Bhp Group Ltd · ASX:BHP
Bhp — H1 FY2018 Earnings Presentation
37 slides from Bhp's earnings presentation, Feb 20, 2018
Slide 1: Results presentation for half year ended 31 December 2017
For personal use only 20 February 2018 To: Australian Securities Exchange New York Stock Exchange RESULTS PRESENTATION FOR HALF YEAR ENDED 31 DECEMBER 2017 Attached are the presentation slides for a presentation that will be given by the Chief Executive Officer and Chief Financial Officer shortly. T
Slide 2: Financial results, Half year ended 31 December 2017
For personal use only Financial results Half year ended 31 December 2017 Port Hedland
Slide 3: Disclaimer: Forward-looking statements
Disclaimer Forward-looking statements For personal use only 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
For personal use only Financial results Half year ended 31 December 2017 Andrew Mackenzie Chief Executive Officer Daunia
Slide 5: Key messages
Key messages Continued delivery of consistent plans is driving improvement across our business For personal use only Maximise cash flow Capital discipline Value and returns US$4.9 bn free cash flow US$15.4 bn net debt ROCE up to 12.8% >US$12 bn in FY18 at spot prices* in US$10-15 bn range in H2 FY18
Slide 6: Interim FY18 scorecard
Interim FY18 scorecard Financial performance supports shareholders returns For personal use only Tragically we had two fatalities during the period Safety TRIF of 4.11 Financial Attributable profit of US$2.0 billion; Underlying attributable profit of US$4.1 billion highlights Underlying EBITDA of US
Slide 7: Safety and sustainability
Safety and sustainability Health and safety are core to our values For personal use only Safety Health Samarco • We had two fatalities during the period • Committed to a 50% reduction in • Committed to social and environmental workers potentially exposed to harmful rehabilitation in Brazil – Goonyel
Slide 8: Financial results, Peter Beaven
For personal use only Financial results Half year ended 31 December 2017 Peter Beaven Chief Financial Officer Escondida Escondida
Slide 9: Financial performance
Financial performance Results reflect higher commodity prices and a solid operating performance For personal use only Summary H1 FY18 Income Statement Strong margins through the cycle (US$ billion) (Underlying EBITDA margin4, %) 60 Underlying EBITDA 11.2 14% EBITDA margin 53% Underlying EBIT 6.9
Slide 10: Segment performance
Segment performance Balanced contribution across the portfolio with significant improvement in Copper For personal use only Iron Ore Petroleum 38% of Group EBITDA5 18% of Group EBITDA5 Strong margins and record production run-rate in Q2 Weather impacts offset by improved well performance Cost6: US$1
Slide 11: Group EBITDA waterfall
Group EBITDA waterfall Strong commodity prices partially offset by negative productivity For personal use only Underlying EBITDA variance (US$ billion) 15 External US$1.6 billion Controllable US$(0.3) billion 2.2 11.5 0.4 0.2 0.1 11.2 (0.4) (0.2) (0.2) (0.8) 9.9 (0.0) 10 5 0 H1 FY17 Price 8 Foreign
Slide 12: Productivity
Productivity Negative productivity of US$496 million largely due to Olympic Dam planned shutdown and geotechnical issues at BMA For personal use only H1 FY18 productivity performance Cumulative productivity gains (US$ million) (US$ billion) Olympic Dam BMA Exploration Other Escondida 0 16 200 (200)
Slide 13: Operating cash flow
Operating cash flow Strong underlying cash generation offset by increased tax payments For personal use only Operating cash flow Movements in operating cash flow (US$ billion) (Index, FY08=100) (US$ billion) 35 200 12 200 30 0.1 0.1 1.8 0.2 (0.3) 25 7.7 7.3 20 (2.3) 100 6 15 10 200 7.3 5 0 0 0 FY08
Slide 14: Free cash flow
Free cash flow Free cash flow of >US$12 billion at spot prices13 in FY18 For personal use only Free cash flow Movements in free cash flow (US$ billion) (Index, FY08=100) (US$ billion) 15 200 10 200 10 0.5 1.4 4.9 100 (0.5) 5 5.8 4.9 5 (2.3) 0 0 200 (5) (10) (100) 0 FY08 FY09 FY10 FY11 FY12 FY13 FY14
Slide 15: Capital allocation
Capital allocation Relentless focus on capital discipline, debt reduction and shareholder returns For personal use only H1 FY18 Operating Capital productivity productivity Net operating cash flow Less: dividends to NCIs US$7.3 bn of US$0.9bn14 Maintenance capital US$1.0 bn Strong balance sheet Min
Slide 16: Balance sheet
Balance sheet Net debt US$15.4 billion; gearing 19.9%; average debt maturity of 9.4 years16 For personal use only Net debt and gearing Movements in net debt (Net debt, US$ billion) (Gearing, %) (US$ billion) 30 40 20 16.3 0.7 15.4 0.9 0.1 15 25 15 2.3 (4.9) 0 10 10 FY12 FY13 FY14 FY15 FY16 FY17 H1 F
Slide 17: Investing for the future
Investing for the future Ongoing improvements in capital productivity are enabling us to thrive on lower levels of capex For personal use only 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
Slide 18: 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 For personal use only Dividend determined and capital and exploration expenditure18 (US$ billion) 4 0 (4) Capital and exploration expenditure Progressive dividend (8)
Slide 19: Return on Capital Employed
Return on Capital Employed H1 FY18 ROCE improves to 12.8% (after tax) For personal use only 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 opt
Slide 20: Onshore US
Onshore US Exit process tracking to plan with bids to be assessed during the September 2018 quarter For personal use only Safety/ Redoubling safety efforts following fatality in the Permian Operations Well trials increasing recoveries; FY18 production at upper end of guidance range Development Tailo
Slide 21: Financial results, Andrew Mackenzie
For personal use only Financial results Half year ended 31 December 2017 Andrew Mackenzie Chief Executive Officer Neptune Angostura Angostura, Trinidad
Slide 22: Market outlook
Market outlook Near-term uncertainty, attractive long-term fundamentals For personal use only Short term Medium term Long term Growth in Uncertainty Solid Steeper New demand New supply population, moderate growth cost curves centres wealth Decarbonisation Balanced Sentiment Sustainable Emerging and
Slide 23: Our strategy
Our strategy Value and returns are at the centre of everything we do For personal use only Simple portfolio Distinctive enablers Shareholder Diversified exposure to preferred value and Charter Values and commodities returns culture of connectivity Safety, productivity and Tier 1 upstream assets oper
Slide 24: Our strategy in action
Our strategy in action We drive value and returns through our six focus areas For personal use only Latent Major Productivity capacity projects Exploration Technology Onshore US Financial results 20 February 2018 23
Slide 25: Minerals Australia
Minerals Australia Detailed plans to improve ROCE to ~30% by FY22 (at FY17 prices) For personal use only WAIO annualised run rate (Iron ore production, Mtpa) Targeting >10% reduction in unit costs21 over medium term FY19 exit rate 300 Productivity • Minerals Australia to account for >80% of Group’s
Slide 26: Minerals Americas
Minerals Americas Releasing latent capacity, investing in new capacity and exploring For personal use only Escondida grade decline to be offset by higher throughput Record Escondida throughput with 3 concentrators (Production, Mt) (Mill head grade, %) • Supported by investments in OGP1, LCE, EWS 1.5
Slide 27: Conventional Petroleum
Conventional Petroleum Extending production runway and securing next wave of growth For personal use only Peer leading EBITDA margins24,25 (5-year average, %) Continue to pursue low-risk, high-return growth options Latent • GOM Atlantis Phase 3 unlocked by enhanced seismic capacity • Trinidad Ruby/D
Slide 28: We are delivering against our plans in FY18
We are delivering against our plans in FY18… For personal use only Maximise 6% copper equivalent volume growth expected in FY18 ROCE cash flow FY18 free cash flow >US$12 billion at spot prices13 (%) 20 Capital Expect net debt to be in US$10-15 billion target range in H2 FY18 discipline FY18 capex gu
Slide 29: ...and will continue to deliver over the medium term
…and will continue to deliver over the medium term For personal use only Maximise US$2 billion productivity target for FY18 and FY19 unchanged ROCE cash flow Minerals Australia targeting medium-term unit cost21 reductions >10% (%) 20 Capital Net debt range of US$10-15 billion to be maintained discip
Slide 30: For personal use only
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Slide 31: Appendix
For personal use only Appendix
Slide 32: Samarco and Renova Foundation
Samarco and Renova Foundation Committed to social and environmental rehabilitation For personal use only Rio Gualaxo do Norte Rio Doce - Governador Valadares December 2016 September 2017 November 2015 August 2017 Rehabilitation (Renova Foundation) Legal developments Samarco mine restart • River stab
Slide 33: BHP guidance
BHP guidance For personal use only Group FY18e Capital and exploration expenditure (US$bn) 6.9 Cash basis. US$100 million lower Onshore US investment offsets unfavourable exchange rate movements. Including: Maintenance 2.0 Includes non-discretionary capital expenditure to maintain asset integrity, r
Slide 34: BHP guidance (continued)
BHP guidance (continued) For personal use only Copper FY18e Total copper production (Mt) 1.66 – 1.79 Escondida at 1.13 - 1.23 Mt; Pampa Norte production is expected to increase; Olympic Dam at 150 kt; and Antamina production at 125 kt and zinc at 100 kt. Escondida Production (Mt, 100% basis) 1.13 –
Slide 35: Key Underlying EBITDA sensitivities
Key Underlying EBITDA sensitivities For personal use only Approximate impact28 on FY18 Underlying EBITDA of changes of: US$ million US$1/t on iron ore price29 221 US$1/bbl on oil price30 64 US¢10/MMbtu on US gas price 23 US$1/t on metallurgical coal price 43 US¢1/lb on copper price29 37 US$1/t on en
Slide 36: Debt maturity profile
Debt maturity profile For personal use only Debt balances 32,33 (US$ 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 Bonds 34 Bonds Bonds Subsidiaries % of portfolio 38% 34% 12% 3% 3% 10% Capital markets 90% Asset financing
Slide 37: 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 For personal use only mine dust, as compared with