Executing the Strategy and Providing for a Growth Economy Chip Goodyear Chief Executive Officer

Transcription

1 Executing the Strategy and Providing for a Growth Economy Chip Goodyear Chief Executive Officer Merrill Lynch Conference, Boston 12 May 2004

2 The world s largest diversified resources company Petroleum Aluminium Base Metals Carbon Steel Materials Diamonds & Spec Prod Energy Coal Stainless Steel Materials Page 2

3 The BHP Billiton strategic focus M&A Bolt- on Acq. Growth Pipeline Cost Savings and Efficiencies Low Cost, High Quality Assets Page 3

4 Results of strategic focus Increasing margins and return on capital 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 21.0% EBIT margin 11.0% Bolt- M&A 24.3% on Acq. Growth Pipeline 13.4% Cost Savings and Efficiencies Return on Capital 27.0% 15.4% Low Cost, High Quality Assets H Page 4

5 Results of strategic focus Steady increases in EBITDA (1) US$ billion 2.0 September 11 World Trade Centre Attack Enron Bankruptcy SA Rand A$ strengthen BEE Charter leak Iraq war SARS 1.5 Quarterly average US$1.324 billion Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 FY2002 FY2003 FY2004 Page 5 (1) Excluding exceptional items.

6 Reinvested for growth Growth projects delivered since July 2001 San Juan Antamina Tintaya Oxide Escondida IV Ekati Typhoon Bolt- M&A on Acq. Ohanet Growth Pipeline Cerrejon Mozal II Savings and Efficiencies Hillside III Zamzama Area C PACE Low Cost, High Quality Assets 15 projects, US$3.8 billion of capital expenditure Delivered on time and on budget Mt Arthur North Bream Gas Pipeline Aluminium Base Metals Carbon Steel Energy Coal Diamonds Petroleum Page 6

7 Meeting China s Demand Growth

8 China steel consumption by sectors Million Tonnes Building Highways Capital goods & construction Shipbuilding Durables (House hold) Cans & containers Auto Page 8

9 China is still only in the early stages of modernisation. Steel demand which path will China take? 1.2 Steel Demand Intensity of GDP ( ) Steel Consumption per Capita (tonnes/person) China today USA South Korea Taiwan Japan GDP per Capita (2002 US$/person) Page 9

10 China s copper demand growth from 1990 to 2002 K Tonnes 4,000 3,000 2,000 China s copper consumption has grown by more than 10% per annum since , ,000 Japan CIS / E. Europe W. Euro pe ASEAN Korea / T aiwan N. America China World Final consumption Page 10 Source: BME, CRU

11 Chinese aluminium production vs. alumina imports 6,000 Aluminium Production Alumina Imports 6,000 5,000 5,000 4,000 3,000 2,000 4,000 3,000 2, ,000 Page ,000 0 Thousands of tonnes Thousands of tonnes

12 Global growth translates to opportunity for BHP Billiton China Currently 10% of company revenues, up from 5% a year ago US$M F Y02* F Y03Q1 FY03Q2 F Y03Q3 FY03Q4 FY04Q1 FY04Q2 *FY02 average quarter sales Annual sales to China (US$B) % of total BHPB sales FY FY FY04 (H1 annualised) But it will have ups and downs Page 12

13 Global Copper Prices 1890 to 2004 US$/lb (2004) European and American industrial expansion Colonial/imperial raw materials netw orks Flat real prices Real Annual Price Opening up of US copperbelt s Depression World War II High military demand Inv estment dries up Prices collapse and stagnate WWI Post-war economic boom Japan s economic miracle High consumer demand Nationalisation in Chile, Peru, Mexico and Africa Real prices rising, era of producer pricing LME role small WWII Korean War Expansion in African Copperbelt 1970s 1973 and 1979 oil shocks Inflation/recession Demand slumps Substitution End of producer pricing. Real prices decline sharply 10-Y MA Emergence of Asian NICs and China. Maturing of Japan s economy 1990: Collapse of USSR Re-birth of US economy IT revolution Privatisation/de-regulation Technology driv ing dow n costs Declining real prices - Commodification 0.60 Expansion in 0.40 Flotation, open-pit Flash smelting Chile/Peru 0.20 mining and Escondida mechanisation Birth of Sx/Ew Ertsberg/Grasberg ?? Page 13

14 Global growth translates to opportunity for BHP Billiton China Currently 10% of company revenues, up from 5% a year ago Will have ups and downs but underlying fundamentals of growth are attractive Increasing demand for more raw materials US$M FY02* FY03Q1 F Y03Q2 FY03Q3 FY03Q4 F Y04Q1 FY04Q2 *FY02 average quarter sales How is BHP Billiton going to feed this global demand for resources Page 14

15 Creating real options from deep inventory of projects B R O W N F I E L D Cerrejon WAIO RGP WAIO Acc d Exp n GoM Infrastr. NWS 4th Train Dendrobium Paranam Broadmeadow Panda UG Esc da Norte Blackw ater CPP Klipspruit Esc da Sulphide Worsley Escondida CPR Yabulu Ravensthorpe WA Iron Ore Long Term Expansion CY ROD Minerva Mad Dog G R E E N F I E L D Angostura As at 6 May 2004 Size of bubble indicates propos ed capital ex penditure; bold outer border signifies sanctioned project $US 200M Spence Atlantis Aluminium Base Metals Carbon Steel Energy Coal Nickel Petroleum Diamonds Page 15

16 Consistent execution of the business strategy Maximising the performance of operating assets Safety M&A EBIT margins excluding third party product activities grown to 27% Annualised return on capital of 15.4% Continued savings and Boltefficiencies on Acq. Reinvestment in growth projects Growth Pipeline 13 major projects currently in development; 3 in feasibility stage Plus smaller scale, capital efficient expansions based on existing infrastructure Savings and Efficiencies Enables us to meet the challenge of increasing demand from China AND Low Cost, High Quality Assets Positions us to benefit from recovering global economies Page 16

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