BHP Billiton. Fairy Tales for Investors. Brian Gilbertson: CEO - elect. JP Morgan CEO Conference 2002 Lake Como, Italy April 2002

Transcription

1 BHP Billiton Fairy Tales for Investors Brian Gilbertson: CEO - elect JP Morgan CEO Conference 2002 Lake Como, Italy April 2002

2 Enter the knight in shining armour Page 2

3 Share price has outperformed peers and the markets since the merger announcement in March Indexed 1 March 2001 = BHP BILLITON +17% RIO TINTO +13% ANGLO AMERICAN +3% ASX200 +2% ALCOA -1% FTSE100-11% March 2001 April 2002 Page 3

4 Billiton IPO Industry Consolidation Gold Fields-Driefontein restructure Placer Dome - Getchell Newmont acquires Santa Fe Valepar acquires CVRD (42%) Alcoa Acquires Alumax Anglo acquires Minorco MINERALS M&A (Deals above US$1B) Anglo acquires Shell coal assets Alcoa merger with Reynolds Phelps Dodge acquires Cyprus Amax Grupo Mexico acquires Asarco Barrick-Homestake merger Rio acquires North Ltd. Alcan merger with Alusuisse Billiton increases stake in Worsley 86% Billiton acquires Rio Algom * Combined Mk Cap. of BHPB BHP merges with Billiton* BP & Amoco Repsol & YPF BP & Arco Phillips & ARCO s Alaskan interests (from BP/Amoco) Chevron & Texaco Agip & Phillips & LASMO Conoco & Tosco D/S Gulf Canada Total SA & FINA Exxon & Mobil Total FINA & ELF Anadarko & Union Pacific Resources PETROLEUM M&A (Deals above US$5B) M&A Deals in : Oil & Gas ~US$600 billion Mining and Metals ~US$100 billion Page 4 Source: John S Herold M&A Database (Petroleum), Goldman Sachs (Minerals), RMG Database, Bloomberg

5 1990 Industry Structure In 1990 the top five companies accounted for less than 25% of total resource equity market value 12 Market value of minerals industry US$150B Market Cap. at end of 1990 (US$B) BHP Rio Tinto Anglo Am. Value of Top Five De Beers Gencor Alcoa Newmont Alcan Amplats Placer Dome Reynolds Driefontein WMC Barrick GFSA Noranda Minorco Inco Pechiney MIM US$36B 0 Page 5

6 2002 Industry Structure Top five companies account for almost 50% of resource equity market value double their share of 10 years ago. Market Cap. On 02/04/02 (US$B) BHPB ALCOA Rio Tinto Anglo Alcan Newmont Mining CVRD Barrick Gold WMC Anglogold Pechiney Placer Dome Impala Platinum INCO Phelps Dodge Noranda Freeport-McMoran Lonmin Falconbridge New Teck Cominco Grupo Mexico Page 6

7 Oil and Gas: less consolidated but OPEC is vital Oil and gas sector has a market value of about US$1,400 billion, excluding the national oil companies. The five super-majors account for just over US$900 billion in market cap. OPEC 43% Exxon Mobil BP Shell Supermajors 15% other smaller Integrateds, Independents & NOC s 34% Chevron - Texaco TFE International Integrateds 6% Super Independents 2% BHPB 0.3% 2000 crude oil production 68 million bbls/day Source: BHPB Petroleum Page 7

8 3 Year Mining Industry Return Analysis Consolidation driving better share growth return for Top Four 100% 80% Top Four share movement 60% 40% 20% 0% 02/04/99 02/07/99 02/10/99 02/01/00 02/04/00 02/07/00 02/10/00 02/01/01 02/04/01 02/07/01 02/10/01 02/01/02 02/04/02 World Mining Index Rapid consolidation activity begins Page 8 Source: Datastream

9 BHP Billiton has delivered superior shareholder returns (from a Billiton perspective) since listing in London 200 Total Shareholder Returns BHP Billiton Rio Tinto Anglo FTSE100 S&P Industrials Dow Jones Industrials Source: Datastream 0 01/08/ /11/ /02/ /05/ /08/ /11/ /02/ /05/ /08/ /11/ /02/ /05/ /08/ /11/ /02/ /05/ /08/ /11/ /02/2002 Page 9

10 BHP Billiton s historical market (PE) multiples are behind those of the major industrials 60 Price-Earnings Ratios BHP Billiton Rio Tinto Anglo FTSE100 S&P Industrials Dow Jones Industrials Source: Datastream 0 01/08/ /11/ /02/ /05/ /08/ /11/ /02/ /05/ /08/ /11/ /02/ /05/ /08/ /11/ /02/ /05/ /08/ /11/ /02/2002 Page 10

11 Value Drivers - What distinguishes us from the rest I. Stability From Outstanding Assets II. Stability From The Portfolio Effect III. Stability & Growth From Customer-Centric Marketing IV. Growth From Deep Inventory of Projects V. Growth From Petroleum VI. Growth Through Innovation Page 11

12 Value Driver - I I. Stability From Outstanding Assets Page 12

13 Escondida Copper Mine - Chile Page 13

14 Worsley Alumina Refinery - Australia Page 14

15 Mozal Aluminium Smelter - Mozambique Page 15

16 BHP Billiton Mitsubishi Alliance (BMA) - Australia Page 16

17 Ingwe Coal South Africa Page 17

18 Ekati TM Diamond Mine - Canada Page 18

19 Bass Strait Australia Page 19

20 North West Shelf Project - Australia Page 20

21 Value Driver - I I. Stability From Outstanding Assets Strategic Imperatives (What we have to get right) Operating excellence BHP Billiton Way Performance Measures (How the market should judge us) Cut operating costs by 2% p.a. on average for 3 years. (US$500M FY03-05) Improved EBIT and FCF. EBIT SVA. Return on Capital >15% by FY2006 Page 21

22 The Customer Sector Groups Page 22 Energy Coal Operations in Sth Africa, Australia, US, Colombia Base Metals Copper Zinc Lead Petroleum Oil Gas LNG Operating Excellence and Technical Capability Stainless Steel Materials Nickel Chrome Carbon Steel Materials Iron Ore Coking Coal Manganese Aluminium Alumina Aluminium

23 Value Driver - II II. Stability from the Portfolio Effect Page 23

24 Outstanding Diversification By Commodity Customer Sector Group EBIT: Petroleum 35% Carbon Steel Materials 22% Aluminium 13% Base Metals 12% Energy Coal 9% Steel 7% Stainless Steel Materials 2% By Geography Net Operating Assets: Australia 37% South America 35% Southern Africa 20% Europe 3% Rest of World 5% By Shareholder Holding: Australia 37% UK & Europe 30% North America 17% S. Africa 8% Asia 6% Other 2% By Market Sales: Asia/Oceania 47% Europe 24% North America 18% Rest of World 11% Data for FY2001 or at 30 June 2001 Shareholder data for 31 December 2001 Sales data includes Steel Page 24

25 Cash Flow at Risk BHP Billiton EBITDA (Indicative) 5 th Percentile ~$4 billion Mean ~$5 billion Frequency ~ US$1 billion CFAR EBITDA (US$billion) Page 25

26 Value Driver - II II. Stability from the Portfolio Effect Strategic Imperatives (What we have to get right) Portfolio management Funding and capital management Performance Measures (How the market should judge us) Credit rating of A or better. Positive Cash Flow each year. EBITDA/Interest coverage > 8x. (gearing 35%-40%) Page 26

27 Value Driver -III III. Stability & Growth From Customer-Centric Marketing Strategic Imperatives (What we have to get right) Performance Measures (How the market should judge us) Serving customers best Preferred supplier status. Global marketing and trading. Page 27

28 Marketing A Key Component of the Organisational Structure Strategy, Corporate Governance Portfolio composition, M&A Corporate The Hague Centralised Marketing Function Singapore Marketing Aluminium CUSTOMER SECTOR GROUPS the business units Base Metals Carbon Steel Materials Stainless Steel Materials Energy Coal Petroleum CSGs Page 28

29 Value Driver - IV IV. Growth From Deep Inventory of Projects Strategic Imperatives (What we have to get right) Investment judgement. Project management skills. Performance Measures (How the market should judge us) Decide/implement projects (potential US$10B by FY2006) Page 29

30 Sample of new look B R O W N F I E L D Intercor Sth BW Escondida Phase IV Tintaya Oxide Mozal 2 Mount Arthur North Zamzama FFD San Juan CdC Exp n Mining Area C Bream Gas Pipeline Esc da Norte Hillside 3 Yabulu R thorpe NWS 4 th Train Dendrobium GoM Infrastr. CY ROD Minerva Mad Dog Spence G R E E N F I E L D Note: Size of bubble indicates proposed capital expenditure Page 30 $US 250m Coal Nickel Ohanet Aluminium Iron Ore Angostura Copper Oil and Gas ROD Kipper

31 Pursuit of high value growth US$10 billion in growth projects Investment by Business (% of group total in ) Page 31 0 Petroleum Base Metals Aluminium Energy Coal Carbon Steel Materials * Indicative data only Stainless Steel & Other

32 Value Driver - V V. Growth From Petroleum Strategic Imperatives (What we have to get right) Performance Measures (How the market should judge us) Value adding growth Low discovery costs. Growing reserves and production. Page 32

33 Petroleum s Industry Ranking ExxonMobil Shell BP Chevron Texaco TotalFina Elf Repsol-Ypf Phillips Conoco Unocal Occidental Talisman Energy Marathon Burlington Amerada Hess BHP Billiton Devon Canadian Nat. Res. Anadarko Kerr-McGee PanCanadian BG Enterprise Oil Alberta Energy Apache Corp. Nexen Production (Mmboe) 15th in terms of production Oil & Gas and Energy - Market Value (US$M) ExxonMobil Shell BP TotalFinaElf ChevronTexaco ENI E.ON Enel BHP Billiton Schlumberger Petrochina Suez Duke Energy Tokyo Elec. Petrobras 9th in terms of market size Page 33 Source: BHPB Petroleum. Excludes oil companies with state ownership

34 Value Driver - VI VI. Growth Through Innovation Page 34

35 Our vision We seek to earn superior returns for our shareholders as the world s premier supplier of natural resources and related products and services We aspire to be one of the world s premier companies Page 35

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37 VALUE DRIVERS (What distinguishes us from others) STRATEGIC IMPERATIVES (What we have to get right) PERFORMANCE MEASURES (How the market should judge us) I Stability From Outstanding Assets II Stability From The Portfolio Effect III Stability & Growth From Customer-centric Marketing IV Growth From Deep Inventory of Projects V Growth From Petroleum VI Growth Through Innovation Operating excellence. Portfolio management. Funding and capital management. Serving customers best. Investment judgement. Project management skills. Value adding growth. Creative thinking. Commercial judgement. Transaction execution. Cut operating costs by 2% p.a. on average for 3 yrs. (US$500M FY03-05) Improved EBIT and FCF. EBIT SVA. Return on Capital >15% by FY2006. Credit rating of A or better. Positive Cash Flow each year. EBITDA/Interest coverage > 8x (gearing 35% -40%) Preferred supplier status. Global marketing and trading. Decide/implement projects (potential US$10B by FY2006) Low discovery costs. Growing reserves and production. New initiative's as opportunities arise.