BHP Billiton Plc (BHP)
Full Year Financial Results 2008
August 18th 2008.

Executives

Marius Kloppers -- Chief Executive Officer
Alex Vanselow -- Chief Financial Officer

Analysts

Andrew Keen -- Sanford Bernstein
Jason Fairclough – Merrill Lynch
Robert Clifford -- Deutsche Bank
Vicky Binns -- Merrill Lynch
Craig Campbell -- Morgan Stanley
Brendan Harris -- Macquarie
Sylvain Brunet -- Exane BNP Paribas
Sophia Hart -- UBS
Maurizio Carulli -- AXA Investment Managers
Peter O’Connor -- Deutsche Bank
David Pleming -- Macquarie
Warren Edney -- ABN AMRO

Marius Kloppers -- Chief Executive Officer

Okay. Ladies and gentlemen, my name is Marius Kloppers, Chief Executive Officer of BHP Billiton. Welcome today to presentation of our full year results for our fiscal year 2008. I’m speaking to you today from London. We’ve got in Sydney Alex Vanselow, CFO of the company, who’ll be presenting from Sydney. Before we begin today’s presentation, unfortunately, as is now customary, I’ve got to point you to the three pages of disclaimer. They are important. As usual, we tried hard to get them down to two pages and didn’t succeed but they are important in relation to today’s presentation. Please read them carefully in the materials that you’ve received.

Before handing over to Alex Vanselow to give you a full overview of the financial results, I’d like to start by giving you a brief overview of the results. I’ll then cover, after Alex has spoken, our performance, BHP Billiton’s perspectives on the macro environment, supply/demand for our product, and then finally I’ll talk about a few aspects of our business and how we’re positioned. Then Alex and I will take some questions. So let me talk about the most difficult part of today’s presentation and simultaneously, also, the most important, safety. Over the past year, as we did last year, we had a 20% improvement in our total recordable injury frequency rate, which is the measure that we most commonly use to measure our performance, 20% improvement. Last year, we had roughly the same improvement and, over the past year, we’ve taken down our rate to, 5.9, which is a very, very good achievement by industry standards. However, despite this positive result, despite our severity rates, despite our injury rates going down, we still suffered 11 fatalities this year, five of which in a helicopter crash in Angola. This is a very difficult thing for a company to handle that is dedicated to zero harm. These events touch not only the families but also colleagues and operations of those teams that our workers are involved in and it just shows you that, despite our best efforts, despite having made great progress on safety, we’ve got more to do, and you should understand that this management team, every person in the company, is committed to taking this further, to continue to strive to zero harm and continue to drive towards that goal. We believe that zero harm is an achievable objective.

Now let me talk about our financial performance. In the past year, we’ve continued to see strong demand for our products. Strong demand with supply-side constraints, which we’ll talk about a little bit later on, has resulted in a strong pricing environment for us. And it’s against this backdrop of strong supply/demand, good supply/demand conditions, that I’m very pleased with the strong operating result that the company has put in, which has allowed us to present another set of record results today, the seventh set of record results in succession. The result and this performance demonstrates our focus on the core business. We achieved this result through production records across the breadth of our portfolio and we’ve posted earnings record numbers and production record numbers for a number of key commodities. We’re extremely pleased about our cost performance, which has been achieved in a market that has been very, very tight for inputs and where certainly some of our raw materials have escalated in cost fairly dramatically over the period.

So, in summary, our EBITDA was up 22% to US$28 billion. Our EBIT was up 21% to US$24.3 billion and then the measure that’s perhaps of most interest to our shareholders, attributable-profit. Our attributable-profit was up 12% to $15.4 billion before exceptional items, and the exceptional items in our results, really was immaterial over this past year. Earnings per share, was up 18% per share to US$2.75 per share. The latter figure, which is obviously higher than the 12% on the attributable line, showed the benefit of our buyback program, which, unfortunately, had to be suspended in December 2007 when our mandates expired because of regulatory constraints surrounding our bid for Rio Tinto.

Despite cost pressures, and Alex will talk about that a little bit more, we continued to capture a very substantial portion of price movement to the bottom line. Our underlying EBIT margin was 48%. Our return on capital was 38% and I just want to point out that that return on capital figure was achieved in an environment where we’ve been ramping up our capital expenditure and there is a considerable amount of capital that is not yet productive on the balance sheet. These results are spectacular. They are built on very, very solid operating performance, and, looking towards the future, we continued our track record of successful project execution and achieved first production in 10 major new projects, and these were spread across five commodities and during the past 12 months, we also sanctioned another seven new projects.

Now, turning to the dividend, we’ve always said that our base dividend is a function of our future expectations for the sustainable earnings on the business, and cash generation of the business, and I’m very pleased that for the second year in a row we’ve rebased our dividend, this time to a final dividend of $ 0.41 per share. This is 50% higher than the equivalent period last year and, importantly, over the last three years we have seen 150% dividend increase. Because we look at our dividend as an annuity on which we progressively build, this dividend rebasing reflects management and the Board’s confidence in the outlook for our business in the years ahead. Taken together, the operating and the financial results, the dividend growth and the capital management program illustrate how we continue to lead our industry. Now let me hand over to Alex, to take you through the details of the financial results. Alex?

Alex Vanselow -- Chief Financial Officer

Thank you Marius, and welcome to everyone. Today I’m delighted to present, as Marius has highlighted, a seventh consecutive record profit result. We delivered an absolute record attributable profit of $15.4 billion, which is an exceptional achievement, realized through the diligence of our people, the hard work of our people, excellent operating performance and cost control. Importantly, we also delivered higher volumes into strong market conditions. These results demonstrate that we are focused on the right strategy of owning and operating a portfolio of upstream, large, low-cost, long-life expendable assets, diversified by commodities and geographies. This strategy provides us with greater stability of cash flow and a solid platform of growth, enabling us to reinvest in our business for the individual commodity cycles and also to continue to create and return significant value to our shareholders.

Marius mentioned a number of financial highlights in his introduction, but it is worth repeating that it is the strength of our strategy and the quality of our delivery that has produced record performance for each one of these key measures.

This year’s performance is not just about the 2008 financial year. These results build on the strength of previous years achieved through the disciplined execution of our strategy. Most of you will recall the ‘Jackson Pollock’ slide that’s on the screen now, which show the margins by commodities over half-year intervals. This is a very relevant slide because our EBIT margin progression over time shows that underlying commodities are indeed volatile. But it also shows how a highly diversified portfolio of exceptional quality and scale, embedded with superior growth optionality, can and will continue to create outstanding shareholder value. Our portfolio diversification, quality and scale is without parallel in our industry. Let’s have a look at the second half of 2008 financial year on the slide. Our performance was impacted by power disruption, by floods, by industrial action and by accelerated cost inflation. However, EBIT margin for the second half expanded to an all-time record 50% and, for the full year, as Marius mentioned, the EBIT margin was 48%.

Now we’ll turn to the performance for each customer sector group in detail and, as usual, we’ll start with Petroleum. This business is a core component of our uniquely diversified portfolio. With 13% volume growth, strong oil prices and low and stable operating cash costs, Petroleum achieved an EBIT of $5.5 billion, which was an impressive 82% increase from the prior year. Importantly, this result was not just about high oil prices. Volumes from new operations were a significant contributor, adding $1.1 billion to EBIT. Atlantis, Genghis Khan, Stybarrow were all commissioned during the year, increasing the mix of higher margin liquids in our production to 44%. This trend is likely to continue in future years, starting with the production of Neptune, which was commissioned on 6 July. As we said before, we want to focus on operating assets and we are the operator of three of these four projects.

We’ve been particularly pleased with the start-up of these operations. Stybarrow has continued to produce at full capacity of 80,000 barrels of oil equivalent per day and Neptune reached full capacity in just 15 days. These are remarkable achievements. We have also continued to progress our growth pipeline with the approval of both Bass Strait, Kipper and Turrum projects and, in addition, the capture of significant acreage in the Gulf of Mexico two lease sales and our discovery of the large Thebe gas field in North Western Australia have added further to our growth pipeline. Outside the Gulf of Mexico and outside Australia, we also continue to build a solid portfolio of opportunities within Colombia, Malaysia and the Falklands. Our focus on long-term sustainable development is also evident. For the second consecutive year, we achieved greater than 100% reserve replacement.

Aluminum delivered record alumina and metal sales. However, industry-wide cost increases for energy, fuel and other raw materials drove EBIT down by 21%. Despite a mandated 10% reduction in power consumption in South Africa, we have been able to limit the loss of local southern African metal production to just 8%. We are managing the situation as best as we can but the impact in Southern Africa metal production will continue. Base Metals is the largest EBIT contributor in the group with a record EBIT of $8 billion. As well as higher prices, we achieved record copper production for the third consecutive year, despite two earthquakes in Chile and unplanned SAG mill outages at Antamina in Peru. We delivered a 10% increase in copper production at a time of very high prices. We also announced the discovery of Pampa Escondida. Drilling to date suggests that Pampa Escondida contains at least one billion metric tons of porphyry style mineralization. Diamonds & Specialty Products EBIT was in line with last year. The Koala Underground project was delivered ahead of schedule and under budget, and production is ramping up strongly. In early July, we acquired Anglo Potash, which gives us a full ownership of more than 7,000 sq km of highly-prospective exploration permits near some of the major potash mines in Saskatchewan, Canada. And potash will further diversify our portfolio.

For Stainless Steel, EBIT was down 65%, mainly due to lower nickel price and volume, and also the start-up of Ravensthorpe and the Yabulu Expansion. The nickel price has eased from its record high in May 2007 but has remained above long-term average historical rates. During the year, we commissioned three major projects: Ravensthorpe, the Yabulu Expansion and Cliffs. Production ramp-up is continuing. Now turning to the steelmaking materials customer sector groups, in Iron Ore, we delivered yet another record result driven by strong volume growth and also cost control to capture the full benefits of the higher prices. Excluding the impact of foreign exchange, the increase in operating costs, cash costs, in Western Australia was contained to only 3%; this at a time when the whole industry is facing substantial inflationary pressures. We have consistently delivered against our aggressive growth plan, which will take production capacity to more than 300 million tons per annum by 2015 and even more beyond. This is our eighth consecutive iron ore production record, reflecting an exceptional history of successful project execution and operation efficiency.