Voluntary disclosure of BHP Billiton
- Introduction
BHP Billiton is the natural resources company doing business internationally as the largest mining business organization globally in Australia. BHP Billiton involves in producing iron, oil, aluminum, and silver, steep, copper and gas. Melbourne is the Headquarters of this organization. This report of BHP Billiton is to analyze the financial performance by considering key ratios of this organization, and to analyze the voluntary disclosure rates in response to GRI standards. (Britannia 2019). This report will focus on Voluntary disclosure of BHP Billiton.
2.0 BHP Billiton Financial performances analysis (Ratio of BHP Billiton from Appendix 1)
In the aspect of Liquidity ratio, current ratio and quick ratio is the most used concept (Anotes 2019)For, BHP Billiton, it is seen that current ratio is increased in 2018 (2.25) and it is because of the firm has sale on credit compare to sale on cash as well as quick ratio (1.36) is decreased and it is because of the firm has less cash in hand. (BHP Billiton, 2018).
In the aspect of Leverage ratio, debt equity ratio and interest coverage ratio is the most used concept. For, BHP Billiton, it is seen that debt equity ratio is increased in 2018 (0.48) as well as interest coverage ratio (15.34) is also increased and it is just because of taking less loan or borrowing less. (Macrotrends 2019)
In the aspect of profitability ratio, EPS, Gross Profit Margin, Net Profit margin, ROE, ROI and ROA are the most used concept. For, BHP Billiton, it is seen that EPS, Gross Profit margin and Net Profit margin is decreased in 2018 but ROE, ROA, ROI is increased in 2018. And it is because of the firm is not covering better earnings in 2018, on the other hand, the firm is generating better return from its investment that also shows financial balancing and stability. (BHP Billiton, 2018).
In the aspect of Valuation ratio, P/E ratio and Dividend Yield is the most used concept. For, BHP Billiton, it is seen that P/E Ratio is Increased (0.012) is increased in 2018 as well as Dividend Yield is also increased and it is because of net profit of the firm is increased. (BHP Billiton, 2018),
3.0 Voluntary disclosure in 2018 (based on the disclosure rate of Appendix 2 )
For the 2018 annual report, the total disclosure rate for BHP Billiton is 48.72% in total as per company IC disclosure index.
In that voluntarily disclosure from employee’s category out of 27 points only 13 points is disclosed in the report whereas it is seemed that half of the employee’s disclosure points has not been voluntarily disclosed. This disclosure rate is low compared to others company in mining industry such as Whitehaven. In that case, the firm is not well to maintain the employee information discloser to their companies IC disclosure index. Therefore, the index is 48.19% (BHP 2018)
As per Legitimacy theory focuses that the implicit agreements among associations and society exist as organizations should willful divulgence social and ecological data for their investors and guarantee the straightforwardness, hence to attempt social responsibility. In that voluntarily disclosure from customer’s category out of 14 points only 6 points is disclosed in the report whereas it is seemed that half of the customer’s disclosure points has not been voluntarily disclosed. In that case, the firm is not well to maintain the customer information discloser to their companies IC disclosure index. Therefore, the index is 42.16%. Similarly other results are below 50% except IT category.
Finally, as per Shareholder Theory, organizations should responsible to key partner bunch they think significant but BHP is not well established to disclosure fact.
4.0 Recommendation
As quick ratio is decreased in 2018, it is recommended to work on it as problem with maintain short term liquidity is a problem because sometimes short term liquidity helps to operate the operating activities and also helps to meet up the short term obligations.
As they are transparent with tax and royalty payments, it should synchronized with every year payments. It is transparent but there should have logical explanation for each tax payment and royalty payments.
From the ethical point of view, the information disclosure of stock price should be publicly available, there must not have information manipulation that may deceive the shareholders.
So, the ethical part of stakeholder theory states that all partners need a record of the element’s exercises. It is better for BHP to build disclosures rate of HR Policy in maintainability reports to guarantee the straightforwardness for all their employee roles.
5.0 Conclusion
In conclusion, the financial performance of BHP Billiton is much better, it is a financially stable company with profitability ratio and valuation. Tax and royalties disclosure rates should be revised as on GRI standards. They should increase short term liquidity position also.
References
Anotes. 2019. Main Types of Ratio Analysis. Accessed 2019. http://www.accountingnotes.net/cost-accounting/ratio-analysis/5-main-types-of-ratio-analysis/6399.
BHP. 2018. BHP Billiton releases report disclosing payment to govts. & calls for mandatory disclosure framework globally. Accessed 2019. https://www.business-humanrights.org/en/bhp-billiton-releases-report-disclosing-payment-to-govts-calls-for-mandatory-disclosure-framework-globally.
Billiton, BHP. 2018. Voluntary Disclosure and Annual Report 2018. BHP.
Britannia. 2019. About BHP Billiton. Accessed 2019. https://www.britannica.com/topic/BHP-Billiton.
Macrotrends. 2019. BHP Billiton Financial Ratios for Analysis 2005-2019. Accessed 2019. https://www.macrotrends.net/stocks/charts/BBL/bhp-billiton/financial-ratios.
Appendix 1
Ratios for financial analysis
| Types of Ratios | PY 2017 | PY 2018 |
| Liquidity Ratios
Current Ratio (CR) Quick Ratio |
||
| 1.85
1.50 |
2.51
1.36 |
|
| Leverage Ratios
Debt to Equity Ratio (DE Ratio) Interest cover ratio |
||
| 0.44
11.14 |
0.48
15.34 |
|
| Profitability Ratio
Earnings Per Share (EPS) Gross Profit Margin (GPM) Net Profit Margin ROE ROI ROA |
||
| 2.21
55.6 16.3 10.67 7.28 5.72 |
1.38
60.6 8.59 12.76 9.14 6.91 |
|
| Valuation ratios
Price to Earnings ratio (PE ratio) Dividend Yield (DY) |
||
| 0.0062
1.08 |
0.012
1.96 |
|
Appendix 2
The disclosure rate based on the Sustainability Report of BHP Billiton, which included in the annual report 2018 of BHP Billiton.
| Disclosure item | 0/1 | page |
| Employees (27 items) | ||
| Staff breakdown by age | 0 | |
| Staff breakdown by seniority | 0 | |
| Staff breakdown by gender | 0 | |
| Staff breakdown by nationality | 0 | |
| Staff breakdown by department | 0 | |
| Staff breakdown by job function | 1 | 128 |
| Staff breakdown by level of education | 0 | |
| Rate of staff tur0ver | 0 | |
| Comments on changes in number of employees | 0 | |
| Staff health and safety | 1 | 129 |
| Absence | 0 | |
| Staff interview | 0 | |
| Statements of policy on competence development | 1 | 152 |
| Description of competence development program and activities | 1 | 152 |
| Education and training expenses | 1 | 152 |
| Education and training expenses/number of employees | 0 | |
| Employee expenses/number of employees | 0 | |
| Recruitment policies | 1 | 128 |
| HRM department, division or function | 1 | 128 |
| Job rotation opportunities | 1 | 128 |
| Career opportunities | 1 | 128 |
| Remuneration and incentive systems | 1 | 128 |
| Pensions | 1 | 128 |
| Insurance policies | 1 | 128 |
| Statements of dependence on key personnel | 0 | |
| Revenues/employee | 1 | 130 |
| Value added/employee | 0 | |
| Total Employees Disclosures | 13/27 = ___48.19_____% | |
| Customers (14 items) | ||
| Number of customers | 1 | 54 |
| Sales breakdown by customer | 0 | |
| Annual sales per segment or product | 0 | |
| Average customer size | 1 | 54 |
| Dependence on key customers | 0 | |
| Description of customer involvement | 1 | 54 |
| Description of customer relations | 0 | |
| Education/training of customers | 0 | |
| Customers/employees | 1 | 54 |
| Value added per customer or segment | 0 | |
| Market share (%) | 1 | 152 |
| Relative market share | 1 | 152 |
| Market share, breakdown by country/segment/product | 0 | |
| Repurchase | 0 | |
| Total Customer Disclosures | 6/14 = ____42.86____% | |
| IT (five items) | ||
| Description and reason for investments in IT | 1 | 30 |
| IT systems | 1 | 30 |
| Software assets | 1 | 30 |
| Description of IT facilities | 1 | 30 |
| IT expenses | 1 | 32 |
| Total IT Disclosures | 5/5 = _____100___% | |
| Processes (eight items) | ||
| Information and communication within the company | 1 | 30 |
| Efforts related to the working environment | 1 | 30 |
| Working from home | 0 | |
| Internal sharing of k0wledge and information | 0 | |
| External sharing of k0wledge and information | 1 | 32 |
| Measure of internal or external failures | 1 | 32 |
| Fringe benefits and company social programs | 1 | 32 |
| Environmental approvals and statements/policies | 1 | 32 |
| Total Processes Disclosures | 6/8 = ____75____% | |
| Research and development (nine items) | ||
| Statements of policy, strategy and/or objectives of R&D activities | 1 | 42 |
| R&D expenses | 1 | 42 |
| R&D expenses/sales | 0 | |
| R&D invested in basic research | 0 | |
| R&D invested in product design/development | 0 | |
| Future prospects regarding R&D | 0 | |
| Details of company patents | 1 | 52 |
| Number of patents and licenses etc. | 0 | |
| Patents pending | 0 | |
| Total R&D disclosures | 3/9 = ____33.33____% | |
| Strategic statements (15 items) | ||
| Description of new production tech0logy | 0 | |
| Statements of corporate quality performance | 0 | |
| Strategic alliances | 0 | |
| Objectives and reason for strategic alliances | 0 | |
| Comments on the effects of the strategic alliances | 0 | |
| Description of the network of suppliers and distributors | 1 | 54 |
| Statements of image and brand | 0 | |
| Corporate culture statements | 1 | 36 |
| Best practice | 0 | |
| Organizational structure | 1 | 124 |
| Utilization of energy, raw materials and other input goods | 0 | |
| Investment in the environment | 0 | |
| Description of community involvement | 1 | 32 |
| Information on corporate social responsibility and objective | 1 | 32 |
| Description of employee contracts/contractual issues | 0 | |
| Total Strategic Statement Disclosures | 5/15 = ____33.33____% | |
| Company IC disclosure index | 38/78 = ____48.72____% | |
Voluntary Disclosure
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