22 August 2007
Number 26/07

The consistent execution of our strategy has once again allowed the Company to deliver outstanding financial and operational results. Our strategy is simple. We create long term value by focusing on owning and operating large, long-life, low-cost, expandable assets diversified by geography and commodity and pursuing growth opportunities consistent with our core skills. Our business excellence model promotes and deploys best practices and operating efficiencies across these assets, further enhancing their value. Our priority for cash is to reinvest in the business. In line with our strategy, we have grown our business rapidly and consistently through project development and acquisitions.

We achieved record production for eight major commodities and increased annual production for three further commodities. Production records were set by 17 assets⁽³⁾. This reflects our key operating objective of delivering consistent, predictable and sustainable operating performance across all of our businesses providing a stable platform for growth.

Our continued focus on growing production from high returning assets throughout the cycle has allowed us to take advantage of strong global market conditions and underpins the financial results we have announced today. Our attributable profit (excluding exceptional items) of US$13.7 billion represents an increase of 34.7 per cent over last year and a more than sevenfold increase since our 2002 result (our inaugural result following the BHP and Billiton merger). It is our fourth consecutive record annual result, with five of our nine CSGs generating record EBIT. Underlying EBIT⁽¹⁾ margins rose to 48.4 per cent, from 44.4 per cent last year while Return on Capital Employed increased from 34.6 per cent to 38.4 per cent. This was the sixth consecutive record for both of these metrics.

Our world-class asset suite continues to provide us with an array of value-accretive, growth opportunities. We have a diversified minerals portfolio and a unique portfolio of energy assets; oil, gas, LNG, energy coal and uranium, all with important growth opportunities. Our project pipeline provides significant future value, with 33 projects in either execution or feasibility representing an expected capital investment of US$20.9 billion. We also have further medium-term options in our portfolio with capital expenditure requirements in excess of US$50 billion. During the year we continued the ramp up of 5 projects, approved three additional projects and commissioned Spence, a 200,000 tonnes per annum copper operation in Chile. We also commissioned two projects at our Queensland Coal Operations (Australia). In addition to these brownfield opportunities, we also acquired the Genghis Khan oil field, in the Gulf of Mexico, and a one-third share of the Guinea Alumina project, which consists of high-quality bauxite reserves and the development of an alumina refinery in Guinea. We are expecting to deliver further significant growth in the next financial year with new projects commissioning or ramping up across our Petroleum, Base Metals, Iron Ore and Stainless Steel Materials CSGs.

We are focused on delivering an enhanced resource endowment to underpin future generations of growth. We have an abundance of tier one resources in fiscally stable countries that provide us with a unique set of options to deliver decades of brownfield growth. We also have strong experience operating in emerging resource regions and the capability to capture additional opportunities as they emerge. This experience enables us to continue to build and strengthen our position for long term value creation.

Exploration continues to be an important focus. In our minerals businesses we are undertaking exploration in 28 countries, while Petroleum exploration is underway in eight countries.

The quality of our assets and the diversity of our portfolio underpin the strength of our cash flow. This allows us to both identify and invest in growth opportunities while continuing to deliver outstanding returns to shareholders.

During the 2007 financial year we completed one major growth project.

(1) References to quarters are based on calendar years.
(2) Excluding the impact of foreign exchange the cost was US$990 million.

There are 15 major projects (defined as BHP Billiton's share of capital expenditure of greater than US$100 million) under development with a total budgeted investment of US$12,781 million. Details for these are given in the quarterly Exploration and Development Report, released on 24 July 2007.

(1) All references to capital expenditure and capacity are BHP Billiton's share unless noted otherwise.
(2) References to quarters and half years are based on calendar years.

The Board today declared a final dividend of 27 US cents per share. This rebased dividend represents a 46 per cent increase over last year's final dividend of 18.5 US cents per share. This brings the total dividends for the 2007 financial year to 47 US cents per share, an increase of 11 US cents per share, or 30.6 per cent, over last year. Today's declaration represents our eleventh consecutive dividend increase and signals both our confidence in the outlook and our ability to consistently deliver future earnings and cash flow to underpin this increased dividend. Our dividend has increased more than fourfold since the interim dividend paid in 2002. Our compound annual dividend growth rate has been 24 per cent over this period. We will continue with our progressive dividend policy from this new base, with further increases dependent upon the expectations for future market conditions and investment opportunities.

During the year we also announced US$13 billion of capital management initiatives. We have returned US$6.3 billion of this to our shareholders and will return the remaining US$6.7 billion during the next 12 months. We repurchased 305,545,269 shares, via both on-market and off-market buy-backs, at an approximate average price of US$20.57. To date, we have cancelled 262,433,555 of these shares.

Since August 2004 we have announced capital management initiatives totalling US$17 billion. Since November 2004 601 million shares have been repurchased, representing approximately 10.1 per cent of the total shares on issue at an approximate price of US$16.79 (A$21.42 / GBP 8.74). At the completion of all announced initiatives we will have returned US$28.2 billion in total to shareholders through capital initiatives and dividends since June 2001.

To provide clarity into the underlying performance of our operations, we present Underlying EBIT which is a measure used internally and in our Supplementary Information. Underlying EBIT excludes all net finance costs and taxation (including net finance costs and taxation of jointly controlled entities) and any exceptional items. The differences between Underlying EBIT and EBIT (Profit from operations) are set out in the following table:

The following table and commentary describes the approximate impact of the principal factors that affected Underlying EBIT for the year ended 30 June 2007 compared with last year:

Continued strong demand underpinned increased sales volumes of metallurgical coal, petroleum products, nickel, manganese ore, alumina, zinc, iron ore, aluminium and energy coal, which contributed approximately US$438 million more (measured at last year's average margins) to Underlying EBIT than last year. Sales volumes of base metals were lower at Olympic Dam (Australia) due to a smelter shutdown and at Cannington (Australia) due to the temporary closure of the southern zone. However this was more than offset by copper sales from Spence, which commenced operations in December 2006, and added US$363 million and the ramp-up of the Sulphide Leach project at Escondida (Chile). We experienced a decrease in diamond sales for the year as a result of inventory sales in the prior year.

Net changes in price increased Underlying EBIT by US$7,101 million. Lower prices for metallurgical coal and manganese ore had a negative impact.

Higher price-linked costs reduced Underlying EBIT by US$979 million with increased charges for third party nickel ore contributing US$658 million to this amount. Higher royalties for nickel, iron ore, and higher LME-linked power charges in Aluminium were offset by lower metallurgical coal royalties (in line with lower prices) and more favourable rates for copper treatment and refining charges (TCRCs), including the removal or limiting of price participation in new contracts.

Continued strong global demand for resources has led to increased costs across the industry for labour, contractors, raw materials, fuel, energy and other input costs. In addition, port congestion and other third party infrastructure constraints resulted in increased demurrage costs and shipping, freight and other distribution charges. In this environment, costs for the Group have increased by US$859 million. Excluding non cash costs of US$145 million, this represents an increase on our June 2006 total cost base of 3.6 per cent. Given the current market tightness, this represents an outstanding performance.

Specific areas of cost increase include labour and contractor charges, consumables and fuels, maintenance and other operating costs. Changed mining conditions, particularly at Cannington, where we had a temporary closure of the southern zone, and higher strip ratios at Queensland Coal (Australia) had an adverse impact. However, we generated savings of US$203 million on our 2006 cost base through a wide range of business improvement initiatives across the Group.

The current environment continues to be challenging across the resource industry and the pressure on access to labour and other inputs to our business remains. However the quality of ore bodies, our supplier relationships, systems and capabilities of our people have allowed us to manage these challenges.

Exchange rate movements had a negative impact on Underlying EBIT of US$271 million. The stronger Australian dollar had a negative impact of US$478 million. This was partially offset by the favourable impact of a weaker South African rand on operating costs for our South African businesses. The Western Australia Iron Ore and Queensland Coal operations were both significantly impacted by the strength of the Australian dollar.

The following exchange rates against the US dollar have been applied:

(a) Displayed as US$ to A$1 based on common convention.

Inflationary pressures on input costs across all our businesses had an unfavourable impact on Underlying EBIT of US$416 million. These pressures were most evident in Australia and South Africa.

The sale of assets and interests decreased Underlying EBIT by US$61 million. The current period was principally impacted by the sale of 1 million tonnes of annual capacity at the Richards Bay Coal Terminal (South Africa), the Moranbah Coal Bed Methane assets (Australia), the Koornfontein energy coal mine (South Africa), the interest in Eyesizwe (South Africa) and Alliance Copper (Chile). In the corresponding period we had higher profits arising largely from the divestment of our interest in the Wonderkop chrome joint venture (South Africa), the Vincent Van Gogh undeveloped oil discovery (Australia) and the Green Canyon oil fields (US).

The current period was negatively impacted by the loss of US$343 million of Underlying EBIT from Tintaya (Peru) (divested in June 2006) and the Southern Cross Fertiliser operations (Australia) (divested in August 2006). This was partly offset by a US$82 million year on year impact of movements in restoration and rehabilitation provisions for closed operations.

Gross exploration expenditure increased to US$805 million during the year. We increased activity on nickel targets in Western Australia, Guatemala, Indonesia and the Philippines, on energy coal targets in New South Wales (Australia) and on diamond targets in Angola. This increased expenditure however, was offset by a higher level of capitalisation of oil and gas exploration expenditure, primarily in Australia. This resulted in exploration expense, being US$17 million lower than last year.

Expenditure on business development was US$166 million higher than last year mainly due to the pre-feasibility study on the Olympic Dam expansion and other Base Metals activities.

Other items increased Underlying EBIT by US$36 million. These included higher insurance recoveries than last year partially offset by a lower contribution from freight and other activities.

Net finance costs decreased to US$390 million, from US$505 million last year. This was driven predominantly by higher capitalised interest, partially offset by higher average interest rates and foreign exchange impacts.

The total taxation expense on profit before tax was US$4,515 million, representing an effective rate of 25.1 per cent.

Excluding the impacts of royalty-related taxation, non tax-effected foreign currency adjustments, translation of tax balances and other functional currency translation adjustments and including the taxation expense of jointly controlled entities, the underlying effective rate was 29.6 per cent. When compared to the UK and Australian statutory tax rate (30 per cent), the underlying effective tax rate included a benefit of 1.4 per cent due to the recognition of prior year US tax benefits (US$282 million). All of the prior year US tax losses have now been utilised. Royalty-related taxation represents an effective rate of 2.1 per cent for the current period.

As part of our regular review of asset carrying values, a charge of US$142 million (net of a taxation benefit of US$34 million) has been recorded in relation to coal operations in South Africa.

We have recognised a charge of US$117 million (net of a taxation benefit of US$50 million) for additional rehabilitation obligations in respect of former operations at the Newcastle Steelworks (Australia). The obligations relate to sediment in the Hunter River requiring remediation and treatment.

Last year we sold our interest in the Tintaya copper mine in Peru. The profit on disposal was US$296 million (net of a taxation charge of US$143 million).

Refer note 2 in the Financial Information for further details.

Net operating cash flow after interest and tax increased by 48.9 per cent to US$15.6 billion. Higher profits increased cash generated from operating activities, offset by an increase in working capital (principally due to higher prices) and increased taxation payments.

Capital and exploration expenditure totalled US$7.2 billion for the period. Expenditure on major growth projects was US$5.1 billion, including US$1.7 billion on Petroleum projects and US$3.4 billion on Minerals projects. Capital expenditure on maintenance, sustaining and minor capital items was US$1.2 billion. Exploration expenditure was approximately US$800 million, including US$265 million which has been capitalised. Other investing cash flows included the purchase of interests in the Genghis Khan oil field, and the Guinea Alumina project.

Financing cash flows include US$8.0 billion in relation to the capital management program and increased dividend payments.

Net debt, comprising cash and interest-bearing liabilities, was US$8.7 billion, an increase of US$0.5 billion, or 5.7 per cent, compared to 30 June 2006. Gearing, which is the ratio of net debt to net debt plus net assets, was 22.5 per cent at 30 June 2007, compared with 25.2 per cent at 30 June 2006.

Underlying net debt (which varies from net debt above as it includes net debt of jointly controlled entities) was US$10.0 billion up from US$9.2 billion at 30 June 2006. Underlying gearing was 25.0 per cent at 30 June 2007 compared to 27.2 per cent at 30 June 2006.

Payment - 28 September 2007
 

Our strategy is focused on long-life, low-cost, expandable assets and we continually review our portfolio to identify assets which do not fit this strategy. These activities continued during the year with proceeds of US$444 million being recorded. We disposed of a number of assets and interests including Southern Cross Fertilisers, 1 million tonnes of annual capacity in the Richards Bay Coal Terminal, Koornfontein, our Moranbah Coal Bed Methane assets, our interest in Eyesizwe and Alliance Copper. Proceeds from the sale or distribution of our assets and interests over the last six years surpasses US$6 billion.

Also during the year we announced the potential sale of Optimum, an energy coal mine in South Africa.

We will also purchase interests in assets where they fit our strategy. We acquired interests in the Genghis Khan oil field for US$583 million and the Guinea Alumina project for US$140 million.

In October 2006 the Group signed a new US$3.0 billion multi-currency revolving credit facility. This new credit facility, which expires in October 2011, replaces the previous US$3.0 billion credit facility that was due to expire in 2009.

In February 2007, we issued Euro 600 million (US$788 million) of Floating Rate Notes due in 2008 and Euro 600 million (US$788 million) of 4.375 per cent Euro Bonds due in 2014. The proceeds were used to refinance short-term debt.

In March 2007 we filed a new shelf registration statement with the US Securities and Exchange Commission (SEC) and, during the same month, issued a SEC registered Global Bond comprising US$875 million of Floating Rate Notes due in 2009, US$625 million of 5.125 per cent Senior Notes due in 2012, and US$750 million of 5.40 per cent Senior Notes due in 2017. The proceeds were used for general corporate purposes.

On 7 February 2007, Mr Charles (Chip) Goodyear announced his intention to retire from the Company on 1 January 2008. He will not seek re-election to the Board and will retire as an Executive Director at the conclusion of the BHP Billiton Limited AGM on 28 November 2007. On 31 May 2007 the Board announced that Mr Marius Kloppers will succeed Mr Goodyear as Chief Executive Officer of BHP Billiton, effective 1 October 2007.

Mr Chris Lynch retired as an Executive Director on 30 June 2007.

The membership of the Sustainability Committee changed during the year. Its members are now Dr John Schubert (Chairman), Mr Paul Anderson and The Hon. E Gail de Planque.

Commodities outlook

In 2007 real prices for all our major commodities remained at or near their highest levels since the 1970s as Chinese demand for raw materials continued. Over the last year the LME traded metals performed very well. Bulk commodity prices also continued to be strong and demand remains firm. Energy prices are very strong with crude oil near record highs. Looking forward, supply side pressures will remain high and demand growth from China is expected to remain robust. With continuing strong demand, structurally higher cost sources of supply will be required. Higher energy prices are also likely to have a flow-on effect to commodity prices.

Recent discussions with our customers have indicated that they do not expect the volatility in the US and European credit markets to have a material impact on raw material demand. In particular, our customers in China and India believe domestic supply and demand criteria are much more important factors in their markets. We will continue to assess impacts from this recent volatility.

The Annual General Meeting of BHP Billiton Plc will be held at the Queen Elizabeth II Conference Centre, Broad Sanctuary, Westminster, London SW1P 3EE, UK, on Thursday 25 October 2007, commencing at 10:30am.

The Annual General Meeting of BHP Billiton Limited will be held at the Hilton Adelaide, Ballroom, 233 Victoria Square, Adelaide, South Australia, Australia on Wednesday 28 November 2007, commencing at 10.30am.

BHP Billiton Limited will accept nominations for the election of directors up until 4.30pm on 12 September 2007.

The Annual Report and details of the business to be conducted at the meetings will be mailed to shareholders in mid to late September 2007.

The following table provides a summary of the performance of the Customer Sector Groups for the year ended 30 June 2007 and last year.

(1) Revenue together with share of jointly controlled entities' revenues, and Underlying EBIT include trading activities comprising the sale of
third party product. Underlying EBIT is defined on page 16.
(2) Includes consolidation adjustments, exploration and technology activities, unallocated items and external sales from the Group's freight, transport and logistics operations.

Underlying EBIT was US$3,014 million, an increase of US$46 million, or 1.5 per cent, compared to last year. This was mainly due to higher average realised oil prices per barrel of US$63.87 (compared with US$61.90) and higher average realised prices for liquefied petroleum gas of US$529.96 per tonne (compared to US$483.74 per tonne). This was partially offset by lower average realised natural gas prices of US$3.19 per thousand standard cubic feet (compared with US$3.33). Production volumes were in line with last year despite no new major project start ups. The impact of foreign exchange (A$ and GBP) and price-linked costs was unfavourable.

During the year we acquired a 44 per cent interest in the Genghis Khan oil and gas field. This development, together with Atlantis and Neptune (both Gulf of Mexico), Stybarrow (Australia) and Zamzama Phase 2 (Pakistan) is scheduled to commence producing within the next six months, significantly increasing petroleum production.

Gross expenditure on exploration of US$395 million was US$52 million lower than last year. Exploration expenditure charged to profit was US$334 million including US$82 million of previously capitalised expenditure.

Underlying EBIT was US$1,856 million, an increase of US$665 million or 55.8 per cent over last year. Higher prices for aluminium and alumina had a favourable impact, with the average LME aluminium price increasing to US$2,692 per tonne (compared with US$2,244 per tonne).

Full year production records were achieved at the Worsley (Australia), Paranam (Suriname) and Alumar (Brazil) refineries, and the Hillside, Bayside and Mozal smelters (Southern Africa). The recent expansion at Worsley reached nameplate capacity in the fourth quarter.

Favourable exchange rate movements as a result of a weaker Rand and foreign exchange contracts associated with the Alumar refinery expansion increased Underlying EBIT. Last year the write-down of our interest in Valesul (a smelter in Brazil) to fair value, in line with the value achieved on its subsequent divestment, decreased Underlying EBIT by US$50 million.

Earnings were adversely impacted by higher charges for electricity, depreciation, maintenance, raw materials and labour. Despite these higher costs, Underlying EBIT margins⁽¹⁾ improved to 40 per cent (30 per cent last year) and are at record levels. This improved translation of higher prices to the bottom line reflects an intensive focus on cost containment through various Business Excellence initiatives. The contribution from third party trading was lower than the comparative period.

In April, we announced the acquisition of a 33.3 per cent interest in Global Alumina's refinery project in Guinea, West Africa. The project, to be known as the Guinea Alumina Project, comprises the design, construction and operation of a 3.2 mtpa alumina refinery, a 9.6 mtpa bauxite mine and associated infrastructure.

Underlying EBIT was US$6,905 million, an increase of US$1,505 million, or 27.9 per cent, over last year. This increase is predominantly attributable to higher average LME prices for copper of US$3.21/lb (compared to US$2.28/lb), as well as higher prices for lead, silver, zinc and gold. Record copper production, from continuing operations, was achieved due to the commissioning of Spence in December 2006, the ramp-up of Sulphide Leach at Escondida and the recovery at Cerro Colorado (Chile) following the earthquake. This was partially reduced by lower volumes at Olympic Dam due to a scheduled smelter shutdown, lower head grades and lower tonnes milled. Lower volumes were also reported at Cannington as the rehabilitation of ground support was successfully completed during the period.

These gains were partially offset by higher labour and contractor costs, higher price-linked costs at Antamina (Peru), higher fuel and energy charges and the impact of industrial activity at Escondida. Increased expenditure on the Cannington rehabilitation project and the combined effect of inflation and the impact of a stronger A$/US$ exchange rate also negatively impacted the result. Higher costs were partially mitigated by cost reductions achieved through several improvement projects which continue to deliver strong savings. In addition, the Olympic Dam Expansion pre-feasibility study expenditures increased. The cessation of the contribution from Tintaya, which was sold in June 2006, also reduced Underlying EBIT.

Provisional pricing of copper shipments, including the impact of finalisations and revaluations of outstanding shipments resulted in the calculated average realised price being $3.24/lb versus $2.66/lb last year. The positive impact of provisional pricing for the period was US$108 million. Outstanding copper volumes, subject to the fair value measurement, amounted to 346,610 tonnes at 30 June 2007. These were revalued at a weighted average price of US$7,152 per tonne.

Underlying EBIT was US$261 million, a decrease of US$84 million, or 24.3 per cent over last year. This was due to lower sales volumes for diamonds (down 23 per cent following inventory sales in the prior year), and higher unit costs reflecting variations in the mix of ore processed. The cessation of earnings from the Southern Cross Fertiliser operation, which was sold effective 1 August 2006, also had a negative impact. This was partially offset by higher value per carat diamonds and good performance at Richards Bay Minerals (South Africa) with a firm market for metallic and zircon co-products.

Underlying EBIT was a record US$3,697 million, an increase of US$2,796 million or 310 per cent over last year. Higher nickel and cobalt prices were the main contributors with an average LME nickel price of US$17.21/lb (compared to US$7.03/lb). The higher prices, (net of price-linked costs) added US$3,109 million to underlying EBIT.

Record annual nickel production was driven by strong performances at all operations. Annual production at Yabulu (Australia) increased by almost 40 per cent.

Higher use of third party ore at Nickel West and Yabulu and higher costs at the Kwinana refinery (all Australia) impacted Underlying EBIT negatively as did the impact of the stronger A$/US$ exchange rate on operating costs at the Australian operations. In addition, Underlying EBIT was impacted by higher electricity and gas costs at Cerro Matoso (Colombia) and higher maintenance and depreciation at Yabulu.

Exploration expenditure was higher than last year due to increased activity in Western Australia, Indonesia, the Philippines and Guatemala.

The comparative period included a US$61 million profit on the sale of BHP Billiton's interest in the Wonderkop joint venture (South Africa).

Underlying EBIT was US$2,738 million up US$201 million, or 7.9 per cent over last year. This was driven mainly by increased prices together with higher sales volumes.

Record production was achieved despite cyclonic events unfavourably impacting production in the third quarter. Record sales reflected business improvement initiatives implemented to promote increased shipping efficiency.

Higher operating costs had an adverse impact during the period, largely attributable to the stronger A$/US$ exchange rate but also to higher contractor and labour costs, price-linked royalties, freight costs and demurrage. A number of initiatives were undertaken during the year to minimise the impact of external cost pressures on the business with the benefits mainly realised in the second six months of the year.

Depreciation was higher, due to the commissioning of the expanded capacity at Western Australia Iron Ore.

Underlying EBIT was US$253 million up US$121 million compared to last year.  Stronger demand drove increased sales volumes of manganese ore and higher prices for manganese alloy. Production volumes were also higher than last year with manganese alloy up 17 per cent and manganese ore setting a production record, up 14 per cent. Operating costs were lower resulting from production efficiencies but were partly offset by increased distribution costs.

Underlying EBIT was US$1,249 million, a decrease of US$585 million, or 31.9 per cent over last year. This was mainly attributable to lower prices for hard coking coal (down 10 per cent) and weak coking coal (down 32 per cent). Higher sales volumes at both Queensland Coal and Illawarra Coal (Australia) impacted Underlying EBIT. The increase in sales volumes at Queensland Coal was supported by the expanded capacity at our Hay Point coal terminal. Royalties were lower due to lower prices.

Operating costs were higher at Queensland Coal following the startup of the new longwall panel at Broadmeadows and higher demurrage costs. Difficult mining conditions and an extended longwall change-out at Illawarra Coal also increased operating costs. A stronger A$/US$ exchange rate had an unfavourable impact across our operations as did inflationary pressure.

Depreciation and amortisation costs were higher due to commissioning of new projects during the year, the write off of the coal dryer at Dendrobium (Australia) and higher amortisation of deferred development costs at Illawarra Coal.

Underlying EBIT was US$484 million, an increase of US$157 million, or 48 per cent, over last year. The increase was mainly attributable to higher export prices resulting from continued strong demand and a favourable movement of the Rand against the US dollar. The profit on divestment of Koornfontein, 1 million tonnes of Richards Bay Coal Terminal annual capacity and the Eyesizwe investment increased Underlying EBIT.

Despite adverse weather conditions in the last quarter and high demurrage costs in Australia, Hunter Valley Coal achieved record production volumes as well as increased cost efficiencies. At Cerrejon Coal (Colombia) higher volumes also had a favourable impact on results. In South Africa unit costs were adversely affected by inflationary pressure, a redundancy provision for the closure of the Douglas underground mine and lower production as a result of safety interventions and equipment availability.

The divestment of the Zululand Anthracite Colliery (South Africa) during the year, reduced Underlying EBIT.

Underlying net corporate operating costs, excluding exchange impacts, were US$231 million compared to US$251 million in the corresponding period, a decrease of US$20 million.

The current period benefited from lower insurance claims, offset by higher costs for corporate projects, sponsorships, and regulatory compliance.

One-off costs in relation to the acquisition of WMC were incurred in the prior period. There were no similar costs in this period.

The minerals exploration group expenditure, charged to Corporate, increased from US$115 million to US$131 million in the current period, mainly due to increased exploration activity on diamond targets in Angola and the Democratic Republic of Congo, and on nickel targets in Australia. In addition, the prior year included a US$60 million profit on the sale of an option held over an exploration property in Pakistan.

(1) Underlying EBIT margin is calculated net of third party product activities

(2) Net operating cash flow includes dividends from jointly controlled entities and is after net interest and taxation.

(3) Unless otherwise stated production volumes exclude suspended and sold operations.

(4) Based on share price of US$20.57.

(5) Underlying EBIT is earnings before net finance costs and taxation, and jointly controlled entities' net finance costs and taxation and any exceptional items. Underlying EBITDA is Underlying EBIT before depreciation, impairments, and amortisation of US$2,883 million (comprising Group depreciation, impairments and amortisation of US$2,550 million and jointly controlled entities' depreciation and amortisation of US$333 million) for the year ended 30 June 2007 and US$2,776 million (comprising Group depreciation, impairments and amortisation of US$2,427 million and jointly controlled entities' depreciation and amortisation of US$349 million) for the year ended 30 June 2006. We believe that Underlying EBIT and Underlying EBITDA provide useful information, but should not be considered as an indication of, or alternative to, attributable profit as an indicator of operating performance or as an alternative to cash flow as a measure of liquidity.

(6) Underlying EBIT is used to reflect the underlying performance of BHP Billiton's operations. Underlying EBIT is reconciled to EBIT - Profit from operations on page 5.

(7) For this purpose, net interest includes net finance costs of jointly controlled entities, and capitalised interest and excludes the effect of discounting on provisions and other liabilities, fair value change on hedged loans, net of hedging derivatives, and exchange differences arising from net debt.

Financial Information

Consolidated Income Statement
for the year ended 30 June 2007

Consolidated Statement of Recognised Income and Expense
for the year ended 30 June 2007

Consolidated Statement of Cash Flows
For the year ended 30 June 2007

The accompanying notes form part of this financial information.

Notes to the Financial Information continued

1 Business segments (continued)