Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — FY2006 Earnings Presentation
50 slides from Bhp's earnings presentation, Aug 23, 2006
Slide 1: Preliminary Results – 30 June 2006
Preliminary Results – 30 June 2006 23 August 2006 Chip Goodyear Chief Executive Officer Alex Vanselow Chief Financial Officer
Slide 2: Disclaimer
Disclaimer The views expressed here contain information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. Any forward looking information in this presentation ha
Slide 3: Preliminary Results – 30 June 2006
Preliminary Results – 30 June 2006 Chip Goodyear Chief Executive Officer
Slide 4: Highlights – 12 months ended June 2006
Highlights – 12 months ended June 2006 • HSEC – 12 month rolling average Classified Injury Frequency Rate of 4.8 • Record full year earnings – Underlying EBITDA US$18.1 billion ⇈ 50% – Underlying EBIT US$15.3 billion ⇈ 54% – Attributable profit US$10.2 billion ⇈ 58% – Earnings per share 168.2 US cen
Slide 5: Preliminary Results – 30 June 2006
Preliminary Results – 30 June 2006 Alex Vanselow Chief Financial Officer
Slide 6: Steady growth in EBIT
Steady growth in EBIT(1) 9 EBIT margins increased from 20% to 44% 9 Project delivery and strategic acquisitions US$M 16,000 9Focus on cost reductions and business excellence 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 FY 02 Incremental EBIT Incremental EBIT Incremental EBIT Incremental EBIT FY 06
Slide 7: Underlying EBIT by Customer Sector Group
Underlying EBIT by Customer Sector Group Year ended June (US$M) 2006 2005 %%Change Change Petroleum 2,968 2,395 +24 Aluminium 1,191 959 +24 Base Metals 5,400 2,171 +149 Carbon Steel Materials 4,503 2,800 +61 Diamonds & Specialty Products 345 560 -38 Energy Coal 327 587 -44 Stainless Steel Materials
Slide 8: Underlying EBIT by Customer Sector Group: Petroleum
Underlying EBIT by Customer Sector Group Year ended June (US$M) 2006 2005 %%Change Change Petroleum 2,968 2,395 +24 • Project pipeline of nine major projects with investment of US$5.2 billion. • FY2007 production in line with FY2006, assuming Atlantis first oil in Q1 CY2007. • Atlantis sail out in e
Slide 9: Underlying EBIT by Customer Sector Group: Aluminium
Underlying EBIT by Customer Sector Group Year ended June (US$M) 2006 2005 %%Change Change Aluminium 1,191 959 +24 • Fourth consecutive aluminium production record. • Worsley expansion and new ship loading berth both commissioned. Mozal • Alumar refinery expansion approved. • Worsley Efficiency & Gro
Slide 10: Underlying EBIT by Customer Sector Group: Base Metals
Underlying EBIT by Customer Sector Group Year ended June (US$M) 2006 2005 %%Change Change Base Metals 5,400 2,171 +149 • Record production of copper and molybdenum. • Escondida Norte and Sulphide Leach completed to schedule and in line with local currency budgets. • Spence on target for first produc
Slide 11: Underlying EBIT by Customer Sector Group: Carbon Steel Materials
Underlying EBIT by Customer Sector Group Year ended June (US$M) 2006 2005 %%Change Change Carbon Steel Materials 4,503 2,800 +61 • Record iron ore production. • Project pipeline of 7 projects with investment of US$4.0 billion. • RGP2 commissioned to schedule. BMA • Queensland Coal: BMA Phase 1 expan
Slide 12: Underlying EBIT by Customer Sector Group: Diamonds & Specialty Products
Underlying EBIT by Customer Sector Group Year ended June (US$M) 2006 2005 %%Change Change Diamonds & Specialty Products 345 560 -38 • Lower carat value reduced EBIT by approx US$200 million. • Higher diamond sales volumes contributed US$91 million. Ekati • Koala Underground project approved. • Panda
Slide 13: Underlying EBIT by Customer Sector Group: Energy Coal
Underlying EBIT by Customer Sector Group Year ended June (US$M) 2006 2005 %%Change Change Energy Coal 327 587 -44 • Record annual production at Cerrejon and New Mexico coal. • Ingwe recovery plan starting to take hold. • Douglas - Middelburg Optimisation project Douglas Colliery in feasibility. • Sa
Slide 14: Underlying EBIT by Customer Sector Group: Stainless Steel Materials
Underlying EBIT by Customer Sector Group Year ended June (US$M) 2006 2005 %%Change Change Stainless Steel Materials 901 712 +27 • Record nickel production. • Ravensthorpe cost and schedule under review. Ravensthorpe – 3 August 2006 • Yabulu expansion on schedule. • Yabulu gas conversion to improve u
Slide 15: Impact of major volume changes on Underlying EBIT
Impact of major volume changes on Underlying EBIT Year ended June 06 vs year ended June 05 Total volume variance US$1,220 million(1) (includes acquisitions(2) ) US$M Organic Growth New Business & Acquisitions 700 Copper 610 600 500 Nickel 400 365 Petroleum 185 300 200 Diamonds 90 Iron Ore Energy Oth
Slide 16: Underlying EBIT analysis
Underlying EBIT analysis Year ended June 06 vs year ended June 05 US$M 1,220 6,215 16,000 15,277 (310) (1,215) (125) (280) (149) 14,000 12,000 9,921 10,000 8,000 6,000 4,000 2,000 0 Jun-05 Net Price Inflation Volume Cash Co sts No n Cash Exp loration Other Ju n-06 Costs Preliminary Results Slide 16
Slide 17: Cost impact on Underlying EBIT
Cost impact on Underlying EBIT Year ended June 06 vs year ended June 05 Total cost variance - US$1,340 million US$M 0 -50 Distribution & Demurrage Business (25) Other -100 Develop (60) (70) -150 Non Cash (125) Maintenance -200 (165) -250 Labour & -300 Contractors Mining/ (265) Grade -350 Raw Materia
Slide 18: Net finance costs, taxation and attributable profit
Net finance costs, taxation and attributable profit Year ended June (US$M) 2006 2005 Underlying EBIT 15,277 9,921 JV net finance costs (95) (106) JV tax expense (950) (433) Exceptional items (before tax) 439 (111) EBIT - Profit from operations 14,671 9,271 Net finance costs (505) (331) Profit before
Slide 19: Cash flow
Cash flow Year ended June (US$M) 2006 2005 Operating cash flow and JV dividends (1) 14,665 10,626 Net interest paid (378) (225) Tax paid (2) (3,811) (2,027) Available cash flow 10,476 8,374 Capital expenditure (5,239) (3,450) Exploration expenditure (766) (531) Purchases of investments (596) (6,240)
Slide 20: Preliminary Results – 30 June 2006
Preliminary Results – 30 June 2006 Chip Goodyear Chief Executive Officer
Slide 21: Chinese demand growth to continue
Chinese demand growth to continue BHP Billiton sales to China (US$M) 3,611 2,946 2,407 1,588 1,357 1,075 785 371 431 ++ ve FY 02 H 1 03 H 2 03 H1 04 H2 04 H1 05 H 2 05 H1 06 H2 06 China – GDP growth 10% for CY2006 – Major commodities consumption growth – Government macro controls to remain Prelimina
Slide 22: India exceeding expectations
India exceeding expectations BHP Billiton sales to India (US$M) 726 515 257 168 H1 05 H2 05 H1 06 H2 06 ++ ve ++ ve India China – Growth led by service sector – GDP growth 10% for CY2006 – Growing processing industries – Major commodities – BHP Billiton sales dominated consumption growth by coking c
Slide 23: Developed economies
Developed economies Europe – Recovering strongly – Inflation concerns leading to Japan monetary tightening – Domestic consumption increasing + ve – Government continues to promote + growth + ve US ++ ve – Concerns on housing ++ ve and inflation India China – Export sector – Growth led by service sec
Slide 24: Inventory levels at historic lows
Inventory levels at historic lows Real LME metal prices at similar levels to late 1980s’ boom Monthly LME Metal Prices and Stocks 200 20 LME Price Index (left scale) 180 18 Exchange and Producer Stocks (Weeks' Demand)* Real LME Monthly Price Index (July 2006=100)* Stocks Consumption Ratio (right sca
Slide 25: Industry cost and capacity pressures
Industry cost and capacity pressures tyre preservation programmes ongoing truck capacity increased – longer lead times 9 months 18 months rig availability constraints ongoing shortage of experienced people – focus on training ongoing Preliminary Results Slide 25 23 August 2006
Slide 26: Deep inventory of growth projects
Deep inventory of growth projects BROW NFIELD Koala Koala UG UG Atlantis GEMCO As at 30 June 2006 Size of bubble in dicates proposed capital expenditure; bold outer border signifies sanctioned project.. $$US US 200M 200M North NWS NWS T5 T5 Zamzama Yabulu Yabulu Phase 2 Alumar Alumar Douglas Douglas
Slide 27: Capital expenditure profile
Capital expenditure profile US$ Billion (1) 2002 2003 2004 2005 2006 2007F (1) Includes expenditure for jointly controlled Growth (2) 1.9 2.0 1.8 2.6 4.7 5.3 entities Sustaining 0.9 0.7 0.8 1.2 1.4 1.4 (2) Growth capital includes expenditure on minor Exploration (3) 0.4 0.3 0.5 0.5 0.7 0.8 improveme
Slide 28: Growth projects will continue to drive volumes higher
Growth projects will continue to drive volumes higher As has been the case since 2001, where organic projects and M&A has led to average volume growth of 38% across all commodities Mn Or e Alu mina Me t. Co al Ener gy Co al Ir on Or e Ba se M etals M n Or e Nickel Iro n Or e Diam ond s Petr oleum Me
Slide 29: Longer term options will keep the pipeline replenished
And longer term options will keep the pipeline replenished Our exploration footprint spans traditional resource producing regions as well as many countries currently less comprehensively explored Alumin a Me t. Coa l Ene rg y Coa l Base Met als Mn Ore Nicke l Iro n O re Diamo nds Petr oleu m CY2007
Slide 30: Disciplined capital management
Disciplined capital management US$ bn Returns US cps Dividends 8.0 20 Demerger 18 7.0 Buy-backs 16 6.0 Dividends – 29% 14 AGR C 5.0 12 4.0 10 8 3.0 6 2.0 4 1.0 2 0.0 0 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 Nov M ay Oct M ay Oct M ay A ug Feb A ug Feb A ug 01 02 02 03 03 04 04 05 05 06 06 US$15.5 b
Slide 31: Summary
Summary • Consistent execution of our strategy • Increase volumes through organic growth and acquisitions • Record full year results • Margins continue to expand • Execution and replenishment of project pipeline continues • Final dividend increased 28% to 18.5 US cents per share, consistent with out
Slide 32: Appendix
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Slide 33: Highlights
Highlights Year ended June (US$M) 2006 2005 % Change Revenue (with JV share of revenue) 39,099 31,150 +26 Underlying EBITDA 18,052 12,036 +50 Underlying EBIT 15,277 9,921 +54 EBIT – Profit from operations 14,671 9,271 +58 Attributable profit 10,154 6,426 +58 Attributable profit (including exceptiona
Slide 34: Increasing margins and return on capital
Outstanding assets Increasing margins and return on capital (1) Return on Capital EBIT Margin 50% 44% 45% 40% 40% 35% 35% 30% 29% 30% 24% 25% 21% 20% 20% 15% 13% 11% 10% 5% 0% FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 (1) FY2005 and FY2006 are shown on the basis of Underlying EBIT. Refer to slide 49 f
Slide 35: EBIT margin by Customer Sector Group
Outstanding assets EBIT margin(1) by Customer Sector Group FY 2004 FY 2005 FY 2006 70% 60% 50% 40% 30% 20% 10% 0% Petroleum Aluminium Base Metals Carbon Steel Diamonds & Energy Coal Stainless Materials Specialty Steel Products Materials (1) FY2005 and FY2006 margins are calculated on the basis of Un
Slide 36: Impact of major commodity price changes on Underlying EBIT
Impact of major commodity price changes on Underlying EBIT Year ended June 2006 vs year ended June 2005 US$M Gross price variance US$6,690 million (1) 2,800 Copper 2,575 2,400 2,000 Met Coal 1,600 1,490 Iron ore 1,360 1,200 Petroleum 805 Aluminium Other 800 590 Base Metals 400 280 Thermal Nickel Coa
Slide 37: Portfolio management – US$5.6bn of disposals
Portfolio management – US$5.6bn of disposals US$M 6,000 Proceeds from sale of assets US$M 5,000 FY06 934 4,000 FY05 1,035 3,000 FY04 277 2,000 FY03 (1) 2,472 FY02 845 1,000 Total proceeds 5,563 0 (1) Includes BHP Steel demerger and BHP Steel loans Sale Proceeds (net of cash disposed and costs) Base
Slide 38: China
China • Sales into China increasing but diversification remains • Currently 16.8% of total company revenues US$M 4,000 ROW 3,611 3,500 Australia Eur ope 2,946 3,000 2,500 China 2,407 Japan Nth America 2,000 Other Asia 1,588 1,500 1,357 1,075 1,000 785 371 431 500 0 FY02 H1 03 H2 03 H1 04 H2 04 H1 05
Slide 39: Financial flexibility
Financial flexibility 40 60 35 52 30 44 25 36 % gearing 20 28 15 10 20 5 12 0 4 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 Gearing (LHS) Average borrowing cost (%) (RHS) EBITDA interest cover (times) (RHS) Moody’s Investment A3 A2 A1 A1 Services Standard & Poor’s A- A A+ A+ Underly ing Gearing
Slide 40: Sanctioned development projects (US$9.84bn)
Sanctioned development projects (US$9.84bn) Share of Initial Minerals Projects Commodity Approved Production Production Capacity Progress Capex Target Date (100%) US$M Alumar Refinery Expansion On time and Alumina 518 M id CY08 2 million tpa budget (Brazil) – 36% 200,000 tpa copper On time and Spenc
Slide 41: Sanctioned development projects (US$9.84bn) cont.
Sanctioned development projects (US$9.84bn) cont. Share of Minerals Projects Initial Approved Production Capacity Commodity Production Progress (cont’d) Capex (100%) Target Date US$M Up to 50,000 tpa Revised cost and Ravensthorpe (Australia) – 100% Nickel 1,340 Q2 CY07 contained nickel in schedule u
Slide 42: Sanctioned development projects (US$9.84bn) cont.
Sanctioned development projects (US$9.84bn) cont. Share of Initial Petroleum Projects Approved Production Capacity Commodity Production Progress (cont’d) Capex (100%) Target Date US$M On time and Atlantis North (US) – 44% Oil/Gas 100 End CY07 Tie-back to Atlantis South budget On time and Stybarrow (
Slide 43: Development projects in feasibility
Development projects in feasibility Minerals Projects Estimated Share Forecast Initial Project Capacity Commodity of Capex* (US$3.66bn) Production* (100%) US$M Worsley Efficiency and Growth Alumina 700 End CY09 800,000 tpa (Australia) – 86% Western Australia Iron Ore RGP 4+ Increase system capacity
Slide 44: Development projects commissioned since July 2001
Development projects commissioned since July 2001 Our Share of Capex Initial Production Date Project Budget Actual Budget Actual US$M US$M Antamina (Peru) – 33.75% 775 752 Q2 CY01 Q2 CY01 Typhoon (US) – 50% 128 114 Q3 CY01 Q3 CY01 Tintaya Oxide (Peru) – 99.9% 138 120 Q2 CY02 Q2 CY02 Escondida Phase
Slide 45: Development projects commissioned since July 2001
Development projects commissioned since July 2001 Our Share of Capex Initial Production Date Project Budget Actual Budget Actual US$M US$M WA Iron Ore Accelerated Expansion (Australia) – 85% 83 80 Q2 CY04 Q2 CY04 NWS Train 4 (Australia) – 16.7% 247 252 M id CY04 M id CY04 ROD (Algeria) – 36% 192 192
Slide 46: Development projects commissioned since July 2001
Development projects commissioned since July 2001 Our Share of Capex Initial Production Date Project Budget Actual Budget Actual US$M US$M Escondida Sulphide Leach (Chile) – 57.5% 500 500 (1) H2 CY06 Q2 CY06 Western Australia Iron Ore RGP2 (Australia) – 85% 489 489 (1) H2 CY06 Q2 CY06 (1) Actual cos
Slide 47: Key net profit sensitivities
Key net profit sensitivities Approximate impact(1) on FY07 net profit after tax of changes of: (US$M) US$1/t on iron ore price 60 US$1/bbl on oil price 30 US$1/t on metallurgical coal price 20 USc1/lb on aluminium price 20 USc1/lb on copper price 20 US$1/t on energy coal price 25 USc1/lb on nickel p
Slide 48: Non IFRS and GAAP measures used within this presentation
Non IFRS and GAAP measures used within this presentation EBITD A EBITD A is earnings before in terest and tax, from contin uin g operatio ns (except 2001 which includes Steel), before deprecia tion, amortisation and impairments of Group companie s and join tly controlled entities and associa tes, as
Slide 49: Non IFRS and GAAP measures used within this presentation
Non IFRS and GAAP measures used within this presentation EBIT margin by Customer Sector Group exclu din g third party product activities Slide 35 refers to Customer Sector Group EBIT margins, excludin g third party product activities, as detailed belo w. Underlying EBIT is earnings before net financ
Slide 50: Ohpbilliton
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