必和必拓 (BHP) 2019 Q2 法說會逐字稿

Today, Peter Beaven and I are pleased to present our 2019 interim results. But before I begin, I'd like to briefly reflect on the tragic incident at Vale's Brumadinho iron ore operation in Brazil last month.

The collapse of the dam is a tragedy, and we offer our heartfelt sympathy to all those affected. At BHP, we're committed to learn from this. And as an industry, we must redouble our efforts to make sure events like this cannot happen. As always, please note the disclaimer and its importance. At BHP, our focus is clear: to maximize cash flow, maintain capital discipline and increase value and returns.

And our record shows that this is the right formula, the right formula for our shareholders. Because since 2016, we have strengthened our balance sheet through a $16 billion reduction in net debt, we've reinvested $20 billion into high-returning projects, and we've returned more than $25 billion to the shareholder.

In the December half, despite some unplanned outages, our simplified portfolio of world-class assets delivered a solid performance. And this is reflected in the financial scorecard for the period. We generated underlying EBITDA of $10.5 billion at a margin of 52%. And after disciplined investment, this was converted into a free cash flow of $3.6 billion, and this excludes the proceeds from the recently completed sale of our onshore US assets of $10.8 billion.

We further reduced net debt and returned over $13 billion to shareholders, and that includes the $5.2 billion special dividend that was paid in January.

Before I hand over to Peter to go through our financial performance in detail, let me turn to safety. The safety, health and well-being of our people is our first priority. So it is with great sadness that in December, our colleague Allan Houston died in an incident at BMA Saraji Mine.

On behalf of everyone at BHP, I extend our deepest sympathies to Allan's family, to his friends, and the team at Saraji. A thorough investigation is now underway, and we will share its findings.

This period, the frequency of our high potential injuries, a key metric we use to assess safety performance, fell 25%, but we can and will always do more. More to strengthen the safety -- the culture of safety, and with 3 priorities to drive this: first, to embed a new contractor management framework to make sure our contractors like our employees are safe at work; second, to actively promote a mindset of chronic unease, this is a state of constant vigilance and awareness that makes safety everyone's responsibility; and third, to utilize a new global tool that will make it much easier to capture and report safety data and share lessons across the company.

At BHP, we have an extreme focus on the safety and the safe management of tailings facilities. It's our responsibility to our employees, contractors and the communities where we operate. And we significantly increased the rigor of our assessment and management of tailing facilities after the failure of the Fundão dam at Samarco in 2015.

Dam safety reviews were performed at all significant active, inactive and closed tailings facilities across BHP, and that included a thorough evaluation of their risks. And the reviews identified that there were no significant deficiencies to the stability of the dams. The tailings dam monitoring and alarm systems at all sites were also reviewed, and they were supplemented where new opportunities to improve were identified. All our significant tailings facilities have emergency response and evacuation plans in place, and we've implemented regular monitoring and review processes as directed by the Canadian Dam Association guidelines, which are regarded as the most rigorous in the industry.

In total, over 400 actions were assigned from the reviews, 93% of them are complete and those actions still in progress are considered low priority, such as administrative actions and long-lead items related to closure and climate change impacts. And none of these actions are overdue. The recent tragedy at Vale's iron ore operations shows that we as an industry must act with even greater urgency to make sure these incidents do not happen. So we'll review all the lessons of this failure as we emerge and urgently apply them to further upgrade the construction and operation of our dams.

We will act with even greater care and attention to make sure our employees and communities are not in harm's way. And we will continue and accelerate our work with the industry to advance the science and technology required to make tailings storage safe. And this includes existing work streams that we have, such as early warning technologies, better models and monitoring of possible modes of failure, tailings dewatering options and dry tailings storage viability at scale. And we'll also meet with a number of global bodies this month to expedite this work. And at BHP, we welcome -- we'd welcome a common international independent body to oversee the integrity of the construction and operation of all dams. And we support the call for increased transparency in tailings dam disclosure. And we'll work with the industry to make sure the disclosure is consistently applied and will inform better tailings dam stewardship.

So I'll now hand over to Peter.

Over the past 6 months, we delivered a solid financial performance. Our strong results in petroleum and coal offset a lower contribution from copper, demonstrating the effectiveness of our diversified portfolio. Strategically, we've added early-stage options in our preferred commodities and completed a timely exit from shale for $10.8 billion. Excluding Onshore U.S., we generated EBITDA of $10.5 billion and maintained our margin of more than 50%. Our underlying attributable profit was $4 billion. We recorded 2 exceptional items, which largely offset each other: a $210 million charge related to funding and the provision for Samarco; and a $240 million gain related to global taxation matters resolved during the period.

The EBITDA waterfall chart shows the positive impact of the stronger U.S. dollar, offset by several unplanned outages during the half. These mask the underlying performance of the business, which contributed productivity gains of $215 million. Western Australian Iron Ore delivered a strong performance with record volumes at Jimblebar. BMC benefited from record production at South Walker Creek. And while Escondida recorded a negative movement in controllable cash costs, this was attributable to an expected fall in grade. Unplanned outages had a negative $835 million EBITDA impact. And we now anticipate productivity gains to be broadly flat for the full year. With these issues and an elevated level of planned maintenance now behind us, we expect a strong second half performance.

Each of our commodities again made a significant contribution to our result. Iron Ore generated EBITDA of more than $4 billion, at a margin of 59%. Unit costs declined from the same period last year despite the derailment. In the second half, we expect record volumes and full year unit costs of below $14 per tonne. In Petroleum, higher oil and gas prices and strong uptime performance supported a 38% increase in EBITDA to over $2 billion, representing 22% of group EBITDA.

While unit costs rose 10% due to planned maintenance and natural field decline, guidance for the full year remains unchanged at less than $11 per barrel with volumes at the upper end of guidance now expected. Coal also delivered a strong result with EBITDA of $2 billion, reflecting higher metallurgical coal prices and a solid operating performance. Queensland Coal costs were broadly flat despite a maintenance-heavy half and a 10% increase in stripping.

Copper EBITDA decreased to $1.9 billion with prices 18% lower and production outages at Olympic Dam and Spence.

At Escondida, the 10% increase in costs is largely due to an 11% decline in grade and payment of the labor negotiation bonus. Improved labor productivity and optimized maintenance strategies to increase equipment utilization are expected to keep costs around $1.15 per pound over the full year. Over the past 6 months, net operating cash flow was $6.7 billion and free cash flow was $3.6 billion. This included greater investment in high-returning projects and increased taxes paid following last year's strong profits. And this excludes the $7 billion in proceeds from the Onshore U.S. sale received by the 31st of December.

As we went through in detail last November, our capital allocation framework has been embedded throughout the organization. It transparently directs cash to its value maximizing use, be that the balance sheet, investment or returns to shareholders.

Today, after a further $1 billion reduction during the half, net debt sits at $9.9 billion. This is before the $5.2 billion special dividend paid at the end of January and the $3.5 billion of deferred Onshore U.S. proceeds to be received by the end of April.

In the near term, net debt is expected to remain at the lower end of our $10 billion to $15 billion range. Over the period, we invested $3.5 billion in maintenance and organic growth projects. Capital and exploration expenditure guidance for the 2019 and 2020 financial years remains below $8 billion and this includes the recently approved high-returning Atlantis Phase 3 and West Barracouta projects. And finally, over the last 6 months, we've returned more than $13 billion to shareholders.

This comprises last year's $3.4 billion record final dividend, the $5.2 billion buyback of BHP Group Limited shares at $27.64 per share, and the $5.2 billion special dividend paid on the 30th of January, delivering on our commitment to return the entire Onshore U.S. proceeds to shareholders in a timely manner.

Reflecting our strong balance sheet and cash flow, today, the Board announced an interim dividend of USD 0.55 per share, which represents a payout ratio of 75%. This includes USD 0.37 per share under the 50% payout ratio and an additional amount of USD 0.18 per share. In total, since February 2016, we've returned more than $25 billion to shareholders. Over the half year, our return on capital employed was 15%.

Our bulk commodity assets again provided exceptional returns, approximately 30%, with increases at both Western Australian Iron Ore and Queensland Coal. Conventional petroleum also delivered higher returns, as the strong operational performance meant we captured the benefit of higher prices. Softer prices clearly weighed on returns at our copper assets and this was compounded by unplanned outages at Olympic Dam and Spence. While the underlying performance of these assets is sound, we must do more to improve the stability of our operations. At Olympic Dam, progression into the Southern mine area is going well with record underground development. Delivering the higher grade from this area and the Brownfields Expansion Project will unlock higher returns.

Jansen remains an important strategic option, and we continue to investigate multiple ways to maximize the value of the project, from progressing detailed engineering studies to improved capital efficiency, to trialing technology to minimize operating costs.

So in summary, over the past 6 months, we delivered on several strategic priorities. We exited shale cleanly in a high oil price environment and returned a record amount to shareholders within months of the transaction close. We continue to add to our portfolio of options in copper and oil and have settled a long-standing dispute with the Australian Taxation Office. We have a very strong sense of where the next wave of productivity will come. This will continue to offset inflationary and resource pressures and allow all our assets to improve returns. We remain confident that our plans will deliver, at 2017 prices, returns around 20% in the medium term. And we will always remain focused on maximizing cash flow, maintaining capital discipline and increasing value and returns in accordance with our Capital Allocation Framework.

Thank you.

Thank you, Peter. Our insights on economic and commodity markets inform our capital allocations decisions. We operate in an uncertain world. Unfavorable policies, demonstrated by recent shifts towards protectionism, undermine confidence and disrupt trade. The free flow of capital, goods and services and ideas across the world sustain global growth and underpin the prosperity of companies like BHP and their host nations. So we closely monitor the external environment amid the current trade uncertainties and therefore are somewhat cautious about the short-term outlook. But our long-term view remains positive. Population growth and higher standards of living will generate demand for decades to come. And our company is well placed for this future.

Our strategic framework provides us the foundation for long-term value creation. And we've shaped our portfolio around the highest quality assets in stable, low-risk jurisdictions and they supply premium commodities with attractive fundamentals. As well we hold development options and exploration licenses in the world's premier basins, which have the potential to increase our exposure to copper, oil and potash. This portfolio is unique in the sector, but our competitive advantage must extend beyond world-class assets and attractive commodities. It's our culture and capability that will truly set us apart. So that's why late last year, we established a transformation office to deliver the next wave of value creation. And through this systemic program, we will take advantage of, and fully leverage, proven methods of continuous improvement, automation and our centers of excellence to make our operations more stable and predictable. And at the heart of this transformation are our people. So we'll build on our capability, strengthen our culture and empower our front line to act on their ideas in real time, unfettered by bureaucracy.

I am confident that our transformation program will shape our destiny and position BHP for the next decade and beyond. Over the past few years, I've outlined our key drivers to increase the value and returns of BHP. They include cost efficiencies, technology, latent capacity, major projects exploration and Onshore U.S. I'll expand now on some examples of those from across our businesses. In Minerals Australia, we made good progress. At Queensland Coal, we've offset a sharply higher strip ratio with record stripping, and we're confident to deliver a strong end to the year. Western Australian Iron Ore, Jimblebar's fully automated -- autonomous trucks are now our safest and most productive. And this success will now guide a phased rollout across other operations. And through an innovative approach to maintenance and production, our new operation services team will bring more contractors in house to improve labor stability and accelerate productivity. In Minerals Americas, Escondida's new labor agreement has triggered improvements in truck utilization and labor productivity. And increased concentrator throughput has helped offset lower grades. Despite this grade decline and the increase of desalinated water, we will keep costs around $1.15 per pound this year and into the medium term. At Spence, improved maintenance practices increased mill availability and throughput. And the development of the hypogene resource is now over 1/3 complete and remains on track to significantly increase output in 2021.

At Jansen, we've reached target depth at both shafts during the period. And we're excited about our copper exploration opportunities. We've increased our interest in SolGold, which has -- and its highly-prospective Cascabel project in Ecuador. And, we've expanded our drilling campaign to appraise our recent discovery south of Olympic Dam. So finally to conventional petroleum, where our suite of almost 30 low-cost infill and improvement options offer average returns above 40%. We also have several high-return projects in execution. Mad Dog 2 is more than 1/3 progressed. And in December, we sanctioned the Bass Strait West Barracouta project. Just last week, we approved Atlantis Phase 3, and we reached first production at Greater Western Flank-B with completion now imminent. Our exploration strategy also shows great promise. During the period, we had drilling successes in Mexico and Trinidad and Tobago and we'll now accelerate our appraisals in each of those regions.

So to conclude. Our focus is simple and resolute: to maximize cash flow, maintain capital discipline and increase value and returns. Over the past 6 months, our long-term plans delivered solid results and we returned record amounts of cash to our shareholders. I'm confident that our asset-by-asset plans will improve safety, unit costs, and production in the second half, so that at current spot prices, we expect full year free cash flow of more than $9 billion and a return on capital employed of 20%. Beyond this, there is still more we can and will do. With a constructive outlook for our commodities, a culture of continuous improvement, a strong balance sheet and a rich suite of quality organic options, BHP is set up for a great future. Thank you.