Final Results
BHP Billiton Limited
18 August 2004
BHP Billiton Limited is issuing this announcement to fulfil disclosure
obligations arising from its secondary listing on the London Stock Exchange.
The text of this release is identical to that issued by BHP Billiton Plc
earlier.
Date 18 August 2004
Number 26/04
BHP BILLITON RESULTS FOR THE YEAR ENDED 30 JUNE 2004
• Record EBITDA, EBIT and attributable profit.
• EBITDA (excluding exceptional items), up 40.0% to US$7.5 billion and EBIT
(excluding exceptional items), up 57.7% to US$5.5 billion.
• Attributable profit (excluding exceptional items) of US$3.5 billion, an
increase of 82.8% and basic earnings per share (excluding exceptional items)
of 56.4 US cents, up 82.5%.
• Including other efficiency gains, the total merger benefits and cost
savings target of US$770 million was exceeded, 12 months ahead of schedule.
• Available cash flow (after interest and tax) increased to US$5.2 billion,
up 45.6%.
• Increased production for all major minerals commodities, natural gas and
LPG, with record production rates for eight major products.
• Seven projects commissioned during the current year. A further 14 major
projects currently under development.
• Final dividend of 9.5 US cents declared (a 26.7% increase above the 2003
final dividend), bringing the full year dividend to 26.0 US cents per share.
• Board approves up to US$2 billion capital management programme.
Year ended 30 June 2004 2003 Change
US$M US$M
Turnover (1) 24 943 17 506 42.5%
EBITDA (1) (2) (3) 7 506 5 363 40.0%
EBIT (1) (2) (3) 5 488 3 481 57.7%
Attributable profit (excluding exceptional items) (1) 3 510 1 920 82.8%
Attributable profit (including exceptional items) (1) 3 379 1 901 77.7%
Available cash flow (4) 5 235 3 596 45.6%
Basic earnings per share (excluding exceptional items) (US cents) (1) 56.4 30.9 82.5%
Basic earnings per share (including exceptional items) (US cents) (1) 54.3 30.6 77.5%
EBITDA interest coverage (times) (1) (2) (3) (5) 21.1 13.3 58.6%
Dividend per share (US cents) (6) 26.0 14.5 N/C
(1) Including the Group's share of joint ventures and associates.
(2) Excluding exceptional items.
(3) Throughout this report, EBIT is earnings before interest and tax. EBITDA is
EBIT before depreciation, impairments and amortisation of US$2,018 million
(comprising Group depreciation, impairments and amortisation of US$1,867 million
and joint venture and associate depreciation, impairments and amortisation of
US$151 million) for the year ended 30 June 2004 and US$1,882 million (comprising
Group depreciation, impairments and amortisation of US$1,721 million and joint
venture and associate depreciation, impairments and amortisation of US$161
million) for the year ended 30 June 2003. We believe that EBIT and EBITDA
provide useful information, but should not be considered as an indication of, or
alternative to, attributable profit as an indicator of operating performance or
as an alternative to cash flow as a measure of liquidity.
(4) Available cash flow is operating cash flow including dividends from joint
ventures and associates and after net interest and tax.
(5) For this purpose, net interest includes capitalised interest and excludes
the effect of discounting on provisions and other liabilities, and exchange
differences arising from net debt.
(6) Three dividends were declared for the year ended 30 June 2004, compared to
two dividends declared for the year ended 30 June 2003, as a result of the
Group's decision to realign dividend declaration dates to coincide with the
announcements of our interim and full year results.
The above financial results are prepared in accordance with UK generally
accepted accounting principles (GAAP) and are unaudited. Financial results in
accordance with Australian GAAP are provided on page 30 to 31. All references to
the corresponding period are to the year ended 30 June 2003.
RESULTS FOR THE YEAR ENDED 30 JUNE 2004
Commentary on the Group Results
Introduction
The Group set new records this year, both in terms of its operations and its
financial results. Attributable profit (before exceptional items) increased by
82.8% to US$3.5 billion. Attributable profit (after exceptional items - refer
page 4) of US$3.4 billion, was a 77.7% increase from last year's results and
production records were set at many operations across our business. This record
result is reflective of strong market conditions and the successful execution of
our business strategy. Since the creation of BHP Billiton, we have consistently
focused on maximising the operating performance of our world class assets and
reducing costs and improving the efficiencies of our businesses. We have
utilised the growing cash flows generated from these businesses to invest in
value accretive organic growth projects which have enabled us to benefit from
the market conditions we are now experiencing.
Record production volumes were achieved at a number of our businesses as seven
new projects came on stream and other projects ramped up to full production. Our
Operating Excellence initiatives also contributed to the increased production,
allowing us to take full advantage of strong market demand. Western Australian
iron ore, Queensland coal and Groote Eylandt manganese (all Australia)
operations produced record volumes of iron ore, coking coal and manganese ore,
respectively. Escondida (Chile) produced record copper volumes, Cannington
(Australia) produced record silver volumes and Ekati (Canada) achieved record
diamond volumes. Record alumina, aluminium, nickel and natural gas volumes were
also achieved during the current year.
Including other efficiency gains of US$70 million and US$115 million of
additional cost savings achieved during the year, the total benefits since the
merger reached US$780 million. This exceeds, 12 months ahead of schedule, the
target set in April 2002 of US$770 million. EBIT margin, excluding exceptional
items and third party product sales, improved to 29.8% compared to 24.3% for
financial year 2003.
Available cash flow (after interest and tax) for the year was a record US$5.2
billion. This strength in cash flow enabled the continuing development of our
project pipeline. The seven projects successfully commissioned during the year
required a capital investment of approximately US$1.9 billion. The Board also
approved five major projects during the year; the Worsley Development Capital
Projects, Escondida Sulphide Leach, Panda Underground, Ravensthorpe Nickel and
the Yabulu Extension projects, representing a combined capital expenditure of
US$2.2 billion. In total, the Group currently has 14 major growth projects under
development, 12 of which are tracking within Board approved budget and schedule.
Refer further details on page 8 and 9.
BHP Billiton has consistently stated that the priorities for its cash flow are:
• to finance growth opportunities with attractive rates of return;
• to maintain a capital structure in line with an A credit rating; and
• to return cash to shareholders, either through its progressive dividend
policy or by other means.
The Board of BHP Billiton remains committed to demonstrating strong capital
discipline whilst ensuring that BHP Billiton is able to finance its strong and
growing organic growth pipeline.
Following a review of its current and anticipated cash flows, the Board approved
a number of actions associated with capital management activities. The Board has
today declared a final dividend of 9.5 US cents per share, an increase of 26.7%
over last year's final dividend. This brings the total dividends for the 2004
financial year to 26 US cents per share. Additionally, the Board approved plans
to pursue additional capital management initiatives with a target amount of up
to US$2 billion. BHP Billiton is currently reviewing various means of returning
capital, including the use of share buy-backs, so as to optimise value, with the
exact amount and timing of any return being dependent upon market conditions.
The Income Statement
Earnings excluding Exceptional Items
Turnover (including turnover from third party products) rose by 42.5% to
US$24,943 million. Turnover from sales of Group product increased by 29.4% to
US$18,283 million, mainly due to higher prices for copper, nickel, petroleum
products, aluminium, export energy coal, ferrochrome and iron ore, together with
increased sales volumes for our major minerals commodities, natural gas and LPG.
This was partly offset by lower volumes for petroleum liquids and titanium
products. Sales of third party products increased by US$3,278 million to
US$6,660 million.
Earnings before interest, tax, depreciation and amortisation, excluding
exceptional items, increased by 40.0% to US$7,506 million from US$5,363 million
in the corresponding period.
Earnings before interest and tax excluding exceptional items were US$5,488
million compared with US$3,481 million in the corresponding period, an increase
of 57.7%. This increase was due to higher commodity prices, net benefits from
portfolio management activities, higher sales volumes, cost savings and
efficiency gains. Offsetting factors were higher A$/US$ and rand/US$ exchange
rates, price-linked costs, inflation and exploration costs. Further analysis of
the factors affecting turnover and EBIT is set out on page 10 and 11.
Net interest on borrowings and cash fell from US$403 million to US$355 million,
principally driven by lower average debt levels and active management of the
Group's debt portfolio which has resulted in lower average interest rates.
Exchange losses on net debt, mainly relating to the translation of rand
denominated debt, were US$133 million compared with losses of US$140 million in
the corresponding period.
The tax charge on earnings, excluding exceptional items, was US$1,379 million,
representing an effective rate of 27.7%. The underlying effective rate was 26.4%
when taking into account the impacts of non tax-effected foreign currency
adjustments, translation of tax balances and other functional currency
translation adjustments, mainly attributable to the strengthening of both the
rand and Australian dollar against the US dollar during the period. When
compared to the UK and Australian statutory tax rate (30%), the underlying
effective tax rate benefited 2.0% due to the recognition of tax losses (US$100
million) in the US. In addition, investment incentives, development entitlements
and other unbenefited tax losses and tax credits were recognised during the
year. These benefits were offset by non-deductible accounting depreciation and
amortisation and non-tax effected losses.
Attributable profit excluding exceptional items (after minority interests of
US$97 million) was US$3,510 million, an increase of 82.8% from US$1,920 million
last year (after minority interests of US$40 million).
Basic earnings per share (excluding exceptional items) were 56.4 US cents per
share against 30.9 US cents per share in the corresponding period, an increase
of 82.5%.
Exceptional Items
Exceptional items reduced attributable profit by US$131 million (after tax)
during the year, as follows.
The Group refined its plans in relation to certain closed operations. This
resulted in a charge of US$534 million (US$512 million after tax) comprising:
• At Southwest Copper (US), a charge of US$425 million resulting from a
re-estimation of short-term closure costs and the inclusion of residual
risks, longer-term costs, (including overhead and water management) and an
increase in the residual value of certain assets; and,
• At other closed sites, a charge of US$109 million (before a tax benefit of
US$22 million), in relation to the Island Copper mine (Canada), the
Newcastle steelworks (Australia), the Selbaie copper mine (Canada), and
several other smaller sites.
The Group announced it was part of a consortium that had reached a settlement
with Dalmine SpA with respect to a claim brought against Dalmine in April 1998.
The claim followed the failure of an underwater pipeline installed in 1994 in
the Liverpool Bay area of the UK continental shelf. As a result of the
settlement, BHP Billiton has recorded an exceptional gain of US$66 million
(US$48 million after tax).
BHP Billiton elected to consolidate its Australian subsidiaries under the
Australian tax consolidation regime, as introduced by the Australian Federal
Government. Under the transitional rules, the Group has chosen to reset the tax
cost base of certain depreciable assets which will result in additional tax
depreciation over the lives of the assets. This resulted in the restatement of
deferred tax balances and an exceptional tax benefit of US$95 million being
recorded in accordance with UK Generally Accepted Accounting Principles.
The level of certainty regarding potential benefits arising from prior period
taxation deductions and foreign tax credits available in the US and Canada has
increased to the extent that some of the provisions against deferred tax assets
established in prior years are no longer necessary. This is a result of higher
income generation, changes in legislation and effective utilisation of tax
credits during the year, along with increasing confidence regarding the ability
to realise benefits in the future. Accordingly, the Group has recorded an
exceptional tax benefit of US$238 million.
Earnings including Exceptional Items
Attributable profit including exceptional items (after minority interests of
US$97 million) was a record at US$3,379 million, an increase of 77.7% from
US$1,901 million (after minority interests of US$40 million).
Basic earnings per share, including exceptional items, of 54.3 US cents was also
a record, and is 77.5% higher than the 30.6 US cents in the corresponding
period.
Cash Flow
Available cash flow (after interest and tax) was a record US$5,235 million.
Total capital and investment expenditure amounted to US$2,624 million, including
US$952 million on petroleum projects, and US$1,672 million on minerals and other
minor projects. Of the total capital and investment expenditure, sustaining
capital expenditure was US$926 million. In addition, exploration expenditure was
US$454 million, comprising petroleum exploration of US$340 million and minerals
exploration of US$114 million. Disposals of fixed assets, sale of subsidiaries
and investments, and repayments of loans by joint ventures generated US$425
million.
Net cash flow before dividend payments was US$2,582 million. Dividends paid in
the period were US$1,501 million compared with US$830 million in the
corresponding period. Net debt of US$4,769 million at 30 June 2004 represents
24.9% of net debt plus net assets. Net debt comprises US$6,587 million of total
debt offset by US$1,818 million of cash, including money market deposits.
Dividends
A final dividend for the year ended 30 June 2004 of 9.5 US cents per share will
be paid to shareholders on 22 September 2004. The BHP Billiton Limited dividend
will be fully franked for Australian taxation purposes.
A first interim dividend of 8.0 US cents per share was paid on 3 December 2003
and a second interim dividend of 8.5 US cents per share was paid on 5 May 2004.
This brings the total dividends declared for the year to 26.0 US cents compared
to 14.5 US cents in the prior year. Three dividends were declared for the year
ended 30 June 2004 as a result of the Group's decision to realign dividend
declaration dates to coincide with the announcements of our interim and full
year results. In future years, BHP Billiton will declare an interim dividend at
the time of its interim results announcement, and a final dividend at the time
of its full year results announcement.
Dividends for the BHP Billiton Group are determined and declared in US dollars.
However, BHP Billiton Limited dividends are mainly paid in Australian dollars
and BHP Billiton Plc dividends are mainly paid in pounds sterling to
shareholders on the UK section of the register and rand to shareholders on the
South African section of the register. The rates of exchange applicable two
business days before the announcement date are used for conversion, and are
detailed below.
The timetable in respect of this dividend will be:
Currency conversion - 16 August 2004
Last day to trade Johannesburg Stock Exchange (JSE) - 27 August 2004
Ex-dividend Australian Stock Exchange (ASX) - 30 August 2004
Ex-dividend Johannesburg Stock Exchange (JSE) - 30 August 2004
Ex-dividend London Stock Exchange (LSE) - 1 September 2004
Record - 3 September 2004
American Depositary Shares (ADSs) each represent two fully paid ordinary shares
and receive dividends accordingly. The record date for both the BHP Billiton
Limited ADSs and BHP Billiton Plc ADSs is 3 September 2004.
BHP Billiton Plc shareholders registered on the South African section of the
register will not be able to dematerialise or rematerialise their shareholdings,
nor will transfers between the UK register and the South African register be
permitted, between the dates of 30 August 2004 and 3 September 2004.
The following table details the exchange rates applicable for conversion of the
dividend payable on 22 September 2004:
Dividend 9.5 US cents Exchange Dividend per ordinary
Rate share in local currency
Australian cents 0.717885 13.233317
British pence 1.842750 5.155338
South African cents 6.500350 61.75332
New Zealand cents 0.664906 14.287734
Merger Benefits, Cost Savings and Efficiency Gains
As of 30 June 2004, including other efficiency gains of US$70 million, the Group
had achieved total merger benefits, additional cost savings and efficiency gains
of US$780 million. Cost savings of US$115 million during the year were driven by
the continuation of our Operating Excellence program, strategic sourcing and
marketing initiatives. The additional efficiency gains of US$70 million came
from items that to date have not been counted towards the original cost savings
target.
These programs and initiatives have been embedded in the way the BHP Billiton
Group does business. As a result, we expect to see continued improvements in
future periods, although there is growing pressure on input costs based on the
current strong demand environment.
Capital Management
In November 2003, Standard & Poor's upgraded the Group's long term credit rating
from A to A+, and in May 2004, Moody's Investors Service changed the Group's
outlook from A2 (stable) to A2 (positive). The benefit of a diversified
portfolio, strong financial performance, disciplined financial policies, the
integration of the Group's operations following the merger and the lengthening
track record in successfully executing our substantial growth projects
underpinned our continued positive ratings performance.
In addition, the Group has announced a capital management program as outlined in
further detail on page 2.
Portfolio Management
A number of portfolio management activities were finalised during the current
year. Sales of non-core assets, including the sale of our interest in the
Highland Valley Copper mine (Canada) and the Robinson copper/gold mine (US) by
Base Metals, the sale of our interest in Mamore (Bolivia) by Petroleum, sale of
a non-core royalty interest by Diamonds and Specialty Products, and sales of
non-core mineral rights by Stainless Steel Materials, generated total proceeds
of US$277 million.
Outlook
The global economy has been experiencing a significant increase in growth with
synchronised demand increases in many economies. Of particular note has been
strong growth in China, Japan and other Asian economies. Recovery in the United
States has been an important contributor to global growth and economic activity
in Europe has been experiencing a steady recovery from a relatively low base.
The Chinese government has taken steps to control excessive growth in certain
areas of the economy. As a result, China's economy is expected to ease modestly
from current near double-digit growth rates. The efforts to slow demand growth
did have an impact on certain materials prices in the second calendar quarter of
2004. However, given that the government remains committed to reform,
infrastructure provision and economic growth, China is expected to remain a
large and sustainable consumer of raw materials and resources in coming years.
As in any economic cycle, we expect the rate of growth will vary from period to
period, although we do not see this altering the course of long-term growth and
development.
While recent GDP and job growth statistics in the United States have been
disappointing, we continue to see solid demand for metals through our US metals
distribution business. Raw material demand in Europe has continued to increase
as economic activity has picked up. Physical premia in Europe for some
non-ferrous metals are currently exceeding the premia in Asia, indicating the
strengthening activity in this market.
In general terms, synchronised world growth, China's strong demand growth and
relatively low inventory levels have been instrumental in driving commodity
prices to their highest levels in several years. In certain areas, this has been
exacerbated by supply disruptions and physical infrastructure constraints.
These factors suggest that commodity prices could be sustained at higher levels
than experienced in recent years. However, stronger commodity prices will in
turn act as an inducement to new supply, which should bring supply and demand
fundamentals back towards balance over the medium term.
BHP Billiton is well placed to exercise the growth options within our portfolio
and increase production capacity for many commodities currently in short supply.
Many of these expansions can be brought to market quickly and at low cost, and
will be profitable not only in today's strong demand environment, but throughout
the economic cycle. This is a key competitive advantage. BHP Billiton's
combination of strong, stable cash flow and extensive organic growth
opportunities ensure that we will be able to take full advantage of continued
global economic growth and any sustained demand for raw materials. We will also
continue to look opportunistically at acquisitions where these fit our business
strategy and add value to the BHP Billiton Group.
Annual General Meetings
The Annual General Meeting of BHP Billiton Limited will be held at the Sydney
Convention and Exhibition Centre, Darling Harbour, Sydney, on Friday 22 October
2004 commencing at 11:00 am. The Annual General Meeting of BHP Billiton Plc will
be held at the Queen Elizabeth II Conference Centre, Broad Sanctuary,
Westminster, London, on Thursday 25 November 2004 commencing at 10:30 am. The
Annual Report and details of the business to be conducted at the meetings will
be mailed to shareholders in late September 2004.
Growth Projects
Seven projects reached the commissioning stage during the current period. With
costing yet to be finalised on some of those projects, total capital expenditure
throughout the development phase of these projects was approximately US$1,857
million, which is US$80 million or 4.1% below budget.
Completed projects
Customer Sector Project Production (1) Capital expenditure Date of initial
Group (US$ million) (1) production (2)
Budget Actual Target Actual
Petroleum Ohanet 21,150 barrels 464 464 (3) Q4 2003 Q4 2003
(Algeria) of oil
BHP Billiton - 45% equivalent per
day
Aluminium Hillside 3 132,000 tonnes 449 411 Q2 2004 Q4 2003
(South Africa) per annum of
BHP Billiton - aluminium metal
100%
Carbon Steel Products & Increase export 299 270 (3) Q2 2004 Q1 2004
Materials Capacity Expansion capacity to 100
(Australia) million tonnes
BHP Billiton - 85% per annum of
iron ore (100%)
Area C 12.75 million 181 171 Q4 2003 Q3 2003
(Australia) tonnes per
BHP Billiton - 85% annum of iron
ore
WA iron ore Increase system 83 80 Q2 2004 Q2 2004
Accelerated capacity to 100
Expansion million tonnes
(Australia) per annum
BHP Billiton - 85% (100%)
Energy Coal Mt Arthur North 12.1 million 411 411 (3) Q4 2003 Q4 2003
(Australia) tonnes per
BHP Billiton - annum of
100% saleable energy
coal
Cerrejon Zona 28 million 50 50 (3) Q1 2004 Q1 2004
Norte tonnes per
(Colombia) annum of
BHP Billiton - saleable energy
33.3% coal by 2008
(100%)
1,937 1,857
(1) All references to capital expenditure and production volumes are BHP
Billiton's share unless noted otherwise.
(2) References to quarters and half years are based on calendar years.
(3) Total project costs yet to be finalised. Share of actual capital expenditure
is indicative only.
There are 14 major projects under development (defined as BHP Billiton capital
expenditure share of greater than US$100 million). Full details on these are
given in the quarterly Exploration and Development Report, released on Friday 28
July 2004.
Projects approved during the year
Customer Sector Group Project Production (1) Budgeted capital Target date for
expenditure initial production
(US$ million) (2)
(1)
Aluminium Worsley Development 250,000 tonnes per
Capital Projects annum (100%) of 165 Q1 2006
alumina
(Australia)
BHP Billiton - 86%
Base Metals Escondida Sulphide Leach 180,000 tonnes of
copper cathode per 500 H2 2006
(Chile) annum (100%)
BHP Billiton - 57.5%
Diamonds and Specialty Products Panda Underground 4.7 million carats of
high value Panda 146 Early 2005
(Canada) diamonds over six
years (100%)
BHP Billiton - 80%
Stainless Steel Materials Ravensthorpe Nickel Up to 50,000 tonnes
per annum contained 1,050 Q2 2007
(Australia) nickel in concentrate
BHP Billiton - 100%
Yabulu Extension 45,000 tonnes per
annum of nickel 350 End 2007
(Australia)
BHP Billiton - 100%
2,211
(1) All references to capital expenditure and production volumes are BHP
Billiton's share unless noted otherwise.
(2) References to quarters and half years are based on calendar years.
Projects currently under development (approved in prior years)
Customer Sector Group Project Production (1) Budgeted capital Target date for
expenditure initial production
(US$ million) (2)
(1)
Petroleum Mad Dog (US) 20,700 barrels of oil 335 End 2004
equivalent per day
BHP Billiton - 23.9%
Atlantis (US) 79,200 barrels of oil 1,100 Q3 2006
equivalent per day
BHP Billiton - 44%
ROD (Algeria) 28,800 barrels of oil 192 Q4 2004 (3)
equivalent per day
BHP Billiton - 36%
Angostura (Trinidad) 45,000 barrels of oil 327 End 2004
equivalent per day
BHP Billiton - 45%
North West Shelf Train 4 4.2 million tonnes per 247 Mid 2004
annum of LNG
(Australia) liquification
processing facility
BHP Billiton - 16.7% (100%)
Gulf of Mexico Pipelines Capacities of 100 Q4 2004
Infrastructure (US) Oil - 450,000 bbl/day
BHP Billiton - Gas 22%; (100%)
Oil 25% Gas - 500 million
standard cubic feet
per day (100%)
Minerva (Australia) 150 terrajoules of gas 150 (4) Q4 2004 (4)
per day
BHP Billiton - 90%
Base Metals Escondida Norte (Chile) Maintain capacity at 230 Q4 2005
1.25 million tonnes
BHP Billiton - 57.5% per annum of copper
(100%)
Carbon Steel Materials Dendrobium (Australia) 5.2 million tonnes per 170 Mid 2005
annum of raw met coal
BHP Billiton - 100% (3.6 million tonnes
per annum of clean met
coal)
2,851
(1) All references to capital expenditure and production volumes are BHP
Billiton's share unless noted otherwise.
(2) References to quarters and half years are based on calendar years.
(3) Following delays in procurement of some equipment and materials, and below
expected construction productivity, first oil is now scheduled for Q4 2004
(original target Q1 2004).
(4) Following a review of contractual arrangements relating to the design and
construction of the Minerva development, initial production is now expected in
Q4 2004 (original target end Q1 2004), and BHP Billiton's share of capital
expenditure was increased from US$123 million to US$150 million.
OPERATING REVIEW
EBIT
The following table details the approximate impact of major factors affecting
EBIT (excluding exceptional items) for the year ended 30 June 2004 compared with
the corresponding period.
US$M
EBIT excluding exceptional items for the year ended 30 June 2003 3 481
Change in volumes 180
Change in sales prices 3 145
Price-linked costs (325)
Inflation on costs (300)
Costs 70
New operations 55
Ceased and sold operations 75
Asset sales 60
Exchange rates (775)
Exploration (85)
Other items (93)
EBIT excluding exceptional items for the year ended 30 June 2004 5 488
Volumes
Higher sales volumes of copper, iron ore, aluminium, natural gas, LPG, manganese
ore, metallurgical coal and diamonds were partially offset by lower oil and
titanium feedstock product volumes. This resulted in a net positive impact on
EBIT of approximately US$180 million.
Prices
Higher commodity prices increased EBIT by approximately US$3,145 million with
copper, nickel, petroleum products, aluminium, export energy coal, ferrochrome
and iron ore prices having significant contributions.
Costs
Higher price-linked costs decreased EBIT by approximately US$325 million, mainly
due to increased taxes on petroleum products, and higher LME-linked costs.
Inflationary and other input cost pressures, principally in South Africa and
Australia, increased costs by approximately US$300 million. These factors were
partially offset by favourable operating cost performance of approximately US$70
million.
New operations
New operations increased EBIT by approximately US$55 million mainly due to the
commencement of commercial production from the Ohanet wet gas development in
Algeria from October 2003.
Ceased and sold operations
Ceased and sold operations had a favourable impact on EBIT of approximately
US$75 million. This mainly reflects the impact of divested assets including the
Group's petroleum assets in Bolivia, the Alumbrera copper/gold mine in
Argentina, and our 33.3% interest in the Highland Valley Copper mine.
Asset sales
Asset sales favourably impacted EBIT by approximately US$60 million mainly due
to the sale of non-core assets in the current period, including a non-core
royalty interest in December 2003 and sales of non-core mineral rights.
Exchange rates
The unfavourable exchange rate impact on EBIT of US$775 million was primarily
due to stronger A$/US$ and rand/US$ average exchange rates on operating costs
which had an unfavourable impact on EBIT of approximately US$915 million. The
conversion of rand and Australian dollar denominated net monetary liabilities at
balance sheet date had a favourable impact of approximately US$65 million on
EBIT, which was mainly due to the closing A$/US$ exchange rate appreciating 3.4%
during the current period compared with an appreciation of 17.7% in the
corresponding period. Gains on legacy A$/US$ currency hedging of US$39 million
in the current period had a favourable impact of US$125 million compared to
losses of US$86 million in the corresponding period.
Exploration
Exploration expense was approximately US$85 million higher than the prior
period. Gross exploration expenditure was US$454 million, comprising petroleum
exploration of US$340 million and minerals exploration of US$114 million,
compared with US$348 million in the corresponding period.
CUSTOMER SECTOR GROUP SUMMARY
The following table provides a summary of the Customer Sector Group results for
the year ended 30 June 2004 and the corresponding period (before exceptional
items).
Year ended 30 June (US$ Turnover (1) EBIT (1)
Million)
2004 2003 Change % 2004 2003 Change %
Petroleum 5 558 3 264 70.3% 1 391 1 178 18.1%
Aluminium 4 432 3 386 30.9% 776 581 33.6%
Base Metals 3 422 1 954 75.1% 1 156 286 304.2%
Carbon Steel Materials 4 857 3 714 30.8% 1 137 1 045 8.8%
Diamonds and Specialty 1 710 1 485 15.2% 410 299 37.1%
Products
Energy Coal 2 569 2 089 23.0% 234 198 18.2%
Stainless Steel Materials 1 749 1 106 58.1% 571 150 280.7%
Group and unallocated items (3) 1 796 1 014 77.1% (187) (256) N/A
BHP Billiton Group (2) 24 943 17 506 42.5% 5 488 3 481 57.7%
(1) Turnover and EBIT include trading activities comprising the sale of third
party product.
(2) BHP Billiton Group turnover is stated after the elimination of intersegment
transactions.
(3) Includes consolidation adjustments, unallocated items and the Group's
freight, transport and logistics operations and associated third party activity,
much of which are transactions with other Customer Sector Groups.
An explanation of the factors influencing EBIT, including the Group's share of
joint ventures and associates, by Customer Sector Group, is as follows:
Petroleum
Petroleum contributed EBIT of US$1,391 million, up from US$1,178 million, an
increase of 18.1% compared with the corresponding period.
The increase in EBIT was primarily due to stronger prices for crude oil (2004 -
US$32.24bbl; 2003 - US$28.14bbl) and natural gas (2004 - US$2.62 per thousand
standard cubic feet; 2003 - US$2.21 per thousand standard cubic feet), new
production from Ohanet (Algeria) and Boris (US), and a smaller loss on foreign
exchange. These factors were partially offset by lower oil volumes, higher
price-linked costs and increased exploration expenditure.
The conversion of Australian dollar denominated net monetary liabilities at 30
June 2004, mainly resource rent tax, had a smaller negative impact on EBIT
compared to the corresponding period. The prior year was also negatively
impacted by a write down of the Group's Bolivian assets, due to a government
driven change to fiscal arrangements.
Overall, production of petroleum products on a barrel of oil equivalent basis
increased by 1% from 121.8 million barrels to 122.5 million barrels. Oil and
condensate production declined by 12% from 65.9 million barrels to 58.0 million
barrels, but natural gas production (including LNG) increased by 15% from 281.2
billion cubic feet to 324.3 billion cubic feet. Gross exploration expenditure
for the period of US$340 million was US$97 million higher than the corresponding
period reflecting increased exploration activity in the Gulf of Mexico (US),
Trinidad and Tobago and Western Australia. Due to successful drilling results,
the capitalisation rate increased to 46.8% from 36.6% in the corresponding
period.
Aluminium
Aluminium contributed EBIT of US$776 million, up from US$581 million, an
increase of 33.6% compared with the corresponding period.
The increase in EBIT was mainly attributable to higher realised prices for
aluminium and alumina. Average LME aluminium prices increased to US$1,570 per
tonne, compared with US$1,360 per tonne in the corresponding period. Higher
sales volumes from Mozal 2 (Mozambique) and Hillside 3 (South Africa) following
full commissioning in August 2003 and December 2003 respectively, also had a
favourable impact on EBIT.
These factors were partially offset by the unfavourable impact on operating
costs of strengthening A$/US$, rand/US$ and Brazilian real/US$ average exchange
rates, higher LME price-linked costs, increased transportation costs and
inflationary pressure in Brazil.
Base Metals
Base Metals contributed EBIT of US$1,156 million, up from US$286 million, an
increase of US$870 million compared with the corresponding period.
This increase in EBIT is mainly attributed to higher average realised prices for
copper (2004 - US$1.14lb; 2003 - US$0.73lb), silver, lead and zinc. Record
production was achieved at Escondida where de-bottlenecking continues as the
operation moves towards full capacity. The improvement in the copper market
allowed sulphide operations at Tintaya (Peru) to resume in August 2003,
returning to full capacity during the current calendar year. Record production
was also achieved at Cannington, and production of zinc at Antamina (Peru) was
significantly higher.
These factors were partially offset by the unfavourable impact on operating
costs of stronger A$/US$ and Chilean peso/US$ average exchange rates, higher
operating and maintenance costs at Escondida, and higher production costs at
Antamina. The prior year included the results of the Alumbrera mine, which was
sold effective April 2003.
Carbon Steel Materials
Carbon Steel Materials contributed EBIT of US$1,137 million, up from US$1,045
million, an increase of 8.8% compared with the corresponding period.
The increase in EBIT was mainly attributable to stronger commodity prices,
record production and sales volumes at Western Australian iron ore operations,
and higher sales at both Queensland coal and Australian manganese ore
operations. Local currency unit cost performance improved at Western Australian
iron ore, as a result of ongoing cost efficiency programs and increased
production.
The EBIT improvements above were partially offset by the unfavourable impact of
stronger A$/US$ and rand/US$ average exchange rates and inflationary pressure on
Australian and South African operations compared with the corresponding period.
Depreciation charges increased at Western Australian iron ore operations
following the completion of the Area C and Products and Capacity Expansion
projects, and stripping and demurrage costs were higher at Queensland coal and
Western Australian iron ore operations.
Diamonds and Specialty Products
Diamonds and Specialty Products contributed EBIT of US$410 million, up from
US$299 million, an increase of 37.1% compared with the corresponding period.
The increase in EBIT was mainly attributable to higher realised prices for
diamonds and Integris metal products, (a reflection of strong market
conditions), profits realised on the sale of a non-core royalty interest (US$37
million), and higher diamond sales volumes.
These factors were partially offset by higher price-linked costs at Integris
Metals (US), lower titanium feedstock volumes, higher depreciation charges at
Ekati and the unfavourable impact of stronger rand/US$ average exchange rates on
operating costs.
Energy Coal
Energy Coal contributed EBIT of US$234 million, up from US$198 million, an
increase of 18.2% compared with the corresponding period.
The increase in EBIT was mainly due to improved export prices resulting from
strong demand in both the Atlantic and Pacific markets, cost savings driven by
integration synergies and business improvement programs at Cerrejon Coal
(Colombia), and increased sales volumes from Australian and Colombian
operations.
This was partially offset by the unfavourable impact on net operating costs of
stronger rand/US$ and A$/US$ average exchange rates, and higher unit costs at
Ingwe (South Africa) reflecting lower export sales volumes, higher contractor
costs, and South African inflationary pressures. Increased demurrage costs at
Ingwe and Hunter Valley (Australia) also had an unfavourable impact on EBIT. In
addition, exploration expenditure previously capitalised has been written off.
Stainless Steel Materials
Stainless Steel Materials contributed EBIT of US$571 million, up from US$150
million, an increase of US$421 million compared with the corresponding period.
The increase in EBIT was driven by higher realised prices for nickel (2004 -
US$5.49lb; 2003 - US$3.46lb), and ferrochrome. Profits from the sale of mineral
rights in South Africa (US$30 million), and record production at nickel
operations achieved through ongoing improvement programs at both Cerro Matoso
(Colombia) and the QNI Yabulu refinery (Australia), also had a favourable impact
on EBIT.
These factors were partially offset by the unfavourable impact on operating
costs of stronger rand/US$ and A$/US$ average exchange rates, higher
price-linked ore supply costs to the QNI Yabulu refinery and higher royalties at
Cerro Matoso. In addition, increased shipping costs, higher oil and coking coal
prices, and inflationary pressures in South Africa had an unfavourable impact on
EBIT.
Group and Unallocated Items
Net corporate operating costs, excluding gains and losses from legacy A$/US$
currency hedging and other exchange impacts, were US$258 million, a decrease of
US$9 million compared to US$267 million in the corresponding period. The
underlying decrease in costs was partially offset by the impact of asset sales
and other one-off items in the corresponding period.
Gains on legacy A$/US$ currency hedging were approximately US$39 million during
the current period, compared with losses of approximately US$86 million in the
corresponding period.
FINANCIAL INFORMATION
Contents
Consolidated Profit and Loss Account 17
Consolidated Balance Sheet 19
Consolidated Statement of
Total Recognised Gains and Losses 19
Consolidated Statement of Cash Flows 20
Notes to the Financial Information 22
The financial information in this document for the year ended 30 June 2004 is
unaudited, has been derived from the draft financial statements of BHP Billiton
Plc and does not constitute the statutory accounts of BHP Billiton Plc for that
year.
The financial information set out on pages 17 to 29 has been prepared on the
same basis and using the same accounting policies as were applied in drawing up
the financial information contained in the accounts of BHP Billiton Plc for the
year ended 30 June 2003 except for the change in accounting policy for employee
share awards described in Note 1. Where applicable, comparatives have been
adjusted to disclose them on the same basis as current period figures.
In the opinion of the Directors, the financial information for the year ended 30
June 2004 presents fairly the financial position, results of operations and cash
flows for the year in conformity with UK generally accepted accounting
principles (GAAP). The financial information for the year ended 30 June 2003 has
been derived from the audited financial statements of BHP Billiton Plc for that
period as filed with the UK Registrar of Companies and does not constitute the
statutory accounts of BHP Billiton Plc for that period. The auditors' report on
the statutory accounts for the year ended 30 June 2003 was unqualified and did
not contain statements under Section 237 (2) (regarding adequacy of accounting
records and returns) or under Section 237 (3) (provision of necessary
information and explanations) of the United Kingdom Companies Act 1985. The
statutory accounts for the year ended 30 June 2004 will be finalised on the
basis of the financial information presented by the Directors in this
preliminary announcement and will be delivered to the UK Registrar of Companies
following the Annual General Meeting.
The combined results for the year ended 30 June 2004, prepared in accordance
with UK GAAP, are generally consistent with the combined results under
Australian GAAP as required by the Australian Securities and Investments
Commission in respect of dual listed companies, except for the impact of
accounting for deferred taxation. Financial results prepared in accordance with
Australian GAAP are provided on page 30 to 31.
Consolidated Profit and Loss Account
For the year ended 30 June 2004
Year ended 30 June 2004
Excluding Exceptional Total
exceptional items
items (Note 2)
Notes US$M US$M US$M
Turnover (including share of joint ventures and
associates)
Group production 18 283 - 18 283
Third party products 3 6 660 - 6 660
3 24 943 - 24 943
less Share of joint ventures' and associates' (2 056) - (2 056)
turnover included above
Group turnover 22 887 - 22 887
Net operating costs 2 (17 960) 66 (17 894)
Group operating profit 4 927 66 4 993
Share of operating profit of joint ventures and 425 - 425
associates
Operating profit 5 352 66 5 418
(including share of profit of joint ventures and
associates)
Comprising:
Group production 5 319 66 5 385
Third party products 3 33 - 33
5 352 66 5 418
Income from other fixed asset investments 35 - 35
Profit on sale of fixed assets 95 - 95
Profit on sale of operations 6 - 6
Loss on sale of discontinued operations (a) 2 - - -
Loss on termination of operations (b) 2 - (534) (534)
Profit/(loss) before net interest and similar items 5 488 (468) 5 020
payable and taxation
Net interest and similar items payable
Group 4 (407) - (407)
Joint ventures and associates 4 (95) - (95)
Profit/(loss) before taxation 3 4 986 (468) 4 518
Taxation 2 (1 379) 337 (1 042)
Profit/(loss) after taxation 3 607 (131) 3 476
Equity minority interests (97) - (97)
Profit/(loss) for the financial year (attributable 3 510 (131) 3 379
profit)
Dividends to shareholders 5 (1 617) - (1 617)
Retained profit/(loss) for the financial year 1 893 (131) 1 762
Earnings per ordinary share (basic) (US cents) 6 56.4 (2.1) 54.3
Earnings per ordinary share (diluted) (US cents) 6 56.2 (2.1) 54.1
Dividend per ordinary share (US cents) 26.0
Consolidated Profit and Loss Account continued
Year ended 30 June 2003
Excluding Exceptional Total
exceptional items
items (Note 2)
Notes US$M US$M US$M
Turnover (including share of joint ventures and
associates)
Group production 14 124 - 14 124
Third party products 3 3 382 - 3 382
3 17 506 - 17 506
less Share of joint ventures' and associates' (1 898) (1 898)
turnover included above
Group turnover 15 608 - 15 608
Net operating costs 2 (12 554) - (12 554)
Group operating profit 3 054 - 3 054
Share of operating profit of joint ventures and 358 - 358
associates
Operating profit 3 412 - 3 412
(including share of profit of joint ventures and
associates)
Comprising:
Group production 3 361 - 3 361
Third party products 3 51 - 51
3 412 - 3 412
Income from other fixed asset investments 16 - 16
Profit on sale of fixed assets 46 - 46
Profit on sale of operations 7 - 7
Loss on sale of discontinued operations (a) 2 - (19) (19)
Loss on termination of operations (b) 2 - - -
Profit/(loss) before net interest and similar items 3 481 (19) 3 462
payable and taxation
Net interest and similar items payable
Group 4 (444) - (444)
Joint ventures and associates 4 (93) - (93)
Profit/(loss) before taxation 3 2 944 (19) 2 925
Taxation 2 (984) - (984)
Profit/(loss) after taxation 1 960 (19) 1 941
Equity minority interests (40) - (40)
Profit/(loss) for the financial year (attributable 1 920 (19) 1 901
profit)
Dividends to shareholders 5 (900) - (900)
Retained profit/(loss) for the financial year 1 020 (19) 1 001
Earnings per ordinary share (basic) (US cents) 6 30.9 (0.3) 30.6
Earnings per ordinary share (diluted) (US cents) 6 30.9 (0.3) 30.6
Dividend per ordinary share (US cents) 14.5
(a) All the items in the Profit and Loss Account relate to Continuing Operations
other than the loss on the sale of Discontinued Operations (refer Note 2).
(b) In the year ended 30 June 2004, the exceptional loss on termination of
operations includes US$425 million relating to the refinement of the closure
provisions for the Southwest Copper operations (refer Note 2).
Consolidated Balance Sheet
As at 30 June 2004
As at As at
30 June 2004 30 June 2003
(Restated -
refer Note 1)
Notes US$M US$M
Fixed assets
Intangible assets
Goodwill 34 36
Negative goodwill (26) (29)
8 7
Tangible assets 20 971 19 809
Investments
Joint ventures - share of gross assets 2 951 2 880
Joint ventures - share of gross liabilities (1 582) (1 477)
1 369 1 403
Loans to joint ventures and other investments 361 441
Total fixed assets 22 709 21 660
Current assets
Stocks 1 760 1 379
Debtors
Amounts due within one year 2 924 2 224
Amount due after more than one year 1 482 1 405
4 406 3 629
Investments 167 143
Cash including money market deposits 7 1 818 1 552
Total current assets 8 151 6 703
Creditors - amounts falling due within one year (4 935) (4 207)
Net current assets 3 216 2 496
Total assets less current liabilities 25 925 24 156
Creditors - amounts falling due after more than one year (5 987) (6 849)
Provisions for liabilities and charges (5 558) (4 898)
Net assets 14 380 12 409
Equity minority interests (342) (318)
Attributable net assets 14 038 12 091
Capital and reserves
Called up share capital - BHP Billiton Plc 1 234 1 234
Share premium account 518 518
Contributed equity - BHP Billiton Limited 1 851 1 785
Profit and loss account 10 461 8 580
Interest in shares of BHP Billiton 1 (26) (26)
Equity shareholders' funds 5 14 038 12 091
Consolidated Statement of Total Recognised Gains and Losses
For the year ended 30 June 2004
Year ended Year ended
30 June 2004 30 June 2003
US$M US$M
Attributable profit for the financial year 3 379 1 901
Exchange gains on foreign currency net investments 48 67
Total recognised gains for the financial year 3 427 1 968
Prior year adjustment arising from the change in accounting policy (refer Note 1) 84
Total recognised gains since last annual report 3 511
Consolidated Statement of Cash Flows
For the year ended 30 June 2004
Year ended Year ended
30 June 2004 30 June 2003 (Restated)
US$M US$M
Net cash inflow from Group operating activities (a) 6 701 4 799
Dividends received from joint ventures and associates 203 197
Interest paid (347) (383)
Dividends paid on redeemable preference shares (23) (28)
Interest received 78 36
Other dividends received 35 15
Dividends paid to minorities (75) (38)
Net cash outflow from returns on investments and servicing of finance (332) (398)
Taxation paid (1 337) (1 002)
Available cash flow 5 235 3 596
Purchases of tangible fixed assets (2 589) (2 571)
Exploration expenditure (454) (348)
Disposals of tangible fixed assets 157 99
Purchase of investments and funding of joint ventures (35) (95)
Sale of investments and repayments by joint ventures (b) 89 560
Net cash outflow from capital expenditure and financial investment (2 832) (2 355)
Demerger or sale of subsidiaries (b) 53 358
Cash transferred on demerger or disposal (b) (5) (86)
Disposal of joint ventures and associates 131 133
Net cash inflow from acquisitions and disposals 179 405
Net cash flow before equity dividends paid, management of liquid 2 582 1 646
resources and financing
Equity dividends paid (1 501) (830)
Net cash flow before management of liquid resources and financing 1 081 816
Net cash outflow from management of liquid resources (178) (665)
Debt due within one year - repayment of loans (854) (2 683)
Debt due within one year - drawdowns 121 1 435
Debt due after more than one year - repayment of loans (482) (1 438)
Debt due after more than one year - drawdowns 254 2 263
Finance lease obligations (9) -
Net cash outflow from debt and finance leases (970) (423)
Share repurchase scheme - BHP Billiton Plc - (20)
Purchase of shares by ESOP trusts (25) (6)
Issue of shares 76 172
Net cash outflow from financing (919) (277)
(Decrease) in cash in the financial year (16) (126)
Consolidated Statement of Cash Flows continued
For the year ended 30 June 2004
Year ended Year ended
30 June 2004 30 June 2003
Notes US$M US$M
Reconciliation of net cash flow to movement in net debt
(Decrease) in cash in the financial year (16) (126)
Cash flow from debt and finance leases 970 423
Cash flow from management of liquid resources 178 665
Decrease in net debt arising from cash flows 1 132 962
Other non-cash movements 7 (31) 232
(Increase) in net debt from exchange adjustments 7 (98) (144)
Decrease in net debt 1 003 1 050
Net debt at beginning of the financial year 7 (5 772) (6 822)
Net debt at end of the financial year 7 (4 769) (5 772)
(a) Net cash inflow from Group operating activities
Year ended Year ended
30 June 2004 30 June 2003
(Restated)
US$M US$M
Group operating profit 4 993 3 054
Depreciation and amortisation 1 751 1 648
Impairment of assets 116 73
Employee share awards 96 70
Net exploration charge (excluding impairment of assets) 284 248
(Increase) in stocks (356) (250)
(Increase) in debtors (734) (286)
Increase in creditors 500 69
Increase in provisions 48 128
Other items 3 45
Net cash inflow from Group operating activities 6 701 4 799
(b) The impact on the BHP Billiton Group's cash flows of the demerger of the BHP
Steel business in July 2002 was a cash inflow of US$347 million. This represents
US$294 million from the settlement by BHP Steel of intercompany loans, less
US$22 million demerger transaction costs paid, which are both included in net
cash inflow from acquisitions and disposals, and US$75 million from the sale of
the 6 per cent interest in BHP Steel which is included in the sale of
investments and repayments by joint ventures.
Notes to Financial Information
NOTE 1. CHANGE IN ACCOUNTING POLICY
Employee Share Awards
The BHP Billiton Group has adopted the provisions of Urgent Issues Task Force
(UITF) Abstract 38 'Accounting for Employee Share Ownership Plan (ESOP) Trusts'
from 1 July 2003, which has resulted in the adoption of a revised accounting
policy for employee share awards.
Under the revised accounting policy, the estimated cost of share awards made by
the BHP Billiton Group is charged to profit over the period from grant date to
the date of expected vesting or the performance period, as appropriate. The
accrued employee entitlement is recorded as an equal credit to shareholders'
funds. The estimated cost of awards is based on the market value of shares at
the grant date (in the case of Group Incentive Scheme Performance Shares,
Performance Rights, the Bonus Equity Plan, the Restricted Share Scheme and
Co-Investment Plan) or the intrinsic value of options awarded (being the
difference between the exercise price and the market price at the date of
granting the award), adjusted to reflect the impact of performance conditions,
where applicable. Where awards are satisfied by on market purchases, the cost of
acquiring the shares is carried in shareholders' funds as 'Interest in shares of
BHP Billiton', and any difference between the cost of awards and the
consideration paid to purchase shares on market is transferred to retained
earnings when the shares vest to the employees unconditionally. In addition, the
assets and liabilities of ESOP trusts utilised by the BHP Billiton Group to hold
shares for employee remuneration schemes are consolidated.
In prior years, the estimated cost of share awards was initially charged to
profit and recorded as a provision using the market value of shares at the grant
date. Where share awards were satisfied by on market purchases, the cost was
subsequently adjusted to the actual consideration for shares purchased. Further,
shares in BHP Billiton held by the ESOP trusts were shown as a fixed asset
investment.
The effects of the accounting policy change on the financial statements for the
year ended 30 June 2004 are as follows:
• Opening shareholders' funds increased by US$84 million representing the
reclassification from provisions to retained earnings for the accrued
employee entitlement on unvested share awards and decreased by US$6 million
representing the reclassification of shares held by ESOP trusts from fixed
asset investments into 'Interest in Shares of BHP Billiton'; and
• Attributable profit increased by US$12 million representing costs no
longer recognised for the excess consideration paid to purchase shares
on-market (US$8 million) and the foreign currency translation of the accrued
cost of unvested awards now recorded in shareholders' funds (US$4 million).
The impact on prior period profit and loss accounts is immaterial and
accordingly these have not been restated.
The accounting policy change in respect of the consideration paid to purchase
shares on-market and to include shares held by ESOP trusts in shareholders'
funds better represents the nature of the transactions involved, that is, a
share buy-back by the Group and a separate issue of shares to employees to
satisfy the share awards. This also aligns the amount of expense recorded in the
profit and loss account for share awards, irrespective of whether the Group
satisfies awards through a new share issue or on-market purchase.
NOTE 2. EXCEPTIONAL ITEMS
Year ended 30 June 2004
Gross Tax Net
US$M US$M US$M
Introduction of tax consolidation regime in Australia (a) - 95 95
Litigation settlement (b) 66 (18) 48
US and Canadian taxation deductions (c) - 238 238
Closure plans (d) (534) 22 (512)
Total by category (468) 337 (131)
Petroleum 66 (18) 48
Base Metals (482) 11 (471)
Stainless Steel Materials (10) 3 (7)
Group and unallocated items (42) 341 299
Total by Customer Sector Group (468) 337 (131)
(a) During the year ended 30 June 2004, BHP Billiton elected to consolidate its
Australian subsidiaries under the Australian tax consolidation regime, as
introduced by the Australian Federal Government. Under the transitional rules,
the Group has chosen to reset the tax cost base of certain depreciable assets
which will result in additional tax depreciation over the lives of the assets.
This resulted in the restatement of deferred tax balances and an exceptional tax
benefit of US$95 million being recorded in accordance with UK GAAP.
(b) In December 2003, BHP Billiton announced that it was part of a consortium
that had reached a settlement with Dalmine SpA with respect to a claim brought
against Dalmine in April 1998. The claim followed the failure of an underwater
pipeline installed in 1994 in the Liverpool Bay area of the UK continental
shelf. As a result of the settlement, BHP Billiton has recorded an exceptional
gain of US$66 million, before tax expense of US$18 million.
(c) During the year ended 30 June 2004, the level of certainty regarding
potential benefits arising from prior period taxation deductions and foreign tax
credits available in the US and Canada has increased to the extent that some of
the provisions against deferred tax assets established in prior years are no
longer necessary. This is a result of higher income generation, changes in
legislation and effective utilisation of tax credits during the year, along with
increasing confidence regarding the ability to realise benefits in the future.
Accordingly, the Group has recorded an exceptional tax benefit of US$238
million.
(d) During the year ended 30 June 2004, the Group refined its plans in relation
to certain closed operations. In relation to the Group's Southwest Copper
business in the US, this resulted in a charge of US$425 million resulting from a
re-estimation of short-term closure costs and the inclusion of residual risks,
longer-term water management and other costs, and an increase in the residual
value of certain assets. Additionally, at other closed sites, a charge of US$109
million (before a tax benefit of US$22 million) was recorded, mainly in relation
to the Island Copper mine, the Newcastle steelworks and the Selbaie copper mine.
Accordingly, the Group has recorded a net after-tax exceptional loss of US$512
million.
Year ended 30 June 2003
Effective July 2002, the BHP Steel business was demerged from the BHP Billiton
Group. A 6 per cent interest in BHP Steel was retained by the Group upon
demerger of the Group's Steel business. This was sold in July 2002 for US$75
million and the loss of US$19 million associated with this sale was recognised
in the year ended 30 June 2003 as an exceptional item in relation to
Discontinued Operations.
NOTE 3. ANALYSIS BY BUSINESS SEGMENT
Year ended Year ended
30 June 2004 30 June 2003
Turnover US$M US$M
Petroleum 5 558 3 264
Aluminium 4 432 3 386
Base Metals 3 422 1 954
Carbon Steel Materials 4 857 3 714
Diamonds and Specialty Products 1 710 1 485
Energy Coal 2 569 2 089
Stainless Steel Materials 1 749 1 106
Group and unallocated items 1 796 1 014
Intersegment (1 150) (506)
Total BHP Billiton Group 24 943 17 506
Profit before taxation
Petroleum 1 391 1 178
Aluminium 776 581
Base Metals 1 156 286
Carbon Steel Materials 1 137 1 045
Diamonds and Specialty Products 410 299
Energy Coal 234 198
Stainless Steel Materials 571 150
Group and unallocated items (187) (256)
Exceptional items (468) (19)
Profit before net interest and taxation 5 020 3 462
Net interest (502) (537)
Total BHP Billiton Group 4 518 2 925
As at As at
30 June 2004 30 June 2003
Net operating assets US$M US$M
Petroleum 4 074 3 293
Aluminium 5 309 5 095
Base Metals 3 272 3 877
Carbon Steel Materials 3 026 2 567
Diamonds and Specialty Products 1 521 1 518
Energy Coal 2 194 2 193
Stainless Steel Materials 1 823 1 695
Group and unallocated items 291 418
Total BHP Billiton Group 21 510 20 656
NOTE 3. ANALYSIS BY BUSINESS SEGMENT (continued)
Third party products included above
Year ended Year ended
30 June 2004 30 June 2003
External turnover US$M US$M
Petroleum 2 286 296
Aluminium 1 823 1 333
Base Metals 335 38
Carbon Steel Materials 102 26
Diamonds and Specialty Products 829 747
Energy Coal 554 413
Stainless Steel Materials 47 10
Group and unallocated items 684 519
Total BHP Billiton Group 6 660 3 382
Profit before taxation
Petroleum (22) 1
Aluminium 11 28
Base Metals (4) 5
Carbon Steel Materials (9) (2)
Diamonds and Specialty Products 29 10
Energy Coal 21 7
Stainless Steel Materials 7 1
Group and unallocated items - 1
Total BHP Billiton Group 33 51
NOTE 4. NET INTEREST AND SIMILAR ITEMS PAYABLE
Year ended Year ended
30 June 2004 30 June 2003
US$M US$M
On bank loans and overdrafts 113 131
On all other loans 229 241
Finance lease and hire purchase interest 2 4
344 376
Dividends on redeemable preference shares 23 24
Discounting on provisions and other liabilities 111 97
less Amounts capitalised (a) (97) (103)
381 394
Share of interest of joint ventures and associates 66 68
447 462
Interest received/receivable (78) (65)
369 397
Exchange differences on net debt (b)
Group 104 115
Joint ventures and associates 29 25
133 140
Net interest and similar items payable (c) 502 537
(a) Interest has been capitalised at the rate of interest applicable to the
specific borrowings financing the assets under construction or, where financed
through general borrowings, at a capitalisation rate representing the average
borrowing cost of the Group. For the year ended 30 June 2004, the capitalisation
rate was 4.6 per cent (2003: 5.2 per cent).
(b) Net exchange losses primarily represent the effect on borrowings of the
appreciation/(depreciation) of the rand against the US dollar.
(c) Disclosed in the consolidated profit and loss account as:
Year ended Year ended
30 June 2004 30 June 2003
US$M US$M
Net interest and similar items payable
Group 407 444
Joint ventures and associates 95 93
Net interest and similar items payable 502 537
NOTE 5. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Year ended Year ended
30 June 2004 30 June 2003
(Restated)
US$M US$M
Profit for the financial year 3 379 1 901
Other recognised gains 48 67
Total recognised gains for the financial year 3 427 1 968
Dividends (1 617) (900)
Issue of ordinary shares for cash 66 98
Employee share awards (a) 71 64
Share repurchase scheme (b)
BHP Billiton Plc - (20)
Capital reduction on BHP Steel demerger - (1 489)
Net movement in shareholders' funds 1 947 (279)
Shareholders' funds at beginning of the financial year as restated 12 091 12 370
(refer Note 1)
Shareholders' funds at end of the financial year 14 038 12 091
(a) The movement in shareholders' funds of US$71 million (2003: US$64 million)
for employee share awards comprises the accrued employee entitlement of US$96
million (2003: US$70 million) which has been charged to profit less purchases of
shares made by ESOP trusts of US$25 million (2003: US$6 million) (refer Note 1).
(b) BHP Billiton Plc entered into an arrangement under which it contingently
agreed to purchase its own shares from a special purpose vehicle (Nelson
Investment Limited) established for that purpose. No shares were purchased
during the year ended 30 June 2004 (2003: 3 890 000 ordinary shares). The
aggregate purchase price of US$nil (2003: US$20 million) was funded by the BHP
Billiton Group. The cost of purchasing these shares was deducted from
shareholders' funds. There is no intention to trade these shares and no
dividends are paid in respect of them outside the BHP Billiton Group. No shares
were re-issued during the year ended 30 June 2004 (2003: nil).
NOTE 6. EARNINGS PER SHARE
Year ended Year ended
30 June 2004 30 June 2003
Basic earnings per share (US cents)
Excluding exceptional items 56.4 30.9
Impact of exceptional items (2.1) (0.3)
Including exceptional items 54.3 30.6
Diluted earnings per share (US cents)
Excluding exceptional items 56.2 30.9
Impact of exceptional items (2.1) (0.3)
Including exceptional items 54.1 30.6
Basic earnings per ADS (US cents) (a)
Including exceptional items 108.6 61.2
Diluted earnings per ADS (US cents) (a)
Including exceptional items 108.2 61.2
Earnings (US$ million)
Excluding exceptional items 3 510 1 920
Including exceptional items 3 379 1 901
Weighted average number of shares (millions)
Basic earnings per share denominator 6 218 6 207
Diluted earnings per share denominator 6 246 6 222
(a) For the periods reported, one American Depositary Share (ADS) represents two
shares.
The exceptional loss due to the refinement of current closure provisions
relating to the Group's Southwest Copper business in the US and certain other
closed operations, net of tax, of US$512 million reduced basic and diluted
earnings per share by 8.2 US cents for the year ended 30 June 2004.
The exceptional gain due to benefits arising from prior period taxation
deductions and foreign tax credits available in the US and Canada of US$238
million increased basic and diluted earnings per share by 3.8 US cents for the
year ended 30 June 2004.
The exceptional gain due to Australian subsidiaries being consolidated under
Australian tax consolidation law of US$95 million increased basic and diluted
earnings per share by 1.5 US cents for the year ended 30 June 2004.
The exceptional gain on the settlement of litigation, net of tax expense, of
US$48 million increased basic and diluted earnings per share by 0.8 US cents for
the year ended 30 June 2004.
The exceptional loss of US$19 million upon sale of the 6% interest in BHP Steel
for US$75 million in July 2002 reduced basic and diluted earnings per share by
0.3 US cents for the year ended 30 June 2003.
The Directors present earnings per share data based on earnings excluding
exceptional items as this provides a more meaningful representation of the
underlying operating performance of the BHP Billiton Group.
Under the terms of the DLC merger, the rights to dividends of a holder of an
ordinary share in BHP Billiton Plc and a holder of an ordinary share in BHP
Billiton Limited are identical. Consequently, earnings per share have been
calculated on the basis of the aggregate number of ordinary shares ranking for
dividend. The weighted average number of shares used for the purposes of
calculating basic earnings per share is calculated after deduction of the shares
held by the share repurchase scheme and the Group's ESOP trusts.
NOTE 7. ANALYSIS OF MOVEMENTS IN NET DEBT
Other
As at Acquisitions non-cash Exchange As at
1 July 2003 & disposals Cash flow movements movements 30 June 2004
US$M US$M US$M US$M US$M US$M
Cash at bank and in hand 587 (5) 88 - 4 674
Overdrafts (21) - (99) - (13) (133)
566 (5) (11) - (9) 541
Redeemable preference shares (450) - - - - (450)
Finance lease obligations (53) - 9 (31) (1) (76)
Other debt due within one (1 011) - 733 (637) (77) (992)
year
Other debt due after one year (5 789) - 228 637 (12) (4 936)
(7 303) - 970 (31) (90) (6 454)
Liquid resources (a) 965 - 178 - 1 1 144
Net debt (b) (5 772) (5) 1 137 (31) (98) (4 769)
The balance sheet movement in
cash including money market
deposits is as follows:
Cash at bank and in hand 587 (5) 88 - 4 674
Money market deposits (a) 965 - 178 - 1 1 144
1 552 (5) 266 - 5 1 818
(a) Liquid resources represent money market deposits with financial institutions
that have a maturity of up to three months.
(b) The breakdown of net debt by currency is as follows:
As at As at
30 June 2004 30 June 2003
US$M US$M
Net debt is denominated in:
US dollars 4 869 5 387
South African rand 211 540
Australian dollars (47) 34
Canadian dollars (10) (122)
Other currencies (254) (67)
Net debt 4 769 5 772
BHP BILLITON GROUP
STATEMENT OF FINANCIAL PERFORMANCE
(prepared in accordance with Australian GAAP; unaudited)
Year ended 30 June 2004 2003
US$M US$M
Revenue from ordinary activities
Sales 22 887 15 608
Other revenue 626 941
23 513 16 549
Profit from ordinary activities before depreciation, amortisation and borrowing costs 6 652 4 983
Deduct: Depreciation and amortisation 1 793 1 689
Borrowing costs 490 511
Profit from ordinary activities before tax 4 369 2 783
Deduct: Tax expense attributable to ordinary activities 870 883
Net profit 3 499 1 900
Outside equity interests in net profit (96) (40)
Net profit attributable to members of the BHP Billiton Group 3 403 1 860
Basic earnings per fully paid ordinary share (US cents) 54.7 30.0
Basis of Preparation
The results of the BHP Billiton Group, comprising BHP Billiton Limited and BHP
Billiton Plc and their respective subsidiaries, for the year ended 30 June 2004,
and the corresponding period, have been prepared in accordance with Australian
GAAP and Practice Note 71 'Financial reporting by Australian entities in dual
listed company arrangements' issued by the Australian Securities and Investments
Commission.
The financial information has been prepared using the same accounting policies
as were used in preparing the results for the BHP Billiton Group as presented in
the BHP Billiton Limited financial statements for the year ended 30 June 2003,
except for the change in accounting policy for employee share awards referred to
below.
Employee Share Awards
Effective 1 July 2003, the BHP Billiton Group changed its accounting policy for
employee share awards.
Under the revised accounting policy, the estimated cost of share awards made by
the BHP Billiton Group is charged to profit over the period from grant date to
the date of expected vesting or the performance period, as appropriate. The
accrued employee entitlement is recorded as an equal credit to shareholders'
equity. The estimated cost of awards is based on the market value of shares at
the grant date or the intrinsic value of options awarded (being the difference
between the exercise price and the market price at the date of granting the
award), adjusted to reflect the impact of performance conditions, where
applicable.
In prior years, the estimated cost of share awards was initially charged to
profit and recorded as a provision using the market value of shares at the grant
date. Where share awards were satisfied by on-market purchases, the cost was
subsequently adjusted to the actual consideration for shares purchased.
The effect of the accounting policy change on the Statement of Financial
Performance for the year ended 30 June 2004 is an increase in net profit for the
year of US$12 million representing costs no longer recognised for the excess
consideration paid to purchase shares on-market (US$8 million) and the foreign
currency translation of the accrued cost of unvested awards now recorded in
shareholders' equity (US$4 million).
The impact on the prior period Statement of Financial Performance is immaterial.
Full details of the policy change, including the effect on the Statement of
Financial Position, will be set out in the Group's Annual Report for the year
ended 30 June 2004.
Significant Items
Individually significant items (before outside equity interests) included within
the BHP Billiton Group net profit are detailed below.
Year ended 30 June 2004 Year ended 30 June 2003
Gross Tax Net Gross Tax Net
US$M US$M US$M US$M US$M US$M
Introduction of tax - 267 267 - - -
consolidation regime in
Australia (a)
Litigation settlement (b) 66 (18) 48 - - -
US and Canadian taxation - 238 238 - - -
deductions (c)
Closure plans (d) (534) 22 (512) - - -
Loss on sale of 6% interest in - - - (19) - (19)
BHP Steel (e)
Total (468) 509 41 (19) - (19)
(a) During the current year BHP Billiton elected to consolidate its Australian
subsidiaries under the Australian tax consolidation regime, as introduced by the
Australian Federal Government. Under the transitional rules, the Group has
chosen to reset the tax cost base of certain depreciable assets which will
result in additional tax depreciation over the lives of the assets. This
resulted in the restatement of deferred tax balances and a tax benefit of US$267
million being recorded in accordance with Urgent Issues Group Abstract 52.
(b) In December 2003, BHP Billiton announced that it was part of a consortium
that had reached a settlement with Dalmine SpA with respect to a claim brought
against Dalmine in April 1998. The claim followed the failure of an underwater
pipeline installed in 1994 in the Liverpool Bay area of the UK continental
shelf. As a result of the settlement, BHP Billiton has recorded a gain of US$66
million, before tax expense of US$18 million.
(c) During the year ended 30 June 2004, the level of certainty regarding
potential benefits arising from prior period taxation deductions and foreign tax
credits available in the US and Canada has increased to the extent that some of
the provisions against deferred tax assets established in prior years are no
longer necessary. This is a result of higher income generation, changes in
legislation and effective utilisation of tax credits during the year, along with
increasing confidence regarding the ability to realise benefits in the future.
Accordingly, the Group has recorded a tax benefit of US$238 million.
(d) During the year ended 30 June 2004, the Group refined its plans in relation
to certain closed operations. In relation to the Group's Southwest Copper
business in the US, this resulted in a charge of US$425 million resulting from a
re-estimation of short-term closure costs and the inclusion of residual risks,
longer-term water management and other costs, and an increase in the residual
value of certain assets. Additionally, at other closed sites, a charge of US$109
million (before a tax benefit of US$22 million) was recorded, mainly in relation
to the Island Copper mine, the Newcastle steelworks and the Selbaie copper mine.
Accordingly, the Group has recorded a net after-tax loss of US$512 million.
(e) Effective July 2002, the BHP Steel business was demerged from the BHP
Billiton Group. A 6 per cent interest in BHP Steel was retained by the Group
upon demerger of the Group's Steel business. This was sold in July 2002 for
US$75 million and the loss of US$19 million associated with this sale was
recognised in the year ended 30 June 2003.
Forward-looking statements
Certain statements contained in this release, including statements in the
section entitled 'Introduction' and 'Outlook', may constitute 'forward-looking
statements' within the meaning of the US Private Securities Litigation Reform
Act of 1995. We undertake no obligation to revise the forward-looking statements
included in this release to reflect any future events or circumstances. Our
actual results, performance or achievements could differ materially from the
results expressed in, or implied by, these forward-looking statements. Factors
that could cause or contribute to such differences are discussed in the sections
entitled 'Risk Factors' and 'Operating and Financial Review and Prospects-
General factors affecting our operating results' included in our annual report
on Form 20-F for the fiscal year ended 30 June 2003, which we filed with the US
Securities and Exchange Commission (SEC) on 23 October 2003 and is available on
the SEC's website at 'www.sec.gov'. Nothing in this release should be construed
as either an offer to sell or a solicitation of an offer to buy or sell
securities in any jurisdiction.
Further information on BHP Billiton can be found on our Internet site:
http://www.bhpbilliton.com
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
Tania Price, Media Relations Ariane Gentil, Media Relations
Tel: +61 3 9609 3815 Mobile: +61 419 152 780 Tel: +44 20 7802 4177 Mobile: +44 7881 518 715
email: Tania.Price@bhpbilliton.com email: Ariane.Gentil@bhpbilliton.com
United States South Africa
Francis McAllister, Investor Relations Michael Campbell, Investor & Media Relations
Tel: +1 713 961 8625 Mobile: +1 713 480 3699 Tel: +27 11 376 3360 Mobile: +27 82 458 2587
email: Francis.R.McAllister@bhpbilliton.com email: Michael.J.Campbell@bhpbilliton.com
BHP Billiton Limited ABN 49 004 028 077 BHP Billiton Plc Registration number 3196209
Registered in Australia Registered in England and Wales
Registered Office: 180 Lonsdale Street Melbourne Victoria Registered Office: Neathouse Place London SW1V 1BH United
3000 Australia Kingdom
Telephone +61 1300 55 4757 Facsimile +61 3 9609 3015 Telephone +44 20 7802 4000 Facsimile +44 20 7802 4111
The BHP Billiton Group is headquartered in Australia
This information is provided by RNS
The company news service from the London Stock Exchange
Latest directors dealings
- 14 hours ago Mattioli Woods
- 15 hours ago Morgan Advanced Materials
- 15 hours ago Capita
- 15 hours ago Judges Scientific
- 16 hours ago Me Group International