Financial Performance Analysis of BHP Billiton (2017-2018)

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Executive Summary
Established in 2001, by the merger of Broken Hill Proprietary Limited (BHP) and Billiton, its
headquarters are located in London and Melbourne. BHP Billiton is a well-known Anglo-
Australian mining company which has global market shares. This dual-listed company deals in
mining, petroleum and minerals. On the basis of market capitalization, BHP Billiton was ranked
as a leading mining country of the world in the year 2017. The report aims to scrutinize the
financial data of the company. Also, the report shall make an interpretation of the reasons for
fluctuation in clusters such as profitability and liquidity of the company. Further, the report
outlines the recommendations that stakeholders must consider.
Analysis
The key statistics of the company are as follows:
2017 (US$ Million) 2018 (US$ Million)
Market Capitalization 67.5 44.07
Revenue 36,135 43,638
Total comprehensive
Income
6,173 4,823
Cash Flow 14,108 15,183
Total Assets 117,006 111,993
Working Capital 9,690 21,141
The global market capitalization of the company tends to decrease from the year 2014. In the
year 2014, the market capitalization of the company was US$179, which gradually decreased to
US$108 by the year 2015 and to US$71.2 in the year 2016. By the end of the financial year
2018, it reached US$44.07, which is lowest in the last 8 years. By the end of the fiscal year 2018
(30-06-2018), the company's financial statements have reflected the growth in its earnings. The
margins and revenues of the company have visibly improved. The revenue of BHP Billiton
increased with the rate of 20.76% from the year 2017, which is a higher rate of increase from the

year 2016, where the increase in revenue rate was 16.9%. The increased revenue has resulted in
increased dividends, which are 63 cents per share in the year 2018, which is as same as to the
payout ratio of 69%. The dividend announced by the company to its shareholders amounted to
US$6.3 Billion. The net debt of the company has increased from $16.3Billion (2017) to $10.9
Billion by the end of the fiscal year 2018. The Working Capital of the company has been
increased, which means that the company is making investments for growth of the company
(BHP, 2018).
CategoryMarket Capitalization
Revenue
Total comprehensive Income
Cash Flow
Total Assets
Working Capital
0
50000
100000
150000
200000
250000
2017
(US$
M)
Analysis of BHP group
2017 (US$M) 2018(US$M)

Interpretation
All over the financial performance of the company has increased over the year, such that the
profitability and the operational efficiency level of the company have increased. The output has
been increasing at a constant trend such has it has increased from $38,285 million in 2017 to
$43,638 in 2018. This increase has played a major contribution to the increased profitability level
of the company. The company although has increased its production level, but at the same time
have been able to curb the operational expenses such that they have remained at the same level
as last year, leading to increase in the profitability of the company. The gross margin had
increased from 55.6% in 2017 to 60.6% in 2018. This was achieved by maintaining the
operational efficiency of the business processes. This can be measured by considering the
efficiency ratios such as Receivables Turnover Ratio (12.78 in 2017 to 14.71 in 2018) and Asset
Turnover ratio (0.32 in 2017 to 0.38 to 2018), suggesting that the company has generating more
revenue from the employed capital and hence signifying increase in the operational efficiency of
the company.
The decrease in the net income has also resulted from the loss from discontinued operations,
which was valued at $2,291 million. The company suffered from a disaster (extra-ordinary item)
last year, termed as Samarco Dam Failure where the dam broke incurring huge costs and loss to
the company. Also, huge tax liabilities were required to be paid owing to the US tax reforms
introduced on 22nd December 2017. These are the major reason faced a slight drop in the
profitability levels; otherwise, internally company has been performing well (BHP, 2019).
The liquidity position of the company has increased from last year, which can be measured using
a liquidity ratio, which has increased from 1.85 in 2017 to 2.51 in 2018. This suggests that the
company will be able to pay off its debts as and when required. This is the outcome of the
efficient cash management of the company. Free cash flows have amounted to $13,482 million in
2018, which have increased from $12,552 million in 2017. Company has overseen cash
management in a systematic manner such that the Trade receivables and Inventory outflows have
been compensated by Trade payables inflows, repayment of interest-bearing liabilities causing a
decrease in the finance cost of the company.
The financial condition of the company has always been stable such that the market
capitalisation for 2018 is $44.07 million. EPS for the 2018 ending comes out to be 124.6, which
have increased from 119.5 in 2017 (ASX, 2019).
Apart from the incident of the Samarco Dam Failure, the company has always strived towards
providing a safe environment for its employed and promoting a healthy workplace for each
individual. Owing to the dam failure incident, TRIF increased to 4.4 in 2018. Company is also
involved in the social upliftment projects donating $77.1 Million in 2018. Company has always
been employing the latest technologies and skilled labour force, leading to an increase in the

productivity of the operations. BHP has undertaken a total of 5 major projects, which are still
operating at year ending 2018. The total budget for the project comes out to be $10.6 Billion.

Conclusion
It can be seen from the above, that the company had faced a disaster in 2017 and still managed to
salvage the resources from the disaster and maintain the profitability of the company at a
desirable level. Company's liquidity position and financial strength have increased over the
period and generated more revenue in that period. Company's dividend policy is also investor
friendly, such that the company has adopted dividend reinvestment plan and allows for the
dividend to be reinvested as shares in the company, thus allowing for a steady increase in the
dividend income. It is recommended that that investor may undertake long term investment in
the company.

References
 BHP. 2018. Annual report. [Online] BHP. Available at:
https://www.bhp.com/-/media/documents/investors/annual-reports/2018/
bhpannualreport2018.pdf [Accessed on: 06 June. 2019]
 ASX. 2019. BHP. [Online] ASX. Available at: https://www.asx.com.au/asx/share-price-
research/company/BHP [Accessed on: 06 June. 2019]
 BHP. 2019. OUR COMPANY. [Online] BHP. Available at: https://www.bhp.com/our-
approach/our-company [Accessed on: 05 June. 2019]