Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — H1 FY2016 Earnings Presentation
37 slides from Bhp's earnings presentation, Feb 23, 2016
Slide 1: Financial results Half year ended 31 December 2015
Yandi Financial results Half year ended 31 December 2015
Slide 2: Disclaimer
Disclaimer Forward-looking statements This presentation contains forward-looking statements, including statements regarding: trends in commodity prices and currency exchange rates; demand for commodities; plans, strategies and objectives of management; closure or divestment of certain operations or
Slide 3: Financial results
Spence Escondida Financial results Half year ended 31 December 2015 Andrew Mackenzie Chief Executive Officer Escondida
Slide 4: Key themes
Key themes • Well-supplied markets compounded by global economic uncertainty Commodity markets have weakened significantly (H1 FY15 to H1 FY16 price change1, %) – prices to remain low as markets rebalance 0 – volatility to persist as China’s economy transitions – recovery will take time but continue
Slide 5: Samarco
Samarco Reclamation work, Barra Longa Infrastructure reconstruction, Mariana Samarco Minas Gerais, Brazil Supporting fish rescue, Linhares Monitoring room, Samarco Interim results 23 February 2016 Slide 5
Slide 6: The health and safety of our people always come first
The health and safety of our people always come first Total Recordable Injury Frequency at operated sites (excludes Samarco) (number of recordable injuries per million hours worked1) 10 8 6 down 50% 4 2 0 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 H1 FY16 1. FY06 to FY15 presented on a total
Slide 7: Financial results
Macedon Financial results Half year ended 31 December 2015 Peter Beaven Chief Financial Officer Gulf of Mexico
Slide 8: Strong cash flow
Strong cash flow • Asset quality and operating performance provide resilience Leading margins through the cycle (Underlying EBITDA margin2, %) – net operating cash flow of US$5.3 billion 60 – Underlying EBITDA margin of 40% • Balance sheet provides strong foundations 45 – net debt of US$25.9 billion
Slide 9: Falling prices weighed on EBIT
Falling prices weighed on EBIT Underlying EBIT variance (US$ billion) 10.0 Uncontrollable (-US$7.0 billion) Controllable (US$0.0 billion) 8.3 +0.6 Productivity volumes Escondida 5.0 Controllable grade cash costs impact -0.6 1.0 1.3 0.2 0.0 1.3 0.2 (0.2) (0.0) (0.2) (0.2) (7.8) 0.0 H1 FY15 Price¹ Exc
Slide 10: Financial impact of Samarco dam failure
Financial impact of Samarco dam failure • Total after tax charge of US$858 million recognised by Equity accounted investment in Samarco BHP Billiton Half year ended 31 December 2015 US$ million – US$655 million share of loss relating to the Samarco dam At the beginning of the reporting period 1,044
Slide 11: Tier 1 assets and operational excellence provide resilience
Tier 1 assets and operational excellence provide resilience • Sustainable free cash flow Our portfolio of high-quality assets… (H1 FY16 Underlying EBITDA margin, %) – optimised portfolio of well-capitalised, low-cost, long-life 80 Petroleum Note: Bubble size assets following divestments and demerger
Slide 12: Value in a strong balance sheet
Value in a strong balance sheet • Our balance sheet is strong Long-dated maturity profile1 (debt maturity profile, US$ billion2) – long-dated maturity profile with low refinancing risk 8 – highest credit rating in the sector 6 – net debt broadly unchanged over the last 12 months 4 – liquidity of US$
Slide 13: Financial results
Escondida Financial results Half year ended 31 December 2015 Andrew Mackenzie Chief Executive Officer Mt Arthur Coal
Slide 14: Sector-leading capital management track record
Sector-leading capital management track record • Our capital management policies have been well suited to Volume growth Return on invested capital macroeconomic conditions since the merger… (FY02 to FY15 CAGR, %) (FY02 to FY15 average, %) 10 24 – average annual volume growth of >6% – average ROIC of
Slide 15: Markets are undergoing significant changes
Markets are undergoing significant changes • Rate, magnitude and correlation of decline in commodity prices Proportion of industry supply loss-making at current prices1 has surprised (%) 45 – signs of faster transition from industry to services in China – loss-making capacity continues to operate 30
Slide 16: A more flexible dividend policy
A more flexible dividend policy • Minimum dividend of 50% of Underlying attributable profit Our new dividend policy is aligned with our historical cash returns (cumulative, US$ billion) – minimum 50% payout of US$0.04 per share 80 – additional amount of US$0.12 per share this period reflects Board’s
Slide 17: Financial discipline to optimise returns and value
Financial discipline to optimise returns and value • We continue to generate material cash flow Operating Capital productivity productivity – provides capital allocation optionality • We will strictly adhere to a disciplined capital allocation hierarchy Maximise cash flow – maintenance capital suppo
Slide 18: Competition for free cash flow
Competition for free cash flow • Near-term competitive opportunities Disciplined capital expenditure focused on efficiency and flexibility3 (US$ billion) – major projects in execution in Copper and Petroleum 15 – capital-efficient latent capacity 10 • Onshore US focused on near-term cash preservatio
Slide 19: More to come from productivity
More to come from productivity • Embedded annualised productivity gains of >US$10 billion since FY12 Unit costs continue to fall rapidly1 (US$ per copper equivalent tonne) – reduced average unit costs by >40% since the beginning of our productivity journey • Further US$472 million secured in H1 FY16
Slide 20: Key themes
Key themes • Well-supplied markets compounded by global economic uncertainty – prices to remain low as markets rebalance Tier 1 Assets – volatility to persist as China’s economy transitions – recovery will take time but continue to see longer-term upside • We are resilient with robust free cash flow
Slide 21: bhpbilliton
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Slide 22: Appendix
684 bhpbilliton Appendix
Slide 23: A simpler and more productive organisation
A simpler and more productive organisation Operated Non-operated Non-core Australia Minerals Western Queensland NSW Energy Olympic Nickel West Australia IO Coal Coal Dam Americas Minerals Escondida Pampa Norte Jansen (CCO portfolio) Antamina Cerrejón Samarco (CCO portfolio) New Mexico Coal Petroleum
Slide 24: Petroleum
Petroleum • Production decreased by 5% to 124.7 MMboe due to deferred development activity in Onshore US and natural field decline in Conventional • The decline in non-cash costs reflects the non-recurrence of Onshore US non-exceptional impairment charges in the prior period • Other items include On
Slide 25: Crude oil
Crude oil Short-term drivers OECD commercial inventory of crude oil and other liquids (billion bbl) • Crude oil prices under pressure 3.1 – OPEC decision to maintain production levels 2.9 – resilient non-OPEC supply – large, growing inventories 2.7 • Market expected to rebalance in CY17 2.5 Jan Feb
Slide 26: US natural gas
US natural gas Short-term drivers North American gas supply and demand (bcf/d) (annual, %) • Weaker winter demand combined with ongoing supply overhang 2 6 contributing to high inventory levels 1 3 • Market expected to rebalance in CY16 – demand grows on commencement of LNG exports and 0 0 higher No
Slide 27: Copper
Copper • Escondida grade decline unfavourably impacted productivity volumes by US$342 million and controllable cash costs by US$299 million • Escondida EBIT also impacted by inventory movements and write-downs of US$448 million – partial drawdown of historical low-grade inventory to maximise utilisa
Slide 28: Copper
Copper Short-term drivers Surge in capital investment following high prices (US$ billion) (US$/lb) • Prices fell as demand growth in China underperformed against 30 4.5 expectations while supply from new projects continued to enter the market, compounded by a strengthening US dollar and falling 20 3
Slide 29: Iron Ore
Iron Ore • WAIO production increased by 6% to a record 131 Mt1 underpinned by Jimblebar operating at full capacity and improved plant utilisation at Newman • WAIO unit cash costs declined 25% to US$15.21 per tonne with full year guidance remaining unchanged at US$15 per tonne2 Underlying EBIT varian
Slide 30: Iron ore
Iron ore Short-term drivers Steel intensity per capita (kg crude steel per capita, per annum) • China’s steel demand becoming more variable as the country 1,000 transitions to the next phase of development 750 • Iron ore prices likely to remain low on currently weak demand 500 from China and rising
Slide 31: Coal
Coal • Queensland Coal unit cash costs1 declined by 17%, as the operations benefited from a stronger US dollar, lower diesel prices and a further reduction in labour and contractor costs – unit costs for FY16 now expected to be US$59 per tonne2, as favourable currency movements offset removal of Cri
Slide 32: Metallurgical coal
Metallurgical coal Short-term drivers Seaborne metallurgical coal supply growth (Mtpa, year-on-year change) • Supply is being curtailed, however further production cuts are 30 required to offset weakening demand 15 • China continues to import high-quality coals, but competition with domestic supply
Slide 33: Other items affecting profitability
Other items affecting profitability Other items (US$ billion) Underlying Underlying EBIT attributable profit1 Exceptional items1 0.0 (0.1) (0.2) (0.2) (0.1) (0.1) (0.2) (0.4) (0.9) (2.0) (4.0) (4.9) (6.0) Redundancies Inventory write- Royalty and Redundancies Inventory write- Royalty and Global taxa
Slide 34: Debt maturity profile
Debt maturity profile Debt balances1 (US$ billion2) 8 6 4 2 0 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 Post FY28 US$ Euro Sterling A$ C$ Bonds3 Bonds 3 Bonds 3 Bonds Bonds Subsidiaries % of portfolio 45% 32% 10% 5% 2% 6% Capital Markets 94% Asset Financing 6% 1. All debt bala
Slide 35: BHP Billiton guidance
BHP Billiton guidance Group FY16e FY17e Capital and exploration expenditure (US$bn) 7.0 5.0 Cash basis; BHP Billiton share; excludes capitalised deferred stripping and non-controlling interests; includes BHP Billiton proportionate share of equity accounted investments. Including: Maintenance 2.0 Exp
Slide 36: BHP Billiton guidance (continued)
BHP Billiton guidance (continued) Copper FY16e Total copper production (Mt) 1.5 Guidance for Escondida remains unchanged at approximately 0.94 Mt. Pampa Norte production is now expected to be ahead of the prior year. Olympic Dam production is now expected to exceed 0.20 Mt. Guidance for Antamina rem
Slide 37: Key net profit sensitivities
Key net profit sensitivities Approximate impact1 on FY16 net profit after tax of changes of: US$ million US$1/t on iron ore price2 147 US$1/bbl on oil price3 60 US¢10/MMbtu on US gas price 24 US$1/t on metallurgical coal price 23 US¢1/lb on copper price2 23 US$1/t on energy coal price2 10 US¢1/lb on