We are well placed to create value BHP Billiton makes decisions to optimise value in the long-term interests of all shareholders Simplification Simplification journey well advanced: productivity, organisation structure and portfolio…
Elliotts proposals our assessment Elliott Proposal BHP Billiton Conclusions Unification UK incorporated NewCo (Australian tax resident) to Costs significantly outweigh savings, no other material benefits own 100% of both Limited and…
Our journey We have built a stronger, more resilient company with a simpler portfolio that is positioned well for future economic cycles Simplified portfolio Simplified operating model Productivity improvements Additional…
Productivity focus has delivered results Over US11 billion of productivity gains delivered over past Productivity improvements driving margins four years (Underlying EBITDA margin, %) 60 Productivity improvements and streamlined…
Disciplined, rigorous approach to capital allocation Operating productivity Capital productivity Net operating cash flow Maintenance capital Strong balance sheet Minimum 50% payout ratio dividend Excess cash Additional…
We have strengthened the balance sheet Net debt of US20.1 billion at H1 FY17, down US6 billion since Net debt has decreased and gearing has improved FY16 year end (Net debt, US billion) (Gearing, %) A credit rating maintained through…
1. Our assessment of Elliotts proposals
i. Unification ii. US Petroleum demerger iii. Buybacks
The DLC is not an impediment and has some advantages Our corporate structure has not impeded our ability to manage the business effectively or return capital to shareholders The DLC involves modest incremental costs and is more complex…
Unification proposal would be costly We regularly review the DLC and have considered unification Costs of proposal1 Benefits of proposal2 before US3.0 billion US32 million Costs of unification outweigh the savings (US0.56 per share)…
Proposal would result in wastage of franking credits All dividends would be fully franked under Elliotts unification proposal, including to existing Plc shareholders most of whom cannot use them If BHP Billiton were a single-headed…
Unification is not required for off-market buybacks Since the DLC merger in 2001, the Group has returned 50% of its underlying earnings to shareholders in the form of dividends and buybacks US56bn in dividends US23bn in buybacks…
Proposal would make off-market buybacks less attractive Elliotts unification proposal could result in materially greater share capital and non-distributable profits that could not be distributed as franked dividends in off-market…
Proposal unlikely to appeal to Limited shareholders Even if NewCo trades at a blended Plc/Limited share price (as Share price assumed by Elliott) (US) Indicative value loss for Limited shareholders becoming holders in UK incorporated…
Proposal has regulatory uncertainty Under Elliotts unification proposal, both Limited and Plc would become subsidiaries of a UK incorporated NewCo would require a number of approvals, including approval by the Foreign Investment Review…
i. Unification ii. US Petroleum demerger iii. Buybacks
Petroleum is core to our strategy Aligned with our strategy of owning the best commodities, assets Petroleum is a high-margin business and capabilities (Average underlying EBITDA margin over last 5 years2, %) 80 Petroleum growth…
Petroleum benefits from being a part of BHP Billiton BHP Billitons scale and financial strength a key competitive Our major commodities experience largely weak or negative correlation advantage for Petroleum (Correlation frequency, %)…
Onshore US Free Cash Flow positive and positioned for growth Operating and capital productivity improvements continue to Black Hawk well performance relative to peers2, 3, 4 unlock value (cumulative production, gross condensate Mbbls)…
Demerger proposal has limited upside, significant downside risk Demergers can create value, but not in this case: our operating capabilities and capital allocation approach are competitive with any in the industry demerger would not…
i. Unification ii. US Petroleum demerger iii. Buybacks
Returns to shareholders are central to our capital allocation framework We have returned almost the equivalent of our market capitalisation in dividends and buybacks1 BHP Billiton continues to generate material cash flow as a result of…
Proposal would undo recent strengthening of balance sheet Buyback would return net debt to historical levels... and negatively impact credit metrics and gearing (Net debt, US billion) (Net debt / CY16 underlying EBITDA) (Net Gearing,…
A mechanistic approach to balance sheet management is inappropriate Buybacks based on targeted 1.3x net debt / EBITDA Elliotts suggestion that BHP Billiton should target 1.3x Pro-forma net debt (US billion) net debt/EBITDA (or similar)…
3. Conclusion
We are on the right path BHP Billiton is now a stronger, simpler, more resilient company, well-positioned for the future We have been on a value-driven simplification journey for many years and this will continue in the years ahead We…
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