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BIL
BIBLT
BIL - BHP Billiton - Annual financial report
BHP Billiton Plc
Share code: BIL
ISIN: GB0000566504
BHP Billiton Plc - Annual Financial Report
UK Listing Authority Submissions
The following documents have today been submitted to the UK Listing Authority
in accordance with Listing Rule 9.6.1R and will shortly be available for
inspection at the UK Listing Authority`s Document Viewing Facility, situated
at Financial Services Authority, 25 The North Colonnade, Canary Wharf, London
E14 5HS (telephone no: +44 (0)20 7066 1000):
* Annual Report 2009
http://www.bhpbilliton.com/bb/investorsMedia/reports/annualReports.jsp
* Summary Review 2009
http://www.bhpbilliton.com/bb/investorsMedia/reports/annualReports.jsp
* Notice of Annual General Meeting 2009 - BHP Billiton Plc
http://www.bhpbilliton.com/bbContentRepository/docs/2009NoticeOfMeetingB
hpBillitonPlcLondon.pdf
* Proxy Form (UK Principal Register)
* Proxy Form (South African Branch Register)
* Sustainability Summary Report 2009
http://www.bhpbilliton.com/bb/sustainableDevelopment/reports.jsp
The documents (with the exception of the Proxy Forms) may also be accessed
via BHP Billiton`s website - www.bhpbilliton.com - or using the web links
above.
Additional Information
The following information is extracted from the Annual Report 2009 (page
references are to pages in the Annual Report) and should be read in
conjunction with BHP Billiton`s Final Results announcement issued on 12
August 2009. Both documents can be found at www.bhpbilliton.com and
together, constitute the material required by DTR 6.3.5 to be communicated to
the media in unedited full text through a Regulatory Information Service.
This material is not a substitute for reading the Annual Report 2009 in full.
1. Principal risks and uncertainties
We believe that, because of the international scope of our operations and the
industries in which we are engaged, there are numerous factors which may have
an effect on our results and operations. The following describes the material
risks that could affect the BHP Billiton Group.
Fluctuations in commodity prices and impacts of the global financial crisis
may negatively impact our results
The prices we obtain for our oil, gas, minerals and other commodities are
determined by, or linked to, prices in world markets, which have historically
been subject to substantial variations. The Group`s usual policy is to sell
its products at the prevailing market prices. The diversity provided by the
Group`s broad portfolio of commodities may not fully insulate the effects of
price changes. Fluctuations in commodity prices can occur due to sustained
price shifts reflecting underlying global economic and geopolitical factors,
industry demand and supply balances, product substitution and national
tariffs. The global financial crisis has severely impacted commodity markets
in terms of lower prices, reduced demand and increased price volatility. The
ongoing uncertainty and impact on global economic growth, particularly in the
developed economies, may impact future demand and prices for commodities. The
influence of hedge and other financial investment funds participating in
commodity markets has increased in recent years contributing to higher levels
of price volatility. The impact of potential longer-term sustained price
shifts and shorter-term price volatility creates the risk that our financial
and operating results and asset values will be materially and adversely
affected by unforeseen declines in the prevailing prices of our products.
We seek to maintain a solid `A` credit rating as part of our strategy.
Notwithstanding our financial and capital management programs the ongoing
effects of the global financial crisis may impact our future cash flows and
credit rating.
Our profits may be negatively affected by currency exchange rate fluctuations
Our assets, earnings and cash flows are influenced by a wide variety of
currencies due to the geographic diversity of the countries in which we
operate. Fluctuations in the exchange rates of those currencies may have a
significant impact on our financial results. The US dollar is the currency in
which the majority of our sales are denominated. Operating costs are
influenced by the currencies of those countries where our mines and
processing plants are located and also by those currencies in which the costs
of imported equipment and services are determined. The Australian dollar,
South African rand, Chilean peso, Brazilian real and US dollar are the most
important currencies influencing our operating costs. Given the dominant role
of the US currency in our affairs, the US dollar is the currency in which we
present financial performance. It is also the natural currency for borrowing
and holding surplus cash. We do not generally believe that active currency
hedging provides long-term benefits to our shareholders. We may consider
currency protection measures appropriate in specific commercial
circumstances, subject to strict limits established by our Board. Therefore,
in any particular year, currency fluctuations may have a significant impact
on our financial results.
Failure to discover new reserves, maintain or enhance existing reserves or
develop new operations could negatively affect our future results and
financial condition
The increased demand for our products and increased production rates from our
operations in recent years has resulted in existing reserves being depleted
at an accelerated rate. Because our revenues and profits are related to our
oil and gas and minerals operations, our results and financial conditions are
directly related to the success of our exploration and acquisition efforts,
and our ability to replace existing reserves. The depletion of reserves has
necessitated increased exploration adjacent to established operations and
development of new operations in less-developed countries. Additionally these
activities may increase land tenure, infrastructure and related political
risks. A failure in our ability to discover new reserves, enhance existing
reserves or develop new operations in sufficient quantities to maintain or
grow the current level of our reserves could negatively affect our results,
financial condition and prospects.
There are numerous uncertainties inherent in estimating ore and oil and gas
reserves, and geological, technical and economic assumptions that are valid
at the time of estimation may change significantly when new information
becomes available. The impacts of the global financial crisis may impact
economic assumptions related to reserve recovery and require reserve
restatements. Reserve restatements could negatively affect our reputation,
results, financial condition and prospects.
Reduction in Chinese demand may negatively impact our results
The Chinese market has become a significant source of global demand for
commodities. In calendar year 2008, China represented 49 per cent of global
seaborne iron ore demand, 28 per cent of copper demand, 28 per cent of nickel
demand and 18 per cent of energy demand. China`s demand for these commodities
has been driving global materials demand over the past decade.
The strong economic growth and infrastructure development in China of recent
years has been tempered by the global financial crisis. Sales into China
generated US$9.9 billion (FY2008: US$11.7 billion), or 19.7 per cent (FY2008:
19.6 per cent), of our revenue in the year ended 30 June 2009. A continued
slowing in China`s economic growth could result in lower prices and demand
for our products and therefore reduce our revenues.
In response to its increased demand for commodities, China is increasingly
seeking strategic self-sufficiency in key commodities, including investments
in existing businesses or new developments in other countries. These
investments may adversely impact future commodity demand and supply balances
and prices.
Actions by governments or political events in the countries in which we
operate could have a negative impact on our business
We have operations in many countries around the globe, some of which have
varying degrees of political and commercial stability. We operate in emerging
markets, which may involve additional risks that could have an adverse impact
upon the profitability of an operation. These risks could include terrorism,
civil unrest, nationalisation, renegotiation or nullification of existing
contracts, leases, permits or other agreements, and changes in laws and
policy, as well as other unforeseeable risks. Risks relating to bribery and
corruption may be prevalent in some of the countries in which we operate. If
one or more of these risks occurs at one of our major projects, it could have
a negative effect on the operations in those countries as well as the Group`s
overall operating results and financial condition.
Our business could be adversely affected by new government regulation, such
as controls on imports, exports and prices, new forms or rates of taxation
and royalties. Increasing requirements relating to regulatory, environmental
and social approvals can potentially result in significant delays in
construction and may adversely impact upon the economics of new mining and
oil and gas projects, the expansion of existing operations and results of our
operations.
Infrastructure such as rail, ports, power and water, is critical to our
business operations. We have operations or potential development projects in
countries where government provided infrastructure or regulatory regimes for
access to infrastructure, including our own privately operated
infrastructure, may be inadequate or uncertain. These may adversely impact
the efficient operations and expansion of our businesses.
In South Africa, the Mineral and Petroleum Resources Development Act (2002)
(MPRDA) came into effect on 1 May 2004. The law provides for the conversion
of existing mining rights (so called `Old Order Rights`) to rights under the
new regime (`New Order Rights`) subject to certain undertakings to be made by
the company applying for such conversion. The Mining Charter requires that
mining companies achieve 15 per cent ownership by historically disadvantaged
South Africans of South African mining assets by 1 May 2009 and 26 per cent
ownership by 1 May 2014. If we are unable to convert our South African mining
rights in accordance with the MPRDA and the Mining Charter, we could lose
some of those rights. Where new order mining rights are obtained under the
MPRDA, these rights may not be equivalent to the old order mining rights in
terms of duration, renewal, rights and obligations.
We operate in several countries where ownership of land is uncertain and
where disputes may arise in relation to ownership. In Australia, the Native
Title Act (1993) provides for the establishment and recognition of native
title under certain circumstances. In South Africa, the Extension of Security
of Tenure Act (1997) and the Restitution of Land Rights Act (1994) provide
for various landholding rights. Such legislation could negatively affect new
or existing projects.
We may not be able to successfully integrate our acquired businesses
We have grown our business in part through acquisitions. We expect that some
of our future growth will stem from acquisitions. There are numerous risks
encountered in business combinations. These include adverse regulatory
conditions and obligations, commercial objectives not achieved due to
minority interests, unforeseen liabilities arising from the acquired
businesses, retention of key staff, anticipated synergies and cost savings
being delayed or not being achieved, uncertainty in sales proceeds from
planned divestments, and planned expansion projects are delayed or higher
cost than anticipated. These factors could negatively affect our financial
condition and results of operations.
We may not recover our investments in mining and oil and gas projects
Our operations may be impacted by changed market or industry structures,
commodity prices, technical operating difficulties, inability to recover our
mineral, oil or gas reserves and increased operating cost levels. These may
impact the ability for assets to recover their historical investment and may
require financial write-downs adversely impacting our financial results.
Our non-controlled assets may not comply with our standards
Some of our assets are controlled and managed by joint venture partners or by
other companies. Some joint venture partners may have divergent business
objectives which may impact business and financial results. Management of our
non-controlled assets may not comply with our management and operating
standards, controls and procedures (including health, safety, environment).
Failure to adopt equivalent standards, controls and procedures at these
assets could lead to higher costs and reduced production and adversely impact
our results and reputation.
Operating cost pressures and shortages could negatively impact our operating
margins and expansion plans
The strong commodity cycle of past years led to increasing cost pressures
across the resources industry and shortages in skilled personnel,
contractors, materials and supplies that are required as critical inputs to
our existing operations and planned developments. Recent rapid declines in
commodity prices without commensurate cost declines have resulted in
operating margins being reduced. Notwithstanding our efforts to reduce costs
and a number of key cost inputs being commodity price-linked, the inability
to reduce costs and a timing lag may impact our operating margins for an
extended period.
Changing industrial relations legislation such as the Australian Fair Work
Act 2009 may impact workforce flexibility, productivity and costs. Labour
unions may seek to pursue claims under the new framework. Industrial action
may impact our operations resulting in lost production and revenues.
A number of our operations are energy or water intensive and, as a result,
the Group`s costs and earnings could be adversely affected by rising costs or
by supply interruptions. These could include the unavailability of energy,
fuel or water due to a variety of reasons, including fluctuations in climate,
significant increase in costs, inadequate infrastructure capacity,
interruptions in supply due to equipment failure or other causes and the
inability to extend supply contracts on economical terms.
These factors have led, and could continue to lead, to increased operating
costs at existing operations.
Increased costs and schedule delays may impact our development projects
Although we devote significant time and resources to our project planning,
approval and review process, we may underestimate the cost or time required
to complete a project. In addition, we may fail to manage projects as
effectively as we anticipate, and unforeseen challenges may emerge. Any of
these may result in increased capital costs and schedule delays at our
development projects impacting anticipated financial returns.
Health, safety, environmental and community exposures and related regulations
may impact our operations and reputation negatively
The nature of the industries in which we operate means that our activities
are highly regulated by health, safety and environmental laws. As regulatory
standards and expectations are constantly developing, we may be exposed to
increased litigation, compliance costs and unforeseen environmental
remediation expenses.
Potential health, safety, environmental and community events that may
materially impact our operations include rockfall incidents in underground
mining operations, aircraft incidents, light vehicle incidents, explosions or
gas leaks, incidents involving mobile equipment, uncontrolled tailings
breaches, escape of polluting substances, community protests or civil unrest.
Longer-term health impacts may arise due to unanticipated workplace exposures
by employees or site contractors. These effects may create future financial
compensation obligations.
We provide for operational closure and site remediation. We have closure
plans for all of our operating and closed facilities. Changes in regulatory
or community expectations may result in the relevant plans not being
adequate. This may impact financial provisioning and costs at the affected
operations.
We contribute to the communities in which we operate by providing skilled
employment opportunities, salaries and wages, taxes and royalties and
community development programs. Notwithstanding these actions, local
communities may become dissatisfied with the impact of our operations,
potentially affecting costs and production, and in extreme cases viability.
Legislation requiring manufacturers, importers and downstream users of
chemical substances, including metals and minerals, to establish that the
substances can be used without negatively affecting health or the environment
may impact our operations and markets. These potential compliance costs,
litigation expenses, regulatory delays, remediation expenses and operational
costs could negatively affect our financial results.
We may continue to be exposed to increased operational costs due to the costs
and lost time associated with the HIV/AIDS and malaria infection rate mainly
within our African workforce. Because we operate globally, we may be affected
by potential influenza outbreaks, such as A(H1N1) and avian flu, in any of
the regions in which we operate.
Despite our best efforts and best intentions, there remains a risk that
health, safety, environmental and/or community incidents or accidents may
occur that may negatively impact our reputation or licence to operate.
Unexpected natural and operational catastrophes may impact our operations
We operate extractive, processing and logistical operations in many
geographic locations both onshore and offshore. Our operational processes and
geographic locations may be subject to operational accidents such as port and
shipping incidents, fire and explosion, pitwall failures, loss of power
supply, railroad incidents and mechanical failures. Our operations may also
be subject to unexpected natural catastrophes such as earthquakes, flood,
hurricanes and tsunamis. Based on our claims, insurance premiums and loss
experience, our risk management approach changed during the year to
maintaining self-insurance for property damage and business interruption
related risk exposures. Existing business continuity plans may not provide
protection for all of the costs that may arise from such events. The impact
of these events could lead to disruptions in production and loss of
facilities more than offsetting premiums saved and adversely affecting our
financial results.
Climate change and greenhouse effects may adversely impact our operations and
markets
We are a major producer of carbon-related products such as energy and
metallurgical coal, oil, gas, and liquefied natural gas. Carbon based energy
is also a significant input in a number of the Group`s mining and processing
operations.
A number of governments or governmental bodies have introduced or are
contemplating regulatory change in response to the impacts of climate change.
The December 1997 Kyoto Protocol established a set of greenhouse gas emission
targets for developed countries that have ratified the Protocol. The European
Union Emissions Trading System (EU ETS), which came into effect on 1 January
2005, has had an impact on greenhouse gas and energy-intensive businesses
based in the EU. Our Petroleum assets in the UK are currently subject to the
EU ETS, as are our EU based customers. Elsewhere, there is current and
emerging climate change regulation that will affect energy prices, demand and
margins for carbon intensive products. The Australian Government`s plan of
action on climate change includes the introduction of a national emissions
trading scheme by 2011 and a mandatory renewable energy target of 20 per cent
by the year 2020. From a medium- to long-term perspective, we are likely to
see some changes in the cost position of our greenhouse-gas-intensive assets
and energy-intensive assets as a result of regulatory impacts in the
countries in which we operate. These regulatory mechanisms may impact our
operations directly or indirectly via our suppliers and customers.
Inconsistency of regulations particularly between developed and developing
countries may also change the competitive position of some of our assets.
Assessments of the potential impact of future climate change regulation are
uncertain given the wide scope of potential regulatory change in the many
countries in which we operate.
The physical impacts of climate change on our operations are highly uncertain
and will be particular to the geographic circumstances. These may include
changes in rainfall patterns, water shortages, rising sea levels, increased
storm intensities and higher average temperature levels. These effects may
adversely impact the cost, production and financial performance of our
operations.
Our human resource talent pool may not be adequate to support our growth
Our existing operations and our pipeline of development projects, when
activated, require highly skilled staff with relevant industry and technical
experience. The inability of the Group and industry to attract and retain
such people may adversely impact our ability to adequately meet demand in
projects and fill roles in existing operations. Skills shortages in
engineering, technical service, construction and maintenance contractors may
impact activities. These shortages may adversely impact the cost and schedule
of development projects and the cost and efficiency of existing operations.
Breaches in our information technology (IT) security processes may adversely
impact the conduct of our business activities
We maintain global IT and communication networks and applications to support
our business activities. IT security processes protecting these systems are
in place and subject to assessment as part of the review of internal control
over financial reporting. These processes may not prevent future malicious
action or fraud by individuals or groups, resulting in the corruption of
operating systems, theft of commercially sensitive data, misappropriation of
funds and disruptions to our business operations.
A breach in our governance processes may lead to regulatory penalties and
loss of reputation
We operate in a global environment straddling multiple jurisdictions and
complex regulatory frameworks. Our governance and compliance processes, which
include the review of control over financial reporting, may not prevent
future potential breaches of law, accounting or governance practice. Our Code
of Business Conduct and anti-trust standards may not prevent instances of
fraudulent behaviour and dishonesty nor guarantee compliance with legal or
regulatory requirements. This may lead to regulatory fines, litigation, loss
of operating licences or loss of reputation.
2. Related party transactions
There have been no related party transactions that have taken place during
the year ended 30 June 2009 that have materially affected the financial
position or the performance of the BHP Billiton Group during that period.
Details of the related party transactions that have taken place during the
year ended 30 June 2009 are set out in Note 33 to the Financial Statements on
page 233 of the Annual Report 2009.
3. Statement of Directors` responsibilities
"In accordance with a resolution of the Directors of the BHP Billiton Group,
the Directors declare that:
(a) the financial statements and notes, set out on pages 177 to 247 are in
accordance with the United Kingdom Companies Act 2006 and the Australian
Corporations Act 2001, including:
(i) Complying with the applicable Accounting Standards; and
(ii) Giving a true and fair view of the financial position of each of
BHP Billiton Limited, BHP Billiton Plc, the BHP Billiton Group and the
undertakings included in the consolidation taken as a whole as at 30
June 2009 and of their performance for the year ended 30 June 2009.
(b) the Directors` Report includes a fair review of the development and
performance of the business and the financial position of the BHP Billiton
Group and the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties that the
Group faces; and
(c) in the Directors` opinion there are reasonable grounds to believe that
each of the BHP Billiton Group, BHP Billiton Limited and BHP Billiton Plc
will be able to pay its debts as and when they become due and payable."
Date: 23/09/2009 07:23:01 Produced by the JSE SENS Department.
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