Interim Results

7th Feb 2007 07:00

BHP Billiton PLC06 February 2007 Release Time IMMEDIATE Date 7 February 2007 Number 03/07 BHP BILLITON RESULTS FOR THE HALF YEAR ENDED 31 DECEMBER 2006 * Records for all key earnings measures including Underlying EBITDA up 32% to US$10.5 billion and Underlying EBIT up 37% to US$9.1 billion. * Attributable profit up 41% to US$6.2 billion and EPS up 44%, benefiting from ongoing buy-backs. * Underlying EBIT margin(1) and Return on Capital Employed increased to 47% and 37% respectively. * Half year production records for aluminium, alumina, copper cathode, iron ore, manganese ore and molybdenum from continuing operations. * While costs remain a challenge, the rate of increase has continued to slow. * Current project pipeline includes 29 projects in execution or feasibility comprising US$17.5 billion of investment. * Interim dividend of 20.0 US cents per share, an increase of 14% on last year's interim dividend and the tenth consecutive dividend increase. * Capital return increased by US$10.0 billion representing 9.1%(2) of capital. This is in addition to the US$1.3 billion remaining from the program announced in August 2006. * An outstanding half year result, underpinned by robust demand, solid production and a focus on business excellence. +---+----------------------------------------+---------+------------+-------+---+| |Half Year ended 31 December | 2006| 2005|Change | || | | | | | || | | US$M| US$M| | |+---+----------------------------------------+---------+------------+-------+---+| |Revenue together with share of jointly | 22,113| 18,080| 22.3%| || |controlled entities' revenue | | | | |+---+----------------------------------------+---------+------------+-------+---+| |Underlying EBITDA (3) | 10,494| 7,971| 31.7%| |+---+----------------------------------------+---------+------------+-------+---+| |Underlying EBIT (3) (4) | 9,134| 6,671| 36.9%| |+---+----------------------------------------+---------+------------+-------+---+| |EBIT - Profit from operations | 8,519| 6,259| 36.1%| |+---+----------------------------------------+---------+------------+-------+---+| |Attributable profit | 6,168| 4,364| 41.3%| |+---+----------------------------------------+---------+------------+-------+---+| |Net operating cash flow (5) | 7,018| 4,308| 62.9%| |+---+----------------------------------------+---------+------------+-------+---+| |Basic earnings per share (US cents) | 103.9| 72.1| 44.1%| |+---+----------------------------------------+---------+------------+-------+---+| |Underlying EBITDA interest coverage | 46.7| 41.2| 13.3%| || |(times) (3) (6) | | | | |+---+----------------------------------------+---------+------------+-------+---+| |Dividend per share (US cents) | 20.0| 17.5| 14.3%| |+---+----------------------------------------+---------+------------+-------+---+ Refer to page 14 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 half year ended 31December 2005. RESULTS FOR THE HALF YEAR ENDED 31 DECEMBER 2006 Commentary on the Group Results Record half year results Robust demand, strong product prices and solid production underpins today'srecord result. Our attributable profit of US$6.2 billion represents an increaseof 41.3 per cent over the corresponding period and is the seventh consecutiverecord half year result. The quality of our portfolio and the strong productdemand are evident with seven of our nine Customer Sector Groups (CSGs)(7)recording increases in Underlying EBIT over the comparative period. We achieved production records (from continuing operations) for five major andone minor commodity during the half year and ten of our assets set productionrecords. This reflects our key operating objective of delivering consistent,predictable and sustainable operating performance across all of our businesses. Our Underlying EBIT of US$9.1 billion is an increase of 36.9 per cent over thefirst half of FY06. Underlying EBIT margins rose to 47.4 per cent, from 41.9 percent in the corresponding period while return on Capital Employed increased from31.2 per cent to 36.5 per cent. The environment in which we operate continues tobe challenging. However, our recruitment and procurement strategies thatleverage off our scale and geographic diversity and our Business Excellenceprogram, which is sourcing and replicating best practice from our extensiveasset base, are contributing to a continued reduction in the rate of costincrease. Our activities are becoming more geographically diverse and ourBusiness Excellence program has graduated to its next level of maturity. Investing in the future Our project pipeline continues to grow with a number of organic growth optionsprogressing to the feasibility phase and the acquisition of the Genghis Khan oilfield in the Gulf of Mexico. We now have 29 projects in either execution orfeasibility with an expected budget of US$17.5 billion. The majority of ourprojects under development continue to track to schedule. Cost pressuresresulting from the shortage of labour, equipment and other input costs remain,but recently reassessed projects remain on cost and schedule. During the periodproduction from the Spence copper cathode project in Chile commenced ahead ofschedule while the Escondida Sulphide Leach (copper), Worsley DCP (alumina) andRapid Growth 2 (iron ore) projects continued to ramp up to full capacity. We are committed to creating value added options in our portfolio to provide thenext generation of growth opportunities beyond our current project pipeline.During the period we have opened corporate offices in Guinea and the DemocraticRepublic of Congo, building on our already significant exploration and projectassessment activities in these countries. We also entered into an exclusiveagreement with Global Alumina relating to the development of an alumina refineryin Guinea and we announced the acquisition of the Genghis Khan oil field, whichis adjacent to our Shenzi development. We have a track record of sustainablelong term partnerships that deliver in-country expansion and reinvestmentbringing long term prosperity to all stakeholders, including local communitiesand the governments. The quality of our assets and the diversity of our portfolio underpin thestrength of our cash flow and continues to support our ability to both identifyand invest in growth opportunities while continuing to deliver outstandingreturns to shareholders. Dividend and Capital Management The Board today declared an interim dividend of 20.0 US cents per share. Thisrepresents a 14.3 per cent increase over last year's interim dividend of 17.5 UScents per share. This is our tenth consecutive dividend increase and also meansthat today's dividend has increased more than threefold since the interimdividend paid in 2002. We will continue with our progressive dividend policy,with further increases dependent upon the expectations for future investmentopportunities and market conditions. We are announcing today an increase of US$10 billion to the US$1.3 billionremaining from the capital initiative announced in August 2006. This amount willbe returned to shareholders over the next 18 months through a series of sharebuy-backs. Since August 2006 US$1.7 billion has been returned to shareholdersthrough on-market purchases of 92,285,000 BHP Billiton Plc (Plc) shares (at anapproximate price of US$18.23, being a 8.9 per cent discount to the price of ourLimited stock). We are commencing the first stage in this return immediately with an off-marketbuy-back of BHP Billiton Limited (Ltd) stock (see separate announcement). Thisprogram will begin immediately with a targeted maximum size of around A$3.25billion (US$2.5 billion). We expect the on-market buy-back of Plc shares willcontinue during the off-market process. Today's announcement brings the total capital management programs announcedsince August 2004 to US$17 billion. To date 388 million shares have beenrepurchased, representing approximately 6.6 per cent of the total shares onissue at an approximate price of US$14.11 (A$18.68 / GBP 7.56). On completion of today's announced program BHP Billiton will have repurchasedapproximately 16.9 per cent of the shares on issue since November 2004(8) andwill have returned US$26.6 billion in total to shareholders through capitalinitiatives and dividends since June 2001. The Income Statement To provide clarity into the underlying performance of our operations, we presentUnderlying EBIT which is a measure used internally and in our SupplementaryInformation. Underlying EBIT excludes all net finance costs and taxation,including net finance costs and taxation of jointly controlled entities. Thedifferences between Underlying EBIT and EBIT (Profit from operations) are setout in the following table:+---------------------------+-----------------+---------------+-----------------+|Half Year ended 31 December| | 2006| 2005|+---------------------------+-----------------+---------------+-----------------+| | | US$M| US$M|+---------------------------+-----------------+---------------+-----------------+|Underlying EBIT | | 9,134| 6,671|+---------------------------+-----------------+---------------+-----------------+|Impact of equity accounting for statutory | | ||purposes: | | ||Share of jointly controlled entities' net | (79)| (60)||finance costs | | |+---------------------------------------------+---------------+-----------------+|Share of jointly controlled entities' total | (536)| (352)||taxation expense | | |+---------------------------------------------+---------------+-----------------+|EBIT - Profit from operations | 8,519| 6,259|+---------------------------------------------+---------------+-----------------+ Earnings The following table and commentary describes the approximate impact of theprincipal factors that affected Underlying EBIT for the half year ended 31December 2006 compared with the corresponding half year period:+--+--------------------------------------------------------+---------+-------+--+| | | | | |+--+--------------------------------------------------------+---------+-------+--+| | | US$ Million| |+--+--------------------------------------------------------+---------+-------+--+| |Underlying EBIT for the half year ended 31 December 2005| | 6,671| |+--+--------------------------------------------------------+---------+-------+--+| |Change in volumes: | | | |+--+--------------------------------------------------------+---------+-------+--+| |Increase in volumes | 385| | |+--+--------------------------------------------------------+---------+-------+--+| |Decrease in volumes | (330)| | |+--+--------------------------------------------------------+---------+-------+--+| | | | 55| |+--+--------------------------------------------------------+---------+-------+--+| |Net price impact | | | |+--+--------------------------------------------------------+---------+-------+--+| |Change in sales prices | 3,940| | |+--+--------------------------------------------------------+---------+-------+--+| |Price-linked costs | (515)| | |+--+--------------------------------------------------------+---------+-------+--+| | | | 3,425| |+--+--------------------------------------------------------+---------+-------+--+| |Change in costs: | | | |+--+--------------------------------------------------------+---------+-------+--+| |Costs (rate and usage) | (530)| | |+--+--------------------------------------------------------+---------+-------+--+| |Exchange rates | (175)| | |+--+--------------------------------------------------------+---------+-------+--+| |Inflation on costs | (200)| | |+--+--------------------------------------------------------+---------+-------+--+| | | | (905)| |+--+--------------------------------------------------------+---------+-------+--+| |Asset sales | | (40)| |+--+--------------------------------------------------------+---------+-------+--+| |Ceased and sold operations | | (45)| |+--+--------------------------------------------------------+---------+-------+--+| |Exploration | | (50)| |+--+--------------------------------------------------------+---------+-------+--+| |Other | | 23| |+--+--------------------------------------------------------+---------+-------+--+| | | | | |+--+--------------------------------------------------------+---------+-------+--+| |Underlying EBIT for the half year ended 31 December 2006| | 9,134| |+--+--------------------------------------------------------+---------+-------+--+| | | | | |+--+--------------------------------------------------------+---------+-------+--+ Volumes Strong demand drove increased sales volumes of metallurgical coal, manganeseore, petroleum products, iron ore, nickel, alumina, molybdenum, energy coal and,from some operations, copper and contributed approximately US$385 million moreto Underlying EBIT (measured at the corresponding period's average margins) thanfor the corresponding period. Overall sales volumes of base metals were lowerthan the prior year, due largely to the industrial disruptions at Escondida(Chile), a smelter shutdown at Olympic Dam (Australia) and the temporary closureof the southern zone at Cannington (Australia). We experienced lower gradediamond production at Ekati (Canada) as it transitions from an open-cut to anunderground operation which led to a decrease in diamond sales for the period.The comparative period also included diamond sales from inventory. Prices Stronger commodity prices for most products increased Underlying EBIT byUS$3,940 million. Higher prices for nickel, copper, aluminium, iron ore,petroleum products, zinc, alumina, energy coal, silver, lead, manganese alloyand diamonds contributed approximately US$4,208 million, which was partiallyoffset by lower prices for metallurgical coal and manganese ore. Higher price-linked costs reduced Underlying EBIT by US$515 million, arisinglargely from higher charges for third party ore in Stainless Steel Materials,royalties for nickel, oil and gas and iron ore, increased copper treatment andrefining charges (TCRCs), price participation, higher earnings linked costs atAntamina (Peru) and higher LME linked power charges in Aluminium. 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$530 million. Excluding non cash costs, this represents an increase on ourDecember 2005 half year total cost base of 5.1 per cent. Specific areas of cost increases include changed mining conditions particularlyat Ekati where we are mining a lower grade zone and higher strip ratios atQueensland Coal (Australia). Labour and contractor charges, consumables andfuels, business development expenditure, maintenance and other operating costshave also increased. However, the Group generated savings of 1.7 per cent on ourDecember 2005 half year cost base through a wide range of business improvementinitiatives across the Group. The rate of increase in costs across our business has slowed. Although this is apositive sign, the current environment continues to be challenging and thepressure on access to labour and other inputs to our business has not lessened. Exchange rates Exchange rate movements had a negative impact on Underlying EBIT of US$175million. A stronger Australian dollar had a negative impact on both operatingcosts and also the translation of monetary items into US dollars. This was onlypartially offset by the favourable impact of a weaker South African rand onoperating costs for our South African businesses. The following exchange rates against the US dollar have been applied:+---------------+------------+------------+------------+------------+------------+| | Half year| Half year| 31 Dec 2006|30 June 2006| 31 Dec 2005|| |ended 31 Dec|ended 31 Dec| | | || | 2006| 2005| closing| closing| closing|| | | | | | || | average| average| | | |+---------------+------------+------------+------------+------------+------------+| | | | | | |+---------------+------------+------------+------------+------------+------------+|Australian | 0.76| 0.75| 0.79| 0.74| 0.73||dollar (a) | | | | | |+---------------+------------+------------+------------+------------+------------+|South African | 7.23| 6.52| 7.00| 7.12| 6.33||rand | | | | | |+---------------+------------+------------+------------+------------+------------+ (a) Displayed as US$ to A$1 based on common convention. Inflation on costs Inflationary pressures on input costs across all of our businesses had anunfavourable impact on Underlying EBIT of US$200 million. Asset Sales The impact from the sale of assets and interests on Underlying EBIT was US$40million lower than the corresponding period. The impact amounted to US$70million for the current period, principally related to the sale of our MoranbahCoal Bed Methane assets (Australia), our interest in Eyesizwe (South Africa) andAlliance Copper (Chile). This compared to higher profits in the correspondingperiod arising largely from the divestment of our interest in the Wonderkopchrome joint venture (South Africa) and the Green Canyon oil fields (US). Ceased and sold operations Ceased and sold operations had a US$45 million unfavourable impact on UnderlyingEBIT. The current period was negatively impacted by the loss of US$134 millionof earnings from Tintaya (Peru) (divested in June 2006) and the Southern CrossFertiliser operations (Australia) (divested in August 2006). This was partlyoffset by the US$96 million favourable impact due to investigation and salvagecosts for Typhoon/Boris (US) that were included in the corresponding period. Exploration Exploration expense was US$50 million higher than the corresponding period andrelates mainly to a US$43 million current period write-off of Petroleumexpenditure that had previously been capitalised and increased expenditure atMaruwai (Indonesia). Other Other items increased Underlying EBIT by US$23 million. These included higherinsurance recoveries than the corresponding period partially offset by a lowercontribution from freight activities. Net finance costs Net finance costs increased to US$222 million, from US$215 million in thecorresponding period. This was driven predominantly by a higher average interestrate but was partially offset by higher capitalised interest and lower averagedebt levels. Taxation expense The total taxation expense on profit before tax was US$2,097 million,representing an effective rate of 25.3 per cent. Excluding the impacts of royalty-related taxation, non tax-effected foreigncurrency adjustments, translation of tax balances and other functional currencytranslation adjustments and including the taxation expense of jointly controlledentities, the underlying effective rate was 30.2 per cent. When compared to theUK and Australian statutory tax rate (30 per cent), the underlying effective taxrate included a benefit of 1.6 per cent due to the recognition of prior year UStax benefits (US$140 million). Royalty-related taxation represents an effectiverate of 2.5 per cent for the current period. Cash Flows Net operating cash flow after interest and tax increased by 62.9 per cent toUS$7.0 billion. Higher profits increased cash generated from operatingactivities, offset by an increase in working capital (principally due to higherprices) and increased taxation payments. Capital and exploration expenditure totalled US$3,396 million for the period.Expenditure on major growth projects was US$2,476 million, including US$706million on petroleum projects and US$1,770 million on minerals projects. Othercapital expenditure on maintenance, sustaining and minor capital items wasUS$616 million. Financing cash flows include US$2.5 billion in relation to thecapital management program and increased dividend payments. Net debt, comprising cash and interest-bearing liabilities, was US$7.2 billion,a decrease of US$1.0 billion, or 12.5 per cent, compared to 30 June 2006.Gearing, which is the ratio of net debt to net debt plus net assets, was 20.3per cent at 31 December 2006, compared with 25.2 per cent at 30 June 2006. Underlying net debt (which varies from net debt above as it includes net debt ofjointly controlled entities) was US$8.5 billion down from US$9.2 billion at 30June 2006. Underlying gearing was 23.1 per cent at 31 December 2006 compared to27.2 per cent at 30 June 2006. Dividend An interim dividend for the half year ended 31 December 2006 of 20.0 US centsper share will be paid to shareholders on 20 March 2007. The dividend paid by Ltd will be fully franked for Australian taxation purposes.Dividends for the BHP Billiton Group are determined and declared in US dollars.However, Ltd dividends are paid mainly in Australian dollars. Plc dividends arepaid mainly in pounds sterling to shareholders on the UK section of the registerand South African rands to shareholders on the South African section of theregister. Currency conversions were based on the foreign currency exchange ratestwo business days before the declaration of the dividend. The timetable in respect of this dividend will be:Currency conversion date 5 February 2007 Last day to trade cum dividend on JSE Limited (JSE) 23 February 2007 Ex-dividend Australian Securities Exchange (ASX) 26 February 2007 Ex-dividend Johannesburg Stock Exchange (JSE) 26 February 2007 Ex-dividend London Stock Exchange (LSE) 28 February 2007 Ex-dividend New York Stock Exchange (NYSE) 28 February 2007 Record date 2 March 2007 Payment date 20 March 2007 American Depositary Receipts (ADRs) each represent two fully paid ordinaryshares and receive dividends accordingly. Plc shareholders registered on the South African section of the register willnot be able to dematerialise or rematerialise their shareholdings, and transfersbetween the UK register and the South African register will not be permittedbetween the dates of 26 February 2007 and 2 March 2007. The following table details the currency exchange rates applicable for thedividend:+----------------------+-------------------------+----------------------------+|Dividend 20.0 US cents| Exchange Rate| Dividend per ordinary share|| | | in local currency|+----------------------+-------------------------+----------------------------+|Australian cents | 0.774851| 25.811414|+----------------------+-------------------------+----------------------------+|British pence | 1.958223| 10.213341|+----------------------+-------------------------+----------------------------+|South African cents | 7.238158| 144.763160|+----------------------+-------------------------+----------------------------+|New Zealand cents | 0.682000| 29.325513|+----------------------+-------------------------+----------------------------+ Portfolio Management Portfolio activities continued during the period with proceeds amounting toUS$326 million. We disposed of a number of assets and interests including theSouthern Cross Fertiliser operations, the Moranbah Coal Bed Methane assets, theCascade and Chinook oil prospects (US), the interest in the Valesul aluminiumsmelter (Brazil) and the interest in Eyesizwe. Proceeds realised from the saleor distribution of our assets and interests over the last five and a half yearsnow totals approximately US$6 billion. At 31 December 2006 we had announced the sale of our Koornfontein energy coalmine (South Africa). We also announced the acquisition of an interest in the Genghis Khan oil fieldfor US$583 million during the period. The transaction closed on 1 February 2007. Liquidity In October 2006 the Group signed a new US$3.0 billion multi-currency revolvingcredit facility. This new credit facility, which expires in October 2011,replaces the previous US$3.0 billion credit facility that was due to expire in2009. The finance facility that was put in place for the acquisition of WMCResources Ltd has been fully repaid. Corporate Governance The following Board changes occurred during the period: * 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 elected to the Board at the Plc and Ltd Annual General Meetings in October and November 2006 respectively; and * Mr Paul Anderson and Mr Jacques Nasser were appointed Non-executive Directors from 6 June 2006 and elected to the Board at the Plc and Ltd Annual General Meetings. * On 1 August 2006, Mr Miklos Salamon announced his intention to retire from the Board and Company effective from 26 October 2006. He retired from the Boards of Ltd and Plc at the Annual General Meeting of Plc. During January 2007, 67,285,000 Plc shares which were purchased by Ltd, werecancelled and 2,400,862,002 Plc shares remained on issue (including Treasuryshares and shares purchased by Ltd in Plc). Outlook Global Economic Outlook The outlook for the global economy remains encouraging with continued GDP growthin China, strong performance in Europe and improving confidence in the US. Ahealthy corporate sector, accommodative monetary policies and ample liquiditycontinue to provide support. Falling oil prices have also brought some relief toinflation levels and have assisted in improving sentiment in oil-importingcountries. Tight labour market conditions and falling unemployment ratescontinue in a number of regions. Asian economies continue to expand at a solid pace. China's GDP growth was 10.7per cent in 2006. This is the fourth consecutive year that China's real GDPgrowth has exceeded 10 per cent. We have seen evidence that recent governmenttightening of liquidity and investment controls are moderating growth butexpansion will continue. India is maintaining robust growth momentum, even as itcontinues to wrestle with economic reforms. Although Japan has recentlyexperienced slower economic growth, business investment and external demandremains robust. Growth in the US has moderated from exceptionally strong levelsa year ago. This is reflected in the progressive slowdown in its domestichousing and construction sectors. While global industrial activity has beenslowing, it is being cushioned by strength in final demand growth in WesternEurope and developing economies. In the short-term, we expect global growth to moderate, but the economic outlookremains healthy. Growth in Asia is likely to persist although we expect furtherdampening in China's economic growth due to the momentum of its recent cooling.While we expect growth for the US economy to be below the rate in 2006, a softlanding in the housing sector, strong capital investment and an easing of energyprices should result in a growth rate consistent with long term trends. Strongeconomic activity in Western Europe and an improvement in Japan's economicoutlook should lessen the impact of any slowdown in the US. Commodity Outlook In 2006 real annual average prices for copper, zinc, iron ore, coking coal,thermal coal, crude oil, natural gas and uranium reached their highest levelssince the 1970s. Aluminium, nickel and lead also passed 15 to 20 year annualaverage peaks. Strong global demand growth coupled with low inventories weresupportive of high prices, although investment interest also exerted aninfluence. World consumption of the major non-ferrous metals rose by five to tenper cent in 2006 while use of finished steel also grew strongly. Supply alsoaccelerated, but notwithstanding this, most commodities remained in deficit.Combined LME warehouse inventories of primary metal continue to remain athistorically low levels. Overall stock-to-consumption ratios are at their lowestlevels in more than 30 years, and there may be limits to further consumerde-stocking in many sectors. Market indicators do not point to large scale supply surpluses emerging in 2007,although demand growth can be expected to vary regionally in line with varyingeconomic activity. China is set to continue as the main driver of demand, butmore mature markets may also lend support, especially Europe and Japan. Despitethe expansion of China's domestic production base, imports of commodities willcontinue to play a crucial role in supporting the country's industrialisation. While we expect a constructive environment, the path of the US economy isuncertain. Although the US economy will continue to have an important impact onthe global economy, it is increasingly clear that improved economic conditionsin other OECD countries and the increased relevance of emerging economies isdecreasing the global impact of US economic activity. As a result the globalimpact of a slow down in the US is expected to be lower than generally assumedand we do not anticipate a return of prices to longer run averages over themedium term. CUSTOMER SECTOR GROUP SUMMARY The following table provides a summary of the Customer Sector Group results forthe six months ended 31 December 2006 and the corresponding period.+--+---------------------+----------------------------+---------------------------+| | | | |+--+---------------------+----------------------------+---------------------------+| |Half year ended 31 |Revenue together with share | Underlying EBIT (1) || |December | of jointly controlled | || | | entities' revenues (1) | || |(US$ Million) | | |+--+---------------------+-------+--------+-----------+-------+-------+-----------+| | | 2006| 2005| Change %| 2006| 2005| Change %|+--+---------------------+-------+--------+-----------+-------+-------+-----------+| | | | | | | | |+--+---------------------+-------+--------+-----------+-------+-------+-----------+| |Petroleum | 2,958| 2,668| 10.9| 1,612| 1,436| 12.3|+--+---------------------+-------+--------+-----------+-------+-------+-----------+| |Aluminium | 2,828| 2,252| 25.6| 840| 406| 106.9|+--+---------------------+-------+--------+-----------+-------+-------+-----------+| |Base Metals | 5,644| 4,031| 40.0| 2,905| 1,893| 53.5|+--+---------------------+-------+--------+-----------+-------+-------+-----------+| |Diamonds and | 393| 679| (42.1)| 105| 261| (59.8)|| |Specialty Products | | | | | | |+--+---------------------+-------+--------+-----------+-------+-------+-----------+| |Stainless Steel | 2,805| 1,358| 106.6| 1,436| 374| 284.0|| |Materials | | | | | | |+--+---------------------+-------+--------+-----------+-------+-------+-----------+| |Iron Ore | 2,749| 2,323| 18.3| 1,406| 1,243| 13.1|+--+---------------------+-------+--------+-----------+-------+-------+-----------+| |Manganese | 575| 499| 15.2| 105| 85| 23.5|+--+---------------------+-------+--------+-----------+-------+-------+-----------+| |Metallurgical Coal | 1,833| 1,906| (3.8)| 659| 947| (30.4)|+--+---------------------+-------+--------+-----------+-------+-------+-----------+| |Energy Coal | 2,321| 2,061| 12.6| 243| 205| 18.5|+--+---------------------+-------+--------+-----------+-------+-------+-----------+| |Group and unallocated| 304| 352| (13.4)| (177)| (179)| N/A|| |items (2) | | | | | | |+--+---------------------+-------+--------+-----------+-------+-------+-----------+| |Less: inter-segment | (297)| (49)| N/A| -| -| || |turnover | | | | | | |+--+---------------------+-------+--------+-----------+-------+-------+-----------+| |BHP Billiton Group | 22,113| 18,080| 22.3| 9,134| 6,671| 36.9|+--+---------------------+-------+--------+-----------+-------+-------+-----------+ (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 14. (2) Includes consolidation adjustments, exploration and technology activities,unallocated items and external sales from the Group's freight, transport andlogistics operations. Petroleum Underlying EBIT was US$1,612 million, an increase of US$176 million or 12.3 percent, compared with the same period last year. This was due mainly to higheraverage realised prices for most petroleum products, with higher averagerealised oil prices per barrel of US$63.77 (compared with US$58.25), higheraverage realised natural gas prices of US$3.27 per thousand standard cubic feet(compared with US$3.13) and higher average realised liquefied natural gas pricesof US$7.44 per thousand standard cubic feet (compared to US$6.81). Higher salesvolumes due to timing of liftings more than offset slightly lower overallproduction volumes due to natural field decline and the September 2005hurricane-related loss of the Typhoon (US) platform. Royalty and excise taxeswere higher in line with higher revenue. Exploration expenditure charged to profit of US$154 million (correspondingperiod: US$123 million) included the additional write-off of US$43 million ofpreviously capitalised expenditure. Gross expenditure on exploration of US$159million was US$92 million lower than the corresponding period as a result of thetiming of spending on exploration and appraisal drilling activity in the Gulf ofMexico. Non Ferrous Materials Aluminium Underlying EBIT was US$840 million, an increase of US$434 million or 106.9 percent compared with the same period last year. Higher prices for aluminium andalumina had a favourable impact, with the average LME aluminium price increasingto US$2,602 per tonne (compared with US$1,952 per tonne). Half year productionrecords at Worsley (Australia), Paranam (Suriname), Hillside, Bayside and Mozal(all Southern Africa) also contributed to this result. Exchange rate movementsduring the period also had a favourable impact on EBIT. Earnings were adversely impacted by higher charges for price linked costs,largely LME linked power. Raw materials and labour costs were also higher, aswere depreciation charges associated with new mines in Suriname and thecommissioning of the Worsley expansion. Despite higher costs in some areas, a focus on cost containment and businessimprovement initiatives achieved success. Base Metals Underlying EBIT was US$2,905 million, an increase of US$1,012 million or 53.5per cent, over the same period last year. This increase was predominantlyattributable to higher average LME prices for copper of US$3.34/lb (compared toUS$1.84/lb) as well as higher prices for silver, zinc, lead and gold. Recordcopper cathode production was achieved due to the ramp up of the Sulphide LeachProject (Chile) and a higher production level at Cerro Colorado (Chile)following successful recovery from the earthquake interruption in thecorresponding period. This was offset by reduced copper concentrate volumes dueto the industrial disruption at Escondida, lower volumes at Olympic Dam becauseof a scheduled smelter shutdown and lower volumes at Cannington as therehabilitation of ground support progressed. Higher price-linked TCRCs (mainly price participation), labour and contractorcosts (due largely to one-off bonuses at Escondida from the recent unionnegotiations), Cannington rehabilitation expenditure, the effect of inflationand a stronger A$/US$ exchange rate on costs for Australian operations had anegative impact. These higher costs were mitigated to some extent by costsavings achieved through improvement projects. The cessation of earningsfollowing the sale of Tintaya (Peru) in June 2006 also reduced EBIT. Provisional pricing of copper shipments impacted finalised and outstandingaverage copper revenues resulting in the calculated average realised price beingUS$0.18/lb below the LME average. The negative finalisation adjustment andprovisional pricing impact for the period was US$220 million. Average copperrevenue for the half year ended December 2006 was US$3.13/lb versus US$2.06/lbfor the same period last year. Outstanding copper volumes, subject to the fairvalue measurement, amounted to 205,129 tonnes at 31 December 2006. These wererevalued at a weighted average price of US$2.87/lb. Diamonds and Specialty Products Underlying EBIT was US$105 million, a decrease of US$156 million or 59.8 percent from the same period last year. This was due to higher sales volumes ofdiamonds in the corresponding period from inventory sales and higher unit costsin relation to the processing of lower grade material and moving to undergroundmining areas at Ekati. In addition, the corresponding period included earningsfrom Southern Cross Fertiliser operations which was sold effective 1 August2006. This was partially offset by higher value per carat diamonds and a reduceddepreciation charge, primarily because of an extension of mine life followingapproval of the Koala Underground project. At Ekati, the 2007 financial year will continue to be negatively impacted bylower value diamond production. Over the next few years, increasing undergroundproduction will help reverse this trend. Stainless Steel Materials Underlying EBIT was a record US$1,436 million, an increase of US$1,062 millionor 284.0 per cent compared with the same period last year. Higher nickel andcobalt prices were the main contributors with an average LME nickel price ofUS$13.81/lb compared with US$6.17/lb in the comparative period. The higherprices (net of price linked costs) added US$1,217 million to underlying EBIT.Additionally, Yabulu (Australia) and Cerro Matoso (Colombia) benefited fromhigher volumes in the current period. This was partially offset by higher mining costs at Mount Keith and Leinster(both Australia). The corresponding period also included a US$61 million profiton the sale of BHP Billiton's interest in the Wonderkop joint venture. Carbon Steel Materials Iron Ore Underlying EBIT was US$1,406 million up US$163 million or 13.1 per cent from thesame period last year. This was driven mainly by increased prices (which wereapproximately 17 per cent higher across the total product range, net of a lowernegotiated price for iron pellets). Sales volumes were also six per cent higher reflecting record production levelsat Western Australia Iron Ore (Australia) (WAIO) and a number of businessimprovement initiatives implemented to promote increased shipping efficiency.Production was also higher at Samarco (Brazil). Higher operating costs had an adverse impact during the period and were largelyattributable to higher contractor and labour costs, price-linked royalties andfuel costs. A stronger A$/US$ exchange rate had an unfavourable impact, as didinflationary pressures on the Australian operations. Depreciation was also higher due to the commissioning of expanded capacity atWAIO. Manganese Underlying EBIT was US$105 million, an increase of US$20 million or 23.5 percent compared to the same period last year. Stronger demand for manganese oredrove increased sales volumes and consequently record volumes of ore and highervolumes of alloy were produced for the half year. The favourable movement of therand against the US dollar also contributed to this positive result. Lower prices for ore had an unfavourable impact but were partially offset byimproved alloy prices. Metallurgical Coal Underlying EBIT was US$659 million, a decrease of US$288 million or 30.4 percent from the same period last year. This was attributable mostly to lowerprices for all products at Queensland Coal where benchmark prices will againdecrease for the 12 months commencing April 2007. Operating costs rose due tothe first longwall change out at the Broadmeadow mine (Australia), which wascommissioned during 2006 and higher strip ratios at open cut mines. A strongerA$/US$ exchange rate had an unfavourable impact as did Australian inflationarypressures. This was offset partially by increased production and sales at bothQueensland Coal and Illawarra Coal (Australia). The ramp up of expanded capacitysupported by increased throughput at our Hay Point Coal terminal contributed tothe higher sales at Queensland Coal. As new projects ramped up depreciation and amortisation charges increased, asdid exploration expenditure to support a higher level of activity at Maruwai(Indonesia). Energy Coal Underlying EBIT was US$243 million, an increase of US$38 million or 18.5 percent, from the same period last year. The increase was mainly because of higherexport prices for product from our South African coal operations as a result ofcontinued strong demand. The favourable movement of the rand against the USdollar also contributed to this positive result. Higher production volumes andcost efficiencies at Hunter Valley Coal (Australia) and Cerrejon Coal (Colombia)had a favourable impact. Operating unit costs were higher at New Mexico (US) due to difficult miningconditions and equipment outages that impacted production. At our South Africancoal operations unit costs were adversely affected by inflationary pressure andlower production because of safety interventions. The cessation of earnings from the Zululand Anthracite Colliery (South Africa)following its divestment during the prior year had a negative impact, while aprofit on the divestment of Eyesizwe during the period had a favourable impact. Group and Unallocated Items Underlying net corporate operating costs, excluding exchange impacts, were US$80million compared to US$108 million in the corresponding period, a decrease ofUS$28 million. The current period benefited from lower insurance claims, offset by higher costsfor corporate projects, sponsorships, and regulatory compliance. One-off costs in relation to the acquisition of WMC were incurred in the priorperiod. There were no similar costs in this period. Minerals exploration expenditure has increased from US$43 million to US$57million in the current period, mainly due to increased exploration activity inAngola and Mongolia. The following notes explain the terms used throughout this profit release: (1) Underlying EBIT margin is calculated net of third party product activities. (2) Based on share price of US$18.65. (3) 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$1,360 million (comprising Group depreciation, impairmentsand amortisation of US$1,196 million and jointly controlled entities'depreciation and amortisation of US$164 million) for the six months ended 31December 2006 and US$1,300 million (comprising Group depreciation, impairmentsand amortisation of US$1,137 million and jointly controlled entities'depreciation and amortisation of US$163 million) for the six months ended 31December 2005. We believe that Underlying EBIT and Underlying EBITDA provideuseful information, but should not be considered as an indication of, oralternative to, attributable profit as an indicator of operating performance oras an alternative to cash flow as a measure of liquidity. (4) Underlying EBIT is used to reflect the underlying performance of BHPBilliton's operations. Underlying EBIT is reconciled to EBIT - Profit fromoperations on page 3. (5) Net operating cash flow includes dividends from jointly controlled entitiesand is after net interest and taxation. (6) 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, fair value change on hedgedloans, net of hedging derivatives, and exchange differences arising from netdebt. (7) Iron Ore, Metallurgical Coal and Manganese are now separate CSGs (previouslycombined as Carbon Steel Materials). (8) Based upon closing price as at 2 February 2007 of A$26.59 and GBP9.76. Forward-looking statements Certain statements contained in this release,including statements in the section entitled 'Investing in the Future' 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 2006, which we filed with the US Securities and ExchangeCommission (SEC) on 25 September 2006 and 18 December 2006, respectively, andare available on the SEC's website at 'www.sec.gov'. Nothing in this releaseshould be construed as either an offer to sell or a solicitation of an offer tobuy or sell 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 934 942 email: [email protected] 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 Ivan Arriagada, Investor Relations Tel: US +1 713 599 6100 or UK +44 20 7802 4031 Tel SA: +27 11 376 2121 or UK: +44 20 7802 4183 Mobile: +44 7917 648 093 Mobile: +44 7769 936 227 email: [email protected] email: [email protected] INTERIM FINANCIAL REPORT For the half year ended 31 December 2006 CONTENTS Interim Financial Statements Consolidated Income Statement - Page 17 Consolidated Statement of Recognised Income and Expense - Page 18 Consolidated Balance Sheet - Page 19 Consolidated Cash Flow Statement - Page 20 Notes to the Interim Financial Statements - Page 21 Notes to Interim Financial Statements 1 Accounting policies - Page 21 2 Business segments - Page 21 3 Exceptional items - Page 25 4 Investments accounted for using the equity method - Page 25 5 Net finance costs - Page 26 6 Taxation - Page 26 7 Earnings per share - Page 26 8 Dividends - Page 27 9 Assets sold or classified as held for sale - Page 27 10 Total equity - Page 28 11 Contingent liabilities - Page 28 12 Subsequent events - Page 28 Directors' Report - Page 29 Directors' Declaration - Page 30 Lead Auditor's Independence Declaration - Page 30 Review Report - Page 31 Consolidated Income Statementfor the half year ended 31 December 2006+-----------------------------------+------+----------+------------+--------+| | | Half year| Half year| Year|| | | ended| ended| ended|| | | | | || | | 31| 31 December| 30 June|| | | December| 2005| 2006|| | | 2006| | |+-----------------------------------+------+----------+------------+--------+| | Notes| US$M| US$M| US$M|+-----------------------------------+------+----------+------------+--------+|Revenue together with share of | | | | ||jointly controlled entities' | | | | ||revenue | | | | |+-----------------------------------+------+----------+------------+--------+|Group production | | 19,046| 15,638| 34,139|+-----------------------------------+------+----------+------------+--------+|Third party products | | 3,067| 2,442| 4,960|+-----------------------------------+------+----------+------------+--------+| | | 22,113| 18,080| 39,099|+-----------------------------------+------+----------+------------+--------+|Less: share of jointly controlled | | (3,610)| (2,880)| (6,946)||entities' external revenue included| | | | ||above | | | | |+-----------------------------------+------+----------+------------+--------+|Revenue | | 18,503| 15,200| 32,153|+-----------------------------------+------+----------+------------+--------+|Other income | | 293| 297| 1,227|+-----------------------------------+------+----------+------------+--------+|Expenses excluding finance costs | | (12,292)| (10,679)|(22,403)|+-----------------------------------+------+----------+------------+--------+|Share of profits from jointly | 4| 2,015| 1,441| 3,694||controlled entities | | | | |+-----------------------------------+------+----------+------------+--------+|Profit from operations | | 8,519| 6,259| 14,671|+-----------------------------------+------+----------+------------+--------+|Comprising: | | | | |+-----------------------------------+------+----------+------------+--------+|Group production | | 8,407| 6,148| 14,560|+-----------------------------------+------+----------+------------+--------+|Third party products | | 112| 111| 111|+-----------------------------------+------+----------+------------+--------+| | | 8,519| 6,259| 14,671|+-----------------------------------+------+----------+------------+--------+| | | | | |+-----------------------------------+------+----------+------------+--------+|Financial income | 5| 116| 93| 226|+-----------------------------------+------+----------+------------+--------+|Financial expenses | 5| (338)| (308)| (731)|+-----------------------------------+------+----------+------------+--------+|Net finance costs | 5| (222)| (215)| (505)|+-----------------------------------+------+----------+------------+--------+|Profit before taxation | | 8,297| 6,044| 14,166|+-----------------------------------+------+----------+------------+--------+|Income tax expense | | (1,901)| (1,389)| (3,207)|+-----------------------------------+------+----------+------------+--------+|Royalty related taxation (net of | | (196)| (227)| (425)||income tax benefit) | | | | |+-----------------------------------+------+----------+------------+--------+|Total taxation expense | 6| (2,097)| (1,616)| (3,632)|+-----------------------------------+------+----------+------------+--------+|Profit after taxation | | 6,200| 4,428| 10,534|+-----------------------------------+------+----------+------------+--------+|Profit attributable to minority | | 32| 64| 84||interests | | | | |+-----------------------------------+------+----------+------------+--------+|Profit attributable to members of | | 6,168| 4,364| 10,450||BHP Billiton Group | | | | |+-----------------------------------+------+----------+------------+--------+| | | | | |+-----------------------------------+------+----------+------------+--------+|Earnings per ordinary share (basic)| 7| 103.9| 72.1| 173.2||(US cents) | | | | |+-----------------------------------+------+----------+------------+--------+|Earnings per ordinary share | 7| 103.8| 71.9| 172.4||(diluted) (US cents) | | | | |+-----------------------------------+------+----------+------------+--------+| | | | | |+-----------------------------------+------+----------+------------+--------+| | | | | |+-----------------------------------+------+----------+------------+--------+|Dividends per ordinary share - paid| 8| 18.5| 14.5| 32.0||during the period (US cents) | | | | |+-----------------------------------+------+----------+------------+--------+|Dividends per ordinary share - | 8| 20.0| 17.5| 36.0||declared in respect of the period | | | | ||(US cents) | | | | |+-----------------------------------+------+----------+------------+--------+| | | | | |+-----------------------------------+------+----------+------------+--------+ The accompanying notes form part of these financial statements. Consolidated Statement of Recognised Income and Expensefor the half year ended 31 December 2006+----------------------------------+-----+-------------+----------+--------+| | | Half year| Half year| Year|| | | ended| ended| ended|| | | | | || | | 31 December| 31| 30 June|| | | 2006| December| 2006|| | | | 2005| |+----------------------------------+-----+-------------+----------+--------+| |Notes| US$M| US$M| US$M|+----------------------------------+-----+-------------+----------+--------+|Profit after taxation | | 6,200| 4,428| 10,534|+----------------------------------+-----+-------------+----------+--------+|Amounts recognised directly in | | | | ||equity | | | | |+----------------------------------+-----+-------------+----------+--------+|Actuarial gains/(losses) on | | (48)| 6| 111||pension and medical schemes | | | | |+----------------------------------+-----+-------------+----------+--------+|Available for sale investments: | | | | |+----------------------------------+-----+-------------+----------+--------+|Valuation gains/(losses) taken to | | 113| 4| (1)||equity | | | | |+----------------------------------+-----+-------------+----------+--------+|Cash flow hedges: | | | | |+----------------------------------+-----+-------------+----------+--------+|Gains/(losses) taken to equity | | 87| (35)| (27)|+----------------------------------+-----+-------------+----------+--------+|(Gains)/losses transferred to the | | (17)| (34)| (25)||initial carrying amount of hedged | | | | ||items | | | | |+----------------------------------+-----+-------------+----------+--------+|Exchange fluctuations on | | 22| (12)| (1)||translation of foreign operations | | | | |+----------------------------------+-----+-------------+----------+--------+|Tax on items recognised directly | | (22)| 43| 4||in, or transferred from, equity | | | | |+----------------------------------+-----+-------------+----------+--------+|Total amounts recognised directly | | 135| (28)| 61||in equity | | | | |+----------------------------------+-----+-------------+----------+--------+|Total recognised income and | | 6,335| 4,400| 10,595||expense for the period | | | | |+----------------------------------+-----+-------------+----------+--------+|Attributable to minority interests| | 32| 64| 84|+----------------------------------+-----+-------------+----------+--------+|Attributable to members of BHP | | 6,303| 4,336| 10,511||Billiton Group | | | | |+----------------------------------+-----+-------------+----------+--------+| | | | | |+----------------------------------+-----+-------------+----------+--------+| | | | | |+----------------------------------+-----+-------------+----------+--------+| | | | | |+----------------------------------+-----+-------------+----------+--------+|Effect of change in accounting | | | | ||policy: | | | | |+----------------------------------+-----+-------------+----------+--------+|Impact of adoption of IAS 39/ AASB| | | | ||139 (net of tax) to: | | | | |+----------------------------------+-----+-------------+----------+--------+|- retained earnings | 10| -| 55| 55|+----------------------------------+-----+-------------+----------+--------+|- hedging reserve | 10| -| 30| 30|+----------------------------------+-----+-------------+----------+--------+|- financial assets reserve | 10| -| 116| 116|+----------------------------------+-----+-------------+----------+--------+|Total effect of change in | | -| 201| 201||accounting policy | | | | |+----------------------------------+-----+-------------+----------+--------+|Attributable to minority interests| | -| -| -|+----------------------------------+-----+-------------+----------+--------+|Attributable to members of BHP | | -| 201| 201||Billiton Group | | | | |+----------------------------------+-----+-------------+----------+--------+ The accompanying notes form part of these financial statements Consolidated Balance Sheetas at 31 December 2006+--------------------------------------+-----+-----------+-----------+--------+| | |31 December|31 December| 30 June|| | | 2006| 2005| 2006|+--------------------------------------+-----+-----------+-----------+--------+| |Notes| US$M| US$M| US$M|+--------------------------------------+-----+-----------+-----------+--------+|ASSETS | | | | |+--------------------------------------+-----+-----------+-----------+--------+|Current assets | | | | |+--------------------------------------+-----+-----------+-----------+--------+|Cash and cash equivalents | | 1,423| 809| 776|+--------------------------------------+-----+-----------+-----------+--------+|Trade and other receivables | | 3,987| 3,722| 3,831|+--------------------------------------+-----+-----------+-----------+--------+|Other financial assets | | 846| 392| 808|+--------------------------------------+-----+-----------+-----------+--------+|Inventories | | 3,203| 2,538| 2,732|+--------------------------------------+-----+-----------+-----------+--------+|Assets held for sale | | -| 46| 469|+--------------------------------------+-----+-----------+-----------+--------+|Other | | 278| 139| 160|+--------------------------------------+-----+-----------+-----------+--------+|Total current assets | | 9,737| 7,646| 8,776|+--------------------------------------+-----+-----------+-----------+--------+|Non-current assets | | | | |+--------------------------------------+-----+-----------+-----------+--------+|Trade and other receivables | | 809| 762| 813|+--------------------------------------+-----+-----------+-----------+--------+|Other financial assets | | 1,013| 866| 950|+--------------------------------------+-----+-----------+-----------+--------+|Inventories | | 123| 103| 93|+--------------------------------------+-----+-----------+-----------+--------+|Investments in jointly controlled | | 3,772| 3,735| 4,299||entities | | | | |+--------------------------------------+-----+-----------+-----------+--------+|Property, plant and equipment | | 33,282| 29,261| 30,985|+--------------------------------------+-----+-----------+-----------+--------+|Intangible assets | | 686| 652| 683|+--------------------------------------+-----+-----------+-----------+--------+|Deferred tax assets | | 2,230| 1,180| 1,829|+--------------------------------------+-----+-----------+-----------+--------+|Other | | 88| 73| 88|+--------------------------------------+-----+-----------+-----------+--------+|Total non-current assets | | 42,003| 36,632| 39,740|+--------------------------------------+-----+-----------+-----------+--------+|Total assets | | 51,740| 44,278| 48,516|+--------------------------------------+-----+-----------+-----------+--------+|LIABILITIES | | | | |+--------------------------------------+-----+-----------+-----------+--------+|Current liabilities | | | | |+--------------------------------------+-----+-----------+-----------+--------+|Trade and other payables | | 3,937| 3,583| 4,053|+--------------------------------------+-----+-----------+-----------+--------+|Interest bearing liabilities | | 1,386| 1,106| 1,368|+--------------------------------------+-----+-----------+-----------+--------+|Liabilities held for sale | | -| -| 192|+--------------------------------------+-----+-----------+-----------+--------+|Other financial liabilities | | 389| 348| 544|+--------------------------------------+-----+-----------+-----------+--------+|Current tax payable | | 1,734| 863| 1,358|+--------------------------------------+-----+-----------+-----------+--------+|Provisions | | 1,021| 934| 1,067|+--------------------------------------+-----+-----------+-----------+--------+|Deferred income | | 275| 266| 279|+--------------------------------------+-----+-----------+-----------+--------+|Total current liabilities | | 8,742| 7,100| 8,861|+--------------------------------------+-----+-----------+-----------+--------+|Non-current liabilities | | | | |+--------------------------------------+-----+-----------+-----------+--------+|Trade and other payables | | 177| 162| 169|+--------------------------------------+-----+-----------+-----------+--------+|Interest bearing liabilities | | 7,243| 8,427| 7,648|+--------------------------------------+-----+-----------+-----------+--------+|Other financial liabilities | | 189| 100| 289|+--------------------------------------+-----+-----------+-----------+--------+|Deferred tax liabilities | | 1,379| 1,499| 1,592|+--------------------------------------+-----+-----------+-----------+--------+|Provisions | | 5,172| 4,801| 4,853|+--------------------------------------+-----+-----------+-----------+--------+|Deferred income | | 611| 757| 649|+--------------------------------------+-----+-----------+-----------+--------+|Total non-current liabilities | | 14,771| 15,746| 15,200|+--------------------------------------+-----+-----------+-----------+--------+|Total liabilities | | 23,513| 22,846| 24,061|+--------------------------------------+-----+-----------+-----------+--------+|Net Assets | | 28,227| 21,432| 24,455|+--------------------------------------+-----+-----------+-----------+--------+| | | | | |+--------------------------------------+-----+-----------+-----------+--------+|EQUITY | | | | |+--------------------------------------+-----+-----------+-----------+--------+|Share capital - BHP Billiton Limited | | 1,498| 1,628| 1,490|+--------------------------------------+-----+-----------+-----------+--------+|Share capital - BHP Billiton Plc | | 1,234| 1,234| 1,234|+--------------------------------------+-----+-----------+-----------+--------+|Share premium account | | 518| 518| 518|+--------------------------------------+-----+-----------+-----------+--------+|Treasury shares held | | (1,768)| (5)| (418)|+--------------------------------------+-----+-----------+-----------+--------+|Reserves | | 492| 270| 306|+--------------------------------------+-----+-----------+-----------+--------+|Retained earnings | | 26,006| 17,495| 21,088|+--------------------------------------+-----+-----------+-----------+--------+|Total equity attributable to members | 10| 27,980| 21,140| 24,218||of BHP Billiton Group | | | | |+--------------------------------------+-----+-----------+-----------+--------+|Minority interests | 10| 247| 292| 237|+--------------------------------------+-----+-----------+-----------+--------+|Total equity | | 28,227| 21,432| 24,455|+--------------------------------------+-----+-----------+-----------+--------+ The accompanying notes form part of these financial statements. Consolidated Cash Flow Statementfor the half year ended 31 December 2006+-------------------------------------------+-+-----------+----------+---------+| | | Half year| Half year| Year|| | | ended| ended 31| ended|| | |31 December| December| 30 June|| | | 2006| 2005| 2006|+-------------------------------------------+-+-----------+----------+---------+| | | US$M| US$M| US$M|+-------------------------------------------+-+-----------+----------+---------+|Operating activities | | | | |+-------------------------------------------+-+-----------+----------+---------+|Receipts from customers | | 19,115| 15,582| 32,938|+-------------------------------------------+-+-----------+----------+---------+|Payments to suppliers and employees | | (12,108)| (10,246)| (20,944)|+-------------------------------------------+-+-----------+----------+---------+|Cash generated from operations | | 7,007| 5,336| 11,994|+-------------------------------------------+-+-----------+----------+---------+|Dividends received | | 2,571| 921| 2,671|+-------------------------------------------+-+-----------+----------+---------+|Interest received | | 54| 60| 121|+-------------------------------------------+-+-----------+----------+---------+|Interest paid | | (223)| (209)| (499)|+-------------------------------------------+-+-----------+----------+---------+|Income tax paid | | (2,043)| (1,511)| (3,152)|+-------------------------------------------+-+-----------+----------+---------+|Royalty related taxation paid | | (348)| (289)| (659)|+-------------------------------------------+-+-----------+----------+---------+|Net operating cash flows | | 7,018| 4,308| 10,476|+-------------------------------------------+-+-----------+----------+---------+|Investing activities | | | | |+-------------------------------------------+-+-----------+----------+---------+|Purchases of property, plant and equipment | | (3,092)| (2,317)| (5,239)|+-------------------------------------------+-+-----------+----------+---------+|Exploration expenditure (including amounts | | (304)| (348)| (766)||capitalised) | | | | |+-------------------------------------------+-+-----------+----------+---------+|Purchases of investments and funding of | | (52)| (5)| (65)||jointly controlled entities | | | | |+-------------------------------------------+-+-----------+----------+---------+|Purchases of, or increased investment in, | | (12)| (500)| (531)||subsidiaries, operations and jointly | | | | ||controlled entities, net of their cash | | | | |+-------------------------------------------+-+-----------+----------+---------+|Cash outflows from investing activities | | (3,460)| (3,170)| (6,601)|+-------------------------------------------+-+-----------+----------+---------+|Proceeds from sale of property, plant and | | 82| 37| 92||equipment | | | | |+-------------------------------------------+-+-----------+----------+---------+|Proceeds from sale or redemption of | | 23| 108| 153||investments | | | | |+-------------------------------------------+-+-----------+----------+---------+|Proceeds from sale or partial sale of | | 203| 111| 844||subsidiaries, operations and jointly | | | | ||controlled entities net of their cash | | | | |+-------------------------------------------+-+-----------+----------+---------+|Net investing cash flows | | (3,152)| (2,914)| (5,512)|+-------------------------------------------+-+-----------+----------+---------+|Financing activities | | | | |+-------------------------------------------+-+-----------+----------+---------+|Proceeds from ordinary share issues | | 12| 24| 34|+-------------------------------------------+-+-----------+----------+---------+|Proceeds from interest bearing liabilities | | 1,957| 3,946| 5,912|+-------------------------------------------+-+-----------+----------+---------+|Repayment of interest bearing liabilities | | (2,580)| (4,646)| (7,013)|+-------------------------------------------+-+-----------+----------+---------+|Purchase of shares by Employee Share | | (131)| (145)| (187)||Ownership Plan Trusts | | | | |+-------------------------------------------+-+-----------+----------+---------+|Share buy back - BHP Billiton Limited | | -| -| (1,619)|+-------------------------------------------+-+-----------+----------+---------+|Share buy back - BHP Billiton Plc | | (1,355)| -| (409)|+-------------------------------------------+-+-----------+----------+---------+|Dividends paid | | (1,100)| (877)| (1,936)|+-------------------------------------------+-+-----------+----------+---------+|Dividends paid to minority interests | | (22)| (112)| (190)|+-------------------------------------------+-+-----------+----------+---------+|Repayment of finance leases | | (2)| (1)| (4)|+-------------------------------------------+-+-----------+----------+---------+|Net financing cash flows | | (3,221)| (1,811)| (5,412)|+-------------------------------------------+-+-----------+----------+---------+|Net increase/(decrease) in cash and cash | | 645| (417)| (448)||equivalents | | | | |+-------------------------------------------+-+-----------+----------+---------+|Cash and cash equivalents, net of | | 760| 1,207| 1,207||overdrafts, at beginning of period | | | | |+-------------------------------------------+-+-----------+----------+---------+|Effect of foreign currency exchange rate | | (2)| (1)| 1||changes on cash and cash equivalents | | | | |+-------------------------------------------+-+-----------+----------+---------+|Cash and cash equivalents, net of | | 1,403| 789| 760||overdrafts, at end of period | | | | |+-------------------------------------------+-+-----------+----------+---------+ The accompanying notes form part of these financial statements. Notes to the Interim Financial Statements 1 Accounting policies This general purpose condensed financial report for the six months ended 31December 2006 is an unaudited report which has been prepared in accordance withIAS 34/AASB 134 'Interim Financial Reporting' and with the requirements of theListing Rules of the Financial Services Authority in the United Kingdom and theAustralian Corporations Act 2001 as applicable to interim financial reporting. The interim financial report has been prepared on the basis of accountingpolicies consistent with those applied in the 30 June 2006 Annual financialstatements contained within the Annual Report of the BHP Billiton Group, exceptfor IFRIC 4 / UIG Interpretation 4 "Determining whether an arrangement containsa lease" which is first applicable for the Group's annual reporting periodending 30 June 2007 and has been applied in this interim report. IFRIC 4 / UIG 4provides interpretive guidance for determining whether arrangements (such asservice delivery and take-or-pay purchase contracts) contain a lease which needsto be accounted for in accordance with IAS 17 / AASB 117 "Leases". Theapplication of IFRIC 4 / UIG 4 did not have a material impact on the current orcomparative periods. The interim financial report does not include all of the information requiredfor a full annual financial report and is to be read in conjunction with themost recent annual financial report. The comparative figures for the financialyear ended 30 June 2006 are not the statutory accounts of BHP Billiton Plc forthat financial year. Those accounts, which were prepared under IFRS, have beenreported on by the company's auditors and delivered to the registrar ofcompanies. The report of the auditors was unqualified and did not containstatements under Section 237(2) or (3) of the UK Companies Act 1985. Comparative information for the six months ended 31 December 2005 has beenrestated in accordance with IFRS 3 / AASB 3 "Business Combinations" to reflectthe final allocation of fair values on acquisition of WMC Resources Ltd asoutlined in note 36 to the BHP Billiton Annual Report 2006. There was no impacton profit or net assets of this restatement. Rounding of amountsAmounts in this financial report have, unless otherwise indicated, been roundedto the nearest million dollars. Exchange ratesThe following exchange rates against the US dollar have been applied in thefinancial report:+--------------+---------+---------+---------+---------+---------+---------+| | Average| Average| Average| As at| As at| || | | | | | | || |Half year|Half year| Year| 31| 31| As at|| | ended 31| ended 31| ended| December| December| || | December| December| | 2006| | 30 June|| | 2006| 2005| 30 June| | 2005| || | | | | | | 2006|| | | | 2006| | | |+--------------+---------+---------+---------+---------+---------+---------+|Australian | 0.76| 0.75| 0.75| 0.79| 0.73| 0.74||dollar (a) | | | | | | |+--------------+---------+---------+---------+---------+---------+---------+|Brazilian real| 2.16| 2.30| 2.24| 2.14| 2.33| 2.18|+--------------+---------+---------+---------+---------+---------+---------+|Canadian | 1.13| 1.19| 1.16| 1.16| 1.16| 1.11||dollar | | | | | | |+--------------+---------+---------+---------+---------+---------+---------+|Chilean peso | 534| 540| 532| 534| 514| 546|+--------------+---------+---------+---------+---------+---------+---------+|Colombian peso| 2,372| 2,297| 2,324| 2,240| 2,287| 2,635|+--------------+---------+---------+---------+---------+---------+---------+|South African | 7.23| 6.52| 6.41| 7.00| 6.33| 7.12||rand | | | | | | |+--------------+---------+---------+---------+---------+---------+---------+|Euro | 0.78| 0.83| 0.82| 0.76| 0.84| 0.78|+--------------+---------+---------+---------+---------+---------+---------+|UK pound | 0.53| 0.57| 0.56| 0.51| 0.58| 0.55||sterling | | | | | | |+--------------+---------+---------+---------+---------+---------+---------+ (a) Displayed as US$ to A$ based on common convention. 2 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 of hydrocarbons including oil, gas and LNG) * Aluminium (exploration for and mining of bauxite, processing and marketing of aluminium and alumina) * Base Metals (exploration for and mining, processing and marketing of copper, silver, zinc, lead, uranium and copper by-products including gold) * Diamonds and Specialty Products (exploration for and mining of diamonds and titanium minerals, and prior to divestment in August 2006, fertiliser operations) * Stainless Steel Materials (exploration for and mining, processing and marketing of nickel) * Iron Ore (exploration for and mining, processing and marketing of iron ore) * Manganese (exploration for and mining, processing and marketing of manganese) * Metallurgical Coal (exploration for and mining, processing and marketing of metallurgical coal) * Energy Coal (exploration for and mining, processing and marketing of energy coal) Iron Ore, Manganese and Metallurgical Coal, which were previously reported asthe Carbon Steel Materials CSG are now reported as separate CSGs. 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. 2 Business segments (continued)US$ million Petroleum Aluminium Base Diamonds Stainless Iron Manganese Metallurgical Energy Group and BHP Metals and Steel Ore Coal Coal unallocated Billiton Specialty Materials items/ Group Products eliminations Half year ended 31 December 2006 Revenue together with share of jointly controlled entities' revenue from external customers Sale of group 2,490 2,157 4,630 393 2,762 2,717 535 1,829 1,494 - 19,007production Sale of third 169 667 1,014 - 43 15 40 - 827 292 3,067party product Rendering of 4 4 - - - 17 - 2 - 12 39services Inter-segment 295 - - - - - - 2 - (297) -revenue 2,958 2,828 5,644 393 2,805 2,749 575 1,833 2,321 7 22,113Less: share (3) - (2,887) (167) - (318) - - (235) - (3,610)of jointly controlled entities' external revenue included above Segment 2,955 2,828 2,757 226 2,805 2,431 575 1,833 2,086 7 18,503revenue Segment 1,608 700 757 11 1,430 1,246 105 657 121 (131) 6,504result Other 5 - 12 2 6 - - - 21 (46) -attributable income (1) Share of (1) 122 1,648 50 - 121 - 2 73 - 2,015profits from jointly controlled entities Profit from 1,612 822 2,417 63 1,436 1,367 105 659 215 (177) 8,519operations Net finance (222)costs Taxation (1,901)Royalty (196)related taxation Profit after 6,200taxation (1) Other attributable income represents the re-allocation of certain items recorded in the segment result of Group and unallocated items / eliminations to the applicable CSG / business segment. US$ million Petroleum Aluminium Base Diamonds Stainless Iron Manganese Metallurgical Energy Group and BHP Metals and Steel Ore Coal Coal unallocated Billiton Specialty Materials items/ Group Products eliminations Half year ended 31 December 2005 Revenue together with share of jointly controlled entities' revenue from external customers Sale of group 2,371 1,575 3,549 679 1,346 2,300 473 1,901 1,399 5 15,598production Sale of third 250 677 481 - 12 8 26 - 662 326 2,442party product Rendering of - - 1 - - 15 - 3 - 21 40services Inter-segment 47 - - - - - - 2 - (49) -revenue 2,668 2,252 4,031 679 1,358 2,323 499 1,906 2,061 303 18,080Less: share (3) (46) (2,062) (201) - (329) (16) - (222) (1) (2,880)of jointly controlled entities' external revenue included above Segment 2,665 2,206 1,969 478 1,358 1,994 483 1,906 1,839 302 15,200revenue Segment 1,431 329 490 190 374 1,042 79 947 103 (167) 4,818result Other 5 - - - - - 8 - - (13) -attributable income (1) Share of - 56 1,114 33 - 162 (2) - 77 1 1,441profits from jointly controlled entities Profit from 1,436 385 1,604 223 374 1,204 85 947 180 (179) 6,259operations Net finance (215)costs Taxation (1,389)Royalty (227)related taxation Profit after 4,428taxation (1) Other attributable income represents the re-allocation of certain itemsrecorded in the segment result of Group and unallocated items / eliminations tothe applicable CSG / business segment. 2 Business segments (continued)US$ million Petroleum Aluminium Base Diamonds Stainless Iron Manganese Metallurgical Energy Group and BHP Metals and Steel Ore Coal Coal unallocated Billiton 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 1,263 2,916 4,735 965 3,926 2,713 5 34,058production Sale of third 321 1,374 1,259 - 37 15 72 1 1,252 629 4,960party product Rendering of 3 6 1 - - 32 - 6 - 33 81services Inter-segment 109 - - - 2 - - 8 - (119) -revenue 5,230 5,084 10,294 1,263 2,955 4,782 1,037 3,941 3,965 548 39,099Less: share (5) (107) (5,393) (377) - (593) (33) - (438) - (6,946)of jointly controlled entities' external revenue included above Segment 5,225 4,977 4,901 886 2,955 4,189 1,004 3,941 3,527 548 32,153revenue Segment 2,963 917 1,998 209 901 2,201 126 1,832 131 (301) 10,977result Other 5 37 - - - - 8 1 - (51) -attributable income (1) Share of - 193 3,015 91 - 263 (2) 1 139 (6) 3,694profits from jointly controlled entities' Profit from 2,968 1,147 5,013 300 901 2,464 132 1,834 270 (358) 14,671operations Net finance (505)costs Taxation (3,207)Royalty (425)related taxation Profit after 10,534taxation (1) Other attributable income represents the re-allocation of certain items recorded in thesegment result of Group and unallocated items / eliminations to the applicable CSG / business segment. 3 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 period are detailed below. Half year ended 31 December 2006There were no exceptional items for the half year ended 31 December 2006. Half year ended 31 December 2005There were no exceptional items for the half year ended 31 December 2005. Year ended 30 June 2006 Gross Tax Net US$M US$M US$MExceptional items by category Sale of Tintaya copper mine 439 (143) 296Exceptional items by Customer Sector Group Base Metals 439 (143) 296 Sale of Tintaya copper mineEffective 1 June 2006, BHP Billiton sold its interest in the Tintaya copper minein 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$116 million of debt, working capital adjustments and deferred paymentscontingent upon future copper prices and production volumes. 4 Investments accounted for using the equity method+----------------+--+-------------------------+--------------------------+|Major | |Ownership interest at BHP| Contribution to profit ||shareholdings in| |Billiton Group reporting | after taxation ||jointly | | date (a) | ||controlled | | | ||entities | | | |+----------------+--+---------+--------+------+---------+---------+------+| | | 31| 31| 30| 31| 31| 30|| | | December|December| June| December| December| June|| | | 2006| 2005| 2006| 2006| 2005| 2006|| | | %| %| %| US$M| US$M| US$M|+----------------+--+---------+--------+------+---------+---------+------+|Samarco | | 50| 50| 50| 121| 163| 262||Mineracao SA | | | | | | | |+----------------+--+---------+--------+------+---------+---------+------+|Minera Antamina | | 33.75| 33.75| 33.75| 246| 170| 437||SA | | | | | | | |+----------------+--+---------+--------+------+---------+---------+------+|Carbones del | | 33.3| 33.3| 33.3| 73| 77| 97||Cerrejon LLC | | | | | | | |+----------------+--+---------+--------+------+---------+---------+------+|Minera Escondida| | 57.5| 57.5| 57.5| 1,412| 944| 2,595||Limitada | | | | | | | |+----------------+--+---------+--------+------+---------+---------+------+|Mozal SARL | | 47.1| 47.1| 47.1| 123| 60| 185|+----------------+--+---------+--------+------+---------+---------+------+|Valesul Aluminio| | -| 45.5| 45.5| -| (4)| 8||SA (b) | | | | | | | |+----------------+--+---------+--------+------+---------+---------+------+|Other (c) | | | | | 40| 31| 110|+----------------+--+---------+--------+------+---------+---------+------+|Total | | | | | 2,015| 1,441| 3,694|+----------------+--+---------+--------+------+---------+---------+------+ (a) The ownership interest at the jointly controlled entity's reporting date and BHP Billiton's reporting date are the same. Whilst the annual financial reporting date may be different to BHP Billiton's, financial information is obtained as at 31 December in order to report on a consistent basis with BHP Billiton's reporting date. (b) Subsequent to 30 June 2006, the BHP Billiton Group sold its interest in Valesul Aluminio SA. (c) Includes immaterial jointly controlled entities and the Richards Bay Minerals joint venture owned 50% (31 December 2005: 50%; 30 June 2006: 50%). 5 Net finance costs+--------------------------------------+-----------+-----------+---------+| | Half year| Half year| Year|| | ended| ended| ended|| | | | || |31 December|31 December| 30 June|| | 2006| 2005| 2006|+--------------------------------------+-----------+-----------+---------+| | US$M| US$M| US$M|+--------------------------------------+-----------+-----------+---------+|Financial expenses | | | |+--------------------------------------+-----------+-----------+---------+|Interest on bank loans and overdrafts | 9| 71| 134|+--------------------------------------+-----------+-----------+---------+|Interest on all other loans | 252| 149| 382|+--------------------------------------+-----------+-----------+---------+|Finance lease and hire purchase | 3| 3| 6||interest | | | |+--------------------------------------+-----------+-----------+---------+|Dividends on redeemable preference | 1| 13| 17||shares | | | |+--------------------------------------+-----------+-----------+---------+|Discounting on provisions and other | 123| 107| 266||liabilities | | | |+--------------------------------------+-----------+-----------+---------+|Discounting on pension and medical | 63| 40| 108||benefit entitlements | | | |+--------------------------------------+-----------+-----------+---------+|Interest capitalised (a) | (145)| (57)| (144)|+--------------------------------------+-----------+-----------+---------+|Net fair value change on hedged loans | 16| (16)| (30)||and related hedging derivatives | | | |+--------------------------------------+-----------+-----------+---------+|Exchange differences on net debt | 16| (2)| (8)|+--------------------------------------+-----------+-----------+---------+| | 338| 308| 731|+--------------------------------------+-----------+-----------+---------+|Financial income | | | |+--------------------------------------+-----------+-----------+---------+|Interest income | (62)| (53)| (123)|+--------------------------------------+-----------+-----------+---------+|Return on pension plan assets | (54)| (40)| (103)|+--------------------------------------+-----------+-----------+---------+| | (116)| (93)| (226)|+--------------------------------------+-----------+-----------+---------+|Net finance costs | 222| 215| 505|+--------------------------------------+-----------+-----------+---------+ (a) Interest has been capitalised at the rate of interest applicable to the specific borrowings financing the assets under construction or, wherefinanced through general borrowings, at a capitalisation rate representing the average interest rate on such borrowings. For the half year ended 31 December 2006 the capitalisation rate was 5.5 per cent (31 December 2005: 4.6 per cent; 30 June 2006: 5.0 per cent). 6 Taxation+---------------------------------------+-----------+-----------+--------+| | Half year| Half year| Year|| | ended| ended| ended|| | | | || |31 December|31 December| 30 June|| | 2006| 2005| 2006|+---------------------------------------+-----------+-----------+--------+| | US$M| US$M| US$M|+---------------------------------------+-----------+-----------+--------+|Taxation expense including royalty | | | ||related taxation | | | |+---------------------------------------+-----------+-----------+--------+|UK taxation expense | 9| 131| 294|+---------------------------------------+-----------+-----------+--------+|Australian taxation expense | 1,432| 1,180| 2,547|+---------------------------------------+-----------+-----------+--------+|Overseas taxation expense | 656| 305| 791|+---------------------------------------+-----------+-----------+--------+|Total taxation expense | 2,097| 1,616| 3,632|+---------------------------------------+-----------+-----------+--------+ 7 Earnings per share+-----------------------------------------+----------+-------------+---------+| | Half year| Half year| Year|| | ended| ended| ended|| | 31| 31 December| 30 June|| | December| 2005| 2006|| | 2006| | |+-----------------------------------------+----------+-------------+---------+|Basic earnings per share (US cents) | 103.9| 72.1| 173.2|+-----------------------------------------+----------+-------------+---------+|Diluted earnings per share (US cents) | 103.8| 71.9| 172.4|+-----------------------------------------+----------+-------------+---------+|Basic earnings per American Depositary | 207.8| 144.2| 346.4||Share (ADS) (US cents) (a) | | | |+-----------------------------------------+----------+-------------+---------+|Diluted earnings per American Depositary | 207.6| 143.8| 344.8||Share (ADS) (US cents) (a) | | | |+-----------------------------------------+----------+-------------+---------+|Basic earnings (US$ million) | 6,168| 4,364| 10,450|+-----------------------------------------+----------+-------------+---------+|Diluted earnings (US$ million) (b) | 6,182| 4,370| 10,456|+-----------------------------------------+----------+-------------+---------+ 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: +-----------------------------------------+----------+-------------+---------+| | Half year| Half year| Year|| | ended| ended| ended|| | 31| 31 December| 30 June|| | December| 2005| 2006|| | 2006| | |+-----------------------------------------+----------+-------------+---------+|Weighted average number of shares | Million| Million| Million|+-----------------------------------------+----------+-------------+---------+|Basic earnings per share denominator | 5,934| 6,055| 6,035|+-----------------------------------------+----------+-------------+---------+|Shares and options contingently issuable | 21| 26| 31||under employee share ownership plans | | | |+-----------------------------------------+----------+-------------+---------+|Diluted earnings per share denominator | 5,955| 6,081| 6,066|+-----------------------------------------+----------+-------------+---------+ (a) For the periods indicated, each ADS represents two ordinary shares. (b) Diluted earnings are calculated after adding back dividend equivalent payments of US$14 million (31 December 2005: US$6 million; 30 June 2006: US$6 million) that would not be made if potential ordinary shares were converted to fully paid. 8 Dividends+-----------------------------------------+----------+-------------+---------+| | Half year| Half year| Year|| | ended| ended| ended|| | 31| 31 December| 30 June|| | December| 2005| 2006|| | 2006| | |+-----------------------------------------+----------+-------------+---------+| | US$M| US$M| US$M|+-----------------------------------------+----------+-------------+---------+|Dividends paid during the period | | | |+-----------------------------------------+----------+-------------+---------+|BHP Billiton Limited | 647| 520| 1,148|+-----------------------------------------+----------+-------------+---------+|BHP Billiton Plc - Ordinary shares | 453| 358| 790|+-----------------------------------------+----------+-------------+---------+|- Preference shares (a) | -| -| -|+-----------------------------------------+----------+-------------+---------+| | 1,100| 878| 1,938|+-----------------------------------------+----------+-------------+---------+| | | | |+-----------------------------------------+----------+-------------+---------+|Dividends declared in respect of the | | | ||period | | | |+-----------------------------------------+----------+-------------+---------+|BHP Billiton Limited | 699| 628| 1,275|+-----------------------------------------+----------+-------------+---------+|BHP Billiton Plc - Ordinary shares | 475| 432| 885|+-----------------------------------------+----------+-------------+---------+|- Preference shares (a) | -| -| -|+-----------------------------------------+----------+-------------+---------+| | 1,174| 1,060| 2,160|+-----------------------------------------+----------+-------------+---------+ +-----------------------------------------+--------+--------------+----------+| | Half| Half year|Year ended|| | year| ended 31| 30 June|| |ended 31| December 2005| 2006|| |December| | || | 2006| | |+-----------------------------------------+--------+--------------+----------+| |US cents| US cents| US cents|+-----------------------------------------+--------+--------------+----------+|Dividends paid during the period (per | | | ||share) | | | |+-----------------------------------------+--------+--------------+----------+|Prior year final dividend | 18.5| 14.5| 14.5|+-----------------------------------------+--------+--------------+----------+|Interim dividend | N/A| N/A| 17.5|+-----------------------------------------+--------+--------------+----------+| | 18.5| 14.5| 32.0|+-----------------------------------------+--------+--------------+----------+|Dividends declared in respect of the | | | ||period (per share) | | | |+-----------------------------------------+--------+--------------+----------+|Interim dividend | 20.0| 17.5| 17.5|+-----------------------------------------+--------+--------------+----------+|Final dividend | N/A| N/A| 18.5|+-----------------------------------------+--------+--------------+----------+| | 20.0| 17.5| 36.0|+-----------------------------------------+--------+--------------+----------+ (a) 5.5 per cent dividend on 50,000 preference shares of £1 each (December 2005:5.5 per cent). 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. Each American Depository Share (ADS) represents two ordinary shares of BHPBilliton Limited or BHP Billiton Plc. Dividends declared on each ADS representtwice the dividend declared on BHP Billiton shares. BHP Billiton Limited dividends for all periods presented are, or will be, fullyfranked based on a tax rate of 30%. Subsequent to half year end, on 7 February 2007, BHP Billiton declared aninterim dividend of 20.0 US cents per share (US$1,174 million), which will bepaid on 20 March 2007. 9 Assets sold or classified as held for sale During the six months ended 31 December 2006, the sale of Southern CrossFertiliser Pty Ltd, the Cascade and Chinook oil and gas prospects, the Coal BedMethane assets and the sale of BHP Billiton's 45.5 per cent interest in ValesulAluminio SA, have been finalised. These assets were classified as held for saleat 30 June 2006. At 31 December 2006, the Bruce and Keith oil fields (with associated acreage),which form part of the Petroleum CSG, were no longer classified as held forsale. These operations will be retained and additional growth options have beenevaluated. 10 Total equity+-------------------------------+-------------------------+-------------------------+| | Attributable to members | Minority interests || | of BHP Billiton Group | |+-------------------------------+--------+--------+-------+---------+---------+-----+| | Half| Half| Year|Half year|Half year| Year|| | year| year| ended| ended| ended|ended|| | ended| ended|30 June| 31| 31| 30|| | 31| 31| 2006| December| December| June|| |December|December| | 2006| 2005| 2006|| | 2006| 2005| | | | |+-------------------------------+--------+--------+-------+---------+---------+-----+| | US$M| US$M| US$M| US$M| US$M| US$M|+-------------------------------+--------+--------+-------+---------+---------+-----+|Total equity opening balance | 24,218| 17,575| 17,575| 237| 341| 341|+-------------------------------+--------+--------+-------+---------+---------+-----+|Adjustment for adoption of IAS | | | | | | ||39/AASB 139 | | | | | | |+-------------------------------+--------+--------+-------+---------+---------+-----+|- retained earnings | -| 55| 55| -| -| -|+-------------------------------+--------+--------+-------+---------+---------+-----+|- hedging reserve | -| 30| 30| -| -| -|+-------------------------------+--------+--------+-------+---------+---------+-----+|- financial asset reserve | -| 116| 116| -| -| -|+-------------------------------+--------+--------+-------+---------+---------+-----+|Total equity opening balance | 24,218| 17,776| 17,776| 237| 341| 341||after adoption of IAS 39/AASB | | | | | | ||139 | | | | | | |+-------------------------------+--------+--------+-------+---------+---------+-----+|Changes in the statement of | 6,303| 4,336| 10,511| 32| 64| 84||recognised income and expense | | | | | | |+-------------------------------+--------+--------+-------+---------+---------+-----+|Transactions with owners - | 8| 17| 24| -| -| -||contributed equity | | | | | | |+-------------------------------+--------+--------+-------+---------+---------+-----+|Dividends | (1,100)| (878)|(1,938)| (22)| (113)|(188)|+-------------------------------+--------+--------+-------+---------+---------+-----+|Accrued employee entitlement to| 37| 34| 61| -| -| -||share awards | | | | | | |+-------------------------------+--------+--------+-------+---------+---------+-----+|Purchases of shares made by | (131)| (145)| (187)| -| -| -||ESOP trusts | | | | | | |+-------------------------------+--------+--------+-------+---------+---------+-----+|BHP Billiton Plc share buy-back| (1,355)| -| (409)| -| -| -|+-------------------------------+--------+--------+-------+---------+---------+-----+|BHP Billiton Limited share | -| -|(1,620)| -| -| -||buy-back | | | | | | |+-------------------------------+--------+--------+-------+---------+---------+-----+|Total equity closing balance | 27,980| 21,140| 24,218| 247| 292| 237|+-------------------------------+--------+--------+-------+---------+---------+-----+ Share buy-backs Following the announcement on 23 August 2006 of a US$3.0 billion capital return,we commenced this on 7 September 2006 with the on-market buy-back of BHPBilliton Plc shares. As at 31 December 2006, 73,885,000 BHP Billiton Plc shareshad been bought back (6,600,000 by BHP Billiton Plc and 67,285,000 by BHPBilliton Limited) at a total cost of US$1,355 million. The shares wererepurchased at an average price of £9.54, representing a discount of 8.9 percent to the average BHP Billiton Limited share price between 7 September and 31December 2006. At 31 December 2006, all BHP Billiton Plc shares bought back wereheld as Treasury shares. Subsequent to 31 December 2006, on 18 January 2007,67,285,000 BHP Billiton Plc shares purchased by BHP Billiton Limited werecancelled. This reduces the value of treasury shares held by US$1,237 million. On 16 May 2006, the BHP Billiton Group completed an on-market buy-back of18,820,000 BHP Billiton Plc shares. The shares were re-purchased at an averageprice of £11.5356, representing a discount of 8.8 per cent to the average BHPBilliton Limited share price between 27 April 2006 and 16 May 2006. On 3 April 2006, the BHP Billiton Group completed an off-market buy-back of95,950,979 BHP Billiton Limited shares. 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$23.45 per share,representing a discount of 14 per cent to the volume weighted average price ofBHP Billiton Limited shares over the five days up to and including the closingdate of the buy-back. 11 Contingent liabilities+----------------------------------------+-----------+-----------+--------+| |31 December|31 December| 30 June|| | 2006| 2005| 2006|+----------------------------------------+-----------+-----------+--------+| | US$M| US$M| US$M|+----------------------------------------+-----------+-----------+--------+|Contingent liabilities at balance date, | | | ||not otherwise provided for in the | | | ||financial report, are categorised as | | | ||arising from: | | | |+----------------------------------------+-----------+-----------+--------+|Jointly controlled entities | | | |+----------------------------------------+-----------+-----------+--------+|Other (a) | 410| 153| 355|+----------------------------------------+-----------+-----------+--------+| | 410| 153| 355|+----------------------------------------+-----------+-----------+--------+|Subsidiaries and jointly controlled | | | ||assets (including guarantees) | | | |+----------------------------------------+-----------+-----------+--------+|Performance guarantees (b) | 1| 1| 1|+----------------------------------------+-----------+-----------+--------+|Other (a) | 282| 209| 220|+----------------------------------------+-----------+-----------+--------+| | 283| 210| 221|+----------------------------------------+-----------+-----------+--------+|Total contingent liabilities | 693| 363| 576|+----------------------------------------+-----------+-----------+--------+ (a) Other contingent liabilities relate predominantly to actual or potential litigation of the Group for which amounts are reasonably estimable but the liability is not probable and therefore the Group has notprovided for such amounts in these financial statements. The amounts relateto a number of actions against the Group, none of which are individually significant. Additionally, there are a number of legal claims or potential claims against the Group, the outcome of which cannot be foreseen at present, and for which no amounts have been included in the table above. (b) The BHP Billiton Group has entered into various counter-indemnities of performance guarantees related to its own future performance in the normal course of business. 12 Subsequent events Other than the matters outlined below, or disclosed elsewhere in this interimfinancial report, no matters or circumstances have arisen since the end of thehalf year that have significantly affected, or may significantly affect, theoperations, results of operations or state of affairs of the BHP Billiton Groupin subsequent accounting periods. On 1 February 2007, the purchase of the Genghis Khan oil and gas development wascompleted. The transaction, which was announced in November 2006, closedfollowing completion of all remaining conditions to sale, with the net share toBHP Billiton at US$583 million after final purchase price adjustments. BHPBilliton holds a 44 percent interest and is the operator of the Genghis Khandevelopment. Director's Report The Directors present their report together with the interim financialstatements for the half year ended 31 December 2006 and the auditor's reviewreport thereon. Review of Operations A detailed review of the Group's operations, the results of those operationsduring the half year ended 31 December 2006 and likely future developments aregiven on page 1 to 14. Dividend Full details of dividends are given on page 27. Board of Directors The Directors of the Company in office at any time during or since the end ofthe half year are: Mr D R Argus - Chairman since April 1999 (on the Board of Directors sinceNovember 1996) Mr P M Anderson - a Director since June 2006 Dr D C Brink - a Director since June 1997 Dr J G Buchanan - a Director since February 2003 Mr C A Cordeiro - a Director since February 2005 Mr D A Crawford - a Director since May 1994 Dr E G de Planque - a Director since October 2005 Mr C W Goodyear - an Executive Director since November 2001 Dr D A Jenkins - a Director since March 2000 Mr M Kloppers - an Executive Director since January 2006 Mr C J Lynch - an Executive Director since January 2006 Mr J Nasser - a Director since June 2006 Mr M Salamon - an Executive Director from February 2003 until 26 October 2006 Dr J M Schubert - a Director since June 2000 Auditor's independence declaration KPMG in Australia are the auditors of BHP Billiton Limited. Their auditor'sindependence declaration under Section 307C of the Australian Corporations Act2001 is set out on page 30 and forms part of this Directors' Report. Rounding of amounts BHP Billiton Limited is a company of a kind referred to in Australian Securitiesand Investments Commission Class Order No 98/100, dated 10 July 1998. Amounts inthe Directors' Report and financial report have been rounded to the nearestmillion dollars in accordance with that class order. Signed in accordance with a resolution of the Board of Directors. D R Argus - Chairman C W Goodyear - Chief Executive Officer Dated this 7th day of February 2007 Director's Declaration and Lead Auditor's Independence Declaration Directors' Declaration In accordance with a resolution of the Directors of the BHP Billiton Group, theDirectors declare that: a. the financial statements and notes, set out on pages 16 to 28, are inaccordance with the Listing Rules of the Financial Services Authority in theUnited Kingdom and the Australian Corporations Act 2001, including: (i) complying with applicable accounting standards; and (ii) giving a true and fair view of the financial position of the BHP BillitonGroup as at 31 December 2006 and of its performance for the half-year ended onthat date; and b. There are reasonable grounds to believe that each of the BHP BillitonGroup, BHP Billiton Limited and BHP Billiton Plc will be able to pay its debtsas and when they become due and payable. Signed in accordance with a resolution of the Board of Directors. D R Argus - Chairman C W Goodyear - Chief Executive Officer Dated this 7th day of February 2007 Lead Auditor's Independence Declaration To the directors of BHP Billiton Limited: I declare that, to the best of my knowledge and belief, in relation to thereview for the financial period ended 31 December 2006 there have been: (i) no contraventions of the auditor independence requirements as set outin the Australian Corporations Act 2001 in relation to the review; and (ii) no contraventions of any applicable code of professional conduct inrelation to the review. This declaration is in respect of the BHP Billiton Group and the entities itcontrolled during the financial period. KPMG Peter NashPartner Dated in Melbourne this 7th day of February 2007 Independent Review Report of KPMG Audit Plc to BHP Billiton Plc and KPMG to theMembers of BHP Billiton Limited Scope For the purposes of these reports, the terms "we" and "our" denote KPMG AuditPlc in relation to its responsibilities under its terms of engagement to reportto BHP Billiton Plc and KPMG in relation to Australian professional andregulatory responsibilities and reporting obligations to the members of BHPBilliton Limited. We have reviewed the financial information of the Group for the half-year ended31 December 2006, set out on pages 17 to 28, which comprises the interimconsolidated income statement, consolidated statement of recognised income andexpense, consolidated balance sheet, consolidated cash flow statement andrelated notes 1 to 12. We have read the other information contained in theinterim report and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial information. KPMG has also reviewedthe directors' declaration set out on page 30. The BHP Billiton Group ("the Group") consists of BHP Billiton Plc and BHPBilliton Limited and the entities they controlled at the end of the half-year orfrom time to time during the half-year ended 31 December 2006. Respective Responsibilities of KPMG Audit Plc and KPMG KPMG Audit Plc's report is made solely to BHP Billiton Plc in accordance withthe terms of KPMG Audit Plc's engagement to assist BHP Billiton Plc in meetingthe requirements of the Listing Rules of the Financial Services Authority in theUnited Kingdom. KPMG Audit Plc's review has been undertaken so that we mightstate to the company those matters we are required to state to it in this reportand for no other purpose. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the company for our reviewwork, for this report, or for the conclusions we have reached. KPMG has performed an independent review of the interim financial report inorder to state whether, on the basis of the procedures described, anything hascome to its attention that would indicate that the interim financial report isnot in accordance with the Corporations Act 2001 including: giving a true andfair view of the Group's financial position as at 31 December 2006 and itsperformance for the half-year ended on that date; and complying with AustralianAccounting Standard AASB 134 Interim Financial Reporting and the CorporationsRegulations 2001. Directors' Responsibilities The interim report, including the financial information contained therein, isthe responsibility of and has been approved by the Directors. The Directors areresponsible for preparing the interim report: * in accordance with the Listing Rules of the Financial Services Authority in the United Kingdom which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual financial statements except where any changes, and the reasons for them, are disclosed; and * in accordance with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the interim financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Review work performed KPMG Audit Plc conducted its review in accordance with guidance contained inBulletin 1999/4 Review of interim financial information issued by the AuditingPractices Board for use in the United Kingdom. KPMG conducted its review in accordance with Australian Auditing Standard onReview Engagements ASRE 2410 Review of an Interim Financial Report Performed bythe Independent Auditor of the Entity. As auditor of BHP Billiton Limited, ASRE2410 requires that KPMG complies with the ethical requirements relevant to theaudit of the annual financial report. A review consists principally of making enquiries of group management andapplying analytical procedures to the financial information and underlyingfinancial data and, based thereon, assessing whether the accounting policies andpresentation have been consistently applied unless otherwise disclosed. A reviewexcludes audit procedures such as tests of controls and verification of assets,liabilities and transactions. A review is substantially less in scope than anaudit conducted in accordance with auditing standards and consequently does notenable us to obtain assurance that we would become aware of all significantmatters that might be identified in an audit. Accordingly, we do not express anaudit opinion on the financial information. Review conclusion by KPMG Audit PlcOn the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 31 December 2006. KPMG Audit PlcChartered AccountantsLondon7 February 2007 Review conclusion by KPMG Based on our review, which is not an audit, we have not become aware of anymatter that makes us believe that the interim financial report of the Group isnot in accordance with: a) the Corporations Act 2001, including: i. giving a true and fair view of the Group's financial position as at 31December 2006 and of its performance for the half-year ended on that date; and ii. complying with Australian Accounting Standard AASB 134 Interim FinancialReporting and the Corporations Regulations 2001. b) other mandatory financial reporting requirements in Australia. KPMG Peter NashPartner Melbourne7 February 2007 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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