- Another strong set of financial results, with growth in Underlying EBITDA and Attributable profit (excluding exceptional items) of 10% and 16% respectively.
- Record sales volumes achieved in iron ore, metallurgical coal and petroleum with local currency costs well controlled across the Group.
- Underlying EBIT margin(1) of 41% and Underlying return on capital of 26% demonstrates the strength of our uniquely diversified business model.
- Continued investment in our business successfully delivered another five growth projects.
- Cash flow for the year remained strong and resulted in net debt declining further to US$3.3 billion while net gearing declined to 6%.
Final dividend of 45 US cents per share, resulting in a dividend for the full year of 87 US cents per share.
Commentary on the Group Results
BHP Billiton delivered another strong set of results despite significant volatility in the macro economic environment with growth in Underlying EBITDA and Attributable profit (excluding exceptional items) of 10 per cent and 16 per cent, respectively. Record sales volumes were achieved in three of our major commodities as our focus on efficiency and productivity at all points in the cycle ensured we were well positioned to capitalise on the recovery in demand and prices. Local currency costs were well controlled across the Group, however the weaker US dollar had a negative exchange rate impact of US$2,150 million. The combination of these factors underpinned strong margins and returns. For the sixth consecutive year, BHP Billiton recorded an Underlying EBIT margin of around 40 per cent, while Underlying return on capital for the past financial year was 26 per cent. Excluding capital investment associated with projects not yet in production, Underlying return on capital was 30 per cent. Operating cash flow for the year remained strong at US$17,920 million and resulted in net debt declining further to US$3,308 million, with net gearing falling to six per cent. These results continue to demonstrate the strength of our uniquely diversified business model and world class, low cost asset portfolio. We invested heavily in our business and successfully delivered another five growth projects including those in petroleum and iron ore. We approved two major growth projects (with a combined budget of US$695 million) and made pre-commitments totalling US$2,237 million (BHP Billiton share) to accelerate early works for another four. To underline the depth of our project pipeline, we have 20 projects in various stages of execution and definition with an estimated budget in excess of US$25 billion. In the Pilbara (Australia), we continued to progress the proposed Iron Ore Production Joint Venture with Rio Tinto with a key focus on gaining regulatory approval. We also bolstered our upstream resource base with the acquisition of Athabasca Potash Inc. (Canada) and United Minerals Corporation NL (Australia, iron ore). On 18 August 2010, BHP Billiton announced its intention to make an all-cash offer to acquire all of the issued and outstanding common shares of Potash Corporation of Saskatchewan Inc. (PotashCorp), at a price of US$130 in cash per PotashCorp common share. Outlook
Economic Outlook
BHP Billiton remains cautious on the short term outlook for the global economy. After a period of rapid recovery in the developing world, economies such as Brazil and India have returned to full output and the focus has now shifted away from supporting growth, towards controlling inflation. In China, the government has implemented meaningful measures aimed at controlling rapid economic expansion and asset inflation. Fiscal policy has been adjusted with renewed focus on the economy’s inevitable transition away from a dependence on investment, towards more balanced, consumption led growth. With this recent policy tightening, property sales volumes and prices have started to decline in Tier 1 cities over the last quarter. While BHP Billiton sees these measures as the normal continuation of China’s economic management, we do expect Chinese Gross Domestic Product (GDP) growth to slow towards the more sustainable level of circa eight per cent in the first half of fiscal year 2011. Uncertainty continues to surround the developed world as governments adjust fiscal policies following a period of significant stimulus and subsequent increase in sovereign debt levels. Significant public spending cuts and higher taxes have been announced in Europe, however are yet to be fully implemented, implying the inevitable negative impact on growth from fiscal consolidation remains ahead. Industrial output, a core measure of economic activity, remains well below previous peaks despite the positive impact attributable to re-stocking that now appears largely complete. In the absence of any additional inventory adjustment, improvement in end demand is essential to drive overall economic growth. Some positive signs have emerged, with strong private investment in equipment and software seen in some parts of the United States economy, although ongoing de-leveraging and weak confidence are hampering efforts to revive demand. Despite our short term caution, we remain positive on the longer term prospects for the global economy, driven by the continuing urbanisation and industrialisation of emerging economies. This path, however, will not be without volatility, reflecting normal business cycles. Commodities Outlook
Following a broad recovery in prices for the majority of BHP Billiton’s products, the short term outlook for commodities is mixed. There is strong physical demand for some commodities, such as copper, where consumers are restocking and premiums continue to rise. Elsewhere, there is weaker demand for those commodities where short term demand is likely to be satisfied by inventory rather than primary supply. With global steel production running ahead of real demand in the quarter ended June 2010, we expect output to soften from the record highs achieved in April this year. This will impact near term demand for steel making raw materials, however the fundamentals remain strong in those commodities, particularly iron ore, where there is a lack of low cost supply response expected over the next one to two years. In the medium term, we expect commodity demand to remain heavily dependent on emerging market demand as the gradual withdrawal of government stimulus is expected to constrain growth in the developed world. While China’s rapid growth is expected to slow from recent highs, domestic consumption is expected to remain strong and investment spending is likely to remain commodity intensive. There is no change to our expectation of strong growth in demand for our commodities in the longer term. With long run prices determined by the marginal cost of supply, our position at the lower end of the cost curve is expected to underpin strong margins and investment returns. Further information |
