Briefing Paper

8 April 2002
Number: 20/02


BHP Billiton CEO and Managing Director Paul Anderson and Deputy CEO Brian Gilbertson will today present an overview of the Group's Strategic Framework at an Australian Securities Institute luncheon in Sydney, Australia.

Attached is a copy of the Briefing Paper that will be distributed at the luncheon. Additionally, a copy of the PowerPoint slide presentation from the briefing will be available on the BHP Billiton website ( at about 1.00pm today (Australian Eastern Standard Time).

The BHP Billiton Strategic Framework briefing will be repeated in London on Wednesday 10 April 2002.


Dr Robert Porter, Investor Relations
Tel: +61 3 9609 3540
Mobile: +61 419 587 456

Michael Buzzard, Media Relations
Tel: +61 3 9609 3709
Mobile: +61 417 914 103

United States
Francis McAllister, Investor Relations
Tel: +1 713 961 8625
Mobile: +1 713 480 3699

South Africa/United Kingdom
Michael Campbell, Investor & Media Relations
Tel: +27 11 376 3360
Mobile: +27 82 458 2587

Ariane Gentil, Manager Communications
Tel: +44 20 7747 3977
Mobile: +44 7881 518 715



Briefing Paper

BHP Billiton Strategic Framework



I Strategic Framework


II Strategic Framework and Performance Measures 


III Business Model to Support Strategy 


IV Capital Management Disciplines 







BHP Billiton aspires to be one of the world's premier companies.

This will be accomplished by delivering upon our vision to earn superior returns for our shareholders as the world's premier supplier of natural resources and related products and services.


Value Objectives:


The delivery of superior total shareholder returns through a focus on Net Present Value (NPV) enhancement, sustainable returns above the cost of capital and free cash flow generation. This is associated with a recognition that the Group's ultimate goal must be to be a core holding for global equity investors.

Customers, Employees, Communities and the Environment:

BHP Billiton's success as a global corporation depends, in large part, on how effectively we work with our customers, our employees and the communities in which we operate. Our objective is to be the employer and partner of choice in the resources sector, and to serve our customers better with a broader and more flexible product offering.

We are committed to continued improvement in our Health, Safety, Environment and Community (HSEC) performance towards the aspirational goal of zero harm to people and the environment. Our standards and guidelines reflect leading industry practice and community expectations both local and global.

II Strategic Framework and Performance Measures

BHP Billiton Value Drivers
(Organisational capabilities & distinguishing factors)

Strategic Imperatives

Performance Measures

(How the market can judge progress)

I. Outstanding Assets

1. Zero Harm

  • BHP Billiton is committed to continued improvement in its HSEC performance towards our aspirational goal of zero harm to people and the environment.

2. Operating Excellence

  • 60% of the Group's assets are in the first quartile of costs and 80% are in the lowest half of the cost curve.
  • Improved unit cost performance.
  • Improved capital efficiency.
  • Systematic process to establish, benchmark and transfer best practices across the Group (The BHP Billiton Way).
  1. Improving HSEC Performance
  • Policy goal of zero harm (zero fatalities, zero significant environmental incidents, no transgressions of UN Declaration of Human Rights)
  • Expenditure of 1% of pre-tax profits (three year rolling average) on community development programmes


2. Cut Operating Costs

  • Reduce operating costs for existing businesses by 2% in real terms per annum on average over the next three years (US$500m in FY 2003-05)
  • Achieve US$270m merger benefits by the end of FY 2003
  • Improved EBIT & Free Cash Flow (FCF) (normalised)

3. Return on Capital

  • Return on capital - greater than 15% by 2006

II. Growth From Deep Inventory of Projects

3. Project Evaluation & Execution

  • The Group has a deep inventory of high quality growth projects spread across its main Customer Sector Groups (CSGs).
  • Investment evaluation and project execution skills will be central to the efficient delivery of this growth potential.
  • High value growth will be pursued through a combination of brownfield and greenfield projects, as well as appropriate M&A activities.






4. Evaluate/Implement Projects

  • BHP Billiton has US$10 billion of mature identified growth potential in the current portfolio (approximately US$2.5 billion has been committed since the merger to April 2002)
  • The indicative split of expenditure by CSGs to 2006 is as follows
    - Aluminium 15%
    - Base Metals 15% - 20%

- Carbon Steel Materials 10%
- Energy Coal 10%
- Petroleum 35% - 40%
- Stainless Steel Mat. & Others 10%


III. Customer-Centric Marketing

4. Serving Customers Best

  • BHP Billiton's marketing approach seeks to combine physical product handling skills with the flexibility and trading skills of a merchant, and the risk management skills of a financial institution.
  • The combination of these skills will allow additional value creation and growth opportunities through the transformation of products from a purely physical, to an augmented offer.

5. Preferred supplier status & global marketing and trading


IV. The Portfolio Effect

5. Portfolio Management

  • Key capital management, risk management and portfolio management decisions are taken at a Group level. The major focus is on enhancing the performance of the existing portfolio of assets, and the management of portfolio risk

6. Funding & Capital Management

  • BHP Billiton will maintain an approach to funding and capital management to support delivery of its strategic imperatives. This includes maintaining a credit rating that will enable the Group to minimise its cost of debt within the constraints of optimising its gearing ratio and debt maturity profile to reduce its overall cost of capital.

6. Maintain a credit rating of A or better

  • Generate positive cash flow after tax & investment every year.
  • Maintain EBITDA to interest coverage ratio such that the ratio exceeds eight times over the cycle (gearing band of 35%- 40%)
  • Cash Flow at Risk to Cash Flow ratio not greater than 25%

V. The Petroleum Customer Sector Group

  1. Value Adding Growth
  • Petroleum provides the ability for BHP Billiton to pursue high quality growth opportunities in the E&P sector, without some of the regulatory and market constraints that may impact upon growth in some metals and mining sectors.
  • Petroleum, in combination with the Group's other energy positions allows the pursuit of energy marketing and trading opportunities.

7. Low discovery costs & growth in reserves and production


VI Innovation

  1. Creative Thinking
    Commercial Judgement
    Transaction Execution

Pursuit of selective growth opportunities based on accessing external and internal networks related to existing BHP Billiton activities (business development initiatives, BCAP)

8.    Dependent on opportunities




III. Business Model to Support Strategy

BHP Billiton's business model is designed to support the achievement of superior shareholder returns through the:

The main features of the BHP Billiton business model are as follows:


  1. Customer Sector Group Structure
  2. The Customer Sector Groups or CSGs have been established based on natural customer-oriented groupings of commodities. This is consistent with our approach of orienting our business from the customer to the mines rather than simply on the extraction and delivery of product.

    Each of the CSGs is a substantial business in its own right, a number are leaders in their field. The CSGs have significant autonomy to optimise their businesses with clear accountabilities, based on their own strategic plan, around EBIT performance and shareholder value add.

    The CSGs operate with their own Board comprising the CSG President and two Executive Committee members drawn from other CSG or functional areas. The marketing personnel from within the CSGs are located in one of the twin marketing hubs - in The Hague and Singapore - and have a direct reporting line to their CSG President as well as the Chief Marketing Officer.


  3. Portfolio Model

The purpose of the portfolio model is two-fold:

The portfolio model rests fundamentally on a robust capital management system applying techniques, such as Cash Flow at Risk, and Value at Risk, as well as the centralization of key capital management, risk management, business and economic evaluation methodologies.

The ability to utilise the portfolio's characteristics provides the capability to deliver value beyond that provided by the aggregation of business strategies at the CSG level. These include:

- The inherent increased stability of cash flows of the portfolio

- The ability for investments to be made through business cycles

- The ability to provide more customer focused solutions

- Critical mass in capital markets


3.    Marketing Structure

The marketing approach entails the adoption of a coordinated marketing function based around twin hubs in The Hague and Singapore, designed to augment and extend the product offering to customers and enhance value from a customer-orientated approach to the delivery of product, as well as sell more goods than the Group produces.

This customer-centric marketing approach is underpinned by a number of pillars, including:


4.    Common Business Processes (The BHP Billiton Way)

The adoption of common business processes and practices (termed the BHP Billiton Way) to deliver operational improvements through the rigorous application of the same proven improvement process across the Group.

Benefits to derive from:




Capital Management Disciplines (including Financial Risk Management Model)

Asset Leaders, Selected VP

Up to US$5 million

Business CEO/President CSG

US$5 million to US$50 million

Executive Committee

US$50 - US$100 million

BHP Billiton Board

Above US$100 million


Financial Risk Management


BHP Billiton Limited ABN 49 004 028 077
Registered in Australia
Registered Office: 600 Bourke Street Melbourne Victoria 3000
Telephone +61 3 9609 3333 Facsimile +61 3 9609 3015

BHP Billiton Plc Registration number 3196209
Registered in England and Wales
Registered Office: 1-3 Strand London WC2N 5HA United Kingdom
Telephone +44 20 7747 3800 Facsimile +44 20 7747 3900

The BHP Billiton Group is headquartered in Australia