Overview: BHP's FY14 earnings and demerger outline (Part 1 of 11)
BHP Billiton (BHP) is a leading global diversified resources company. It’s one of the world’s largest major commodity producers. The commodities include iron ore, metallurgical and energy coal, oil and gas, copper, aluminium, manganese, uranium, nickel, and silver. It’s headquartered in Melbourne, Australia. BHP operates through 100 locations in 25 countries. It was created when BHP and Billiton merged in June 2001.
BHP’s work is organized into five business units—petroleum and potash, copper, iron ore, coal and aluminium, and manganese and nickel. We’ll discuss them in detail later on in the series.
BHP’s main focus is to own low-cost, long-life assets. In keeping with this focus, it has decided to spin off the assets into a separate company. The assets don’t fall into this category. They’re non-core to its approach. Most of the demerged assets were small compared to the “core”—iron ore, coal, copper, petroleum and potash. They contribute 3% of the overall earnings before interest, taxes, depreciation, and amortization (or EBITDA) We’ll discuss this more in the next parts of the series.
BHP came up with its fiscal year 2014 (or FY14) results—ending June 30—on August 19. The results were in-line with the market expectations. Revenue was up 2% year-over year (or YoY). It came in at $67.2 billion.
EBITDA was $32.3 billion. This was up 6.8% YoY. The EBITDA margin was also up 200 basis points. It came in at 48%.
Net debt was $25.8 billon. This was close to the company’s target of $25 billion by FY14. We’ll discuss the FY14 results and how they compare to the FY13 results in the following parts of this series.
We’ll compare BHP to its diversified peers including Rio Tinto (RIO), Vale SA (VALE), and Anglo American (or AAUKY). We’ll also compare its commodity-wise performance with its peers in the respective segments like Peabody Energy (BTU), Smaller, ExxonMobil (XMO), and Cliffs Natural Resources (or CLF). An exchange-traded fund (or ETF) like the SPDR S&P Metals & Mining ETF (XME) is another good way to gain exposure to the metals and mining sector without picking individual companies.
Browse this series on Market Realist:
- Part 2 - BHP’s FY14 results were broadly in-line with market expectations
- Part 3 - Why BHP’s share price was down after the results
- Part 4 - Must-know: The long-awaited split
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- Commodity Markets
- BHP Billiton