Supp Info Prelim FinalResults
BHP Billiton Limited
30 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.
30 August 2004
For the information of your local markets, please find following the
supplementary information required by the Listing Rules of the Australian Stock
Exchange following the preliminary announcement on 18 August of the BHP Billiton
Group Results for the Financial Year ended 30 June 2004.
Karen Wood
Company Secretary
30 August 2004
APPENDIX 4E TO THE LISTING RULES OF THE AUSTRALIAN STOCK EXCHANGE
Supplementary Information - Preliminary Final Results
Name of Company: BHP Billiton Limited
A.B.N.: 49 004 028 077
Supplementary Information - Preliminary final results for 12 months to 30/6/2004
This supplementary information required by the Listing Rules of the Australian
Stock Exchange includes the combined results of the BHP Billiton Group,
comprising BHP Billiton Limited and BHP Billiton Plc and their respective
subsidiaries, for the full year ended 30 June 2004 compared with the full year
ended 30 June 2003, prepared in accordance with Australian Generally Accepted
Accounting Principles. The information is supplementary to the results of the
BHP Billiton Group for the full year ended 30 June 2004 announced to the market
on 18 August 2004.
Results for the Financial Year 2004
Discussion and Analysis
Basis of presentation of financial information
On 29 June 2001, BHP Billiton Limited (previously known as BHP Limited), an
Australian listed company, and BHP Billiton Plc (previously known as Billiton
Plc), a UK listed company, entered into a Dual Listed Companies (DLC) merger.
This was effected by contractual arrangements between the Companies and
amendments to their constitutional documents.
The effect of the DLC merger is that BHP Billiton Limited and its subsidiaries
(the BHP Billiton Limited Group) and BHP Billiton Plc and its subsidiaries (the
BHP Billiton Plc Group) operate together as a single economic entity (the BHP
Billiton Group), with neither assuming a dominant role.
Accounting and reporting on the DLC merger
In accordance with the Australian Securities and Investments Commission (ASIC)
Practice Note 71 'Financial Reporting by Australian Entities in Dual-Listed
Company Arrangements', and an order issued by ASIC under section 340 of the
Corporations Act 2001 on 2 September 2002, this information presents the
financial results of the BHP Billiton Group as follows:
• Results for the years ended 30 June 2004 and 30 June 2003 are of the
combined entity including both BHP Billiton Limited and its subsidiary
companies and BHP Billiton Plc and its subsidiary companies; and,
• Results are presented in US dollars unless otherwise stated.
Results for the year ended 30 June 2004
Overview
The Group set new records this year, both in terms of its operations and its
financial results. 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.
Net profit attributable to members of the BHP Billiton Group for 2004 increased
by 83.0% to US$3 403 million (2003: US$1 860 million) and production records
were set at many operations across our business.
Profit before borrowing costs and tax
Profit before borrowing costs and tax was US$4 859 million compared to a profit
of US$3 294 million for 2003. Excluding significant items (refer below), profit
before borrowing costs and tax was US$5 327 million, an increase of 60.8% when
compared to a profit of US$3 313 million in the corresponding period. The
following represent the major factors affecting profit before borrowing costs
and tax (excluding significant items and outside equity interests) for the year
ended 30 June 2004, compared with the prior period:
• Higher commodity prices for copper, nickel, petroleum products, aluminium,
export energy coal, ferrochrome and iron ore increased profit significantly.
• Higher sales volumes of copper, iron ore, aluminium, natural gas, LPG,
manganese ore, metallurgical coal and diamonds, partially offset by lower
oil and titanium feedstock product volumes, resulted in a net positive
impact on profit.
• Ceased and sold operations had a favourable impact on profit. This mainly
reflects the impact of divested assets including the Group's petroleum
assets in Bolivia, the Alumbrera copper/gold mine in Argentina, and our
33.6% interest in the Highland Valley Copper mine (Canada).
• Asset sales favourably impacted profit, mainly due to the sale of non-core
assets in the current period, including a non-core royalty interest in
December 2003 and sales of non-core mineral rights.
• New operations increased profit, mainly due to the commencement of
commercial production from the Ohanet wet gas development in Algeria from
October 2003.
• Stronger A$/US$ and rand/US$ average exchange rates on operating costs had
an unfavourable impact on profit. The conversion of rand and Australian
dollar denominated net monetary liabilities at balance date had a favourable
impact on profit, 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.
• Higher price-linked costs decreased profit, 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. These factors were partially offset by favourable operating cost
performance.
• Exploration expense was approximately US$85 million higher than the prior
period reflecting increased exploration activity in the Gulf of Mexico (US),
Trinidad and Tobago and Western Australia.
Significant items
Significant items increased attributable profit by US$41 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 a 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 a tax benefit of US$267 million being recorded in
accordance with Australian Generally Accepted Accounting Principles (GAAP).
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.
The significant item for the year ended 30 June 2003 arose from the demerger of
the Group's BHP Steel business which became unconditional on 1 July 2002. A 6
per cent interest in BHP Steel was retained by the Group upon demerger which was
sold in July 2002 for US$75 million. The loss of US$19 million associated with
this sale was recognised in the year ended 30 June 2003 as a significant item in
relation to Discontinued Operations.
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.
Borrowing costs
Total borrowing costs, including capitalised interest and excluding discounting
on provisions and other liabilities and exchange differences on Group
borrowings, fell from US$400 million to US$367 million. This was 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
Group borrowings, mainly relating to the translation of rand denominated debt,
were US$109 million compared with losses of US$117 million in the corresponding
period.
Taxation
The tax charge on earnings was US$870 million, which included the tax benefits
of significant items totalling US$509 million as noted above. Excluding the
benefit of these significant items, the tax charge would be US$1 379 million,
representing an effective rate of 28.5%. The underlying effective rate was 27.5%
before 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.
Balance Sheet
Net assets and equity for the BHP Billiton Group were US$15 425 million at 30
June 2004, an increase of US$2 586 million from the previous year. Net
borrowings for the BHP Billiton Group decreased by 17.4% to US$4 769 million at
30 June 2004. As a consequence of the above, the gearing ratio decreased to 23.6
per cent, compared with 31.0 per cent at 30 June 2003.
Net tangible assets per ordinary fully paid share were US$2.35 as at 30 June
2004 compared with US$1.94 as at 30 June 2003.
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.
Capital Management
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 has
approved a number of actions associated with capital management activities. On
18 August 2004 the Board 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 (refer '
Dividends' below). 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.
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.
Cash flows
Net operating cash flow (after interest and tax) was a record US$5 310 million,
with a total cash inflow (after investing and financing activities) of US$162
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. Proceeds from the sale of property, plant and
equipment, proceeds from the sale investments, and proceeds from the sale of
controlled entities, joint venture and associated entities generated US$425
million, contributing to an investing cash outflow of US$2 653 million.
After dividends paid in the period of US$1 501 million (up from US$830 million
in the corresponding period), financing cash outflows amounted to US$2 495
million.
Currency
The Group has adopted the US dollar as its reporting currency and, subject to
some specific exceptions, its functional currency.
Currency fluctuations affect the Statement of Financial Performance in two
principal ways.
Sales are predominantly based on US dollar pricing (the principal exceptions
being Petroleum's gas sales to Australian and UK domestic customers and Energy
Coal's sales to South African domestic customers). However, a proportion of
operating costs (particularly labour) arises in local currency of the
operations, most significantly the Australian dollar and South African rand, but
also the Brazilian real, the Chilean peso and Colombian peso. Accordingly,
changes in the exchange rates between these currencies and the US dollar can
have a significant impact on the Group's reported results.
Several subsidiaries hold certain monetary assets and liabilities denominated in
currencies other than their functional currency (US dollars), in particular
non-US dollar denominated tax liabilities, provisions and, to a lesser extent,
debt. Group borrowings are primarily in US dollars, with 4% of borrowings in
South African rand. Monetary assets and liabilities are converted into US
dollars at the closing rate. The resultant differences are accounted for in the
Statements of Financial Performance.
Dividends
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.
The final dividend for the year ended 30 June 2004 of 9.5 US cents per share was
declared after year end and so is not provided for as at 30 June 2004. The final
dividend will be paid to shareholders on 22 September 2004. The BHP Billiton
Limited dividends are all fully franked for Australian taxation purposes.
The total dividends declared for the year is 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.
International Financial Reporting Standards
For reporting periods beginning on or after 1 January 2005, the Group must
comply with Australian Accounting standards that have been revised to satisfy
the requirements of International Financial Reporting Standards (IFRS) as issued
by the International Accounting Standards Board. The Group DLC structure results
in two parent entities with their own statutory reporting obligations, one in
Australia and the other in the UK. While Australia and the UK are currently
moving to an IFRS based financial reporting regime in the same timeframe, the
Group's DLC structure creates unique IFRS implementation issues. In addition,
the regulatory bodies that promulgate Australian GAAP and IFRS have significant
ongoing projects that could affect the ultimate differences between Australian
GAAP and IFRS and their impact on the Group's financial statements in future
years. Accordingly, significant uncertainty remains as to the likely impact of
IFRS on the Group's financial statements. The Group has not quantified the
effects of the differences between Australian GAAP and IFRS.
The Group has established a formal project, monitored by a steering committee,
to manage the transition to IFRS reporting. Regular updates are also provided to
the Board Risk Management and Audit Committee.
The key potential implications of the conversion to IFRS on the Group identified
to date are as follows:
• All derivative financial instruments must be recognised in the Statement
of Financial Position and measured at fair value. Application of hedge
accounting will only be available where specific designation and
effectiveness criteria are satisfied. These changes may impact the manner in
which the Group executes risk mitigation strategies through derivatives and
their consequent accounting.
• Income tax will be calculated using the 'balance sheet liability'
approach, which recognises deferred tax assets and liabilities by reference
to differences between the accounting and tax values of balance sheet items,
rather than accounting and tax values of items recognised in profit and
loss. This approach has the potential to give rise to a wider range of
deferred tax assets and liabilities and an increase in the volatility of
deferred tax balances brought about by foreign exchange rate movements.
• The cost of employee compensation provided in the form of equity-based
compensation (including shares and options) will be measured based on the
fair value of those instruments, rather than their intrinsic value, and
accrued over the period of employee service. This is likely to change the
total amount of compensation cost and the pattern of cost recognition.
• Defined benefit plan and medical benefit plan arrangements will result in
the recognition of net assets or liabilities directly based on the
underlying obligations and assets of those plans. The recognised net asset
or liability will be subject to changes in value that may be more volatile
than changes in assets and liabilities currently recognised under Group
policy. Changes in the net asset or liability of these plans will be
recognised directly in profit and loss as they occur.
Changes in accounting policies will be recognised by restating comparatives
rather than making current year adjustments with note disclosure of prior year
effects.
Audit
This Preliminary Final Results report is based upon financial statements, which
are in the process of being audited.
Statement of Financial Performance
for the year ended 30 June 2004
2004 2003
US$M (a) US$M (a)
Revenue from ordinary activities
Operating revenue 22 887 15 608
Non-operating revenue 626 941
23 513 16 549
deduct
Expenses from ordinary activities, excluding depreciation, amortisation and borrowing 17 084 11 730
costs
6 429 4 819
add
Share of net profit of joint venture and associated entities accounted for using the 223 164
equity method
6 652 4 983
deduct
Depreciation and amortisation 1 793 1 689
Borrowing costs 490 511
Profit from ordinary activities before income tax 4 369 2 783
deduct
Income tax expense attributable to ordinary activities 870 883
Net profit 3 499 1 900
deduct
Outside equity interests in net profit of controlled entities 96 40
Net profit attributable to members of the BHP Billiton Group 3 403 1 860
Net exchange fluctuations on translation of foreign currency net assets and foreign
currency interest bearing liabilities net of tax 48 67
Total direct adjustments to equity attributable to members of the BHP Billiton Group 48 67
Total changes in equity other than those resulting from transactions with owners 3 451 1 927
Basic earnings per share (US cents) 54.7 30.0
Diluted earnings per share (US cents) 54.5 29.9
(a) Financial information for 2004 and 2003 represents the financial performance
of the BHP Billiton Group (Refer 'Basis of preparation').
Statement of Financial Position
as at 30 June 2004
2004 2003
US$M (a) US$M (a)
Current assets
Cash assets 1 818 1 552
Receivables 2 778 2 177
Other financial assets 167 143
Inventories 1 715 1 328
Other assets 176 129
Total current assets 6 654 5 329
Non-current assets
Receivables 748 897
Investments accounted for using the equity method 1 369 1 403
Other financial assets 123 148
Inventories 45 51
Property, plant and equipment 20 945 19 780
Intangible assets 422 466
Deferred tax assets 502 447
Other assets 371 354
Total non-current assets 24 525 23 546
Total assets 31 179 28 875
Current liabilities
Payables 2 786 2 362
Interest bearing liabilities 1 134 898
Tax liabilities 297 309
Other provisions and liabilities 810 1 100
Total current liabilities 5 027 4 669
Non-current liabilities
Payables 177 195
Interest bearing liabilities 5 453 6 426
Deferred tax liabilities 1 053 1 434
Other provisions and liabilities 4 044 3 312
Total non-current liabilities 10 727 11 367
Total liabilities 15 754 16 036
Net assets 15 425 12 839
Equity
Contributed equity - BHP Billiton Limited 1 851 1 785
Called up share capital - BHP Billiton Plc 1 752 1 732
Reserves 547 440
Retained profits 10 928 8 558
Total BHP Billiton interest 15 078 12 515
Outside equity interests 347 324
Total equity 15 425 12 839
(a) Financial information for 2004 and 2003 represents the financial position of
the BHP Billiton Group (Refer 'Basis of preparation').
Statement of Cash Flows
for the year ended 30 June 2004
2004 2003
US$M (a) US$M (a)
Cash flows related to operating activities
Receipts from customers 23 372 15 415
Payments in the course of operations (16 671) (10 617)
Dividends received 238 212
Interest received 78 36
Borrowing costs (includes capitalised interest) (370) (411)
Operating cash flows before income tax 6 647 4 635
Income taxes paid (1 337) (1 002)
Net operating cash flows (b) 5 310 3 633
Cash flows related to investing activities
Purchases of property, plant and equipment (2 589) (2 571)
Exploration expenditure (includes capitalised exploration) (454) (348)
Purchases of investments and funding of joint ventures (35) (95)
Investing cash outflows (3 078) (3 014)
Proceeds from sale of property, plant and equipment 157 99
Proceeds from sale or redemption of investments 89 560
Proceeds from demerger or sale of controlled entities, joint venture and associated
entities' interests net of their cash 179 405
Net investing cash flows (2 653) (1 950)
Cash flows related to financing activities
Proceeds from ordinary share issues 76 172
Proceeds from interest bearing liabilities 375 3 698
Repayment of interest bearing liabilities (1 336) (4 121)
Purchase of shares by Employee Share Ownership Plan (ESOP) trusts (25) (6)
Purchase of shares under Share Buy-Back program - (20)
Dividends paid (1 501) (830)
Dividends paid to outside equity interests (75) (38)
Other (9) 1
Net financing cash flows (2 495) (1 144)
Net increase in cash and cash equivalents 162 539
Cash and cash equivalents at beginning of period 1 531 990
Effect of foreign currency exchange rate changes on cash and cash equivalents (8) 2
Cash and cash equivalents at end of period (c) 1 685 1 531
(a) Financial information for 2004 and 2003 represents the financial performance
of the BHP Billiton Group (Refer 'Basis of preparation').
Statement of Cash Flows continued
(b) Reconciliation of net cash provided by operating activities to net profit
2004 2003
US$M US$M
Net profit 3 499 1 900
Depreciation and amortisation 1 793 1 689
Share of net profit of joint venture and associated entities less dividends (20) 33
Capitalised borrowing costs (97) (103)
Exploration, evaluation and development expense (excluding diminution) 284 248
Net gain on sale of non-current assets (101) (34)
Discounting on provisions and other liabilities 111 97
Closure plans 534 -
Diminution of property, plant and equipment, investments and intangibles 116 73
Dalmine settlement (66) -
Employee share awards 96 70
Exchange differences on Group debt 104 115
Change in assets and liabilities net of effects from acquisitions and disposals of controlled
entities and exchange fluctuations
Increase in inventories (356) (250)
Increase in deferred charges (80) (118)
Increase in trade receivables (560) (264)
Decrease/(increase) in sundry receivables 35 (98)
Decrease in income taxes payable (19) (189)
(Decrease)/increase in deferred taxes (439) 87
Increase in trade creditors 259 132
Increase in sundry creditors 132 112
Decrease in interest payable (2) (14)
Increase in other provisions and liabilities 84 226
Other movements (d) 3 (79)
Net cash provided by operating activities 5 310 3 633
(c) For the purpose of the Statement of Cash Flows, cash is defined as cash and
cash equivalents. Cash equivalents include highly liquid investments which are
readily convertible to cash, bank overdrafts and interest bearing liabilities at
call.
2004 2003
US$M US$M
Reconciliation of cash
Cash and cash equivalents comprise:
Cash assets
Cash 674 587
Short-term deposits 1 144 965
Total cash assets 1 818 1 552
Bank overdrafts (133) (21)
Total cash and cash equivalents 1 685 1 531
(d) In the year ended 30 June 2003, amounts include the demerged Steel
business.
BASIS OF PREPARATION
In accordance with the Australian Securities and Investments Commission (ASIC)
Practice Note 71 'Financial Reporting by Australian Entities in Dual-Listed
Company Arrangements', and an order issued by ASIC under section 340 of the
Corporations Act 2001 on 2 September 2002, this report presents the financial
results of the BHP Billiton Group as follows:
• Results for the years ended 30 June 2004 and 30 June 2003 are of the
combined entity including both BHP Billiton Limited and its subsidiary
companies and BHP Billiton Plc and its subsidiary companies; and
• Results are presented in US dollars unless otherwise stated.
CHANGE IN ACCOUNTING POLICY
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 (where there are no performance hurdles) 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$4 million).
The impact on the prior period Statement of Financial Performance is immaterial.
For comparative purposes the relevant items in the Statement of Financial
Position as at 30 June 2003 have been reclassified.
Full details of the policy change, including the effect on the Statement of
Financial Position, will be set out in the Group's Annual Report for the year
ended 30 June 2004.
SIGNIFICANT ITEMS
Individually significant items (before outside equity interests) included within
the BHP Billiton Group net profit are detailed below.
Year ended 30 June 2004 Year ended 30 June 2003
Gross Tax Net Gross Tax Net
US$M US$M US$M US$M US$M US$M
Introduction of tax consolidation regime in - 267 267 - - -
Australia (a)
Litigation settlement (b) 66 (18) 48 - - -
US and Canadian taxation deductions (c) - 238 238 - - -
Closure plans (d) (534) 22 (512) - - -
Loss on sale of 6% interest in BHP Steel (e) - - - (19) - (19)
Total (468) 509 41 (19) - (19)
Introduction of tax consolidation regime in Australia
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 these assets.
This has 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. The BHP Billiton Limited Interim Report noted that BHP Billiton made the
election to consolidate and as a result, the Group recorded a tax benefit of
US$207 million as at 31 December 2003. As a result of recent pronouncements by
the Australian government and taxation authority on the Australian tax
consolidation regime, and revision of estimates, an additional benefit of US$60
million has since been recorded for the year ended 30 June 2004.
Litigation settlement
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.
US and Canadian taxation deductions
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.
Closure plans
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.
Loss on sale of 6% interest in BHP Steel
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$19 million associated with this sale was recognised
in the year ended 30 June 2003.
SEGMENT RESULTS
The BHP Billiton Group has grouped its major operating assets into the following
Customer Sector Groups (CSGs):
• Petroleum (exploration for and production, processing and marketing of
hydrocarbons including oil, gas and LNG);
• Aluminium (exploration for and mining of bauxite, processing and marketing
of aluminium and alumina);
• Base Metals (exploration for and mining, processing and marketing of
copper, silver, zinc, lead and copper by-products including gold);
• Carbon Steel Materials (exploration for and mining, processing and
marketing of coking coal, iron ore and manganese);
• Diamonds and Specialty Products (EKATI diamond mine, titanium operations,
metals distribution activities and exploration, and technology activities);
• Energy Coal (exploration for and mining, processing and marketing of
steaming coal); and
• Stainless Steel Materials (exploration for and mining, processing and
marketing of chrome and nickel).
Net unallocated interest represents the charge to profit of debt funding to the
BHP Billiton Group.
Group and unallocated items represent Group Centre functions and certain
comparative data for divested assets and investments.
It is the Group's policy that inter-segment sales are made on a commercial
basis.
Industry segment information
Share of net Carrying
profit of Profit Gross Gross value of
External Inter-segment equity before segment segment equity
US$ million revenue revenue accounted tax assets liabilities accounted
investments (a) (b) investments
Year ended 30
June 2004
Petroleum 5 686 50 - 1 456 6 764 2 800 98
Aluminium 4 463 - - 765 6 233 949 -
Base Metals 3 080 - 45 614 5 322 2 856 212
Carbon Steel 4 640 7 78 1 110 4 450 1 659 286
Materials
Diamonds and 698 22 19 321 1 510 521 250
Specialty
Products
Energy Coal 2 351 - 85 186 3 192 1 186 519
Stainless Steel 1 782 - - 555 2 190 538 4
Materials
Group and 730 1 071 (4) (231) 1 518 5 245 -
unallocated
items (c)
23 430 1 150 223 4 776 31 179 15 754 1 369
Net unallocated 83 (407)
interest
23 513 4 369
Year ended 30
June 2003
Petroleum 3 334 4 - 1 178 5 164 2 207 73
Aluminium 3 401 - - 569 5 976 936 -
Base Metals 1 757 - 20 245 4 423 1 133 262
Carbon Steel 3 474 26 57 1 018 3 793 1 562 299
Materials
Diamonds and 469 11 59 185 1 455 362 277
Specialty
Products
Energy Coal 1 901 - 27 162 3 185 1 120 488
Stainless Steel 1 105 - 1 145 2 077 426 4
Materials
Group and 966 465 - (256) 2 802 8 290 -
unallocated
items (c)
16 407 506 164 3 246 28 875 16 036 1 403
Discontinued 75 (19)
Operations (d)
Net unallocated 67 (444)
interest
16 549 2 783
(a) Before outside equity interests.
(b) Excludes income tax expense for BHP Billiton Group of US$870 million (2003:
US$883 million), which results in a net profit after income tax expense of US$3
499 million (2003: US$1 900 million).
(c) Includes consolidation adjustments.
(d) The results of operations and the financial position presented as
Discontinued Operations, represents the demerged Steel business.
BORROWING COSTS
2004 2003
US$M US$M
Borrowing costs paid or due and payable
On interest bearing liabilities 365 396
On finance leases 2 4
Total borrowing costs 367 400
deduct
Amounts capitalised (a) 97 103
270 297
add
Discounting on provisions and other liabilities 111 97
Exchange differences on Group borrowings (b) 109 117
Borrowing costs charged against net profit from ordinary activities 490 511
(a) Interest has been capitalised at the rate of interest applicable to the
specific borrowings financing the assets under construction or, where financed
through general borrowings, at a capitalisation rate representing the average
borrowing cost of the Group. For the year ended 30 June 2004 the capitalisation
rate was 4.6 per cent (2003: 5.2 per cent).
(b) Exchange differences primarily represent the effect on borrowings of the
appreciation of the rand against the US dollar.
TOTAL EQUITY
2004 2003
US$M US$M
Total equity opening balance 12 839 13 167
Total changes in equity recognised in the Statement of Financial Performance 3 451 1 927
Transactions with owners - contributed equity 66 98
Accrued employee entitlement to share awards 96 70
Dividends (1 025) (900)
Purchase of shares made by ESOP trusts (25) (6)
BHP Billiton Plc share repurchase scheme (a) - (20)
BHP Steel demerger - capital reduction - (1 489)
Total changes in outside equity interests 23 (8)
Total equity closing balance 15 425 12 839
(a) BHP Billiton Plc entered into an arrangement under which it contingently
agreed to purchase its own shares from a special purpose vehicle (Nelson
Investment Limited) established for that purpose. No shares were purchased in
the year ended 30 June 2004 (2003: 3 890 000 ordinary shares). The aggregate
purchase price of US$nil (2003: US$20 million) was funded by the BHP Billiton
Group. The cost of purchasing these shares was deducted from total equity. On 23
June 2004, 3 890 000 ordinary shares of BHP Billiton Plc, which were held by
Nelson Investment Limited, were transferred to a Group ESOP trust.
RETAINED PROFITS
2004 2003
US$M US$M
Retained profits opening balance 8 558 7 455
Dividends provided for or paid (a) (1 025) (900)
Vesting of employee share awards (8) -
Aggregate of amounts transferred from reserves - 143
Net profit 3 403 1 860
Retained profits closing balance 10 928 8 558
(a) Dividends declared since 30 June 2004 of US$592 million (2003: US$nil) have
not been provided for.
EARNINGS PER SHARE
2004 2003
Basic earnings per share (US cents) 54.7 30.0
Diluted earnings per share (US cents) 54.5 29.9
Basic earnings per American Depositary Share (ADS) (US cents) (a) 109.4 60.0
Diluted earnings per American Depositary Share (ADS) (US cents) (a) 109.0 59.8
Earnings (US$ million) (b) 3 403 1 860
(a) For the periods indicated, each ADS represents two ordinary shares.
(b) Represents basic and diluted earnings.
The weighted average number of shares used for the purposes of calculating
diluted earnings per share reconciles to the number used to calculate basic
earnings per share as follows:
2004 2003
Weighted average number of shares Million Million
Basic earnings per share denominator 6 218 6 207
Shares and options contingently issuable under employee share ownership plans 28 15
Diluted earnings per share denominator 6 246 6 222
INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Ownership interest Contribution to
operating profit
after income tax
At joint venture's or At BHP Billiton Group
associate's reporting reporting date
date
Major 2004 2003 2004 2003 2004 2003
shareholdings in
joint
venture and Principal % % % % US$M US$M
associated activities
entities
Carbones del Coal mining 33.3 33.3 33.3 33.3 58 27
Cerrejon LLC
Highland Valley Copper mining 33.6 33.6 - 33.6 7 (3)
Copper (a)
Samarco Mineracao Iron ore mining 50 50 50 50 75 54
SA
Minera Antamina SA Copper and zinc 33.75 33.75 33.75 33.75 38 -
mining
Minera Alumbrera Copper and gold - - - - - 25
Limited (b) mining
Other (c) 45 61
Total 223 164
2004 2003
US$M US$M
Share of net profit of investments accounted for using the equity method
Revenue 2 056 1 902
Expenses (1 726) (1 637)
Profit before income tax 330 265
Income tax expense (107) (101)
Share of net profit of investments accounted for using the equity method 223 164
(a) Effective January 2004, the BHP Billiton Group sold its interest in Highland
Valley Copper for US$81 million.
(b) Effective April 2003, the BHP Billiton Group sold its interest in
Minera Alumbrera Limited for US$187 million.
(c) Includes various immaterial equity accounted joint venture and
associated entities and the Richards Bay Minerals joint venture entity owned 50%
(2003: 50%).
DETAILS OF CONTROL GAINED OVER OR LOSS OF CONTROL OF ENTITIES HAVING A MATERIAL
EFFECT DURING THE PERIOD
Company Profit/(loss) attributable to members of Fair value of net tangible assets
the BHP Billiton Group arising on on disposal
disposal US$M
US$M
Material demergers and disposals
2003
BHP Steel Limited Group (19) 1 861
There were no material acquisitions in 2004 or 2003.
There were no material demergers or disposals in 2004.
BHP Billiton Limited ABN 49 004 028 077 BHP Billiton Plc Registration number 3196209
Registered in Australia Registered in England and Wales
Registered Office: Level 27, 180 Lonsdale Street Melbourne Registered Office: Neathouse Place London SW1V 1BH United
Victoria 3000 Kingdom
Telephone +61 1300 554 757 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
Wednesday, 15th May 2024
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