Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — FY2016 Earnings Presentation
34 slides from Bhp's earnings presentation, Aug 16, 2016
Slide 1: Financial results Year ended 30 June 2016
Financial results Year ended 30 June 2016 Olympic Dam
Slide 2: Disclaimer
Disclaimer 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 certain operations or
Slide 3: Financial results
Spence Escondida Financial results Year ended 30 June 2016 Andrew Mackenzie Chief Executive Officer South Walker Creek
Slide 4: Solid performance in a challenging year
Solid performance in a challenging year Safety Committed to addressing consequences of the Samarco tailings dam failure Zero fatalities at BHP Billiton operated sites Volume Record WAIO and metallurgical coal production; strong conventional petroleum volumes Offset by anticipated Escondida grade dec
Slide 5: Committed to Samarco
Committed to Samarco • Rehabilitation progressing well Samarco infrastructure – Germano and Santarem Dams reinforcement works continue – 90% of the 41 work programs initiated – community resettlement ongoing • Foundation established – Framework Agreement is the appropriate long-term response Santare
Slide 6: Safety is paramount
Safety is paramount • The health and safety of our people and communities always Total Recordable Injury Frequency at operated sites come first (number of recordable injuries per million hours worked1) 10 – tragically 19 lives were lost following the Samarco dam failure • Strong safety performance a
Slide 7: Financial results
Financial results Year ended 30 June 2016 Peter Beaven Chief Financial Officer Shenzi
Slide 8: Asset quality and operating performance drive margins
Asset quality and operating performance drive margins • Underlying EBITDA of US$12.3 billion Leading margins through the cycle (Underlying EBITDA margin1, %) – Underlying EBITDA margin of 41% 60 – 16% reduction in unit costs • Underlying EBIT of US$3.5 billion • Underlying attributable profit of US$
Slide 9: Group EBITDA waterfall
Group EBITDA waterfall Underlying EBITDA variance (US$ billion) 24 21.9 External (US$9.9 billion) Controllable US$0.3 billion 16 1.1 0.2 0.2 12.3 12.0 1.4 (0.3) (0.3) (10.7) (0.4) (0.8) 8 0 FY15 Price¹ Foreign Inflation Sub-total Growth Productivity Controllable Fuel & Non-cash² Other³ FY16 exchange
Slide 10: Financial impact of Samarco dam failure
Financial impact of Samarco dam failure • Investment in Samarco written down to US$nil at Equity accounted investment in Samarco 31 December 2015 Income statement impacts H1 H2 (US$ million) FY16 FY16 FY16 • US$1.2 billion provision at 30 June 2016 reflects uncertainty Share of loss relating to dam
Slide 11: Free cash flow provides optionality
Free cash flow provides optionality • Free cash flow of US$3.4 billion Capital and exploration expenditure (cash basis) (US$ billion) – net operating cash flow of US$10.6 billion 24 – capital and exploration expenditure of US$7.7 billion1 – working capital release of US$0.2 billion 12 – ~40% reducti
Slide 12: Disciplined capital allocation
Disciplined capital allocation • Our Capital Allocation Framework balances value Capital allocation in FY16 (US$ billion) creation, shareholder returns and balance sheet strength H1 H2 FY16 – ‘A’ credit rating maintained1 5.3 5.3 10.6 Net operating cash flow – total dividends paid of US$4.1 billion
Slide 13: Financial results
Escondida Financial results Year ended 30 June 2016 Andrew Mackenzie Chief Executive Officer Eastern Ridge
Slide 14: Well placed for the conditions we expect
Well placed for the conditions we expect • Near-term is difficult Commodity market outlook to 2025 – well-supplied markets across our commodity suite – ineffective monetary policy, political uncertainty, populist rejection of free trade suppressing Supply opportunity by 2025 (versus 2015) business c
Slide 15: Focused portfolio and simplified operating model
Focused portfolio and simplified operating model • Optimal portfolio after divestments and demerger Tier 1 portfolio (FY16 Underlying EBITDA margin, %) – well-capitalised, low-cost, long-life assets with 80 expansion options Note: Bubble size represents FY16 – diversified across the right commoditie
Slide 16: Broad suite of opportunities offers significant upside
Broad suite of opportunities offers significant upside We have made significant progress to capture valuation upside and improve returns Productivity On track to deliver US$2.2 billion of gains over two years to end FY17 Absorbed US$1.6 billion impact of grade decline at Escondida in FY16 Latent Lat
Slide 17: Momentum builds into the new financial year
Momentum builds into the new financial year Steady volumes… Lowest unit operating costs in a decade expected in FY17 (Mt, operating cost per copper equivalent tonne) • FY17 copper equivalent volume growth of up to 4% (ex-Onshore US) • Onshore US will respond to market conditions …lower costs… • prod
Slide 18: Positioned to grow value and returns
Positioned to grow value and returns The right commodities… We have opportunities to significantly increase returns (Return on Capital Employed3 at consensus prices, nominal) • optimal diversification with petroleum and copper markets expected to rebalance first …the right assets… • optimal portfoli
Slide 19: bhpobilliton
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Slide 20: Appendix
684 bhpbilliton Appendix
Slide 21: BHP Billiton guidance
BHP Billiton guidance Group FY17e FY18e Capital and exploration expenditure (US$bn) 5.4 6.2 Cash basis. Including: Maintenance 2.0 Exploration 0.8 0.8 US$700m Petroleum and US$60m Copper exploration program planned for FY17. Petroleum FY17e Total petroleum production (MMboe) 200 - 210 Onshore US Cap
Slide 22: BHP Billiton guidance (continued)
BHP Billiton guidance (continued) Copper FY17e Total copper production (Mt) 1.66 Guidance for Escondida at 1.07 Mt. Pampa Norte production is expected to increase. Olympic Dam production guidance to remain unchanged. Guidance for Antamina production to decrease to 130 kt as planned mining sequence m
Slide 23: Key Underlying EBITDA sensitivities
Key Underlying EBITDA sensitivities Approximate impact1 on FY17 Underlying EBITDA of changes of: US$ million US$1/t on iron ore price2 217 US$1/bbl on oil price3 79 US¢10/MMbtu on US gas price 26 US$1/t on metallurgical coal price 42 US¢1/lb on copper price2 34 US$1/t on energy coal price2 18 US¢1/l
Slide 24: Petroleum EBITDA waterfall
Petroleum EBITDA waterfall Underlying EBITDA variance (US$ billion) 8.0 External (US$3.7 billion) Controllable US$0.2 billion 7.2 0.7 4.0 3.5 3.7 (0.0) 0.0 (3.6) (0.1) (0.0) (0.1) (0.4) 0.0 FY15 Price¹ Foreign Inflation Sub-total Growth Controllable Fuel & Non-cash² Other³ FY16 exchange volumes cash
Slide 25: Copper EBITDA waterfall
Copper EBITDA waterfall Underlying EBITDA variance (US$ billion) 6.0 External (US$2.0 billion) Controllable (US$0.6 billion) 5.2 0.3 3.2 0.0 3.0 (2.2) (0.1) 0.2 2.6 0.2 0.0 (0.9) (0.1) 0.0 FY15 Price¹ Foreign Inflation Sub-total Growth Productivity Controllable Fuel & Non-cash² Other³ FY16 exchange
Slide 26: Iron Ore EBITDA waterfall
Iron Ore EBITDA waterfall Underlying EBITDA variance (US$ billion) 10.0 External (US$3.4 billion) Controllable US$0.4 billion 8.6 0.1 0.3 0.3 5.6 5.2 0.1 0.0 (0.0) (0.1) 5.0 (3.6) (0.1) 0.0 FY15 Price¹ Foreign Inflation Sub-total Growth Productivity Controllable Fuel & Non-cash² Other³ FY16 exchange
Slide 27: Coal EBITDA waterfall
Coal EBITDA waterfall Underlying EBITDA variance (US$ billion) 1.6 External (US$0.6 billion) Controllable US$0.0 billion 1.2 0.1 0.2 0.0 0.8 0.4 0.0 0.0 0.6 0.6 (0.1) (0.3) (0.9) 0.0 FY15 Price¹ Foreign Inflation Sub-total Growth Productivity Controllable Fuel & Non-cash² Other³ FY16 exchange volume
Slide 28: Other items affecting profitability
Other items affecting profitability Other items (US$ billion) Underlying Underlying EBITDA attributable profit1 Exceptional items1 0.0 (0.2) (0.2) (0.2) (0.2) (0.3) (0.6) (2.0) (2.2) (4.0) (4.9) (6.0) Redundancies and Royalty and Redundancies and Minor impairments Royalty and Global taxation Samarco
Slide 29: Debt maturity profile
Debt maturity profile Debt balances1 (US$ billion2) 8 6 4 2 0 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 Post FY28 US$ Euro Sterling A$ C$ Bonds3 Bonds 3 Bonds 3 Bonds Bonds Subsidiaries % of portfolio 46% 30% 11% 5% 2% 6% Capital markets 94% Asset financing 6% 1. All debt balances
Slide 30: We remain positive on long-term copper fundamentals
We remain positive on long-term copper fundamentals Short-term overcapacity in copper remains persistent Global demand slow recently, but long run trend is still positive (Refined copper demand1, Mt) • Subdued demand with slower than expected growth in China 22.5 and recession in key non-Asian emerg
Slide 31: Oil and US gas markets expected to rebalance
Oil and US gas markets expected to rebalance Outlook remains healthy Oil mass balance: global (Inventory change, MMbbl/d) • Fundamentals tightening, as healthy demand growth intersects with slower global production growth due to falling production in the US 2.0 • Rate of inventory drawdown will impa
Slide 32: Iron ore demand outlook remains modest
Iron ore demand outlook remains modest Chinese and global steel growth to slow Global steel production break-down (Regional split %) (CAGR %) • Global steel production is likely to grow modestly in the future 100 10 • China’s steel demand growth to become more cyclical as it moves past the inflectio
Slide 33: Metallurgical coal outlook supported by growing demand for high-quality product
Metallurgical coal outlook supported by growing demand for high-quality product Demand improvement to be moderate, supply slowly adjusting Seaborne metallurgical coal supply and demand (Bt) • Cost curve has flattened • Lower prices are leading to closures and reduced investment Supply opportunity Th
Slide 34: Energy coal expected to remain an important part of the global energy complex
Energy coal expected to remain an important part of the global energy complex Markets expected to remain oversupplied in the near term Additional seaborne supply required to meet expected demand (Bt) • China’s demand for imports is likely to fall further as domestic overcapacity persists, however co