Interim Results
BHP Billiton Limited
18 February 2004
BHP Billiton Limited is issuing this announcement to fulfil disclosure
obligations arising from its secondary listing on the London Stock Exchange.
The text of this release is identical to that issued by BHP Billiton Plc
earlier.
Date 19 February 2004
Number 10/04
BHP BILLITON RESULTS FOR THE
HALF YEAR ENDED 31 DECEMBER 2003
•EBITDA (excluding exceptional items) up 23.0% to US$3,119 million and
EBIT (excluding exceptional items) up 31.6% to US$2,183 million mainly
reflecting increased commodity prices and operating performance, partly
offset by adverse foreign exchange impacts.
•Strong increase in attributable profit excluding exceptional items to
US$1,213 million, up 30.3% (US$1,339 million, up 46.8%, including
exceptional items), despite adverse movements in exchange rates of
approximately US$230 million compared to the corresponding period.
•Available cash flow (after interest and tax) of US$1,681 million, up
42.6%.
•Half yearly production records in iron ore, aluminium, alumina, nickel
and diamonds.
•Total merger benefits and cost savings of US$655 million since the
merger, against a target of US$770 million by 30 June 2005.
•Five major growth projects commissioned since 30 June 2003 - Ohanet gas
(Algeria), Hillside 3 aluminium (South Africa), Mount Arthur North
(Australia), Mining Area C iron ore and iron ore port expansion (both
Australia).
Half year ended 31 December 2003 2002 Change %
US$M US$M
Turnover (1) 10 963 8 048 36.2%
EBITDA (1) (2) (3) 3 119 2 536 23.0%
EBIT (1) (2) (3) 2 183 1 659 31.6%
Attributable profit (excluding exceptional items) (1) 1 213 931 30.3%
Attributable profit (including exceptional items) (1) 1 339 912 46.8%
Available cash flow (4) 1 681 1 179 42.6%
Basic earnings per share (US cents) (1) (2) 19.5 15.0 30.0%
EBITDA interest coverage (times) (1) (2) (3) (5) 14.8 12.7 16.5%
Dividend per share (US cents) 8.0 7.0 14.3%
(1) Including the Group's share of joint ventures and associates.
(2) Excluding exceptional items.
(3) EBIT is earnings before interest and tax. EBITDA is EBIT before depreciation
and amortisation of US$936 million (comprising Group depreciation and
amortisation of US$853 million and joint venture and associate depreciation and
amortisation of US$83 million) for the half year ended 31 December 2003 and
US$877 million (comprising Group depreciation and amortisation of US$792 million
and joint venture and associate depreciation and amortisation of US$85 million)
for the half year ended 31 December 2002. We believe that EBIT and EBITDA
provide useful information, but should not be considered as an indication of, or
alternative to, attributable profit as an indicator of operating performance or
as an alternative to cash flow as a measure of liquidity.
(4) Available cash flow is operating cash flow including dividends from joint
ventures and associates and after net interest and tax.
(5) For this purpose, net interest includes capitalised interest and excludes
the effect of discounting on provisions and exchange differences arising from
net debt.
The above financial results are prepared in accordance with UK generally
accepted accounting principles (GAAP) and are unaudited. Financial results in
accordance with Australian GAAP are provided on page 28. All references to the
corresponding period are to the half year ended 31 December 2002.
RESULTS FOR THE HALF YEAR ENDED 31 DECEMBER 2003
Commentary on the Group Interim Results
Introduction
The significant growth in the Group's operating and financial performance for
the half year ended 31 December 2003 reflects the consistent execution of its
business strategy over the last several years. The Group has focussed on: 1)
maximising the performance of its operating assets; 2) identifying opportunities
to save cost through the sharing of best practices, including benefiting from
its economies of scale, and; 3) utilising its stable cash flow to reinvest in
its substantial number of growth projects.
Earnings before interest and tax (excluding exceptional items) was US$2,183
million, 31.6% higher than the corresponding period of US$1,659 million,
reflecting higher prices for all commodities, increased sales volumes for
copper, metallurgical coal, diamonds, iron ore and aluminium, and lower
operating costs, partly offset by adverse foreign exchange impacts.
Attributable profit (excluding exceptional items) increased by 30.3% to US$1,213
million compared with the corresponding period of US$931 million. BHP Billiton
operates under a US dollar functional currency based on the fact that the vast
majority of our revenue is US dollar denominated. One major profit impact of
operating as a US dollar functional currency company is the translation of non
US dollar denominated net monetary liabilities at balance date, with the
movement from the corresponding period taken directly to the profit and loss
account in the current period. These are non-cash restatements and reduced
attributable profit by approximately US$230 million compared with the
corresponding period. Attributable profit including exceptional items was
US$1,339 million, an increase of 46.8% from the corresponding period.
Our strong operating performance is reflected in a number of production records
being set during the half year. Western Australian iron ore production of 44.9
million tonnes (100 per cent terms) and despatches of 44.0 million tonnes (100
per cent terms) were both records, driven by strong demand in all Asian markets,
particularly China. Aluminium production was a record at 590,000 tonnes,
following the early commissioning of the Mozal 2 expansion in Mozambique and the
Hillside 3 expansion in South Africa. The benefits of operating excellence
initiatives have also contributed to half yearly production records being set
for nickel, alumina and diamonds.
Building on the merger benefits and cost savings generated to 30 June 2003,
additional savings of US$60 million achieved during the current half year brings
total savings to US$655 million since the merger. The Group is confident of
achieving its previously announced target of US$770 million by 30 June 2005.
Progress continued with our pipeline of projects with first gas production at
the Ohanet wet gas development in Algeria, first metal being cast at the
Hillside aluminium smelter expansion in South Africa, full production achieved
at the Mozal 2 aluminium smelter expansion project in Mozambique, and the first
iron ore shipment from Mining Area C in Western Australia, through the newly
expanded port facilities. Each of these projects was completed on or under
budget, and on or ahead of schedule. The Group currently has nine major growth
projects in development.
EBIT margin before exceptional items and third party product sales was 26.8%
compared to 24.6% for the corresponding period.
This performance has enabled the Group to continue its progressive dividend
policy with a 14.3% increase in the first half dividend compared with last year,
while continuing to progress our pipeline of value accretive growth projects.
The Income Statement
Turnover rose by 36.2% to US$10,963 million, mainly due to higher sales volumes
of copper, metallurgical coal, diamonds, iron ore and aluminium and higher
prices for copper, nickel, aluminium, petroleum products, chrome, energy coal,
iron ore, hot briquetted iron, diamonds and manganese. Turnover includes sales
of third party product which increased by US$1,483 million to US$2,829 million
due to higher prices and volumes. These factors were partly offset by lower
sales volumes of petroleum products and titanium feedstock products.
Earnings before interest, tax, depreciation and amortisation (EBITDA) excluding
exceptional items increased by 23.0% to US$3,119 million from US$2,536 million
in the corresponding period.
Earnings before interest and tax (EBIT) excluding exceptional items were
US$2,183 million compared with US$1,659 million in the corresponding period, an
increase of 31.6%. This increase was due to higher commodity prices, cost
savings, increased sales volumes and profits from asset sales. Offsetting
factors were exchange rate impacts, increased price linked costs, inflationary
pressures principally in Australia and South Africa, higher exploration
expenditure and lower profits of ceased, sold and discontinued operations in the
corresponding period. Further analysis of the factors affecting turnover and
EBIT is set out on page 7 and 8.
Net interest on borrowings and cash increased to US$211 million from US$200
million in the corresponding period, principally driven by costs associated with
restructuring the Group's debt portfolio, partially offset by lower average debt
levels.
Exchange losses on net debt were US$89 million compared to net losses of US$58
million in the corresponding period.
The tax charge excluding exceptional items was US$658 million, representing an
effective rate of 34.8%. Excluding the impacts on tax of non tax-effected
foreign currency adjustments, translation of tax balances and other functional
currency translation adjustments, mainly attributable to the strengthening of
both the South African rand and Australian dollar against the US dollar during
the period, the effective rate was 27.3%. The Group has continued to recoup
unrecognised tax losses in the US, which resulted in a 2.6% reduction in the
effective tax rate of the Group (US$50 million). In addition, investment
incentives and development entitlements which have been able to be recognised
during the current half year, further reduced the effective tax rate by
approximately 3%.
Attributable profit excluding exceptional items (after minority interests of
US$18 million) was US$1,213 million, an increase of 30.3% from US$931 million
(after minority interests of US$17 million), largely due to the positive impacts
on EBIT.
Excluding the impact of exceptional items, basic earnings per share was 19.5 US
cents against 15.0 US cents in the corresponding period, an increase of 30.0%.
Exceptional Items
In December 2003, BHP Billiton announced that it was part of a consortium that
had reached a settlement with Dalmine SpA with respect to a claim brought
against Dalmine in April 1998. The claim followed the failure of an underwater
pipeline installed in 1994 in the Liverpool Bay area of the UK continental
shelf. As a result of the settlement, BHP Billiton has recorded an exceptional
gain of US$66 million (US$48 million after tax).
During the current half year, BHP Billiton has elected to consolidate its
Australian subsidiaries under the Australian tax consolidation regime, as
introduced by the Australian Federal Government. Under the transitional rules,
the Group has chosen to reset the tax cost base of certain depreciable assets
which will result in additional tax depreciation over the lives of the assets.
This has resulted in the restatement of deferred tax balances and an exceptional
tax benefit of US$78 million being recorded in accordance with UK Generally
Accepted Accounting Principles.
Attributable profit including exceptional items (after minority interests of
US$18 million) was US$1,339 million, an increase of 46.8% from US$912 million
(after minority interests of US$17 million).
Including the impact of exceptional items, basic earnings per share was 21.5 US
cents against 14.7 US cents in the corresponding period, an increase of 46.3%.
Cash Flows
Available cash flow (after interest and tax) increased by 42.6% to US$1,681
million.
Expenditure on growth projects and investments amounted to US$836 million,
including US$383 million on petroleum projects and US$453 million on minerals
and other corporate projects. Sustaining capital expenditure was US$400 million
and exploration expenditure was US$193 million, while disposals of fixed assets,
sale of investments and associates and repayments of loans by joint ventures
generated US$108 million.
Net cash flow before dividend payments was US$360 million. Dividends paid in the
period were US$959 million compared with US$830 million in the corresponding
period.
Net debt of US$6,386 million at 31 December 2003 represents 32.3% of net debt
plus net assets. Net debt comprises US$7,198 million of total debt offset by
US$812 million of cash, including money market deposits.
Cost Savings
In addition to targeted merger benefits of US$270 million, in April 2002 under
our Strategic Framework, we set a further target for annual cost savings of
US$500 million to be achieved by 30 June 2005. The target is measured by
comparing current commodity based unit costs, with those of the 30 June 2001
financial year after adjusting for inflation, exchange rate movements and other
one-off items. Cost savings are driven by the continuation of our Operating
Excellence program (comprising the three key elements of leadership, process
improvement and technology), strategic sourcing and marketing initiatives.
During the current half year, we achieved savings of US$60 million. Combined
with total merger benefits and cost savings of US$595 million achieved to 30
June 2003, this brings our total benefits and savings since the merger to US$655
million.
Portfolio Management
The sale of a non-core royalty interest by Diamonds and Specialty Products
generated a profit of US$37 million before tax in the current half year. In
December 2003, the Group announced it had entered into agreements to sell its
33.6% interest in Highland Valley Copper mine in Canada and the Robinson copper/
gold mine in the US. These sales will be recognised when completed, which is
expected to be in the second half of this financial year if certain conditions
precedent are met.
Dividend
On 3 December 2003, a dividend of 8.0 US cents per share was paid to BHP
Billiton Limited and BHP Billiton Plc shareholders, representing an increase of
14.3% on the interim dividend of 7.0 US cents per share paid in December 2002.
The BHP Billiton Limited dividend was fully franked for Australian taxation
purposes.
Capital Management
In October 2003, Standard & Poor's upgraded the Group's long term credit rating
from A to A+. The benefit of a diversified portfolio, strong financial
performance, disciplined financial policies and the successful integration of
the Group's operations following the merger underpinned the upgrade.
Contingent Liabilities
On 18 December 2003, the Victorian Supreme Court action in relation to Ok Tedi
(Papua New Guinea) brought by Rex Dagi against BHP Billiton Limited was
discontinued and on 16 January 2004 the Victorian Supreme Court approved the
settlement of the Gagarimabu class action and dismissed the claim against BHP
Billiton Limited. The settlement involves no further cost to the Group and the
plaintiffs acknowledging that the Group has, at all times, complied with the
1996 Terms of Settlement. The Group no longer has a contingent liability in
relation to Ok Tedi.
Corporate Governance
Mr Cornelius Herkstroter retired as a Director in the December quarter and a
worldwide search is underway for a replacement.
The Group completed a review of its joint external audit services and resolved
that the audit could be more efficiently undertaken by a single audit firm. As a
result of this review, KPMG was selected to continue as sole auditor.
During the half year, the Group announced that it would no longer report
quarterly financial results. This decision brings the Group into line with its
major peers and follows standard practice in the Australian and UK markets of
reporting half and full year results only. BHP Billiton will release its full
year results in August 2004.
Outlook
China continues to record strong domestic growth, providing the impetus for a
recovery in other Asian economies. Continued expansionary monetary and fiscal
policies in the other major economies have provided the basis for improving
business conditions around the world. Recovery in the US has been reinforced by
an upturn in investment, rising manufacturing orders and output, and robust
expectations for future production, employment and exports. European countries
are benefiting from an upturn in global trade, although the strength of the Euro
against the US dollar is a cause for concern. Japan continues to record strong
quarterly growth. Although not without risks, a synchronised global recovery is
a possibility.
BHP Billiton is well placed to take advantage of both current strong demand and
the continued recovery in global economies. In the short term we will continue
to optimise the performance of our existing assets and, where possible,
accelerate smaller scale expansions utilising existing infrastructure to service
market requirements whilst maximising capital efficiency. In addition, we will
bring forward larger, brownfield and greenfield, organic growth opportunities in
certain commodities where we see continued demand growth, enabling us to meet
the longer term needs of our customers. As a result of recent successful
exploration results, we will increase funding for petroleum exploration by
US$100 million in FY2004. Our strong cash flow and balance sheet leave us well
placed to pursue all of these activities.
TRADING REVIEW
EBIT
The following table and commentary detail the approximate impact of major
factors affecting EBIT (excluding exceptional items) for the half year ended 31
December 2003 compared with the corresponding period.
US$M
EBIT excluding exceptional items for the half year
ended 31 December 2002 1 659
Change in volumes 45
Change in sales prices 1 005
Price-linked costs (85)
Inflation on costs (90)
Costs 65
New and acquired operations 10
Ceased, sold and discontinuing operations (20)
Asset sales 55
Exchange rates (455)
Exploration (30)
Other items 24
EBIT excluding exceptional items for the half year
ended 31 December 2003 2 183
Volumes
Higher sales volumes of copper, metallurgical coal, diamonds, iron ore and
aluminium increased EBIT. This was partly offset by lower sales volumes of
petroleum products and titanium feedstock products, resulting in a positive net
volume impact on EBIT of US$45 million.
Prices
Higher prices for all major commodities increased EBIT by US$1,005 million.
Costs
Favourable operating cost performance increased EBIT by US$65 million compared
with the corresponding period.
Increases in price-linked costs decreased EBIT by US$85 million, mainly due to
higher nickel ore supply costs to the QNI Yabulu refinery (Australia), increased
taxes for petroleum products and increased costs linked to higher LME prices.
Inflationary pressures, principally in Australia and South Africa, increased
costs by US$90 million.
New and acquired operations
New and acquired operations increased EBIT by US$10 million due to the
commencement of commercial production from the Ohanet wet gas development in
Algeria from October 2003.
Ceased, sold and discontinuing operations
The corresponding period included EBIT of US$20 million mainly from the
Alumbrera mine (Argentina) which was divested effective April 2003.
Asset sales
The impact of asset sales is an increase in EBIT of US$55 million mainly due to
the sale of a non-core royalty interest (of US$37 million) in the current
period.
Exchange rates
The unfavourable exchange rate impact on EBIT of US$455 million was primarily
due to the effects of stronger A$/US$ and rand/US$ exchange rates on operating
costs. The conversion of rand and A$ denominated net monetary liabilities at
balance sheet date also had an unfavourable impact (US$75 million), which was
mainly due to the A$/US$ exchange rate appreciating 12.3% during the current
period compared with no movement in the corresponding period. This was partly
offset by gains on legacy A$/US$ currency hedging of US$30 million in the
current period, a favourable impact of US$125 million when compared to losses of
US$95 million in the corresponding period.
Exploration
Exploration expense was up by US$30 million. Gross exploration spending was
US$193 million, comprising petroleum exploration of US$153 million and minerals
exploration of US$40 million, compared with US$130 million in the corresponding
period. The capitalisation rate for petroleum exploration was 49.7% in the
current half year, compared to 47.4% in the corresponding period.
CUSTOMER SECTOR GROUP SUMMARY
The following table provides a summary of the Customer Sector Group results for
the half year ended 31 December 2003 and the corresponding period (before
exceptional items).
Half year ended 31 December (US$ Million) Turnover (1) EBIT (1)
2003 2002 Change % 2003 2002 Change %
Petroleum 2 245 1 511 48.6% 602 660 (8.8%)
Aluminium 2 023 1 535 31.8% 307 266 15.4%
Base Metals 1 351 897 50.6% 333 83 301.2%
Carbon Steel Materials 2 206 1 747 26.3% 505 506 (0.2)%
Diamonds and Specialty Products 758 716 5.9% 195 150 30.0%
Energy Coal 1 242 947 31.2% 85 124 (31.5)%
Stainless Steel Materials 744 491 51.5% 193 61 216.4%
Group and unallocated items 810 424 91.0% (37) (191) N/A
BHP Billiton Group (2) 10 963 8 048 36.2% 2 183 1 659 31.6%
(1) Turnover and EBIT include trading activities comprising the sale of third
party product.
(2) BHP Billiton Group turnover is stated after the elimination of intersegment
transactions.
An explanation of the factors influencing EBIT before exceptional items,
including joint ventures and associates, by Customer Sector Group, is as
follows:
Petroleum
Petroleum contributed EBIT of US$602 million, down from US$660 million, a
decrease of 8.8% compared with the corresponding period.
The decrease in EBIT was mainly attributable to lower liquids production,
appreciation of the A$/US$ exchange rate, higher exploration expenditure and
losses on the sale of third party product. Offsetting these factors were
stronger product prices (net of price-linked costs), higher gas volumes and new
production from Ohanet (Algeria) and Boris (US).
Overall, production of petroleum products on a barrel of oil equivalent basis
declined by 1% from 63.1 million barrels to 62.4 million barrels in the current
half year, with oil and condensate production declining by 13% from 34.9 million
barrels to 30.4 million barrels. Lower oil production was due to expected
natural field decline at Laminaria (Australia), Bass Strait (Australia) and
Griffin (Australia). Offsetting this was higher production from Liverpool Bay
(UK), the commissioning of Boris North (US) in September 2003, and Boris South
(US) in February 2003 and the commissioning of Ohanet in October 2003. Natural
gas production increased due to the successful commissioning of the Zamzama
(Pakistan) Phase 1 project in July 2003, together with increased production from
Liverpool Bay.
The conversion of A$ denominated net monetary liabilities, mainly resource rent
tax, had an unfavourable impact on EBIT of US$40 million compared with the
corresponding period. For the period, gross exploration expenditure was US$153
million, which was US$58 million higher than the corresponding period. The
increased spending resulted in a higher level of exploration charged to profit
(US$77 million in the current period compared to US$50 million in the
corresponding period) despite an improved capitalisation rate of approximately
50%. This increase in spending was mainly due to increased activity in the Gulf
of Mexico and Trinidad and Tobago, following successful drilling results.
The decrease in EBIT was partly offset by higher average realised prices. The
average realised oil price was US$29.40 per barrel compared to US$27.19 per
barrel in the corresponding period. The average realised natural gas price was
US$2.37 per thousand standard cubic feet compared to US$1.98 per thousand
standard cubic feet in the corresponding period.
Aluminium
Aluminium contributed EBIT of US$307 million, up from US$266 million, an
increase of 15.4% compared with the corresponding period.
The increase in EBIT was mainly attributable to higher realised aluminium prices
due to the average aluminium LME price increasing to US$1,474 per tonne in the
current period, compared to US$1,332 per tonne in the corresponding period,
together with higher realised alumina prices. Higher sales volumes from Mozal 2
(Mozambique) and Hillside 3 (South Africa) following full commissioning in
August 2003 and December 2003 respectively, also had a favourable impact on
EBIT.
These factors were partially offset by higher LME price-linked costs, the
unfavourable impact of strengthening A$/US$ and rand/US$ average exchange rates
on operating costs, and increased transportation costs. The commissioning of
Mozal 2 and Hillside 3 has also led to higher in-process stocks and finished
goods.
Base Metals
Base Metals contributed EBIT of US$333 million, up from US$83 million, an
increase of US$250 million compared with the corresponding period.
The increase in EBIT was mainly attributable to the higher average realised
copper price of US$0.96 per pound for the half year ended 31 December 2003,
compared to US$0.68 per pound in the corresponding period. Higher prices for
silver, lead and zinc also had a favourable impact on EBIT. Copper production
was 8% higher in the current period mainly due to increased production from the
commissioning of the Phase IV expansion project at Escondida (Chile) in October
2002, and the resumption of sulphide mining operations at Tintaya (Peru) in
August 2003.
These factors were partially offset by higher production costs at Antamina
(Peru) due to access to ore being restricted to the flanks of the deposit, and
at Escondida due to higher depreciation charges associated with the Phase IV
expansion project. The stronger A$/US$ and Chilean peso/US$ average exchange
rates also had an unfavourable impact on EBIT. The corresponding period includes
the results of the Alumbrera mine, which was sold effective April 2003.
Carbon Steel Materials
Carbon Steel Materials contributed EBIT of US$505 million, in line with the
US$506 million in the corresponding period.
EBIT was unfavourably impacted by the stronger A$/US$ and rand/US$ average
exchange rates on operating costs compared with the corresponding period, as
well as unfavourable inflationary pressure on Australian and South African
operations.
These factors were largely offset by higher iron ore prices following contract
settlements announced in May 2003 and stronger prices for hot briquetted iron.
Higher production at the Western Australian iron ore operations and the
Queensland Coal operations led to improved cost performance. Increased shipments
at Queensland Coal and record shipments of iron ore, both in response to
continued strong customer demand, had a favourable impact on EBIT as did
stronger prices for manganese alloys and continuing improvements in the
operating performance of Boodarie Iron (Australia).
Diamonds and Specialty Products
Diamonds and Specialty Products contributed EBIT of US$195 million, up from
US$150 million, an increase of 30.0% compared with the corresponding period.
The increase in EBIT was mainly attributable to profits realised on the sale of
a non-core royalty interest (US$37 million) and mineral rights. Higher average
realised diamond prices, up 14% from the corresponding period, and increased
diamond sales, up 25% from the corresponding period due to the processing of a
pocket of high-grade ore, had a favourable impact on EBIT. Processing
efficiencies achieved at Ekati (Canada) also impacted EBIT favourably.
These factors were partially offset by lower volumes of titanium feedstock in
response to weaker market conditions. The unfavourable impact of strengthening
rand/US$ and Canadian$/US$ average exchange rates on operating costs also had a
negative impact on EBIT.
Energy Coal
Energy Coal contributed EBIT of US$85 million, down from US$124 million, a
decrease of 31.5% compared with the corresponding period.
The decrease in EBIT was primarily due to the unfavourable impact of stronger
rand/US$ and A$/US$ average exchange rates on operating costs and the conversion
of rand and A$ denominated net monetary liabilities at balance date. In
addition, lower exports due to lower availability from Ingwe (South Africa),
down 12% in the current half year, had an unfavourable impact on EBIT. Increased
unit costs at Ingwe, due to the production mix between mines and additional
contractor costs at that operation, and inflationary pressures in South Africa,
also impacted EBIT negatively.
These factors were partially offset by stronger export prices, cost savings at
Cerrejon Coal (Colombia) due to integration synergies and business improvement
programs, and increased volumes at Hunter Valley (Australia) and Cerrejon Coal.
Stainless Steel Materials
Stainless Steel Materials contributed EBIT of US$193 million, up from US$61
million, an increase of US$132 million or 216% compared with the corresponding
period.
The increase in EBIT was driven by higher realised prices for nickel, up 49% on
the corresponding period from US$3.16 per pound to US$4.72 per pound, and higher
prices for ferrochrome compared to the corresponding period.
These factors were partially offset by the unfavourable impact of stronger rand/
US$ and A$/US$ average exchange rates on operating costs. Higher price-linked
nickel ore supply costs to the QNI Yabulu refinery and higher price-linked
royalty costs at Cerro Matoso (Colombia) also adversely affected EBIT.
Group and Unallocated Items
Net corporate operating costs, excluding gains and losses from legacy A$/US$
currency hedging and other exchange impacts, were US$102 million compared with
US$111 million in the corresponding period.
Gains on legacy A$/US$ currency hedging were approximately US$30 million during
the current half year, compared with losses of approximately US$95 million in
the corresponding period.
INTERIM FINANCIAL INFORMATION
CONTENTS
INDEPENDENT REVIEW REPORT OF THE AUDITOR
TO BHP BILLITON PLC 14
CONSOLIDATED PROFIT AND LOSS ACCOUNT 15
CONSOLIDATED STATEMENT OF TOTAL
RECOGNISED GAINS AND LOSSES 16
CONSOLIDATED BALANCE SHEET 17
CONSOLIDATED STATEMENT OF CASH FLOWS 18
NOTES TO INTERIM FINANCIAL INFORMATION 20
The interim financial information set out on pages 15 to 27 has been prepared on
the same basis and using the same accounting policies as were applied in drawing
up the financial information contained in the accounts of BHP Billiton Plc for
the year ended 30 June 2003 except for the change in accounting policy for
employee share awards referred to in Note 1. The interim financial information
should be read in conjunction with the accounts of BHP Billiton Plc for the year
ended 30 June 2003 and does not include all information normally contained
within the notes to annual accounts. Where applicable, comparatives have been
adjusted to disclose them on the same basis as current period figures.
The financial information for the half years ended 31 December 2003 and 31
December 2002 has been subject to review by the auditor but is unaudited. In the
opinion of the Directors, the financial information for these periods presents
fairly the financial position, results of operations and cash flows for the
periods in conformity with UK generally accepted accounting principles (GAAP).
The financial information for the year ended 30 June 2003 has been derived from
the audited financial statements of BHP Billiton Plc for that period as filed
with the UK Registrar of Companies and does not constitute the statutory
accounts of BHP Billiton Plc for that period. The auditors' report on the
statutory accounts for the year ended 30 June 2003 was unqualified and did not
contain statements under Section 237 (2) (regarding adequacy of accounting
records and returns) or under Section 237 (3) (provision of necessary
information and explanations) of the United Kingdom Companies Act 1985.
INDEPENDENT REVIEW REPORT OF THE AUDITOR TO BHP BILLITON PLC
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 31 December 2003 set out on pages 15 to 27 and we have read
the other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Listing
Rules of the United Kingdom Financial Services Authority. Our review has been
undertaken so that we might state to the Company those matters we are required
to state to it in this report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the Company for our review work, for this report, or for the conclusions we have
reached.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the United Kingdom Financial Services Authority which require that the
accounting policies and presentation applied to the interim figures should be
consistent with those applied in preparing the preceding annual accounts except
where they are to be changed in the next annual accounts, in which case any
changes, and the reasons for them, are to be disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/
4: 'Review of Interim Financial Information' issued by the Auditing Practices
Board for use in the United Kingdom. A review consists principally of making
enquiries of management and applying analytical procedures to the financial
information and underlying financial data and, based thereon, assessing whether
the accounting policies and presentation have been consistently applied unless
otherwise disclosed and excludes audit procedures such as tests of controls and
verification of assets, liabilities and transactions. A review is substantially
less in scope than an audit performed in accordance with United Kingdom Auditing
Standards and therefore provides a lower level of assurance than an audit.
Accordingly we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 December 2003.
KPMG Audit Plc
Chartered Accountants
London, 19 February 2004
Interim Financial Information BHP Billiton Plc
Consolidated Profit and Loss Account
for the half year ended 31 December 2003
Half year ended Half year ended Year ended
31 December 2003 31 December 2002 30 June 2003
Excluding Excep Excluding Excep Excluding Excep
excep tional excep tional excep tional
tional items tional items tional items
items (Note 2) Total items (Note 2) Total items (Note 2) Total
Notes US$M US$M US$M US$M US$M US$M US$M US$M US$M
Turnover
(including share
of joint ventures
and associates)
Group production 8 134 - 8 134 6 702 - 6 702 14 124 - 14 124
Third party 3 2 829 - 2 829 1 346 - 1 346 3 382 - 3 382
products
3, 4 10 963 - 10 963 8 048 - 8 048 17 506 - 17 506
less Share of (1 016) - (1 016) (977) - (977) (1 898) - (1 898)
joint ventures'
and associates'
turnover included
above
Group turnover 9 947 - 9 947 7 071 - 7 071 15 608 - 15 608
Net operating 2 (8 014) 66 (7 948) (5 618) - (5 618) (12 554) - (12 554)
costs
Group operating 1 933 66 1 999 1 453 - 1 453 3 054 - 3 054
profit/(loss)
Share of 170 - 170 184 - 184 358 - 358
operating
profit/(loss) of
joint ventures
and associates
Operating 2 103 66 2 169 1 637 - 1 637 3 412 - 3 412
profit/(loss)
(including share
of profit of
joint ventures
and associates)
Comprising:
Group production 2 097 66 2 163 1 627 - 1 627 3 369 - 3 369
Third party 3 6 - 6 10 - 10 43 - 43
products
2 103 66 2 169 1 637 - 1 637 3 412 - 3 412
Income from other 18 - 18 14 - 14 16 - 16
fixed asset
investments
Profit on sale of 62 - 62 8 - 8 46 - 46
fixed assets
Profit on sale of - - - - - - 7 - 7
operations
Loss on sale of 2 - - - - (19) (19) - (19) (19)
Discontinued
Operations (a)
Profit/(loss) 2 183 66 2 249 1 659 (19) 1 640 3 481 (19) 3 462
before net
interest and
similar items
payable and
taxation
Net interest and
similar items
payable
Group 5 (242) - (242) (199) - (199) (444) - (444)
Joint ventures 5 (52) - (52) (46) - (46) (93) - (93)
and associates
Profit/(loss) 3, 4 1 889 66 1 955 1 414 (19) 1 395 2 944 (19) 2 925
before taxation
Taxation 2 (658) 60 (598) (466) - (466) (984) - (984)
Profit/(loss) 1 231 126 1 357 948 (19) 929 1 960 (19) 1 941
after taxation
Equity minority (18) - (18) (17) - (17) (40) - (40)
interests
Profit/(loss) for 1 213 126 1 339 931 (19) 912 1 920 (19) 1 901
the financial
period
(attributable
profit)
Dividends to (497) - (497) (434) - (434) (900) - (900)
shareholders
Retained 716 126 842 497 (19) 478 1 020 (19) 1 001
profit/(loss) for
the financial
period
Earnings per 7 19.5 2.0 21.5 15.0 (0.3) 14.7 30.9 (0.3) 30.6
ordinary share
(basic) (US
cents)
Earnings per 7 19.5 2.0 21.5 15.0 (0.3) 14.7 30.9 (0.3) 30.6
ordinary share
(diluted) (US
cents)
Dividend per 8.0 7.0 14.5
ordinary share
(US cents)
(a) All the items in the Profit and Loss Account relate to Continuing Operations
other than the loss on the sale of Discontinued Operations (refer Note 2).
The accompanying notes form part of these interim financial statements.
Consolidated Statement of Total Recognised Gains and Losses
for the half year ended 31 December 2003
Half year Half year Year ended
ended ended 30 June
31 December 31 December 2003
2003 2002
US$M US$M US$M
Attributable profit for the financial period 1 339 912 1 901
Exchange gains on foreign currency net investments 47 39 67
Total recognised gains for the financial period 1 386 951 1 968
Prior year adjustment arising from the change in accounting 84 - -
policy (refer Note 1)
Total recognised gains since last annual report 1 470 951 1 968
The accompanying notes form part of these interim financial statements.
Consolidated Balance Sheet
at 31 December 2003
As at As at As at
31 December 31 December 30 June
2003 2002 2003
Notes (Restated) (Restated)
US$M US$M US$M
Fixed assets
Intangible assets
Goodwill 35 38 36
Negative goodwill (28) (32) (29)
7 6 7
Tangible assets 20 565 18 931 19 809
Investments
Joint ventures - share of gross assets 2 873 2 799 2 880
Joint ventures - share of gross liabilities (1 482) (1 361) (1 477)
1 391 1 438 1 403
Associates - 100 -
Loans to joint ventures and associates and other 388 866 441
investments
Total fixed assets 22 351 21 341 21 660
Current assets
Stocks 1 658 1 253 1 379
Debtors
Amounts due within one year 3 033 2 254 2 224
Amounts due after more than one year 1 684 1 149 1 405
4 717 3 403 3 629
Investments 185 107 143
Cash including money market deposits 812 874 1 552
Total current assets 7 372 5 637 6 703
Creditors - amounts falling due within one year (4 379) (4 397) (4 207)
Net current assets 2 993 1 240 2 496
Total assets less current liabilities 25 344 22 581 24 156
Creditors - amounts falling due after more than (6 494) (6 569) (6 849)
one year
Provisions for liabilities and charges (5 494) (4 224) (4 898)
Net assets 13 356 11 788 12 409
Equity minority interests (314) (302) (318)
Attributable net assets 13 042 11 486 12 091
Capital and reserves
Called up share capital - BHP Billiton Plc 1 234 1 234 1 234
Share premium account 518 518 518
Contributed equity - BHP Billiton Limited 1 833 1 759 1 785
Profit and loss account 9 482 7 981 8 580
Interest in shares of BHP Billiton 1, 6 (25) (6) (26)
Equity shareholders' funds 6 13 042 11 486 12 091
The accompanying notes form part of these interim financial statements.
Consolidated Statement of Cash Flows
for the half year ended 31 December 2003
Half year Half year Year ended
ended ended 30 June
31 December 31 December 2003
2003 2002
US$M US$M US$M
Net cash inflow from Group operating activities (a) 2 283 1 819 4 793
Dividends received from joint ventures and associates 109 70 197
Interest paid (209) (158) (383)
Dividends paid on redeemable preference shares (12) (12) (28)
Interest received 38 6 36
Other dividends received 18 14 15
Dividends paid to minorities (3) (20) (38)
Net cash outflow from returns on investments and servicing of (168) (170) (398)
finance
Taxation paid (543) (540) (1 002)
Available cash flow 1 681 1 179 3 590
Purchases of tangible fixed assets (1 213) (1 216) (2 571)
Exploration expenditure (193) (130) (348)
Disposals of tangible fixed assets 62 33 99
Purchase of investments and funding of joint ventures (23) (52) (95)
Sale of investments and repayments by joint ventures (b) 40 165 560
Net cash outflow from capital expenditure and financial (1 327) (1 200) (2 355)
investment
Demerger or sale of subsidiaries (b) - 358 358
Cash transferred on demerger or disposal (b) - (86) (86)
Disposal of joint ventures and associates 6 - 133
Net cash inflow from acquisitions and disposals 6 272 405
Net cash flow before equity dividends paid, management of liquid 360 251 1 640
resources and financing
Equity dividends paid (959) (830) (830)
Net cash flow before management of liquid resources and financing (599) (579) 810
Net cash inflow/(outflow) from management of liquid resources 667 (6) (665)
Debt due within one year - repayment of loans (331) (1 657) (2 683)
Debt due within one year - drawdowns 274 1 264 1 435
Debt due after more than one year - repayment of loans (226) (1 038) (1 438)
Debt due after more than one year - drawdowns 41 1 614 2 263
Finance lease obligations (1) - -
Net cash (outflow)/inflow from debt and finance leases (243) 183 (423)
Share repurchase scheme - BHP Billiton Plc - - (20)
Purchase of shares by ESOP trusts (14) - -
Issue of shares 55 147 172
Net cash (outflow)/inflow from financing (202) 330 (271)
Decrease in cash in the period (134) (255) (126)
The accompanying notes form part of these interim financial statements.
Consolidated Statement of Cash Flows continued
for the half year ended 31 December 2003
Half year ended Half year ended Year ended
31 December 31 December 30 June
2003 2002 2003
Notes US$M US$M US$M
Reconciliation of net cash flow to movement in net
debt
Decrease in cash in the period (134) (255) (126)
Cash flow from debt and finance leases 243 (183) 423
Cash flow from management of liquid resources (667) 6 665
(Increase)/decrease in net debt arising from cash (558) (432) 962
flows
Other non-cash movements 8 - 232 232
Increase in net debt from exchange adjustments 8 (56) (41) (144)
(Increase)/decrease in net debt (614) (241) 1 050
Net debt at beginning of period 8 (5 772) (6 822) (6 822)
Net debt at end of period 8 (6 386) (7 063) (5 772)
(a) Net cash inflow from Group operating activities
Half year ended Half year ended Year ended
31 December 2003 31 December 2002 30 June 2003
US$M US$M US$M
Operating profit 1 999 1 453 3 054
Depreciation and amortisation 853 792 1 648
Impairment of assets 9 - 73
Employee share awards 28 15 60
Net exploration charge 106 83 248
Increase in stocks (276) (124) (250)
Increase in debtors (821) (193) (286)
Increase/(decrease) in creditors 320 (152) 69
Increase/(decrease) in provisions 68 (53) 128
Other movements (3) (2) 49
Net cash inflow from Group operating 2 283 1 819 4 793
activities
(b) The impact on the BHP Billiton Group's cash flows of the demerger of the BHP
Steel business in July 2002 was a cash inflow of US$347 million. This represents
US$294 million from the settlement by BHP Steel of intercompany loans, less
US$22 million demerger transaction costs paid, which are both included in net
cash inflow from acquisitions and disposals, and US$75 million from the sale of
the 6 per cent interest in BHP Steel which is included in the sale of
investments and repayments by joint ventures.
The accompanying notes form part of these interim financial statements.
Notes to Interim Financial Information
NOTE 1. CHANGE IN ACCOUNTING POLICY
Employee Share Awards
The BHP Billiton Group has adopted the provisions of Urgent Issues Task Force
(UITF) Abstract 38 'Accounting for Employee Share Ownership Plan (ESOP) Trusts'
from 1 July 2003 which has resulted in the adoption of a revised accounting
policy for employee share awards.
Under the revised accounting policy, the estimated cost of share awards made by
the BHP Billiton Group is charged to profit over the period from grant date to
the date of expected vesting or the performance period, as appropriate. The
accrued employee entitlement is recorded as an equal credit to shareholders'
funds. The estimated cost of awards is based on the market value of shares at
the grant date (in the case of Group Incentive Scheme Performance Shares,
Performance Rights, the Bonus Equity Plan, the Restricted Share Scheme and
Co-Investment Plan) or the intrinsic value of options awarded (being the
difference between the exercise price and the market price at the date of
granting the award), adjusted to reflect the impact of performance conditions,
where applicable. Where awards are satisfied by on market purchases, the cost of
acquiring the shares is carried in shareholders' funds as 'Interest in shares of
BHP Billiton', and any difference between the cost of awards and the
consideration paid to purchase shares on market is transferred to retained
earnings when the shares vest unconditionally in the employees. In addition, the
assets and liabilities of ESOP trusts utilised by the BHP Billiton Group to hold
shares for employee remuneration schemes are consolidated.
In prior years, the estimated cost of share awards was initially charged to
profit and recorded as a provision using the market value of shares at the grant
date. Where share awards were satisfied by on market purchases, the cost was
subsequently adjusted to the actual consideration for shares purchased. Further,
shares in BHP Billiton held by the ESOP trusts were shown as a fixed asset
investment.
The effects of the accounting policy change on the financial statements for the
half-year ended 31 December 2003 are as follow:
•Opening shareholders' funds increased by US$84 million representing the
reclassification from provisions to retained earnings for the accrued
employee entitlement on unvested share awards and decreased by US$6 million
representing the reclassification of shares held by ESOP trusts from fixed
asset investments into 'Interest in Shares of BHP Billiton'.
•Attributable profit increased by US$12 million representing costs no
longer recognised for the excess consideration paid to purchase shares on
market and the foreign currency translation of the accrued cost of unvested
awards now recorded in shareholders' funds.
The impact on prior period profit and loss accounts is immaterial and
accordingly these have not been restated.
NOTE 2. EXCEPTIONAL ITEMS
Gross Tax Net
Half year ended 31 December 2003 US$M US$M US$M
Introduction of tax consolidation regime in Australia (a) - 78 78
Litigation settlement (b) 66 (18) 48
Total by category 66 60 126
Group and unallocated items - 78 78
Petroleum 66 (18) 48
Total by Customer Sector Group 66 60 126
(a) During the half year ended 31 December 2003, BHP Billiton has elected to
consolidate its Australian subsidiaries under the Australian tax consolidation
regime, as introduced by the Australian Federal Government. Under the
transitional rules, the Group has chosen to reset the tax cost base of certain
depreciable assets which will result in additional tax depreciation over the
lives of the assets. This has resulted in the restatement of deferred tax
balances and an exceptional tax benefit of US$78 million being recorded in
accordance with UK GAAP.
(b) In December 2003 BHP Billiton announced that it was part of a consortium
that had reached a settlement with Dalmine SpA with respect to a claim brought
against Dalmine in April 1998. The claim followed the failure of an underwater
pipeline installed in 1994 in the Liverpool Bay area of the UK continental
shelf. As a result of the settlement, BHP Billiton has recorded an exceptional
gain of US$66 million, before tax expense of US$18 million.
Half year ended 31 December 2002 and year ended 30 June 2003
Effective July 2002, the BHP Steel business was demerged from the BHP Billiton
Group. A 6 per cent interest in BHP Steel was retained by the Group upon
demerger of the Group's Steel business. This was sold in July 2002 for US$75
million and the loss of US$19 million associated with this sale was recognised
in the half year ended 31 December 2002 and in the year ended 30 June 2003 as an
exceptional item in relation to Discontinued Operations.
NOTE 3. ANALYSIS BY BUSINESS SEGMENT
Half year ended Half year ended Year ended
31 December 2003 31 December 2002 30 June 2003
Turnover US$M US$M US$M
Petroleum 2 245 1 511 3 264
Aluminium 2 023 1 535 3 386
Base Metals 1 351 897 1 954
Carbon Steel Materials 2 206 1 747 3 714
Diamonds and Specialty Products 758 716 1 485
Energy Coal 1 242 947 2 089
Stainless Steel Materials 744 491 1 106
Group and unallocated items 810 424 1 014
Intersegment (416) (220) (506)
Total BHP Billiton Group 10 963 8 048 17 506
Profit before taxation
Petroleum 602 660 1 178
Aluminium 307 266 581
Base Metals 333 83 286
Carbon Steel Materials 505 506 1 045
Diamonds and Specialty Products 195 150 299
Energy Coal 85 124 201
Stainless Steel Materials 193 61 150
Group and unallocated items (37) (191) (259)
Exceptional items 66 (19) (19)
Profit before net interest and taxation 2 249 1 640 3 462
Net interest (294) (245) (537)
Total BHP Billiton Group 1 955 1 395 2 925
Net operating assets
Petroleum 3 743 3 227 3 293
Aluminium 5 252 4 907 5 095
Base Metals 3 974 4 116 3 877
Carbon Steel Materials 2 858 2 583 2 567
Diamonds and Specialty Products 1 545 1 484 1 518
Energy Coal 2 233 2 172 2 193
Stainless Steel Materials 1 834 1 709 1 695
Group and unallocated items 475 632 418
Total BHP Billiton Group 21 914 20 830 20 656
NOTE 3. ANALYSIS BY BUSINESS SEGMENT (continued)
Third party product included above
Half year ended Half year ended Year ended
31 December 2003 31 December 2002 30 June 2003
Turnover US$M US$M US$M
Petroleum 691 33 296
Aluminium 886 557 1 333
Base Metals 96 6 38
Carbon Steel Materials 24 11 26
Diamonds and Specialty Products 378 374 747
Energy Coal 337 145 413
Stainless Steel Materials 14 3 10
Group and unallocated items 403 217 519
Total BHP Billiton Group 2 829 1 346 3 382
Profit before taxation
Petroleum (17) - 1
Aluminium 16 4 28
Base Metals 1 1 5
Carbon Steel Materials (1) (2) (2)
Diamonds and Specialty Products 6 7 10
Energy Coal - 3 (1)
Stainless Steel Materials 1 - 1
Group and unallocated items - (3) 1
Total BHP Billiton Group 6 10 43
NOTE 4. ANALYSIS BY GEOGRAPHICAL SEGMENT
Half year ended Half year ended Year ended
31 December 2003 31 December 2002 30 June 2003
Turnover by geographical market US$M US$M US$M
Australia 908 935 1 775
Europe 3 805 2 272 5 582
Japan 1 270 1 087 2 393
South Korea 730 585 1 203
China 1 075 431 1 216
Other Asia 683 527 1 172
North America 1 292 1 295 2 389
Southern Africa 566 418 944
Rest of World 634 498 832
Total by geographical market 10 963 8 048 17 506
Turnover by geographical origin
Australia 3 556 3 048 6 527
Europe 2 521 1 180 2 792
North America 1 180 1 011 2 186
South America 1 732 1 228 2 733
Southern Africa 1 776 1 503 3 147
Rest of World 198 78 121
Total by geographical origin 10 963 8 048 17 506
Profit/(loss) before taxation
Continuing Operations
Australia 1 001 930 1 890
Europe 328 108 259
North America 160 85 188
South America 544 216 576
Southern Africa 183 323 558
Rest of World 33 (3) 10
Total Continuing Operations 2 249 1 659 3 481
Discontinued Operations
Australia - (19) (19)
Total Discontinued Operations - (19) (19)
Net interest (294) (245) (537)
Total by geographical origin 1 955 1 395 2 925
NOTE 5. NET INTEREST AND SIMILAR ITEMS PAYABLE
Half year ended Half year ended Year ended
31 December 31 December 30 June 2003
2003 2002
US$M US$M US$M
On bank loans and overdrafts 61 30 131
On all other loans 132 151 241
Finance lease and hire purchase interest 2 2 4
195 183 376
Dividends on redeemable preference shares 12 12 24
Discounting on provisions 56 38 97
less Amounts capitalised (a) (62) (51) (103)
201 182 394
Share of interest of joint ventures and 36 34 68
associates
237 216 462
Interest received/receivable (32) (29) (65)
205 187 397
Exchange differences on net debt (b)
Group 73 46 115
Joint ventures and associates 16 12 25
89 58 140
Net interest and similar items payable (c) 294 245 537
(a) Interest has been capitalised at the rate of interest applicable to the
specific borrowings financing the assets under construction or, where financed
through general borrowings, at a capitalisation rate representing the average
borrowing cost of the Group. For the period ended 31 December 2003 the
capitalisation rate was 5.0 per cent (31 December 2002: 5.3 per cent; 30 June
2003: 5.2 per cent).
(b) Net exchange losses primarily represent the effect on borrowings of the
appreciation of the South African rand against the US dollar.
(c) Disclosed in the consolidated profit and loss account as:
Half year ended Half year ended Year ended
31 December 2003 31 December 2002 30 June 2003
US$M US$M US$M
Net interest and similar items payable
Group 242 199 444
Joint ventures and associates 52 46 93
Net interest and similar items payable 294 245 537
NOTE 6. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Half year ended Half year ended Year ended
31 December 31 December 30 June
2003 2002 2003
US$M US$M US$M
Attributable profit for the financial period 1 339 912 1 901
Other recognised gains 47 39 67
Total recognised gains for the financial period 1 386 951 1 968
Dividends (497) (434) (900)
Issue of ordinary shares 48 72 98
Employee share awards (a) 14 16 64
Share repurchase scheme
BHP Billiton Plc (b) - - (20)
Capital reduction on BHP Steel demerger - (1 489) (1 489)
Net movement in shareholders' funds 951 (884) (279)
Shareholders' funds at beginning of period as 12 091 12 370 12 370
restated
(refer Note 1)
Shareholders' funds at end of period 13 042 11 486 12 091
(a) The accrued employee entitlement for Employee Share Awards of US$28 million
has been charged to profit. Purchase of shares made by ESOP trusts were US$14
million. Refer Note 1.
(b) BHP Billiton Plc entered into an arrangement under which it contingently
agreed to purchase its own shares from a special purpose vehicle (Nelson
Investment Limited) established for that purpose. No shares were purchased
during the half year ended 31 December 2003 (31 December 2002: Nil; 30 June
2003: 3 890 000 ordinary shares). The aggregate purchase price of US$Nil (31
December 2002: US$Nil; 30 June 2003: US$20 million) was funded by the BHP
Billiton Group. The cost of purchasing these shares was deducted from
shareholders' funds. There is no intention to trade these shares and no
dividends are paid in respect of them outside the BHP Billiton Group.
NOTE 7. EARNINGS PER SHARE
Half year ended Half year ended Year ended
31 December 2003 31 December 2002 30 June 2003
Basic earnings per share (US cents)
Excluding exceptional items 19.5 15.0 30.9
Impact of exceptional items 2.0 (0.3) (0.3)
Including exceptional items 21.5 14.7 30.6
Diluted earnings per share (US cents)
Excluding exceptional items 19.5 15.0 30.9
Impact of exceptional items 2.0 (0.3) (0.3)
Including exceptional items 21.5 14.7 30.6
Basic earnings per ADS (US cents) (a)
Including exceptional items 43.0 29.4 61.2
Diluted earnings per ADS (US cents) (a)
Including exceptional items 43.0 29.4 61.2
Earnings (US$million)
Excluding exceptional items 1 213 931 1 920
Including exceptional items 1 339 912 1 901
Weighted average number of shares (millions)
Basic earnings per share denominator 6 215 6 201 6 207
Diluted earnings per share denominator 6 233 6 219 6 222
(a) For the periods reported, one American Depositary Share (ADS) represents two
shares.
The exceptional gain due to Australian subsidiaries being consolidated under
Australian tax consolidation law of US$78 million increased basic and diluted
earnings per share by 1.2 US cents for the half year ended 31 December 2003. The
exceptional gain on the settlement of litigation, net of tax expense, of US$48
million increased basic and diluted earnings per share by 0.8 US cents for the
half year ended 31 December 2003. The exceptional loss of US$19 million upon
sale of the 6% interest in BHP Steel for US$75 million in July 2002 reduced
basic and diluted earnings per share by 0.3 US cents for the half year ended 31
December 2002 and the year ended 30 June 2003.
Under the terms of the DLC merger, the rights to dividends of a holder of an
ordinary share in BHP Billiton Plc and a holder of an ordinary share in BHP
Billiton Limited are identical. Consequently, earnings per share have been
calculated on the basis of the aggregate number of ordinary shares ranking for
dividend. The weighted average number of shares used for the purposes of
calculating basic earnings per share is calculated after deduction of the shares
held by the share repurchase scheme and the Group's employee share ownership
trusts.
NOTE 8. ANALYSIS OF MOVEMENTS IN NET DEBT
As at Acquisitions Cash Other Exchange As at
1 July & disposals flow non-cash movements 31
2003 US$M US$M movements US$M December
US$M US$M 2003
US$M
Cash at bank and in hand 587 - (97) - 24 514
Overdrafts (21) - (37) - - (58)
566 - (134) - 24 456
Redeemable preference shares (450) - - - - (450)
Finance lease obligations (53) - 1 - (1) (53)
Other debt due within one year (1 011) - 57 (169) (56) (1 179)
Other debt due after more than one year (5 789) - 185 169 (23) (5 458)
(7 303) - 243 - (80) (7 140)
Money market deposits (a) 965 - (667) - - 298
Net debt (b) (5 772) - (558) - (56) (6 386)
The balance sheet movement in cash including
money market deposits is as follows:
Cash at bank and in hand 587 - (97) - 24 514
Money market deposits (a) 965 - (667) - - 298
1 552 - (764) - 24 812
(a) Money market deposits with financial institutions have a maturity of up to
three months.
(b) The breakdown of net debt by currency is as follows:
As at As at As at
31 December 2003 31 December 2002 30 June 2003
US$M US$M US$M
Net debt is denominated in:
US dollars 6 049 6 793 5 387
South African rand 471 337 540
Australian dollars 10 20 34
Canadian dollars (20) (68) (122)
Other currencies (124) (19) (67)
Net debt 6 386 7 063 5 772
BHP BILLITON GROUP
STATEMENT OF FINANCIAL PERFORMANCE
(prepared in accordance with Australian GAAP)
Half year ended 31 December 2003 2002
US$M US$M
Revenue from ordinary activities
Operating revenue 9 947 7 056
Non-operating revenue 309 246
10 256 7 302
Profit from ordinary activities before
depreciation, amortisation and borrowing costs 3 071 2 391
Deduct: Depreciation and amortisation 874 813
Borrowing costs 298 253
Profit from ordinary activities before tax 1 899 1 325
Deduct: Tax expense attributable to ordinary activities 489 417
Net profit 1 410 908
Outside equity interests in net profit (18) (17)
Net profit attributable to members of the BHP Billiton Group 1 392 891
Basic earnings per fully paid ordinary share (US cents) 22.4 14.4
Basis of Preparation
The results of the BHP Billiton Group, comprising BHP Billiton Limited and BHP
Billiton Plc and their respective subsidiaries, for the half year ended 31
December 2003, and the corresponding period, have been prepared in accordance
with Australian GAAP and Practice Note 71 'Financial reporting by Australian
entities in dual listed company arrangements' issued by the Australian
Securities and Investments Commission.
The financial information has been prepared using the same accounting policies
as were used in preparing the results for the BHP Billiton Group as presented in
the BHP Billiton Limited financial statements for the year ended 30 June 2003,
except for the change in accounting policy for employee share awards referred to
below.
Employee Share Awards
Effective 1 July 2003, the BHP Billiton Group changed its accounting policy for
employee share awards.
Under the revised accounting policy, the estimated cost of share awards made by
the BHP Billiton Group is charged to profit over the period from grant date to
the date of expected vesting or the performance period, as appropriate. The
accrued employee entitlement is recorded as an equal credit to shareholders'
equity. The estimated cost of awards is based on the market value of shares at
the grant date or the intrinsic value of options awarded (being the difference
between the exercise price and the market price at the date of granting the
award), adjusted to reflect the impact of performance conditions, where
applicable.
In prior years, the estimated cost of share awards was initially charged to
profit and recorded as a provision using the market value of shares at the grant
date. Where share awards were satisfied by on market purchases, the cost was
subsequently adjusted to the actual consideration for shares purchased.
The effect of the accounting policy change on the statement of financial
performance for the half-year ended 31 December 2003 is an increase in net
profit for the half year of US$12 million representing costs no longer
recognised for the excess consideration paid to purchase shares on market and
the foreign currency translation of the accrued cost of unvested awards now
recorded in shareholders' equity.
The impact on the prior period Statement of Financial Performance is immaterial.
Full details of the policy change, including the effect on the Statement of
Financial Position, are set out in the Group's Interim Report for the half year
ended 31 December 2003.
Significant Items
Individually significant items (before outside equity interests) included within
the BHP Billiton Group net profit are detailed below.
Half year ended 31 December 2003 Half year ended 31 December 2002
Gross Tax Net Gross Tax Net
US$M US$M US$M US$M US$M US$M
Introduction of tax consolidation regime - 207 207 - - -
in Australia (a)
Litigation settlement (b) 66 (18) 48 - - -
Loss on sale of 6% interest in BHP Steel(c) - - - (19) - (19)
Total 66 189 255 (19) - (19)
(a) During the current half year BHP Billiton has elected to consolidate its
Australian subsidiaries under the Australian tax consolidation regime, as
introduced by the Australian Federal Government. Under the transitional rules,
the Group has chosen to reset the tax cost base of certain depreciable assets
which will result in additional tax depreciation over the lives of the assets.
This has resulted in the restatement of deferred tax balances and a tax benefit
of US$207 million being recorded in accordance with UIG 52.
(b) In December 2003 BHP Billiton announced that it was part of a consortium
that had reached a settlement with Dalmine SpA with respect to a claim brought
against Dalmine in April 1998. The claim followed the failure of an underwater
pipeline installed in 1994 in the Liverpool Bay area of the UK continental
shelf.
(c) Effective July 2002, the BHP Steel business was demerged from the BHP
Billiton Group. A 6 per cent interest in BHP Steel was retained by the Group
upon demerger of the Group's Steel business. This was sold in July 2002 for
US$75 million and the loss of US$19 million associated with this sale was
recognised in the half year ended 31 December 2002.
The results have been subject to an independent review by the auditors.
The statutory BHP Billiton Limited Interim Report will be released to the
Australian Stock Exchange on 19 February 2004. This information will be
available to shareholders on request.
Forward-looking statements Certain statements contained in this release,
including statements in the section entitled 'Introduction' and 'Outlook', may
constitute 'forward-looking statements' within the meaning of the US Private
Securities Litigation Reform Act of 1995. We undertake no obligation to revise
the forward-looking statements included in this release to reflect any future
events or circumstances. Our actual results, performance or achievements could
differ materially from the results expressed in, or implied by, these
forward-looking statements. Factors that could cause or contribute to such
differences are discussed in the sections entitled 'Risk Factors' and 'Operating
and Financial Review and Prospects-General factors affecting our operating
results' included in our annual report on Form 20-F for the fiscal year ended 30
June 2003, which we filed with the US Securities and Exchange Commission (SEC)
on 23 October 2003 and is available on the SEC's website at 'www.sec.gov'.
Further information on BHP Billiton can be found on our Internet site:
www.bhpbilliton.com
Australia United Kingdom
Andrew Nairn, Investor Relations Mark Lidiard, Investor & Media Relations
Tel: +61 3 9609 3952 Mobile: +61 408 313 259 Tel: +44 20 7802 4156 Mobile: + 44 7769 934 942
email: Andrew.W.Nairn@bhpbilliton.com email: Mark.Lidiard@bhpbilliton.com
Tania Price, Media Relations Ariane Gentil, Media Relations
Tel: +61 3 9609 3815 Mobile: +61 419 152 780 Tel: +44 20 7802 4177 Mobile: +44 7881 518 715
email: Tania.Price@bhpbilliton.com email: Ariane.Gentil@bhpbilliton.com
United States South Africa
Francis McAllister, Investor Relations Michael Campbell, Investor & Media Relations
Tel: +1 713 961 8625 Mobile: +1 713 480 3699 Tel: +27 11 376 3360 Mobile: +27 82 458 2587
email: Francis.R.McAllister@bhpbilliton.com email: Michael.J.Campbell@bhpbilliton.com
BHP Billiton Limited ABN 49 004 028 077 BHP Billiton Plc Registration number 3196209
Registered in Australia Registered in England and Wales
Registered Office: Level 27, 180 Lonsdale Street Registered Office: Neathouse Place London SW1V 1BH
Melbourne Victoria 3000 United Kingdom
Telephone +61 1300 554 757 Facsimile +61 3 9609 3015 Telephone +44 20 7802 4000 Facsimile +44 20 7802 4111
The BHP Billiton Group is headquartered in Australia
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 10th January 2025
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