Final Results

23rd Aug 2006 07:01

BHP Billiton PLC23 August 2006 23 August 2006Number 26/06 BHP BILLITON RESULTS FOR THE YEAR ENDED 30 JUNE 2006 • Commodity markets remain strong underpinned by supply restrictions and a generally constructive global economy. • Annual records for all key earnings measures including Underlying EBITDA up 50% to US$18.1 billion and Underlying EBIT up 54% to US$15.3 billion. • Attributable profit up 63% to US$10.5 billion, including exceptionals, and up 58% to US$10.2 billion, excluding exceptionals. • EPS up 66%, including exceptionals, and 60%, excluding exceptionals, benefiting from recent buy-backs. • Underlying EBIT margin1 and Return on Capital Employed increased to 44% and 35% respectively. • Record annual production volumes for aluminium, copper, iron ore, nickel and natural gas in a strong demand environment. • Four major growth projects completed and seven major growth projects approved. 23 projects in execution or feasibility, representing US$13.8 billion of investment. • Final dividend of 18.5 US cents per share, an increase of 27.6% on last year's final dividend. This brings the full year dividend to 36.0 US cents per share, up 28.6%. • Further capital return of US$3.0 billion, bringing total for FY2006 to US$5.0 billion. +---------------------------------------------+----------+-------------+--------+|Year ended 30 June | 2006| 2005| Change|| | | | || | US$M| US$M| |+---------------------------------------------+----------+-------------+--------+|Revenue together with share of jointly | 39,099| 31,150| 25.5%||controlled entities' revenue | | | |+---------------------------------------------+----------+-------------+--------+|Underlying EBITDA (2) | 18,053| 12,036| 50.0%|+---------------------------------------------+----------+-------------+--------+|Underlying EBIT (2) (3) | 15,277| 9,921| 54.0%|+---------------------------------------------+----------+-------------+--------+|EBIT - Profit from operations | 14,671| 9,271| 58.2%|+---------------------------------------------+----------+-------------+--------+|Attributable profit | 10,450| 6,396| 63.4%|+---------------------------------------------+----------+-------------+--------+|Attributable profit - excluding exceptional | 10,154| 6,426| 58.0%||items | | | |+---------------------------------------------+----------+-------------+--------+|Net operating cash flow (4) | 10,476| 8,374| 25.1%|+---------------------------------------------+----------+-------------+--------+|Basic earnings per share (US cents) | 173.2| 104.4| 65.9%|+---------------------------------------------+----------+-------------+--------+|Basic earnings per share - excluding | 168.2| 104.9| 60.3%||exceptional items (US cents) | | | |+---------------------------------------------+----------+-------------+--------+|Underlying EBITDA interest coverage (times) | 44.3| 51.7| (14.3%)||(2) (5) | | | |+---------------------------------------------+----------+-------------+--------+|Dividend per share (US cents) | 36.0| 28.0| 28.6%|+---------------------------------------------+----------+-------------+--------+ Refer to page 16 for footnotes, including explanations of the non-GAAP measuresused in this announcement. The above financial results are prepared in accordance with IFRS and areunaudited. All references to the prior period are to the year ended 30 June 2005. RESULTS FOR THE YEAR ENDED 30 JUNE 2006 Commentary on the Group Results Record annual results Today we are announcing our third consecutive record annual result withattributable profit of US$10.2 billion before exceptional items. This representsan increase of 58.0% over last year's result, with five of our seven CustomerSector Groups (CSGs) recording significant increases in Underlying EBIT over theprior year. Our Underlying EBIT of US$15.3 billion has increased 54.0% over last year andalmost fivefold since our June 2002 results. Over the last five years, the Grouphas invested US$15 billion on organic growth projects and acquisitions. This hasresulted in an average volume increase across our key commodities ofapproximately 38%. The Company's global footprint, diverse product range andvisibility to global markets have allowed the Company to invest through thebusiness cycle in value adding opportunities. This has positioned our businessto take full advantage of the current robust demand and price environment thatunderpins these record financial results. Full year operational records werealso accomplished, with record production achieved for five major and two minorcommodities. Our Underlying EBIT margins increased during the year to 44.4%, from 39.6% in2005 driven by price and volume increases. Return on Capital Employed remainedvery strong at 34.6%. Raw material, contractor and labour costs are all underpressure but our global procurement and business excellence initiatives arehelping to mitigate these increased costs. Our Business Excellence program hasbeen invigorated during the year with some good gains being recorded. Managementof cost pressures continues to be a key focus across the Group. We continue our strategy of delivering value enhancing growth with thecompletion of four and approval of seven major growth projects during the year.The seven new projects have an expected cost of US$5.0 billion (BHP Billitonshare), bringing our current project pipeline to 23 projects with an expectedinvestment of US$13.8 billion. Despite continued cost and schedule challenges tothe delivery of our project pipeline, we remain confident in the value theseprojects will deliver to our shareholders given market fundamentals, the needfor new supply and our stringent approval and monitoring processes. Preparing for future growth We are also laying the foundation for future growth via our global explorationand development program. Our Petroleum exploration program continues to besuccessful, in particular in the Gulf of Mexico (US). We also have over 200minerals exploration and development opportunities ongoing in approximately 35countries across Asia, Africa, Russia, the Americas and Australasia. Our longhistory of successfully operating in both developed and more challengingjurisdictions together with our proven risk management framework underpins ourability to move discoveries through to operations. The exceptional diversity of our businesses by commodity, geography and customerbase underpins the strength of our cash flows and continues to support ourability to both identify and invest in growth opportunities whilst continuing todeliver outstanding returns to shareholders in the form of our progressivedividend policy and other capital management initiatives. Dividend and Capital Management The Board today declared a final dividend of 18.5 US cents per share. Thisrepresents an increase of 27.6% over last year's final dividend of 14.5 US centsper share. This brings the total dividends for the 2006 financial year to 36.0US cents per share, an increase of 8.0 US cents per share, or 28.6%, over the2005 year. Today's declaration represents our ninth consecutive dividendincrease and means that today's dividend has increased almost threefold sincethe final dividend paid in 2002. We intend to continue with our progressivedividend policy, with further increases dependent upon the expectations forfuture investment opportunities and market conditions. We are also announcing today a further capital return of US$3.0 billion toshareholders over the next 18 months through a series of share buy-backs, and itis yet to be decided the extent to which these will be on or off market. Weexpect this will commence with an on-market buy-back in BHP Billiton Plc. This program brings the total buy-back programs to US$5.0 billion for the yearfollowing the US$2.0 billion capital management program completed in May. Underthat initiative 114.8 million shares, or 1.9% of the issued share capital of theBHP Billiton Group, was repurchased. At the conclusion of today's announced initiative, BHP Billiton will havereturned US$15.5 billion in total to shareholders through capital initiativesand dividends since June 2001. The Income Statement IFRS and Underlying EBIT BHP Billiton adopted International Financial Reporting Standards (IFRS) forreporting purposes from 1 July 2005. We have restated comparative amounts inaccordance with the Group's transition to IFRS as outlined in the FinancialInformation. The measurement differences from previous GAAP are set out in note10 of the Financial Information. IFRS also has presentational differences fromprevious GAAP, including the treatment of income from jointly controlledentities and exceptional items, as noted below, and the treatment of royalty andpetroleum related taxes of US$572 million (prior period US$601 million) whichare presented as taxation, rather than operating costs. The introduction of IFRS has led to us reporting Underlying EBIT, which is ameasure used internally and in our Supplementary Information to reflect theunderlying performance of BHP Billiton's operations. Underlying EBIT excludesall net finance costs and taxation, including net finance costs and taxation ofjointly controlled entities and any exceptional items. Under IFRS, these amountsare included in Profit from operations in the income statement. The differencesbetween Underlying EBIT and EBIT (Profit from operations) are set out in thefollowing table: +---------------------------+-----------------+---------------+-----------------+|Year ended 30 June | | 2006| 2005|+---------------------------+-----------------+---------------+-----------------+| | | US$M| US$M|+---------------------------+-----------------+---------------+-----------------+|Underlying EBIT | | 15,277| 9,921|+---------------------------+-----------------+---------------+-----------------+|Impact of equity accounting for statutory | (95)| (106)||purposes: | | || | | ||Share of jointly controlled entities' net | | ||finance costs | | |+---------------------------------------------+---------------+-----------------+|Share of jointly controlled entities' total | (950)| (433)||taxation expense | | |+---------------------------------------------+---------------+-----------------+|Exceptional items (before taxation) | 439| (111)|+---------------------------------------------+---------------+-----------------+|EBIT - Profit from operations | 14,671| 9,271|+---------------------------------------------+---------------+-----------------+ Earnings Revenue (including revenue from third party product) together with our share ofjointly controlled entities' revenue was US$39.1 billion, up 25.5% from US$31.2billion last year. The increase was due primarily to higher commodity prices.Metallurgical coal, iron ore, base metals, aluminium and petroleum pricescontributed significantly to the increase in revenue. New and acquiredoperations also provided increased volumes. Underlying EBITDA increased by 50.0% to US$18.1 billion (from US$12.0 billionlast year). Underlying EBIT was US$15.3 billion compared with US$9.9 billionlast year, an increase of 54.0%. The following table and commentary detail the approximate impact of theprincipal factors that affected Underlying EBIT for the current year comparedwith the prior year: +------------------------------------------------------------------------+----------+| | |+------------------------------------------------------------------------+----------+| | US$|| | Million|+------------------------------------------------------------------------+----------+|Underlying EBIT for the year ended 30 June 2005 | 9,921|+------------------------------------------------------------------------+----------+|Change in volumes: | |+------------------------------------------------------------------------+----------+|Existing operations | (75)|+------------------------------------------------------------------------+----------+|New and acquired operations | 1,295|+------------------------------------------------------------------------+----------+| | 1,220|+------------------------------------------------------------------------+----------+|Change in sales prices | 6,690 |+------------------------------------------------------------------------+----------+|Change in costs: | |+------------------------------------------------------------------------+----------+|Costs (rate and usage) | (1,340)|+------------------------------------------------------------------------+----------+|Price-linked costs | (475)|+------------------------------------------------------------------------+----------+|Exchange rates | 0|+------------------------------------------------------------------------+----------+|Inflation on costs | (310)|+------------------------------------------------------------------------+----------+| | (2,125)|+------------------------------------------------------------------------+----------+|Asset sales | (10)|+------------------------------------------------------------------------+----------+|Ceased and sold operations | (10)|+------------------------------------------------------------------------+----------+|Exploration | (280)|+------------------------------------------------------------------------+----------+|Other | (129)|+------------------------------------------------------------------------+----------+| | |+------------------------------------------------------------------------+----------+|Underlying EBIT for the year ended 30 June 2006 | 15,277|+------------------------------------------------------------------------+----------+| | |+------------------------------------------------------------------------+----------+ Volumes - existing operations Increased sales volumes of copper, iron ore, diamonds and molybdenum, fromoperations existing at the beginning of the year contributed approximatelyUS$304 million to Underlying EBIT (measured at the prior period's averagemargins). Sales volumes of oil were lower than the prior year, due to naturalfield decline and increased down time at existing assets. Depletion of reservesat Riverside (Australia), extended maintenance outages at Blackwater (Australia)and reduced shipments led to a decrease in sales volumes of metallurgical coal.Reduced market demand for manganese alloy led to lower sales volumes for theperiod. We also experienced decreased sales volumes of silver due to lowerproduction from our Cannington mine (Australia) resulting from lower head gradesand temporary closure of the southern zone. Volumes - new and acquired operations New operations increased Underlying EBIT by US$1,295 million, primarily due to afull year's contribution of US$918 million from the ex-WMC Resources Limited(WMC) operations acquired in June 2005. Also included was a full year'sproduction from ROD (Algeria), which commenced commercial production in October2004, Mad Dog (US) and Angostura (Trinidad and Tobago), which were bothcommissioned in January 2005. Prices Stronger commodity prices for most products increased Underlying EBIT byUS$6,690 million. Higher prices for most base metals products (copper inparticular), metallurgical coal, iron ore, all petroleum products and aluminiumcontributed approximately US$7,200 million, which was partially offset by lowerprices for manganese alloy and the sale of lower quality diamonds. Costs Strong demand for resources globally has continued, leading to increased costsacross the industry for labour, contractors, raw materials, fuel, energy andother input costs. In this environment, costs for the Group have increased byUS$1,340 million, inclusive of non cash costs of US$125 million primarilyrelated to increased depreciation due to the commissioning of new projects. Netof non cash costs, this represents an increase on our 2005 cost base of 5.7%. Specific areas of cost increases include changed mining conditions particularlyat Ekati (Canada) where we are mining a lower grade zone and Queensland Coal(Australia) where mine mix changed following the closure of Riverside. Labourand contractor charges, fuel, and consumables, as well as maintenance and otheroperating costs have also increased. The commissioning of a number of newoperations meant depreciation charges also increased. Price-linked costs Higher price-linked costs reduced Underlying EBIT by US$475 million, largelybecause of higher royalties (particularly for Carbon Steel Materials andPetroleum products), increased treatment charges and refining charges (TCRCs)and price participation charges for copper and higher LME linked power chargesin Aluminium. Exchange rates Exchange rate movements had a net nil impact on Underlying EBIT compared withlast year. The translation of monetary items had a favourable impact onUnderlying EBIT of US$90 million principally due to exchange gains from thestrengthening of the US dollar against the Australian dollar. This compared tolosses in the prior period. This was offset by an unfavourable impact onoperating costs of US$90 million, primarily due to the strengthening of theBrazilian real against the US dollar. The following exchange rates against the US dollar have been applied: +----------------------------------+----------+----------+----------+----------+| | Average| Average| As at| As at|| | | | | || |Year ended|Year ended|Year ended|Year ended|| | | | | || | 30 June| 30 June| 30 June| 30 June|| | 2006| 2005| 2006| 2005|+----------------------------------+ | | | || | | | | |+----------------------------------+----------+----------+----------+----------+|Australian dollar (a) | 0.75| 0.75| 0.74| 0.76|+----------------------------------+----------+----------+----------+----------+|Brazilian real | 2.24| 2.73| 2.18| 2.36|+----------------------------------+----------+----------+----------+----------+|South African rand | 6.41| 6.21| 7.12| 6.67|+----------------------------------+----------+----------+----------+----------+ (a) Displayed as US$ to A$1 based on common convention. Inflation on costs Inflationary pressures on input costs, mainly in Australia and South Africa, hadan unfavourable impact on Underlying EBIT of US$310 million. Asset Sales The impact from the sale of assets and interests on Underlying EBIT was US$10million lower than for the prior period. The impact amounted to US$128 millionfor the current period, principally related to the sale of BHP Billiton'sinterest in the Wonderkop chrome joint venture (South Africa) for US$61 millionand the Green Canyon (US) oil fields and the Vincent Van Gogh (Australia)undeveloped oil discovery. This compared to higher profits in the prior yearwhich included the sale of an equity participation in the North West ShelfProject's (Australia) gas reserve to China National Offshore Oil Corporation ofUS$56 million, the profit of US$22 million on the sale of the Acerinox shareinvestment and the profit on the disposal of our interest in Integris Metals(US) of US$19 million. The profit on sale of the Tintaya copper mine (Peru) has been included inexceptional items. Ceased and sold operations Ceased and sold operations had a US$10 million unfavourable impact on UnderlyingEBIT. The current period was negatively impacted by the loss of earnings fromthe Chrome business (South Africa) and the Laminaria and Corallina oil fields(Australia) that were divested during the 2005 financial year, and the cessationof production at Typhoon/Boris due to hurricane damage sustained duringSeptember 2005. This was partly offset by the favourable impact of US$149million of higher earnings from Tintaya, which was sold in June 2006, and US$137million in relation to care and maintenance costs incurred at Boodarie Iron(Australia) in the prior period. Exploration Exploration expense was US$280 million higher than the prior year. Petroleumexpenditure taken to profit increased by US$192 million due to increasedactivity in the Gulf of Mexico, a US$41 million write-off of expenditure whichhad previously been capitalised and a US$32 million impairment of the Cascadeand Chinook oil and gas prospects which have subsequently been sold. Mineralsexploration activity in Africa and Brazil also increased. Other Other items decreased Underlying EBIT by US$129 million. These included theone-off cost for adjusting our interest in Valesul (Brazil) to realisable valueprior to disposal of US$50 million, as well as a lower contribution from freightactivities. The US$60 million sale of an option held over an explorationproperty in Pakistan partially offset these. Net finance costs Net finance costs increased to US$505 million, from US$331 million in the priorperiod. This was driven largely by higher average debt balances following thefunding of the acquisition of WMC in June 2005, increased discounting onprovisions and a higher average interest rate but was partially offset by highercapitalised interest. Taxation expense The total taxation expense on profit before tax was US$3,632 million,representing an effective rate of 25.6%. Excluding the impacts of exceptional items, royalty related taxation, nontax-effected foreign currency adjustments, translation of tax balances and otherfunctional currency translation adjustments, and including the taxation expenseof jointly controlled entities, the underlying effective rate was 27.6%. Whencompared to the UK and Australian statutory tax rate (30%), the underlyingeffective tax rate included a benefit of 3.4% due to the recognition of US taxlosses (US$500 million). Royalty related taxation represents an effective rateof 3.1% for the current year. Following the transition to IFRS, certain royalty and petroleum resource-relatedtaxes are treated as taxation arrangements when they have the characteristics ofa tax. This is considered to be the case when they are imposed under Governmentauthority and the amount payable is calculated by reference to revenue derived(net of any allowable deductions) as determined by relevant legislation. As aresult, such royalty costs which in prior years would have been reported as anoperating cost in Underlying EBIT are now reported as a taxation expense.Obligations arising from royalty arrangements that do not satisfy these criteriacontinue to be recognised in operating expenses. Exceptional items During June 2006, we sold our interest in the Tintaya copper mine in Peru. Grossconsideration received was US$853 million, before deducting intercompany tradebalances. The net consideration of US$717 million (net of transaction costs)included US$634 million for shares plus the assumption of US$116 million ofdebt, working capital adjustments and deferred payments contingent upon futurecopper prices and production volumes. The profit on disposal was US$296 million(net of a taxation charge of US$143 million). In the prior period exceptional items reduced profit after tax by US$30 million.Refer note 2 in the Financial Information for further details. Cash Flows Net operating cash flow after interest and tax increased by 25.1% to US$10.5billion. Higher profits increased cash generated from operating activities,offset by an increase in working capital (principally due to higher prices), andincreased taxation payments. Capital and exploration expenditure totalled US$6,005 million for the period.Expenditure on major growth projects amounted to US$3,292 million, includingUS$655 million on petroleum projects and US$2,637 million on minerals projects.Other capital expenditure on maintenance, sustaining and minor capital items wasUS$1,947 million. Investment cash flows included US$596 million primarily due tothe purchase of the remaining shares to complete the WMC acquisition. Financingcash flows include the US$2.0 billion capital management program completed inMay 2006 and increased dividend payments. Net debt, comprising cash and interest bearing liabilities, was US$8.2 billion,a decrease of US$0.5 billion, or 5.6%, compared to 30 June 2005. Gearing, whichis the ratio of net debt to net debt plus net assets, was 25.2% at 30 June 2006,compared with 32.8% at 30 June 2005. Underlying net debt (which varies from net debt above as it includes net debt ofjointly controlled entities) was US$9.2 billion, down from US$10.0 billion at 30June 2005. Underlying gearing was 27.2% at 30 June 2006, compared to 35.8% at 30June 2005. Dividend A final dividend for the year ended 30 June 2006 of 18.5 US cents per share willbe paid to shareholders on Wednesday 27 September 2006. Together with theinterim dividend of 17.5 US cents per share paid to shareholders on 22 March2006, this brings the total dividend for the year to 36.0 US cents per share. The dividend paid by BHP Billiton Limited will be fully franked for Australiantaxation purposes. Dividends for the BHP Billiton Group are determined anddeclared in US dollars. However, BHP Billiton Limited dividends are mainly paidin Australian dollars, and BHP Billiton Plc dividends are mainly paid in poundssterling and South African rands to shareholders on the UK section and the SouthAfrican section of the register, respectively. Currency conversions were basedon the foreign currency exchange rates two business days before the declarationof the dividend. The timetable in respect of this dividend will be: Currency conversion - 21 August 2006 Last day to trade Johannesburg Stock Exchange - 1 September 2006 Ex-dividend Australian Stock Exchange - 4 September 2006 Ex-dividend Johannesburg Stock Exchange - 4 September 2006 Ex-dividend London Stock Exchange - 6 September 2006 Record - 8 September 2006 Payment - 27 September 2006 American Depositary Shares (ADSs) each represent two fully paid ordinary sharesand receive dividends accordingly. BHP Billiton Plc shareholders registered on the South African section of theregister will not be able to dematerialise or rematerialise their shareholdings,nor will transfers between the UK register and the South African register bepermitted, between the dates of 4 September 2006 and 8 September 2006. The following table details the currency exchange rates applicable for thedividend: +--------------------------+-------------------------+--------------------------+|Dividend 18.5 US cents | Exchange Rate| Dividend per ordinary|| | | sharein local currency|+--------------------------+-------------------------+--------------------------+|Australian cents | 0.763247| 24.238549|+--------------------------+-------------------------+--------------------------+|British pence | 1.895575| 9.759572|+--------------------------+-------------------------+--------------------------+|South African cents | 7.033723| 130.123876|+--------------------------+-------------------------+--------------------------+|New Zealand cents | 0.640678| 28.875660|+--------------------------+-------------------------+--------------------------+ Portfolio Management Portfolio activities continued during the year with proceeds amounting to US$928million realised. We disposed of a number of assets and interests including ourTintaya mine, our 50% interest in the Wonderkop chrome joint venture, the GreenCanyon 18 and 60 oil fields, our one third interest in the Hi-Fert fertiliserbusiness (Australia) and our ownership of the Zululand Anthracite Colliery(South Africa). This brings to US$5.6 billion the total proceeds realised onassets and interests over the last five years. At 30 June 2006 we had also announced the sale of our Southern Cross Fertiliseroperations (Australia), our Australian Coal Bed Methane assets (Australia), ourinterest in the Valesul aluminium smelter (Brazil), our Cascade and Chinook oiland gas prospects (US) and the Koornfontein energy coal mine (South Africa). At30 June 2006 final sale of these assets was subject to satisfying certainconditions precedent and as such the assets were held in the balance sheet atthe lower of carrying value and expected sale price, less costs to sell.Completion of sale has now been achieved on the Southern Cross Fertiliseroperations, Valesul, the Coal Bed Methane assets and Cascade and Chinook. Capital Management and Liquidity On 16 May this year, the Group completed the US$2 billion capital managementprogram, which was announced in February 2006. A US$1.6 billion off-market sharebuy-back of 96.0 million shares in BHP Billiton Limited was completed in April2006. The shares were purchased at a price of A$23.45, which represented a 14%discount to the volume weighted average trading price over the five days up toand including the buy-back closing date. Subsequently, a further US$409 millionwas spent on an on-market repurchase of 18.8 million BHP Billiton Plc shares atan average price of 1153.56 pence. This represented a discount to the averageBHP Billiton Limited share price over the buy-back period of 8.8%. The aggregate shares repurchased under both programs totalled 114.8 millionshares, or 1.9% of the issued share capital of the BHP Billiton Group. In October 2005 BHP Billiton filed a US$3.0 billion shelf registration statementwith the US Securities and Exchange Commission (SEC). In December 2005, weissued an SEC registered Global Bond comprising US$600 million of 5.00% SeniorNotes due 2010 and US$750 million of 5.25% Senior Notes due 2015. In May 2006,BHP Billiton issued Euro 650 million of 4.125% Euro Bonds due May 2011. Theproceeds were used to partially repay debt incurred to fund the acquisition ofWMC and to repay commercial paper. Corporate Governance The following Board changes occurred during the year: + Mr Michael Chaney and Lord Renwick of Clifton retired as Directors on 25 November 2005; + The Hon. E Gail de Planque was appointed a Non-executive Director from 19 October 2005; + Mr Marius Kloppers (Group President Non-Ferrous Materials) and Mr Chris Lynch (Group President Carbon Steel Materials) were appointed Executive Directors from 1 January 2006; and + Mr Paul Anderson and Mr Jacques Nasser were appointed Non-executive Directors from 6 June 2006. Following a review, the Sustainability Committee was restructured. Its membersare now Dr David Brink (Chairman), Mr Paul Anderson, The Hon. E Gail de Planqueand Dr John Schubert. In addition, Mr Carlos Cordeiro and The Hon. E Gail dePlanque were appointed members of the Remuneration Committee in place of Dr JohnSchubert, who has ceased to be a member of that Committee. Mr Jacques Nasser wasalso appointed a member of the Risk and Audit Committee. On 1 August 2006, Mr Miklos Salamon announced his intention to retire from theBoard on 26 October 2006. Outlook Global economic outlook The global economy has recorded strong growth during the 2006 year to date. InAsia, growth has been supported by continued domestic demand, exports andinvestment, dominated by China's continuing industrialisation and urbanisationand continued growth in Japan. Similarly, economic activity in Europe gainedmomentum, with Germany's industrial production maintaining a solid upward trend.US export growth provided support for overall economic expansion with buoyantexport markets helped by the lagged effects of a weakening dollar. In thisenvironment, commodity prices continued to post multi-decade highs. Economieswith strong energy and minerals exports, particularly in Russia, Australia andparts of South America, have benefited. The global economic outlook continues to be positive, although rates of growthare likely to slow given high energy prices and the increasing trend of higherinterest rates. Growth in Asia will help drive the global economy, with Japan'sexpansion well-established. China's economic growth is expected to remainstrong, even if attempts to cool strong growth are successful. Elsewhere, the USeconomy will slow from rapid growth experienced earlier in the year, but islikely to remain at levels consistent with long-term trends. While the outlookfor the global economy and commodity prices is encouraging, it is not withoutrisk. Escalating geopolitical tensions, supply disruptions, and high energyprices are contributing to a tight oil market, and are adding to increaseduncertainty in markets. Consumers are concerned about the broader impact offurther increases in oil prices and rising interest rates. Commodity prices Commodity prices persist at high levels compared to recent years. In real terms,base metals prices are now at similar levels to the prices experienced in thelate 1980s. Inventories on market exchanges (as a proportion of demand) continueto tighten. The major difference between the situation today and that ofprevious periods is the coincidence of high prices across the energy andminerals spectrum. Today, in addition to high base metals prices, oil prices inreal terms have approached the levels seen in the 1970s and the real prices ofkey steel-making raw materials are at levels last seen in the early 1980s. Theconfluence of demand growth across the commodity spectrum in the developed anddeveloping economies coupled with a lag in the supply response has driven thehigher prices. Increasing investor interest in commodity markets and lowinventory levels have undoubtedly contributed to price levels and volatility.Forward prices of LME metals and oil remain above long-term historical averages,indicating that large scale supply surpluses are currently not being anticipatedin these markets. Natural and man made events are likely to continue to disruptsupply. Regulatory approvals and rising capital costs are delaying projectdevelopments. These factors could further tighten already short markets.Similarly, there are no signs of an imminent retreat in bulk commodity prices.However high prices are inevitably leading to some substitution. Strong increases in industry operating and capital costs, shortages ofexperienced people in some areas and lengthy timeframes for installing newcapacity, suggest that it will be some time before a material supply responseoccurs. Therefore we are likely to see an extended period of high cyclicalprices. As we have consistently stated however, over the longer term we expectthe introduction of new capacity to return prices to more sustainable levels. Annual General Meetings The Annual General Meeting of BHP Billiton Plc will be held at the RoyalHorticultural Halls, Lindley Hall, 80 Vincent Square, SW1P 2PE, London, UK, onThursday 26 October 2006, commencing at 10:30am. The Annual General Meeting of BHP Billiton Limited will be held at the BrisbaneConvention and Exhibition Centre, Plaza Ballroom, Cnr Merivale & GlenelgStreets, Southbank, Brisbane, Queensland, Australia on Wednesday 29 November2006, commencing at 10.30am. The Annual Report and details of the business to be conducted at the meetingswill be mailed to shareholders in mid to late September 2006. Growth Projects Four major growth projects were completed during the 2006 financial year. Completed projects +-----------+------------------+----------------+-----------------+-----------------+| Customer | Project | Capacity (1) | Capital | Date of initial || Sector | | | expenditure | || Group | | | | production (2) || | | |(US$ million) (1)| |+-----------+------------------+----------------+--------+--------+--------+--------+| | | | Budget | Actual | Target | Actual |+-----------+------------------+----------------+--------+--------+--------+--------+|Aluminium |Worsley |250,000 tonnes | | | | || |Development |per annum of | 165| 165| Q1 2006| Q2 2006|| |Capital Projects |alumina (100%) | | | | || |(Australia) | | | | | || |BHP Billiton - 86%| | | | | |+-----------+------------------+----------------+--------+--------+--------+--------+|Base Metals|Escondida Norte |Maintain | | | | || |(Chile) |capacity at 1.25| 230| 251| Q4 2005| Q4 2005|| |BHP Billiton - |million tonnes | | | | || |57.5% |per annum of | | | | || | |copper (100%) | | | | |+-----------+------------------+----------------+--------+--------+--------+--------+| |Escondida Sulphide|180,000 tonnes | | | | || |Leach |per annum of | 500| 500| H2 2006| Q2 2006|| |(Chile) |copper cathode | | | | || |BHP Billiton - |(100%) | | | | || |57.5% | | | | | |+-----------+------------------+----------------+--------+--------+--------+--------+|Carbon |WA Iron Ore Rapid |Increase system | | | | ||Steel |Growth Project 2 |capacity to 118 | 489| 489| H2 2006| Q2 2006||Materials |(Australia) |million tonnes | | | | || |BHP Billiton - 85%|per annum (100%)| | | | |+-----------+------------------+----------------+--------+--------+--------+--------+| | | | 1,384| 1,405| | |+-----------+------------------+----------------+--------+--------+--------+--------+ (1) All references to capital expenditure and capacity are BHP Billiton's shareunless otherwise noted. Escondida Norte was delivered to budget in localcurrency. Costing is yet to be finalised on the three remaining projects.(2) References to quarters and half years are based on calendar years. There are 13 major projects (defined as BHP Billiton's share of capitalexpenditure of greater than US$100 million) under development with a totalbudgeted investment of US$9,503 million. Full details for these are given in thequarterly Exploration and Development Report, released on 25 July 2006. Projects approved during the year +-----------------------+-----------------+---------------+------------+--------------+| Customer Sector Group | Project | Capacity (1) | Budgeted | Target date || | | | capital | for initial || | | |expenditure |production (2)|| | | | (US$ | || | | |million) (1)| |+-----------------------+-----------------+---------------+------------+--------------+|Petroleum |Shenzi |100,000 barrels| | || |(US) |of oil and 50 | 1,940| Mid 2009|| |BHP Billiton - |million cubic | | || |44% |feet of gas per| | || | |day (100%) | | |+-----------------------+-----------------+---------------+------------+--------------+| |Stybarrow |80,000 barrels | | || |(Australia) |of liquids per | 300| Q1 2008|| |BHP Billiton - |day (100%) | | || |50% | | | |+-----------------------+-----------------+---------------+------------+--------------+| |North West Shelf |800 million | | || |Angel |cubic feet of | 200| End 2008|| |(Australia) |gas per day | | || |BHP Billiton - |(100%) | | || |16.67% | | | |+-----------------------+-----------------+---------------+------------+--------------+|Aluminium |Alumar Refinery |2 million | | || |Expansion |tonnes per | 518| Mid 2008|| |(Brazil) |annum of | | || |BHP Billiton - |alumina (100%) | | || |36% | | | |+-----------------------+-----------------+---------------+------------+--------------+|Carbon Steel Materials |WA Iron Ore Rapid|20 million | | || |Growth Project 3 |tonnes per | 1,300| Q4 2007|| |(Australia) |annum of iron | | || |BHP Billiton - |ore (100%) | | || |85% | | | |+-----------------------+-----------------+---------------+------------+--------------+| |Samarco |7.6 million | | || |(Brazil) |tonnes per | 590| H1 2008|| |BHP Billiton - |annum of iron | | || |50% |pellets (100%) | | |+-----------------------+-----------------+---------------+------------+--------------+|Diamonds and Specialty |Koala Underground|3,300 tonnes | | ||Products |(Canada) |per day of ore | 200| End 2007|| |BHP Billiton - |processed | | || |80% |(100%) | | |+-----------------------+-----------------+---------------+------------+--------------+| | | | 5,048| |+-----------------------+-----------------+---------------+------------+--------------+ (1) All references to capital expenditure and capacity are BHP Billiton's shareunless noted otherwise.(2) References to quarters and half years are based on calendar years. Projects currently under development (approved in prior years) +----------------------+-----------------+---------------+--------------+---------------+|Customer Sector Group | Project | Capacity (1) | Budgeted |Target date for|| | | | capital | initial || | | | expenditure |production (2) || | | |(US$ million) | || | | | (1) | |+----------------------+-----------------+---------------+--------------+---------------+|Petroleum |Atlantis South |200,000 barrels| 1,115(3)| Under review|| |(US) |of oil and 180 | | || |BHP Billiton - |million cubic | | || |44% |feet of gas per| | || | |day (100%) | | |+----------------------+-----------------+---------------+--------------+---------------+| |Neptune |50,000 barrels | | || |(US) |of oil and 50 | 300| End 2007|| |BHP Billiton - |million cubic | | || |35% |feet of gas per| | || | |day (100%) | | |+----------------------+-----------------+---------------+--------------+---------------+| |North West Shelf |LNG processing | | || |5th Train |capacity 4.2 | 250(3)| Late 2008(3)|| |(Australia) |million tonnes | | || |BHP Billiton - |per annum | | || |16.7% |(100%) | | |+----------------------+-----------------+---------------+--------------+---------------+|Base Metals |Spence |200,000 tonnes | | || |(Chile) |per annum of | 990| Q4 2006|| |BHP Billiton - |copper cathode | | || |100% | | | |+----------------------+-----------------+---------------+--------------+---------------+|Stainless Steel |Ravensthorpe |Up to 50,000 | 1,340(3)| Q2 2007(3)||Materials |Nickel |tonnes per | | || |(Australia) |annum of | | || |BHP Billiton |contained | | || |-100% |nickel in | | || | |concentrate | | |+----------------------+-----------------+---------------+--------------+---------------+| |Yabulu Extension |45,000 tonnes | 460| Q3 2007|| |(Australia) |per annum of | | || |BHP Billiton - |nickel | | || |100% | | | |+----------------------+-----------------+---------------+--------------+---------------+| | | | 4,455| |+----------------------+-----------------+---------------+--------------+---------------+ (1) All references to capital expenditure and capacity are BHP Billiton's shareunless noted otherwise.(2) References to quarters and half years are based on calendar years.(3) Project costs and schedule are currently under review - refer Explorationand Development Report released 25 July 2006. CUSTOMER SECTOR GROUP SUMMARY The following table provides a summary of the Customer Sector Group results forthe year ended 30 June 2006 and the prior period. +-----------------------+---------------------------+----------------------------+| | | |+-----------------------+---------------------------+----------------------------+|Year ended 30 June |Revenue together with share| Underlying EBIT (1) ||(US$ Million) | of jointly controlled | || | entities' revenues (1) | |+-----------------------+--------+--------+---------+---------+--------+---------+| | 2006| 2005| Change %| 2006| 2005| Change %|+-----------------------+--------+--------+---------+---------+--------+---------+| | | | | | | |+-----------------------+--------+--------+---------+---------+--------+---------+|Petroleum | 5,876| 5,970| (1.6)| 2,968| 2,395| 23.9|+-----------------------+--------+--------+---------+---------+--------+---------+|Aluminium | 5,084| 4,651| 9.3| 1,191| 959| 24.2|+-----------------------+--------+--------+---------+---------+--------+---------+|Base Metals | 10,294| 5,043| 104.1| 5,400| 2,171| 148.7|+-----------------------+--------+--------+---------+---------+--------+---------+|Carbon Steel Materials | 9,760| 7,597| 28.5| 4,503| 2,800| 60.8|+-----------------------+--------+--------+---------+---------+--------+---------+|Diamonds and Specialty | 1,263| 1,509| (16.3)| 345| 560| (38.4)||Products | | | | | | |+-----------------------+--------+--------+---------+---------+--------+---------+|Energy Coal | 3,319| 3,387| (2.0)| 327| 587| (44.3)|+-----------------------+--------+--------+---------+---------+--------+---------+|Stainless Steel | 2,955| 2,274| 29.9| 901| 712| 26.5||Materials | | | | | | |+-----------------------+--------+--------+---------+---------+--------+---------+|Group and unallocated | 667| 813| (18.0)| (358)| (263)| N/A||items (2) | | | | | | |+-----------------------+--------+--------+---------+---------+--------+---------+|Less: inter-segment | (119)| (94)| N/A| | | ||turnover | | | | | | |+-----------------------+--------+--------+---------+---------+--------+---------+|BHP Billiton Group | 39,099| 31,150| 25.5| 15,277| 9,921| 54.0|+-----------------------+--------+--------+---------+---------+--------+---------+ (1) Revenue together with share of jointly controlled entities' revenues, andUnderlying EBIT include trading activities comprising the sale ofthird party product. Underlying EBIT is defined on page 16.(2) Includes consolidation adjustments, unallocated items and external salesfrom the Group's freight, transport and logistics operations. Petroleum Underlying EBIT was US$2,968 million, an increase of US$573 million, or 23.9%,compared to last year. This was mainly due to higher average realised prices forall petroleum products, including higher average realised oil prices per barrelof US$61.90 (compared with US$47.16), higher average realised natural gas pricesof US$3.33 per thousand standard cubic feet (compared with US$2.98), higherliquefied natural gas prices of US$6.76 per thousand standard cubic feet(compared to US$5.75) and higher average realised prices for liquefied petroleumgas of US$483.74 per tonne (compared to US$382.85 per tonne). Increased volumesfrom the first full year of production from ROD, Angostura and Mad Dog also hada favourable effect. This was partially offset by lower volumes from existingassets due to natural field decline, and higher downtime for maintenance andweather related disruptions. The negative impact of the loss of the Typhoon (US)platform as a result of Hurricane Rita in September 2005 was partially offset byinsurance recoveries, and the loss of earnings following the disposal of ourinterest in the Laminaria asset in January 2005 also reduced earnings. Increasedmaintenance expenses and higher price linked costs (mainly royalties and excise)also had an unfavourable impact. Exploration expenditure charged to profit was US$394 million (including theUS$32 million impairment of Cascade and Chinook and US$41 million of otherexploration expenditure previously capitalised). Gross expenditure onexploration of US$447 million was US$67 million higher than for the 2005financial year as a result of increased activity in the Gulf of Mexico. Aluminium Underlying EBIT was US$1,191 million, an increase of US$232 million, or 24.2%,compared to last year. Higher prices for aluminium and alumina had a favourableimpact, with the average LME aluminium price increasing to US$2,244 per tonne(compared with US$1,804 per tonne for the corresponding period). Earnings fromthird party trading were also higher. Earnings were adversely impacted mainly by higher charges for LME linked power,raw materials, fuel, labour and pot relining, in line with global supplypressures. Exchange rate movements in the period also had an unfavourable effecton EBIT, particularly on the earnings derived from our Brazilian operations. Thewrite-down of US$50 million of our interest in Valesul to fair value, in linewith the value achieved on its subsequent divestment, was also a factor. Despite the higher costs, EBIT margins improved significantly in the second halfof the year. This improved translation of rising aluminium and alumina priceinto higher net earnings, despite the current environment of rising costs,reflects an intensive focus on cost containment. Base Metals Underlying EBIT was US$5,400 million, an increase of US$3,229 million, or148.7%, compared to last year. This was mainly attributable to higher averageLME prices for copper of US$2.28/lb (compared to US$1.43/lb) and higher pricesfor silver, zinc and lead. Higher production volumes from record copper andsilver production at Escondida (Chile), record copper, silver and molybdenumproduction at Antamina (Peru), record zinc production at Cannington (Australia)and record gold production at Tintaya (Peru) also led to increased earnings. Theinclusion of Olympic Dam's (Australia) results for the full period, followingits acquisition in June 2005, also contributed positively. The increase waspartially offset by higher price linked TCRCs and price participation costs,charges for raw materials, labour and contractors and higher depreciation costsdue to the commissioning of Escondida Norte. Reduced production at Cerro Colorado (Chile) following an earthquake in June2005 also had an unfavourable impact, although this was partially mitigated bybusiness interruption insurance. Certain of our base metal sales agreements provide for provisional pricing basedon the LME official price prior to shipment. Final settlement is based on theaverage applicable price for a specified future quotational period. The commonmarket quotational periods on sales are the average of the calendar month afterthe month of shipment for cathode and the average of two to four calendar monthsafter the month of shipment for concentrate. We record revenue upon the transferof risk and title using the applicable sales contracts price (typically theprovisional price). The revenue is adjusted to fair value through each profitperiod using the forward curve until final pricing is determined. We considerthis approach to appropriately measure the fair value of the relevant salesagreements at period end. The impact of provisional pricing of copper shipmentswith a rising LME price favourably impacted finalised and outstanding averagecopper revenues by US$0.37/lb over the LME average. Average copper revenue for2006 was US$2.66/lb versus US$1.51/lb in 2005. Outstanding copper volumes,subject to the fair value measurement previously described amounted to 274,280tonnes at 30 June 2006 compared to 231,874 tonnes in the prior year. These wererevalued at a weighted average price of US$3.35/lb compared to US$1.54/lb in theprior year. Carbon Steel Materials Underlying EBIT was US$4,503 million, an increase of US$1,703 million, or 60.8%,compared to last year. This reflects higher prices and volumes and an increasedlevel of spot sales for iron ore, as well as increased prices for metallurgicalcoal. This was partially offset by lower prices for manganese alloy. Higheroperating costs at all operations had an adverse impact during the period andwas largely attributable to higher contractor and labour costs, price-linkedroyalty costs and fuel and energy costs. Queensland Coal (Australia) alsoexperienced extended maintenance outages and a change in mine mix in the period,following the closure of Riverside. A weaker A$/US$ exchange rate had a favourable impact, as did the closure of theBoodarie Iron plant, announced in June 2005. The same period last year includedcare and maintenance costs for the plant whilst there was no impact in thecurrent period as all anticipated closure costs were provided for in June 2005. Depreciation charges increased as new projects were commissioned, as didexploration expenditure to support a higher level of exploration activitylargely at Maruwai (Indonesia). Earnings on freight activities were lower. Diamonds and Specialty Products Underlying EBIT was US$345 million, a decrease of US$215 million, or 38.4%,compared to last year. This was due to a lower value per carat for diamonds(down 24% from last year) because of lower carat quality and higher unit costsin relation to the processing of lower grade material and moving to undergroundmining areas at Ekati (Canada). The prior year included six months of earningsand the profit on sale from Integris Metals (US), which was sold in January2005. However, the inclusion of a full year of earnings from Southern CrossFertiliser operations acquired in June 2005 was positive, as was higher salesvolumes for diamonds and titanium feedstock and a reduced depreciation chargeprimarily as a result of an extension of mine life following approval of theKoala Underground project. At Ekati, the 2007 financial year will be another transition year, from open pitto underground mining, which will be negatively impacted by lower value diamondproduction. In the medium term, increasing underground production from Panda andKoala will help restore profitability to historical levels. Energy Coal Underlying EBIT was US$327 million, a decrease of US$260 million, or 44.3%,compared to last year. Higher fuel and operating costs across all operations,adverse inflationary movements, particularly in South Africa, and higher freightcosts were key contributors to the reduced result. Costs increased at Ingwe(South Africa) largely due to higher depreciation resulting from changedestimates of the economic lives of certain underground export operations and thedepreciation of rehabilitation assets. Increased demurrage at Cerrejon Coal(Colombia) and lower yields and equipment availability combined with increasedstrip ratios at Hunter Valley Coal (Australia) also led to higher costs. The cessation of earnings from the Zululand Anthracite Colliery following itsdivestment during the year had a negative impact on the result whilst afavourable movement of the rand against the US dollar had a positive impact. Stainless Steel Materials Underlying EBIT was US$901 million, an increase of US$189 million, or 26.5%,compared to last year. The inclusion of a full year of results from the NickelWest operations (Australia), acquired in June 2005, as well as a US$61 millionprofit on the sale of BHP Billiton's interest in the Wonderkop joint ventureeffective November 2005 were key factors in the increased result. The impact ofslightly higher average realised nickel prices was partially offset by decreasedprices for cobalt. The average LME nickel price was US$7.03/lb versus US$6.78/lbin the comparative period. Negative impacts included lower production and higher fuel costs at the QNIYabulu refinery (Australia) as a result of lower operational performance, tie-inactivity relating to the refinery expansion and delays to the Gas Conversionproject. Offsetting the Underlying EBIT increase was US$113 million included inthe prior year relating to earnings from the Group's Chrome operations, whichwere sold effective 1 June 2005. Group and Unallocated Items Underlying net corporate operating costs excluding exchange impacts were US$251million compared to US$147 million in the prior year, an increase of US$104million. This was due primarily to higher net insurance costs of US$55 millionassociated with insurance claims arising from natural disasters and incidents.In addition, higher costs relating to corporate projects, sponsorships andregulatory compliance, including Sarbanes-Oxley, contributed approximately US$32million. Lower one-off costs in relation to the acquisition of WMC had a favourableimpact in the current period, partially offset by a gain in 2005 in relation tothe close out of the cash settled derivatives contracts on the acquisition ofWMC shares. Minerals exploration expenditure has increased from US$67 million to US$115million, mainly due to increased exploration activity in Africa and Brazil. Inaddition, the profit on the sale of an option held over an exploration propertyin Pakistan contributed US$ 60 million. The following notes explain the terms used throughout this profit release(footnotes refer to table on page 1): (1) Underlying EBIT margin is calculated net of third party product activities. (2) Underlying EBIT is earnings before net finance costs and taxation, andjointly controlled entities' net finance costs and taxation and any exceptionalitems. Underlying EBITDA is Underlying EBIT before depreciation, impairments,and amortisation of US$2,776 million (comprising Group depreciation, impairmentsand amortisation of US$2,427 million and jointly controlled entities'depreciation and amortisation of US$349 million) for the year ended 30 June 2006and US$2,115 million (comprising Group depreciation, impairments andamortisation of US$1,818 million and jointly controlled entities' depreciationand amortisation of US$297 million) for the year ended 30 June 2005. We believethat Underlying EBIT and Underlying EBITDA provide useful information, butshould not be considered as an indication of, or alternative to, attributableprofit as an indicator of operating performance or as an alternative to cashflow as a measure of liquidity. (3) Underlying EBIT is used to reflect the underlying performance of BHPBilliton's operations. Underlying EBIT is reconciled to EBIT - Profit fromoperations on page 3. (4) Net operating cash flow includes dividends from jointly controlled entitiesand is after net interest and taxation. (5) For this purpose, net interest includes net finance costs of jointlycontrolled entities, and capitalised interest and excludes the effect ofdiscounting on provisions and other liabilities, and exchange differencesarising from net debt. Forward-looking statements Certain statements contained in this release,including statements in the section entitled 'Preparing for future growth' and'Outlook', may constitute 'forward-looking statements' within the meaning of theUS Private Securities Litigation Reform Act of 1995. We undertake no obligationto revise the forward-looking statements included in this release to reflect anyfuture events or circumstances. Our actual results, performance or achievementscould differ materially from the results expressed in, or implied by, theseforward-looking statements. Factors that could cause or contribute to suchdifferences are discussed in the sections entitled 'Key Information - RiskFactors'; 'Operating and Financial Review and Prospects - Our Business -External Factors Affecting Our Results' and 'Trends and Uncertainties' includedin our annual report on Form 20-F as amended by our Form 20-F/A for the fiscalyear ended 30 June 2005, which we filed with the US Securities and ExchangeCommission (SEC) on 3 October 2005 and 10 November 2005, respectively, and areavailable on the SEC's website at 'www.sec.gov'. Nothing in this release shouldbe construed as either an offer to sell or a solicitation of an offer to buy orsell securities in any jurisdiction. Further information on BHP Billiton can be found on our Internet site: www.bhpbilliton.com Australia United Kingdom Samantha Evans, Media Relations Mark Lidiard, Investor & Media Relations Tel: +61 3 9609 2898 Mobile: +61 400 693 915 Tel: +44 20 7802 4156 Mobile: + 44 7769 934 email: [email protected] 942 email: [email protected] Jane Belcher, Investor Relations Tel: +61 3 9609 3952 Mobile: +61 417 031 653 Illtud Harri, Media Relations email: [email protected] Tel: +44 20 7802 4195 Mobile: +44 7920 237 246 email: [email protected] United States South Africa Tracey Whitehead, Investor Relations Alison Gilbert, Investor Relations Tel: +44 020 7802 4031 Tel SA: +27 11 376 2121 or UK: +44 20 7802 4183 Mobile: +44 7917 648 093 email: [email protected] email: [email protected] FINANCIAL INFORMATION For the year ended 30 June 2006 Financial Information Consolidated Income Statement - Page 20 Consolidated Statement of Recognised Income and Expense - Page 21 Consolidated Balance Sheet - Page 22 Consolidated Cash Flow Statement - Page 23 Notes to the Financial Information - Page 24 The financial information included in this document for the year ended 30 June2006 is unaudited and has been derived from the draft financial report of theBHP Billiton Group for the year ended 30 June 2006. The financial informationdoes not constitute the Group's full financial statements for the year ended 30June 2006, which will be approved by the Board and reported on by the auditorsand subsequently filed with the registrar of companies and the AustralianSecurities and Investments Commission. The financial information set out on pages 20 to 32 for the year ended 30 June2006 has been prepared in accordance with the requirements of the UK CompaniesAct 1985 and Australian Corporations Act 2001 and with: • Australian equivalents to International Financial Reporting Standards (IFRS) as issued by the Australian Accounting Standards Board and interpretations effective as of 30 June 2006; • IFRSs and interpretations as adopted by the European Union (EU) as of 30 June 2006; and • those standards and interpretations adopted early as described in the Accounting Policies section of the announcement of the results for the six months ended 31 December 2005. The above standards and interpretations are collectively referred to as "IFRS"in this report. The comparative information has also been prepared on this basis, with theexception of certain items, details of which are given below, for whichcomparative information has not been restated. The comparative figures for thefinancial year ended 30 June 2005 are not the statutory accounts of BHP BillitonPlc for that financial year. Those accounts, which were prepared under UKGenerally Accepted Accounting Principles (GAAP), have been reported on by thecompany's auditors and delivered to the registrar of companies. The report ofthe auditors was unqualified and did not contain statements under section 237(2)(regarding adequacy of accounting records and returns) or section 237(3)(regarding provision of necessary information and explanations) of the CompaniesAct 1985. The basis of preparation of this financial information is different to that ofthe most recent comparative year annual financial report due to the first timeadoption of IFRS. An explanation of how the transition to IFRS has affected thereported financial position and financial performance of the BHP Billiton Groupis provided in note 10. This note includes reconciliations of equity and profitfor comparative periods previously reported under UK GAAP and Australian GAAP tothose amounts reported under IFRS. IFRS 1 / AASB 1 "First time adoption of International Financial ReportingStandards", in general requires accounting policies to be appliedretrospectively in order to determine an opening balance sheet at the BHPBilliton Group's IFRS transition date of 1 July 2004, and allows certainexemptions on the transition to IFRS which the BHP Billiton Group has elected toapply. Those elections considered significant to the BHP Billiton Group includedecisions to: • not restate previous mergers or acquisitions and the accounting thereof; • measure property, plant and equipment at deemed cost, being the carrying value of property, plant and equipment immediately prior to the date of transition, with no adjustment made to fair value; • not apply the recognition and measurement requirements of IFRS 2 / AASB 2 "Share-based Payment" to equity instruments granted before 7 November 2002; • recognise the cumulative effect of actuarial gains and losses on defined benefit employee schemes in retained earnings as at the transition date; and • transfer all foreign currency translation differences, previously held in reserves, to retained earnings at the transition date. In addition, BHP Billiton has applied the exemption available under IFRS 1 /AASB 1 whereby IAS 32 / AASB 132 "Financial Instruments: Disclosure andPresentation" and IAS 39 / AASB 139 "Financial Instruments: Recognition andMeasurement" have been applied from 1 July 2005 and not for the year ended 30June 2005. The following exchange rates against the US dollar have been applied in thefinancial information:+----------------------------------+----------+----------+----------+----------+| | Average| Average| As at| As at|+----------------------------------+----------+----------+----------+----------+| |Year ended|Year ended|Year ended|Year ended|| | | | | || | 30 June| 30 June| 30 June| 30 June|| | 2006| 2005| 2006| 2005|+----------------------------------+----------+----------+----------+----------+|Australian dollar (a) | 0.75| 0.75| 0.74| 0.76|+----------------------------------+----------+----------+----------+----------+|Brazilian real | 2.24| 2.73| 2.18| 2.36|+----------------------------------+----------+----------+----------+----------+|Canadian dollar | 1.16| 1.25| 1.11| 1.23|+----------------------------------+----------+----------+----------+----------+|Chilean peso | 532| 595| 546| 579|+----------------------------------+----------+----------+----------+----------+|Colombian peso | 2,324| 2,454| 2,635| 2,329|+----------------------------------+----------+----------+----------+----------+|South African rand | 6.41| 6.21| 7.12| 6.67|+----------------------------------+----------+----------+----------+----------+|Euro | 0.82| 0.79| 0.78| 0.83|+----------------------------------+----------+----------+----------+----------+|UK pound sterling | 0.56| 0.54| 0.55| 0.55|+----------------------------------+----------+----------+----------+----------+ (a) Displayed as US$ to A$1 based on common convention. Consolidated Income Statementfor the year ended June 2006+-------------------------------------------------+---------+-----------+-----------+| | | 2006| 2005|+-------------------------------------------------+---------+-----------+-----------+| | Notes| US$M| US$M|+-------------------------------------------------+---------+-----------+-----------+|Revenue together with share of jointly controlled| | | ||entities revenue | | | |+-------------------------------------------------+---------+-----------+-----------+|Group production | | 34,139| 24,759|+-------------------------------------------------+---------+-----------+-----------+|Third party products | | 4,960| 6,391|+-------------------------------------------------+---------+-----------+-----------+| | | 39,099| 31,150|+-------------------------------------------------+---------+-----------+-----------+|Less: Share of jointly controlled entities' | | (6,946)| (4,428)||external revenue included above | | | |+-------------------------------------------------+---------+-----------+-----------+|Revenue | | 32,153| 26,722|+-------------------------------------------------+---------+-----------+-----------+|Other income | | 1,227| 757|+-------------------------------------------------+---------+-----------+-----------+|Expenses excluding finance costs | | (22,403)| (19,995)|+-------------------------------------------------+---------+-----------+-----------+|Share of profits from jointly controlled entities| 7| 3,694| 1,787|+-------------------------------------------------+---------+-----------+-----------+|Profit from operations | | 14,671| 9,271|+-------------------------------------------------+---------+-----------+-----------+|Comprising: | | | |+-------------------------------------------------+---------+-----------+-----------+|Group production | | 14,560| 9,157|+-------------------------------------------------+---------+-----------+-----------+|Third party products | | 111| 114|+-------------------------------------------------+---------+-----------+-----------+| | | 14,671| 9,271|+-------------------------------------------------+---------+-----------+-----------+| | | | |+-------------------------------------------------+---------+-----------+-----------+|Financial income | 3| 226| 216|+-------------------------------------------------+---------+-----------+-----------+|Financial expenses | 3| (731)| (547)|+-------------------------------------------------+---------+-----------+-----------+|Net finance costs | 3| (505)| (331)|+-------------------------------------------------+---------+-----------+-----------+|Profit before taxation | | 14,166| 8,940|+-------------------------------------------------+---------+-----------+-----------+|Income tax expense | | (3,207)| (1,876)|+-------------------------------------------------+---------+-----------+-----------+|Royalty related taxation (net of income tax | | (425)| (436)||benefit) | | | |+-------------------------------------------------+---------+-----------+-----------+|Total taxation expense | 4| (3,632)| (2,312)|+-------------------------------------------------+---------+-----------+-----------+|Profit after taxation | | 10,534| 6,628|+-------------------------------------------------+---------+-----------+-----------+|Profit attributable to minority interests | | 84| 232|+-------------------------------------------------+---------+-----------+-----------+|Profit attributable to members of BHP Billiton | | 10,450| 6,396||Group | | | |+-------------------------------------------------+---------+-----------+-----------+| | | | |+-------------------------------------------------+---------+-----------+-----------+|Earnings per ordinary share (basic) (US cents) | 5| 173.2| 104.4|+-------------------------------------------------+---------+-----------+-----------+|Earnings per ordinary share (diluted) (US cents) | 5| 172.4| 104.0|+-------------------------------------------------+---------+-----------+-----------+| | | | |+-------------------------------------------------+---------+-----------+-----------+| | | | |+-------------------------------------------------+---------+-----------+-----------+|Dividends per ordinary share - paid during the | 6| 32.0| 23.0||period (US cents) | | | |+-------------------------------------------------+---------+-----------+-----------+|Dividends per ordinary share - declared in | 6| 36.0| 28.0||respect of the period (US cents) | | | |+-------------------------------------------------+---------+-----------+-----------+ The accompanying notes form part of this financial information. Consolidated Statement of Recognised Income and Expensefor the year ended June 2006+---------------------------------------------------------+------+---------+---------+| | | 2006| 2005|+---------------------------------------------------------+------+---------+---------+| | | US$M| US$M|+---------------------------------------------------------+------+---------+---------+|Profit for the year | | 10,534| 6,628|+---------------------------------------------------------+------+---------+---------+|Amounts recognised directly in equity | | | |+---------------------------------------------------------+------+---------+---------+|Actuarial gains/(losses) on pension and medical plans | | 111| (149)|+---------------------------------------------------------+------+---------+---------+|Available for sale investments: | | | |+---------------------------------------------------------+------+---------+---------+|Valuation gains/(losses) taken to equity | | (1)| -|+---------------------------------------------------------+------+---------+---------+|Cash flow hedges: | | | |+---------------------------------------------------------+------+---------+---------+|Gains /(losses) taken to equity | | (27)| -|+---------------------------------------------------------+------+---------+---------+|(Gains) / losses transferred to the initial carrying | | (25)| -||amount of hedged items | | | |+---------------------------------------------------------+------+---------+---------+|Exchange fluctuations on translation of foreign | | (1)| 7||operations | | | |+---------------------------------------------------------+------+---------+---------+|Tax on items recognised directly in, or transferred from,| | 4| 52||equity | | | |+---------------------------------------------------------+------+---------+---------+|Total amounts recognised directly in equity | | 61| (90)|+---------------------------------------------------------+------+---------+---------+|Total recognised income and expense for the year | | 10,595| 6,538|+---------------------------------------------------------+------+---------+---------+|Attributable to minority interests | | 84| 232|+---------------------------------------------------------+------+---------+---------+|Attributable to members of BHP Billiton Group | | 10,511| 6,306|+---------------------------------------------------------+------+---------+---------+| | | | |+---------------------------------------------------------+------+---------+---------+ +---------------------------------------------------------+------+---------+---------+|Effect of change in accounting policy | | | |+---------------------------------------------------------+------+---------+---------+|Impact of adoption of IAS 39 / AASB 139 (net of tax) to: | | | |+---------------------------------------------------------+------+---------+---------+|- retained earnings | | 55| -|+---------------------------------------------------------+------+---------+---------+|- hedging reserve | | 30| -|+---------------------------------------------------------+------+---------+---------+|- financial assets reserve | | 116| -|+---------------------------------------------------------+------+---------+---------+|Total effect of change in accounting policy | | 201| -|+---------------------------------------------------------+------+---------+---------+|Attributable to minority interests | | -| -|+---------------------------------------------------------+------+---------+---------+|Attributable to members of BHP Billiton Group | | 201| -|+---------------------------------------------------------+------+---------+---------+ The accompanying notes form part of this financial information. Consolidated Balance Sheetas at 30 June 2006+---------------------------------------------------------+--------+--------+--------+| | | 2006| 2005|+---------------------------------------------------------+--------+--------+--------+| | | US$M| US$M|+---------------------------------------------------------+--------+--------+--------+|ASSETS | | | |+---------------------------------------------------------+--------+--------+--------+|Current assets | | | |+---------------------------------------------------------+--------+--------+--------+|Cash and cash equivalents | | 776| 1,222|+---------------------------------------------------------+--------+--------+--------+|Trade and other receivables | | 3,831| 3,175|+---------------------------------------------------------+--------+--------+--------+|Other financial assets | | 808| 69|+---------------------------------------------------------+--------+--------+--------+|Inventories | | 2,732| 2,422|+---------------------------------------------------------+--------+--------+--------+|Assets held for sale | | 469| -|+---------------------------------------------------------+--------+--------+--------+|Other | | 160| 148|+---------------------------------------------------------+--------+--------+--------+|Total current assets | | 8,776| 7,036|+---------------------------------------------------------+--------+--------+--------+|Non-current assets | | | |+---------------------------------------------------------+--------+--------+--------+|Trade and other receivables | | 813| 786|+---------------------------------------------------------+--------+--------+--------+|Other financial assets | | 950| 257|+---------------------------------------------------------+--------+--------+--------+|Inventories | | 93| 101|+---------------------------------------------------------+--------+--------+--------+|Investments in jointly controlled entities | | 4,299| 3,254|+---------------------------------------------------------+--------+--------+--------+|Property, plant and equipment | | 30,985| 27,764|+---------------------------------------------------------+--------+--------+--------+|Intangible assets | | 683| 667|+---------------------------------------------------------+--------+--------+--------+|Deferred tax assets | | 1,829| 1,906|+---------------------------------------------------------+--------+--------+--------+|Other | | 88| 72|+---------------------------------------------------------+--------+--------+--------+|Total non-current assets | | 39,740| 34,807|+---------------------------------------------------------+--------+--------+--------+|Total assets | | 48,516| 41,843|+---------------------------------------------------------+--------+--------+--------+|LIABILITIES | | | |+---------------------------------------------------------+--------+--------+--------+|Current liabilities | | | |+---------------------------------------------------------+--------+--------+--------+|Trade and other payables | | 4,053| 3,856|+---------------------------------------------------------+--------+--------+--------+|Interest bearing liabilities | | 1,368| 1,298|+---------------------------------------------------------+--------+--------+--------+|Liabilities held for sale | | 192| -|+---------------------------------------------------------+--------+--------+--------+|Other financial liabilities | | 544| -|+---------------------------------------------------------+--------+--------+--------+|Current tax payable | | 1,268| 936|+---------------------------------------------------------+--------+--------+--------+|Provisions | | 1,067| 1,097|+---------------------------------------------------------+--------+--------+--------+|Deferred income | | 279| 262|+---------------------------------------------------------+--------+--------+--------+|Total current liabilities | | 8,771| 7,449|+---------------------------------------------------------+--------+--------+--------+|Non-current liabilities | | | |+---------------------------------------------------------+--------+--------+--------+|Trade and other payables | | 169| 156|+---------------------------------------------------------+--------+--------+--------+|Interest bearing liabilities | | 7,648| 8,651|+---------------------------------------------------------+--------+--------+--------+|Other financial liabilities | | 289| -|+---------------------------------------------------------+--------+--------+--------+|Deferred tax liabilities | | 1,682| 2,351|+---------------------------------------------------------+--------+--------+--------+|Provisions | | 4,853| 4,613|+---------------------------------------------------------+--------+--------+--------+|Deferred income | | 649| 707|+---------------------------------------------------------+--------+--------+--------+|Total non-current liabilities | | 15,290| 16,478|+---------------------------------------------------------+--------+--------+--------+|Total liabilities | | 24,061| 23,927|+---------------------------------------------------------+--------+--------+--------+|NET ASSETS | | 24,455| 17,916|+---------------------------------------------------------+--------+--------+--------+| | | | |+---------------------------------------------------------+--------+--------+--------+|EQUITY | | | |+---------------------------------------------------------+--------+--------+--------+|Share capital - BHP Billiton Limited | | 1,490| 1,611|+---------------------------------------------------------+--------+--------+--------+|Share capital - BHP Billiton Plc | | 1,234| 1,234|+---------------------------------------------------------+--------+--------+--------+|Share premium account | | 518| 518|+---------------------------------------------------------+--------+--------+--------+|Treasury shares held | | (418)| (8)|+---------------------------------------------------------+--------+--------+--------+|Reserves | | 306| 161|+---------------------------------------------------------+--------+--------+--------+|Retained earnings | | 21,088| 14,059|+---------------------------------------------------------+--------+--------+--------+|Total equity attributable to members of BHP Billiton | | 24,218| 17,575||Group | | | |+---------------------------------------------------------+--------+--------+--------+|Minority interests | | 237| 341|+---------------------------------------------------------+--------+--------+--------+|Total equity | | 24,455| 17,916|+---------------------------------------------------------+--------+--------+--------+ The accompanying notes form part of this financial information. Consolidated Cash Flow Statementfor the year ended June 2006+-----------------------------------------------------+-------+----------+----------+| | | 2006| 2005|+-----------------------------------------------------+-------+----------+----------+| | | US$M| US$M|+-----------------------------------------------------+-------+----------+----------+|Operating activities | | | |+-----------------------------------------------------+-------+----------+----------+|Receipts from customers | | 32,938| 28,425|+-----------------------------------------------------+-------+----------+----------+|Payments to suppliers and employees | | (20,944)| (18,801)|+-----------------------------------------------------+-------+----------+----------+|Cash generated from operations | | 11,994| 9,624|+-----------------------------------------------------+-------+----------+----------+|Dividends received | | 2,671| 1,002|+-----------------------------------------------------+-------+----------+----------+|Interest received | | 121| 90|+-----------------------------------------------------+-------+----------+----------+|Interest paid | | (499)| (315)|+-----------------------------------------------------+-------+----------+----------+|Income tax paid | | (3,152)| (1,476)|+-----------------------------------------------------+-------+----------+----------+|Royalty related taxation paid | | (659)| (551)|+-----------------------------------------------------+-------+----------+----------+|Net operating cash flows | | 10,476| 8,374|+-----------------------------------------------------+-------+----------+----------+|Investing activities | | | |+-----------------------------------------------------+-------+----------+----------+|Purchases of property, plant and equipment | | (5,239)| (3,450)|+-----------------------------------------------------+-------+----------+----------+|Exploration expenditure (including amounts | | (766)| (531)||capitalised) | | | |+-----------------------------------------------------+-------+----------+----------+|Purchases of investments and funding of jointly | | (65)| (42)||controlled entities | | | |+-----------------------------------------------------+-------+----------+----------+|Purchases of, or increased investment in, | | (531)| (6,198)||subsidiaries, operations and jointly controlled | | | ||entities, net of their cash | | | |+-----------------------------------------------------+-------+----------+----------+|Cash outflows from investing activities | | (6,601)| (10,221)|+-----------------------------------------------------+-------+----------+----------+|Proceeds from sale of property, plant and equipment | | 92| 153|+-----------------------------------------------------+-------+----------+----------+|Proceeds from sale or redemption of investments | | 153| 227|+-----------------------------------------------------+-------+----------+----------+|Proceeds from sale or partial sale of subsidiaries, | | 844| 675||operations and jointly controlled entities, net of | | | ||their cash | | | |+-----------------------------------------------------+-------+----------+----------+|Net investing cash flows | | (5,512)| (9,166)|+-----------------------------------------------------+-------+----------+----------+|Financing activities | | | |+-----------------------------------------------------+-------+----------+----------+|Proceeds from ordinary share issues | | 34| 66|+-----------------------------------------------------+-------+----------+----------+|Proceeds from interest bearing liabilities | | 5,912| 5,668|+-----------------------------------------------------+-------+----------+----------+|Repayment of interest bearing liabilities | | (7,013)| (1,735)|+-----------------------------------------------------+-------+----------+----------+|Purchase of shares by ESOP trusts | | (187)| (47)|+-----------------------------------------------------+-------+----------+----------+|Share buy-back - BHP Billiton Limited | | (1,619)| (1,792)|+-----------------------------------------------------+-------+----------+----------+|Share buy-back- BHP Billiton Plc | | (409)| -|+-----------------------------------------------------+-------+----------+----------+|Dividends paid | | (1,936)| (1,404)|+-----------------------------------------------------+-------+----------+----------+|Dividends paid to minority interests | | (190)| (238)|+-----------------------------------------------------+-------+----------+----------+|Repayment of finance leases | | (4)| (22)|+-----------------------------------------------------+-------+----------+----------+|Net financing cash flows | | (5,412)| 496|+-----------------------------------------------------+-------+----------+----------+|Net increase in cash and cash equivalents | | (448)| (296)|+-----------------------------------------------------+-------+----------+----------+|Cash and cash equivalents, net of overdrafts, at | | 1,207| 1,509||beginning of year | | | |+-----------------------------------------------------+-------+----------+----------+|Effect of foreign currency exchange rate changes on | | 1| (6)||cash and cash equivalents | | | |+-----------------------------------------------------+-------+----------+----------+|Cash and cash equivalents, net of overdrafts, at end | | 760| 1,207||of year | | | |+-----------------------------------------------------+-------+----------+----------+ The accompanying notes form part of this financial information. Notes to the Financial Information 1 Business segments The BHP Billiton Group has grouped its major operating assets into the followingCustomer Sector Groups (CSGs): • Petroleum (exploration for and production, processing and marketing ofhydrocarbons including oil, gas and LNG); • Aluminium (exploration for and mining of bauxite, processing and marketing ofaluminium and alumina); • Base Metals (exploration for and mining, processing and marketing of copper,silver, zinc, lead, uranium and copper by-products including gold); • Carbon Steel Materials (exploration for and mining, processing and marketingof coking coal, iron ore and manganese); • Diamonds and Specialty Products (exploration for and mining of diamonds andtitanium minerals and fertiliser operations); • Energy Coal (exploration for and mining, processing and marketing of energycoal); and • Stainless Steel Materials (exploration for and mining, processing andmarketing of nickel and, prior to divestment in June 2005,chrome). Group and unallocated items represent Group centre functions and certaincomparative data for divested assets and investments and exploration andtechnology activities. It is the Group's policy that inter-segment sales are made on a commercialbasis.+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|US$ million |Petroleum|Aluminium| Base| Carbon| Diamonds|Energy|Stainless| Group and| BHP|| | | | | | | | | | || | | | Metals| Steel| and| Coal| Steel| unallocated|Billiton|| | | | | | | | | | || | | | |Materials|Specialty| |Materials| items/| Group|| | | | | | | | | | || | | | | | Products| | |eliminations| |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Year ended 30| | | | | | | | | ||June 2006 | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Revenue | | | | | | | | | ||together with| | | | | | | | | ||share of | | | | | | | | | ||jointly | | | | | | | | | ||controlled | | | | | | | | | ||entities' | | | | | | | | | ||revenue from | | | | | | | | | ||external | | | | | | | | | ||customers | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Sale of group| 4,797| 3,704| 9,034| 9,626| 1,263| 2,713| 2,916| 5| 34,058||production | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Sale of third| 967| 1,374| 1,259| 88| -| 606| 37| 629| 4,960||party product| | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Rendering of | 3| 6| 1| 38| -| -| -| 33| 81||services | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Inter-segment| 109| -| -| 8| -| -| 2| (119)| -||revenue | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+| | 5,876| 5,084| 10,294| 9,760| 1,263| 3,319| 2,955| 548| 39,099|+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Less: share | (5)| (107)|(5,393)| (626)| (377)| (438)| -| -| (6,946)||of jointly | | | | | | | | | ||controlled | | | | | | | | | ||entities' | | | | | | | | | ||external | | | | | | | | | ||revenue | | | | | | | | | ||included | | | | | | | | | ||above | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Segment | 5,871| 4,977| 4,901| 9,134| 886| 2,881| 2,955| 548| 32,153||revenue | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+| | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Segment | 2,963| 917| 1,998| 4,159| 209| 131| 901| (301)| 10,977||result | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Other | 5| 37| -| 9| -| -| -| (51)| -||attributable | | | | | | | | | ||income (1) | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Share of | -| 193| 3,015| 262| 91| 139| -| (6)| 3,694||profits from | | | | | | | | | ||jointly | | | | | | | | | ||controlled | | | | | | | | | ||entities | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Profit from | 2,968| 1,147| 5,013| 4,430| 300| 270| 901| (358)| 14,671||operations | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Net finance | | | | | | | | | (505)||costs | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Income tax | | | | | | | | | (3,207)||expense | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Royalty | | | | | | | | | (425)||related | | | | | | | | | ||taxation | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Profit after | | | | | | | | | 10,534||taxation | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+| | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Adjusted | 3,798| 1,468| 5,093| 4,772| 396| 500| 1,185| (242)| 16,970||EBITDA | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Other | (7)| (44)| 267| 15| (3)| 17| (41)| (76)| 128||significant | | | | | | | | | ||non-cash | | | | | | | | | ||items | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|EBITDA | 3,791| 1,424| 5,360| 4,787| 393| 517| 1,144| (318)| 17,098|+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Depreciation | (720)| (227)| (339)| (356)| (93)| (247)| (243)| (39)| (2,264)||and | | | | | | | | | ||amortisation | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Impairment | (113)| (50)| (8)| (1)| -| -| -| (1)| (173)||losses | | | | | | | | | ||recognised | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Reversals of | 10| -| -| -| -| -| -| -| 10||previous | | | | | | | | | ||impairment | | | | | | | | | ||losses | | | | | | | | | ||recognised | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Profit from | 2,968| 1,147| 5,013| 4,430| 300| 270| 901| (358)| 14,671||operations | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Profit from | 2,963| 1,071| 5,017| 4,433| 300| 233| 901| (358)| 14,560||group | | | | | | | | | ||production | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Profit from | 5| 76| (4)| (3)| -| 37| -| -| 111||third party | | | | | | | | | ||product | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+| | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Capital | 1,124| 366| 861| 1,606| 202| 131| 1,423| 41| 5,754||expenditure | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+| | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Segment | 7,420| 6,061| 9,419| 6,905| 1,630| 3,018| 5,692| 4,050| 44,195||assets | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Investments | 112| 551| 2,511| 410| 115| 622| -| -| 4,321||in jointly | | | | | | | | | ||controlled | | | | | | | | | ||entities | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Total assets | 7,532| 6,612| 11,930| 7,315| 1,745| 3,640| 5,692| 4,050| 48,516|+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Segment | 2,208| 1,048| 2,617| 2,136| 178| 1,759| 898| 13,217| 24,061||liabilities | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+ (1) Other attributable income represents the re-allocation of certain itemsrecorded in the segment result of group & unallocated / eliminations to theapplicable CSG / business segment. 1 Business segments continued+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|US$ million |Petroleum|Aluminium| Base| Carbon| Diamonds|Energy|Stainless| Group and| BHP|| | | | | | | | | | || | | | Metals| Steel| and| Coal| Steel| unallocated|Billiton|| | | | | | | | | | || | | | |Materials|Specialty| |Materials| items/| Group|| | | | | | | | | | || | | | | | Products| | |eliminations| |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Year ended 30| | | | | | | | | ||June 2005 | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Revenue | | | | | | | | | ||together with| | | | | | | | | ||share of | | | | | | | | | ||jointly | | | | | | | | | ||controlled | | | | | | | | | ||entities' | | | | | | | | | ||revenue from | | | | | | | | | ||external | | | | | | | | | ||customers | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Sale of group| 3,953| 3,103| 4,372| 7,298| 986| 2,718| 2,265| 3| 24,698||production | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Sale of third| 1,955| 1,543| 670| 238| 523| 669| 9| 784| 6,391||party product| | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Rendering of | -| -| 1| 34| -| -| -| 26| 61||services | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Inter-segment| 62| 5| -| 27| -| -| -| (94)| -||revenue | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+| | 5,970| 4,651| 5,043| 7,597| 1,509| 3,387| 2,274| 719| 31,150|+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Less: share | (3)| (80)|(2,714)| (429)| (778)| (416)| (8)| -| (4,428)||of jointly | | | | | | | | | ||controlled | | | | | | | | | ||entities' | | | | | | | | | ||revenue | | | | | | | | | ||included | | | | | | | | | ||above | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Segment | 5,967| 4,571| 2,329| 7,168| 731| 2,971| 2,266| 719| 26,722||revenue | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+| | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Segment | 2,523| 758| 481| 2,330| 429| 319| 828| (184)| 7,484||result | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Other | 6| 26| -| 2| 19| 1| 25| (79)| -||attributable | | | | | | | | | ||income (1) | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Share of | -| 139| 1,285| 148| 77| 137| 1| -| 1,787||profits from | | | | | | | | | ||jointly | | | | | | | | | ||controlled | | | | | | | | | ||entities | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Profit from | 2,529| 923| 1,766| 2,480| 525| 457| 854| (263)| 9,271||operations | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Net finance | | | | | | | | | (331)||costs | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Income tax | | | | | | | | | (1,876)||expense | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Royalty | | | | | | | | | (436)||related | | | | | | | | | ||taxation | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Profit after | | | | | | | | | 6,628||taxation | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+| | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Adjusted | 3,151| 1,122| 1,952| 3,098| 710| 740| 1,014| (65)| 11,722||EBITDA | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Other | -| 15| (33)| (318)| (14)| (95)| (19)| (169)| (633)||significant | | | | | | | | | ||non-cash | | | | | | | | | ||items | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|EBITDA | 3,151| 1,137| 1,919| 2,780| 696| 645| 995| (234)| 11,089|+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Depreciation | (616)| (214)| (153)| (300)| (171)| (179)| (141)| (27)| (1,801)||and | | | | | | | | | ||amortisation | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Impairment | (6)| -| -| -| -| (9)| -| (2)| (17)||losses | | | | | | | | | ||recognised | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Reversals of | -| -| -| -| -| -| -| -| -||previous | | | | | | | | | ||impairment | | | | | | | | | ||losses | | | | | | | | | ||recognised | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Profit from | 2,529| 923| 1,766| 2,480| 525| 457| 854| (263)| 9,271||operations | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Profit from | 2,515| 902| 1,777| 2,466| 503| 403| 854| (263)| 9,157||group | | | | | | | | | ||production | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Profit from | 14| 21| (11)| 14| 22| 54| -| -| 114||third party | | | | | | | | | ||product | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+| | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Capital | 898| 268| 345| 1,063| 239| 164| 475| 31| 3,483||expenditure | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+| | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Segment | 6,448| 5,398| 7,880| 4,885| 1,429| 2,359| 4,377| 5,813| 38,589||assets | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Investments | 112| 509| 1,633| 336| 115| 549| -| -| 3,254||in jointly | | | | | | | | | ||controlled | | | | | | | | | ||entities | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Total assets | 6,560| 5,907| 9,513| 5,221| 1,544| 2,908| 4,377| 5,813| 41,843|+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+|Segment | 1,955| 745| 2,240| 1,903| 162| 1,558| 612| 14,752| 23,927||liabilities | | | | | | | | | |+-------------+---------+---------+-------+---------+---------+------+---------+------------+--------+ (1) Other attributable income represents the re-allocation of certain itemsrecorded in the segment result of group & unallocated / eliminations to theapplicable CSG / business segment. 2 Exceptional items Exceptional items are those items where their nature and amount is consideredmaterial and require separate disclosure. Such items included within the BHPBilliton Group profit for the year are detailed below.+------------------------------------------+--------------+------------+------------+| | Gross| Tax| Net|| | | | ||Year ended 30 June 2006 | US$M| US$M| US$M|+------------------------------------------+--------------+------------+------------+|Exceptional items by category | | | |+------------------------------------------+--------------+------------+------------+|Sale of Tintaya copper mine | 439| 143| 296|+------------------------------------------+--------------+------------+------------+|Exceptional items by Customer Sector Group| | | |+------------------------------------------+--------------+------------+------------+|Base Metals | 439| 143| 296|+------------------------------------------+--------------+------------+------------+ Sale of Tintaya copper mineEffective 1 June 2006, BHP Billiton sold its interests in the Tintaya coppermine in Peru. Gross consideration received was US$853 million, before deductingintercompany trade balances. The net consideration of US$717 million (net oftransaction costs) included US$634 million for shares plus the assumption ofUS$116 million of debt, working capital adjustments and deferred paymentscontingent upon future copper prices and production volumes.+------------------------------------------+--------------+------------+------------+| | Gross| Tax| Net|| | | | ||Year ended 30 June 2005 | US$M| US$M| US$M|+------------------------------------------+--------------+------------+------------+|Exceptional items by category | | | |+------------------------------------------+--------------+------------+------------+|Sale of Laminaria and Corallina | 134| (10)| 124|+------------------------------------------+--------------+------------+------------+|Disposal of Chrome operations | 142| (6)| 136|+------------------------------------------+--------------+------------+------------+|Termination of operations | (266)| 80| (186)|+------------------------------------------+--------------+------------+------------+|Closure plans | (121)| 17| (104)|+------------------------------------------+--------------+------------+------------+|Total by category | (111)| 81| (30)|+------------------------------------------+--------------+------------+------------+|Exceptional items by Customer Sector Group| | | |+------------------------------------------+--------------+------------+------------+|Petroleum | 134| (10)| 124|+------------------------------------------+--------------+------------+------------+|Base Metals | (29)| (4)| (33)|+------------------------------------------+--------------+------------+------------+|Carbon Steel Materials | (285)| 80| (205)|+------------------------------------------+--------------+------------+------------+|Energy Coal | (73)| 21| (52)|+------------------------------------------+--------------+------------+------------+|Stainless Steel Materials | 142| (6)| 136|+------------------------------------------+--------------+------------+------------+|Total by Customer Sector Group | (111)| 81| (30)|+------------------------------------------+--------------+------------+------------+ Sale of Laminaria and CorallinaIn January 2005, the Group disposed of its interest in the Laminaria andCorallina oil fields. Proceeds on the sale were US$130 million resulting in aprofit before tax of US$134 million (US$10 million tax expense). Disposal of Chrome operationsEffective 1 June 2005, BHP Billiton disposed of its economic interest in themajority of its South African chrome business. The total proceeds on the salewere US$421 million, resulting in a profit before tax of US$127 million (US$1million tax expense). In addition, the Group sold its interest in the Palmietchrome business in May 2005 for proceeds of US$12 million, resulting in a profitbefore tax of US$15 million (US$5 million tax expense). Provision for termination of operationsThe Group decided to decommission the Boodarie Iron operations and a charge ofUS$266 million (US$80 million tax benefit) relating to termination of theoperation was recognised. The charge primarily relates to settlement of existingcontractual arrangements, plant decommissioning, site rehabilitation, redundancyand other closure related costs/charges associated with the closure. Closure plansAs part of the Group's regular review of decommissioning and site restorationplans, the Group reassessed plans in respect of certain closed operations. Atotal charge of US$121 million (US$104 million after tax) was recorded andincluded a charge of US$73 million (US$21 million tax benefit) for closed minesat Ingwe in relation to revision of the Group's assessed rehabilitationobligation, predominantly resulting from revised water management plans and acharge of US$48 million (US$4 million tax expense) in relation to other closedmining operations. 3 Net finance costs+-------------------------------------------------------------+--------+--------+| | 2006| 2005|+-------------------------------------------------------------+--------+--------+| | US$M| US$M|+-------------------------------------------------------------+--------+--------+|Financial expenses: | | |+-------------------------------------------------------------+--------+--------+|Interest on bank loans and overdrafts | 134| 34|+-------------------------------------------------------------+--------+--------+|Interest on all other loans | 382| 254|+-------------------------------------------------------------+--------+--------+|Finance lease and hire purchase interest | 6| 6|+-------------------------------------------------------------+--------+--------+| | 522| 294|+-------------------------------------------------------------+--------+--------+|Dividends on redeemable preference shares | 17| 25|+-------------------------------------------------------------+--------+--------+|Discounting on provisions and other liabilities | 266| 173|+-------------------------------------------------------------+--------+--------+|Discounting on pension and medical benefit entitlements | 108| 114|+-------------------------------------------------------------+--------+--------+|Interest capitalised (a) | (144)| (78)|+-------------------------------------------------------------+--------+--------+|Net fair value change on hedged loans and related hedging | (30)| -||derivatives | | |+-------------------------------------------------------------+--------+--------+| | 739| 528|+-------------------------------------------------------------+--------+--------+|Exchange differences on net debt | (8)| 19|+-------------------------------------------------------------+--------+--------+| | 731| 547|+-------------------------------------------------------------+--------+--------+|Financial income: | | |+-------------------------------------------------------------+--------+--------+|Interest income | (123)| (118)|+-------------------------------------------------------------+--------+--------+|Return on pension plan assets | (103)| (98)|+-------------------------------------------------------------+--------+--------+| | (226)| (216)|+-------------------------------------------------------------+--------+--------+|Net finance costs | 505| 331|+-------------------------------------------------------------+--------+--------+ (a) Interest has been capitalised at the rate of interest applicable to thespecific borrowings financing the assets under construction or, where financedthrough general borrowings, at a capitalisation rate representing the averageinterest rate on such borrowings. For the year ended 30 June 2006 thecapitalisation rate was 5.0 per cent. (2005: 4.6 percent) 4 Taxation+------------------------------------------------------------+-----------+---------+| | 2006| 2005|+------------------------------------------------------------+-----------+---------+|Taxation expense including royalty related taxation | US$M| US$M|+------------------------------------------------------------+-----------+---------+|UK taxation expense | 294| 206|+------------------------------------------------------------+-----------+---------+|Australian taxation expense | 2,547| 1,613|+------------------------------------------------------------+-----------+---------+|Overseas taxation expense | 791| 493|+------------------------------------------------------------+-----------+---------+|Total taxation expense | 3,632| 2,312|+------------------------------------------------------------+-----------+---------+ 5 Earnings per share+------------------------------------------------------------+----------+---------+| | 2006| 2005|+------------------------------------------------------------+----------+---------+|Basic earnings per share (US cents) | 173.2| 104.4|+------------------------------------------------------------+----------+---------+|Diluted earnings per share (US cents) | 172.4| 104.0|+------------------------------------------------------------+----------+---------+|Basic earnings per American Depositary Share (ADS) (US | 346.4| 208.8||cents) (a) | | |+------------------------------------------------------------+----------+---------+|Diluted earnings per American Depositary Share (ADS) (US | 344.8| 208.0||cents) (a) | | |+------------------------------------------------------------+----------+---------+|Basic earnings (US$ million) | 10,450| 6,396|+------------------------------------------------------------+----------+---------+|Diluted earnings (US$ million) (b) | 10,456| 6,399|+------------------------------------------------------------+----------+---------+ The weighted average number of shares used for the purposes of calculatingdiluted earnings per share reconciles to the number used to calculate basicearnings per share as follows: +------------------------------------------------------------+----------+---------+| | 2006| 2005|+------------------------------------------------------------+----------+---------+|Weighted average number of shares | Million| Million|+------------------------------------------------------------+----------+---------+|Basic earnings per share denominator | 6,035| 6,124|+------------------------------------------------------------+----------+---------+|Shares and options contingently issuable under employee | 31| 32||share ownership plans | | |+------------------------------------------------------------+----------+---------+|Diluted earnings per share denominator | 6,066| 6,156|+------------------------------------------------------------+----------+---------+ (a) For the periods indicated, each ADS represents two ordinary shares. (b) Diluted earnings are calculated after adding back dividend equivalentpayments of US$6 million (2005: US$3 million) that would not be made ifpotential ordinary shares were converted to fully paid. 6 Dividends+------------------------------------------------------------+---------+---------+| | 2006| 2005|+------------------------------------------------------------+---------+---------+| | US$M| US$M|+------------------------------------------------------------+---------+---------+|Dividends paid during the period | | |+------------------------------------------------------------+---------+---------+|BHP Billiton Limited | 1,148| 842|+------------------------------------------------------------+---------+---------+|BHP Billiton Plc - Ordinary shares | 790| 567|+------------------------------------------------------------+---------+---------+| - Preference shares (a) | -| -|+------------------------------------------------------------+---------+---------+| | 1,938| 1,409|+------------------------------------------------------------+---------+---------+| | | |+------------------------------------------------------------+---------+---------+|Dividends declared in respect of the period | | |+------------------------------------------------------------+---------+---------+|BHP Billiton Limited | 1,275| 1,004|+------------------------------------------------------------+---------+---------+|BHP Billiton Plc - Ordinary shares | 885| 691|+------------------------------------------------------------+---------+---------+| - Preference shares (a) | -| -|+------------------------------------------------------------+---------+---------+| | 2,160| 1,695|+------------------------------------------------------------+---------+---------+ +------------------------------------------------------------+---------+---------+| | 2006| 2005|+------------------------------------------------------------+---------+---------+| | US cents| US cents|+------------------------------------------------------------+---------+---------+|Dividends paid during the period (per share) | | |+------------------------------------------------------------+---------+---------+|Prior year final dividend | 14.5| 9.5|+------------------------------------------------------------+---------+---------+|First interim dividend | 17.5| 13.5|+------------------------------------------------------------+---------+---------+| | 32.0| 23.0|+------------------------------------------------------------+---------+---------+| | | |+------------------------------------------------------------+---------+---------+|Dividends declared in respect of the period (per share) | | |+------------------------------------------------------------+---------+---------+|Interim dividend | 17.5| 13.5|+------------------------------------------------------------+---------+---------+|Final dividend | 18.5| 14.5|+------------------------------------------------------------+---------+---------+| | 36.0| 28.0|+------------------------------------------------------------+---------+---------+ (a) 5.5 per cent dividend on 50,000 preference shares of £1 each (2005: 5.5 percent). Dividends are declared after period end in the announcement of the results forthe period. Interim dividends are declared in February and paid in March. Finaldividends are declared in August and paid in September. Dividends declared arenot recorded as a liability at the end of the period to which they relate.Subsequent to year end, on 23 August 2006, BHP Billiton declared a finaldividend of 18.5 US cents per share (US$1,100 million) which will be paid on 27September 2006 (2005: 14.5 US cents per share- US$878 million). Each American Depository Share (ADS) represents two ordinary shares of BHPBilliton Limited or BHP Billiton Plc. Dividends declared on each ADS representtwice the dividend declaredon BHP Billiton shares. BHP Billiton Limited dividends for all periods presented are, or will be, fullyfranked based on a tax rate of 30%.+-------------------------------------------------------------+---------+---------+| | 2006| 2005|+-------------------------------------------------------------+---------+---------+| | US$M| US$M|+-------------------------------------------------------------+---------+---------+|Franking credits available for subsequent financial years | 831| 328||based upon a tax rate of 30% (i) (ii) | | |+-------------------------------------------------------------+---------+---------+ (i) The above amounts represent the balance of the BHP Billiton Limited frankingaccount as at the end of the financial year, adjusted for (a) franking creditsthat will arise from the payment of the amount of the provision for income tax; and (b) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date. (ii) The payment of the final 2006 dividend declared post reporting date willreduce the franking account balance by US$285 million. 7 Investments accounted for using the equity method+--------------------------------------------+-----------------+------------------+|Material shareholdings in jointly controlled| Ownership | Contribution to ||entities | interest at BHP | profit after || | Billiton Group | taxation || | reporting date | || | (a) | |+--------------------------------------------+--------+--------+--------+---------+| | 30 June| 30 June| 30 June| 30 June|| | 2006| 2005| 2006| 2005|| | %| %| US$M| US$M|+------------------------+-------------------+--------+--------+--------+---------+|Carbones del Cerrejon | | 33.3| 33.3| 97| 111||LLC | | | | | |+------------------------+-------------------+--------+--------+--------+---------+|Minera Antamina SA | | 33.75| 33.75| 437| 194|+------------------------+-------------------+--------+--------+--------+---------+|Integris Metals Inc (b) | | -| -| -| 17|+------------------------+-------------------+--------+--------+--------+---------+|Samarco Mineracao SA | | 50| 50| 262| 148|+------------------------+-------------------+--------+--------+--------+---------+|Valesul Aluminio SA (c) | | 45.5| 45.5| 8| 9|+------------------------+-------------------+--------+--------+--------+---------+|Minera Escondida | | 57.5| 57.5| 2,595| 1,090||Limitada | | | | | |+------------------------+-------------------+--------+--------+--------+---------+|Mozal SARL | | 47.1| 47.1| 185| 130|+------------------------+-------------------+--------+--------+--------+---------+|Other (d) | | N/A| N/A| 110| 88|+------------------------+-------------------+--------+--------+--------+---------+|Total | | | | 3,694| 1,787|+------------------------+-------------------+--------+--------+--------+---------+ (a) The ownership interest at the jointly controlled entities' reporting dateand BHP Billiton's reporting date are the same. (b) Effective January 2005, the BHP Billiton Group sold its interest in IntegrisMetals Inc. (c) Subsequent to 30 June 2006, the BHP Billiton Group sold its interest inValesul Aluminio SA. (d) Includes immaterial jointly controlled entities and the Richards BayMinerals joint venture owned 50% (30 June 2005: 50%). 8 Total equity+--------------------------------------------------------------+--------+--------+| | 2006| 2005|+--------------------------------------------------------------+--------+--------+| | US$M| US$M|+--------------------------------------------------------------+--------+--------+|Total equity opening balance | 17,916| 14,743|+--------------------------------------------------------------+--------+--------+|Adjustment for adoption of IAS 39 / AASB 139 - Retained | 55| -||earnings | | |+--------------------------------------------------------------+--------+--------+| | 30| -||- Hedging reserves | | |+--------------------------------------------------------------+--------+--------+| | 116| -||- Financial asset reserve | | |+--------------------------------------------------------------+--------+--------+|Total equity opening balance after adoption of IAS 39 / AASB | 18,117| 14,743||139 | | |+--------------------------------------------------------------+--------+--------+|Changes in the statement of recognised income and expense | 10,511| 6,306|+--------------------------------------------------------------+--------+--------+|Transactions with owners - contributed equity | 24| 56|+--------------------------------------------------------------+--------+--------+|Dividends | (1,938)| (1,409)|+--------------------------------------------------------------+--------+--------+|Accrued employee entitlement to share awards | 61| 53|+--------------------------------------------------------------+--------+--------+|Purchases of shares made by ESOP trusts | (187)| (47)|+--------------------------------------------------------------+--------+--------+|Cash settlement of share awards | -| (3)|+--------------------------------------------------------------+--------+--------+|Total changes in minority interests | (104)| (6)|+--------------------------------------------------------------+--------+--------+|BHP Billiton Plc share buy-back (a) | (409)| -|+--------------------------------------------------------------+--------+--------+|BHP Billiton Limited share buy-back (b) | (1,620)| (1,777)|+--------------------------------------------------------------+--------+--------+|Total equity closing balance | 24,455| 17,916|+--------------------------------------------------------------+--------+--------+ (a) On 16 May 2006, the BHP Billiton Group completed an on-market buy-back of18,820,000 BHP Billiton Plc shares. All BHP Billiton Plc shares bought back areheld as Treasury shares within the share capital of BHP Billiton Plc andresulted in a reduction in equity of US$409 million. The shares were repurchasedat an average price of £11.5356, representing a discount of 8.8 per cent to theaverage BHP Billiton Limited share price between 27 April 2006 and 16 May 2006. (b) On 3 April 2006, the BHP Billiton Group completed an off-market buy-back of95,950,979 BHP Billiton Limited shares. As a result of the buy-back, totalequity decreased US$1,620 million. In accordance with the structure of thebuy-back, US$145 million was allocated to the share capital of BHP BillitonLimited and US$1,475 million was allocated to retained earnings. These shareswere then cancelled. The final price for the buy-back was A$23.45 per share,representing a discount of 14 per cent to the volume weighted average price ofBHP Billiton Limited shares over the five days up to and including the closingdate of the buy-back. On 23 November 2004, the BHP Billiton Group completed anoff-market share buy-back of 180,716,428 BHP Billiton Limited shares. As aresult of the buy-back, total equity decreased by US$1,777 million. Inaccordance with the structure of the buy-back, US$296 million was allocated tothe share capital of BHP Billiton Limited and US$1,481 million was allocated toretained profits. The final price for the buy-back was A$12.57 per share,representing a discount of 12 per cent to the volume weighted average price ofBHP Billiton Limited shares over the five days up to and including the closingdate of the buy-back. 9 Subsequent events Subsequent to 30 June 2006, the sale of BHP Billiton's 45.5% joint ventureinterest in Valesul Aluminio SA, an aluminium smelter, the sale of SouthernCross Fertilisers Pty Ltd, a fertiliser mining and processing business, the saleof the Cascade and Chinook oil and gas prospects, and the sale of the Coal BedMethane assets have been finalised. These assets are classified as held for saleas at 30 June 2006. The financial effects of these transactions have not beenbrought to account at 30 June 2006. 10 Transition to International Financial Reporting Standards The accounting policies set out in this financial information have been appliedfor the years ended 30 June 2006 and 2005, and in the preparation of an openingIFRS balance sheet at 1 July 2004. In preparing its opening IFRS balance sheet, the BHP Billiton Group has adjustedamounts reported previously in financial reports prepared in accordance with itsprevious basis of accounting (previous GAAP). An explanation of how thetransition from previous UK and Australian GAAP to IFRS has affected the Group'sfinancial position and financial performance is set out in the following tablesand accompanying notes. Because of the DLC structure, the preparation of IFRSfinancial statements for the BHP Billiton Group requires transition from the twodifferent predecessor GAAPs of BHP Billiton Limited (which reported underAustralian GAAP) and BHP Billiton Plc (which reported under UK GAAP). Wherenecessary, Australian GAAP has been chosen as the reference predecessor GAAPfrom which to base transition adjustments. The amounts presented below differ to the amounts presented in the note on theimpact of adopting IFRS in the financial statements for the year ended 30 June2005. This follows resolution of the treatment of two items identified in thatnote as being subject to interpretation, and revision. The amounts in the tablesbelow are presented based on the application of the revised interpretation fromthe date of transition to IFRS: • Royalties and resource rent taxes which are in the nature of an income tax are now measured and presented as income tax in accordance with IAS 12 / AASB 112 "Income Taxes" deferred tax principles. At 30 June 2005 these were accounted for as operating costs; and • Deferred tax liabilities are no longer recorded on non-tax depreciable assets, such as mineral rights, where a tax base exists for capital gains tax, and that tax base exceeds the book base. At 30 June 2005 a deferred tax liability was recorded by reference to the tax base for income tax purposes. 10 Transition to International Financial Reporting Standards continued The following table presents a summary of the impact of IFRS on net equity as at30 June 2005 and 1 July 2004. Reconciliation of net equity+------------------------------------------+------------------+------------------+| | UKGAAP | Australian GAAP |+------------------------------------------+---------+--------+---------+--------+| Note| As at| As at| As at| As at|| +---------+--------+---------+--------+| | 30 June| 1 July| 30 June| 1 July|| | 2005| 2004| 2005| 2004|| +---------+--------+---------+--------+| | US$M| US$M| US$M| US$M|+--------------------------------------+---+---------+--------+---------+--------+|Net equity as previously reported | | 17,489| 14,380| 18,364| 15,425||under UK and Australian GAAP | | | | | |+--------------------------------------+---+---------+--------+---------+--------+|IAS 19 / AASB 119 Post-retirement | a| (650)| (527)| (650)| (527)||pension obligations - pre tax | | | | | |+--------------------------------------+---+---------+--------+---------+--------+|IAS 19 / AASB 119 Post-retirement | a| 158| 135| 158| 135||pension obligations - deferred tax | | | | | ||effect | | | | | |+--------------------------------------+---+---------+--------+---------+--------+|IAS 19 / AASB 119 Post-retirement | a| (111)| (76)| (111)| (76)||medical benefits - pre tax | | | | | |+--------------------------------------+---+---------+--------+---------+--------+|IAS 19 / AASB 119 Post-retirement | a| 30| 21| 30| 21||medical benefits - deferred tax effect| | | | | |+--------------------------------------+---+---------+--------+---------+--------+|IAS 12 / AASB 112 Deferred income tax | b| (226)| (202)| 36| (267)||accounting | | | | | |+--------------------------------------+---+---------+--------+---------+--------+|IAS 12 / AASB 112 Remeasurement of | b| 32| 30| 32| 30||royalties as income taxes | | | | | |+--------------------------------------+---+---------+--------+---------+--------+|IFRS 3 / AASB 3 Reinstatement of | c| 354| 388| 41| -||goodwill | | | | | |+--------------------------------------+---+---------+--------+---------+--------+|IAS 10 / AASB 110 Reversal of dividend| d| 878| 592| -| -||payable | | | | | |+--------------------------------------+---+---------+--------+---------+--------+|IFRS 2 / AASB 2 Equity based | e| 16| 2| 16| 2||compensation payments to employees - | | | | | ||tax effect | | | | | |+--------------------------------------+---+---------+--------+---------+--------+|IFRS 3 / AASB 3 Business combinations | c| (54)| -| -| -||- WMC acquisition | | | | | |+--------------------------------------+---+---------+--------+---------+--------+|Net equity in accordance with IFRS | | 17,916| 14,743| 17,916| 14,743|+--------------------------------------+---+---------+--------+---------+--------+|Overall net increase in equity under | | 427| 363| (448)| (682)||IFRS | | | | | |+--------------------------------------+---+---------+--------+---------+--------+ The following table presents a summary of the impact of IFRS on investments injointly controlled entities as at 30 June 2005 and 1 July 2004. Reconciliation of investments in jointly controlled entities - UK and AustralianGAAP+-------------------------------------------------------------+---------+--------+| Note| As at| As at|| +---------+--------+| | 30 June| 1 July|| | 2005| 2004|| +---------+--------+| | US$M| US$M|+-----------------------------------------------------+-------+---------+--------+|Investments in jointly controlled entities as | | 1,525| 1,369||previously reported under UK and Australian GAAP | | | |+-----------------------------------------------------+-------+---------+--------+|Impact on investments in jointly controlled entities | | | ||of adjustments to reclassify assets and liabilities | | | ||previously accounted for by proportional | | | ||consolidation: | | | |+-----------------------------------------------------+-------+---------+--------+| Current assets | | 623| 507|+-----------------------------------------------------+-------+---------+--------+| Non-current assets | | 2,687| 2,425|+-----------------------------------------------------+-------+---------+--------+| Current liabilities | | (374)| (505)|+-----------------------------------------------------+-------+---------+--------+| Non-current liabilities | | (1,184)| (1,196)|+-----------------------------------------------------+-------+---------+--------+|Increase in investments in jointly controlled | f| 1,752| 1,231||entities in applying the equity method of accounting | | | |+-----------------------------------------------------+-------+---------+--------+|Other IFRS and acquisition accounting adjustments | | (23)| (7)|+-----------------------------------------------------+-------+---------+--------+|Investments in jointly controlled entities in | | 3,254| 2,593||accordance with IFRS | | | |+-----------------------------------------------------+-------+---------+--------+ 10 Transition to International Financial Reporting Standards continued The following tables present a summary of the impact of IFRS on profit after taxfor the year ended 30 June 2005. Reconciliation of profit after tax+-----------------------------------------------------+-------+--------+----------+| | Note| UKGAAP|Australian|| | | | GAAP|+-----------------------------------------------------+-------+--------+----------+| | | Year|Year ended|| | | ended| |+-----------------------------------------------------+-------+--------+----------+| | | 30 June| 30 June|| | | 2005| 2005|+-----------------------------------------------------+-------+--------+----------+| | | US$M| US$M|+-----------------------------------------------------+-------+--------+----------+|Net Profit after tax as previously reported under UK | | 6,630| 6,241||and Australian GAAP | | | |+-----------------------------------------------------+-------+--------+----------+| | | | |+-----------------------------------------------------+-------+--------+----------+|Pre Tax IFRS adjustments: | | | |+-----------------------------------------------------+-------+--------+----------+|IAS 19 / AASB 119 Post-retirement medical and pension| a| (8)| (8)||obligations | | | |+-----------------------------------------------------+-------+--------+----------+|IAS 12 / AASB 112 Deferred tax effects within jointly| b| (6)| (6)||controlled entities | | | |+-----------------------------------------------------+-------+--------+----------+|IFRS 3 / AASB 3 Reversal of amortisation of goodwill | c| 2| 44|+-----------------------------------------------------+-------+--------+----------+|IFRS 2 / AASB 2 Equity based compensation payments to| e| 56| 56||employees | | | |+-----------------------------------------------------+-------+--------+----------+|Adjustment to goodwill included in the net book value| c| 31| (3)||of the disposed Chrome operations | | | |+-----------------------------------------------------+-------+--------+----------+|IFRS 3 / AASB 3 Business combinations - WMC | c| (54)| -||acquisition | | | |+-----------------------------------------------------+-------+--------+----------+|IAS 31 / AASB 131 Reclassification of jointly | | (197)| -||controlled entity tax expense to profit before tax - | f| | ||previously equity accounted | | | |+-----------------------------------------------------+-------+--------+----------+|IAS 31 / AASB 131 Reclassification of jointly | | (230)| (230)||controlled entity tax expense to profit before tax - | f| | ||previously proportionately consolidated | | | |+-----------------------------------------------------+-------+--------+----------+|IAS 12 / AASB 112 Deferred tax on the disposed Chrome| b| 3| 3||operations | | | |+-----------------------------------------------------+-------+--------+----------+|IAS 12 / AASB 112 Reclassification of royalties which| g| 603| 603||are accounted for as income taxes | | | |+-----------------------------------------------------+-------+--------+----------+|Other | | (1)| -|+-----------------------------------------------------+-------+--------+----------+| | | | |+-----------------------------------------------------+-------+--------+----------+|Tax IFRS adjustments: | | | |+-----------------------------------------------------+-------+--------+----------+|IAS 12 / AASB 112 Recognition of prior year tax | b| -| 350||losses | | | |+-----------------------------------------------------+-------+--------+----------+|IAS 12 / AASB 112 Withholding and repatriation taxes | b| (10)| (10)|+-----------------------------------------------------+-------+--------+----------+|IAS 12 / AASB 112 Additional foreign exchange | b| (40)| (46)||variations | | | |+-----------------------------------------------------+-------+--------+----------+|IAS 12 / AASB 112 Non-tax depreciable items now | b| 31| 31||tax-effected | | | |+-----------------------------------------------------+-------+--------+----------+|IAS 12 / AASB 112 Tax base resets under Australian | b| 17| -||tax consolidations | | | |+-----------------------------------------------------+-------+--------+----------+|IFRS 2 / AASB 2 Equity based compensation payments to| e| (12)| (12)||employees | | | |+-----------------------------------------------------+-------+--------+----------+|IAS 31 / AASB 131 Reclassification of jointly | | 197| -||controlled entity tax expense to profit before tax - | f| | ||previously equity accounted | | | |+-----------------------------------------------------+-------+--------+----------+|IAS 31 / AASB 131 Reclassification of jointly | | 230| 230||controlled entity tax expense to profit before tax - | f| | ||previously proportionately consolidated | | | |+-----------------------------------------------------+-------+--------+----------+|IAS 19 / AASB 119 Post-retirement medical and pension| a| 3| 3||benefits - tax impact | | | |+-----------------------------------------------------+-------+--------+----------+|IAS 12 / AASB 112 Reclassification of royalties which| g| (603)| (603)||are accounted for as income taxes | | | |+-----------------------------------------------------+-------+--------+----------+|IAS 12 / AASB 112 Remeasurement of royalties as | g| 2| 2||income taxes | | | |+-----------------------------------------------------+-------+--------+----------+|Other | | (16)| (17)|+-----------------------------------------------------+-------+--------+----------+|Net profit after tax in accordance with IFRS | | 6,628| 6,628|+-----------------------------------------------------+-------+--------+----------+ a Post-retirement and medical benefits (IAS 19 / AASB 119 Employee Benefits)Under IFRS, defined benefit pension plan and medical benefit plan arrangementsresult in the recognition of net assets or liabilities directly based on theunderlying obligations and assets of those plans. The recognised net asset orliability is subject to changes in value that are more volatile than changes inassets and liabilities that were recognised under BHP Billiton Group's previouspolicy, which was based on the UK Statement of Accounting Practice (SSAP) 24'Accounting for Pension Costs'. Under SSAP 24, the cost of providing pensionswas charged to profit and loss so as to allocate the cost systematically overthe employees' service lives on the basis of independent actuarial advice. Apension liability or asset was consequently recognised in the balance sheet tothe extent that the contributions payable either lagged or preceded expenserecognition. b Deferred Tax (IAS 12 / AASB 112 Income Taxes)On transition to IFRS, the balance sheet liability method of tax effectaccounting was adopted, rather than the income statement liability methodapplied under previous BHP Billiton Group policy. This balance sheet methodrecognises deferred tax assets and liabilities on temporary differences betweenthe accounting and tax values of balance sheet items, rather than accounting andtax values of items recognised in profit and loss. This approach gives rise to awider range of deferred tax assets and liabilities and an increase in thevolatility of deferred tax balances brought about by foreign exchange ratemovements. IFRS requires deferred tax to be recognised on items which do nothave a tax base, such as certain mineral rights and fair value adjustments onacquisitions, and for tax on unremitted earnings from subsidiaries and jointventures except to the extent that the group can control the timing ofdistributions and those distributions are not probable in the foreseeablefuture. In addition, royalty arrangements which are in the nature of income taxhave been measured and presented as income tax in accordance with IAS 12 / AASB112 deferred tax accounting principles. The impact on deferred tax balances ofadopting IAS 12 / AASB 112, other than the tax effect of other IFRS adjustments,is as follows:+--------------------------------+-----------------------+-----------------------+| | UK GAAP to IFRS |Australian GAAP to IFRS|+--------------------------------+-----------+-----------+-----------+-----------+| | 30 June |1 Jul 2004 | 30 June |1 Jul 2004 || | 2005 | | 2005 | |+--------------------------------+-----------+-----------+-----------+-----------+| |Tax asset /|Tax asset /|Tax asset /|Tax asset /|| |(provision)|(provision)|(provision)|(provision)|| | | | | || | US$M | US$M | US$M | US$M |+--------------------------------+-----------+-----------+-----------+-----------+|Deferred tax on non depreciable | (309) | (321) | (309) | (321) ||assets acquired in business | | | | ||combinations | | | | |+--------------------------------+-----------+-----------+-----------+-----------+|Tax base resets under Australian| 188 | 165 | - | - ||tax consolidations | | | | |+--------------------------------+-----------+-----------+-----------+-----------+|Foreign exchange movements - tax| 434 | 216 | 434 | 216 ||base of non-monetary assets | | | | |+--------------------------------+-----------+-----------+-----------+-----------+|Foreign exchange movements - USD| (516) | (255) | (516) | (255) ||debt | | | | |+--------------------------------+-----------+-----------+-----------+-----------+|Withholding taxes | (10) | - | (10) | - |+--------------------------------+-----------+-----------+-----------+-----------+|Adoption of IAS 12 to jointly | (13) | (7) | (13) | (7) ||controlled entities | | | | |+--------------------------------+-----------+-----------+-----------+-----------+|Remeasurement of royalties as | 32 | 30 | 32 | 30 ||income taxes | | | | |+--------------------------------+-----------+-----------+-----------+-----------+|Recognition of tax losses | - | - | 450 | 100 |+--------------------------------+-----------+-----------+-----------+-----------+|(Increase) / decrease in net | (194) | (172) | 68 | (237) ||deferred tax liability | | | | |+--------------------------------+-----------+-----------+-----------+-----------+ 10 Transition to International Financial Reporting Standards continued c Goodwill and business combinations (IFRS 3 / AASB 3 Business Combinations)IFRS requires impairment assessments of goodwill, whereas both previous UK andAustralian GAAP permitted / required the amortisation of goodwill. Businesscombinations undertaken after the date of transition to IFRS (1 July 2004) mustbe accounted for in accordance with IFRS. The acquisition of WMC Resources Ltdwas effective 3 June 2005. Differences in accounting for the acquisition existbetween UK GAAP and IFRS with respect to the measurement of fair value ofinventory and the recognition of deferred tax liabilities, and betweenAustralian GAAP and IFRS with respect to deferred tax assets attributable tounused tax losses. Under previous UK GAAP goodwill existing prior to 1998 wasclassified as a reduction of retained earnings. In order to maintain consistencyin the IFRS treatment of goodwill in the DLC structure, such goodwill has beenreclassified on transition as an asset in the balance sheet in accordance withprevious GAAP. The reclassification of goodwill was required because the IFRSaccounting for past business combinations is determined from the previous basisof accounting applied by the Group under previous Australian GAAP which has beenchosen as the reference predecessor GAAP for these purposes. d Dividend payable (IAS 10 / AASB 110 Events after the Balance Sheet Date)IFRS does not permit the recognition of dividends payable as a liability untilthe dividend has been formally declared by the Directors. Under previous UKGAAP, dividends payable were recognised as a liability in the balance sheet atbalance date, despite the fact they were declared subsequent to balance date. e Equity based compensation (IFRS 2 / AASB 2 Share-based Payment)Under IFRS the cost of employee compensation provided in the form ofequity-based compensation (including shares and options) is measured based onthe fair value of those instruments rather than their intrinsic value asrecognised under previous BHP Billiton Group policy. In addition, the change inthe tax base over time is reflected directly in equity. f Joint ventures (IAS 31 / AASB 131 Interests in Joint Ventures)Under IFRS as implemented in Australia, all joint ventures that are constitutedas a legal entity are accounted for using the equity method. Under both previousUK and Australian GAAP, the BHP Billiton Group's interests in the Escondida,Mozal and Valesul joint ventures were accounted for by proportionalconsolidation. As each of these joint ventures operates through an incorporatedentity, IFRS classifies them as jointly controlled entities and the Australianversion of IFRS mandates the use of the equity method of accounting,notwithstanding that in substance none of the entities operate as independentbusiness entities. The change to single line equity accounting for jointlycontrolled entities does not impact net profit or net equity, however, asdemonstrated in the schedules above, the amounts of profit before tax, incometax expense, investments in jointly controlled entities and other balance sheetand income statement line items are significantly affected. g Royalty related taxation (IAS 12 / AASB 112 Income Taxes)Under IFRS, royalties and resource rent taxes are treated as taxationarrangements when they have the characteristics of a tax. For such arrangements,current and deferred tax is provided on the same basis as for other forms oftaxation. Under previous UK and Australian GAAP, such taxes were included inoperating costs, and in some cases, were not calculated in accordance withdeferred tax principles. Material Adjustments to Cash FlowThe use of the equity method of accounting under IFRS for the Group's interestsin the Escondida, Mozal and Valesul jointly controlled entities, as compared toproportional consolidation under previous UK and Australian GAAP, hascorresponding impacts on the Cash Flow Statement. Under IFRS, amounts includedin dividends received from these jointly controlled entities were previouslyincluded elsewhere in cash flows related to operating activities. In additioncapital expenditure and debt repayments for these joint ventures are nowexcluded from the Group's investing and financing cash flows. The presentation of the Cash Flow Statement is consistent with previousAustralian GAAP, however compared to UK GAAP, the cash flows have beenreclassified as operating, investing and financing. BHP Billiton Limited ABN 49 004 028 077 BHP Billiton Plc Registration number 3196209 Registered in Australia Registered in England and Wales Registered Office: Level 27, 180 Lonsdale Street Registered Office: Neathouse Place London SW1V 1BH Melbourne Victoria 3000 United Kingdom Telephone +61 1300 554 757 Facsimile +61 3 9609 3015 Telephone +44 20 7802 4000 Facsimile +44 20 7802 4111 The BHP Billiton Group is headquartered in Australia This information is provided by RNS The company news service from the London Stock Exchange

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