| Thu 19 Feb 2004, 8:40 | | RESULTS FOR THE HALF YEAR Ended 31 DECEMBER 2003 |
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BHP BILLITON RESULTS FOR THE HALF YEAR Ended 31 DECEMBER 2003
BHP Billiton Plc
Share code: BIL
ISIN: GB0000566504
Date 19 February 2004
BHP BILLITON RESULTS FOR THE
HALF YEAR Ended 31 DECEMBER 2003
- EBITDA (excluding exceptional items) up 23.0% to US$3,119 million and EBIT
(excluding exceptional items) up 31.6% to US$2,183 million mainly reflecting
increased commodity prices and operating performance, partly offset by adverse
foreign exchange impacts.
- Strong increase in attributable profit excluding exceptional items to US$1,213
million, up 30.3% (US$1,339 million, up 46.8%, including exceptional items),
despite adverse movements in exchange rates of approximately US$230 million
compared to the corresponding period.
- Available cash flow (after interest and tax) of US$1,681 million, up 42.6%.
- Half yearly production records in iron ore, aluminium, alumina, nickel and
diamonds.
- Total merger benefits and cost savings of US$655 million since the merger,
against a target of US$770 million by 30 June 2005.
- Five major growth projects commissioned since 30 June 2003 - Ohanet gas
(Algeria), Hillside 3 aluminium (South Africa), Mount Arthur North (Australia),
Mining Area C iron ore and iron ore port expansion (both Australia).
2003 2002 Change
Half year ended 31 December US$M US$M %
Turnover (1) 10 963 8 048 36.2%
EBITDA (1) (2) (3) 3 119 2 536 23.0%
EBIT (1) (2) (3) 2 183 1 659 31.6%
Attributable profit 1 213 931 30.3%
(excluding exceptional items)
(1)
Attributable profit 1 339 912 46.8%
(including exceptional items)
(1)
Available cash flow (4) 1 681 1 179 42.6%
Basic earnings per share (US 19.5 15.0 30.0%
cents) (1) (2)
EBITDA interest coverage 14.8 12.7 16.5%
(times) (1) (2) (3) (5)
Dividend per share (US cents) 8.0 7.0 14.3%
(1) Including the Group"s share of joint ventures and associates.
(2) Excluding exceptional items.
(3) EBIT is earnings before interest and tax. EBITDA is EBIT before
depreciation and amortisation of US$936 million (comprising Group depreciation
and amortisation of US$853 million and joint venture and associate depreciation
and amortisation of US$83 million) for the half year ended 31 December 2003 and
US$877 million (comprising Group depreciation and amortisation of US$792 million
and joint venture and associate depreciation and amortisation of US$85 million)
for the half year ended 31 December 2002. 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.
(4) Available cash flow is operating cash flow including dividends from joint
ventures and associates and after net interest and tax.
(5) 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 28. All references to the
corresponding period are to the half year ended 31 December 2002.
RESULTS FOR THE HALF YEAR ENDED 31 DECEMBER 2003
Commentary on the Group Interim Results
Introduction
The significant growth in the Group"s operating and financial performance for
the half year ended 31 December 2003 reflects the consistent execution of its
business strategy over the last several years. The Group has focussed on: 1)
maximising the performance of its operating assets; 2) identifying opportunities
to save cost through the sharing of best practices, including benefiting from
its economies of scale, and; 3) utilising its stable cash flow to reinvest in
its substantial number of growth projects.
Earnings before interest and tax (excluding exceptional items) was US$2,183
million, 31.6% higher than the corresponding period of US$1,659 million,
reflecting higher prices for all commodities, increased sales volumes for
copper, metallurgical coal, diamonds, iron ore and aluminium, and lower
operating costs, partly offset by adverse foreign exchange impacts.
Attributable profit (excluding exceptional items) increased by 30.3% to US$1,213
million compared with the corresponding period of US$931 million. BHP Billiton
operates under a US dollar functional currency based on the fact that the vast
majority of our revenue is US dollar denominated. One major profit impact of
operating as a US dollar functional currency company is the translation of non
US dollar denominated net monetary liabilities at balance date, with the
movement from the corresponding period taken directly to the profit and loss
account in the current period. These are non-cash restatements and reduced
attributable profit by approximately US$230 million compared with the
corresponding period. Attributable profit including exceptional items was
US$1,339 million, an increase of 46.8% from the corresponding period.
Our strong operating performance is reflected in a number of production records
being set during the half year. Western Australian iron ore production of 44.9
million tonnes (100 per cent terms) and despatches of 44.0 million tonnes (100
per cent terms) were both records, driven by strong demand in all Asian markets,
particularly China. Aluminium production was a record at 590,000 tonnes,
following the early commissioning of the Mozal 2 expansion in Mozambique and the
Hillside 3 expansion in South Africa. The benefits of operating excellence
initiatives have also contributed to half yearly production records being set
for nickel, alumina and diamonds.
Building on the merger benefits and cost savings generated to 30 June 2003,
additional savings of US$60 million achieved during the current half year brings
total savings to US$655 million since the merger. The Group is confident of
achieving its previously announced target of US$770 million by 30 June 2005.
Progress continued with our pipeline of projects with first gas production at
the Ohanet wet gas development in Algeria, first metal being cast at the
Hillside aluminium smelter expansion in South Africa, full production achieved
at the Mozal 2 aluminium smelter expansion project in Mozambique, and the first
iron ore shipment from Mining Area C in Western Australia, through the newly
expanded port facilities. Each of these projects was completed on or under
budget, and on or ahead of schedule. The Group currently has nine major growth
projects in development.
EBIT margin before exceptional items and third party product sales was 26.8%
compared to 24.6% for the corresponding period.
This performance has enabled the Group to continue its progressive dividend
policy with a 14.3% increase in the first half dividend compared with last year,
while continuing to progress our pipeline of value accretive growth projects.
The Income Statement
Turnover rose by 36.2% to US$10,963 million, mainly due to higher sales volumes
of copper, metallurgical coal, diamonds, iron ore and aluminium and higher
prices for copper, nickel, aluminium, petroleum products, chrome, energy coal,
iron ore, hot briquetted iron, diamonds and manganese. Turnover includes sales
of third party product which increased by US$1,483 million to US$2,829 million
due to higher prices and volumes. These factors were partly offset by lower
sales volumes of petroleum products and titanium feedstock products.
Earnings before interest, tax, depreciation and amortisation (EBITDA) excluding
exceptional items increased by 23.0% to US$3,119 million from US$2,536 million
in the corresponding period.
Earnings before interest and tax (EBIT) excluding exceptional items were
US$2,183 million compared with US$1,659 million in the corresponding period, an
increase of 31.6%. This increase was due to higher commodity prices, cost
savings, increased sales volumes and profits from asset sales. Offsetting
factors were exchange rate impacts, increased price linked costs, inflationary
pressures principally in Australia and South Africa, higher exploration
expenditure and lower profits of ceased, sold and discontinued operations in the
corresponding period. Further analysis of the factors affecting turnover and
EBIT is set out on page 7 and 8.
Net interest on borrowings and cash increased to US$211 million from US$200
million in the corresponding period, principally driven by costs associated with
restructuring the Group"s debt portfolio, partially offset by lower average debt
levels.
Exchange losses on net debt were US$89 million compared to net losses of US$58
million in the corresponding period.
The tax charge excluding exceptional items was US$658 million, representing an
effective rate of 34.8%. Excluding the impacts on tax of non tax-effected
foreign currency adjustments, translation of tax balances and other functional
currency translation adjustments, mainly attributable to the strengthening of
both the South African rand and Australian dollar against the US dollar during
the period, the effective rate was 27.3%. The Group has continued to recoup
unrecognised tax losses in the US, which resulted in a 2.6% reduction in the
effective tax rate of the Group (US$50 million). In addition, investment
incentives and development entitlements which have been able to be recognised
during the current half year, further reduced the effective tax rate by
approximately 3%.
Attributable profit excluding exceptional items (after minority interests of
US$18 million) was US$1,213 million, an increase of 30.3% from US$931 million
(after minority interests of US$17 million), largely due to the positive impacts
on EBIT.
Excluding the impact of exceptional items, basic earnings per share was 19.5 US
cents against 15.0 US cents in the corresponding period, an increase of 30.0%.
Exceptional Items
In December 2003, BHP Billiton announced that it was part of a consortium that
had reached a settlement with Dalmine SpA with respect to a claim brought
against Dalmine in April 1998. The claim followed the failure of an underwater
pipeline installed in 1994 in the Liverpool Bay area of the UK continental
shelf. As a result of the settlement, BHP Billiton has recorded an exceptional
gain of US$66 million (US$48 million after tax).
During the current half year, BHP Billiton has elected to consolidate its
Australian subsidiaries under the Australian tax consolidation regime, as
introduced by the Australian Federal Government. Under the transitional rules,
the Group has chosen to reset the tax cost base of certain depreciable assets
which will result in additional tax depreciation over the lives of the assets.
This has resulted in the restatement of deferred tax balances and an exceptional
tax benefit of US$78 million being recorded in accordance with UK Generally
Accepted Accounting Principles.
Attributable profit including exceptional items (after minority interests of
US$18 million) was US$1,339 million, an increase of 46.8% from US$912 million
(after minority interests of US$17 million).
Including the impact of exceptional items, basic earnings per share was 21.5 US
cents against 14.7 US cents in the corresponding period, an increase of 46.3%.
Cash Flows
Available cash flow (after interest and tax) increased by 42.6% to US$1,681
million.
Expenditure on growth projects and investments amounted to US$836 million,
including US$383 million on petroleum projects and US$453 million on minerals
and other corporate projects. Sustaining capital expenditure was US$400 million
and exploration expenditure was US$193 million, while disposals of fixed assets,
sale of investments and associates and repayments of loans by joint ventures
generated US$108 million.
Net cash flow before dividend payments was US$360 million. Dividends paid in
the period were US$959 million compared with US$830 million in the corresponding
period.
Net debt of US$6,386 million at 31 December 2003 represents 32.3% of net debt
plus net assets. Net debt comprises US$7,198 million of total debt offset by
US$812 million of cash, including money market deposits.
Cost Savings
In addition to targeted merger benefits of US$270 million, in April 2002 under
our Strategic Framework, we set a further target for annual cost savings of
US$500 million to be achieved by 30 June 2005. The target is measured by
comparing current commodity based unit costs, with those of the 30 June 2001
financial year after adjusting for inflation, exchange rate movements and other
one-off items. Cost savings are driven by the continuation of our Operating
Excellence program (comprising the three key elements of leadership, process
improvement and technology), strategic sourcing and marketing initiatives.
During the current half year, we achieved savings of US$60 million. Combined
with total merger benefits and cost savings of US$595 million achieved to 30
June 2003, this brings our total benefits and savings since the merger to US$655
million.
Portfolio Management
The sale of a non-core royalty interest by Diamonds and Specialty Products
generated a profit of US$37 million before tax in the current half year. In
December 2003, the Group announced it had entered into agreements to sell its
33.6% interest in Highland Valley Copper mine in Canada and the Robinson
copper/gold mine in the US. These sales will be recognised when completed,
which is expected to be in the second half of this financial year if certain
conditions precedent are met.
Dividend
On 3 December 2003, a dividend of 8.0 US cents per share was paid to BHP
Billiton Limited and BHP Billiton Plc shareholders, representing an increase of
14.3% on the interim dividend of 7.0 US cents per share paid in December 2002.
The BHP Billiton Limited dividend was fully franked for Australian taxation
purposes.
Capital Management
In October 2003, Standard & Poor"s upgraded the Group"s long term credit rating
from A to A+. The benefit of a diversified portfolio, strong financial
performance, disciplined financial policies and the successful integration of
the Group"s operations following the merger underpinned the upgrade.
Contingent Liabilities
On 18 December 2003, the Victorian Supreme Court action in relation to Ok Tedi
(Papua New Guinea) brought by Rex Dagi against BHP Billiton Limited was
discontinued and on 16 January 2004 the Victorian Supreme Court approved the
settlement of the Gagarimabu class action and dismissed the claim against BHP
Billiton Limited. The settlement involves no further cost to the Group and the
plaintiffs acknowledging that the Group has, at all times, complied with the
1996 Terms of Settlement. The Group no longer has a contingent liability in
relation to Ok Tedi.
Corporate Governance
Mr Cornelius Herkstroter retired as a Director in the December quarter and a
worldwide search is underway for a replacement.
The Group completed a review of its joint external audit services and resolved
that the audit could be more efficiently undertaken by a single audit firm. As
a result of this review, KPMG was selected to continue as sole auditor.
During the half year, the Group announced that it would no longer report
quarterly financial results. This decision brings the Group into line with its
major peers and follows standard practice in the Australian and UK markets of
reporting half and full year results only. BHP Billiton will release its full
year results in August 2004.
Outlook
China continues to record strong domestic growth, providing the impetus for a
recovery in other Asian economies. Continued expansionary monetary and fiscal
policies in the other major economies have provided the basis for improving
business conditions around the world. Recovery in the US has been reinforced by
an upturn in investment, rising manufacturing orders and output, and robust
expectations for future production, employment and exports. European countries
are benefiting from an upturn in global trade, although the strength of the Euro
against the US dollar is a cause for concern. Japan continues to record strong
quarterly growth. Although not without risks, a synchronised global recovery is
a possibility.
BHP Billiton is well placed to take advantage of both current strong demand and
the continued recovery in global economies. In the short term we will continue
to optimise the performance of our existing assets and, where possible,
accelerate smaller scale expansions utilising existing infrastructure to service
market requirements whilst maximising capital efficiency. In addition, we will
bring forward larger, brownfield and greenfield, organic growth opportunities in
certain commodities where we see continued demand growth, enabling us to meet
the longer term needs of our customers. As a result of recent successful
exploration results, we will increase funding for petroleum exploration by
US$100 million in FY2004. Our strong cash flow and balance sheet leave us well
placed to pursue all of these activities.
TRADING REVIEW
EBIT
The following table and commentary detail the approximate impact of major
factors affecting EBIT (excluding exceptional items) for the half year ended 31
December 2003 compared with the corresponding period.
US$M
EBIT excluding exceptional items for the half year ended 1 659
31 December 2002
Change in volumes 45
Change in sales prices 1 005
Price-linked costs (85)
Inflation on costs (90)
Costs 65
New and acquired operations 10
Ceased, sold and discontinuing operations (20)
Asset sales 55
Exchange rates (455)
Exploration (30)
Other items 24
EBIT excluding exceptional items for the half year ended 2 183
31 December 2003
Volumes
Higher sales volumes of copper, metallurgical coal, diamonds, iron ore and
aluminium increased EBIT. This was partly offset by lower sales volumes of
petroleum products and titanium feedstock products, resulting in a positive net
volume impact on EBIT of US$45 million.
Prices
Higher prices for all major commodities increased EBIT by US$1,005 million.
Costs
Favourable operating cost performance increased EBIT by US$65 million compared
with the corresponding period.
Increases in price-linked costs decreased EBIT by US$85 million, mainly due to
higher nickel ore supply costs to the QNI Yabulu refinery (Australia), increased
taxes for petroleum products and increased costs linked to higher LME prices.
Inflationary pressures, principally in Australia and South Africa, increased
costs by US$90 million.
New and acquired operations
New and acquired operations increased EBIT by US$10 million due to the
commencement of commercial production from the Ohanet wet gas development in
Algeria from October 2003.
Ceased, sold and discontinuing operations
The corresponding period included EBIT of US$20 million mainly from the
Alumbrera mine (Argentina) which was divested effective April 2003.
Asset sales
The impact of asset sales is an increase in EBIT of US$55 million mainly due to
the sale of a non-core royalty interest (of US$37 million) in the current
period.
Exchange rates
The unfavourable exchange rate impact on EBIT of US$455 million was primarily
due to the effects of stronger A$/US$ and rand/US$ exchange rates on operating
costs. The conversion of rand and A$ denominated net monetary liabilities at
balance sheet date also had an unfavourable impact (US$75 million), which was
mainly due to the A$/US$ exchange rate appreciating 12.3% during the current
period compared with no movement in the corresponding period. This was partly
offset by gains on legacy A$/US$ currency hedging of US$30 million in the
current period, a favourable impact of US$125 million when compared to losses of
US$95 million in the corresponding period.
Exploration
Exploration expense was up by US$30 million. Gross exploration spending was
US$193 million, comprising petroleum exploration of US$153 million and minerals
exploration of US$40 million, compared with US$130 million in the corresponding
period. The capitalisation rate for petroleum exploration was 49.7% in the
current half year, compared to 47.4% in the corresponding period.
CUSTOMER SECTOR GROUP SUMMARY
The following table provides a summary of the Customer Sector Group results for
the half year ended 31 December 2003 and the corresponding period (before
exceptional items).
Half year ended Turnover (1) EBIT (1)
31 December (US$
Million)
2003 2002 Change % 2003 2002 Change %
Petroleum 2 245 1 511 48.6% 602 660 (8.8%)
Aluminium 2 023 1 535 31.8% 307 266 15.4%
Base Metals 1 351 897 50.6% 333 83 301.2%
Carbon Steel 2 206 1 747 26.3% 505 506 (0.2)%
Materials
Diamonds and 758 716 5.9% 195 150 30.0%
Specialty
Products
Energy Coal 1 242 947 31.2% 85 124 (31.5)%
Stainless Steel 744 491 51.5% 193 61 216.4%
Materials
Group and 810 424 91.0% (37) (191) N/A
unallocated items
BHP Billiton 10 963 8 048 36.2% 2 183 1 659 31.6%
Group (2)
(1) Turnover and EBIT include trading activities comprising the sale of third
party product.
(2) BHP Billiton Group turnover is stated after the elimination of intersegment
transactions.
An explanation of the factors influencing EBIT before exceptional items,
including joint ventures and associates, by Customer Sector Group, is as
follows:
Petroleum
Petroleum contributed EBIT of US$602 million, down from US$660 million, a
decrease of 8.8% compared with the corresponding period.
The decrease in EBIT was mainly attributable to lower liquids production,
appreciation of the A$/US$ exchange rate, higher exploration expenditure and
losses on the sale of third party product. Offsetting these factors were
stronger product prices (net of price-linked costs), higher gas volumes and new
production from Ohanet (Algeria) and Boris (US).
Overall, production of petroleum products on a barrel of oil equivalent basis
declined by 1% from 63.1 million barrels to 62.4 million barrels in the current
half year, with oil and condensate production declining by 13% from 34.9 million
barrels to 30.4 million barrels. Lower oil production was due to expected
natural field decline at Laminaria (Australia), Bass Strait (Australia) and
Griffin (Australia). Offsetting this was higher production from Liverpool Bay
(UK), the commissioning of Boris North (US) in September 2003, and Boris South
(US) in February 2003 and the commissioning of Ohanet in October 2003. Natural
gas production increased due to the successful commissioning of the Zamzama
(Pakistan) Phase 1 project in July 2003, together with increased production from
Liverpool Bay.
The conversion of A$ denominated net monetary liabilities, mainly resource rent
tax, had an unfavourable impact on EBIT of US$40 million compared with the
corresponding period. For the period, gross exploration expenditure was US$153
million, which was US$58 million higher than the corresponding period. The
increased spending resulted in a higher level of exploration charged to profit
(US$77 million in the current period compared to US$50 million in the
corresponding period) despite an improved capitalisation rate of approximately
50%. This increase in spending was mainly due to increased activity in the Gulf
of Mexico and Trinidad and Tobago, following successful drilling results.
The decrease in EBIT was partly offset by higher average realised prices. The
average realised oil price was US$29.40 per barrel compared to US$27.19 per
barrel in the corresponding period. The average realised natural gas price was
US$2.37 per thousand standard cubic feet compared to US$1.98 per thousand
standard cubic feet in the corresponding period.
Aluminium
Aluminium contributed EBIT of US$307 million, up from US$266 million, an
increase of 15.4% compared with the corresponding period.
The increase in EBIT was mainly attributable to higher realised aluminium prices
due to the average aluminium LME price increasing to US$1,474 per tonne in the
current period, compared to US$1,332 per tonne in the corresponding period,
together with higher realised alumina prices. Higher sales volumes from Mozal 2
(Mozambique) and Hillside 3 (South Africa) following full commissioning in
August 2003 and December 2003 respectively, also had a favourable impact on
EBIT.
These factors were partially offset by higher LME price-linked costs, the
unfavourable impact of strengthening A$/US$ and rand/US$ average exchange rates
on operating costs, and increased transportation costs. The commissioning of
Mozal 2 and Hillside 3 has also led to higher in-process stocks and finished
goods.
Base Metals
Base Metals contributed EBIT of US$333 million, up from US$83 million, an
increase of US$250 million compared with the corresponding period.
The increase in EBIT was mainly attributable to the higher average realised
copper price of US$0.96 per pound for the half year ended 31 December 2003,
compared to US$0.68 per pound in the corresponding period. Higher prices for
silver, lead and zinc also had a favourable impact on EBIT. Copper production
was 8% higher in the current period mainly due to increased production from the
commissioning of the Phase IV expansion project at Escondida (Chile) in October
2002, and the resumption of sulphide mining operations at Tintaya (Peru) in
August 2003.
These factors were partially offset by higher production costs at Antamina
(Peru) due to ore access being restricted to the flanks of the deposit and at
Escondida due to higher depreciation charges associated with the Phase IV
expansion project. The stronger A$/US$ and Chilean peso/US$ average exchange
rates also had an unfavourable impact on EBIT. The corresponding period includes
the results of the Alumbrera mine, which was sold effective April 2003.
Carbon Steel Materials
Carbon Steel Materials contributed EBIT of US$505 million, in line with the
US$506 million in the corresponding period.
EBIT was unfavourably impacted by the stronger A$/US$ and rand/US$ average
exchange rates on operating costs compared with the corresponding period, as
well as unfavourable inflationary pressure on Australian and South African
operations.
These factors were largely offset by higher iron ore prices following contract
settlements announced in May 2003 and stronger prices for hot briquetted iron.
Higher production at the Western Australian iron ore operations and the
Queensland Coal operations led to improved cost performance. Increased shipments
at Queensland Coal and record shipments of iron ore, both in response to
continued strong customer demand, had a favourable impact on EBIT as did
stronger prices for manganese alloys and continuing improvements in the
operating performance of Boodarie Iron (Australia).
Diamonds and Specialty Products
Diamonds and Specialty Products contributed EBIT of US$195 million, up from
US$150 million, an increase of 30.0% compared with the corresponding period.
The increase in EBIT was mainly attributable to profits realised on the sale of
a non-core royalty interest (US$37 million) and mineral rights. Higher average
realised diamond prices, up 14% from the corresponding period, and increased
diamond sales, up 25% from the corresponding period due to the processing of a
pocket of high-grade ore, had a favourable impact on EBIT. Processing
efficiencies achieved at Ekati (Canada) also impacted EBIT favourably.
These factors were partially offset by lower volumes of titanium feedstock in
response to weaker market conditions. The unfavourable impact of strengthening
rand/US$ and Canadian$/US$ average exchange rates on operating costs also had a
negative impact on EBIT.
Energy Coal
Energy Coal contributed EBIT of US$85 million, down from US$124 million, a
decrease of 31.5% compared with the corresponding period.
The decrease in EBIT was primarily due to the unfavourable impact of stronger
rand/US$ and A$/US$ average exchange rates on operating costs and the conversion
of rand and A$ denominated net monetary liabilities at balance date. In
addition, lower exports due to lower availability from Ingwe (South Africa),
down 12% in the current half year, had an unfavourable impact on EBIT. Increased
unit costs at Ingwe, due to the production mix between mines and additional
contractor costs at that operation, and inflationary pressures in South Africa,
also impacted EBIT negatively.
These factors were partially offset by stronger export prices, cost savings at
Cerrejon Coal (Colombia) due to integration synergies and business improvement
programs, and increased volumes at Hunter Valley (Australia) and Cerrejon Coal.
Stainless Steel Materials
Stainless Steel Materials contributed EBIT of US$193 million, up from US$61
million, an increase of US$132 million or 216% compared with the corresponding
period.
The increase in EBIT was driven by higher realised prices for nickel, up 49% on
the corresponding period from US$3.16 per pound to US$4.72 per pound, and higher
prices for ferrochrome compared to the corresponding period.
These factors were partially offset by the unfavourable impact of stronger
rand/US$ and A$/US$ average exchange rates on operating costs. Higher price-
linked nickel ore supply costs to the QNI Yabulu refinery and higher price-
linked royalty costs at Cerro Matoso (Colombia) also adversely affected EBIT.
Group and Unallocated Items
Net corporate operating costs, excluding gains and losses from legacy A$/US$
currency hedging and other exchange impacts, were US$102 million compared with
US$111 million in the corresponding period.
Gains on legacy A$/US$ currency hedging were approximately US$30 million during
the current half year, compared with losses of approximately US$95 million in
the corresponding period.
INTERIM FINANCIAL INFORMATION
CONTENTS
INDEPENDENT REVIEW REPORT OF THE AUDITOR
TO BHP BILLITON PLC 14
CONSOLIDATED PROFIT AND LOSS ACCOUNT 15
CONSOLIDATED STATEMENT OF TOTAL
RECOGNISED GAINS AND LOSSES 16
CONSOLIDATED BALANCE SHEET 17
CONSOLIDATED STATEMENT OF CASH FLOWS 18
NOTES TO INTERIM FINANCIAL INFORMATION 20
The interim financial information set out on pages 15 to 27 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 2003 except for the change in accounting policy for
employee share awards referred to in Note 1. The interim financial information
should be read in conjunction with the accounts of BHP Billiton Plc for the year
ended 30 June 2003 and does not include all information normally contained
within the notes to annual accounts. Where applicable, comparatives have been
adjusted to disclose them on the same basis as current period figures.
The financial information for the half years ended 31 December 2003 and 31
December 2002 has been subject to review by the auditor but is unaudited. In the
opinion of the Directors, the financial information for these periods presents
fairly the financial position, results of operations and cash flows for the
periods in conformity with UK generally accepted accounting principles (GAAP).
The financial information for the year ended 30 June 2003 has been derived from
the audited financial statements of BHP Billiton Plc for that period as filed
with the UK 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 2003 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.
INDEPENDENT REVIEW REPORT OF THE AUDITOR TO BHP BILLITON PLC
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 31 December 2003 set out on pages 15 to 27 and we have read
the other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Listing
Rules of the United Kingdom Financial Services Authority. Our review has been
undertaken so that we might state to the Company those matters we are required
to state to it in this report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the Company for our review work, for this report, or for the conclusions we have
reached.
Directors" responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the United Kingdom Financial Services Authority which require that the
accounting policies and presentation applied to the interim figures should be
consistent with those applied in preparing the preceding annual accounts except
where they are to be changed in the next annual accounts, in which case any
changes, and the reasons for them, are to be disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin
1999/4: "Review of Interim Financial Information" issued by the Auditing
Practices Board for use in the United Kingdom. A review consists principally of
making enquiries of management and applying analytical procedures to the
financial information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed and excludes audit procedures
such as tests of controls and verification of assets, liabilities and
transactions. A review is substantially less in scope than an audit performed in
accordance with United Kingdom Auditing Standards and therefore provides a lower
level of assurance than an audit. Accordingly we do not express an audit opinion
on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 December 2003.
KPMG Audit Plc
Chartered Accountants
London, 19 February 2004
Consolidated Profit and Loss Account
for the half year ended 31 December 2003
Half year ended
31 December 2003
Excluding Exceptional
exceptional items
items (Note 2) Total
Notes US$M US$M US$M
Turnover (including share of joint
ventures and associates)
Group production 8 134 - 8 134
Third party products 3 2 829 - 2 829
3, 4 10 963 - 10 963
less Share of joint ventures" and (1 016) - (1 016)
associates" turnover included above
Group turnover 9 947 - 9 947
Net operating costs 2 (8 014) 66 (7 948)
Group operating profit/(loss) 1 933 66 1 999
Share of operating profit/(loss) of 170 - 170
joint ventures and associates
Operating profit/(loss) (including
share of profit of joint ventures 2 103 66 2 169
and associates)
Comprising:
Group production 2 097 66 2 163
Third party products 3 6 - 6
2 103 66 2 169
Income from other fixed asset 18 - 18
investments
Profit on sale of fixed assets 62 - 62
Profit on sale of operations - - -
Loss on sale of Discontinued 2 - - -
Operations (a)
Profit/(loss) before net interest and 2 183 66 2 249
similar items payable and taxation
Net interest and similar items
payable
Group 5 (242) - (242)
Joint ventures and associates 5 (52) - (52)
Profit/(loss) before taxation 3, 4 1 889 66 1 955
Taxation 2 (658) 60 (598)
Profit/(loss) after taxation 1 231 126 1 357
Equity minority interests (18) - (18)
Profit/(loss) for the financial 1 213 126 1 339
period (attributable profit)
Dividends to shareholders (497) - (497)
Retained profit/(loss) for the 716 126 842
financial period
Earnings per ordinary share (basic) 7 19.5 2.0 21.5
(US cents)
Earnings per ordinary share 7 19.5 2.0 21.5
(diluted) (US cents)
Dividend per ordinary share (US 8.0
cents)
(a) All the items in the Profit and Loss Account relate to Continuing
Operations other than the loss on the sale of Discontinued Operations
(refer Note 2).
The accompanying notes form part of these interim financial statements.
Consolidated Profit and Loss Account (continued)
for the half year ended 31 December 2003
Half year ended
31 December 2002
Excluding Exceptional
exceptional items
items (Note 2) Total
Notes US$M US$M US$M
Turnover (including share of joint
ventures and associates)
Group production 6 702 - 6 702
Third party products 3 1 346 - 1 346
3, 4 8 048 - 8 048
less Share of joint ventures" and (977) - (977)
associates" turnover included above
Group turnover 7 071 - 7 071
Net operating costs 2 (5 618) - (5 618)
Group operating profit/(loss) 1 453 - 1 453
Share of operating profit/(loss) of 184 - 184
joint ventures and associates
Operating profit/(loss) (including
share of profit of joint ventures 1 637 - 1 637
and associates)
Comprising:
Group production 1 627 - 1 627
Third party products 3 10 - 10
1 637 - 1 637
Income from other fixed asset 14 - 14
investments
Profit on sale of fixed assets 8 - 8
Profit on sale of operations - - -
Loss on sale of Discontinued 2 - (19) (19)
Operations (a)
Profit/(loss) before net interest and 1 659 (19) 1 640
similar items payable and taxation
Net interest and similar items
payable
Group 5 (199) - (199)
Joint ventures and associates 5 (46) - (46)
Profit/(loss) before taxation 3, 4 1 414 (19) 1 395
Taxation 2 (466) - (466)
Profit/(loss) after taxation 948 (19) 929
Equity minority interests (17) - (17)
Profit/(loss) for the financial 931 (19) 912
period (attributable profit)
Dividends to shareholders (434) - (434)
Retained profit/(loss) for the 497 (19) 478
financial period
Earnings per ordinary share (basic) 7 15.0 (0.3) 14.7
(US cents)
Earnings per ordinary share 7 15.0 (0.3) 14.7
(diluted) (US cents)
Dividend per ordinary share (US 7.0
cents)
(a) All the items in the Profit and Loss Account relate to Continuing
Operations other than the loss on the sale of Discontinued Operations
(refer Note 2).
The accompanying notes form part of these interim financial statements.
Consolidated Profit and Loss Account (continued)
for the half year ended 31 December 2003
Year ended
30 June 2003
Excluding Exceptional
exceptional items
items (Note 2) Total
Notes US$M US$M US$M
Turnover (including share of joint
ventures and associates)
Group production 14 124 - 14 124
Third party products 3 3 382 - 3 382
3, 4 17 506 - 17 506
less Share of joint ventures" and (1 898) - (1 898)
associates" turnover included above
Group turnover 15 608 - 15 608
Net operating costs 2 (12 554) - (12 554)
Group operating profit/(loss) 3 054 - 3 054
Share of operating profit/(loss) of 358 - 358
joint ventures and associates
Operating profit/(loss) (including
share of profit of joint ventures 3 412 - 3 412
and associates)
Comprising:
Group production 3 369 - 3 369
Third party products 3 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 sale of Discontinued 2 - (19) (19)
Operations (a)
Profit/(loss) before net interest and 3 481 (19) 3 462
similar items payable and taxation
Net interest and similar items
payable
Group 5 (444) - (444)
Joint ventures and associates 5 (93) - (93)
Profit/(loss) before taxation 3, 4 2 944 (19) 2 925
Taxation 2 (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
period (attributable profit)
Dividends to shareholders (900) - (900)
Retained profit/(loss) for the 1 020 (19) 1 001
financial period
Earnings per ordinary share (basic) 7 30.9 (0.3) 30.6
(US cents)
Earnings per ordinary share 7 30.9 (0.3) 30.6
(diluted) (US cents)
Dividend per ordinary share (US 14.5
cents)
(a) All the items in the Profit and Loss Account relate to Continuing
Operations other than the loss on the sale of Discontinued Operations
(refer Note 2).
The accompanying notes form part of these interim financial statements.
Consolidated Statement of Total Recognised Gains and Losses
for the half year ended 31 December 2003
Half year Half year Year
ended ended ended
31 31 30 June
December December 2003
2003 2002
US$M US$M US$M
Attributable profit for the 1 339 912 1 901
financial period
Exchange gains on foreign 47 39 67
currency net investments
Total recognised gains for the 1 386 951 1 968
financial period
Prior year adjustment arising
from the change in accounting 84 - -
policy (refer Note 1)
Total recognised gains since 1 470 951 1 968
last annual report
The accompanying notes form part of these interim financial statements.
Consolidated Balance Sheet
at 31 December 2003
As at As at As at
31 31 30 June
December December 2003
2003 2002
(Restated) (Restated)
Notes US$M US$M US$M
Fixed assets
Intangible assets
Goodwill 35 38 36
Negative goodwill (28) (32) (29)
7 6 7
Tangible assets 20 565 18 931 19 809
Investments
Joint ventures - share of 2 873 2 799 2 880
gross assets
Joint ventures - share of (1 482) (1 361) (1 477)
gross liabilities
1 391 1 438 1 403
Associates - 100 -
Loans to joint ventures and 388 866 441
associates and other investments
Total fixed assets 22 351 21 341 21 660
Current assets
Stocks 1 658 1 253 1 379
Debtors
Amounts due within one year 3 033 2 254 2 224
Amounts due after more than 1 684 1 149 1 405
one year
4 717 3 403 3 629
Investments 185 107 143
Cash including money market 812 874 1 552
deposits
Total current assets 7 372 5 637 6 703
Creditors - amounts falling (4 379) (4 397) (4 207)
due within one year
Net current assets 2 993 1 240 2 496
Total assets less current 25 344 22 581 24 156
liabilities
Creditors - amounts falling (6 494) (6 569) (6 849)
due after more than one year
Provisions for liabilities (5 494) (4 224) (4 898)
and charges
Net assets 13 356 11 788 12 409
Equity minority interests (314) (302) (318)
Attributable net assets 13 042 11 486 12 091
Capital and reserves
Called up share capital - 1 234 1 234 1 234
BHP Billiton Plc
Share premium account 518 518 518
Contributed equity - BHP 1 833 1 759 1 785
Billiton Limited
