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Investment analysis bhp Billiton
Contents
- Company Overview..
- Corporate Governance Analysis of BHP Billiton
- Economic Analysis.
- Industry Analysis.
3.1 SWOT Analysis of a Company in Oil and Gas Industry.
3.2 PESTLE Analysis of Oil and Gas industry.
3.3 Porter’s 5 Forces Model in Oil and Gas Industry.
Weighted Average Cost of Capital
Summarized Findings from Ratios.
Discounted Cash Flow Approach.
Conclusion and Recommendation.
1.Company Overview
Investment analysis bhp billiton, BHP Billiton is an Anglo-Australian multinational company with its headquarters located jointly in Melbourne, Australia and London, United Kingdom. It is one of the world’s leading firms which is primarily engaged in the production of commodities and minerals such as coal, iron ore, copper, uranium, aluminum, manganese, oil and gas. BHP Billiton extracts and process minerals and commodities from its various operational production sites which are chiefly located in Australia, Americas and southern Africa. At the end of the last fiscal year, the firm’s workforce comprised of 123,800 employees and contractors spread across 130 locations in 21 different countries.
The company came into being in 2001 after the merger of Australian Broken Hill Propriety Company (BHP) and the Anglo-Dutch Billiton plc. The company operates under a Dual Listed Company (DLC) structure, Investment analysis bhp billiton with two parent companies namely BHP Billiton Limited and BHP Billiton Plc operated as a single economic entity, run by a unified Board and management team. The Australia-registered BHP Billiton Limited, Investment analysis bhp billiton which has equal financial stake in the company, has a primary listing on the Australian Securities Exchange and is the biggest company in Australia measured by market capitalization. The UK-registered BHP Billiton plc has a primary listing on the London Stock Exchange and is a part of the FTSE 100 Index. Moreover, BHP Billiton plc has a secondary listing on the Johannesburg Stock Exchange (JSE) South Africa. Both the parent companies are traded on the New York Stock Exchange (NYSE) United States.
Furthermore, as of 30th June 2014, the company had a market capitalization of USD 179 billion. In FY2014, its revenues increased by 2% to USD 67.2 billion, whereas its profit for the year was USD 15.224 billion. Mr. Andrew Mackenzie is the current Chief Executive Officer of the firm, whereas Mr. Jacques Nasser serves as the Chairman of the board.
2. Corporate Governance Analysis of BHP Billiton
According to Council (2010), the first ever corporate governance code is referred to as the Cadbury code which was formed in 1992 by the Cadbury Committee formed in 1991. The Cadbury committee was formed by the financial reporting council, the accountancy professionals and the stock exchange as there were numerous financial reporting problems faced across the world. The purpose of corporate governance code is to ensure that the management of the companies is effective and prudent and they can ensure the long-term success of the company. As prescribed in the Cadbury report of 1992, the role of corporate governance code is to ensure that the companies are directed and controlled properly. The shareholders select the directors and auditors to govern the company who are responsible for the corporate governance of the businesses. It shows that the corporate governance is performed by the board of a company that is selected by the shareholders through the voting rights. Every renowned company around the world has formed some corporate governance standards to direct and control their management is an effective manner (Council, 2010). Since the inception of Cadbury code, the code has focused on comply or explain philosophy which means that the management and board of directors of a company either need to comply with the Cadbury code or need to explain reasons for incompliance otherwise. The Cadbury code allows the management to explain the excuses which shows that the code is very flexible for the management of the company. The flexibility of the code has enabled it to be applicable for most of the companies (Council, 2010).
As prescribed in BHP Billiton (2014), the BHP Billiton Company has also developed its corporate governance policy which is modified every year and the company publishes its corporate governance code in its annual report. It is stated in their corporate governance statement that the company’s governance is designed in such a way that it enables the board to pursue non-personal interests i.e. the interests of its shareholders need to be pursued. The company complies with the corporate governance code and other regulatory requirements related to the corporate governance code within the country. The company’s management perceives that corporate governance is not applicable to the board only but the executive management of the company is also interested in the corporate governance of the BHP Billiton. The corporate governance structure of the BHP Billiton is shown in the figure below:
Figure 1 – Corporate Governance code of BHP Billiton
(Source: BHP Billiton, 2015).
The figure above shows that the different groups of individuals are responsible for the corporate governance activities at BHP Billiton. The figure shows that the board interacts with shareholders to know their interests and the board also provides input to the shareholders on different aspects. The board informs the shareholders about the interests of management and helps the managers and shareholders reach an agreement on the interests. The board is representative of shareholders and it tries its best to protect the rights and interests of shareholders in both short-run and long-run. The board communicates the interests of shareholders to different committees like governance committee, remuneration committee and audit committee. The top management of the company including…
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