BHP Billiton Financial Analysis: Performance and Strategies

This report provides a comprehensive financial analysis of BHP Billiton, a dual-listed mining company. It evaluates key financial ratios, including gross profit margin, profit margin, return on assets, return on equity, current ratio, quick ratio, operating cash flow margin, and earnings per share, for the years 2017 and 2018. The analysis delves into profitability, liquidity, and cash flow ratios, highlighting the company's performance in revenue generation and its ability to meet obligations. Market analysis considers earnings per share and dividend payouts, alongside external factors like economic crises, fluctuating currency, and competition from companies like Rio Tinto. The report also examines BHP Billiton's strategies, including maximizing value and returns for stakeholders, and its human capital, including its experienced management and employee benefits. The conclusion suggests that the company needs to reduce expenses and strengthen shareholder relations to improve its financial performance. The report references the company's annual reports, market analyses, and industry reports to support its findings.

Executive Summary
In this report, the discussion is made on the financial analysis of the organisation. For this, BHP Billiton has
been taken into consideration to evaluate the financial position of an organisation. BHP Billiton is a mining
company of metals and petroleum dual-listed company. The financial ratio’s has been evaluated to analyse the
financial position of the company. The operating cost of the organisation is affected due to economic crises such
as fluctuating currency, and recession period. As per the market analysis, the company allocation amount is
decreases due to falling down the profit. The company has to build the strong relation with shareholders to
improve the performances.
Analysis
2017
201
8
Gross Profit
Margin 0.56 0.61
Profit Margin 0.15 0.08
Return on Assets 0.05 0.03
Return on Equity 2.63 1.65
Current Ratio 1.85 2.51
Quick Ratio 1.50 1.36
Operating Cash
Flow Margin 0.44 0.42
Earnings Per
share 2.63 1.67
There are some data is founded that helps the shareholders to take the decision towards the organisation for
investment. It has been evaluated that the organisation financial performance is continuously improving in terms
of profit from 0.56 to 0.61. Increasing profit helps to attract the short terms investors and suppliers to support
the company. But the company allocate the profit to shareholders is not effective that is why; shareholders have
to analyse the policies before purchasing the shares.
Interpretation
Profitability Ratio is the financial metrics which helps to measure the ability of an organisation to generate
revenue, assets and shareholders’ equity. As per the above evaluation, it has been seen that the organisation
amount of net income is increases from the year 2017 to 2018 with the amount of 21269 and 26434 respectively
(BHP Billiton, 2018). The net sales of the organisation are increases but the net income of the company is
decreases due to high cost consuming on the different activities. Liquidity Ratio is the financial ratio that
depicts the current asset of an organisation in order to meet the obligations. It is observed that the ability of the
company to pay all the obligations is increases as the current asset amount is large as compare to the current

liabilities. It has been evaluated that the current asset of the company is 21056 in the year 2017 and it is
increases to 35130 in the year 2018 respectively (BHP Billiton, 2018). Cash flow ratio of the organisation
indicates the inflow and outflow of cash in the organisation. According to ratio evaluation, the amount of
operating activities is evaluated in the year 2017 it is 16804 and in the year 2018, it is 18461(BHP Billiton,
2018). The ratio of cash return equity reflects that the amount of return to owners on their equity. The company
cash return ratio depicts that the company has the capacity to pay’s the owner’s equity from 7.49 to 8.23 in the
year 2017 to 2018 respectively. Market analysis reflects the size in the market in terms of shares price. Earnings
per share and dividend pay-out are the ratio which is evaluated to measure the company performance in the
market. The ratio of earning per share is decreases that mean allocated profit amount is distributed to each
outstanding share and its common stock. In the recent financial crises of recession, the oil prices were fall down
due to which the company suffer with the loss. But after the recovery of crises in the year 2009, the demand oil
is increases. But due to fluctuation in the prices of petroleum, the demands of consumers are affected. The
Current Petroleum Resources Rent Tax in Australia will be extended to all the Australian oil and gas companies.
The operating costs of the company are influenced due to fluctuation of currency amount (CSI Market, 2018).
The company expand the business at the international level as it operates 90 locations in the world. It is the one
of the largest mining company. There are many companies compete the BHP Billiton providing the similar
services such as Rio Tinto, Vale, Alcoa and many others. Rio Tinto is the main competitors who beat the
company in terms of revenue and customer preferences. Australia has a large supply of mineral, hydrocarbon
and non-mineral reserves. The export and import of minerals earn 78% of revenue in the year 2018-19. The
annual growth of the market is 2.4% and it is expected that the market will grow with the high rate (IBIS World,
2019). BHP Billiton main strategy is to maximise value and returns. It means the company provide the best
return to its stakeholders and shareholders as per their capabilities. The employees and team management of the
organisation has the experience in their operating fields. The company has 62000 employees that are highly
qualified and experienced. As per the management of BHP, Ken Mackenize is a Director of BHP Group
implement collectivism strategy in which they work together to strengthen its application. The different
management handle their all activities in order to operate smoothly in their business to earn profit. The
remuneration amount paid by BHP in the year 2017 $184700 that is now increases with the profits as compare
to its competitors that is Rio Tinto. It also provide the other benefits except the non-wage such as insurance,
pension plan, family and parenting, vacations and time off that helps to influence the employee to work with the
organisation. It has the opportunity to influence the employees to work with the companies to gain the
competitive advantage.
Conclusion
At the end, it is concluded that the organisation has to implement some changes and strategies. It has been seen
that the company financial performance is decreases due to which the allocation amount of profit to
shareholders are also falls down. The company has to reduce the expenses so that the profit amount is increases
and it is able to distribute the effective amount of profit. The company has to build the strong relation with its
shareholders and also promise them to give the high profit amount.

References
BHP Billiton. (2018). Annual Report 2018. Retrieved from:
https://www.bhp.com/-/media/documents/investors/annual-reports/2018/bhpannualreport2018.pdf?
la=en
CSI Market. (2018). Bhp Group Ltd's Comment on Sales, Marketing and Customers. Retrieved from:
https://csimarket.com/stocks/markets_glance.php?code=BHP
Dunn, M. (2009) Recession fears as economy hits lowest level since 2009 global financial crisis. Retrieved
from: https://finance.nine.com.au/personal-finance/australian-recession-2019-economy-slowed-to-
weakest-level-since-2009-global-financial-crisis/9282fe6c-b394-40d2-ab83-39add2e099d5
IBIS World. (2019). Mining - Australia Market Research Report. Retrieved from:
https://www.ibisworld.com.au/industry-trends/market-research-reports/mining/mining.html
Owler. (2018). BHP's Competitors, Revenue, Number of Employees, Funding and Acquisitions. Retrieved from:
https://www.owler.com/company/bhpbillitonplc