Wrap Text
Results for the Half Year Ended 31 December 2018
BHP Group Plc
Registration number 3196209
Registered in England and Wales
Share code: BHP
ISIN: GB00BH0P3Z91
19 February 2019
For Announcement to the Market
Name of Companies: BHP Group Limited (ABN 49 004 028 077) and
BHP Group Plc (Registration No. 3196209)
Report for the half year ended 31 December 2018
This statement includes the consolidated results of BHP for the half year ended
31 December 2018 compared with the half year ended 31 December 2017 and the
year ended 30 June 2018.
The results are prepared in accordance with IFRS and are presented in US
dollars.
Headline Earnings
In accordance with the JSE Listing Requirements, Headline earnings is presented
below.
Half year Half year Year
ended ended ended
31 December 31 December 30 June
2018 2017 2018
US$M US$M US$M
Earnings attributable to ordinary shareholders/(1)/ 3,764 2,015 3,705
Adjusted for:
Loss/(gain) on sale of PP&E, Investments and Operations 376 (4) (12)
Impairments 168 211 3,101
Tax effect of above adjustments 45 (56) (182)
Subtotal of Adjustments 589 151 2,907
Headline earnings 4,353 2,166 6,612
Diluted Headline earnings 4,353 2,166 6,612
Basic earnings per share denominator (millions) 5,303 5,323 5,323
Diluted earnings per share denominator (millions) 5,318 5,338 5,337
Headline earnings per share (US cents) 82.1 40.7 124.2
Diluted Headline earnings per share (US cents) 81.9 40.6 123.9
1) Includes loss after taxation from discontinued operations attributable to
ordinary shareholders as at 31 December 2018 of US$300 million (31 December
2017: gain of US$146 million; 30 June 2018: loss of US$2,947 million).
Sponsor: UBS South Africa (Pty) Limited
NEWS RELEASE LOGO
Release Time IMMEDIATE
Date 19 February 2019
Number 05/19
BHP RESULTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2018
--------------------------------------------------------------------------------
Safety and sustainability: We will continue our work to improve safety at our
operations
. Tragically we had a fatality at Saraji in December 2018, despite
improvements in our safety performance indicators.
Maximise cash flow: Solid free cash flow generation and margin above 50%
. Attributable profit of US$3.8 billion and Underlying attributable
profit/(i)/ of US$3.7 billion down 8% from the prior period.
. Underlying EBITDA/(i)/ of US$10.5 billion at a margin/(i)/ of 52% from
continuing operations.
. Net operating cash flow of US$6.7 billion and free cash flow/(i)/ of US$3.6
billion from continuing operations with volumes and commodity prices broadly
in line with the prior period.
. Productivity/(i)/ guidance is now expected to be broadly flat for the 2019
financial year largely reflecting the unplanned production outages at
Olympic Dam, Western Australia Iron Ore, Spence and Nickel West.
Capital discipline: Net debt reduced to US$9.9 billion and to remain at the
lower end of the target range
. Net debt/(i)/ of US$9.9 billion, reduced by US$1.0 billion from 30 June 2018
(reduced by US$5.5 billion from 31 December 2017), which includes US$7.0
billion/(ii)/ of proceeds received from the Onshore US sale, partially
offset by the completion of a US$5.2 billion off-market BHP Group Limited
share buy-back.
. Capital and exploration expenditure/(i)/ of US$3.5 billion. Guidance
unchanged at below US$8 billion per annum for the 2019 and 2020 financial
years. This includes investments in the high returning West Barracouta (Bass
Strait) and Atlantis Phase 3 (US Gulf of Mexico) projects approved in
December 2018 and February 2019, respectively.
. In exploration, we encountered oil at Trion (Mexico), hydrocarbons at
Bongo-2 (Trinidad and Tobago) and had early success at our copper
exploration program in the Stuart Shelf (South Australia). We also added new
optionality with interests acquired in the Orphan Basin (offshore Eastern
Canada) and SolGold (Cascabel copper project in Ecuador).
Value and returns: Onshore US sale completed with US$10.4 billion net proceeds
returned to shareholders
. The Onshore US sales process was completed on 31 October 2018, with the net
proceeds of US$10.4 billion returned to shareholders through a combination
of an off-market buy-back in December 2018 and a special dividend (US$1.02
per share) in January 2019.
. The Board has determined to pay an interim dividend of 55 US cents per share
which includes an additional amount of 18 US cents per share (equivalent to
US$0.9 billion) above the 50% minimum payout policy. This brings the total
announced returns to shareholders over the last six months to
US$13.2 billion.
. Underlying return on capital employed/(i)/, excluding Onshore US assets, of
15% (after tax).
2018 2017 Change
Half year ended 31 December US$M US$M %
--------------------------- ---------- ---------- --------
Total operations
Attributable profit........................................... 3,764 2,015 87%
Basic earnings per share (cents).............................. 71.0 37.9 87%
Interim dividend per share (cents)............................ 55.0 55.0 0%
Net operating cash flow....................................... 7,274 7,343 (1%)
Capital and exploration expenditure........................... 3,501 2,877 22%
Net debt...................................................... 9,890 15,411 (36%)
Underlying attributable profit................................ 3,732 4,053 (8%)
Underlying basic earnings per share (cents)/(i)/.............. 70.4 76.1 (8%)
------ ------ -----
Continuing operations
Profit from operations........................................ 7,333 7,165 2%
Underlying EBITDA............................................. 10,539 10,836 (3%)
Underlying attributable profit/(i)/........................... 4,032 4,399 (8%)
Net operating cash flow....................................... 6,709 6,993 (4%)
------ ------ -----
--------------------------------------------------------------------------------
1
Results for the half year ended 31 December 2018
BHP Chief Executive Officer, Andrew Mackenzie:
"The collapse of the Brumadinho dam in Brazil is a tragedy and we offer our
heartfelt sympathy to all those affected. At BHP, we are committed to learn
from what happened, and as an industry we must redouble our efforts to make
sure events like this cannot happen.
Our focus on portfolio simplification, cash generation and capital discipline
delivered higher cash returns to shareholders in the December 2018 half year.
Our strong balance sheet and fully funded capital investment plans allowed us
to return the US$10.4 billion net Onshore US proceeds to shareholders in the
form of a US$5.2 billion off-market share buy-back completed in December 2018
and a US$5.2 billion special dividend paid in January 2019. The Board has also
today determined to pay an interim dividend of 55 cents per share, which
equates to a payout ratio of 75 per cent.
Since the beginning of 2016, we have reduced debt by US$16 billion, reinvested
US$20 billion in the business and returned more than US$25 billion to
shareholders.
A strong second half is expected to partially offset the impacts from
operational outages in the first half, with unit costs across our business
forecast to improve.
We have a portfolio of attractive development opportunities and have recently
approved the West Barracouta and Atlantis Phase 3 projects in petroleum and had
early success in our oil and copper exploration programs. We are confident in
our plans to increase shareholder value and returns."
Sustainability is one of our core values
Safety, health and environment
The health and safety of our employees and contractors, and that of the broader
communities in which we operate, are central to the success of our organisation.
Tragically, one of our colleagues died at Saraji in Queensland in December 2018.
Our Total Recordable Injury Frequency (TRIF) was 4.3 per million hours
worked/(iii)/ for the first half of the 2019 financial year, a two per cent
reduction from 30 June 2018. The frequency rate for high potential injuries,
which are injury events where there was the potential for a fatality, declined
by 25 per cent/(iii)/.
We are determined to become safer through the redesign of our work and
increased application of technology to eliminate hazards, while improving our
awareness through leadership engagement in the field. Proactive hazard
reporting from the workforce and in-field safety leadership engagements
increased significantly in the December 2018 half year.
Samarco
BHP remains committed to supporting the Renova Foundation with the recovery of
communities and ecosystems affected by the Samarco tragedy.
Resettlement of the Bento Rodrigues, Paracatu and Gesteira communities is a
priority of the Renova Foundation. Key milestones have been achieved in each of
the three relocation programs.
As part of the compensation program, more than 8,200 general damages claims
have been resolved in addition to the resolution of approximately 260,000
claims for temporary interruption to water supplies immediately following the
dam failure. The river remediation programs continue to deliver improvements in
water quality, with turbidity levels in impacted areas returned to historical
levels.
The restart of Samarco's operations will occur only if it is safe, economically
viable and has the support of the community. To restart, Samarco requires the
necessary licencing approvals and the funding for restart preparation works. A
key consideration regarding further shareholder funding is that restart remains
economically viable, which includes an appropriate debt restructure.
In the December 2018 half year, BHP reported an exceptional loss of
US$210 million (after tax) in relation to the Samarco dam failure. Additional
commentary is included on page 42.
--------------------------------------------------------------------------------
News Release 2
Financial performance
Earnings and margins
. Attributable profit of US$3.8 billion includes an exceptional gain of
US$32 million (after tax), compared to an attributable profit of
US$2.0 billion, which includes an exceptional loss of US$2.0 billion (after
tax), in the prior period. The December 2018 half year exceptional gain is
related to the reversal of provisions for global taxation matters which
were resolved during the period, partially offset by a loss related to the
Samarco dam failure. The December 2017 half year exceptional loss related
to the US tax reform and the Samarco dam failure.
. Underlying attributable profit of US$3.7 billion, compared to US$4.1
billion in the prior period.
. Profit from operations (continuing operations) of US$7.3 billion, compared
to US$7.2 billion in the prior period, has increased as a result of lower
depreciation and amortisation charges and the favourable impacts of
exchange rate movements, partially offset by higher costs.
. Underlying EBITDA (continuing operations) of US$10.5 billion, compared to
US$10.8 billion in the prior period, with higher costs (including
production outages), inflation and other net movements (in total US$1.1
billion) more than offsetting the benefits of higher volumes at WAIO and
Queensland Coal and favourable exchange rate movements (in total US$0.8
billion).
. Underlying EBITDA margin (continuing operations) of 52 per cent, compared
to 55 per cent in the prior period.
. Underlying return on capital employed of 13.0 per cent (after tax),
compared with 12.8 per cent in the prior period. Underlying return on
capital employed, excluding Onshore US assets, is approximately 15 per cent
(after tax), compared with 17 per cent in the prior period.
Productivity and costs
. A negative movement in productivity of US$460 million was recorded and
reflects a negative impact of US$835 million related to unplanned
production outages at Olympic Dam (acid plant outage in August 2018), WAIO
(train derailment in November 2018), Spence (fire at the electro-winning
plant in September 2018) and Nickel West (fire at the Kalgoorlie smelter in
September 2018). This impact was partially offset by the build-up of
inventory levels during the outages (benefit of approximately US$160
million) as well as record volumes at Jimblebar and South Walker Creek. The
inventory build from the outages will be released in the coming periods.
. We expect a strong second half performance to offset the negative
productivity movement in this period, bringing the overall movement to
broadly flat for the full year, down from the previous guidance of
US$1 billion.
. We will continue to drive productivity improvements as we unlock value
through technology with the ongoing automation of our supply chain, reduce
our reliance on labour hire through the continued roll out in Australia of
our Operations Services initiative to leverage best practice in production
and maintenance, and continue to set records for underground development,
equipment utilisation, milling and production across our operations.
. Unit costs/(i)/ at our major assets were above full year guidance (at 2019
financial year guidance exchange rates of AUD/USD 0.75 and USD/CLP 663) as a
result of planned maintenance and production outages during the period.
. Full year unit cost guidance remains unchanged for our major assets (based
on exchange rates of AUD/USD 0.75 and USD/CLP 663).
. Historical costs and guidance are summarised below:
H1 FY19 at
guidance realised H1 FY19/(2)/
Medium-term FY19 exchange exchange vs
guidance/(1)/ guidance/(1)/ rates/(1)/ rates/(2)/ H1 FY18 H1 FY18
------------- ------------- ---------- ---------- --------- ------------
Conventional Petroleum unit cost (US$/boe).............. <13 <11 11.36 11.14 10.17 10%
Escondida unit cost (US$/lb)............................ <1.15 <1.15 1.18 1.17 1.06 10%
Western Australia Iron Ore unit cost (US$/t)............ <13 <14 15.03 14.51 14.90 (3%)
Queensland Coal unit cost (US$/t)....................... ~57 68 - 72 72.72 70.20 71.21 (1%)
(1) FY19 unit costs guidance are based on exchange rates of AUD/USD 0.75 and
USD/CLP 663.
(2) Average exchange rates for H1 FY19 of AUD/USD 0.72 and USD/CLP 671.
--------------------------------------------------------------------------------
BHP Results for the half year 3
ended 31 December 2018
. Production and guidance are summarised below:
H1 FY18
vs FY19
Production H1 FY19 H1 FY19 FY18 guidance
-----------------------------------------------------------------------------
Petroleum Conventional (MMboe)... 63 (1%) 120 113 - 118 FY19 guidance unchanged, with volumes
expected to be towards the upper end of
range.
---------------------------------------------------------------------------------------------------------------------
Copper (kt)...................... 825 (1%) 1,753 1,645 - 1,740 FY19 guidance increased.
---------------------------------------------------------------------------------------------------------------------
Escondida (kt)................. 580 0% 1,213 1,120 - 1,180 FY19 guidance unchanged, with volumes
expected to be towards the lower end of
range.
---------------------------------------------------------------------------------------------------------------------
Other copper/(1)/(kt).......... 245 (2%) 540 525 - 560 FY19 guidance increased from 500 - 525
kt and reflects the retention of Cerro
Colorado (60 - 70 kt).
---------------------------------------------------------------------------------------------------------------------
Iron ore/(2)/(Mt)................ 119 2% 238 241 - 250 FY19 guidance unchanged.
---------------------------------------------------------------------------------------------------------------------
WAIO (100% basis) (Mt)......... 135 (1%) 275 273 - 283 FY19 guidance unchanged.
---------------------------------------------------------------------------------------------------------------------
Metallurgical coal (Mt).......... 21 2% 43 43 - 46 FY19 guidance unchanged.
---------------------------------------------------------------------------------------------------------------------
Energy coal (Mt)................. 13 (5%) 29 28 - 29 FY19 guidance unchanged.
----------------------------------------------------------------------------------------------------------------------
(1) Other copper comprises Pampa Norte (including Cerro Colorado production for
the full 2019 financial year to reflect its retention, previous guidance
only included 35 kt of production for the first half of the 2019 financial
year), Olympic Dam and Antamina.
(2) Increase in BHP's share of volumes reflects the expiry of the Wheelarra
Joint Venture sublease in March 2018, with control of the sublease area
reverted to the Jimblebar Joint Venture, which is accounted for on a
consolidated basis with minority interest adjustments.
. Group copper equivalent production was broadly unchanged in the December
2018 half year/(iv)/, with volumes for the full year also expected to be in
line with the 2018 financial year/(iv)/.
Cash flow and balance sheet
. Net operating cash flows (continuing operations) of US$6.7 billion, with
volumes and commodity prices broadly in line with the prior period and
higher Australian and Chilean income tax payments in the period.
. Free cash flow (continuing operations) of US$3.6 billion for the half year.
Free cash flow of US$10.6 billion, which includes US$7.0 billion/(ii)/ of
proceeds received from the sale of Onshore US. Remaining consideration of
US$3.5 billion to be received during the June 2019 half year.
. Our balance sheet remains strong with net debt of US$9.9 billion at
31 December 2018 (30 June 2018: US$10.9 billion; 31 December 2017: US$15.4
billion). The reduction of US$1.0 billion in the half year (or
US$5.5 billion from 31 December 2017) includes proceeds received from the
sale of Onshore US, partially offset by the completion of a US$5.2 billion
off-market buy-back.
. We will maintain a strong balance sheet through the commodity price cycle,
with a targeted net debt range of US$10 to US$15 billion/(v)/. In the near
term, we expect net debt to remain at the lower end of the target range.
. Gearing ratio/(i)/ of 15.2 per cent (30 June 2018: 15.3 per cent;
31 December 2017: 19.9 per cent).
Dividends and share buy-back
. On 17 December 2018, a US$5.2 billion off-market buy-back of BHP Group
Limited shares was successfully completed. On 30 January 2019, a special
dividend of US$1.02 per share, representing the balance of US$5.2 billion
of the net proceeds from the sale of Onshore US, was paid to shareholders.
. The dividend policy provides for a minimum 50 per cent payout of Underlying
attributable profit at every reporting period. The minimum dividend payment
for the December 2018 half year period is 37 US cents per share or
US$1.9 billion.
. The Board has determined to pay an additional amount of 18 US cents per
share or US$0.9 billion, taking the interim dividend to 55 US cents per
share. This is equivalent to a 75 per cent payout ratio.
. This brings the total announced returns to shareholders over the last six
months to US$13.2 billion.
--------------------------------------------------------------------------------
News Release 4
Capital and exploration
. Capital and exploration expenditure of US$3.5 billion in the December 2018
half year included maintenance expenditure/(vi)/ of US$0.8 billion,
exploration of US$0.4 billion and Onshore US expenditure of US$0.4 billion.
. Capital and exploration expenditure guidance is unchanged at below
US$8 billion per annum for the 2019 and 2020 financial years, subject to
exchange rate movements.
. This guidance includes a US$0.9 billion exploration program being executed
for the 2019 financial year, with US$750 million for petroleum exploration
and appraisal expenditure.
. Historical capital and exploration expenditure and guidance are summarised
below:
FY19e H1 FY19 H1 FY18 FY18
US$B US$M US$M US$M
------- ------- ------- -------
Maintenance/(1)(2)/................................................ 2.1 829 994 1,930
Development
Minerals......................................................... 4.0 1,545 859 2,494
Conventional Petroleum/(2)/...................................... 0.6 287 225 555
----- ----- ----- -----
Capital expenditure (purchases of property, plant and equipment)... 6.7 2,661 2,078 4,979
----- ----- ----- -----
Add: exploration expenditure....................................... 0.9 397 464 874
----- ----- ----- -----
Capital and exploration expenditure - continuing operations........ 7.6 3,058 2,542 5,853
----- ----- ----- -----
Capital and exploration expenditure - discontinued operations...... 0.4 443 335 900
----- ----- ----- -----
Capital and exploration expenditure - total operations............. < 8.0 3,501 2,877 6,753
----- ----- ----- -----
(1) Includes capitalised deferred stripping of US$1.0 billion for the FY19e and
US$508 million for the H1 FY19 (H1 FY18: US$433 million; FY18: $880
million).
(2) Conventional Petroleum capital expenditure for FY19e includes US$0.6
billion of development and US$0.1 billion of maintenance.
. Average annual sustaining capital expenditure guidance over the medium term
is unchanged and forecast to be approximately:
. US$4 per tonne for WAIO, including the capital cost for South Flank;
. US$8 per tonne for Queensland Coal; and
. US$5 per tonne for New South Wales Energy Coal (NSWEC).
. At the end of the December 2018 half year, BHP had five major projects under
development (in petroleum, copper, iron ore and potash) with a combined
budget of US$10.6 billion over the life of the projects.
--------------------------------------------------------------------------------
BHP Results for the half year 5
ended 31 December 2018
Major projects
. On 13 February 2019, the BHP Board approved an investment of US$0.7 billion
(BHP share) for the development of the Atlantis Phase 3 project in the
deepwater Gulf of Mexico.
. Major projects are summarised below:
Capital
Project and expenditure/(1)/ Date of initial
Commodity ownership Project scope / capacity/(1)/ US$M production Progress / comments
------------- ------------------- ----------------------------------------- ---------------- --------------- ---------------------
Budget Target
----------------------------------------------------------------------------------------------------------------------------------
Projects in execution at 31 December 2018
----------------------------------------------------------------------------------------------------------------------------------
Iron Ore South Flank Sustaining iron ore mine to replace 3,061 CY21 21% complete On
(Australia) production from the 80 Mtpa Yandi mine. schedule and budget
85%
----------------------------------------------------------------------------------------------------------------------------------
Copper Spence Growth New 95 ktpd concentrator is expected to 2,460 FY21 34% complete On
Option (Chile) increase Spence's payable copper in schedule and budget
100% concentrate production by approximately
185 ktpa in the first 10 years of
operation and extend the mining
operations by more than 50 years.
----------------------------------------------------------------------------------------------------------------------------------
Petroleum North West Shelf To maintain LNG plant throughput from the 216 CY19 98% complete First
Greater Western North West Shelf operations. production achieved
Flank-B (Australia) in October 2018,
16.67% ahead of schedule
(non-operator) and below budget.
----------------------------------------------------------------------------------------------------------------------------------
Petroleum Mad Dog Phase 2 New floating production facility with the 2,154 CY22 37% complete On
(US Gulf of Mexico) capacity to produce up to 140,000 gross schedule and budget
23.9%(non-operator) barrels of crude oil per day.
----------------------------------------------------------------------------------------------------------------------------------
Other projects in progress at 31 December 2018
----------------------------------------------------------------------------------------------------------------------------------
Potash/(2)/ Jansen Potash Investment to finish the excavation and 2,700 82% complete Within
(Canada) 100% lining of the production and service the approved budget
shafts, and to continue the installation
of essential surface infrastructure and
utilities.
----------------------------------------------------------------------------------------------------------------------------------
(1) Unless noted otherwise, references to capacity are on a 100 per cent basis,
references to capital expenditure from subsidiaries are reported on a
100 per cent basis and references to capital expenditure from joint
operations reflect BHP's share.
(2) Potash capital expenditure of approximately US$240 million is expected for
the 2019 financial year.
Capital Allocation Framework
Adherence to our Capital Allocation Framework aims to balance value creation,
cash returns to shareholders and balance sheet strength in a transparent and
consistent manner.
H1 FY19 H1 FY18 FY18
US$B US$B US$B
--------- --------- --------
Net operating cash flow - total
operations............................... 7.3 7.3 18.5
----- ----- -----
Our priorities for capital
Maintenance capital...................... 0.8 1.0 1.9
Strong balance sheet..................... (check mark) check mark) (check mark)
Minimum 50% payout ratio dividend........ 2.5 1.8 3.8
----- ----- -----
Excess cash/(1)/......................... 3.6 3.8 11.8
----- ----- -----
Balance sheet.......................... 1.8 1.5 5.6
Additional dividends................... 0.9 0.5 1.4
Buy-back............................... 5.2 -- --
Organic development.................... 2.7 1.9 4.9
Acquisitions/(Divestments)............. (7.0) (0.1) (0.1)
----- ----- -----
(1) Includes dividends paid to non-controlling interests of US$0.6 billion for
H1 FY19 (H1 FY18: US$0.9 billion); excludes exploration expenses of
US$0.2 billion (H1 FY18: US$0.2 billion) which is classified as organic
development in accordance with the Capital Allocation Framework; net cash
outflow of US$0.4 billion (H1 FY18: US$0.7 billion).
--------------------------------------------------------------------------------
News Release 6
Outlook
Economic outlook
The global economy grew around 3 3/4 per cent in the 2018 calendar year, with a
notable pick up in the US economy and resilient growth in China. We expect
world growth to sit in the range of 3 1/4 per cent to 3 3/4 per cent for the
2019 calendar year. Further escalation in trade protection is a downside risk.
We expect China's economic growth to slow modestly in the 2019 calendar year.
The negative impact of weaker exports will be partially offset by easier
monetary and fiscal policy. In our view, China's policymakers will continue to
seek a balance between the pursuit of reform and maintenance of macroeconomic
and financial stability. Over the longer term, we expect China's economic
growth rate to decelerate as the working age population falls and the capital
stock matures.
The US performed strongly in the 2018 calendar year but near-term prospects are
less certain. The expansionary impact of tax cuts will progressively fade and
trade policies remain unpredictable. In Europe and Japan, we believe business
confidence and manufacturing momentum peaked in the 2018 calendar year. In
India, growth prospects are solid. The general election, timed for the first
half of the 2019 calendar year, is a key milestone for the country's reform
trajectory.
Commodities outlook
Crude oil prices were volatile in the second half of the 2018 calendar year.
Brent Crude hit a four year high ahead of US sanctions on Iran taking effect.
Prices then fell sharply towards the end of the 2018 calendar year on mounting
oversupply concerns, despite OPEC "Plus" announcing further production cuts in
December 2018. The fundamental outlook remains positive, underpinned by rising
demand from the developing world and natural field decline in supply.
The Japan-Korea Marker price for LNG was higher on average compared to the
previous calendar year, reflecting strong demand and slower than expected
ramp-ups. A material amount of new supply is expected to come online in 2019.
Longer term, the demand outlook for gas remains positive. Depleting domestic
gas supplies in some major consuming markets will help LNG to grow faster than
overall gas demand.
Copper prices have maintained a relatively tight range for much of the December
2018 half year. This period of stability followed a sharp drop associated with
the trade tensions that escalated in the June quarter of 2018. Against this
backdrop, we believe underlying fundamentals remain sound. Copper demand should
grow steadily. Grade decline, rising input costs, water constraints and a
scarcity of high-quality future development opportunities continue to constrain
the industry's ability to cheaply meet this growing demand and provide support
for our positive outlook.
Global steel production has maintained healthy growth in the 2018 calendar
year. Growth is expected to slow in the 2019 calendar year, along with the
global economy. Margins have begun to normalise from the extremes seen in the
initial stages of steel Supply Side Reform in China. That is an anticipated
development. We expect quality differentiation to remain a durable element in
price formation for steel-making raw materials.
The Platts 62% Fe Iron Ore Fines index performed solidly in the December 2018
half year, driven by firm pig iron production and unanticipated supply
disruptions. The lump premium has been strong. In the short term, the supply
picture is uncertain following the tragedy in Brazil. Total demand in the 2019
calendar year is expected to be similar to last year.
The Platts premium low-volatility metallurgical coal price index finished the
2018 calendar year strongly, with healthy demand conditions, especially in
India, set against a modest recovery in seaborne supply. China's import
policies remain a source of uncertainty. Over the longer term, India is
expected to sustain strong demand growth, while high quality metallurgical
coals are expected to continue to offer steelmakers value-in-use benefits in
mature markets.
Potash prices have performed strongly over the last year, despite several major
capacity additions coming online. Demand lifted again in the 2018 calendar
year, following a record in 2017 calendar year. We expect annual demand growth
of between two and three per cent over the next decade, resulting in demand
exceeding available supply from existing and forthcoming capacity by the
mid-to-late 2020s.
Further information on BHP's economic and commodity outlook can be found at:
bhp.com/prospects
--------------------------------------------------------------------------------
BHP Results for the half year 7
ended 31 December 2018
Underlying EBITDA
The following table and commentary describe the impact of the principal
factors(i) that affected Underlying EBITDA for the December 2018 half year
compared with the December 2017 half year:
US$M
--------
Half year ended 31 December 2017......... 10,836
Net price impact:
Change in sales prices................. 32 Higher average realised prices for petroleum and metallurgical coal, offset
by lower average realised prices for thermal coal, copper and iron ore.
Price-linked costs..................... (173) Increased royalties reflect higher realised prices related to petroleum and
metallurgical coal.
--------
(141)
--------
Change in volumes:
Productivity........................... 50 Increased volumes at WAIO (record production at Jimblebar, expiry of the
Wheelarra Joint Venture, partially offset by the impact from a train
derailment) and our Australian coal operations (record production at South
Walker Creek, higher wash-plant throughput at Poitrel and improved
ultra-class truck productivity) offset by lower volumes at Spence (fire at
the electro-winning plant).
Growth................................. (95) Lower petroleum volumes due to planned dry-dock maintenance at
Pyrenees and expected natural field decline.
--------
(45)
--------
Change in controllable cash costs:
Operating cash costs................... (606) Higher costs reflect: increased planned maintenance activity; costs related
to unplanned production outages at Olympic Dam, WAIO, Spence and
Nickel West; increased contractor stripping activity and rates at
Queensland Coal; and lower concentrator head grade at Escondida,
partially offset by favourable inventory movements across a number of
assets.
Exploration and business development... (1) Higher petroleum exploration expenses (expensing of two wells and
seismic acquisition cost) offset by lower study costs (following
development approval of the Escondida Water Supply Extension project
in March 2018).
--------
(607)
--------
Change in other costs:
Exchange rates....................... 674 Impact of the weakening Australian dollar and Chilean peso against the
US dollar.
Inflation............................ (206) Impact of inflation on the Group's cost base.
Fuel and energy...................... (158) Predominantly higher diesel prices at minerals assets.
Non-Cash............................. 124 Higher capitalisation of deferred stripping and lower depletion at Escondida.
One-off items........................ --
--------
434
--------
Asset sales.............................. 20
Ceased and sold operations............... 45 Sale of Bruce and Keith oil and gas fields in the United Kingdom.
Other items.............................. (3) Lower average realised prices received by our equity accounted
investments largely offset by higher sales volumes from Antamina and a
favourable impact from the revaluation of the embedded derivative in the
Trinidad and Tobago gas contract.
--------
Half year ended 31 December 2018......... 10,539
--------
The following table reconciles relevant factors with changes in the Group's
productivity:
Half year ended 31 December 2018 US$M
-------------------------------- --------
Change in controllable cash costs................. (607)
Change in volumes attributed to productivity...... 50
-----
Change in productivity in Underlying EBITDA....... (557)
Change in capitalised exploration................. 97
-----
Change attributable to productivity measures...... (460)
-----
--------------------------------------------------------------------------------
News Release 8
Prices and exchange rates
The average realised prices achieved for our major commodities are summarised
in the following table and are presented on a total operations basis:
H1 FY19 H1 FY19 H1 FY19
vs vs vs
Average realised prices/(1)/ H1 FY19 H1 FY18 H2 FY18 FY18 H1 FY18 H2 FY18 FY18
---------------------------------------- ------- ------- ------- ------- ------- ------- -------
Oil (crude and condensate) (US$/bbl).... 69.41 53.76 67.07 60.12 29% 3% 15%
Natural gas (US$/Mscf)/(2)/............. 3.98 3.54 3.71 3.62 12% 7% 10%
US natural gas (US$/Mscf)............... 2.88 2.84 2.77 2.80 1% 4% 3%
LNG (US$/Mscf).......................... 10.19 7.48 8.65 8.07 36% 18% 26%
Copper (US$/lb)/(5)/.................... 2.54 3.08 2.93 3.00 (18%) (13%) (15%)
Iron ore (US$/wmt, FOB)................. 55.62 56.54 56.86 56.71 (2%) (2%) (2%)
Metallurgical coal (US$/t).............. 179.82 164.22 189.66 177.22 9% (5%) 1%
Hard coking coal (HCC) (US$/t)/(3)/..... 197.86 182.29 205.80 194.59 9% (4%) 2%
Weak coking coal (WCC) (US$/t)/(3)/..... 134.12 120.99 143.40 131.70 11% (6%) 2%
Thermal coal (US$/t)/(4)/............... 84.15 87.49 86.47 86.94 (4%) (3%) (3%)
Nickel metal (US$/t).................... 12,480 11,083 13,974 12,591 13% (11%) (1%)
(1) Based on provisional, unaudited estimates. Prices exclude sales from equity
accounted investments, third party product and internal sales, and represent
the weighted average of various sales terms (for example: FOB, CIF and CFR),
unless otherwise noted. Includes the impact of provisional pricing and
finalisation adjustments.
(2) Includes internal sales.
(3) Hard coking coal (HCC) refers generally to those metallurgical coals with a
Coke Strength after Reaction (CSR) of 35 and above, which includes coals
across the spectrum from Premium Coking to Semi Hard Coking coals, while
weak coking coal (WCC) refers generally to those metallurgical coals with a
CSR below 35.
(4) Export sales only; excludes Cerrejon. Includes thermal coal sales from
metallurgical coal mines.
(5) Comparative financial information has been restated for the new accounting
standard, IFRS 15 Revenue from Contracts with Customers, which became
effective from 1 July 2018.
In Copper, the provisional pricing and finalisation adjustments will decrease
Underlying EBITDA by US$272 million in the 2019 financial year.
The following exchange rates relative to the US dollar have been applied in the
financial information:
Average Average
Half year ended Half year ended As at As at As at
31 December 2018 31 December 2017 31 December 2018 31 December 2017 30 June 2018
---------------- ---------------- ---------------- ---------------- ------------
Australian dollar/(1)/............ 0.72 0.78 0.71 0.78 0.74
Chilean peso...................... 671 638 696 615 648
(1) Displayed as US$ to A$1 based on common convention.
Depreciation, amortisation and impairments
Depreciation, amortisation and impairments decreased by US$449 million to
US$3.1 billion, reflecting lower depreciation and amortisation at Petroleum due
to lower volumes at Shenzi and an increase in estimated remaining reserves at
Atlantis, lower depreciation at Escondida due to an increase in asset life of
the Escondida Water Supply project, and lower impairment charges compared to
the previous period which predominantly related to conveyors at Escondida.
Net finance costs
Net finance costs decreased by US$125 million to US$533 million due to higher
interest earned on increased cash and term deposit holdings along with higher
interest.
--------------------------------------------------------------------------------
BHP Results for the half year 9
ended 31 December 2018
Taxation expense
Half year ended 31 December 2018 2017
----------------------------------- -----------------------------------
Profit Income Profit Income
before taxation tax expense before taxation tax expense
US$M US$M % US$M US$M %
---------------------------------- --------------- ----------- ------- --------------- ----------- -------
Statutory effective tax rate...... 6,800 (2,358) 34.7 6,507 (4,101) 63.0
Adjusted for:
Exchange rate movements........... -- 68 -- (98)
Exceptional items/(1)/............ 210 (242) 210 2,320
----- ------ ---- ----- ------ ----
Adjusted effective tax rate/(i)/.. 7,010 (2,532) 36.1 6,717 (1,879) 28.0
----- ------ ---- ----- ------ ----
(1) Refer exceptional items below for further details.
The Group's adjusted effective tax rate, which excludes the influence of
exchange rate movements and exceptional items, was 36.1 per cent (31 December
2017: 28.0 per cent). The higher adjusted effective tax rate reflects a
reduction in US tax credits related to Chilean taxes. The adjusted effective
tax rate is expected to be in the range of 33 to 38 per cent for the 2019
financial year.
Other royalty and excise arrangements which are not profit based are recognised
as operating costs within Profit before taxation. These amounted to
US$1.2 billion during the period (31 December 2017: US$986 million).
Exceptional items
The following table sets out the exceptional items for the December 2018 half
year. Additional commentary is included on page 36.
Gross Tax Net
Half year ended 31 December 2018 US$M US$M US$M
-------------------------------- ------- -------- --------
Exceptional items by category
Samarco dam failure/(1)/......................... (210) -- (210)
Global taxation matters/(2)/..................... -- 242 242
---- --- ----
Total............................................ (210) 242 32
---- --- ----
Attributable to non-controlling interests........ -- -- --
Attributable to BHP shareholders................. (210) 242 32
---- --- ----
(1) Refer to note 4 Exceptional items and note 12 Significant events - Samarco
dam failure of the Financial Report for further information.
(2) Financial impact of US$242 million relates to the reversal of provisions for
global taxation matters which were resolved during the period. Refer to note
4 Exceptional items of the Financial Report for further information.
Debt management and liquidity
During the December 2018 half year, the Group continued to focus on debt
reduction, with no new debt issued and a (Euro)1.25 billion bond repaid at
maturity. The repayment of maturing debt and fair value adjustments contributed
to a US$1.3 billion overall decrease in the Group's gross debt, from US$26.8
billion at 30 June 2018 to US$25.5 billion at 31 December 2018.
At the subsidiary level, Escondida refinanced US$0.2 billion of maturing long
term debt.
The Group has a US$6.0 billion commercial paper program backed by a
US$6.0 billion revolving credit facility which expires in May 2021. As at
31 December 2018, the Group had no outstanding US commercial paper, no drawn
amount under the revolving credit facility and US$15.6 billion in cash and cash
equivalents.
--------------------------------------------------------------------------------
News Release 10
Dividend
The BHP Board today determined to pay an interim dividend of 55 US cents per
share (US$2.8 billion). The interim dividend to be paid by BHP Group Limited
will be fully franked for Australian taxation purposes.
BHP's Dividend Reinvestment Plan (DRP) will operate in respect of the interim
dividend. Full terms and conditions of the DRP and details about how to
participate can be found at bhp.com.
Events in respect of the interim dividend Date
----------------------------------------- -------------
Currency conversion into rand................................................... 1 March 2019
Last day to trade cum dividend on Johannesburg Stock Exchange Limited (JSE)..... 5 March 2019
Ex-dividend Date JSE............................................................ 6 March 2019
Ex-dividend Date Australian Securities Exchange (ASX), London Stock
Exchange (LSE) and New York Stock Exchange (NYSE)............................. 7 March 2019
Record Date..................................................................... 8 March 2019
Dividend Reinvestment Election date (including currency conversion and
currency election dates for ASX and LSE)...................................... 11 March 2019
Payment Date.................................................................... 26 March 2019
DRP Allocation Date (ASX and LSE) within 10 business days after the
payment date.................................................................. 9 April 2019
DRP Allocation Date (JSE), subject to the purchase of shares by the
Transfer Secretaries in the open market Central Securities Depository
Participant (CSDP) accounts credited/updated on or about...................... 9 April 2019
BHP Group Plc shareholders registered on the South African section of the
register will not be able to dematerialise or rematerialise their shareholdings
between the dates of 6 March and 8 March 2019 (inclusive), nor will transfers
between the UK register and the South African register be permitted between the
dates of 1 March and 8 March 2019 (inclusive). American Depositary Shares
(ADSs) each represent two fully paid ordinary shares and receive dividends
accordingly. Details of the currency exchange rates applicable for the dividend
will be announced to the relevant stock exchanges following conversion, and
will appear on the Group's website.
Any eligible shareholder who wishes to participate in the DRP, or to vary a
participation election, should do so in accordance with the timetable set out
above or, in the case of shareholdings on the South African branch register of
BHP Group Plc, in accordance with the instructions of their Central Securities
Depository Participant (CSDP) or broker. The DRP allocation price will be
calculated in each jurisdiction as an average of the price paid for each share
purchased to satisfy DRP elections. The allocation price applicable to each
exchange will made available at bhp.com/DRP.
On 17 December 2018, BHP determined to pay a special dividend of US$1.02 per
share (US$5.2 billion), which was paid on 30 January 2019 related to the
disbursement of proceeds from the disposal of Onshore US.
Corporate governance
During the December 2018 half year, we announced that Wayne Murdy had decided
not to stand for re-election at the 2018 Annual General Meetings of BHP, and
retired from the Board as a Non-executive Director effective 2 November 2018.
The current members of the Board's committees are:
Risk and Audit Nomination and Governance Remuneration Sustainability
Committee Committee Committee Committee
----------------------------- ---------------------------- ---------------------------- ---------------------------
Lindsay Maxsted (Chairman) Ken MacKenzie (Chairman) Carolyn Hewson (Chairman) Malcolm Broomhead (Chairman)
Terry Bowen Malcolm Broomhead Anita Frew Ken MacKenzie
Anita Frew Carolyn Hewson Shriti Vadera John Mogford
Shriti Vadera
--------------------------------------------------------------------------------
BHP Results for the half year 11
ended 31 December 2018
Segment summary/(1)/
A summary of performance for the December 2018 and December 2017 half years is
presented below. It excludes Onshore US.
Half year ended Net
31 December 2018 Underlying Underlying Exceptional operating Capital Exploration Exploration
US$M Revenue/(2)/ EBITDA/(3)/ EBIT/(3)/ items/(4)/ assets/(3)/ expenditure gross/(5)/ to profit/(6)/
---------------------------- --------------- ----------- ---------- ----------- ----------- ----------- ----------- --------------
Petroleum................... 3,203 2,258 1,440 -- 7,828 339 316 167
Copper...................... 5,069 1,924 895 -- 23,796 1,014 20 20
Iron Ore.................... 7,418 4,341 3,526 (130) 18,264 732 46 21
Coal........................ 4,512 2,025 1,696 -- 9,801 305 10 10
Group and unallocated
items/(7)/................ 582 (9) (74) (20) 3,517 271 5 5
Inter-segment
adjustment/(8)/........... (42) -- -- -- -- -- -- --
------ ------- ------ ------ ------ ------ ---- ----
Total Group................. 20,742 10,539 7,483 (150) 63,206 2,661 397 223
------ ------- ------ ------ ------ ------ ---- ----
Half year ended
31 December 2017 Net
(Restated) Underlying Underlying Exceptional operating Capital Exploration Exploration
US$M Revenue/(2)(9)/ EBITDA/(3)/ EBIT/(3)/ items assets/(3)/ expenditure gross/(5)/ to profit/(6)/
---------------------------- --------------- ----------- ---------- ----------- ----------- ----------- ----------- --------------
Petroleum................... 2,581 1,633 617 -- 8,589 277 378 208
Copper...................... 6,132 3,195 2,052 -- 23,983 993 19 19
Iron Ore.................... 7,221 4,307 3,430 (153) 19,135 470 41 10
Coal........................ 4,047 1,790 1,436 -- 9,904 185 7 7
Group and unallocated
items/(7)/................ 589 (89) (204) (13) 2,492 153 19 19
Inter-segment
adjustment/(8)/.......... (44) -- -- -- -- -- -- --
------ ------- ------ ----- ------ ----- --- ---
Total Group................. 20,526 10,836 7,331 (166) 64,103 2,078 464 263
------ ------- ------ ----- ------ ----- --- ---
(1) Group and segment level information is reported on a statutory basis which,
in relation to Underlying EBITDA, includes depreciation, amortisation and
impairments, net finance costs and taxation expense of US$291 million (2017:
US$318 million) related to equity accounted investments. It excludes
exceptional items of US$117 million (2017: US$137 million) related to share
of loss from equity accounted investments.
Group profit before taxation comprised Underlying EBITDA, exceptional items,
depreciation, amortisation and impairments of US$3,206 million (2017:
US$3,671 million) and net finance costs of US$533 million (2017: US$658
million).
(2) Revenue is based on Group realised prices and includes third party products.
Sale of third party products by the Group contributed revenue of US$633
million and Underlying EBITDA of US$26 million (2017: US$725 million and
US$29 million).
(3) For more information on the reconciliation of certain alternative
performance measures to our statutory measures, reasons for usefulness and
calculation methodology, please refer to alternative performance measures
set out on pages 57 to 66.
(4) Exceptional items of US$(150) million excludes net finance costs of US$(60)
million included in the total US$(210) million related to the Samarco dam
failure.
(5) Includes US$175 million capitalised exploration (2017: US$272 million).
(6) Includes US$1 million of exploration expenditure previously capitalised,
written off as impaired (included in depreciation and amortisation) (2017:
US$71 million).
(7) Group and unallocated items includes Functions, other unallocated operations
including Potash, Nickel West and consolidation adjustments. Revenue not
attributable to reportable segments comprises the sale of freight and fuel
to third parties. Exploration and technology activities are recognised
within the relevant segments.
Half year ended Net
31 December 2018 Underlying Underlying operating Capital Exploration Exploration
US$M Revenue EBITDA/(3)/ D&A EBIT/(3)/ assets/(3)/ expenditure gross to profit
-------------------------------- ------------ ----------- ---------- ---------- ----------- ----------- ----------- --------------
Potash.......................... -- (56) 2 (58) 3,585 86 -- --
Nickel West..................... 563 43 1 42 (180) 128 5 5
Half year ended Net
31 December 2017 Underlying Underlying operating Capital Exploration Exploration
US$M Revenue EBITDA/(3)/ D&A EBIT/(3)/ assets/(3)/ expenditure gross to profit
-------------------------------- ------------ ----------- ---------- ---------- ----------- ----------- ----------- --------------
Potash.......................... -- (76) 2 (78) 3,258 117 -- --
Nickel West..................... 575 71 39 32 (296) 27 19 19
(8) Comprises revenue of US$37 million generated by Petroleum (2017: US$38
million) and US$5 million generated by Iron Ore (2017: US$6 million).
(9) Comparative financial information has been restated for the new accounting
standard, IFRS15 Revenue from Contracts with Customers, which became
effective from 1 July 2018.
--------------------------------------------------------------------------------
News Release 12
Petroleum
Underlying EBITDA for Petroleum, excluding Onshore US, increased by
US$625 million to US$2.3 billion in the December 2018 half year.
US$M
------
Underlying EBITDA for the half year
ended 31 December 2017................... 1,633
------
Net price impact........................... 692 Higher average realised prices:
Crude and condensate oil US$69.91/bbl (2017: US$54.27/bbl);
Natural gas US$4.67/Mscf (2017: US$4.13/Mscf);
LNG US$10.19/Mscf (2017: US$7.48/Mscf).
Change in volumes: growth.................. (95) Higher uptime in the US Gulf of Mexico and Australia and
increased tax barrels in Trinidad & Tobago were more than
offset by planned Pyrenees dry-dock maintenance and natural
field decline across the portfolio.
Change in controllable cash costs.......... (97) Additional maintenance at our Australian assets
(US$60 million) and higher exploration expenses
(US$37 million) due to Ocean Bottom Node survey acquisition
in Gulf of Mexico and expensing the Bongos-1 (mechanical
failure) and Concepcion-1 wells.
Ceased and sold operations................. 42 Sale of our interests in the Bruce and Keith oil and
gas fields.
Other...................................... 83 Other includes exchange rate, inflation and other items.
Other items includes the impact from revaluation of
embedded derivatives in Trinidad and Tobago gas contract
of US$11 million loss (2017: US$97 million loss).
------
Underlying EBITDA for the half year
ended 31 December 2018................... 2,258
------
Conventional Petroleum unit costs increased by 10 per cent to US$11.14 per
barrel of oil equivalent due to the impact of planned maintenance and lower
volumes. Unit cost guidance for the 2019 financial year remains unchanged at
less than US$11 per barrel (based on an exchange rate of AUD/USD 0.75). In the
medium term, we expect an increase in unit costs to less than US$13 per barrel
as a result of natural field decline.
Conventional Petroleum unit costs/(1)/(US$M) H1 FY19 H2 FY18 H1 FY18 FY18
-------------------------------------------- ------- ------- ------- -------
Revenue......................................... 3,203 2,827 2,581 5,408
Underlying EBITDA............................... 2,259 1,749 1,644 3,393
Gross costs..................................... 944 1,078 937 2,015
Less: exploration expense/(2)/.................. 166 379 137 516
Less: freight................................... 64 84 68 152
Less: development and evaluation................ 20 21 13 34
Less: other/(3)/................................ (8) 38 68 106
Net costs....................................... 702 556 651 1,207
Production (MMboe, equity share)................ 63 56 64 120
Cost per boe (US$)/(4)(5)/...................... 11.14 9.93 10.17 10.06
(1) Conventional Petroleum assets exclude divisional activities reported in
Other and closed mining and smelting operations in Canada and the United
States.
(2) Exploration expense represents conventional Petroleum's share of total
exploration expense.
(3) Other includes non-cash profit on sales of assets, inventory movements,
foreign exchange, provision for onerous lease costs and the impact from
revaluation of embedded derivatives in the Trinidad and Tobago gas contract.
(4) H1 FY18 and H2 FY18 restated to exclude costs related to the Onshore US sale
process
(5) H1 FY19 based on an exchange rate of AUD/USD 0.72.
On 13 February 2019, the BHP Board approved the development of the Atlantis
Phase 3 project in the US Gulf of Mexico. The project includes a subsea tie
back with the potential to increase production by an estimated 38,000 barrels
of oil per day (100 per cent basis) at its peak from eight new production
wells. This decision follows sanction by BP (the operator).
--------------------------------------------------------------------------------
BHP Results for the half year 13
ended 31 December 2018
Petroleum exploration
Petroleum exploration expenditure for the December 2018 half year was
US$316 million, of which US$166 million was expensed. Activity for the period
was largely focused in the US Gulf of Mexico, Trinidad & Tobago and Mexico. A
US$750 million exploration and appraisal program is being executed for the 2019
financial year.
In the US Gulf of Mexico, Samurai-2 and Samurai-2 ST01 drilling has delineated
the accumulation of oil. Further appraisal and development planning at Samurai
is in progress. In the southern portion of the Wildling sub-basin, we continue
to assess the potential resource, with further appraisal drilling now expected
in the 2020 financial year. In the Western US Gulf of Mexico, the Ocean Bottom
Node(vii) seismic acquisition was completed in early January 2019 and processed
data is expected to be delivered during the March 2020 quarter.
Following the success in Trinidad and Tobago of the Bongos-2 Exploration well
in the first half of the 2019 financial year, phase 3 of our deepwater
exploration drilling campaign has been accelerated and will start in the second
half of the 2019 financial year. Phase 3 will test three wells on three
prospects in the northern licence area.
In Mexico, we spud the Trion-2DEL appraisal well in November 2018 and
encountered oil in line with expectations. This was followed by a planned down
dip geologic sidetrack which encountered oil and water, as predicted, further
appraising the field and delineating the resource. Following the recent
encouraging results in the Trion block, an additional appraisal well (3DEL) to
further delineate the scale and characterisation of the resource is expected to
be drilled in the second half of the 2019 calendar year.
Having been the successful bidder in October 2018 for licences in the Orphan
Basin, offshore Eastern Canada, we have begun working with the
Canada-Newfoundland and Labrador Offshore Petroleum Board to meet all
regulatory requirements for the exploration phase. The licences became
effective 15 January 2019.
--------------------------------------------------------------------------------
News Release 14
Financial information for Petroleum for the December 2018 and December 2017
half years is presented below.
Half year ended Net
31 December 2018 Underlying Underlying operating Capital Exploration Exploration
US$M Revenue/(1)/ EBITDA D&A EBIT assets expenditure gross/(2)/ to profit/(3)/
---------------- ------------ ---------- ----- ---------- ----------- ----------- ----------- --------------
Australia Production Unit/(4)/.. 201 124 90 34 650 8
Bass Strait..................... 768 580 241 339 2,300 16
North West Shelf................ 906 691 148 543 1,527 61
Atlantis........................ 505 414 136 278 1,150 8
Shenzi.......................... 294 241 77 164 739 28
Mad Dog......................... 160 124 29 95 1,070 180
Trinidad/Tobago................. 145 82 29 53 259 15
Algeria......................... 143 119 13 106 46 3
Exploration..................... -- (166) 20 (186) 974 --
Other/(5)/...................... 89 52 37 15 (32) 20
----- ----- ----- ------ ------ ----- --- ---
Total Petroleum from Group
production.................... 3,211 2,261 820 1,441 8,683 339 316 167
----- ----- ----- ------ ------ ----- --- ---
Closed mines/(6)/............... -- (1) -- (1) (855) -- -- --
Third party products............ -- -- -- -- -- -- -- --
----- ----- ----- ------ ------ ----- --- ---
Total Petroleum................. 3,211 2,260 820 1,440 7,828 339 316 167
----- ----- ----- ------ ------ ----- --- ---
Adjustment for equity accounted
investments/(7)/.............. (8) (2) (2) -- -- -- -- --
----- ----- ----- ------ ------ ----- --- ---
Total Petroleum statutory
result........................ 3,203 2,258 818 1,440 7,828 339 316 167
----- ----- ----- ------ ------ ----- --- ---
Half year ended
31 December 2017 Net
(Restated) Underlying Underlying operating Capital Exploration Exploration
US$M Revenue/(1)/ EBITDA D&A EBIT assets expenditure gross/(2)/ to profit/(3)/
---------------- ------------ ---------- ----- ---------- ----------- ----------- ----------- --------------
Australia Production Unit/(4)/.. 291 206 135 71 828 2
Bass Strait..................... 666 512 288 224 2,701 19
North West Shelf................ 663 497 116 381 1,573 80
Atlantis........................ 355 245 198 47 1,361 71
Shenzi.......................... 264 212 94 118 845 5
Mad Dog......................... 118 84 28 56 787 47
Trinidad/Tobago................. 64 (60) 19 (79) 290 6
Algeria......................... 101 78 14 64 18 3
Exploration..................... -- (136) 98 (234) 1,174 --
Other/(5)/...................... 57 9 28 (19) (143) 44
----- ----- ----- ------ ------ ----- --- ---
Total Petroleum from Group
production.................... 2,579 1,647 1,018 629 9,434 277 378 208
----- ----- ----- ------ ------ ----- --- ---
Closed mines/(6)/............... -- (11) -- (11) (845) -- -- --
Third party products............ 10 (1) -- (1) -- -- -- --
----- ----- ----- ------ ------ ----- --- ---
Total Petroleum................. 2,589 1,635 1,018 617 8,589 277 378 208
----- ----- ----- ------ ------ ----- --- ---
Adjustment for equity accounted
investments/(7)/.............. (8) (2) (2) -- -- -- -- --
----- ----- ----- ------ ------ ----- --- ---
Total Petroleum statutory
result........................ 2,581 1,633 1,016 617 8,589 277 378 208
----- ----- ----- ------ ------ ----- --- ---
(1) Total Petroleum statutory result revenue includes: crude oil US$1,667
million (2017: US$1,403 million), natural gas US$676 million (2017: US$581
million), LNG US$665 million (2017: US$423 million), NGL US$175 million
(2017: US$141 million) and other US$20 million (2017: US$33 million which
includes third party products).
(2) Includes US$150 million of capitalised exploration (2017: US$241 million).
(3) Includes US$1 million of exploration expenditure previously capitalised,
written off as impaired (included in depreciation and amortisation) (2017:
US$71 million).
(4) Australia Production Unit includes Macedon, Pyrenees and Minerva.
(5) Predominantly divisional activities, business development, UK (divested in
November 2018), Neptune and Genesis. Also includes the Caesar oil pipeline
and the Cleopatra gas pipeline, which are equity accounted investments. The
financial information for the Caesar oil pipeline and the Cleopatra gas
pipeline presented above, with the exception of net operating assets,
reflects BHP's share.
(6) Comprises closed mining and smelting operations in Canada and the United
States. Petroleum manages the closed mine sites due to their geographic
location.
(7) Total Petroleum statutory result Revenue excludes US$8 million (2017: US$8
million) revenue related to the Caesar oil pipeline and the Cleopatra gas
pipeline. Total Petroleum statutory result Underlying EBITDA includes US$2
million (2017: US$2 million) D&A related to the Caesar oil pipeline and the
Cleopatra gas pipeline.
--------------------------------------------------------------------------------
BHP Results for the half year 15
ended 31 December 2018
Copper
Underlying EBITDA for the December 2018 half year decreased by US$1.3 billion
to US$1.9 billion.
US$M
------
Underlying EBITDA for the half year
ended 31 December 2017................... 3,195
------
Net price impact........................... (940) Lower average realised price:
Copper US$2.54/lb (2017: US$3.08/lb).
Change in volumes: productivity............ (114) Lower concentrator head grade at Escondida; decreased
sales volumes at Spence predominantly as a result of
a fire at the electro-winning plant and lower stacked
materials at the end of June 2018 reflecting planned
maintenance, partially offset by higher cathode sales
at Cerro Colorado.
Change in controllable cash costs.......... (301) Lower concentrator head grade at Escondida; planned
drawdown of mined ore inventory following the Los
Colorados Extension commissioning; end-of-negotiation
bonus payments at Escondida and Cerro Colorado and
costs related to production outages at Olympic Dam and
Spence. This was partially offset by favourable inventory
movements at Cerro Colorado, inventory build-up at Olympic
Dam and Spence during outages and prior period unfavourable
fixed cost dilution impact as a result of the smelter
maintenance campaign at Olympic Dam.
Change in other costs:
Exchange rates........................... 208
Inflation................................ (73)
Non-cash................................. 84 Increased waste movement and decreased deferred stripping
depletion at Escondida.
Other...................................... (135) Other includes fuel and energy of US$(56) million and
other items (including lower profit from equity accounted
investments).
------
Underlying EBITDA for the half year
ended 31 December 2018................... 1,924
------
Escondida unit costs increased by 10 per cent to US$1.17 per pound, mainly due
to lower concentrator head grade (11 per cent decrease) and labour settlement
costs. Unit cost guidance for the 2019 financial year remains unchanged at less
than US$1.15 per pound (based on an exchange rate of USD/CLP 663), as improved
labour productivity and maintenance optimisation strategies are expected to
partially offset a decrease in average concentrator head grade of approximately
15 per cent, consistent with the mine plan, and an increase in the usage of
higher cost desalinated water. Unit costs are expected to remain at less than
US$1.15 per pound over the medium term.
Escondida unit costs (US$M) H1 FY19 H2 FY18 H1 FY18 FY18
--------------------------- ------- ------- ------- -------
Revenue......................................... 3,339 4,234 4,112 8,346
Underlying EBITDA............................... 1,570 2,403 2,518 4,921
Gross costs..................................... 1,769 1,831 1,594 3,425
Less: by-product credits........................ 224 251 196 447
Less: freight................................... 76 73 50 123
Net costs....................................... 1,469 1,507 1,348 2,855
Sales (kt, equity share)........................ 571 631 578 1,209
Sales (Mlb, equity share)....................... 1,259 1,391 1,273 2,664
Cost per pound (US$)/(1)/....................... 1.17 1.08 1.06 1.07
(1) H1 FY19 based on exchange rates of AUD/USD 0.72 and USD/CLP 671.
Consistent with our exploration focus on copper, in September 2018, BHP
acquired an initial 6.1 per cent interest in SolGold Plc (SolGold), the
majority owner and operator of the Cascabel porphyry copper-gold project in
Ecuador. On 15 October 2018, BHP entered into an agreement to acquire an
additional 100 million shares in SolGold, for an investment of US$59 million,
with our total interest now approximately 11.2 per cent.
In November 2018, BHP confirmed identification of a potential new iron oxide,
copper, gold mineralised system, located 65 kilometres to the south east of
BHP's operations at Olympic Dam in South Australia. Laboratory assay results
show downhole mineralisation intercepts ranging from 0.5 per cent to six per
cent copper with associated gold, uranium and silver metals. This exploration
project is at an early stage and there is currently insufficient geological
information to assess the size, quality and continuity of the mineralised
intersections. BHP is evaluating and interpreting the results reported, and
planning a further drilling program to commence in early in the 2019 calendar
year.
--------------------------------------------------------------------------------
News Release 16
Financial information for Copper for the December 2018 and December 2017 half
years is presented below.
Half year ended Net
31 December 2018 Underlying Underlying operating Capital Exploration Exploration
US$M Revenue EBITDA D&A EBIT assets expenditure gross to profit
---------------- ------------ ---------- ----- ---------- ----------- ----------- ----------- -------------
Escondida/(1)/.................. 3,339 1,570 611 959 13,223 475
Pampa Norte/(2)/................ 613 284 207 77 2,254 291
Antamina/(3)/................... 562 374 55 319 1,310 119
Olympic Dam..................... 523 (38) 207 (245) 7,123 247
Other/(3)(4)/................... -- (103) 5 (108) (114) 1
----- ----- ----- ------ ------ -----
Total Copper from Group
production.................... 5,037 2,087 1,085 1,002 23,796 1,133
----- ----- ----- ------ ------ -----
Third party products............ 594 13 -- 13 -- --
----- ----- ----- ------ ------ ----- --- ---
Total Copper.................... 5,631 2,100 1,085 1,015 23,796 1,133 20 20
----- ----- ----- ------ ------ ----- --- ---
Adjustment for equity accounted
investments/(5)/.............. (562) (176) (56) (120) -- (119) -- --
----- ----- ----- ------ ------ ----- --- ---
Total Copper statutory result... 5,069 1,924 1,029 895 23,796 1,014 20 20
----- ----- ----- ------ ------ ----- --- ---
Half year ended Net
31 December 2017 Underlying Underlying operating Capital Exploration Exploration
US$M Revenue/(6)/ EBITDA D&A EBIT assets expenditure gross to profit
---------------- ------------ ---------- ----- ---------- ----------- ----------- ----------- -------------
Escondida/(1)/.................. 4,112 2,518 900 1,618 14,580 466
Pampa Norte/(2)/................ 860 428 143 285 1,686 191
Antamina/(3)/................... 677 495 57 438 1,254 103
Olympic Dam..................... 479 27 97 (70) 6,657 334
Other/(3)(4)/................... -- (83) 4 (87) (194) 2
----- ----- ----- ------ ------ -----
Total Copper from Group
production.................... 6,128 3,385 1,201 2,184 23,983 1,096
----- ----- ----- ------ ------ -----
Third party products............ 681 23 -- 23 -- --
----- ----- ----- ------ ------ ----- --- ---
Total Copper.................... 6,809 3,408 1,201 2,207 23,983 1,096 19 19
----- ----- ----- ------ ------ ----- --- ---
Adjustment for equity accounted
investments/(5)/.............. (677) (213) (58) (155) -- (103) -- --
----- ----- ----- ------ ------ ----- --- ---
Total Copper statutory result... 6,132 3,195 1,143 2,052 23,983 993 19 19
----- ----- ----- ------ ------ ----- --- ---
(1) Escondida is consolidated under IFRS 10 and reported on a 100 per cent
basis.
(2) Includes Spence and Cerro Colorado.
(3) Antamina, SolGold and Resolution are equity accounted investments and their
financial information presented above with the exception of net operating
assets reflects BHP Group's share.
(4) Predominantly comprises divisional activities, greenfield exploration and
business development. Includes Resolution and SolGold (acquired in October
2018).
(5) Total Copper statutory result Revenue excludes US$562 million (2017: US$746
million) revenue related to Antamina. Total Copper statutory result
Underlying EBITDA includes US$56 million (2017: US$58 million) D&A and
US$120 million (2017: US$155 million) net finance costs and taxation expense
related to Antamina, Resolution and SolGold that are also included in
Underlying EBIT. Total Copper Capital expenditure excludes US$119 million
(2017: US$103 million) related to Antamina.
(6) Comparative financial information has been restated for the new accounting
standard, IFRS15 Revenue from Contracts with Customers, which became
effective from 1 July 2018.
--------------------------------------------------------------------------------
BHP Results for the half year 17
ended 31 December 2018
Iron Ore
Underlying EBITDA for the December 2018 half year increased by US$34 million to
US$4.3 billion.
US$M
------
Underlying EBITDA for the half year
ended 31 December 2017................... 4,307
------
Net price impact........................... (166) Lower average realised price:
Iron ore US$55.62/wmt, FOB (2017: US$56.54/wmt, FOB).
Change in volumes: productivity............ 123 Increased sales volumes supported by record production at
Jimblebar, higher volumes reflecting the expiry of the
Wheelarra Joint Venture/(1)/and the prior period impact
from the Mt Whaleback fire. This increase was partially
offset by the impact from a train derailment on 5 November
2018 which resulted in the suspension of rail operations
for five days.
Change in controllable cash costs.......... 28 Favourable inventory movements, partially offset by
derailment remediation costs and higher maintenance
activity.
Change in other costs:
Exchange rates........................... 169
Inflation................................ (53)
Other...................................... (67) Other includes fuel and energy of US$(44) million, non-cash
and other items.
------
Underlying EBITDA for the half year
ended 31 December 2018................... 4,341
------
(1) Increased volumes reflecting the expiry of the Wheelarra Joint Venture
sublease in March 2018, with control of the sublease areas reverting to the
Jimblebar Joint Venture, which is accounted for on a consolidated basis with
minority interest adjustments.
WAIO unit costs decreased by three per cent to US$14.51 per tonne (or US$13.85
per tonne on a C1 basis excluding third party royalties(2)), reflecting
favourable exchange movements which offset impacts from maintenance and
unplanned outages during the period. Unit cost guidance for the 2019 financial
year remains unchanged at less than US$14 per tonne (based on an exchange rate
of AUD/USD 0.75). In the medium term, we expect to lower our unit costs to less
than US$13 per tonne.
WAIO unit costs (US$M) H1 FY19 H2 FY18 H1 FY18 FY18
---------------------- ------- ------- ------- -------
Revenue......................................... 7,317 7,479 7,117 14,596
Underlying EBITDA............................... 4,300 4,604 4,265 8,869
Gross costs..................................... 3,017 2,875 2,852 5,727
Less: freight................................... 741 650 626 1,276
Less: royalties................................. 540 571 504 1,075
Net costs....................................... 1,736 1,654 1,722 3,376
Sales (kt, equity share)........................ 119,620 121,228 115,543 236,771
Cost per tonne (US$)/(1)/....................... 14.51 13.64 14.90 14.26
Cost per tonne on a C1 basis excluding third
party royalties (US$)/(2)/.................... 13.85 12.41 13.68 13.03
(1) H1 FY19 based on an average exchange rate of AUD/USD 0.72.
(2) Excludes third party royalties of US$0.84 per tonne (December 2017: US$0.73
per tonne), exploration expenses, depletion of production stripping,
demurrage, exchange rate gains/losses, net inventory movements and other
income.
--------------------------------------------------------------------------------
News Release 18
Financial information for Iron Ore for the December 2018 and December 2017
financial years is presented below.
Half year ended Net
31 December 2018 Underlying Underlying operating Capital Exploration Exploration
US$M Revenue EBITDA D&A EBIT assets expenditure gross/(1)/ to profit
---------------- ------- ---------- ----- ---------- --------- ----------- ----------- -----------
Western Australia Iron Ore............ 7,317 4,300 798 3,502 19,318 723
Samarco/(2)/.......................... -- -- -- -- (1,240) --
Other/(3)/............................ 79 28 17 11 186 9
------ ----- ----- ----- ------ -----
Total Iron Ore from Group
production......................... 7,396 4,328 815 3,513 18,264 732
------ ----- ----- ----- ------ -----
Third party products/(4)/............. 22 13 -- 13 -- --
------ ----- ----- ----- ------ ----- ---- ----
Total Iron Ore........................ 7,418 4,341 815 3,526 18,264 732 46 21
------ ----- ----- ----- ------ ----- ---- ----
Adjustment for equity accounted
investments......................... -- -- -- -- -- -- -- --
------ ----- ----- ----- ------ ----- ---- ----
Total Iron Ore statutory result....... 7,418 4,341 815 3,526 18,264 732 46 21
------ ----- ----- ----- ------ ----- ---- ----
Half year ended Net
31 December 2017 Underlying Underlying operating Capital Exploration Exploration
US$M Revenue EBITDA D&A EBIT assets expenditure gross/(1)/ to profit
---------------- ------- ---------- ----- ---------- --------- ----------- ----------- -----------
Western Australia Iron Ore............ 7,117 4,265 873 3,392 19,959 446
Samarco/(2)/.......................... -- -- -- -- (1,025) --
Other/(3)/............................ 76 36 4 32 201 24
------ ----- ----- ----- ------ -----
Total Iron Ore from Group
production.......................... 7,193 4,301 877 3,424 19,135 470
------ ----- ----- ----- ------ -----
Third party products/(4)/............. 28 6 -- 6 -- --
------ ----- ----- ----- ------ ----- ---- ----
Total Iron Ore........................ 7,221 4,307 877 3,430 19,135 470 41 10
------ ----- ----- ----- ------ ----- ---- ----
Adjustment for equity accounted
investments......................... -- -- -- -- -- -- -- --
------ ----- ----- ----- ------ ----- ---- ----
Total Iron Ore statutory result....... 7,221 4,307 877 3,430 19,135 470 41 10
------ ----- ----- ----- ------ ----- ---- ----
(1) Includes US$25 million of capitalised exploration (2017: US$31 million).
(2) Samarco is an equity accounted investment and its financial information
presented above, with the exception of net operating assets, reflects BHP
Billiton Brasil Ltda's share. All financial impacts following the Samarco
dam failure have been reported as exceptional items in both reporting
periods.
(3) Predominantly comprises divisional activities, towage services, business
development and ceased operations.
(4) Includes inter-segment and external sales of contracted gas purchases.
--------------------------------------------------------------------------------
BHP Results for the half year 19
ended 31 December 2018
Coal
Underlying EBITDA for the December 2018 half year increased by US$235 million
to US$2.0 billion.
US$M
------
Underlying EBITDA for the half year
ended 31 December 2017................... 1,790
------
Net price impact........................... 238 Higher average realised metallurgical coal prices partially
offset by lower thermal coal price:
Hard coking coal US$197.86/t (2017: US$182.29/t);
Weak coking coal US$134.12/t (2017: US$120.99/t);
Thermal coal US$84.15/t (2017: US$87.49/t).
Change in volumes: productivity............ 53 Increased sales volumes supported by record production at
South Walker Creek, higher wash-plant throughput at Poitrel
(from Red Mountain processing facility), improved
ultra-class truck productivity and prior period impacts
from lower volumes at Broadmeadow (roof conditions) and
Blackwater (geotechnical issues). This increase was
partially offset by the scheduled longwall move at
Broadmeadow during the period.
Change in controllable cash costs.......... (145) Increased contractor stripping activity and rates coupled
with higher planned maintenance activity at Queensland
Coal (US$65 million) and unfavourable inventory movements
and increased contractor mining and stripping activity at
NSWEC (US$80 million).
Change in other costs:
Exchange rates........................... 193
Inflation................................ (47)
Other...................................... (57) Other includes: fuel and energy of US$(56) million and
other items.
------
Underlying EBITDA for the half year
ended 31 December 2018................... 2,025
------
Queensland Coal unit costs decreased by one per cent to US$70 per tonne,
reflecting higher sales volumes and favourable exchange rate movements,
partially offset by the impacts from planned maintenance during the period.
Unit cost guidance for the 2019 financial year remains unchanged and is
expected to be between US$68 and US$72 per tonne (based on an exchange rate of
AUD/USD 0.75). In the medium term, we expect to lower our unit costs to
approximately US$57 per tonne.
Queensland Coal unit costs (US$M) H1 FY19 H2 FY18 H1 FY18 FY18
--------------------------------- ------- ------- ------- -------
Revenue......................................... 3,767 4,038 3,350 7,388
Underlying EBITDA............................... 1,811 2,143 1,504 3,647
Gross costs..................................... 1,956 1,895 1,846 3,741
Less: freight................................... 85 86 64 150
Less: royalties................................. 394 419 321 740
Net costs....................................... 1,477 1,390 1,461 2,851
Sales (kt, equity share)........................ 21,039 21,383 20,516 41,899
Cost per tonne (US$)/(1)/....................... 70.20 65.00 71.21 68.04
(1) H1 FY19 based on an average exchange rate of AUD/USD 0.72.
NSWEC unit costs increased by 14 per cent to US$54 per tonne as a result of
unfavourable inventory movements and increased strip ratio and contractor
stripping activity. This was partially offset by increased sales volumes and
the impacts from favourable exchange rate movements. Unit cost guidance for the
2019 financial year remains unchanged at between US$43 and US$48 per tonne
(based on an exchange rate of AUD/USD 0.75), with costs expected to be towards
the upper end of the guidance range. In the medium term, geological constraints
are expected to continue as the mine plan works through the monocline, with
unit costs forecast to remain at approximately US$45 per tonne during this
period.
New South Wales Energy Coal unit costs (US$M) H1 FY19 H2 FY18 H1 FY18 FY18
--------------------------------------------- ------- ------- ------- -------
Revenue.......................................... 745 804 697 1,501
Underlying EBITDA................................ 191 328 241 569
Gross costs...................................... 554 476 456 932
Less: royalties.................................. 60 60 51 111
Net costs........................................ 494 416 405 821
Sales (kt, equity share)......................... 9,083 9,536 8,486 18,022
Cost per tonne (US$)/(1)/........................ 54.39 43.62 47.73 45.56
(1) H1 FY19 based on an average exchange rate of AUD/USD 0.72.
--------------------------------------------------------------------------------
News Release 20
Financial information for Coal for the December 2018 and December 2017 half
years is presented below.
Half year ended Net
31 December 2018 Underlying Underlying operating Capital Exploration Exploration
US$M Revenue EBITDA D&A EBIT assets expenditure gross to profit
---------------- ------- ---------- ----- ---------- ------------- ----------- ----------- -----------
Queensland Coal...................... 3,767 1,811 269 1,542 8,328 256
New South Wales Energy Coal/(1)/..... 799 229 75 154 968 47
Colombia/(1)/........................ 423 199 52 147 892 65
Other/(2)/........................... -- (63) 1 (64) (387) 3
----- ----- ----- ----- ----- -----
Total Coal from Group production..... 4,989 2,176 397 1,779 9,801 371
----- ----- ----- ----- ----- -----
Third party products................. -- -- -- -- -- --
----- ----- ----- ----- ----- ----- ---- ----
Total Coal........................... 4,989 2,176 397 1,779 9,801 371 10 10
----- ----- ----- ----- ----- ----- ---- ----
Adjustment for equity accounted
investments/(3)(4)/................ (477) (151) (68) (83) -- (66) -- --
----- ----- ----- ----- ----- ----- ---- ----
Total Coal statutory result.......... 4,512 2,025 329 1,696 9,801 305 10 10
----- ----- ----- ----- ----- ----- ---- ----
Half year ended Net
31 December 2017 Underlying Underlying operating Capital Exploration Exploration
US$M Revenue EBITDA D&A EBIT assets/(5)/ expenditure gross to profit
---------------- ------- ---------- ----- ---------- ------------- ----------- ----------- -----------
Queensland Coal...................... 3,350 1,504 294 1,210 8,384 176
New South Wales Energy Coal/(1)/.. 750 304 92 212 1,035 10
Colombia/(1)/........................ 403 201 47 154 905 39
Other/(2)/........................... -- (53) 2 (55) (420) (1)
----- ----- ----- ----- ----- -----
Total Coal from Group production..... 4,503 1,956 435 1,521 9,904 224
----- ----- ----- ----- ----- -----
Third party products................. -- -- -- -- -- --
----- ----- ----- ----- ----- ----- ---- ----
Total Coal........................... 4,503 1,956 435 1,521 9,904 224 7 7
----- ----- ----- ----- ----- ----- ---- ----
Adjustment for equity accounted
investments/(3)(4)/................ (456) (166) (81) (85) -- (39) -- --
----- ----- ----- ----- ----- ----- ---- ----
Total Coal statutory result.......... 4,047 1,790 354 1,436 9,904 185 7 7
----- ----- ----- ----- ----- ----- ---- ----
(1) Newcastle Coal Infrastructure Group and Cerrejon are equity accounted
investments and their financial information presented above with the
exception of net operating assets reflects BHP Group's share.
(2) Predominantly comprises divisional activities.
(3) Total Coal statutory result Revenue excludes US$423 million (2017: US$403
million) revenue related to Cerrejon. Total Coal statutory result Underlying
EBITDA includes US$52 million (2017: US$47 million) D&A and US$61 million
(2017: US$56 million) net finance costs and taxation expense related to
Cerrejon, that are also included in Underlying EBIT. Total Coal statutory
result Capital expenditure excludes US$65 million (2017: US$39 million)
related to Cerrejon.
(4) Total Coal statutory result Revenue excludes US$54 million (2017: US$53
million) revenue related to Newcastle Coal Infrastructure Group. Total Coal
statutory result excludes US$38 million (2017: US$63 million) Underlying
EBITDA, US$16 million (2017: US$34 million) D&A and US$22 million (2017:
US$29 million) Underlying EBIT related to Newcastle Coal Infrastructure
Group until future profits exceed accumulated losses. Total Coal Capital
expenditure excludes US$1 million (2017: US$ nil) related to Newcastle Coal
Infrastructure Group.
(5) Queensland Coal net operating assets have been restated to reflect ceased
operations in Other on a consistent basis with the December 2018 half year.
There is no change to the overall net operating assets position.
--------------------------------------------------------------------------------
BHP Results for the half year 21
ended 31 December 2018
Group and unallocated items
Underlying EBITDA loss for Group and unallocated items decreased by
US$80 million to US$9 million in the December 2018 half year, as a favourable
exchange rate impact on the off-market buy-back of BHP Group Limited shares
more than offset the decrease in EBITDA at Nickel West.
Nickel West's Underlying EBITDA decreased from US$71 million to US$43 million
for the December 2018 half year predominantly due to the drawdown of ore
inventories as the business transitions to new ore bodies and the impact from a
fire at the Kalgoorlie smelter in September 2018, partially offset by higher
prices and favourable exchange rate movements.
--------------------------------------------------------------------------------
News Release 22
The Financial Report set out on pages 25 to 49 for the half year ended
31 December 2018 has been prepared on the basis of accounting policies and
methods of computation consistent with those applied in the 30 June 2018
Financial Report with the exception of new accounting standards and
interpretations which became effective from 1 July 2018. This news release
including the financial information is unaudited. Variance analysis relates to
the relative financial and/or production performance of BHP and/or its
operations during the December 2018 half year compared with the December 2017
half year, unless otherwise noted. Operations includes operated and
non-operated assets, unless otherwise noted. Numbers presented may not add up
precisely to the totals provided due to rounding.
The following abbreviations may have been used throughout this report: barrels
(bbl); billion cubic feet (bcf); barrels of oil equivalent (boe); billion
tonnes (Bt); cost and freight (CFR); cost, insurance and freight (CIF), dry
metric tonne unit (dmtu); free on board (FOB); grams per tonne (g/t); kilograms
per tonne (kg/t); kilometre (km); metre (m); million barrels of oil equivalent
(MMboe); million barrels of oil equivalent per day (MMboe/d); thousand cubic
feet equivalent (Mcfe); million cubic feet per day (MMcf/d); million ounces per
annum (Mozpa); million pounds (Mlb); million tonnes (Mt); million tonnes per
annum (Mtpa); ounces (oz); pounds (lb); thousand barrels of oil equivalent
(Mboe); thousand ounces (koz); thousand ounces per annum (kozpa); thousand
standard cubic feet (Mscf); thousand tonnes (kt); thousand tonnes per annum
(ktpa); thousand tonnes per day (ktpd); tonnes (t); and wet metric tonnes (wmt).
The following footnotes apply to this Results Announcement:
(i) We use various alternative performance measures to reflect our underlying
performance. For further information on the reconciliations of certain
alternative performance measures to our statutory measures, reasons for
usefulness and calculation methodology, please refer to alternative
performance measures set out on pages 57 to 66.
(ii) Net proceeds received from the sale of Onshore US at 31 December 2018
comprises of US$0.3 billion from the sale of Fayetteville and US$6.7
billion from the sale of Eagle Ford, Haynesville and Permian. Payment of
the deferred consideration is not subject to any conditions and has been
recognised as a US$3.5 billion receivable at 31 December 2018.
(iii) Reported for total operations (including Onshore US).
(iv) Copper equivalent production based on 2018 financial year average
realised prices. Excludes production from Onshore US.
(v) Adoption of IFRS 16 Leases is effective for the Group from 1 July 2019
and the potential impact is currently under review.
(vi) Maintenance capital includes non-discretionary spend for the following
purposes: deferred development and production stripping; risk reduction,
compliance and asset integrity.
(vii) WGOM OBN 2018 Seismic Permit is OCS Permit T18-010.
Forward-looking statements
This release contains forward-looking statements, including statements
regarding: trends in commodity prices and currency exchange rates; demand for
commodities; plans, strategies and objectives of management; closure or
divestment of certain operations or facilities (including associated costs);
anticipated production or construction commencement dates; capital costs and
scheduling; operating costs and shortages of materials and skilled employees;
anticipated productive lives of projects, mines and facilities; provisions and
contingent liabilities; tax and regulatory developments.
Forward-looking statements can be identified by the use of terminology,
including, but not limited to, 'intend', 'aim', 'project', 'anticipate',
'estimate', 'plan', 'believe', 'expect', 'may', 'should', 'will', 'continue',
'annualised' or similar words. These statements discuss future expectations
concerning the results of operations or financial condition, or provide other
forward-looking statements.
These forward-looking statements are not guarantees or predictions of future
performance, and involve known and unknown risks, uncertainties and other
factors, many of which are beyond our control, and which may cause actual
results to differ materially from those expressed in the statements contained
in this release. Readers are cautioned not to put undue reliance on
forward-looking statements.
For example, our future revenues from our operations, projects or mines
described in this release will be based, in part, upon the market price of the
minerals, metals or petroleum produced, which may vary significantly from
current levels. These variations, if materially adverse, may affect the timing
or the feasibility of the development of a particular project, the expansion of
certain facilities or mines, or the continuation of existing operations.
Other factors that may affect the actual construction or production
commencement dates, costs or production output and anticipated lives of
operations, mines or facilities include our ability to profitably produce and
transport the minerals, petroleum and/or metals extracted to applicable
markets; the impact of foreign currency exchange rates on the market prices of
the minerals, petroleum or metals we produce; activities of government
authorities in some of the countries where we are exploring or developing these
projects, facilities or mines, including increases in taxes, changes in
environmental and other regulations and political uncertainty; labour unrest;
and other factors identified in the risk factors discussed in BHP's filings
with the U.S. Securities and Exchange Commission (the 'SEC') (including in
Annual Reports on Form 20-F) which are available on the SEC's website at
www.sec.gov.
Except as required by applicable regulations or by law, the Group does not
undertake any obligation to publicly update or review any forward-looking
statements, whether as a result of new information or future events.
Past performance cannot be relied on as a guide to future performance.
No offer of securities
Nothing in this release should be construed as either an offer, or a
solicitation of an offer, to buy or sell BHP securities in any jurisdiction, or
be treated or relied upon as a recommendation or advice by BHP.
Reliance on third party information
The views expressed in this release contain information that has been derived
from publicly available sources that have not been independently verified. No
representation or warranty is made as to the accuracy, completeness or
reliability of the information. This release should not be relied upon as a
recommendation or forecast by BHP.
No financial or investment advice - South Africa
BHP does not provide any financial or investment 'advice' as that term is
defined in the South African Financial Advisory and Intermediary Services Act,
37 of 2002, and we strongly recommend that you seek professional advice.
BHP and its subsidiaries
In this release, the terms 'BHP', 'Group', 'BHP Group', 'we', 'us', 'our' and
'ourselves' are used to refer to BHP Group Limited, BHP Group Plc and, except
where the context otherwise requires, their respective subsidiaries as
identified in note 27 'Subsidiaries' in section 5.1 of BHP's 30 June 2018
Annual Report on Form 20-F. Notwithstanding that this release may include
production, financial and other information from non-operated assets,
non-operated assets are not included in the BHP Group and, as a result,
statements regarding our operations, assets and values apply only to our
operated assets unless otherwise stated.
--------------------------------------------------------------------------------
BHP Results for the half year 23
ended 31 December 2018
Further information on BHP can be found at bhp.com
Media Relations Investor Relations
Email: media.relations@bhp.com Email: investor.relations@bhp.com
Australia and Asia Australia and Asia
Gabrielle Notley Tara Dines
Tel: +61 3 9609 3830 Mobile: +61 411 071 715 Tel: +61 3 9609 2222 Mobile: +61 499 249 005
United Kingdom and South Africa United Kingdom and South Africa
Neil Burrows Elisa Morniroli
Tel: +44 20 7802 7484 Mobile: +44 7786 661 683 Tel: +44 20 7802 7611 Mobile: +44 7825 926 646
North America Americas
Judy Dane James Wear
Tel: +1 713 961 8283 Mobile: +1 713 299 5342 Tel: +1 713 993 3737 Mobile: +1 347 882 3011
BHP Group Limited ABN 49 004 028 077 BHP Group Plc Registration number 3196209
LEI WZE1WSENV6JSZFK0JC28 LEI 549300C116EOWV835768
Registered in Australia Registered in England and Wales
Registered Office: Level 18, 171 Collins Street Registered Office: Nova South, 160 Victoria Street
Melbourne Victoria 3000 Australia London SW1E 5LB United Kingdom
Tel +61 1300 55 4757 Fax +61 3 9609 3015 Tel +44 20 7802 4000 Fax +44 20 7802 4111
Members of the BHP Group which is
headquartered in Australia
[LOGO]
Follow us on social media
--------------------------------------------------------------------------------
News Release 24
[LOGO]
BHP
Financial Report
Half year ended
31 December 2018
--------------------------------------------------------------------------------
Contents
Half Year Financial Statements Page
Consolidated Income Statement for the half year ended 31 December 2018... 27
Consolidated Statement of Comprehensive Income for the half year
ended 31 December 2018................................................ 27
Consolidated Balance Sheet as at 31 December 2018 28
Consolidated Cash Flow Statement for the half year ended 31 December
2018.................................................................. 29
Consolidated Statement of Changes in Equity for the half year ended
31 December 2018...................................................... 30
Notes to the Financial Information ...................................... 31
1. Basis of preparation............................................. 31
2. Impact of new accounting standards............................... 33
3. Revenue.......................................................... 35
4. Exceptional items................................................ 36
5. Interests in associates and joint venture entities............... 37
6. Net finance costs................................................ 37
7. Income tax expense............................................... 38
8. Earnings per share............................................... 39
9. Dividends........................................................ 39
10. Share capital.................................................... 40
11. Financial risk management - Fair values.......................... 40
12. Significant events - Samarco dam failure......................... 42
13. Discontinued operations.......................................... 47
14. Subsequent events................................................ 49
Directors' Report........................................................ 50
Directors' Declaration of Responsibility................................. 52
Lead Auditor's Independence Declaration under Section 307C of the
Australian Corporations Act 2001...................................... 53
Independent Review Report................................................ 54
--------------------------------------------------------------------------------
Financial Report 26
Consolidated Income Statement for the half year ended 31 December 2018
Half year Year
Half year ended ended
ended 31 Dec 30 June
31 Dec 2017 2018
2018 US$M US$M
Notes US$M Restated Restated
----- ---------- ----------- ------------
Continuing operations
Revenue.............................................................. 3 20,742 20,526 43,129
Other income......................................................... 170 123 247
Expenses excluding net finance costs................................. (13,695) (13,697) (27,527)
Profit from equity accounted investments, related impairments and
expenses........................................................... 5 116 213 147
------- ------- -------
Profit from operations............................................... 7,333 7,165 15,996
------- ------- -------
Financial expenses................................................... (772) (737) (1,567)
Financial income..................................................... 239 79 322
------- ------- -------
Net finance costs.................................................... 6 (533) (658) (1,245)
------- ------- -------
Profit before taxation............................................... 6,800 6,507 14,751
------- ------- -------
Income tax expense................................................... (2,224) (4,057) (6,879)
Royalty-related taxation (net of income tax benefit)................. (134) (44) (128)
------- ------- -------
Total taxation expense............................................... 7 (2,358) (4,101) (7,007)
------- ------- -------
Profit after taxation from Continuing operations..................... 4,442 2,406 7,744
------- ------- -------
Discontinued operations
(Loss)/profit after taxation from Discontinued operations............ 13 (293) 168 (2,921)
------- ------- -------
Profit after taxation from Continuing and Discontinued operations.... 4,149 2,574 4,823
------- ------- -------
Attributable to non-controlling interests.......................... 385 559 1,118
Attributable to BHP shareholders................................... 3,764 2,015 3,705
------- ------- -------
Basic earnings per ordinary share (cents)............................ 8 71.0 37.9 69.6
Diluted earnings per ordinary share (cents).......................... 8 70.8 37.7 69.4
Basic earnings from Continuing operations per ordinary share
(cents)............................................................ 8 76.6 35.1 125.0
Diluted earnings from Continuing operations per ordinary share
(cents)............................................................ 8 76.4 35.0 124.6
------- ------- -------
The accompanying notes form part of this financial information.
Consolidated Statement of Comprehensive Income for the half year ended 31 December 2018
Half year Half year Year
ended ended ended
31 Dec 31 Dec 30 June
2018 2017 2018
US$M US$M US$M
---------- ----------- ------------
Profit after taxation from Continuing and Discontinued operations...... 4,149 2,574 4,823
Other comprehensive income
Items that may be reclassified subsequently to the income statement:
Net valuation gains on investments taken to equity................... -- 10 11
Hedges:
(Losses)/gains taken to equity....................................... (344) 666 82
Losses/(gains) transferred to the income statement................... 267 (623) (215)
Exchange fluctuations on translation of foreign operations taken to
equity............................................................... 2 (1) 2
Exchange fluctuations on translation of foreign operations
transferred to income statement...................................... (6) -- --
Tax recognised within other comprehensive income....................... 23 (15) 36
------- ------- -------
Total items that may be reclassified subsequently to the income
statement............................................................ (58) 37 (84)
------- ------- -------
Items that will not be reclassified to the income statement:
Remeasurement gains on pension and medical schemes..................... 8 2 1
Tax recognised within other comprehensive income....................... 3 (3) (14)
------- ------- -------
Total items that will not be reclassified to the income statement...... 11 (1) (13)
------- ------- -------
Total other comprehensive (loss)/income................................ (47) 36 (97)
------- ------- -------
Total comprehensive income............................................. 4,102 2,610 4,726
------- ------- -------
Attributable to non-controlling interests............................ 389 561 1,118
Attributable to BHP shareholders..................................... 3,713 2,049 3,608
------- ------- -------
The accompanying notes form part of this financial information.
--------------------------------------------------------------------------------
BHP Results for the half year 27
ended 31 December 2018
Consolidated Balance Sheet as at 31 December 2018
31 Dec 2018 30 June 2018
US$M US$M
----------- ------------
ASSETS
Current assets
Cash and cash equivalents.......................................... 15,575 15,871
Trade and other receivables........................................ 6,395 3,096
Other financial assets............................................. 237 200
Inventories........................................................ 3,972 3,764
Assets held for sale............................................... -- 11,939
Current tax assets................................................. 92 106
Other.............................................................. 136 154
------- -------
Total current assets............................................... 26,407 35,130
------- -------
Non-current assets
Trade and other receivables........................................ 196 180
Other financial assets............................................. 885 999
Inventories........................................................ 1,041 1,141
Property, plant and equipment...................................... 66,673 67,182
Intangible assets.................................................. 718 778
Investments accounted for using the equity method.................. 2,582 2,473
Deferred tax assets................................................ 3,849 4,041
Other.............................................................. 63 69
------- -------
Total non-current assets........................................... 76,007 76,863
------- -------
Total assets....................................................... 102,414 111,993
------- -------
LIABILITIES
Current liabilities
Trade and other payables........................................... 5,616 5,977
Interest bearing liabilities....................................... 1,527 2,736
Liabilities held for sale.......................................... -- 1,222
Other financial liabilities........................................ 19 138
Current tax payable................................................ 1,101 1,773
Provisions......................................................... 1,977 2,025
Deferred income.................................................... 128 118
------- -------
Total current liabilities.......................................... 10,368 13,989
------- -------
Non-current liabilities
Trade and other payables........................................... 4 3
Interest bearing liabilities....................................... 23,938 24,069
Other financial liabilities........................................ 1,256 1,093
Non-current tax payable............................................ 136 137
Deferred tax liabilities........................................... 3,381 3,472
Provisions......................................................... 7,700 8,223
Deferred income.................................................... 315 337
------- -------
Total non-current liabilities...................................... 36,730 37,334
------- -------
Total liabilities.................................................. 47,098 51,323
------- -------
Net assets......................................................... 55,316 60,670
------- -------
EQUITY
Share capital - BHP Group Limited.................................. 1,111 1,186
Share capital - BHP Group Plc...................................... 1,057 1,057
Treasury shares.................................................... (16) (5)
Reserves........................................................... 2,233 2,290
Retained earnings.................................................. 46,262 51,064
------- -------
Total equity attributable to BHP shareholders...................... 50,647 55,592
Non-controlling interests.......................................... 4,669 5,078
------- -------
Total equity....................................................... 55,316 60,670
------- -------
The accompanying notes form part of this financial information.
--------------------------------------------------------------------------------
Financial Report 28
Consolidated Cash Flow Statement for the half year ended 31 December 2018
Half year
Half year ended Year
ended 31 Dec ended
31 Dec 2017 30 June
2018 US$M 2018
Notes US$M Restated US$M
----- --------- --------- -------
Operating activities
Profit before taxation................................................. 6,800 6,507 14,751
Adjustments for:
Depreciation and amortisation expense................................ 2,888 3,206 6,288
Impairments of property, plant and equipment, financial assets and
intangibles........................................................ 168 299 333
Net finance costs.................................................... 533 658 1,245
Profit from equity accounted investments, related impairments and
expenses........................................................... (116) (213) (147)
Other................................................................ 84 321 597
Changes in assets and liabilities:
Trade and other receivables.......................................... 298 (672) (662)
Inventories.......................................................... (108) (279) (182)
Trade and other payables............................................. (297) 331 719
Provisions and other assets and liabilities.......................... (232) (123) 7
------- ------ -------
Cash generated from operations......................................... 10,018 10,035 22,949
Dividends received..................................................... 281 370 709
Interest received...................................................... 240 79 290
Interest paid.......................................................... (676) (557) (1,177)
Settlement of cash management related instruments...................... 167 (275) (292)
Net income tax and royalty-related taxation refunded................... 3 39 17
Net income tax and royalty-related taxation paid....................... (3,324) (2,698) (4,935)
------- ------ -------
Net operating cash flows from Continuing operations.................... 6,709 6,993 17,561
------- ------ -------
Net operating cash flows from Discontinued operations.................. 565 350 900
------- ------ -------
Net operating cash flows............................................... 7,274 7,343 18,461
------- ------ -------
Investing activities
Purchases of property, plant and equipment............................. (2,661) (2,078) (4,979)
Exploration expenditure................................................ (397) (464) (874)
Exploration expenditure expensed and included in operating cash flows.. 222 192 641
Net investment and funding of equity accounted investments............. (356) 271 204
Proceeds from sale of assets........................................... 102 72 89
Other investing........................................................ (61) (138) (141)
------- ------ -------
Net investing cash flows from Continuing operations.................... (3,151) (2,145) (5,060)
------- ------ -------
Net investing cash flows from Discontinued operations.................. (443) (301) (861)
------- ------ -------
Proceeds from divestment of Onshore US, net of its cash................ 13 6,924 -- --
------- ------ -------
Net investing cash flows............................................... 3,330 (2,446) (5,921)
------- ------ -------
Financing activities
Proceeds from interest bearing liabilities............................. 150 500 528
Settlements of debt related instruments................................ (160) (227) (218)
Repayment of interest bearing liabilities.............................. (1,739) (4,008) (4,188)
Purchase of shares by Employee Share Ownership Plan (ESOP) Trusts...... (82) (96) (171)
Share buy-back - BHP Group Limited..................................... (5,220) -- --
Dividends paid......................................................... (3,411) (2,276) (5,220)
Dividends paid to non-controlling interests............................ (623) (925) (1,582)
------- ------ -------
Net financing cash flows from Continuing operations.................... (11,085) (7,032) (10,851)
------- ------ -------
Net financing cash flows from Discontinued operations.................. (13) (27) (40)
------- ------ -------
Net financing cash flows............................................... (11,098) (7,059) (10,891)
------- ------ -------
Net (decrease)/increase in cash and cash equivalents from Continuing
operations........................................................... (7,527) (2,184) 1,650
Net increase/(decrease) in cash and cash equivalents from Discontinued
operations........................................................... 109 22 (1)
Proceeds from divestment of Onshore US, net of its cash................ 6,924 -- --
Cash and cash equivalents, net of overdrafts, at the beginning of the
period............................................................... 15,813 14,108 14,108
Foreign currency exchange rate changes on cash and cash equivalents.... (220) 331 56
------- ------ -------
Cash and cash equivalents, net of overdrafts, at the end of the
period ............................................................... 15,099 12,277 15,813
------- ------ -------
The accompanying notes form part of this financial information.
--------------------------------------------------------------------------------
BHP Results for the half year 29
ended 31 December 2018
Consolidated Statement of Changes in Equity for the half year ended
31 December 2018
Attributable to BHP shareholders
---------------------------------------------------------------------
Share capital Treasury shares
----------------- -----------------
Total equity
BHP BHP BHP BHP attributable to Non-
Group Group Group Group Retained BHP controlling Total
US$M Limited Plc Limited Plc Reserves earnings shareholders interests equity
---- -------- -------- -------- -------- -------- -------- --------------- ----------- ------
Balance as at 1 July 2018..... 1,186 1,057 (5) -- 2,290 51,064 55,592 5,078 60,670
Impact of adopting IFRS 9..... -- -- -- -- -- (7) (7) -- (7)
Balance as at 1 July 2018..... 1,186 1,057 (5) -- 2,290 51,057 55,585 5,078 60,663
----- ----- ---- ---- ----- ------ ------ ----- ------
Total comprehensive income.... -- -- -- -- (58) 3,771 3,713 389 4,102
----- ----- ---- ---- ----- ------ ------ ----- ------
Transactions with owners:
Purchase of shares by ESOP
Trusts...................... -- -- (79) (3) -- -- (82) -- (82)
Employee share awards
exercised net of employee
contributions............... -- -- 68 3 (48) (23) -- -- --
Employee share awards
forfeited................... -- -- -- -- (12) 12 -- -- --
Accrued employee entitlement
for unexercised awards...... -- -- -- -- 61 -- 61 -- 61
Dividends..................... -- -- -- -- -- (3,356) (3,356) (630) (3,986)
BHP Group Limited shares
bought back and cancelled... (75) -- -- -- -- (5,199) (5,274) -- (5,274)
Divestment of subsidiaries,
operations and joint
operations.................. -- -- -- -- -- -- -- (168) (168)
----- ----- ---- ---- ----- ------ ------ ----- ------
Balance as at 31 December
2018........................ 1,111 1,057 (16) -- 2,233 46,262 50,647 4,669 55,316
----- ----- ---- ---- ----- ------ ------ ----- ------
Balance as at 1 July 2017..... 1,186 1,057 (2) (1) 2,400 52,618 57,258 5,468 62,726
----- ----- ---- ---- ----- ------ ------ ----- ------
Total comprehensive income.... -- -- -- -- 35 2,014 2,049 561 2,610
----- ----- ---- ---- ----- ------ ------ ----- ------
Transactions with owners:
Purchase of shares by ESOP
Trusts...................... -- -- (87) (9) -- -- (96) -- (96)
Employee share awards
exercised net of employee
contributions............... -- -- 81 10 (100) 9 -- -- --
Employee share awards
forfeited................... -- -- -- -- (1) 1 -- -- --
Accrued employee entitlement
for unexercised awards...... -- -- -- -- 57 -- 57 -- 57
Distribution to
non-controlling
interests................... -- -- -- -- -- -- -- (6) (6)
Dividends..................... -- -- -- -- -- (2,291) (2,291) (839) (3,130)
----- ----- ---- ---- ----- ------ ------ ----- ------
Balance as at 31 December
2017........................ 1,186 1,057 (8) -- 2,391 52,351 56,977 5,184 62,161
----- ----- ---- ---- ----- ------ ------ ----- ------
The accompanying notes form part of this financial information.
--------------------------------------------------------------------------------
Financial Report 30
Notes to the Financial Information
1. Basis of preparation
This general purpose financial report for the half year ended 31 December 2018
is unaudited and has been prepared in accordance with IAS 34 'Interim Financial
Reporting' as issued by the International Accounting Standards Board (IASB) and
as adopted by the European Union (EU), AASB 134 'Interim Financial Reporting' as
issued by the Australian Accounting Standards Board (AASB) and the Disclosure
and Transparency Rules of the Financial Conduct Authority in the United Kingdom
and the Australian Corporations Act 2001 as applicable to interim financial
reporting.
The half year financial statements represent a 'condensed set of financial
statements' as referred to in the UK Disclosure and Transparency Rules issued by
the Financial Conduct Authority. Accordingly, they do not include all of the
information required for a full annual report and are to be read in conjunction
with the most recent annual financial report. The comparative figures for the
financial year ended 30 June 2018 are not the statutory accounts of the Group
for that financial year. Those accounts, which were prepared under IFRS, have
been reported on by the Company's auditor and delivered to the registrar of
companies. The auditor has reported on those accounts; the report was
unqualified, did not include a reference to any matters to which the auditors
drew attention by way of emphasis without qualifying their report and did not
contain statements under Section 498 (2) or (3) of the UK Companies Act 2006.
The directors have made an assessment of the Group's ability to continue as a
going concern and consider it appropriate to adopt the going concern basis of
accounting in preparing the half year financial statements.
The half year financial statements have been prepared on a basis of accounting
policies and methods of computation consistent with those applied in the 30 June
2018 annual financial statements contained within the Annual Report of the
Group, with the exception of the following new accounting standards and
interpretations which became effective from 1 July 2018:
. IFRS 9/AASB 9 'Financial Instruments' which replaces IAS 39/AASB 139
'Financial Instruments: Recognition and Measurement';
. IFRS 15/AASB 15 'Revenue from Contracts with Customers' which replaces
previous revenue requirements, including IAS 18/AASB 118 'Revenue'; and
. IFRIC 22 'Foreign Currency Transactions and Advance Consideration'.
Note 2 describes the impact of new accounting standards and interpretations. In
addition to restatements arising from the application of the new accounting
standards, the 31 December 2017 financial information has been restated for the
effects of applying IFRS 5/AASB 5 'Non-current Assets Held for Sale and
Discontinued Operations' to the Petroleum business's Onshore US operations
comprising of Eagle Ford, Permian, Haynesville and Fayetteville assets.
--------------------------------------------------------------------------------
BHP Results for the half year 31
ended 31 December 2018
1. Basis of preparation (continued)
While not applied in the current reporting period, IFRS 16/AASB 16 'Leases' is
effective from 1 January 2019 and is applicable for the Group from 1 July 2019.
Title of standard Summary of impact on the financial statements
------------------- --------------------------------------------------------------------------------------------
IFRS 16/AASB 16 The Group continues to progress its IFRS 16 implementation project, focusing on the review
'Leases' of new contractual arrangements, aggregation of data to support the measurement of leases on
transition and implementation of changes to systems and processes.
The Group is actively monitoring developments in the generally accepted application of
IFRS 16. Practice continues to develop in the identification of leases, particularly in
mining services and logistics arrangements; and in their measurement, including the
allocation of payments between lease and non-lease components. Work is ongoing to finalise
the Group's accounting policies and interpretations in these areas and the outcomes may
impact the quantification of any transition adjustments recognised by the Group.
The Group expects to use the modified retrospective approach and the available practical
expedients in measuring leases on transition, including not recognising low value or short
term leases on balance sheet. The Group continues to assess the use of the grandfathering
provisions to retain its existing lease classifications. Under the modified retrospective
approach, the comparative periods will not be restated on transition.
There are a number of measurement differences between the existing leases standard and
IFRS 16 that will impact the initial recognition of lease liabilities and right of use
assets and their subsequent measurement. These differences include that:
. payments under contracts will be allocated between lease and non-lease components;
. the minimum lease payments, applying indexing levels at the reporting date, will be
discounted over the expected lease term rather than the minimum term;
. the lease liability will be re-measured periodically for changes in the expected term
and indexation.
The transition impact of adopting IFRS 16 will reflect the final accounting policy
determinations, the lease population at transition and variables such as interest and
foreign exchange rates and any index levels which adjust the lease payments.
The Group is progressing the design and build of a lease accounting system and initial
training on the impacts of IFRS 16 has been developed and is being delivered to relevant
teams, including accounting, reporting and supply.
The Group will disclose the impact on adoption in its 2019 Annual Report.
A number of other accounting standards and interpretations, along with
revisions to the Conceptual Framework for Financial Reporting have been issued,
and will be applicable in future periods. While these remain subject to ongoing
assessment, no significant impacts have been identified to date. These
standards have not been applied in the preparation of these half year financial
statements.
All amounts are expressed in US dollars unless otherwise stated. The Group's
presentation currency and the functional currency of the majority of its
operations is US dollars as this is the principal currency of the economic
environment in which it operates. Amounts in this financial information have,
unless otherwise indicated, been rounded to the nearest million dollars.
--------------------------------------------------------------------------------
Financial Report 32
2. Impact of new accounting standards
This note explains the impact of adopting IFRS 9/AASB 9 'Financial Instruments'
(IFRS 9) and IFRS 15/AASB 15 'Revenue from Contracts with Customers' (IFRS 15)
on the Group's financial statements from 1 July 2018. The adoption of other
changes to IFRS applicable from 1 July 2018, including IFRIC 22 'Foreign
Currency Transactions and Advance Consideration', did not have a significant
impact on the Group's financial statements.
IFRS 9 Financial Instruments
This standard revises the classification and measurement of financial assets
and financial liabilities, introduces a forward looking 'expected credit loss'
impairment model and modifies the approach to hedge accounting. Upon adoption
of the new standard on 1 July 2018, the Group has adjusted the opening balance
sheet, with no restatement of comparatives required. Adoption impacts include:
. At 1 July 2018, the Group reassessed the classification and measurement of
financial assets and liabilities based on the business model by which they
are managed and their cash flow characteristics.
Financial assets previously classified as loans and receivables of US$17.7
billion were recategorised as amortised cost. The Group's available for sale
(AFS) shares of US$33 million were designated as fair value through other
comprehensive income (FVOCI), while investments in shares after 1 July 2018
will be designated at fair value through profit or loss (FVTPL) or FVOCI on
an investment by investment basis.
Other AFS investments of US$47 million were classified as held at FVTPL
because they are not investments in shares and their cash flows do not
consist solely of payments of principal and interest. The adoption of IFRS 9
has not resulted in any changes to the classification of financial assets
held at FVTPL or to the classification or measurement of financial
liabilities.
. Financial assets carried at amortised cost are tested for impairment based
on expected losses, whereas the previous policy required that impairments
were recognised only when there was objective evidence that a credit loss
was present. Upon adoption of IFRS 9, an expected credit loss provision of
US$7 million against cash and cash equivalents and trade receivables was
recognised in retained earnings.
. From 1 July 2018, the Group has applied the amended rules on hedge
accounting which enable closer alignment between the Group's risk management
strategy and the accounting outcomes. IFRS 9 broadens the scope of
arrangements that may qualify for hedge accounting and allows for
simplification of hedge designations. Other changes under the standard mean
that hedge effectiveness is only considered on a prospective basis with no
set quantitative thresholds and voluntary de-designation of hedges is
prohibited.
Certain of the Group's existing derivatives hedging foreign currency notes
and debentures, were in qualifying fair value and cash flow hedge
relationships and have been treated as continuing hedges. The opportunity to
apply simplified hedge designations under IFRS 9 will continue to be
assessed for future hedge relationships. Risks present in the derivative
only, such as counterparty credit risk, are not part of the hedge
designation and will continue to be recognised through the income statement.
Foreign currency basis has been separately measured as a cost of hedging and
movements continue to be recognised in reserves, with US$176 million being
reclassified into the cost of hedging reserve on transition. The hedging
reserves at transition will continue to be transferred to the income
statement over the life of the underlying notes and debentures.
The impact of adopting IFRS 9 on Total equity as at 1 July 2018 is as follows:
US$M
------
Total equity as at 30 June 2018................................... 60,670
Impairment provision resulting from application of the Expected
Credit Loss model............................................... (7)
------
Total equity as at 1 July 2018.................................... 60,663
------
--------------------------------------------------------------------------------
BHP Results for the half year 33
ended 31 December 2018
2. Impact of new accounting standards (continued)
The table below summarises the change in classification and measurement of
financial assets and liabilities upon adoption of IFRS 9 on 1 July 2018.
Measurement category under Measurement category under
IAS 39 IFRS 9
-------------------------- --------------------------
Financial assets
Derivative contracts FVTPL FVTPL
Investment in shares AFS FVOCI
Other investments AFS or FVTPL FVTPL
Cash and cash equivalents Loans and receivables Amortised cost
Trade and other receivables Loans and receivables Amortised cost
Provisionally priced trade receivables FVTPL FVTPL
Loans to equity accounted investments Loans and receivables Amortised cost
Financial liabilities
Other financial liabilities FVTPL FVTPL
Trade and other payables Amortised cost Amortised cost
Provisionally priced trade payables FVTPL FVTPL
Bank overdrafts and short-term borrowings Amortised cost Amortised cost
Bank loans Amortised cost Amortised cost
Notes and debentures Amortised cost Amortised cost
Finance leases Amortised cost Amortised cost
Other Amortised cost Amortised cost
IFRS 15 Revenue from Contracts with Customers
This standard modifies the determination of when to recognise revenue and how
much revenue to recognise. Revenue is recognised when control of the promised
goods or services passes to the customer. The amount of revenue recognised
should reflect the consideration to which the entity expects to be entitled in
exchange for those goods or services.
The Group has applied the full retrospective transition approach, resulting in
the restatement of comparative information. Comparative information in the
consolidated income statement has been restated to reflect changes in the
presentation of treatment costs and refining charges included in concentrate
sales contracts.
Concentrate sales contracts require the Group to physically deliver concentrate
with the contractual sales amount reflecting the final refined metal content
delivered, reduced by treatment costs and refining charges. Revenue was
previously recognised at the gross value of the final refined metal content
delivered with contractually agreed treatment costs and refining charges
recorded as an expense. Under IFRS 15 treatment costs and refining charges will
instead be recognised as a reduction to revenue, reflecting the consideration
that the Group expects to receive from the customer. This will have no net
income statement impact as applying this change would have reduced revenue and
expenses by US$251 million for the half year ended 31 December 2017 and
US$509 million for the year ended 30 June 2018, with no impact on profit after
tax. This change has no impact on the basic and diluted earnings per ordinary
share.
Revenue includes both revenue from contracts with customers, which is
recognised under IFRS 15 and provisional pricing adjustments, which are
recognised under IFRS 9. Following adoption of IFRS 15 provisional pricing
adjustments will be separately disclosed in the notes to the financial
statements as other revenue. The impact of all other measurement differences
identified between IAS 18 and IFRS 15 was immaterial at 1 July 2018.
--------------------------------------------------------------------------------
Financial Report 34
3. Revenue
Revenue by segment
Group and
unallocated
Half year ended 31 December 2018 items/
US$M Petroleum Copper Iron Ore Coal eliminations Group total
-------------------------------- --------- ------ -------- ----- ------------ -----------
Revenue from contracts with customers.... 3,071 5,328 7,401 4,509 549 20,858
Other revenue............................ 132 (259) 17 3 (9) (116)
----- ------ ------ ----- ----- ------
Total revenue............................ 3,203 5,069 7,418 4,512 540 20,742
----- ------ ------ ----- ----- ------
Group and
unallocated
Half year ended 31 December 2017 items/
US$M Petroleum Copper Iron Ore Coal eliminations Group total
-------------------------------- --------- ------ -------- ----- ------------ -----------
Revenue from contracts with customers.... 2,525 5,790 7,196 4,044 533 20,088
Other revenue............................ 56 342 25 3 12 438
----- ------ ------ ----- ----- ------
Total revenue............................ 2,581 6,132 7,221 4,047 545 20,526
----- ------ ------ ----- ----- ------
Group and
unallocated
Year ended 30 June 2018 items/
US$M Petroleum Copper Iron Ore Coal eliminations Group total
----------------------- --------- ------ -------- ----- ------------ -----------
Revenue from contracts with customers.... 5,194 12,660 14,782 8,887 1,225 42,748
Other revenue............................ 214 121 28 2 16 381
----- ------ ------ ----- ----- ------
Total revenue............................ 5,408 12,781 14,810 8,889 1,241 43,129
----- ------ ------ ----- ----- ------
Revenue by geographical location
Revenue by location of customer
---------------------------------------
Half Year Half year Year
ended ended ended
31 Dec 2018 31 Dec 2017 30 June 2018
US$M US$M US$M
----------- ----------- ------------
Australia.................... 1,247 1,110 2,304
Europe....................... 983 818 1,886
China........................ 11,176 10,511 22,660
Japan........................ 2,081 2,015 4,628
India........................ 1,141 1,285 2,439
South Korea.................. 1,067 1,374 2,588
Rest of Asia................. 1,355 1,454 2,620
North America................ 1,176 1,234 2,715
South America................ 362 566 1,054
Rest of world................ 154 159 235
------ ------ ------
20,742 20,526 43,129
------ ------ ------
Recognition and measurement (following adoption of IFRS 15)
The Group generates revenue from the production and sale of commodities.
Revenue is recognised when or as control of the promised goods or services
passes to the customer. In most instances, control passes when the goods are
delivered to a destination specified by the customer, typically on board the
customer's appointed vessel. The amount of revenue recognised reflects the
consideration to which the Group expects to be entitled in exchange for the
goods or services.
Where the Group's sales are provisionally priced, the final price depends on
future index prices. The amount of revenue initially recognised is based on the
relevant forward market price. Adjustments between the provisional and final
price are accounted for under IFRS 9 and recognised in revenue. Provisional
pricing adjustments are separately disclosed as other revenue. The period
between provisional pricing and final invoicing is typically between 60 and 120
days.
Revenue from concentrate is net of treatment costs and refining charges.
Revenue from the sale of significant by-products is included within revenue.
Where a by-product is not significant, revenue is credited against costs.
--------------------------------------------------------------------------------
BHP Results for the half year 35
ended 31 December 2018
4. Exceptional items
Exceptional items are those gains or losses where their nature, including the
expected frequency of the events giving rise to them, and amount is considered
material to the financial statements. Such items included within the Group's
profit for the half year are detailed below. Exceptional items attributable to
Discontinued operations are detailed in note 13 Discontinued operations:
Gross Tax Net
Half year ended 31 December 2018 US$M US$M US$M
-------------------------------- ------- ------- -------
Exceptional items by category
Samarco dam failure........................... (210) -- (210)
Global taxation matters....................... -- 242 242
---- ---- ----
Total......................................... (210) 242 32
---- ---- ----
Attributable to non-controlling interests..... -- -- --
Attributable to BHP shareholders.............. (210) 242 32
---- ---- ----
Samarco Mineracao SA (Samarco) dam failure
The exceptional loss of US$210 million related to the Samarco dam failure in
November 2015 comprises the following:
Half year ended 31 December 2018 US$M
-------------------------------- ------
Expenses excluding net finance costs:
Costs incurred directly by BHP Billiton Brasil Ltda and other BHP
entities in relation to the Samarco dam failure............................ (33)
Loss from equity accounted investments, related impairments and expenses:
Share of loss relating to the Samarco dam failure............................ (47)
Samarco dam failure provision................................................ (70)
Net finance costs............................................................... (60)
----
Total/(1)/...................................................................... (210)
----
(1) Refer to note 12 Significant events - Samarco dam failure for further
information.
Global taxation matters
Global taxation matters includes amounts released from provisions for tax
matters and other claims resolved during the period.
Half year ended 31 December 2017 Gross Tax Net
Restated US$M US$M US$M
-------------------------------- ------- ------- -------
Exceptional items by category
Samarco dam failure........................... (210) -- (210)
US tax reform................................. -- (2,320) (2,320)
------- ------- -------
Total......................................... (210) (2,320) (2,530)
------- ------- -------
Attributable to non-controlling interests..... -- -- --
Attributable to BHP shareholders.............. (210) (2,320) (2,530)
------- ------- -------
Gross Tax Net
Year ended 30 June 2018 US$M US$M US$M
----------------------- ------- ------- -------
Exceptional items by category
Samarco dam failure........................... (650) -- (650)
US tax reform................................. -- (2,320) (2,320)
------- ------- -------
Total......................................... (650) (2,320) (2,970)
------- ------- -------
Attributable to non-controlling interests..... -- -- --
Attributable to BHP shareholders.............. (650) (2,320) (2,970)
------- ------- -------
--------------------------------------------------------------------------------
Financial Report 36
5. Interests in associates and joint venture entities
The Group's major shareholdings in associates and joint venture entities,
including their profit/(loss), are listed below:
Profit/(loss)
Ownership interest at the from equity accounted investments,
Group's reporting date/(1)/ related impairments and expenses
--------------------------- --------------------------------------------
31 Dec 31 Dec 30 June Half year ended Half year ended Year ended
2018 2017 2018 31 Dec 2018 31 Dec 2017 30 June 2018
% % % US$M US$M US$M
-------- -------- --------- --------------- --------------- ------------
Share of operating profit/(loss) of
equity accounted investments:
Cerrejon................................... 33.33 33.33 33.33 85 87 192
Compania Minera Antamina SA................ 33.75 33.75 33.75 199 282 544
Samarco Mineracao SA/(2)/.................. 50.00 50.00 50.00 (47) (50) (80)
Other...................................... (51) (19) (80)
----- ----- -----
Share of operating profit of equity
accounted investments.................... 186 300 576
----- ----- -----
Samarco dam failure provision
expense/(2)/............................. (70) (87) (429)
----- ----- -----
Profit from equity accounted investments,
related impairments and expenses......... 116 213 147
----- ----- -----
(1) The ownership interest at the Group's and the associates and joint venture
entities' reporting dates are the same.
(2) Refer to note 12 Significant events - Samarco dam failure for further
information.
6. Net finance costs
Half year Half year
ended ended Year ended
31 Dec 2018 31 Dec 2017 30 June 2018
US$M US$M US$M
----------- ----------- ------------
Financial expenses
Interest expense using the effective interest rate method:
Interest on bank loans, overdrafts and all other borrowings........... 660 558 1,168
Interest capitalised at 4.94% (31 December 2017: 3.86%;
30 June 2018: 4.24%)/(1)/........................................... (109) (59) (139)
Interest on finance leases............................................ 23 29 59
Discounting on provisions and other liabilities....................... 223 211 414
Other gains and losses:
Fair value change on hedged loans..................................... 106 93 (265)
Fair value change on hedging derivatives.............................. (148) (26) 329
Exchange variations on net debt....................................... 11 (75) (19)
Other................................................................. 6 6 20
----- ------ ------
Total Financial expenses.............................................. 772 737 1,567
----- ------ ------
Financial income
Interest income....................................................... (239) (79) (322)
----- ------ ------
Net finance costs..................................................... 533 658 1,245
----- ------ ------
(1) Interest has been capitalised at the rate of interest applicable to the
specific borrowings financing the assets under construction or, where
financed through general borrowings, at a capitalisation rate representing
the average interest rate on such borrowings.
--------------------------------------------------------------------------------
BHP Results for the half year 37
ended 31 December 2018
7. Income tax expense
Half year Half year
ended ended Year ended
31 Dec 2018 31 Dec 2017 30 June 2018
US$M US$M US$M
----------- ----------- ------------
Total taxation expense comprises:
Current tax expense................................................... 2,414 2,302 5,052
Deferred tax (benefit)/expense........................................ (56) 1,799 1,955
----- ----- ------
2,358 4,101 7,007
----- ----- ------
Half year Half year
ended ended Year ended
31 Dec 2018 31 Dec 2017 30 June 2018
US$M US$M US$M
----------- ----------- ------------
Factors affecting income tax expense for the year
Income tax expense differs to the standard rate of corporation
tax as follows:
Profit before taxation................................................ 6,800 6,507 14,751
Tax on profit at Australian prima facie tax rate of 30 per cent....... 2,040 1,952 4,425
Impact of US tax reform
Tax rate changes...................................................... -- 1,390 1,390
Non-tax effected operating losses and capital gains................... -- 834 834
Tax on remitted and unremitted foreign earnings/(1)/.................. -- 194 194
Recognition of previously unrecognised tax assets..................... -- (95) (95)
Other................................................................. -- (3) (3)
------ ------ -------
Subtotal.............................................................. -- 2,320 2,320
Other items not related to US tax reform
Non-tax effected operating losses and capital gains................... 255 68 721
Tax on remitted and unremitted foreign earnings....................... 167 221 401
Foreign exchange adjustments.......................................... 68 (98) (152)
Amounts under/(over) provided in prior years.......................... 60 (4) (51)
Tax rate changes...................................................... -- (16) (79)
Recognition of previously unrecognised tax assets..................... (13) (14) (170)
Tax effect of profit from equity accounted investments, related
impairments and expenses/(2)/....................................... (35) (62) (44)
Investment and development allowance.................................. (40) (81) (180)
Impact of tax rates applicable outside of Australia................... (128) (281) (484)
Other................................................................. (150) 52 172
Income tax expense.................................................... 2,224 4,057 6,879
------ ------ -------
Royalty-related taxation (net of income tax benefit).................. 134 44 128
------ ------ -------
Total taxation expense................................................ 2,358 4,101 7,007
------ ------ -------
(1) Comprising US$797 million repatriation tax and US$603 million of previously
unrecognised tax credits.
(2) The profit from equity accounted investments and related expenses is net of
income tax. This item removes the prima facie tax effect on such profits and
related expenses.
--------------------------------------------------------------------------------
Financial Report 38
8. Earnings per share
Half year Half year
ended ended Year ended
31 Dec 2018 31 Dec 2017 30 June 2018
----------- ----------- ------------
Earnings attributable to BHP shareholders (US$M)
- Continuing operations.............................................. 4,064 1,869 6,652
- Total.............................................................. 3,764 2,015 3,705
Weighted average number of shares (Million)
- Basic/(1)/......................................................... 5,303 5,323 5,323
- Diluted/(2)/....................................................... 5,318 5,338 5,337
Basic earnings per ordinary share (US cents)/(3)/
- Continuing operations.............................................. 76.6 35.1 125.0
- Total.............................................................. 71.0 37.9 69.6
Diluted earnings per ordinary share (US cents)/(3)/
- Continuing operations.............................................. 76.4 35.0 124.6
- Total.............................................................. 70.8 37.7 69.4
(1) The calculation of the number of ordinary shares used in the computation of
basic earnings per share is the aggregate of the weighted average number of
ordinary shares of BHP Group Limited and BHP Group Plc outstanding during
the period after deduction of the number of shares held by the Billiton
Employee Share Ownership Plan Trust and the BHP Billiton Limited Employee
Equity Trust.
(2) For the purposes of calculating diluted earnings per share, the effect of 15
million of dilutive shares has been taken into account for the half year
ended 31 December 2018 (31 December 2017: 15 million shares; 30 June 2018:
14 million shares). The Group's only potential dilutive ordinary shares are
share awards granted under employee share ownership plans. Diluted earnings
per share calculation excludes instruments which are considered
antidilutive. At 31 December 2018, there are no instruments which are
considered antidilutive (31 December 2017: nil; 30 June 2018: nil).
(3) Each American Depositary Share represents twice the earnings for BHP
ordinary shares.
9. Dividends
Half year ended Half year ended Year ended
31 Dec 2018 31 Dec 2017 30 June 2018
------------------- ------------------ -------------------
Per share Total Per share Total Per share Total
US cents US$M US cents US$M US cents US$M
----------- ------- ----------- ------ ----------- -------
Dividends paid during the period/(1)/
Prior year final dividend................ 63.0 3,356 43.0 2,291 43.0 2,291
Interim dividend......................... N/A -- N/A -- 55.0 2,930
---- ----- ---- ------ ----- -----
63.0 3,356 43.0 2,291 98.0 5,221
---- ----- ---- ------ ----- -----
(1) 5.5 per cent dividend on 50,000 preference shares of (Pounds)1 each
determined and paid annually (31 December 2017: 5.5 per cent; 30 June 2018:
5.5 per cent).
Dividends paid during the period differs from the amount of dividends paid in
the Cash Flow Statement as a result of foreign exchange gains and losses
relating to the timing of equity distributions between the record date and the
payment date.
On 17 December 2018, BHP Group Limited and BHP Group Plc determined a special
dividend of US$1.02 per share (US$5.2 billion), which was paid on 30 January
2019 related to the disbursement of proceeds from the disposal of Onshore US.
Special dividends determined are not recorded as a liability at the end of the
period while they remain at the discretion of the Directors.
Interim and final dividends are determined after period-end and contained
within the announcement of the results for the period. Interim dividends are
determined in February and paid in March. Final dividends are determined in
August and paid in September. Dividends determined are not recorded as a
liability at the end of the period to which they relate. Subsequent to the half
year, on 19 February 2019, BHP Group Limited and BHP Group Plc determined an
interim ordinary dividend of 55.0 US cents per share (US$ 2,781 million), which
will be paid on 26 March 2019 (31 December 2017: interim dividend of 55.0 US
cents per share - US$2,928 million; 30 June 2018: final dividend of 63.0 US
cents per share - US$3,354 million).
At 31 December 2018, BHP Group Limited had 2,945 million ordinary shares on
issue and held by the public and BHP Group Plc had 2,112 million ordinary
shares on issue and held by the public. No shares in BHP Group Limited were
held by BHP Group Plc at 31 December 2018 (31 December 2017: nil; 30 June 2018:
nil).
The Dual Listed Company merger terms require that ordinary shareholders of BHP
Group Limited and BHP Group Plc are paid equal cash dividends on a per share
basis. Each American Depositary Share (ADS) represents two ordinary shares of
BHP Group Limited or BHP Group Plc. Dividends determined on each ADS represent
twice the dividend determined on BHP ordinary shares.
BHP Group Limited dividends for all periods presented are, or will be, fully
franked based on a tax rate of 30 per cent.
--------------------------------------------------------------------------------
BHP Results for the half year 39
ended 31 December 2018
10. Share capital
During December 2018, BHP completed an off-market buy-back program of
US$5.2 billion of BHP Group Limited shares related to the disbursement of
proceeds from the disposal of Onshore US.
Shares bought back and cancelled during the period differs from the amount paid
in the Cash Flow Statement as a result of foreign exchange gains and losses
relating to the timing of equity distributions between the completion of the
buy-back tender and the payment date.
Details of the BHP Group Limited purchases are shown in the table below:
Total cost
Half year ended Shares purchased Number Cost per share US$M
---------------- ------------------ ----------- -------------- ---------------
31 December 2018 BHP Group Limited 265,839,711 A$27.64 5,274
11. Financial risk management - Fair values
All financial assets and financial liabilities, other than derivatives, are
initially recognised at the fair value of consideration paid or received, net
of transaction costs as appropriate, and subsequently carried at fair value or
amortised cost, as indicated in the tables below. Derivatives are initially
recognised at fair value on the date the contract is entered into and are
subsequently remeasured at their fair value.
The carrying amount of financial assets and liabilities measured at fair value
is principally calculated based on inputs other than quoted prices that are
observable for these financial assets or liabilities, either directly (i.e. as
unquoted prices) or indirectly (i.e. derived from prices). Where no price
information is available from a quoted market source, alternative market
mechanisms or recent comparable transactions, fair value is estimated based on
the Group's views on relevant future prices, net of valuation allowances to
accommodate liquidity, modelling and other risks implicit in such estimates.
The inputs used in fair value calculations are determined by the relevant
segment or function. The functions support the assets and operate under a
defined set of accountabilities authorised by the Executive Leadership Team.
Movements in the fair value of financial assets and liabilities may be
recognised through the income statement or in other comprehensive income.
For financial assets and liabilities carried at fair value, the Group uses the
following to categorise the method used:
Fair value hierarchy Level 1 Level 2 Level 3
--------------------- ----------------------- --------------------------------- -------------------------
Valuation method Based on quoted prices Based on inputs other than quoted Based on inputs not
(unadjusted) in active prices included within Level 1 observable in the market
markets for identical that are observable for the using appropriate
financial assets and financial asset or liability, valuation models,
liabilities. either directly (i.e. as unquoted including discounted
prices) or indirectly cash flow modelling.
(i.e. derived from prices).
The financial assets and liabilities are presented by class in the table below
at their carrying values, which generally approximate to fair value. In the
case of US$3,019 million (30 June 2018: US$3,019 million) of fixed rate debt
not swapped to floating rate, the fair value at 31 December 2018 was
US$3,366 million (30 June 2018: US$3,434 million) included within Notes and
debentures in the table below.
For financial instruments that are carried at fair value on a recurring basis,
the Group determines whether transfers have occurred between levels in the
hierarchy by reassessing categorisation (based on the lowest level input that
is significant to the fair value measurement as a whole) at the end of each
reporting period. There were no transfers between categories during the period.
For financial instruments not valued at fair value on a recurring basis, the
Group uses a method that is categorised as Level 2.
Financial instruments categorised as level 3 are shares and other investments
and other derivative contracts. The potential effect of using reasonably
possible alternative assumptions in these models, based on a change in the most
significant input, such as commodity prices, by an increase/(decrease) of
10 per cent while holding all other variables constant will increase/(decrease)
profit after taxation by US$45 million (31 December 2017: US$50 million).
--------------------------------------------------------------------------------
Financial Report 40
11. Financial risk management - Fair values (continued)
Financial assets and liabilities
IFRS 13 Fair
value
hierarchy 31 Dec 2018 30 June 2018
Level IFRS 9 Classification/(1)/ US$M US$M
------------ --------------------------------------- ----------- ------------
Fair value hierarchy/(2)/
Current cross currency and interest rate
swaps....................................... 2 Fair value through profit or loss 1 12
Current other derivative contracts/(3)/....... 2,3 Fair value through profit or loss 219 170
Current other investments/(4)/................ 1,2 Fair value through profit or loss 17 18
Non-current cross currency and interest
rate swaps.................................. 2 Fair value through profit or loss 335 396
Non-current other derivative contracts/(3)/... 2,3 Fair value through profit or loss 186 195
Non-current investment in shares.............. 3 Fair value through other comprehensive
income 33 33
Non-current other investments/(4)(5)/......... 1,2,3 Fair value through profit or loss 331 375
-------- --------
Total other financial assets.................... 1,122 1,199
Cash and cash equivalents....................... Amortised cost 15,575 15,871
Trade and other receivables/(6)/................ Amortised cost 5,117 1,799
Provisionally priced trade receivables/(6)/..... 2 Fair value through profit or loss 1,066 1,126
Loans to equity accounted investments........... Amortised cost 13 13
-------- --------
Total financial assets.......................... 22,893 20,008
-------- --------
Non-financial assets............................ 79,521 91,985
-------- --------
Total assets.................................... 102,414 111,993
-------- --------
Current cross currency and interest rate
swaps....................................... 2 Fair value through profit or loss -- 121
Current other derivative contracts/(3)/....... 2,3 Fair value through profit or loss 19 17
Non-current cross currency and interest
rate swaps.................................. 2 Fair value through profit or loss 1,255 1,092
Non-current other derivative contracts/(3)/... 2,3 Fair value through profit or loss 1 1
-------- --------
Total other financial liabilities............... 1,275 1,231
Trade and other payables/(7)/................... Amortised cost 5,094 5,414
Provisionally priced trade payables/(7)/........ 2 Fair value through profit or loss 403 377
Bank overdrafts and short-term borrowings/(8)/.. Amortised cost 476 58
Bank loans/(8)/................................. Amortised cost 2,502 2,555
Notes and debentures/(8)/....................... Amortised cost 21,714 23,298
Finance leases.................................. Amortised cost 749 802
Other/(8)/...................................... Amortised cost 24 92
-------- --------
Total financial liabilities..................... 32,237 33,827
-------- --------
Non-financial liabilities....................... 14,861 17,496
-------- --------
Total liabilities............................... 47,098 51,323
-------- --------
(1) For classifications under IAS 39 refer to note 2 Impact of new accounting
standards.
(2) All of the Group's financial assets and financial liabilities recognised at
fair value were valued using market observable inputs categorised as Level 2
with the exception of the specified items in the following footnotes.
(3) Includes other derivative contracts of US$202 million (30 June 2018: US$213
million) categorised as Level 3. Significant items are derivatives embedded
in physical commodity purchase and sales contracts of gas in Trinidad and
Tobago with net assets fair value of US$205 million (30 June 2018: US$216
million).
(4) Includes investments held by BHP Foundation which are restricted and not
available for general use by the Group of US$298 million (30 June 2018:
US$343 million) of which other investments (US Treasury Notes) of US$94
million is categorised as Level 1 (30 June 2018: US$108 million).
(5) Includes other investments of US$47 million (30 June 2018: US$47 million)
categorised as Level 3.
(6) Excludes input taxes of US$395 million (30 June 2018: US$338 million)
included in other receivables.
(7) Excludes input taxes of US$123 million (30 June 2018: US$189 million)
included in other payables.
(8) All interest bearing liabilities, excluding finance leases, are unsecured.
--------------------------------------------------------------------------------
BHP Results for the half year 41
ended 31 December 2018
12. Significant events - Samarco dam failure
As a result of the Samarco dam failure on 5 November 2015, BHP Billiton Brasil
Ltda (BHP Billiton Brasil) and other Group entities continue to incur costs and
maintain liabilities for future costs. The information presented in this note
should be read in conjunction with section 1.8 'Samarco' and Financial
Statements note 3 'Significant events - Samarco dam failure' in the 30 June 2018
Annual Report.
The financial impacts of the Samarco dam failure on the Group's income
statement, balance sheet and cash flow statement for the half year ended
31 December 2018 are shown below and have been treated as an exceptional item.
Half year Half year Year
ended ended ended
31 Dec 2018 31 Dec 2017 30 June 2018
Financial impacts of Samarco dam failure US$M US$M US$M
---------------------------------------- ----------- ----------- ------------
Income statement
Expenses excluding net finance costs:
Costs incurred directly by BHP Billiton Brasil and other BHP entities in
relation to the Samarco dam failure/(1)/.................................... (33) (29) (57)
Loss from equity accounted investments, related impairments and expenses:
Share of loss relating to the Samarco dam failure/(2)/........................ (47) (50) (80)
Samarco dam failure provision/(3)/............................................ (70) (87) (429)
------ ------ ------
Loss from operations............................................................ (150) (166) (566)
Net finance costs/(4)/........................................................ (60) (44) (84)
------ ------ ------
Loss before taxation............................................................ (210) (210) (650)
Income tax benefit.............................................................. -- -- --
------ ------ ------
Loss after taxation............................................................. (210) (210) (650)
------ ------ ------
Balance sheet movement
Trade and other payables........................................................ 2 (2) 4
Provisions...................................................................... 38 25 (228)
------ ------ ------
Net assets/(liabilities)........................................................ 40 23 (224)
------ ------ ------
Half year Half year Year
ended ended ended
31 Dec 2018 31 Dec 2017 30 June 2018
US$M US$M US$M
----------- ----------- ------------
Cash flow statement
Loss before taxation...................................................... (210) (210) (650)
Adjustments for:
Share of loss relating to the Samarco dam failure/(2)/.................... 47 50 80
Samarco dam failure provision/(3)/........................................ 70 87 429
Net finance costs/(4)/.................................................... 60 44 84
Changes in assets and liabilities:
Trade and other payables.................................................. (2) 2 (4)
------ ------ ------ ------ ------ ------
Net operating cash flows.................................................. (35) (27) (61)
------ ------ ------
Net investment and funding of equity accounted
investments(5).......................................................... (215) (206) (365)
------ ------ ------
Net investing cash flows.................................................. (215) (206) (365)
------ ------ ------
Net decrease in cash and cash equivalents................................. (250) (233) (426)
------ ------ ------
(1) Includes legal and advisor costs incurred.
(2) Loss from working capital funding provided during the period.
(3) US$(76) million change in estimate and US$6 million exchange translation.
(4) Amortisation of discounting of provision.
(5) Includes US$(47) million funding provided during the period and US$(168)
million utilisation of the Samarco dam failure provision, of which US$(164)
million allowed for the continuation of reparatory and compensatory programs
in relation to the Framework Agreement and a further US$(4) million for dam
stabilisation and expert costs.
Equity accounted investment in Samarco
BHP Billiton Brasil's investment in Samarco remains at US$ nil. BHP Billiton
Brasil provided US$47 million funding under a working capital facility during
the period and recognised additional share of losses of US$47 million. No
dividends have been received by BHP Billiton Brasil from Samarco during the
period. Samarco currently does not have profits available for distribution and
is legally prevented from paying previously declared and unpaid dividends.
--------------------------------------------------------------------------------
Financial Report 42
12.Significant events - Samarco dam failure (continued)
Provision for Samarco dam failure
31 Dec 2018 30 June 2018
US$M US$M
----------- ------------
At the beginning of the reporting period.................................. 1,285 1,057
Movement in provision..................................................... (38) 228
Comprising:
Utilised.................................................................. (168) (285)
Adjustments charged to the income statement:
Change in estimate..................................................... 76 560
Amortisation of discounting impacting net finance costs................ 60 84
Exchange translation...................................................... (6) (131)
------ ------ ----- ------
At the end of the reporting period........................................ 1,247 1,285
------ ------
Comprising:
Current................................................................ 308 313
Non-current............................................................ 939 972
------ ------
At the end of the reporting period........................................ 1,247 1,285
------ ------
Provision for Samarco dam failure
On 2 March 2016, BHP Billiton Brasil, Samarco and Vale, entered into a
Framework Agreement with the Federal Government of Brazil, the states of
Espirito Santo and Minas Gerais and certain other public authorities to
establish a foundation (Fundacao Renova) to develop and execute environmental
and socio-economic programs (Programs) to remediate and provide compensation
for damage caused by the Samarco dam failure. Key Programs include those for
financial assistance and compensation of impacted persons, including fishermen
impacted by the dam failure, remediation of impacted areas and resettlement of
impacted communities. A committee (Interfederative Committee) comprising
representatives from the Brazilian Federal and State Governments, local
municipalities, environmental agencies, impacted communities and Public Defence
Office oversees the activities of the Fundacao Renova in order to monitor,
guide and assess the progress of actions agreed in the Framework Agreement.
To the extent that Samarco does not meet its funding obligations during the 15
year term of the Framework Agreement, each of BHP Billiton Brasil and Vale has
funding obligations under the Framework Agreement in proportion to its 50 per
cent shareholding in Samarco.
Mining and processing operations remain suspended and Samarco is currently
progressing plans to resume operations, however significant uncertainties
surrounding the nature and timing of ongoing future operations remain. In light
of these uncertainties and based on currently available information, BHP
Billiton Brasil's provision for its obligations under the Framework Agreement
Programs is US$1.2 billion before tax and after discounting at 31 December 2018
(30 June 2018: US$1.3 billion).
Under a Governance Agreement ratified on 8 August 2018, BHP Billiton Brasil,
Samarco and Vale will establish a process to renegotiate the Programs over two
years to progress settlement of the R$155 billion (approximately US$40 billion)
Federal Public Prosecution Office claim (defined below).
BHP Billiton Brasil, Samarco and Vale maintain security comprising R$1.3 billion
(approximately US$335 million) in insurance bonds, R$100 million (approximately
US$25 million) in liquid assets and a charge of R$800 million (approximately
US$205 million) over Samarco's assets. The security is maintained for a period
of 30 months from ratification of the Governance Agreement, after which BHP
Billiton Brasil, Vale and Samarco will be required to provide security of an
amount equal to the Fundacao Renova's annual budget up to a limit of R$2.2
billion (approximately US$570 million).
--------------------------------------------------------------------------------
BHP Results for the half year 43
ended 31 December 2018
12.Significant events - Samarco dam failure (continued)
Contingent liabilities
The following matters are disclosed as contingent liabilities and given the
status of proceedings it is not possible to provide a range of possible
outcomes or a reliable estimate of potential future exposures for BHP, unless
otherwise stated. Ultimately, all the legal matters disclosed as contingent
liabilities could have a material adverse impact on BHP's business, competitive
position, cash flows, prospects, liquidity and shareholder returns.
Federal Public Prosecution Office claim
BHP Billiton Brasil is among the defendants named in a claim brought by the
Federal Public Prosecution Office on 3 May 2016, seeking R$155 billion
(approximately US$40 billion) for reparation, compensation and moral damages in
relation to the Samarco dam failure.
The 12th Federal Court previously suspended the Federal Public Prosecution
Office claim, including a R$7.7 billion (approximately US$2 billion) injunction
request. Suspension of the claim continues for a period of two years from the
date of ratification of the Governance Agreement on 8 August 2018.
United States class action complaint - Samarco bond holders
On 14 November 2016, a putative class action complaint (Complaint) was filed in
the U.S. District Court for the Southern District of New York on behalf of all
purchasers of Samarco's ten-year bond notes (Plaintiff) due 2022-2024 between 31
October 2012 and 30 November 2015 against Samarco and the former chief executive
officer of Samarco.
The Complaint was subsequently amended to include BHP Group Limited, BHP Group
Plc, BHP Billiton Brasil Ltda, Vale S.A. and officers of Samarco, including
four of Vale S.A. and BHP Billiton Brasil Ltda's nominees to the Samarco Board.
On 5 April 2017, the Plaintiff dismissed the claims against all individuals.
The remaining corporate defendants (Defendants) filed a joint motion on 26 June
2017 to dismiss the Plaintiff's Complaint.
On 7 March 2018, the District Court granted the Defendants' motion to dismiss
the Complaint, however, the District Court granted the Plaintiff leave to file
a second amended Complaint, which it did on 21 March 2018. On 21 May 2018, the
Defendants moved to dismiss the Complaint. The Defendants' motion remains
pending before the District Court.
The amount of damages sought by the Plaintiff on behalf of the putative class
is unspecified.
Australian class action complaints
Three separate shareholder class actions were previously filed in the Federal
Court of Australia on behalf of persons who acquired shares in BHP Group Ltd on
the Australian Securities Exchange or shares in BHP Group Plc on the London
Stock Exchange and Johannesburg Stock Exchange in periods prior to the Samarco
dam failure.
On 18 December 2018, the Court made orders to permanently stay one of the class
actions and temporarily stay another. The claimants in respect of both these
class actions have sought leave to appeal from these orders.
The amount of damages sought in the remaining Australian class action is
unspecified.
United Kingdom class action complaint
BHP Group Plc is among companies named as defendants in claims for damages
filed in courts in the United Kingdom on behalf of certain individuals,
governments, business and communities in Brazil impacted by the Samarco dam
failure. BHP Group Plc has not yet been served with the claims and damages have
not yet been quantified.
Criminal charges
The Federal Prosecutors' Office has filed criminal charges against BHP Billiton
Brasil, Samarco and Vale and certain employees and former employees of BHP
Billiton Brasil (Affected Individuals) in the Federal Court of Ponte Nova,
Minas Gerais. On 3 March 2017, BHP Billiton Brasil filed its preliminary
defences. BHP Billiton Brasil rejects outright the charges against the company
and the Affected Individuals and will defend the charges and fully support each
of the Affected Individuals in their defence of the charges.
--------------------------------------------------------------------------------
Financial Report 44
12.Significant events - Samarco dam failure (continued)
Other claims
BHP Billiton Brasil is among the companies named as defendants in a number of
legal proceedings initiated by individuals, non-governmental organisations
(NGOs), corporations and governmental entities in Brazilian Federal and State
courts following the Samarco dam failure. The other defendants include Vale,
Samarco and Fundacao Renova. The lawsuits include claims for compensation,
environmental rehabilitation and violations of Brazilian environmental and
other laws, among other matters. The lawsuits seek various remedies including
rehabilitation costs, compensation to injured individuals and families of the
deceased, recovery of personal and property losses, moral damages and
injunctive relief. In addition, government inquiries and investigations
relating to the Samarco dam failure have been commenced by numerous agencies of
the Brazilian government and are ongoing.
Additional lawsuits and government investigations relating to the Samarco dam
failure could be brought against BHP Billiton Brasil and possibly other BHP
entities in Brazil or other jurisdictions.
BHP insurance
BHP has various third party liability insurances for claims related to the
Samarco dam failure made directly against BHP Billiton Brasil or other BHP
entities, their directors and officers, including class actions. External
insurers have been notified of the Samarco dam failure, the third party claims
and the class actions referred to above.
At 31 December 2018, an insurance receivable has not been recognised for any
potential recoveries in respect of ongoing matters.
Commitments
Under the terms of the Samarco joint venture agreement, BHP Billiton Brasil does
not have an existing obligation to fund Samarco. For the half-year ended 31
December 2018, BHP Billiton Brasil has provided US$47 million funding to support
Samarco's operations and a further US$4 million for dam stabilisation and
prosecutor experts costs, with undrawn amounts of US$2 million expiring as at 31
December 2018. On 22 January 2019, BHP announced a new short-term facility of up
to US$77 million to carry out remediation and stabilisation work and support
Samarco's operations. Funds will be released to Samarco only as required and
subject to the achievement of key milestones with amounts undrawn expiring at 30
June 2019.
Any additional requests for funding or future investment provided would be
subject to a future decision by BHP, accounted for at that time.
--------------------------------------------------------------------------------
BHP Results for the half year 45
ended 31 December 2018
12. Significant events - Samarco dam failure (continued)
Key judgements and estimates
The outcomes of litigation are inherently difficult to predict and significant
judgement has been applied in determining which legal claims require
recognition of a provision or disclosure of a contingent liability.
The facts and circumstances relating to these cases are regularly evaluated in
determining whether a provision for any specific claim is required.
Management have determined that a provision can only be recognised for
obligations under the Framework Agreement as at 31 December 2018. It is not yet
possible to provide a range of possible outcomes or a reliable estimate of
potential future exposures to BHP in connection to the contingent liabilities
noted above, given their status.
The provision for Samarco dam failure of US$1.2 billion currently reflects the
estimated remaining costs to complete Programs under the Framework Agreement
and requires the use of significant judgements, estimates and assumptions.
Based on current estimates, it is expected that approximately 55 per cent of
remaining costs for Programs under the Framework Agreement will be incurred by
December 2020.
The key estimates that may have a material impact upon the provision in the
next and future reporting periods include:
. timing of repealing the fishing ban along the Rio Doce, which is subject to
certain regulatory approvals and could impact upon the length of financial
assistance payments;
. number of people eligible for financial assistance and compensation, as
changes to geographical boundaries or eligibility criteria could impact
estimated future costs;
. costs to complete resettlement of the Bento Rodrigues, Gesteira and Paracatu
communities.
The provision may also be affected by factors including but not limited to:
. potential changes in scope of work and funding amounts required under the
Framework Agreement including the impact of the decisions of the
Interfederative Committee along with further technical analysis and
community participation required under the Preliminary Agreement and
Governance Agreement;
. the outcome of ongoing negotiations with State and Federal Prosecutors,
including review of Fundacao Renova's Programs as provided in the Governance
Agreement;
. actual costs incurred;
. resolution of uncertainty in respect of operational restart;
. updates to discount and foreign exchange rates;
. resolution of existing and potential legal claims;
. the status of the Framework Agreement and the renegotiation process
established in the Governance Agreement.
Given these factors, future actual expenditures may differ from the amounts
currently provided and changes to key assumptions and estimates could result in
a material impact to the provision in the next and future reporting periods.
In addition, while we do not expect any immediate direct financial impact to
BHP, the status of the tailings dam failure at Vale's Feijao mine in Brumadinho
will be monitored for possible impacts on the provision, contingent liabilities
and Samarco's operations.
--------------------------------------------------------------------------------
Financial Report 46
13. Discontinued operations
On 28 September 2018, BHP completed the sale of 100 per cent of the issued
share capital of BHP Billiton Petroleum (Arkansas) Inc. and 100 per cent of the
membership interests in BHP Billiton Petroleum (Fayetteville) LLC, which held
the Fayetteville assets, for a total cash consideration of US$0.3 billion.
On 31 October 2018, BHP completed the sale of 100 per cent of the issued share
capital of Petrohawk Energy Corporation, the BHP subsidiary which held the
Eagle Ford (being Black Hawk and Hawkville), Haynesville and Permian assets,
for a total cash consideration of US$10.5 billion (less preliminary customary
completion adjustments of US$0.2 billion). Net proceeds of US$6.7 billion (net
of transaction costs of US$0.1 billion) were received by 31 December 2018 with
the balance (deferred consideration) being receivable in four equal monthly
instalments by April 2019. Payment of the deferred consideration is not subject
to any conditions and has been recognised as a US$3.5 billion receivable at
31 December 2018. Final completion adjustments are scheduled to be determined
in April 2019 and are not currently capable of reliable estimation.
While the effective date at which the right to economic profits transferred to
the purchasers was 1 July 2018, the Group continued to control the Onshore US
assets until the completion dates of their respective transactions. As such the
Group continued to recognise its share of revenue, expenses, net finance costs
and associated income tax expense related to the operation until the completion
date.
The completion adjustments included a reduction in sale proceeds, based on the
operating cash generated and retained by the Group in the period prior to
completion, in order to transfer the economic profits from 1 July to completion
date to the buyers. Therefore, the pre-tax profit from operating the assets is
largely offset by a pre-tax loss on disposal. Accordingly, the net loss from
discontinued operations predominantly relates to incremental costs arising as a
consequence of the divestment, including restructuring costs and provisions for
surplus office accommodation, and tax expenses largely triggered by the
completion of the transactions.
The contribution of Discontinued operations included within the Group's profit
and cash flows are detailed below:
Income statement - Discontinued operations
Half year Half year Year
ended ended ended
31 Dec 2018 31 Dec 2017 30 June 2018
US$M US$M US$M
----------- ----------- ------------
Revenue......................................................................... 850 1,002 2,171
Other income.................................................................... 28 14 34
Expenses excluding net finance costs............................................ (608) (1,445) (5,790)
------ ------ ------
Profit/(loss) from operations................................................... 270 (429) (3,585)
------ ------ ------
Financial expenses.............................................................. (8) (12) (22)
------ ------ ------
Net finance costs............................................................... (8) (12) (22)
------ ------ ------
Profit/(loss) before taxation................................................... 262 (441) (3,607)
------ ------ ------
Income tax (expense)/benefit.................................................... (58) 609 686
------ ------ ------
Profit/(loss) after taxation from operating activities.......................... 204 168 (2,921)
------ ------ ------
Net loss on disposal............................................................ (497) -- --
------ ------ ------
(Loss)/profit after taxation.................................................... (293) 168 (2,921)
------ ------ ------
Attributable to non-controlling interests..................................... 7 22 26
Attributable to BHP shareholders.............................................. (300) 146 (2,947)
------ ------ ------
Basic (loss)/earnings per ordinary share (cents)................................ (5.6) 2.7 (55.4)
Diluted (loss)/earnings per ordinary share (cents).............................. (5.6) 2.7 (55.4)
------ ------ ------
The total comprehensive income attributable to BHP shareholders from
Discontinued operations was a loss of US$300 million (31 December 2017: gain of
US$151 million; 30 June 2018: loss of US$2,943 million).
The conversion of options and share rights would decrease the loss per share for
the half year ended 31 December 2018 and the year ended 30 June 2018, therefore
its impact has been excluded from the diluted earnings per share calculation.
--------------------------------------------------------------------------------
BHP Results for the half year 47
ended 31 December 2018
13. Discontinued operations (continued)
Cash flows from Discontinued operations
Half year Half year Year
ended ended ended
31 Dec 2018 31 Dec 2017 30 June 2018
US$M US$M US$M
----------- ----------- ------------
Net operating cash flows........................................................ 565 350 900
Net investing cash flows/(1)/................................................... (443) (301) (861)
Net financing cash flows/(2)/................................................... (13) (27) (40)
------ ------ ------
Net increase/(decrease) in cash and cash equivalents from Discontinued
operations.................................................................... 109 22 (1)
------ ------ ------
Net proceeds received from the sale of Onshore US............................... 7,028 -- --
Less Cash and cash equivalents.................................................. (104) -- --
------ ------ ------
Proceeds from divestment of Onshore US, net of its cash......................... 6,924 -- --
------ ------ ------
Total cash impact............................................................... 7,033 22 (1)
------ ------ ------
(1) Includes purchases of property, plant and equipment of US$443 million
related to drilling and development expenditure (31 December 2017: US$335
million; 30 June 2018: US$900 million) less proceeds from sale of assets of
US$ nil (31 December 2017: US$35 million; 30 June 2018: US$39 million), and
other investing outflows of US$ nil (31 December 2017: US$1 million; 30 June
2018: US$ nil).
(2) Includes net repayment of interest bearing liabilities of US$6 million (31
December 2017: US$2 million; 30 June 2018: US$4 million), distribution to
non-controlling interests of US$ nil (31 December 2017: US$6 million; 30
June 2018: US$14 million) and dividends paid to non-controlling interests of
US$7 million (31 December 2017: US$19 million; 30 June 2018: US$22 million).
Net loss on disposal of Discontinued operations
Details of the net loss on disposal is presented in the table below:
2018
US$M
------
Assets
Cash and cash equivalents...................................... 104
Trade and other receivables.................................... 562
Other financial assets......................................... 32
Inventories.................................................... 34
Property, plant and equipment.................................. 10,998
Intangible assets.............................................. 667
------
Total assets................................................... 12,397
------
Liabilities
Trade and other payables....................................... 796
Provisions..................................................... 493
------
Total liabilities.............................................. 1,289
------
Net assets..................................................... 11,108
------
Less non-controlling interest share of net assets disposed..... (168)
------
BHP Share of net assets disposed............................... 10,940
------
Gross consideration............................................ 10,590
Less transaction costs......................................... (60)
Income tax expense............................................. (87)
------
Net loss on disposal........................................... (497)
------
--------------------------------------------------------------------------------
Financial Report 48
13. Discontinued operations (continued)
Exceptional items - Discontinued operations
Exceptional items are those gains or losses where their nature, including the
expected frequency of the events giving rise to them, and amount is considered
material to the financial statements.
Half year ended 31 December 2018
There were no exceptional items related to Discontinued operations for the half
year ended 31 December 2018.
Items related to Discontinued operations included within the Group's profit for
the half year ended 31 December 2017 are detailed below:
Gross Tax Net
Half year ended 31 December 2017 US$M US$M US$M
-------------------------------- ------ ---- ------
Exceptional items by category
US tax reform............................... -- 492 492
------ ---- ------
Total....................................... -- 492 492
------ ---- ------
Attributable to non-controlling interests... -- -- --
Attributable to BHP shareholders............ -- 492 492
------ ---- ------
Items related to Discontinued operations included within the Group's profit for
the year ended 30 June 2018 are detailed below:
Gross Tax Net
Year ended 30 June 2018 US$M US$M US$M
----------------------- ------ ---- ------
Exceptional items by category
US tax reform............................... -- 492 492
Impairment of Onshore US assets............. (2,859) 109 (2,750)
------ ---- ------
Total....................................... (2,859) 601 (2,258)
------ ---- ------
Attributable to non-controlling interests... -- -- --
Attributable to BHP shareholders............ (2,859) 601 (2,258)
------ ---- ------
14. Subsequent events
Other than the matters outlined elsewhere in this financial information, no
matters or circumstances have arisen since the end of the half year that have
significantly affected, or may significantly affect, the operations, results of
operations or state of affairs of the Group in subsequent accounting periods.
--------------------------------------------------------------------------------
BHP Results for the half year 49
ended 31 December 2018
Directors' Report
The Directors present their report together with the half year financial
statements for the half year ended 31 December 2018 and the auditor's review
report thereon.
Review of Operations
A detailed review of the Group's operated and non-operated assets, the results
of those operations during the half year ended 31 December 2018 and likely
future developments are given on pages 1 to 24. The Review of Operations has
been incorporated into, and forms part of, this Directors' Report.
Principal Risks and Uncertainties
Due to the international scope of the Group's operated and non-operated assets
and the industries in which it is engaged, there are a number of risk factors
and uncertainties which could have an effect on the Group's results and
operations over the next six months. The principal risks affecting the Group
are described on pages 27 to 35 of the Group's Annual Report for the year ended
30 June 2018 (a copy of which is available on the Group's website at
www.bhp.com) and are summarised below. There are no material changes in those
risk factors for the six months of this financial year except to the extent
described in note 12 'Significant events - Samarco dam failure' of the half
year financial statements, updates in relation to the sale of our Onshore US
assets and the 'Outlook' section.
- Fluctuations in commodity prices (including - We may not fully recover our investments in
sustained price shifts) and impacts of ongoing mining, oil and gas assets, which may require
global economic volatility may negatively financial write-downs
affect our results, including cash flows and
asset values
- Our financial results may be negatively - The commercial counterparties with whom we
affected by exchange rate fluctuations transact with may not meet their obligations,
which may negatively affect our results
- Reduction in Chinese demand may negatively - Unexpected natural and operational catastrophes
impact our results may adversely impact our assets, functions or
people
- Actions by governments, or courts, regulatory - Information technology and operational
change, political events or alleged compliance technology services are subject to
breaches in the countries in which we operate cybersecurity risks and threats that may
or assets in which we have an interest could materially affect our business and reputation
have a negative impact on our business
- Failure to discover or acquire new resources, - Our potential liability from litigation and
maintain reserves or develop new assets could other actions resulting from the Samarco dam
negatively affect our future results and failure is subject to significant uncertainty
financial condition and cannot be reliably estimated at this time,
but could have a material adverse impact on our
business
- Potential changes to our portfolio of assets - Cost pressures and reduced productivity could
through merger, acquisition and divestment negatively impact our operating margins and
activity may have a material adverse effect on expansion plans
our future results and financial condition
- Increased costs and schedule delays may - Non-operated joint ventures have their own
adversely affect our development projects management and operating standards, joint
venture partners or other companies managing
those non- operated joint ventures may take
action contrary to our standards or fail to
adopt standards equivalent to BHP's standards,
and commercial counterparties may not comply
with our standards
- If our liquidity and cash flow deteriorate - Safety, health, environmental and community
significantly, it could adversely affect our impacts, incidents or accidents may adversely
ability to fund our major capital programs affect our people, assets and reputation or
licence to operate
--------------------------------------------------------------------------------
Financial Report 50
Dividend
Full details of dividends are given on page 11.
Board of Directors
The Directors of BHP at any time during or since the end of the half year are:
Ken MacKenzie - Chairman since September 2017 (a Director since September 2016)
Andrew Mackenzie - an Executive Director since May 2013
Terry Bowen - a Director since October 2017
Malcolm Broomhead - a Director since March 2010
Anita Frew - a Director since September 2015
Carolyn Hewson - a Director since March 2010
Lindsay Maxsted - a Director since March 2011
John Mogford - a Director since October 2017
Wayne Murdy - a Director from June 2009 to November 2018
Shriti Vadera - a Director since January 2011
Auditor's independence declaration
KPMG in Australia are the auditors of BHP Group Limited. Their auditor's
independence declaration under Section 307C of the Australian Corporations Act
2001 is set out on page 53 and forms part of this Directors' Report.
Rounding of amounts
BHP Group Limited is an entity to which Australian Securities and Investments
Commission (ASIC) Corporations (Rounding in Financial/Directors' Reports)
Instrument 2016/191 dated 24 March 2016 applies. Amounts in the Directors'
Report and half year financial statements have been rounded to the nearest
million dollars in accordance with ASIC Instrument 2016/191.
Signed in accordance with a resolution of the Board of Directors.
Ken MacKenzie - Chairman
Andrew Mackenzie - Chief Executive Officer
Dated this 19th day of February 2019
--------------------------------------------------------------------------------
BHP Results for the half year 51
ended 31 December 2018
Directors' Declaration of Responsibility
The half year financial report is the responsibility of, and has been approved
by, the Directors. In accordance with a resolution of the Directors of BHP
Group Limited and BHP Group Plc, the Directors declare that:
(a) in the Directors' opinion and to the best of their knowledge, the half
year financial statements and notes, set out on pages 25 to 49, have been
prepared in accordance with IAS 34 'Interim Financial Reporting' as
issued by the IASB, IAS 34 'Interim Financial Reporting' as adopted by
the EU, AASB 134 'Interim Financial Reporting' as issued by the AASB, the
Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority in the United Kingdom and the Australian Corporations Act 2001,
including:
(i) complying with applicable accounting standards and the Australian
Corporations Regulations 2001; and
(ii) giving a true and fair view of the financial position of the Group
as at 31 December 2018 and of its performance for the half year
ended on that date;
(b) to the best of the Directors' knowledge, the Directors' Report, which
incorporates the Review of Operations on pages 1 to 24, includes a fair
review of the information required by:
(i) DTR4.2.7R of the Disclosure Guidance and Transparency Rules in the
United Kingdom, being an indication of important events during the
first six months of the current financial year and their impact on
the half year financial statements, and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(ii) DTR4.2.8R of the Disclosure Guidance and Transparency Rules in the
United Kingdom, being related party transactions that have taken
place in the first six months of the current financial year and
that have materially affected the financial position or
performance of the Group during that period, and any changes in
the related party transactions described in the last annual report
that could have such a material effect; and
(c) in the Directors' opinion, there are reasonable grounds to believe that
each of BHP Group Limited, BHP Group Plc and the Group will be able to
pay its debts as and when they become due and payable.
Signed on behalf of the Directors in accordance with a resolution of the Board
of Directors.
Ken MacKenzie - Chairman
Andrew Mackenzie - Chief Executive Officer
Dated this 19th day of February 2019
--------------------------------------------------------------------------------
Financial Report 52
Lead Auditor's Independence Declaration under Section 307C of the Australian
Corporations Act 2001
To: the Directors of BHP Group Limited
I declare that, to the best of my knowledge and belief, in relation to the
review of BHP Group Limited for the half year ended 31 December 2018 there have
been:
(i) no contraventions of the auditor independence requirements as set
out in the Australian Corporations Act 2001 in relation to the
review; and
(ii) no contraventions of any applicable code of professional conduct
in relation to the review.
This declaration is in respect of BHP Group Limited and the entities it
controlled during the financial period.
KPMG
Anthony Young
Partner
Melbourne
19 February 2019
KPMG, an Australian partnership and a
member firm of the KPMG network of
independent member firms affiliated with
KPMG International Cooperative ('KPMG
International'), a Swiss entity.
KPMG Australia's liability limited by a
scheme approved under Professional
Standards Legislation.
--------------------------------------------------------------------------------
BHP Results for the half year 53
ended 31 December 2018
Independent Review Report
Independent Auditors' review report of KPMG LLP ('KPMG UK') to the members of
BHP Group Plc and of KPMG ('KPMG Australia') to the members of BHP Group Limited
Conclusions
For the purposes of these reports, the terms 'we' and 'our' denote KPMG UK in
relation to UK responsibilities and reporting obligations to the members of BHP
Group Plc, and KPMG Australia in relation to Australian responsibilities and
reporting obligations to the members of BHP Group Limited.
BHP ('the Group') consists of BHP Group Plc, BHP Group Limited and the entities
they controlled during the half year ended 31 December 2018.
We have reviewed the accompanying condensed financial statements of the Group
for the half year ended 31 December 2018 ('half year financial statements'),
which comprise the Consolidated Income Statement, Consolidated Statement of
Comprehensive Income, Consolidated Balance Sheet, Consolidated Cash Flow
Statement, Consolidated Statement of Changes in Equity, Notes 1 to 14 comprising
a summary of significant accounting policies and other explanatory information.
KPMG Australia considers the Directors' Declaration to be part of the half year
financial statements when forming its conclusion.
Review conclusion by KPMG UK
Based on our review, nothing has come to our attention that causes us to
believe that the half year financial statements for the six months ended
31 December 2018 are not prepared, in all material respects, in accordance with
IAS 34 'Interim Financial Reporting', as adopted by the European Union ('EU'),
and the Disclosure Guidance and Transparency Rules ('the DTR') of the United
Kingdom's Financial Conduct Authority ('the UK FCA').
Review conclusion by KPMG Australia
Based on our review, which is not an audit, we have not become aware of any
matter that makes us believe that the half year financial statements, including
the Directors' Declaration, of the Group are not in accordance with the
Australian Corporations Act 2001, including:
(a) Giving a true and fair view of the Group's financial position as at 31
December 2018 and of its performance for the half year ended on that date;
and
(b) Complying with Australian Accounting Standard AASB 134 'Interim Financial
Reporting' and the Australian Corporations Regulations 2001.
Scope of review
KPMG UK conducted its review in accordance with International Standard on
Review Engagements (UK and Ireland) 2410 'Review of Interim Financial
Information Performed by the Independent Auditor of the Entity' ('ISRE 2410')
issued by the Auditing Practices Board for use in the UK. We read the other
information contained in the half year financial report and consider whether it
contains any apparent misstatements or material inconsistencies with the
information in the half year financial statements.
KPMG Australia conducted its review in accordance with Auditing Standard on
Review Engagements ASRE 2410 'Review of a Financial Report Performed by the
Independent Auditor of the Entity' ('ASRE 2410'), as issued by the Australian
Auditing and Assurance Standards Board. As the auditor of BHP Group Limited,
ASRE 2410 requires that KPMG Australia complies with the ethical requirements
relevant to the audit of the annual consolidated financial statements.
A review of half year financial statements consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is substantially less
in scope than an audit conducted in accordance with auditing standards and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
--------------------------------------------------------------------------------
Financial Report 54
The impact of uncertainties due to the UK exiting the European Union on our
review
Uncertainties related to the effects of Brexit are relevant to understanding our
review of the half year financial statements. Brexit is one of the most
significant economic events for the UK, and at the date of this report its
effects are subject to unprecedented levels of uncertainty of outcomes, with the
full range of possible effects unknown. An interim review cannot be expected to
predict the unknowable factors or all possible future implications for a company
and this is particularly the case in relation to Brexit.
Directors' responsibilities
The Directors are responsible for preparing the half year financial report
which gives a true and fair view in accordance with:
. The DTR of the UK FCA, and under those rules, in accordance with IAS 34
'Interim Financial Reporting' as adopted by the EU; and
. Australian Accounting Standards and the Australian Corporations Act 2001 and
for such internal control as the Directors determine is necessary to enable
the preparation of the half year financial statements that are free from
material misstatement, whether due to fraud or error; selecting and applying
appropriate accounting policies; and making accounting estimates that are
reasonable in the circumstances.
Respective responsibilities of KPMG UK and KPMG Australia
KPMG UK's responsibility is to express a conclusion on the half year financial
statements in the half year financial report based on our review.
KPMG Australia's responsibility is to express a conclusion on the half year
financial statements, including the Directors' Declaration based on our review.
The purpose of our review work and to whom we owe our responsibilities
KPMG UK's report is made solely to BHP Group Plc's members, as a body, in
accordance with the terms of KPMG UK's engagement to assist BHP Group Plc in
meeting the requirements of the DTR of the UK FCA.
KPMG Australia's report is made solely to BHP Group Limited's members, as a
body, in accordance with the Australian Corporations Act 2001. KPMG Australia
has performed an independent review of the half year financial statements,
including the Directors' Declaration, in order to state whether, on the basis
of the procedures described, it has become aware of any matter that makes KPMG
Australia believe that the half year financial statements, including the
Directors' Declaration, are not in accordance with the Australian Corporations
Act 2001 including: giving a true and fair view of the Group's financial
position as at 31 December 2018 and its performance for the half year ended on
that date; and complying with Australian Accounting Standard AASB 134 'Interim
Financial Reporting' and the Australian Corporations Regulations 2001.
Our review work has been undertaken so that we might state to the members of
each BHP Group Plc and BHP Group Limited those matters we are required to state
to them in this report, and the further matters we are required to state to
them in accordance with the terms agreed with each company, and for no other
purpose. Accordingly, each of KPMG UK and KPMG Australia makes the following
statement: to the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company's members as a
body, for our review work, for our report, or for the conclusions we have
reached.
--------------------------------------------------------------------------------
BHP Results for the half year 55
ended 31 December 2018
Independence
In conducting its review, KPMG Australia has complied with the independence
requirements of the Australian Corporations Act 2001.
Michiel Soeting
For and behalf of KPMG LLP
Chartered Accountants
London
19 February 2019
KPMG
Anthony Young
Partner
Melbourne
19 February 2019
KPMG, an Australian partnership and KPMG
LLP, a UK limited liability partnership,
are member firms of the KPMG network of
independent member firms affiliated with
KPMG International Cooperative ('KPMG
International'), a Swiss entity.
KPMG Australia's liability limited by a
scheme approved under Professional
Standards Legislation.
--------------------------------------------------------------------------------
Financial Report 56
[LOGO]
BHP
Alternative performance measures
Half year ended
31 December 2018
--------------------------------------------------------------------------------
Alternative performance measures
We use various alternative performance measures (APMs) to reflect our
underlying financial performance.
These indicators are not defined or specified under the requirements of IFRS,
but are derived from the financial statements prepared in accordance with IFRS.
The APMs are consistent with how management review financial performance with
the Board and the investment community.
The glossary section outlines why we believe the APMs are useful and the
calculation methodology. We believe these APMs provide useful information, but
they should not be considered as an indication of, or as a substitute for
statutory measures as an indicator of actual operating performance.
The following tables provide reconciliations between the APMs and their nearest
respective IFRS measure. Unless otherwise noted, information in this section
has been presented on a total operations basis (including Onshore US).
Exceptional items
To improve the comparability of underlying financial performance between
reporting periods some of our APMs adjust the relevant IFRS measures for
exceptional items. Refer to the Group's 31 December 2018 financial report for
further information on exceptional items.
Exceptional items are those gains or losses where their nature, including the
expected frequency of the events giving rise to them, and amount is considered
material to the financial statements. The exceptional items included within the
Group's profit from Continuing and Discontinued operations for the half year
are detailed below.
2018 2017
Half year ended 31 December US$M US$M
--------------------------- ------- -------
Continuing operations
Revenue.......................................................................... -- --
Other income..................................................................... -- --
Expenses excluding net finance costs, depreciation, amortisation
and impairments................................................................ (33) (29)
Depreciation and amortisation.................................................... -- --
Net impairments.................................................................. -- --
Profit/(loss) from equity accounted investments, related impairments
and expenses................................................................... (117) (137)
------- -------
Profit/(loss) from operations.................................................... (150) (166)
------- -------
Financial expenses............................................................... (60) (44)
Financial income................................................................. -- --
------- -------
Net finance costs................................................................ (60) (44)
------- -------
Profit/(loss) before taxation.................................................... (210) (210)
------- -------
Income tax benefit/(expense)..................................................... 242 (2,320)
Royalty-related taxation (net of income tax benefit)............................. -- --
------- -------
Total taxation benefit/(expense)................................................. 242 (2,320)
------- -------
Profit/(loss) after taxation from Continuing operations.......................... 32 (2,530)
------- -------
Discontinued operations
Profit/(loss) after taxation from Discontinued operations........................ -- 492
------- -------
Profit/(loss) after taxation from Continuing and Discontinued operations......... 32 (2,038)
------- -------
Total exceptional items attributable to non-controlling interests.............. -- --
Total exceptional items attributable to BHP shareholders....................... 32 (2,038)
------- -------
Exceptional items attributable to BHP shareholders per share (US cents).......... 0.6 (38.2)
------- -------
Weighted basic average number of shares (Million)................................ 5,303 5,323
------- -------
--------------------------------------------------------------------------------
Alternative performance measures 58
APMs derived from Consolidated Income Statement
Underlying attributable profit
2018 2017
Half year ended 31 December US$M US$M
--------------------------- ------- -------
Profit after taxation from Continuing and Discontinued operations
attributable to BHP shareholders............................................... 3,764 2,015
Total exceptional items attributable to BHP shareholders/(1)/.................... (32) 2,038
------- -------
Underlying attributable profit................................................... 3,732 4,053
------- -------
(1) Refer to Exceptional items for further information.
Underlying attributable profit - Continuing operations
2018 2017
Half year ended 31 December US$M US$M
--------------------------- ------- -------
Profit after taxation from Continuing and Discontinued operations
attributable to BHP shareholders............................................... 3,764 2,015
Loss/(profit) attributable to members of BHP for Discontinued operations......... 300 (146)
Total exceptional items attributable to BHP shareholders/(1)/.................... (32) 2,038
Total exceptional items attributable to BHP shareholders for Discontinued
operations/(1)/................................................................ -- 492
------- -------
Underlying attributable profit - continuing operations........................... 4,032 4,399
------- -------
(1) Refer to Exceptional items for further information.
Underlying basic earnings per share
2018 2017
Half year ended 31 December US cents US cents
--------------------------- -------- --------
Basic earnings per ordinary share................................................ 71.0 37.9
Exceptional items attributable to BHP shareholders per share/(1)/................ (0.6) 38.2
------- -------
Underlying basic earnings per ordinary share..................................... 70.4 76.1
------- -------
(1) Refer to Exceptional items for further information.
Underlying EBITDA
2018 2017
Half year ended 31 December US$M US$M
--------------------------- ------- -------
Profit from operations........................................................... 7,333 7,165
Exceptional items included in profit from operations/(1)/....................... 150 166
------- -------
Underlying EBIT.................................................................. 7,483 7,331
------- -------
Depreciation and amortisation expense............................................ 2,888 3,206
Net impairments.................................................................. 168 299
Exceptional item included in Depreciation, amortisation and impairments/(1)/..... -- --
------- -------
Underlying EBITDA................................................................ 10,539 10,836
------- -------
(1) Refer to Exceptional items for further information.
--------------------------------------------------------------------------------
BHP Results for the half year 59
ended 31 December 2018
Underlying EBITDA margin
Group and
unallocated
items/ Total
Half year ended 31 December 2018 US$M Petroleum Copper Iron Ore Coal eliminations Group
------------------------------------- --------- ------ -------- ------ ------------ -------
Revenue - Group production.................................. 3,203 4,475 7,396 4,512 523 20,109
Revenue - Third party products.............................. -- 594 22 -- 17 633
----- ----- ----- ----- --- ------
Revenue..................................................... 3,203 5,069 7,418 4,512 540 20,742
----- ----- ----- ----- --- ------
Underlying EBITDA - Group production........................ 2,258 1,911 4,328 2,025 (9) 10,513
Underlying EBITDA - Third party products.................... -- 13 13 -- -- 26
----- ----- ----- ----- --- ------
Underlying EBITDA........................................... 2,258 1,924 4,341 2,025 (9) 10,539
----- ----- ----- ----- --- ------
Segment contribution to the Group's Underlying EBITDA/(1)/.. 22% 18% 41% 19% 100%
Underlying EBITDA margin/(2)/............................... 70% 43% 59% 45% 52%
Group and
unallocated
items/ Total
Half year ended 31 December 2017 US$M Petroleum Copper Iron Ore Coal eliminations Group
------------------------------------- --------- ------ -------- ------ ------------ -------
Revenue - Group production.................................. 2,571 5,451 7,193 4,047 539 19,801
Revenue - Third party products.............................. 10 681 28 -- 6 725
----- ----- ----- ----- --- ------
Revenue..................................................... 2,581 6,132 7,221 4,047 545 20,526
----- ----- ----- ----- --- ------
Underlying EBITDA - Group production........................ 1,634 3,172 4,301 1,790 (90) 10,807
Underlying EBITDA - Third party products.................... (1) 23 6 -- 1 29
----- ----- ----- ----- --- ------
Underlying EBITDA........................................... 1,633 3,195 4,307 1,790 (89) 10,836
----- ----- ----- ----- --- ------
Segment contribution to the Group's Underlying EBITDA/(1)/.. 15% 29% 40% 16% 100%
Underlying EBITDA margin/(2)/............................... 64% 58% 60% 44% 55%
(1) Percentage contribution to Group Underlying EBITDA, excluding Group and
unallocated items.
(2) Underlying EBITDA margin excludes Third party products.
APMs derived from Consolidated Cash Flow Statement
Capital and exploration expenditure
2018 2017
Half year ended 31 December US$M US$M
--------------------------- ------- -------
Capital expenditure (purchases of property, plant and equipment)................. 2,661 2,078
Add: Exploration expenditure..................................................... 397 464
------- -------
Capital and exploration expenditure (cash basis) - Continuing operations......... 3,058 2,542
------- -------
Capital and exploration expenditure - Discontinued operations.................... 443 335
------- -------
Capital and exploration expenditure (cash basis) - Total operations.............. 3,501 2,877
------- -------
Free cash flow
2018 2017
Half year ended 31 December US$M US$M
--------------------------- ------- -------
Net operating cash flows......................................................... 7,274 7,343
Net investing cash flows......................................................... 3,330 (2,446)
------- -------
Free cash flow................................................................... 10,604 4,897
------- -------
Free cash flow - Continuing operations
2018 2017
Half year ended 31 December US$M US$M
--------------------------- ------- -------
Net operating cash flows from Continuing operations.............................. 6,709 6,993
Net investing cash flows from Continuing operations.............................. (3,151) (2,145)
------- -------
Free cash flow - Continuing operations........................................... 3,558 4,848
------- -------
--------------------------------------------------------------------------------
Alternative performance measures 60
APMs derived from Consolidated Balance Sheet
Net debt and gearing ratio
31 Dec 2018 30 June 2018
US$M US$M
----------- ------------
Interest bearing liabilities - Current........................................... 1,527 2,736
Interest bearing liabilities - Non current....................................... 23,938 24,069
------- ------
Total interest bearing liabilities............................................... 25,465 26,805
------- ------
Less: Cash and cash equivalents.................................................. 15,575 15,871
------- ------
Net debt......................................................................... 9,890 10,934
------- ------
Net assets....................................................................... 55,316 60,670
------- ------
Gearing.......................................................................... 15.2% 15.3%
------- ------
Net debt waterfall
2018 2017
Half year ended 31 December US$M US$M
--------------------------- ------- -------
Net debt at the beginning of the period.......................................... (10,934) (16,321)
------- -------
Net operating cash flows....................................................... 7,274 7,343
Net investing cash flows....................................................... 3,330 (2,446)
Net financing cash flows....................................................... (11,098) (7,059)
------- -------
Net decrease in cash and cash equivalents from Continuing and Discontinued
operations..................................................................... (494) (2,162)
------- -------
Carrying value of interest bearing liability repayments.......................... 1,589 3,419
------- -------
Interest rate movements........................................................ (111) (5)
Foreign exchange impacts on debt............................................... 268 (662)
Foreign exchange impacts on cash............................................... (220) 331
Others......................................................................... 12 (11)
------- -------
Non-cash movements............................................................. (51) (347)
------- -------
Net debt at the end of the period................................................ (9,890) (15,411)
------- -------
Net operating assets (NOA)
31 Dec 2018 30 Dec 2017
US$M US$M
----------- ------------
Net assets...................................................................... 55,316 62,161
------- ------
Less: Non-operating assets
Cash and cash equivalents...................................................... (15,575) (12,322)
Trade and other receivables/(1)/............................................... (44) (162)
Other financial assets/(2)/.................................................... (899) (1,268)
Current tax assets............................................................. (92) (97)
Deferred tax assets............................................................ (3,849) (4,355)
Assets related to Onshore US divestment/(3)/................................... (3,500) (13,701)
------- ------
Add: Non-operating liabilities
Trade and other payables/(4)/.................................................. 294 300
Interest bearing liabilities................................................... 25,465 27,733
Other financial liabilities/(5)/............................................... 1,272 716
Current tax payable............................................................ 1,101 1,438
Non-current tax payable........................................................ 136 134
Deferred tax liabilities....................................................... 3,381 3,526
Liabilities related to Onshore US divestment/(3)/.............................. 200 --
------- ------
Net operating assets............................................................ 63,206 64,103
------- ------
(1) Represents loans to associates and accrued interest receivable included
within other receivables.
(2) Represents cross currency and interest rate swaps, forward exchange
contracts and investment in shares and other investments.
(3) Represents assets and liabilities related to Onshore US divestment mainly
comprising deferred consideration receivable from BP.
(4) Represents accrued interest payable included within other payables.
(5) Represents cross currency and interest rate swaps and forward exchange
contracts.
--------------------------------------------------------------------------------
BHP Results for the half year 61
ended 31 December 2018
Other APMs
Principal factors that affect Revenue, Profit from operations and Underlying
EBITDA
The following table describes the impact of the principal factors that affected
Revenue, Profit from operations and Underlying EBITDA for half year ended
December 2018 and relates them back to our Consolidated Income Statement.
Total expenses,
Other income
and Profit/(loss) Depreciation,
from equity amortisation
accounted Profit from and impairments Underlying
Revenue investments operations and Exceptional EBITDA
US$M US$M US$M Items US$M US$M
------- ----------------- ----------- --------------- ----------
Half year ended 31 December 2017
Revenue..................................................... 20,526
Other income................................................ 123
Expenses excluding net finance costs........................ (13,697)
Profit from equity accounted investments, related
impairments and expenses.................................. 213
-------
Total other income, expenses excluding net finance costs and
Profit from equity accounted investments, related
impairments and expenses.................................. (13,361)
-----
Profit from operations...................................... 7,165
Depreciation, amortisation and impairments.................. 3,505
Exceptional items........................................... 166
------
Underlying EBITDA........................................... 10,836
------ ------- ----- ----- ------
Change in sales prices...................................... 166 (134) 32 -- 32
Price-linked costs.......................................... -- (173) (173) -- (173)
------ ------- ----- ----- ------
Net price impact............................................ 166 (307) (141) -- (141)
------ ------- ----- ----- ------
Productivity volumes........................................ 264 (214) 50 -- 50
Growth volumes.............................................. (72) (23) (95) -- (95)
------ ------- ----- ----- ------
Changes in volumes.......................................... 192 (237) (45) -- (45)
------ ------- ----- ----- ------
Operating cash costs........................................ -- (606) (606) -- (606)
Exploration and business development........................ -- (1) (1) -- (1)
------ ------- ----- ----- ------
Change in controllable cash costs........................... -- (607) (607) -- (607)
------ ------- ----- ----- ------
Exchange rates.............................................. (53) 727 674 -- 674
Inflation on costs.......................................... -- (206) (206) -- (206)
Fuel and energy............................................. -- (158) (158) -- (158)
Non-cash.................................................... -- 124 124 -- 124
One-off items............................................... -- -- -- -- --
------ ------- ----- ----- ------
Change in other costs....................................... (53) 487 434 -- 434
------ ------- ----- ----- ------
Asset sales................................................. -- 20 20 -- 20
Ceased and sold operations.................................. 3 42 45 -- 45
Other....................................................... (92) 89 (3) -- (3)
------ ------- ----- ----- ------
Depreciation, amortisation and impairments.................. -- 449 449 (449) --
Exceptional items........................................... -- 16 16 (16) --
------ ------- ----- ----- ------
Half year ended 31 December 2018
Revenue..................................................... 20,742
Other income................................................ 170
Expenses excluding net finance costs........................ (13,695)
Profit from equity accounted investments, related
impairments and expenses.................................. 116
-------
Total other income, expenses excluding net finance costs and
Profit from equity accounted investments, related
impairments and expenses.................................. (13,409)
-----
Profit from operations...................................... 7,333
Depreciation, amortisation and impairments.................. 3,056
Exceptional items........................................... 150
------
Underlying EBITDA........................................... 10,539
------
--------------------------------------------------------------------------------
Alternative performance measures 62
Underlying return on capital employed (ROCE)
2018 2017
Half year ended 31 December US$M US$M
--------------------------- ------ ------
Profit after taxation from Continuing and Discontinued operations.......... 4,149 2,574
Exceptional items/(1)/..................................................... (32) 2,038
------ ------
Subtotal................................................................... 4,117 4,612
Adjusted for:
Net finance costs.......................................................... 533 658
Exceptional items included within net finance costs/(1)/................... (60) (44)
Income tax expense on net finance costs.................................... (159) (207)
------ ------
Profit after taxation excluding net finance costs and exceptional items.... 4,431 5,019
------ ------
Annualised Profit after taxation excluding net finance costs and
exceptional items........................................................ 8,862 10,038
------ ------
Net assets at the beginning of the period.................................. 60,670 62,726
Net debt at the beginning of the period.................................... 10,934 16,321
------ ------
Capital employed at the beginning of the period............................ 71,604 79,047
------ ------
Net assets at the end of the period........................................ 55,316 62,161
Net debt at the end of the period.......................................... 9,890 15,411
------ ------
Capital employed at the end of the period.................................. 65,206 77,572
------ ------
Average capital employed................................................... 68,405 78,310
------ ------
Underlying Return on Capital Employed...................................... 13.0% 12.8%
------ ------
(1) Refer to Exceptional items for further information
Underlying return on capital employed (ROCE) by segment
Group and
unallocated
items/ Total
Half year ended 31 December 2018 US$M Petroleum Copper Iron Ore Coal eliminations Continuing Onshore US Total Group
------------------------------------- --------- ------ -------- ----- ------------ ---------- ---------- -----------
Annualised profit after taxation
excluding net finance costs and
exceptional items..................... 1,357 799 5,216 2,305 (240) 9,437 (575) 8,862
Average capital employed................ 9,000 22,278 16,386 8,721 6,661 63,046 5,359 68,405
----- ------ ------ ----- ----- ------ ------ ------
Underlying Return on Capital Employed... 15% 4% 32% 26% -- 15% -- 13.0%
----- ------ ------ ----- ----- ------ ------ ------
Group and
unallocated
items/ Total
Half year ended 31 December 2017 US$M Petroleum Copper Iron Ore Coal eliminations Continuing Onshore US Total Group
------------------------------------- --------- ------ -------- ----- ------------ ---------- ---------- -----------
Annualised profit after tax excluding
net finance costs and exceptional
items................................. 586 3,446 4,839 2,198 (431) 10,638 (600) 10,038
Average capital employed................ 8,454 23,057 16,846 8,863 5,365 62,585 15,725 78,310
----- ------ ------ ----- ----- ------ ------ ------
.Underlying Return on Capital Employed.. 7% 15% 29% 25% -- 17% (4%) 12.8%
----- ------ ------ ----- ----- ------ ------ ------
Underlying return on capital employed (ROCE) by asset
New
South
Western Wales
Half year ended 31 December 2018 Queensland Australia Energy Conventional Pampa Olympic Total Onshore Total
US$M Antamina Coal Iron Ore Coal Petroleum Cerrejon Escondida Norte Potash Dam Other Continuing US Group
-------------------------------- -------- ---------- --------- ------ ------------ -------- --------- ----- ------ ------- ----- ---------- ------- ------
Annualised profit after
taxation excluding net
finance costs and
exceptional items............. 382 2,114 5,215 195 1,599 162 981 64 (128) (358) (789) 9,437 (575) 8,862
Average capital employed........ 1,264 7,034 17,705 848 8,596 870 11,990 1,999 3,784 7,114 1,842 63,046 5,359 68,405
----- ----- ------ --- ----- --- ------ ----- ----- ----- ----- ------ ----- ------
Underlying Return on Capital
Employed...................... 30% 30% 29% 23% 19% 19% 8% 3% (3%) (5%) -- 15% -- 13.0%
----- ----- ------ --- ----- --- ------ ----- ----- ----- ----- ------ ----- ------
New
South
Western Wales
Half year ended 31 December 2017 Queensland Australia Energy Conventional Pampa Olympic Total Onshore Total
US$M Antamina Coal Iron Ore Coal Petroleum Cerrejon Escondida Norte Potash Dam Other Continuing US Group
-------------------------------- -------- ---------- --------- ------ ------------ -------- --------- ----- ------ ------- ----- ---------- ------- ------
Annualised profit after tax
excluding net finance costs
and exceptional items......... 524 1,782 4,834 277 848 189 2,516 514 -- (82) (764) 10,638 (600) 10,038
Average capital employed........ 1,206 7,099 17,991 888 7,960 884 13,897 1,484 3,478 6,541 1,157 62,585 15,725 78,310
----- ----- ------ --- ----- --- ------ ----- ----- ----- ----- ------ ------ ------
Underlying Return on Capital
Employed...................... 43% 25% 27% 31% 11% 21% 18% 35% -- (1%) -- 17% (4%) 12.8%
----- ----- ------ --- ----- --- ------ ----- ----- ----- ----- ------ ------ ------
--------------------------------------------------------------------------------
BHP Results for the half year 63
ended 31 December 2018
Glossary
Alternative Performance
Measure (APM) Reasons why we believe the APMs are useful Calculation methodology
----------------------- ------------------------------------------------- -------------------------------------------------
Underlying Allows the comparability of underlying financial Profit after taxation attributable to BHP
attributable profit performance by excluding the impacts of shareholders excluding any exceptional items
exceptional items and is a performance indicator attributable to BHP shareholders.
against which short- term incentive outcomes for
our senior executives are measured. It is also
the basis on which our dividend payout ratio
policy is applied.
Underlying basic Allows the comparability of underlying financial Underlying attributable profit divided by the
earnings per share performance by excluding the impacts of weighted basic average number of shares.
exceptional items.
Underlying EBITDA Used to help assess current operational Earnings before net finance costs, depreciation,
profitability excluding the impacts of sunk costs amortisation and impairments, taxation expense,
(i.e. depreciation from initial investment). Each discontinued operations and exceptional items.
is a measure that management uses internally to Underlying EBITDA includes BHP's share of
assess the performance of the Group's segments profit/(loss) from investments accounted for
and make decisions on the allocation of using the equity method including net finance
resources, along with Underlying EBITDA margin. costs, depreciation, amortisation and impairments
and taxation expense.
Underlying EBITDA Underlying EBITDA excluding third party product
margin EBITDA, divided by revenue excluding third party
product revenue.
Underlying EBIT Used to help assess current operational Earnings before net finance costs, taxation
profitability excluding finance costs and expense, discontinued operations and any
taxation expense which are managed at the Group exceptional items.
level.
Capital and Represents the total outflows of our operational Purchases of property, plant and equipment and
exploration investing expenditure and is used as part of our exploration expenditure.
expenditure Capital Allocation Framework for the most
efficient deployment of capital.
Free cash flow Reflects our operational cash performance Net operating cash flows less net investing cash
inclusive of investment expenditure which helps flows.
to highlight how much cash was generated in the
period to be available for the servicing of debt
and distribution to shareholders. It is a key
measure used as part of our Capital Allocation
Framework.
Net debt Net debt shows the economic position of gross Interest bearing liabilities less cash and cash
debt offset by cash immediately available to pay equivalents for the Group at the reporting date.
debt if required. It is also used to monitor the
Group's capital management by relating net debt
Gearing ratio relative to equity from shareholders. Ratio of net debt to net debt plus net assets.
Net operating assets Enables a clearer view of the physical assets Operating assets net of operating liabilities,
deployed to generate earnings by highlighting the including the carrying value of equity accounted
net operating assets of the business from the investments and predominantly excludes cash
financing and tax balances. This helps provide a balances, loans to associates, interest bearing
meaningful indicator of the underlying liabilities, derivatives hedging our debt and tax
performance of our assets and enhances balances.
comparability between them.
--------------------------------------------------------------------------------
Alternative performance measures 64
Alternative Performance
Measure (APM) Reasons why we believe the APMs are useful Calculation methodology
------------- ------------------------------------------------- -------------------------------------------------
Underlying return Indicator of the Group's capital efficiency and Annualised attributable profit after taxation
on capital employed is provided on an underlying basis to allow excluding exceptional items and net finance costs
(ROCE) comparability of underlying financial performance (after taxation) divided by average capital
by excluding the impacts of exceptional items. employed.
Profit after taxation excluding exceptional items
and net finance costs (after taxation) is profit
after taxation from Continuing and Discontinued
operations excluding exceptional items, net
finance costs and the estimated taxation impact
of net finance costs. These are annualised for a
half-year end reporting period.
The estimated tax impact is calculated using a
prima facie taxation rate on net finance costs
(excluding any foreign exchange impact).
Average capital employed is calculated as the
average of net assets less net debt for the last
two reporting periods.
Adjusted effective Provided on an underlying basis to allow Total taxation expense excluding exceptional
tax rate comparability of underlying financial performance items and exchange rate movements included in
by excluding the impacts of exceptional items. taxation expense divided by Profit before
taxation and exceptional items.
Unit cost Used to assess the controllable financial Ratio of net costs of the assets to the equity
performance of the Group's assets for each unit share of sales tonnage. Net costs is defined as
of production. Unit costs are adjusted for site revenue less Underlying EBITDA and excludes
specific non controllable factors to enhance freight and other costs, depending on the nature
comparability between the Group's assets. of each asset. Freight is excluded to provide a
similar basis of comparison to our peer group.
Conventional petroleum unit costs exclude:
. Exploration, development and evaluation
expense as these costs do not represent our
cost performance in relation to current
production and provides a similar basis of
comparison to our peer group;
. Other costs that do not represent underlying
cost performance of the business.
Escondida unit costs exclude:
. By-product credits being the favourable impact
of by-products (such as gold or silver) to
determine the directly attributable costs of
copper production.
WAIO, Queensland Coal and NSWEC unit cash costs
exclude royalties as these are costs which are
not deemed to be under the Group's control, and
exclusion provides a similar basis of comparison
to our peer group.
--------------------------------------------------------------------------------
BHP Results for the half year 65
ended 31 December 2018
The method of calculation of the principal factors that affect the period on
period movements of Underlying EBITDA are as follows:
Principal factor Method of calculation
---------------- -------------------------------------------------------------------------------
Change in sales Change in average realised price for each operation from the prior period to
prices the current period, multiplied by current period sales volumes.
Price-linked costs Change in price-linked costs (mainly royalties) for each operation from the
prior period to the current period, multiplied by current period sales volumes.
Productivity Change in sales volumes for each operation not included in the Growth category
volumes from the prior period to the current period, multiplied by the prior year
Underlying EBITDA margin.
Growth volumes Volume - Growth comprises: (1) Underlying EBITDA for operations that are new or
acquired in the current period minus Underlying EBITDA for operations that are
new or acquired in the prior period; (2) Change in sales volumes for operations
identified as a Growth project from the prior period to the current period
multiplied by the prior year Underlying EBITDA margin; and (3) Change in sales
volumes for our petroleum assets from the prior period to the current period
multiplied by the prior year Underlying EBITDA margin.
Controllable cash Total of operating cash costs and exploration and business development costs.
costs
Operating cash costs Change in total costs, other than price-linked costs, exchange rates, inflation
on costs, fuel and energy costs, non-cash costs and one-off items as defined
below for each operation from the prior period to the current period.
Exploration and Exploration and business development expense in the current period minus
business exploration and business development expense in the prior period.
development
Exchange rates Change in exchange rate multiplied by current period local currency revenue and
expenses.
Inflation on costs Change in inflation rate applied to expenses, other than depreciation and
amortisation, price-linked costs, exploration and business development
expenses, expenses in ceased and sold operations and expenses in new and
acquired operations.
Fuel and energy Fuel and energy expense in the current period minus fuel and energy expense in
the prior period.
Non-cash Change in net impact of capitalisation and depletion of deferred stripping from
the prior period to the current period.
One-off items Change in costs exceeding a pre-determined threshold associated with an
unexpected event that had not occurred in the last two years and is not
reasonably likely to occur within the next two years.
Asset sales Profit/(loss) on the sale of assets or operations in the current period minus
profit/(loss) on sale of assets or operations in the prior period.
Ceased and sold Underlying EBITDA for operations that ceased or were sold in the current period
operations minus Underlying EBITDA for operations that ceased or were sold in the prior
period.
Share of operating Share of operating profit from equity accounted investments for the current
profit from equity period minus share of operating profit from equity accounted investments in the
accounted prior period.
investments
Other Variances not explained by the above factors.
Productivity comprises changes in controllable cash costs, changes in volumes
attributed to productivity and changes in capitalised exploration (being
capitalised exploration in the current period less capitalised exploration in
the prior period as reported in the cash flow statement).
--------------------------------------------------------------------------------
Alternative performance measures 66
Date: 19/02/2019 07:47:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
