Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — FY2008 Earnings Presentation
53 slides from Bhp's earnings presentation, Aug 18, 2008
Slide 1: Preliminary Results – 30 June 2008
For personal use only Preliminary Results – 30 June 2008 18 August 2008 Marius Kloppers Chief Executive Officer Alex Vanselow Chief Financial Officer
Slide 2: Disclaimer
Disclaimer By viewing this presentation you agree to be bound by the following conditions. For personal use only The directors of BHP Billiton Limited and BHP Billiton Plc (“BHP Billiton") accept responsibility for the information contained in this presentation. Having taken all reasonable care to e
Slide 3: Disclaimer continued
Disclaimer continued Factors that could cause actual results or performance to differ materially from those expressed or implied in the forward-looking statements For personal use only include, but are not limited to, BHP Billiton's ability to successfully combine the businesses of BHP Billiton and
Slide 4: Disclaimer continued
Disclaimer continued Information for US Holders of Rio Tinto Limited Shares For personal use only BHP Billiton Limited is not required to, and does not plan to, prepare and file with the SEC a registration statement in respect of the Rio Tinto Limited Offer. Accordingly, Rio Tinto Limited shareholde
Slide 5: Preliminary Results – June 2008
For personal use only Preliminary Results – 30 June 2008 Marius Kloppers Chief Executive Officer
Slide 6: Overview – Year ended June 2008
For personal use only Overview – Year ended June 2008 • HSEC • Outstanding operating and financial results – Annual production records set in 7 commodities – Underlying EBITDA up 22% to US$28.0 billion – Underlying EBIT up 21% to US$24.3 billion – Attributable profit of US$15.4 billion, up 12% – Ear
Slide 7: Preliminary Results – June 2008
For personal use only Preliminary Results – 30 June 2008 Alex Vanselow Chief Financial Officer
Slide 8: Financial highlights
For personal use only Financial highlights Year ended June (US$m) 2008 2007 % Change Revenue 59,473 47,473 25.3 Underlying EBITDA 28,031 22,950 22.1 Underlying EBIT 24,282 20,067 21.0 Attributable profit (excluding exceptionals) 15,368 13,675 12.4 Attributable profit 15,390 13,416 14.7 Net operating
Slide 9: Diversity = Stability and Strength
Diversity = Stability and Strength EBIT Margin(1) For personal use only % 80 70 60 Petroleum Aluminium 50 Base Metals D&SP SSM 40 Iron Ore Manganese 30 Met Coal Energy Coal 20 BHP Billiton 10 0 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 Preliminary Res
Slide 10: Underlying EBIT by Customer Sector Group
For personal use only Underlying EBIT by Customer Sector Group Year ended June (US$m) 2008 2007 % Change Petroleum 5,489 3,014 +82.1 • Record EBIT and production • Operating cash costs held under US$5 per BOE • 3 new major projects commissioned and volume growth expected to continue • Strong operati
Slide 11: Underlying EBIT by Customer Sector Group
For personal use only Underlying EBIT by Customer Sector Group Year ended June (US$m) 2008 2007 % Change Aluminium 1,465 1,856 -21.1 • Record alumina production • South African power situation will continue to impact metal production • Worsley E&G approved Worsley Base Metals 7,989 6,875 +16.2 • Rec
Slide 12: Underlying EBIT by Customer Sector Group
For personal use only Underlying EBIT by Customer Sector Group Year ended June (US$m) 2008 2007 % Change Diamonds & Specialty Products 189 197 -4.1 • Koala Underground ramping up strongly • Anglo Potash acquisition adding flexibility for future growth Ekati Stainless Steel Materials 1,275 3,675 -65.
Slide 13: Underlying EBIT by Customer Sector Group
For personal use only Underlying EBIT by Customer Sector Group Year ended June (US$m) 2008 2007 % Change Iron Ore 4,631 2,728 +69.8 • Record production due to successful project execution • Exceptional local currency cost control at Western Australia Iron Ore • Strong volume growth expected in FY200
Slide 14: Underlying EBIT by Customer Sector Group
For personal use only Underlying EBIT by Customer Sector Group Year ended June (US$m) 2008 2007 % Change Metallurgical Coal 937 1,247 -24.9 • Strong recovery from flood impacts in Queensland • Costs impacted by recovery activities • Great outlook for margins • Market remains tight • Growth pipeline
Slide 15: Cash cost increase mostly recouped in revenue
Cash cost increase mostly recouped in revenue Recouped Investment One Other Business For personal use only Recouped Investment One Other Business in in Revenue Revenue + + Offs Offs + - Excellence Excellence = $967m $967m (1) (1) $645m $645m $257m $257m $190m $190m $100m $100m $225m $225m US$m 650 5
Slide 16: High capture of price benefit to EBIT
For personal use only High capture of price benefit to EBIT US$m 28,000 6,559 26,000 24,282 24,000 64% 4,215 22,000 20,067 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 (1) FY2007 EBIT Net Price Variance Price to EBIT FY2008 EBIT Preliminary Results Slide 16 18 August 2008 (1)
Slide 17: Strong Return On Capital Employed despite record capital investments
Strong Return On Capital Employed despite record capital For personal use only investments Capital and exploration expenditure ROCE (US$bn) 12 40% 35% 10 30% 8 25% 6 20% 15% 4 10% 2 5% 0 0% FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 Capex (LHS) Capitalised Exploration (LHS) Acquisitions (LHS)
Slide 18: Delivering superior returns to shareholders
Delivering superior returns to shareholders Ordinary dividends per share Earnings per share For personal use only (US cents per share) (US cents per share) 70 300 H1 H2 60 250 CAGR 36% CAGR 37% 50 200 40 150 30 100 20 50 10 0 0 FY2005 FY2006 FY2007 FY2008 FY2005 FY2006 FY2007 FY2008 Preliminary Resu
Slide 19: Preliminary Results – June 2008
For personal use only Preliminary Results – 30 June 2008 Marius Kloppers Chief Executive Officer
Slide 20: Outstanding results driven by strategy and execution
Outstanding results driven by strategy and execution Underlying EBIT(a) For personal use only (US$bn) 25 24.3 14.7 20.1 20 15.3 H2 15 9.9 10 9.6 5.5 5 3.5 H1 3.1 0 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 Preliminary Results Notes: Slide 20 18 August 2008 a) FY2002 to FY2005 calculated on th
Slide 21: A track record of project delivery
A track record of project delivery Copper equivalent production growth(a) For personal use only (Indexed, 100=FY2001) 200 • Projects successfully delivered: – 44 since the DLC merger 150 – 10 completed in FY2008 • 10% growth estimated in FY2009 • Completed projects ramping up in FY2009 100 – Atlanti
Slide 22: Our portfolio is diversified and balanced across high margin commodities
Our portfolio is diversified and balanced across high margin commodities Underlying EBIT Underlying EBIT Margin(a) For personal use only (FY2008, US$bn) (FY2008) 25 Petroleum 67% Petroleum Energy Energy Coal 30% 20 (27%) Energy Coal Aluminium 31% Aluminium Base Metals 62% 15 Diamonds and Base Metals
Slide 23: Short-term global challenges exist
Short-term global challenges exist United States annual GDP growth(a) For personal use only (Annual growth, %) 6% • Global economic activity is moderating 4% • Financial market instability, housing market decline and inflationary 2% pressures • Emerging economies not immune 0% Jun-06 Sep-06 Dec-06 M
Slide 24: Long-term fundamentals of emerging/developing economies remain intact
However, long-term fundamentals of emerging/developing economies remain intact IMF world GDP growth For personal use only (%) 12% Developed Economies Emerging & Developing Economies China 10.1% 10.1% 9.8% 10% 9.4% 8% 7.0% 6.7% 6.4% 6% 4% 3.5% 2.8% 2.9% 2.3% 2% 1.3% 0% Average historical growth Avera
Slide 25: Domestic consumption and investment continues to drive China's economy
Domestic consumption and investment continues to drive China’s economy Composition of GDP For personal use only (RMB Trillions) 25 Net Exports • Chinese economic growth is Inventories predominantly domestically driven 20 • Long-term China economic Investment growth is driven by continued 15 urbanisa
Slide 26: Urbanisation and industrialisation call on steelmaking raw materials
Urbanisation and industrialisation has resulted in a huge For personal use only call on steelmaking raw materials Annual steel consumption Cumulative steel consumption since 1900 (mtpa) (mt) 900 10,000 United States United States 800 China 9,000 China 8,000 700 7,000 600 6,000 500 5,000 400 4,000 30
Slide 27: The impact is also being felt in the energy markets
For personal use only The impact is also being felt in the energy markets Share of world primary energy consumption Growth in energy consumption CY2000-2007 (mmtoe) (mmtoe) 100% Other 30% 31% Other 36% Europe 30% 27% 50% China 26% North 30% America 9% 5% Europe 17% China North America 10% 0% CY2000
Slide 28: Supply-side constraints are limiting the industry's response
For personal use only Supply-side constraints are limiting the industry’s response Existing Supply Future Supply Growth • Equipment stress • Infrastructure bottlenecks • Industrial action and wage disputes • Developments are increasingly • Labour shortages tending to be: • Equipment shortages – Smal
Slide 29: Existing supply: Equipment shortages are continuing
Existing supply: For personal use only Equipment shortages are continuing Tyres and Trucks Draglines & Shovels Ammonium Nitrate Grinding Mills Tyres (2004) • Historical cyclicality has • Production capacity • Access to castings, contributed to constraints forgings • OEM underinvestment underinvestme
Slide 30: Future industry supply growth: New projects are encountering delays
Future industry supply growth: For personal use only New projects are encountering delays Expected future production from highly probable and probable copper developments (kt) 8,000 7,000 6,000 2-3 year delays 5,000 4,000 Forecast production as at 2006 Q1 3,000 Forecast production 2,000 as at 2008 Q
Slide 31: Resourcing the Future – BHP Billiton's response
For personal use only Resourcing the Future – BHP Billiton’s response • BHP Billiton has not been immune from supply constraint issues • But our scale, global presence and diversification provides significant competitive advantages • We are focused on the disciplined execution of the core strategy •
Slide 32: Accelerating growth from a diversified portfolio of projects
For personal use only Accelerating growth from a diversified portfolio of projects Production in copper equivalent tonnes % of growth CY2007-2012 (Copper equivalent tonnes '000s) (Estimated & unrisked) 14,000 9% R 6. 12,000 CAG Steelmaking Non-Ferrous Materials 10,000 18% 8,000 45% 6,000 37% 4,000 E
Slide 33: Focused on low risk volume growth from existing assets
Focused on low risk volume growth from existing assets, high margin CSGs and known regions Projected growth in production in copper equivalent tonnes(a) For personal use only (CY2007-CY 2012) By project type (b) By region (c) New Greenfield 3% 13% 87% 97% Brownfield Existing By country risk(d) By hi
Slide 34: And lower risk longer term options
For personal use only And lower risk longer term options Projects in pre-feasibility or future option stage of development (~US$90bn)(a) By project type (b) By region (c) New Greenfield 13% 35% 65% 87% Brownfield Existing Notes: a) Based on current BHP Billiton estimates of future capital expenditur
Slide 35: Unlocking further value through a combination with Rio Tinto
For personal use only Unlocking further value through a combination with Rio Tinto • Optimising mineral basin positions and infrastructure – Lower cost, more efficient production – Unlocking volume through matching reserves with infrastructure • Enhanced platform for future growth – Deployment of sc
Slide 36: Summary
For personal use only Summary • Excellent operating and financial results • Long-term demand outlook remains strong despite some short-term economic uncertainty • Supply-side constraints are limiting the ability for the industry to respond to demand growth • BHP Billiton’s portfolio of assets focuse
Slide 37: Resourcing the future
édl ohpbilliton ircing the future
Slide 38: Appendix
For personal use only Appendix
Slide 39: Return on capital and margins
For personal use only Return on capital and margins 60% (1) Return on Capital EBIT Margin 50% 48% 48% 44% 40% 40% 38% 38% 35% 30% 29% 30% 24% 20% 21% 20% 13% 11% 10% 0% FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 Preliminary Results Slide 39 18 August 2008 (1) FY2005 toFY2008 are shown on the b
Slide 40: Rate of cost increase
For personal use only Rate of cost increase Operating cost increase relative to preceding year Other Costs 7% 6.8% Raw Materials Fuel & Energy 6% 4.9% 5% 4.3% 4% 3.6% 3% 2% 1% 0% FY2005 FY2006 FY2007 FY2008 Preliminary Results FY2005 is shown on the basis of UKGAAP. Other periods are calculated unde
Slide 41: Underlying EBIT analysis
Underlying EBIT analysis For personal use only Year ended June 08 vs June 07 US$m 30,000 1,828 6,559 (1,133) (532) 25,000 (967) 24,282 (216) (404) (920) 20,067 20,000 15,000 10,000 5,000 0 (1) (2) Jun-07 Net Price Volume Exchange Inflation Cash Costs Non Cash Exploration Other Jun-08 Costs & Bus Dev
Slide 42: Impact of major volume changes
Impact of major volume changes For personal use only Year ended June 08 vs June 07 Total volume(1) variance US$1,828 million US$m 1400 Petroleum 1200 894 1000 Copper 800 727 Iron 600 Ore 424 400 Energy Aluminium/ 200 Coal Other Alumina Manganese D&SP 38 47 20 19 20 0 -200 Met Coal (47) -400 Nickel (
Slide 43: Impact of major commodity price
Impact of major commodity price For personal use only Year ended June 08 vs June 07 Total price variance US$6,559 million(1) US$m 2500 Iron Ore 2,134 2000 Petroleum 1,684 Manganese 1,465 Energy 1500 Coal 1,062 Copper 1000 946 500 Other Met Coal Diamonds 154 151 80 0 Aluminium (51) -500 -1000 Nickel
Slide 44: Cash flow
For personal use only Cash flow Year ended June (US$m) 2008 2007 Operating cash flow and dividends 25,541 22,012 Net interest paid (630) (494) Tax paid (1) (6,752) (5,561) Net operating cash flow 18,159 15,957 Capital expenditure (7,558) (7,129) Exploration expenditure (1,350) (805) Purchases of inv
Slide 45: Diversification remains for sales into China
For personal use only Diversification remains for sales into China • 20% of total company revenues in FY2008 US$m 7,000 FY2008 revenue by location of customer 6,657 ROW Europe 6,000 Australia 5,293 5,013 5,000 China Japan 3,999 4,000 3,611 Nth Other Asia America 2,946 3,000 2,407 2,000 1,588 1,357 1
Slide 46: Strong cash flow - delivering value to shareholders
For personal use only Strong cash flow - delivering value to shareholders Available Available Cash Cash Flow Flow Organic Growth1 US$m US$m 9000 20,000 7500 18,000 6000 4500 16,000 H1 H2 3000 14,000 1500 0 12,000 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 Return to Shareholders2 10,000 US$m 90
Slide 47: Capital & exploration expenditure
For personal use only Capital & exploration expenditure US$ billion FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009F Grow th 1.9 2.0 1.7 2.6 4.0 5.5 6.1 9.9 (1) FY2009 includes Sustaining & Other 0.8 0.7 0.9 1.3 2.1 1.6 1.8 2.1 US$700m for Exploration(1) Petroleum 0.4 0.3 0.5 0.5 0.8 0.8 1.4
Slide 48: Key net profit sensitivities
For personal use only Key net profit sensitivities Approximate impact(1) on FY 2009 net profit (US$m) after tax of changes of: US$1/t on iron ore price 80 US$1/bbl on oil price 35 US$1/t on metallurgical coal price 25 USc1/lb on aluminium price 25 USc1/lb on copper price 20 US$1/t on energy coal pri
Slide 49: Maintenance of a deep diversified inventory of growth options
For personal use only Maintenance of a deep diversified inventory of growth options Maruwai NWS NWS Angola Angola Macedon CMSA Heap Cerrejon CW CW Africa Africa DRC DRC CMSA CMSA Heap Heap Olympic Dam Olympic Dam & DRC Macedon CMSA Leach Heap 11 Opt Exp Stage 2 T5 T5 WAWA Iron Iron Ore Ore Leach Lea
Slide 50: Sanctioned development projects (US$12.4bn)
For personal use only Sanctioned development projects (US$12.4bn) Share of Initial Minerals Projects Commodity Approved Production Production Capacity (100%) Progress Capex Target Date US$m Alumar Refinery Expansion (Brazil) – Schedule and Alumina 725 Q2 CY09 2 million tpa 36% budget under review Wo
Slide 51: Sanctioned development projects (US$12.4bn) cont.
Sanctioned development projects (US$12.4bn) cont. Share of For personal use only Initial Approved Petroleum Projects Commodity Capex Production Production Capacity (100%) Progress Target Date US$m North West Shelf 5th Train (Australia) – LNG processing capacity 4.2 On schedule and LNG 350 Late CY08
Slide 52: Development projects in feasibility (US$12.4bn)
For personal use only Development projects in feasibility (US$12.4bn) Estimated Share of Minerals Projects Forecast Initial Project Capacity Commodity Capex* (US$4.7bn) US$m Production* (100%)* Guinea Alumina Project (Guinea) – Alumina 1,700 H2 CY11 3.3 million tpa 33.3% Bakhuis 100% (Suriname/ Para
Slide 53: Development projects in feasibility (US$12.4bn)
For personal use only Development projects in feasibility (US$12.4bn) Petroleum Projects Estimated Share of Commodity Capex* Forecast Initial Project Capacity (US$600m) Production* (100%)* US$m Oil/Gas 250 H2 CY10 60,000 barrels of oil and 90 million NWS CWLH (Australia) – 16. 67% cubic feet gas per