Essay on rio tinto and BHP project

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Words: 5537
Pages: 23
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CONTENTS
Sl No.
Title
Page No.
I
Introduction
1
II
BHP Billiton Limited
1
III
Rio Tinto Limited
3
IV
Analysis Report
5

A
Liquidity Ratio Analysis
5
1
Current Ratio
5
2
Quick Ratio
6
B
Profitability Ratio Analysis
7
1
Gross Profit Ratio
7
2
Operating Margin Ratio
8
3
Dividend Payout Ratio
10
4
Return on Capital Employed Ratio
11
5
Return on Equity Ratio
13
6
Return on Total Assets Ratio
14
7
Du Pont Analysis
16
C
Activity Ratio Analysis
18
1
Fixed Assets Turnover Ratio
18
2
Working Capital Turnover Ratio
19
D
Solvency Ratio Analysis
21
1
Total Debt to Equity Ratio
21
E
Operating Efficiency Ratio Analysis
22
1
Cash Conversion Cycle
22
2
Cash from Operating Activities
25
F
Sustainable Growth Rate
26

V
Observations & Recommendations
27
VI
References
28
I. Introduction
Mining industry is one of the important industries in Australia when it to comes to revenue generation. BHP Billiton and Rio Tinto are two of Australia's top and leading players in the mining industry that are looking to take the industry to new heights and improve on Australia's supremacy in the mining industry.

II. BHP Billiton Limited

BHP Billiton came into existence through the DLC (Dual Listed Companies) merger of BHP Limited (now BHP Billiton Limited) and Billiton Plc (now BHP Billiton Plc), which was concluded on 29 June 2001. Having its headquarters in Melbourne, Australia, its business comprises of mining, metals and petroleum. BHP is the world's largest mining company measured by 2014 revenues which amounted to US$67,206M.

BHP Billiton is incorporated with various stock markets such as the Australian Stock Exchange, London Stock Exchange, New York Stock Exchange and Johannesburg Stock Exchange. The share prices of BHP in the Australian Stock Exchange had been fluctuating in the range of AU$25 per share to AU$50 per share. There was no drastic fall in the prices of the shares during the past five years starting from July 2010 to March 2015. This indicates that the progress of BHP Billiton was quite steady in spite of the share price fluctuations. Share prices of BHP increased drastically on 1st April 2011 during which the opening price was AU$ 46.46 per share and on the same day the market closed leaving the share prices at AU$ 45.83 per share, during this period BHP had average volume of AU$ 22,787,000.

Figure 1: Comparison between BHP Billiton Ltd and Industry

Figure 1 shows the share price comparison of BHP Billiton in relation with the materials and mining industries with the help of metals and mining index (XMM). It can be seen from the chart that the overall performance of BHP was at peak during 2011 with comparison to the overall industry which led to an increase in share prices during that period. Later on, it followed a downward trend. The performance of the industry was very meagre in 2013 but during that period BHP’s performance was better as compared to the industry. Since then BHP has been successful in maintaining its shares prices to a certain level above the overall materials industry.

BHP over the years has followed a basic unchanged strategy which is to own and operate large, long-life, low-cost, expandable, upstream assets which are diversified by commodity, geography and market. This very simple but dynamic strategy has enabled them to successfully enhance the elasticity of their cash flows. Owing to that fact, they have managed to invest and grow their business year on year, delivering superior value to their shareholders.

BHP is dedicated to building a workforce personified by diversity which is reflected in each market they operate in. BHP Billiton has always been focused on developing and growing their diversified portfolio to continue to meet the changing needs of their customers. With wide range of products in their armory they have been successful in creating value for their stakeholders.

III. Rio Tinto Limited

Rio Tinto was incorporated as a business 140 years ago on 29th March 1873. It
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