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An annual report of a company is the most essential way of conveying its market position to its potential investors. Thus, it should be realized that the report must present that company in a good way without violating regulations of the stock market. Unfortunately, a number of investors fail to effectively read annual reports. In other words, where as annual reports are plainly prepared not to reflect or deceive dishonesty on the company; investors always go through them with a wrong judgment of skepticism. In order to get the true picture, annual reports should be read line by the line and correctly deciphered to get the actual company’s stand in the stock market. This study sets out to give a critical review of the 2010 annual reports of BHP & RIO companies by providing their similarities and differences.
Layout and format
The layout and format of the two annual reports have structured their companies’ information very well. However, Rio Tinto annual report makes use of general design features particularly red and light blue colors to express how powerful their company is. Moreover, the report has combined the use of photographs to make it easy in finding information of serious dedication to the strategic goals of the company. This is aimed at moving the company from its current market position to the same level with its competitor, BHP Billiton. On the other hand, BHP Billiton’s annual report has omitted use of excess photographs but focused more on including information that is relevant to their investors and potential customers (Bhp Billiton, 2010).
There is a table of content at the beginning of Rio Tinto’s report. This makes it very easy for the audience to locate information in the report (Rio Tinto, 2010). BHP Billiton’s report provides a table of content after it has given locations of its company outlets with descriptions of each of their assets. Investors can quickly tell how widespread the company’s investment is.
The content of either report has been structured in business terms. The 2010 annual report of BHP Billiton Company portrays it as the largest widespread resource company in the world. It indicates that the company has outlets in various continents. Its involved with various sectors including mineral production, exploration and processing, gas and oil development and exploration, steel merchandising and production. Its strategic goals are divided into three sections: maintaining a stable Greenfield pipeline of projects to ensure internal growth; established on its different reserves base to ensure that only best practices are quickly shared among its operations; and to help enhance its pipeline by being close to its potential customers. On the other hand, Rio Tinto (2010, p. 4) indicates that majority of its operations are in North America and Australia. Nonetheless it also describes a number of minerals it deals with. For instance, there is aluminum, copper, diamonds and mineral, iron ore, energy and technological innovation. A similarity in this is that both companies are concerned with more than one product.
BHP Billiton gives its financial report of up to US$10.52bn for the financial year 2010. Revenues generated from normal activities amounted to US$34.17bn. This was a 39% increase from the previous year. The report accounts that there was a US$12.19bn net operating cash flow as judged against the US$5.47bn that had been witnessed a year ago (Bhp Billiton, 2010). From these records, investors can tell how good business is for the company and exactly how much it is worth.
Rio Tinto also provides its key performance indicators and strategic drivers that can enable one make a financial analysis of the company. It also gives a clear view of developments and the future performance of Rio Tinto’s 2010 annual operations. However, the choice of information is more specific than in BHP’s report. For instance, it’s indicated that while the 2009 annual review instituted various goals in many corporate, social and economic responsibility areas like the economic performance, society, governance and environment, commitment to implementation on sustainable principles of development, realization of long-term stable economic goals became a reality (Rio Tinto, 2010).
The audiences to the 2010 annual report for BHP Billiton Company are likely to be potential investors and end user customers. The report designates that a massive yearly profit on the power of high revenues resulting from copper and iron ore were driven by the increase in the Chinese market demand. It also describes how low its assets cost but with strong cash generation. This is the kind of information a future investor would want to see because cutting down on expenditure is good for business (Bhp Biliton, p. 22, 2010).
Judging from the information provided, the audience for Rio Tinto comprises of its customers and other share holders. Information on issues like corporate responsibility is definitely meant to show that customers that the company has the interest of the society at heart. It also gives a portfolio meant to guide the company ahead (Rio Tinto, 2010). However, it is also fair to show that Bhp report also gives account of its community involvement and corporate responsibility.
The language used in these two reports is formal and understandable. There is no use of tough economic terms that would scare the audience. The language is simple and straight to the point. This is an advantage for both reports.
Future plans for the Company
BHP Billiton has a high expectation of increasing the demand for its products. The demand is likely to increase in India, China and even in Brazil markets. For potential investors, it will really be a matter of how you view demand maintaining itself particularly from the upcoming markets in China against the slow global economy along with cost pressures (Bhp Billiton, 2010). This shows a direct communication with the customer (from the use of the term, “you”). Irrespective of all the pressure, BHP Billiton Company has and will continue having a bright future, as the commodities’ demand will still be high. A sign that mirrors the activities of the current market in 2010 report of BHP Billiton Company is its stable credit facility. BHP Billiton Company had a circling credit capacity of US$3.0 billion towards the end of 2010. This company had similar amount both in 2008 and 2009. The money virtually remained unchanged as it had not been unused up. This amount of unused cash and credit helped the company pursue huge acquisitions to consolidate varied resource base like expanding the company by producing a new product, potash.
For Rio Tinto annual report, a sign that mirrors the activities of the stock market is the weakening in production of American thermal coal. The report clearly demonstrates that coal production was the company's essential source of income in the previous years. It declined from 49.04% to only 42.3 million tons. This represented a smaller fraction of the total production of the company.