Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — H1 FY14 Earnings Presentation
40 slides from Bhp's earnings presentation, Feb 18, 2014
Slide 1: Interim results, half year ended 31 December 2013
Newman For personal use only Interim results Half year ended 31 December 2013 Andrew Mackenzie Chief Executive Officer Graham Kerr Chief Financial Officer 18 February 2014
Slide 2: Disclaimer
Disclaimer For personal use only Forward looking statements This release 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 certa
Slide 3: Interim results
Gulf of Mexico Escondida For personal use only Interim results Half year ended 31 December 2013 Andrew Mackenzie Chief Executive Officer 18 February 2014
Slide 4: Key themes
Key themes For personal use only • Record operational performance and strong production growth • Sustainable productivity gains of US$4.9 billion now embedded • Capital and exploration expenditure to decline by 25% this year • Competition for capital will drive investment returns higher • Net debt o
Slide 5: Safety is paramount
Safety is paramount For personal use only Total Recordable Injury Frequency (TRIF) (number of recordable injuries per million hours worked) 10 8 6 4 2 0 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 H1 FY14 Interim results, 18 February 2014 Slide 5
Slide 6: Strong growth in free cash flow
Strong growth in free cash flow For personal use only • Underlying EBITDA of US$16.5 billion, up 16% • Underlying EBIT of US$12.4 billion, up 15% • Underlying attributable profit of US$7.8 billion, up 31% • Net operating cash flow of US$11.9 billion, up 65% • Capital and exploration expenditure of U
Slide 7: Production records achieved at operations
Production records achieved at 10 operations For personal use only • Record Western Australia Iron Ore (WAIO) Strong and predictable operating performance production, up 20% to 108 mt1, with full year (production volumes, % change, H1 FY14 versus H1 FY13) guidance upgraded to 212 mtpa1 during the Me
Slide 8: Selective investment and productivity gains underpin strong momentum
Selective investment and productivity gains underpin strong momentum For personal use only • Production guidance maintained for FY14 Production growth contribution1 (%, FY13 to FY15) – iron ore production of 192 mt 20 – petroleum production of 250 MMboe – metallurgical coal production of 41 mt 15 –
Slide 9: Interim results - Graham Kerr, CFO
Newman For personal use only Interim results Half year ended 31 December 2013 Graham Kerr Chief Financial Officer 18 February 2014
Slide 10: Other items affecting profitability
Other items affecting profitability For personal use only Other items (US$ million) EBITDA Tax 500 250 0 (250) Onshore US Onshore US UK pension plan Balance sheet Remeasurement of rig termination charges underutilised gas charges monetary items¹ deferred tax assets² pipeline charges (Petroleum) 1. P
Slide 11: Productivity is delivering sustainable growth in margins and returns
Productivity is delivering sustainable growth in margins and returns For personal use only Controllable cash costs1 EBIT variance (US$ million) (US$ billion, H1 FY14 versus H1 FY13) 1,200 275 1,047 129 20.0 325 71 600 247 0 Equipment People Supply Other Expl'n & Total bus. dev.² 15.0 1.0 0.5 12.4 1.
Slide 12: US$4.9 billion of cost and volume efficiencies now embedded
US$4.9 billion1 of cost and volume efficiencies now embedded For personal use only Productivity led cost and volume efficiencies1 (US$ billion) 1.5 4.9 5.0 1.6 2.5 1.8 0.0 Operating Exploration Productivity Total cash costs & business volumes development 1. Represents annualised volume and/or cash c
Slide 13: Our framework to maximise shareholder returns
Our framework to maximise shareholder returns For personal use only • Our purpose when allocating capital is to maximise total shareholder returns • Our strategy is to own and operate large, long life, low cost, expandable, upstream assets diversified by commodity, geography and market • We will str
Slide 14: A strong track record of capital management
A strong track record of capital management For personal use only • Over the last 10 years we returned Capital US$62 billion1 to our shareholders return – a payout ratio of ~50% • US$100 invested in BHP Billiton a decade ago would have a value of US$4663 today – CAGR of 17% Capital growth Balancing
Slide 15: Applying strict capital discipline
Applying strict capital discipline For personal use only Return excess Strong balance • We are committed to a solid A credit rating to shareholders sheet & solid A credit rating – 65% increase in net operating cash flow – proceeds of US$2.2 billion1 from portfolio simplification received in the peri
Slide 16: Applying strict capital discipline
Applying strict capital discipline For personal use only Strong balance Return excess • Our progressive base dividend has been to shareholders sheet & solid A credit rating maintained throughout the economic cycle – it is the minimum annual distribution that a shareholder should expect – returned US
Slide 17: Applying strict capital discipline
Applying strict capital discipline For personal use only Strong balance Return excess • By reducing annual expenditure, we have to shareholders sheet & solid A credit rating significantly increased internal competition for capital – 25% reduction in capital and exploration expenditure1 in FY14 – our
Slide 18: Applying strict capital discipline
Applying strict capital discipline For personal use only Strong balance Return excess • We have consistently returned excess to shareholders sheet & solid A credit rating capital to shareholders – completed buy-backs totalling US$23 billion1 over the last 10 years • With strong free cash flow, selec
Slide 19: Competition for capital will increase returns
Competition for capital will increase returns For personal use only • Our opportunity rich portfolio remains a key point of differentiation • By continuing to operate within a disciplined Maximise framework and by testing all decisions against shareholder challenging criteria, we will increase the c
Slide 20: Primed to increase shareholder returns
Primed to increase shareholder returns For personal use only • We have delivered a significant increase in free cash flow • Capital and exploration expenditure is expected to decline by 25% in FY14, as planned • An average rate of return of >20%1 for our favoured major projects is achievable • Our p
Slide 21: BMA Interim results
For personal use only BMA Interim results Half year ended 31 December 2013 Andrew Mackenzie Chief Executive Officer 18 February 2014
Slide 22: Unlocking shareholder value through productivity
Unlocking shareholder value through productivity For personal use only • We committed to deliver more tonnes and BMA 797 truck performance (Goonyella) more barrels from existing infrastructure at (hours, 12 month moving average, index, July 2012=100) a lower unit cost 150 • Our culture, capability a
Slide 23: Unlocking shareholder value through productivity
Unlocking shareholder value through productivity For personal use only • We committed to deliver more tonnes and Coal productivity gains2 more barrels from existing infrastructure at (US$ billion) a lower unit cost 3.0 • Our culture, capability and systems support 2.0 our continuing pursuit of susta
Slide 24: Unlocking shareholder value through productivity
Unlocking shareholder value through productivity For personal use only • We committed to deliver more tonnes and Iron Ore productivity gains2 more barrels from existing infrastructure at (US$ billion) a lower unit cost 0.6 0.3 • Our culture, capability and systems support our continuing pursuit of s
Slide 25: Generating a sustainable increase in return on capital
Generating a sustainable increase in return on capital For personal use only • Strong operating performance and an Return on capital intense focus on productivity has delivered (earnings to average capital employed1, %) an increase in the Group‟s Underlying 25 return on capital to 22%1 • Further dis
Slide 26: Global growth is broad based and improving
Global growth is broad based and improving For personal use only • Global economic conditions improved Private sector driving recent US growth during H1 FY14 (% QoQ, annualised) 5.0 • In the United States, growth has accelerated as private sector confidence 2.5 builds 0.0 • China is in transition to
Slide 27: Markets will respond to supply growth
Markets will respond to supply growth For personal use only • With the displacement of high cost supply, The iron ore cost curve will flatten the marginal cost of production for iron ore (US$/t) will decline CY13 – current steep cost curve contributes to CY15 volatility – price and volatility will r
Slide 28: Our portfolio provides unrivalled flexibility
Our portfolio provides unrivalled flexibility Capital & exploration expenditure1 For personal use only (%) 100 Aluminium, Manganese & Nickel 75 Coal 50 Copper 25 Iron Ore Petroleum & Potash 0 Saskatchewan FY09 FY10 FY11 FY12 FY13 (Potash) Onshore US (Oil & gas) Gulf of Mexico (Oil & gas) WAIO Queens
Slide 29: Our portfolio approach to capital allocation
Our portfolio approach to capital allocation For personal use only Maximise Saskatchewan shareholder (Potash) returns Onshore US (Oil & gas) Gulf of Mexico (Oil & gas) WAIO Queensland Coal (Iron ore) (Metallurgical coal) Escondida (Copper) Note: Bubble size represents combined capital expenditure fo
Slide 30: An increasing focus on our major basins
An increasing focus on our major basins Production growth1 Capital & exploration expenditure3 For personal use only (%, FY13 to FY15) (US$ million) 30 24 Major basins2 24 16 18 8 Group2 12 0 30 35 40 45 50 55 FY12 FY13 FY14e Saskatchewan EBIT margin2 (Potash) Onshore US (Oil & gas) Gulf of Mexico (O
Slide 31: Key themes
Key themes For personal use only • Record operational performance and strong production growth • Sustainable productivity gains of US$4.9 billion now embedded • Capital and exploration expenditure to decline by 25% this year • Competition for capital will drive investment returns higher • Net debt o
Slide 32: For personal use only
édl bhpbilliton resourcing the future
Slide 33: Appendix
For personal use only Appendix
Slide 34: Strength in diversity
Strength in diversity For personal use only EBIT margin (%) 75 50 25 0 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 H1 FY14 Petroleum & Potash Aluminium, Manganese & Nickel Copper Iron Ore Coal Group Note: All periods exclude third party trading activities. Calculated on the basis of IFRS 10, IFRS 1
Slide 35: Impact of commodity price movements
Impact of commodity price movements For personal use only Total price variance1 (US$ million, H1 FY14 versus H1 FY13) 1,000 815 (14) 500 (306) 0 (611) (500) (658) (774) (1,000) Iron Ore Petroleum Aluminium, Coal Copper Total Manganese & Nickel 1. Includes impact of price linked costs. Interim result
Slide 36: Foreign exchange gain/(loss) on balance sheet monetary items
Foreign exchange gain/(loss) on balance sheet monetary items For personal use only Foreign exchange gain/(loss) on balance sheet monetary items (US$ million) 400 50 345 (11) 24 300 64 73 200 145 100 0 Iron Ore Copper Coal Aluminium, Group & Petroleum & Total Manganese & unallocated Potash Nickel Not
Slide 37: Our high quality project pipeline
Our high quality project pipeline For personal use only WAIO WAIO Jimblebar Caval Jansen shaft Inner Ridge development Harbour Macedon WAIO Bass Strait Broad- Port and Rail HPX3 NWS LGCP meadow GWF-A FY13 FY14 FY15 FY16 Escondida OLAP Escondida Appin Kipper1 Daunia NWS North OGP1 Area 9 Rankin B NTP
Slide 38: Maturity profile analysis
Maturity profile analysis For personal use only Debt balances1 (US$ billion2) 7 6 5 4 3 2 1 0 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 Post FY28 US$ Euro Sterling A$ C$ CP Bonds Bonds Bonds Bonds Bonds Issuance Subsidiaries3 % of portfolio 59% 22% 8% 3% 2% 1% 5% Cap
Slide 39: Key net profit sensitivities
Key net profit sensitivities For personal use only Approximate impact1 on FY14 net profit after tax of changes of US$ million US$1/t on iron ore price 120 US$1/bbl on oil price 45 US¢10/MMbtu on US gas price 25 US$1/t on metallurgical coal price 25 US¢1/lb on aluminium price 25 US¢1/lb on copper pri
Slide 40: For personal use only
édl bhpbilliton resourcing the future