07 November 2001
The BHP Billiton Group (BHP Billiton) today announced a record attributable profit of US$608 million for the quarter ended 30 September 2001, an increase of US$19 million or 3.2 per cent compared to the combined figure in the corresponding period last year.
Earnings Before Interest and Tax (EBIT) was US$921 million. Earnings per share of US$0.10 for the quarter was unchanged from the corresponding period last year.
BHP Billiton CEO and Managing Director Paul Anderson said: "This is a solid result that was achieved despite the slowdown in the global economy. It reflects the resilience and earnings capability of our world-class businesses and our commodity, region and market diversity."
"In the context of an increasingly difficult economic environment - with lower prices in many of our major commodity businesses including base metals, petroleum products, aluminium, steel and stainless steel materials - the Group has delivered a stronger financial performance."
Compared with the corresponding quarter last year, lower commodity prices reduced EBIT by approximately $US185 million. However the contribution from acquisitions and new operations, higher sales volumes and favourable foreign currency impacts, substantially offset the declines in commodity prices.
The BHP Billiton Group generated EBITDA of US$1,336 million for the September quarter and committed US$565 million to capital projects and other investment activities during the period. New and acquired operations raised EBIT by US$125 million, compared with the corresponding quarter last year.
This EBIT improvement was due to increased interests in the Worsley alumina refinery (Australia) and the Ekatiä diamond mine (Canada), increased profits from the Mozal aluminium smelter (Mozambique), and the start-up of operations at the Typhoon oil field (USA).
Mr Anderson said: "Since the announcement of the merger in March this year, BHP Billiton has invested about US$1.6 billion in capital and growth activities."
Committed growth projects include the ROD oil field and Ohanet wet gas field (Algeria) and North West Shelf Train 4 (Australia); Mozal II (Mozambique) aluminium expansion; base metals projects including Escondida Phase IV (Chile) and Tintaya Oxide (Peru), and the Mount Arthur North energy coal development (Australia).
Mr Anderson said: "During the quarter, we announced two world class oil and gas fields in the deepwater Gulf of Mexico (USA). Together, the two fields have an estimated recoverable reserve of 225 to 460 million barrels of oil equivalent (BHP Billiton share)."
Additionally, BHP Billiton's Antamina (Peru) copper-zinc mine achieved commercial production ahead of schedule and on budget in October this year.
The strength of BHP Billiton's financial performance is also reflected in the Group's EBITDA/interest coverage ratio of 8.5 times, excluding the impact of foreign exchange on foreign denominated debt. (The coverage ratio is 17 times when these foreign exchange differentials are taken into account.)
The Group's capital structure was enhanced via the completion of a US$2.5 billion syndicated multicurrency revolving credit facility, the first financing transaction since merger completion.
Significantly, Standard & Poor's upgraded its long-term debt rating for BHP Billiton to 'A' Outlook Positive and Moody's also recently reaffirmed the Group's long-term debt rating of 'A3' with a Positive Watch.
The credit rating upgrade from Standard & Poor's is an endorsement of one of the elements of the strategic rationale for the merger and reflects the stronger financial position and more diversified risk structure of the combined Group.
BHP Billiton Deputy CEO Brian Gilbertson said the integration was progressing well, with the organisational framework now in place and the Group focused on sequencing the extensive pipeline of growth opportunities, streamlining the organisation and realising merger synergies.
"Reducing costs remains a prime area of focus for the management team," he said.
During the September quarter, BHP Billiton also announced the appointment of Christopher Lynch to the position of Chief Financial Officer.
In October, BHP Billiton announced it had reached agreement for the sale of its 80 per cent interest in the PT Arutmin Indonesia (Arutmin) energy coal mining operations in Kalimantan, Indonesia to PT Bumi Resources Tbk for US$148 million. The sale includes an agreement whereby BHP Billiton will market 75 per cent of the mine's current coal production.
More recently, the Group announced it had completed its acquisition of Dia Met Minerals Ltd (Dia Met) and the merger of its North American metals distribution business with Alcoa Inc.
Steel Public Listing
The public listing of BHP Steel remains on-track for the end of the current financial year. During the quarter, BHP Billiton announced that Graham Kraehe had accepted the role of Chairman Elect and Ron McNeilly would become Deputy Chairman Elect upon his retirement from BHP Billiton at the end of this calendar year.
During recent months, BHP Billiton's risk management team has undertaken a detailed review of the potential impact that a range of global economic scenarios could have on the Group's future operational and financial performance.
Mr Gilbertson said: "We are closely monitoring the global economic environment and the impact of the slowdown on BHP Billiton's operational and financial performance. Many commodity markets have deteriorated materially and several traded commodities, including copper, nickel and aluminium are trading at near record lows.
"If these conditions persist our earnings will not escape the impact. However, the quality, size and diversity of the BHP Billiton portfolio provides us with more options for responding to the slowdown than may be available to many of our competitors."
BHP Billiton previously announced it had idled about 30 per cent of its ferrochrome capacity at Samancor (South Africa) and brought forward planned maintenance at its Cerro Matoso (Colombia) and Yabulu (Australia) nickel operations, due to the low price environment. Customer deliveries have been supplemented by production stockpiles, and therefore have not been affected.
The BHP Billiton Directors today announced an interim dividend of US$0.065 per share would be paid to shareholders on 5 December 2001. The BHP Billiton Limited dividend is fully franked.
As the BHP Billiton Group generates cashflows primarily in US dollars, dividends are determined and declared in US dollars. BHP Billiton Limited dividends are mainly paid in Australian dollars and BHP Billiton Plc dividends are paid in pounds sterling to shareholders on the UK register and rand to shareholders on the South African stock exchange register.
The record date of the dividend will be 16 November 2001.
The Board also announced that it had considered and elected not to pursue the share exchange offer outlined at the time of the merger announcement.
If pursued, that offer would have enabled BHP Billiton Limited (Limited) shareholders a one-time opportunity to exchange some, or their entire holding of Limited shares for an equal number of BHP Billiton Plc shares, up to an aggregate limit of 10 per cent of the then issued share capital of Limited.
As BHP Billiton Plc shares have consistently traded at a discount to Limited shares since completion of the merger, there was no apparent economic justification for such an election by Limited shareholders - who could achieve more advantageous exchange terms by trading through the market. The Board therefore determined that the costs of implementing the proposal could not be justified and were not in the best interests of all shareholders.
Share Buy Back
BHP Billiton also announced today that the current program to buy back shares in BHP Billiton Limited (Limited) through on-market purchases is being revised to take into account any on-market purchases of BHP Billiton Plc shares (Plc) by Nelson Investment Limited (Nelson).
Limited's buy-back program would now allow for the purchase of up to 186 million Limited shares, less the number of Plc shares purchased on-market by Nelson. The level of share purchases undertaken will also remain subject to prevailing market conditions and alternative capital investment opportunities available to BHP Billiton.
Nelson is a company that may acquire and hold Plc shares under arrangements with certain wholly owned subsidiaries of Plc. The effect of share purchases by Nelson is similar to purchases by Plc of its own shares, but provides BHP Billiton with greater flexibility in terms of capital management.
Any Plc shares purchased by Nelson will not be cancelled immediately and will be available either to be placed in the market or repurchased by Plc and cancelled in the future. Limited shares acquired under the program will be purchased by Limited and subsequently cancelled.
During the September quarter, BHP Billiton repurchased approximately 4.1 million Limited shares at a weighted average price of A$8.83 per share in accordance with the on-market buy back program announced in February 2001.
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