Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — H1 FY2016 Earnings Presentation
38 slides from Bhp's earnings presentation, Feb 23, 2016
Slide 1: Interim Results Presentation
BHP Billiton Limited BHP Billiton Plc 171 Collins Street Neathouse Place Melbourne Victoria 3000 Australia London SW1V 1LH UK GPO BOX 86 Tel +44 20 7802 4000 Melbourne Victoria 3001 Australia Fax + 44 20 7802 4111 For personal use only Tel +61 1300 55 47 57 Fax +61 3 9609 3015 bhpbilliton.com bhpbil
Slide 2: Financial results: Half year ended 31 December 2015
For personal use only Yandi Financial results Half year ended 31 December 2015
Slide 3: Disclaimer: Forward-looking statements
Disclaimer For personal use only 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
Slide 4: Financial results: Andrew Mackenzie, Chief Executive Officer
For personal use only Spence Escondida Financial results Half year ended 31 December 2015 Andrew Mackenzie Chief Executive Officer Escondida
Slide 5: Key themes
Key themes For personal use only • 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
Slide 6: Samarco
Samarco For personal use only 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 7: The health and safety of our people always come first
The health and safety of our people always come first For personal use only 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
Slide 8: Financial results: Peter Beaven, Chief Financial Officer
For personal use only Macedon Financial results Half year ended 31 December 2015 Peter Beaven Chief Financial Officer Gulf of Mexico
Slide 9: Strong cash flow
Strong cash flow For personal use only • Asset quality and operating performance provide resilience Leading margins through the cycle (Underlying EBITDA margin2, %) – net operating cash flow of US$5.3 billion 60 – Underlying EBITDA margin of 40% • Balance sheet provides strong foundations 45 – net d
Slide 10: Falling prices weighed on EBIT
Falling prices weighed on EBIT For personal use only Underlying EBIT variance (US$ 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)
Slide 11: Financial impact of Samarco dam failure
Financial impact of Samarco dam failure For personal use only • 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$655 million share of loss relating to the Samarco dam At the beginning of the r
Slide 12: Tier 1 assets and operational excellence provide resilience
Tier 1 assets and operational excellence provide resilience For personal use only • Sustainable free cash flow Our portfolio of high-quality assets… (H1 FY16 Underlying EBITDA margin, %) – optimised portfolio of well-capitalised, low-cost, long-life 80 Petroleum Note: Bubble size assets following di
Slide 13: Value in a strong balance sheet
Value in a strong balance sheet For personal use only • Our balance sheet is strong Long-dated maturity profile1 (debt maturity profile, US$ 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 month
Slide 14: Financial results: Andrew Mackenzie, Chief Executive Officer
For personal use only Escondida Financial results Half year ended 31 December 2015 Andrew Mackenzie Chief Executive Officer Mt Arthur Coal
Slide 15: Sector-leading capital management track record
Sector-leading capital management track record For personal use only • 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
Slide 16: Markets are undergoing significant changes
Markets are undergoing significant changes For personal use only • 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 c
Slide 17: A more flexible dividend policy
A more flexible dividend policy For personal use only • 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$0.12 per share this p
Slide 18: Financial discipline to optimise returns and value
Financial discipline to optimise returns and value For personal use only • We continue to generate material cash flow Operating Capital productivity productivity – provides capital allocation optionality • We will strictly adhere to a disciplined capital allocation hierarchy Maximise cash flow – mai
Slide 19: Competition for free cash flow
Competition for free cash flow For personal use only • Near-term competitive opportunities Disciplined capital expenditure focused on efficiency and flexibility3 (US$ billion) – major projects in execution in Copper and Petroleum 15 – capital-efficient latent capacity 10 • Onshore US focused on near
Slide 20: More to come from productivity
More to come from productivity For personal use only • 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 mill
Slide 21: Key themes
Key themes For personal use only • 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
Slide 22: For personal use only
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Slide 23: Appendix
For personal use only Appendix
Slide 24: A simpler and more productive organisation
A simpler and more productive organisation For personal use only 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
Slide 25: Petroleum
Petroleum For personal use only • 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 •
Slide 26: Crude oil
Crude oil For personal use only 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 rebalanc
Slide 27: US natural gas
US natural gas For personal use only 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 exp
Slide 28: Copper
Copper For personal use only • 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$448 million – partial drawdown of historical low-grade invento
Slide 29: Copper
Copper For personal use only Short-term drivers Surge in capital investment following high prices (US$ 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 d
Slide 30: Iron Ore
Iron Ore For personal use only • 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
Slide 31: Iron ore
Iron ore For personal use only 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
Slide 32: Coal
Coal For personal use only • 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$59 per tonne2, as favourable currency movements
Slide 33: Metallurgical coal
Metallurgical coal For personal use only Short-term drivers Seaborne metallurgical coal supply growth (Mtpa, year-on-year change) • Supply is being curtailed, however further production cuts are 30 required to offset weakening demand 15 • China continues to import high-quality coals, but competition
Slide 34: Other items affecting profitability
Other items affecting profitability For personal use only Other items (US$ 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- R
Slide 35: Debt maturity profile
Debt maturity profile For personal use only 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 Financi
Slide 36: BHP Billiton guidance
BHP Billiton guidance For personal use only Group FY16e FY17e Capital and exploration expenditure (US$bn) 7.0 5.0 Cash basis; BHP Billiton share; excludes capitalised deferred stripping and non-controlling interests; includes BHP Billiton proportionate share of equity accounted investments. Includin
Slide 37: BHP Billiton guidance (continued)
BHP Billiton guidance (continued) For personal use only Copper FY16e Total copper production (Mt) 1.5 Guidance for Escondida remains unchanged at approximately 0.94 Mt. Pampa Norte production is now expected to be ahead of the prior year. Olympic Dam production is now expected to exceed 0.20 Mt. Gui
Slide 38: Key net profit sensitivities
Key net profit sensitivities For personal use only Approximate impact1 on FY16 net profit after tax of changes of: US$ 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 coa