BHP Billiton Overview and Financial Analysis

This document provides an overview of BHP Billiton, a multinational mining and petroleum company based in Australia. It includes information about the company's history, revenue, and products. The document also analyzes the company's financial ratios, profitability, liquidity, solvency, and market performance. References and financial statements are provided.

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Table of Contents
BHP Billiton Overview...............................................................................................................................3
Review of the Auditor’s Opinion.................................................................................................................3
Financial Ratios...........................................................................................................................................3
Profitability..........................................................................................................................................3
Liquidity..............................................................................................................................................3
Solvency..............................................................................................................................................4
Market performance............................................................................................................................4
Analysis of the stock prices.........................................................................................................................4
Comments...................................................................................................................................................5
Financial statements................................................................................................................................5
References...................................................................................................................................................7

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BHP Billiton Overview
BHP formerly known as the BHP Billiton is one of the most important trading entity
based in Australia. The company is engaged in the business of multinational mining, petrol,
metals and petroleum products whose headquarters are situated in Melbourne Victoria. The
major feature of this company is that it is listed on London stock exchange, New York stock
exchange as well as Australian Stock Exchange. The company was founded in the year 1860
originally as a mining company. During the initial ventures the company was included in tin and
lead smelting in the Netherlands. The current revenue of the company is US$43638 with the
earnings of US$17.561 billion for the financial year 2018. Also, currently the company is
working with 62000 employees. The products that are majorly on the front platform of the
company are iron ore, coal, petroleum, copper, nickel, natural gas and uranium (BHP Billiton,
2018).
Review of the Auditor’s Opinion
From time to time the audit of the BHP Billiton is done by the KPMG, to conduct the
non-statutory services for the BHP Billiton. After analyzing the review presented by the auditors
it can be stated that the financial statements give the true and the fair view. The consolidated
statements have been prepared properly in accordance with the International Financial Reporting
Standards. The company has also included FRS 101 Reduced Disclosure framework. The
opinion presented by the auditors is unmodified (BHP Billiton, 2018).
Financial Ratios
The ratio analysis is a technique which determines the comparison of the companies on
the basis of different ratios and categories. The ratios are also classified on the basis of the
profitability, liquidity, solvency, efficiency as well as the market ratios.
Profitability
The profitability of the BHP Billiton is typically sound as the return on equity is 8.84% in
the year 2017 and 22.10% in the year 2019. This indicates that the company has the ability to
give good returns back to the investors. While comparing to the previous year the return on

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equity is low as compared to the previous year 2017. The rate of return is 5.15% whereas the
same fell down to 3.33% and the major reason behind such scenario is the lower growth or the
issue of the common stock. Therefore the attributable profit of the 3.7 billion tends to be
worthwhile (BHP Billiton, 2018).
Liquidity
The liquidity position of the BHP can be observed on the basis of the current ratio. The
current ratio of the BHP Company is 1.84 and it improved to 2.51 as the companies focused
more towards realizing the cash on the early basis. The liquidity position has risen beyond the
ideal industry performance and hence this indicates the positive shift for the investors to take into
consideration this noteworthy key point (BHP Billiton, 2018).
Solvency
The solvency ratios determine the debt position and the repayment capacity of the
company. The payment capacity of the company has been increased as the times earning
coverage ratio has been increased from 10.14 to 24.05 whereas the debt to equity ratio is has
been reduced from 0.5 to 0.42 due to the increase in the capacity of the company to back the
financial obligations (BHP Billiton, 2018).
Market performance
The market performance of the company with respect to the previous year as well as the
competitors the P/E ratio of the company was 48.92 whereas the same increased to 75.82 in the
year 2018. This happened due to the shift in the share price of the company and eventually the
price earnings ratio took a sharp end. The market performance is also dependent on the basis of
the external factors such as demand, economies of scale political as well as the legal factors
affecting the position of the company (BHP group, 2018).
Analysis of the stock prices
While analyzing the stock movement of the BHP Billiton against the industry standard
S&P 500, it can be observed that the annual returns of the BHP are above the average returns
posted by the S&P 500 index. This indicated that there is an indirect relationship between the
average returns of BHP as well as S&P 500. Rarely there was a situation where the BHP
encountered the lower returns but it grasped quickly. The chart also presents that the current

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price of the company is 52.81 which suggests that the company is almost similar with the
patterns of the S&P 500 index. Hence overall it can be concluded that the company is performing
better than the average returns of the S&P and the investors are advised to invest in the business
(BHP group, 2018).
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Price Moving Calculations
S&P 200 Average return (BHP)
Comments
Financial statements
 The sales are up from the last year by 40%. In the year 2017, the sales were$38285
whereas in the year 2018, the sales were $53638.
 Almost all expenses increased from direct operating expenses amounted to $24515 to
$28036 to non-direct such as income tax expense which increased from $4276 to $6879.
 The overall profit have been reduced from $6222 to $4823, this is due to the loss after tax
booked in the current year of $2921.
 Total assets of the company have decreased from $117006 to $111993 to due to the
decrease in the fixed assets of the company as well as other financial assets from @1281
to $999. The major decrease has been found due to the reduction in the non-current
assets.
 The liabilities of the company have reduced indicating the positive situation. The
liabilities were $54280 to $51323 (BHP Billiton, 2018).

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 The cash flow while analyzing the annual report of the BHP Billiton seems to be positive
as well as higher from the previous year $14108 to $15813 (BHP Billiton, 2018).
 For determining the innovative approach of the business the as it can be observed from
the annual report where it states that the company uses the 3D design tools which enable
the designers to spot the potential clashes, safety necks as well as the readily accepted.
 The company introduced the Finance for forests (F4F) initiative which will be able to
share the replication off the investments.
 The BHP is all set to sell the US Shale oil and gas assets to BP for $10.5 billion, which
will strengthen the portfolio and simplify it for the long term growth.
(Source: BHP, 2018)
 The major hot news that can be observed with regards to the BHP Billiton is that in a
separate transaction the Merit Energy Company wills Buy BHP Billiton Petroleum Inc.
and BHP Billiton Petroleum for $300 million. Both the sales are going to be expected to
execute by the end of the October (Business Standard, 2019).
 The company’s major focus was on securing the accumulated productivity of more than
US$12 billion since the financial year 2012. The cost comparisons can itself deliver the
results and the summit at which the company wanted to reach from the year 2012 to
2018.
 In terms of product the company produced 238 million or iron ore, 1753 kilo tonnes of
copper, 120 MMboe of petroleum and 72 million tons of coal.

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 Also in the year 2018 the economic contribution of US$33.9 billion was observed along
with 1% increase in the operational greenhouse gas emissions from FY2017 (BHP
Billiton, 2018).

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References
BHP Billiton, (2018). Annual Report. Retrieved from
https://www.bhp.com/-/media/documents/investors/annual-reports/2018/
bhpannualreport2018.pdf
BHP group, (2018). Historical Data. Retrieved from
https://finance.yahoo.com/quote/BHP/history?
period1=1525429493&period2=1556965493&interval=1mo&filter=history&frequency=
1mo
Business Standard, (2019). BHP Billiton to sell US shale oil and gas assets to BP for $10.5
billion. Retrieved from https://www.business-standard.com/article/international/bhp-
billiton-to-sell-us-shale-oil-and-gas-assets-to-bp-for-10-5-billion-118072700100_1.html