BHP Group PLC BHP Results for the Year Ended 30 June 2019

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BHP Group PLC BHP Results for the Year Ended 30 June 2019

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BHP Group PLC

19 August 2019

 
 Release Time    IMMEDIATE 
 Date            20 August 2019 
 Number          15/19 
 

BHP RESULTS FOR THE YEARED 30 JUNE 2019

Safety and sustainability: Our highest priority

-- Tragically we had a fatality at Saraji in Queensland in December 2018. This was despite improvements in our safety leading indicators with increased proactive hazard reporting and in-field safety leadership engagements.

Value and returns: Record US$17 billion of total announced returns to shareholders for the year

-- Record final dividend of 78 US cents per share, which includes an additional amount of 25 US cents per share (equivalent to US$1.3 billion) above the 50% minimum payout policy. Total ordinary dividends announced of US$1.33 per share or US$6.7 billion, equivalent to a 74% payout ratio.

-- Onshore US sales process completed, with net proceeds of US$10.4 billion returned to shareholders through a combination of an off-market buy-back (A$27.64 per share) and a special dividend (US$1.02 per share).

-- Underlying return on capital employed(i) , excluding Onshore US assets, of 18%.

Maximise cash flow: Strong free cash flow generation and high margin

-- Attributable profit of US$8.3 billion and Underlying attributable profit(i) of US$9.1 billion up 2% from the prior year.

-- Profit from operations of US$16.1 billion and Underlying EBITDA(i) of US$23.2 billion at a margin(i) of 53% for continuing operations.

-- Net operating cash flow of US$17.4 billion and free cash flow(i) of US$10.0 billion from continuing operations.

Capital discipline: Investment in high returning projects, exploration success and strong balance sheet

-- Capital and exploration expenditure(i) within guidance at US$7.6 billion. Guidance unchanged for the 2020 financial year at below US$8 billion. In accordance with our Capital Allocation Framework, we expect capital and exploration expenditure to be approximately US$8 billion for the 2021 financial year.

-- At the end of the year, we had five major projects under development that are all tracking to plan. The Ruby (Trinidad and Tobago) oil and gas development was approved in August 2019.

-- In exploration, seven out of nine petroleum wells drilled encountered hydrocarbons over the year, across Trinidad and Tobago, Mexico and the US Gulf of Mexico, and acreage acquired in the Orphan Basin (offshore Canada). We increased our early stage optionality in copper with three new investments completed across Canada, Mexico and Ecuador, in addition to a stake acquired in SolGold (Ecuador). Further evaluation of the Oak Dam discovery (Australia) is underway.

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-- Net debt(i) of US$9.2 billion, down by US$1.7 billion, reflects continued strong free cash flow. The application of IFRS 16 Leases, inclusion of derivatives and new leases increases net debt by US$3.8 billion in the 2020 financial year. As a result, we have revised our net debt target range from US$10 to US$15 billion to US$12 to US$17 billion. We expect net debt to remain at the lower end of this range in the near term. There is no change to underlying cash flows.

 
                                                  2019    2018   Change 
Year ended 30 June                                US$M    US$M      % 
-----------------------------------------------  ------  ------  ------ 
Total operations 
Attributable profit                               8,306   3,705    124% 
Basic earnings per share (cents)                  160.3    69.6    130% 
Dividend per share (cents)                        133.0   118.0     13% 
Net operating cash flow                          17,871  18,461    (3%) 
Capital and exploration expenditure               7,566   6,753     12% 
Net debt                                          9,215  10,934   (16%) 
Underlying attributable profit                    9,124   8,933      2% 
Underlying basic earnings per share (cents)(i)    176.1   167.8      5% 
Continuing operations 
Profit from operations                           16,113  15,996      1% 
Underlying EBITDA                                23,158  23,183    (0%) 
Underlying attributable profit(i)                 9,466   9,622    (2%) 
Net operating cash flow                          17,397  17,561    (1%) 
 

Results for the year ended 30 June 2019

BHP Chief Executive Officer, Andrew Mackenzie:

"Today we announced a record final dividend of 78 US cents per share, or US$3.9 billion. This is on top of a record US$17 billion already returned to shareholders in the 2019 financial year.

Our performance over the past five years has delivered an increase in volumes of 10 per cent and a reduction in unit costs of more than 20 per cent across our major assets. Over the 2019 financial year, underlying improvements in our operational performance were offset by the impacts of weather, resource headwinds and unplanned outages in the first half of the year. At Western Australia Iron Ore, unit costs on a C1 basis were below US$13 per tonne for the 2019 financial year.

Higher prices and record production from several of our operations contributed to strong operating cash flows. We used that cash to invest in attractive growth projects, advance our exploration programs and increase returns to shareholders. We now have six major projects under development in petroleum, copper, iron ore and potash, following the approval of the Ruby oil and gas development this month. All of them are on schedule and budget.

This disciplined approach sets us up to deliver strong returns over the long term. Our transformation programs have the potential to unlock significant value through more productive and stable operations, as we embrace new ways of working and harness new technology.

We enter the 2020 financial year with positive momentum and a strong outlook for both volume and cost."

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We are committed to making our workplaces safer

Safety, health, environment and community

Our highest priority is the health and safety of our employees and contractors, and that of the broader communities in which we operate. Tragically, one of our colleagues died at our Saraji mine in Queensland in December 2018. Our investigation of the incident has been completed, and we are in the process of implementing lessons learnt across the business. The frequency rate for high potential injuries, which are injury events where there was the potential for a fatality, declined by 18 per cent over the 2019 financial year(ii) . Our Total Recordable Injury Frequency (TRIF) was 4.7 per million hours worked(ii) , seven per cent higher than the previous year predominantly relating to minor injuries with low potential severity. We continued to focus on leading indicators to improve our safety performance, with further increases in proactive hazard reporting from the workforce and in-field safety leadership engagements throughout the 2019 financial year.

We are resolute in our determination that all of our people go home safe, every day. Our transformation programs, focus on asset integrity and our ongoing commitment to safety leadership across the company, will help us achieve this.

We continue to take action on climate change and are well placed to meet our five-year target to maintain total operational greenhouse gas emissions at or below 2017 financial year levels. Our operational greenhouse gas emissions totalled 14.2 Mt CO(2) -e on a continuing operations basis for the 2019 financial year(iii) , a three per cent decrease compared to our 2017 financial year baseline (excluding Onshore US). Operational greenhouse gas emissions (including Onshore US) totalled 14.7 Mt CO(2) -e for the 2019 financial year.

We invested US$93 million in social and environmental projects (including donations) that contribute to an improved quality of life in the communities where we operate, meeting our social investment target.

Samarco

BHP remains committed to supporting the Renova Foundation with the recovery of communities and ecosystems affected by the Samarco tragedy.

Resettlement of the Bento Rodrigues, Paracatu and Gesteira communities remains one of the Renova Foundation's priority social programs and they continue to engage and consult with a large number of stakeholders. Increases to the technical scope for resettlement of the communities and licencing delays from authorities have impacted the timeline for completion, however, construction of the resettlement sites continues to progress. At Bento Rodrigues, construction of housing and a public school is underway, while infrastructure works are progressing; at Paracatu, earthworks to prepare the town site have started; and at Gesteria, the urban plan is being designed in consultation with the community.

Under the compensation program, more than 8,700 general damages claims have been resolved, in addition to approximately 260,000 claims for temporary interruption to water supplies resolved immediately following the dam failure. The Renova Foundation continues to assist 13,160 families with income support. River stabilisation is largely completed, while other river remediation works continue to progress, including improvements in water quality and re-vegetation of riverbanks and floodplains. In May 2019, Brazil's National Sanitary Surveillance Agency (ANVISA) attested to the safe consumption in certain quantities of fish and crustaceans from the Doce River basin and coastal region.

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BHP continues to support Samarco in its efforts to restart, provided it is safe, economically viable and has the support of the community. To restart, Samarco also requires the necessary licencing approvals and the funding for restart preparation works.

Samarco is currently progressing plans for the accelerated decommissioning of its upstream tailings dams in the Germano dam complex following legislative changes in Brazil. This accelerated timing has resulted in BHP recognising a provision for decommissioning of US$263 million. Combined with the impact of US$586 million related to updated assumptions for the lifting of the fishing ban, financial assistance and compensation programs and resettlement of communities, and other movements, BHP recorded a total income statement charge of US$1.1 billion (after tax) in relation to the Samarco dam failure for the 2019 financial year. This charge is recognised as an exceptional item. Additional commentary is included on page 37.

Financial performance

Earnings and margins

-- Attributable profit of US$8.3 billion includes an exceptional loss of US$818 million (2018: US$3.7 billion, which includes a US$5.2 billion exceptional loss). The 2019 financial year exceptional loss is related to the Samarco dam failure, partially offset by the reversal of provisions for global taxation matters which were resolved during the period.

   --    Underlying attributable profit of US$9.1 billion (2018: US$8.9 billion). 

-- Profit from operations (continuing operations) of US$16.1 billion (2018: US$16.0 billion) increased as a result of higher prices, lower depreciation and amortisation charges and the favourable impacts of exchange rate movements, offset by the impact from resource headwinds (copper grade decline, petroleum natural field decline and higher coal strip ratios), production outages, and adverse weather (including Tropical Cyclone Veronica).

-- Underlying EBITDA (continuing operations) of US$23.2 billion (2018: US$23.2 billion), with higher prices and favourable exchange rate movements offset by higher costs (including outages), inflation, the impact of weather, and other net movements.

   --    Underlying EBITDA margin (continuing operations) of 53 per cent (2018: 55 per cent). 

-- Underlying return on capital employed of 16.1 per cent (2018: 14.4 per cent), or 18.0 per cent excluding Onshore US.

Costs and productivity

-- Improvements in our operational performance (record volumes at Jimblebar; record throughput at our Chilean copper assets; record production at South Walker Creek and Poitrel) were offset by significant resource headwinds (grade decline at our copper assets; higher strip ratios at our coal assets; natural field decline in petroleum) and the impact of unplanned production outages in the first half of the 2019 financial year.

-- We achieved unit cost(i) guidance at Petroleum, Escondida and Western Australia Iron Ore (WAIO).

WAIO unit costs, on a C1 basis excluding third party royalties, were lower than the prior year at US$12.86 per tonne, despite the impact from the Tropical Cyclone Veronica. Queensland Coal and New South Wales Energy Coal (NSWEC) unit costs were marginally above guidance (based on exchange rate of AUD/USD 0.75).

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-- Unit cost guidance for the 2020 financial year (based on exchange rates of AUD/USD 0.70 and USD/CLP 683) reflects: natural field decline at Conventional Petroleum; lower copper grades, lower by-product credits and higher deferred stripping costs at Escondida; maintenance strategies to improve equipment reliability at WAIO; and increased wash plant maintenance and inflationary pressures at Queensland Coal.

   --    Historical costs and guidance are summarised below: 
 
                                                                 FY19 at 
                                                    FY20e   guidance  realised         FY19(2) 
                         Medium-term     FY20        vs     exchange  exchange           vs 
                         guidance(1)  guidance(1)  FY19(2)  rates(3)  rates(2)   FY18     FY18 
Conventional Petroleum                      10.50     0% - 
 unit cost (US$/boe)             <13      - 11.50       9%     10.82     10.54  10.06       5% 
Escondida unit cost                          1.20     5% - 
 (US$/lb)                      <1.15       - 1.35      18%      1.15      1.14   1.07       7% 
                                             13 -     (1%) 
WAIO unit cost (US$/t)           <13           14   - (8%)     14.84     14.16  14.26     (1%) 
Queensland Coal unit                         67 -     (4%) 
 cost (US$/t)                54 - 61           74     - 7%     72.83     69.44  68.04       2% 
 

(1) FY20 and medium-term unit cost guidance are based on exchange rates of AUD/USD 0.70 and USD/CLP 683.

   (2)    Average exchange rates for 2019 of AUD/USD 0.72 and USD/CLP 673. 
   (3)    FY19 unit costs at guidance exchange rates of AUD/USD 0.75 and USD/CLP 663. 

-- Underlying improvements in productivity of US$1.0 billion were offset by the impact of unplanned production outages of US$0.8 billion during the December 2018 half year, in addition to grade decline at Escondida of US$0.8 billion and higher unit costs in coal (lower volumes, wet weather, and higher strip ratio and contractor stripping costs) and Nickel West (mine plan changes) of US$0.4 billion. Overall, a negative movement of US$1.0 billion was recorded for the 2019 financial year.

   --    Production and guidance are summarised below: 
 
                                           FY20e                      FY19 
                          FY20               vs                         vs 
Production               guidance           FY19        FY19   FY18    FY18 
                      -------------  -----------------  -----  -----  ----- 
Petroleum (MMboe)         110 - 116        (9%) - (4%)    121    120     1% 
Copper (kt)           1,705 - 1,820            1% - 8%  1,689  1,753   (4%) 
 Escondida (kt)       1,160 - 1,230            2% - 8%  1,135  1,213   (6%) 
 Other copper(1) 
  (kt)                    545 - 590          (2%) - 6%    554    540     3% 
Iron ore(2) (Mt)          242 - 253            2% - 6%    238    238     0% 
 WAIO (100% basis) 
  (Mt)                    273 - 286            1% - 6%    270    275   (2%) 
Metallurgical coal 
 (Mt)                       41 - 45          (3%) - 6%     42     43   (1%) 
 Queensland Coal 
  (100% basis) (Mt)         73 - 79          (2%) - 6%     75     76   (1%) 
Energy coal (Mt)            24 - 26       (13%) - (5%)     27     29   (6%) 
 NSWEC (Mt)                 15 - 17       (18%) - (7%)     18     19   (2%) 
 Cerrejon (Mt)                   9  Broadly unchanged      9     11  (13%) 
Nickel (kt)                     87  Broadly unchanged     87     91   (6%) 
 
   (1)    Other copper comprises Pampa Norte, Olympic Dam and Antamina. 

(2) Increase in BHP's share of volumes reflects the expiry of the Wheelarra Joint Venture sublease in March 2018, with control of the sublease area reverted to the Jimblebar Joint Venture, which is accounted for on a consolidated basis with minority interest adjustments.

-- Group copper equivalent production declined by two per cent(iv) , with annual production records at two petroleum and four minerals operations offset by grade and natural field decline, weather-related interruptions and unplanned outages.

-- Group copper equivalent production for the 2020 financial year is expected to be slightly higher than the 2019 financial year(iv) , despite an expected seven per cent decline in petroleum volumes largely due to natural field decline.

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Cash flow and balance sheet

-- Net operating cash flows (continuing operations) of US$17.4 billion (2018: US$17.6 billion) reflect strong commodity prices offset by increased costs and higher Australian and Chilean income tax payments in the 2019 financial year.

-- Free cash flow (continuing operations) of US$10.0 billion, after investment of US$7.4 billion. Total free cash flow of US$20.5 billion, including US$10.4 billion of proceeds from the sale of Onshore US.

-- Our balance sheet remains strong, with net debt at US$9.2 billion at 30 June 2019 (31 December 2018: US$9.9 billion; 30 June 2018: US$10.9 billion). The reduction of US$1.7 billion in net debt reflects strong free cash flow generation, including proceeds received from the sale of Onshore US, partially offset by record returns to shareholders of US$16.6 billion, dividends paid to non-controlling interests of US$1.2 billion and an unfavourable non-cash fair value adjustment of US$0.4 billion related to interest rate and exchange rate movements(v) .

-- The application of IFRS 16 Leases from 1 July 2019 will increase the Group's assets and liabilities by approximately US$2.3 billion as operating leases and certain other leases are recognised on the balance sheet. A change in our definition of net debt to include the fair value of derivatives used to hedge foreign exchange and interest rate risks relating to net debt (which are recognised in other financial assets and other financial liabilities on the balance sheet) will also increase net debt by US$0.2 billion. Had these changes, which have a combined impact of approximately US$2.5 billion, been in effect at 30 June 2019, net debt would have been approximately US$11.7 billion. Additional new leases commencing in the 2020 financial year (including the Spence Growth Option desalination plant and renewals of existing lease arrangements) are expected to increase net debt by a further US$1.3 billion to bring the overall increase to US$3.8 billion. Included within leases are vessel lease contracts that are priced with reference to a freight index that can be volatile. While these contracts make up less than a quarter of the total lease liability balance on 1 July 2019, they must be remeasured at each reporting date and could potentially cause significant movements in lease assets, lease liabilities and net debt. Reflecting these impacts, the Group has revised its net debt target range from US$10 to US$15 billion, to US$12 to US$17 billion. There is no change to the Group's underlying cash flows.

-- We remain committed to a strong balance sheet through the commodity price cycle, and expect net debt to remain at the lower end of the revised target range in the near term.

-- Gearing ratio(i) of 15.1 per cent (31 December 2018: 15.2 per cent; 30 June 2018: 15.3 per cent).

Dividends and share buy-back

-- On 17 December 2018, a US$5.2 billion off-market buy-back of BHP Group Limited shares was successfully completed and enabled the buy-back of 265.8 million shares at A$27.64 per share. On 30 January 2019, a special dividend of US$1.02 per share, representing the balance of US$5.2 billion of the net proceeds from the sale of Onshore US, was paid to shareholders.

-- The dividend policy provides for a minimum 50 per cent payout of Underlying attributable profit at every reporting period. The minimum dividend payment for the June 2019 half year period is 53 US cents per share, or US$2.7 billion.

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-- The Board has determined to pay an additional amount of 25 US cents per share or US$1.3 billion, taking the final dividend to a record 78 US cents per share. This is equivalent to a 73 per cent payout ratio

(2018: 69 per cent).

-- In total, dividends of US$11.9 billion (US$2.35 per share) have been determined for the 2019 financial year, including the special dividend of US$5.2 billion (US$1.02 per share) and an additional amount of US$2.2 billion above the minimum payout policy.

-- This brings the total announced cash returns to shareholders for the 2019 financial year to US$17.1 billion.

Capital and exploration

-- Capital and exploration expenditure of US$7.6 billion in the 2019 financial year was within guidance. This included maintenance expenditure(vi) of US$2.0 billion and exploration of US$873 million.

-- Capital and exploration expenditure guidance for the 2020 financial year is unchanged at below US$8 billion. Capital and exploration expenditure of approximately US$8 billion is expected for the 2021 financial year. Guidance is subject to exchange rate movements.

-- This guidance includes a US$0.9 billion exploration program in the 2020 financial year, with US$0.7 billion for petroleum exploration and appraisal expenditure.

   --    Historical capital and exploration expenditure and guidance are summarised below: 
 
                                              FY20e  FY19   FY18 
                                              US$B   US$M   US$M 
                                              -----  -----  ----- 
Maintenance(1)(2)                               2.1  1,978  1,930 
Development 
 Minerals                                       3.9  3,680  2,494 
 Conventional Petroleum(2)                      1.1    592    555 
Capital expenditure (purchases of property, 
 plant and equipment)                           7.1  6,250  4,979 
Add: exploration expenditure                    0.9    873    874 
Capital and exploration expenditure - 
 continuing operations                        < 8.0  7,123  5,853 
Capital and exploration expenditure - 
 discontinued operations                        0.0    443    900 
Capital and exploration expenditure - 
 total operations                             < 8.0  7,566  6,753 
 

(1) Includes capitalised deferred stripping of US$1.0 billion for FY19 (FY18: US$880 million) and US$0.8 billion for FY20.

(2) Conventional Petroleum capital expenditure for FY20 includes US$1.1 billion of development and US$0.1 billion of maintenance.

-- Average annual sustaining capital expenditure guidance over the medium term, excluding costs associated with our Value Chain Automation program, is unchanged for WAIO and Queensland Coal and forecast to be approximately:

   -   US$4 per tonne for WAIO, including the capital cost for South Flank; and 
   -   US$8 per tonne for Queensland Coal. 

-- NSWEC sustaining capital expenditure guidance has increased from US$5 per tonne to US$6 per tonne as a result of lower than expected volumes in the medium term, as we focus on higher quality products.

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Projects

   --    Our three latent capacity projects under development are tracking to plan: 

- Escondida Water Supply Extension project is expected to deliver first water in the 2020 financial year;

   -   West Barracouta project is expected to achieve first production in the 2021 calendar year; and 
   -   WAIO to sustainably achieve supply chain capacity of 290 Mtpa over the medium-term. 

-- At the end of the 2019 financial year, BHP had five major projects under development in petroleum, copper, iron ore and potash, with a combined budget of US$11.1 billion over the life of the projects. All projects remain on time and on budget.

- The Spence Growth Option project remains on budget and is expected to achieve first production in the first half of the 2021 financial year.

-- On 7 August 2019, the BHP Board approved an investment of US$283 million (BHP share) for the development of the Ruby oil and gas project in Trinidad and Tobago.

-- BHP continues to progress feasibility studies on the phased roll-out of autonomous haul trucks across a number of our Australian operations (coal and iron ore). In accordance with our Capital Allocation Framework, a decision on the deployment of autonomous trucks will be made on a site by site basis, considering return and risk metrics, as we look to replicate the improvement in haulage costs and reduction in safety incidents seen at Jimblebar.

   --    Major projects are summarised below: 
 
                                                                     Capital         Date of 
                Project and                                       expenditure(1)     initial       Progress 
Commodity         ownership        Project scope / capacity(1)         US$M         production     / comments 
---------  ----------------------  ----------------------------  ---------------  -------------  ------------- 
                                                                          Budget     Target 
Projects completed during the 2019 financial year 
Petroleum  North West Shelf        To maintain LNG plant                     216      CY19       Completed 
            Greater Western         throughput from the                                           in May 
            Flank- B                North West Shelf operations                                   2019. 
            (Australia) 
            16.67% (non-operator) 
Projects in execution at the end of the 2019 financial year 
Copper     Spence Growth           New 95 ktpd concentrator                2,460     H1 FY21     On schedule 
            Option                  is expected to increase                                       and budget. 
                                    Spence's payable copper                                       The overall 
                                    in concentrate production                                     project 
                                    by approximately 185                                          is 60% 
                                    ktpa in the first 10                                          complete. 
                                    years of operation 
                                    and extend the mining 
                                    operations by more 
                                    than 50 years. 
            (Chile) 
            100% 
Iron Ore   South Flank             Sustaining iron ore                     3,061      CY21       On schedule 
                                    mine to replace production                                    and budget. 
                                    from the 80 Mtpa Yandi                                        The overall 
                                    mine.                                                         project 
                                                                                                  is 39% 
                                                                                                  complete. 
             (Australia) 
             85% 
Petroleum  Atlantis Phase          New subsea production                     696      CY20       On schedule 
            3                       system that will tie                                          and budget. 
            (US Gulf of             back to the existing                                          The overall 
            Mexico)                 Atlantis facility,                                            project 
            44% (non-operator)      with capacity to produce                                      is 13% 
                                    up to 38,000 gross                                            complete. 
                                    barrels of oil equivalent 
                                    per day. 
Petroleum  Mad Dog Phase           New floating production                 2,154      CY22       On schedule 
            2                       facility with the capacity                                    and budget. 
            (US Gulf of             to produce up to 140,000                                      The overall 
            Mexico)                 gross barrels of crude                                        project 
            23.9% (non-operator)    oil per day.                                                  is 53% 
                                                                                                  complete. 
Other projects in progress at the end of the 2019 financial 
 year 
Potash(2)  Jansen Potash           Investment to finish                    2,700                 The project 
            (Canada)                the excavation and                                            is 84% 
                                    lining of the production                                      complete 
                                    and service shafts,                                           and within 
                                    and to continue the                                           the approved 
                                    installation of essential                                     budget. 
                                    surface infrastructure 
                                    and utilities. 
             100% 
 
 

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(1) Unless noted otherwise, references to capacity are on a 100 per cent basis, references to capital expenditure from subsidiaries are reported on a 100 per cent basis and references to capital expenditure from joint operations reflects BHP's share.

   (2)    Potash capital expenditure of approximately US$215 million is expected for FY20. 

Capital Allocation Framework

Adherence to our Capital Allocation Framework aims to balance value creation, cash returns to shareholders and balance sheet strength in a transparent and consistent manner.

 
                                   FY19    FY18 
                                   US$B     US$B 
                                 -------  ------ 
 Net operating cash flow - 
  total operations                 17.9    18.5 
 Our priorities for capital 
 Maintenance capital               2.0      1.9 
 Strong balance sheet               P        P 
 Minimum 50% payout ratio 
  dividend                         4.4      3.8 
 Excess cash(1)                    10.2    12.0 
   Balance sheet                   2.8      5.8 
   Additional dividends(2)         7.0      1.4 
   Buy-backs                       5.2       - 
   Organic development             5.6      4.9 
   Acquisitions/(Divestments)     (10.4)   (0.1) 
 

(1) Includes dividends paid to non-controlling interests of US$(1.2) billion (FY18: US$(1.6) billion); net investment and funding of equity accounted investments of US$(0.6) billion (FY18: US$0.2 billion); excludes exploration expenses of US$0.5 billion (FY18: US$0.6 billion) which is classified as organic development in accordance with the Capital Allocation Framework; total net cash outflow of US$1.3 billion (FY18: US$0.8 billion).

   (2)    Includes a special dividend of US$5.2 billion (US$1.02 per share) paid in January 2019. 

Outlook - further information can be found at: bhp.com/prospects

Economic outlook

The global economy grew by around 3 3/4 per cent in the 2018 calendar year, with a notable pick up in the US economy, and resilient growth in China. We expect global growth to register near the lower end of a range of 3 1/4 per cent to 3 3/4 per cent for the 2019 calendar year. Any further escalation in trade protection or loss of business confidence is a downside risk for consensus views of the world economy, commodity demand and energy and metals prices in the 2020 financial year. We actively consider the plausibility of this outcome in our range analysis.

We continue to expect China's economic growth to slow modestly in the 2019 calendar year to around 6 1/4 per cent. The negative impact of weaker exports is expected to be partially offset by easier monetary and fiscal policy. China's policymakers are likely to seek a balance between the pursuit of reform and maintenance of macroeconomic and financial stability. Over the longer term, we expect China's economic growth rate to decelerate as the working age population falls and the capital stock matures.

The US performed strongly in the 2018 calendar year but near-term prospects are less certain. The expansionary impact of tax cuts is expected to progressively fade and trade policies remain unpredictable. The European and Japanese economies have slowed and we expect growth to be modest next year. In India, growth prospects remain solid.

Commodities outlook

Global steel production has maintained healthy growth in the second half of the 2019 financial year, continuing the upswing from the trough towards the end of the 2015 calendar year. However, the growth profile has become unbalanced recently, with robust expansion in China and the US offsetting weakness in Europe and Japan. As anticipated, steel mill margins have begun to normalise. We expect iron ore quality differentiation to remain a durable element in price formation for steel making raw materials.

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The Platts 62% Fe Iron Ore Fines price index has been elevated since the Brumadinho tailings dam tragedy in Brazil first disrupted the market in late January 2019. The lump premium has also been strong. In addition to the decline in Brazilian exports, prices have responded to stronger than expected Chinese pig iron production and cyclone disruptions to Australian supply. We expect supply conditions will return to a more normal path on a one to three year timeframe, and prices are likely to be volatile as that adjustment plays out. In the longer term, the marginal price setting tonne will be provided by a higher-cost, lower value-in-use exporter from Australia or Brazil.

The Platts Premium Low-Volatile Metallurgical Coal price index reached a high in the middle of the 2019 financial year amid supply constraints in Queensland. Prices eased from the peak on weaker European demand and improved Australian supply. China's import policies remain a source of uncertainty. Longer term, we expect India to sustain strong demand growth, while high-quality metallurgical coals are expected to continue to offer steelmakers value-in-use benefits.

Copper prices have been heavily influenced by swings in global trade uncertainty in the second half of the 2019 financial year. Against this backdrop, we believe underlying fundamentals remain sound. Copper demand should grow steadily. Grade decline, rising input costs, water constraints and a scarcity of high-quality future development opportunities continue to constrain the industry's ability to meet this growing demand at low cost. Scrap supply and aluminium substitution are constraints on the upside.

Nickel prices have also been heavily affected by trade uncertainty in the second half of the 2019 financial year. In our view, growth in supply should keep pace with demand from traditional uses in the near term. The electrification of transport will require on-going investment in new sources of supply in the coming decades.

Crude oil prices were volatile in the second half of the 2019 financial year. Swings in global growth expectations, strategic behaviour of major producers, falling production in Venezuela and Iran, and geopolitical risk, all contributed to price volatility over the last six months. The fundamental outlook remains positive, underpinned by rising demand from the developing world and natural field decline in supply.

The Japan-Korea Marker price for LNG was lower on average in the second half of the 2019 financial year, reflecting slower growth in North Asian demand and a large increment of new supply from project ramp-ups. Longer term, we expect LNG to grow faster than overall gas demand, with price formation progressing towards global harmonisation.

Potash prices continued their gradual upward trend in the second half of the 2019 financial year, but weakness has recently started to appear in some markets. Regional demand has been mixed in the 2019 calendar year to date, with China the positive standout. We expect annual demand growth of two to three per cent over the next decade, resulting in demand exceeding available supply from on-stream, latent and forthcoming capacity by the mid-to-late 2020s.

10

Underlying EBITDA

The following table and commentary describes the impact of the principal factors(i) that affected Underlying EBITDA for the 2019 financial year compared with the 2018 financial year:

 
                              US$M 
                             ------- 
Year ended 30 June 
 2018                         23,183 
Net price impact: 
 Change in sales prices        1,555  Higher average realised prices for petroleum, 
                                       iron ore and metallurgical coal, offset 
                                       by lower average realised prices for 
                                       copper and thermal coal. 
 Price-linked costs            (353)  Increased royalties reflect higher realised 
                                       prices related to iron ore, petroleum 
                                       and hard coking coal. 
                               1,202 
Change in volumes: 
 Productivity                    143  Record throughput at Escondida following 
                                       the Los Colorados Extension commissioning 
                                       and increased sales volumes at WAIO 
                                       (record production at Jimblebar and 
                                       improved material handling and equipment 
                                       reliability), partially offset by lower 
                                       head grade at Escondida, the WAIO train 
                                       derailment and fire at the Spence electro-winning 
                                       plant. 
 Growth                         (75)  Planned Pyrenees dry-dock maintenance, 
                                       higher gas to liquids production mix 
                                       and natural field decline, partially 
                                       offset by higher uptime in the US Gulf 
                                       of Mexico and Australia and increased 
                                       tax barrels in Trinidad and Tobago. 
                                  68 
Change in controllable 
 cash costs(i) : 
 Operating cash costs        (1,176)  Unfavourable fixed cost dilution related 
                                       to unplanned production outages during 
                                       the first half, higher strip ratios 
                                       and contractor stripping costs at our 
                                       Australian coal operations, increased 
                                       maintenance activities, partially offset 
                                       by favourable inventory movements and 
                                       the benefit from higher overall volumes 
                                       at Olympic Dam as a result of the smelter 
                                       maintenance campaign in the prior year. 
 Exploration and business        142  Lower petroleum exploration expenses 
  development                          (the Ocean Bottom Node survey acquisition 
                                       costs in the Gulf of Mexico were less 
                                       than the prior year impact of expensing 
                                       the Scimitar well) and lower study costs 
                                       (following development approval of the 
                                       Escondida Water Supply Extension project 
                                       in March 2018). 
                             (1,034) 
Change in other costs: 
 Exchange rates                  997  Impact of the weakening Australian dollar 
                                       and Chilean peso against the US dollar. 
 Inflation                     (400)  Impact of inflation on the Group's cost 
                                       base. 
 Fuel and energy               (180)  Predominantly higher diesel prices at 
                                       our minerals assets. 
 Non-Cash                         81  Lower deferred stripping depletion at 
                                       Escondida. 
 One-off items                 (396)  Reflects the impact of Tropical Cyclone 
                                       Veronica in March 2019 and restructuring 
                                       and redundancies in relation to our 
                                       World Class Functions initiative. 
                                 102 
Asset sales                       29 
Ceased and sold operations     (241)  Reflects an increase in the closure 
                                       and rehabilitation provision for closed 
                                       mines, partially offset by the sale 
                                       of the Bruce and Keith oil and gas fields 
                                       in the United Kingdom. 
Other items                    (151)  Lower average realised copper prices 
                                       received by Antamina and lower sales 
                                       volumes at Cerrejón; settlement 
                                       of a royalty dispute with the Western 
                                       Australian Government; partially offset 
                                       by a favourable impact from the revaluation 
                                       of the embedded derivatives in the Trinidad 
                                       and Tobago gas contract. 
Year ended 30 June 
 2019                         23,158 
 

11

Productivity

Underlying improvements in productivity of US$1.0 billion were offset by the impact of unplanned production outages of US$0.8 billion during the December 2018 half year; higher than expected unit costs at Queensland Coal (lower volumes, wet weather and increased contractor stripping costs), New South Wales Energy Coal (higher strip ratio and contractor stripping costs) and Nickel West (mine plan changes) of US$0.4 billion; and grade decline at Escondida of US$0.8 billion. Overall, a negative movement in productivity of US$1.0 billion was recorded for the 2019 financial year.

The following table reconciles relevant factors with changes in the Group's productivity:

 
Year ended 30 June 2019                          US$M 
---------------------------------------------  ------- 
Change in controllable cash costs              (1,034) 
Change in volumes attributed to productivity       143 
Change in productivity in Underlying EBITDA      (891) 
Change in capitalised exploration                (124) 
Change attributable to productivity measures   (1,015) 
 

Prices and exchange rates

The average realised prices achieved for our major commodities are summarised in the following table and are presented on a continuing operations basis:

 
                                                                              FY19    H2 FY19   H2 FY19 
                                                                               vs       vs        vs 
Average realised prices(1)              H2 FY19   H1 FY19    FY19     FY18    FY18    H2 FY18   H1 FY19 
-------------------------------------  --------  --------  -------  -------  ------  --------  -------- 
Oil (crude and condensate) (US$/bbl)      63.29     69.91    66.59    60.57     10%      (7%)      (9%) 
Natural gas (US$/Mscf)(2)                  4.42      4.67     4.55     4.44      2%      (8%)      (5%) 
LNG (US$/Mscf)                             8.53     10.19     9.43     8.07     17%      (1%)     (16%) 
Copper (US$/lb)(3)                         2.70      2.54     2.62     3.00   (13%)      (8%)        6% 
Iron ore (US$/wmt, FOB)                   77.74     55.62    66.68    56.71     18%       37%       40% 
Metallurgical coal (US$/t)               179.53    179.82   179.67   177.22      1%      (5%)      (0%) 
 Hard coking coal (HCC) (US$/t)(4)       201.33    197.86   199.61   194.59      3%      (2%)        2% 
 Weak coking coal (WCC) (US$/t)(4)       126.46    134.12   130.18   131.70    (1%)     (12%)      (6%) 
Thermal coal (US$/t)(5)                   72.18     84.15    77.90    86.94   (10%)     (17%)     (14%) 
Nickel metal (US$/t)                     12,444    12,480   12,462   12,591    (1%)     (11%)      (0%) 
 

(1) Based on provisional, unaudited estimates. Prices exclude sales from equity accounted investments, third party product and internal sales, and represent the weighted average of various sales terms (for example: FOB, CIF and CFR), unless otherwise noted. Includes the impact of provisional pricing and finalisation adjustments.

   (2)    Includes internal sales. 

(3) Comparative financial information has been restated for the new accounting standard, IFRS 15 Revenue from Contracts with Customers, which became effective from 1 July 2018.

(4) Hard coking coal (HCC) refers generally to those metallurgical coals with a Coke Strength after Reaction (CSR) of 35 and above, which includes coals across the spectrum from Premium Coking to Semi Hard Coking coals, while weak coking coal (WCC) refers generally to those metallurgical coals with a CSR below 35.

(5) Export sales only; excludes Cerrejón. Includes thermal coal sales from metallurgical coal mines.

12

In Copper, the provisional pricing and finalisation adjustments decreased Underlying EBITDA by US$242 million in the 2019 financial year and is included in the average realised copper price in the above table.

The following exchange rates relative to the US dollar have been applied in the financial information:

 
                        Average     Average 
                       Year ended  Year ended   As at    As at    As at 
                        30 June     30 June    30 June  30 June  30 June 
                          2019        2018      2019     2018     2017 
                       ----------  ----------  -------  -------  ------- 
Australian dollar(1)         0.72        0.78     0.70     0.74     0.77 
Chilean peso                  673         625      680      648      663 
 
   (1)    Displayed as US$ to A$1 based on common convention. 

Depreciation, amortisation and impairments

Depreciation, amortisation and impairments decreased by US$528 million to US$6.1 billion, reflecting lower depreciation and amortisation at Petroleum (lower volumes at Shenzi and an increase in estimated remaining reserves at Atlantis), lower depreciation at Escondida (increase in asset life of the Escondida Water Supply project), and lower impairment charges compared to the previous period (predominantly related to conveyors at Escondida).

Net finance costs

Net finance costs decreased by US$181 million to US$1.1 billion mainly due to higher interest earned on increased term deposit holdings and a lower average debt balance following the repayment on maturity of Group debt.

Taxation expense

 
                                           2019                                            2018 
                      ----------------------------------------------  ---------------------------------------------- 
                         Profit before                                   Profit before 
                            taxation        Income tax expense              taxation        Income tax expense 
Year ended 30 June            US$M                 US$M          %            US$M                 US$M          % 
                      --------------------  ------------------  ----  --------------------  ------------------  ---- 
Statutory effective 
 tax rate                           15,049             (5,529)  36.7                14,751             (7,007)  47.5 
Adjusted for: 
Exchange rate 
 movements                               -                (25)                           -               (152) 
Exceptional items(1)                 1,060               (242)                         650               2,320 
Adjusted effective 
 tax rate                           16,109             (5,796)  36.0                15,401             (4,839)  31.4 
 
   (1)    Refer exceptional items below for further details. 

The Group's adjusted effective tax rate, which excludes the influence of exchange rate movements and exceptional items, was 36.0 per cent (2018: 31.4 per cent). The adjusted effective tax rate is above 30 per cent primarily due to profits being subject to rates of tax higher than 30 per cent (for example, Australian petroleum projects and Chilean operations), a reduction in US tax credits related to Chilean taxes and an increase in provision for tax disputes. The adjusted effective tax rate is expected to be in the range of 33 to 38 per cent for the 2020 financial year.

Other royalty and excise arrangements which are not profit based are recognised as operating costs within Profit before taxation. These amounted to US$2.5 billion during the period (2018: US$2.2 billion).

13

On 19 November 2018, BHP settled its long-standing transfer pricing dispute relating to its marketing operations in Singapore with the Australian Taxation Office. The settlement fully resolved all prior years and provides certainty in relation to the future Australian taxation treatment of BHP's marketing operations. The settlement did not involve any admission of tax avoidance by BHP. As part of the settlement, BHP paid a total of approximately A$529 million in additional taxes for the prior years, being 2003 to 2018 (BHP paid A$328 million of this amount when the amended assessments were received in prior years, with the balance of A$201 million paid in the December 2018 quarter). From the 2020 financial year, all profits made in Singapore in relation to the Australian assets owned by BHP Group Limited will be fully subject to Australian tax under the Controlled Foreign Company tax rules, due to a change in ownership of the main marketing entity.

Exceptional items

The following table sets out the exceptional items for the 2019 financial year. Additional commentary is included on page 33.

 
                                             Gross    Tax     Net 
Year ended 30 June 2019                       US$M    US$M    US$M 
------------------------------------------  -------  -----  ------- 
Exceptional items by category 
Samarco dam failure(1)                      (1,060)      -  (1,060) 
Global taxation matters(2)                        -    242      242 
Total                                       (1,060)    242    (818) 
Attributable to non-controlling interests         -      -        - 
Attributable to BHP shareholders            (1,060)    242    (818) 
 

(1) Refer to note 1 Exceptional items and note 8 Significant events - Samarco dam failure of the Financial Information for further information.

(2) Financial impact of US$242 million relates to the reversal of provisions for global taxation matters which were resolved during the period. Refer to note 1 Exceptional items of the Financial Information for further information.

Debt management and liquidity

During the 2019 financial year, the Group's gross debt decreased from US$26.8 billion at 30 June 2018 to US$24.8 billion at 30 June 2019. This was mainly due to the redemption of US$2.4 billion of debt (consisting of EUR1.3 billion of European medium term notes and US$0.8 billion of senior notes, which matured in November 2018 and April 2019 respectively), partially offset by a fair value adjustment of US$0.4 billion related to interest rate and exchange rate movements.

The Group has a US$6.0 billion commercial paper program backed by a US$6.0 billion revolving credit facility, which expires in May 2021. As at 30 June 2019, the Group had no outstanding US commercial paper, no drawn amount under the revolving credit facility and US$15.6 billion in cash and cash equivalents.

Dividend

Our Board today determined to pay a final dividend of 78 US cents per share. The final dividend to be paid by BHP Group Limited will be fully franked for Australian taxation purposes.

14

BHP's Dividend Reinvestment Plan (DRP) will operate in respect of the final dividend. Full terms and conditions of the DRP and details about how to participate can be found at: bhp.com

 
Events in respect of the final dividend                                                             Date 
-------------------------------------------------------------------------------------------  ----------------- 
Currency conversion into RAND                                                                   30 August 2019 
Last day to trade cum dividend on Johannesburg Stock Exchange Limited (JSE)                   3 September 2019 
Ex-dividend Date JSE                                                                          4 September 2019 
Ex-dividend Date Australian Securities Exchange (ASX), London Stock Exchange (LSE) and New    5 September 2019 
 York Stock Exchange (NYSE) 
Record Date                                                                                   6 September 2019 
DRP and Currency Election date (including announcement of currency conversion for ASX and 
 LSE)                                                                                         9 September 2019 
Payment Date                                                                                 25 September 2019 
DRP Allocation Date (ASX and LSE) within 10 business days after the payment date                9 October 2019 
DRP Allocation Date (JSE), subject to the purchase of shares by the Transfer Secretaries in     9 October 2019 
 the open market Central Securities Depository Participant (CDSP) accounts credited/updated 
 on or about 
 

BHP Group Plc shareholders registered on the South African section of the register will not be able to dematerialise or rematerialise their shareholdings between the dates of 4 September and 6 September 2019 (inclusive), and transfers between the UK register and the South African register will not be permitted between the dates of 30 August and 6 September 2019 (inclusive). American Depositary Shares (ADSs) each represent two fully paid ordinary shares and receive dividends accordingly. Details of the currency exchange rates applicable for the dividend will be announced to the relevant stock exchanges following conversion and will appear on the Group's website.

Any eligible shareholder who wishes to participate in the DRP, or to vary a participation election should do so in accordance with the timetable above, or, in the case of shareholdings on the South African branch register of BHP Group Plc, in accordance with the instructions of your CSDP. The DRP Allocation Price will be calculated in each jurisdiction as an average of the price paid for each share actually purchased to satisfy DRP elections. The Allocation Price applicable to each stock exchange will made available at: bhp.com/DRP

Corporate governance

On 19 March 2019, we announced the appointment of Ian Cockerill and Susan Kilsby to the BHP Board as independent Non-executive Directors, effective 1 April 2019.

The current members of the Board's committees are:

 
Risk and Audit                  Nomination and Governance            Remuneration                Sustainability 
 Committee                              Committee                      Committee                    Committee 
--------------------------  ---------------------------------  -------------------------  ---------------------------- 
Lindsay Maxsted (Chairman)  Ken MacKenzie (Chairman)           Carolyn Hewson (Chairman)  Malcolm Broomhead (Chairman) 
 Terry Bowen                 Malcolm Broomhead                  Anita Frew                 John Mogford 
 Ian Cockerill               Carolyn Hewson                     Susan Kilsby               Ian Cockerill 
 Anita Frew                  Shriti Vadera (SID)(1)             Shriti Vadera (SID) 
 
   (1)    Senior Independent Director (SID). 

15

Segment summary(1)

A summary of performance for the 2019 and 2018 financial years is presented below. Unless otherwise noted, information in this section has been presented on a continuing operations basis to exclude the contribution from Onshore US.

 
Year ended                                                           Net 
 30 June 2019                Underlying  Underlying  Exceptional   operating    Capital     Exploration   Exploration 
 US$M            Revenue(2)   EBITDA(3)    EBIT(3)     items(4)    assets(3)   expenditure    gross(5)    to profit(6) 
---------------  ----------  ----------  ----------  -----------  ----------  ------------  -----------  ------------- 
Petroleum             5,930       3,801       2,220            -       7,228           645          685            409 
Copper               10,838       4,550       2,587            -      24,088         2,735           62             62 
Iron Ore             17,255      11,129       9,397        (971)      17,486         1,611           93             41 
Coal                  9,121       4,067       3,400            -       9,674           655           23             15 
Group and 
 unallocated 
 items(7)             1,225       (389)       (539)           19       3,580           604           10             10 
Inter-segment 
adjustment(8)          (81)           -           -            -           -             -            -              - 
Total Group          44,288      23,158      17,065        (952)      62,056         6,250          873            537 
 
 
Year ended 
 30 June 2018 
 (Restated) 
                                                                       Net 
                               Underlying  Underlying  Exceptional   operating    Capital    Exploration  Exploration 
 US$M           Revenue(2)(9)   EBITDA(3)    EBIT(3)      items      assets(3)  expenditure    gross(5)   to profit(6) 
--------------  -------------  ----------  ----------  -----------  ----------  -----------  -----------  ------------ 
Petroleum               5,408       3,341       1,546            -       8,052          656          709           592 
Copper                 12,781       6,522       4,389            -      23,679        2,428           53            53 
Iron Ore               14,810       8,930       7,195        (539)      18,320        1,074           84            44 
Coal                    8,889       4,397       3,682            -       9,853          409           21            21 
Group and 
 unallocated 
 items(7)               1,329         (7)       (250)         (27)       2,789          412            7             7 
Inter-segment 
 adjustment(8)           (88)           -           -            -           -            -            -             - 
Total Group            43,129      23,183      16,562        (566)      62,693        4,979          874           717 
 

(1) Group and segment level information is reported on a statutory basis which, in relation to Underlying EBITDA, includes depreciation, amortisation and impairments, net finance costs and taxation expense of US$505 million (2018: US$618 million) related to equity accounted investments. It excludes exceptional items of US$945 million (2018: US$509 million) related to share of loss from equity accounted investments, related impairments and expenses. Refer to note 1 Exceptional items and note 8 Significant events - Samarco dam failure of the Financial Information for further information.

Group profit before taxation comprised Underlying EBITDA, exceptional items, depreciation, amortisation and impairments of US$7,045 million (2018: US$7,187 million) and net finance costs of US$1,064 million (2018: US$1,245 million).

(2) Revenue is based on Group realised prices and includes third party products. Sale of third party products by the Group contributed revenue of US$1,198 million and Underlying EBITDA of US$129 million (2018: US$1,436 million and US$62 million).

(3) For more information on the reconciliation of certain alternative performance measures to our statutory measures, reasons for usefulness and calculation methodology, please refer to alternative performance measures set on pages 45 and 54.

(4) Exceptional items of US$(952) million excludes net finance costs of US$(108) million included in the total US$(1,060) million related to the Samarco dam failure. Refer to note 1 Exceptional items and note 8 Significant events - Samarco dam failure of the Financial Information for further information.

   (5)    Includes US$357 million capitalised exploration (2018: US$233 million). 

(6) Includes US$21 million of exploration expenditure previously capitalised, written off as impaired (included in depreciation and amortisation) (2018: US$76 million).

16

(7) Group and unallocated items includes Functions, other unallocated operations including Potash, Nickel West and consolidation adjustments. Revenue not attributable to reportable segments comprises the sale of freight and fuel to third parties. Exploration and technology activities are recognised within the relevant segments.

 
Year ended 
 30 June 2019            Underlying       Underlying  Net operating    Capital     Exploration  Exploration 
 US$M           Revenue   EBITDA(3)  D&A    EBIT(3)     assets(3)     expenditure     gross      to profit 
--------------  -------  ----------  ---  ----------  -------------  ------------  -----------  ----------- 
Potash                -       (127)    4       (131)          3,737           174            -            - 
Nickel West       1,193         102   11          91          (158)           274            9            9 
 
 
Year ended 
 30 June 2018               Underlying       Underlying  Net operating    Capital     Exploration  Exploration 
 US$M           Revenue(9)   EBITDA(3)  D&A    EBIT(3)     assets(3)     expenditure     gross      to profit 
--------------  ----------  ----------  ---  ----------  -------------  ------------  -----------  ----------- 
Potash                   -       (135)    4       (139)          3,425           205            -            - 
Nickel West          1,297         291   76         215          (267)           129            7            7 
 

(8) Comprises revenue of US$77 million generated by Petroleum (2018: US$75 million) and US$4 million generated by Iron Ore (2018: US$13 million).

(9) Comparative financial information has been restated for the new accounting standard, IFRS15 Revenue from Contracts with Customers, which became effective from 1 July 2018.

Petroleum

Underlying EBITDA for Petroleum, excluding Onshore US, increased by US$460 million to US$3.8 billion in the 2019 financial year.

 
                                                    US$M 
                                                    ----- 
Underlying EBITDA for the year ended 
 30 June 2018                                       3,341 
Net price impact                                      599  Higher average realised prices: 
                                                           Crude and condensate oil US$66.59/bbl (2018: US$60.57/bbl); 
                                                           Natural gas US$4.55/Mscf (2018: US$4.44/Mscf); 
                                                           LNG US$9.43/Mscf (2018: US$8.07/Mscf). 
Change in volumes: growth                            (75)  Higher uptime in the US Gulf of Mexico and Australia and 
                                                           increased tax barrels in Trinidad 
                                                           and Tobago were more than offset by planned Pyrenees 
                                                           dry-dock maintenance, higher gas to liquids 
                                                           production mix, natural field decline across the portfolio 
                                                           and an increase in overlift positions 
                                                           in Australia. 
Change in controllable cash costs                      27  Additional maintenance activity at our Australian assets 
                                                           offset by lower exploration expenses 
                                                           due to the Ocean Bottom Node survey acquisition costs in 
                                                           the Gulf of Mexico less than the 
                                                           prior year impact of expensing the Scimitar well. 
Ceased and sold operations                          (167)  Revaluation of closed mines provision (US$191 million) 
                                                           partially offset by the sale of our 
                                                           interests in the Bruce and Keith oil and gas fields. 
Other                                                  76  Includes exchange rate, inflation and the impact from 
                                                           revaluation of embedded derivatives 
                                                           in Trinidad and Tobago gas contract of US$14 million loss 
                                                           (2018: US$153 million loss). 
Underlying EBITDA for the year ended 30 June 2019   3,801 
 

17

Conventional Petroleum unit costs increased by five per cent to US$10.54 per barrel of oil equivalent due to additional planned maintenance, partially offset by higher volumes. Unit costs in the 2020 financial year are expected to be between US$10.50 and US$11.50 per barrel (based on an exchange rate of AUD/USD 0.70) reflecting the impact of lower volumes, partially offset by lower maintenance activities at our Australian assets. In the medium term, we expect an increase in unit costs to less than US$13 per barrel (based on an exchange rate of AUD/USD 0.70) as a result of natural field decline.

 
Conventional Petroleum 
 unit costs(1) (US$M)             H2 FY19  H1 FY19  FY19   FY18 
-----------------------------     -------  -------  -----  ----- 
Revenue                             2,727    3,203  5,930  5,408 
Underlying EBITDA                   1,802    2,259  4,061  3,393 
Gross costs                           925      944  1,869  2,015 
Less: exploration expense(2)          222      166    388    516 
Less: freight                          88       64    152    152 
Less: development and 
 evaluation                            26       20     46     34 
Less: other(3)                         16      (8)      8    106 
Net costs                             573      702  1,275  1,207 
Production (MMboe, equity 
 share)                                58       63    121    120 
Cost per boe (US$)(4)                9.88    11.14  10.54  10.06 
 

(1) Conventional Petroleum assets exclude divisional activities reported in Other and closed mining and smelting operations in Canada and the United States.

   (2)    Exploration expense represents conventional Petroleum's share of total exploration expense. 

(3) Other includes non-cash profit on sales of assets, inventory movements, foreign exchange, provision for onerous lease contracts and the impact from revaluation of embedded derivatives in the Trinidad and Tobago gas contract.

   (4)    FY19 based on an exchange rate of AUD/USD 0.72. 

Petroleum exploration

Petroleum exploration expenditure for the 2019 financial year was US$685 million, of which US$388 million was expensed. A US$0.7 billion exploration and appraisal program is planned for the 2020 financial year. This program includes the 3DEL appraisal well at Trion in Mexico and additional wells in Trinidad and Tobago to follow up on our discoveries to date.

In Trinidad and Tobago, Phase 2 and 3 of our deepwater drilling campaign were completed. These campaigns included two wells in the Southern licences which further assessed the commercial potential of the Magellan play - the Victoria-1 well encountered gas and no commercial hydrocarbons were encountered at the Concepcion-1 well. Analysis is ongoing. Four wells were drilled in our Northern licences, the Bongos-2 discovery well opened a new play and subsequent wells Bélé-1, Tuk-1 and Hi-Hat-1 all encountered gas. Technical work is underway to evaluate commercial options for the Northern Gas play. The rig will return to our Northern licences during the September 2019 quarter to explore for additional volumes.

In the US Gulf of Mexico, we continue to advance evaluation of the development options to optimise value at Wildling. In the Western US Gulf of Mexico, the Ocean Bottom Node(vii) seismic acquisition was completed in early January 2019 and processed data is expected to be delivered during the March 2020 quarter. On 8 August 2019, we entered into an agreement to sell our 50 per cent interest in the Samurai prospect to a private equity firm. The sale is subject to customary closing conditions and is expected to close in September 2019.

In Mexico, we drilled our first operated well at Trion, following acquisition of the discovery in 2017. Trion 2DEL encountered oil in line with expectations and was followed by a down-dip sidetrack to delineate the field and provide information about the Oil Water Contact. Another appraisal well, Trion 3DEL(viii) spud on 9 July 2019 and we are encouraged by the preliminary results, with the well encountering oil in the reservoirs up dip from all previous well intersections. Evaluation and analysis is ongoing.

18

In Eastern Canada, we were the successful bidder in October 2018 for licences in the Orphan Basin, offshore Eastern Canada. An exploration plan for the licences 8 and 12 was submitted to the Canada-Newfoundland and Labrador Offshore Petroleum Board on 13 July 2019.

Financial information for Petroleum for the 2019 and 2018 financial years is presented below.

 
Year ended                                                           Net 
 30 June 2019                      Underlying         Underlying   operating    Capital     Exploration   Exploration 
 US$M                  Revenue(1)    EBITDA     D&A      EBIT       assets     expenditure    gross(2)    to profit(3) 
---------------------  ----------  ----------  -----  ----------  ----------  ------------  -----------  ------------- 
Australia Production 
 Unit(4)                      507         332    192         140         513            13 
Bass Strait                 1,237         915    427         488       2,217            32 
North West Shelf            1,657       1,220    298         922       1,371           106 
Atlantis                      979         824    261         563       1,060            31 
Shenzi                        540         437    151         286         658            30 
Mad Dog                       319         268     59         209       1,232           362 
Trinidad/Tobago               287         181     56         125         302            23 
Algeria                       258         201     26         175          49             7 
Exploration                     -       (388)     58       (446)       1,039             - 
Other(5)                      153          73     55          18       (109)            41 
Total Petroleum from 
 Group production           5,937       4,063  1,583       2,480       8,332           645          685            409 
Closed mines(6)                 -       (260)      -       (260)     (1,104)             -            -              - 
Third party products           10           -      -           -           -             -            -              - 
Total Petroleum             5,947       3,803  1,583       2,220       7,228           645          685            409 
Adjustment for equity 
 accounted 
 investments(7)              (17)         (2)    (2)           -           -             -            -              - 
Total Petroleum 
 statutory 
 result                     5,930       3,801  1,581       2,220       7,228           645          685            409 
 
 
Year ended                                                           Net 
 30 June 2018                      Underlying         Underlying   operating    Capital     Exploration   Exploration 
 US$M                  Revenue(1)    EBITDA     D&A      EBIT       assets     expenditure    gross(2)    to profit(3) 
---------------------  ----------  ----------  -----  ----------  ----------  ------------  -----------  ------------- 
Australia Production 
 Unit(4)                      568         422    247         175         740             - 
Bass Strait                 1,285         948    494         454       2,504            29 
North West Shelf            1,400       1,058    230         828       1,574           167 
Atlantis                      833         666    332         334       1,307           159 
Shenzi                        576         470    193         277         743            32 
Mad Dog                       229         160     50         110         947           189 
Trinidad/Tobago               161        (53)     38        (91)         256            16 
Algeria                       234         186     28         158          37             6 
Exploration                     -       (516)    127       (643)         953             - 
Other(5)                      126          54     59         (5)       (142)            58 
Total Petroleum from 
 Group production           5,412       3,395  1,798       1,597       8,919           656          709            592 
Closed mines(6)                 -        (52)      -        (52)       (867)             -            -              - 
Third party products           12           1      -           1           -             -            -              - 
Total Petroleum             5,424       3,344  1,798       1,546       8,052           656          709            592 
Adjustment for equity 
 accounted 
 investments(7)              (16)         (3)    (3)           -           -             -            -              - 
Total Petroleum 
 statutory 
 result                     5,408       3,341  1,795       1,546       8,052           656          709            592 
 

(1) Total Petroleum statutory result revenue includes: crude oil US$3,171 million (2018: US$2,933 million), natural gas US$1,259 million (2018: US$1,124 million), LNG US$1,179 million (2018: US$920 million), NGL US$263 million (2018: US$294 million) and other US$58 million (2018: US$137 million which includes third party products).

   (2)    Includes US$297 million of capitalised exploration (2018: US$193 million). 

(3) Includes US$21 million of exploration expenditure previously capitalised, written off as impaired (included in depreciation and amortisation) (2018: US$76 million).

   (4)    Australia Production Unit includes Macedon, Pyrenees and Minerva. 

(5) Predominantly divisional activities, business development, UK (divested in November 2018), Neptune and Genesis. Also includes the Caesar oil pipeline and the Cleopatra gas pipeline, which are equity accounted investments. The financial information for the Caesar oil pipeline and the Cleopatra gas pipeline presented above, with the exception of net operating assets, reflects BHP's share.

   (6)    Comprises closed mining and smelting operations in Canada and the United States. 

(7) Total Petroleum statutory result Revenue excludes US$17 million (2018: US$16 million) revenue related to the Caesar oil pipeline and the Cleopatra gas pipeline. Total Petroleum statutory result Underlying EBITDA includes US$2 million (2018: US$3 million) D&A related to the Caesar oil pipeline and the Cleopatra gas pipeline.

19

Copper

Underlying EBITDA for the 2019 financial year decreased by US$2.0 billion to US$4.6 billion.

 
                                        US$M 
                                       ------- 
Underlying EBITDA for the year ended 
 30 June 2018                            6,522 
Net price impact                       (1,338)  Lower average realised price: 
                                                 Copper US$2.62/lb (FY18: US$3.00/lb). 
Change in volumes: productivity          (315)  Lower grade at Escondida; decreased sales volumes at Pampa Norte after 
                                                a fire at the electro-winning 
                                                plant at Spence and heavy rainfall; partially offset by record 
                                                concentrator throughput at 
                                                Escondida and record ore milled at Pampa Norte. 
Change in controllable cash costs        (321)  Unfavourable fixed cost dilution related to the acid plant outage and 
                                                lower inventory build 
                                                at Olympic Dam, end-of-negotiation bonus payments and a change in 
                                                estimated recoverable copper 
                                                contained in Escondida sulphide leach pad which benefited costs in the 
                                                prior year. This was 
                                                partially offset by Olympic Dam acid plant outage self-insurance 
                                                recoveries, inventory movements 
                                                at Pampa Norte and the benefit from higher overall volumes at Olympic 
                                                Dam as a result of smelter 
                                                maintenance campaign in the prior year. 
Change in other costs: 
Exchange rates                             283 
Inflation                                (143) 
Non-cash                                    88  Lower deferred stripping depletion at Escondida. 
Other                                    (226)  Other includes fuel and energy of US$(78) million and other items 
                                                (including lower profit 
                                                from equity accounted investments). 
Underlying EBITDA for the year ended 
 30 June 2019                            4,550 
 

Escondida unit costs increased by seven per cent to US$1.14 per pound, driven by an expected 12 per cent decline in copper grade and labour settlement costs.

Unit costs in the 2020 financial year are expected to increase to between US$1.20 and US$1.35 per pound (based on an exchange rate of USD/CLP 683) reflecting lower by-product credits and higher deferred stripping costs. The impact of a decline in copper grade of approximately five per cent is expected to be offset by increased concentrator throughput. Unit costs are expected to remain less than US$1.15 per pound in the medium term (based on an exchange rate of USD/CLP 683) with expected higher power and water costs offset by transformation programs focused on efficiency improvements and optimised maintenance strategies.

 
Escondida unit costs 
 (US$M)                       H2 FY19  H1 FY19  FY19   FY18 
-------------------------     -------  -------  -----  ----- 
Revenue(1)                      3,537    3,339  6,876  8,346 
Underlying EBITDA               1,814    1,570  3,384  4,921 
Gross costs                     1,723    1,769  3,492  3,425 
Less: by-product credits          266      224    490    447 
Less: freight                      73       76    149    123 
Net costs                       1,384    1,469  2,853  2,855 
Sales (kt)                        560      571  1,131  1,209 
Sales (Mlb)                     1,234    1,259  2,493  2,664 
Cost per pound (US$)(2)          1.12     1.17   1.14   1.07 
 

(1) Comparative financial information has been restated for the new accounting standard, IFRS15 Revenue from Contracts with Customers, which became effective from 1 July 2018.

   (2)    FY19 based on exchange rates of AUD/USD 0.72 and USD/CLP 673. 

20

Consistent with our exploration focus on copper we have added to our early stage copper optionality. In the first half of the 2019 financial year we acquired an 11.2 per cent interest in SolGold Plc, the majority owner and operator of the Cascabel porphyry copper-gold project in Ecuador. In the June 2019 quarter, we secured a five per cent interest in Midland Exploration Inc, which has copper exploration tenements in Canada, and entered an exploration financing agreement with Riverside Resources to fund exploration in Mexico's north-eastern Sonora region. In July 2019 we entered a binding earn-in and joint venture agreement over two mining concessions in Ecuador with Luminex and are preparing to continue exploration activities on the sites, Tarqui and Tarqui 2.

In addition, we progressed the second phase of a drilling program at Oak Dam in the June 2019 half after identifying a potential new iron oxide, copper, gold (IOCG) mineralised system 65 kilometres to the south east of BHP's operations at Olympic Dam in South Australia. The results are currently being analysed and an update will be provided once finalised later in the year.

Financial information for Copper for the 2019 and 2018 financial years is presented below.

 
Year ended                                                             Net 
 30 June 2019                        Underlying         Underlying   operating    Capital     Exploration  Exploration 
 US$M                       Revenue    EBITDA     D&A      EBIT       assets     expenditure     gross      to profit 
--------------------------  -------  ----------  -----  ----------  ----------  ------------  -----------  ----------- 
Escondida(1)                  6,876       3,384  1,245       2,139      12,726         1,036 
Pampa Norte(2)                1,502         701    381         320       2,937         1,194 
Antamina(3)                   1,144         723    108         615       1,345           229 
Olympic Dam                   1,351         273    331        (58)       7,133           485 
Other(3)(4)                       -       (315)      8       (323)        (53)            21 
Total Copper from 
 Group production            10,873       4,766  2,073       2,693      24,088         2,965 
Third party products          1,109         116      -         116           -             - 
Total Copper                 11,982       4,882  2,073       2,809      24,088         2,965           66           65 
Adjustment for equity 
 accounted investments(5)   (1,144)       (332)  (110)       (222)           -         (230)          (4)          (3) 
Total Copper statutory 
 result                      10,838       4,550  1,963       2,587      24,088         2,735           62           62 
 
 
Year ended                                                             Net 
 30 June 2018                        Underlying         Underlying   operating    Capital     Exploration  Exploration 
 US$M                    Revenue(6)    EBITDA     D&A      EBIT       assets     expenditure     gross      to profit 
-----------------------  ----------  ----------  -----  ----------  ----------  ------------  -----------  ----------- 
Escondida(1)                  8,346       4,921  1,601       3,320      13,666           997 
Pampa Norte(2)                1,831         924    298         626       1,967           757 
Antamina(3)                   1,305         955    111         844       1,313           183 
Olympic Dam                   1,255         267    228          39       6,937           669 
Other(3)(4)                       -       (193)      8       (201)       (204)             5 
Total Copper from 
 Group production            12,737       6,874  2,246       4,628      23,679         2,611 
Third party products          1,349          60      -          60           -             - 
Total Copper                 14,086       6,934  2,246       4,688      23,679         2,611           53           53 
Adjustment for equity 
 accounted 
 investments(5)             (1,305)       (412)  (113)       (299)           -         (183)            -            - 
Total Copper statutory 
 result                      12,781       6,522  2,133       4,389      23,679         2,428           53           53 
 
   (1)    Escondida is consolidated under IFRS 10 and reported on a 100 per cent basis. 
   (2)    Includes Spence and Cerro Colorado. 

(3) Antamina, SolGold and Resolution are equity accounted investments and their financial information presented above with the exception of net operating assets reflects BHP Group's share.

(4) Predominantly comprises divisional activities, greenfield exploration and business development. Includes Resolution and SolGold (acquired in October 2018).

(5) Total Copper statutory result Revenue excludes US$1,144 million (2018: US$1,305 million) revenue related to Antamina. Total Copper statutory result Underlying EBITDA includes US$110 million (2018: US$113 million) D&A and US$222 million (2018: US$299 million) net finance costs and taxation expense related to Antamina, Resolution and SolGold that are also included in Underlying EBIT. Total Copper Capital expenditure excludes US$229 million (2018: US$183 million) related to Antamina and US$1 million (2018: US$ nil) related to SolGold. Exploration gross excludes US$4 million (2018: US$ nil) related to SolGold of which US$3 million (2018: US$ nil) was expensed.

(6) Comparative financial information has been restated for the new accounting standard, IFRS15 Revenue from Contracts with Customers, which became effective from 1 July 2018.

21

Iron Ore

Underlying EBITDA for the 2019 financial year increased by US$2.2 billion to US$11.1 billion.

 
                                                     US$M 
                                                    ------- 
Underlying EBITDA for the year ended 
 30 June 2018                                         8,930 
Net price impact                                      2,065  Higher average realised price: 
                                                              Iron ore US$66.68/wmt, FOB (2018: US$56.71/wmt, FOB). 
Change in volumes: productivity                         382  Increased sales volumes supported by record production at 
                                                             Jimblebar, higher volumes reflecting 
                                                             the expiry of the Wheelarra joint venture(1) and improved 
                                                             supply chain reliability and performance. 
                                                             This was partially offset by a train derailment on 5 
                                                             November 2018. 
Change in controllable cash costs                       103  Favourable inventory movements, partially offset by 
                                                             increased maintenance activities. 
Change in other costs: 
Exchange rates                                          227 
Inflation                                              (97) 
One-off items                                         (285)  Reflects the impact of Tropical Cyclone Veronica in March 
                                                             2019. 
Other                                                 (196)  Other includes fuel and energy of US$(51) million, 
                                                             non-cash and other items (includes settlement 
                                                             of a royalty dispute with the Western Australian 
                                                             Government). 
Underlying EBITDA for the year ended 30 June 2019    11,129 
 

(1) Increased volumes reflecting the expiry of the Wheelarra Joint Venture sublease in March 2018, with control of the sublease areas reverting to the Jimblebar Joint Venture, which is accounted for on a consolidated basis with minority interest adjustments.

WAIO unit costs were lower than the prior year at US$14.16 per tonne (or US$12.86 per tonne on a C1 basis excluding third party royalties(3) ), reflecting higher volumes, continued productivity improvements and favourable exchange movements, offset by the impacts of a train derailment in November 2018 and Tropical Cyclone Veronica in March 2019. Unit costs declined by five per cent in the second half of the 2019 financial year following strong operational performance in the June 2019 quarter and optimised maintenance schedules.

Unit costs in the 2020 financial year are expected to decrease to between US$13 and US$14 per tonne (based on an exchange rate of AUD/USD 0.70). In the medium term, we expect to lower our unit costs to less than US$13 per tonne (based on an exchange rate of AUD/USD 0.70).

 
WAIO unit costs (US$M)                                                     H2 FY19  H1 FY19   FY19     FY18 
----------------------------------------------------------------------     -------  -------  -------  ------- 
Revenue                                                                      9,749    7,317   17,066   14,596 
Underlying EBITDA                                                            6,753    4,300   11,053    8,869 
Gross costs                                                                  2,996    3,017    6,013    5,727 
Less: freight                                                                  567      741    1,308    1,276 
Less: royalties                                                                782      540    1,322    1,075 
Net costs                                                                    1,647    1,736    3,383    3,376 
Sales (kt, equity share)(1)                                                119,216  119,620  238,836  236,771 
Cost per tonne (US$)(2)                                                      13.82    14.51    14.16    14.26 
Cost per tonne on a C1 basis excluding third party royalties (US$)(3)        11.89    13.85    12.86    13.03 
 
   (1)    June 2019 quarter sales has been adjusted since it was previously reported. 
   (2)    FY19 based on an average exchange rate of AUD/USD 0.72. 

(3) Excludes third party royalties of US$1.00 per tonne (2018: US$0.74 per tonne), net inventory movements US$(0.30) per tonne (2018: US$0.25 per tonne), depletion of production stripping US$0.75 (2018: US$0.58), exploration expenses, demurrage, exchange rate gains/losses, and other income US$(0.15) per tonne (2018: US$(0.35) per tonne).

22

Financial information for Iron Ore for the 2019 and 2018 financial years is presented below.

 
Year ended                                                            Net 
 30 June 2019                       Underlying         Underlying   operating    Capital     Exploration  Exploration 
 US$M                      Revenue    EBITDA     D&A      EBIT       assets     expenditure    gross(1)    to profit 
-------------------------  -------  ----------  -----  ----------  ----------  ------------  -----------  ----------- 
Western Australia Iron 
 Ore                        17,066      11,053  1,707       9,346      19,208         1,600 
Samarco(2)                       -           -      -           -     (1,908)             - 
Other(3)                       157          62     25          37         186            11 
Total Iron Ore from 
 Group production           17,223      11,115  1,732       9,383      17,486         1,611 
Third party products(4)         32          14      -          14           -             - 
Total Iron Ore              17,255      11,129  1,732       9,397      17,486         1,611           93           41 
Adjustment for equity 
 accounted investments           -           -      -           -           -             -            -            - 
Total Iron Ore statutory 
 result                     17,255      11,129  1,732       9,397      17,486         1,611           93           41 
 
 
Year ended                                                            Net 
 30 June 2018                       Underlying         Underlying   operating    Capital     Exploration  Exploration 
 US$M                      Revenue    EBITDA     D&A      EBIT       assets     expenditure    gross(1)    to profit 
-------------------------  -------  ----------  -----  ----------  ----------  ------------  -----------  ----------- 
Western Australia Iron 
 Ore                        14,596       8,869  1,721       7,148      19,406         1,047 
Samarco(2)                       -           -      -           -     (1,278)             - 
Other(3)                       160          60     14          46         192            27 
Total Iron Ore from 
 Group production           14,756       8,929  1,735       7,194      18,320         1,074 
Third party products(4)         54           1      -           1           -             - 
Total Iron Ore              14,810       8,930  1,735       7,195      18,320         1,074           84           44 
Adjustment for equity 
 accounted investments           -           -      -           -           -             -            -            - 
Total Iron Ore statutory 
 result                     14,810       8,930  1,735       7,195      18,320         1,074           84           44 
 
   (1)    Includes US$52 million of capitalised exploration (2018: US$40 million). 

(2) Samarco is an equity accounted investment and its financial information presented above, with the exception of net operating assets, reflects BHP Billiton Brasil Ltda's share. All financial impacts following the Samarco dam failure have been reported as exceptional items in both reporting periods.

(3) Predominantly comprises divisional activities, towage services, business development and ceased operations.

   (4)    Includes inter-segment and external sales of contracted gas purchases. 

Coal

Underlying EBITDA for the 2019 financial year decreased by US$330 million to US$4.1 billion.

 
                                  US$M 
                                  ----- 
Underlying EBITDA for 
 the year ended 
 30 June 2018                     4,397 
Net price impact                  (115)  Lower average realised thermal coal 
                                          prices, partially offset by higher 
                                          average realised metallurgical coal 
                                          prices: 
                                          Hard coking coal US$199.61/t (2018: 
                                          US$194.59/t); 
                                          Weak coking coal US$130.18/t (2018: 
                                          US$131.70/t); 
                                          Thermal coal US$77.90/t (2018: US$86.94/t). 
Change in volumes: productivity     103  Increased sales volumes supported 
                                          by record production at South Walker 
                                          Creek and Poitrel and prior year 
                                          impacts from lower volumes at Broadmeadow 
                                          (roof conditions) and Blackwater 
                                          (geotechnical issues). This was partially 
                                          offset by unfavourable weather impacts 
                                          and the scheduled longwall move at 
                                          Broadmeadow during the year. 
Change in controllable            (415)  Increased contractor stripping activity 
 cash costs                               and rates coupled with higher planned 
                                          maintenance activity at Queensland 
                                          Coal, and unfavourable inventory 
                                          movements and increased contractor 
                                          mining and stripping activity at 
                                          NSWEC. 
Change in other costs: 
Exchange rates                      350 
Inflation                          (94) 
Other                             (159)  Other includes fuel and energy of 
                                          US$(57) million, ceased and sold 
                                          operations and other items (including 
                                          lower profit from equity accounted 
                                          investments). 
Underlying EBITDA for 
 the year ended 30 June 
 2019                             4,067 
 

23

Queensland Coal unit costs increased by two per cent to US$69 per tonne mainly due to wet weather impacts and higher strip ratios, diesel prices and contractor stripping costs, partially offset by favourable exchange rate movements. Unit costs in the 2020 financial year are expected to be between US$67 and US$74 per tonne (based on an exchange rate of AUD/USD 0.70) as a result of increased wash plant maintenance and local inflationary pressures. In the medium term, we expect to lower our unit costs to between US$54 and US$61 per tonne (based on an exchange rate of AUD/USD 0.70) reflecting higher volumes, lower strip ratios, optimised maintenance strategies and efficiency improvements from the transformation programs.

 
Queensland Coal unit costs 
 (US$M)                       H2 FY19   H1 FY19    FY19     FY18 
---------------------------  --------  --------  -------  ------- 
Revenue                         3,912     3,767    7,679    7,388 
Underlying EBITDA               1,911     1,811    3,722    3,647 
Gross costs                     2,001     1,956    3,957    3,741 
Less: freight                      71        85      156      150 
Less: royalties                   411       394      805      740 
Net costs                       1,519     1,477    2,996    2,851 
Sales (kt, equity share)       22,106    21,039   43,145   41,899 
Cost per tonne (US$)(1)         68.71     70.20    69.44    68.04 
 
   (1)    FY19 based on an average exchange rate of AUD/USD 0.72. 

NSWEC unit costs increased by 10 per cent to US$50 per tonne as a result of higher strip ratios and contractor stripping costs, and unfavourable inventory movements. This was partially offset by the impact of favourable exchange rate movements. Unit costs in the 2020 financial year are expected to be between US$55 and US$61 per tonne (based on an exchange rate of AUD/USD 0.70) reflecting increased stripping costs and lower volumes as we continue to progress through the monocline, increase development stripping and focus on higher quality products. In the medium term, unit costs are expected to be between US$46 and US$50 per tonne (based on an exchange rate of AUD/USD 0.70), reflecting ongoing progression through the monocline and our focus on higher quality products.

 
New South Wales Energy Coal 
 unit costs (US$M)             H2 FY19   H1 FY19    FY19     FY18 
----------------------------  --------  --------  -------  ------- 
Revenue                            676       745    1,421    1,501 
Underlying EBITDA                  162       191      353      569 
Gross costs                        514       554    1,068      932 
Less: royalties                     54        60      114      111 
Net costs                          460       494      954      821 
Sales (kt, equity share)         9,987     9,083   19,070   18,022 
Cost per tonne (US$)(1)          46.06     54.39    50.03    45.56 
 
   (1)    FY19 based on an average exchange rate of AUD/USD 0.72. 

Financial information for Coal for the 2019 and 2018 financial years is presented below.

 
Year ended                                                             Net 
 30 June 2019                        Underlying         Underlying   operating    Capital     Exploration  Exploration 
 US$M                       Revenue    EBITDA     D&A      EBIT       assets     expenditure     gross      to profit 
--------------------------  -------  ----------  -----  ----------  ----------  ------------  -----------  ----------- 
Queensland Coal               7,679       3,722    532       3,190       8,232           549 
New South Wales 
 Energy Coal(1)               1,527         431    166         265         920           102 
Colombia(1)                     698         274    101         173         853           104 
Other(2)                          2       (110)      2       (112)       (331)             5 
Total Coal from 
 Group production             9,906       4,317    801       3,516       9,674           760 
Third party products             19         (1)      -         (1)           -             - 
Total Coal                    9,925       4,316    801       3,515       9,674           760           23           15 
Adjustment for equity 
 accounted 
 investments(3)(4)            (804)       (249)  (134)       (115)           -         (105)            -            - 
Total Coal statutory 
 result                       9,121       4,067    667       3,400       9,674           655           23           15 
 

24

 
Year ended                                                             Net 
 30 June 2018                        Underlying         Underlying   operating    Capital     Exploration  Exploration 
 US$M                       Revenue    EBITDA     D&A      EBIT       assets     expenditure     gross      to profit 
--------------------------  -------  ----------  -----  ----------  ----------  ------------  -----------  ----------- 
Queensland Coal               7,388       3,647    596       3,051       8,355           391 
New South Wales Energy 
 Coal(1)                      1,605         652    149         503         994            18 
Colombia(1)                     818         395     95         300         883            54 
Other(2)                          -        (10)      3        (13)       (379)             - 
Total Coal from Group 
 production                   9,811       4,684    843       3,841       9,853           463 
Third party products              2         (1)      -         (1)           -             - 
Total Coal                    9,813       4,683    843       3,840       9,853           463           21           21 
Adjustment for equity 
 accounted 
 investments(3)(4)            (924)       (286)  (128)       (158)           -          (54)            -            - 
Total Coal statutory 
 result                       8,889       4,397    715       3,682       9,853           409           21           21 
 

(1) Newcastle Coal Infrastructure Group and Cerrejón are equity accounted investments and their financial information presented above with the exception of net operating assets reflects BHP Group's share.

   (2)    Predominantly comprises divisional activities and ceased operations. 

(3) Total Coal statutory result Revenue excludes US$698 million (2018: US$818 million) revenue related to Cerrejón. Total Coal statutory result Underlying EBITDA includes US$101 million (2018: US$95 million) D&A and US$70 million (2018: US$108 million) net finance costs and taxation expense related to Cerrejón, that are also included in Underlying EBIT. Total Coal statutory result Capital expenditure excludes US$104 million (2018: US$54 million) related to Cerrejón.

(4) Total Coal statutory result Revenue excludes US$106 million (2018: US$106 million) revenue related to Newcastle Coal Infrastructure Group. Total Coal statutory result excludes US$78 million (2018: US$83 million) Underlying EBITDA, US$33 million (2018: US$33 million) D&A and US$45 million (2018: US$50 million) Underlying EBIT related to Newcastle Coal Infrastructure Group until future profits exceed accumulated losses. Total Coal Capital expenditure excludes US$1 million (2018: US$ nil) related to Newcastle Coal Infrastructure Group.

Group and unallocated items

Underlying EBITDA loss for Group and unallocated items increased by US$382 million to US$(389) million in the 2019 financial year due to self-insurance claims related to the Olympic Dam acid plant outage, restructuring and redundancy costs in relation to our World Class Functions initiative and a decrease in EBITDA at Nickel West. This was partially offset by the impact of favourable exchange rate movements.

Nickel West's Underlying EBITDA decreased from US$291 million to US$102 million for the 2019 financial year, due to the transition to new ore bodies, which resulted in a drawdown of inventories and unfavourable fixed cost dilution from reduced volumes at Leinster and Mt Keith, and the impact from a fire at the Kalgoorlie smelter in the December 2018 half year.

The financial information set out on pages 27 to 44 for the year ended 30 June 2019 has been prepared on the basis of accounting policies and methods of computation consistent with those applied in the 30 June 2018 financial statements contained within the Annual Report of the Group, with the exception of the following new accounting standards and interpretations which became effective from 1 July 2018:

-- IFRS 9/AASB 9 'Financial Instruments' which is a replacement of IAS 39/AASB 139 'Financial Instruments: Recognition and Measurement';

-- IFRS 15/AASB 15 'Revenue from Contracts with Customers' which replaces previous revenue requirements, including IAS 18/AASB 118 'Revenue'; and

-- IFRIC 22 'Foreign Currency Transactions and Advance Consideration'.

This news release including the financial information is unaudited. Variance analysis relates to the relative financial and/or production performance of BHP and/or its operations during the 2019 financial year compared with the 2018 financial year, unless otherwise noted. Operations includes operated and non-operated assets, unless otherwise noted. Numbers presented may not add up precisely to the totals provided due to rounding.

25

The following abbreviations may have been used throughout this report: barrels (bbl); billion cubic feet (bcf); barrels of oil equivalent (boe); billion tonnes (Bt); cost and freight (CFR); cost, insurance and freight (CIF), dry metric tonne unit (dmtu); free on board (FOB); grams per tonne (g/t); kilograms per tonne (kg/t); kilometre (km); metre (m); million barrels of oil equivalent (MMboe); million barrels of oil equivalent per day (MMboe/d); thousand cubic feet equivalent (Mcfe); million cubic feet per day (MMcf/d); million ounces per annum (Mozpa); million pounds (Mlb); million tonnes (Mt); million tonnes per annum (Mtpa); ounces (oz); pounds (lb); thousand barrels of oil equivalent (Mboe); thousand ounces (koz); thousand ounces per annum (kozpa); thousand standard cubic feet (Mscf); thousand tonnes (kt); thousand tonnes per annum (ktpa); thousand tonnes per day (ktpd); tonnes (t); and wet metric tonnes (wmt).

The following footnotes apply to this Results Announcement:

(i) We use various alternative performance measures to reflect our underlying performance. For further information on the reconciliations of certain alternative performance measures to our statutory measures, reasons for usefulness and calculation methodology, please refer to alternative performance measures set out on pages 45 to 54.

   (ii)    Reported for total operations (including Onshore US). 
   (iii)   Subject to final sustainability assurance review. 

(iv) Copper equivalent production based on 2019 financial year average realised prices. Excludes production from Onshore US.

   (v)    The balances of derivatives used to hedge external debt (included within net other financial assets/(liabilities)) at 30 June 2019 was US$(0.2) billion (2018: US$(0.8) billion). The movement primarily relates to a non-cash fair value adjustment of US$(0.4) billion which offsets in net debt. 

(vi) Maintenance capital includes non-discretionary spend for the following purposes: deferred development and production stripping; risk reduction, compliance and asset integrity.

(vii) WGOM OBN 2018 Seismic Permit is OCS Permit T18-010.

(viii) For further information on the Trion-3DEL well, please refer to the BHP Financial Results presentation for the year ended 30 June 2019 (slide 37), released 20 August 2019 on www.bhp.com.

Forward-looking statements

This release contains forward-looking statements, including statements regarding: trends in commodity prices and currency exchange rates; demand for commodities; plans, strategies and objectives of management; closure or divestment of certain operations or facilities (including associated costs); anticipated production or construction commencement dates; capital costs and scheduling; operating costs and shortages of materials and skilled employees; anticipated productive lives of projects, mines and facilities; provisions and contingent liabilities; tax and regulatory developments.

Forward-looking statements can be identified by the use of terminology, including, but not limited to, 'intend', 'aim', 'project', 'anticipate', 'estimate', 'plan', 'believe', 'expect', 'may', 'should', 'will', 'continue', 'annualised' or similar words. These statements discuss future expectations concerning the results of operations or financial condition, or provide other forward-looking statements.

These forward-looking statements are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed in the statements contained in this release. Readers are cautioned not to put undue reliance on forward-looking statements.

For example, our future revenues from our operations, projects or mines described in this release will be based, in part, upon the market price of the minerals, metals or petroleum produced, which may vary significantly from current levels. These variations, if materially adverse, may affect the timing or the feasibility of the development of a particular project, the expansion of certain facilities or mines, or the continuation of existing operations.

Other factors that may affect the actual construction or production commencement dates, costs or production output and anticipated lives of operations, mines or facilities include our ability to profitably produce and transport the minerals, petroleum and/or metals extracted to applicable markets; the impact of foreign currency exchange rates on the market prices of the minerals, petroleum or metals we produce; activities of government authorities in some of the countries where we are exploring or developing these projects, facilities or mines, including increases in taxes, changes in environmental and other regulations and political uncertainty; labour unrest; and other factors identified in the risk factors discussed in BHP's filings with the U.S. Securities and Exchange Commission (the 'SEC') (including in Annual Reports on Form 20-F) which are available on the SEC's website at www.sec.gov.

Except as required by applicable regulations or by law, the Group does not undertake any obligation to publicly update or review any forward-looking statements, whether as a result of new information or future events.

Past performance cannot be relied on as a guide to future performance.

26

Non-IFRS financial information

BHP results are reported under IFRS. This release may also include certain non-IFRS (also referred to as alternative performance measures) and other measures including Underlying attributable profit, Underlying EBITDA, Underlying EBIT, Adjusted effective tax rate, Free cash flow, Gearing ratio, Net debt, Net operating assets, Principal factors that affect Underlying EBITDA, Underlying basic earnings per share, Underlying EBITDA margin and Underlying return on capital employed (ROCE). These measures are used internally by management to assess the performance of our business and segments, make decisions on the allocation of our resources and assess operational management. Non-IFRS and other measures have not been subject to audit or review and should not be considered as an indication of or alternative to an IFRS measure of profitability, financial performance or liquidity.

No offer of securities

Nothing in this release should be construed as either an offer, or a solicitation of an offer, to buy or sell BHP securities in any jurisdiction, or be treated or relied upon as a recommendation or advice by BHP.

Reliance on third party information

The views expressed in this release contain information that has been derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. This release should not be relied upon as a recommendation or forecast by BHP.

No financial or investment advice - South Africa

BHP does not provide any financial or investment 'advice' as that term is defined in the South African Financial Advisory and Intermediary Services Act, 37 of 2002, and we strongly recommend that you seek professional advice.

BHP and its subsidiaries

In this release, the terms 'BHP', 'Group', 'BHP Group', 'we', 'us', 'our' and 'ourselves' are used to refer to BHP Group Limited, BHP Group Plc and, except where the context otherwise requires, their respective subsidiaries as identified in note 13 'Related undertaking of the Group' in section 5.2 of BHP's 30 June 2018 Annual Report on Form 20-F. Notwithstanding that this release may include production, financial and other information from non-operated assets, non-operated assets are not included in the BHP Group and, as a result, statements regarding our operations, assets and values apply only to our operated assets unless otherwise stated.

27

Further information on BHP can be found at bhp.com

 
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Email: media.relations@bhp.com    Email: investor.relations@bhp.com 
Australia and Asia                Australia and Asia 
Gabrielle Notley                  Tara Dines 
Tel: +61 3 9609 3830 Mobile: +61  Tel: +61 3 9609 2222 Mobile: +61 
 411 071 715                       499 249 005 
United Kingdom and South Africa   United Kingdom and South Africa 
Neil Burrows                      Elisa Morniroli 
Tel: +44 20 7802 7484 Mobile:     Tel: +44 20 7802 7611 Mobile: +44 
 +44 7786 661 683                  7825 926 646 
North America                     Americas 
Judy Dane                         James Wear 
Tel: +1 713 961 8283 Mobile: +1   Tel: +1 713 993 3737 Mobile: +1 
 713 299 5342                      347 882 3011 
 
 
BHP Group Limited ABN 49 004 028   BHP Group plc Registration number 
 077                                3196209 
LEI WZE1WSENV6JSZFK0JC28           LEI 549300C116EOWV835768 
Registered in Australia            Registered in England and Wales 
Registered Office: Level 18, 171   Registered Office: Nova South, 
 Collins Street                     160 Victoria Street 
Melbourne Victoria 3000 Australia  London SW1E 5LB United Kingdom 
Tel +61 1300 55 4757 Fax +61 3     Tel +44 20 7802 4000 Fax +44 20 
 9609 3015                          7802 4111 
 

Members of the BHP Group which is

headquartered in Australia

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28

BHP

Financial Information

Year ended

30 June 2019

Contents

 
 Financial Information                                       Page 
 Consolidated Income Statement for the year ended 30 June 
  2019                                                         31 
 Consolidated Statement of Comprehensive Income for the 
  year ended 30 June 2019                                      32 
 Consolidated Balance Sheet as at 30 June 2019                 33 
 Consolidated Cash Flow Statement for the year ended 30 
  June 2019                                                    34 
 Consolidated Statement of Changes in Equity for the year 
  ended 30 June 2019                                           35 
                                                             36 - 
 Notes to the Financial Information                            48 
 

The financial information included in this document for the year ended 30 June 2019 is unaudited and has been derived from the draft financial report of the Group for the year ended 30 June 2019. The financial information does not constitute the Group's full statutory accounts for the year ended 30 June 2019, which will be approved by the Board, reported on by the auditors, and subsequently filed with the UK Registrar of Companies and the Australian Securities and Investments Commission.

The financial information set out of pages 27 to 44 for the year ended 30 June 2019 has been prepared on the basis of accounting policies and methods of computation consistent with those applied in the 30 June 2018 financial statements contained within the Annual Report of the Group, with the exception of the following new accounting standards and interpretations which became effective from 1 July 2018:

-- IFRS 9/AASB 9 'Financial Instruments' which is a replacement of IAS 39/AASB 139 'Financial Instruments: Recognition and Measurement';

-- IFRS 15/AASB 15 'Revenue from Contracts with Customers' which replaces previous revenue requirements, including IAS 18/AASB 118 'Revenue'; and

   --    IFRIC 22 'Foreign Currency Transactions and Advance Consideration'. 

The comparative figures for the financial years ended 30 June 2018 and 30 June 2017 are not the statutory accounts of the Group for those financial years. Those accounts have been reported on by the company's auditor and delivered to the Registrar of Companies. The reports of the auditor were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the reports and (iii) did not contain a statement under Section 498(2) or (3) of the UK Companies Act 2006.

All amounts are expressed in US dollars unless otherwise noted. The Group's presentation currency and the functional currency of the majority of its operations is US dollars as this is the principal currency of the economic environment in which it operates. Amounts in this financial information have, unless otherwise indicated, been rounded to the nearest million dollars.

Where applicable, comparative periods have been adjusted to disclose them on the same basis as the current period figures.

30

Consolidated Income Statement for the year ended 30 June 2019

 
                                                                         2018        2017 
                                                              2019        US$M        US$M 
                                                    Notes     US$M      Restated    Restated 
                                                   ------  ---------  ----------  ---------- 
Continuing operations 
Revenue                                                       44,288      43,129      35,740 
Other income                                                     393         247         662 
Expenses excluding net finance costs                        (28,022)    (27,527)    (24,120) 
(Loss)/profit from equity accounted investments, 
 related impairments and expenses                     2        (546)         147         272 
Profit from operations                                        16,113      15,996      12,554 
 
Financial expenses                                           (1,510)     (1,567)     (1,560) 
Financial income                                                 446         322         143 
Net finance costs                                     3      (1,064)     (1,245)     (1,417) 
Profit before taxation                                        15,049      14,751      11,137 
 
Income tax expense                                           (5,335)     (6,879)     (4,276) 
Royalty-related taxation (net of income 
 tax benefit)                                                  (194)       (128)       (167) 
Total taxation expense                                4      (5,529)     (7,007)     (4,443) 
Profit after taxation from Continuing operations               9,520       7,744       6,694 
Discontinued operations 
Loss after taxation from Discontinued operations      9        (335)     (2,921)       (472) 
Profit after taxation from Continuing and 
 Discontinued operations                                       9,185       4,823       6,222 
   Attributable to non-controlling interests                     879       1,118         332 
   Attributable to BHP shareholders                            8,306       3,705       5,890 
 
Basic earnings per ordinary share (cents)             5        160.3        69.6       110.7 
Diluted earnings per ordinary share (cents)           5        159.9        69.4       110.4 
Basic earnings from Continuing operations 
 per ordinary share (cents)                           5        166.9       125.0       119.8 
Diluted earnings from Continuing operations 
 per ordinary share (cents)                           5        166.5       124.6       119.5 
 

The accompanying notes form part of this financial information.

31

Consolidated Statement of Comprehensive Income for the year ended 30 June 2019

 
                                                                                           2019     2018 
                                                                                            US$M     US$M    2017 US$M 
                                                                                         -------  -------  ----------- 
Profit after taxation from Continuing and Discontinued operations                          9,185    4,823        6,222 
Other comprehensive income 
Items that may be reclassified subsequently to the income statement: 
Net valuation gains/(losses) on investments taken to equity                                    -       11          (1) 
Hedges: 
      (Losses)/gains taken to equity                                                       (327)       82          351 
      Losses/(gains) transferred to the income statement                                     299    (215)        (432) 
Exchange fluctuations on translation of foreign operations taken to equity                     1        2          (1) 
Exchange fluctuations on translation of foreign operations transferred to income 
statement                                                                                    (6)        -            - 
Tax recognised within other comprehensive income                                               8       36           24 
Total items that may be reclassified subsequently to the income statement                   (25)     (84)         (59) 
Items that will not be reclassified to the income statement: 
Re-measurement (losses)/gains on pension and medical schemes                                (20)        1           36 
Equity investments held at fair value                                                          1        -            - 
Tax recognised within other comprehensive income                                              19     (14)         (26) 
Total items that will not be reclassified to the income statement                              -     (13)           10 
Total other comprehensive loss                                                              (25)     (97)         (49) 
Total comprehensive income                                                                 9,160    4,726        6,173 
      Attributable to non-controlling interests                                              878    1,118          332 
      Attributable to BHP shareholders                                                     8,282    3,608        5,841 
 

The accompanying notes form part of this financial information.

32

Consolidated Balance Sheet as at 30 June 2019

 
                                                        2019       2018 
                                                         US$M       US$M 
                                                     ---------  --------- 
ASSETS 
Current assets 
Cash and cash equivalents                               15,613     15,871 
Trade and other receivables                              3,462      3,096 
Other financial assets                                      87        200 
Inventories                                              3,840      3,764 
Assets held for sale                                         -     11,939 
Current tax assets                                         124        106 
Other                                                      247        154 
Total current assets                                    23,373     35,130 
Non-current assets 
Trade and other receivables                                313        180 
Other financial assets                                   1,303        999 
Inventories                                                768      1,141 
Property, plant and equipment                           68,041     67,182 
Intangible assets                                          675        778 
Investments accounted for using the equity method        2,569      2,473 
Deferred tax assets                                      3,764      4,041 
Other                                                       55         69 
Total non-current assets                                77,488     76,863 
Total assets                                           100,861    111,993 
LIABILITIES 
Current liabilities 
Trade and other payables                                 6,717      5,977 
Interest bearing liabilities                             1,661      2,736 
Liabilities held for sale                                    -      1,222 
Other financial liabilities                                127        138 
Current tax payable                                      1,546      1,773 
Provisions                                               2,175      2,025 
Deferred income                                            113        118 
Total current liabilities                               12,339     13,989 
Non-current liabilities 
Trade and other payables                                     5          3 
Interest bearing liabilities                            23,167     24,069 
Other financial liabilities                                896      1,093 
Non-current tax payable                                    187        137 
Deferred tax liabilities                                 3,234      3,472 
Provisions                                               8,928      8,223 
Deferred income                                            281        337 
Total non-current liabilities                           36,698     37,334 
Total liabilities                                       49,037     51,323 
Net assets                                              51,824     60,670 
EQUITY 
Share capital - BHP Group Limited                        1,111      1,186 
Share capital - BHP Group Plc                            1,057      1,057 
Treasury shares                                           (32)        (5) 
Reserves                                                 2,285      2,290 
Retained earnings                                       42,819     51,064 
Total equity attributable to BHP shareholders           47,240     55,592 
Non-controlling interests                                4,584      5,078 
Total equity                                            51,824     60,670 
 

The accompanying notes form part of this financial information.

33

Consolidated Cash Flow Statement for the year ended 30 June 2019

 
                                                                                           2019       2018      2017 
                                                                                 Notes     US$M       US$M       US$M 
                                                                                ------  ---------  ---------  -------- 
Operating activities 
Profit before taxation                                                                     15,049     14,751    11,137 
Adjustments for: 
   Depreciation and amortisation expense                                                    5,829      6,288     6,184 
   Impairments of property, plant and equipment, financial assets and 
    intangibles                                                                               264        333       193 
   Net finance costs                                                                        1,064      1,245     1,417 
   Loss/(profit) from equity accounted investments, related impairments and 
    expenses                                                                                  546      (147)     (272) 
   Other                                                                                      308        597       194 
Changes in assets and liabilities: 
   Trade and other receivables                                                              (211)      (662)       267 
   Inventories                                                                                298      (182)     (687) 
   Trade and other payables                                                                   406        719       512 
   Provisions and other assets and liabilities                                              (125)          7     (333) 
Cash generated from operations                                                             23,428     22,949    18,612 
Dividends received                                                                            516        709       636 
Interest received                                                                             443        290       164 
Interest paid                                                                             (1,346)    (1,177)   (1,148) 
Proceeds/(settlements) of cash management related instruments                                 296      (292)     (140) 
Net income tax and royalty-related taxation refunded                                           59         17       337 
Net income tax and royalty-related taxation paid                                          (5,999)    (4,935)   (2,585) 
Net operating cash flows from Continuing operations                                        17,397     17,561    15,876 
Net operating cash flows from Discontinued operations                              9          474        900       928 
Net operating cash flows                                                                   17,871     18,461    16,804 
Investing activities 
Purchases of property, plant and equipment                                                (6,250)    (4,979)   (3,697) 
Exploration expenditure                                                                     (873)      (874)     (966) 
Exploration expenditure expensed and included in operating cash flows                         516        641       610 
Net investment and funding of equity accounted investments                                  (630)        204     (234) 
Proceeds from sale of assets                                                                  145         89       529 
Proceeds from divestment of subsidiaries, operations and joint operations, net 
 of their cash                                                                                  4          -       187 
Other investing                                                                             (289)      (141)     (153) 
Net investing cash flows from Continuing operations                                       (7,377)    (5,060)   (3,724) 
Net investing cash flows from Discontinued operations                              9        (443)      (861)     (437) 
Proceeds from divestment of Onshore US, net of its cash                            9       10,427          -         - 
Net investing cash flows                                                                    2,607    (5,921)   (4,161) 
Financing activities 
Proceeds from interest bearing liabilities                                                    250        528     1,577 
(Settlements)/proceeds of debt related instruments                                          (160)      (218)        36 
Repayment of interest bearing liabilities                                                 (2,604)    (4,188)   (7,114) 
Purchase of shares by Employee Share Ownership Plan (ESOP) Trusts                           (188)      (171)     (108) 
Share buy-back - BHP Group Limited                                                        (5,220)          -         - 
Dividends paid                                                                           (11,395)    (5,220)   (2,921) 
Dividends paid to non-controlling interests                                               (1,198)    (1,582)     (575) 
Net financing cash flows from Continuing operations                                      (20,515)   (10,851)   (9,105) 
Net financing cash flows from Discontinued operations                              9         (13)       (40)      (28) 
Net financing cash flows                                                                 (20,528)   (10,891)   (9,133) 
Net (decrease)/increase in cash and cash equivalents from Continuing 
 operations                                                                              (10,495)      1,650     3,047 
Net increase/(decrease) in cash and cash equivalents from Discontinued 
 operations                                                                                    18        (1)       463 
Proceeds from divestment of Onshore US, net of its cash                                    10,427          -         - 
Cash and cash equivalents, net of overdrafts, at the beginning of the 
 financial year                                                                            15,813     14,108    10,276 
Foreign currency exchange rate changes on cash and cash equivalents                         (170)         56       322 
Cash and cash equivalents, net of overdrafts, at the end of the financial year             15,593     15,813    14,108 
 

The accompanying notes form part of this financial information.

34

Consolidated Statement of Changes in Equity for the year ended 30 June 2019

 
                                        Attributable to BHP shareholders 
                  ---------------------------------------------------------------------------- 
                     Share capital         Treasury 
                                             shares 
                  ------------------  ------------------                         -------------  ------------ 
                     BHP       BHP       BHP       BHP                               Total 
                     Group     Group     Group     Group                             equity 
                    Limited     Plc     Limited     Plc                           attributable      Non- 
                                                                      Retained       to BHP      controlling    Total 
US$M                                                       Reserves    earnings   shareholders    interests     equity 
                  ---------  -------  ---------  -------  ---------  ----------  -------------  ------------  -------- 
Balance as at 1 
 July 2018            1,186    1,057        (5)        -      2,290      51,064         55,592         5,078    60,670 
Impact of 
 adopting 
 IFRS 9                   -        -          -        -          -         (7)            (7)             -       (7) 
Balance as at 1 
 July 2018            1,186    1,057        (5)        -      2,290      51,057         55,585         5,078    60,663 
Total 
 comprehensive 
 income                   -        -          -        -       (24)       8,306          8,282           878     9,160 
Transactions 
with 
owners: 
Purchase of 
 shares 
 by ESOP Trusts           -        -      (182)      (6)          -           -          (188)             -     (188) 
Employee share 
 awards 
 exercised 
 net of employee 
 contributions            -        -        155        6      (100)        (61)              -             -         - 
Employee share 
 awards 
 forfeited                -        -          -        -       (18)          18              -             -         - 
Accrued employee 
 entitlement for 
 unexercised 
 awards                   -        -          -        -        138           -            138             -       138 
Dividends                 -        -          -        -          -    (11,302)       (11,302)       (1,205)  (12,507) 
BHP Group 
 Limited 
 shares bought 
 back 
 and cancelled         (75)        -          -        -          -     (5,199)        (5,274)             -   (5,274) 
Divestment of 
 subsidiaries, 
 operations and 
 joint 
 operations               -        -          -        -          -           -              -         (168)     (168) 
Transfer to 
 non-controlling 
 interests                -        -          -        -        (1)           -            (1)             1         - 
Balance as at 30 
 June 2019            1,111    1,057       (32)        -      2,285      42,819         47,240         4,584    51,824 
 
Balance as at 1 
 July 2017            1,186    1,057        (2)      (1)      2,400      52,618         57,258         5,468    62,726 
Total 
 comprehensive 
 income                   -        -          -        -       (87)       3,695          3,608         1,118     4,726 
Transactions 
with 
owners: 
Purchase of 
 shares 
 by ESOP Trusts           -        -      (159)     (12)          -           -          (171)             -     (171) 
Employee share 
 awards 
 exercised 
 net of employee 
 contributions            -        -        156       13      (139)        (30)              -             -         - 
Employee share 
 awards 
 forfeited                -        -          -        -        (2)           2              -             -         - 
Accrued employee 
 entitlement for 
 unexercised 
 awards                   -        -          -        -        123           -            123             -       123 
Distribution to 
 non-controlling 
 interests                -        -          -        -          -           -              -          (14)      (14) 
Dividends                 -        -          -        -          -     (5,221)        (5,221)       (1,499)   (6,720) 
Transfer to 
 non-controlling 
 interests                -        -          -        -        (5)           -            (5)             5         - 
Balance as at 30 
 June 2018            1,186    1,057        (5)        -      2,290      51,064         55,592         5,078    60,670 
 
Balance as at 1 
 July 2016            1,186    1,057        (7)     (26)      2,538      49,542         54,290         5,781    60,071 
Total 
 comprehensive 
 income                   -        -          -        -       (59)       5,900          5,841           332     6,173 
Transactions 
with 
owners: 
Purchase of 
 shares 
 by ESOP Trusts           -        -      (105)      (3)          -           -          (108)             -     (108) 
Employee share 
 awards 
 exercised 
 net of employee 
 contributions            -        -        110       28      (167)          29              -             -         - 
Employee share 
 awards 
 forfeited                -        -          -        -       (18)          18              -             -         - 
Accrued employee 
 entitlement for 
 unexercised 
 awards                   -        -          -        -        106           -            106             -       106 
Distribution to 
 non-controlling 
 interests                -        -          -        -          -           -              -          (16)      (16) 
Dividends                 -        -          -        -          -     (2,871)        (2,871)         (601)   (3,472) 
Divestment of 
 subsidiaries, 
 operations and 
 joint 
 operations               -        -          -        -          -           -              -          (28)      (28) 
Balance as at 30 
 June 2017            1,186    1,057        (2)      (1)      2,400      52,618         57,258         5,468    62,726 
 

The accompanying notes form part of this financial information.

35

Notes to the Financial Information

   1.     Exceptional items 

Exceptional items are those gains or losses where their nature, including the expected frequency of the events giving rise to them, and amount is considered material to the Financial Statements. Such items included within the Group's profit for the year are detailed below. Exceptional items attributable to Discontinued operations are detailed in note 9 Discontinued operations.

 
                                               Gross      Tax       Net 
Year ended 30 June 2019                         US$M      US$M      US$M 
                                            ---------  -------  --------- 
Exceptional items by category 
Samarco dam failure                           (1,060)        -    (1,060) 
Global taxation matters                             -      242        242 
Total                                         (1,060)      242      (818) 
Attributable to non-controlling interests           -        -          - 
Attributable to BHP shareholders              (1,060)      242      (818) 
 

Samarco Mineração SA (Samarco) dam failure

The exceptional loss of US$1,060 million related to the Samarco dam failure in November 2015 comprises the following:

 
Year ended 30 June 2019                                                                         US$M 
                                                                                               ------- 
Other income                                                                                        50 
Expenses excluding net finance costs: 
   Costs incurred directly by BHP Billiton Brasil Ltda and other BHP entities in relation to 
    the Samarco dam failure                                                                       (57) 
Loss from equity accounted investments, related impairments and expenses: 
   Share of loss relating to the Samarco dam failure                                              (96) 
   Samarco Germano dam decommissioning                                                           (263) 
   Samarco dam failure provision                                                                 (586) 
Net finance costs                                                                                (108) 
Total(1)                                                                                       (1,060) 
 
   (1)    Refer to note 8 Significant events - Samarco dam failure for further information. 

Global taxation matters

Global taxation matters includes amounts released from provisions for tax matters and other claims resolved during the period.

 
                                              Gross      Tax        Net 
Year ended 30 June 2018                        US$M      US$M       US$M 
                                            -------  ---------  --------- 
Exceptional items by category 
Samarco dam failure                           (650)          -      (650) 
US tax reform                                     -    (2,320)    (2,320) 
Total                                         (650)    (2,320)    (2,970) 
Attributable to non-controlling interests         -          -          - 
Attributable to BHP shareholders              (650)    (2,320)    (2,970) 
 
 
                                                                            Gross     Tax       Net 
Year ended 30 June 2017                                                      US$M     US$M      US$M 
                                                                          -------  -------  --------- 
Exceptional items by category 
Samarco dam failure                                                         (381)        -      (381) 
Escondida industrial action                                                 (546)      179      (367) 
Cancellation of the Caroona exploration licence                               164     (49)        115 
Withholding tax on Chilean dividends                                            -    (373)      (373) 
Total                                                                       (763)    (243)    (1,006) 
Attributable to non-controlling interests - Escondida industrial action     (232)       68      (164) 
Attributable to BHP shareholders                                            (531)    (311)      (842) 
 
 

36

   2.     Interests in associates and joint venture entities 

The Group's major shareholdings in associates and joint venture entities, including their (loss)/profit, are listed below:

 
                         Ownership interest at the Group's reporting          (Loss)/profit from equity accounted 
                                           date(1)                       investments, related impairments and expenses 
                      ------------------------------------------------  ---------------------------------------------- 
                           2019             2018             2017            2019            2018            2017 
                             %                %                %              US$M            US$M            US$M 
                      --------------  ---------------  ---------------  --------------  --------------  -------------- 
Share of operating 
profit/(loss) of 
equity accounted 
investments: 
Cerrej n                       33.33            33.33            33.33             103             192             129 
Compañia Minera 
 Antamina SA                   33.75            33.75            33.75             393             544             341 
Samarco 
 Mineração 
 SA(2)(3)                      50.00            50.00            50.00            (96)            (80)           (134) 
Other                                                                             (97)            (80)            (26) 
Share of operating profit of equity accounted investments                          303             576             310 
Samarco dam failure provision expense(2)                                         (586)           (429)            (38) 
Samarco Germano dam decommissioning(2)                                           (263)               -               - 
(Loss)/profit from equity accounted investments, related impairments 
 and expenses                                                                    (546)             147             272 
 

(1) The ownership interest at the Group's and the associates and joint venture entities' reporting dates are the same.

   (2)    Refer to note 8 Significant events - Samarco dam failure for further information. 

(3) As the carrying value has been previously written down to US$ nil, any additional share of Samarco's losses are only recognised to the extent BHP Billiton Brasil Ltda has an obligation to fund the losses or investment funding is provided. BHP Billiton Brasil Ltda has provided US$(96) million funding during the period and recognised additional share of losses of US$(96) million.

   3.     Net finance costs 
 
                                         Year ended 30 June 2019    Year ended 30 June 2018    Year ended 30 June 2017 
                                                   US$M                       US$M                       US$M 
                                       -------------------------  -------------------------  ------------------------- 
Financial expenses 
Interest expense using the effective 
interest rate method: 
Interest on bank loans, overdrafts 
 and all other borrowings                                  1,296                      1,168                      1,130 
Interest capitalised at 4.96% (2018: 
 4.24%; 2017: 3.25%)(1)                                    (248)                      (139)                      (113) 
Interest on finance leases                                    47                         59                         33 
Discounting on provisions and other 
 liabilities                                                 470                        414                        450 
Other gains and losses: 
Fair value change on hedged loans                            729                      (265)                    (1,185) 
Fair value change on hedging 
 derivatives                                               (809)                        329                      1,244 
Exchange variations on net debt                                6                       (19)                       (23) 
Other                                                         19                         20                         24 
Total financial expenses                                   1,510                      1,567                      1,560 
Financial income 
Interest income                                            (446)                      (322)                      (143) 
Net finance costs                                          1,064                      1,245                      1,417 
 

(1) Interest has been capitalised at the rate of interest applicable to the specific borrowings financing the assets under construction or, where financed through general borrowings, at a capitalisation rate representing the average interest rate on such borrowings. Tax relief for capitalised interest is approximately US$74 million (2018: US$42 million; 2017: US$34 million).

37

   4.     Income tax expense 
 
                                       Year ended       Year ended       Year ended 
                                       30 June 2019     30 June 2018     30 June 2017 
                                           US$M             US$M             US$M 
                                    ---------------  ---------------  --------------- 
Total taxation expense comprises: 
Current tax expense                           5,408            5,052            4,412 
Deferred tax expense                            121            1,955               31 
                                              5,529            7,007            4,443 
 
 
                                                                        Year ended       Year ended       Year ended 
                                                                        30 June 2019     30 June 2018     30 June 2017 
                                                                            US$M             US$M             US$M 
                                                                     ---------------  ---------------  --------------- 
Factors affecting income tax expense for the year 
Income tax expense differs to the standard rate of corporation tax 
as follows: 
Profit before taxation                                                        15,049           14,751           11,137 
Tax on profit at Australian prima facie tax rate of 30 per cent                4,515            4,425            3,341 
Impact of US tax reform 
Tax rate changes                                                                   -            1,390                - 
Non-tax effected operating losses and capital gains                                -              834                - 
Tax on remitted and unremitted foreign earnings(1)                                 -              194                - 
Recognition of previously unrecognised tax assets                                  -             (95)                - 
Other                                                                              -              (3)                - 
Subtotal                                                                           -            2,320                - 
Other items not related to US tax reform 
Non-tax effected operating losses and capital gains                              742              721              242 
Tax on remitted and unremitted foreign earnings                                  283              401              478 
Tax effect of (loss)/profit from equity accounted investments, 
 related impairments and expenses(2)                                             164             (44)             (82) 
Tax rate changes                                                                   6             (79)               25 
Recognition of previously unrecognised tax assets                               (10)            (170)             (21) 
Amounts (over)/under provided in prior years                                    (21)             (51)              175 
Foreign exchange adjustments                                                    (25)            (152)               88 
Investment and development allowance                                            (94)            (180)             (53) 
Impact of tax rates applicable outside of Australia                            (312)            (484)            (136) 
Other                                                                             87              172              219 
Income tax expense                                                             5,335            6,879            4,276 
Royalty-related taxation (net of income tax benefit)                             194              128              167 
Total taxation expense                                                         5,529            7,007            4,443 
 

(1) Comprising US$797 million repatriation tax and US$603 million of previously unrecognised tax credits.

(2) The profit from equity accounted investments and related expenses is net of income tax. This item removes the prima facie tax effect on such profits and related expenses.

   5.     Earnings per share 
 
                                         Year ended 30 June 2019    Year ended 30 June 2018    Year ended 30 June 2017 
                                       -------------------------  -------------------------  ------------------------- 
Earnings attributable to BHP 
shareholders (US$M) 
- Continuing operations                                    8,648                      6,652                      6,375 
- Total                                                    8,306                      3,705                      5,890 
Weighted average number of shares 
(Million) 
- Basic(1)                                                 5,180                      5,323                      5,323 
- Diluted(2)                                               5,193                      5,337                      5,336 
Basic earnings per ordinary share (US 
cents)(3) 
- Continuing operations                                    166.9                      125.0                      119.8 
- Total                                                    160.3                       69.6                      110.7 
Diluted earnings per ordinary share 
(US cents)(3) 
- Continuing operations                                    166.5                      124.6                      119.5 
- Total                                                    159.9                       69.4                      110.4 
 

(1) The calculation of the number of ordinary shares used in the computation of basic earnings per share is the aggregate of the weighted average number of ordinary shares of BHP Group Limited and BHP Group Plc outstanding during the period after deduction of the number of shares held by the Billiton Employee Share Ownership Trust and the BHP Billiton Limited Employee Equity Trust.

38

(2) For the purposes of calculating diluted earnings per share, the effect of 13 million of dilutive shares has been taken into account for the year ended 30 June 2019 (2018: 14 million shares; 2017: 13 million shares). The Group's only potential dilutive ordinary shares are share awards granted under employee share ownership plans. Diluted earnings per share calculation excludes instruments which are considered antidilutive.

At 30 June 2019, there are no instruments which are considered antidilutive (2018: nil, 2017: nil).

   (3)    Each American Depositary Share represents twice the earnings for BHP ordinary shares. 
   6.     Dividends 
 
                                 Year ended          Year ended          Year ended 
                                30 June 2019         30 June 2018        30 June 2017 
                            -------------------  ------------------  ------------------ 
                             Per share   Total    Per share   Total   Per share   Total 
                              US cents    US$M     US cents    US$M    US cents    US$M 
                            ----------  -------  ----------  ------  ----------  ------ 
Dividends paid during the 
 period(1) 
Prior year final dividend         63.0    3,356        43.0   2,291        14.0     746 
Interim dividend                  55.0    2,788        55.0   2,930        40.0   2,125 
Special dividend                 102.0    5,158           -       -           -       - 
                                 220.0   11,302        98.0   5,221        54.0   2,871 
 

(1) 5.5 per cent dividend on 50,000 preference shares of GBP1 each determined and paid annually (2018: 5.5 per cent; 2017: 5.5 per cent).

Dividends paid during the period differs from the amount of dividends paid in the Cash Flow Statement as a result of foreign exchange gains and losses relating to the timing of equity distributions between the record date and the payment date.

Dividends are determined after period-end and contained within the announcement of the results for the period. Interim dividends are determined in February and paid in March. Final dividends are determined in August and paid in September. Dividends determined are not recorded as a liability at the end of the period to which they relate. Subsequent to the year-end, on 20 August 2019, BHP Group Limited and BHP Group Plc determined a final dividend of 78 US cents per share (US$3,944 million), which will be paid on 25 September 2019 (2018: final dividend of 63 US cents per share - US$3,354 million; 2017: final dividend of 43 US cents per share - US$2,289 million).

At 30 June 2019, BHP Group Limited had 2,945 million ordinary shares on issue and held by the public and BHP Group Plc had 2,112 million ordinary shares on issue and held by the public. No shares in BHP Group Limited were held by BHP Group Plc at 30 June 2019 (2018: nil; 2017: nil).

The Dual Listed Company merger terms require that ordinary shareholders of BHP Group Limited and BHP Group Plc are paid equal cash dividends on a per share basis. Each American Depositary Share (ADS) represents two ordinary shares of BHP Group Limited or BHP Group Plc. Dividends determined on each ADS represent twice the dividend determined on BHP ordinary shares.

BHP Group Limited dividends for all periods presented are, or will be, fully franked based on a tax rate of 30 per cent.

 
                                                                2019      2018      2017 
                                                                 US$M     US$M      US$M 
                                                              -------  --------  -------- 
Franking credits as at 30 June                                  8,681    10,400    10,155 
Franking credits arising from the payment of current tax        1,194     1,330     1,239 
Total franking credits available(1)                             9,875    11,730    11,394 
 

(1) The payment of the final 2019 dividend determined after 30 June 2019 will reduce the franking account balance by US$984 million.

   7.     Share capital 

During December 2018, BHP completed an off-market buy-back program of US$5.2 billion of BHP Group Limited shares related to the disbursement of proceeds from the disposal of Onshore US.

39

Shares bought back and cancelled during the period differs from the amount paid in the Cash Flow Statement as a result of foreign exchange gains and losses relating to the timing of equity distributions between the completion of the buy-back tender and the payment date.

Details of the BHP Group Limited purchases are shown in the table below:

 
                                                                        Total cost 
 Year ended       Shares purchased       Number       Cost per share       US$M 
-------------  --------------------  -------------  ----------------  ------------ 
30 June 2019     BHP Group Limited     265,839,711       A$27.64          5,274 
 
   8.     Significant events - Samarco dam failure 

On 5 November 2015, the Samarco Mineração S.A. (Samarco) iron ore operation in Minas Gerais, Brazil, experienced a tailings dam failure that resulted in a release of mine tailings, flooding the communities of Bento Rodrigues, Gesteira and Paracatu and impacting other communities downstream (the Samarco dam failure).

Samarco is jointly owned by BHP Billiton Brasil Ltda (BHP Billiton Brasil) and Vale S.A. (Vale). BHP Billiton Brasil's 50 per cent interest is accounted for as an equity accounted joint venture investment. BHP Billiton Brasil does not separately recognise its share of the underlying assets and liabilities of Samarco, but instead records the investment as one line on the balance sheet. Each period, BHP Billiton Brasil recognises its 50 per cent share of Samarco's profit or loss and adjusts the carrying value of the investment in Samarco accordingly. Such adjustment continues until the investment carrying value is reduced to US$ nil, with any additional share of Samarco losses only recognised to the extent that BHP Billiton Brasil has an obligation to fund the losses, or when future investment funding is provided. After applying equity accounting, any remaining carrying value of the investment is tested for impairment.

Any charges relating to the Samarco dam failure incurred directly by BHP Billiton Brasil or other BHP entities are recognised 100 per cent in the Group's results.

The financial impacts of the Samarco dam failure on the Group's income statement, balance sheet and cash flow statement for the year ended 30 June 2019 are shown in the table below and have been treated as an exceptional item.

 
                                                                        Year ended       Year ended       Year ended 
                                                                        30 June 2019     30 June 2018     30 June 2017 
Financial impacts of Samarco dam failure                                    US$M             US$M             US$M 
                                                                     ---------------  ---------------  --------------- 
Income statement 
Other income(1)                                                                   50                -                - 
Expenses excluding net finance costs: 
   Costs incurred directly by BHP Billiton Brasil and other BHP 
    entities in relation to the Samarco 
    dam failure(2)                                                              (57)             (57)             (82) 
Loss from equity accounted investments, related impairments and 
expenses: 
   Share of loss relating to the Samarco dam failure(3)                         (96)             (80)            (134) 
   Samarco Germano dam decommissioning                                         (263)                -                - 
   Samarco dam failure provision(4)                                            (586)            (429)             (38) 
Loss from operations                                                           (952)            (566)            (254) 
Net finance costs(5)                                                           (108)             (84)            (127) 
Loss before taxation                                                         (1,060)            (650)            (381) 
Income tax benefit                                                                 -                -                - 
Loss after taxation                                                          (1,060)            (650)            (381) 
 
Balance sheet movement 
Trade and other payables                                                           4                4              (3) 
Provisions                                                                     (629)            (228)              143 
Net (liabilities)/assets                                                       (625)            (224)              140 
 

40

   8.     Significant events - Samarco dam failure (continued) 
 
                                                                   Year ended         Year ended         Year ended 
                                                                   30 June 2019       30 June 2018       30 June 2017 
                                                                       US$M               US$M               US$M 
                                                               -----------------  -----------------  ----------------- 
Cash flow statement 
Loss before taxation                                                     (1,060)              (650)              (381) 
Adjustments for: 
Share of loss relating to the Samarco dam failure(3)              96                  80                134 
Samarco Germano dam decommissioning                              263                   -                  - 
Samarco dam failure provision(4)                                 586                 429                 38 
Net finance costs(5)                                             108                  84                127 
Changes in assets and liabilities: 
Trade and other payables                                         (4)                 (4)                  3 
Net operating cash flows                                                    (11)               (61)               (79) 
Net investment and funding of equity accounted investments(6)              (424)              (365)              (442) 
Net investing cash flows                                                   (424)              (365)              (442) 
Net decrease in cash and cash equivalents                                  (435)              (426)              (521) 
 
   (1)    Proceeds from insurance settlements. 
   (2)    Includes legal and advisor costs incurred. 
   (3)    Loss from working capital funding provided during the period. 
   (4)    US$(579) million change in estimate and US$(7) million exchange translation. 
   (5)    Amortisation of discounting of provision. 

(6) Includes US$(96) million funding provided during the period and US$(328) million utilisation of the Samarco dam failure provision, of which US$(313) million allowed for the continuation of reparatory and compensatory programs in relation to the Framework Agreement and a further US$(15) million for dam stabilisation and expert costs.

Equity accounted investment in Samarco

BHP Billiton Brasil's investment in Samarco remains at US$ nil. BHP Billiton Brasil provided US$96 million funding under a working capital facility during the period and recognised additional share of losses of US$96 million. No dividends have been received by BHP Billiton Brasil from Samarco during the period. Samarco currently does not have profits available for distribution and is legally prevented from paying previously declared and unpaid dividends.

Provisions related to the Samarco dam failure

 
                                                              30 June 2019      30 June 2018 
                                                                  US$M              US$M 
                                                           ----------------  ---------------- 
At the beginning of the financial year                                1,285             1,057 
Movement in provisions                                                  629               228 
Comprising: 
Utilised                                                     (328)             (285) 
Adjustments charged to the income statement: 
 Change in estimate                                            579               560 
 Samarco Germano dam decommissioning                           263                 - 
 Amortisation of discounting impacting net finance costs       108                84 
Exchange translation                                             7             (131) 
At the end of the financial year                                      1,914             1,285 
Comprising: 
 Current                                                                440               313 
 Non-current                                                          1,474               972 
At the end of the financial year                                      1,914             1,285 
 

41

   8.     Significant events - Samarco dam failure (continued) 

Samarco dam failure provisions and contingencies

As at 30 June 2019, BHP Billiton Brasil has identified provisions and contingent liabilities arising as a consequence of the Samarco dam failure as follows:

Provision for Samarco dam failure

On 2 March 2016, BHP Billiton Brasil, Samarco and Vale, entered into a Framework Agreement with the Federal Government of Brazil, the states of Espírito Santo and Minas Gerais and certain other public authorities to establish a foundation (Fundação Renova) that will develop and execute environmental and socio-economic programs (Programs) to remediate and provide compensation for damage caused by the Samarco dam failure. Key Programs include those for financial assistance and compensation of impacted persons, including fishermen impacted by the dam failure, and those for remediation of impacted areas and resettlement of impacted communities. A committee (Interfederative Committee) comprising representatives from the Brazilian Federal and State Governments, local municipalities, environmental agencies, impacted communities and Public Defence Office oversees the activities of the Fundação Renova in order to monitor, guide and assess the progress of actions agreed in the Framework Agreement.

The term of the Framework Agreement is 15 years, renewable for periods of one year successively until all obligations under the Framework Agreement have been performed. Under the Framework Agreement, Samarco is responsible for funding Fundação Renova's annual calendar year budget for the duration of the Framework Agreement. The funding amounts for each calendar year will be dependent on the remediation and compensation projects to be undertaken in a particular year. Annual contributions may be reviewed under the Framework Agreement. To the extent that Samarco does not meet its funding obligations, each of BHP Billiton Brasil and Vale has funding obligations under the Framework Agreement in proportion to its 50 per cent shareholding in Samarco.

Mining and processing operations remain suspended and Samarco is currently progressing plans to resume operations, however significant uncertainties surrounding the nature and timing of ongoing future operations remain. In light of these uncertainties and based on currently available information, BHP Billiton Brasil's provision for its obligations under the Framework Agreement Programs is US$1.7 billion before tax and after discounting at 30 June 2019 (30 June 2018: US$1.3 billion).

Under a Governance Agreement ratified on 8 August 2018, BHP Billiton Brasil, Samarco and Vale will establish a process to renegotiate the Programs over two years to progress settlement of the R$155 billion (approximately US$40 billion) Federal Public Prosecution Office claim (described below).

BHP Billiton Brasil, Samarco and Vale maintain security comprising R$1.3 billion (approximately US$340 million) in insurance bonds, R$100 million (approximately US$25 million) in liquid assets and a charge of R$800 million (approximately US$210 million) over Samarco's assets. The security is maintained for a period of 30 months from ratification of the Governance Agreement, after which BHP Billiton Brasil, Vale and Samarco will be required to provide security of an amount equal to the Fundação Renova's annual budget up to a limit of R$2.2 billion (approximately US$575 million).

Samarco Germano dam decommissioning

Due to legislative changes in Brazil, Samarco is currently progressing plans for the accelerated decommissioning of its upstream tailings dams (the Germano dam complex).

42

   8.     Significant events - Samarco dam failure (continued) 

Given the significant uncertainties surrounding the nature and timing of Samarco's future operations, BHP Billiton Brasil has recognised a provision of US$263 million for a 50 per cent share of the expected Germano decommissioning cost. Plans for the decommissioning are at an early stage and as a result, further engineering work and required validation by Brazilian authorities could lead to material changes to estimates in future reporting periods.

If Samarco successfully restarts and generates sufficient cash flows during the period in which the Germano decommissioning activity occurs, BHP Billiton Brasil may not be required to provide funding for the decommissioning, resulting in a reversal of the provision in future reporting periods.

Key judgements and estimates

Judgements

The outcomes of litigation are inherently difficult to predict and significant judgement has been applied in assessing the likely outcome of legal claims and determining which legal claims require recognition of a provision or disclosure of a contingent liability. The facts and circumstances relating to these cases are regularly evaluated in determining whether a provision for any specific claim is required.

Management have determined that a provision can only be recognised for obligations under the Framework Agreement and Samarco Germano dam decommissioning as at 30 June 2019. It is not yet possible to provide a range of possible outcomes or a reliable estimate of potential future exposures to BHP in connection to the contingent liabilities noted below, given their status.

Estimates

The provisions for the Samarco dam failure and Samarco Germano dam decommissioning currently reflect the estimated remaining costs to complete Programs under the Framework Agreement and estimated costs to complete the Germano dam decommissioning and require the use of significant judgements, estimates and assumptions. Based on current estimates, it is expected that approximately 45 per cent of remaining costs for Programs under the Framework Agreement will be incurred by December 2020.

While the provisions have been measured based on information available as at 30 June 2019, likely changes in facts and circumstances in future reporting periods may lead to revisions to these estimates. However, it is currently not possible to determine what facts and circumstances may change, therefore the possible revisions in future reporting periods cannot be reliably measured.

The key estimates that may have a material impact upon the provisions in the next and future reporting periods include:

-- timing of repealing the fishing ban along the Rio Doce, which is subject to certain regulatory approvals and could impact upon the length of financial assistance and compensation payments;

-- number of people eligible for financial assistance and compensation, as duration of registration periods and changes to geographical boundaries or eligibility criteria could impact estimated future costs;

   --   costs to complete resettlement of the Bento Rodrigues, Gesteira and Paracatu communities. 
   --   costs to complete Germano dam decommissioning 

The provisions may also be affected by factors including but not limited to:

43

   8.     Significant events - Samarco dam failure (continued) 

-- potential changes in scope of work and funding amounts required under the Framework Agreement including the impact of the decisions of the Interfederative Committee along with further technical analysis and community participation required under the Governance Agreement;

   --   the outcome of ongoing negotiations with State and Federal Prosecutors, including review of Fundação Renova's Programs as provided in the Governance Agreement; 
   --   actual costs incurred; 
   --   resolution of uncertainty in respect of operational restart; 
   --   updates to discount and foreign exchange rates; 
   --   resolution of existing and potential legal claims; 

Given these factors, future actual expenditures may differ from the amounts currently provided and changes to key assumptions and estimates could result in a material impact to the provision in the next and future reporting periods.

Contingent liabilities

The following matters are disclosed as contingent liabilities and given the status of proceedings it is not possible to provide a range of possible outcomes or a reliable estimate of potential future exposures for BHP, unless otherwise stated. Ultimately, all the legal matters disclosed as contingent liabilities could have a material adverse impact on BHP's business, competitive position, cash flows, prospects, liquidity and shareholder returns.

Federal Public Prosecution Office claim

BHP Billiton Brasil is among the defendants named in a claim brought by the Federal Public Prosecution Office on 3 May 2016, seeking R$155 billion (approximately US$40 billion) for reparation, compensation and moral damages in relation to the Samarco dam failure.

The 12th Federal Court previously suspended the Federal Public Prosecution Office claim, including a R$7.7 billion (approximately US$2 billion) injunction request. Suspension of the claim continues for a period of two years from the date of ratification of the Governance Agreement on 8 August 2018.

United States class action complaint - Samarco bond holders

On 14 November 2016, a putative class action complaint (Bondholder Complaint) was filed in the U.S. District Court for the Southern District of New York on behalf of purchasers of Samarco's ten-year bond notes (Plaintiff) due 2022-2024 between 31 October 2012 and 30 November 2015. The Bondholder Complaint was initially filed against Samarco and the former chief executive officer of Samarco.

The Complaint was subsequently amended to include BHP Group Limited, BHP Group Plc, BHP Billiton Brasil Ltda, Vale S.A. and officers of Samarco, including four of Vale S.A. and BHP Billiton Brasil Ltda's nominees to the Samarco Board. On 5 April 2017, the Plaintiff discontinued its claims against the individual defendants.

On 7 March 2018, the District Court granted a joint motion from the remaining corporate defendants to dismiss the Bondholder Complaint. A second amended Bondholder Complaint was also dismissed by the Court on 18 July 2019. The Plaintiff has filed a motion, which remains pending before the Court, for reconsideration of that decision or leave to file a third amended complaint.

44

   8.     Significant events - Samarco dam failure (continued) 

The amount of damages sought by the putative class is unspecified.

Australian class action complaints

Three separate shareholder class actions were filed in the Federal Court of Australia on behalf of persons who acquired shares in BHP Group Ltd on the Australian Securities Exchange or shares in BHP Group Plc on the London Stock Exchange and Johannesburg Stock Exchange in periods prior to the Samarco dam failure.

On 18 December 2018, the Court made orders to permanently stay one of the class actions and temporarily stay another. These orders were appealed, with the Federal Court of Australia continuing the temporary stay until 1 September 2019 and ordering representatives of the remaining two class actions to consolidate their actions.

The amount of damages sought in these class actions is unspecified.

United Kingdom group action complaint

BHP Group Plc and BHP Group Ltd are named as defendants in group action claims for damages that have been filed in the courts of England. These claims have been filed on behalf of certain individuals, governments, business and communities in Brazil allegedly impacted by the Samarco dam failure.

On 7 August 2019, the BHP parties filed a preliminary application to strike out or stay this action on jurisdictional and other procedural grounds.

The amount of damages sought in these claims is unspecified.

Criminal charges

The Federal Prosecutors' Office has filed criminal charges against BHP Billiton Brasil, Samarco and Vale and certain employees and former employees of BHP Billiton Brasil (Affected Individuals) in the Federal Court of Ponte Nova, Minas Gerais. On 3 March 2017, BHP Billiton Brasil filed its preliminary defences. BHP Billiton Brasil rejects outright the charges against the company and the Affected Individuals and will defend the charges and fully support each of the Affected Individuals in their defence of the charges.

Other claims

The civil public actions filed by State Prosecutors in Minas Gerais (claiming damages of approximately R$7.5 billion, US$2 billion), State Prosecutors in Espírito Santo (claiming damages of approximately R$2 billion, US$520 million), and public defenders in Minas Gerais (claiming damages of approximately R$10 billion, US$2.6 billion), have been consolidated before the 12th Federal Court and suspended. The Governance Agreement provides for a process to review whether these civil public claims should be terminated or suspended.

BHP Billiton Brasil is among the companies named as defendants in a number of legal proceedings initiated by individuals, non-governmental organisations, corporations and governmental entities in Brazilian Federal and State courts following the Samarco dam failure. The other defendants include Vale, Samarco and Fundação Renova. The lawsuits include claims for compensation, environmental rehabilitation and violations of Brazilian environmental and other laws, among other matters. The lawsuits seek various remedies including rehabilitation costs, compensation to injured individuals and families of the deceased, recovery of personal and property losses, moral damages and injunctive relief. In addition, government inquiries and investigations relating to the Samarco dam failure have been commenced by numerous agencies of the Brazilian government and are ongoing.

45

   8.     Significant events - Samarco dam failure (continued) 

Additional lawsuits and government investigations relating to the Samarco dam failure could be brought against BHP Billiton Brasil and possibly other BHP entities in Brazil or other jurisdictions.

BHP insurance

BHP has various third party liability insurances for claims related to the Samarco dam failure made directly against BHP Billiton Brasil or other BHP entities, their directors and officers, including class actions. External insurers have been notified of the Samarco dam failure, the third party claims and the class actions referred to above.

In the year ended 30 June 2019, BHP recognised income of US$50 million relating to proceeds from insurance settlements. As at 30 June 2019, an insurance receivable has not been recognised for any potential recoveries in respect of ongoing matters.

Commitments

Under the terms of the Samarco joint venture agreement, BHP Billiton Brasil does not have an existing obligation to fund Samarco. For the year ended 30 June 2019, BHP Billiton Brasil has provided US$96 million funding to support Samarco's operations and a further US$15 million for dam stabilisation and prosecutor experts costs, with undrawn amounts of US$17 million expiring as at 30 June 2019. In June 2019, BHP Billiton Brasil made available a new short-term facility of up to US$79 million to carry out remediation and stabilisation work and support Samarco's operations. Funds will be released to Samarco only as required and subject to the achievement of key milestones with amounts undrawn expiring at 31 December 2019.

Any additional requests for funding or future investment provided would be subject to a future decision by BHP Billiton Brasil, accounted for at that time.

   9.     Discontinued operations 

On 28 September 2018, BHP completed the sale of 100 per cent of the issued share capital of BHP Billiton Petroleum (Arkansas) Inc. and 100 per cent of the membership interests in BHP Billiton Petroleum (Fayetteville) LLC, which held the Fayetteville assets, for a gross cash consideration of US$0.3 billion.

On 31 October 2018, BHP completed the sale of 100 per cent of the issued share capital of Petrohawk Energy Corporation, the BHP subsidiary which held the Eagle Ford (being Black Hawk and Hawkville), Haynesville and Permian assets, for a gross cash consideration of US$10.3 billion (net of preliminary customary completion adjustments of US$0.2 billion).

While the effective date at which the right to economic profits transferred to the purchasers was 1 July 2018, the Group continued to control the Onshore US assets until the completion dates of their respective transactions. As such the Group continued to recognise its share of revenue, expenses, net finance costs and associated income tax expense related to the operation until the completion date. In addition the Group provided transitional services to the buyer, which ceased in July 2019.

The completion adjustments included a reduction in sale proceeds, based on the operating cash generated and retained by the Group in the period prior to completion, in order to transfer the economic profits from 1 July to completion date to the buyers. Therefore, the pre-tax profit from operating the assets is largely offset by a pre-tax loss on disposal. Accordingly, the net loss from discontinued operations predominantly relates to incremental costs arising as a consequence of the divestment, including restructuring costs and provisions for surplus office accommodation, and tax expenses largely triggered by the completion of the transactions.

46

The contribution of Discontinued operations included within the Group's profit and cash flows are detailed below:

Income statement - Discontinued operations

 
                                    Year ended 30 June 2019    Year ended 30 June 2018 
                                              US$M                       US$M             Year ended 30 June 2017 US$M 
                                  -------------------------  -------------------------  ------------------------------ 
 
Revenue                                                 851                      2,171                           2,150 
Other income                                             94                         34                              74 
Expenses excluding net finance 
 costs                                                (729)                    (5,790)                         (3,025) 
Profit/(loss) from operations                           216                    (3,585)                           (801) 
 
Financial expenses                                      (8)                       (22)                            (14) 
Net finance costs                                       (8)                       (22)                            (14) 
Profit/(loss) before taxation                           208                    (3,607)                           (815) 
 
Income tax (expense)/benefit                           (33)                        686                             343 
Profit/(loss) after taxation 
 from operating activities                              175                    (2,921)                           (472) 
Net loss on disposal                                  (510)                          -                               - 
Loss after taxation                                   (335)                    (2,921)                           (472) 
      Attributable to 
       non-controlling interests                          7                         26                              13 
      Attributable to BHP 
       shareholders                                   (342)                    (2,947)                           (485) 
 
Basic loss per ordinary share 
 (cents)                                              (6.6)                     (55.4)                           (9.1) 
Diluted loss per ordinary share 
 (cents)                                              (6.6)                     (55.4)                           (9.1) 
 

The total comprehensive income attributable to BHP shareholders from Discontinued operations was a loss of US$342 million (2018: loss of US$2,943 million; 2017: loss of US$489 million).

The conversion of options and share rights would decrease the loss per share for the years ended 30 June 2019, 2018 and 2017 and therefore its impact has been excluded from the diluted earnings per share calculation.

Cash flows from Discontinued operations

 
                                    Year ended 30 June 2019    Year ended 30 June 2018 
                                              US$M                       US$M             Year ended 30 June 2017 US$M 
                                  -------------------------  -------------------------  ------------------------------ 
Net operating cash flows                                474                        900                             928 
Net investing cash flows(1)                           (443)                      (861)                           (437) 
Net financing cash flows(2)                            (13)                       (40)                            (28) 
Net increase/(decrease) in cash 
 and cash equivalents from 
 Discontinued operations                                 18                        (1)                             463 
Net proceeds received from the                       10,531                          -                               - 
sale of Onshore US 
Less Cash and cash equivalents                        (104)                          -                               - 
Proceeds from divestment of                          10,427                          -                               - 
Onshore US, net of its cash 
Total cash impact                                    10,445                        (1)                             463 
 

(1) Includes purchases of property, plant and equipment of US$443 million (2018: US$900 million; 2017: US$555 million), less proceeds from sale of assets of US$ nil (2018: US$39 million; 2017: US$118 million).

(2) Includes net repayment of interest bearing liabilities of US$6 million (2018: US$4 million; 2017: US$6 million), distribution to non-controlling interests of US$ nil (2018: US$14 million; 2017: US$16 million) and dividends paid to non-controlling interests of US$7 million (2018: US$22 million; 2017: US$6 million).

47

Net loss on disposal of Discontinued operations

Details of the net loss on disposal is presented in the table below:

 
                                                              2019 
                                                              US$M 
                                                             ------ 
Assets 
Cash and cash equivalents                                       104 
Trade and other receivables                                     562 
Other financial assets                                           31 
Inventories                                                      34 
Property, plant and equipment                                10,998 
Intangible assets                                               667 
Total assets                                                 12,396 
Liabilities 
Trade and other payables                                        794 
Provisions                                                      491 
Total liabilities                                             1,285 
Net assets                                                   11,111 
Less non-controlling interest share of net assets disposed    (168) 
BHP Share of net assets disposed                             10,943 
Gross consideration                                          10,555 
Less transaction costs                                         (54) 
Income tax expense                                             (68) 
Net loss on disposal                                          (510) 
 

Exceptional items - Discontinued operations

Exceptional items are those gains or losses where their nature, including the expected frequency of the events giving rise to them, and amount is considered material to the financial statements.

There were no exceptional items related to Discontinued operations for the year ended 30 June 2019.

Items related to Discontinued operations included within the Group's profit for the year ended 30 June 2018 are detailed below:

 
                                               Gross      Tax       Net 
Year ended 30 June 2018                         US$M      US$M      US$M 
                                            ---------  -------  --------- 
Exceptional items by category 
US tax reform                                       -      492        492 
Impairment of Onshore US assets               (2,859)      109    (2,750) 
Total                                         (2,859)      601    (2,258) 
Attributable to non-controlling interests           -        -          - 
Attributable to BHP shareholders              (2,859)      601    (2,258) 
 

There were no exceptional items related to Discontinued operations for the year ended 30 June 2017.

   10.    Subsequent events 

Other than the matters outlined elsewhere in this financial information, no matters or circumstances have arisen since the end of the financial year that have significantly affected, or may significantly affect, the operations, results of operations or state of affairs of the Group in subsequent accounting periods.

48

BHP

Alternative performance

measures

Year ended

30 June 2019

Alternative performance measures

We use various alternative performance measures (APMs) to reflect our underlying performance.

These indicators are not defined or specified under the requirements of IFRS, but are derived from the Group's draft financial report for the year ended 30 June 2019 prepared in accordance with IFRS. The measures and below reconciliations included in this document for the year ended 30 June 2019 and comparative periods are unaudited. The APMs are consistent with how management review financial performance of the Group with the Board and the investment community.

We consider Underlying attributable profit to be a key measure that is used as a basis against which short-term incentive outcomes for our senior executives are measured and, in our view, is a relevant measure to assess the financial performance of the Group for this purpose.

Underlying EBITDA is a key APM that management uses internally to assess the performance of the Group's segments and make decisions on the allocation of resources. In the Group's view, this is more relevant to capital intensive industries with long-life assets. Underlying EBITDA and Underlying EBIT are included in the Group's consolidated Financial Statements, as required by IFRS 8 'Operating Segments'.

The "Definition and calculation of alternative performance measures" section outlines why we believe the APMs are useful and the calculation methodology. We believe these APMs provide useful information, but they should not be considered as an indication of, or as a substitute for, statutory measures as an indicator of actual operating performance (such as profit or, net operating cash flow) or any other measure of financial performance or position presented in accordance with IFRS, or as a measure of a company's profitability, liquidity or financial position.

The following tables provide reconciliations between the APMs and their nearest respective IFRS measure.

Exceptional items

To improve the comparability of underlying financial performance between reporting periods some of our APMs adjust the relevant IFRS measures for exceptional items. Refer to the Group's 30 June 2019 financial information for further information on exceptional items.

50

Exceptional items are those gains or losses where their nature, including the expected frequency of the events giving rise to them, and amount is considered material to the Group's financial statements. The exceptional items included within the Group's profit from Continuing and Discontinued operations for the period are detailed below.

 
                                                                                       2019       2018 
Year ended 30 June                                                                      US$M       US$M 
                                                                                    ---------  --------- 
Continuing operations 
Revenue                                                                                     -          - 
Other income                                                                               50          - 
Expenses excluding net finance costs, depreciation, amortisation and impairments         (57)       (57) 
Depreciation and amortisation                                                               -          - 
Net impairments                                                                             -          - 
(Loss)/profit from equity accounted investments, related impairments and expenses       (945)      (509) 
Profit/(loss) from operations                                                           (952)      (566) 
 
Financial expenses                                                                      (108)       (84) 
Financial income                                                                            -          - 
Net finance costs                                                                       (108)       (84) 
Profit/(loss) before taxation                                                         (1,060)      (650) 
 
Income tax benefit/(expense)                                                              242    (2,320) 
Royalty-related taxation (net of income tax benefit)                                        -          - 
Total taxation benefit/(expense)                                                          242    (2,320) 
Profit/(loss) after taxation from Continuing operations                                 (818)    (2,970) 
Discontinued operations 
Profit/(loss) after taxation from Discontinued operations                                   -    (2,258) 
Profit/(loss) after taxation from Continuing and Discontinued operations                (818)    (5,228) 
   Total exceptional items attributable to non-controlling interests                        -          - 
   Total exceptional items attributable to BHP shareholders                             (818)    (5,228) 
 
Exceptional items attributable to BHP shareholders per share (US cents)                (15.8)     (98.2) 
Weighted basic average number of shares (Million)                                       5,180      5,323 
 

APMs derived from Consolidated Income Statement

Underlying attributable profit

 
                                                                                                       2019     2018 
Year ended 30 June                                                                                      US$M     US$M 
                                                                                                     -------  ------- 
Profit after taxation from Continuing and Discontinued operations attributable to BHP shareholders     8,306    3,705 
Total exceptional items attributable to BHP shareholders(1)                                              818    5,228 
Underlying attributable profit                                                                         9,124    8,933 
 
   (1)    Refer to Exceptional items for further information. 

Underlying attributable profit - Continuing operations

 
                                                                                                      2019      2018 
Year ended 30 June                                                                                     US$M      US$M 
                                                                                                    -------  --------- 
Profit after taxation from Continuing and Discontinued operations attributable to BHP shareholders    8,306      3,705 
Loss/(profit) attributable to members of BHP for Discontinued operations                                342      2,947 
Total exceptional items attributable to BHP shareholders(1)                                             818      5,228 
Total exceptional items attributable to BHP shareholders for Discontinued operations(1)                   -    (2,258) 
Underlying attributable profit - continuing operations                                                9,466      9,622 
 
   (1)    Refer to Exceptional items for further information. 

Underlying basic earnings per share

 
                                                                      2019         2018 
Year ended 30 June                                                   US cents     US cents 
                                                                  -----------  ----------- 
Basic earnings per ordinary share                                       160.3         69.6 
Exceptional items attributable to BHP shareholders per share(1)          15.8         98.2 
Underlying basic earnings per ordinary share                            176.1        167.8 
 
   (1)    Refer to Exceptional items for further information. 

51

Underlying EBITDA

 
                                                                                2019      2018 
Year ended 30 June                                                              US$M      US$M 
---------------------------------------------------------------------------  --------  -------- 
Profit from operations                                                         16,113    15,996 
Exceptional items included in profit from operations(1)                           952       566 
Underlying EBIT                                                                17,065    16,562 
Depreciation and amortisation expense                                           5,829     6,288 
Net impairments                                                                   264       333 
Exceptional item included in Depreciation, amortisation and impairments(1)          -         - 
Underlying EBITDA                                                              23,158    23,183 
 
   (1)    Refer to Exceptional items for further information. 

Underlying EBITDA margin

 
                                                                        Group 
                                                                    and unallocated 
Year ended 30 June 2019                              Iron               items/       Total 
 US$M                            Petroleum  Copper    Ore   Coal     eliminations     Group 
-------------------------------  ---------  ------  ------  -----  ----------------  ------ 
Revenue - Group production           5,920   9,729  17,223  9,102             1,116  43,090 
Revenue - Third party products          10   1,109      32     19                28   1,198 
Revenue                              5,930  10,838  17,255  9,121             1,144  44,288 
Underlying EBITDA - Group 
 production                          3,801   4,434  11,115  4,068             (389)  23,029 
Underlying EBITDA - Third 
 party products                          -     116      14    (1)                 -     129 
Underlying EBITDA                    3,801   4,550  11,129  4,067             (389)  23,158 
Segment contribution to the 
 Group's Underlying EBITDA(1)          16%     19%     48%    17%                      100% 
Underlying EBITDA margin(2)            64%     46%     65%    45%                       53% 
 
 
                                                                        Group 
                                                                    and unallocated 
Year ended 30 June 2018                              Iron               items/       Total 
 US$M                            Petroleum  Copper    Ore   Coal     eliminations     Group 
-------------------------------  ---------  ------  ------  -----  ----------------  ------ 
Revenue - Group production           5,396  11,432  14,756  8,887             1,222  41,693 
Revenue - Third party products          12   1,349      54      2                19   1,436 
Revenue                              5,408  12,781  14,810  8,889             1,241  43,129 
Underlying EBITDA - Group 
 production                          3,340   6,462   8,929  4,398               (8)  23,121 
Underlying EBITDA - Third 
 party products                          1      60       1    (1)                 1      62 
Underlying EBITDA                    3,341   6,522   8,930  4,397               (7)  23,183 
Segment contribution to the 
 Group's Underlying EBITDA(1)          14%     28%     39%    19%                      100% 
Underlying EBITDA margin(2)            62%     57%     61%    49%                       55% 
 
   (1)    Percentage contribution to Group Underlying EBITDA, excluding Group and unallocated items. 
   (2)    Underlying EBITDA margin excludes Third party products. 

APMs derived from Consolidated Cash Flow Statement

Capital and exploration expenditure

 
                                                                             2019     2018 
Year ended 30 June                                                            US$M     US$M 
                                                                           -------  ------- 
Capital expenditure (purchases of property, plant and equipment)             6,250    4,979 
Add: Exploration expenditure                                                   873      874 
Capital and exploration expenditure (cash basis) - Continuing operations     7,123    5,853 
Capital and exploration expenditure - Discontinued operations                  443      900 
Capital and exploration expenditure (cash basis) - Total operations          7,566    6,753 
 

Free cash flow

 
                             2019     2018 
Year ended 30 June            US$M     US$M 
                           -------  ------- 
Net operating cash flows    17,871   18,461 
Net investing cash flows     2,607  (5,921) 
Free cash flow              20,478   12,540 
 

52

Free cash flow - Continuing operations

 
                                                        2019     2018 
Year ended 30 June                                       US$M     US$M 
                                                      -------  ------- 
Net operating cash flows from Continuing operations    17,397   17,561 
Net investing cash flows from Continuing operations   (7,377)  (5,060) 
Free cash flow - Continuing operations                 10,020   12,501 
 

APMs derived from Consolidated Balance Sheet

Net debt and gearing ratio

 
                                               2019     2018 
Year ended 30 June                              US$M     US$M 
                                             -------  ------- 
Interest bearing liabilities - Current         1,661    2,736 
Interest bearing liabilities - Non current    23,167   24,069 
Total interest bearing liabilities            24,828   26,805 
Less: Cash and cash equivalents               15,613   15,871 
Net debt                                       9,215   10,934 
Net assets                                    51,824   60,670 
Gearing                                        15.1%    15.3% 
 

Net debt waterfall

 
                                                                                                      2019      2018 
Year ended 30 June                                                                                    US$M      US$M 
                                                                                                   --------  -------- 
Net debt at the beginning of the period                                                            (10,934)  (16,321) 
 Net operating cash flows                                                                            17,871    18,461 
 Net investing cash flows                                                                             2,607   (5,921) 
 Net financing cash flows                                                                          (20,528)  (10,891) 
Net (decrease)/increase in cash and cash equivalents from Continuing and Discontinued operations       (50)     1,649 
Carrying value of interest bearing liability repayments                                               2,351     3,573 
 Interest rate movements                                                                              (729)       353 
 Foreign exchange impacts on debt                                                                       311     (245) 
 Foreign exchange impacts on cash                                                                     (170)        56 
 Others                                                                                                   6         1 
 Non-cash movements                                                                                   (582)       165 
Net debt at the end of the period                                                                   (9,215)  (10,934) 
 

Net operating assets

 
                                     2019        2018 
Year ended 30 June                   US$M        US$M 
                                 ----------  ---------- 
Net assets                           51,824      60,670 
Less: Non-operating assets 
Cash and cash equivalents          (15,613)    (15,871) 
Trade and other receivables(1)        (222)        (36) 
Other financial assets(2)           (1,188)       (974) 
Current tax assets                    (124)       (106) 
Deferred tax assets                 (3,764)     (4,041) 
Assets held for sale(3)                   -    (11,939) 
Add: Non-operating liabilities 
Trade and other payables(4)             328         363 
Interest bearing liabilities         24,828      26,805 
Other financial liabilities(5)        1,020       1,218 
Current tax payable                   1,546       1,773 
Non-current tax payable                 187         137 
Deferred tax liabilities              3,234       3,472 
Liabilities held for sale(3)              -       1,222 
Net operating assets                 62,056      62,693 
 

(1) Represents loans to associates, external finance receivable and accrued interest receivable included within other receivables.

(2) Represents cross currency and interest rate swaps, forward exchange contracts and investment in shares and other investments.

   (3)    Represents Onshore US assets and liabilities treated as held for sale. 
   (4)    Represents accrued interest payable included within other payables. 
   (5)    Represents cross currency and interest rate swaps and forward exchange contracts. 

53

Other APMs

Principal factors that affect Revenue, Profit from operations and Underlying EBITDA

The following table describes the impact of the principal factors that affected Revenue, Profit from operations and Underlying EBITDA for full year ended June 2019 and relates them back to our Consolidated Income Statement.

 
                                       Total expenses, 
                                         Other income                                   Depreciation, 
                                       and (Loss)/profit                                 amortisation 
                                          from equity                                   and impairments     Underlying 
                           Revenue   accounted investments  Profit from operations   and Exceptional Items    EBITDA 
                             US$M            US$M                    US$M                    US$M              US$M 
                           -------  ----------------------  ----------------------  ----------------------  ---------- 
Year ended 30 June 2018 
Revenue                     43,129 
Other income                                           247 
Expenses excluding net 
 finance costs                                    (27,527) 
(Loss)/profit from equity 
 accounted investments, 
 related impairments and 
 expenses                                              147 
Total other income, 
 expenses excluding net 
 finance costs and Profit 
 from equity accounted 
 investments, related 
 impairments and expenses                         (27,133) 
Profit from operations                                                      15,996 
Depreciation, 
 amortisation and 
 impairments                                                                                         6,621 
Exceptional items                                                                                      566 
Underlying EBITDA                                                                                               23,183 
Change in sales prices       1,591                    (36)                   1,555                       -       1,555 
Price-linked costs               -                   (353)                   (353)                       -       (353) 
Net price impact             1,591                   (389)                   1,202                       -       1,202 
Productivity volumes           304                   (161)                     143                       -         143 
Growth volumes                (17)                    (58)                    (75)                       -        (75) 
Changes in volumes             287                   (219)                      68                       -          68 
Operating cash costs             -                 (1,176)                 (1,176)                       -     (1,176) 
Exploration and business 
 development                     -                     142                     142                       -         142 
Change in controllable 
 cash costs                      -                 (1,034)                 (1,034)                       -     (1,034) 
Exchange rates               (107)                   1,104                     997                       -         997 
Inflation on costs               -                   (400)                   (400)                       -       (400) 
Fuel and energy                  -                   (180)                   (180)                       -       (180) 
Non-cash                         -                      81                      81                       -          81 
One-off items                (350)                    (46)                   (396)                       -       (396) 
Change in other costs        (457)                     559                     102                       -         102 
Asset sales                      -                      29                      29                       -          29 
Ceased and sold 
 operations                     23                   (264)                   (241)                       -       (241) 
Other                        (285)                     134                   (151)                       -       (151) 
Depreciation, 
 amortisation and 
 impairments                     -                     528                     528                   (528)           - 
Exceptional items                -                   (386)                   (386)                     386           - 
Year ended 30 June 2019 
Revenue                     44,288 
Other income                                           393 
Expenses excluding net 
 finance costs                                    (28,022) 
(Loss)/profit from equity 
 accounted investments, 
 related impairments and 
 expenses                                            (546) 
Total other income, 
 expenses excluding net 
 finance costs and Profit 
 from equity accounted 
 investments, related 
 impairments and expenses                         (28,175) 
Profit from operations                                                      16,113 
Depreciation, 
 amortisation and 
 impairments                                                                                         6,093 
Exceptional items                                                                                      952 
Underlying EBITDA                                                                                               23,158 
 

54

Underlying return on capital employed (ROCE)

 
                                                                             2019      2018 
Year ended 30 June                                                           US$M      US$M 
                                                                          --------  -------- 
Profit after taxation from Continuing and Discontinued operations            9,185     4,823 
Exceptional items(1)                                                           818     5,228 
Subtotal                                                                    10,003    10,051 
Adjusted for: 
Net finance costs                                                            1,072     1,267 
Exceptional items included within net finance costs(1)                       (108)      (84) 
Income tax expense on net finance costs                                      (319)     (405) 
Profit after taxation excluding net finance costs and exceptional items     10,648    10,829 
 
Net assets at the beginning of the period                                   60,670    62,726 
Net debt at the beginning of the period                                     10,934    16,321 
Capital employed at the beginning of the period                             71,604    79,047 
Net assets at the end of the period                                         51,824    60,670 
Net debt at the end of the period                                            9,215    10,934 
Capital employed at the end of the period                                   61,039    71,604 
Average capital employed                                                    66,322    75,326 
Underlying Return on Capital Employed                                        16.1%     14.4% 
 
   (1)    Refer to Exceptional items for further information 

Underlying return on capital employed (ROCE) by segment

 
Year ended 30 June                                           Group and 
2019                                                     unallocated items/ 
US$M                 Petroleum  Copper  Iron Ore  Coal      eliminations     Total Continuing  Onshore US  Total Group 
                     ---------  ------  --------  -----  ------------------  ----------------  ----------  ----------- 
Profit after 
 taxation excluding 
 net finance costs 
 and exceptional 
 items                   1,049   1,451     6,721  2,274               (518)            10,977       (329)       10,648 
Average capital 
 employed                7,973  22,449    16,283  8,715               5,543            60,963       5,359       66,322 
Underlying Return 
 on Capital 
 Employed                  13%      6%       41%    26%                   -             18.0%           -        16.1% 
 
Year ended 30 June                                           Group and 
2018                                                     unallocated items/ 
US$M                 Petroleum  Copper  Iron Ore  Coal      eliminations     Total Continuing  Onshore US  Total Group 
                     ---------  ------  --------  -----  ------------------  ----------------  ----------  ----------- 
Profit after 
 taxation excluding 
 net finance costs 
 and exceptional 
 items                     606   3,304     5,184  2,723               (341)            11,476       (647)       10,829 
Average capital 
 employed                8,264  22,870    16,976  8,914               4,796            61,820      13,506       75,326 
Underlying Return 
 on Capital 
 Employed                   7%     14%       31%    31%                   -             18.6%           -        14.4% 
 

Underlying return on capital employed (ROCE) by asset

 
                                                              New 
                                                             South 
Year ended     Western                                       Wales 
30 June 2019  Australia  Queensland            Conventional  Energy                       Pampa  Olympic                     Total     Onshore  Total 
US$M          Iron Ore      Coal     Antamina   Petroleum     Coal   Cerrejon  Escondida  Norte    Dam    Potash   Other   Continuing    US     Group 
              ---------  ----------  --------  ------------  ------  --------  ---------  -----  -------  ------  -------  ----------  -------  ------ 
Profit after 
 taxation 
 excluding 
 net finance 
 costs and 
 exceptional 
 items            6,730       2,151       374         1,476     153        98      1,176    224     (62)    (59)  (1,284)      10,977    (329)  10,648 
Average 
 capital 
 employed        18,040       7,028     1,281         7,617     863       851     11,760  2,376    7,091   3,881      175      60,963    5,359  66,322 
Underlying 
 Return on 
 Capital 
 Employed           37%         31%       29%           19%     18%       12%        10%     9%     (1%)    (2%)        -       18.0%        -   16.1% 
 
 

55

 
                                                              New 
                                                             South 
Year ended     Western                                       Wales 
30 June 2018  Australia  Queensland            Conventional  Energy                       Pampa  Olympic                   Total     Onshore  Total 
US$M          Iron Ore      Coal     Antamina   Petroleum     Coal   Cerrejon  Escondida  Norte    Dam    Potash  Other  Continuing    US     Group 
              ---------  ----------  --------  ------------  ------  --------  ---------  -----  -------  ------  -----  ----------  -------  ------ 
Profit after 
 taxation 
 excluding 
 net finance 
 costs and 
 exceptional 
 items            5,196       2,232       518         1,017     346       179      2,351    479       22    (77)  (787)      11,476    (647)  10,829 
Average 
 capital 
 employed        18,344       7,152     1,239         7,871     905       869     13,386  1,659    6,660   3,539    196      61,820   13,506  75,326 
Underlying 
 Return on 
 Capital 
 Employed           28%         31%       42%           13%     38%       21%        18%    29%       0%    (2%)      -       18.6%        -   14.4% 
 

Definition and calculation of alternative performance measures

 
 Alternative Performance Measure (APM)    Reasons why we believe the APMs are 
                                                        useful                          Calculation methodology 
                                        --------------------------------------  -------------------------------------- 
 Underlying attributable profit          Allows the comparability of             Profit after taxation attributable to 
                                         underlying financial performance by     BHP shareholders excluding any 
                                         excluding the impacts of exceptional    exceptional items attributable 
                                         items and is a performance indicator    to BHP shareholders. 
                                         against which short-term incentive 
                                         outcomes for our senior 
                                         executives are measured. It is also 
                                         the basis on which our dividend 
                                         payout ratio policy is 
                                         applied. 
 Underlying basic earnings per share     On a per share basis, allows the        Underlying attributable profit 
                                         comparability of underlying financial   divided by the weighted basic average 
                                         performance by excluding                number of shares. 
                                         the impacts of exceptional items. 
 Underlying EBITDA                       Used to help assess current             Earnings before net finance costs, 
                                         operational profitability excluding     depreciation, amortisation and 
                                         the impacts of sunk costs               impairments, taxation expense, 
                                         (i.e. depreciation from initial         discontinued operations and 
                                         investment). Each is a measure that     exceptional items. Underlying EBITDA 
                                         management uses internally              includes BHP's share of profit/(loss) 
                                         to assess the performance of the        from investments accounted for using 
                                         Group's segments and make decisions     the equity method including net 
                                         on the allocation of                    finance costs, depreciation, 
                                         resources.                              amortisation and impairments and 
                                                                                 taxation expense/(benefit). 
 Underlying EBITDA margin                                                        Underlying EBITDA excluding third 
                                                                                 party product EBITDA, divided by 
                                                                                 revenue excluding third 
                                                                                 party product revenue. 
 Underlying EBIT                         Used to help assess current             Earnings before net finance costs, 
                                         operational profitability excluding     taxation expense, discontinued 
                                         net finance costs and taxation          operations and any exceptional 
                                         expense (each of which are managed at   items. Underlying EBIT includes BHP's 
                                         the Group level), as well as            share of profit/(loss) from 
                                         discontinued operations                 investments accounted for 
                                         and any exceptional items.              using the equity method including net 
                                                                                 finance costs and taxation 
                                                                                 expense/(benefit). 
 Capital and exploration expenditure     Used as part of our Capital             Purchases of property, plant and 
                                         Allocation Framework to assess          equipment and exploration 
                                         efficient deployment of capital.        expenditure. 
                                         Represents the total outflows of our 
                                         operational investing expenditure. 
 

56

 
 Alternative Performance Measure (APM)    Reasons why we believe the APMs are 
                                                        useful                          Calculation methodology 
                                        --------------------------------------  -------------------------------------- 
 Free cash flow                          It is a key measure used as part of     Net operating cash flows less Net 
                                         our Capital Allocation Framework.       investing cash flows. 
                                         Reflects our operational 
                                         cash performance inclusive of 
                                         investment expenditure, which helps 
                                         to highlight how much cash 
                                         was generated in the period to be 
                                         available for the servicing of debt 
                                         and distribution to 
                                         shareholders. 
 Net debt                                Net debt shows the position of gross    Interest bearing liabilities less 
                                         debt offset by cash immediately         Cash and cash equivalents for the 
                                         available to pay debt                   Group at the reporting 
                                         if required. It along with the          date. 
                                         gearing ratio is used to monitor the 
                                         Group's capital management 
                                         by relating net debt relative to 
                                         equity from shareholders. 
 Gearing ratio                                                                   Ratio of Net debt to Net debt plus 
                                                                                 Net assets. 
 Net operating assets                    Enables a clearer view of the           Operating assets net of operating 
                                         physical assets deployed to generate    liabilities, including the carrying 
                                         earnings by highlighting                value of equity accounted 
                                         the net operating assets of the         investments and predominantly 
                                         business separate from the financing    excludes cash balances, loans to 
                                         and tax balances. This                  associates, interest bearing 
                                         measure helps provide an indicator of   liabilities, derivatives hedging our 
                                         the underlying performance of our       debt and tax balances. 
                                         assets and enhances 
                                         comparability between them. 
 Underlying return on capital employed   Indicator of the Group's capital        Attributable profit after taxation 
 (ROCE)                                  efficiency and is provided on an        excluding exceptional items and net 
                                         underlying basis to allow               finance costs (after 
                                         comparability of underlying financial   taxation) divided by average capital 
                                         performance by excluding the impacts    employed. 
                                         of exceptional                          Profit after taxation excluding 
                                         items.                                  exceptional items and net finance 
                                                                                 costs (after taxation) is 
                                                                                 profit after taxation from Continuing 
                                                                                 and Discontinued operations excluding 
                                                                                 exceptional items, 
                                                                                 net finance costs and the estimated 
                                                                                 taxation impact of net finance costs. 
                                                                                 These are annualised 
                                                                                 for a half-year end reporting period. 
                                                                                 The estimated tax impact is 
                                                                                 calculated using a prima facie 
                                                                                 taxation rate on net finance costs 
                                                                                 (excluding any foreign exchange 
                                                                                 impact). 
                                                                                 Average capital employed is 
                                                                                 calculated as the average of net 
                                                                                 assets less net debt for the 
                                                                                 last two reporting periods. 
 Adjusted effective tax rate             Provides an underlying tax rate to      Total taxation expense/(benefit) 
                                         allow comparability of underlying       excluding exceptional items and 
                                         financial performance                   exchange rate movements included 
                                         by excluding the impacts of             in taxation expense/(benefit) divided 
                                         exceptional items.                      by Profit before taxation and 
                                                                                 exceptional items. 
 

57

 
 Alternative Performance      Reasons why we believe the 
 Measure (APM)                     APMs are useful                           Calculation methodology 
                             ---------------------------  ------------------------------------------------------------ 
 Unit cost                    Used to assess the           Ratio of net costs of the assets to the equity share of 
                              controllable financial       sales tonnage. Net costs is defined 
                              performance of the Group's   as revenue less Underlying EBITDA and excludes freight and 
                              assets for each unit         other costs, depending on the nature 
                              of production. Unit costs    of each asset. Freight is excluded as the Group believes it 
                              are adjusted for site        provides a similar basis of comparison 
                              specific non controllable    to our peer group. 
                              factors to enhance           Conventional petroleum unit costs exclude: 
                              comparability between the     *    Exploration, development and evaluation expense as 
                              Group's assets.                    these costs do not represent our cost performance in 
                                                                 relation to current production and the Group believes 
                                                                 it provides a similar basis of comparison to our peer 
                                                                 group; 
 
 
                                                            *    Other costs that do not represent underlying cost 
                                                                 performance of the business. 
 
 
                                                           Escondida unit costs exclude: 
                                                            *    By-product credits being the favourable impact of 
                                                                 by-products (such as gold or silver) to determine the 
                                                                 directly attributable costs of copper production. 
 
 
                                                           WAIO, Queensland Coal and NSWEC unit cash costs exclude 
                                                           royalties as these are costs which 
                                                           are not deemed to be under the Group's control, and the 
                                                           Group believes exclusion provides 
                                                           a similar basis of comparison to our peer group. 
 

58

Definition and calculation of principal factors

The method of calculation of the principal factors that affect the period on period movements of Underlying EBITDA are as follows:

 
 Principal factor                                                              Method of calculation 
----------------------------------------------------------  ---------------------------------------------------------- 
 Change in sales prices                                      Change in average realised price for each operation from 
                                                             the prior period to the current period, 
                                                             multiplied by current period sales volumes. 
 Price-linked costs                                          Change in price-linked costs (mainly royalties) for each 
                                                             operation from the prior period to 
                                                             the current period, multiplied by current period sales 
                                                             volumes. 
 Productivity volumes                                        Change in sales volumes for each operation not included 
                                                             in the Growth category from the prior 
                                                             period to the current period, multiplied by the prior 
                                                             year Underlying EBITDA margin. 
 Growth volumes                                              Volume - Growth comprises: (1) Underlying EBITDA for 
                                                             operations that are new or acquired in 
                                                             the current period minus Underlying EBITDA for operations 
                                                             that are new or acquired in the 
                                                             prior period; (2) Change in sales volumes for operations 
                                                             identified as a Growth project from 
                                                             the prior period to the current period multiplied by the 
                                                             prior year Underlying EBITDA margin; 
                                                             and (3) Change in sales volumes for our petroleum assets 
                                                             from the prior period to the current 
                                                             period multiplied by the prior year Underlying EBITDA 
                                                             margin. 
 Controllable cash costs                                     Total of operating cash costs and exploration and 
                                                             business development costs. 
 Operating cash costs                                        Change in total costs, other than price-linked costs, 
                                                             exchange rates, inflation on costs, 
                                                             fuel and energy costs, non-cash costs and one-off items 
                                                             as defined below for each operation 
                                                             from the prior period to the current period. 
 Exploration and business development                        Exploration and business development expense in the 
                                                             current period minus exploration and business 
                                                             development expense in the prior period. 
 Exchange rates                                              Change in exchange rate multiplied by current period 
                                                             local currency revenue and expenses. 
 Inflation on costs                                          Change in inflation rate applied to expenses, other than 
                                                             depreciation and amortisation, price-linked 
                                                             costs, exploration and business development expenses, 
                                                             expenses in ceased and sold operations 
                                                             and expenses in new and acquired operations. 
 Fuel and energy                                             Fuel and energy expense in the current period minus fuel 
                                                             and energy expense in the prior period. 
 Non-cash                                                    Change in net impact of capitalisation and depletion of 
                                                             deferred stripping from the prior 
                                                             period to the current period. 
 One-off items                                               Change in costs exceeding a pre-determined threshold 
                                                             associated with an unexpected event that 
                                                             had not occurred in the last two years and is not 
                                                             reasonably likely to occur within the next 
                                                             two years. 
 Asset sales                                                 Profit/(loss) on the sale of assets or operations in the 
                                                             current period minus profit/(loss) 
                                                             on sale of assets or operations in the prior period. 
 Ceased and sold operations                                  Underlying EBITDA for operations that ceased or were sold 
                                                             in the current period minus Underlying 
                                                             EBITDA for operations that ceased or were sold in the 
                                                             prior period. 
 Share of operating profit from equity accounted             Share of operating profit from equity accounted 
 investments                                                 investments for the current period minus share 
                                                             of operating profit from equity accounted investments in 
                                                             the prior period. 
 Other                                                       Variances not explained by the above factors. 
 

Productivity comprises changes in controllable cash costs, changes in volumes attributed to productivity and changes in capitalised exploration (being capitalised exploration in the current period less capitalised exploration in the prior period as reported in the cash flow statement).

59

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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