BHP Billiton Limited Essay Example

BHP Billiton Limited is Anglo-Australian multi national petroleum, metals, and mining, which is a dual-listed public company: Sydney-London listing (BHP, 2017). The company that was established in 1885 has its headquarters in Melbourne, Victoria. BHP Billiton was formed after the merging of Anglo-Dutch Billiton plc and Australian Broken Hill Proprietary Company Limited (BHP, 2017). The company that serves across the world focuses on uranium, nickel, natural gas, copper, petroleum, coal and iron ore related production.

Main Structure of Annual Report and Summary of Key Activities

The 2016 annual report is divided into seven parts with core values, which are sustainability, integrity, respect, performance, simplicity, and accountability. The premise of these values is to create a sustainable organization that focuses on numerous areas that include environmental, economic and people (BHP Billiton, 2016a). The seven parts of the 2016 annual financial report include the strategic, governance, remuneration, directors’, financial statements, additional information and shareholder information (BHP Billiton, 2016b). BHP decision to take the approach is to ensure each segment or function of the organization is addressed the public understand the direction of the company, and how the company meets the different operational facets.

The strategic part of the 2016 annual report presents the business model, performance summary, and operating environment. It leads the audiences to understand the reasons and approaches of activities and reasons behind any action taken (BHP Billiton, 2016a). The governance section defines the roles and responsibilities of different stakeholders such as the board of directors, chairman, and independence indicating the governance is crucial to the success of the company. The remuneration presents compensation to the directors, which further discusses the fundamentals of employee policies and directors including other benefits these stakeholders’ gains through engaging with the company (BHP Billiton, 2016a). The financial statement section presents a summary of financial information, additional information discusses the production including resources and reserves while the last part of shareholder information presents share ownership, markets, and the material contracts among other information.

Key Numbers in the Financial Statements

Analyzing the financial data, it can be argued that BHP faced operational and strategic challenges in 2016 (4-Traders, 2016). The sales was $30,912 million, EDITBA $12,340 million, operating profit $3,469 million, net income $(-) 6,385 million, P/E ratio -10.5, EPS (-) 1,2 million, divided per share $0.30 while the yield was 2.39%. Furthermore, the net margin during the period was -20.66% and the operating margin was 11.22% (BHP Billiton, 2016a). Compared to 2015, the sales $52,267 million, operating profit $11,866 million, net income $1,920, net margin 3.65% while the operating margin was 22.70% (4-Traders, 2016). Analyzing the information means that the company is facing both strategic and economic challenges, which may be addressed in the subsequent years based on the information provided on the reasons behind the financial statements.

BHP Billiton (2016b) understands the significance of sustainability and continuously provides a report targeting environmental and social performance. The report presents information about the operational activities and highlights measures in place to create a sustainable company that focuses on protecting and sustaining the social and environmental framework.

Appropriateness of Annual Reports to Different Stakeholders

Company annual financial reports are crucial in ensuring the healthiness of the company to the community, the media, shareholders, and stakeholders (Lusardi and Mitchell, 2014). During the release of the annual reports, media and the shareholders are interested information. The media analyses the information and releases the information to the public while the public uses the information to make informed choices (Lobo and Zhao, 2013). The annual reports are significant in nature such as providing financial information, highlighting achievements, promoting the company, and providing internal information such as directors and future or expectations of the company in future. It lays down the direction of the company, highlights achievements in specific areas such as sustainability and environment protection, and providing information of effectiveness of the company in meeting the wider objectives of different stakeholders.

The annual financial reports indicate the sales patterns, and it provides avenues for budgeting (Lobo and Zhao, 2013). The limitations of annual reports include inflationary effects, intangible assets are not recorded, and the information is specific to a given period, subject to fraud, not verified and no discussion of non-financial issues (Lusardi and Mitchell, 2014). Even though the annual reports are informative and summaries the operations of a company, the limited period and potential to fraud are the major shortcomings of using financial reports.

References

4-Traders. 2016. BHP Billiton Plc. Retrieved from http://www.4-traders.com/BHP-BILLITON-PLC-4001096/financials/

BHP Billiton. 2016a. Integrity Resilience Growth: Annual Report 2016. Retrieved from http://www.bhp.com/-/media/bhp/documents/investors/annual-reports/2016/bhpbillitonannualreport2016.pdf?la=en

BHP Billiton. 2016b. Integrity Resilience Growth: Sustainability Report 2016. Retrieved from http://static.globalreporting.org/report-pdfs/2016/44555af3257002153c39a6c5c86ccdb0.pdf

BHP. 2017. Homepage. Retrieved from http://www.bhp.com/

Lobo, G.J., and Zhao, Y., 2013. Relation between audit effort and financial report misstatements: Evidence from quarterly and annual restatements. The Accounting Review, 88(4), pp. 1385-1412.

Lusardi, A. and Mitchell, O.S., 2014. The economic importance of financial literacy: Theory and evidence. Journal of Economic Literature, 52(1), pp. 5-44.