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CREATING TOMORROW TODAY BHP BILLITON LIMITED ANNUAL REPORT 2004 BHP Billiton is the world's largest diversified resources group, operating a unique mix of high-quality assets across the globe. We structure our portfolio of assets into seven customer-oriented groupings called Customer Sector Groups. These are Petroleum, Aluminium, Base Metals, Carbon Steel Materials, Diamonds and Specialty Products, Energy Coal and Stainless Steel Materials. As you will see on the following pages, our commodities are used in a vast range of products, from playful plastics to powerful PCs to super-fast trains. We're proud of the contribution our operations are making to 'creating tomorrow today' while delivering value and sustainable returns for our shareholders. WE CREATE VALUE THROUGH THE DISCOVERY, DEVELOPMENT, CONVERSION AND MARKETING OF NATURAL RESOURCES ANNUAL GENERAL MEETING The Annual General Meeting of BHP Billiton Limited will be held at the Harbourside Auditorium, Sydney Convention and Exhibition Centre, Darling Harbour, Sydney on Friday 22 October 2004 commencing at 11.00 am. ABOUT THIS REPORT BHP Billiton is a Dual Listed Company comprising BHP Billiton Limited and BHP Billiton Plc. The two entities continue to exist BHP Billiton Limited. as separate companies but operate as a combined group known as BHP Billiton. ABN 49 004 028 077. Registered in Australia. The headquarters of BHP Billiton Limited and the global headquarters of the combined BHP Billiton Group are located in Registered Office: Melbourne, Australia. BHP Billiton Plc is located in London, UK. Both companies have identical Boards of Directors and are 180 Lonsdale Street, run by a unified management team. Throughout this Report the Boards are referred to collectively as the Board. Shareholders Melbourne Victoria 3000 in each company have equivalent economic and voting rights in the BHP Billiton Group as a whole. Australia. The laws in Australia and the UK require us to adopt a different approach to reporting results. This Concise Report deals with BHP Billiton Plc. the affairs of the BHP Billiton Group. Registration Number 3196209. Registered in England Throughout this Report, the terms BHP Billiton, the Company and the Group refer to the combined group, including both and Wales. BHP Billiton Limited and subsidiary companies and BHP Billiton Plc and subsidiary companies. The term ‘the merger’ has a Registered Office: corresponding meaning. Neathouse Place, Copies of the Annual Reports for BHP Billiton Plc and BHP Billiton Limited (Concise Report and Combined Financial London SW1V 1BH UK. Statements) can be found on www.bhpbilliton.com. Shareholders may also request a copy by telephoning 1300 656 780 (within Australia) or (61 3) 9649 5020 (from elsewhere). CONTENTS Chairman’s Review 2 Chief Executive Officer’s Report 4 10 Financial Performance 6 PETROLEUM Review of Operations 8 Customer Sector Group Review Petroleum 10 Aluminium 12 Base Metals 14 12 ALUMINIUM Carbon Steel Materials 16 Diamonds and Specialty Products 18 Energy Coal 20 Stainless Steel Materials 22 Health, Safety, Environment and Community (HSEC) Review 24 14 BASE METALS BHP Billiton Locations 26 16 Board of Directors 28 CARBON STEEL Executive Committee 30 MATERIALS Corporate Governance Statement 34 Remuneration Report 46 BHP Billiton Charter 63 Directors’ Report 64 18 DIAMONDS AND SPECIALTY PRODUCTS Concise Financial Report 69 Shareholder Information 90 Corporate Directory IBC 20 ENERGY COAL 22 STAINLESS STEEL MATERIALS BHP BILLITON LIMITED ANNUAL REPORT 2004 ¥ 1 CHAIRMAN’S REVIEW ‘I commend my Board colleagues and Chip Goodyear and his team for their continued commitment to superior performance and transparency, which has enabled the Company to turn in a stellar performance for the 2004 financial year.’ Don Argus, Chairman A world class diversified asset base; stable and increasing cash BHP Billiton is not immune from market volatility but if we flows; strong margins stemming from cost savings, operating continue to deliver growth with returns above our cost of capital efficiencies and higher commodity prices; growing volumes, and maintain a strong cash flow, we will continue to attract a a range of premium organic growth options together with an wide investor base and achieve our objective of becoming a engaged and committed workforce have contributed to the core shareholding for global institutional investors as well as stellar profit performance recorded by BHP Billiton for the for individual shareholders and superannuation funds. financial year ended 30 June 2004. While we are extremely proud of our financial results for the year, Our profit before borrowing costs, tax, depreciation and ultimately it is the ability of an entity to manage its assets well amortisation was US$6.7 billion; our net operating cash flows and execute growth opportunities that create sustainable value reached US$5.3 billion and the total dividend payment for the in a company. The quality of our resource reserves, product and year was 26 US cents a share, compared with 14.5 US cents a geographic diversity are the foundation of our success. Together share last year. Three dividends were declared this year as a with our pipeline of project opportunities, which remains result of our decision to realign dividend dates to coincide with unequalled in the industry, these attributes provide us with the announcements of our interim and full year results. In recognition confidence that the growth momentum can be maintained in of the strength of our cash flow, we are assessing the best way to the near to medium term. return up to US$2 billion to shareholders. Today BHP Billiton has a market capitalisation of around Corporate Governance US$58 billion, compared to US$35 billion as at 30 June 2003 and Shareholders, community groups, the legal system and US$28 billion at the time of the merger announcement in 2001. governments have greater expectations than ever before of Since the merger, our focus on creating value has resulted in the behaviours required of our corporations and their leaders. BHP Billiton Limited outperforming the ASX200 by 75 per cent The Board of BHP Billiton recognises that out-performance can and the S&P 500 by 83 per cent and BHP Billiton Plc only be sustained over the long term if the right governance outperforming the FTSE100 by 106 per cent and the S&P 500 by framework is in place. Empirical evidence is starting to emerge 92 per cent. All this is a very satisfying result for shareholders: that supports this view and we applaud those investment it demonstrates market recognition of our performance and institutions working hard to demonstrate the link. vindicates the strategic direction being undertaken by the Group. At BHP Billiton the Board is committed to a governance Resource companies are often criticised by the financial market framework that supports the pursuit of the Group’s objective – for ‘wasting’ capital, by investing in big capital projects when that is the creation of long-term value for shareholders through times are good then failing to generate an acceptable return on the discovery, development and conversion of natural resources that capital. One of the reasons that the financial markets now and the provision of innovative customer and market-focused recognise BHP Billiton as a very different resource company is solutions. The most challenging but integral ingredient for the our return on capital. This year, we achieved a financial return effective operation of a board is the relationship between on capital of 19.7 per cent, an extremely competitive result for directors and how they function as a group. For a board to a resource company. If we look at the Shareholder Value Added operate effectively it is imperative that there is a climate of trust measure over the past three years, during part of which global where every member of the board is not only provided with growth was in a downturn, we see a testament to the discipline timely information but is encouraged to question and challenge and focus that Chip Goodyear and his team have brought to the each other, the operational management and accepted wisdom consistent delivery of our strategy and allocation of capital over and strategy. this period. 2 ¥ BHP BILLITON LIMITED ANNUAL REPORT 2004 CHAIRMAN’S REVIEW Another essential element in the governance process is a contractors lost their lives during the year, an outcome that is commitment to board renewal. To assist this process, skill set unacceptable by any measure. Management have refocused and requirements are regularly reviewed; a collective review of the redoubled their efforts to address this issue in line with the Board as a whole and its various sub-committees is undertaken Group’s target of Zero Harm. We know this is achievable because every two years and individual non-executive Director reviews we have many operations around the world where excellence in are undertaken every alternate year or when a Director offers safety has been and is being consistently achieved. himself/herself for re-election. The Board has also adopted a Board Governance Document that outlines the processes and Outlook practices that the BHP Billiton Board has adopted to discharge This is an exciting time to be part of the resources industry. its responsibilities to shareholders. It outlines the individual The global economy has been experiencing a significant increase qualities of the Directors and their commitment to the collective in growth with simultaneous demand increases in many decision-making process and describes the separate roles, economies. Of particular note has been strong growth in China, authorities and accountabilities of each of the Board and the Japan and other Asian economies. We expect China’s economy Chief Executive Officer. It outlines how delegated authority is to ease modestly from current near double-digit growth rates yet monitored and performance is evaluated. A copy of the remain a large and sustainable consumer of raw materials and document can be found on our website at www.bhpbilliton.com resources in coming years.