BHP BILLITON PLC ANNUAL REPORT 2002 BHP BILLITON PLC BHP BILLITON ANNUAL REPORT 2002 REPORT ANNUAL STABILITY GROWTH VALUE www.bhpbilliton.com Corporate Directory Stability. Growth. Value . BHP BILLITON PLC REGISTRARS AND TRANSFER OFFICES REGISTERED OFFICE United Kingdom United Kingdom Lloyds TSB Registrars 1-3 Strand The Causeway London WC2N 5HA UK Worthing West Sussex BN99 6DA Telephone (44 20) 7747 3800 Facsimile (44 20) 7747 3900 Telephone 0870 600 3970 (44 121) 433 8000 from outside the UK Company Secretary Facsimile 0870 600 3980 Karen J Wood (44) 1903 854031 from outside the UK 0870 600 3950 text phone for shareholders with hearing difficulties Website www.lloydstsb-registrars.co.uk BHP BILLITON OFFICES Lloyds TSB Registrars operates a web-based enquiry and portfolio CORPORATE CENTRES management service for shareholders. Visit www.shareview.co.uk Australia for details. Bourke Place 600 Bourke Street South Africa Melbourne VIC 3000 Computershare Investor Services Limited 8th Floor Telephone (61 3) 9609 3333 11 Diagonal Street Facsimile (61 3) 9609 3015 Johannesburg 2001 United Kingdom (PO Box 1053, Johannesburg 2000) Neathouse Place London SW1V 1LH UK Telephone (27 11) 370 5000 Facsimile (27 11) 370 5487 Telephone (44 20) 7802 7000 Website www.registrars.co.za Facsimile (44 20) 7603 8008 USA Contents South Africa (Depositary bank for ADRs) Chairman’s Review 2 6 Hollard Street JPMorgan Chase Bank Chief Executive’s Report 4 Johannesburg 2001 Shareholder Services Republic of South Africa P O Box 43013 Financial Performance 6 Providence Marketing Hubs 8 Telephone (27 11) 376 9111 RI 02940-3013 Marketing and Financial Risk Facsimile (27 11) 838 4716 Management 10 USA Review of Operations 12 United States Telephone (1 781) 575 4328 Customer Sector Group Reviews 1360 Post Oak Boulevard, Suite 150 Facsimile (1 781) 575 4082 Houston, TX 77056-3020, USA Aluminium 14 Website www.adr.com Base Metals 16 Telephone (1 713) 961 8500 Carbon Steel Materials 18 Facsimile (1 713) 961 8400 Energy Coal20 Petroleum 22 Stainless Steel Materials 24 MARKETING OFFICES Steel 26 Netherlands Health, Safety, Environment Verheeskade 25 and Community (HSEC) Review 28 About this Report 2521 BE The Hague BHP Billiton Locations 30 BHP Billiton was created through the Dual Listed Companies (DLC) merger of BHP Limited (now BHP Billiton Limited) and Billiton Plc (now BHP Billiton Plc), on 29 June 2001. The Netherlands Board of Directors 32 BHP Billiton Limited and BHP Billiton Plc continue to exist as separate companies, but operate on a combined basis as BHP Telephone (31 70) 315 6666 Executive Committee 35 Billiton. The headquarters of BHP Billiton Limited, and the global headquarters of the combined BHP Billiton Group, are Facsimile (31 70) 315 6767 Corporate Governance Statement 38 located in Melbourne, Australia. BHP Billiton Plc is located in London, United Kingdom. Both companies have identical Boards of Directors and are run by a unified management team. Shareholders in each company have equivalent economic and voting Remuneration Report 47 rights in the BHP Billiton Group as a whole. Singapore BHP Billiton Charter 59 168 Robinson Road #10-01 The laws in Australia and the UK require us to adopt a different approach to reporting results. This Annual Report deals with Receive your Annual Report electronically. Capital Tower Directors’ Report 60 the affairs of the BHP Billiton Group. BHP Billiton Plc’s Annual Report is also posted on the Internet. Singapore 068912 Financial Review 63 Copies of the Annual Reports for BHP Billiton Plc and BHP Billiton Limited (Concise Report and Combined Financial Shareholders are encouraged to visit www.bhpbilliton.com to inspect Statements) can be found on www.bhpbilliton.com. Shareholders may also request a copy by telephoning (44 20) 7747 3977. Statement of Directors’ Telephone (65) 6349 3333 the electronic version of the Annual Report and provide feedback to Responsibilities 68 Throughout this Report, the terms BHP Billiton, the Company, the Merger and the Group refer to the combined group, Facsimile (65) 6349 4000 the Company. Independent Auditors’ Report 69 including both BHP Billiton Limited and subsidiary companies and BHaP Billiton Plc and subsidiary companies. The term ‘the merger’ has a corresponding meaning. Financial Statements 70 Throughout the Report, a reference to a year is to a financial year unless otherwise indicated. Shareholder Information 193 BHP Billiton Limited. ABN 49 004 028 077. Registered in Australia. Registered Office: Level 45, 600 Bourke Street, Melbourne Victoria 3000, Australia. Corporate Directory IBC BHP Billiton Plc. Registration Number 3196209. Registered in England and Wales. Registered Office: 1–3 Strand, London WC2N 5HA United Kingdom. Excellence at the asset level is the foundation of our business BHP Billiton is the largest diversified resources company in the world We are distinguished from other resources companies by 5. Portfolio management the quality of our outstanding assets; our deep inventory 6. Funding and capital management of growth projects; our customer-focused marketing; our 7. Value-adding growth diversification across countries, commodities, markets and shareholders; our Petroleum business; and our innovation. 8. Creative thinking, commercial judgement and transaction execution Our vision is to earn superior returns for shareholders as the world’s premier supplier of natural resources and related Excellence at the asset level is the foundation of our products and services. To this end, the Company’s Strategic business. Our assets are organised into Customer Sector Framework sets out eight imperatives. They are: Groups (CSGs) based on natural customer-oriented groupings. Marketing is conducted through our two ‘hubs’ 1. Zero harm to people and the environment in The Hague and Singapore. This structure allows us to 2. Operating excellence focus on the needs of our customers. The Annual Report 3. Project evaluation and execution presents our 2002 results, strategic direction, and operational reviews of the CSGs. 4. Serving customers best Aluminium Energy Coal ‘By delivering expansion projects in line ‘We are moving forward with growth with approved milestones, we will projects to reinforce our low-cost supply strengthen our position as one of the position, while building on our capabilities world’s leading low-cost producers to deliver enhanced customer service.’ of aluminium.’ 14 20 Base Metals Petroleum ‘While tempering production to reflect ‘Following considerable success in meeting today’s lower demand, we are progressing our growth objectives, we are progressing our development projects in readiness for our exploration and development activities future recovery in the market.’ to underpin future production capability.’ 16 22 Carbon Steel Materials Stainless Steel Materials ‘As well as pushing ahead with our ‘Our focus is on reducing production costs growth projects, we are determined to and optimising productivity in order to protect the competitive position and enhance our position as a leading supplier attractive margins we maintain in our of quality raw materials to the stainless key markets.’ 18 steel industry.’ 24 1 The merged Company • The successful demerger of BHP Steel. One should not spend too much time reflecting on the past, but • A smooth transition of the Chief Executive Officer it would be remiss of me not to revisit the merits of the merged responsibilities from Paul Anderson to Brian Gilbertson. Company’s value proposition and then comment upon some of • A restructure of the Board that will result in a downsizing from the opportunities that should add future value. 17 members to 12. The merger has created a Company with an exceptional low- How then do these initiatives transfer into value? cost asset base. It has long-life operations, with outstanding commodity and country diversification. BHP Billiton is an industry Creating value leader or has a near-leader position in aluminium, metallurgical There are a number of ways to measure a company’s ability to coal, seaborne steaming coal, copper, ferro alloys, iron ore and create value: from an external perspective, by focusing on those titanium minerals, and substantial interests in oil and gas, LNG, value propositions that will drive its share price over time, or from nickel, diamonds and silver. an internal perspective by analysing its business fundamentals, e.g. strategy, operational effectiveness and the quality of its Since the creation of BHP Billiton on 29 June 2001, there have human resource assets. been many outstanding initiatives undertaken and completed from a Board perspective. For the purposes of this review I would The mining industry has often been characterised as highly list the following initiatives as integral to the long-term wellbeing cyclical and has had difficulty covering its cost of capital during of the Group: economic downturns. However, a close analysis of our 2002 • The finalisation and publication of our Strategic Framework, financial results gives an indication of how the Group is which detailed the key value drivers that distinguished us from delivering on those external value drivers that contribute our competitors and outlined the strategic imperatives that will to sustained share price throughout the cycle. realise our full potential. • Our operating cash flows (after net interest and tax) were • The performance measures against which we have invited steady at US$3.9 billion for the year. the market to judge us. • Our strong balance sheet is reflected in improvements to key • The approval of 12 new projects involving aggregated capital financial ratios – our gearing reduced to 35.0 per cent and investment of US$2.9 billion. Earnings Before Interest, Tax, Depreciation and Amortisation • A number of remarkable successes by our Petroleum (EBITDA) interest cover was strong at 11.0 times. exploration teams. 2 CHAIRMAN’S REVIEW • EBITDA (before exceptional items) was US$4.9 billion, down only investors in reported financial results. What is required now is 7.2 per cent on last year’s record level, notwithstanding much for companies like BHP Billiton to demonstrate that we are weaker commodity prices.