Economic Contributions
The economic contribution we make to society is much more than the financial profits we derive. Our contribution includes the value that flows from the broader contributions of our operations, such as payments to our employees and suppliers, and disbursements to governments, including taxes and royalties.
The following provides an outline of:
- Our Financial Performance
- The broader economic contributions we make to society through our Value Added.
Our Financial Performance
The data in this section deal with the economic affairs of the BHP Billiton Group and cover both operated assets and our share of unincorporated joint ventures. Details on the financial definitions and additional performance information are available in the financial Annual Reports.
Summary financial information for the Group is presented in the following table.
| 2004/05 | 2003/04 | 2002/03 | 2001/02 | |
|---|---|---|---|---|
| Turnover 1 | 31 804 | 24 943 | 17 506 | 15 228 |
| EBIT 1 2 3 | 9 330 | 5 488 | 3 481 | 3 102 |
| Earnings before tax 1 2 | 8 909 | 4 986 | 2 944 | 2 866 |
| Attributable profit 1 2 | 6 512 | 3 510 | 1 920 | 1 866 |
| Net operating assets 1 | 29 581 | 20 656 | 20 711 | 20 160 |
| Taxation paid (net of refunds) | 1 695 | 1 337 | 1 002 | 515 |
| Government royalties paid or payable | 629 | 421 | 352 | 294 |
| Dividends paid or payable | 1 695 | 1 617 | 900 | 784 |
| R&D expenditure | 33 | 19 | 40 | 30 |
| EBITDA to interest cover (times) 1 2 3 4 | 34.7 | 21.1 | 13.3 | 11.2 |
| Debt to equity or gearing ratio 5 | 35.7% | 25.7% | 31.7% | 35.0% |
| Profit and loss account at end of year 6 | 13 798 | 10 461 | 8 580 | 7 475 |
- From continuing operations, including the Group's share of joint ventures and associates.
- Excluding exceptional items.
- EBIT is earnings before interest and tax. EBITDA is EBIT before depreciation, impairments and amortisation of both Group companies and Joint Ventures and Associates.
- For this purpose, net interest includes capitalised interest and excludes the effect of discounting on provisions and exchange differences arising from net debt.
- Gearing as at 30 June 2002 includes the Group's Steel business which was demerged in July 2002.
- Movement in retained earnings is represented by movement in cumulative profit and loss accounts.
Refer to the graphs below for the Company's diversification by operating assets and by market (turnover) across geographic regions and a breakdown of earnings by Customer Sector Group
Diversification by Market (Turnover)
at 30 June 2005
CSG Earnings Before Interest and Tax (EBIT) Excluding Exceptional Items
at 30 June 2005
Diversification by Geographic Region (Net Operating Assets)
at 30 June 2005
Value Added
Value added, consistent with the definition used by the Global Reporting Initiative, is total revenues less total cost of procurement. We expand on this definition by incorporating additional allocated expenditures such as those allocated to tax payments, employee payments, community contributions and shareholder dividends. Globally, in 2004/05 the Company spent in the order of US$16 billion sustaining its businesses. The breakdown of this amount by category is presented below and shows expenditure by region to help to quantify the regional economic contributions of the Group.
| Income Tax, Resource Rent Tax and Royalties | Employee Payments, Goods and Services2 | Community Contributions3 | Shareholder Dividends4 | Regional Totals | |
|---|---|---|---|---|---|
| Africa | 167 | 3184 | 15.3 | 157 | 3523 |
| Australia and Asia | 1474 | 5536 | 18.5 | 845 | 7873 |
| Europe | 235 | 277 | 1.3 | 420 | 933 |
| North America | 234 | 1005 | 17.3 | 1 | 1257 |
| South America | 674 | 1661 | 5.0 | <1 | 2341 |
| Total | 2784 | 11663 | 57.4 | 1423 | 15927 |
- The data in this table have been rounded. Unless otherwise stated the data cover operated assets and the Group's share of unincorporated joint ventures.
- Goods and Services data only cover operated assets. Due to the way that we currently document the sourcing of all imported materials and services, we have not been able to allocate all expenditure on goods and services. (Note: these data have not been audited.)
- Data cover both operated assets and our share of joint ventures.
- Shareholder dividends are based on the location of shareholders as per the share register of members dated 30 June 2005 and total dividends payable in FY05.
Total Allocated Expenditure by Category
2004/05
(US$ million)
Employee Payments, Goods and Services by Region
2004/05
Income Tax, Resource Rent Tax and Royalties by Region
2004/05
The Extractive Industries Transparency Initiative (EITI) is gaining momentum as an international initiative bringing together companies, investors, governments, the international financial institutions and civil society to improve disclosure and tracking of revenues in developing countries.
The second international EITI Conference was held in London in March 2005. The conference agreed to a set of criteria and guidelines for implementing countries and companies. There is strong recognition that revenue transparency in the extractive industries is an essential part of promoting good governance and enhancing access for resources to promote economic development. Citizens need clear information about revenues from natural resources to hold their governments accountable for the revenues that they collect.
BHP Billiton continues to support the EITI, and we are committed to working with our host governments that participate in this process and develop systems to report these payments. The government of Trinidad and Tobago is actively committed to implementing the EITI, and our petroleum asset in this country will report its payments in its annual site-based sustainability report. In May 2005, the Peruvian Ministry of Energy and Mines issued a declaration marking Peru's launch of the EITI. BHP Billiton will work with the government of Peru to advance the initiative. The chart above presents relevant BHP Billiton payments on a regional basis.
During the reporting period, we continued to be actively involved in the International Council on Mining and Metal's Resource Endowment Project. The objective of this project is to follow up on the World Bank's Extractive Industries Review, including identifying policy actions, operational practices, and partnership arrangements which will deliver improved socio-economic outcomes in the mining sector. The project is not focusing on the theoretical debate between those who argue that mineral wealth is necessarily a curse for development and those who argue that it is a blessing. Instead, the research is seeking to identify underlying reasons for national and community successes and to pinpoint practical lessons for companies, governments and other stakeholders.
Initial findings of the project were reviewed at a November 2004 workshop involving key stakeholders including governments, labour, and NGOs and the World Bank. BHP Billiton is facilitating a case study on our Escondida mine in Chile which includes an assessment of the socio-economic impact of the mine on the region. The study will highlight some of the programs which have helped the mine make a positive contribution to the region. These include the effort to raise capacity of local suppliers (see our case study Escondida program supports the development of local suppliers), the establishment of links to educational institutions through joint research and development programs, and the development of social programs that have helped to build human and social capacities.
