BHP Billiton Limited (ADR) (NYSE:BHP) Back on Track

BHP Billiton Limited (ADR) (NYSE:BHP) Back on Track

BHP Billiton Limited (ADR) (NYSE:BHP) Back on Track

BHP reported a return to profit Tuesday as strong commodity prices helped it bounce back from a large loss last year, with the mining giant also flagging the sale of its US shale assets.

The world’s largest miner recorded an annual net profit of 5.89 billion for the year to June 30 after a 6.39 billion loss in the previous period, just under analysts’ expectations.

“Over the last five years, we have laid the foundations to significantly improve our return on capital and grow long-term shareholder value,” BHP chairman Jac Nasser said.

Underlying profit, which strips out one-off writedowns, was also below forecasts at 6.73 billion. The Anglo-Australian firm rewarded shareholders with a final dividend of 43 cents compared to 14 cents last year.

BHP said it had determined its onshore US shale operions were “non-core” to the business and it was “actively pursuing options to exit these assets for value”.

The announcement follows a push by New York-based Elliott Advisors, a significant shareholder in the company, for BHP to restructure the business, including spinning off its US oil and gas operations.

BHP had previously rejected Elliott’s proposals in April.

BHP, like other miners, has benefited from the rebound in key metals prices after a slump caused by supply gluts and a slowdown in growth in the world’s top commodities consumer China.

The price headwinds in recent years had led BHP to tighten its belt, and on Tuesday it said it had achieved productivity gains and cost cuts of 1.3 billion for the reporting period.

Consensus Estimates Analysis

# of Estimates Mean High Low 1 Year Ago
SALES (in millions)
Year Ending Jun-17 3 38,801.90 40,799.00 37,547.00 32,618.10
Year Ending Jun-18 3 40,351.10 43,267.00 37,719.30 36,663.20
Earnings (per share)
Year Ending Jun-17 5 1.74 2.92 1.38 0.90
Year Ending Jun-18 5 1.74 2.49 1.12 1.37
LT Growth Rate (%) 1 5.30 5.30 5.30 5.30
Sales and Profit Figures in US Dollar (USD);

Valuation Ratios

Company industry sector
P/E Ratio (TTM) 43.36 22.97 45.68
P/E High – Last 5 Yrs. 31.72 30.29 154.28
P/E Low – Last 5 Yrs. 10.69 10.43 13.94
Beta 1.17 1.29 0.97
Price to Sales (TTM) 2.97 8.49 3.13
Price to Book (MRQ) 1.15 1.69 2.62
Price to Tangible Book (MRQ) 1.92 2.00 3.13
Price to Cash Flow (TTM) 9.32 10.98 14.49
% Owned Institutions 3.17 3.02 0.15

Dividends

Company industry sector
Dividend Yield 3.47 2.12 2.47
Dividend Yield – 5 Year Avg 4.55 2.94 1.84
Dividend 5 Year Growth Rate -21.70 -11.21 12.77
Payout Ratio(TTM) 115.68 58.89 52.08

Growth Rates

Company industry sector
Sales (MRQ) vs Qtr. 1 Yr. Ago 19.63 17.88 14.82
Sales (TTM) vs TTM 1 Yr. Ago -4.20 36.48 8.19
Sales – 5 Yr. Growth Rate -15.50 -10.68 1.67
EPS (MRQ) vs Qtr. 1 Yr. Ago 156.37 132.57 36.43
EPS (TTM) vs TTM 1 Yr. Ago 140.57
EPS – 5 Yr. Growth Rate -5.28 8.07
Capital Spending – 5 Yr. Growth Rate -9.35 -7.15 0.15

Financial Strength

Company industry sector
Quick Ratio (MRQ) 1.50 1.47 1.89
Current Ratio (MRQ) 1.79 2.07 2.45
LT Debt to Equity (MRQ) 54.14 43.92 30.43
Total Debt to Equity (MRQ) 60.10 50.32 39.71
Interest Coverage (TTM) 3.57 6.99 21.84

Profitability Ratios

Company industry sector
Gross Margin (TTM) 11.25 28.39
Gross Margin – 5 Yr. Avg. 85.76 56.11 29.48
EBITD Margin (TTM) 46.16
EBITD – 5 Yr. Avg 49.00 13.84 22.99
Operating Margin (TTM) 20.16 -25.00 14.18
Operating Margin – 5 Yr. Avg. 27.92 -6.83 16.06
Pre-Tax Margin (TTM) 16.71 -24.82 14.15
Pre-Tax Margin – 5 Yr. Avg. 26.22 -12.44 16.11
Net Profit Margin (TTM) 8.76 -32.15 11.29
Net Profit Margin – 5 Yr. Avg. 17.10 -19.37 12.41
Effective Tax Rate (TTM) 47.57 36.71 22.90
Effective Tax Rate – 5 Yr. Avg. 34.78 31.83 25.19

Efficiency

Company industry sector
Revenue/Employee (TTM) 1,267,231 1,457,322 4,222,534,543
Net Income/Employee (TTM) 111,008 193,180 593,548,170
Receivable Turnover (TTM) 10.47 13.61 7.89
Inventory Turnover (TTM) 2.27 5.28
Asset Turnover (TTM) 0.29 0.33 0.61

Management Effectiveness

Company industry sector
Return on Assets (TTM) 2.50 4.06 7.37
Return on Assets – 5 Yr. Avg. 6.70 4.45 9.09
Return on Investment (TTM) 2.93 5.95 9.20
Return on Investment – 5 Yr. Avg. 8.05 5.22 10.97
Return on Equity (TTM) 4.43 9.21 11.80
Return on Equity – 5 Yr. Avg. 11.49 7.28 12.74
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S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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