Interim Results
BHP Billiton Limited
16 February 2005
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 16 February 2005
Number 06/05
BHP BILLITON RESULTS FOR THE
HALF YEAR ENDED 31 DECEMBER 2004
• Record half yearly EBITDA, EBIT and attributable profit.
• EBITDA increase of 67% to US$5.2 billion, and EBIT increase of 95% to
US$4.3 billion (both excluding exceptional items).
• Attributable profit of US$2.8 billion, an increase of 127%, and earnings
per share of 44.5 US cents, an increase of 128% compared with the prior
period (both excluding exceptional items).
• Record half yearly production volumes for six major commodities.
• Available cash flow of US$3.5 billion, an increase of 116%.
• Commissioning of six major projects since 30 June 2004, with a further ten
major projects in development.
• Successful completion of the US$2 billion capital management programme
including the US$1.8 billion off-market buy-back in BHP Billiton Limited and
rebasing the interim dividend.
• Interim dividend rebased to 13.5 US cents per share, an increase of 69% on
the prior period interim dividend.
Half year ended 31 December 2004 2003 Change
US$M US$M
Turnover (1) 15 521 10 963 41.6%
EBITDA (1) (2) (3) 5 212 3 128 66.6%
EBIT (1) (2) (3) 4 258 2 183 95.1%
Attributable profit (excluding exceptional items) (1) 2 757 1 213 127.3%
Attributable profit (including exceptional items) (1) 2 813 1 339 110.1%
Available cash flow (4) 3 513 1 625 116.2%
Basic earnings per share (US cents) (excluding exceptional items) (1) 44.5 19.5 128.2%
Basic earnings per share (US cents) (including exceptional items) (1) 45.4 21.5 111.2%
EBITDA interest coverage (times) (1) (2) (3) (5) 33.6 14.8 127.0%
Dividend per share (US cents) 13.5 8.0 68.8%
(1) Including the Group's share of joint ventures.
(2) Excluding exceptional items.
(3) EBIT is earnings before interest and tax. EBITDA is EBIT before
depreciation, impairments, and amortisation of US$954 million (comprising Group
depreciation, impairments and amortisation of US$881 million and joint venture
and associate depreciation and amortisation of US$73 million) for the half year
ended 31 December 2004 and US$945 million (comprising Group depreciation,
impairments and amortisation of US$862 million and joint venture and associate
depreciation and amortisation of US$83 million) for the half year ended 31
December 2003. We believe that EBIT and EBITDA provide useful information, but
should not be considered as an indication of, or alternative to, attributable
profit as an indicator of operating performance or as an alternative to cash
flow as a measure of liquidity.
(4) Available cash flow is operating cash flow including dividends from joint
ventures and associates and after net interest and tax.
(5) For this purpose, net interest includes capitalised interest and excludes
the effect of discounting on provisions and other liabilities, and exchange
differences arising from net debt.
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 2003.
RESULTS FOR THE HALF YEAR ENDED 31 DECEMBER 2004
Commentary on the Group Interim Results
Introduction
The record financial result for the half year ended 31 December 2004 is a
reflection of the continued consistent execution of our strategy. The focus on
the efficient operation of our high quality, diversified asset base, the
development of short and long term growth options and our customer focused
marketing has enabled us to fully capture the opportunity provided from strong
demand conditions. Attributable profit was US$2.8 billion (excluding exceptional
items), an increase of 127% on the corresponding period.
The commissioning of a number of growth projects in recent years has provided
leverage to strong customer demand. Along with operational improvements
resulting from the continued deployment of our Operating Excellence initiatives,
these new projects contributed to the achievement of half yearly production
records for six major commodities within our portfolio at a time when customer
demand has strengthened considerably. With completion of the fourth processing
train in the North West Shelf, the commissioning of an additional five projects
commencing production in recent weeks and the approval of two major new projects
during the current period, our capacity to respond to the growth in demand for
raw materials is further enhanced and augurs well for future periods.
We currently have ten major projects and four smaller projects in development
across a range of commodities, and an additional twelve projects where
feasibility studies are underway. In total our project pipeline, which includes
approved projects and projects in feasibility, now represents US$10.2 billion of
value accretive investment options. Notwithstanding this sizeable planned
investment, our strong cash flow allowed us to execute the first stage of our
planned US$2 billion capital management programme, returning US$1.78 billion to
shareholders during the half year, via an off-market share buy-back of BHP
Billiton Limited shares. The remaining US$220 million (3.6 US cents per share)
will be distributed as part of the interim dividend, which the Board declared
today at 13.5 US cents per share. This is an increase of 69% over last year's
interim dividend and a 42% increase from the dividend declared in August 2004.
BHP Billiton intends to continue with its progressive dividend policy using this
rebased dividend level as the starting reference point for future periods. This
rebasing of the dividend is a sign of the confidence we have in the medium term
outlook and our ability to consistently deliver earnings and cash flow to
support this higher level of dividend payment.
The Income Statement
Earnings excluding exceptional items
Turnover (including turnover from third party products) was US$15.5 billion, an
increase of 41.6% from US$11.0 billion in the corresponding period. The increase
was primarily due to higher prices for all commodities with base metals, carbon
steel materials, petroleum and coal prices contributing significantly. Sales of
third party products increased 44.8% to US$4.1 billion.
Earnings before interest, tax, depreciation, impairments and amortisation
(EBITDA) excluding exceptional items, increased by 66.6% to US$5.2 billion from
US$3.1 billion in the corresponding period. Earnings before interest and
taxation (EBIT), excluding exceptional items, were US$4.3 billion compared with
US$2.2 billion for the corresponding period.
The following table and commentary detail the approximate impact of the
principal factors that affected earnings before interest and taxation for the
current half year compared with the corresponding period were:
US$ Million
EBIT excluding exceptional items for the half year ended 31 December 2003 2 183
Change in volumes 150
Change in sales prices 3 035
New operations 30
Exchange rates (340)
Price-linked costs (235)
Costs (255)
Inflation on costs (110)
Asset sales (45)
Ceased and sold operations (15)
Exploration (10)
Other (130)
EBIT excluding exceptional items for the half year ended 31 December 2004 4 258
Volumes
Higher sales volumes increased EBIT by US$265 million, primarily from
copper, aluminium, iron ore, natural gas and manganese ore, partially offset
by lower oil volumes. The net positive impact on EBIT was US$150 million,
using prior period margins. The change in volume at current period prices
added US$490 million to turnover.
Prices
Higher commodity prices across all products increased EBIT by US$3,035
million with copper, petroleum products, energy coal, manganese ore and
alloys, metallurgical coal, aluminium, diamonds, iron ore, ferrochrome and
nickel prices making significant contributions.
New operations
New operations increased EBIT by US$30 million due to a full period of
operation from the Ohanet wet gas development in Algeria which commenced
commercial production in October 2003.
Exchange rates
Strengthening exchange rates had an overall unfavourable impact on EBIT of
US$340 million. This was primarily due to stronger A$/US$ and rand/US$
average exchange rates on operating costs of US$200 million and an
unfavourable impact of US$65 million from the conversion of rand and
Australian dollar denominated net monetary liabilities. The prior period
included gains on legacy A$/US$ currency hedging of US$30 million which
expired in the year ended 30 June 2004.
Currency Half year ended Half year ended 31 Dec 2004 30 June 2004 31 Dec 2003
31 Dec 2004 31 Dec 2003 closing closing closing
average average
Australian dollar 0.73 0.69 0.78 0.69 0.75
South African rand 6.21 7.08 5.65 6.27 6.62
Costs
Higher price-linked costs decreased EBIT by US$235 million, mainly due to
increased taxes on petroleum products, higher royalty costs, and higher
LME-linked costs.
Increased costs of US$255 million were primarily driven by higher operating
and raw material costs, and increased demurrage, stripping and maintenance
costs, partly offset by continued operating cost savings.
Rising input costs, principally in South Africa and Australia, increased
costs by US$110 million.
Asset sales
The prior period's EBIT was higher by US$45 million due to higher profits on
the sale of non-core assets.
Ceased and sold operations
The prior period included a favourable impact from ceased and sold
operations on EBIT of US$15 million.
Exploration
Exploration expense was US$10 million higher than in the prior period.
Other
Other items totalling US$130 million include the unfavourable impact of
ceased production at Boodarie Iron in Western Australia, where operations
are currently being transitioned to care and maintenance.
Net interest expense
Net interest expense fell from US$294 million to US$259 million, despite higher
US dollar interest rates during the period. This was principally driven by lower
average debt levels and increased interest income from higher average cash
balances compared to the corresponding period. This was partially offset by
higher expense from discounting of provisions, and lower capitalisation of
interest as several projects move into production phase. Included in net
interest were exchange losses on net debt of US$69 million, mainly relating to
the translation of rand denominated debt. This compares with losses of US$89
million in the corresponding period.
Taxation expense
The tax charge on earnings was US$1,131 million, representing an effective rate
of 28.3%. Excluding the impacts of non tax-effected foreign currency
adjustments, translation of tax balances and other functional currency
translation adjustments, mainly attributable to the strengthening of both the
rand and Australian dollar against the US dollar during the period, the
effective rate was 27.3%. When compared to the UK and Australian statutory tax
rate (30%), the underlying effective tax rate benefited 4.4% due to the
recognition of tax losses (US$175 million) in the US. In addition, investment
incentives and development entitlements were recognised during the period offset
by non-deductible accounting depreciation and amortisation, non-deductible
expenditures, overseas tax rate differential and other items.
Exceptional items
Earnings before interest and tax were increased by an exceptional item of US$56
million from the completion of the sale in December 2004 of an equity
participation in the North West Shelf (NWS) Project in Western Australia to
China National Offshore Oil Corporation (CNOOC). Under the agreement, CNOOC
purchased an interest in a new joint venture that has been established within
the NWS Project to supply LNG to the Guangdong LNG Project in China. CNOOC has
acquired a 5.3% title interest in NWS Project production licences, retention
leases and the exploration permit relating to natural gas, but excluding oil
(equivalent to 5.8% of BHP Billiton's share of current remaining proved natural
gas reserves). CNOOC paid each joint venture partner US$59 million, resulting in
a profit on sale of US$56 million (no tax effect). CNOOC's rights to process its
gas and associated LPG and condensate through the NWS Project offshore and
onshore infrastructure are contained in a separate agreement.
The corresponding period included an exceptional gain relating to the settlement
of a litigation matter with Dalmine SpA of US$66 million (before tax expense of
US$18 million) and an exceptional tax benefit of US$78 million relating to the
introduction of the tax consolidation regime in Australia.
Earnings per share
Basic earnings per share excluding exceptional items were 44.5 US cents per
share compared to 19.5 US cents per share in the corresponding period, an
increase of 128.2%.
Basic earnings per share including exceptional items were 45.4 US cents per
share compared to 21.5 US cents per share in the corresponding period, an
increase of 111.2%.
Cash Flows
Available cash flow after interest and tax increased by 116.2% to US$3.5
billion. The key components of this increase were increased cash generated from
operating activities (mainly due to higher profits), partly offset by increased
taxation payments.
Spending on capital, exploration and investment expenditures totalled US$1,740
million for the period. Expenditure on growth projects and investments amounted
to US$1,111 million, including US$433 million on petroleum projects and US$678
million on minerals projects. Sustaining and maintenance capital expenditure was
US$430 million. In addition, the current period includes US$1.78 billion
distributed to shareholders as part of the US$2 billion capital management
programme.
Net debt at 31 December 2004 was US$5.5 billion, an increase of US$0.6 billion
for the period. Net debt at 31 December 2003 was US$6.5 billion. Gearing, which
is the ratio of net debt to net debt plus net assets, was 27.2% at 31 December
2004, compared with 32.8% at 31 December 2003.
Dividend
An interim dividend for the half year ended 31 December 2004 of 13.5 US cents
per share will be paid to shareholders on 23 March 2005. This dividend includes
US$220 million (3.6 US cents per share) to complete the US$2 billion capital
management programme announced in August 2004. BHP Billiton intends to continue
with its progressive dividend policy using this rebased dividend level as the
starting reference point for future periods. This rebasing of the dividend is
also a sign of the confidence we have in the ability to consistently deliver
earnings and cash flow to support this higher level of dividend payment in the
years ahead.
The dividend paid by BHP Billiton Limited will be fully franked for Australian
taxation purposes. Dividends for the BHP Billiton Group are determined and
declared in US dollars. However, BHP Billiton Limited dividends are mainly paid
in Australian dollars and BHP Billiton Plc dividends are mainly paid in pounds
sterling to shareholders on the UK section of the register and South African
rand to shareholders on the South African section of the register. The foreign
currency exchange rates applicable two business days before the declaration of
the dividend were used for conversion of currencies. These rates are detailed in
the table below.
The timetable in respect of this dividend will be:
Currency conversion - 14 February 2005
Last day to trade Johannesburg Stock Exchange (JSE) - 25 February 2005
Ex-dividend Australian Stock Exchange (ASX) - 28 February 2005
Ex-dividend Johannesburg Stock Exchange (JSE) - 28 February 2005
Ex-dividend London Stock Exchange (LSE) - 2 March 2005
Record - 4 March 2005
Payment - 23 March 2005
American Depositary Shares (ADSs) each represent two fully paid ordinary shares
and receive dividends accordingly.
BHP Billiton Plc shareholders registered on the South African section of the
register will not be able to dematerialise or rematerialise their shareholdings,
nor will transfers between the UK register and the South African register be
permitted, between the dates of 28 February 2005 and 4 March 2005.
The following table details the currency exchange rates applicable for the
dividend:
Dividend 13.5 US cents Exchange Dividend per ordinary
Rate share in local currency
Australian cents 0.787068 17.152266
British pence 1.884750 7.162754
South African cents 6.059289 81.800402
New Zealand cents 0.716600 18.838962
Liquidity and Capital Management
In October 2004, Moody's Investor Services upgraded BHP Billiton's credit rating
from A2 to A1, reflecting the Group's strengthened financial risk profile.
On 23 November 2004, the first phase of a US$2 billion capital management
programme was completed through an off-market share buy-back of 180.72 million
BHP Billiton Limited shares. The total amount of capital repurchased was US$1.78
billion, or 2.9% of the issued BHP Billiton Group share capital. The buy-back
price of A$12.57 per share, represented a discount of 12% to the volume weighted
average price of BHP Billiton Limited shares over the five days up to and
including buy-back closing date. The remaining US$220 million will be returned
to shareholders as part of the interim dividend declared today.
Portfolio Management
As previously noted, we sold an equity participation in the North West Shelf
Project to China National Offshore Oil Corporation for proceeds of US$59
million. In addition, we announced the sale of our interests in the Laminaria
and Corallina Oil Fields (located in the Timor Sea) and our equity interest in
Integris Metals (US) during the current half year. We have also sold 50% of our
shareholding in Acerinox S.A. These transactions have been completed subsequent
to 31 December 2004 and will generate proceeds of US$130 million, US$205 million
and US$56 million, respectively.
Corporate Governance
The Group announced the appointment of Mr Carlos A Cordeiro to the BHP Billiton
Board effective 3 February 2005.
IFRS Implementation
The Group will commence reporting financial information in accordance with
International Financial Reporting Standards (IFRS) for financial periods
beginning on or after 1 July 2005. Selected financial information for the half
year to 31 December 2004 prepared in accordance with IFRS together with a
reconciliation from IFRS to UK Generally Accepted Accounting Principles, and
explanatory notes, are expected to be released in the second half of this fiscal
year as unaudited supplementary information.
Outlook
While the global economy slowed during the half year, GDP growth for calendar
2004 was one of the strongest in the last three decades. The real GDP growth
rate slowed in the September quarter - particularly in Japan, Germany, France
and the UK - and the rate of growth in OECD industrial production has continued
to decelerate. Although the reasons for the slowdown are varied and reflect the
particular circumstances for each economy, some common factors have been the
rise in oil prices, a tightening in economic policies and a slowing in export
growth. With the Chinese government taking steps to control growth in certain
areas of its economy during 2004, growth rates in China also slowed in the
second half.
Overall, while the pace of global economic growth may have slowed in recent
months, we remain of the view that the cycle is extendable and the global
economy will continue to experience an above trend growth rate in the coming
year. In particular, we expect that China will remain a large and sustainable
consumer of raw materials and resources as the government remains committed to
sustainable long-term development. For some commodities, inventory levels are
already at or close to historically low levels. Given this, together with
continued growing demand, it is likely that for many commodities, supply will
continue to fall short of demand over the coming year. Over time we expect this
situation will come into balance with the introduction of new supply, either
through new projects or the expansion of existing operations.
We will remain focussed on our strategy of maximising the operating performance
of our world class assets, reducing costs and improving efficiencies and
exercising the value accretive expansion options within our portfolio. Our
recent financial performance demonstrates how this has positioned us to take
advantage of the current strong demand for raw materials. The cash generating
ability of our existing assets allows us to continue with this approach whilst
remaining alert for opportunistic, value adding acquisitions. We also believe it
is critical that we continue to generate options to participate in value-added
opportunities to expand our activities as the prospects for demand growth become
apparent. To this end, it is possible that we will enter new production regions,
new markets with new customers and into new products where these add value and
are in line with our strategic objectives.
CUSTOMER SECTOR GROUP SUMMARY
The following table provides a summary of the Customer Sector Group results for
the half year ended 31 December 2004 and the corresponding period (before
exceptional items).
Half year ended 31 December (US$ Million) Turnover (1) EBIT (1)
2004 2003 Change 2004 2003 Change
Petroleum 3 171 2 245 41.2% 909 602 51.0%
Aluminium 2 615 2 023 29.3% 458 307 49.2%
Base Metals 2 353 1 351 74.2% 1 041 333 212.6%
Carbon Steel Materials 3 229 2 206 46.4% 1 007 505 99.4%
Diamonds and Specialty Products 1 136 758 49.9% 317 195 62.6%
Energy Coal 1 640 1 242 32.0% 308 85 262.4%
Stainless Steel Materials 1 013 744 36.2% 340 193 76.2%
Group and unallocated items (2) 411 429 (4.2)% (122) (37) N/A
Less: inter-segment turnover (47) (35) N/A
BHP Billiton Group 15 521 10 963 41.6% 4 258 2 183 95.1%
(1) Turnover and EBIT include trading activities comprising the sale of third
party product.
(2) Includes consolidation adjustments, unallocated items and external sales of
the Group's freight, transport and logistics operations.
Petroleum
EBIT was US$909 million, an increase of US$307 million or 51% compared with the
corresponding period. The increase was a result of higher realised prices, where
the average realised oil price per barrel was US$44.85 compared to US$29.40, and
the average realised natural gas price per thousand standard cubic feet was
US$2.94 compared with US$2.37 in the corresponding period. In addition, lower
exploration expenditure and a smaller loss on third party trading activities
also had a favourable impact. The increase was offset by the unfavourable effect
of increased taxes on petroleum products, lower production volumes, with total
production for the period of 57.4 million barrels of oil equivalent, compared
with 62.4 million barrels of oil equivalent in the corresponding period, and the
translation impact of a stronger A$/US$ exchange rate on net monetary assets and
liabilities.
Exploration expenditure charged to profit was US$55 million representing a
capitalisation rate of 59.9% compared to a charge to profit of US$77 million and
a capitalisation rate of 49.7% in the corresponding period, and reflects timing
of exploration and appraisal activities.
Aluminium
EBIT was US$458 million, an increase of US$151 million or 49%, compared with the
corresponding period. The increase was mainly due to higher realised prices for
aluminium and alumina, and increased aluminium sales volumes. Average LME
aluminium prices increased to US$1,764 per tonne, compared with US$1,474 per
tonne in the corresponding period. Higher aluminium sales volumes resulted from
the full commissioning of Mozal 2 (Mozambique) and Hillside 3 (South Africa) in
August 2003 and December 2003 respectively, and from the return to full
production at the Alumar smelter following the July 2003 power supply failure.
This was partially offset by a once-off US$36 million charge for the agreed
cancellation of a discounted aluminium supply agreement, the unfavourable impact
on operating costs of strengthening A$/US$, rand/US$ and Brazilian real/US$
average exchange rates, higher LME price-linked costs, increased production
input costs and pot relining activity.
Base Metals
EBIT was US$1,041 million, an increase of US$708 million or 213% compared with
the corresponding period. This increase was mainly attributable to higher
average realised prices for copper of US$1.46/lb, compared with US$0.96/lb in
the corresponding period, higher copper sales volumes as well as higher average
realised prices for silver, lead and zinc. Record silver and lead production was
achieved for the current period and was a result of the continuation of the
Cannington (Australia) de-bottlenecking programme. These factors were partially
offset by higher input costs as well as the unfavourable translation impact on
operating costs and net monetary assets and liabilities of stronger A$/US$ and
Chilean peso/US$ average and closing exchange rates.
Carbon Steel Materials
EBIT was US$1,007 million, an increase of US$502 million or 99% compared with
the corresponding period. This increase was mainly attributable to stronger
commodity prices for all products combined with record production and sales
volumes for iron ore and manganese ore operations. Operating cost performance at
Australian and South African operations was unfavourably impacted by stronger A$
/US$ and rand/US$ average exchange rates and inflationary pressures compared
with the corresponding period. Queensland Coal operations (Australia) incurred
higher price-linked royalty costs, stripping costs linked to expansion projects
and increased demurrage costs. Western Australian iron ore operations
(Australia) also incurred higher demurrage costs as well as increased
depreciation charges for recently commissioned expansion projects offset by
higher capitalisation of stripping costs. Compared with the prior period, ceased
production at Boodarie Iron in Western Australia also had an unfavourable impact
on EBIT. Operations at Boodarie Iron are currently being transitioned to care
and maintenance status.
BHP Billiton has settled commercial terms for approximately three quarters of
its annually priced metallurgical coal contracts with prices increasing by an
average of 120% across all markets. For 70% of our contracts by volume the
increase is effective from 1 April 2005.
Diamonds and Specialty Products
EBIT was US$317 million, an increase of US$122 million or 63% compared with the
corresponding period. The increase was mainly attributable to higher realised
prices and sales volumes for diamonds and Integris Metals (US) products. These
factors were partially offset by higher price-linked costs at Integris, the
unfavourable impact of stronger Canadian$/US$ and rand/US$ average exchange
rates on operating costs, and higher diamond royalties arising from increased
profits. Additionally the half year ended 31 December 2003 included profits
realised on the sale of a non-core royalty interest (US$37 million).
The second half of the 30 June 2005 financial year will be negatively impacted
by the processing of lower grade, lower value material at Ekati (Canada) and the
cessation of earnings from Integris Metals following its sale in January 2005.
Energy Coal
EBIT was US$308 million, an increase of US$223 million or 262% compared with the
corresponding period. The increase was mainly due to higher export prices
resulting from continued strong demand in both the Atlantic and Pacific markets,
increased export sales volumes from Hunter Valley Coal (Australia) following the
successful ramp-up of the Mt Arthur North project, and cost efficiencies gained
at Hunter Valley Coal from increased volumes. This was partially offset by the
unfavourable impact on net operating costs of a stronger rand/US$ average
exchange rate, higher unit costs at Ingwe (South Africa) reflecting higher
operating costs, and South African inflationary pressures.
Stainless Steel Materials
EBIT was US$340 million, an increase of US$147 million or 76% compared with the
corresponding period. The increase was mainly driven by higher realised prices
for nickel, ferrochrome and cobalt. Nickel prices averaged US$6.38/lb in the
current period, up 35% from US$4.72/lb in the corresponding period. This was
partially offset by the impact of stronger currencies on operating costs and
translation of net monetary assets and liabilities, higher cost of production
inputs for chrome operations in South Africa and increased shipping costs.
Group and Unallocated Items
Corporate operating costs were US$135 million compared to US$110 million in the
corresponding period. This was primarily due to an increase of US$27 million
associated with costs of employee share awards in the current period.
Other items in the corresponding period included gains on legacy A$/US$ currency
hedging of US$30 million and benefits from one-off items.
INTERIM FINANCIAL REPORT
CONTENTS
INDEPENDENT REVIEW REPORT OF THE AUDITOR
TO BHP BILLITON PLC - 13
CONSOLIDATED PROFIT AND LOSS ACCOUNT - 14
CONSOLIDATED STATEMENT OF TOTAL
RECOGNISED GAINS AND LOSSES - 15
CONSOLIDATED BALANCE SHEET - 16
CONSOLIDATED STATEMENT OF CASH FLOWS - 17
NOTES TO INTERIM FINANCIAL INFORMATION - 19
The interim financial information set out on pages 14 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 2004. The interim financial information should be read in
conjunction with the accounts of BHP Billiton Plc for the year ended 30 June
2004 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 2004 and 31
December 2003 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 2004 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 2004 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.
Impact of International Financial Reporting Standards
For reporting periods beginning on or after 1 January 2005, the Group must
comply with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board. The Group's DLC structure results in
two parent entities with their own statutory reporting obligations, one in
Australia and the other in the UK. While Australia and the UK are currently
moving to an IFRS-based financial reporting regime in the same timeframe, this
structure creates unique IFRS implementation issues, for example:
i. the Australian Accounting Standards Board has approved IFRS-based standards
which mandate particular policies that are only optional in the UK; and
ii. there is a risk that further changes in IFRS prior to 30 June 2006 attract
inconsistent early adoption rules between the two jurisdictions.
Accordingly, significant uncertainty remains as to the likely impact of IFRS on
the Group's financial statements.
Management of IFRS implementation
The Group has established a formal project, monitored by a steering committee,
to manage the transition to IFRS reporting. Regular updates are also provided to
the Board Risk Management and Audit Committee. The implementation project
consists of three phases:
(i) Scoping and impact analysis phase - Project scoping and impact analysis was
substantially complete by 30 June 2004 and produced a high-level view of
potential differences to existing accounting and reporting policies and
consequential changes to information systems and business processes.
Management of IFRS implementation continued
(ii) Evaluation and design phase - This phase involves specification of changes
required to existing accounting policies, information systems and business
processes, together with an analysis of policy alternatives allowed under IFRS
and development of draft IFRS financial statement content. The evaluation and
design phase was well advanced at 31 December 2004 and the Group will continue
to evaluate the impact of developments in IFRS through to implementation.
(iii) Implementation and review phase - The implementation and review phase is
in progress and includes substantial training programmes across the Group's
finance staff, execution of changes to information systems and business
processes and completing formal authorisation processes to approve recommended
accounting policy changes. It will culminate in the collection of financial
information necessary to compile IFRS-compliant financial statements, embedding
of IFRS in business processes, elimination of any unnecessary data collection
processes and Board approval of IFRS financial statements. Implementation also
involves delivery of further training to staff as revised systems begin to take
effect. This phase commenced at the beginning of the 2004 calendar year and is
not expected to be complete until 30 June 2005.
Key differences in accounting policies
The interim financial information has been prepared in accordance with UK
accounting standards and other UK financial reporting requirements (UK GAAP).
The differences between UK GAAP and IFRS identified to date as potentially
having a significant effect on the Group's financial performance and financial
position are summarised below. The summary should not be taken as an exhaustive
list of all the differences (significant or not) between UK GAAP and IFRS.
The Group has not quantified the effects of the differences described below. The
regulatory bodies that promulgate UK GAAP and IFRS have significant ongoing
projects that could affect the ultimate differences between UK GAAP and IFRS and
their impact on the Group's financial statements in future years. The future
impact of IFRS will also depend on the particular circumstances prevailing in
those years.
The key potential implications of the conversion to IFRS on the Group identified
to date are as follows:
• all derivative financial instruments must be recognised in the balance
sheet and measured at fair value. Application of hedge accounting will only
be available where specific designation and effectiveness criteria are
satisfied. These changes may impact the manner in which the Group executes
risk mitigation strategies through derivatives and their consequent
accounting. Where hedge accounting cannot be achieved for ongoing risk
mitigation activity, net profit will be directly affected by changes in
market values of derivative financial instruments.
• income tax will be calculated using the 'balance sheet liability'
approach, which recognises deferred tax assets and liabilities by reference
to differences between the accounting and tax values of balance sheet items,
rather than accounting and tax values of items recognised in profit and
loss. This approach has the potential to give rise to a wider range of
deferred tax assets and liabilities and an increase in the volatility of
deferred tax balances brought about by foreign exchange rate movements. In
general, a weakening of other currencies relative to the Group's US dollar
functional currency will reduce the value of future tax deductions attached
to existing assets and liabilities that are denominated for tax purposes in
those other currencies. Such movements will give rise to foreign exchange
losses recognised in income tax expense.
• the cost of employee compensation provided in the form of equity-based
compensation (including shares and options) will be measured based on the
fair value of those instruments, rather than their intrinsic value, and
accrued over the period of employee service. This is likely to change the
total amount of compensation cost and the pattern of cost recognition.
Relative to the Group's existing accounting policy, the cost of employee
compensation provided in the form of shares and options will be lower and
higher respectively, and the cost will be spread over a longer recognition
period.
• defined benefit pension plan and medical benefit plan arrangements will
result in the recognition of net assets or liabilities directly based on the
underlying obligations and assets of those plans. The recognised net asset
or liability will be immediately subject to changes in the market value of
plan assets and changes in the accumulated benefits of employees that may be
more volatile than changes in assets and liabilities currently recognised
under Statement of Standard Accounting Practice (SSAP) 24. Alternative
methods of recognising this volatility will be available, including direct
recognition in profit and loss, progressive recognition using a 'corridor'
approach, or recognition directly in equity. The Group intends to adopt the
last of these options, which will result in most sources of volatility being
recognised directly in equity rather than through profit and loss.
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 2004 set out on pages 14 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 2004.
KPMG Audit Plc
Chartered Accountants
London, 16 February 2005
Consolidated Profit and Loss Account
for the half year ended 31 December 2004
Half year ended Half year ended Year ended
31 December 2004 31 December 2003 30 June 2004
Excluding Exceptional Excluding Exceptional Total Excluding Exceptional Total
exceptional items Total exceptional items US$M exceptional items US$M
Notes items (Note 1) US$M items (Note 1) items (Note 1)
US$M US$M US$M US$M US$M US$M
Turnover
(including
share of
joint
ventures)
Group 11 454 - 11 454 8 155 - 8 155 18 283 - 18 283
production
Third party 2 4 067 - 4 067 2 808 - 2 808 6 660 - 6 660
products
2,3 15 521 - 15 521 10 963 - 10 963 24 943 - 24 943
less Share (1 305) - (1 305) (1 016) - (1 016) (2 056) - (2 056)
of joint
ventures'
turnover
included
above
Group 14 216 - 14 216 9 947 - 9 947 22 887 - 22 887
turnover
Net (10 375) -(10 375) (8 014) 66 (7 948) (17 960) 66 (17 894)
operating
costs
Group 3 841 - 3 841 1 933 66 1 999 4 927 66 4 993
operating
profit
Share of 388 - 388 170 - 170 425 - 425
operating
profit of
joint
ventures
Operating 4 229 - 4 229 2 103 66 2 169 5 352 66 5 418
profit
(including
share of
profit of
joint
ventures)
Comprising:
Group 4 198 - 4 198 2 097 66 2 163 5 319 66 5 385
production
Third party 2 31 - 31 6 - 6 33 - 33
products
4 229 - 4 229 2 103 66 2 169 5 352 66 5 418
Income from 11 - 11 18 - 18 35 - 35
other fixed
asset
investments
Profit on 18 56 74 62 - 62 95 - 95
sale of
fixed
assets
Profit on - - - - - - 6 - 6
sale of
operations
Loss on - - - - - - - (534) (534)
termination
of
operations
Profit/(loss) 4 258 56 4 314 2 183 66 2 249 5 488 (468) 5 020
before net
interest and
similar items
payable and
taxation
Net
interest
and similar
items
payable
Group 4 (219) - (219) (242) - (242) (407) - (407)
Joint 4 (40) - (40) (52) - (52) (95) - (95)
ventures
Profit/(loss)2,3 3 999 56 4 055 1 889 66 1 955 4 986 (468) 4 518
before
taxation
Taxation (1 131) - (1 131) (658) 60 (598) (1 379) 337 (1 042)
Profit/(loss) 2 868 56 2 924 1 231 126 1 357 3 607 (131) 3 476
after
taxation
Equity (111) - (111) (18) - (18) (97) - (97)
minority
interests
Profit/(loss) 2 757 56 2 813 1 213 126 1 339 3 510 (131) 3 379
for the
financial
period
(attributable
profit)
Dividends (817) - (817) (497) - (497) (1 617) - (1 617)
to
shareholders
Retained 1 940 56 1 996 716 126 842 1 893 (131) 1 762
profit/(loss)
for the
financial
period
Earnings 6 44.5 0.9 45.4 19.5 2.0 21.5 56.4 (2.1) 54.3
per
ordinary
share
(basic) (US
cents)
Earnings 6 44.3 0.9 45.2 19.5 2.0 21.5 56.2 (2.1) 54.1
per
ordinary
share
(diluted)
(US cents)
Dividend 13.5 8.0 26.0
per
ordinary
share (US
cents)
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 2004
Half year ended Half year ended Year ended
31 December 2004 31 December 2003 30 June 2004
US$M US$M US$M
Attributable profit for the financial period 2 813 1 339 3 379
Exchange gains on foreign currency net investments 42 47 48
Total recognised gains for the financial period 2 855 1 386 3 427
Prior period adjustment arising from the change in - 84 84
accounting policy
Total recognised gains since last annual report 2 855 1 470 3 511
The accompanying notes form part of these interim financial statements.
Consolidated Balance Sheet
as at 31 December 2004
31 December 2004 31 December 2003 30 June 2004
Notes US$M US$M US$M
Fixed assets
Intangible assets
Goodwill 33 35 34
33 35 34
Tangible assets 21 941 20 537 20 945
Investments
Joint ventures - share of gross assets 3 099 2 873 2 951
Joint ventures - share of gross liabilities (1 598) (1 482) (1 582)
1 501 1 391 1 369
Loans to joint ventures and other investments 258 388 361
Total fixed assets 23 733 22 351 22 709
Current assets
Stocks 2 212 1 658 1 760
Debtors
Amounts due within one year 3 269 3 033 2 924
Amounts due after more than one year 1 797 1 684 1 482
5 066 4 717 4 406
Investments 226 185 167
Cash including money market deposits 7 1 016 812 1 818
Total current assets 8 520 7 372 8 151
Creditors - amounts falling due within one year (5 674) (4 379) (4 935)
Net current assets 2 846 2 993 3 216
Total assets less current liabilities 26 579 25 344 25 925
Creditors - amounts falling due after more than one (5 615) (6 494) (5 987)
year
Provisions for liabilities and charges (6 196) (5 494) (5 558)
Net assets 14 768 13 356 14 380
Equity minority interests (422) (314) (342)
Attributable net assets 14 346 13 042 14 038
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 1 591 1 833 1 851
Profit and loss account 11 015 9 482 10 461
Interest in shares of BHP Billiton (12) (25) (26)
Equity shareholders' funds 5 14 346 13 042 14 038
The accompanying notes form part of these interim financial statements.
Consolidated Statement of Cash Flows
for the half year ended 31 December 2004
Half year ended Half year ended Year ended
31 December 2004 31 December 2003 (b) 30 June 2004 (b)
US$M US$M US$M
Net cash inflow from Group operating activities(a) 4 228 2 227 6 566
Dividends received from joint ventures and 124 109 203
associates
Interest paid (154) (209) (347)
Dividends paid on redeemable preference shares (12) (12) (23)
Interest received 43 38 78
Other dividends received 11 18 35
Dividends paid to equity minority interests (32) (3) (75)
Net cash outflow from returns on investments and (144) (168) (332)
servicing of finance
Taxation (695) (543) (1 337)
Available cash flow 3 513 1 625 5 100
Purchases of tangible fixed assets (1 527) (1 213) (2 589)
Exploration expenditure (199) (193) (454)
Disposals of tangible fixed assets 38 62 157
Purchase of investments and funding of joint (14) (23) (35)
ventures
Sale of investments and repayments by joint 73 40 89
ventures
Net cash outflow from capital expenditure and (1 629) (1 327) (2 832)
financial investment
Demerger or sale of subsidiaries 1 - 53
Cash transferred on demerger or disposal - - (5)
Disposal of joint ventures - 6 131
Net cash inflow from acquisitions and disposals 1 6 179
Net cash flow before equity dividends paid, 1 885 304 2 447
management of liquid resources and financing
Equity dividends paid (594) (959) (1 501)
Net cash flow before management of liquid 1 291 (655) 946
resources and financing
Net cash inflow/(outflow) from management of 843 667 (178)
liquid resources
Debt due within one year - repayment of loans (680) (331) (854)
Debt due within one year - drawdowns 587 330 256
Debt due after more than one year - repayment of (77) (226) (482)
loans
Debt due after more than one year - drawdowns 3 41 254
Finance lease obligations (12) (1) (9)
Net cash outflow from debt and finance leases (179) (187) (835)
Share repurchase scheme - BHP Billiton Limited (1 792) - -
Purchase of shares by ESOP trusts (29) (14) (25)
Issue of shares 38 55 76
Net cash outflow from financing (1 962) (146) (784)
Increase/(Decrease) in cash in the period 172 (134) (16)
The accompanying notes form part of these interim financial statements.
Consolidated Statement of Cash Flows continued
for the half year ended 31 December 2004
Half year ended Half year ended Year ended
31 December 2004 31 December 2003 (b) 30 June 2004 (b)
Notes US$M US$M US$M
Reconciliation of net cash flow to movement
in net debt
Increase/(Decrease) in cash in the period 172 (134) (16)
Cash flow from debt and finance leases 179 187 835
Cash flow from management of liquid resources (843) (667) 178
(Increase)/decrease in net debt arising from (492) (614) 997
cash flows
Other non-cash movements 7 (2) - (31)
Increase in net debt from exchange 7 (57) (73) (104)
adjustments
(Increase)/decrease in net debt (551) (687) 862
Net debt at beginning of period 7 (4 965) (5 827) (5 827)
Net debt at end of period 7 (5 516) (6 514) (4 965)
(a) Net cash inflow from Group operating activities
Half year ended Half year ended Year ended
31 December 2004 31 December 2003 30 June 2004
US$M US$M US$M
Operating profit 3 841 1 999 4 993
Depreciation and amortisation 877 853 1 751
Impairment of assets 4 9 116
Employee share awards 49 28 96
Net exploration charge (excluding impairment of assets) 116 106 284
Increase in stocks (462) (276) (356)
Increase in debtors (365) (821) (734)
Increase in creditors 71 264 365
Increase in provisions 72 68 48
Other items 25 (3) 3
Net cash inflow from Group operating activities 4 228 2 227 6 566
(b) Restated - refer note 7.
The accompanying notes form part of these interim financial statements.
Notes to Interim Financial Information
NOTE 1. EXCEPTIONAL ITEMS
Gross Tax Net
Half year ended 31 December 2004 US$M US$M US$M
Sale of equity interest in North West Shelf Project (a) 56 - 56
Total by category 56 - 56
Petroleum 56 - 56
Total by Customer Sector Group 56 - 56
(a) During the half year ended 31 December 2004, BHP Billiton sold an equity
participation in the North West Shelf (NWS) Project to China National Offshore
Oil Corporation (CNOOC). CNOOC purchased an interest in a new joint venture that
is being established within the NWS Project to supply LNG to the Guangdong LNG
Project in China. CNOOC will acquire title to approximately 5.8% of current NWS
Project gas reserves and rights to process its gas and associated LPG and
condensate through NWS Venture offshore and onshore infrastructure. CNOOC paid
each joint venture partner US$59 million resulting in a profit on sale of US$56
million (no tax effect).
Gross Tax Net
Half year ended 31 December 2003 US$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 elected to
consolidate its Australian subsidiaries under the Australian tax consolidation
regime, as introduced by the Australian Federal Government. Under the
transitional rules, the Group has chosen to reset the tax cost base of certain
depreciable assets which will result in additional tax depreciation over the
lives of these assets. This 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 recorded an exceptional gain
of US$66 million, before tax expense of US$18 million.
NOTE 1. EXCEPTIONAL ITEMS (continued)
Gross Tax Net
Year ended 30 June 2004 US$M US$M US$M
Introduction of tax consolidation regime in Australia (a) - 95 95
Litigation settlement (b) 66 (18) 48
US and Canadian taxation deductions (c) - 238 238
Closure plans (d) (534) 22 (512)
Total by category (468) 337 (131)
Petroleum 66 (18) 48
Base Metals (482) 11 (471)
Stainless Steel Materials (10) 3 (7)
Group and unallocated items (42) 341 299
Total by Customer Sector Group (468) 337 (131)
(a) During the year ended 30 June 2004, BHP Billiton elected to consolidate its
Australian subsidiaries under the Australian tax consolidation regime, as
introduced by the Australian Federal Government. Under the transitional rules,
the Group has chosen to reset the tax cost base of certain depreciable assets
which will result in additional tax depreciation over the lives of these assets.
This resulted in the restatement of deferred tax balances and an exceptional tax
benefit of US$95 million being recorded in accordance with UK GAAP.
(b) In December 2003, BHP Billiton announced that it was part of a consortium
that had reached a settlement with Dalmine SpA with respect to a claim brought
against Dalmine in April 1998. The claim followed the failure of an underwater
pipeline installed in 1994 in the Liverpool Bay area of the UK continental
shelf. As a result of the settlement, BHP Billiton recorded an exceptional gain
of US$66 million, before tax expense of US$18 million.
(c) During the year ended 30 June 2004, the level of certainty regarding
potential benefits arising from prior period taxation deductions and foreign tax
credits available in the US and Canada increased to the extent that some of the
provisions against deferred tax assets established in prior years were no longer
necessary. This was a result of higher income generation, changes in legislation
and effective utilisation of tax credits during the year, along with increasing
confidence regarding the ability to realise benefits in the future. Accordingly,
the Group recorded an exceptional tax benefit of US$238 million.
(d) During the year ended 30 June 2004, the Group refined its plans in relation
to certain closed operations. In relation to the Group's Southwest Copper
business in the US, this resulted in a charge of US$425 million resulting from a
re-estimation of short-term closure costs and the inclusion of residual risks,
longer-term water management and other costs, and an increase in the residual
value of certain assets. Additionally, at other closed sites, a charge of US$109
million (before a tax benefit of US$22 million) was recorded, mainly in relation
to the Island Copper mine, the Newcastle steelworks and the Selbaie copper mine.
Accordingly, the Group recorded a net after-tax exceptional loss of US$512
million.
NOTE 2. ANALYSIS BY BUSINESS SEGMENT
Half year ended Half year ended Year ended
31 December 2004 31 December 2003 30 June 2004
Turnover US$M US$M US$M
Petroleum 3 171 2 245 5 558
Aluminium 2 615 2 023 4 432
Base Metals 2 353 1 351 3 422
Carbon Steel Materials 3 229 2 206 4 857
Diamonds and Specialty Products 1 136 758 1 710
Energy Coal 1 640 1 242 2 569
Stainless Steel Materials 1 013 744 1 749
Group and unallocated items 411 429 725
Inter-segment (47) (35) (79)
BHP Billiton Group 15 521 10 963 24 943
Profit before taxation
Petroleum 909 602 1 391
Aluminium 458 307 776
Base Metals 1 041 333 1 156
Carbon Steel Materials 1 007 505 1 137
Diamonds and Specialty Products 317 195 410
Energy Coal 308 85 234
Stainless Steel Materials 340 193 571
Group and unallocated items (122) (37) (187)
Exceptional items 56 66 (468)
Profit before net interest and taxation 4 314 2 249 5 020
Net interest (259) (294) (502)
BHP Billiton Group 4 055 1 955 4 518
Net operating assets
Petroleum 4 494 3 743 4 074
Aluminium 5 351 5 252 5 309
Base Metals 3 587 3 974 3 272
Carbon Steel Materials 3 626 2 961 3 175
Diamonds and Specialty Products 1 674 1 570 1 568
Energy Coal 2 188 2 233 2 194
Stainless Steel Materials 2 059 1 834 1 823
Group and unallocated items 292 475 291
BHP Billiton Group 23 271 22 042 21 706
NOTE 2. ANALYSIS BY BUSINESS SEGMENT (continued)
Third party product included above
Half year ended Half year ended Year ended
31 December 2004 31 December 2003 30 June 2004
External Turnover US$M US$M US$M
Petroleum 1 224 670 2 286
Aluminium 1 108 886 1 823
Base Metals 375 96 335
Carbon Steel Materials 95 24 102
Diamonds and Specialty Products 523 378 829
Energy Coal 344 337 554
Stainless Steel Materials 2 14 47
Group and unallocated items 396 403 684
BHP Billiton Group 4 067 2 808 6 660
Profit before taxation
Petroleum (3) (17) (22)
Aluminium 5 16 11
Base Metals (11) 1 (4)
Carbon Steel Materials 16 (1) (9)
Diamonds and Specialty Products 22 6 29
Energy Coal 2 - 21
Stainless Steel Materials - 1 7
Group and unallocated items - - -
BHP Billiton Group 31 6 33
NOTE 3. ANALYSIS BY GEOGRAPHICAL SEGMENT
Half year ended Half year ended Year ended
31 December 2004 31 December 2003 30 June 2004
Turnover by geographical market US$M US$M US$M
Australia 1 259 908 1 874
Europe 5 382 3 805 8 941
Japan 1 777 1 270 2 807
South Korea 881 730 1 598
China 1 588 1 075 2 432
Other Asia 910 683 1 583
North America 1 679 1 292 2 782
Southern Africa 861 566 1 363
Rest of World 1 184 634 1 563
BHP Billiton Group 15 521 10 963 24 943
Turnover by geographical origin
Australia 4 495 3 556 7 270
Europe 4 282 2 521 6 750
North America 1 506 1 180 2 503
South America 2 625 1 732 4 130
Southern Africa 2 495 1 776 3 882
Rest of World 118 198 408
BHP Billiton Group 15 521 10 963 24 943
Profit before taxation by geographical origin
Australia 1 627 1 001 2 104
Europe 341 328 756
North America 341 160 (188)
South America 1 387 544 1 719
Southern Africa 554 183 537
Rest of World 64 33 92
4 314 2 249 5 020
Net interest (259) (294) (502)
BHP Billiton Group 4 055 1 955 4 518
NOTE 4. NET INTEREST AND SIMILAR ITEMS PAYABLE
Half year ended Half year ended Year ended
31 December 2004 31 December 2003 30 June 2004
US$M US$M US$M
On bank loans and overdrafts 26 31 83
On all other loans 132 162 259
Finance lease and hire purchase interest 2 2 2
160 195 344
Dividends on redeemable preference shares 12 12 23
Discounting on provisions and other liabilities 78 56 111
less Amounts capitalised (a) (43) (62) (97)
207 201 381
Share of interest of joint ventures 28 36 66
235 237 447
Interest received/receivable (45) (32) (78)
190 205 369
Exchange differences on net debt (b)
Group 57 73 104
Joint ventures 12 16 29
69 89 133
Net interest and similar items payable (c) 259 294 502
(a) Interest has been capitalised at the rate of interest applicable to the
specific borrowings financing the assets under construction or, where financed
through general borrowings, at a capitalisation rate representing the average
borrowing cost of the Group. For the period ended 31 December 2004 the
capitalisation rate was 4.25 per cent (31 December 2003: 5.0 per cent; 30 June
2004: 4.6 per cent).
(b) Net exchange losses primarily represent the effect on borrowings of the
appreciation of the South African rand against the US dollar.
(c) Disclosed in the consolidated profit and loss account as:
Half year ended Half year ended Year ended
31 December 2004 31 December 2003 30 June 2004
US$M US$M US$M
Net interest and similar items payable
Group 219 242 407
Joint ventures 40 52 95
Net interest and similar items payable 259 294 502
NOTE 5. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Half year ended Half year ended Year ended
31 December 2004 31 December 2003 30 June 2004
US$M US$M US$M
Attributable profit for the financial period 2 813 1 339 3 379
Other recognised gains 42 47 48
Total recognised gains for the financial period 2 855 1 386 3 427
Dividends (817) (497) (1 617)
Issue of ordinary shares for cash 33 48 66
Accrued employee entitlement to share awards 49 14 96
Cash settlement of share awards (6) - -
Purchase of shares by ESOP trusts (29) - (25)
Share buy-back
BHP Billiton Limited (a) (1 777) - -
Share repurchase scheme
BHP Billiton Plc (b) - - -
Net movement in shareholders' funds 308 951 1 947
Shareholders' funds at beginning of period 14 038 12 091 12 091
Shareholders' funds at end of period 14 346 13 042 14 038
(a) On 23 November 2004, the BHP Billiton Group completed an off-market share
buy-back of 180 716 428 BHP Billiton Limited shares. As a result of the buy-
back, shareholders' funds decreased by US$1 777 million (including US$5
million of transaction costs). In accordance with the structure of the buy-back,
US$296 million was allocated to the contributed equity of BHP Billiton
Limited, and US$1 481 million was allocated to the profit and loss account.
The final price for the buy-back was A$12.57 per share, representing a discount
of 12% to the volume weighted average price of BHP Billiton Limited
shares over the 5 days up to and including the closing date of the buy-back.
(b) BHP Billiton Plc entered into an arrangement under which it contingently
agreed to purchase its own shares from a special purpose vehicle (Nelson
Investment Limited) established for that purpose. No shares were purchased
during the half year ended 31 December 2004 (31 December 2003: nil; 30 June
2004: nil). On 23 June 2004, 3 890 000 ordinary shares of BHP Billiton
Plc, which were held by Nelson Investment Limited, were transferred to The
Billiton Employee Share Ownership Trust.
NOTE 6. EARNINGS PER SHARE
Half year ended Half year ended Year ended
31 December 2004 31 December 2003 30 June 2004
Basic earnings per share (US cents)
Excluding exceptional items 44.5 19.5 56.4
Impact of exceptional items 0.9 2.0 (2.1)
Including exceptional items 45.4 21.5 54.3
Diluted earnings per share (US cents)
Excluding exceptional items 44.3 19.5 56.2
Impact of exceptional items 0.9 2.0 (2.1)
Including exceptional items 45.2 21.5 54.1
Basic earnings per ADS (US cents) (a)
Including exceptional items 90.8 43.0 108.6
Diluted earnings per ADS (US cents) (a)
Including exceptional items 90.4 43.0 108.2
Basic Earnings (US$ million)
Excluding exceptional items 2 757 1 213 3 510
Including exceptional items 2 813 1 339 3 379
Diluted Earnings (US$ million) (b)
Excluding exceptional items 2 760 1 213 3 510
Including exceptional items 2 816 1 339 3 379
Weighted average number of shares (million)
Basic earnings per share denominator 6 195 6 215 6 218
Diluted earnings per share denominator 6 224 6 233 6 246
(a) For the periods reported, one American Depositary Share (ADS) represents two
shares.
(b) For the half year ended 31 December 2004, diluted earnings is calculated
after adding back dividend equivalent payments of US$3 million (31 December
2003: nil; 30 June 2004: nil) that would not be made if potential ordinary
shares were converted to fully paid.
Exceptional Items
Details of exceptional items are set out in note 1. The impact of exceptional
items on basic and diluted earnings per share is as follows:
Half year ended Half year ended Year ended
31 December 2004 31 December 2003 30 June 2004
US cents per share US cents per share US cents per share
Sale of equity interest in North West Shelf 0.9 - -
Project
Introduction of tax consolidation regime in - 1.2 1.5
Australia
Litigation settlement - 0.8 0.8
US and Canadian taxation deductions - - 3.8
Closure plans - - (8.2)
0.9 2.0 (2.1)
Under the terms of the DLC merger, the rights to dividends of a holder of an
ordinary share in BHP Billiton Plc and a holder of an ordinary share in BHP
Billiton Limited are identical. Consequently, earnings per share have been
calculated on the basis of the aggregate number of ordinary shares ranking for
dividend. The weighted average number of shares used for the purposes of
calculating basic earnings per share is calculated after deduction of the shares
held by the share repurchase scheme and the Group's ESOP trusts.
The weighted average number of shares used for the purpose of calculating
diluted earnings per share can be reconciled to the number used to calculate
basic earnings per share as follows:
Half year ended Half year ended Year ended
31 December 2004 31 December 2003 30 June 2004
Million Million Million
Basic earnings per share denominator 6 195 6 215 6 218
Shares and options contingently issuable under employee 29 18 28
share ownership plans
Diluted earnings per share denominator 6 224 6 233 6 246
NOTE 7. ANALYSIS OF MOVEMENTS IN NET DEBT
Other
1 July 2004 Acquisitions non-cash Exchange 31 December
(a) & disposals Cash flow movements movements 2004
US$M US$M US$M US$M US$M US$M
Cash at bank and in hand 674 - 38 - 3 715
Overdrafts (133) - 134 - (6) (5)
541 - 172 - (3) 710
Redeemable preference shares (450) - - - - (450)
Finance lease obligations (76) - 12 (2) - (66)
Other debt due within one (1 188) - 93 (297) (30) (1 422)
year
Other debt due after more (4 936) - 74 297 (24) (4 589)
than one year
(6 650) - 179 (2) (54) (6 527)
Liquid resources (b) 1 144 - (843) - - 301
Net debt (c) (4 965) - (492) (2) (57) (5 516)
The balance sheet movement in
cash including money market
deposits is as follows:
Cash at bank and in hand 674 - 38 - 3 715
Money market deposits (b) 1 144 - (843) - - 301
1 818 - (805) - 3 1 016
(a) Amounts owing to joint venture participants of US$196 million at 30 June
2004 (31 December 2003: US$128 million) have been reclassified from sundry
creditors to other debt due within one year, to better reflect the funding
nature of these amounts.
(b) Liquid resources represent money market deposits with financial institutions
that have a maturity of up to three months.
(c) The breakdown of net debt by currency is as follows:
31 December 2004 31 December 2003 30 June 2004
US$M US$M US$M
Net debt is denominated in:
US dollars 5 336 6 049 4 869
South African rand 173 471 211
Australian dollars 24 113 101
Canadian dollars 98 5 38
Other currencies (115) (124) (254)
Net debt 5 516 6 514 4 965
NOTE 8. Events occurring after balance date
On 4 January 2005, the sale of BHP Billiton's 50% interest in Integris Metals
was completed. Total proceeds from the sale were US$205 million resulting in a
profit on sale before tax of US$19 million (no tax effect).
On 7 January 2005, the Group sold 50% of its holding in Acerinox S.A. Total
proceeds from the sale were US$56 million resulting in a profit on sale before
tax of US$22 million (no tax effect and US$13 million after outside equity
interests).
On 14 January 2005, the sale of the Laminaria and Corallina oil fields was
completed. Total proceeds from the sale were US$130 million resulting in a
profit on sale before tax of US$134 million (US$123 million after tax).
The financial effects of the above transactions have not been brought to account
at 31 December 2004.
BHP BILLITON GROUP
STATEMENT OF FINANCIAL PERFORMANCE
(prepared in accordance with Australian GAAP)
Half year ended 31 December 2004 2003
US$M US$M
Revenue from ordinary activities
Operating revenue 14 216 9 947
Non-operating revenue 256 309
14 472 10 256
Profit from ordinary activities before
depreciation, amortisation and borrowing costs 5 096 3 071
Deduct: Depreciation and amortisation 898 874
Borrowing costs 266 298
Profit from ordinary activities before tax 3 932 1 899
Deduct: Income tax expense attributable to ordinary activities 1 184 489
Net profit 2 748 1 410
Deduct: Outside equity interests in net profit 111 18
Net profit attributable to members of the BHP Billiton Group 2 637 1 392
Basic earnings per fully paid ordinary share (US cents) 42.6 22.4
Basis of Preparation
The results of the BHP Billiton Group, comprising BHP Billiton Limited and BHP
Billiton Plc and their respective subsidiaries, for the half year ended 31
December 2004, and the corresponding period, have been prepared in accordance
with Australian GAAP and Practice Note 71 'Financial reporting by Australian
entities in dual listed company arrangements' issued by the Australian
Securities and Investments Commission.
The financial information has been prepared using the same accounting policies
as were used in preparing the results for the BHP Billiton Group as presented in
the BHP Billiton Limited financial statements for the year ended 30 June 2004.
Significant Items
Individually significant items (before outside equity interests) included within
the BHP Billiton Group net profit are detailed below.
Half year ended 31 December 2004 Half year ended 31 December 2003
Gross Tax Net Gross Tax Net
US$M US$M US$M US$M US$M US$M
Sale of equity interest in 56 - 56 - - -
North West Shelf Project (a)
Introduction of tax - - - - 207 207
consolidation regime in
Australia (b)
Litigation settlement (c) - - - 66 (18) 48
Total 56 - 56 66 189 255
(a) During the half year ended 31 December 2004, BHP Billiton sold an equity
participation in the North West Shelf (NWS) Project to China National Offshore
Oil Corporation (CNOOC). CNOOC purchased an interest in a new joint venture that
is being established within the NWS Project to supply LNG to the Guangdong LNG
Project in China. CNOOC will acquire title to approximately 5.8% of current NWS
Project gas reserves and rights to process its gas and associated LPG and
condensate through NWS Venture offshore and onshore infrastructure. CNOOC paid
each joint venture partner US$59 million resulting in a profit on sale of US$56
million (no tax effect).
(b) During the half year ended 31 December 2003, BHP Billiton elected to
consolidate its Australian subsidiaries under the Australian tax consolidation
regime, as introduced by the Australian Federal Government. Under the
transitional rules, the Group chose to reset the tax cost base of certain
depreciable assets which will result in additional tax depreciation over the
lives of the assets. This resulted in the restatement of deferred tax balances
and a tax benefit of US$207 million being recorded in accordance with UIG 52.
(c) 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 recorded a gain of US$66
million, before tax expense of US$18 million.
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 16 February 2005. 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 'Key Information-Risk Factors' and
'Operating and Financial Review and Prospects-External factors affecting our
operating results' included in our annual report on Form 20-F for the fiscal
year ended 30 June 2004, which we filed with the US Securities and Exchange
Commission (SEC) on 20 October 2004 and is available on the SEC's website at
'www.sec.gov'. Nothing in this release should be construed as either an offer to
sell or a solicitation of an offer to buy or sell securities in any
jurisdiction.
Further information on BHP Billiton can be found on our Internet site:
http://www.bhpbilliton.com
Australia United Kingdom
Jane Belcher, Investor Relations Mark Lidiard, Investor & Media Relations
Tel: +61 3 9609 3952 Mobile: +61 417 031 653 Tel: +44 20 7802 4156 Mobile: + 44 7769 934 942
email: Jane.H.Belcher@bhpbilliton.com email: Mark.Lidiard@bhpbilliton.com
Tania Price, Media Relations Ariane Gentil, Media Relations
Tel: +61 3 9609 3815 Mobile: +61 419 152 780 Tel: +44 20 7802 4177 Mobile: +44 7881 518 715
email: Tania.Price@bhpbilliton.com email: Ariane.Gentil@bhpbilliton.com
United States South Africa
Francis McAllister, Investor Relations Michael Campbell, Investor & Media Relations
Tel: +1 713 961 8625 Mobile: +1 713 480 3699 Tel: +27 11 376 3360 Mobile: +27 82 458 2587
email: Francis.R.McAllister@bhpbilliton.com email: Michael.J.Campbell@bhpbilliton.com
BHP Billiton Limited ABN 49 004 028 077 BHP Billiton Plc Registration number 3196209
Registered in Australia Registered in England and Wales
Registered Office: 180 Lonsdale Street Melbourne Victoria Registered Office: Neathouse Place London SW1V 1BH
3000 Australia United Kingdom
Telephone +61 1300 55 4757 Facsimile +61 3 9609 3015 Telephone +44 20 7802 4000 Facsimile +44 20 7802 4111
The BHP Billiton Group is headquartered in Australia
This information is provided by RNS
The company news service from the London Stock Exchange
Thursday, 9th January 2025
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