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Net debt
 12 Months Ended
Jun. 30, 2019
Text block [abstract]  
Net debt

Financial management

19    Net debt

The Group seeks to maintain a strong balance sheet and deploys its capital with reference to the Capital Allocation Framework.

The Group monitors capital using the net debt balance and the gearing ratio, being the ratio of net debt to net debt plus net assets.

 

     2019     2018  

US$M

    Current      Non-current     Current      Non-current  

Interest bearing liabilities

           

Bank loans

      508        1,990       308        2,247  

Notes and debentures

      1,002        20,527       2,228        21,070  

Finance leases

      65        650       77        725  

Bank overdraft and short-term borrowings

      20        –       58        –  

Other

      66        –       65        27  
  

 

 

     

 

 

    

 

 

     

 

 

  

Total interest bearing liabilities

      1,661        23,167       2,736        24,069  
  

 

 

     

 

 

    

 

 

     

 

 

  

Less cash and cash equivalents

           

Cash

      2,210        –       1,065        –  

Short-term deposits

      13,403        –       14,806        –  
  

 

 

     

 

 

    

 

 

     

 

 

  

Total 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 % 
     

 

 

       

 

 

  

Cash and short-term deposits are disclosed in the cash flow statement net of bank overdrafts and interest bearing liabilities at call.

 

     2019     2018     2017  
     US$M     US$M     US$M  

Total cash and cash equivalents

      15,613       15,871       14,153  

Bank overdrafts and short-term borrowing

      (20 )      (58 )      (45 ) 
  

 

 

    

 

 

    

 

 

  

Total cash and cash equivalents, net of overdrafts

      15,593       15,813       14,108  
  

 

 

    

 

 

    

 

 

  

Recognition and measurement

Cash and short-term deposits in the balance sheet comprise cash at bank and on hand and highly liquid cash deposits with short-term maturities that are readily convertible to known amounts of cash with insignificant risk of change in value. The Group considers that the carrying value of cash and cash equivalents approximate fair value due to their short term to maturity.

Cash and cash equivalents includes US$108 million (2018: US$98 million) restricted by legal or contractual arrangements.

 

Interest bearing liabilities and cash and cash equivalents include balances denominated in the following currencies:

 

     Interest bearing liabilities      Cash and cash equivalents  
     2019      2018      2019      2018  
     US$M      US$M      US$M      US$M  

USD

      12,485        12,981        9,214        7,024  

EUR

      7,680        9,070        6        5,845  

GBP

      3,118        3,104        48        1,560  

AUD

      951        1,077        3,023        9  

CAD

      594        573        3,092        1,301  

Other

      –        –        230        132  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

      24,828        26,805        15,613        15,871  
  

 

 

     

 

 

     

 

 

     

 

 

  

The Group enters into derivative transactions to convert the majority of its exposures above into US dollars. Further information on the Group’s risk management activities relating to these balances is provided in note 21 ‘Financial risk management’.

Liquidity risk

The Group’s liquidity risk arises from the possibility that it may not be able to settle or meet its obligations as they fall due and is managed as part of the portfolio risk management strategy. Operational, capital and regulatory requirements are considered in the management of liquidity risk, in conjunction with short-term and long-term forecast information.

Recognising the cyclical volatility of operating cash flows, the Group has defined minimum target cash and liquidity buffers to be maintained to mitigate liquidity risk and support operations through the cycle.

The Group’s strong credit profile, diversified funding sources, its minimum cash buffer and its committed credit facilities ensure that sufficient liquid funds are maintained to meet its daily cash requirements.

Standard & Poor’s credit rating of the Group remained at the A level with stable outlook throughout FY2019. Moody’s upgraded its credit rating of the Group from A3 to A2 on 31 October 2018 with a stable outlook thereafter in FY2019.

There were no defaults on the Group’s liabilities during the period.

Counterparty risk

The Group is exposed to credit risk from its financing activities, including short-term cash investments such as deposits with banks and derivative contracts. This risk is managed by Group Treasury in line with the counterparty risk framework, which aims to minimise the exposure to a counterparty and mitigate the risk of financial loss through counterparty failure.

Exposure to counterparties is monitored at a Group level across all products and includes exposure with derivatives and cash investments.

Investments and derivatives are only transacted with approved counterparties who have been assigned specific limits based on a quantitative credit risk model. These limits are updated at least bi-annually. Additionally, derivatives are subject to tenor limits and investments are subject to concentration limits by rating.

Derivative fair values are inclusive of valuation adjustments that take into account consideration of both the counterparty and the Group’s risk of default.

 

Standby arrangements and unused credit facilities

The Group’s committed revolving credit facility operates as a back-stop to the Group’s uncommitted commercial paper program. The combined amount drawn under the facility or as commercial paper will not exceed US$6.0 billion. As at 30 June 2019, US$ nil commercial paper was drawn (2018: US$ nil). The revolving credit facility has a five-year maturity ending 7 May 2021. A commitment fee is payable on the undrawn balance and an interest rate comprising an interbank rate plus a margin applies to any drawn balance. The agreed margins are typical for a credit facility extended to a company with the Group’s credit rating.

Maturity profile of financial liabilities

The maturity profile of the Group’s financial liabilities based on the undiscounted contractual amounts, taking into account the derivatives related to debt, is as follows:

 

2019

US$M

   Bank loans,
debentures and
other loans		     Expected
future
interest
payments		     Derivatives
related to
debentures		     Other
derivatives		     Obligations
under
finance
leases		     Trade and
other
payables(1)		     Total  

Due for payment:

              

In one year or less or on demand

     1,587       864       200       64       110       6,555       9,380  

In more than one year but not more than two years

     4,107       775       226       1       110       5       5,224  

In more than two years but not more than five years

     5,513       1,864       558       –       307       –       8,242  

In more than five years

     11,662       4,896       1,102       –       501       –       18,161  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

     22,869       8,399       2,086       65       1,028       6,560       41,007  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Carrying amount

     24,113       –       958       65       715       6,560       32,411  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

2018

US$M

   Bank loans,
debentures and
other loans		     Expected
future
interest
payments		     Derivatives
related to
debentures		     Other
derivatives		     Obligations
under
finance
leases		     Trade and
other
payables(1)		     Total  

Due for payment:

              

In one year or less or on demand

     2,647       682       302       17       127       5,788       9,563  

In more than one year but not more than two years

     1,545       957       188       1       113       3       2,807  

In more than two years but not more than five years

     8,019       2,203       823       –       335       –       11,380  

In more than five years

     13,287       5,519       1,191       –       590       –       20,587  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

     25,498       9,361       2,504       18       1,165       5,791       44,337  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Carrying amount

     26,003       –       1,213       18       802       5,791       33,827  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(1) 

Excludes input taxes of US$162 million (2018: US$189 million) included in other payables. Refer to note 9 ‘Trade and other payables’.