BHP Billiton Barrels in $18.2B, Up 13.8% in Second Quarter
BHP Billiton has issued the Company's financial results for the period ended June 30, 2008.
- Record attributable profit delivered for the seventh consecutive year.
- Underlying EBITDA up 22.1% to US$28.0 billion and Underlying EBIT up 21.0% to US$24.3 billion.
- Attributable profit up 12.4% to US$15.4 billion and EPS up 17.5%, benefiting from buy-backs (both measures excluding exceptionals).
- Record Underlying EBIT in the Petroleum, Base Metals, Iron Ore, Manganese and Energy Coal Customer Sector Groups (CSGs).
- Strong Underlying EBIT margin(6) of 47.5% despite unexpected disruptions and accelerated cost inflation.
- Return on Capital Employed(7) of 37.5% despite unprecedented level of capital investments.
- Record net operating cash flow(1) of US$18.2 billion, up 13.8%.
- Annual production records for petroleum, copper, iron ore, manganese ore and alloy, alumina and molybdenum(2).
- Commissioning of six major growth projects and other volume growth in the Company's high margin oil and gas, iron ore and manganese businesses expected in 2009.
- Dividend rebased for the second consecutive year, a strong signal of our confidence in the outlook. Final dividend rebased to 41.0 US cents per share. BHP delivered a significant 150.0% increase in annual dividend over the past three years.
A Seventh Consecutive Record
BHP Billiton has achieved another year of record earnings, driven by excellent operating performance, cost control and the delivery of high margin growth projects into strong market conditions.
Underlying EBIT increased by 21.0 per cent to US$24.3 billion, with an excellent margin of 47.5%. Base Metals, Iron Ore, Manganese and Energy Coal had record Underlying EBIT at a time when prices were high and the demand outlook remains very strong. In Petroleum, newly commissioned projects in fiscally stable regimes, 93.8% operational up time and record high oil prices led to record Underlying EBIT.
Annual production records were set in seven commodities and production increased in a further six commodities. Strong volume growth has allowed us to capture the benefits of very high prices. Most of the records were set in consecutive years, as BHP reaped the benefit of our drive to deliver consistent, predictable and sustainable performance across all of our businesses. This provides a stable platform as the Company continues to develop and deliver world class projects that are expected to add significant shareholder value.
First product was delivered from 10 major projects across five commodities with a further seven major projects sanctioned, during the year. Neptune (US), BHP's first operated development in the deepwater Gulf of Mexico (US), achieved first production on July 6, 2008. All newly commissioned projects will play a pivotal role in the Company's growth strategy; BHP's commitment of "resourcing the future."
BHP's results were outstanding in the context of a challenging supply environment which was characterized by unexpected disruptions, rising input prices, skills shortages and the further devaluation of the US dollar.
The Company's strong performance demonstrates the power of our uniquely diversified and high margin portfolio across the energy, steelmaking and non-ferrous product suites. This performance also reflects the success of BHP's unrelenting focus on its strategy to create lasting shareholder value by owning and operating a diversified portfolio of upstream, large, long-life, low-cost, expandable, export-oriented assets.
Exploration and Business Development
BHP continued to focus on finding new long-term growth options for the business. Exploration expense was US$906 million for the year, an increase of US$284 million. The Company increased activity on nickel targets in Western Australia, Guatemala, Indonesia and the Philippines, on diamond targets in Angola and iron ore targets in Western Australia. The main expenditure for the Petroleum CSG was on targets in the Gulf of Mexico, Colombia and Australia.
Expenditure on business development was US$119 million higher than last year. This was mainly due to the pre-feasibility study on the Olympic Dam expansion along with earlier stage activities in Base Metals and iron ore.
Other items decreased Underlying EBIT by US$794 million. The start-up of operations at Ravensthorpe and the Yabulu Expansion Project (both Australia) adversely impacted earnings by US$313 million and contribution of third party trading was US$458 million lower compared to last year.
Net Finance Costs
Net finance costs increased to US$662 million, from US$512 million in the corresponding period. This was driven predominantly by lower capitalised interest and foreign exchange impacts.
The total taxation expense on profit before tax was USD$7,521 million, representing an effective rate of 32.0%.
Excluding the impacts of royalty-related taxation, non tax-effected foreign currency adjustments, translation of tax balances and other functional currency translation adjustments and exceptional items the underlying effective rate was 30.4% compared to the UK and Australian statutory tax rate (28.0 and 30.0 per cent respectively). Royalty-related taxation represents an effective rate of 3.1% for the current period.
Net operating cash flow after interest and tax increased by 13.8% to US$18,159 million. Higher profits increased cash generated from operating activities, offset by an increase in working capital (principally due to higher prices) and increased taxation payments.
Capital and exploration expenditure totalled US$8,908 million for the period. Expenditure on major growth projects was US$5,339 million, including US$1,571 million on Petroleum projects and US$3,768 million on Minerals projects. Capital expenditure on maintenance, sustaining and minor capital items was US$2,219 million. Exploration expenditure was US$1,350 million, including US$491 million which has been capitalized.
Financing cash flows include US$6,250 million in relation to the share buy-backs and increased dividend payments.
Net debt, comprising cash and interest-bearing liabilities, was US$8,458 million, a decrease of US$1,513 million, or 15.2%, compared to June 30, 2007. Gearing, which is the ratio of net debt to net debt plus net assets, was 17.8% at June 30, 2008, compared with 25.0% at June 30, 2007.
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