Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — FY2003 Earnings Presentation
40 slides from Bhp's earnings presentation, Aug 28, 2003
Slide 1: Preliminary Results
PRELIMINARY RESULTS 28 August 2003 Chip Goodyear Chief Executive Officer Chris Lynch Chief Financial Officer
Slide 2: Preliminary Results – Chip Goodyear
PRELIMINARY RESULTS Chip Goodyear Chief Executive Officer
Slide 3: Highlights – year ended 30 June 2003
Highlights – year ended 30 June 2003 • HSEC performance indicators continue to improve. • EBITDA up 9% to US$5,129 million and EBIT up 12% to US$3,481 million. • Attributable profit of US$1,920 million and earnings per share of 30.9 US cents. • Available cashflow remained strong at US$3,590 million.
Slide 4: Preliminary Results – Chris Lynch
PRELIMINARY RESULTS Chris Lynch Chief Financial Officer
Slide 5: Results highlights – year ended 30 June
Results highlights –year ended 30 June (US$M) 2003 2002 % Change Turnover(1) 17,506 15,228 +15.0 EBITDA(1)(2)(3) 5,129 4,697 +9.2 EBIT(1)(2) 3,481 3,102 +12.2 Attrib profit (1)(2) 1,920 1,866 +2.9 Exceptional items (19) (244) Attrib profit (incl exceptionals) 1,901 1,622 +17.2 Available cash flow (1
Slide 6: EBIT by Customer Sector Group
EBIT by Customer Sector Group Year ended 30 June (US$M) 2003 2002 % Change Petroleum 1,178 1,073 +10 Aluminium 581 492 +18 Base Metals 286 192 +49 Carbon Steel Materials 1,045 1,084 -4 Diamonds & Spec Products 370 342 +8 Energy Coal 190 536 -65 Stainless Steel Materials 150 3 Exploration & Technolog
Slide 7: Impact of major commodity price changes on EBIT
Impact of major commodity price changes on EBIT Year ended 30 June 03 v year ended 30 June 02 US$M Petroleum products 500 465 400 Nickel & 300 Ferrochrome 200 200 100 Copper HBI Mang Aluminium Others 40 35 25 15 5 0 -100 Iron Ore (40) -200 Energy Coal (200) Excludes impact of price linked costs, US$
Slide 8: Net interest, taxation & attributable profit
Net interest, taxation & attributable profit Continuing operations, excluding exceptionals Year ended 30 June (US$M) 2003 2002 EBIT 3,481 3,102 Net interest expense (403) (432) Exchange impact on debt (140) 180 Discounting of provisions/Capitalised interest 6 16 Profit before tax 2,944 2,866 Tax exp
Slide 9: Impact of restatements of net monetary liabilities
Impact of restatements of net monetary liabilities - Year ended June Impact of Impact of (US$M) June 03 Restatement June 02 Restatement EBIT 3,481 (80) 3,102 (15) Net interest (537) (140) (236) 180 Taxation expense (984) (160) (961) 15 Attributable profit 1,920 (380) 1,866 180 US$2,300M US$1,686M Ex
Slide 10: Quarterly earnings
Quarterly earnings Excluding restatement of net monetary liabilities 750 1,686 2,300 600 Earnings US$ million © 36% 450 300 150 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY2002 FY2003 (1) Quarterly earnings is based on net profit after tax, from continuing operations, excluding Preliminary Results exceptional items
Slide 11: Cash flow – from continuing operations
Cash flow – from continuing operations Year ended 30 June (US$M) 2003 2002 Operating cash flow and JV dividends 4,990 4,471 Net interest paid (398) (353) Tax paid (1,002) (518) Available cash flow 3,590 3,600 Capital expenditure (2,666) (2,564) Exploration expenditure (348) (390) Sale of fixed asset
Slide 12: Cost savings on track – margin and bottom line growth
Cost savings on track – margin and bottom line growth $285M achieved to 31 Dec 2002 – 6 Merger Merger synergies synergies months ahead of target target of of $270M $270M schedule $310M achieved to Further Further target target 30 June 2003 $500M $500M (2% (2% real real p.a. p.a. FY03 FY03 –– FY05) F
Slide 13: Cost savings – progress to June 2003
Cost savings – progress to 30 June 2003 (US$M) FY 02 H1 03 H2 03 Total Cost related merger benefits 160 40 200 Non cost related merger benefits 60 25 85 Total merger benefits 220 65 285 Cost savings Operating Excellence 32 168 200 Strategic sourcing - 40 40 Portfolio mix 38 32 70 Total cost savings
Slide 14: Preliminary Results – Chip Goodyear
PRELIMINARY RESULTS Chip Goodyear Chief Executive Officer
Slide 15: Value Drivers – Review of Progress
Value Drivers – Review of Progress I. Outstanding Assets II. Growth From Deep Inventory of Projects III. Customer-Centric Marketing IV. The Portfolio Effect V. The Petroleum CSG VI. Innovation VII. Employees Preliminary Results Page 15 28 August 2003
Slide 16: Value Driver – Outstanding Assets: EBIT Margins
Value Driver 1 – Outstanding Assets EBIT Margins(1) 25.0% 24.3% 21.0% 20.0% 15.0% EBIT margin 10.0% 5.0% 0.0% 2001 2003 Preliminary Results (1) Excluding third party product activities. Refer to slide 39 for further information. 2001 includes Page 16 28 August 2003 BHP Steel.
Slide 17: Value Driver – Growth Projects Budgeted Expenditure
Value Driver 2 – Growth Projects Budgeted Expenditure Antamina(1) Escondida Phase IV Cerrejon Typhoon Mozal 2 Tintaya Diamet Oxide San Juan U/G Zamzama Bream Gas Pipeline 2001 2002 2003 2004 Antamina (1) Aluminum Mozal 2 Base Metals Zamzama Energy Coal Typhoon Petroleum Bream Gas DSP Size of bubble
Slide 18: Value Driver – Growth Projects Actual expenditure
Value Driver 2 – Growth Projects Actual expenditure Antamina(1) Escondida Phase IV Cerrejon Typhoon Mozal 2 Tintaya Diamet Oxide San Juan U/G Zamzama Bream Gas Pipeline 2001 2002 2003 2004 Antamina (1) Mozal 2 Aluminum Savings US$223M Base Metals Energy Coal Zamzama Petroleum Typhoon $$US Bream Gas
Slide 19: Value Driver – Customer Centric Marketing
Value Driver 3 - Customer Centric Marketing • Selling more product – Increased volumes = buying power in terms of freight & logistics – Hub and spoke structure - foundation for cross commodity opportunities • At higher margins – Target margin increment of 2 to 3 per cent – Own and third party produc
Slide 20: Value Driver – The Portfolio Effect: Stable EBITDA
Value Driver 4 - The Portfolio Effect Stable EBITDA (1) US$ billion September 11 Enron SA Rand A$ BEE Charter Iraq war SARS 1.6 World Trade Centre Attack Bankruptcy strengthen leak 1.4 1.2 1.0 Average - US$1.228 billion 0.8 0.6 0.4 0.2 0.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY2002 FY2003 Preliminary Results (1
Slide 21: Value Driver – The Portfolio Effect: Financial Strength
Value Driver 4 - The Portfolio Effect Financial Strength Net Debt US$M EBITDA interest cover 7,321 12.7x 6,822 5,772 8.5x 10.9x 8.3% 6.1% Average borrowing cost 5.1% 2001 2002 2003 Moody’s Investment A3 A2 Services Standard & A- Poor’s A Positive Average borrowing cost = gross interest for period /
Slide 22: Value Driver – Petroleum
Value Driver 5 – Petroleum Delivering value through Operations and Exploration • Top quartile performance against peers (1) • Profit margin of US$7.33 boe • Return on capital of 24.8% • 3 projects successfully commissioned since the merger • Typhoon • Bream gas pipeline • Zamzama • Positive explorat
Slide 23: Strategic focus
Strategic focus M&A Bolt-on Acq. Growth Pipeline Cost Savings Low Cost, High Quality Assets Preliminary Results Page 23 28 August 2003
Slide 24: Summary and outlook
Summary and outlook • China set for another year of strong growth – US$1.2 bn of direct sales; 7% of turnover – Continued strong demand for iron ore and alumina – Increasing sales of coking coal, manganese, nickel and copper – Increasing confidence that demand is sustainable • Demand remains subdued
Slide 25: Ohpodilliton
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Slide 26: Strategic Framework scorecard
Strategic Framework scorecard Value Driver Strategic imperatives Performance measures FY03 performance I. Outstanding assets Zero harm Improve HSEC statistics Injury rates improved by 20% Improvements in most eco- Community – 1% of pre- efficiency measures tax profits 1.4% Operating excellence Cut o
Slide 27: Strategic Framework scorecard
Strategic Framework scorecard Value Driver Strategic imperatives Performance measures FY03 performance IV. The portfolio effect Portfolio management Credit rating of ‘A’ or better S&P: A (+ve); Moodys: A2 Funding and capital Positive cash flow before management dividends & funding $1.6bn EBITDA inte
Slide 28: Deep inventory of projects
Deep inventory of projects BROWNFIELD Broadmeadow Cerrejon Exp’n Yabulu Yabulu Mount Mount R’thorpe R’thorpe Arthur WAIO Acc Exp’n Esc’da Arthur North North Esc’da GoM Infrastr. Norte Norte PACE PACE Dendrobium Esc’da Esc’da Hillside Hillside 33 Sulphide Sulphide Klipspruit Paranam NWS NWS Area Area
Slide 29: Growth pipeline – update on sanctioned projects: Minerals
Growth pipeline – update on sanctioned projects Minerals Project Commodity Share of Initial Share of production capacity Progress Capex production US$M target date Hillside 3 (South Africa) – Two quarters ahead 100% Aluminium 449 Q4 2003 132,000 tpa of initial schedule Paranam refinery expansion Alu
Slide 30: Growth pipeline – update on sanctioned projects: Petroleum
Growth pipeline – update on sanctioned projects Petroleum Project Commodity Share of Initial Share of production Progress Capex production capacity US$M target date One quarter Ohanet (Algeria) – 45% Gas 464 Q3 2003 26,100 boe/day ahead of schedule ROD (Algeria) – 36% Oil/gas 192 Q1 2004 28,800 boe/
Slide 31: Growth projects commissioned since merger
Growth projects commissioned since merger Project Our share of capex Initial production date Budget Actual Budget Actual Mozal 2 (Mozambique) – 47.1% 405 313* Q4 2003 Q2 2003 Zamzama (Pakistan) – 38.5% 40 40* Q3 2003 Q2 2003 Bream Gas Pipeline (Australia) – 50% 50 34 Q2 2003 Q4 2002 Escondida Phase
Slide 32: Capital expenditure
Capital expenditure 2003 2004 (US$M) Actual Forecast Project expenditure 1,995 2,270 Sustaining capital 671 700 Exploration expenditure (1) 348 340 Total 3,014 3,310 Preliminary Results (1) 2004 forecast made up of US$250 million Petroleum exploration and Page 32 28 August 2003 US$90 million Mineral
Slide 33: EBIT analysis – Continuing operations
EBIT analysis – Continuing operations Year ended 30 June 03 v year ended 30 June 02 US$M 4,000 545 (275) 235 25 (30) (95) (81) 3,481 3,500 (160) 360 (190) 3,102 45 3,000 2,500 Uncontrollable variance Favourable variance Unfavourable variance 2,000 Year Prices Inflation Price Exchange Exp’n Costs Vol
Slide 34: Strategic framework US$500M cost reduction target
Strategic framework US$500M cost reduction target Methodology principles • Commodity based – unit costs • FY01 base year – consistent with merger synergies • Adjusted for price linked costs, exchange rates, inflation and exceptionals Cost savings and efficiency gains result from: – Operating excelle
Slide 35: USD functional currency policy - general level of exposure
USD functional currency policy - general level of exposure (US$M) AUD Rand Impact Net payables, receivables & (300) (100) EBIT employee provisions Resource Rent Tax provision (200) - EBIT Tax provisions (600) (400) Tax Debt - (600) Interest Total (1,100) (1,100) P&L Restoration & Rehab (900) (300) B
Slide 36: Key net profit sensitivities
Key net profit sensitivities Approximate impact on FY04 net profit after tax of changes of: (US$M) US$1/t on iron ore price 45 US$1/bbl on oil price 35 US$1/t on metallurgical coal price 20 USc1/lb on aluminium price 20 USc1/lb on copper price 15 US$1/t on energy coal price 15 USc1/lb on nickel pric
Slide 37: Key net profit sensitivities
Key net profit sensitivities Approximate impact on FY04 net profit after tax of changes of: (US$M) Australian dollar (USc1/A$) Operations (net of hedging)(1) 30 Net monetary liabilities(2) 20 South African Rand (0.2 Rand/US$) Operations(1) 20 Net monetary liabilities(2) 10 Rand debt(2) 15 (1) Impact
Slide 38: Preliminary results under Australian GAAP
Preliminary results under Australian GAAP Year ended 30 June (US$M) 2003 2002 Sales revenue 15,608 15,896 Profit before tax 2,783 2,607 Profit after tax attributable to members 1,860 1,648 EPS (US cents) 30.0 27.3 Preliminary Results Page 38 28 August 2003
Slide 39: Non GAAP measures used within this presentation
Non GAAP measures used within this presentation EBITDA EBITDA is earnings before interest and tax, from continuing operations, before depreciation and amortisation of Group companies, as detailed below. We believe that EBITDA provides useful information, but should not be considered an indication of
Slide 40: Ohpodilliton
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