Must-know: An investor’s guide to BHP (Part 1 of 10)
Overview of BHP Billiton
BHP Billiton (BHP) is a leading global diversified resources company. It’s among the world’s top producers of major commodities including 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 formed from the merger of BHP and Billiton in June, 2001. It has become one of the world’s largest producers of major commodities.
BHP’s share price has been quite resilient. It has been flat year-to-date (or YTD). Its peers’ share price is down significantly. We’ll discuss this later in the series.
The company’s work is organized into five business units—Petroleum and Potash, Copper, Iron ore, Coal and Aluminium, Manganese and Nickel. We’ll discuss them in detail later in the series.
Recent operating performance
For the six months ending December, 2013 BHP produced 120 million barrels of oil equivalent (or MMboe), 98 million tons (or Mt) of iron ore, and 843 thousand tons of copper. It delivered ~$34 billion in revenues—up 5.9% year-over-year (YoY)—and earnings before interest and tax (or EBIT) growth of 15% to $12.4 billion.
Iron ore contributed to 34% of the company’s revenues and 52% of its EBIT. The next largest division is copper. It contributed to 20% of revenues and 23% of EBIT.
BHP’s diversified peers include Rio Tinto (RIO), Vale SA (VALE), and Anglo American (or AAUKY). A smaller, less diversified peer is Cliffs Natural Resources (CLF)—engaged in iron ore and metallurgical coal production mainly in U.S.
Also, exchange-traded funds (or ETFs) like SPDR S&P Metals & Mining ETF (XME) is another good way of gaining exposure to the metals and mining sector without picking individual companies.
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