| Wed 24 Aug 2005, 10:56 | | RESULTS FOR THE YEAR ENDED 30 JUNE 2005 |
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Bhp Billiton - Results For The Year Ended 30 June 2005
Bhp Billiton Plc
Share Code: BIL
Share: GB0000566504
Date: 24 August 2005
BHP BILLITON RESULTS FOR THE YEAR ENDED 30 JUNE 2005
Record EBITDA, EBIT and attributable profit with year on year EBIT increases in
every Customer Sector Group.
EBITDA up 52.5% to US$11.4 billion and EBIT up 70.0% to US$9.3 billion (both
excluding exceptional items).
Attributable profit (excluding exceptional items) up 85.5% to US$6.5 billion and
record available cash flow of US$8.7 billion.
- Record annual production volumes for 11 commodities.
Eight major growth projects commissioned during the year with a further ten
major projects under development. Current project pipeline of US$11.9 billion of
new growth related investments.
Successful acquisition of WMC Resources Limited with integration proceeding to
plan.
- Final dividend of 14.5 US cents declared (a 52.6% increase above the 2004
final dividend), bringing the full year dividend to 28.0 US cents per share.
2005 2004
Year ended 30 June US$M US$M Change
Turnover (1) 31 804 24 943 27.5%
EBITDA (1) (2) (3) 11 446 7 506 52.5%
EBIT (1) (2) (3) 9 330 5 488 70.0%
Attributable profit (excluding 6 512 3 510 85.5%
exceptional items) (1)
Attributable profit (including 6 398 3 379 89.3%
exceptional items) (1)
Available cash flow (4) 8 688 5 100 70.4%
Basic earnings per share (US cents) 106.4 56.4 88.7%
(excluding exceptional items) (1)
Basic earnings per share (US cents) 104.5 54.3 92.4%
(including exceptional items) (1)
EBITDA interest coverage (times) 34.7 21.1 64.4%
(1) (2) (3) (5)
Dividend per share (US cents) 28.0 26.0 7.7%
(1) Including the Group`s share of joint ventures.
(2) Excluding exceptional items.
(3) EBIT is earnings before interest and tax. EBITDA is EBIT before
depreciation, impairments, and amortisation of US$2,116 million (comprising
Group depreciation, impairments and amortisation of US$1,968 million and joint
venture depreciation and amortisation of US$148 million) for the year ended 30
June 2005 and US$2,018 million (comprising Group depreciation, impairments and
amortisation of US$1,867 million and joint venture depreciation and amortisation
of US$151 million) for the year ended 30 June 2004. 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 after net interest and tax.
(5) For this purpose, net interest includes capitalised interest and excludes
the effect of discounting on provisions and other liabilities, 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 32. All references to the
corresponding period are to the year ended 30 June 2004.
RESULTS FOR THE YEAR ENDED 30 JUNE 2005
Commentary on the Group Results
Introduction
The consistent execution of the BHP Billiton business strategy has positioned
the Group to take advantage of the current strong market conditions and deliver
another record result. Attributable profit, excluding exceptional items, of
US$6.5 billion is an increase of 85.5% from the previous year with available
cash flow (after interest and tax) of US$8.7 billion up 70.4% over last year.
The benefits of commodity diversification, focussing on large, low cost, long
life assets, capturing and sharing efficiencies across our businesses globally
and the identification of, and continued investment in, value adding growth
opportunities throughout the cycle, are not only reflected in the current result
but enable us to capture our share of demand growth from the rapidly developing
regions of the world.
During the year, the Group brought eight new growth projects into production,
bringing to 24 the total number of major growth projects delivered over the last
four years. This, in combination with the continuing benefit derived from
operational excellence initiatives, contributed to record production being
achieved in 11 commodities including iron ore, metallurgical coal, natural gas,
aluminium, nickel, silver, and manganese ore and alloy, at a time of strong
demand and increased product prices. Production volumes for energy coal and
copper also increased during the current financial year. Record production was
complemented by record shipments for a number of commodities reflecting, in
part, the benefits of operating our own port facilities and providing freight
solutions for an increasing proportion of our customers.
Four further major growth projects were approved during the year: Spence copper
cathode project (Chile), Rapid Growth Project 2 in iron ore, North West Shelf
LNG Train 5 (both Australia) and the Neptune oil and gas project (US). This
brings the total number of major projects currently under development to ten and
represents a total investment of US$5.4 billion. We also have four smaller
projects under development. In total, our pipeline of projects in execution or
feasibility currently represents US$11.9 billion of growth related investments.
In addition, the successful acquisition of WMC Resources Limited (WMC),
represents a further investment of US$7.2 billion, and immediately adds world
class assets to the Group`s existing nickel and copper businesses, as well as
introducing uranium to the Group`s suite of energy products. In combination,
these investments position us to respond to customer demand globally and enhance
the option value embedded in our asset portfolio.
The Group`s strong cash flow also underpins the Group`s balance sheet strength
and allows for increasing returns to shareholders. In November 2004 the Group
completed an off-market share buyback programme by spending US$1.78 billion to
repurchase 180.7 million of BHP Billiton Limited shares at A$12.57, at what was
an attractive discount to the market price. In February 2005, we announced the
rebasing of our dividend payment from 9.5 to 13.5 US cents per share. The
Group`s progressive dividend policy continues, with the announcement today of a
final dividend of 14.5 US cents per share. This represents a full 5.0 US cent
increment on last year`s final dividend and brings the total dividends for the
2005 financial year to 28.0 US cents per share.
WMC Acquisition
In March 2005 the Group announced a cash offer for WMC, an Australian based
resource company. As of 30 June 2005 BHP Billiton owned approximately 93% of
WMC, with 100% ownership achieved on 2 August. BHP Billiton`s results for the
2005 financial year include the contribution from WMC for the month of June
2005.
This transaction provides the ability to build on the Group`s existing nickel
and copper businesses, as well as introducing uranium to our suite of energy
products. In addition to providing immediate production to service global
customers, the acquisition provides significant growth opportunities. The
transaction is fully aligned with our strategy of developing, operating and
maximising the performance of large, long life, low cost assets and provided a
unique opportunity to acquire operational tier 1 assets in a stable, developed
economy well positioned to service the growing demand for commodities in Asia.
The planning process for the integration of the WMC assets into the BHP Billiton
portfolio began in late 2004, and a dedicated integration team has been in place
since our bid was announced in March 2005. This integration, critical to the
early realisation of value, is proceeding to plan. Unfortunately, as a
consequence, in excess of 400 permanent positions (including those filled via
contractors) are expected to be eliminated. The one-off cost generated by this
activity is expected to be in line with previous advice, and US$50 million of
this amount has been expensed in the current period as an exceptional item.
Annual corporate cost efficiencies are expected to be in line with previous
advice of A$115 million.
The management of the former WMC assets has now been devolved to the Stainless
Steel Materials, Base Metals, and Diamonds and Speciality Products Customer
Sector Groups (CSGs), and the financial results of the assets are reported
within these groups.
The Income Statement
Earnings excluding exceptional items
Turnover (including turnover from third party product) was US$31.8 billion, an
increase of 27.5% from US$24.9 billion in the corresponding period. The increase
was primarily due to higher prices for all commodities with base metals, carbon
steel materials, petroleum and energy coal prices contributing significantly.
Increased volumes also benefited the Group result . Sales of third party product
increased slightly above the corresponding period to US$6.9 billion.
Earnings before interest, tax, depreciation, impairments and amortisation
(EBITDA) excluding exceptional items, increased by 52.5% to US$11.4 billion from
US$7.5 billion in the corresponding period. Earnings before interest and
taxation (EBIT), excluding exceptional items, were US$9.3 billion compared with
US$5.5 billion for the corresponding period, an increase of 70.0%.
The following table and commentary detail the approximate impact of the
principal factors that affected earnings before interest and taxation for the
current year ended 30 June 2005 compared with the corresponding period:
US$
Million
EBIT excluding exceptional items for the year ended 5 488
30 June 2004
Change in volumes 110
Change in sales prices 5 665
New operations 140
Asset sales 5
Exchange rates (465)
Price-linked costs (565)
Costs (775)
Inflation on costs (235)
Ceased and sold operations (190)
Exploration (20)
Other 172
EBIT excluding exceptional items for the year ended 30 9 330
June 2005
Volumes
Higher sales volumes (measured at last year`s average margins) increased EBIT by
US$110 million. Increased sales volumes of iron ore, copper, natural gas,
aluminium, silver and lead contributed approximately US$350 million, and was
partially offset by US$265 million of unfavourable impacts resulting from lower
oil volumes, due to natural field decline and planned shutdowns for maintenance
activities, and lower diamond sales.
Prices
Stronger commodity prices across the suite of products increased EBIT by
US$5,665 million, with higher prices achieved for iron ore, copper,
metallurgical coal, petroleum products, energy coal, aluminium, manganese alloy,
nickel and diamonds being the predominant contributors.
New operations
New operations increased EBIT by US$140 million, primarily due to first
production from ROD (Algeria) which commenced commercial production in October
2004, the first full year of production from Ohanet (Algeria) which commenced
commercial production in October 2003, and the start of oil production from Mad
Dog (US) in January 2005.
The acquisition of WMC also resulted in a US$35 million favourable impact on
EBIT with the inclusion of profit for the month of June.
Asset sales
The current period`s EBIT included US$5 million of additional profits on the
sale of non-core assets. In addition, further profits on the sale of non-core
assets have been included in exceptional items.
Exchange rates
Relative to the prior year, exchange rate movements had a negative impact on
EBIT of US$465 million. The continued strength of the Australian dollar and rand
against the US dollar had an overall unfavourable impact on operating costs and
translation of net monetary liabilities of US$320 million and US$30 million
respectively. In addition, the prior period included gains on legacy Australian
dollar to US dollar currency hedging of US$39 million which expired during that
year.
Currency Year Year
ended ended 30 June 30 June
30 June 30 June 2005 2004
2005 2004 closing closing
average average
US dollar : 0.75 0.71 0.76 0.69
Australian dollar
South African rand 6.21 6.89 6.67 6.27
: US dollar
Price-linked costs
Higher price-linked costs decreased EBIT by US$565 million, primarily due to
higher amounts of tax paid on petroleum products in Australia, higher royalties
and increased LME-linked costs.
Costs
Increased costs of US$775 million were primarily due to higher fuel, labour, raw
material and other operating costs, an increase in stripping and maintenance
related activities and development expenditure. The increase in costs was
caused, in part, by the increased level of activity currently experienced in the
resources industry. Although the impact is of varying degrees globally, these
pressures are particularly acute in Australia. A portion of the increase in
costs was deliberately incurred by the Group to maximise production to capture
current prices. Increased costs were partially offset by continued operating
cost savings from improvement initiatives and efficiency gains.
Inflation on costs
Inflationary pressures, mainly in Australia and South Africa, had an
unfavourable impact on EBIT of US$235 million.
Ceased and sold operations
Ceased and sold operations had an unfavourable impact of US$190 million and
includes US$135 million relating to ceased production at Boodarie Iron in
Western Australia after it was placed on care and maintenance during the year.
The unfavourable impact also included the loss of earnings from the Laminaria
and Corallina oil fields following their sale in January 2005.
Exploration
Exploration expense was US$20 million higher than the corresponding period.
Other
Other items increased EBIT by US$172 million and include the favourable impact
of earnings from sales of third party product, benefits of freight risk
management activities, and profit on the close out of cash settled derivative
contracts for WMC shares.
Net interest expense
Despite higher US dollar interest rates, net interest expense fell from US$502
million to US$421 million during the period. This was principally driven by
lower average debt levels and increased interest income from higher average cash
balances and higher interest earning rates compared to the corresponding period.
This was partially offset by higher expense from discounting of provisions and
lower capitalisation of interest. The corresponding period included exchange
losses on net debt of US$133 million, primarily related to the translation of
rand denominated debt.
Taxation expense
The tax charge on earnings, excluding exceptional items, was US$2,215 million,
representing an effective rate of 24.9%. Excluding the impacts of non tax-
effected foreign currency adjustments, translation of tax balances and other
functional currency translation adjustments, the effective rate was 26.2%. When
compared to the UK and Australian statutory tax rate (30%), the underlying
effective tax rate benefited 3.9% due to the recognition of US tax losses
(US$350 million). In addition, investment incentives and development
entitlements were recognised during the period which were offset, to some
extent, by non-deductible accounting depreciation and amortisation and other
items.
Exceptional items
Exceptional items reduced profit after taxation (before minority interests) by
US$64 million and attributable profit by US$114 million, and incorporated the
items outlined below.
Profit on disposal of various assets and interests totalled US$298 million
(US$282 million after tax and before minority interests) and included:
US$ million Proceeds Profit before tax Tax
Laminaria & Corallina 130 134 (10)
oil fields
Chrome business 433 108 (6)
Interest in North West 59 56 -
Shelf
Total 622 298 (16)
The Group disposed of its interest in the Laminaria and Corallina oil fields to
Paladin Resources plc in January 2005;
BHP Billiton disposed of its economic interest in the majority of its South
African chrome business to the Kermas Group in June 2005. In addition, the Group
sold its interest in the Palmiet chrome business to Mogale Alloys in May 2005.
After the minority share of profit after tax of US$50 million, the Group`s share
arising from the sale of the chrome businesses was US$52 million; and,
In December 2004 the sale of an equity participation in the North West Shelf
(NWS) Project`s gas reserves in Western Australia to China National Offshore Oil
Corporation (CNOOC) was completed.
Following a decision to close the Boodarie Iron (Australia) operations as of
today, a charge of US$266 million (US$80 million tax benefit) relating to
termination of the operation has been recognised. The charge primarily relates
to settlement of existing contractual arrangements, plant decommissioning, site
rehabilitation, redundancy and other costs associated with the closure.
As part of the Group`s regular review of decommissioning and site restoration
plans, the Group reassessed plans in respect of certain closed operations. A
total charge US$121 million (US$104 million after tax) was recorded and
included:
A charge of US$73 million (US$21 million tax benefit) in relation to revision of
the Group`s assessed rehabilitation obligation at closed mines at Ingwe (South
Africa), predominantly resulting from revised water management plans; and,
A charge of US$48 million (US$4 million tax expense) in relation to other closed
mining operations.
The Group is required to recognise provisions and record a charge of US$79
million (US$56 million after tax) against earnings in respect of restructuring
certain operations. This included US$50 million (US$15 million tax benefit) in
respect of restructuring associated with the acquisition of WMC in June 2005
primarily relating to redundancy and termination costs, office closures and
termination of previous contractual arrangements, and US$29 million (US$8
million tax benefit) for other restructurings, primarily for redundancies at
Ingwe (South Africa).
The corresponding period included exceptional items as follows:
A charge of US$534 million (US$512 million after tax) in relation to certain
closed operations;
A gain of US$66 million (US$48 million after tax) in relation to a settlement
with Dalmine SpA with respect to the failure of an underwater pipeline;
A tax benefit of US$95 million resulting from the restatement of deferred tax
balances following the election to consolidate Australian subsidiaries under the
Australian tax consolidation regime; and,
A tax benefit of US$238 million arising from prior period taxation deductions
and foreign tax credits available in the US and Canada.
Cash Flows
Available cash flow after interest and tax increased by 70.4% to US$8.7 billion.
The key components of this increase were increased cash generated from operating
activities (mainly due to higher profits), partly offset by increased taxation
payments.
Spending on capital, exploration and investment expenditures totalled US$11.0
billion for the period. Expenditure on growth projects and investments amounted
to US$10,467 million, including US$6,594 million for the acquisition of WMC,
US$845 million on petroleum projects and US$1,869 million on minerals projects.
Sustaining and maintenance capital expenditure was US$1,159 million. Total
expenditure on exploration was US$533 million, including US$380 million on
petroleum activities and US$153 million on minerals activities. In addition, the
current period includes US$1.78 billion for the repurchase of shares as part of
the US$2 billion capital management programme.
Net debt at 30 June 2005 was US$9.7 billion, an increase of US$4.7 billion for
the period. Gearing, which is the ratio of net debt to net debt plus net
assets, was 35.7% at 30 June 2005, compared with 25.7% at 30 June 2004. The
significant increase in net debt relates to debt financing for the acquisition
of WMC. In prior communication the Company had estimated that gearing at 30 June
2005, following the WMC acquisition, would be 42%. The strong cash flows from
the WMC and BHP Billiton businesses have resulted in a significantly lower
gearing level.
Dividend
A final dividend for the year ended 30 June 2005 of 14.5 US cents per share will
be paid to shareholders on Wednesday, 28 September 2005. An interim dividend of
13.5 US cents per share was paid to shareholders on 23 March 2005. That dividend
included US$220 million (3.6 US cents per share) to complete the US$2 billion
capital management programme announced in August 2004. BHP Billiton intends to
continue with its progressive dividend policy.
The dividend paid by BHP Billiton Limited will be 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 rands to
shareholders on the South African section of the register. The foreign currency
exchange rates applicable two business days before the declaration of the
dividend were used for conversion of currencies. These rates are detailed in
the table below.
The timetable in respect of this dividend will be:
Currency conversion - 22 August 2005
Last day to trade Johannesburg Stock Exchange - 2 September 2005
Ex-dividend Australian Stock Exchange - 5 September 2005
Ex-dividend Johannesburg Stock Exchange - 5 September 2005
Ex-dividend London Stock Exchange - 7 September 2005
Record - 9 September 2005
Payment - 28 September 2005
American Depositary Shares (ADSs) each represent two fully paid ordinary shares
and receive dividends accordingly.
BHP Billiton Plc shareholders registered on the South African section of the
register will not be able to dematerialise or rematerialise their shareholdings,
nor will transfers between the UK register and the South African register be
permitted, between the dates of 5 September 2005 and 9 September 2005.
The following table details the currency exchange rates applicable for the
dividend:
Dividend 14.5 US Exchange Dividend per
cents Rate ordinary
share in local
currency
Australian cents 0.755061 19.203746
British pence 1.800675 8.052536
South African 6.478365 93.936293
cents
New Zealand cents 0.696000 20.833333
Liquidity and Capital Management
In October 2004, Moody`s Investor Services (Moody`s) upgraded BHP Billiton`s
credit rating from A2 to A1, reflecting the Group`s strengthened financial risk
profile.
In March 2005, following the announcement of the takeover offer for WMC,
Standard and Poor`s (S&P) and Moody`s reviewed the Group`s rating, with S&P
maintaining the Group`s A+ stable rating and Moody`s placing the outlook on
developing. In June 2005 Moody`s restored the Group`s outlook to stable stating
that the rating affirmation was prompted by the successful acquisition of WMC at
the price and on the terms anticipated.
During the year, the Group completed both stages of its US$2 billion capital
management programme. Stage one was completed in November 2004 via a US$1.78
billion off-market share buy-back of 180.7 million BHP Billiton Limited shares
or 2.9% of the issued capital of the BHP Billiton Group. The shares were
purchased at A$12.57 per share, representing a 12% discount to the volume
weighted average price of BHP Billiton shares over the five days up to and
including the buy-back closing date. The residual US$220 million was used to
rebase the interim dividend declared in February 2005.
Portfolio Management
During the year, the ongoing review of the asset portfolio continued to ensure
alignment with our strategy of owning and operating large, low cost, long life
assets. As a result, the Group acquired WMC (as detailed on page 3), disposed of
its economic interests in the majority of its South African chrome business in
June 2005 and sold our interests in the Laminaria and Corallina Oil Fields
(located in the Timor Sea) in January 2005. Our equity interest in Integris
Metals (US) was sold for proceeds of US$202 million in January 2005. We have
also sold 50% of our shareholding in Acerinox S.A for proceeds of US$56 million,
and a 5.8% equity participation in the gas reserves associated with the North
West Shelf Project to CNOOC. Since July 2001, total proceeds on the sale or
divestment of assets totalled US$4.6 billion, including US$1.8 billion from the
demerger of the BHP Steel business.
Corporate Governance
IFRS Implementation
The Group will commence reporting financial information in accordance with
International Financial Reporting Standards (IFRS) for financial periods
beginning on or after 1 July 2005. On 19 May 2005 the Group released unaudited
selected financial information for the half year to 31 December 2004 prepared in
accordance with IFRS together with a reconciliation from IFRS to UK Generally
Accepted Accounting Principles, and explanatory notes.
In addition, as required by regulation and accounting standards applicable for
the year ended 30 June 2005, the Group`s Annual Financial Statements will
include disclosures detailing the impact of IFRS for the year ended 30 June
2005. This will form the basis for the comparatives in the Group`s 30 June 2006
Annual Financial Statements, to be prepared under IFRS.
Outlook
As noted at the time of our interim results in February, global economic growth
rates have slowed from the exceptionally high levels seen in 2004. In the United
States growth rates continue above the long-term trend, but we expect higher
interest rates and higher energy prices to keep growth rates below last year`s
level. Elsewhere, leading indicators point to a slowing in Japan after a
stronger than anticipated first half, whilst the growth environment in Europe
generally remains challenging. However, the emerging economies do remain
buoyant, offsetting slowing growth in the OECD nations. As a result, we
continue to expect the global economy to experience an above trend growth rate
this year, thereby providing a sound underpin for commodity demand. We have not
altered our view that China will remain a large and sustainable consumer of raw
materials and resources over the coming decades and the Chinese government`s
recently announced measures to tackle the excessive growth rates in certain
sectors of their economy are to be welcomed. Having said this, we also believe
that developing economies, like all economies, will be subject to business
cycles which will impact economic activity from time to time.
Whilst our financial results illustrate the benefit we gain from the current
high price environment, the underlying strategy of the company remains
unchanged. Prices will inevitability ease from their highs as demand growth
slows and new supply comes on stream, although we continue to expect prices to
remain high by recent historical standards. As we said in February, we are
seeing capacity utilisation rates at extremely high levels and the resources
industry continues to suffer from a lack of latent capacity to act as swing
production. This lack of capacity is compounded by logistical and infrastructure
bottlenecks in many regions and this, combined with the pressure on construction
and operating costs translates to a higher risk of supply side shocks than would
otherwise be the case. Price volatility therefore is not unexpected, and our
focus remains on ensuring that we have a robust, long life and low cost
portfolio of assets capable of generating strong returns and stable cash flows
throughout the cycle.
Our track record of bringing on material levels of new production over the past
four years has illustrated the unrealised option value within our resource base.
Having the reinvestment opportunities and rigorous systems and processes to
bring on further new production to meet the demand that we see over the longer
term is critical. It is management`s ability to manage its existing asset base
and to exercise value accretive expansion options, in the form of the expansion
of existing operations, new projects, and acquisitions, that will drive the
future success of our business.
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
Thursday 20 October 2005 commencing at 10:30 am. The Annual General Meeting of
BHP Billiton Limited will be held at the Convention Exhibition Centre, 21 Mounts
Bay Road, Perth, on Friday 25 November 2005 commencing at 10:30 am. The Annual
Report and details of the business to be conducted at the meetings will be
mailed to shareholders in mid to late September 2005.
Growth Projects
Eight projects were commissioned during the 2005 financial year. With costing
yet to be finalised on the Panda project, total capital expenditure throughout
the development phase of these projects is expected to be US$1,786 million,
which is slightly above budget.
Completed projects
Customer Project Capacity (1) Capital Date of
Sector expenditure initial
Group (US$ million) production (2)
(1)
Budget Actual Target Actual
Petroleum North West 4.2 million
Shelf Train 4 tonnes per 247 252 Mid Sept
(Australia) annum 2004 2004
BHP Billiton - liquefaction
16.7% processing
facility
(100%)
ROD
(Algeria) 28,800 192 192 Q4 Oct
BHP Billiton - barrels of 2004 2004
36% oil
equivalent
per day
Gulf of Mexico Capacities
Pipelines of: 132 132 Q4 Dec
Infrastructure Oil - 450,000 2004 2004
(US) barrels of
BHP Billiton - oil
Gas 22%; Oil equivalent
25% per day
(100%)
Gas - 500
million
standard
cubic feet
per day
(100%)
Minerva
(Australia) 150 150 157 Q4 Jan
BHP Billiton - terrajoules 2004 2005
90% of gas per
day (100%)
Mad Dog
(US) 26,290 368 370 End Jan
BHP Billiton - barrels of 2004 2005
23.9% oil
equivalent
per day
Angostura
(Trinidad) 45,000 327 337 End Jan
BHP Billiton - barrels of 2004 2005
45% oil
equivalent
per day
Carbon Dendrobium 5.2 million
Steel (Australia) tonnes per 200 200 Mid Apr
Materials BHP Billiton - annum of raw 2005 2005
100% coal
(3.6 million
tonnes per
annum of
clean coal)
Diamonds Panda 4.7 million
& Underground carats of 146 146(3) Early Apr
Specialty (Canada) high value 2005 2005
Products BHP Billiton - diamonds over
80% six years
(100%)
1,762 1,786
(1) All references to capital expenditure and capacity are BHP Billiton`s share
unless noted otherwise.
(2) References to quarters and half years are based on calendar years.
(3) Total project costs yet to be finalised. Share of actual capital expenditure
is indicative only.
There are 10 major projects (defined as BHP Billiton`s share of capital
expenditure of greater than US$100 million) under development with a total
budgeted investment of US$5,439 million. Full details on these are given in the
quarterly Exploration and Development Report, released on 28 July 2005.
Projects approved during the year
Customer Sector Project Capacity (1) Budgeted Target
Group capital date for
expenditure initial
(US$ production
million) (1) (2)
Petroleum Neptune 50,000
(US) barrels of 300 End 2007
BHP Billiton - oil and 50
35% million
cubic feet
of gas per
day (100%)
North West LNG
Shelf 5th processing 250 Late 2008
Train capacity 4.2
(Australia) million
BHP Billiton - tonnes per
16.7% annum (100%)
Base Metals Spence 200,000
(Chile) tonnes per 990 Q4 2006
BHP Billiton - annum of
100% copper
cathode
Carbon Steel WA Iron Ore Increase
Materials Rapid Growth system 489 H2 2006
Project 2 capacity to
(Australia) 118 million
BHP Billiton - tonnes per
85% annum
(100%)
2,029
(1) All references to capital expenditure and capacity are BHP Billiton`s share
unless noted otherwise.
(2) References to quarters and half years are based on calendar years.
Projects currently under development (approved in prior years)
Customer Sector Project Capacity (1) Budgeted Target date
Group capital for initial
expenditure production
(US$ (2)
million) (1)
Petroleum Atlantis South 200,000 1,115 Q3 2006
(US) barrels of
BHP Billiton - oil and 180
44% million
cubic feet
of gas per
day (100%)
Aluminium Worsley 165 Q1 2006
Development 250,000
Capital tonnes per
Projects annum of
(Australia) alumina
BHP Billiton - (100%)
86%
Base Metals Escondida Maintain 230 Q4 2005
Norte capacity at
(Chile) 1.25 million
BHP Billiton - tonnes per
57.5% annum of
copper
(100%)
Escondida 180,000 500 H2 2006
Sulphide Leach tonnes per
(Chile) annum of
BHP Billiton - copper
57.5% cathode
(100%)
Stainless Steel Ravensthorpe Up to 50,000 1,050(3) Q2 2007
Materials Nickel tonnes per
(Australia) annum of
BHP Billiton contained
-100% nickel in
concentrate
Yabulu 350(3) End 2007
Extension 45,000
(Australia) tonnes per
BHP Billiton - annum of
100% nickel
3,410
(1) All references to capital expenditure and capacity are BHP Billiton`s share
unless noted otherwise.
(2) References to quarters and half years are based on calendar years.
(3) Project costs are currently under review.
CUSTOMER SECTOR GROUP SUMMARY
The following table provides a summary of the Customer Sector Group results for
the year ended 30 June 2005 and the corresponding period (before exceptional
items).
Year ended 30 Turnover (1) EBIT (1)
June(US$ Million)
2005 2004 Change 2005 2004 Change
Petroleum 5 970 5 558 7.4% 1 830 1 391 31.6%
Aluminium 5 265 4 432 18.8% 977 776 25.9%
Base Metals 5 071 3 422 48.2% 2 177 1 156 88.3%
Carbon Steel 7 606 4 857 56.6% 2 821 1 137 148.1%
Materials
Diamonds and 1 544 1 710 (9.7%) 417 410 1.7%
Specialty
Products
Energy Coal 3 390 2 569 32.0% 616 234 163.2%
Stainless Steel 2 274 1 749 30.0% 758 571 32.7%
Materials
Group and 798 725 10.1% (266) (187) N/A
unallocated items
(2)
Less: inter- (114) (79) N/A
segment turnover
BHP Billiton 31 804 24 943 27.5% 9 330 5 488 70.0%
Group
(1) Turnover and EBIT include trading activities comprising the sale of third
party product.
(2) Includes consolidation adjustments, unallocated items and external sales
from the Group`s freight, transport and logistics operations.
Petroleum
EBIT was US$1,830 million, an increase of US$439 million or 31.6%, compared with
the corresponding year. The increase was mainly due to higher average realised
prices for all petroleum products compared with the corresponding period,
including a higher average realised oil price per barrel of US$47.16 compared to
US$32.24, and higher average realised natural gas prices of US$2.98 per thousand
standard cubic feet compared with US$2.62 per thousand standard cubic feet. New
production from North West Shelf LNG Train 4 (Australia), ROD (Algeria) and Mad
Dog (US), the first full year of production from Ohanet (Algeria), and profits
from the sale of third party product compared with losses in the corresponding
period also had a favourable impact.
These factors were partly offset by the unfavourable effect of higher price-
linked costs, lower crude and condensate volumes due to natural field decline at
mature assets, higher downtime for maintenance, and disposal of our interests in
the Laminaria and Corallina oil fields. The impact of a stronger Australian
dollar to US dollar exchange rate on the translation of net monetary liabilities
also had an unfavourable impact.
Exploration expenditure charged to profit was US$202 million (2004: US$181
million) reflecting a capitalisation rate of 46.8% (2004: 46.8%). Gross
expenditure on exploration of US$380 million was US$40 million higher than the
prior period, reflecting increased exploration activity in the Gulf of Mexico
and Australia.
Aluminium
EBIT was US$977 million, an increase of US$201 million or 25.9%, compared with
the corresponding period. The increase was mainly attributable to higher
realised prices for aluminium and alumina. The average LME aluminium price
increased to US$1,804 per tonne, compared with US$1,570 per tonne in the
corresponding period. Higher aluminium sales volumes, mainly reflecting the
first full year of production from the expansion at Hillside (South Africa)
following commissioning in December 2003 and the benefits of various operational
excellence projects, also had a favourable impact.
These factors were partially offset by the unfavourable impact on operating
costs of a stronger South African rand, Australian dollar and Brazilian real
against the US dollar and higher LME price-linked and other production input
costs. Increased pot relining activity also had an unfavourable impact. In
addition, a one-off charge of US$36 million was recorded for the agreed
repurchase of an aluminium supply contract. The benefits of this repurchase will
be realised through increased profit over the next ten years.
Base Metals
EBIT was US$2,177 million, an increase of US$1,021 million or 88.3%, compared
with the corresponding year. This increase was mainly attributable to higher
average LME prices for copper of US$1.43/lb compared to US$1.06/lb in the
previous period, higher prices for molybdenum, silver, lead and zinc, and higher
copper sales volumes. Record silver and lead production achieved at Cannington
(Australia), record copper production at Escondida (Chile), record copper and
molybdenum at Antamina and higher production at Tintaya (Peru), together with
savings from cost and volume related improvements projects, primarily at
Escondida and Antamina, also had a favourable impact. These factors were
partially offset by increased input and price-linked costs and the unfavourable
impact of the stronger Australian dollar to US dollar exchange rate.
Certain sales agreements of Base Metals provide for provisional pricing based on
the LME when shipped. Final settlement is based on the average applicable price
for a specified future period. Base Metals record revenue upon transfer of title
using the forward rate in place for the relevant specified future period. These
revenues are adjusted to fair value through profit each period until the date of
the final pricing, using the lower of the cash or forward curve price rather
than period-end spot price used previously. This is considered to appropriately
measure the fair value of the applicable sales agreements at period end.
Outstanding copper volumes, subject to this adjustment at 30 June 2005 amounted
to 231,874 tonnes compared to 197,864 tonnes in the corresponding year. These
were revalued at a weighted average rate of US$1.54/lb compared to US$1.21/lb in
the previous year.
Carbon Steel Materials
EBIT was US$2,821 million, an increase of US$1,684 million or 148.1%, compared
with the corresponding period. This increase was mainly attributable to stronger
commodity prices for all products, record sales volumes from Western Australian
iron ore, Queensland coal and manganese ore operations, modified supply
arrangements with Bluescope Steel Limited and larger volumes of CIF shipments.
This was partially offset by the impact of Boodarie Iron not operating at all
during the year, and unit cost performance across all operations being impacted
by the stronger Australian dollar and the South African rand relative to the US
dollar. Increased price-linked royalty costs and inflationary pressures on
Australian and South African operations, compared with the corresponding year,
were also unfavourable impacts. In addition, higher labour and contractor costs,
increased stripping costs, principally at Queensland Coal operations due to
expansion projects, and higher fuel costs for all operations had an unfavourable
impact during the year. Depreciation charges also increased at Western
Australian iron ore operations in respect of the Area C and Products and
Capacity Expansion projects.
Diamonds and Specialty Products
EBIT was US$417 million, an increase of US$7 million or 1.7%, compared with the
corresponding period. Higher realised prices for diamonds (up 38% from the
corresponding period) and titanium feedstock were offset by lower diamond sales
volumes (down 19% from the prior year), higher costs due to the processing of
lower grade material and the unfavourable impact of the stronger Canadian dollar
to US dollar exchange rate. In addition, the cessation of earnings from Integris
Metals (US) following its sale in January 2005 also had an unfavourable impact.
The prior period also included profits realised on the sale of a non-core
royalty interest (US$37 million), the impact of which was partly offset by the
profit realised on the sale of Integris (US$19 million) during the current
period.
Energy Coal
EBIT was US$616 million, an increase of US$382 million or 163.2%, compared with
the corresponding year. The increase was mainly attributable to higher export
prices, resulting from continued strong demand in the Atlantic and Pacific
markets, as well as higher earnings from the trading of third party product. In
addition, US$37 million was charged to profit in the previous period reflecting
previously capitalised exploration expenditure being written off as impaired.
These factors were partially offset by higher unit costs at Ingwe reflecting the
timing of major overhauls, increased consumable usage and cost as well as
increased utilisation of contractors. The strengthening of the rand, Australian
dollar and Colombian peso against the US dollar as well as South African
inflationary pressures also had an unfavourable impact on operating costs.
Stainless Steel Materials
EBIT was US$758 million, an increase of US$187 million or 32.7%, compared with
the corresponding period. The increase was mainly due to higher realised prices
for all products with the average realised nickel price increasing 23.0% from
US$5.49/lb to US$6.75/lb. The average realised price for ferrochrome also
increased over the corresponding period. The EBIT result includes earnings from
the ferrochrome operations for the 11 months to 1 June 2005 during which they
were owned by BHP Billiton. These operations were sold effective 1 June 2005.
This was partially offset by higher price-linked ore supply costs to the QNI
Yabulu refinery and higher royalties at Cerro Matoso. In addition, the
strengthening of the Colombian peso and Australian dollar against the US dollar,
and higher fuel costs, had an unfavourable impact on operating costs.
The current period benefited from the profit on sale of the Acerinox share
investment (US$22 million) whilst the prior period result included the profit
from the sale of mineral rights in South Africa (US$30 million).
Group and Unallocated Items
Net corporate operating costs, excluding gains and losses from legacy Australian
dollar to US dollar currency hedging and other exchange impacts, were US$292
million, an increase of US$34 million compared to US$258 million in the
corresponding period. This was primarily due to employee share award costs which
increased US$26 million over the corresponding period, higher corporate project
and regulatory compliance costs offset by the profit on the close out of cash
settled derivative contracts for WMC shares.
The prior period included gains on legacy Australian dollar to US dollar
currency hedging of US$39 million which expired during that year.
Financial Information BHP Billiton Plc
FINANCIAL INFORMATION
CONTENTS
CONSOLIDATED PROFIT AND LOSS ACCOUNT - 17
CONSOLIDATED STATEMENT OF TOTAL
RECOGNISED GAINS AND LOSSES - 18
CONSOLIDATED BALANCE SHEET - 19
CONSOLIDATED STATEMENT OF CASH FLOWS - 20
NOTES TO THE FINANCIAL INFORMATION - 22
The financial information in this document for the year ended 30 June 2005 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.
The financial information set out on pages 17 to 31 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 2004. Where applicable, comparatives have been adjusted to
disclose them on the same basis as current period figures.
In the opinion of the Directors, the financial information for the year ended 30
June 2005 presents fairly the financial position, results of operations and cash
flows for the year in conformity with UK genera
