset by stronger Australian domestic demand
for value added coated products and the profit on sale of the Australian
and US strapping businesses.
Group & Unallocated Items
The net costs of Group and Unallocated Items, excluding losses from
legacy A$/US$ currency hedging was, US$242 million compared with US$235
million in the corresponding period.
Group and Unallocated Items includes losses on legacy A$/US$ currency
hedging of approximately US$331 million compared with losses of US$360
million in the corresponding period. These losses mainly reflect the
lower value of hedge settlement rates compared with hedge contract rates
for currency hedging contracts settled during the year.
GROWTH PROJECTS
BHP Billiton has committed approximately US$2.9 billion to new growth
projects since the merger was consummated on 29 June 2001.
All references to production volumes and capital expenditure are BHP
Billiton`s share, unless otherwise stated.
Customer Sector Project Capital Production Completion
Group
Expenditur
e
US$M
Aluminium Mozal 2 405 120,000 tonnes Initial
expansion per annum production
Mozambique of aluminium late 2003
metal
BHP Billiton
47.1%
Hillside 3 449 132,000 tonnes Initial
expansion per annum production
South Africa of aluminium mid 2004
metal
BHP Billiton
100%
Carbon Steel Mining Area C 181 15 million Initial
Materials tonnes per production
Australia annum of iron late 2003
ore by
BHP Billiton 2011 (100%)
85%
Port & capacity 299 Increase in port Late 2004
expansion capacity
Australia to 81 millions
of tonnes per
BHP Billiton annum by 2004
85% (100%)
Dendrobium 170 5.2 million Initial
tonnes per annum production
Australia of raw mid 2005
metallurgical
coal
BHP Billiton
100%
Energy Coal Mt Arthur North 411 12.1 million Initial
tonnes per production
Australia annum of late 2003
saleable
BHP Billiton energy coal
100%
Petroleum Mad Dog oil and 335 20,000 boe/day Initial
gas field production
late 2004
US
BHP Billiton
23.9%
Atlantis oil 355 66,000 boe/day Initial
and gas field production
US late 2005
BHP Billiton
44%
Gulf of Mexico 100 Pipeline Commissionin
capacities g
(100%)
transportation Oil - 450,000 late 2004
system bbls per day
US Gas - 500,000
million
BHP Billiton 22- standard cubic
25% feet per day
Minerva gas 123 150 terrajoules Initial
field of gas production
Australia per day early 2004
BHP Billiton
90%
Zamzama gas 40 300 million Initial
field cubic feet of production
Pakistan gas per day mid 2003
BHP Billiton
47.5%
Bream gas 50 15 million bbls Initial
pipeline over 10 years production
Australia mid 2003
BHP Billiton
50%
2,918
Financial Information
The financial information in this document for the year ended 30 June
2002 is unaudited, has been derived from the draft financial statements
of BHP Billiton Plc and does not constitute the statutory accounts of
BHP Billiton Plc for that year.
With effect from 1 July 2001, the majority of BHP Billiton Limited`s
businesses changed their functional currency to US dollars, the
functional currency of the combined BHP Billiton Group. This is
consistent with BHP Billiton Plc`s previous policy and is the basis on
which the combined BHP Billiton Group manages its businesses. Most BHP
Billiton commodities are sold in US dollars and are predominantly
destined for export markets. BHP Billiton`s reporting currency is US
dollars.
Concurrent with this change, the BHP Billiton Group has changed its
policy regarding the treatment of foreign exchange gains or losses on
local currency site restoration provisions held in the accounts of
entities using US dollar functional currencies. Under the previous
policy, the foreign exchange gains and losses on site restoration
provisions were recognised in the profit and loss account. Under the
revised policy, such foreign exchange gains and losses are treated as
part of the revision to the estimated future restoration cost and are
included in the cost of tangible fixed assets. The revised policy has
been adopted as it better matches the ultimate cost of site restoration
charged in the profit and loss account to the profit earned. The impact
in the year ended 30 June 2002 has been the capitalisation to tangible
fixed assets of foreign exchange losses of US$40 million. The
application of the revised policy to prior periods does not have a
material impact on the comparative profit and loss account or balance
sheet figures and no prior period adjustment has been made.
In the opinion of the Directors, the financial information for the year
ended 30 June 2002, presents fairly the financial position, results of
operations and cash flows for the periods in conformity with UK
generally accepted accounting principles. The financial information for
the year ended 30 June 2001 has been derived from the audited financial
statements of BHP Billiton Plc for that period as filed with the
Registrar of Companies and does not constitute the statutory accounts of
BHP Billiton Plc for that period. The auditors` report on the statutory
accounts for the year ended 30 June 2001 was unqualified and did not
contain statements under Section 237 (2) (regarding adequacy of
accounting records and returns) or under Section 237 (3) (provision of
necessary information and explanations) of the United Kingdom Companies
Act 1985. The statutory accounts for the year ended 30 June 2002 will
be finalised on the basis of the financial information presented by the
Directors in this preliminary announcement and will be delivered to the
Registrar of Companies following the Annual General Meeting.
The combined results for the year ended 30 June 2002, prepared in
accordance with UK GAAP, are generally consistent with the combined
results under Australian GAAP as required by the Australian Securities
and Investments Commission in respect of dual listed companies.
However, in contrast to UK GAAP, Australian regulatory requirements do
not allow the combination of the results of BHP Billiton Limited with
those of BHP Billiton Plc for periods prior to consummation of the DLC
merger on 29 June 2001. Financial results prepared in accordance with
Australian GAAP are provided on page 26.
Consolidated
Profit and Loss
Account
for the year ended
30 June 2002
Year ended 30 June 2002 Year ended 30 June 2001
Excludin Including Excluding Inclu
g
Excep- Excep- Excep- Excep- Excep- Excep
tional tional tional tional tional tional
Items Items Items Items Items Items
Not US$M US$M US$M US$M US$M US$M
e
Turnover 3 17 778 - 17 778 19 079 - 19 079
(including share
of joint ventures`
and associates`
turnover)
Less: share of joint (1 872) - (1 872) (1 290) - (1 290)
ventures` and
associates` turnover
included above
Group turnover 15 906 - 15 906 17 789 - 17 789
- continuing 13 562 - 13 562 14 771 - 14 77
operations
- discontinued 2 344 - 2 344 3 018 - 3 018
operations
Net operating (13 192) (212) (13 404) (14 551) (60) (14 61
costs
Group operating 2 714 (212) 2 502 3 238 (60) 3 178
profit
- continuing 2 655 (212) 2 443 3 005 (38) 2 967
operations
- discontinued 59 - 59 233 (22) 211
operations
Share of operating 340 - 340 281 (634) (353)
profit/(loss) of joint
ventures and
associates [a]
Operating profit 3 054 (212) 2 842 3 519 (694) 2 825
(including share of
profit of joint
ventures and
associates)
Income from other 37 - 37 28 - 28
fixed asset
investments -
continuing operations
Income from other 1 - 1 4 - 4
fixed asset
investments -
discontinued
operations
Profit on sale of 13 - 13 71 128 199
fixed assets -
continuing operations
Profit on sale of 15 - 15 1 - 1
fixed assets -
discontinued
operations
Profit on sale of 68 - 68 4 - 4
subsidiaries -
continuing operations
Loss on termination of - - - - (430) (430)
operations -
continuing operations
[b]
Merger transaction - - - - (92) (92)
costs - continuing
operations
Net interest and 4 (212) - (212) (407) (6) (413)
similar items
