Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — FY2001 Earnings Presentation
66 slides from Bhp's earnings presentation, August 2001
Slide 1: Preliminary Results August 2001
PRELIMINARY RESULTS AUGUST 2001 Paul Anderson - Chief Executive Officer & Managing Director Charles Goodyear - Chief Development Officer & Chief Financial Officer
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Slide 3: BHP Financial Results
BHP Financial Results 2001 2000 Net Profit (A$m) 2,007 1,581 EPS (cents) 54.4 43.3 EBITDA interest cover 9.5x 6.5x Gearing (%) 38.3 42.7 Return on equity (%) 18.2 15.3 Return on capital (%) 11.7 10.0
Slide 4: BHP Achievements
BHP Achievements • Record profits 2 years running • Financial fundamentals improved • Reinstated franking credits • OneSteel spin-out • QCT acquisition and subsequent equalisation of interests with Mitsubishi in Queensland • New approach to metallurgical coal pricing • Dia Met acquisition
Slide 5: BHP Growth in Value – New Projects
BHP Growth in Value – New Projects • Escondida Phase IV • North West Shelf – Train IV • Ohanet • San Juan Underground • Tintaya Oxide • Blackwater Mine • Laminaria II • Typhoon
Slide 6: Billiton Achievements
Billiton Achievements • Record profit of US$693 million excluding exceptional items • Continued strategy of aggressive growth – Rio Algom – Worsley – CdelC and CZN coal acquisitions • Successful US$850 million capital raising • BioCOP technology
Slide 7: Billiton Achievements
Billiton Achievements • Delivery of growth projects: – Mozal 1 – Cerro Matoso – Antamina – Worsley expansion • Cost efficiencies
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Slide 9: BHP Billiton Group Financial Strength
BHP Billiton Group Financial Strength 2001 2000 US$m US$m EBITDA pre exceptionals 5,299 4,775 Attributable profit pre exceptionals 2,189 1,743 Net debt / (net debt + net assets) 38.4% 34.2% Debt to equity ratio 64.6% 55.2% EBITDA interest cover 11.1x 9.1x Capital & Investment expenditure 6,435 1,761
Slide 10: Merger Process and Momentum
Merger Process and Momentum • 33 integration teams • Post merger announcements – Mozal 2 – Mt Arthur North – Dia Met acquisition completion – Queensland Coal equalisation – Columbus Stainless & NAMD transactions
Slide 11: Strategic Direction
Strategic Direction Priorities • Focus on returns on invested capital • Leverage value from all of our resources • Create a new industry business model • Market and customer orientation
Slide 12: Value Creation from all our Resources
Value Creation from all our Resources • World class physical assets • People - dynamic and entrepreneurial culture • Global and regional customer relationships • Intellectual capital and market knowledge • Technology applications • Financial expertise capabilities
Slide 13: Organisational Structure
Organisational Structure Strategy, Corporate Governance Portfolio composition, M&A Corporate Centralised Marketing Function Marketing The Singapore Hague CUSTOMER SECTOR GROUPS Base Carbon Carbon Stainless Stainless Energy Aluminium Aluminium Base Steel Steel Steel Steel Energy Petroleum Petroleum C
Slide 14: Corporate Governance
Corporate Governance Investment Review Committee • Responsible for capital review process for expenditures greater than US$100m • Chaired by Chief Financial Officer • Function: – Risk identification and management – Review extent of value optimization – Agree project team composition – Commission in
Slide 15: Corporate Governance
Corporate Governance Mergers & Acquisitions • Activity above US$100m requires IRC review and Board approval • Corporate M&A provides overall co-ordination for M&A projects • Customer sector groups have accountability for identifying acquisition opportunities • Risk Management Committee (sub-committe
Slide 16: Marketing Organisation
Marketing Organisation • Marketing co-located in two hubs – Singapore and The Hague Singapore – focus on Asian energy market • Metallurgical and energy coal • Oil & gas • Carbon steel materials The Hague – centralised portfolio risk systems • Aluminium • Stainless steel materials • Base metals • Ene
Slide 17: Marketing Opportunities
Marketing Opportunities • Enhanced product offerings • Insight into market dynamics • Single risk management system • Leverage logistics and freight capabilities
Slide 18: Customer Sector Groups
Customer Sector Groups Carbon Carbon Stainless Stainless Base Base Energy Energy Aluminium Aluminium Steel Steel Steel Steel Petroleum Petroleum Metals Metals Coal Coal Materials Materials Materials Materials
Slide 19: Customer Sector Groups
Customer Sector Groups Grouping of assets aligned to customer segments • Fully accountable for profit at EBIT level • Responsible for margin performance and production • Discretion to grow business from brownfield and greenfield opportunities (up to US$50m) without ExCo or IRC approval • Role in ide
Slide 20: Cultural Integration
Cultural Integration • BHP Billiton Charter – value imperatives defined • Cultural integration started prior to merger • Mix of BHP/Billiton personnel to senior roles • Senior management alignment with key performance measures and behaviours • BHP Billiton Way – common language, common way of doing
Slide 21: Outstanding Commodity Diversification
Outstanding Commodity Diversification EBIT by Customer Sector Group year ended 30 June 2001 Steel Carbon Steel 7% Materials 22% Base Metals 12% Aluminium 13% Stainless Steel Materials 2% Petroleum Energy Coal 35% 9% EBIT contribution excludes exceptional items
Slide 22: Global Supplier of Resources
Global Supplier of Resources Sales by destination year ended 30 June 2001 Rest of World 5% Australia North America 18% 18% Other Asia Europe 11% 24% South Korea 5% South Africa Japan 6% 13%
Slide 23: Diversification Strengths
Diversification Strengths • Exchange traded commodities – aluminium, nickel, copper • Negotiated commodities – metallurgical coal, energy coal, iron ore, manganese • Titanium minerals & diamonds • Petroleum • Resilience through the cycle
Slide 24: Role of Petroleum
Role of Petroleum • High quality portfolio • 35% of Group EBIT • Commodity & growth diversification • Strong growth options • Key to broader energy capability
Slide 25: Portfolio Review
Portfolio Review • Reviewed all assets in portfolio using common criteria – Competitiveness of asset (financial measures) – Stage of value cycle – Scale of influence in sector – Strategic fit and/or value – Risk profile
Slide 26: Portfolio Review – Category of Assets
Portfolio Review – Category of Assets • Core assets • Non-core assets being actively worked out of portfolio • Majority of remaining assets fulfill minimum performance criteria but not ‘trophy’ assets – Candidates for divestiture, re-financing subject to realising sufficient value
Slide 27: Growth Portfolio
Growth Portfolio • Impressive portfolio of growth opportunities • Options reviewed according to following considerations: – optimising development opportunities – funding – project management – portfolio risk
Slide 28: Growth Pipeline
Growth Pipeline New or Incremental Production Captured in Financial Year 2001 Project Commodity New / Incremental Production (1) Mozal I (Mozambique) – 47% Aluminium 120,000 tpa Worsley (Australia) – 56% Alumina 1.5 Mtpa Cerro Matoso (Colombia) – 100% Nickel 25,000 tpa Cerro Colorado (Chile) – 100%
Slide 29: Growth Pipeline
Growth Pipeline Projects sanctioned in Financial Year 2001 Project Commodity Share of Capex New / Incremental 1st US$m Production (net) Production Mozal II (Mozambique) – 47% Aluminium 405 120,000 tpa FY04 Escondida Phase IV (Chile) – 57.5% Copper 600 230,000 tpa(1) FY03 Tintaya Oxide (Peru) – 100%
Slide 30: Growth Pipeline
Growth Pipeline Projects expected to be sanctioned in Financial Year 2002 Project Commodity Share of Description / Production 1st Production Hillside III (South Africa ) – 100% Aluminium 130,000 tpa additional capacity FY04 Carbones del Cerrejon (Colombia) Energy coal Expansion of capacity FY05 from
Slide 31: Well Balanced Project Pipeline
Well Balanced Project Pipeline Dendrobium BROWNFIELD Escondida Mozal 2 Yabulu Phase IV R’thorpe Mount Arthur North Esc’da CdC Norte Zamzama FFD Exp’n Hillside 3 Cerro San Bream Gas Sth Tintaya Juan Matoso Pipeline BW Oxide NWS Mining 4th Train Area C CY 2001 2002 2003 2004 2005 Mad Typhoon ROD Dog S
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Slide 33: Chip Goodyear, Chief Development Officer & CFO
Chip Goodyear Chief Development Officer & Chief Financial Officer
Slide 34: Financial Reporting for the BHP Billiton Group
Financial Reporting for the BHP Billiton Group • Combined accounts using merger accounting principles • US dollar currency • Financial statements are prepared in accordance with UK GAAP • Stand alone preliminary reports for BHP Billiton Ltd Group and BHP Billiton Plc Group
Slide 35: Results Highlights
Results Highlights (US$m) 2001 2000 % Change Turnover* 19,079 18,402 +3.7 EBITDA 4,211 4,016 +4.9 Excluding exceptionals 5,299 4,775 +11.0 EBIT 2,539 2,267 +12.0 Excluding exceptionals 3,627 3,027 +19.8 Profit before tax 2,063 1,778 +16.0 Attributable profit 1,529 1,506 +1.5 Excluding exceptionals 2
Slide 36: Significant Features
Significant Features • Higher prices for petroleum products, iron ore and coal • Higher volumes for most major mineral commodities • Acquisitions (Rio Algom, Worsley) and new operations (Mozal) contributed to earnings • Lower A$/US$ and Rand/US$ exchange rates • Exceptional items impacted attributab
Slide 37: Exceptional Items
Exceptional Items Pre-tax and equity minority interests US$m HBI Venezuela write-off (520) Ok Tedi write-off (430) Columbus Joint Venture write down (114) Merger costs (92) Restructuring costs and provisions (64) Executive share awards (37) Lake Mines write down (26) Equalisation of interests in Que
Slide 38: EBIT by Customer Sector Group
EBIT by Customer Sector Group (US$m) 2001 2000 % Change Aluminium 523 438 +19 % Base Metals 485 478 +2 % Carbon Steel Materials 894 538 +66 % Stainless Steel Materials 79 205 -62 % Energy Coal 382 137 +179 % Petroleum 1,407 1,061 +33 % Steel 270 402 -33 % Exploration, Technology 6 12 & New Business
Slide 39: Aluminium
Aluminium 2001 2000 Turnover (US$m) 2,971 2,357 EBIT excluding exceptionals (US$m) 523 438 EBIT including exceptionals (US$m) 576 438 Attributable production (‘000t) – Alumina 2,938 1,878 – Aluminium 984 883 Average LME cash aluminium price (US$/t) 1,539 1,516
Slide 40: Aluminium – Key Points
Aluminium – Key Points • EBIT includes contribution from the additional 56% of Worsley • Mozal reached full production in December 2000 and contributed US$25m EBIT for the year • EBIT includes US$61m from sale of Mozal II expansion rights and US$14m from Gove break fee • Pot relining program at Hill
Slide 41: Base Metals
Base Metals 2001 2000 Turnover (US$m) 2,231 2,374 EBIT excluding exceptionals (US$m) 485 478 EBIT including exceptionals (US$m) 47 478 Attributable production – Copper concentrate (contained Cu ’000t) 813.7 735.9 – Copper cathode (‘000t) 207.1 111.6 – Lead (‘000t) 216.9 206.9 – Zinc (‘000t) 140.2 12
Slide 42: Base Metals – Key Points
Base Metals – Key Points • Write-off of Ok Tedi impacted EBIT by US$430m • Excluding OK Tedi write-off, EBIT was in line with 2000 • Rio Algom acquisition completed in October 2000 • Average LME cash copper price was 3% higher than 2000, offset by lower gold, silver and zinc • Total copper productio
Slide 43: Carbon Steel Materials
Carbon Steel Materials 2001 2000 Turnover (US$m) 3,369 2,842 EBIT excluding exceptionals (US$m) 894 538 EBIT including exceptionals (US$m) 836 (157) Attributable production (mt) – Iron ore 65.9 59.8 – Metallurgical coal 37.1 30.6 – Manganese ores 3.8 3.6 – Manganese alloys 0.6 0.7 – HBI 1.0 0.6
Slide 44: Carbon Steel Materials – Key Points
Carbon Steel Materials – Key Points • EBIT impacted by the write-off of HBI Venezuela US$180m offset by a profit of US$128m from the sale of interests in Queensland coal • Record Western Australia iron ore sales volumes, up 13% • 2000 EBIT included write-off of HBI WA of US$695m • Acquisition of QCT
Slide 45: Stainless Steel Materials
Stainless Steel Materials 2001 2000 Turnover (US$m) 838 977 EBIT excluding exceptionals (US$m) 79 205 EBIT including exceptionals (US$m) 74 205 Attributable production (‘000t) – Nickel 60.8 54.1 – Chrome ores 3,158 3,726 – Chrome alloys 908 1,055 Average LME cash nickel price (US$/lb) 3.28 3.75
Slide 46: Stainless Steel Materials – Key Points
Stainless Steel Materials – Key Points • Lower nickel prices (down 12%) and cobalt by-product (down 22%) • Lower ferrochrome prices • Nickel production up 12% to 61kt • Lower unit costs at Cerro Matoso and Yabulu • Cerro Matoso Line II produced its first ferronickel in January 2001, three months ahe
Slide 47: Energy Coal
Energy Coal 2001 2000 Turnover (US$m) 1,982 1,597 EBIT excluding exceptionals (US$m) 382 137 EBIT includings exceptionals (US$m) 348 137 Attributable production (mt) – South Africa 61.3 66.3 – USA 14.9 14.5 – Australia 5.3 5.1 – Indonesia 8.5 8.0 – Colombia 2.8 - Total 92.9 93.9 2001 production does
Slide 48: Energy Coal – Key Points
Energy Coal – Key Points • Higher export energy coal prices • Cost savings and efficiencies • Acquisition of interests in Colombian coal assets CdelC (33.3%) and CZN (16.7%) in September and November 2000 respectively added 2.8mt to attributable production • Total energy coal production of 92.9mt, i
Slide 49: Petroleum
Petroleum 2001 2000 Turnover (US$m) 3,361 2,971 EBIT excluding exceptionals (US$m) 1,407 1,061 EBIT including exceptionals (US$m) 1,407 1,142 Attributable production – Crude oil and condensate (mmbbl) 79.1 79.8 – Natural gas (bcf) 261.8 238.6 – LPG (‘000t) 673.6 681.7 Average realised oil price (US$
Slide 50: Petroleum – Key Points
Petroleum – Key Points • Higher realised oil prices, up 23% • Higher natural gas, liquefied natural gas (LNG) and liquefied petroleum gas (LPG) prices • Higher oil volumes from Laminaria • Lower oil volumes from Bass Strait reflecting natural field decline • Higher exploration reflecting activity in
Slide 51: Steel
Steel 2001 2000 Turnover (US$m) 3,760 5,393 EBIT excluding exceptionals (US$m) 270 402 EBIT including exceptionals (US$m) 248 249 Attributable production (‘000t) – Raw steel 5,432 5,461 – Marketable steel products 5,316 4,883 Core steel production only
Slide 52: Steel – Key Points
Steel – Key Points • Improved operating performance from the Asian businesses • Lower international steel prices • Lower volumes of coated products to the Australian market reflecting lower building activity
Slide 53: Balance Sheet Strength
Balance Sheet Strength 2001 2000 Attributable net assets (equity) (US$m) 11,340 11,036 Net debt (US$m) 7,321 6,092 Net debt / equity 64.6% 55.2% Net debt / (net debt + net assets) 38.4% 34.2% EBITDA interest cover • excluding exceptionals 11.1x 9.1x • including exceptionals 8.8x 7.7x
Slide 54: Issues for First Quarter FY02
Issues for First Quarter FY02 • Dia Met acquisition increases Group share in Ekati diamond production to approximately 80% effective 1 July • Commencement of production from Typhoon oilfield in the Gulf of Mexico • Power usage restrictions in Brazil are expected to impact aluminium production • Acce
Slide 55: Issues for First Quarter FY02 (cont)
Issues for First Quarter FY02 (cont) • No profit will be recognised for Ok Tedi except to the extent that dividends are received • Ferrochrome business • Base metal prices • Exchange rates • Commence implementation of new financing plan
Slide 56: Capital & Investment Expenditure Update
Capital & Investment Expenditure Update (US$m) 2001 2002F Project expenditure 900 1,800 Sustaining capital 800 800 Exploration expenditure 300 300 Investment expenditure 4,800 Total 6,800 2,900
Slide 57: BHP Billiton Ltd Group Financial Results
BHP Billiton Ltd Group Financial Results (A$m, Aus GAAP) 2001 2000 % Change Sales Revenue 20,698 19,872 +4% EBITDA 5,530 4,404 +26% EBIT 3,128 2,264 +38% Profit before tax 2,575 1,600 +61% Net Profit 2,007 1,581 +27% EPS (cents) 54.4 43.3 +26%
Slide 58: BHP Billiton Ltd Group Significant Features
BHP Billiton Ltd Group Significant Features • Charges relating to HBI Venezuela (A$811m after tax) and Ok Tedi (A$286m after tax), partly offset by benefits due to changes in accounting policies (A$320m after tax) • Excluding above items: EBITDA A$6,676 million EBIT A$4,531 million Net profit A$2,78
Slide 59: BHP Billiton Ltd Group Net Profit
BHP Billiton Ltd Group Net Profit (A$m, Aus GAAP) 2001 2000 % Change Minerals 624 436 +43 % Petroleum 1,916 1,286 +49 % Steel 323 283 +14 % Services 94 Group items (incl. interest) (1,354) (550) Outside equity 498 32 Net profit 2,007 1,581 +27 % Return on capital 11.7% 10.0% Return on equity 18.2% 1
Slide 60: BHP Billiton Ltd Group 2001 vs 2000
BHP Billiton Ltd Group 2001 vs 2000 A$m 3000 180 225 360 (10) (80) 2500 (115) 610 (185) 2007 2000 1581 (559) 1500 1000 500 0 Year Exchange Price Asset New Volume Cost Exploration Ceased / Other Year ended Rates Sales operations Sold / ended June 2000 Discontinuing June 2001
Slide 61: WA HBI Performance Update
WA HBI Performance Update FY01 FY01 FY01 FY01 (A$ Nominal) (Q3) (Q4) (H2) (H2) Actual Actual Actual Target Production Volume (kT) 177 276 452 606 Ave Campaign Length (days) 109 133 115 91 Ave Train Throughput (T/h) 42 58.4 50.2 60.6 Ave Train Turnaround (days) - 93 93 49 Cash Flow* (after tax) (54)
Slide 62: BHP Billiton Plc Group Pro Forma Highlights
BHP Billiton Plc Group Pro Forma Highlights • Turnover up 32% to US$7,333 million • Operating profit up 18% to US$992 million • Attributable profit excluding exceptional items up 22% to US$693 million • Cash flow from operating activities 35% higher at US$1,346 million • EPS excluding exceptional it
Slide 63: BHP Billiton Plc Group Pro Forma Financial Results
BHP Billiton Plc Group Pro Forma Financial Results (US$m) 2001 2000 % Change Turnover 7,333 5,550 +32% Operating Profit 992 843 +18% Excluding exceptionals 1,120 843 +33% Attributable Profit 565 566 - Excluding exceptionals 693 566 +22% EPS (cents) 25.1 27.3 -8% Excluding exceptionals 30.7 27.3 +12%
Slide 64: BHP Billiton Plc Group Pro Forma Operating Profit by Business Segment
BHP Billiton Plc Group Pro Forma Operating Profit by Business Segment (US$m) 2001 2000 % Change Aluminium 511 431 +19% Base Metals 66 27 +144% Coal 257 52 +394% Nickel 81 140 -42% Steel and Ferroalloys 83 148 -44% Titanium Minerals 162 155 +5% Metals Distribution 23 - New Business & Technology (40)
Slide 65: BHP Billiton Plc Group Pro Forma 2001 vs. 2000
BHP Billiton Plc Group Pro Forma 2001 vs. 2000 (US$m) 2000 operating profit 843 Weakening of currencies relative to US$ 236 Acquisitions and disposals 120 Efficiency gains at production units 76 Sales prices 77 Sales volumes 27 Reorganisation costs (10) Other items (incl trading and central items) (
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