BHP Billiton Ltd-Interims
BHP Billiton Limited
6 March 2002
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.
BHP Billiton Limited
Interim Report
for the half year ended 31 December 2001
BHP Billiton Limited ABN 49 004 028 077 BHP Billiton Plc Registration number 3196209
Registered in Australia Registered in England and Wales
Registered Office: 600 Bourke Street Melbourne Victoria Registered Office: 1-3 Strand London WC2N 5HA United Kingdom
3000 Telephone +44 20 7747 3800 Facsimile +44 20 7747 3900
Telephone +61 3 9609 3333 Facsimile +61 3 9609 3015
The BHP Billiton Group is headquartered in Australia
CONTENTS
Page
DUAL LISTED COMPANIES MERGER 1
REVIEW OF OPERATIONS 1
DIRECTORS' REPORT 6
CONDENSED FINANCIAL STATEMENTS
8
Condensed Statement of Financial Performance
Condensed Statement of Financial Position 9
Condensed Statement of Cash Flows 10
Notes to the Financial Statements 11
DIRECTORS' DECLARATION 33
INDEPENDENT REVIEW REPORT 34
Notes to the financial statements
1. Basis of preparation of half year financial statements 11
2. Significant items 11
3. Revenue from ordinary activities 12
4. Expenses from ordinary activities, excluding depreciation,
amortisation and borrowing costs 12
5. Depreciation and amortisation 12
6. Borrowing costs 13
7. Income tax 14
8. Segment results 15
9. Dividends 17
10. Earnings per share 17
11. Investments accounted for using the equity method 18
12. Exploration, evaluation and development expenditure capitalised 19
13. Contributed equity - BHP Billiton Limited 20
14. Called up share capital - BHP Billiton Plc 24
15. Retained profits 25
16. Total equity 26
17. Notes to the statement of cash flows 26
18. Contingent liabilities and contingent assets 27
19. Reconciliation to US generally accepted accounting principles (GAAP) 28
20. Significant events after end of half year 32
All amounts are expressed in Australian dollars unless otherwise stated.
BHP BILLITON
The Directors present their report together with the consolidated financial
statements for the half year ended
31 December 2001 and the auditors' review report thereon.
DUAL LISTED COMPANIES MERGER
On 29 June 2001, BHP Limited and Billiton Plc completed the formation of a Dual
Listed Companies structure, or DLC. To effect the DLC, BHP Limited and Billiton
Plc entered into certain contractual arrangements which are designed to place
the shareholders of both companies in substantially the same position as if they
held shares in a single enterprise which owns all of the assets and is subject
to all of the liabilities of both companies. Coincident with the formation of
the DLC, BHP Limited changed its name to BHP Billiton Limited and Billiton Plc
changed its name to BHP Billiton Plc.
Under the DLC merger, BHP Billiton Limited and BHP Billiton Plc each continue as
separate public companies retaining their existing separate stock exchange
listings, including the primary listings on the Australian and London stock
exchanges, the secondary listings of BHP Billiton Plc on the Johannesburg and
Paris stock exchanges, and an American Depositary Receipt listing of BHP
Billiton Limited on the New York Stock Exchange.
BHP Billiton Limited and BHP Billiton Plc have identical boards and are run by a
unified management team, with headquarters in Melbourne, Australia, and with a
significant corporate management centre in London. Shareholders in BHP Billiton
Limited and BHP Billiton Plc have equivalent economic and voting rights in both
groups, as if they held shares in a single company.
A full description of the DLC merger (including management, equalisation of
economic and voting rights, dividends, voting, matching actions, cross
guarantees, takeover provisions and the bonus issue) is provided in the 'BHP
Billiton Limited Annual Report 2001 - Description of Business and Financial
Statements' commencing on page 100.
Accounting and Reporting on the DLC Merger
In accordance with Australian Securities and Investments Commission ('ASIC')
Practice Note 71 'Financial Reporting by Australian Entities in Dual-Listed
Company Arrangements', this interim financial report discloses the combined
financial results of the BHP Billiton Group as well as the consolidated
financial results of the BHP Billiton Limited Group.
References throughout this document are as follows:
• BHP Billiton and BHP Billiton Group refers to the combined entity
including both BHP Billiton Limited and its subsidiary companies and BHP
Billiton Plc and its subsidiary companies;
• BHP Billiton Limited Group refers to BHP Billiton Limited and its
subsidiary companies; and
• BHP Billiton Plc Group refers to BHP Billiton Plc and its subsidiary
companies.
Australian regulatory requirements do not allow the combination of the results
of the BHP Billiton Limited Group with those of the BHP Billiton Plc Group for
periods prior to consummation of the DLC merger on 29 June 2001. Consequently,
no comparative financial information is presented for the BHP Billiton Group
prior to that date.
REVIEW OF OPERATIONS
Financial Results
BHP Billiton Group
The profit after tax attributable to BHP Billiton shareholders for the half year
ended 31 December 2001 was $2,293 million (US$1,177 million). Earnings per share
were 38.1 cents (19.5 US cents). There were no significant items in the half
year ended 31 December 2001.
BHP Billiton's financial results for the half year ended 31 December 2001
demonstrate the substantial benefits of commodity and market diversification
that characterise the merged Group.
The financial results for the half year are a pleasing outcome in a market
environment where depressed prices for copper, oil, nickel, chrome, steel
products and aluminium were apparent.
For many companies in the natural resources sector, this alignment of weaker
commodity prices would present a major threat to both earnings and the ability
to fund future growth. In BHP Billiton's case, stronger price performances in
Carbon Steel Materials (iron ore and metallurgical coal), Energy Coal and
natural gas have partially offset the adverse impact of price declines
elsewhere. Furthermore, our operating base in countries with depreciating
currencies, notably the South African rand and Australian dollar benefited our
result substantially. In addition, BHP Billiton has had the flexibility in
adverse market conditions to temporarily reduce copper output.
Revenue
Sales revenue for the half year ended 31 December 2001 was $15,730 million
(US$8,067 million). This mainly reflects the effect of lower prices for crude
oil, stainless steel materials, base metals, aluminium, alumina, diamonds and
steel products. These factors were partly offset by the higher prices for
metallurgical coal, energy coal, iron ore and gas, and the inclusion of a full
half year's results of Rio Algom, the energy coal operations in Colombia, the
additional 29% interest in the EkatiTM diamond mine (Canada) and the additional
56% interest in Worsley alumina refinery (Australia).
EBIT
Earnings before interest and tax (EBIT) were $3,807 million (US$1,955 million).
This result includes the unfavourable effect of a significant decline in
commodity sales prices, increased exploration activity, and inflation on
operating costs, partly offset by the favourable effect of profits from new and
acquired operations, exchange rates on operating costs and borrowings, price
linked costs, and profits from asset sales.
The significant decline in commodity sales prices related to crude oil, nickel,
chrome, copper, aluminium, alumina, diamonds, silver and zinc. This impact was
partly offset by higher energy coal, metallurgical coal, iron ore and gas
prices.
Exploration charged to profit was $337 million (US$172 million) which includes
the write-off of La Granja copper exploration activities (Peru), and petroleum
exploration activities in the Gulf of Mexico.
New and acquired operations that contributed to the current period result
included increased ownership interests in the Worsley alumina refinery, a full
six months contribution from Carbones del Cerrejon and Cerrejon Zona Norte Coal
(Colombia), the fully commissioned Mozal aluminium smelter (Mozambique), a full
six months contribution from Rio Algom base metals businesses, the acquisition
of an additional 29% interest in the EkatiTM diamond business, commencement of
production of petroleum products from Typhoon (America), Zamzama (Pakistan) and
Keith (North Sea), and improved operating performance at BoodarieTM Iron
(Western Australia). These factors were partially offset by a downturn in the
Metals Distribution (US) business.
Lower price linked costs for London Metals Exchange (LME) listed commodities
together with lower royalties and taxes for petroleum products resulted in cost
reductions totalling approximately $245 million (US$125 million). Costs
increased during the period due to operational issues at energy coal operations
(New Mexico) and metallurgical coal operations (Australia) together with higher
business development costs at Petroleum, partly offset by transport costs
savings at Iron Ore operations (Western Australia).
Foreign currency fluctuations had a favourable effect on EBIT mainly due to the
impact of lower Rand/US$ and A$/US$ exchange rates on related operating costs,
including translation of provision balances, partly offset by increased losses
on legacy A$/US$ currency hedging. Exchange gains on interest bearing
liabilities were approximately $475 million (US$242 million), primarily arising
on the period end translation of Rand denominated debt of companies which
account in US dollars as their functional currency. The Rand depreciated by 32%
during the current period.
Profits from asset sales were approximately $110 million (US$55 million) mainly
due to the profit on sale of PT Arutmin Energy Coal operations in Indonesia.
Depreciation and Amortisation
The depreciation and amortisation charge for the half year ended 31 December
2001 was $1,724 million (US$884 million). This included the impact of the
commissioning of Cerro Matoso Line 2 (Stainless Steel Materials), the additional
29% interest acquired in EkatiTM (Exploration Technology and New Business) and
the additional 56% interest in the Worsley alumina refinery (Aluminium) and
increased production across various petroleum businesses. These factors were
partly offset by reduced depreciation charges from ceased, sold and
discontinuing operations, including the effect on depreciation of the write-off
in the year ended 30 June 2001 of Ok Tedi.
Borrowing Costs
Borrowing costs for the half year ended 31 December 2001 were $503 million
(US$259 million). This includes the benefit of lower market interest rates,
partly offset by additional interest on higher net borrowing levels.
Tax Expense
The tax charge for the half year ended 31 December 2001 of $967 million (US$497
million) represents an effective tax rate of 29.3%. This is lower than the
nominal Australian tax rate of 30% primarily due to non-tax effected foreign
exchange gains and other functional currency translation adjustments, and
recognition of prior year tax losses. These factors were partly offset by
non-tax effected operating losses and exploration expenditure, non-deductible
accounting depreciation and amortisation, and secondary taxes on dividends paid
and payable by South African entities.
Outside equity interests
Outside equity interests' share of net profit for the half year ended 31
December 2001 was $44 million (US$22 million).
Comparison to results under UK GAAP
To comply with UK regulatory requirements, the BHP Billiton Group has also
produced an Interim Report for BHP Billiton Plc. The BHP Billiton Plc Interim
Report complies with UK GAAP and reports the 2001 financial year and the
corresponding period on a combined BHP Billiton Group basis. It includes
financial statements (and certain notes to financial statements) presented in US
dollars. The BHP Billiton Plc Interim Report can be viewed on the BHP Billiton
web site (www.bhpbilliton.com).
As a consequence of the DLC merger, the BHP Billiton Limited Group and the BHP
Billiton Plc Group have aligned accounting policies, as far as is possible, to
minimise differences and simplify determination and reporting of the combined
results. The item where alignment is not possible in terms of UK and Australian
GAAP and which impacts the half year ended 31 December 2001 is described below:
Under UK GAAP, until 30 June 1998 goodwill arising upon acquisition was written
off directly against equity. Subsequently and currently under UK GAAP, goodwill
is to be retained as an asset and amortised. This current treatment is
consistent with that required under Australian GAAP. As of 30 June 1998, the BHP
Billiton Plc Group had written off a gross amount of goodwill of US$704 million
directly against equity. For Australian GAAP reporting on a combined basis, this
goodwill is reinstated on the statement of financial position as an intangible
asset, with a corresponding credit to equity. The net balance at 31 December
2001 (after amortisation) is $962 million (US$492 million) and the impact on the
Australian GAAP statement of financial performance is a charge to profit of $41
million (US$21 million)(no tax effect) for the half year ended 31 December 2001.
Thus, the attributable profit of the combined BHP Billiton Group of $2,334
million (US$1,198 million) under UK GAAP compares to that recorded by the
combined BHP Billiton Group of $2,293 million (US$ 1,177 million) for the same
period under Australian GAAP.
Dividends
During the half year ended 31 December 2001, a dividend of 6.5 US cents per
fully paid ordinary share was declared and paid by BHP Billiton Limited and BHP
Billiton Plc. The dividend was paid on 5 December 2001. The BHP Billiton Limited
dividend was fully franked for Australian taxation purposes.
The corresponding period included a dividend of 12.1 Australian cents (adjusted
for bonus issue) per fully paid ordinary share paid to BHP Billiton Limited
shareholders and a dividend of 4.0 US cents per fully paid ordinary share paid
to BHP Billiton Plc shareholders.
Dividends are determined in US dollars. BHP Billiton Limited dividends are paid
in Australian dollars and BHP Billiton Plc dividends are paid in pounds
sterling. For the December 2001 dividend, conversion from US currency was at
exchange rates applicable on 5 November 2001. BHP Billiton Limited shareholders
received 12.8 Australian cents per fully paid ordinary share and BHP Billiton
Plc shareholders received 4.46 pence per fully paid ordinary share.
BHP Billiton's final dividend for the year ending 30 June 2002 is intended to be
declared at the announcement of the third quarter results on 1 May 2002. The
dividend will be paid to shareholders in July 2002.
Financial Ratios
At 31 December 2001 BHP Billiton's gearing ratio was 37.8% compared to 39.3% at
30 June 2001.
Based on earnings before interest and tax (EBIT), interest cover for the half
year was 7.2 times. Based on earnings before interest, tax and depreciation
(EBITDA), interest cover for the half year was 10.4 times.
Profit from ordinary activities before tax as a percentage of revenue was 19.2%
for the half year ended 31 December 2001.
Net profit as a percentage of equity was 18.6% for the half year ended 31
December 2001.
BHP Billiton Limited Group
The profit after tax attributable to BHP Billiton Limited Group shareholders for
the half year ended 31 December 2001 was $1,435 million, an increase of 1% or $8
million compared to the corresponding period. Earnings per share were 38.7
cents, consistent with the corresponding period. There were no significant items
included in the half year ended 31 December 2001 or the corresponding period.
Revenue
Sales revenue for the half year ended 31 December 2001 was $9,698 million a
decrease of 8% or $808 million compared to the corresponding period. This mainly
reflects the effect of lower commodity sales prices compared to the
corresponding period and the inclusion of sales revenue from OneSteel Limited in
the corresponding period, partly offset by the inclusion of an additional 29%
interest in the EkatiTM diamond mine (Canada). The significant decline in
commodity sales prices related to crude oil, copper, diamonds, silver and zinc
partly offset by higher energy coal, metallurgical coal, iron ore and gas
prices.
EBIT
Earnings before interest and tax (EBIT) were $2,329 million, a decrease of 3% or
$60 million compared to the corresponding period. This result includes the
unfavourable effect of a significant decline in commodity sales prices,
increased exploration activity and increased operating costs, partly offset by
the favourable effect of profits from new and acquired operations, exchange
rates on operating costs, price linked costs, and profits from asset sales.
Depreciation and Amortisation
The depreciation and amortisation charge for the half year ended 31 December
2001 was $1,114 million, an increase of 5% or $57 million compared to the
corresponding period. This included the impact of the additional 29% interest
acquired in EkatiTM (Exploration Technology and New Business) and increased
production across various petroleum businesses. These factors were partly offset
by reduced depreciation charges from ceased, sold and discontinuing operations,
including the effect on depreciation of the write-off in the year ended 30 June
2001 of Ok Tedi.
Borrowing Costs
Borrowing costs for the half year ended 31 December 2001 were $238 million, a
decrease of 24% or $74 million compared to the corresponding period. This mainly
includes the benefit of lower market interest rates.
Tax Expense
The tax charge for the half year ended 31 December 2001 of $630 million
represents an effective tax rate of 30.1%. This is higher than the nominal
Australian tax rate of 30% primarily due to non-tax effected operating losses
and exploration expenditure, non deductible accounting depreciation and
amortisation and the tax rate differential on overseas income, partly offset by
the recognition of prior year tax losses.
Outside equity interests
Outside equity interests' share of net profit for the half year ended 31
December 2001 was $26 million compared to $29 million in the corresponding
period.
Financial Ratios
At 31 December 2001 BHP Billiton Limited Group's gearing ratio was 43.7%
compared to 38.3% at 30 June 2001.
Based on earnings before interest and tax (EBIT), interest cover for the half
year was 8.7 times compared to 7.6 times in the corresponding period. Based on
earnings before interest, tax and depreciation (EBITDA), interest cover for the
half year was 12.9 times compared to 10.9 times in the corresponding period.
Profit from ordinary activities before tax as a percentage of revenue was 20.5%
for the half year ended 31 December 2001 compared to 19.3% in the corresponding
period.
Net profit as a percentage of equity was 24.1% for the half year ended 31
December 2001 compared to 27.4% in the corresponding period.
Balances with BHP Billiton Plc Group
As at 31 December 2001 the BHP Billiton Limited Group's Statement of Financial
Position includes the following material intercompany balances with the BHP
Billiton Plc Group:
• $1,521 million is included in current receivables representing a loan to
the BHP Billiton Plc Group; and
• $631 million is included in investments accounted for using the equity
method representing a 58% ownership interest in Billiton Marketing Holdings
BV.
Growth
BHP Billiton's commitment to delivering high quality growth projects was
demonstrated with the approval of a number of major projects including the Mozal
II aluminium expansion in Mozambique, the Mount Arthur North energy coal mine
and the Dendrobium metallurgical coal mine, both in New South Wales (Australia),
the Bream Gas Pipeline in Bass Strait, Victoria (Australia), the Hillside III
aluminium expansion in South Africa and the Mad Dog oil and gas field
development in the US. The depth of the inventory of projects under
construction, as well as new projects awaiting sanction, is a clear
distinguishing feature of the BHP Billiton portfolio.
Merger Integration
Progress has been made on other fronts. The merger integration work has
delivered an organisational structure with clear accountabilities and
responsibilities, a group wide marketing organisation and an established
governance and risk management framework. The process for capturing the US$270
million of merger benefits in financial year 2003 has been established and we
are on track to achieving this goal.
While at an early stage of the Group's development, significant progress is
being made in addressing the real value propositions from the merger - the
sequencing of the deep inventory of high quality growth projects, extracting
benefits across the organisation through common business systems, and a rigorous
approach to achieving operating cost performance improvements.
A stronger focus on operating performance and cost reduction is taking root in
the organisation. Already, an operating excellence programme is being
implemented in key businesses, harnessing the ideas and skills of our employees
to improve business, safety and community outcomes. Progress in our West
Australian iron ore operations in reducing railing and port loading costs over
the past year is one example of improvement, and provides a framework for best
practices in one area to be transferred across the organisation.
Additional highlights for the period include a credit rating upgrade by Standard
& Poors to A/A-1. Also BHP Billiton made its first post merger approach to the
debt market for a US$2.5 billion syndicated multi-currency revolving credit
facility and then a A$1 billion corporate debt security issue. Both transactions
were very successful and contribute to diversifying our debt portfolio as well
as improving our cost of funds.
The Customer Sector Groups have developed strategic plans and we expect to
announce the BHP Billiton strategic framework to the investment market shortly.
Portfolio Management
From a portfolio management perspective, we have made significant progress in
aligning the combined asset portfolio, including the sell down or divestiture of
a number of assets, which are detailed in this report. As recently announced, we
have also finalised our responsible exit from the Ok Tedi copper mine in Papua
New Guinea, in the process establishing a programme fund to support the future
social and economic development of the people of Papua New Guinea and, in
particular the Western Province. We also announced the sale of our interest in
the PT Arutmin Indonesian coal operations.
The public listing of BHP Steel remains on track. We expect to make an
announcement to the market by May 2002 that includes the release of scheme
documents, a prospectus and details on the sales facility. Shareholder approvals
will be sought by means of Extraordinary Shareholder Meetings in Australia and
the United Kingdom, and subject to such approvals, the public listing should be
completed around the middle of the year.
Business Outlook
In calendar 2001, the global economy experienced the sharpest annual contraction
in industrial production since 1975. Production across member countries of the
Organisation for Economic Co-Operation and Development (OECD) is estimated to
have declined by over 5% in the year to October 2001 as companies reduced
production and pared back inventories in the face of falling demand. Growth
across the major Asian economies also slowed with only China, South Korea,
Indonesia and Thailand managing to avoid a recession. The events of 11 September
2001 only reinforced the downward momentum already evident in major markets. As
yet, there is little evidence of a recovery in the major economies. Though
demand and prices remain strong for some of our products and in certain markets,
others are experiencing challenging conditions. While we are confident of the
medium term outlook, the current half year will continue to be difficult. Our
robust cash flows and diversified income stream leave us well placed in this
downturn and in a strong position to take advantage of the recovery when it
comes.
Significant Events After End of Half Year
No matter or circumstance has arisen since the end of the half year that
significantly affected or may significantly affect the operations, the results
of operations or state of affairs of the Company in subsequent financial
periods, other than the following:
• On 8 February 2002, BHP Billiton announced it has completed its withdrawal
from the Ok Tedi copper mine (Papua New Guinea). BHP Billiton transferred
its 52% interest to an independent Program Company that will operate for the
benefit of the people of Papua New Guinea. A series of legal releases,
indemnities and warranties have been established which will protect BHP
Billiton from certain legal liabilities for the period after its exit.
BHP Billiton will provide financial support to the Program Company by way of
a fully repayable, interest free facility of up to US$100 million for a
period of three years (until it has built up its own funds) with repayment
arrangements if these are used and, in the event of an Ok Tedi Mining Ltd
request in a drought situation, agreement to pre-purchase copper concentrate
up to an agreed level.
• On 15 February 2002, BHP Billiton Limited announced the Australian High
Court allowed by consent its appeal against the majority decision of the
Full Federal Court, which was handed down in favour of the Australian Tax
Office on 18 October 2000.
The dispute concerned the deductibility of amounts paid to the General
Electric Company in connection with BHP Billiton Limited's acquisition of
the Utah Group in the early 1980s, and the validity of a related assessment.
As a result of the High Court order, an amount of A$166 million (US$85
million) will be refunded to BHP Billiton Limited, together with associated
interest and penalties (which are expected to be insignificant) in respect
of the overall matter. This amount had previously been paid by BHP Billiton
Limited and recorded as a non-current asset, pending resolution of the
dispute. The amount has been reclassified as a current asset at 31 December
2001.
DIRECTORS' REPORT
Board of Directors
The Directors of the Company in office during or since the end of the half year
are:
B C ALBERTS - a Director since January 2000;
P M ANDERSON - Chief Executive Officer and Managing Director since December
1998;
D R ARGUS -- Chairman since April 1999;
D C BRINK - a Director since June 2001;
M A CHANEY - a Director since May 1995;
J C CONDE - a Director since March 1995;
D A CRAWFORD - a Director since May 1994;
B P GILBERTSON - Executive Director since June 2001;
C W GOODYEAR - Executive Director since November 2001;
C A HERKSTROTER - a Director since June 2001;
J B JACKSON - a Director since June 2001;
D A JENKINS - a Director since March 2000;
D L KEYS - a Director since June 2001;
R J McNEILLY - Executive Director since July 1991, retired effective October
2001;
J T RALPH - a Director since November 1997;
LORD RENWICK OF CLIFTON - a Director since June 2001;
B D ROMERIL - a Director since June 2001; and
J M SCHUBERT - a Director since June 2000.
Review of operations
Refer pages 1 - 5.
Rounding of amounts
The Company is a company of a kind referred to in Class Order No. 98/0100 dated
10 July 1998 issued by the Australian Securities and Investments Commission.
Amounts in this report, unless otherwise indicated, have been rounded in
accordance with that Class Order to the nearest million dollars.
Signed in accordance with a resolution of the Board.
D R Argus
Chairman
Dated in Melbourne this 6th day of March 2002
Condensed Financial Statements
for the half year ended 31 December 2001
CONDENSED STATEMENT OF FINANCIAL PERFORMANCE
for the half year ended
BHP Billiton Group BHP Billiton Ltd Group
Notes 31 Dec 31 Dec 31 Dec 31 Dec
2001 2001 2001 2000
A$M US$M A$M A$M
Revenue from ordinary activities
Sales revenue 3 15 730 8 067 9 698 10 506
Other revenue 3 1 474 758 484 270
17 204 8 825 10 182 10 776
Deduct
Expenses from ordinary activities, excluding depreciation, amortisation 4 11 965 6136 6 783 7 308
and borrowing costs
Depreciation and amortisation 5 1 724 884 1 114 1 057
Borrowing costs 6 503 259 238 312
3 012 1 546 2 047 2 099
Share of net profit/(loss) of associated entities accounted for using 11 292 150 44 (22)
the equity method
Profit from ordinary activities before income tax 3 304 1 696 2 091 2 077
expense.............................................................
Deduct
Income tax expense attributable to ordinary activities 7 967 497 630 621
Net profit 2 337 1 199 1 461 1 456
Deduct
Outside equity interests in net profit 44 22 26 29
Net profit attributable to members of BHP Billiton . 2 293 1 177 1 435 1 427
Net exchange fluctuations on translation of foreign currency net assets (242) 26 (66) 248
and foreign currency interest bearing liabilities net of tax
Total direct adjustments to equity attributable to members of BHP (242) 26 (66) 248
Billiton
Total changes in equity other than those resulting from transactions 16 2 051 1 203 1 369 1 675
with owners
Basic earnings per ordinary share 10 38.1 19.5 38.7 38.7
(cents per share) (a)
Diluted earnings per ordinary share 10 38.0 19.5 38.6 38.6
(cents per share) (a)
The accompanying notes form part of these financial statements.
(a) Comparative data has been adjusted to take into account the bonus issue
of shares effective 29 June 2001 (Refer note 13) and the application of revised
accounting standard AASB1027 'Earnings per share'.
CONDENSED STATEMENT OF FINANCIAL POSITION
as at
BHP Billiton Group BHP Billiton Ltd Group
Notes 31 Dec 30 June 31 Dec 30 June 31 Dec 30 June 31 Dec
2001
2001 2001 2001 2001 2001 2000
A$M A$M US$M US$M A$M A$M A$M
Current assets
Cash assets 17 1 293 2 542 661 1 285 792 1 183 749
Receivables 4 004 4 445 2 048 2 246 4 090 2 615 2 498
Other financial assets 342 424 175 214 139 163 3
Inventories 3 032 3 329 1 550 1 682 1 628 1 621 1 768
Other assets 303 257 155 130 260 219 263
Total current assets 8 974 10 997 4 589 5 557 6 909 5 801 5 281
Non-current assets
Receivables 1 293 766 661 387 327 228 194
Investments accounted for using 11 2 917 2 445 1 492 1 236 1 143 498 1 130
the equity method
Other financial assets 987 1 088 505 550 185 257 303
Inventories 150 211 77 107 134 146 135
Property, plant and equipment 32 877 33 669 16 813 17 011 17 298 17 520 16 240
Exploration, evaluation and 12 3 560 3 220 1 820 1 628 2 921 2 494 2 306
development expenditure
Intangible assets 1 047 1 203 536 608 1 2 2
Deferred tax assets 826 1 155 422 584 668 906 988
Other assets 1 401 1 349 717 682 1 368 1 335 870
Total non-current assets 45 058 45 106 23 043 22 793 24 045 23 386 22 168
Total assets 54 032 56 103 27 632 28 350 30 954 29 187 27 449
Current liabilities
Payables 3 685 4 510 1 885 2 279 2 413 2 813 2 444
Interest bearing liabilities 2 380 3 567 1 217 1 803 614 973 882
Tax liabilities 527 593 270 300 130 217 191
Other provisions 1 001 2 069 512 1 046 964 1 608 980
Total current liabilities 7 593 10 739 3 884 5 428 4 121 5 611 4 497
Non-current liabilities
Payables 257 283 131 143 26 34 36
Interest bearing liabilities 13 310 12 905 6 807 6 523 8 963 6 257 6 331
Deferred tax liabilities 2 649 2 950 1 355 1 491 1 859 1 844 1 826
Other provisions 4 815 5 012 2 462 2 533 3 947 4 193 3 680
Total non-current liabilities 21 031 21 150 10 755 10 690 14 795 12 328 11 873
Total liabilities 28 624 31 889 14 639 16 118 18 916 17 939 16 370
Net assets 25 408 24 214 12 993 12 232 12 038 11 248 11 079
Equity
Contributed equity - 13 6 063 6 013 3 065 3 039 6 063 6 013 5 919
BHP Billiton Limited
Called up share capital - 14 3 467 3 467 1 752 1 752
BHP Billiton Plc
Reserves 655 1 061 479 531 831 1 061 675
Retained profits 15 14 573 12 911 7 369 6 525 5 026 3 930 3 814
24 758 23 452 12 665 11 847 11 920 11 004 10 408
Equity attributable to outside
equity interests 650 762 328 385 118 244 671
Total equity 25 408 24 214 12 993 12 232 12 038 11 248 11 079
The accompanying notes form part of these financial statements.
CONDENSED STATEMENT OF CASH FLOWS
For the half year ended
BHP Billiton Group BHP Billiton Ltd Group
Notes 31 Dec 31 Dec 31 Dec 31 Dec
2001
2001 2001 2000
A$M US$M A$M A$M
Cash flows related to operating activities
Receipts from customers 16 397 8 411 10 234 10 700
Payments to suppliers, employees, etc (12,626) (6 480) (7 618) (7 595)
Dividends received 134 69 29 33
Interest received 92 47 45 53
Borrowing costs (582) (298) (295) (352)
Other 263 134 263 203
Operating cash flows before income tax 3 678 1 883 2 658 3 042
Income tax paid (780) (400) (466) (217)
Net operating cash flows 2 898 1 483 2 192 2 825
Cash flows related to investing activities
Purchases of plant, property and equipment (2 108) (1 080) (1 609) (683)
Exploration expenditure (394) (202) (339) (212)
Purchases of investments (91) (47) (631) (498)
Purchases of, or increased investments in, controlled (77) (45) (77) -
entities net of their cash
Investing outflows (2 670) (1 374) (2 656) (1 393)
Proceeds from sale of plant, property and equipment 281 144 70 31
Proceeds from OneSteel spin-out - - - 661
Proceeds from sale or redemption of investments 60 36 23 96
Proceeds from disposal, sale or partial sale of 255 130 274 -
controlled entities and joint venture interests net
of their cash
Net investing cash flows (2 074) (1 064) (2 289) (605)
Cash flows related to financing activities
Proceeds from ordinary share issues 58 31 58 49
Loans to BHP Billiton Plc Group - - (1 517) -
Proceeds from interest bearing liabilities 7 128 3 659 6 127 -
Repayment of interest bearing liabilities (6 845) (3 511) (3 756) 650
Dividends paid (1 591) (815) (930) (2 255)
Redemption of Employee Share Plan programme loans (261) (134) (261) -
Purchase of shares under Share Buy Back programme (37) (19) (37) -
Net financing of controlled entities - - - (891)
Other 23 11 41 (36)
Net financing cash flows (1 525) (778) (275) (2 483)
Net decrease in cash and cash equivalents (701) (359) (372) (263)
Cash and cash equivalents at beginning of half year 1 963 998 1 111 937
Effect of foreign currency exchange rate changes on (23) (6) (1) 7
cash and cash equivalents
Cash and cash equivalents at end of half year 17 1 239 633 738 681
The accompanying notes form part of these financial statements.
Notes to the Financial Statements
1 Basis of preparation of half year financial statements
These statements are general purpose half year consolidated financial statements
that have been prepared in accordance with the requirements of the Corporations
Act, Australian Stock Exchange Listing Rules, Australian Accounting Standard
AASB 1029 'Interim Financial Reporting' and Urgent Issues Group Consensus Views,
and give a true and fair view of the matters disclosed. These half year
financial statements and reports should be read in conjunction with the annual
financial statements for the year ended 30 June 2001 and any public
announcements made by the BHP Billiton Group and its controlled entities during
the half year in accordance with continuous disclosure obligations arising under
the Corporations Act and Australian Stock Exchange Listing Rules. The notes to
the financial statements do not include all information normally contained
within the notes to an annual financial report.
In accordance with Australian Securities and Investments Commission ('ASIC')
Practice Note 71 'Financial Reporting by Australian Entities in Dual-Listed
Company Arrangements', this interim financial report discloses the combined
financial results of the BHP Billiton Group as well as the consolidated
financial results of the BHP Billiton Limited Group.
Australian regulatory requirements do not allow the combination of the results
of the BHP Billiton Limited Group with those of the BHP Billiton Plc Group for
periods prior to consummation of the DLC merger on 29 June 2001. Consequently,
no comparative financial information is presented for the BHP Billiton Group
prior to that date.
Accounting policies have been consistently applied by all entities in the BHP
Billiton Group and are consistent with those of the previous financial year
except for:
(a) Application of Revised Accounting Standard
The requirements of the revised accounting standard, AASB 1027 'Earnings Per
Share' have been applied to these financial statements. In accordance with the
requirements of this revised standard, prior period comparatives have been
restated accordingly.
(b) Changes in Accounting Policy
Functional currency
With effect from 1 July 2001, the majority of the BHP Billiton Limited Group's
businesses changed to US dollars, the functional currency of the combined BHP
Billiton Group. This is consistent with the BHP Billiton Plc Group and is the
basis on which the combined BHP Billiton Group manages its businesses and
records its transactions. Since the majority of the Group's net assets are now
denominated in US dollars, an exchange fluctuation is generated on translation
to Australian dollars. The effect of this policy change for the half year ended
31 December 2001 has been a decrease in net profit attributable to members of
$10 million (US$5 million).
Asset impairment tests
With effect from 1 July 2001, asset impairment tests for the BHP Billiton
Limited Group are completed using risk-adjusted market-based discount rates
(weighted average cost of capital). Previously, an asset's estimated recoverable
amount was determined using expected net cash flows discounted at an interest
rate based on the long term interest bearing liabilities of the BHP Billiton
Limited Group. The BHP Billiton Plc Group has adopted the same methodology for
completion of asset impairment tests. This policy change had $nil (US$nil)
effect on net profit attributable to members for the half year ended 31 December
2001.
(c) Relief on Reporting Requirements
In accordance with ASIC relief order 02/0169, dated 13 February 2002, the BHP
Billiton Group has adopted the following reporting disclosures:
• Disclosure of combined financial data of the BHP Billiton Group on the
face of the financial statements and throughout the notes to the financial
statements, rather than by way of a note to the financial statements.
• Disclosure of combined financial data of the BHP Billiton Group in US
dollars in addition to Australian dollars.
2 Significant items
No significant items are included in the results for the half years ended 31
December 2001 or 31 December 2000.
Half Year Ended
BHP Billiton Group BHP Billiton Ltd Group
31 Dec 31 Dec 31 Dec 31 Dec
2001 2001 2001 2000
A$M US$M A$M A$M
3 Revenue from ordinary activities
Sales revenue
Sale of goods 15 395 7 896 9 363 10 236
Rendering of services 335 171 335 270
Total sales revenue 15 730 8 067 9 698 10 506
Other revenue
Interest revenue 97 51 45 47
Dividend income 35 18 12 5
Proceeds from sale of assets 1 275 655 360 137
Management fees 4 2 4 29
Other revenue 63 32 63 52
Total other revenue 1 474 758 484 270
4 Expenses from ordinary activities, excluding
depreciation, amortisation and borrowing costs
Employee benefits expense 1 958 1 000 1 320 1 287
Raw materials and consumables used 2 589 1 330 1 725 1 927
Changes in inventories of finished goods and work (240) (128) (195) 174
in progress
Net book value of assets sold 1 160 599 158 112
Diminution in value of non-current assets 48 25 48 40
Other expenses from ordinary activities 6 540 3 310 3 727 3 768
Total expenses from ordinary activities, excluding 11 965 6 136 6 783 7 308
depreciation, amortisation and borrowing costs
5 Depreciation and amortisation
Depreciation relates to
Buildings 128 66 50 57
Plant, machinery and equipment 1 358 696 924 834
Mineral rights 98 50 51 24
87 45 87 136
Exploration, evaluation and development
expenditures carried forward
Capitalised leased assets 8 4 2 2
Total depreciation 1 679 861 1 114 1 053
Amortisation (a)(b) 45 23 - 4
Total depreciation and amortisation 1 724 884 1 114 1 057
Half Year Ended
BHP Billiton Group BHP Billiton Ltd Group
31 Dec 31 Dec 31 Dec 31 Dec
2001 2001 2001 2000
A$M US$M A$M A$M
5 Depreciation and amortisation (continued)
(a) Amortisation relates to goodwill only (not tax-effected)
(b) Profit from ordinary activities restated to exclude amortisation of goodwill
Net profit before outside equity interests 2 337 1 199 1 461 1 456
Amortisation of goodwill 45 23 - 4
Net profit before outside equity interests 2 382 1 222 1 461 1 460
and amortisation of goodwill
(Deduct)/add outside equity interests (44) (22) (26) (29)
Net profit (before amortisation of goodwill) 2 338 1 200 1 435 1 431
attributable to members of BHP Billiton
6 Borrowing costs
Borrowing costs paid or due and payable
on borrowings 524 270 265 313
on finance leases 8 4 2 2
Total borrowing costs 532 274 267 315
29 15 29 3
Deduct amounts capitalised
Borrowing costs charged against profit 503 259 238 312
Half Year Ended
BHP Billiton Group BHP Billiton Ltd Group
31 Dec 31 Dec 31 Dec 31 Dec
2001 2001 2001 2000
A$M US$M A$M A$M
7 Income tax
The prima facie tax on profit from ordinary activities
differs from the income tax provided in the accounts
and is calculated as follows:
Profit from ordinary activities before income tax 3 304 1 696 2 091 2 077
Tax calculated at 30 cents in the dollar (2000 - 34 991 509 627 706
cents in the dollar) on profit from ordinary activities
before income tax
Add/(deduct) tax effect of:
Recognition of prior year tax losses (117) (60) (80) (173)
Non-tax effected capital gains (12) (6) (12) -
Amounts over provided in prior years (6) (3) (8) (19)
Profits from associated entities after tax (87) (45) (13) 7
Non-tax effected operating losses 137 70 2 10
Non-deductible accounting depreciation 95 50 21 15
and amortisation
Foreign expenditure not presently deductible 35 18 35 41
South African secondary tax on companies 31 16 - -
Non-deductible dividend on redeemable 14 7 12 33
preference shares
Tax rate differential on overseas income (24) (12) 27 9
Foreign exchange gains and other adjustments (90) (47) 19 (8)
Income tax expense attributable to ordinary 967 497 630 621
activities
Effective tax rate 29.3% 29.3% 30.1% 29.9%
8 Segment results
BHP Billiton Group
Intersegment Depreciation Profit Gross Segment Capital
revenue and before tax expenditure
External amortisation (a) Assets
(b)
Revenue
Industry classification A$M
2001
Aluminium 2 674 - 224 454 10 871 228
Base Metals 1 300 - 231 96 8 784 741
Carbon Steel Materials 2 807 169 174 1 072 5 919 185
Stainless Steel Materials 718 - 105 (56) 3 585 76
Energy Coal 2 379 - 203 763 4 779 234
Exploration, Technology and New 328 3 67 81 1 983 113
Business
Other Activities 1 501 - 14 224 1 418 10
Petroleum 2 805 25 552 1 108 6 603 581
Steel 2 502 277 135 129 4 962 51
Net unallocated interest 94 - - (18) - -
Group and unallocated items(c) 96 34 19 (549) 5 128 49
BHP Billiton Group 17 204 508 1 724 3 304 54 032 2 268
US$M
2001
Aluminium 1 371 - 115 233 5 574 117
Base Metals 667 - 118 50 4 496 380
Carbon Steel Materials 1 440 87 89 550 3 028 95
Stainless Steel Materials 368 - 54 (29) 1 838 39
Energy Coal 1 220 - 104 391 2 449 120
Exploration, Technology and New 168 2 35 41 1 014 58
Business
Other Activities 771 - 7 115 727 5
Petroleum 1 437 13 283 568 3 371 298
Steel 1 282 142 69 65 2 536 26
Net unallocated interest 49 - - (9) - -
Group and unallocated items(c) 52 16 10 (279) 2 599 25
BHP Billiton Group 8 825 260 884 1 696 27 632 1 163
8 Segment results (continued)
BHP Billiton Ltd Group
External Intersegment Depreciation Profit Gross Segment Capital
revenue and before tax expenditure
Revenue amortisation (a) Assets
(b)
Industry classification A$M
2001
Aluminium - - - - - -
Base Metals 1 027 - 159 180 5 619 595
Carbon Steel Materials 2 347 169 135 960 4 871 170
Stainless Steel Materials - - - - - -
Energy Coal 916 - 53 256 621 135
Exploration, Technology and New 328 3 67 111 1 975 113
Business
Other Activities 173 - - 14 2 4
Petroleum 2 805 25 552 1 108 6 603 581
Steel 2 502 277 135 129 4 962 51
Net unallocated interest 42 - - (180) -
Group and unallocated items(c) 42 34 13 (487) 6 301 39
BHP Billiton Limited Group 10 182 508 1 114 2 091 30 954 1 688
Industry classification A$M
2000
Aluminium - - - - - -
Base Metals 1 284 - 207 419 5 418 188
Carbon Steel Materials 1 954 161 135 633 5 526 78
Stainless Steel Materials - - - - - -
Energy Coal 569 - 53 103 810 30
Exploration, Technology and New 213 3 26 70 811 17
Business
Other Activities 434 - - 1 354 -
Petroleum 3 204 15 447 1 268 7 746 420
Steel (d) 3 289 312 178 350 5 381 51
Net unallocated interest 39 - - (272) - -
Group and unallocated items(c) (210) 18 11 (495) 1 403 39
BHP Billiton Limited Group 10 776 509 1 057 2 077 27 449 823
a. Before outside equity interests.
b. Excluding capitalised borrowing costs and capitalised exploration.
d. Includes consolidation adjustments.
c. Includes the OneSteel business, which was spun-out with effect from 31
October 2000.
Half Year Ended
BHP Billiton Group BHP Billiton Ltd Group
31 Dec 31 Dec 31 Dec 31 Dec
2001 2001 2001 2000
A$M US$M A$M A$M
9 Dividends
Half yearly dividend or equivalent paid to the members 466 241 466 446
of BHP Billiton Limited (a)
Half yearly dividend or equivalent paid to the members 292 151
of BHP Billiton Plc
758 392 466 446
(a) The dividend for the December 2001 half year of US$0.065 per share paid
on 5 December 2001 was fully franked, (2000 - A$0.121 per share unfranked
(adjusted for the bonus issue)). Having regard to the existing franking account
balances, provision for income tax and any dividends payable and receivable as
recognised in the accounts, the Group has a deficit in the franking account of
A$354 million at 30 cents in the dollar at 31 December 2001. This deficit arises
due to the payment of fully franked dividends. Due to tax payments in the next
six months, it is anticipated that the franking account will be in a surplus as
at 30 June 2002. The current outlook is that dividends payable in the next
twelve months will be fully franked.
10 Earnings per share
Half Year Ended
BHP Billiton Group BHP Billiton Ltd Group
31 Dec 31 Dec 31 Dec 31 Dec 2000(a)
2001 2001 2001 A$
A$ US$ A$
Basic earnings per ordinary share (cents) (b) (c) 38.1 19.5 38.7 38.7
Diluted earnings per ordinary share (cents) (b) 38.0 19.5 38.6 38.6
Weighted average number of fully paid ordinary
shares (Millions)
- basic earnings per ordinary share 6 024 6 024 3 704 3 683
- diluted earnings per ordinary share (d) (e) 6 040 6 040 3 718 3 699
(a) Comparative data has been restated to take into account the bonus share
issue effective 29 June 2001. Refer note 13.
(b) Based on net profit attributable to members of BHP Billiton.
(c) Basic earning per American Depositary Share (ADS) 76.2 39.0 77.4 77.4
(cents). For the periods indicated, each ADS
represents two ordinary shares.
(d) The weighted average diluted number of ordinary shares has been adjusted
for the effect of Employee Share Plan options and Executive Share Scheme partly
paid shares to the extent they were dilutive at balance date. Refer note 13 for
details of shares issued under these plans.
(e) Performance rights are excluded and would only be included where an issue
of shares is expected to occur.
11. Investments in associated entities
Major Principal Reporting Ownership interest (a) Carrying value of investment
shareholdings in activities date
associated
entities
At associate's At BHP Billiton's
reporting date reporting date
2000 31 30 31 Dec 31 Dec 30 30 31
Dec June 2001 2001 June June Dec
2001
2001 2001 2001 2001 2000
% % % % A$M US$M A$M US$M A$M
Samarco Iron ore 31 Dec 50 50 50 50 495 253 498 252 426
Mineracao S.A. mining
Orinoco Iron HBI production 30 Sept 50 50 50 50 - - - - 277
C.A.
QCT Resources Coal Mining 30 June - 50 - - - - - - 427
Limited
South Blackwater Coal Mining 30 June - - 50 - 17 9 - - -
Billiton Marketing 30 June - - 58 - 631 323 - - -
Marketing
Holdings BV (b)
BHP Billiton Ltd 1 143 585 498 252 1 130
Group Total
Minera Antamina Copper and 30 June 34 34 34 34 651 333 671 339
S.A. Zinc Mining
Carbones del Coal Mining 31 Dec 33 33 33 33 329 168 350 177
Cerrejon S.A.
Cerrejon Zona Coal Mining 31 Dec 17 17 17 17 209 107 172 87
Norte S.A.
Highland Valley Copper Mining 31 Dec 34 34 34 34 248 127 257 130
Copper
Richard Bay Titanium 31 Dec 50 50 50 50 428 219 273 138
Minerals dioxide
Minera Alumbrera Copper and 30 June 25 25 25 25 123 63 115 58
Limited Gold Mining
Integris Metals Metals 31 Dec 50 - 50 - 297 152 - -
Distribution
Other(c) 120 61 109 55
Eliminations (d) (631) (323) - -
BHP Billiton Group 2 917 1 492 2 445 1 236
Total
Half year ended
BHP Billiton Group BHP Billiton Ltd Group
31 Dec 31 Dec 31 Dec 31 Dec
2001 2001 2001 2000
A$M US$M A$M A$M
Share of profits/(losses) of associated entities
Profit/(loss) from ordinary activities before income tax 360 185 63 (5)
Income tax on ordinary activities 68 35 19 17
Profit from ordinary activities after tax 292 150 44 (22)
(a) Ownership interest reflects the interest held at the end of the financial
period, and at the associated entities most recent balance date. The proportion
of voting power held corresponds to ownership interest.
(b) Despite holding a 58% voting interest in Billiton Marketing Holdings BV, the
BHP Billiton Limited Group does not have the capacity to control this entity.
(c) Includes various immaterial associated entities.
(d) Includes consolidation adjustments related to Billiton Marketing Holdings BV.
BHP Billiton Group BHP Billiton Ltd Group
31 Dec 30 June 31 Dec 30 June 31 Dec 30 June 31 Dec
2001
2001 2001 2001 2001 2001 2000
A$M A$M US$M US$M A$M A$M A$M
12 Exploration, evaluation and development
expenditure capitalised
Exploration, evaluation and development
expenditures carried forward in areas of
interest
- now in production 1 715 1 679 877 849 1 377 1 315 1 393
- in development stage but not 1 118 777 572 393 1 048 721 498
yet producing(a)
- in exploration and/or 727 764 371 386 496 458 415
evaluation stage(a)
Total exploration, evaluation and 3 560 3 220 1 820 1 628 2 921 2 494 2 306
development expenditure capitalised
(a) Details of movement in BHP Billiton Group BHP Billiton Ltd Group
expenditure capitalised in
development stage but not yet
producing and in exploration and/or
evaluation stage
Development stage Exploration and/or Development Exploration and/or
evaluation stage stage but not evaluation stage
but not yet yet producing
producing
31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec
2001 2001 2001 2001 2001 2000 2001 2000
A$M A$M A$M A$M
US$M US$M A$M A$M
Balance at the beginning of the half 777 393 764 386 721 223 458 375
year
Expenditure incurred during the half 386 198 405 208 371 243 341 213
year
Expenditure expensed during the half - - (337) (172) - - (203) (149)
year
Transferred to development - - (62) (32) - - (62) (11)
Transferred from exploration and/or 62 32 - - 62 11 - -
evaluation
Transferred to production (119) (61) - - (119) - - -
Disposals - - - - - - - -
Depreciation (4) (2) (20) (10) (4) (1) (20) (35)
Exchange fluctuations and other 16 12 (23) (9) 17 22 (18) 22
movements
Balance at the end of the half year 1 118 572 727 371 1 048 498 496 415
BHP Billiton Limited
31 Dec 31 Dec 30 June 30 June 31 Dec
2001 2001 2001 2001 2000
A$M US$M A$M US$M A$M
13 Contributed equity - BHP Billiton Limited
Paid up
- 3 706 520 347 ordinary shares fully paid 6 063 3 065 6 013 3 039 5 919
(June 01 - 3 704 256 885; Dec 00 - 1 785 946 791)......
- 340 000 ordinary shares each paid to seventy one - - - - -
Australian cents (June 01 - 385 000; Dec 00 - 415 000
paid to five cents)...................................
..................
- 3 153 500 ordinary shares each paid to sixty seven - - - - -
Australian cents (June 01 - 3 656 500;
Dec 00 - 4 976 500 paid to one cent)...................
- 1 Special Voting Share (June 01 - 1; Dec 00 - Nil) - - - - -
(a)...
6 063 3 065 6 013 3 039 5 919
Movement in issued ordinary shares for the half year BHP Billiton Limited
Number of fully Number of partly paid shares
paid shares
Paid to A$0.71 Paid to A$0.67
Opening number of shares (b) 3 704 256 885 385 000 3 656 500
Shares issued upon exercise of Employee Share Plan Options(c) 5 716 946
Shares issued on exercise of Performance Rights(d) -
Buyback of shares under repurchase scheme(e) (f) (4 134 622)
Partly paid shares converted to fully paid* 681 138 (45 000) (503 000)
Closing number of shares 3 706 520 347 340 000 3 153 500
* Note that the effect of the DLC Merger bonus issue on Executive Share Scheme
(ESS) partly paid shares issued prior to 1996 was that the holder was entitled
to additional ordinary fully paid shares on 9 July 2001 at a rate of 1.0651
ordinary shares for every partly paid share held. The DLC Merger bonus issue for
holdings of ESS partly paid shares issued in 1996 and 1997 was accrued and the
ordinary fully paid bonus shares will not be issued until the partly paid shares
are converted to fully paid. Accordingly, the number of shares converted from
partly paid to fully paid will not necessarily be on a 1:1 basis because the
conversion of some partly paid shares also attracts the issue of the bonus
shares.
13 Contributed equity - BHP Billiton Limited (continued)
Options and Performance Rights
Month of issue Number Number of Number Shares Number Options/ Exercise Exercise period (i)
recipients issued on lapsed
Issued Exercised exercise (d) Performance Price
(j) (A$)(h)
Rights
outstanding
at balance
date
Employee Share Plan Options (c)
November 2001 14 077 500 266 - - - 14 077 500 $8.99 Oct 2004 - Sep 2011
December 2000 1 668 000 67 - - - 1 668 000 $19.43 Jul 2003 - Dec 2010
December 2000 1 121 500 59 54 500 112 550 - 1 067 000 $19.42 Jul 2003 - Dec 2010
November 2000 832 500 44 15 000 30 977 54 000 763 500 $18.52 Jul 2003 - Oct 2010
November 2000 3 760 000 197 94 000 194 122 23 500 3 642 500 $18.51 Jul 2003 - Oct 2010
April 2000 30 000 3 - - - 30 000 $17.13 Apr 2003 - Apr 2010
April 2000 454 000 5 - - - 454 000 $17.12 Apr 2003 - Apr 2010
December 1999 200 000 1 - - - 200 000 $19.21 Apr 2002 - Apr 2009
December 1999 150 000 1 - - - 150 000 $16.92 Apr 2002 - Apr 2009
October 1999 60 000 6 25 000 51 628 10 000 25 000 $17.06 Apr 2002 - Apr 2009
October 1999 51 000 3 2 000 4 131 15 000 34 000 $17.05 Apr 2002 - Apr 2009
July 1999 100 000 1 - - - 100 000 $17.13 Apr 2002 - Apr 2009
April 1999 21 536 400 45 595 101 500 208 157 9 104 600 12 330 300 $15.73 Apr 2002 - Apr 2009
April 1999 8 184 300 944 319 000 658 778 2 842 150 5 023 150 $15.72 Apr 2002 - Apr 2009
April 1998 177 500 16 34 500 39 826 - 143 000 $14.74 Apr 2001 - Apr 2003
April 1998 140 000 23 77 000 113 748 5 000 58 000 $14.73 Apr 2001 - Apr 2003
November 1997 7 910 900 16 411 5 800 300 6 177 889 1 060 650 1 049 950 $15.56 Nov 2000 - Nov 2002
November 1997 1 579 400 3 501 884 100 1 027 204 266 000 429 300 $15.55 Nov 2000 - Nov 2002
October 1997 3 992 000 379 2 123 800 2 502 783 140 000 1 728 200 $15.33 Oct 2000 - Oct 2002
October 1997 5 440 000 511 2 768 542 3 507 806 53 000 2 618 458 $15.32 Oct 2000 - Oct 2002
July 1997 395 500 36 105 500 151 301 69 500 220 500 $18.97 Jul 2000 - Jul 2002
July 1997 200 000 1 - - - 200 000 $18.96 Jul 2000 - Jul 2002
October 1996 848 100 46 645 000 867 076 203 100 - $15.56 Oct 1999 - Oct 2001
October 1996 1 086 700 66 1 047 200 1 381 120 39 500 - $15.55 Oct 1999 - Oct 2001
46 012 358
Performance Rights (d)(f)(g)
November 2001 4 770 800 110 - - - 4 770 800 - Oct 2004 - Sep 2011
October 2001 162 200 2 - - - 162 200 - Oct 2004 - Sep 2011
October 2001 222 892 6 - - - 222 892 - Oct 2003 - Mar 2006
December 2000 187 691 11 - - - 187 691 - July 2003 - Dec 2010
November 2000 2 006 333 104 226 389 - - 1 779 944 - July 2003 - Dec 2010
March 1999 1 000 000 1 550 000 376 840 - 450 000 - Mar 1999 - Mar 2009
7 573 527
13 Contributed equity - BHP Billiton Limited (continued)
(a) Each of BHP Billiton Plc and BHP Billiton Limited issued one Special
Voting Share to facilitate the joint voting by shareholders of BHP Billiton Plc
and BHP Billiton Limited on Joint Electorate Actions.
(b) The DLC structure between BHP Billiton Limited and BHP Billiton Plc was
established on 29 June 2001. Under the terms of the DLC structure, BHP Billiton
Limited issued fully paid bonus shares effective 29 June 2001 with the allotment
of shares occurring on 9 July 2001.
(c) The Employee Share Plan provides eligible employees with the opportunity
to acquire fully paid ordinary shares or options for ordinary shares in BHP
Billiton Limited at such times as the Directors deem appropriate. Shares and
options issued under the Employee Share Plan are issued on the following terms:
• The limit on the number of shares and outstanding options or other rights
issued under the various employee share plans is 8% of issued ordinary
capital.
• Shares may be offered for subscription for market value (which is the
weighted average market price over the five days prior to issue) less a
discount not exceeding 10%.
• The Board of Directors may specify an issue price for an option. The
exercise price of an option is market value less a discount not exceeding
10%.
• Where shares are offered, interest free employee loans are available to
fund the purchase of shares for a maximum period of 20 years, repayable by
application of dividends or an equivalent amount. Any amounts outstanding
are repayable at the end of that 20 year period.
• Exercise price is unaffected by the bonus share issue which took effect on
29 June 2001.
• Each option is granted over one unissued share in BHP Billiton Limited
(and, where relevant, 1.0651 bonus shares which attach to that share)
pursuant to the Rules of the Plan.
• Options granted in November 2001 do not become exercisable until after 1
October 2004 and then only if performance hurdles are achieved. These
performance hurdles relate to the ASX 100 index. The BHP Billiton Limited
Group's performance in terms of total shareholders return is measured
against this group of companies at the end of the three year performance
period to determine if the performance hurdles have been achieved. If the
options are exercisable, they lapse ten years after issue.
• Options granted from November to December 2000 do not become exercisable
until after 30 June 2003 and then only if performance hurdles are achieved.
These performance hurdles relate to the ASX 100 index. The BHP Billiton
Limited Group's performance in terms of total shareholders return is
measured against this group of companies to determine if the performance
hurdles have been achieved. The options lapse if the hurdles have not been
achieved within a two year period. If the options are exercisable, they
lapse ten years after issue.
• Options granted from April 1999 to April 2000 are 10 year options, not
exercisable until after three years, and then only if performance hurdles
are achieved. These performance hurdles relate to two comparative groups
(ASX 100 index and an international comparative group). The BHP Billiton
Limited Group's performance in terms of total shareholder return is measured
against both of these groups to determine if performance hurdles have been
achieved.
• At cessation of employment an extension of the loan repayment period may
be granted if the outstanding loan is in a non profitable position or if the
repayment of the loan would cause unnecessary hardship. The extension will
be reviewed periodically. If during the extension period the shares become
profitable, BHP Billiton Limited will arrange for the sale of those shares.
• Options carry no voting rights.
• Unexercised options will expire at the end of the exercise period.
(d) Performance Rights have been issued to executive officers under the
Performance Share Plan as part of the Long Term Incentive Plan. Performance
Rights constitute a right, issued by a trustee of a special purpose trust
established by BHP Billiton Limited, to require the trustee to acquire a BHP
Billiton Limited share on behalf of the executive, upon fulfilment of prescribed
performance hurdles or completion of service conditions. Where a service
condition or performance hurdle is fulfilled, related Performance Rights are
exercisable. The trustee acquires the shares either by purchase on market or
subscription, and the shares are held in trust until the executive requests that
they be transferred. In accordance to the above, Performance Rights are
currently issued on the following terms:
• a Performance Right entitles the beneficiary to one fully paid share in
BHP Billiton Limited plus 1.0651 bonus shares which attach to that share
pursuant to the Rules of Plan.
• The exercise price of the Performance Rights is zero.
• Performance Rights are not transferable.
• Performance Rights carry no right to dividends.
• Performance Rights carry no voting rights.
• Performance Rights will lapse if performance hurdles or service conditions
are not satisfied or in other specified situations.
• Performance Rights lapse on the tenth anniversary of their date of issue
unless previously exercised or lapsed on accordance with their terms of
issue.
• The performance hurdles attached to the Performance Rights issued from
October to November 2001 relate to a global comparator group of companies.
The BHP Billiton Limited Group's performance in terms of the total
shareholder return is measured against this group of companies to determine
if the performance hurdles have been achieved. This measurement is first
taken after 30 September 2004 and the Performance Rights lapse if the
hurdles have not been achieved within the two years following that date.
13 Contributed equity - BHP Billiton Limited (continued)
• The performance hurdles attached to the Performance Rights issued from
November to December 2000 relate to a global comparator group of companies.
The BHP Billiton Limited Group's performance in terms of the total
shareholder return is measured against this group of companies to determine
if the performance hurdles have been achieved. This measurement is first
taken after 30 June 2003 and the Performance Rights lapse if the hurdles
have not been achieved within the two years following that date.
(e) During the half year ended 31 December 2001, BHP Billiton Limited
commenced the on-market re-purchase of shares in accordance its share buyback
programme resulting in the re-purchase of 4,134,622 shares at a weighted average
price of A$8.83 per share. BHP Billiton Limited's buy-back program allows for
the purchase of up to 186 million BHP Billiton Limited shares (adjusted for the
bonus issue), less the number of BHP Billiton Plc shares purchased on-market by
Nelson Investment Limited.
(f) The Performance Share Plan is also the vehicle through which BHP Billiton
operates the Medium Term Incentive Plan. Awards under the Medium Term Incentive
Plan allow eligible executives to invest a proportion of their net of tax bonus
award in performance rights issued under the Performance Share Plan, known as a
committed award. If an executive invests in a committed award, a matching award
of additional performance rights are made at the same time, which will vest at
the end of the relevant performance period depending on BHP Billiton Limited's
performance against performance hurdles. Terms of the awards are as follows:
• The vesting of matching awards is determined by reference to two
performance periods. The amount of performance rights that vest (become
exercisable) under the matching award at the end of the relevant performance
period is determined by the Company's performance measured in terms of total
shareholders return, relative to (1) the total shareholder return of a
selected group of international companies and (2) the increase in the CPI
plus a specified percentage.
• The first performance period is 2 years in length, and the second is 4
years in length. If both performance hurdles are achieved at the end of the
first performance period the corresponding number of performance rights
awarded under the matching award will vest. If either performance hurdle is
not achieved, the matching award will not vest.
• The participant then has the option to remain within the Medium Term
Incentive Plan and enter the second performance period, or leave the Medium
Term Incentive Plan. If the participant opts to leave at this stage 100% of
the performance rights awarded under the committed award are immediately
exercisable, together with any performance rights awarded under the matching
award that may have vested.
• If the participant chooses to remain in the Medium Term Incentive Plan,
the second performance period will be relevant and there will be an
opportunity for more of the performance rights awarded under the matching
award to vest.
• In relation to both performance periods, where a participant has lodged an
exercise form, the Trustee will acquire one share in BHP Billiton Limited
for every performance right exercised and no exercise price will be payable.
• Under the Medium Term Incentive Plan, a participant will not be entitled
to any shareholder benefits such as dividends or voting rights until the
point when performance rights are exercised.
(g) Shares issued on exercise of Performance Rights include shares purchased
on market.
(h) The bonus issue which took effect 29 June 2001 did not affect the
exercise price of Employee Share Plan options or Performance Rights. However,
the number of shares attributable to each option and Performance Rights on issue
at the record date has been increased to reflect the bonus issue.
(i) The expiry date corresponds to the end of the exercise period.
(j) The number of shares received on exercise of Performance Rights issued in
March 1999 are as follows:
• From the period 26 February 1999 to 27 October 2000 each Performance Right
constituted a right to acquire 1 ordinary BHP Billiton Limited share upon
completion of service conditions or fulfilment of performance conditions.
• From the period 28 October 2000 to 4 July 2001 each Performance Right
constituted a right to acquire, after adjustment to take account of the spin
off of OneSteel Limited in October 2000, 1.0368 ordinary BHP Billiton
Limited shares upon completion of service conditions or fulfilment of
performance conditions.
• From the period 5 July 2001 onwards each Performance Right constitutes a
right to acquire, after a further adjustment to take account of the bonus
issue on 5 July 2001, 2.1411 ordinary BHP Billiton Limited shares upon
completion of service conditions or fulfilment of performance conditions.
BHP Billiton Plc
31 Dec 31 Dec 30 June 30 June 2001
2001
2001 2001
A$M US$M A$M US$M
14 Called up share capital - BHP Billiton Plc
Allotted, called up and fully paid share capital
2 319 147 885 (June 01 - 2 319 147 885) ordinary shares 3 467 1 752 3 467 1 752
50 000 (June 01 - 50 000) 5.5 per cent preference shares (a) - - - -
1 Special Voting Share (June 01 -1) (b) - - - -
3 467 1 752 3 467 1 752
Performance Rights
Month of issue Number Number of Number Shares Number Options/ Exercise Exercise period
recipients issued on lapsed
Issued Exercised exercise Performance Price
Rights
outstanding
at balance
date
Restricted Share Plan(c)
November 2001 274 914 1 - - - 274 914 - Nov 2004
October 2001 4 090 100 193 - - - 4 090 100 - Oct 2004
October 2001 863 000 41 - - - 863 000 - Oct 2004 - Mar 2005
5 228 014
Co-investment Plan(d)
November 2001 71 431 1 - - - 71 431 - Nov 2003 - Mar 2004
October 2001 653 104 127 - - - 653 104 - Oct 2003 - Mar 2004
724 535
(a) The preference shares have the right to repayment of the amount paid up
on the nominal value and any unpaid dividends in priority to the holders of any
other class of shares in BHP Billiton Plc on a return of capital or winding up.
The holders of preference shares have limited voting rights if payment of the
preference dividends are six months or more in arrears or a resolution is passed
changing the rights of the preference shareholders. At 31 December 2001 these
shares were held by BHP Billiton Limited.
(b) Each of BHP Billiton Plc and BHP Billiton Limited issued one Special Voting
Share to facilitate the joint voting by the shareholders of BHP Billiton Plc and
BHP Billiton Limited on Joint Electorate Actions. In addition, an Equalisation
Share was authorised (but not allotted) to enable a distribution to be made by
BHP Billiton Plc to the BHP Billiton Limited Group should this be required under
the terms of the DLC merger. The Directors have the ability to issue the
Equalisation Share if required under those terms. The constitution of BHP
Billiton Limited allows the Directors of that company to issue a similar
equalisation share.
(c) Awards under the Restricted Share Plan are made at the discretion of the
Trustees of the Billiton Employee Share Ownership Trust. In respect of the
Executive Directors, awards are made on the recommendation of the Remuneration
Committee and, in the case of other employees, the Remuneration Committee
recommend the level of award following proposals from the Executive Committee.
An award takes the form of conditional awards or share options in BHP Billiton
Plc and is made subject to performance conditions that are set by the
Remuneration Committee. The Remuneration Committee also recommends the value of
the ordinary shares to be comprised in an award and this value does not exceed
100 per cent of a participant's annual base salary. The value of the award is
not pensionable.
14 Called up share capital - BHP Billiton Plc (continued)
Subject to the performance conditions being met and the extent to which they
are met, the award/option will vest and the participant will become
absolutely entitled to the appropriate number of Ordinary Shares (if any),
or if relevant, exercise his/her option over the relevant number of Ordinary
Shares subject to his/her paying over to the Trust or to BHP Billiton Plc
any tax liability arising on the vesting of the award/option. The
performance condition to be met over the performance period will be
determined by the Company's performance measured in terms of total
shareholder return relative to (1) the total shareholder return of a
selected group of international companies, and (2) with reference to an
inflationary underpin based on the UK Retail Price Index. Both performance
conditions must be met in order for awards to vest.
Under the Restricted Share Plan a participant will not be entitled to any
shareholder benefits such as dividends and voting rights until an award
vests.
(d) All full time employees (including Executive Directors) of the BHP
Billiton Plc Group are eligible to participate in the Co-Investment Plan.
Participants in the Plan are asked to indicate the proportion of their
discretionary annual bonus for the current financial year they wish to
invest in the Plan subject to the minimum and maximum investment limits set
by the Remuneration Committee. Within those limits, part of the bonus that
would otherwise have been paid in cash is used to acquire ordinary shares in
BHP Billiton Plc; these are known as committed shares.
Each invitee who acquires committed shares is also granted a matching award
over shares in BHP Billiton Plc. Matching awards are normally granted during
the 42 day period commencing on the day on which BHP Billiton Plc releases
its results for any financial period. The matching award entitles the
participant to acquire a number of shares in BHP Billiton Plc for nil
consideration, subject to the satisfaction of performance conditions and the
continuing employment of the participant. Awards are generally made on the
following terms:
• The vesting of matching awards is determined by reference to two
performance periods. The first performance period is 2 years in length
and the second performance period is 4 years in length;
• The proportion of shares subject to the award that vest at the end
of the relevant performance period will be determined by the Company's
performance measured in terms of total shareholder return relative to
(1) the total shareholder return of a selected group of international
companies, and (2) with reference to an inflationary underpin based on
the UK Retail Price Index. Both performance hurdles must be met in order
for awards to vest.
• If both performance hurdles are achieved at the end of the first
performance period, the corresponding number of matching awards will
vest. At this time the participant has the option to remain within the
Plan and enter the second performance period, or leave the Plan. If the
participant opts to leave the Plan at this stage, committed shares are
released together with any shares under the matching award that may have
vested. All remaining shares under the matching award will then lapse.
• If a participant chooses to remain in the Plan, the second
performance period will be relevant and there will be an opportunity for
more shares to be awarded under the matching award subject to
performance conditions being met at the end of the four year period.
• If prior to vesting of a Matching Award, a Participant ceases to be
employed for any reason other than compassionate circumstances, or is
made redundant, or retired reaching normal retirement age, or where a
participants employer ceases to be a member of the BHP Billiton Plc
Group, or where the business in which a Participant is employed is
transferred out of the Group or any other circumstance in which the
Remuneration Committee determined to be a compassionate circumstance,
the Participant's committed shares will be forfeited and the related
Matching Award will also lapse and cease to be exercisable.
• Employees who are within two years of the date on which they are
required to retire can only participate in exceptional circumstances, at
the discretion of the Remuneration Committee. Under the Plan a
participant is not entitled to any shareholder benefits such as
dividends or voting rights until the committed shares are released.
Half Year Ended
BHP Billiton Group BHP Billiton Ltd Group
31 Dec 31 Dec 31 Dec 31 Dec
2001 2001 2001 2000
A$M US$M A$M A$M
15 Retained profits
Retained profits at the beginning of the half year 12 911 6 525 3 930 2 841
Add/(deduct)
Net profit/(loss) 2 293 1 177 1 435 1 427
Aggregate of amounts transferred from/(to) reserves 164 78 164 (8)
Dividends (a) (758) (392) (466) (446)
Share buyback (b) (37) (19) (37) -
Retained profits at the end of the half year 14 573 7 369 5 026 3 814
(a) Refer note 9.
(b) Refer note 13.
Half Year Ended
BHP Billiton Group BHP Billiton Ltd Group
31 Dec 31 Dec 31 Dec 31 Dec
2001 2001 2001 2000
A$M US$M A$M A$M
16 Total equity
Total equity at the beginning of the half year 24 214 12 232 11 248 11 005
Total changes in equity recognised in the Statement of 2 051 1 203 1 369 1 675
Financial Performance
Transactions with owners
Contributed equity 50 26 50 69
Dividends(a) (758) (392) (466) (446)
Share buyback(b) (37) (19) (37) -
OneSteel spin-out
Capital reduction (c) - - - (1 243)
Total changes in outside equity interests (112) (57) (126) 19
Total equity at the end of the half year 25 408 12 993 12 038 11 079
(a) Refer note 9.
(b) Refer note 13.
(c) The long products steel business was spun-out with effect from
31 October 2000 via OneSteel Limited. As a result of this transaction,
contributed equity was reduced by $1 243 million, including spin-out
costs of $56 million. This reflected a capital reduction of $0.66 per
share. The spin-out resulted in BHP Billiton Limited shareholders being
issued one OneSteel Limited share for every four shares held in BHP
Billiton Limited.
On 19 March 2001, BHP Billiton Limited announced its intention to
spin-out the remaining steel businesses. The spinout is expected to be
completed around the middle of the calendar year.
17 Notes to the statement of cash flows
Reconciliation of cash
For the purposes of the statement of cash flows, cash includes cash on hand
and at bank and short term deposits at call, net of outstanding bank
overdrafts.
Cash and cash equivalents comprise:
BHP Billiton Group BHP Billiton Ltd Group
31 Dec 31 Dec 31 Dec 31 Dec
2001 2001 2001 2000
A$M US$M A$M A$M
Cash 948 485 447 397
Short term deposits 345 176 345 352
Total cash assets 1 293 661 792 749
Bank overdrafts (a) (54) (28) (54) (68)
Total cash and cash equivalents 1 239 633 738 681
(a) Included in the Statement of Financial Position classification
of Interest bearing liabilities (current liabilities).
17 Notes to the statement of cash flows (continued)
Non-cash financing and investing activities
Half Year Ended
BHP Billiton Group BHP Billiton Limited Group
31 Dec 31 Dec 31 Dec 31 Dec
2001 2001 2001 2000
A$M US$M A$M A$M
Disposal of North American Metals Distribution 663 341 - -
assets to Integris Joint Venture..................
........................
Employee Share Plan loan instalments 6 12 6 20
The Employee Share Plan loan instalments represent the repayment of loans
outstanding with the BHP Billiton Limited Group by the application of
dividends.
During the half year ended 31 December 2000, the BHP Billiton Limited Group
negotiated the purchase with deferred consideration of property, plant and
equipment with a value of $83 million (US$46 million). There were no
transactions of this nature in the current period.
Disposal of controlled entities
During the half year ended 31 December 2001, BHP Billiton sold its
investment in PT Arutmin Indonesia for proceeds of $271 million (US$140
million). The net assets of the entity sold at the time of disposal were
$147 million (US$76 million). BHP Billiton has recognised a profit on sale
of PT Arutmin Indonesia of A$124 million (US$64 million) during the half
year. The inflow of cash as a result of the sale (net of cash disposed) was
A$274 million (US$141 million).
18 Contingent liabilities and contingent assets
There have been no changes in contingent liabilities or contingent assets
that existed at 30 June 2001 except for the following:
Income tax audit - Non-deductibility of financing costs
As a consequence of an income tax audit conducted by the Australian Taxation
Office (ATO), an amount of A$229 million has been subject to litigation.
The dispute concerned the deductibility of amounts paid to General Electric
Company in connection with the BHP Billiton Ltd Group's acquisition of the
Utah Group in the early 1980's. On 23 November 1999, the Federal Court ruled
in favour of the BHP Billiton Group. On 18 October 2000, the Full Bench of
the Federal Court ruled in favour of the ATO. The BHP Billiton Group sought
leave to appeal to the High Court of Australia (High Court) and the hearing
occurred on 10 August 2001. The High Court refused the BHP Billiton Group
leave to appeal on the general question of deductibility but did allow leave
to appeal on the question of whether the ATO had the power to amend the 1985
assessment.
An amount of A$79 million was paid in 1992 and up to 2001 was accounted for
as a non-current asset. At 30 June 2001, the accounts included a tax expense
of A$63 million relating to refusal of the High Court to grant leave to
appeal on the deductibility of financing costs. A non-current asset of A$16
million was carried forward.
In July 2001, the outstanding balance of A$150 million was paid and also
recorded as a non-current asset. This together with the A$16 million carried
forward from the 2001 year represented the tax and interest in dispute in
relation to the 1985 assessment.
On 14 February 2002 the Australian High Court allowed by consent BHP
Billiton Limited's appeal against the majority decision of the Full Federal
Court on 18 October 2000.
As a result of the High Court order, an amount of A$166 million (US$85
million) will be refunded to BHP Billiton Limited, together with associated
interest and penalties in respect of the overall matter. The amount has been
reclassified as a current asset at 31 December 2001.
19 Reconciliation to US generally accepted accounting principles (GAAP)
The reconciliations presented in this note represent the net income for the
half years ended 31 December 2001 and 2000 and shareholders' funds as at 31
December 2001 and 30 June 2001 respectively had US GAAP been followed by the
BHP Billiton Group and the BHP Billiton Limited Group rather than Australian
GAAP.
On 29 June 2001, BHP Billiton Limited (formerly BHP Limited) consummated the
Dual Listed Companies (DLC) merger with BHP Billiton Plc (formerly Billiton
Plc). A brief summary of the DLC merger and the basis of reporting are
provided on page 1 of this interim financial report.
Under Australian GAAP, the DLC merger has been accounted for as a
combination of the assets, liabilities and equity of the BHP Billiton
Limited Group and the BHP Billiton Plc Group at their respective book values
at 29 June 2001. Australian regulatory requirements do not allow the
combination of the results of the BHP Billiton Limited Group with those of
the BHP Billiton Plc Group for periods prior to 29 June 2001.
Under US GAAP, the DLC merger is accounted for as a purchase business
combination with the BHP Billiton Limited Group acquiring the BHP Billiton
Plc Group. Under US GAAP, the net income for the half year ended 31 December
2001 and the reconciliation of shareholders' equity at 31 December 2001 and
30 June 2001 include the purchase adjustments required under US GAAP to
recognise the BHP Billiton Plc Group's assets and liabilities at their fair
values, with the excess recorded as goodwill.
The following categories of adjustments are made in order to reflect the
results of the BHP Billiton Group and BHP Billiton Limited Group under US
GAAP:
(A) The reversal of adjustments arising from intergroup transactions
between the BHP Billiton Limited Group and the BHP Billiton Plc Group.
(B) The reconciliation of the BHP Billiton Limited Group's net income
and shareholders' funds from Australian GAAP to US GAAP
Items (A) and (B) are discussed in more detail below.
(A) Reversal of adjustments arising from intergroup transactions
During December 1998, the BHP Billiton Plc Group acquired certain assets
from the BHP Billiton Limited Group. The BHP Billiton Plc Group
recognised fair value adjustments as a result of this acquisition which
are being amortised over their useful lives. For US GAAP this fair value
adjustment is reinstated.
(B) Reconciliation to US GAAP
The consolidated financial statements of the BHP Billiton Limited Group
are prepared in accordance with Australian GAAP. Material differences
between generally accepted accounting principles as followed by the BHP
Billiton Limited Group in Australia and US GAAP are summarised below.
Acquisition of the BHP Billiton Plc Group
On 29 June 2001, BHP Billiton Limited and BHP Billiton Plc established a
DLC merger. Under US GAAP, the DLC merger is accounted for as a purchase
business combination of the BHP Billiton Plc Group by the BHP Billiton
Limited Group.
The total assumed purchase consideration of $22,812 million (US$11,529
million) was calculated by multiplying the number of shares held by BHP
Billiton Plc shareholders of 2,319,147,885 on 29 June 2001 by the
$9.8059 (US$4.9559) adjusted average share price of BHP Billiton
Limited's ordinary shares. The average share price was calculated over a
period of three days prior to, and subsequent to, the announcement of
the DLC merger on 19 March 2001. The average share price is adjusted for
the 1:1 equalisation ratio which is achieved by BHP Billiton Limited's
bonus share issue of 1,910,918,073 million shares. The cost of
acquisition was therefore $22,812 million (US$11,529 million), including
direct external acquisition costs of $71 million (US$36 million). The
direct external acquisition costs have been expensed as incurred for
Australian GAAP purposes.
Under US GAAP purchase accounting, the cost of the acquisition is
allocated to the fair values of identifiable assets acquired and
liabilities assumed. As a result of the fair value exercise, increases
in the values of the BHP Billiton Plc Group's inventory, investments,
long term contracts and long term debt were recognised and fair market
values attributed to their other tangible assets mainly property, plant
and equipment and undeveloped properties, together with appropriate
deferred taxation effects. The difference between the cost of
acquisition and the fair value of the assets and liabilities of the BHP
Billiton Plc Group has been recorded as goodwill. Fair value adjustments
to the recorded amount of inventory and long term contracts will be
expensed in the period the inventory is utilised and the long term
contracts are delivered into, and additional amortisation and
depreciation will be recorded in respect of the fair value adjustments
of intangible and tangible assets and the resulting goodwill over the
periods of their respective useful economic lives.
The adjustments to the assets and liabilities of the BHP Billiton Plc
Group to reflect the fair values and allocation of the excess purchase
consideration over the fair value of net assets acquired, based on
management's best estimates of fair value, are summarised in the
shareholders' funds reconciliation and are discussed below:
a. The increase in fair value of inventory was determined based on the
difference between the carrying value and the market value of these
assets.
19 Reconciliation to US GAAP (continued)
b. The increase in investments relates to increases to the BHP Billiton Plc
Group's equity investments. These equity investments have been measured
at fair value and any excess of the fair value over the underlying
tangible assets and liabilities has been attributed to mineral reserves
within the underlying investments. These uplifts to mineral properties
are being amortised over their estimated useful lives, on an investment
by investment basis.
c. The increase in property, plant and equipment relates to increases in the
carrying value of the BHP Billiton Plc Group's property, plant and
equipment to their estimated fair value. The increase in carrying value
of the property, plant and equipment is to be amortised over the
estimated useful life of the property, plant and equipment.
d. The amount of total consideration allocated to the BHP Billiton Plc
Group's undeveloped properties has been estimated by the BHP Billiton
Group management using current estimates of the status and prospects of
the BHP Billiton Plc Group's undeveloped property portfolio as contained
in the BHP Billiton Plc Group's strategic plans. The undeveloped
properties include only those identified properties that have advanced
to a stage of development feasibility where management believes
reasonable estimates of projected cash flows can be prepared. The value
allocated to the undeveloped properties was determined utilising a risk
adjusted income approach that included earnings discounted by the
appropriate cost of capital for the investment. Estimates of future cash
flows related to individual undeveloped properties were based on
existing estimates of revenues and contribution margin for the project.
The increase in undeveloped properties is being amortised over their
estimated exploitable useful lives on a project by project basis.
e. The increase in value of the long term contracts was determined by
attributing a fair value to certain long term contracts, which were not
accorded a value in the BHP Billiton Plc Group's financial statements.
f. Goodwill represents the remainder of the unallocated purchase
consideration. Goodwill is to be amortised over its expected useful
economic life.
g. Deferred taxes have been computed on the excess of fair value over book
value, other than for goodwill, using the applicable weighted average
statutory tax rates.
h. The decrease in long term debt was as a result of attributing a fair
value to fixed interest rate long term loans which were not recorded at
fair value in the BHP Billiton Plc Group's financial statements.
i. Other differences between UK GAAP and US GAAP included adjustments for
pensions, post retirement benefits and start up costs.
In relation to the US GAAP reconciliation for the BHP Billiton Limited
Group for the half year ended 31 December 2001, the adjustment
associated with the acquisition of BHP Billiton Plc includes the net
income of the BHP Billiton Plc Group for the period.
The purchase accounting presented in the reconciliation of net income
and shareholders' funds below is preliminary pending completion of
comprehensive fair value determinations. Any impact arising from the
final purchase price allocation cannot presently be quantified.
Fair value accounting for derivatives
When undertaking risk mitigation transactions hedge accounting
principles are applied, whereby derivatives are matched to the
specifically identified commercial risks being hedged. These matching
principles are applied to both matured and unmatured transactions.
Derivatives undertaken as hedges of anticipated transactions are
recognised when such transactions are recognised. Upon recognition of
the underlying transaction, derivatives are valued at the appropriate
market spot rate.
When an underlying transaction can no longer be identified, gains or
losses arising from a derivative that has been designated as a hedge of
a transaction will be included in the profit and loss account whether or
not such derivative is terminated. When a hedge is terminated, the
deferred gain or loss that arose prior to termination is:
a. Deferred and included in the measurement of the anticipated transaction
when it occurs; or
b. Included in the profit and loss account where the anticipated transaction
is no longer expected to occur
The premiums paid on interest rate options and foreign currency put and
call options are included in other assets and are deferred and included
in the settlement of the underlying transaction. When undertaking
strategic or opportunistic financial transactions, all gains and losses
are included in the profit and loss account at the end of each reporting
period. The premiums paid on strategic financial transactions are
included in the profit and loss account at the inception of the
contract.
19 Reconciliation to US GAAP (continued)
For the purpose of deriving US GAAP information, Statement of Financial
Accounting Standards No. 133: Accounting for Derivative Instruments and
Hedging Activities (FAS 133) requires that each derivative instrument be
recorded in the Statement of Financial Position as either an asset or
liability measured at its fair value. On initial application of this
Standard an accumulated loss of $312 million was recognised in respect
of the fair value of derivative instruments held on 1 July 2000, which
qualified as cash flow hedge transactions. This amount was reported as a
component of other comprehensive income. An accumulated gain of $11
million was recognised in respect of the fair value of derivative
instruments which qualified as fair value hedge transactions and their
associated hedged liabilities held at 1 July 2000. This amount was taken
directly to profit and loss.
In the year ended 30 June 2001, subsequent gains and losses on cash flow
hedges were taken to other comprehensive income and reclassified to
profit and loss in the same period the hedged transaction was
recognised. Gains and losses on fair value hedges continued to be taken
to profit and loss in subsequent periods, as were offsetting gains and
losses on hedged liabilities. In both cases, these gains and losses are
not recognised under Australian GAAP until the hedged transaction is
recognised.
In the half year ended 31 December 2001, for US GAAP purposes, BHP
Billiton Limited de-designated existing derivative instruments as hedges
of underlying transactions. As a consequence, the amount previously
included in other comprehensive income in relation to those derivative
instruments previously designated as cash flow hedges will remain until
the transactions originally being hedged are recognised, at which time
the amounts will be taken to the profit and loss account. Movements in
the fair value of derivative instruments since 30 June 2001 are taken to
the profit and loss account.
Asset write-downs
At 31 May 1998, the BHP Billiton Limited Group changed its impairment
test policy for determining the recoverable amount of non-current assets
from an undiscounted to a discounted basis. The discount rate is a risk
adjusted market rate which is applied both to determine impairment and
to calculate the write-down.
Under US GAAP, where an asset is reviewed for impairment, an impairment
test is required utilising undiscounted cash flows. If the asset's
carrying value exceeds the sum of undiscounted future cash flows, the
asset is considered impaired and it is written down to its fair value.
These differences created adjustments to the profit and loss account in
prior years representing the lower charge to profit and resultant higher
asset values for the write-downs calculated under US GAAP. In subsequent
financial periods, the difference in asset carrying values is reduced
through the inclusion of additional depreciation charges in the profit
and loss account. Refer 'Depreciation' below.
Depreciation
Revaluations of property, plant and equipment and investments have
resulted in upward adjustments to the historical cost values reflected
in a revaluation reserve which is part of total equity. In the case of
property, plant and equipment, the depreciation charged against income
increases as a direct result of such a revaluation. Since US GAAP does
not permit property, plant and equipment to be valued at above
historical cost, the BHP Billiton Limited Group depreciation charge has
been restated to reflect historical cost depreciation.
Following smaller asset write-downs, the higher asset values under US
GAAP are being depreciated in accordance with asset utilisation. Refer '
Asset write-downs' above.
Employee benefits
These accounts include provisions for redundancies associated with
organisational restructuring that can be recognised where positions have
been identified as being surplus to requirements, provided the
circumstances are such that a constructive liability exists. Under US
GAAP a provision for redundancies involving voluntary severance offers
is restricted to employees who have accepted these offers. The
adjustment is reversed over subsequent periods as the offers are
accepted.
Pension costs
The BHP Billiton Group recognises periodic pension cost based on
actuarial advice in a manner similar to US GAAP. However, differences in
the actuarial method used and the timing of recognition of expense
components results in different periodic costs and pension assets or
liabilities.
Realised net exchange gains on sale of assets/closure of operations
Net exchange gains or losses reported in shareholders' funds which
relate to assets that have been sold, closed or written down are
transferred to retained earnings. US GAAP requires these net exchange
gains or losses be recognised in the profit and loss reflecting that
they have, in substance, been realised.
Exploration, evaluation and development expenditures
The BHP Billiton Group follows the ' area of interest' method in
accounting for petroleum exploration, evaluation and development
expenditures. This method differs from the 'successful efforts' method
followed by some US companies, and adopted in this reconciliation to US
GAAP, in that it permits certain exploration costs in defined areas of
interest to be capitalised. Such expenditure capitalised by the BHP
Billiton Group is amortised in subsequent years.
19 Reconciliation to US GAAP (continued)
Employee Share Plan loans
Under the Employee Share Plan, loans have been made to employees for the
purchase of shares in BHP Billiton Limited. Under US GAAP the amount
outstanding as an obligation to the BHP Billiton Limited Group, which
has financed equity, is required to be eliminated from shareholders'
funds.
Employee compensation costs
In these accounts, the expected cost of awards under the BHP Billiton
Limited Employee Share Plan and the Executive Share Plan is charged to
the profit and loss over the vesting period. Under US GAAP, compensation
expense arising from variable share, option and Performance Rights plans
are recognised based on movements in their intrinsic value. Changes to
the exercise terms for certain shares and options arising from the
OneSteel spin-out in October 2000 caused the related plan to become
variable.
Costs of start-up activities
The BHP Billiton Group capitalises as part of property, plant and
equipment, costs associated with start-up activities at new plants or
operations which are incurred prior to commissioning date. These
capitalised costs are depreciated in subsequent years. Under US GAAP
costs of start-up activities should be expensed as incurred. In
subsequent financial periods, amounts amortised (which have been
expensed for US GAAP purposes) will be added back when determining net
income according to US GAAP.
Profit on asset sales
Under US GAAP, profits arising from the sale of assets cannot be
recognised in the period in which the sale occurs where the vendor has a
significant continuing association with the purchaser. In such
circumstances, any profit arising from a sale is recognised over the
life of the continuing arrangements.
The following is a summary of the estimated adjustments to profit for the half
years ended 31 December 2001 and 31 December 2000 and BHP Billiton shareholders'
equity as at 31 December 2001 and 30 June 2001, which would be required if US
GAAP had been applied instead of Australian GAAP.
Net profit for the half year Half Year Ended
BHP Billiton Group BHP Billiton Ltd Group
31 Dec 31 Dec 31 Dec 31 Dec
2001 2001 2001 2000
A$M US$M A$M A$M
Net profit attributable to members of BHP Billiton as 2 293 1 177 1 435 1 427
reported in the Statement of Financial Performance
Deduct/add
- Reversal of intercompany adjustments (A) (8) (4) - -
2 285 1 173 1 435 1 427
Estimated adjustment required to accord with
US GAAP: (B)
add/(deduct)
- Adjustment associated with acquisition of BHP (385) (197) 460 -
Billiton Plc Group
- Depreciation - writedowns (16) (8) (16) (20)
- revaluations 4 2 4 5
- Exploration, evaluation and development expenditure (8) (4) (8) (3)
- Pension plans 16 8 16 (15)
- Consolidation of Tubemakers of Australia Ltd - - - (2)
- Employee entitlements (43) (22) (43) (7)
- Realised net exchange gains and losses 6 3 6 (11)
- Profit on asset sales 2 1 2 1
- Start up costs (2) (1) (2) 2
- Fair valuation of derivative instruments 53 27 53 (43)
Total adjustment (373) (191) 472 (93)
Estimated profit according to US GAAP 1 912 982 1 907 1 334
Earnings per share - US GAAP 31.7 16.3 31.7 36.2
(Cents per share)
Earnings per American Depository Share (ADS)
- US GAAP
(Cents per share) 63.4 32.6 63.4 72.4
19 Reconciliation to US GAAP (continued)
Equity attributable to members BHP Billiton Group BHP Billiton Ltd Group
as at
31 Dec 30 June 31 Dec 30 June 31 Dec 30 June
2001 2001 2001 2001 2001 2001
A$M A$M US$M US$M A$M A$M
Shareholders' equity attributable to
members of the BHP Billiton Entity 24 758 23 452 12 665 11 847 11 920 11 004
(deduct)/add
Reversal of intercompany adjustments 219 229 112 116 - -
24 977 23 681 12 777 11 963 11 920 11 004
Estimated adjustment required to accord
with US GAAP:
(deduct)/add
- Book value of BHP Billiton Plc Group - - - - 12 107 11 674
- Fair value adjustment on
acquisition of BHP Billiton Plc Group
- Inventory and fixed assets - 311 - 157 - 311
- Investments 1 979 2 046 1 012 1 034 1 979 2 046
- Property, Plant and equipment 3 923 4 072 2 006 2 058 3 923 4 072
- Undeveloped properties 1 576 1 630 806 824 1 576 1 630
- Long term contracts 78 79 40 40 78 79
- Goodwill 3 841 3 944 1 964 1 993 4 791 4 947
- Deferred taxation (1 744) (1 907) (892) (964) (1 744) (1 907)
- Long term debt 53 57 27 29 53 57
- Other (74) (97) (38) (49) (74) (97)
- Property, plant and equipment - (129) (135) (66) (68) (129) (135)
revaluations
- Exploration, evaluation and (70) (64) (36) (32) (70) (64)
development expenditures
- Employee Share Plan loans (297) (98) (152) (50) (297) (98)
- Pension plans (147) (164) (75) (83) (147) (164)
- Asset write-downs 323 341 165 173 323 341
- Employee entitlements 31 74 16 38 31 74
- Start-up costs (14) (11) (7) (6) (14) (11)
- Profit on asset sales (25) (28) (13) (14) (25) (28)
- Fair valuation of derivative instruments (561) (872) (287) (441) (561) (872)
Total adjustment 8 743 9 178 4 470 4 639 21 800 21 855
Estimated shareholders' equity attributable 33 720 32 859 17 247 16 602 33 720 32 859
to members of the BHP Billiton Entity
according to US GAAP
20 Significant events after end of half year
Matters or circumstances that have arisen since the end of the half year that
have significantly affected, or may significantly affect, the operations,
results of operations or state of affairs of the Company in subsequent
accounting periods are detailed on page 5.
Directors' DECLARATION
I, Don R Argus, being a Director of BHP Billiton Limited and BHP Billiton Plc,
state on behalf of the Directors and in accordance with a resolution of the
Directors that, in the opinion of the Directors -
(a) the accompanying financial statements set out on pages 8 to 32 are
drawn up so as to give a true and fair view of the financial position as at
31 December 2001, and the performance for the half year ended 31 December
2001 of the consolidated entity and combined entities;
(b) the half year consolidated financial statements have been made out
in accordance with Australian Accounting Standard AASB1029: 'Interim
Financial Reporting' and other mandatory professional reporting
requirements;
(c) at the date of this statement there are reasonable grounds to
believe that the Company will be able to pay its debts as and when they
become due and payable.
D R Argus
Director
Dated in Melbourne this 6th day of March 2002
Independent Review Report
To the members of BHP Billiton Limited
Scope
We have reviewed the financial report of BHP Billiton Limited for the half year
ended 31 December 2001 as set out on pages 8 to 33. The financial report
includes the consolidated financial statements of the consolidated entity
comprising BHP Billiton Limited and the entities it controlled at the end of the
half year or from time to time during the half year. The financial report also
includes financial information for the BHP Billiton Limited and BHP Billiton Plc
Groups on a combined basis.
We have performed an independent review of the financial report in order to
state whether, on the basis of the procedures described, anything has come to
our attention that would indicate that the financial report is not presented
fairly in accordance with Accounting Standard AASB1029 'Interim Financial
Reporting', other mandatory professional reporting requirements in Australia and
statutory requirements so as to present a view which is consistent with our
understanding of the consolidated entity's and combined entities' financial
position, and performance as represented by the results of their operations and
their cash flows, and in order for BHP Billiton Limited to lodge the financial
report with the Australian Securities and Investments Commission.
Our review has been conducted in accordance with Australian Auditing Standards
applicable to review engagements. The review is limited primarily to inquiries
of BHP Billiton Limited's and BHP Billiton Plc's personnel and analytical
procedures applied to the financial data. These procedures do not provide all
the evidence that would be required in an audit, thus the level of assurance is
less than given in an audit. We have not performed an audit, and accordingly, we
do not express an audit opinion.
Statement
Based on our review, which is not an audit, we have not become aware of any
matter that makes us believe that the half year financial report of BHP Billiton
Limited is not in accordance with:
(a) the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity's and
combined entities' financial position as at 31 December 2001 and of
their performance for the half year ended on that date; and
(ii) complying with Accounting Standard AASB1029 'Interim
Financial Reporting' and the Corporations Regulations 2001; and
(b) other mandatory professional reporting requirements.
Arthur Andersen
Chartered Accountants
G A HOUNSELL
Partner
Dated in Melbourne this 6th day of March 2002
This information is provided by RNS
The company news service from the London Stock Exchange
Latest directors dealings
- 9 hours ago Savannah Energy
- 10 hours ago Buccaneer Energy PLC
- 11 hours ago Savannah Energy
- 11 hours ago Carclo
- 11 hours ago Schroder Japan Growth Fund