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Net debt

12 Months Ended

Jun. 30, 2024

21 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.

The net debt definition includes the fair value of derivative financial instruments used to hedge cash and borrowings which reflects the Group’s risk management strategy of reducing the volatility of net debt caused by fluctuations in foreign exchange and interest rates.

Under IFRS 16/AASB16 ‘Leases’, certain vessel lease contracts are required to be remeasured at each reporting date to the prevailing freight index. While these liabilities are included in the Group interest bearing liabilities, they are excluded from the net debt calculation as they do not align with how the Group assesses net debt for decision making in relation to the Capital Allocation Framework. In addition, the freight index has historically been volatile which creates significant short-term fluctuation in these liabilities.


	2024						2023
US$M	Current			Non-current			Current			Non-current
Interest bearing liabilities
Bank loans		540			2,070			5,310			2,192
Notes and debentures		848			14,084			1,337			10,482
Lease liabilities		686			2,430			521			2,498
Bank overdraft and short-term borrowings		3			–			5			–
Other		7			50			–			–

Total interest bearing liabilities		2,084			18,634			7,173			15,172

Less: Lease liability associated with index-linked freight contracts		267			244			114			173

Less: Cash and cash equivalents
Cash		8,150			–			7,206			–
Short-term deposits		4,351			–			5,222			–

Less: Total cash and cash equivalents		12,501			–			12,428			–

Less: Derivatives included in net debt
Net debt management related instruments 1		(171	)		(1,224	)		(113	)		(1,459	)
Net cash management related instruments 2		(19	)		–			36			–

Less: Total derivatives included in net debt		(190	)		(1,224	)		(77	)		(1,459	)

Net debt					9,120						11,166

Net assets					49,120						48,530

Gearing					15.7	%					18.7	%

1	Represents the net cross currency and interest rate swaps designated as effective hedging instruments included within current and non-current other financial assets and liabilities.

2	Represents the net forward exchange contracts included within current and non-current other financial assets and liabilities.

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


	2024			2023			2022
	US$M			US$M			US$M
Total cash and cash equivalents		12,501			12,428			17,236
Bank overdrafts and short-term borrowings		(3	)		(5	)		–

Total cash and cash equivalents, net of overdrafts		12,498			12,423			17,236

Cash and cash equivalents includes US$112 million (2023: US$95 million) restricted by legal or contractual arrangements.

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. Refer to note 22 ‘Leases’ and note 24 ‘Financial risk management’ for the recognition and measurement principles for lease liabilities and other financial liabilities.

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


	Interest bearing liabilities				Cash and cash equivalents
	2024		2023		2024		2023
	US$M		US$M		US$M		US$M
USD		15,203		16,289		4,445		5,925
EUR		2,440		3,050		5		544
GBP		1,613		1,587		711		674
AUD		1,265		1,233		3,840		1,797
CAD		5		7		3,259		3,362
Other		192		179		241		126

Total		20,718		22,345		12,501		12,428

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 24 ‘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.

The Group’s Moody’s credit rating has remained at

A1/P-1

outlook stable (long-term/short-term). The Group’s S&P Global’s rating has remained at

A-/A-1

outlook stable (long-term/short-term).

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 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$5.5 billion. As at 30 June 2024, US$

nil commercial paper was drawn (2023: US$

nil). The facility is due to mature on 10 October 2026. A commitment fee is payable on the undrawn balance and interest is payable on any drawn balance comprising a reference rate plus a margin. 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:


2024 US$M	Bank loans, debentures and other loans		Expected future interest payments		Derivatives related to debentures		Other financial liabilities		Obligations under lease liabilities		Trade and other payables 1		Total
Due for payment:
In one year or less or on demand		1,402		884		485		333		836		6,618		10,558
In more than one year but not more than two years		1,362		827		171		67		591		15		3,033
In more than two years but not more than five years		4,960		1,923		377		233		1,012		27		8,532
In more than five years		10,999		4,784		1,131		163		1,761		3		18,841

Total		18,723		8,418		2,164		796		4,200		6,663		40,964

Carrying amount		17,602		–		1,513		758		3,116		6,663		29,652


2023 US$M	Bank loans, debentures and other loans		Expected future interest payments		Derivatives related to debentures		Other financial liabilities		Obligations under lease liabilities		Trade and other payables 1		Total
Due for payment:
In one year or less or on demand		6,659		757		536		257		658		6,175		15,042
In more than one year but not more than two years		1,399		595		388		126		538		4		3,050
In more than two years but not more than five years		4,058		1,410		399		267		1,031		–		7,165
In more than five years		8,093		3,693		1,020		211		1,846		–		14,863

Total		20,209		6,455		2,343		861		4,073		6,179		40,120

Carrying amount		19,326		–		1,755		804		3,019		6,179		31,083

1	Excludes input taxes of US$101 million (2023: US$121 million) included in other payables.