| Thu 28 Aug 2003, 10:00 | | Results for the year ended 30 June 2003 |
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BHP Billiton plc - Results for the year ended 30 June 2003
BHP Billiton Limited
ABN 49 004 028 077
Registered in Australia
Registered Office: 600 Bourke Street
Melbourn, Victoria 3000 Australia
Tel +61 3 9609 3333
Fax +61 3 9609 3015
BHP Billiton Plc
Registration number 3196209
Registered in England and Wales
Neathouse Place
London 3W1V 1BH United Kingdom
Tel +44 20 7802 4000
Fax +44 20 7802 4111
Share code: BIL
ISIN: GB0000566504
A member of the BHP Billiton Group which is headquartered in Australia
BHP BILLITON RESULTS FOR THE YEAR ENDED 30 JUNE 2003
EBITDA up 9.2% to US$5,129 million and EBIT up 12.2% to US$3,481 million, both
from continuing operations.
Attributable profit of US$1,920 million and earnings per share of 30.9 US cents
(both from continuing operations) impacted by adverse movements in exchange
rates compared with the corresponding period.
Total merger benefits and cost savings of US$595 million since the merger,
against a target of US$770 million by 30 June 2005.
Production for all major minerals commodities higher or in line with last year:
Record Western Australian iron ore production and shipments, in response to
strong demand in all Asian markets, particularly China.
Record nickel production and record plant throughput at Ekati(TM) diamonds,
reflecting benefits of Operating Excellence programs.
Available cash flow (after interest and tax) remains strong at US$3,590 million.
Five projects commissioned since 1 July 2002 - all on or below budget and on or
ahead of schedule. Three major projects approved.
14 major projects in development; 13 currently tracking on or ahead of cost and
commissioning targets.
Dividends of 14.5 US cents per share declared during the year, an increase of
11.5%.
FROM CONTINUING OPERATIONS AND
EXCLUDING EXCEPTIONAL ITEMS 2003 2002 Change%
Year ended 30 June US$M US$M
Turnover (1) (2) 17 506 15 228 15.0%
EBITDA (1) (2) (3) (4) 5 129 4 697 9.2%
EBIT (1) (2) (3) (4) 3 481 3 102 12.2%
Attributable profit (1) (2) (3) 1 920 1 866 2.9%
Available cash flow (1) (5) 3 590 3 600 (0.3)%
Basic earnings per share (US cents) 30.9 31.0 (0.3)%
(1) (2) (3)
EBITDA interest coverage (times) 12.7 10.9 16.5%
(1) (2) (3) (4) (6)
Dividends per share (US cents) 14.5 13.0 11.5%
(1) From continuing operations, excluding the results of the Group"s Steel
business, which was demerged in July 2002. Refer pages 16, 17 and 19.
(2) Including the Group"s share of joint ventures and associates.
(3) Excluding exceptional items.
(4) EBIT is earnings before interest and tax. EBITDA is EBIT before
depreciation and amortisation of Group companies of US$1,648 million and
US$1,595 million for the years ended 30 June 2003 and 2002 respectively. We
believe that EBIT and EBITDA provide useful information, but should not be
considered as an indication of, or alternative to, attributable profit as an
indicator of operating performance or as an alternative to cash flow as a
measure of liquidity.
(5) Available cash flow is operating cash flow including dividends from joint
ventures and associates and after net interest and tax.
(6) For this purpose, net interest includes capitalised interest and excludes
the effect of discounting on provisions and exchange differences arising from
net debt.
The above financial results are prepared in accordance with UK generally
accepted accounting principles (GAAP) and are unaudited. Financial results in
accordance with Australian GAAP are provided on page 26. All references to the
corresponding period are to the year ended 30 June 2002.
RESULTS FOR THE YEAR ENDED 30 JUNE 2003
Commentary on the Group Results
Introduction
Global economic conditions remained weak during the year ended 30 June 2003. In
what has been a challenging climate, BHP Billiton"s operating and financial
results clearly demonstrate our ability to consistently generate stable cash
flows, improve underlying profitability and increase returns to shareholders
whilst still continuing our investment in value accretive growth projects.
Attributable profit from continuing operations and excluding exceptional items
was US$1,920 million, 2.9% above last year"s result of US$1,866 million.
Compared with the corresponding period, the financial results reflect an
unfavourable non-cash exchange impact of approximately US$560 million arising
mainly from the translation of non US dollar denominated net monetary
liabilities. Excluding this non-cash impact, attributable profit was 36.4%
higher than the corresponding period reflecting generally higher prices and
sales volumes and the benefits from our cost savings program.
Production of all major minerals commodities was higher than, or in line with,
the prior period and a number of production records were achieved during the
year. Record Western Australian iron ore production of 76.5 million tonnes (100
per cent terms) and shipments of 80.3 million tonnes (100 per cent terms)
reflect strong demand in all Asian markets, particularly China. Record nickel
production at both QNI Yabulu refinery (Australia) and Cerro Matoso (Colombia),
and record plant throughput at Ekati(TM) (Canada) all reflect the benefits of
Operating Excellence programs. Fourth quarter production of all petroleum and
major minerals commodities was higher than, or in line with, the third quarter.
It is significant to note that a general improvement in our safety results
accompanied the solid production performance.
Our diversified asset base generated US$3,590 million in available cash flow
(after interest and tax) during the year, which allowed us to progress
investment in sanctioned growth projects. Following the recent commissioning of
Zamzama (Pakistan) and Mozal 2 (Mozambique), there are now 14 major capital
projects under development. 13 of these are either on or under budget and are
currently tracking on or ahead of schedule. Three projects, representing
US$1,657 million of capital expenditure (BHP Billiton share) were sanctioned
during the year. Our ability to deliver projects on or ahead of budgeted
parameters is illustrated by the five projects commissioned since 1 July 2002,
all on or under budget, and on or ahead of schedule. The projects commissioned
since 1 July 2002 involved capital expenditures amounting to US$1,073 million.
At the time of the merger, a target was set to capture US$270 million of merger
benefits by 30 June 2003. US$285 million of on-going annual benefits had been
achieved by 31 December 2002, six months ahead of schedule. Cost saving
initiatives continued, with total annual savings (including merger benefits) of
US$375 million being achieved in the current year. Of this total, US$65 million
were merger benefits achieved in the first half of the current year and US$310
million represents steady progress towards our cost savings target of US$500
million by 30 June 2005.
The confidence of the Board of Directors in the stable cash generating ability
of the business allowed an increase in dividends declared to shareholders for
the full year from 13.0 US cents per share last year to 14.5 US cents per share
in the full year ended 30 June 2003, an increase of 11.5%.
The Income Statement
During the period, the Group"s Steel business was demerged. In order to provide
meaningful comparison the discussion in this section is based on the Group"s
continuing operations, excluding exceptional items and the Group"s Steel
business.
Turnover (including turnover from third party products) rose by 15.0% to
US$17,506 million, mainly due to higher sales volumes of iron ore, energy coal,
copper, aluminium, diamonds and manganese and higher prices for petroleum
products, nickel, ferrochrome, copper, hot briquetted iron and manganese alloy.
These factors were partly offset by lower sales volumes of petroleum products
and lower prices for export energy coal and iron ore.
Earnings before interest, tax, depreciation and amortisation (EBITDA) increased
by 9.2% to US$5,129 million from US$4,697 million in the corresponding period.
Earnings before interest and tax (EBIT) were US$3,481 million compared with
US$3,102 million in the corresponding period, an increase of 12.2%. This
increase was due to generally higher commodity prices, increased sales volumes,
cost savings, lower exploration expense and increased profits from new and
acquired operations. Offsetting factors were inflationary pressures,
principally in South Africa, exchange rate impacts, increased price linked
costs, lower profits from ceased and sold operations and profits from asset
sales recorded in the corresponding period. Please refer to pages 9 and 10 for
further analysis of the factors affecting turnover and EBIT.
Net interest on borrowings and cash fell from US$432 million to US$403 million,
principally driven by lower market interest rates, lower average debt levels and
management of the Group"s debt portfolio.
Exchange losses on net debt were US$140 million compared with gains of US$180
million in the corresponding period, mainly in relation to the translation of
rand denominated debt of companies which account in US dollars as their
functional currency. The rand appreciated by 27% during the current period
compared with depreciation of 27% in the corresponding period.
The tax charge was US$984 million, representing an effective rate of 33.4%.
Excluding the impacts on tax of non tax-effected foreign currency adjustments,
translation of tax balances and other functional currency translation
adjustments, the effective rate was 26.3%. The Group recognises tax losses to
the extent that it can reasonably foresee future profits which can absorb those
losses. Following promising progress in the Group"s Gulf of Mexico (US)
projects, previously unrecognised tax losses in the US have been recouped and
have been recognised this year resulting in a reduction in the effective tax
rate of approximately 3%. If and when the projects reach appropriate milestones
that provide greater certainty over projected future profits, further benefits
in respect of past losses may be recognised.
Basic earnings per share was 30.9 US cents per share against 31.0 US cents per
share in the corresponding period, reflecting the increased number of shares on
issue (including the equalisation issue associated with the BHP Steel demerger).
Discontinued Operations / Exceptional Items
The demerger of the Group"s Steel business became unconditional on 1 July 2002.
The contribution of the Group"s Steel business in the corresponding period has
been disclosed as discontinued operations. The 6% interest in BHP Steel
retained by BHP Billiton was sold in July 2002 for US$75 million and the loss of
US$19 million associated with this sale has been recognised in the current year
and is disclosed as an exceptional item in relation to discontinued operations.
The demerger was effected through a Court approved capital reduction of A$0.69
per BHP Billiton Limited share totalling approximately US$1.5 billion (A$2.6
billion) via the transfer of BHP Steel Limited shares to BHP Billiton Limited
shareholders. Consequently, BHP Billiton Plc shareholders received
approximately 149 million BHP Billiton Plc equalisation shares.
After including discontinued operations and exceptional items, the attributable
profit for the period was US$1,901 million, US$211 million higher than the
US$1,690 million for the corresponding period, which included profits from
discontinued operations of US$68 million, together with exceptional losses of
US$244 million. Basic earnings per share, including discontinued operations and
exceptional items, was 30.6 US cents per share, 9.3% higher than the 28.0 US
cents per share of the corresponding period.
Cash Flows
Available cash flow (after interest and tax) remained strong at US$3,590
million.
Expenditure on growth projects and investments amounted to US$1,995 million,
including US$814 million on petroleum projects and US$1,181 million on minerals
and other corporate projects. Maintenance capital expenditure was US$671 million
and exploration expenditure was US$348 million, whilst disposals of fixed
assets, sale of investments and associates and repayments of loans by joint
ventures generated US$792 million.
Additionally, a net cash inflow of US$272 million was derived from the proceeds
on demerger of the Group"s Steel business. Whilst not reflected in cash flows,
Group debt further declined by US$232 million which was retained by BHP Steel
upon demerger.
Net cash inflow before dividend payments was US$1,640 million. After dividend
payments of US$830 million (up from US$811 million in the prior year), net cash
inflow (before management of liquid resources and financing) amounted to US$810
million.
Net debt of US$5,772 million at 30 June 2003 was 15.4% (US$1,050 million) lower
than last year and represents 31.9% of net debt plus net assets. Net debt
comprises US$7,324 million of total debt offset by US$1,552 million of cash,
including money market deposits.
Dividends
An interim dividend of 7.0 US cents per fully paid ordinary share was paid in
December 2002 and a final dividend of 7.5 US cents per fully paid ordinary share
was paid in July 2003, bringing the declared total for the year to 14.5 US
cents. This compares to total dividends declared in the corresponding period of
13.0 US cents per share. The BHP Billiton Limited dividends were fully franked
for Australian taxation purposes.
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.
Portfolio Management
During the year, a number of portfolio management activities were finalised.
Proceeds of US$345 million were received from the sale of our indirect 2.1%
interest in Companhia Vale do Rio Doce (CVRD), during March 2003. Our
interests in the Agua Rica prospect and Alumbrera mine in Argentina were also
sold during the year, which generated US$136 million in cash proceeds, with an
additional US$63 million deferred for receipt until June 2005.
Capital Management
Moody"s Investor Services upgraded our long-term credit rating to A2 from A3 and
our short-term rating to P-1 from P-2 during the year ended 30 June 2003. This
was as a result of the successful integration of the Group"s operations
following the merger, the benefits of our substantially diversified portfolio
and our focus on maintaining disciplined financial policies.
The Group"s stronger credit profile enabled further diversification of funding
sources, resulting in the issuance of our inaugural Euro750 million Eurobond
under the US$1.5 billion Euro Medium Term Note program and issuance of our
inaugural US$850 million Global Bond with a 10 year maturity.
In February 2003, a US$2 billion commercial paper program was established and
issuance from this program commenced during June 2003. This provides additional
diversification of our short term funding programs and enhances flexibility.
Merger Benefits and Cost Savings
At the time of the merger, a target was set to capture US$270 million of merger
benefits by 30 June 2003. US$285 million of on-going annual benefits had been
achieved by 31 December 2002, six months ahead of schedule.
A further target, to achieve additional cost savings and efficiency gains of
US$500 million by 30 June 2005, was set in our Strategic Framework in April
2002. This target is to be measured by comparing commodity-based unit costs
against base year costs for the year ended 30 June 2001. During the current
year, US$310 million of annual cost savings and efficiency gains were achieved,
which is additional to the US$285 million of merger benefits captured as
detailed above. These additional savings have been largely driven through the
continuation of our Operating Excellence program and resulting productivity
improvements across most divisions, and ongoing strategic sourcing and marketing
initiatives.
Outlook
For the third consecutive year global economic growth has been anaemic. The
fragile economic recovery felt the impact of a number of adverse developments
including the conflict in Iraq, Severe Acute Respiratory Syndrome (SARS), a
weakening US dollar and the ongoing threat of deflation. Across the industrial
economies, a combination of lower interest rates and expansionary fiscal
policies was insufficient to raise consumer and business confidence and
expectations were consistently revised downwards during the year as the forward
momentum faltered. In contrast, despite a feared SARS induced slowdown, Asian
economies have demonstrated growth, driven in particular by strong demand for
commodities in China.
In spite of the generally weak economic environment, commodity markets made some
notable gains. Nickel and aluminium prices rose and stock levels for copper and
nickel fell, average West Texas Intermediate (WTI) oil prices were just under
US$30 per barrel for the year and prices for steel making raw materials were
generally stronger, reflecting record global steel production.
China appears set for another year of strong growth. The outlook for other key
commodity markets remains fragile, although there are some promising early signs
that the more expansionary fiscal policies in some markets are starting to
create increased demand for our products. The diversity of our portfolio, and
in particular the exposure we have to the stronger Asian economies, places us
well to benefit from any global economic upturn. In the meantime, the strength
of our cash flows allows us to respond to opportunities as and when they arise
and to build on the progress we have made over the last two years.
Annual General Meetings
The Annual General Meeting of BHP Billiton Plc will be held at the Queen
Elizabeth II Conference Centre, Broad Sanctuary, Westminster, London, on Friday
24 October 2003 commencing at 10:30 am. The Annual General Meeting of BHP
Billiton Limited will be held at the Melbourne Concert Hall, St Kilda Road,
Melbourne, on Thursday 13 November 2003 commencing at 11:00 am. The Annual
Report and details of the business to be conducted at the meetings will be
mailed to shareholders in early October 2003.
Corporate Governance
Dr John Buchanan and Mr Miklos (Mike) Salamon were appointed as Directors during
the year. Shareholders will be asked to approve these appointments at the
Annual General Meetings. Mr Charles Goodyear was appointed Chief Executive
Officer on 5 January 2003 following the resignation of Mr Brian Gilbertson.
Growth Projects
Of the 14 projects currently in development, 13 are on or under budget and are
currently tracking on or ahead of schedule.
Since 1 July 2002, five projects reached commissioning stage, all either on or
under budget and on or ahead of schedule. With costing yet to be finalised on
two projects, total capital expenditure throughout the development stage is
assessed at approximately US$1,073 million, which is US$168 million or 13.5%
below budget.
Completed Projects
Customer Project Production(1) Capital Date of
Sector expenditure initial
Group (US$ million) production(2)
(1)
Budget Actual Target Actual
Petroleu Zamzama 123 million
m (Pakistan) cubic feet of 40 <40(3) Q3 Q2
BHP Billiton - 38.5% gas per day 2003 2003
Bream Gas Pipeline 7.5 million
(Australia) barrels of oil 50 34 Q2 Q4
BHP Billiton - 50% equivalent 2003 2002
over 10 years
Aluminiu Mozal 2 120,000 tonnes
m (Mozambique) per annum of 405 313(3) Q4 Q2
BHP Billiton - 47.1% aluminium 2003 2003
metal
Base Escondida Phase IV 230,000 tonnes
Metals (Chile) per annum of 600 543 Q3 Q3
BHP Billiton - 57.5% copper 2002 2002
Energy San Juan Underground 6.5 million
Coal (US) tonnes per 146 143 Q3 Q3
BHP Billiton - 100% annum of 2002 2002
energy coal
1,241 1,073
New Growth Projects
Customer Project Production(1 Budgeted Target
Sector ) capital date for
Group expenditure initial
(US$ production
million)(1) (2)
Petroleum Atlantis 79,200
(US) barrels 1,100(4) Q3 2006
BHP Billiton - 44% of oil
equivalent
per day
Angostura 45,000 bbl
(Trinidad) oil 327 Q4 2004
BHP Billiton - 45% per day
Base Metals Escondida Norte Maintain
(Chile) capacity at 230 Q4 2005
BHP Billiton - 57.5% 1.25 million
tonnes per
annum of
copper
(100%)
1,657
All references to capital expenditure and production volumes are BHP Billiton"s
share unless noted otherwise.
(2) References to quarters are based on calendar years.
(3) Total project costs yet to be finalised. Share of actual capital
expenditure is indicative only.
(4) US$355 million was approved in May 2002 to fund detailed engineering and
design work, purchasing of long lead time items, and awarding of major
contracts. Full capital funding was approved in February 2003, bringing the
total project capital cost to US$1.1 billion.
Projects Approved in Prior Years
Customer Project Production(1) Budgeted Target
Sector capital date for
Group expenditure initial
(US$ production
million)(1) (2)
Petroleum Ohanet (Algeria) 26,100 barrels 464 Q3 2003
BHP Billiton - 45% of oil
equivalent
per day
ROD (Algeria) 28,800 barrels 192 Q1 2004
BHP Billiton - 36% of oil
equivalent per
day
Mad Dog (US) 20,700 barrels 335 Q4 2004
BHP Billiton - of oil
23.9% equivalent per
day
Gulf of Mexico Capacities of 100 Q4 2004
Pipelines Oil - 450,000
Infrastructure (US) bbl/day (100%)
BHP Billiton - Gas - 500
22/25% million
standard cubic
feet per day
(100%)
North West Shelf 4.2 million 237 Q2 2004
Train 4 (Australia) tonnes per
BHP Billiton - annum of LNG
16.7% liquification
processing
facility
(100%)
Minerva (Australia) 150 123 Q1 2004(3)
BHP Billiton - 90% terrajoules
of gas per day
Aluminium Hillside 3 132,000 tonnes 449 Q4 2003
(South Africa) of aluminium
BHP Billiton - 100% per annum
Carbon Steel Area C (Australia) 12.75 million 181 Q4 2003
Materials BHP Billiton - 85% tonnes per
annum of iron
ore
Products & Capacity Increase 299 Q1 2004
Expansion export
(Australia) capacity to
BHP Billiton - 85% 100 million
tonnes
per annum of
iron ore
(100%)
Dendrobium 5.2 million 170 Q1 2005
(Australia) tonnes per
BHP Billiton - 100% annum of raw
met coal
(3.6 million
tonnes per
annum of clean
met coal)
Energy Coal Mt Arthur North 15 million
(Australia) tonnes per 411 Q4 2003
BHP Billiton - 100% annum of raw
energy coal
(12.1 million
tonnes per
annum of
saleable
energy coal)
2,961
All references to capital expenditure and production volumes are BHP Billiton"s
share unless noted otherwise.
(2) References to quarters are based on calendar years.
(3) Some delays have been experienced against the project"s original
schedule, where first gas production was expected in the first quarter of
2004.
OPERATING REVIEW
EBIT
The following table details the approximate impact of major factors affecting
EBIT (from continuing operations and excluding exceptional items) for the year
ended 30 June 2003 compared with the corresponding period.
US$M
EBIT from continuing operations and 3 102
excluding exceptional items for the year
ended 30 June 2002
Change in volumes 235
Change in sales prices 545
Price-linked costs (160)
Inflation on costs (275)
Costs 360
New and acquired operations 25
Exchange rates (190)
Ceased and sold operations (95)
Asset sales (30)
Exploration 45
Other items (81)
EBIT from continuing operations and 3 481
excluding exceptional items for the year
ended 30 June 2003
Volumes
Higher sales volumes of iron ore, energy coal, copper, aluminium, diamonds and
manganese were partly offset by lower sales volumes of petroleum products,
resulting in a positive net volume impact on EBIT of approximately US$235
million.
Prices
Higher realised prices for petroleum products, nickel, ferrochrome, copper, hot
briquetted iron and manganese alloy increased turnover by approximately US$785
million. This increase was partly offset by lower prices for export energy coal
and iron ore that decreased turnover by approximately US$240 million.
Costs
Favourable unit operating cost performance increased EBIT by approximately
US$360 million compared with the corresponding period. The Group"s cost
reduction initiatives together with increased production lowered costs by
approximately US$480 million. These factors were partially offset by higher
costs at Escondida (Chile) from processing lower grade ore due to the voluntary
production cut-backs and higher depreciation from the start-up of the Phase IV
expansion project.
Increases in price-linked costs depressed EBIT by approximately US$160 million,
mainly due to higher royalties and taxes for petroleum products and higher
nickel ore supply costs to the QNI Yabulu refinery (Australia).
Inflationary pressures, principally in South Africa, and to a lesser extent in
Australia, increased costs by approximately US$275 million.
New and acquired operations
New and acquired operations increased EBIT by approximately US$25 million due to
the commencement of commercial production at Antamina (Peru) in October 2001 and
the increased ownership interest in Cerrejon Coal Company (Colombia) from
February 2002.
Ceased and sold operations
EBIT was impacted unfavourably by approximately US$95 million mainly due to the
disposal of PT Arutmin (Indonesia), divested in November 2001 and the Rietspruit
energy coal mine (South Africa), which was closed in May 2002, together with
higher pension and medical plan costs at Southwest Copper (US).
Asset sales
The impact of asset sales is a reduction in EBIT of approximately US$30 million
mainly from the profit on divestment of PT Arutmin in the corresponding period,
partly offset by profits on sale of BHP Billiton"s interests in Alumbrera and
Agua Rica, during the current year.
Exchange rates
The impact of stronger A$/US$, rand/US$ and Canadian$/US$ exchange rates on
operating costs had an unfavourable impact on EBIT of approximately US$390
million. The conversion of rand and Australian dollar denominated net monetary
liabilities at balance sheet date also had an unfavourable impact (approximately
US$60 million) on EBIT. This was partly offset by reduced losses on legacy
A$/US$ currency hedging compared with the corresponding period of approximately
US$220 million. In addition, the lower average Colombian peso/US$ and Brazilian
real/US$ exchange rates had a favourable impact (approximately US$40 million) on
operating costs.
Exploration
Exploration expense was down by approximately US$45 million compared with the
corresponding period, which included the write off of exploration expenditure at
La Granja (Peru).
CUSTOMER SECTOR GROUP SUMMARY
The following table provides a summary of the Customer Sector Group results for
the year ended 30 June 2003 and the corresponding period (from continuing
operations and excluding exceptional items).
Year ended Turnover(1)(2) EBIT(2)
30 June
(US$
Million)
2003 2002 Change 2003 2002 Change %
%
Petroleum 3 264 2 815 16.0% 1 178 1 073 9.8%
Aluminium 3 386 2 857 18.5% 581 492 18.1%
Base Metals 1 954 1 821 7.3% 286 192 49.0%
Carbon Steel 3 714 3 306 12.3% 1 045 1 084 (3.6)%
Materials
Diamonds and 1 485 1 480 0.3% 299 272 9.9%
Specialty
Products
Energy Coal 2 089 1 919 8.9% 190 536 (64.6)%
Stainless 1 106 868 27.4% 150 3 -(3)
Steel
Materials
Group and 1 014 730 38.9% (248) (550) 54.9%
Unallocated
Items
BHP Billiton 17 506 15 228 15.0% 3 481 3 102 12.2%
Group from
Continuing
operations
BHP Billiton Group turnover is stated after the elimination of intersegment
transactions.
(2) Turnover and EBIT include third party product activities.
(3) Not meaningful.
An explanation of the factors influencing EBIT, including the Group"s share of
joint ventures and associates, by Customer Sector Group, is as follows:
Petroleum
Petroleum contributed EBIT of US$1,178 million, up from US$1,073 million, an
increase of 9.8% compared with the corresponding period.
The increase in EBIT was primarily due to higher average realised prices for all
products compared with the corresponding period, including higher average
realised oil prices of US$28.14 per barrel compared to US$22.58 per barrel,
higher average realised LPG prices of US$283.48 per tonne compared to US$232.87
per tonne and higher average realised natural gas prices of US$2.21 per thousand
standard cubic feet compared with US$1.84 per thousand standard cubic feet.
These were partly offset by higher price-linked costs (royalties and taxes).
Overall, production of petroleum products on a barrel of oil equivalent basis
declined by 9% from 134 to 122 million barrels of oil equivalent, in line with
management expectations. The decrease in production and sales volumes, which
had an unfavourable impact on EBIT, was mostly due to natural field decline at
Bass Strait (Australia), Griffin (Australia), Laminaria (Australia) and
Liverpool Bay (UK). Liverpool Bay was also impacted by downtime from scheduled
maintenance in the first quarter of the period. North West Shelf (Australia)
however, achieved higher volumes due to increased LNG demand and timing of
shipments.
EBIT was also unfavourably impacted by a write down of the Group"s Bolivian
assets in the third quarter due to a government driven change to fiscal
arrangements announced in January 2003. The effect of the stronger A$/US$
exchange rate on translation of Australian dollar denominated resource rent tax
liabilities also reduced EBIT.
Exploration charged to profit was US$154 million a similar level to that in the
corresponding period (US$151 million). The exploration spending profile for this
period was weighted to the fourth quarter, including increased spending on
seismic acquisition in the Gulf of Mexico. The capitalisation rate of 36.6% this
period compared to a capitalisation rate of 47.6% in the corresponding period
was due mainly to a higher proportion of appraisal drilling in the corresponding
period, and the return to a more normal level in the year ended 30 June 2003.
Aluminium
Aluminium contributed EBIT of US$581 million, up from US$492 million, an
increase of 18.1% compared with the corresponding period.
The increase in EBIT was mainly attributable to improved operational cost
performance resulting from reduced maintenance costs, lower costs of consumables
and increased production. Lower maintenance costs at Hillside (South Africa)
were mainly a result of a lower number of pots being relined in the current
period, combined with the absence of the net costs associated with the September
2001 power outage. Lower costs at Worsley (Australia) were due to reduced costs
of consumables. Increased production at Alumar (Brazil) and Valesul (Brazil)
was due to the end of power restrictions in Brazil and increased production at
Hillside, Worsley and Suriname was mainly attributable to the continued success
of Operating Excellence projects. The weakening of Brazilian real/US$ average
exchange rate also had a favourable impact on operating costs.
These factors were partially offset by the unfavourable impact of the
strengthening of the rand/US$ and A$/US$ average exchange rates on operating
costs and the effect of inflationary pressure on costs in South Africa.
Base Metals
Base Metals contributed EBIT of US$286 million, up from US$192 million, an
increase of 49% compared with the corresponding period.
The increase in EBIT was mainly attributable to the higher average realised
copper price at US$0.73 per pound for the year ended 30 June 2003, compared to
US$0.69 per pound in the corresponding period and increased production from
Escondida as a result of the Escondida Phase IV expansion which was completed in
October 2002. EBIT was also favourably impacted by lower exploration expense
with US$38 million relating to the write off of La Granja included in the
corresponding period and the gain on sale of US$23 million of BHP Billiton"s
interests in Alumbrera and Agua Rica, realised in June 2003. EBIT also benefited
from a full year of operations from Antamina, which commenced commercial
production in October 2001.
These factors were partially offset by increased unit costs at Escondida due to
the mining of lower grade ore (due to voluntary production cut-backs), costs
associated with the start up of Phase IV production and higher depreciation
charges associated with the Phase IV expansion project. Higher pension and
medical plan costs at Southwest Copper, together with costs incurred in the
current year associated with the development of the Alliance Copper prototype
plant and lower realised lead and zinc prices also had an unfavourable impact on
EBIT.
Carbon Steel Materials
Carbon Steel Materials contributed EBIT of US$1,045 million, down from US$1,084
million, a decrease of 3.6% compared with the corresponding period.
The decrease in EBIT was mainly attributable to the unfavourable impact of
stronger A$/US$ average exchange rates on operating costs compared to the
corresponding period and inflationary pressures on costs in Australia and South
Africa. Lower iron ore prices, following the contract settlements announced in
May 2002, also negatively impacted EBIT.
These factors were partially offset by record production and shipments of
Western Australian iron ore in response to continued strong demand from all
Asian markets, as well as higher production of Samarco (Brazil) pellets and
manganese products, which also reflected increased customer demand. Improved
operating performance at Boodarie(TM) Iron (Australia), lower costs due to
increased production at Illawarra Coal (Australia) and higher prices for
Boodarie(TM) Iron and manganese alloy also had a favourable impact on EBIT.
Diamonds and Specialty Products
Diamonds and Specialty Products contributed EBIT of US$299 million, up from
US$272 million, an increase of 9.9% compared with the corresponding period.
The increase in EBIT was primarily due to increased diamond production and lower
costs at Ekati(TM), mainly as a result of increased plant throughput and
processing efficiencies. Whilst the titanium market remains oversupplied, an
increase in titanium shipments in the current period favourably impacted EBIT.
Cost efficiencies were also achieved by Integris Metals (US) subsequent to the
merger of BHP Billiton"s and Alcoa Metals" metals distribution businesses on 1
November 2001.
These factors were partially offset by lower sales volumes at Integris due to
adverse market conditions in North America, together with the unfavourable
impact of the strengthening of the rand/US$ and Canadian$/US$ average exchange
rates on operating costs.
Energy Coal
Energy Coal contributed EBIT of US$190 million, down from US$536 million, a
decrease of 64.6% compared with the corresponding period.
The decrease in EBIT was primarily due to a 15% decline in South African export
market prices. The divestment of PT Arutmin in November 2001 and the closure of
the Rietspruit mine in May 2002 had an unfavourable impact on EBIT with both the
exclusion of the results of these operations in the current period and the US$64
million profit on sale of PT Arutmin recorded in the corresponding period. The
conversion of rand denominated net monetary liabilities at balance date, in
addition to the impact of stronger rand/US$ average exchange rates on operating
costs, also had an unfavourable impact on EBIT. Furthermore, costs in South
Africa have been affected unfavourably by inflationary pressures.
These factors were partially offset by higher sales volumes at Ingwe (South
Africa), and at Hunter Valley (Australia) with the Mount Arthur North project
ramping up production. Cost improvement initiatives across all Energy Coal
operations and the inclusion of profits from the additional share of the
Cerrejon Coal Company operation, acquired in February 2002, also had a
favourable impact on EBIT. The impact of weaker Colombian peso/US$ average
exchange rates on operating costs together with improved results at New Mexico
Coal (US) generated by increased customer demand also favourably impacted EBIT.
Stainless Steel Materials
Stainless Steel Materials contributed EBIT of US$150 million, up from US$3
million, an increase of US$147 million.
The increase in EBIT was driven by higher realised prices for nickel, up by 29%
from US$2.69 per pound to US$3.46 per pound. In addition, the realised price
for ferrochrome was higher in the current period in response to strong demand in
a more balanced market. Benefits from ongoing improvement programs at both
Cerro Matoso and QNI Yabulu refinery, an increase in nickel production,
reflecting the ramp-up of production from Cerro Matoso Line 2, and an increase
in ferrochrome production, associated with the restart of idle furnaces, also
had a favourable impact on EBIT.
These factors were partially offset by the unfavourable impact of inflationary
pressures on costs in South Africa, higher nickel ore supply costs to the QNI
Yabulu refinery and the unfavourable impact of stronger rand/US$ and A$/US$
average exchange rates on operating costs.
Group and Unallocated Items
Losses on legacy A$/US$ currency hedging were US$86 million, compared with
US$305 million in the corresponding period. Corporate costs of US$220 million
were US$105 million lower than the same period last year. These reductions were
partly offset by the unfavourable impact of one-off items.
FINANCIAL INFORMATION
Contents
Consolidated Profit and Loss 16
Account
Consolidated Balance Sheet 18
Consolidated Statement of
Total Recognised Gains and Losses 18
Consolidated Statement of Cash 19
Flows
Notes to the Financial Information 21
The financial information in this document for the year ended 30 June 2003 is
unaudited, has been derived from the draft financial statements of BHP Billiton
Plc and does not constitute the statutory accounts of BHP Billliton Plc for that
year.
The financial information set out on pages 16 to 25 has been prepared on the
same basis and using the same accounting policies as were applied in drawing up
the financial information contained in the accounts of BHP Billiton Plc for the
year ended 30 June 2002.
In the opinion of the Directors, the financial information for the year ended 30
June 2003 presents fairly the financial position, results of operations and cash
flows for the year in conformity with UK generally accepted accounting
principles (GAAP). The financial information for the year ended 30 June 2002
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 of the year ended 30 June 2002 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 2003 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 2003, 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. Financial results prepared in
accordance with Australian GAAP are provided on page 26.
Consolidated Profit and Loss Account
For the year ended 30 June 2003
Year ended 30 June 2003
Continuing Discontinued Total
Operations Operations/
Exceptional
Items
Notes US$M US$M US$M
Turnover (including share of
joint ventures and associates)
Group production 14 124 - 14 124
Third party products 3 382 - 3 382
2 17 506 - 17 506
less Share of joint ventures"
and associates" turnover
included above (1 898) (1 898)
Group turnover 15 608 - 15 608
Net operating costs 1 (12 554) - (12 554)
Group operating profit/(loss) 3 054 - 3 054
Share of operating profit of 358 - 358
joint ventures and associates
Operating profit/(loss)
(including share of profit of 3 412 - 3 412
joint ventures and associates)
Comprising:
Group production 3 369 - 3 369
Third party products 43 - 43
3 412 - 3 412
Income from other fixed asset 16 - 16
investments
Profit on sale of fixed assets 46 - 46
Profit on sale of operations 7 - 7
Loss on termination of operations 1 - - -
Loss on sale of discontinued 1 - (19) (19)
operations
Profit/(loss) before net interest 3 481 (19) 3 462
and similar items payable and
taxation
Net interest and similar items
payable
Group 3 (444) - (444)
Joint ventures and associates 3 (93) - (93)
Profit/(loss) before taxation 2 2 944 (19) 2 925
Taxation 1,6 (984) - (984)
Profit/(loss) after taxation 1 960 (19) 1 941
Equity minority interests (40) - (40)
Profit/(loss) for the financial 1 920 (19) 1 901
year (attributable profit)
Dividends to shareholders (900) - (900)
Retained profit/(loss) for the 1 020 (19) 1 001
financial year
Earnings per ordinary share 30.9 (0.3) 30.6
(basic) (US cents)
Earnings per ordinary share 30.9 (0.3) 30.6
(diluted) (US cents)
Dividend per ordinary share 14.5
(US cents)
Consolidated Profit and Loss Account continued
Year ended 30 June 2002
Continuin Except Contin Discon Total
g i uing t
Operation Onal Operat inued
s Items ions Opera
Includin tions
g
Exceptio
n
al
Items
US$M US$M US$M US$M US$M
Notes
Turnover (including share
of
joint ventures and 13 038 - 13 038 2 550 15 588
associates) 2 190 - 2 190 - 2 190
Group production
Third party products
2 15 228 15 228 2 550 17 778
less Share of joint
ventures"
and associates" turnover (1 666) - (1 666) (206) (1
included above 872)
Group turnover 13 562 - 13 562 2 344 15 906
Net operating costs 1 (10 907) (111) (11 018) (2 (13
285) 303)
Group operating profit/(loss) 2 655 (111) 2 544 59 2 603
Share of operating profit of
joint ventures and associates
329 - 329 11 340
Operating profit/(loss)
(including share of profit 2 984 (111) 2 873 70 2 943
of joint ventures and
associates)
Comprising:
Group production 2 956 (111) 2 845 70 2 915
Third party products 28 - 28 - 28
2 984 (111) 2
