In fiscal year 2021, BHP Billiton performed safely and steadily with excellent financial performance. At the same time as the outstanding performance, the board of directors announced a final dividend of $2 per share. The total shareholder return for the year is more than $15 billion.
BHP's strategy is to continue to create long-term value and returns across the entire cycle. In line with this strategy, the Group is committed to having a world-class asset portfolio, producing attractive resource products in line with global trends, and leading the sustainable development of the industry by achieving sound operation and adhering to strict and orderly capital allocation. And continue to create social value.
With the continuous development and change of the world, BHP Billiton actively conforms to the trend, seizes the opportunities brought by the major trend, and is always at the forefront of sustainable development.
To this end, BHP announced:
Invest in the first phase of the Jansen potash project, which is highly compatible with BHP Billiton's development strategy and will help the group develop world-class assets for future commodities.
Coach plans to sign an agreement with Woodside (Woodside) to merge BHP Billiton's oil and gas business to create one of the top 10 independent energy companies in the world. The new company after the merger will have a large-scale portfolio of production, development and exploration assets.
And plans to adopt a unified enterprise structure to make BHP more efficient and flexible, giving new impetus to continued performance improvement and growth.
Ken MacKenzie, chairman of BHP Billiton, said:
BHP's outstanding performance over the past year demonstrates the group's outstanding strength in terms of asset portfolio, balance sheet, staff team, performance culture and so on. Today, we declare a year-end dividend of $2 per share. So far, we have returned more than $15 billion to our shareholders over the past year.
Today's era is rapidly changing, and BHP Billiton is moving steadily on the road to the future. The Group has formulated a clear development strategy and strictly implemented it. By investing in the first phase of the Jansen potash project, the Group will have resource products with clear demand prospects and considerable growth potential in the coming decades. We have signed an agreement with Woodside to merge our respective oil and gas portfolios. The move will increase the scale of operations and synergies, maximise the value of BHP's oil and gas assets and have a more diversified product portfolio to support the energy transformation. It is imperative to unify the enterprise architecture of BHP Billiton. By streamlining its structure and improving efficiency, BHP will actively shape its future-oriented portfolio with greater flexibility. The strategic positioning announced by the Group will help us firmly seize the opportunities in emerging and existing markets and continue to create long-term value and returns in the coming decades. "
Han Murui, chief executive of BHP Billiton, said:
Over the past year, the BHP team has achieved excellent operational and financial performance. These achievements can be attributed not only to the tireless efforts of the Group's 80,000 employees and contractors, but also to the support of our suppliers and customers around the world, as well as the communities and governments in which we do business. Most importantly, we have achieved performance improvement on the premise of ensuring safety in production. BHP Billiton has maintained zero fatalities for more than two years. In the current financial year, the output of a number of assets of the Group has continuously set a new record, and the construction of the four major capital projects have been successfully delivered in accordance with the planned budget and construction period. We continue to invest in talent and technology research and development to inject momentum into the Group's continued performance development.
We are actively adjusting BHP's portfolio to lay a solid foundation for future returns and growth. The Group actively complies with the general trend of electrification and decarbonization and emission reduction, and actively expands the exploration and development fields of copper and nickel. We have approved the construction of the first phase of the Canadian Jansen potash project, which is located in one of the best potash basins in the world and has a good investment attraction in the region. The Jansen potash project will not only generate a healthy return on investment on its own, but more importantly, open up a new future growth path for BHP Billiton and expand our asset allocation in the future-oriented commodities sector. Our gas business will merge with Woodside to form one of the top 10 independent energy companies in the world, unleashing synergies and creating greater value for BHP shareholders. The new company after the merger will be stronger and more resilient, and will continue to increase its value in the process of energy transformation. "
Make every effort to ensure the safety and health of employees and communities
The group has maintained zero fatalities for more than two and a half years. In the current fiscal year, the rate of high potential industrial accidents has decreased by 17%, and the total rate of industrial accidents can be recorded by 11%.
BHP Billiton's great emphasis on safety, health and employee welfare has enabled us to achieve safe and sound operations and excellent performance.
Operational excellence: excellent operating performance and free cash flow with a profit margin of 64%
Strong operating performance during the period, the Western Australian Iron Mine (WAIO), Goonyella Coking Coal Mine and the Olympic Dam continued to set production records, while average production at the (Escondida) Copper Concentrator in Escondida remained at record levels.
The group's operating profit was $25.9 billion, up 80 per cent; the current profit before interest, tax, depreciation and amortisation was $37.4 billion, with a profit margin of 64 per cent.
Distributable profits were $11.3 billion (including a special loss of $5.8 billion, mainly due to impairment of potash and thermal coal assets, as well as the impact of the Samarco dam break on the current fiscal year). The distributable profit for the current period was $17.1 billion, an increase of 88 per cent over the same period last year.
Thanks to rising iron ore and copper prices and excellent operating performance, the Group achieved a net operating cash flow of US $27.2 billion, which exceeded US $15 billion for the fifth year in a row. At the same time, free cash flow reached $19.4 billion.
Strict and orderly capital allocation: four major construction projects were successfully put into production, and early reserve projects increased.
In the current fiscal year, the Group's capital and exploration expenditure was US $7.1 billion, which was within the guidance target. We now expect approximately $6.7 billion in mineral capital and exploration expenditure in fiscal year 2022 (another $2.3 billion for oil and gas exploration).
During the year, the construction of the Group's four major capital projects were successfully delivered in accordance with the planned budget and time limit. The Group completed the acquisition of an additional 28% interest in Shenzi Oilfield in November 2020. In August 2021, investment in the development of the Shenzi North oil field was approved.
The Group is committed to continuing to develop early project options for future-oriented commodities. In order to deepen this strategy, we recently announced that we have made a takeover offer to Noront Resources of Canada. In addition, the Group signed an agreement to cooperate in nickel exploration in Canada and an agreement to purchase exploration rights for the (Elliott Copper Project) copper project in Elliott, Australia. In May 2021, South Australia Oak Dam launched the next phase of drilling.
In fiscal year 2021, net debt fell to $4.1 billion from $12 billion on June 30, 2020. As the Group has announced plans to merge its oil and gas business with Woodside Oil Company (Woodside), we will re-evaluate our net debt target and provide an update in the interim results statement for the first half of fiscal year 2022.
Value and return: continued to achieve generous cash returns, with a total shareholder return of $15.2 billion for the whole year
The board of directors has decided to pay a final dividend of $2 per share, equivalent to a total dividend of $10.1 billion, including an additional dividend of $0.91 per share above the 50 per cent minimum dividend policy (equivalent to a total additional dividend of $4.6 billion). The reported dividend reached $3.01 per share, equivalent to an 89% dividend yield.
The rate of return on capital in the current period increased to 32.5%.
A series of strategic adjustments:
Invest in the first phase of the Jansen potash project, which is highly in line with the Group's development strategy to develop world-class commodity assets for the future.
The board of directors of BHP Billiton has approved a US $5.7 billion investment in the first phase of the Jansen potash project in Canada, including the required port infrastructure.
Investing in potash projects will help BHP better fit global trends, including population growth, dietary changes, decarbonization and improved environmental management.
The annual output of the first phase of the Jansen project is expected to be 4.35 million tons of potash ore.
It is expected to be put into production in 2027, the construction time is expected to be 6 years, and the capacity climbing period after production is 2 years.
According to market consensus price expectations, the approved investment in the first phase of the Jansen project is expected to generate an internal rate of return of 12% to 14%. The investment is expected to be recovered within seven years after it is put into production, and the EBITDA profit margin for the current period will reach about 70%.
Jansen project is located in one of the best potash basins in the world, the region has a good investment attraction, the project will continue to release rich returns.
It plans to sign an agreement with Woodside (Woodside) to merge BHP Billiton's oil and gas business to create an independent energy company that ranks among the top 10 in the world. The combined company will have a large portfolio of production, development and exploration assets.
BHP Billiton and Woodside have signed a merger commitment to merge their respective oil and gas portfolios through an all-share merger. The merger is subject to confirmatory due diligence, negotiations and the signing of complete transaction documents, with prerequisites including shareholder, regulatory and other relevant approvals.
After the completion of the merger, the new company will be owned by existing shareholders of Woodside and BHP Billiton by about 52 per cent and 48 per cent, respectively. The new company will continue to be listed on the Australian Stock Exchange (ASX) and is considering listing on other exchanges.
The merger will form one of the top 10 independent energy companies in the world and will become the largest energy listed company on the Australian Stock Exchange (ASX).
The merger will create more options for BHP shareholders, including how to weigh different investment propositions for BHP and its combined oil and gas business with Woodside.
The merger will bring considerable benefits to BHP shareholders, including the expected release of post-merger synergies of more than $400m a year.
The new company, made up of two high-quality portfolios, will have a high-return oil and gas portfolio, long-lived liquefied natural gas assets and financial resilience to provide the energy needed for global growth and development in the energy transformation process.
The plan is to adopt a unified enterprise structure to make BHP more efficient and flexible, giving new impetus to continued performance improvement and growth.
Subject to the final approval of the board of directors and other relevant parties, BHP plans to unify its current dual-listed corporate structure. The unified enterprise architecture will be more streamlined and efficient, reducing redundancy, and governance and internal processes will be further optimized.
The unified enterprise structure will help BHP Billiton better face the future operating environment, improve the flexibility to reshape the portfolio, maximize the long-term value of shareholders, and simplify the spin-off process of the oil and gas business.
As a result of a series of portfolio adjustments made by the Group over the past period of time, the profit contribution from BHP Plc assets has been significantly reduced, resulting in a significant reduction in the expected cost of unifying the corporate structure, from about $1.2 billion to the currently estimated one-time expenditure of $400m to $500m.
If the unified enterprise structure is implemented, shares held by eligible BHP Plc shareholders will be exchanged for BHP Ltd shares at 1:1. BHP's board, management, dividend policy, ability and fundamentals to pay tax-free dividends will remain unchanged.
BHP Billiton, which has a unified corporate structure, will mainly be listed on the Australian stock exchange (ASX), while trading in London, Johannesburg and New York will be listed in different ways.
If approved, BHP expects to complete corporate restructuring in the first half of the calendar year 2022, followed by a proposed oil and gas merger with Woodside.
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