BHP Billiton Ltd Financial Performance - Example

BHP BILLITON LTD. (BHP) FINANCIAL PERFORMANCE Customer Inserts His/her Name Customer Inserts Grade Course Customer Inserts Tutor’s Name Date Company’s overview BHP Billiton Limited is a worldwide company that deals with diversified natural resource. The company is ranked as the world’s largest diversified resource group which has a global portfolio of quality assets. Its major activities includes exploration, production of oil, mining of bauxite together with its subsidiaries, smelting of alumina into aluminum metal, zinc, lead silver, molybdenum, gold and uranium. The company also engages in production of oil gas and development of potash. It also involve in the production and mining of nickel products, ore, manganese, alloys and manganese metals, as well as the mining of iron ore, thermal coal and metallurgical coal. BHP Billiton Limited was incorporated in 1985 and began its operation as Broken Hill lead/zinc mine in NSW. It expanded its mineral interest to include iron ore, coal and steel-making business in 1915. It initiated petroleum diversification in 1960, with first Bass Strait production in 1967. In 2000 its traditional steel business spun-off which culminated in a dual-listing merger with UK-listed was approved. Among the global resource companies BHP is a leader with petroleum division being the key differentiating factor which represents 15% of it operating assets. The other major portfolio which the company focuses on lately is mining, whilst oil companies tend to divest mining assets. Such exposure has provides a natural edge to the company against increasing energy prices that have negatively impacted on mining company profits. The major customer to the company is Europe which represents 35% of by destination. Other major customer includes Asia, China and Japan which make total of 33%. 11% is taken by North America and the 8% is taken by Australia. Most metal and oil are sold into global spot markets, whilst iron ore, coal and gas are typically sold under contract arrangements with utilities, steel plant and large industrial user. Among the key competitors to the company are Anglo America, Rio Tinto, and CVRD of Brazil for iron ore and Alcoa for aluminum. Financial Statements for BHP BILLITON LTD (BHP) Income statement The company has witness impressive growth in the last four years. Revenue grows from $50.2B to $52.8B. Within the three fiscal years the company manages to reduce the percentage of sales devoted to cost of goods sold from 28.12% to 23.68%. This is the success attributed huge growth from $5.9B to $12.7B. Currency in Millions of U.S. Dollars As of: Jun 30 2007 Restated USD Jun 30 2008 Restated USD Jun 30 2009 USD Jun 30 2010 USD Revenues 47,473.0 59,473.0 50,211.0 52,798.0 Other Revenues 316.0 328.0 324.0 252.0 TOTAL REVENUES 47,789.0 59,801.0 50,535.0 53,050.0 Cost of Goods Sold 13,650.9 16,122.9 14,120.8 12,504.5 GROSS PROFIT 34,138.1 43,678.1 36,414.2 40,545.5 Selling General & Admin Expenses, Total 10,642.1 14,403.1 15,147.2 15,635.5 R&D Expenses 169.0 244.0 156.0 65.0 Depreciation & Amortization, Total 2,754.0 3,612.0 3,871.0 4,759.0 Other Operating Expenses 400.0 990.0 -660.0 639.0 OTHER OPERATING EXPENSES, TOTAL 13,965.1 19,249.1 18,514.2 21,098.5 OPERATING INCOME 20,173.0 24,429.0 17,900.0 19,447.0 Interest Expense -328.0 -533.0 -441.0 -197.0 Interest and Investment Income 198.0 221.0 231.0 133.0 NET INTEREST EXPENSE -130.0 -312.0 -210.0 -64.0 Currency Exchange Gains (Loss) -272.0 -215.0 373.0 -107.0 Other Non-Operating Income (Expenses) -282.0 -312.0 -328.0 -352.0 EBT, EXCLUDING UNUSUAL ITEMS 19,489.0 23,590.0 17,735.0 18,924.0 Merger & Restructuring Charges -- -- -3,649.0 -298.0 Impairment of Goodwill -45.0 -137.0 -27.0 -- Gain (Loss) on Sale of Investments 60.0 -1.0 -63.0 20.0 Gain (Loss) on Sale of Assets 41.0 130.0 30.0 92.0 Other Unusual Items, Total -333.0 -99.0 -2,409.0 834.0 Insurance Settlements 94.0 38.0 88.0 21.0 Other Unusual Items -167.0 -- -1,175.0 235.0 EBT, INCLUDING UNUSUAL ITEMS 19,212.0 23,483.0 11,617.0 19,572.0 Income Tax Expense 5,716.0 7,521.0 5,279.0 6,563.0 Minority Interest in Earnings -80.0 -572.0 -461.0 -287.0 Earnings from Continuing Operations 13,496.0 15,962.0 6,338.0 13,009.0 NET INCOME 13,416.0 15,390.0 5,877.0 12,722.0 NET INCOME TO COMMON INCLUDING EXTRA ITEMS 13,416.0 15,390.0 5,877.0 12,722.0 NET INCOME TO COMMON EXCLUDING EXTRA ITEMS 13,416.0 15,390.0 5,877.0 12,722.0 Balance sheet In the three fiscal years the company manages to stay within the Metal and Mining industry norm. The financial position of the company is stable and there are enough liquid assets to satisfy current obligations. The company is among the most efficient in the industry with only 148.21 days of it cost of good sold tied up in the inventory. The account receivable is typically for the industry with outstanding 29.90 days of sales. Currency in Millions of U.S. Dollars As of: Jun 30 2007 Restated USD Jun 30 2008 Restated USD Jun 30 2009 USD Jun 30 2010 USD Assets         Cash and Equivalents 2,449.0 4,237.0 10,833.0 12,456.0 Short-Term Investments 6.0 7.0 -- -- Trading Asset Securities 290.0 506.0 79.0 23.0 TOTAL CASH AND SHORT TERM INVESTMENTS 2,745.0 4,750.0 10,912.0 12,479.0 Accounts Receivable 4,827.0 8,001.0 3,705.0 4,945.0 Notes Receivable 3.0 3.0 4.0 3.0 Other Receivables 1,409.0 1,916.0 1,868.0 1,784.0 TOTAL RECEIVABLES 6,239.0 9,920.0 5,577.0 6,732.0 Inventory 3,744.0 4,971.0 4,821.0 5,334.0 Other Current Assets 1,028.0 2,039.0 1,176.0 589.0 TOTAL CURRENT ASSETS 13,756.0 21,680.0 22,486.0 25,134.0 Gross Property Plant and Equipment 65,404.0 70,432.0 77,795.0 85,145.0 Accumulated Depreciation -23,143.0 -23,100.0 -28,763.0 -29,569.0 NET PROPERTY PLANT AND EQUIPMENT 42,261.0 47,332.0 49,032.0 55,576.0 Goodwill 555.0 442.0 398.0 370.0 Long-Term Investments 793.0 978.0 1,139.0 1,357.0 Loans Receivable, Long Term 39.0 40.0 24.0 704.0 Deferred Tax Assets, Long Term 2,832.0 3,486.0 3,910.0 4,053.0 Other Intangibles 158.0 183.0 263.0 317.0 Other Long-Term Assets 1,010.0 1,867.0 1,518.0 1,341.0 TOTAL ASSETS 61,404.0 76,008.0 78,770.0 88,852.0         LIABILITIES & EQUITY         Accounts Payable 3,425.0 4,612.0 3,760.0 4,470.0 Accrued Expenses 940.0 1,117.0 1,000.0 1,072.0 Short-Term Borrowings 51.0 64.0 2.0 1.0 Current Portion of Long-Term Debt/Capital Lease 1,589.0 3,397.0 1,092.0 2,472.0 Current Portion of Capital Lease Obligations 14.0 28.0 60.0 63.0 Current Income Taxes Payable 2,193.0 2,141.0 1,931.0 1,685.0 Other Current Liabilities, Total 2,810.0 4,729.0 3,814.0 3,053.0 Unearned Revenue, Current 299.0 418.0 251.0 289.0 TOTAL CURRENT LIABILITIES 11,307.0 16,478.0 11,850.0 13,042.0 Long-Term Debt 10,701.0 9,029.0 15,162.0 13,585.0 Capital Leases 79.0 205.0 163.0 162.0 Minority Interest 251.0 708.0 757.0 804.0 Unearned Revenue, Non-Current 545.0 488.0 485.0 420.0 Pension & Other Post-Retirement Benefits 697.0 796.0 947.0 878.0 Deferred Tax Liability Non-Current 2,260.0 3,116.0 3,038.0 4,320.0 Other Non-Current Liabilities 5,897.0 6,853.0 6,414.0 7,116.0 TOTAL LIABILITIES 31,486.0 36,965.0 38,059.0 39,523.0 Common Stock 2,404.0 2,343.0 2,343.0 2,343.0 Additional Paid in Capital 518.0 518.0 518.0 518.0 Retained Earnings 27,729.0 35,756.0 36,831.0 44,801.0 Treasury Stock -1,457.0 -514.0 -525.0 -525.0 Comprehensive Income and Other 473.0 232.0 787.0 1,388.0 TOTAL COMMON EQUITY 29,667.0 38,335.0 39,954.0 48,525.0 TOTAL EQUITY 29,918.0 39,043.0 40,711.0 49,329.0 TOTAL LIABILITIES AND EQUITY 61,404.0 76,008.0 78,770.0 88,852.0 Cash flow statement Currency in Millions of U.S. Dollars As of: Jun 30 2007 Restated USD Jun 30 2008 Restated USD Jun 30 2009 USD Jun 30 2010 USD NET INCOME 13,416.0 15,390.0 5,877.0 12,722.0 Depreciation & Amortization 2,754.0 3,612.0 3,852.0 4,732.0 Amortization of Goodwill and Intangible Assets -- -- 19.0 27.0 Impairment of Oil, Gas, & Mineral Properties 265.0 137.0 85.0 52.0 DEPRECIATION & AMORTIZATION, TOTAL 3,019.0 3,749.0 3,956.0 4,811.0 (Gain) Loss from Sale of Asset -101.0 -129.0 -38.0 -114.0 (Gain) Loss on Sale of Investment -- -- 71.0 2.0 Asset Write down & Restructuring Costs -136.0 -- 34.0 -19.0 Change in Accounts Receivable -1,118.0 -4,255.0 4,894.0 -1,713.0 Change in Inventories -732.0 -1,313.0 -116.0 -571.0 Change in Accounts Payable 561.0 1,824.0 -847.0 565.0 Change in Other Working Capital 185.0 663.0 -1,266.0 -396.0 CASH FROM OPERATIONS 15,957.0 17,817.0 18,863.0 17,920.0 Capital Expenditure -7,934.0 -8,908.0 -10,735.0 -10,656.0 Sale of Property, Plant, and Equipment 77.0 43.0 164.0 132.0 Cash Acquisitions -701.0 -154.0 -286.0 -508.0 Divestitures 203.0 78.0 -109.0 220.0 Sale (Purchase) of Intangible Assets -18.0 -16.0 -141.0 -85.0 Investments in Marketable & Equity Securities 60.0 -107.0 56.0 -118.0 CASH FROM INVESTING -8,313.0 -9,064.0 -11,051.0 -11,015.0 Long-Term Debt Issued 4,539.0 7,201.0 7,323.0 567.0 TOTAL DEBT ISSUED 4,539.0 7,201.0 7,323.0 567.0 Long Term Debt Repaid -2,925.0 -7,951.0 -3,748.0 -1,155.0 TOTAL DEBT REPAID -2,925.0 -7,951.0 -3,748.0 -1,155.0 Issuance of Common Stock 22.0 24.0 29.0 12.0 Repurchase of Common Stock -5,906.0 -3,365.0 -169.0 -274.0 Common Dividends Paid -2,271.0 -3,135.0 -4,563.0 -4,618.0 TOTAL DIVIDEND PAID -2,271.0 -3,135.0 -4,563.0 -4,618.0 Other Financing Activities -68.0 227.0 -52.0 161.0 CASH FROM FINANCING -6,609.0 -6,999.0 -1,180.0 -5,307.0 Foreign Exchange Rate Adjustments 12.0 21.0 26.0 26.0 NET CHANGE IN CASH 1,047.0 1,775.0 6,658.0 1,624.0 Ratios Short-term (Operating) Activity Analysis This is evaluation of output and revenues generated by the BHP Billiton Ltd.'s assets. The performance of the company is determine by performance ratios which describe the relationship between the BHP Billiton Ltd.'s level of operations and the assets needed to sustain operating activities. Inventory turnover Receivable turnover Payable turnover Working capital turnover Average inventory processing period Average receivable Long-term (Investment) Activity Analysis This is the measures of how efficiently BHP Billiton Ltd. In generating revenues from its investments in total or fixed assets. Net Fixed Asset Turnover Total Asset Turnover Equity Turnover Liquidity Analysis It measures the adequacy of cash resources that enable the company to meet its near-term cash obligations. Current Ratio Quick Ratio Cash Ratio Long-term Debt and Solvency Analysis This measures the company capital structure in terms of the mix of its financing resources and its ability to meet investment obligation and long term debt. Debt to equity Debt to capital Interest coverage Profitability Analysis Measures the income of BHP Billiton Ltd. relative to its revenues and invested capital (Bazley, &Hancock, 2009). Operating profit margin Net Profit Margin Return on Equity (ROE) Return on assets (ROA) BHP Billiton Ltd., short-term (operating) activity ratios (Bazley, &Hancock, 2009)     Jun 30, 2010 Jun 30, 2009 Jun 30, 2008 Jun 30, 2007   Turnover Ratios Inventory turnover 9.90 10.42 11.96 11.98 Receivables turnover 8.07 9.74 6.07 8.42 Payables turnover 8.16 8.94 8.78 8.36 Working capital turnover 9.76 11.53 7.44 12.11   Average No. of Days Average inventory processing period 37 35 31 30 Add: Average receivable collection period 45 37 60 43 Operating cycle 82 73 91 74 Less: Average payables payment period -45 -41 -42 -44 Cash conversion cycle 37 32 49 BHP Billiton Ltd., liquidity ratios     Jun 30, 2010 Jun 30, 2009 Jun 30, 2008 Jun 30, 2007 Jun 30, 2006 Current ratio 1.93 1.90 1.32 1.08 0.99 Quick ratio 1.46 1.35 0.86 0.65 0.52 Cash ratio 0.96 0.91 0.26 0.19 0.09 Source: Based on data from BHP Billiton Ltd. Annual Reports (Bazley, &Hancock, 2009) BHP Billiton Ltd., profitability ratios     Jun 30, 2010 Jun 30, 2009 Jun 30, 2008 Jun 30, 2007 Jun 30, 2006   Return on Sales (%) Operating profit margin 37.94 24.22 40.60 34.77 34.14 Net profit margin 24.10 11.70 25.88 33.97 32.50   Return on Investment (%) Return on equity (ROE) 26.22 14.71 40.15 45.22 43.15 Return on assets (ROA) 14.32 7.46 20.28 23.06 21.54 Source: Based on data from BHP Billiton Ltd. Annual Reports (Bazley, &Hancock, 2009) Financial Summary Year to Jun NPAT Rep $M NPAT1 Adj $M EPS c EPS chg % PER x PER rel All Ords x PER rel Sector x DPS c Yield % Franking % ROE % 2008A 15,988 15,965 285.4 3.8 15.1 0.6 0.2 72.7 1.7 100.0 40.1 2009A 7,243 13,761 246.8 -13.5 17.5 0.7 0.6 101.1 2.3 100.0 28.0 2010A 14,927 14,630 262.0 6.2 16.5 0.9 0.8 102.1 2.4 100.0 25.7 1NPAT is normalized by removing non-recurring items and goodwill. All the above statistics are derived from normalized earnings (Bazley, &Hancock, 2009). Peer Comparison P/E (x) EPS Change (%) Dividend Yield (%) Company Code Last Price Mkt Cap 07A 08F 07A 08F 07A 08F BHP Billiton Limited BHP $42.37 $135,973M 10.5000 7.8000 54.0000 35.3000 2.4000 2.9000 Rio Tinto RIO $80.35 $35,013M 8.1000 8.4000 41.0000 -3.3000 1.5000 1.7000 Equinox Minerals EQN $7.86 $6,913M 15.5000 12.0000 24.3000 29.6000 0.0000 0.0000 Iluka Resources ILU $15.92 $6,666M 14.5000 7.5000 1175.6000 93.6000 3.5000 6.6000 OZ Minerals Limited OZL $12.31 $3,987M 10.7000 9.4000 -36.4000 14.2000 5.7000 5.7000 Share Price Returns 3 Months (%) 6 Months (%) 12 Months (%) BHP -4.6800 -5.8500 15.0700 Sector -5.6795 -8.7289 10.1949 Market -6.3888 -7.0894 2.5742   (Bazley, &Hancock, 2009) Ratio Comparison Year BHP Sector Market P/E (x) FY07 32.9 22.6 FY08 15.1 72.0 26.4 Yield (%) FY07 1.5 8.6 FY08 1.7 3.4 5.0 EV/EBIT (x) FY07 14.7 14.5 FY08 5.4 35.4 14.5 EV/EBITDA (x) FY07 16.8 11.9 FY08 4.7 21.8 11.3 References Bazley, M. &, Hancock, P. (2009). contemporary AccountingAuthors. Cengage Learning Australia. Read More