Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — H1 FY18 Earnings Presentation
36 slides from Bhp's earnings presentation, Feb 20, 2018
Slide 1: BHP Financial results Half year ended 31 December 2017
BHP Financial results Half year ended 31 December 2017 Port Hedland
Slide 2: Disclaimer: Forward-looking statements
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 Half year ended 31 December 2017
Financial results Half year ended 31 December 2017 Andrew Mackenzie Chief Executive Officer
Slide 4: Key messages
Key messages Continued delivery of consistent plans is driving improvement across our business Maximise cash flow US$4.9 bn free cash flow >US$12 bn in FY18 at spot prices* 6% volume growth expected in FY18 US$2 bn productivity gains targeted over two years to end-FY19 Capital discipline US$15.4 bn
Slide 5: Interim FY18 scorecard
Interim FY18 scorecard Financial performance supports shareholders returns Tragically we had two fatalities during the period Safety 1 TRIF of 4.1 Financial Attributable profit of US$2.0 billion; Underlying attributable profit of US$4.1 billion highlights Underlying EBITDA of US$11.2 billion; free c
Slide 6: Safety and sustainability
Safety and sustainability Health and safety are core to our values Safety We had two fatalities during the period – Goonyella Riverside (August 2017) – Permian Basin (November 2017) ~500,000 safety field-leadership interactions in H1 FY18 TRIF at operated assets (Number of recordable injuries per mi
Slide 7: Financial results Half year ended 31 December 2017
Financial results Half year ended 31 December 2017 Peter Beaven Chief Financial Officer Escondida
Slide 8: Financial performance
Financial performance Results reflect higher commodity prices and a solid operating performance Summary H1 FY18 Income Statement (US$ billion) Underlying EBITDA 11.2 14% EBITDA margin 53% Underlying EBIT 6.9 15% Adjusted effective tax rate3 28.1% Adjusted effective tax rate incl. royalties 37.8% Und
Slide 9: Segment performance
Segment performance Balanced contribution across the portfolio with significant improvement in Copper Iron Ore 38% of Group EBITDA5 Strong margins and record production run-rate in Q2 Cost6: US$14.90/t 1% EBITDA: US$4.3 bn 3% EBITDA margin6: 60% ROCE6: 27% Coal 16% of Group EBITDA5 Geotech issues of
Slide 10: Group EBITDA waterfall
Group EBITDA waterfall Strong commodity prices partially offset by negative productivity Underlying EBITDA variance (US$ billion) 15 External US$1.6 billion Controllable US$(0.3) billion 2.2 0.4 11.5 0.2 0.1 (0.4) 11.2 (0.2) (0.2) 9.9 (0.8) (0.0) 10 5 0 H1 FY17 Price8 Foreign Inflation Sub-total Gro
Slide 11: Productivity
Productivity Negative productivity of US$496 million largely due to Olympic Dam planned shutdown and geotechnical issues at BMA H1 FY18 productivity performance (US$ million) Olympic Dam BMA Exploration Other Escondida 0 (200) (400) (600) (800) Cumulative productivity gains (US$ billion) 16 200 12 8
Slide 12: Operating cash flow
Operating cash flow Strong underlying cash generation offset by increased tax payments Operating cash flow (US$ billion) (Index, FY08=100) 35 200 30 25 20 100 15 10 7.3 5 0 0 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Operating cash flow (H1) Operating cash flow (H2) Commodity basket ind
Slide 13: Free cash flow
Free cash flow Free cash flow of >US$12 billion at spot prices13 in FY18 Free cash flow (US$ billion) (Index, FY08=100) 15 200 10 4.9 100 5 0 0 (5) (10) (100) FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Free cash flow (H1) Free cash flow (H2) 12 Commodity basket index (RHS) Movements in f
Slide 14: Capital allocation
Capital allocation Relentless focus on capital discipline, debt reduction and shareholder returns H1 FY18 Operating Capital productivity productivity Net operating cash flow Less: dividends to NCIs US$7.3 bn 14 of US$0.9bn Maintenance capital US$1.0 bn Strong balance sheet Minimum 50% payout ratio d
Slide 15: Balance sheet
Balance sheet Net debt US$15.4 billion; gearing 19.9%; average debt maturity of 9.4 years16 Net debt and gearing (Net debt, US$ billion) (Gearing, %) 30 40 15 25 0 10 FY12 FY13 FY14 FY15 FY16 FY17 H1 FY18 Net debt Net gearing Movements in net debt (US$ billion) 20 16.3 0.7 15.4 0.9 0.1 15 2.3 (4.9)
Slide 16: Investing for the future
Investing for the future Ongoing improvements in capital productivity are enabling us to thrive on lower levels of capex Capital and exploration expenditure H1 FY18 H2 FY18 (US$ billion) US$ billion US$ billion Maintenance 1.0 1.0 Improvement 0.7 0.9 20 Latent capacity 0.1 0.2 Onshore US 0.3 0.8 Maj
Slide 17: Striking a balance between cash returns and investment
Striking a balance between cash returns and investment Our capital allocation framework is embedded in every capital decision we make Dividend determined and capital and exploration expenditure18 (US$ billion) 4 0 (4) Capital and exploration expenditure Progressive dividend (8) Additional dividend a
Slide 18: Return on Capital Employed
Return on Capital Employed H1 FY18 ROCE improves to 12.8% (after tax) ROCE by asset (%) Antamina19 35 Pampa Norte Productivity, technology, latent NSWEC capacity to drive further improvement 25 Cerrejón19 Improving prices and record throughput High-return 15 WAIO Queensland options to slow Coal fiel
Slide 19: Onshore US
Onshore US Exit process tracking to plan with bids to be assessed during the September 2018 quarter Safety/ Redoubling safety efforts following fatality in the Permian Operations Well trials increasing recoveries; FY18 production at upper end of guidance range Development Tailored investment to opti
Slide 20: Financial results Half year ended 31 December 2017
Financial results Half year ended 31 December 2017 Andrew Mackenzie Chief Executive Officer
Slide 21: Market outlook
Market outlook Near-term uncertainty, attractive long-term fundamentals Short term Uncertainty Solid moderate growth Balanced Sentiment risks positive Medium term Steeper New supply cost curves Sustainable Emerging productivity Asia Long term Growth in New demand population, centres wealth Decarboni
Slide 22: Our strategy
Our strategy Value and returns are at the centre of everything we do Simple portfolio Diversified exposure to preferred commodities Tier 1 upstream assets Attractive geographies Valuable options Shareholder value and returns Licence to operate Distinctive enablers Charter Values and culture of conne
Slide 23: Our strategy in action
Our strategy in action We drive value and returns through our six focus areas Productivity Exploration Latent capacity Technology Major projects Onshore US
Slide 24: Minerals Australia
Minerals Australia Detailed plans to improve ROCE to ~30% by FY22 (at FY17 prices) Targeting >10% reduction in unit costs21 over medium term Minerals Australia to account for >80% of Group’s US$2 billion Productivity productivity gains by end-FY19 Olympic Dam executing plans to improve operating sta
Slide 25: Minerals Americas
Minerals Americas Releasing latent capacity, investing in new capacity and exploring Record Escondida throughput with 3 concentrators Supported by investments in OGP1, LCE, EWS Latent capacity ~60% ground water usage, down from 90%23 in FY16 Record Spence production rates Supported by completion of
Slide 26: Conventional Petroleum
Conventional Petroleum Extending production runway and securing next wave of growth Continue to pursue low-risk, high-return growth options Latent GOM Atlantis Phase 3 unlocked by enhanced seismic capacity Trinidad Ruby/Delaware liquid/gas tie-back Bass Strait gas resource development opportunities
Slide 27: We are delivering against our plans in FY18
We are delivering against our plans in FY18… Maximise 6% copper equivalent volume growth expected in FY18 cash flow FY18 free cash flow >US$12 billion at spot prices13 Capital Expect net debt to be in US$10-15 billion target range in H2 FY18 discipline FY18 capex guidance unchanged at US$6.9 billion
Slide 28: ...and will continue to deliver over the medium term
…and will continue to deliver over the medium term Maximise US$2 billion productivity target for FY18 and FY19 unchanged cash flow Minerals Australia targeting medium-term unit cost21 reductions >10% Capital Net debt range of US$10-15 billion to be maintained discipline <US$8 billion p.a. capital an
Slide 29: BHP
BHP
Slide 30: Appendix
BHP Appendix
Slide 31: Samarco and Renova Foundation
Samarco and Renova Foundation Committed to social and environmental rehabilitation Rio Gualaxo do Norte Rio Doce—Governador Valadares December 2016 Rehabilitation (Renova Foundation) River stabilisation and remediation efforts continued to improve river water quality Fish surveys show encouraging ab
Slide 32: BHP guidance
BHP guidance Group FY18e Capital and exploration expenditure (US$bn) 6.9 Cash basis. US$100 million lower Onshore US investment offsets unfavourable exchange rate movements . Including: Maintenance 2.0 Includes non-discretionary capital expenditure to maintain asset integrity, reduce risks, and meet
Slide 33: BHP guidance (continued)
BHP guidance (continued) Copper FY18e Total copper production (Mt) 1.66 – 1.79 Escondida at 1.13—1.23 Mt; Pampa Norte production is expected to increase; Olympic Dam at 150 kt; and Antamina production at 125 kt and zinc at 100 kt. Escondida Production (Mt, 100% basis) 1.13 – 1.23 Volumes weighted to
Slide 34: Key Underlying EBITDA sensitivities
Key Underlying EBITDA sensitivities Approximate impact(28)on FY18 Underlying EBITDA of changes of: US$ million US$1/t on iron ore price(29) 221 US$1/bbl on oil price(30) 64 US¢10/MMbtu on US gas price 23 US$1/t on metallurgical coal price 43 US¢1/lb on copper price(29) 37 US$1/t on energy coal price
Slide 35: Debt maturity profile
Debt maturity profile Debt balances 32,33 (US$ billion) 8 6 4 2 0 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 Post FY28 US$ Euro Sterling A$ C$ Bonds34 Bonds34 Bonds34 Bonds Bonds Subsidiaries % of portfolio 38% 34% 12% 3% 3% 10% Capital markets 90% Asset financing 10%
Slide 36: Footnotes
Footnotes 1. BHP operated assets. 2. Occupational Exposure Limits (OELs). In FY18, a new five-year target was established to achieve a 50% reduction in the number of workers potentially exposed to respirable silica, diesel particulate matter and coal mine dust, as compared with our FY17 baseline (di