Bhp Group Ltd · ASX:BHP
Bhp — H1 FY19 Earnings Presentation
38 slides from Bhp's earnings presentation, Feb 19, 2019
Slide 1: Results presentation for half year ended 31 December 2018
For personal use only 19 February 2019 To: Australian Securities Exchange New York Stock Exchange RESULTS PRESENTATION FOR HALF YEAR ENDED 31 DECEMBER 2018 Attached are the presentation slides for a presentation by the Chief Executive Officer and Chief Financial Officer. A video of this presentation
Slide 2: Financial results: Half year ended 31 December 2018
For personal use only Financial results Half year ended 31 December 2018 Western Australia Iron Ore
Slide 3: Disclaimer: Forward-looking statements
Disclaimer For personal use only 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
Slide 4: Financial results: Half year ended December 2018
For personal use only Financial results Half year ended 31 December 2018 BHP’s Onshore US assets have been presented as discontinued operations. Andrew Mackenzie Chief Executive Officer Trinidad and Tobago
Slide 5: BHP's investment proposition
BHP’s investment proposition We have the assets, options, capability and discipline to grow long-term shareholder value and returns For personal use only Maximise cash flow Capital discipline Value and returns Low-cost producer US$10-15 bn net debt ROCE to ~20% efficiency, technology, culture range
Slide 6: H1 FY19 financial scorecard
H1 FY19 financial scorecard Returns to shareholders of ~US$13 billion over the last six months For personal use only Profitability Free cash flow Net debt US$ 10.5 bn US$ 3.6 bn US$ 9.9 bn Underlying EBITDA and 52% margin free cash flow net debt diversified contribution >US$10 bn including down US$1
Slide 7: Sustainability is one of our core values
Sustainability is one of our core values We will continue our work to improve safety at our operations For personal use only Safety Health • Tragically, we had one fatality at Saraji (December 2018) • Occupational health exposures reduction projects progressing • TRIF at operated assets of 4.3 per m
Slide 8: Financial results: Peter Beaven, CFO
For personal use only Financial results Half year ended 31 December 2018 Peter Beaven Chief Financial Officer Queensland Coal
Slide 9: Financial performance
Financial performance Solid free cash flow generation and EBITDA margin above 50% For personal use only Summary H1 FY19 Income Statement Strong margins through the cycle (US$ billion) (Underlying EBITDA margin4, %) Total operations (including Onshore US) 60 Underlying attributable profit 3.7 Net exc
Slide 10: Group EBITDA waterfall
Group EBITDA waterfall EBITDA impacted by H1 unplanned outages; strong H2 expected; FY19 productivity expected to be broadly flat For personal use only Underlying EBITDA variance (US$ billion) 15 External US$0.4 billion Controllable US$(0.7) billion 0.7 11.2 0.1 10.8 0.0 (0.2) 0.1 10.5 (0.1) (0.1) 1
Slide 11: Segment performance
Segment performance Full-year unit cost guidance unchanged with stronger volumes anticipated in H2 For personal use only Iron Ore10 Petroleum11 Coal Copper Record Jimblebar Strong uptime First coal from Caval Record ore milled at production volumes performance Ridge Southern Circuit Spence and Cerro
Slide 12: Cash generation
Cash generation Solid free cash flow generation despite higher tax payments and capital expenditure For personal use only Operating cash flow Free cash flow (US$ billion) (Index, FY10=100) (US$ billion) (Index, FY10=100) 35 200.00 15 200 30 200 10 25 100 5 20 100.00 15 0 0 10 200 (5) 5 0 0.00 (10) (
Slide 13: Capital allocation
Capital allocation Disciplined adherence to our Capital Allocation Framework For personal use only H1 FY19 Operating Capital productivity productivity Net operating cash flow US$7.3 bn Maintenance capital US$0.8 bn Strong balance sheet Minimum 50% payout ratio dividend14 US$2.5 bn Excess cash Incl
Slide 14: Striking the right balance to maximise value and returns
Striking the right balance to maximise value and returns US$16 billion reduction in net debt; ~US$20 billion reinvested; US$25 billion returned to shareholders16 For personal use only Net debt slightly below target range Disciplined investment Increased returns to shareholders (Net debt, US$ billion
Slide 15: Return on Capital Employed
Return on Capital Employed H1 FY19 ROCE 15%; tailored plans to improve ROCE at every asset For personal use only ROCE by asset (%) Productivity, technology, latent capacity to drive Antamina17 further improvement 30 25 NSWEC High-return options 20 to slow field decline Cerrejón17 Queensland 15 Coal
Slide 16: Financial results: Andrew Mackenzie, CEO
For personal use only Financial results Half year ended 31 December 2018 Andrew Mackenzie Chief Executive Officer Olympic Dam
Slide 17: Market outlook
Market outlook Near-term uncertainty, attractive long-term fundamentals For personal use only Short term Medium term Long term Growth in New demand Policy Growth Steeper New supply population, centres and uncertainty moderating cost curves wealth themes Decarbonisation Sentiment Prudently Sustainabl
Slide 18: Our strategic framework
Our strategic framework Leveraging our values, capabilities and resources to meet the evolving needs of markets For personal use only Culture and capabilities that Commodities with high economic enables the execution of our rent potential that match our business strategy to create long- capabilities
Slide 19: Our strategy in action
Our strategy in action Continued progress against our six focus areas For personal use only Cost efficiencies Technology Latent capacity H2 reduction Integration 4 in unit costs expected with improved CIO live in July 2019; projects progressing to plan; reliability and operational performance; VCA i
Slide 20: Minerals Australia
Minerals Australia Focusing on bottlenecks to release latent capacity across our operations For personal use only Cost reductions at all assets anticipated in H2 Record stripping at Queensland Coal (Prime to product strip ratio) (Prime stripping, Index, FY13=100) • WAIO FY19 unit costs: <US$14/t, –
Slide 21: Minerals Americas
Minerals Americas Major projects and exploration provide optionality For personal use only Sustainable options with limited risk Spence productivity underpinned by maintenance excellence (Throughput, Mt) (Dry area availability, %) • EWSE on track to deliver first water in FY20 25 100 Latent • Review
Slide 22: Conventional Petroleum
Conventional Petroleum Strong operating performance supported by promising short, medium and long-term growth options For personal use only Bass Strait West Barracouta approved Gulf of Mexico Trinidad & Tobago • First gas expected in CY21 Wildling sub-basin Latent ~30 improvement and infill well pro
Slide 23: We expect to deliver on our plans in FY19
We expect to deliver on our plans in FY19 For personal use only Maximise cash flow Capital discipline Value and returns Cu Eq volumes Net debt 20% ROCE broadly flat in FY19, weighted to H2 to remain at lower end of target at spot prices range20 >US$9 bn <US$8 bn Minimum 50% free cash flow at spot pr
Slide 24: BHP's investment proposition
BHP’s investment proposition We have the assets, options, capability and discipline to grow long-term shareholder value and returns For personal use only Maximise cash flow Capital discipline Value and returns Low-cost producer US$10-15 bn net debt ROCE to ~20% efficiency, technology, culture range
Slide 25: For personal use only
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Slide 26: Appendix
For personal use only Appendix
Slide 27: Samarco and Renova Foundation
Samarco and Renova Foundation Committed to social and environmental rehabilitation For personal use only Rehabilitation Compensation Samarco legal developments (Renova Foundation) (Renova Foundation) and restart Communities • More than 8,200 of about 19,200 general • Requires licensing approvals and
Slide 28: Dams and tailings management
Dams and tailings management Increased rigour of our assessment and management of tailings storage facilities since the failure of the Fundão dam at Samarco For personal use only Facilities Safety Governance Centralised Canadian 115 20 External 93% dam Dam tailings storage active tailings storage an
Slide 29: Broad suite of attractive opportunities
Broad suite of attractive opportunities Latent capacity average returns of >100%; major project average returns of ~17%; exploration offers upside potential For personal use only Jansen current scope: 82% complete Jansen Stage 1: study underway Petroleum Copper Orphan Basin exploration: licences acq
Slide 30: The transformative power of Technology
The transformative power of Technology Systems approach to the integration and automation of our value chains to unlock resources and drive a step change in safety, volume and cost For personal use only GEOSCIENCE & PLANNING MINING PROCESSING TRANSPORT MARKETING Optimised planning and Autonomous and
Slide 31: BHP guidance
BHP guidance For personal use only Group FY19e Capital and exploration expenditure (US$ bn) <8.0 Cash basis. Including: Maintenance 2.1 Includes non-discretionary capital expenditure to maintain asset integrity, reduce risks, and meet compliance requirements. Also includes capitalised deferred strip
Slide 32: BHP guidance (continued)
BHP guidance (continued) For personal use only Copper FY19e Total copper production (Mt) 1.645 – 1.740 Includes Escondida at 1.12 - 1.18 Mt, Olympic Dam at 170 – 180 kt, Spence at 160 – 175 kt, Cerro Colorado at 60 – 70 kt, Antamina 135 kt. Escondida Production (Mt, 100% basis) 1.12 – 1.18 Reflects
Slide 33: 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 FY19 FY19e FY20e (US$ billion) US$ billion US$ billion US$ billion Petroleum 0.7 1.5 1.8 Copper 1.0 2.9 2.4 Iron Ore 0
Slide 34: West Barracouta, Atlantis Phase 3, Ruby
West Barracouta, Atlantis Phase 3, Ruby For personal use only West Barracouta Atlantis Phase 3 Ruby Australia USA Gulf of Mexico Trinidad and Tobago Two well brownfield subsea tieback to New subsea production system from eight Oil and gas development consisting of five existing Bass Strait facilitie
Slide 35: Balance sheet
Balance sheet Net debt of US$9.9 billion and gearing of 15.2% For personal use only Movements in net debt Debt maturity profile28,29 (US$ billion) (US$ billion) 15 8 10.9 (10.6) 6 0.6 0.1 0.3 9.9 10 3.4 4 5.2 5 2 0 0 FY18 Free cash Share Dividends Dividends Non-cash Other H1 FY19 FY19 FY20 FY21 FY22
Slide 36: Key Underlying EBITDA sensitivities
Key Underlying EBITDA sensitivities For personal use only Approximate impact31 on FY19 Underlying EBITDA of changes of: US$ million US$1/t on iron ore price32 225 US$1/bbl on oil price33 46 US$1/t on metallurgical coal price 40 US¢1/lb on copper price32 33 US$1/t on energy coal price32 15 US¢1/lb on
Slide 37: Footnotes
Footnotes 1. Slide 6: High potential injury frequency rate: injury events where there was the potential for a fatality. For personal use only 2. Slide 6: Occupational Exposure Limits (OELs): as compared to Q4 FY18 reported exposures and discounting the protection afforded by respiratory protective e
Slide 38: For personal use only
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