Prelim Rslts Y/E 30/06/01-PT5
BHP Billiton Limited
20 August 2001
PART 5
Supplementary Information - Segment Results (Annual)
Annual comparison - June 2001 with June 2000 (1)
Year ended 30 June 2001 ($ million)
Revenue(2) Profit
Other Dep'n & Borrowing Net
Sales revenue Total EBITDA amort'n costs EBT Tax profit
(3) (4) (5)
9 524 967 10 491 Minerals 2 320 (1 050) - 1 270 (646) 624
6 257 138 6 395 Petroleum 3 757 (1 007) ( 1)2 749 (833) 1 916
6 587 85 6 672 Steel 726 ( 321) ( 1) 404 ( 81) 323
- 93 93 Net unallocated 93 - (551) (458) 115 ( 343)
interest
(610) 514 ( 96) Group and (1 366) ( 24) -(1 390) 379 (1 011)
unallocated items(6)
20 698 1 781 22 479 BHP Billiton Ltd 5 530 (2 402) (553)2 575 (1066) 1 509
Group
Revenue(2) Profit
Other Dep'n & Borrowing Net
Sales revenue Total EBITDA amort'n costs EBT Tax profit
(3) (4) (5)
8 108 514 8 622 Minerals 1 291 ( 827) - 464 ( 28) 436
4 774 607 5 381 Petroleum 2 651 ( 833) - 1 818 (532) 1 286
8 260 673 8 933 Steel 824 ( 457) ( 1) 366 ( 83) 283
296 145 441 Services 109 ( 10) - 99 ( 5) 94
- 60 60 Net unallocated 60 - (663) (603) 131 ( 472)
interest
(296) 87 (209) Group and ( 531) ( 13) - (544) 466 ( 78)
unallocated items(6)
19872 2 050 21922 BHP Billiton Ltd 4 404 (2 140) (664)1 600 ( 51) 1 549
Group
(1) Before outside equity interests.
(2) Revenues do not add to the BHP Billiton Ltd Group figure due to
intersegment transactions.
(3) Excludes share of net profit of associates accounted for using the equity
method.
(4) EBITDA is earnings before borrowing costs, tax, and depreciation and
amortisation.
(5) EBT (earnings before tax) is usually EBIT (earnings before borrowing costs
and tax) for Businesses excluding Net unallocated interest and BHP Billiton
Ltd Group.
(6) Includes consolidation adjustments and unallocated items.
Supplementary Information - Segment Results (Quarter)
Quarterly comparison - June 2001 with June 2000 (1)
Quarter ended 30 June 2001 ($ million)
Revenue(2) Profit
Other Dep'n & Borrowing Net
Sales revenue Total EBITDA amort'n costs EBT Tax profit
(3) (4) (5)
2 645 842 3 487 Minerals 203 ( 398) - (195) (98) ( 293)
1 516 10 1 526 Petroleum 1 026 ( 326) ( 1) 699 (227) 472
1 598 55 1 653 Steel 54 ( 74) - ( 20) 15 ( 5)
- 29 29 Net unallocated 29 - ( 114) ( 85) 26 ( 59)
interest
(163) 377 214 Group and ( 7) ( 15) - ( 22) (67) ( 89)
unallocated items(6)
5 329 1 307 6 636 BHP Billiton Ltd 1 305 ( 813) ( 115) 377 (351) 26
Group
Quarter ended 30 June 2000 ($ million)
Revenue(2) Profit
Other Dep'n & Borrowing Net
Sales revenue Total EBITDA amort'n costs EBT Tax profit
(3) (4) (5)
2 094 54 2 148 Minerals 622 ( 208) - 414 ( 53) 361
1 466 141 1 607 Petroleum 802 ( 260) - 542 ( 65) 377
2 232 574 2 806 Steel ( 16) ( 97) ( 1) (114) ( 6) (120)
49 68 117 Services 70 ( 2) - 68 - 68
- 22 22 Net unallocated 22 - ( 156) (134) 19 ( 115)
interest
(109) 3 (106) Group and ( 226) ( 4) - (230) 67 ( 163)
unallocated items(6)
5 464 862 6 326 BHP Billiton Ltd 1 274 ( 571) ( 157) 546 (138) 408
Group
(1) Before outside equity interests.
(2) Revenues do not add to the BHP Billiton Ltd Group figure due to intersegment
transactions.
(3) Excludes share of net profit of associates accounted for using the equity
method.
(4) EBITDA is earnings before borrowing costs, tax,
and depreciation and amortisation.
(5) EBT (earnings before tax) is usually EBIT (earnings before borrowing costs
and tax) for Businesses excluding Net unallocated interest and BHP Billiton
Ltd Group.
(6) Includes consolidation adjustments and unallocated items.
Supplementary Information - Segment Results (Quarter)
Quarterly comparison - June 2001 with March 2001 (1)
Quarter ended 30 June 2001 ($ million)
Revenue (2) Profit
Other Dep'n & Borrowing Net
Sales revenue Total EBITDA amort'n costs EBT Tax profit
(3) (4) (5)
2 645 842 3 487 Minerals 203 ( 398) - (195) ( 98)( 293)
1 516 10 1 526 Petroleum 1 026 ( 326) ( 1) 699 (227) 472
1 598 55 1 653 Steel 54 ( 74) - ( 20) 15 ( 5)
- 29 29 Net unallocated 29 - ( 114) ( 85) 26 ( 59)
interest
(163) 377 214 Group and ( 7) ( 15) - ( 22) ( 67) ( 89)
unallocated items(6)
5 329 1 307 6 636 BHP Billiton Ltd 1 305 ( 813) ( 115) 377 (351) 26
Group
Quarter ended 31 March 2001 ($million)
Revenue (2) Profit
Other Dep'n & Borrowing Net
Sales revenue Total EBITDA amort'n costs EBT Tax profit
(3) (4) (5)
2 347 42 2 389 Minerals 502 ( 226) - 276 (193) 83
1 539 111 1 650 Petroleum 1 016 ( 234) - 782 (235) 547
1 416 2 1 418 Steel 143 ( 69) - 74 2 76
- 25 25 Net unallocated 25 - ( 126) (101) 37 ( 64)
interest
( 152) 28 (124) Group and ( 907) ( 3) - (910) 295 ( 615)
unallocated items(6)
4 863 204 5 067 BHP Billiton Ltd 779 ( 532) ( 126) 121 ( 94) 27
Group
(1) Before outside equity interests.
(2) Revenues do not add to the BHP Billiton Ltd Group figure due to
intersegment transactions.
(3) Excludes share of net profit of associates accounted for using the equity
method.
(4) EBITDA is earnings before borrowing costs, tax, and depreciation and
amortisation.
(5) EBT (earnings before tax) is usually EBIT (earnings before borrowing costs
and tax) for Businesses excluding Net unallocated interest and BHP Billiton
Ltd Group.
(6) Includes consolidation adjustments and unallocated items.
Supplementary Information - Business Results
Year ended $ million
30 June 2001 Sales (1) EBITDA Depre- Net Capital & (3) Exploration
revenue (2) ciation& assets investment (before tax)
amortisa-
tion expenditure Gross Charged
(4) (5)
to profit
Minerals
WA 1 966 959 140 1 414 51
Samarco (6) 89 454 -
Total Iron 1 966 1 048 140 1 868 51
Ore
Queensland(7) 1 847 1 042 116 1 110 541
New Mexico 762 235 68 273 97
Illawarra 480 136 32 165 22
Kalimantan 418 121 54 116 2
Total Coal 3 507 1 534 270 1 664 662
WA 172 ( 252) - 171 57
Venezuela(6) ( 453) ( 39) 76
Total HBI 172 ( 705) - 132 133
Escondida 1 592 764 189 2 970 443
Tintaya 294 46 54 534 91
Ok Tedi 937 ( 657) 128 ( 56) 46
Total 2 823 153 371 3 448 580
Copper
Ekati 448 285 46 1 469 783
Cannington 545 195 46 444 19
Other 94 8 5 ( 678) -
businesses(8)
Development 20 ( 159) 7 442 5
Intra ( 66) ( 1) ( 2)
divisional
adjustment
Divisional 15 ( 118) 7 1 -
activities
Accounting 80 158
policy change(9)
9 524 2 320 1 050 8 788 2 233 137 156
Petroleum(10)
Bass Strait 2 139 1 182 162 810 102
North West 1 358 989 97 1 280 80
Shelf
Liverpool Bay 648 512 194 554 90
Other 2 004 1 036 455 1 572 582
Businesses
Marketing 303 17 - 11 -
activities
Intra-divisional - - - -
adjustment
Divisional ( 195) ( 234) - 3 - 385 271
activities
Accounting 255 99
policy change(9)
6 257 3 757 1 007 4 230 854 385 271
Steel
Flat Products 2 399 176 148 1 808 66
(11)
Coated 3 316 384 111 1 639 43
Products
Discontinuing 881 81 36 ( 61) 15
Operations(12)
Intra-
divisional (1 741) 40 ( 17) ( 2)
adjustment
Divisional 73 ( 40) - ( 5) 1
activities
Transport and 1 659 85 26 179 6
Logistics
6 587 726 321 3 543 129 - -
Net 93 (6 084)
Unallocated
Interest
Group and ( 610) (1 366) 24 771 254
unallocated
items(13)
BHP Billiton 20 698 5 530 2 402 11 248 3 470 522 427
Ltd Group
(1) Sales revenues do not (8) Includes North America Copper mining and smelting
add to the BHP Billiton operations which ceased during the September 1999 Ltd
Ltd Group figure due to quarter, the Beenup mineral sands operation which was
intersegment transactions. closed in April 1999 and the Hartley Platinum mine
which was sold in January 2001
(2) EBITDA is earnings
before borrowing costs,
tax, and depreciation and .(9) Net adjustment for change in accounting policy
for amortisation. restoration and rehabilitation provisions.
(3) Excludes capitalised
interest and capitalised
exploration.
(4) Includes capitalised
exploration: Minerals $14
million and
Petroleum $114 million. (10) Petroleum sales revenue includes: Crude oil
$4,320 million, Natural gas $666 million,
(5) Includes $33 million LNG $542 million, LPG $369 million
Minerals exploration and Other $360 million.
expenditure
previously capitalised,
now written off.
(6) Equity accounted (11) Includes North Star BHP Steel.
investments.
(7) Includes equity accounted
results for QCT Resources Limited
which was acquired in November
2000 and creased following
equalisation of interests with
Mitsubishi
(12) Includes the Long Products businesses
(OneSteel) which ceased
(13) Included within Group and Unallocated items
EBITDA is $379 million
for change in accounting policy for defined
benefit pension plans.
Supplementary Information - Business Results
Year ended $ million
30 June 2000 Sales (1) EBITDA Depre- Net Capital & (3) Exploration
revenue (2) ciation& assets investment (before tax)
amortisa-
tion expenditure Gross Charged
(4) (5)
Minerals
WA 1 425 655 135 1 521 22
Samarco (6) 51 348 14
Total Iron 1 425 706 135 1 869 36
Ore
Queensland 1 459 497 142 1 148 60
New Mexico 585 184 47 216 20
Illawarra 397 78 29 189 18
Kalimantan 352 53 50 189 2
Total Coal 2 793 812 268 1 742 100
WA 71 (1 359) 8 259 42
Venezuela (6) ( 16) 283 102
Total HBI 71 (1 375) 8 542 144
Escondida 1 512 737 159 2 295 86
Tintaya 253 48 57 427 16
Ok Tedi 711 112 104 665 26
Total Copper 2 476 897 320 3 387 128
Ekati 343 263 35 527 28
Cannington 467 146 45 493 11
Other 575 64 5 ( 634) 9
businesses(7)
Development 12 ( 118) 9 349 3
Intra ( 38) 2 - ( 3) -
divisional
adjustment
Divisional ( 16) ( 106) 2 19 (7)
activities
8 108 1 291 827 8 291 452 101 92
Petroleum (8)
Bass Strait 1 850 1 085 197 631 141
North West 1 016 736 122 1 159 47
Shelf
Liverpool Bay 522 403 186 527 29
Other 1 242 809 328 1 135 219
Businesses
Marketing 1 387 14 - ( 15) 1
activities
Intra-
divisional ( 943) - ( 7)
adjustment
Divisional ( 300) ( 396) - 4 - 247 190
activities
4 774 2 651 833 3 434 437 247 190
Steel
Flat Products 2 267 324 142 1 904 55
(9)
Coated 3 516 425 120 1 659 31
Products (10)
Discontinuing 3 452 13 165 2 061 195
Operations(11)
Intra
-divisional (2 475) 17 - ( 44) -
adjustment
Divisional 118 ( 55) - ( 21) ( 12)
activities(10)
Transport and 1 382 100 30 180 8
Logistics
8 260 824 457 5 739 277 - -
Services 296 109 10 ( 5) 8
Net 60 - (7 007) -
Unallocated
Interest
Group and ( 296) ( 531) 13 553 125
unallocated
items
BHP Billiton 19 872 4 404 2 140 11 005 1299 348 282
Ltd Group
(1)Sales revenues do (7) Includes North America Copper mining and smelting
not add to the BHP operations which ceased during the September 1999
Billiton Ltd Group quarter, the Beenup mineral sands operation which
figure due to closed in April and the Hartley Platinum mine
intersegment which suspended operations during the period.
transactions.
(2) EBITDA is
earnings before
borrowing costs, tax,
and depreciation and
amortisation.
(3) Excludes (8) Petroleum sales revenue includes: Crude oil $3,274
capitalised interest million, Natural gas $430 million,
and capitalised LNG $398 million, LPG $305 million
exploration. and Other $367 million.
(4) Includes
capitalised
exploration: Minerals
$9 million and
Petroleum $67 million.
(5) Includes $10 (9) Includes North Star BHP Steel.
million Petroleum
exploration
expenditure previously
capitalised, now
written off
(6) Equity accounted (10) Coated Products' head office costs have been
investments. reclassified from
Divisional activities into Coated Products.
(11) Includes the Long Products businesses (OneSteel),
Newcastle primary steelmaking operations, US steel
assets, Lifting Products and strip casting assets.
Supplementary information - Risk management
PORTFOLIO RISK MANAGEMENT
Foreign exchange risk management
The table below provides information as at 30 June 2001 regarding the BHP
Billiton Ltd Group's significant derivative financial instruments used to hedge
US dollar sales revenues that are sensitive to changes in exchange rates for the
forthcoming twelve months.
Weighted average A$/US$ exchange rate Contract
amounts
Forwards Call options Put options US$ million
US Dollars
Q1 2002 - forwards 0.6954 - - 300
- collar options - 0.6678 0.6372 60
- purchased options - 0.5500 - 30
- sold options - - - -
Q2 - forwards 0.6933 - - 270
- collar options - 0.6837 0.6504 60
- purchased options - 0.5500 - 60
- sold options - - - -
Q3 - forwards 0.6848 - - 270
- collar options - 0.6807 0.6609 60
- purchased options - 0.5500 - 30
- sold options - - - -
Q4 - forwards 0.6804 - - 300
- collar options - 0.6845 0.6536 50
- purchased options - 0.5500 - 10
- sold options - - - -
Commodity price risk management
As at 30 June 2001 there were no significant commodity price derivative
financial instruments outstanding.
STRATEGIC FINANCIAL TRANSACTIONS
As at 30 June 2001 there were no strategic financial derivative transactions
outstanding.
BHP BILLITON
PRELIMINARY RESULTS
FOR THE YEAR ENDED 30 JUNE 2001
PART E
BHP BILLITON PLC GROUP PRO FORMA RESULTS
BHP BILLITON
PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2001
PART E
BHP BILLITON PLC GROUP PRO FORMA RESULTS
Part E1: Operating and Financial Review
Status of financial information
BHP Billiton Plc (formerly Billiton Plc) and BHP Billiton Limited (formerly
BHP Limited) entered into a dual listed company ('DLC') merger on 29 June
2001. The DLC merger will be reflected in the financial statements of BHP
Billiton Plc using the merger method of accounting and consequently these will
include both BHP Billiton Plc and its subsidiaries and BHP Billiton Limited
and its subsidiaries as though they had always been combined. Financial
information prepared on this basis is set out in Part C of this preliminary
announcement 'BHP Billiton Group Results'.
The financial information in this Part of this preliminary announcement has
been prepared on the basis that the DLC merger had not been consummated prior
to 30 June 2001 (except that merger related costs have been recognised) and so
does not include BHP Billiton Limited and its subsidiaries.
The figures for the two years ended 30 June 2001 and 30 June 2000 are
unaudited and do not constitute the Company's statutory accounts. The
statutory accounts for the year ended 30 June 2001 will be provided on the
basis of the financial information presented by the Directors in Part C of
this preliminary announcement and will be delivered to the Registrar of
Companies following the Company's Annual General Meeting. The statutory
accounts for the year ended 30 June 2000 received an unqualified audit report
without statements under section 237 of the Companies Act 1985 and have been
filed with the Registrar of Companies.
Basis of presentation of financial information
The financial information is presented in accordance with UK generally
accepted accounting principles, except that it does not reflect the DLC
merger. The reporting currency is US dollars, the dominant currency in which
BHP Billiton Plc and the companies in which it has holdings operate.
The financial information in this Part of the preliminary announcement has
been prepared on the same basis and using the same accounting policies as were
used in preparing the financial statements for the year ended 30 June 2000,
except that BHP Billiton Plc has adopted two changes to its accounting
policies for deferred tax and exploration costs principally to align policies
between BHP Billiton Plc and BHP Billiton Limited.
Deferred tax
The Group has adopted FRS 19 ('Deferred tax'). Prior to the adoption of FRS
19, the BHP Billiton Plc Group provided for deferred taxation under the
liability method only to the extent that it was probable that a liability or
asset would crystallise in the foreseeable future. As a result of FRS19, the
new policy requires that full provision is made for deferred taxation on all
timing differences which have arisen but have not reversed at balance sheet
date, except as follows:
* Tax payable on the future remittance of the past earnings of
subsidiaries, associates and joint ventures is provided only to the extent
that dividends have been accrued as receivable or a binding agreement to
distribute all past earnings exists;
* Deferred tax is not recognised on the difference between book values and
fair values of non-monetary assets arising on acquisitions unless there is
a binding agreement to sell such an asset and the gain or loss expected to
arise has been recognised; and
* Deferred tax assets are recognised only to the extent that it is more
likely than not that they will be recovered.
The adoption of the new policy, which has been made by way of an adjustment to
previously published results as though the revised policy had always been
applied by the BHP Billiton Plc Group, has had the following effects:
* The previously published figures at 1 July 1999 and 30 June 2000 have
been restated as follows:
a. deferred tax has been increased by US$288 million and US$294 million
respectively;
b. goodwill has been increased by US$111 million and US$104 million
respectively due to increased deferred tax liabilities at the date of
acquisition of businesses; and
c. investments in joint ventures have been reduced by US$49 million and US$49
million respectively resulting in decreases in shareholders' funds of US$189
million and US$200 million after taking account of minority interests of
US$37 million and US$39 million respectively;
* Operating profit and the tax charge on profits from ordinary activities
for the year ended 30 June 2000 have been decreased by US$7 million and
increased by US$6 million respectively from the figures previously
published, resulting in profit after tax and attributable profit being
decreased by US$13 million and US$11 million respectively; and
* The impact on the current year operating profit and charge for taxation
is a decrease of US$7 million and of US$58 million respectively, resulting
in attributable profit being increased by US$37 million, of which US$18
million is attributable to exceptional items.
Exploration costs
Previously, expenditure incurred prior to a project being considered to be
commercially viable was effectively recognised as a charge to the profit and
loss account. Expenditure incurred subsequent to the determination of
commercial viability was capitalised; costs previously charged to the profit
and loss account were written back to the extent that they were considered to
be recoverable.
The policy has been changed so that costs previously recognised in the profit
and loss account are not written back when a project is considered to have
become commercially viable.
The adoption of the new policy, which has been made by way of an adjustment to
previously published results as though the revised policy had always been
applied by the BHP Billiton Plc Group, has had the following effects:
* Exploration expenditure at 1 July 1999 and 30 June 2000 and
shareholders' funds as at those dates have been reduced by US$15 million;
* The current year exploration cost has been reduced by US$5 million and
profit after tax has been increased by the same amount.
Results for financial year 2001
Overview
The results for the year were:
12 months to 30.6.01
Group Acquired Group excl. 12 months
total activities acquisitions to
* 30.6.00
(including joint ventures and US$m US$m US$m US$m
associates)
Group:
Turnover 7,333 1,146 6,187 5,550
Operating costs (6,341) (1,058) (5,283) (4,707)
Operating profit 992 88 904 843
Production:
Turnover 5,363 349 5,014 4,766
Related operating costs (4,415) (284) (4,131) (3,941)
Operating profit 948 65 883 825
Margin 17.7% 18.6% 17.6% 17.3%
Trading and metals distribution:
Turnover 1,970 797 1,173 784
Related operating costs (1,926) (774) (1,152) (766)
Operating profit 44 23 21 18
Margin 2.2% 2.9% 1.8% 2.3%
* Acquired activities comprise Rio Algom (including the metals distribution
business) and the Colombian coal interests
The results for the year ended 30 June 2001 include contributions from the
acquisition of Rio Algom (October 2000) and the additional 56 % interest in
Worsley (January 2001) as well as from the increased production at Mozal
(first metal June 2000) and the addition of the second line at the Cerro
Matoso nickel facility in Colombia (January 2001).
Turnover, including share of joint ventures and associates, rose by 32% to
US$7,333 million. Of this figure, turnover from production was 13% higher at
US$5,363 million. This arises principally through acquisitions and completed
projects during the year. Turnover from third party trading, including joint
ventures, rose by 151% to US$1,970 million. This arises principally due to the
acquisition of the Metals Distribution business of Rio Algom as well as
increased trading of aluminium/alumina and the commencement of trading in coal
and ferroalloys. Excluding the impact of the Rio Algom acquisition, turnover
from trading increased by 50%.
Operating profit from production, including share of joint ventures and
associates, rose by 15% from US$825 million to US$948 million. Operating
profit from third party trading, including share of joint ventures, increased
from US$18 million to US$44 million, an increase of 144% of which US$23
million related to the Metals Distribution business. Excluding the impact of
the acquisition, operating profit from trading increased by 17% though margins
were weaker than in the previous year.
The operating profit for the year was affected by a number of exceptional
items as follows:
US$m
Write down in carrying values of assets: (140)
Columbus JV (114)
Lake Mines (26)
Sale of expansion rights at Mozal 61
DLC merger related items: (49)
Restructuring costs (12)
Employee share awards (37)
(128)
The partners in the Columbus joint venture have entered into a conditional
agreement to sell part of their investment and the carrying value of Columbus
has reduced by US$114 million to reflect the expected transaction value. The
tax effect is a credit of US$30 million and the impact on attributable profit
after taking account of minority interests is a charge of US$50 million.
An impairment provision of US$26 million (US$20 million after tax) has been
recorded by the coal business in respect of its interest in the Lakes Mines
(Australia) following a reassessment of its expected future value to the BHP
Billiton Plc Group.
In addition to its 47% interest in the Mozal aluminium smelter, the BHP
Billiton Plc Group owned expansion rights amounting to 85%. During the year it
sold expansion rights of 38% to its partners (for consideration valued at
US$61 million (US$ 40 million net of tax)), resulting in the Group having a
47% interest both in the existing smelter and in the expansion.
Restructuring costs and the cost of the accelerated vesting of executive share
incentives consequent on the DLC Merger resulted in a charge to operating
profit of US$49 million (US$37 million after tax). The merger transaction
costs of US$55 million (no tax effect) have been charged as a non-operating
exceptional item.
Excluding the exceptional items, operating profit from production including
joint ventures and associates, rose from US$825 million to US$1,076 million,
an increase of 30 %.
The approximate impact of the factors underlying this improvement in operating
profit are analysed in the following tables:
US$m
Operating profit (including joint ventures) for 2000 843
Change in sales prices 77
Increased sales volumes 27
Increase in costs linked to commodity sales prices (net of hedging in 2000 (59)
financial year)
Efficiency gains at production units 76
Acquisitions and disposals 120
Weakening of currencies of key operating territories relative to the US 236
dollar
Inflation impact on costs (180)
Reorganisation costs (10)
Other items (including trading and central items) (10)
Operating profit (excluding exceptional items) for 2001 1,120
Exceptional items (128)
Operating profit (including joint ventures) for 2001 992
Operating costs of production activities, including the share of joint
ventures, increased by 12% to US$4,415 million. Excluding the impact of
exchange rates, movements in costs linked to commodity prices, start-up costs
and rationalisation costs and acquisitions/disposals, unit operating costs
decreased by 2% in real terms reflecting continued benefits from the
group-wide drive to improve operating efficiencies and productivity.
The most substantial efficiency savings were made in the coal business
following restructuring last year with notable contributions from the
aluminium, nickel and manganese businesses.
These efficiency improvements reinforced the benefit of higher base metals
prices and production volumes, resulting in an increase in the operating
margin of the production activities, including joint ventures, from 17.3% to
17.7 %. Prices were however weak in the second half contributing to a decline
in the margin from 18.6% (19.0% excluding acquisitions) reported for the first
half.
Analysis of operating profit excluding exceptional items by business segment
The analysis of total operating profit, including joint ventures and
associates (excluding exceptional items) by business segment, is as follows.
Excluding exceptional items 2001 2000
US$m US$m
Aluminium 511 431
Base Metals 66 27
Coal 257 52
Nickel 81 140
Steel and ferroalloys 83 148
Ferroalloys 94 149
Stainless Steel (11) (1)
Titanium minerals 162 155
Metals distribution 23 -
New business and technology (40) (52)
Central items (23) (58)
Operating profit (including joint ventures & associates) 1,120 843
Aluminium
During the year, aluminium demand declined reflecting the global economic
slowdown, but the anticipated price impact was moderated by unforeseen smelter
production curtailments in the United States, Canada, Brazil and New Zealand
due to constrained availability of competitive power. With the resulting drop
in demand (for feedstock) and the commissioning of several refinery expansion
projects, the alumina market moved into surplus during the second half of the
year, with consequential price weakness.
LME cash prices averaged US$1,539/t for the financial year, a 1.5% increase on
the previous year's level of US$1,516/t. The average realised metal price
(including value-added products) for the year rose by 2% to US$1,573/t (2000:
US$1,542/t).
Total attributable aluminium production for the year increased by 11.4% to 984
kt (2000: 883kt). Of this, 93 kt was due to additional production as the Mozal
smelter built up to full production. The average unit cash cost of aluminium
rose 2.7% to US$1,068/t (excluding the impact of the cost hedge taken out in
the 2000 financial year).
Attributable alumina production rose by 56.4% to 2,938 kt from 1,878 kt. Of
this amount 720 kt relates to the additional 56% interest in Worsley acquired
in January 2001. Alumina cash costs of US$103/t represent a 8.9% decrease on
the previous year.
The increase in Aluminium operating profit includes US$14 million from the
receipt of a break fee on the proposed acquisition of Gove alumina, US$35
million from the additional 56% of the Worsley Alumina business and US$25
million from the increased production at Mozal. In addition, pot relining
costs at Hillside increased by US$26 million and last year's result benefited
from input cost hedging gains of US$29 million.
The doubling of capacity at Mozal by a further 253,000 tpa at a construction
cost of US$860m commenced in June with commissioning scheduled for late
calendar 2003.
Base metals
The current difficult global business environment has dramatically slowed the
consumption of base metals and is putting pressure on inventories and pricing.
Much of the pricing impact was felt towards the end of the financial year and
has continued subsequently.
The average LME prices of copper and lead increased marginally by
approximately 3% while that of zinc declined by 8%. Attributable copper
production for the year increased from 13.5 kt to 189.3 kt reflecting the
addition of the Rio Algom mines (Cerro Colorado, Alumbrera and Highland
Valley) with effect from 1 October 2000. Production of lead declined by 6% and
zinc by 2% in line with expectations as the Pering and Selbaie mines approach
the end of operation.
The Antamina copper/zinc project reached mechanical completion in May 2001,
more than two months ahead of schedule and under budget. It is anticipated
that the project will reach its full design capacity of 70,000tpd of ore well
in advance of December 2001 and significantly ahead of the original schedule
of February 2002.
The acquisition of Rio Algom in October 2000 contributed an additional US$49
million to the operating profit of Base Metals as well as the US$23 million
operating profit of the metals distribution business.
Coal
The year has been characterised by a much-improved pricing environment. At the
end of the financial year, FOB prices for thermal coal were between US$33 and
US$34 per tonne. This is a significant increase over the previous year when
price FOB South Africa fell below US$20 per tonne at one point.
Production decreased by 2.7 % from 71.4 mt to 69.5 mt due in part to the sale
of the Matla and Glisa collieries in South Africa to Eyesizwe Mining and to
the cutback in production at Koornfontein as part of last year's
restructuring.
The increase in Coal operating profit was largely due to the improved prices
for energy coal, cost efficiencies and the positive effect on operating costs
of the weakening of the South African and Australian currencies relative to US
dollar. Unit operating costs were well contained benefiting substantially from
the rationalisation at the Douglas, Koornfontein and Delmas collieries in
South Africa last year. The acquisition of interests in the Colombian coal
mines Cerrejon Zona Norte SA and Carbones del Cerrejon contributed US$16
million and 2.8 mt of attributable production.
The Mt. Arthur North coal project was approved in May at an estimated capital
cost of US$411 million. Full production of 12.1 mta of saleable coal is
expected in 2006.
Nickel
The stainless steel market, the major driver for nickel demand, declined
significantly in the second half of the year, and the availability of
nickel-containing stainless steel scrap also put pressure on the nickel price.
The LME cash price averaged US$3.28/lb compared with US$3.75/lb last year, a
decline of 12.5%. Total nickel production increased to 60,725t of contained
nickel from 54,100t in the previous year. Of this, approximately 3,000 t is
attributable to the expansion at Cerro Matoso which produced its first
ferronickel in January 2001, with the remaining increase a consequence of the
Yabulu rehabilitation programme which resulted in record output of 28,969
tons, 15% up on last year.
Cash costs of production at Yabulu decreased 12% to US$2.36/lb due to the
improved plant utilisation and cost efficiencies, offset by increased energy
costs. A proportion of Yabulu's cash costs represent the cost of purchasing
ore, which is linked to the LME nickel price. Cash costs at Cerro Matoso
increased 6% to US$1.47/lb due to costs incurred in ramping up production on
line 2 as well as increased energy costs. It is anticipated that cash costs
will fall as line 2 production continues to increase over the next year.
The Ravensthorpe /Yabulu feasibility study for the construction of a new mine
and pressure acid leach plant and the associated expansion of the Yabulu
refinery is ongoing.
Steel and ferroalloys
Chrome prices suffered significantly due to the worsening stainless steel
market. Given this weakness in the Ferrochrome market, Samancor Chrome
accelerated its programme of furnace upgrades and cut back production over the
year. At year end, eight chrome furnaces (representing some 30% of total
capacity) were shut down. In addition to assisting to bring alloy stocks back
into line with market demand, the furnace closures enabled the business units
involved to implement a significant restructuring in order to achieve
permanent fixed cost improvements. Charges totalling US$10 million were
recognised in connection with the furnace closures. Given its extremely
low-cost production profile, first production from the Wonderkop JV will be
brought on stream in the first half of financial year 2002, prior to returning
any of the eight furnaces to service.
Chrome alloy production for the year was 908 kt, a reduction of 14% on the
previous year and ore production was 3,158 kt, a reduction of 15%. After the
price improvements experienced in the first half of the year the decline in
prices together with the reduced production led to a decline in turnover of
22%. Overall operating profits declined substantially despite the cost
reductions achieved through the closures.
Manganese alloy production for the year was 385 kt, a reduction of 5% on the
previous year and ore production was 2,264 kt, an increase of 5%. Increased
average prices for the year compensated for the reduced production resulting
in turnover virtually the same as in the previous year. Cost efficiencies led
to an overall improvement in operating profit of 7%.
Stainless steel demand was low leading to Samancor's share of the loss of the
Columbus Joint Venture increasing to US$11 million from US$1 million in the
previous year.
Titanium minerals
At Richards Bay Minerals overall titanium slag sales volumes declined slightly
on the previous year, reflecting a reduction in pigment production as a
consequence of slowing economic activity in the USA and in Europe. This,
together with marginally higher sales prices, resulted in a 2.5% decline in
turnover compared to the previous year. This was more than offset by the
benefits of a relatively strong zircon market as well as reduced costs -
principally arising from the depreciation of the Rand. This resulted in
operating profit being 4.5% ahead of last year.
Metals distribution
Sales of stainless steel and aluminium account for almost 80% of revenues. The
markets for both stainless steel and aluminium remained difficult in the North
American markets with both volumes and prices under pressure.
Since the acquisition of the metals distribution business (as part of the
acquisition of Rio Algom) in October 2000, the business has generated an
operating profit of US$23 million.
New business and technology
Key developments during the year included the acquisitions of Rio Algom and
the La Granja copper deposit in Peru to form a sizeable base metals business
segment, the formation of a joint venture with Codelco to advance the
proprietary BioCOPTM bio-technology and the formation of further strategic
alliances and options to participate in promising exploration projects. The
latter have continued to be primarily by way of equity participation / option
arrangements with junior exploration companies.
New business and technology expenditure fell by US$3 million to US$49 million,
reflecting a US$2 million increase in exploration expenditure to US$28
million, combined with an increase in expenditure on minerals technology, and
a decrease in merger and acquisition expenditure. The figure for exploration
expenditure written-off includes subscriptions for shares in junior partners
of US$3 million. The market value of the shares in junior partners at 30 June
2001 was US$5 million (net book value nil).
Central items
The net cost of central items decreased from US$58 million to US$31 million.
This decrease mainly reflects increased charges to operating units for central
services, principally relating to employee share award costs amounting to
US$15 million, which were charged to central items in previous periods but not
charged out to divisions until vested.
Depreciation
The depreciation charge rose from US$382 million to US$537 million, due
primarily to the inclusion of depreciation in relation to the acquisitions of
Rio Algom and the additional 56 % interest in Worsley as well as initial
depreciation on the Mozal project and the expansion of Nickel's Colombian
operations. The breakdown by business segment (excluding joint ventures and
associates) is as follows:
2001 2000
US$m US$m
Aluminium 196 148
Base Metals 55 9
Coal 148 113
Nickel 51 37
Steel and ferroalloys 70 67
Other 17 8
Depreciation 537 382
Deprecation for Coal includes the impairment provision for the Lakes Mines of
US$26 million.
Income from fixed asset investments and net interest
Income from other fixed asset investments increased from US$8 million to US$18
million, including an interim dividend of US$5 million from the indirect
holding in CVRD acquired in July 2000.
Net interest and similar items payable increased from US$21 million to US$127
million, as shown below:
2001 2000
US$m US$m
Total interest and preference dividends payable* (380) (238)
Interest receivable 86 68
Net interest payable before capitalised interest (294) (170)
Capitalised interest 24 55
Net interest payable (270) (115)
Exchange differences on net debt 143 94
(127) (21)
*Including share of interest of joint ventures and associates
Net interest payable, before capitalised interest and exchange gains, rose
from US$170 million to US$294 million, reflecting the increase in average
Group net debt relative to the previous year. Completion of the major projects
resulted in a decrease in capitalised interest from US$55 million to US$24
million. Interest cover (the ratio of EBIT to net interest payable excluding
exchange gains) was 3.5 times, compared with 7.4 times for the previous year.
Exchange differences primarily reflect the gain or loss from the period-end
translation of the net rand-denominated debt of Group companies, which account
in US dollars as their functional currency.
The exchange gain of US$143 million includes contributions from a number of
companies, predominantly Billiton Aluminium South Africa, Ingwe and the South
African holding/service company. This exchange gain arises from the movement
in the rand/US dollar rate from 6.82 to 8.08 over the period, a reduction of
18 %. For the previous year, there was an exchange gain of US$94 million due
to a 12 % reduction.
The effective average annualised interest rate on Group debt, including
exchange gains, fell from 6.3% to 4.6%.
Taxation
The tax charge for the year was US$284 million. As a percentage of profit
before tax and exchange differences this represents an effective tax rate of
41.5%, compared to 30.3% for the previous year. Both these figures reflect
certain non-recurring tax adjustments.
During the year, as part of the Group's normal dividend planning cycle, it was
decided that an enhanced dividend should be paid from South Africa. Upon
payment the dividend attracted a secondary tax on companies at a rate of 12.5%
of the dividend declared. Adjusting for this and a number of smaller one-off
items (such as merger costs), the Group's underlying tax rate reduces to 32.1%
(33.1% for 2000).
Tax rate for year to 30 June 2001: %
Effective rate excluding non-taxable financing exchange differences 41.5
Impact of:
Secondary tax on companies in South Africa (6.7)
Other one-off items (2.7)
Underlying tax rate 32.1
Attributable profit and earnings per share
Equity minority interests' share of losses were US$21 million (excluding
exceptional items, share of profits, US$13 million), compared with their share
of profits US$41 million last year and related largely to Samancor in which
Anglo American has a 40% interest.
Attributable profit excluding exceptional items rose by 22% to US$693 million,
from US$566 million for the previous year. Basic earnings per share excluding
exceptional items were 12.5% higher at 30.7 US cents (based on 2,255 million
shares outstanding). The shares held under the share repurchase scheme and the
Billiton Employee Share Ownership Trust have been excluded from the
calculation of earnings per share, and the dividends on these shares are
excluded from the profit and loss account.
Attributable profit and basic earnings per share including exceptional items
were US$565 million and 25.1 US cents respectively.
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