Supp Info - Prelim Final Res
BHP Billiton Limited
11 September 2003
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.
For the information of your local markets, please find following supplementary
information required by the Listing Rules of the Australian Stock Exchange
following the preliminary announcement on 28 August of the BHP Billiton Group
Results for the Financial Year ended 30 June 2003.
Karen Wood, Company Secretary
9 September 2003
APPENDIX 4E TO THE LISTING RULES OF THE AUSTRALIAN STOCK EXCHANGE
Supplementary Information - Preliminary Final Results
Name of Company: BHP Billiton Limited
A.B.N: 49 004 028 077
Supplementary Information - Preliminary final results for 12 months to 30/6/2003
This supplementary information required by the Listing Rules of the Australian
Stock Exchange includes the combined results of the BHP Billiton Group,
comprising BHP Billiton Limited and BHP Billiton Plc, for the full year ended 30
June 2003 compared with the full year ended 30 June 2002, prepared in accordance
with Australian Generally Accepted Accounting Principles. The information is
supplementary to the results of the BHP Billiton Group for the full year ended
30 June 2003 announced to the market on 28 August 2003.
Results for the Financial Year 2003
Discussion and Analysis
Basis of presentation of financial information
On 29 June 2001, BHP Billiton Limited (previously known as BHP Limited), an
Australian listed company, and BHP Billiton Plc (previously known as Billiton
Plc), a UK listed company, entered into a Dual Listed Companies (DLC) merger.
This was effected by contractual arrangements between the companies and
amendments to their constitutional documents.
The effect of the DLC merger is that BHP Billiton Limited and its subsidiaries
(the BHP Billiton Limited Group) and BHP Billiton Plc and its subsidiaries (the
BHP Billiton Plc Group) operate together as a single economic entity (the BHP
Billiton Group), with neither assuming a dominant role.
Accounting and Reporting on the DLC Merger
In accordance with the Australian Securities and Investments Commission (ASIC)
Practice Note 71 'Financial Reporting by Australian Entities in Dual-Listed
Company Arrangements', and an order issued by ASIC under section 340 of the
Corporations Act 2001 on 2 September 2002, this information presents the
financial results of the BHP Billiton Group as follows:
• Results for the years ended 30 June 2003 and 30 June 2002 are of the
combined entity including both BHP Billiton Limited and its subsidiary
companies and BHP Billiton Plc and its subsidiary companies; and
• Results are presented in US dollars unless otherwise stated.
Results for the financial year ended 30 June 2003
Overview
Global economic conditions remained weak during the year ended 30 June 2003. In
what has been a challenging climate, BHP Billiton's operating and financial
results clearly demonstrate our ability to consistently generate stable cash
flows, improve underlying profitability and increase returns to shareholders
whilst still continuing our investment in growth projects.
Net profit attributable to members of the BHP Billiton Group for 2003 of US$1
860 million was 12.9 per cent higher than the previous year (2002: US$1 648
million). Basic earnings per share were 30.0 US cents (2002: 27.3 US cents).
Profit before borrowing costs and tax
Profit before borrowing costs and tax was US$3 294 million compared with a
profit of US$2 957 million for 2002.
During the financial year the Group's Steel business was demerged. In order to
provide meaningful comparison, the discussion in the remainder of this section
is based on the Group's continuing operations.
Excluding significant items (refer below), profit from continuing operations
before borrowing costs and tax was US$3 313 million compared with a profit of
US$3 079 million for 2002.
The following represent the approximate impact of the major factors affecting
profit before borrowing costs and tax (from continuing operations, excluding
significant items and outside equity interests) for the year ended 30 June 2003,
compared with last year:
• Higher realised prices for petroleum products, nickel, ferrochrome,
copper, hot briquetted iron and manganese alloy increased revenue. This
increase was partly offset by lower prices for export energy coal and iron
ore that decreased revenue.
• Favourable unit operating cost performance, due to increased production
and the Group's cost reduction initiatives, increased profits compared with
the corresponding period. These factors were partially offset by higher
costs at Escondida (Chile) from processing lower-grade ore due to the
voluntary production cut-backs and higher depreciation from the start-up of
the Phase IV expansion project.
• Increases in price-linked costs depressed profits, mainly due to higher
royalties and taxes for petroleum products and higher nickel ore supply
costs to the Yabulu refinery (Australia).
• Inflationary pressures, principally in South Africa, and to a lesser
extent in Australia, increased costs.
• Higher sales volumes of iron ore, energy coal, copper, aluminium, diamonds
and manganese were partly offset by lower sales volumes of petroleum
products, resulting in a positive net volume impact on profits.
• Exploration expense was down by approximately US$45 million compared with
the corresponding period, which included the write-off of exploration
expenditure at La Granja (Peru).
• New and acquired operations increased profits due to the commencement of
commercial production at Antamina (Peru) in October 2001 and the increased
ownership interest in Cerrejon Coal Company (Colombia) from February 2002.
• The impact of stronger A$/US$, South African rand/US$ and Canadian$/US$
exchange rates on operating costs had an unfavourable impact on profits. The
conversion of South African rand and Australian dollar denominated net
monetary liabilities at balance sheet date also had an unfavourable impact
on profits. This was partly offset by reduced losses on legacy A$/US$
currency hedging compared with the corresponding period of approximately
US$220 million. In addition, the lower average Colombian peso/US$ and
Brazilian real/US$ exchange rates had a favourable impact on operating
costs.
• Profit was impacted unfavourably from ceased/sold operations mainly due to
the disposal of PT Arutmin (Indonesia), divested in November 2001 and the
Rietspruit energy coal mine (South Africa), which was closed in May 2002,
together with higher pension and medical plan costs at Southwest Copper
(US).
• The impact of asset sales is a reduction in profits of approximately US$30
million mainly from the profit on divestment of PT Arutmin in the
corresponding period, partly offset by profits on sale of BHP Billiton's
interests in Alumbrera (Argentina) and Agua Rica (Argentina), during the
current year.
Discontinued operations / Significant items
The demerger of the Group's Steel business became unconditional on 1 July 2002.
The profit before net borrowing costs and income tax of US$77 million relating
to the Group's Steel business in the corresponding period has been disclosed as
Discontinued Operations. The 6 per cent interest in BHP Steel retained by BHP
Billiton was sold in July 2002 for US$75 million and the loss of US$19 million
associated with this sale has been recognised in the current year and is
disclosed as a significant item in relation to Discontinued Operations. The
demerger was effected through a Court-approved capital reduction of A$0.69 per
BHP Billiton Limited share totalling approximately US$1.5 billion (A$2.6
billion) via the transfer of BHP Steel Limited shares to BHP Billiton Limited
shareholders. Consequently, BHP Billiton Plc shareholders received approximately
149 million BHP Billiton Plc equalisation shares.
The major significant items before taxation for the year ended 30 June 2002
included charges to profit of:
• US$101 million relating to Southwest Copper, of which US$171 million
related to the write-down in carrying values of assets offset by a US$70
million reduction in closure provisions;
• US$31 million relating to charges associated with suspension of Tintaya
sulphide operations; and
• US$80 million relating to the merger and restructuring of the Group.
In June 2002 a change in legislation increased the corporation tax rate for
petroleum operations in the United Kingdom from 30 per cent to 40 per cent,
resulting in deferred taxation balances being restated, with an adverse impact
of US$56 million on the results for the year ended 30 June 2002. The tax effects
of other significant items were a benefit of US$24 million for the year ended 30
June 2002.
After including significant items and Discontinued Operations, the attributable
profit for the current period was US$1 860 million, US$212 million higher than
the US$1 648 million for the corresponding period, which included profits from
Discontinued Operations of US$68 million after tax, together with significant
items after tax of US$244 million. Basic earnings per share, including
significant items and Discontinued Operations, was 30.0 US cents per share, 9.9
per cent higher than the 27.3 US cents per share of the corresponding period.
Borrowing costs
Total borrowing costs, including capitalised interest and excluding discounting
on provisions and exchange differences on Group borrowings were US$400 million,
compared with US$507 million in the corresponding period. The lower borrowing
costs were principally driven by lower market interest rates, lower average debt
levels and management of the Group's debt portfolio.
Exchange losses on debt were US$117 million compared with gains of US$141
million in the corresponding period, mainly in relation to the translation of
rand denominated debt of companies which account in US dollars as their
functional currency. The rand appreciated by 27 per cent during the current
period compared with depreciation of 27 per cent in the corresponding period.
Taxation
The tax charge for the year was US$883 million, representing an effective rate
of 31.7 per cent. Excluding the impacts on tax of non tax-effected foreign
currency adjustments, translation of tax balances and other functional currency
translation adjustments, the effective rate was 24.8 per cent. The Group
recognises tax losses to the extent that it expects to earn virtually certain
future profits which can absorb those losses. Following promising progress in
the Group's Gulf of Mexico (US) projects during the year ended 30 June 2003,
previously unrecognised tax losses in the US have been recouped and have been
recognised this year resulting in a reduction in the effective tax rate of
approximately 3 per cent. If and when the projects reach appropriate milestones
that provide virtual certainty over projected future profits, further benefits
in respect of past losses may be recognised.
Comparison to results under UK GAAP
As a consequence of the DLC merger, the BHP Billiton Limited Group and the BHP
Billiton Plc Group have aligned accounting policies, as far as is possible, to
minimise differences and simplify determination and reporting of the combined
results. The item where alignment is not possible in terms of UK and Australian
GAAP and which impacts the year ended 30 June 2003 is described below.
Under UK GAAP, until 30 June 1998 goodwill arising upon acquistion was written
off directly against equity. Subsequently and currently under UK GAAP, goodwill
is to be retained as an asset and amortised. This current treatment is
consistent with that required under Australian GAAP. As of 30 June 1998, the BHP
Billiton Plc Group had written off a net amount of goodwill of US$513 million
directly against equity. For Australian GAAP reporting on a combined basis, this
goodwill is reinstated on the Statement of Financial Position as an intangible
asset, with a corresponding credit to equity. The net balance at 30 June 2003
(after amortisation) is US$430 million (30 June 2002: US$471 million) and the
impact on the Australian GAAP Statement of Financial Performance is a charge to
profit of US$41 million (no tax effect) for the year ended 30 June 2003 (2002:
US$42 million). Thus, the attributable profit of the BHP Billiton Group of US$1
901 million under UK GAAP compares to that recorded by the BHP Billiton Group of
US$1 860 million for the same period under Australian GAAP.
Cash flow
Operating cash inflows for the year were US$3 627 million with a total cash
inflow of US$539 million.
Expenditure on growth projects and investments amounted to US$1 995 million,
including US$814 million on petroleum projects and US$1 181 million on minerals
and other corporate projects. Maintenance capital expenditure was US$671 million
and exploration expenditure was US$348 million, whilst proceeds from the sale of
property, plant and equipment, proceeds from sale of investments and proceeds
from sale of controlled entities, joint ventures and associates generated US$1
064 million, contributing to an investing cash outflow of US$1 950 million.
After dividend payments of US$868 million, financing cash outflows were US$1 138
million.
Portfolio management
During the year, a number of portfolio management activities were finalised.
Proceeds of US$345 million were received from the sale of our indirect 2.1 per
cent interest in Companhia Vale do Rio Doce (CVRD), during March 2003. Our
interests in the Agua Rica prospect and Alumbrera mine in Argentina were also
sold during the year. These sales generated US$136 million in cash proceeds,
with an additional US$63 million deferred for receipt until June 2005.
Balance Sheet
Net assets and equity shareholders' funds for the BHP Billiton Group were US$12
761 million at 30 June 2003, a decrease of US$392 million from the 30 June 2002
position. After allowing for the return of capital to shareholders associated
with the BHP Steel demerger of US$1 489 million, equity shareholders' funds
increased by US$1 097 million. Net borrowings for the BHP Billiton Group
decreased by 13.6 per cent to US$5 772 million.
As a consequence of the above, the net gearing ratio decreased to 31.1 per cent
compared with 33.7 per cent for the previous year.
Net tangible assets per ordinary fully paid share were US$1.92 as at 30 June
2003 compared with US$2.04 as at 30 June 2002.
Currency
The Group has adopted the US dollar as its reporting currency and, subject to
some specific exceptions, its functional currency. Currency fluctuations affect
the Statement of Financial Performance in two principal ways.
Sales are predominantly based on US dollar pricing (the principal exceptions
being Petroleum's gas sales to Australian and UK domestic customers and Energy
Coal's sales to South African domestic customers). However, a proportion of
operating costs (particularly labour) arises in local currency of the
operations, most significantly the Australian dollar and South African rand, but
also the Brazilian real, the Chilean peso and Colombian peso. Accordingly,
changes in the exchange rates between these currencies and the US dollar can
have a significant impact on the Group's reported results.
Several subsidiaries hold certain monetary assets and liabilities denominated in
currencies other than their functional currency (US dollars), in particular
non-US dollar denominated debt, tax liabilities and provisions. Monetary assets
and liabilities are converted into US dollars at the closing rate. The resultant
differences are accounted for in the Statement of Financial Performance.
Capital Management
Moody's Investor Services upgraded our long-term credit rating to A2 from A3 and
our short-term rating to P-1 from P-2 during the year ended 30 June 2003.
The Group's stronger credit profile enabled further diversification of funding
sources, resulting in the issuance of our inaugural €750 million Eurobond under
the US$1.5 billion Euro Medium Term Note program and issuance of our inaugural
US$850 million Global Bond with a ten-year maturity.
In February 2003, a US$2 billion commercial paper program was established and
issuance from this program commenced during June 2003. This provides additional
diversification of our short term funding programs and enhances flexibility.
Dividends
An interim dividend of 7.0 US cents per fully paid ordinary share was paid in
December 2002 and a final dividend of 7.5 US cents per fully paid ordinary share
was paid in July 2003, bringing the declared total for the year to 14.5 US
cents. This compares to total dividends declared in the corresponding period of
13.0 US cents per share. The BHP Billiton Limited dividends were fully franked
for Australian taxation purposes.
Dividends for the BHP Billiton Group are determined and declared in US dollars.
However, BHP Billiton Limited dividends are mainly paid in Australian dollars
and BHP Billiton Plc dividends are mainly paid in pounds sterling to
shareholders on the UK section of the register and South African rand to
shareholders on the South African section of the register.
Audit
This Preliminary Final Results report is based upon accounts, which have been
audited.
Statement of Financial Performance
for the year ended 30 June 2003
2003 2002
US$M (a) US$M (a) (b)
Revenue from ordinary activities
Operating revenue 15 608 15 896
Non-operating revenue 941 1 171
16 549 17 067
deduct
Expenses from ordinary activities, excluding depreciation, amortisation and 11 730 12 564
borrowing costs
4 819 4 503
add
Share of net profit of joint venture and associated entities accounted for using 164 223
the equity method
4 983 4 726
deduct
Depreciation and amortisation 1 689 1 769
Borrowing costs 511 350
Profit from ordinary activities before income tax 2 783 2 607
deduct
Income tax expense attributable to ordinary activities 883 912
Net profit 1 900 1 695
deduct
Outside equity interests in net profit of controlled entities 40 47
Net profit attributable to members of the BHP Billiton Group 1 860 1 648
Net exchange fluctuations on translation of foreign currency net assets and
foreign currency interest bearing liabilities net of tax
67 25
Total direct adjustments to equity attributable to members of the BHP Billiton 67 25
Group
Total changes in equity other than those resulting from transactions with owners 1 927 1 673
Basic earnings per share (US cents) 30.0 27.3
Diluted earnings per share (US cents) 29.9 27.3
(a) Financial information for 2003 and 2002 represents the financial
performance of the BHP Billiton Group (Refer 'Dual Listed Companies structure
and basis of preparation of financial statements').
(b) Effective July 2002, the BHP Steel business was demerged from the BHP
Billiton Group. The Statement of Financial Performance for the year ended 30
June 2002 includes results of BHP Steel. Refer 'Discontinued Operations'.
Statement of Financial Position
as at 30 June 2003
2003 2002
US$M (a) US$M (a) (b)
Current assets
Cash assets 1 552 1 499
Receivables 2 177 2 294
Other financial assets 143 117
Inventories 1 328 1 419
Other assets 129 99
Total current assets 5 329 5 428
Non-current assets
Receivables 897 889
Investments accounted for using the equity method 1 403 1 505
Other financial assets 150 581
Inventories 51 38
Property, plant and equipment 19 780 20 146
Intangible assets 466 513
Deferred tax assets 447 480
Other assets 354 282
Total non-current assets 23 548 24 434
Total assets 28 877 29 862
Current liabilities
Payables 2 362 2 435
Interest bearing liabilities 898 1 797
Tax liabilities 309 493
Other provisions and liabilities 1 141 1 116
Total current liabilities 4 710 5 841
Non-current liabilities
Payables 195 121
Interest bearing liabilities 6 426 6 383
Deferred tax liabilities 1 434 1 600
Other provisions and liabilities 3 351 2 764
Total non-current liabilities 11 406 10 868
Total liabilities 16 116 16 709
Net assets 12 761 13 153
Contributed equity - BHP Billiton Limited 1 785 3 143
Called up share capital - BHP Billiton Plc 1 732 1 752
Reserves 362 471
Retained profits 8 558 7 455
Total BHP Billiton interest 12 437 12 821
Outside equity interests 324 332
Total equity 12 761 13 153
(a) Financial information for 2003 and 2002 represents the financial position
of the BHP Billiton Group (Refer 'Dual Listed Companies structure and basis of
preparation of financial statements').
(b) Effective July 2002, the BHP Steel business was demerged from the BHP
Billiton Group. The Statement of Financial Position as at 30 June 2002 includes
assets and liabilities of BHP Steel. Refer 'Discontinued Operations'.
Statement of Cash Flows
for the year ended 30 June 2003
2003 2002
US$M (a) US$M (a) (b)
Cash flows related to operating activities
Receipts from customers 15 415 16 129
Payments to suppliers, employees, etc. (10 623) (11 586)
Dividends received 212 187
Interest received 36 156
Borrowing costs (includes capitalised interest) (411) (525)
Operating cash flows before income tax 4 629 4 361
Income taxes paid (1 002) (606)
Refund of income taxes paid - 91
Net operating cash flows 3 627 3 846
Cash flows related to investing activities
Purchases of property, plant and equipment (2 571) (2 481)
Exploration expenditure (includes capitalised exploration) (348) (390)
Purchases of investments and funding of joint ventures (95) (321)
Purchases of, or increased investment in, controlled entities and joint venture interests - (45)
net of their cash
Investing cash outflows (3 014) (3 237)
Proceeds from sale of property, plant and equipment 99 200
Proceeds from sale or redemption of investments 560 232
Proceeds from demerger or sale of controlled entities, joint venture and associates 405 145
interests net of their cash
Net investing cash flows (1 950) (2 660)
Cash flows related to financing activities
Proceeds from ordinary share issues 172 140
Proceeds from interest bearing liabilities 3 698 3 975
Repayment of interest bearing liabilities (4 121) (4 331)
Redemption of secured Employee Share Plan program - (134)
Purchase of shares under Share Buy-Back program (20) (19)
Dividends paid (830) (811)
Dividends paid to outside equity interests (38) (20)
Other 1 5
Net financing cash flows (1 138) (1 195)
Net increase/(decrease) in cash and cash equivalents 539 (9)
Cash and cash equivalents at beginning of period 990 998
Effect of foreign currency exchange rate changes on cash and cash equivalents 2 1
Cash and cash equivalents at end of period 1 531 990
(a) Financial information for 2003 and 2002 represents the financial
performance of the BHP Billiton Group (Refer 'Dual Listed Companies structure
and basis of preparation of financial statements').
(b) Effective July 2002, the BHP Steel business was demerged from the BHP
Billiton Group. The Statement of Cash Flows for the year ended 30 June 2002
includes cash flows of BHP Steel. Net operating cash flows for BHP Steel for
that year amounted to US$282 million. Refer 'Discontinued Operations'.
Statement of Cash Flows continued
(c) For the purpose of the Statement of Cash Flows, cash is defined as cash and
cash equivalents. Cash equivalents include highly liquid investments which are
readily convertible to cash, bank overdrafts and interest bearing liabilities at
call.
2003 2002
US$M US$M
Reconciliation of cash
Cash and cash equivalents comprise:
Cash assets
Cash 587 1 199
Short-term deposits 965 300
Total cash assets 1 552 1 499
Bank overdrafts (21) (509)
Total cash and cash equivalents 1 531 990
(d) Reconciliation of net cash provided by operating activities to net profit
2003 2002
US$M US$M
Net profit 1 900 1 695
Depreciation and amortisation 1 689 1 769
Share of net profit of joint venture and associated entities less dividends 33 (74)
Capitalised borrowing costs (103) (58)
Exploration, evaluation and development expense (excluding diminution) 248 243
Net (gain) on sale of non-current assets (34) (119)
Diminution of property, plant and equipment, investments and intangibles 73 272
Employee share awards 60 28
Change in assets and liabilities net of effects from acquisitions and disposals of
controlled entities and exchange fluctuations
(Increase) in inventories (250) (11)
(Increase)/decrease in deferred charges (118) 10
(Increase) in trade receivables (264) (266)
(Increase) in sundry receivables (98) (15)
(Decrease)/increase in income taxes payable (189) 335
Increase in deferred taxes 87 84
Increase in trade creditors 132 37
Increase in sundry creditors 112 49
Decrease in interest payable (14) (25)
Increase/(decrease) in other provisions and liabilities 387 (87)
Other movements (24) (21)
Net cash provided by operating activities 3 627 3 846
Statement of Cash Flows continued
(e) Carrying amount of controlled entities demerged or disposed
2003 2002
US$M US$M
Value of assets and liabilities of entities demerged or disposed of:
Cash and cash equivalents 86 -
Investments (current) 1 -
Receivables (current) 304 32
Inventories (current) 284 19
Other (current) 8 2
Receivables (non-current) 7 -
Investments (non-current) 91 -
Inventories (non-current) 35 -
Property, plant and equipment 1 881 127
Other (non-current) 26 1
Payables and interest bearing liabilities (current) (346) (50)
Provisions (current) (102) (8)
Payables and interest bearing liabilities (non-current) (54) -
Provisions (non-current) (339) (44)
Net outside equity interests disposed (21) 16
Net identifiable assets 1 861 95
Net consideration received
Cash (i) 347 161
Deferred tax benefit 6 -
Settlement of capital reduction 1 489 -
(Loss)/profit on demerger or disposal (19) 66
Non-cash financing and investing activities
Other:
Employee Share Plan loan instalments (ii) 2 6
(i) 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 the proceeds from sale or partial sale, of controlled entities,
joint venture and associated entities' interests net of their cash, and US$75
million from the sale of the 6 per cent interest in BHP Steel which is included
in proceeds from sale or redemption of investments.
(ii)The Employee Share Plan loan instalments represent the repayment of loans
outstanding with the BHP Billiton Group, by the application of dividends.
DUAL LISTED COMPANY STRUCTURE AND BASIS OF PREPARATION OF FINANCIAL STATEMENTS
Merger terms
On 29 June 2001, BHP Billiton Limited (previously known as BHP Limited), an
Australian listed Company, and BHP Billiton Plc (previously known as Billiton
Plc), a UK listed Company, entered into a Dual Listed Companies (DLC) merger.
This was effected by contractual arrangements between the Companies and
amendments to their constitutional documents.
The effect of the DLC merger is that BHP Billiton Limited and its subsidiaries
(the BHP Billiton Limited Group) and BHP Billiton Plc and its subsidiaries (the
BHP Billiton Plc Group) operate together as a single economic entity (the BHP
Billiton Group), with neither assuming a dominant role. Under the arrangements:
• The shareholders of BHP Billiton Limited and BHP Billiton Plc have a
common economic interest in both Groups;
• The shareholders of BHP Billiton Limited and BHP Billiton Plc take key
decisions, including the election of Directors, through a joint electoral
procedure under which the shareholders of the two Companies effectively vote
on a joint basis;
• BHP Billiton Limited and BHP Billiton Plc have a common Board of
Directors, a unified management structure and joint objectives;
• Dividends and capital distributions made by the two Companies are
equalised; and
• BHP Billiton Limited and BHP Billiton Plc each executed a deed poll
guarantee, guaranteeing (subject to certain exceptions) the contractual
obligations (whether actual or contingent, primary or secondary) of the
other incurred after 29 June 2001 together with specified obligations
existing at that date.
If either BHP Billiton Limited or BHP Billiton Plc proposes to pay a dividend to
its shareholders, then the other Company must pay a matching cash dividend of an
equivalent amount per share to its shareholders. If either Company is prohibited
by law or is otherwise unable to declare, pay or otherwise make all or any
portion of such a matching dividend, then BHP Billiton Limited or BHP Billiton
Plc will, so far as it is practicable to do so, enter into such transactions
with each other as the Boards agree to be necessary or desirable so as to enable
both Companies to pay dividends as nearly as practicable at the same time.
The DLC merger did not involve the change of legal ownership of any assets of
BHP Billiton Limited or BHP Billiton Plc, any change of ownership of any
existing shares or securities of BHP Billiton Limited or BHP Billiton Plc, the
issue of any shares or securities or any payment by way of consideration, save
for the issue by each Company of one special voting share to a trustee company
which is the means by which the joint electoral procedure is operated. In
addition, to achieve a position where the economic and voting interests of one
share in BHP Billiton Limited and one share in BHP Billiton Plc were identical,
BHP Billiton Limited made a bonus issue of ordinary shares to the holders of its
ordinary shares.
Treatment of the DLC merger for accounting purposes
In accordance with the Australian Securities and Investments Commission (ASIC)
Practice Note 71 'Financial Reporting by Australian Entities in Dual-Listed
Company Arrangements', and an order issued by ASIC under section 340 of the
Corporations Act 2001 on 2 September 2002, this preliminary final results report
presents the financial results of the BHP Billiton Group as follows:
• Results for the years ended 30 June 2003 and 30 June 2002 are of the
combined entity including both BHP Billiton Limited and its subsidiary
companies and BHP Billiton Plc and its subsidiary companies; and
• Results are presented in US dollars unless otherwise stated.
STATEMENT OF ACCOUNTING POLICIES
Changes in accounting policies
Accounting standards and policies have been consistently applied by all entities
in the BHP Billiton Group and are consistent with those applied in the prior
year except for:
Provisions, employee entitlements and contingent liabilities
Revised Australian Accounting Standard AASB 1028 'Employee Entitlements' was
first adopted from 1 July 2002, which resulted in the Group calculating employee
benefit liabilities using remuneration rates expected to be paid when the
liabilities are settled, rather than remuneration rates at balance date. The
financial effect of the change in policy as at 1 July 2002 was a charge to net
profit for the year ended 30 June 2003 of US$6 million.
In addition, Australian Accounting Standard AASB 1044 'Provisions, Contingent
Liabilities and Contingent Assets' was first adopted from 1 July 2002, which
resulted in the Group no longer disclosing contingent liabilities where the
likelihood of the transfer of future economic benefit is remote. This change in
policy had no impact on net profit for the year ended 30 June 2003.
Foreign currency translation
Revised Australian Accounting Standard AASB 1012 'Foreign Currency Translation'
was first adopted from 1 July 2002.
For hedges of specific purchases or sales, the gains or costs on entering the
hedge and the exchange differences up to the date of the purchase or sale are
now deferred and recognised as assets or liabilities on the Statement of
Financial Position from the inception of the hedge contract, rather than when
the specific purchase or sale occurs.
At 30 June 2003, for foreign currency hedge contracts the Group has recognised
deferred costs of US$9 million, deferred exchange gains of US$104 million and a
net foreign currency receivable of US$95 million. There was no impact on opening
retained profits at 1 July 2002 or on net profit for the year ended 30 June
2003.
Disclosure of components of borrowing costs, interest revenue and income tax
expense
The BHP Billiton Group calculates foreign exchange gains and losses in
accordance with AASB 1012. In prior years, a net foreign exchange gain or loss
arising from the restatement of non-US dollar monetary balances by Group
entities that have a US dollar functional currency, has been disclosed as a
single net amount included in profit from ordinary activities before income tax.
In the current year, the components of this amount that relate to the
restatement of borrowings, short term deposits and tax balances have been
classified and disclosed as a component of borrowing costs, interest revenue and
income tax expense, respectively. In addition, the unwind of the discounting of
provisions has been classified and disclosed separately as a component of
borrowing costs. This disclosure better presents the impact of these foreign
exchange gains or losses and the discount component on the underlying categories
of income or expense.
The change in policy only impacts the disclosure of individual line items in the
Statement of Financial Performance. Comparative amounts have been restated
accordingly. There was no impact on opening retained profits at 1 July 2002 or
on net profit for the year ended 30 June 2003.
Restated As previously
disclosed
2003 2002 2002
US$M US$M US$M
Borrowing costs 511 350 449
Interest revenue 67 147 142
Income tax expense 883 912 955
Tax Consolidation
The Australian Federal Government has introduced consolidations tax law, which
enables an Australian group of companies to be treated as a single entity and to
lodge a single tax return, if the group makes an election, which is voluntary.
STATEMENT OF ACCOUNTING POLICIES continued
The election to consolidate can be made from the 2003 financial year and to be
eligible, the head company of the wholly owned group of entities will need to
make an irrevocable choice to consolidate with its wholly-owned Australian
subsidiaries for income tax purposes. This election needs to be made to the
Australian Taxation Office (ATO) by the time the Group lodges its first
consolidated income tax return (being 1 December for the prior year ended 30
June). Upon such election, all of the wholly-owned subsidiaries will become '
subsidiary members' of the consolidated group and together with the head company
will constitute the members of the group.
The new consolidations tax law rules also provide the means for pooling of group
franking credits and disregarding intra-group transactions in calculating tax
liabilities. Groups that do not elect to form a consolidated group will not be
able to use existing grouping rules, including grouping of tax losses and
rollover of capital gains tax assets. Complex rules, applicable upon election,
restrict the ability to bring tax losses into a consolidated group and permit
reset of the tax cost base of assets in certain circumstances. These could
impact both the Group's deferred tax assets and liabilities at the time of
election and its current tax payable from the first affected period.
The Group has yet to decide whether or not to elect under the consolidations
regime, so any impact on the financial statements has not yet been determined.
It is anticipated the Group will be able to determine this position late in the
2003 calendar year. In the event that the Group elects to consolidate, there is
not expected to be any adverse effect on recorded tax assets.
Impact of International Financial Reporting Standards
The Australian Financial Reporting Council (FRC) announced in July 2002 that
Australia would adopt International Financial Reporting Standards (IFRS),
formerly known as International Accounting Standards (IAS), from 1 January 2005.
The adoption of IFRS will be first reflected in the Group's financial statements
for the half year ending 31 December 2005 and year ending 30 June 2006.
The transition to IFRS could have a material impact on the Group's financial
position and reported results, however it is not possible to quantify the impact
at this time. The Group has established a project team to manage the convergence
to IFRS.
DISCONTINUED OPERATIONS
Due to the demerger of the BHP Steel business in July 2002, BHP Steel's results
have been reported as Discontinued Operations.
The BHP Billiton Group demerged the BHP Steel business in July 2002 as follows:
• A capital reduction and a transfer to BHP Billiton Limited shareholders of
94 per cent of the shares in BHP Steel;
• A bonus issue of BHP Billiton Plc shares to BHP Billiton Plc shareholders
as a Matching Action to ensure economic benefit equality to shareholders of
both BHP Billiton Limited and BHP Billiton Plc (the bonus issue was one BHP
Billiton Plc share for approximately each 15.6 BHP Billiton Plc shares
held); and
• The sale by the BHP Billiton Group of the remaining 6 per cent of BHP
Steel shares held by the Group.
The impact of these steps was:
• The BHP Billiton Group's total equity was reduced by US$1 489 million,
including costs directly associated with the demerger of US$17 million net
of tax (US$24 million before tax);
• A cash inflow of US$347 million, representing net US$294 million from the
settlement by BHP Steel of intercompany loans, less US$22 million demerger
transaction costs paid, and US$75 million from the sale of the 6 per cent of
BHP Steel; and
• 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$19 million associated with this sale has been recognised
in the year ended 30 June 2003 and is disclosed as a significant item.
BHP Steel is the leading steel company in Australia and New Zealand,
specialising in the production of flat steel products, including slab, hot
rolled coil, plate and value-added metallic coated and pre-painted steel
products. It supplies customers in Australia, New Zealand, Asia, the US, Europe,
the Middle East and the Pacific. Key steelmaking assets are the Port Kembla
Steelworks (Australia), BHP New Zealand Steel and North Star BHP Steel (US). A
network of metallic coating and coil painting facilities operates in Australia,
New Zealand and South East Asia.
The financial performance of BHP Steel, as included in the BHP Billiton
financial statements for 2002, is detailed below. The financial effect of the
sale, in July 2002, of the 6 per cent interest retained by the Group upon
demerger is also detailed below.
Discontinued Steel business
2003 2002
US$M US$M
Financial performance
Revenue from ordinary activities before interest income 75 2 389
Expenses from ordinary activities excluding borrowing costs (94) 2 312
(Loss)/profit from ordinary activities before net borrowing costs and income tax (19) 77
There were no significant items included within profit from ordinary activities
before net borrowing costs and income tax for 2002.
While the BHP Billiton Group operates its treasury function on a Group basis,
certain financing arrangements not reported in the Steel segment can be
attributed to the discontinued Steel operations. Not included within revenue
from ordinary activities for 2003 is interest income of US$nil (2002: US$13
million). The borrowing costs associated with attributable debt instruments was
US$nil for 2003 (2002: US$17 million). The income tax expense/(benefit) related
to Discontinued Operations, including the tax impact on financing arrangements
noted above, was a tax benefit of US$nil (2002: US$3 million tax benefit).
DISCONTINUED OPERATIONS continued
The contribution to Group cash flows of the BHP Steel business before
consideration of borrowing costs and income tax, as included in the BHP Billiton
Group financial statements is detailed below:
Discontinued Steel business
2003 2002
US$M US$M
Cash flows
Net operating cash flows (excluding borrowing activities and income tax) - 283
Net investing cash flows (a) 74 (74)
Net financing cash flows - (21)
Total cash flows provided by Discontinued Operations 74 188
(a) 2003 includes US$75 million in proceeds from the sale of 6 per cent of
BHP Steel and US$1 million in costs associated with the sale.
The attributable net assets of BHP Steel as included in the BHP Billiton Group's
30 June 2002 Statement of Financial Position is provided below. In addition, the
net assets demerged in July 2002 are provided, after allowing for the settlement
of intercompany loans by BHP Steel to the BHP Billiton Group and the realisation
of Group profit in stock held by BHP Steel.
Discontinued Steel business
2003 2002
US$M US$M
Financial Position (a)
Total assets - 2 731
Total liabilities - (840)
Outside equity interests - (21)
Total equity - 1 870
Net payments to the BHP Billiton Group by BHP Steel to settle intercompany loans - (294)
(post 30 June 2002)
Attributable net assets of BHP Steel - 1 576
Group profit in stock held by BHP Steel - (9)
Attributable net assets of the BHP Billiton Group at date of demerger (b) - 1 567
(a) Includes certain assets and liabilities (primarily cash, interest
bearing liabilities and taxation provisions) which are not allocated to Steel
for segment reporting purposes.
(b) Of the US$1 567 million attributable net assets at date of demerger,
approximately 94 per cent or US$1 472 million were demerged to shareholders of
BHP Billiton Limited; this together with US$17 million in costs of the demerger
represents a reduction in total equity of US$1 489 million.
REVENUE FROM ORDINARY ACTIVITIES
2003 2002
US$M US$M
Operating revenue
Sale of goods 15 049 15 496
Rendering of services 559 400
Total operating revenue 15 608 15 896
Non-operating revenue
Interest income 65 142
Exchange differences on cash assets 2 5
Interest revenue 67 147
Dividend income 16 46
Proceeds from sales of non-current assets 711 845
Management fees 6 12
Other income 141 121
Total non-operating revenue 941 1 171
DEPRECIATION AND AMORTISATION
2003 2002
US$M US$M
Depreciation relates to
Buildings 98 94
Plant, machinery and equipment 1 220 1 308
Mineral rights 174 135
Exploration, evaluation and development expenditure 141 175
Capitalised leased assets 9 9
Total depreciation 1 642 1 721
Amortisation relates to
Goodwill 47 48
Total amortisation 47 48
Total depreciation and amortisation 1 689 1 769
INCOME TAX
2003 2002
US$M US$M
Income tax expense
Prima facie tax calculated at 30 per cent on profit from ordinary activities 835 782
add/ (deduct) tax effect of permanent differences:
Investment and development allowance (9) (10)
Recognition of prior year tax losses (188) (103)
Non-deductible accounting depreciation and amortisation 87 67
Non-deductible dividends on redeemable preference shares 8 13
Non tax-effected operating losses 112 69
Tax rate differential on non-Australian income (15) (1)
Non tax-effected capital gains (2) (12)
Foreign expenditure including exploration not presently deductible 4 16
Foreign exchange losses/(gains) on current and deferred tax balances 255 (43)
Other foreign exchange (gains)/losses and translation adjustments (63) 42
Tax rate changes (1) 59
Investment and asset impairments - 32
Other (35) 24
Amounts over provided in prior years (105) (23)
Income tax expense attributable to ordinary activities 883 912
SEGMENT RESULTS
The BHP Billiton Group has grouped its major operating assets into the following
Customer Sector Groups (CSGs):
• Petroleum (exploration for and production, processing and marketing of
hydrocarbons including oil, gas and LNG);
• Aluminium (exploration for and mining of bauxite, processing and marketing
of aluminium and alumina);
• Base Metals (exploration for and mining, processing and marketing of
copper, silver, zinc, lead and copper by-products including gold);
• Carbon Steel Materials (exploration for and mining, processing and
marketing of coking coal, iron ore and manganese);
• Diamonds and Specialty Products (EKATI diamond mine, titanium operations,
metals distribution activities and exploration, and technology activities);
• Energy Coal (exploration for and mining, processing and marketing of
steaming coal); and
• Stainless Steel Materials (exploration for and mining, processing and
marketing of chrome and nickel).
Net unallocated interest represents the charge to profit of debt funding to the
BHP Billiton Group.
Group and unallocated items represent Group Centre functions and certain
comparative data for divested assets and investments.
Inter-segment sales are made on a commercial basis.
Industry segment information
US$ Share of Profit Gross Other
million External Inter-segment net before segment Gross Depreciation non-cash Capital
Revenue revenue profit tax assets segment and expenses expenditure
from (a) (g) liabilities amortisation (c)
associated (b)
entities
Year ended 30 June 2003
Petroleum 3 334 4 - 1 178 5 164 2 207 549 50 861
Aluminium 3 401 - - 569 5 976 936 245 - 462
Base 1 757 - 20 245 4 423 1 133 257 (2) 201
Metals
Carbon 3 474 26 57 1 018 3 793 1 562 196 7 479
Steel
Materials
Diamonds 469 11 59 185 1 455 362 107 - 101
and Specialty Products
Energy 1 901 - 27 154 3 185 1 120 194 2 300
Coal
Stainless 1 105 - 1 145 2 077 426 102 10 121
Steel Materials
Group and 966 465 - (248) 2 804 8 370 39 66 46
unallocated
items (d)(e)
Discontinued 75 - - (19) - - - - -
Operations (f)
Net 67 - - (444) - - - - -
unallocated interest
BHP 16 549 506 164 2 783 28 877 16 116 1 689 133 2 571
Billiton Group
Year ended 30 June 2002
Petroleum 2 801 35 - 1 069 4 539 2 061 571 4 687
Aluminium 2 846 - - 476 5 436 746 246 (4) 291
Base 1 415 23 32 23 4 502 1 092 233 161 578
Metals
Carbon 2 949 167 47 1 046 3 079 1 135 188 31 284
Steel Materials
Diamonds 1 096 19 122 220 1 410 181 79 1 121
and Specialty Products
Energy 2 045 - 18 496 2 895 1 072 194 5 295
Coal
Stainless 799 - 4 1 1 963 267 94 2 84
Steel Materials
Group and 580 366 - (598) 3 307 9 315 32 59 43
unallocated items (d)(e)
Discontinued 2 389 - - 77 2 731 840 132 4 98
Operations (f)
Net 147 - - (203) - - - - -
unallocated interest
BHP 17 067 610 223 2 607 29 862 16 709 1 769 263 2 481
Billiton Group
SEGMENT RESULTS continued
(a) Before outside equity interests.
(b) Excludes income tax expense for BHP Billiton Group of US$883 million
(2002: US$912 million), which results in a net profit after income tax expense
of US$1 900 million (2002: US$1 695 million).
(c) Excluding investment expenditure, capitalised borrowing costs and
capitalised exploration.
(d) Comparative results for certain minor residual steel assets and
liabilities that were not demerged as part of the BHP Steel (Residual Steel
operations) are included in Group and unallocated items. The Residual Steel
operations were previously included in Steel.
(e) Includes consolidation adjustments.
(f) The results of operations and the financial position presented as the
Discontinued Operations, represents the demerged Steel business. Refer
'Discontinued Operations'.
(g) Included within gross assets are the following carrying values of
investments in joint ventures and associated entities: Base Metals; 2003: US$262
million (2002: US$383 million), Carbon Steel Materials; 2003: US$299 million
(2002: US$278 million), Stainless Steel Materials; 2003: US$4 million (2002:
US$3 million), Energy Coal; 2003: US$488 million (2002: US$490 million),
Diamonds and Specialty Products; 2003: US$277 million (2002: US$326 million),
Petroleum; 2003: US$73 million (2002: US$25 million), Discontinued Operations
US$nil (2002: US$48 million), and Group and unallocated items; 2003: US$nil
(2002: US$nil).
EARNINGS PER SHARE
2003 2002
Basic earnings per share (US cents) 30.0 27.3
Diluted earnings per share (US cents) 29.9 27.3
Basic earnings per American Depositary Share (ADS) (US cents) (a) 60.0 54.6
Diluted earnings per American Depositary Share (ADS) (US cents) (a) 59.8 54.6
Weighted average number of fully paid shares (millions)
Basic earnings per share denominator 6 207 6 029
Diluted earnings per share denominator (b) 6 222 6 042
Earnings (US$ million) 1 860 1 648
(a) For the periods indicated, each ADS represents two ordinary shares.
(b) The weighted average number of shares used for the purposes of
calculating diluted earnings per share reconciles to the number used to
calculate basic earnings per share as follows:
Number of shares 2003 2002
Million Million
Basic earnings per share denominator 6 207 6 029
BHP Billiton Limited options and performance rights 13 11
BHP Billiton Limited partly paid shares 1 2
BHP Billiton Plc performance shares 1 -
Diluted earnings per share denominator 6 222 6 042
INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Ownership interest Contribution to
operating profit
after income tax
At joint venture's At BHP Billiton
or associate's Group reporting date
reporting date
Major shareholdings in joint 2003 2002 2003 2002 2003 2002
venture and associated entities Principal activities % % % % US$M US$M
Carbones del Cerrejon LLC Coal mining 33 33 33 33 27 18
Highland Valley Copper Copper mining 34 34 34 34 (3) 17
Orinoco Iron C.A. HBI production 50 50 50 50 - -
Samarco Mineracao S.A. Iron ore mining 50 50 50 50 54 32
South Blackwater Coal mining 50 50 50 50 - 18
Minera Alumbrera Limited (a) Copper and gold mining - 25 - 25 25 26
Other (b) 61 112
Total 164 223
2003 2002
US$M US$M
Share of net profit of investments accounted for using the equity method
Revenue (a) 1 902 1 679
Expenses (a) (1 637) (1 378)
Profit before income tax (a) 265 301
Income tax expense (a) (101) (78)
Share of net profit of investments accounted for using the equity method 164 223
(a) The share of net profit of investments accounted for using the equity method
includes the results of associated entities relating to the Group's 50% interest
in Minera Alumbrera Limited. This includes revenue of US$94 million (2002:
US$126 million), expenses of US$69 million (2002: US$104 million), profit before
income tax of US$25 million (2002: US$22 million), and income tax expense/
(benefit) of US$nil million (2002: US$(4) million). Effective April 2003, the
BHP Billiton Group sold its interest in Minera Alumbrera Limited for US$187
million; of which US$54 million has been deferred until June 2005. The deferred
proceeds are included in sundry receivables.
(b) Includes various immaterial equity accounted joint venture and
associated entities and the Richards Bay Minerals joint venture owned 50% (2002:
50%).
PROPERTY, PLANT AND EQUIPMENT
Gross value Accumulated Net value Gross value Accumulated Net value
of assets depreciation of assets of assets depreciation of assets
2003 2003 2003 2002 2002 2002
US$M US$M US$M US$M US$M US$M
Land and buildings (a) (b) 2 260 931 1 329 2 460 1 178 1 282
Plant, machinery and equipment (c) 22 699 12 133 10 566 24 682 13 112 11 570
Capital works in progress (d) 2 936 - 2 936 2 197 - 2 197
Mineral rights and other mineral assets 4 848 1 567 3 281 4 641 1 301 3 340
(e)
Exploration, evaluation and development
(f)
Now in production 1 970 1 101 869 2 475 1 489 986
In development stage but not yet 327 - 327 574 210 364
producing
In exploration and/or evaluation 487 70 417 480 138 342
stage
Capitalised leased assets (g) 103 48 55 105 40 65
Total property, plant and equipment 35 630 15 850 19 780 37 614 17 468 20 146
PROPERTY, PLANT AND EQUIPMENT continued
2003 2002
US$M US$M
(a) Current value of land and buildings
Land 395 534
Buildings 1 245 1 166
1 640 1 700
2003
US$M
(b) Land and buildings
Balance at the beginning of the financial year 1 282
Capital expenditure (including capitalised interest) 159
Depreciation (98)
Net disposals including demerger or disposal of controlled entities (217)
Amounts written off (6)
Exchange variations 2
Transfers and other movements 207
Balance at the end of the financial year 1 329
(c) Plant, machinery and equipment
Balance at the beginning of the financial year 11 570
Capital expenditure (including capitalised interest) 483
Depreciation (1 220)
Net disposals including demerger or disposal of controlled entities (1 723)
Amounts written off (48)
Exchange variations 74
Transfers and other movements 1 430
Balance at the end of the financial year 10 566
(d) Capital works in progress
Balance at the beginning of the financial year 2 197
Capital expenditure (including capitalised interest) 2 276
Transfers and other movements (1 537)
Balance at the end of the financial year 2 936
(e) Mineral rights and other mineral assets
Balance at the beginning of the financial year 3 340
Capital expenditure (including capitalised interest) 51
Depreciation (174)
Net disposals including demerger or disposal of controlled entities (1)
Transfers and other movements 65
Balance at the end of the financial year 3 281
PROPERTY, PLANT AND EQUIPMENT continued
2003
US$M
(f) Exploration, evaluation and development expenditures carried forward
Balance at the beginning of the financial year 1 692
Capital expenditure (including capitalised exploration and interest) 211
Depreciation (141)
Net disposals including demerger or disposal of controlled entities (11)
Amounts written off (9)
Exchange variations 11
Transfers and other movements (140)
Balance at the end of the financial year 1 613
(g) Capitalised leased assets
Balance at the beginning of the financial year 65
Capital expenditure 4
Depreciation (9)
Transfers and other movements (5)
Balance at the end of the financial year 55
INTEREST BEARING LIABILITIES (CURRENT)
2003 2002
US$M US$M
Current portion of unsecured long-term loans
Bank loans 230 154
Notes and debentures 150 706
Total current portion of long-term loans 380 860
Current portion of
Non-recourse finance 78 173
Secured debt (limited recourse) 28 35
Finance leases 4 2
Short-term interest bearing liabilities
Unsecured bank loans 371 197
Unsecured other 16 21
Bank overdrafts
Unsecured 21 509
Total other current interest bearing liabilities 518 937
Total current interest bearing liabilities 898 1 797
INTEREST BEARING LIABILITIES (NON-CURRENT)
2003 2002
US$M US$M
Unsecured long-term loans (at weighted average interest rates) (a)
Bank loans
At average fixed interest rates of 12.1% 85 148
At average floating interest rates of 6.2% 244 1 351
Commercial paper
At average floating interest rates of 1.2% 138 849
Notes and debentures (issued in the US)
At average fixed interest rates of 7.3% 1 673 2 019
At average floating interest rates of 1.8% 850 -
Medium term notes (issued in Australia)
At average fixed interest rates of 7.7% - 113
At average floating interest rates of 2.1% 803 692
Medium term notes (issued in Europe)
At average fixed interest rates of 3.9% 741 -
Other
At average fixed interest rates of 8.7% 176 198
At average floating interest rates of 1.1% 50 50
Total long-term loans 4 760 5 420
less Amounts repayable within 12 months (b) 380 860
Total non-current portion of long-term loans 4 380 4 560
Redeemable preference shares
BHP Operations Inc (c) 450 450
Total redeemable preference shares 450 450
less Amounts repayable within 12 months (b) - -
Total non-current portion of redeemable preference shares 450 450
Non-recourse finance
US$ loans for the Escondida project with maturities 2002-2004 798 872
US$ loans for the OHANET project with maturities 2004-2007 108 -
less Amounts repayable within 12 months (b) 78 173
Total non-current portion of non-recourse finance 828 699
Secured debt (limited recourse)
US$ and Euro loans for the Mozal project with maturities 2003-2004 (d) 506 449
less Amounts payable within 12 months (b) 28 35
Total non-current portion of secured debt (limited recourse) 478 414
Total non-current portion of long-term loans, redeemable preference shares, non-recourse 6 136 6 123
finance and secured debt (limited recourse)
Other non-current interest bearing liabilities
Finance leases 49 33
Other 241 227
Total non-current interest bearing liabilities 6 426 6 383
(a) Weighted average interest rates take into account the effect of interest
rate and cross currency swaps.
(b) Refer 'Interest Bearing Liabilities (Current)'.
(c) BHP Operations Inc: Preferred stock
- Auction market preferred stock:
600 (2002: 600) shares issued at US$250 000 each, fully paid preferred
stock; cumulative, non-participating, dividend reset on a regular basis
reflecting prevailing US market rates; not entitled to any earnings
growth or capital appreciation of the issuer. Redeemable at the option of the
issuer on any dividend payment date or, if redeemed in full, on any
business day. Guaranteed by other BHP Billiton Group companies.
- Cumulative preferred stock series 'A':
3 000 (2002: 3 000) shares issued at US$100 000 each, fixed at 6.76 per
cent per annum, fully paid and not entitled to any earnings growth or
capital appreciation of the issuer. Subject to mandatory redemption on
27 February 2006. Dividends are cumulative and are calculated on the basis
of a year of twelve 30 day months. Guaranteed by other BHP Billiton
Group companies.
(d) The limited recourse secured debt relates to the Mozal joint venture
operation. The debt is secured by a charge over the assets of this joint venture
operation and the lender has recourse to only those assets in the event of
default. The BHP Billiton Group's share of these obligations are
guaranteed by BHP Billiton Plc until such time as the project reaches
financial completion.
OTHER PROVISIONS AND LIABILITIES (CURRENT)
2003 2002
US$M US$M
Employee benefits 313 304
Post-retirement benefits 7 20
Restoration and rehabilitation 56 65
Restructuring 45 92
Other 138 141
Total current other provisions (a) 559 622
Dividends 468 402
Deferred income 114 92
Total current other provisions and liabilities 1 141 1 116
(a) Refer 'Other Provisions and Liabilities (Non-Current)' for non-current
portion of provisions and movement in total provisions.
OTHER PROVISIONS AND LIABILITIES (NON-CURRENT)
2003 2002
US$M US$M
Employee benefits (a) 314 337
Post-retirement benefits 310 195
Resource rent tax 241 214
Restoration and rehabilitation 1 969 1 548
Restructuring (b) 12 33
Other (c) 160 118
Total non-current other provisions 3 006 2 445
Deferred income 345 319
Total non-current other provisions and liabilities 3 351 2 764
Employee Post- Resource Restoration and Restructuring
benefits (a) retirement rent tax rehabilitation (b) Other Total
benefits
US$M US$M US$M US$M US$M US$M US$M
Movements in provision balances
At 1 July 2002 641 215 214 1 613 125 259 3 067
Amounts capitalised - - - 325 - - 325
Demerger or disposals of (183) - - (1) (1) (34) (219)
subsidiaries
Charge/(credit) for the year
Underlying 411 50 (3) 37 4 36 535
Discounting 3 - - 94 - - 97
Exchange variation 51 22 29 - 5 35 142
Exchange variation taken to reserves 1 - 3 15 - 1 20
Utilisation (265) (29) - (84) (28) (23) (429)
Transfers and other movements (32) 59 (2) 26 (48) 24 27
At 30 June 2003 627 317 241 2 025 57 298 3 565
Current 313 7 - 56 45 138 559
Non-current 314 310 241 1 969 12 160 3 006
(a) In the year ended 30 June 2003 the average number of employees,
excluding joint venture and associated entities employees, and including
executive Directors was 34 801 (2002: 50 224).
(b) The provision for restructuring costs as at 30 June 2003 includes
remediation and site rehabilitation costs of US$10 million (2002: US$47
million).
(c) Other provisions include non-current non-executive Directors' retirement
benefits of US$4 million (2002: US$3 million).
CONTRIBUTED EQUITY AND CALLED UP SHARE CAPITAL
2003 2002
US$M US$M
BHP Billiton Limited
Paid up contributed equity (a)
3 747 687 775 fully paid ordinary shares (2002: 3 724 893 687) 1 785 3 143
240 000 ordinary shares paid to A$1.40 (2002: 320 000) (b) - -
1 095 000 ordinary shares paid to A$1.36 (2002: 2 305 000) (b) - -
1 Special Voting Share (2002: 1) (c) - -
1 785 3 143
Number of shares
2003 2002
Movements in fully paid ordinary shares
Opening number of shares 3 724 893 687 3 704 256 885
Shares issued on exercise of Employee Share Plan Options (d) 20 165 784 22 955 508
Shares issued on exercise of Performance Rights (d) 918 120 -
Partly paid shares converted to fully paid (b) 1 710 184 1 815 916
Shares bought back and cancelled (e) - (4 134 622)
Closing number of shares (f) 3 747 687 775 3 724 893 687
2003 2002
US$M US$M
BHP Billiton Plc
Allotted, called up and fully paid share capital
2 468 147 002 ordinary shares of US$0.50 each (2002: 2 319 147 885) (g) 1 732 1 752
50 000 (2002: 50 000) 5.5% preference shares of £1 each (h) - -
1 Special Voting Share (2002: 1) (c) - -
1 732 1 752
Number of shares
2003 2002
Movements in allotted, called up and fully paid shares
Opening number of shares 2 319 147 885 2 319 147 885
Bonus shares issued (a) 148 999 117 -
Closing number of shares 2 468 147 002 2 319 147 885
CONTRIBUTED EQUITY AND CALLED UP SHARE CAPITAL continued
(a) Contributed equity reduced by US$1 456 million due to the demerger of BHP
Steel in July 2002. This reflected a capital reduction of 69 Australian cents
per share. The demerger resulted in BHP Billiton Limited shareholders being
issued one BHP Steel share for every five BHP Billiton Limited shares held. BHP
Billiton Plc shareholders did not receive shares in BHP Steel. Bonus shares were
issued to BHP Billiton Plc shareholders as a Matching Action to ensure economic
benefit equality to shareholders of both BHP Billiton Limited and BHP Billiton
Plc (the bonus issue was one BHP Billiton Plc share for approximately each 15.6
BHP Billiton Plc shares held).
(b) 80 000 (2002: 65 000; 2001: 30 000) shares paid to A$1.40 and 1 210 000
(2002: 1 351 500; 2001: 2 630 000) shares paid to A$1.36 were converted to fully
paid during 2003. There were no partly paid shares issued during the year (2002:
nil; 2001: nil). Including bonus shares, 1 710 184 (2002: 1 815 916 shares) were
issued on conversion of these partly paid shares. 282 000 (2002: 650 000) partly
paid shares are entitled to 321 984 (2002: 692 315) bonus shares on becoming
fully paid. As a consequence of the BHP Steel demerger, an instalment call of
A$0.69 per share was made on partly paid shares which was then immediately
replaced by the application of the capital reduction.
(c) Each of BHP Billiton Limited and BHP Billiton Plc issued one Special
Voting Share to facilitate joint voting by shareholders of BHP Billiton Limited
and BHP Billiton Plc on Joint Electoral Actions.
(d) The number of shares issued on exercise of options after 7 July 2001
includes bonus shares.
(e) During the year ended 30 June 2003, BHP Billiton Limited did not
repurchase any shares in accordance with its announced share buy-back program.
During the year ended 30 June 2002, BHP Billiton Limited repurchased 4 134 622
shares at a weighted average price of A$8.83 per share. The buy-back program
allows for the purchase of up to 186 million BHP Billiton Limited shares
(adjusted for the bonus issue), less the number of BHP Billiton Plc shares
purchased on-market by Nelson Investment Limited.
(f) During the period 1 July 2003 to 9 September 2003, 155 000 Executive
Share Scheme partly paid shares were paid up in full, 2 978 357 fully paid
ordinary shares (including attached bonus shares) were issued on the exercise of
Employee Share Plan Options and 813 709 fully paid ordinary shares (including
attached bonus shares) were issued on the exercise of Performance Share Plan
Performance Rights.
(g) 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. 3 890 000 ordinary shares were
purchased in the year ended 30 June 2003 for an aggregate purchase price of
US$20 million, which was funded by the BHP Billiton Group.
(h) Preference shares have the right to repayment of the amount paid up on
the nominal value and any unpaid dividends in priority to the holders of any
other class of shares in BHP Billiton Plc on a return of capital or winding up.
The holders of preference shares have limited voting rights if payment of the
preference dividends are six months or more in arrears or a resolution is passed
changing the rights of the preference shareholders. Since the merger these
shares have been held by JP Morgan plc.
(i) An Equalisation Share was authorised to enable a distribution to be made
by BHP Billiton Plc to the BHP Billiton Limited Group should this be required
under the terms of the DLC merger. The Directors have the ability to issue the
Equalisation Share if required under those terms. The Constitution of BHP
Billiton Limited allows the Directors of that Company to issue a similar
Equalisation Share.
TOTAL EQUITY
2003 2002
US$M US$M
Total equity opening balance 13 153 12 232
Total changes in equity recognised in the Statement of Financial Performance 1 927 1 673
Transactions with owners - contributed equity 98 104
Dividends (900) (784)
BHP Billiton Limited share buy-back program - (19)
BHP Billiton Plc share repurchase scheme (a) (20) -
BHP Steel demerger - capital reduction (1 489) -
Total changes in outside equity interests (8) (53)
Total equity closing balance 12 761 13 153
(a) BHP Billiton Plc entered into an arrangement under which it contingently
agreed to purchase its own shares from a special purpose vehicle (Nelson
Investment Limited) established for that purpose. 3 890 000 ordinary shares were
purchased in the year ended 30 June 2003 at an aggregate purchase price of US$20
million, which was funded by the BHP Billiton Group. The cost of purchasing
these shares was deducted from shareholders' funds. There was no intention to
trade these shares and no dividends were paid in respect of them outside the BHP
Billiton Group. No shares were re-issued during the year ended 30 June 2003.
RETAINED PROFITS
2003 2002
US$M US$M
Retained profits opening balance 7 455 6 526
Dividends provided for or paid (900) (784)
Aggregate of amounts transferred from reserves 143 84
BHP Billiton Limited share buy-back program - (19)
Net profit 1 860 1 648
Retained profits closing balance 8 558 7 455
DETAILS OF CONTROL GAINED OVER OR LOSS OF CONTROL OF ENTITIES HAVING A MATERIAL
EFFECT DURING THE PERIOD
Company Profit/(loss) Fair value of net
attributable to members tangible assets on
of the BHP Billiton Group disposal
arising on disposal
US$M US$M
Material demergers or disposals of controlled entities
2003
BHP Steel Limited Group (a) (19) 1 861
(a) Refer 'Discontinued Operations'
There were no material acquisitions in 2003.
BHP Billiton Limited ABN 49 004 028 077 BHP Billiton Plc Registration number 3196209
Registered in Australia Registered in England and Wales
Registered Office: 600 Bourke Street Melbourne Victoria Registered Office: Neathouse Place London SW1V 1BH United
3000 Kingdom
Telephone +61 3 9609 3333 Facsimile +61 3 9609 3015 Telephone +44 20 7802 4000 Facsimile +44 20 7802 4111
The BHP Billiton Group is headquartered in Australia
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