Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — Investor Presentation (February 2006)
21 slides from Bhp's investor presentation, February 2006
Slide 1: Portfolio Risk Management
Portfolio Risk Management Investor Presentation February 2006
Slide 2: Disclaimer
Disclaimer The views expressed here contain information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. Any forward looking information in this presentation ha
Slide 3: Agenda
Agenda • Introduction • The BHP Billiton Portfolio • Portfolio Risk Management Strategy & Performance • Portfolio Value @ Risk • Portfolio Potential Slide 3 of 21
Slide 4: Where we have come from
Where we have come from Financial Strength • Credit rating • Liquidity profile • Interest cover • Gearing BHP Billiton Financial Risk Management Financial Markets Strategy Business Strategy • Commodities • Financial targets • Currencies • Capital management • Capital markets • Growth aspirations - D
Slide 5: Strategy
Portfolio Risk Management Strategy • To manage risk through the strength, flexibility and natural diversification in the BHP Billiton Portfolio. • To only hedge when the residual risk in the portfolio may compromise the delivery of corporate objectives. Portfolio Risk managed within Board approved l
Slide 6: The BHP Billiton Portfolio Model
The BHP Billiton Portfolio Model Risk is managed within a quantitative Cash Flow @ Risk framework Slide 6 of 21
Slide 7: What is new: Value Risk
What is new Next generation of the Portfolio Model. Extension from cash flow to value: Cash Flow @ Risk Portfolio Value @ Risk Cash Flow Value Risk Risk • 5 Year Cash flows • Value based, but includes other metrics • Market risk • “Whole of company” risk • Only cost of growth • Risk and reward of gr
Slide 8: Agenda
Agenda • Introduction • The BHP Billiton Portfolio • Portfolio Risk Management Strategy & Performance • Portfolio Value @ Risk • Portfolio Potential Slide 8 of 21
Slide 9: The BHP Billiton Portfolio
The BHP Billiton Portfolio Slide 9 of 21
Slide 10: Agenda
Agenda • Introduction • The BHP Billiton Portfolio • Portfolio Risk Management Strategy & Performance • Portfolio Value @ Risk • Portfolio Potential Slide 10 of 21
Slide 11: Evolution of Cash Flow @ Risk
Evolution of Cash Flow @ Risk US$M Reported Risk Measures % 20 September 11 Managed Synchronisation due China growth to China demand Winding down 18 Steel exposure Steel Iraq war 16 spin-out 14 Increase in Bulk prices 12 10 H1 H2 H1 H2 H1 H2 H1 H2 FY2002 FY2003 FY2004 FY2005 CF@R CF@R to Projected C
Slide 12: Portfolio Risk has decreased
Portfolio Risk has decreased • BHP Billiton portfolio risk less than at time of merger in July 2001 • Addition of WMC acquisition does not significantly alter risk At Time of As Without at end With WMC Merger Jul 01 WMC DecJul 0405 Ratio of Cash flow at Risk 19% 13% 16% 14% to Cash flow • Credit rat
Slide 13: Overview of Modelling
Overview of Modelling Cash Flows (from Business Plan) Market-derived Statistics 83 Assets (24 as at Jul 01) •Correlations Asset 1 Asset 2 … Asset N (26 as at Jul 01) •Volatilities 57 Risk Factors Exposure 1 CF11 CF12 … CF1N •Stress tests including Exposure 2 CF21 CF22 … CF2N • market implied volatil
Slide 14: Agenda
Agenda • Introduction • The BHP Billiton Portfolio • Portfolio Risk Management Strategy & Performance • Portfolio Value @ Risk • Portfolio Potential Slide 14 of 21
Slide 15: The Model
The Portfolio Value @ Risk Model • Takes input directly from the asset valuation models in terms of their sensitivity to major risks (e.g. price, currency, production volumes, reserves, costs, timing) • Aggregates the risks in a consistent way • Cuts and splices the output to reveal features of inte
Slide 16: Portfolio Value @ Risk
Portfolio Value @ Risk Slide 16 of 21
Slide 17: Agenda
Agenda • Introduction • The BHP Billiton Portfolio • Portfolio Risk Management Strategy & Performance • Portfolio Value @ Risk • Portfolio Potential Slide 17 of 21
Slide 18: Portfolio Potential
Portfolio Potential Value Risk Slide 18 of 21
Slide 19: Summary – Portfolio Risk Management
Summary ― Portfolio Risk Management Look at the whole picture … • Pyramid of investment options • Long-term vs. short-term • Alternative future scenarios • Qualitative and quantitative risks • Uncertainty in key business drivers • Inter-relationships in the portfolio • Portfolio risk vs. return “Ret
Slide 20: Conclusion
Conclusion • Ongoing best practice approach to Portfolio Risk Management • Innovative portfolio analysis tools • Demonstration of portfolio potential Slide 20 of 21
Slide 21: Contact Details
Contact Details Australia United Kingdom Jane Belcher, Investor Relations Mark Lidiard, Investor & Media Relations Tel: +61 3 9609 3952 Mobile: +61 417 031 653 Tel: +44 20 7802 4156 Mobile: +44 7769 934 942 email: Jane.H.Belcher@bhpbilliton.com email: Mark.Lidiard@bhpbilliton.com Samantha Evans, Med