The Global 500: No Borders, No Boundaries

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Global largest 500 companiesBy Richard McGill Murphy

Even the most turmoil-tested modern business executive would agree that 2011 was a painful year for the global economy. Oil prices soared amid fears of a shooting war in the Persian Gulf over Iran's nuclear program. In March, Japan's Fukushima Daiichi nuclear plant suffered major damage after an earthquake and tsunami disabled its cooling systems, disrupting global supply chains for everything from automobiles to silicon wafers.

Crop failures around the world drove commodity prices to record heights. Food prices soared across Asia and Latin America, pushing local governments to cool their economies in a bid to head off social unrest. In Europe a festering bank crisis inflicted pain on consumers across the continent, drove a number of European companies off the Global 500, and put the future of European integration in doubt.

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Given those headwinds, you might expect the companies of the Global 500 to have trimmed their sails a bit. In fact, 2011 was a pretty good year for the world's largest corporations. They posted record revenues of $29.5 trillion, up 13.2% over 2010. Total profits rose 7%, to $1.6 trillion, roughly equal to the gross domestic product of India.

The Global 500 list is most useful, at the end of the day, for what it tells us about emerging trends in the world economy.

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The Global 500: No Borders, No Boundaries

Once the envy of the auto industry, the Japanese automaker has dealt with a tumultuous couple of years. And 2011 proved little different. Sales plummeted in April, May and June, following production disruptions caused by the March earthquake and tsunami. A few months later, floods in Thailand weighed on the company's suppliers' ability to make up for Toyota's (TM) earlier output losses.

For 2011, sales dropped 7% to 1.6 million vehicles. After holding the title for the past three years, Toyota lost its spot as the top-selling automaker in annual global sales, sliding behind General Motors and Volkswagen.

Executives forecast a brighter 2012, however. Last December, the company forecasted a 20% jump in global sales to a record 8.48 million vehicles as it builds inventory and meets pent-up demand in Brazil and China, among other countries.

ConocoPhillips (COP) has a strategy for success: less is more. The company continued to shed the remainder of its LUKOIL assets in 2011 and shifted its focus toward assets that give the highest returns. In addition to reducing its debt by nearly $1 billion, ConocoPhillips increased its revenues by 26%, up from $198.7 million in 2010, according to its annual report.

Chevron (CVX) has managed to hold strong throughout the tough economic environment, raising its net income by 41.4% in 2011, up from just over $19 billion in 2010. The company is also generating a lot of positive buzz surrounding its development of a new ethylene plant -- one of the first to be built in the U.S. in more than a decade. The expansion comes at a time when lightweight plastics derived from ethylene are in high demand for the production of electric vehicles. According to market analyst firm Frost & Sullivan, the use of plastics in EVs is expected to reach a market revenue of $73 million by 2017, up from $500,000 in 2010.

China's government-owned power company is in pretty good shape compared to its neighbors in Europe. The turbulent economic situation overseas has left many countries -- including Spain -- turning to China for a lifeline. Just last month, State Grid announced its plan to buy high-voltage electricity transmissions from Spanish construction company Actividades de Construccion y Servicios for $938.2 million.

China National Petroleum has become a major player in the oil industry, both by partnering with the governments of oil-rich nations such as Iraq and Qatar as well as by ramping up domestic oil and gas production. In 2011, CNPC produced 107.54 million tons of crude oil in China -- a 2% increase from the previous year -- the company stated in its 2011 financial report. Like many other oil companies, CNPC is also boosting its natural gas production.

Known as China Petroleum and Chemical Corp., China's biggest oil producer and refiner continued to expand by increasing production of crude oil and natural gas. Sinopec's scale is similar to major multinational oil and gas companies. But unlike its competitors, the state-owned company is more vulnerable to fluctuations in oil price margins because the Chinese government has pressured markets to avoid raising domestic energy prices. To compensate for losses from refining, the company plans to produce 50 million tons of crude overseas annually by 2015. Nevertheless, the company continues to grow by forming partnerships and buying multinational oil companies worldwide. In one of its biggest acquisitions of 2011, Sinopec purchased Daylight Energy Ltd. in October for $2.1 billion in cash, gaining Canadian oil and shale-gas reserves and adding to the company's expansion outside of Asia.

With the Deepwater Horizon oil spill in the Gulf of Mexico two years ago, BP (BP) was forced to sell $30 billion of its assets to pay for related costs and claims, but with profits rebounding from a $3.3 billion loss in 2010 to nearly $26 billion last year, it appears the third-largest energy company in the world is well on its way to righting itself. Throughout 2011, the company focused on three main priorities – reviewing and restructuring its safety procedures, cooperating with efforts related to the oil spill, and establishing a 10-point plan to grow its operating cash flow. "We remained mindful of the tragic events seen in 2010 and the need to ensure such an accident never happens again," wrote BP chairman Carl-Henric Svanberg in a letter to shareholders.

he world's biggest retailer enjoyed robust profits overseas, but continued struggling at home with weak sales and public relations debacles. For fiscal year 2011, Walmart (WMT) saw operating income rise by 6.4% to more than $25 billion. But while the Bentonville, Ark.-based chain saw gains abroad, executives found it harder to lure U.S. shoppers.

The chain saw foot traffic decline, and Walmart tried to bring back shoppers pinched by high unemployment and gas prices. The company also began opening 40 smaller "Walmart Express" stores in rural and urban areas.

Beyond sales, the chain also struggled with a shaky public image. In June 2011, the U.S. Supreme Court threw out a discrimination lawsuit accusing the retailer of favoring men over women in promotions and pay. While executives may have breathed a sigh of relief, Walmart suffered another blow when U.S. lawmakers launched an investigation in April 2012 following allegations of bribery at the chain's Mexican affiliate.

ExxonMobil (XOM) topped the Fortune 500 this year with a banner 2011, raking in $41.1 billion in profits, up 35% from the previous year. To keep the energy giant growing, CEO Rex Tillerson has made a big bet on natural gas. The company now produces roughly as much natural gas as oil. Tillerson believes the long-term play will pay off over the next 25-30 years. In the short term, the price of natural gas remains low in the U.S. and other markets. This past quarter, ExxonMobil's profits decreased by about 11.3% from the previous year, due to a decrease in oil and gas production, according to the company. Like other oil majors, ExxonMobil is champing at the bit to boost production by drilling in the Arctic this year.

The company at the top of Fortune's Global 500 list has made headlines for its push to drill in Arctic waters. It's been a controversial plan, in part, because a spill in cold water near Alaska would likely prove difficult to clean. Shell (RDS.A) is pushing forward, hoping to begin drilling this July for some of the estimated 90 billion barrels of recoverable oil in the Arctic. Over the next 10-20 years, the company expects oil from the Arctic to be its largest source of crude. In the short-term, Shell has done well, boosting its earnings for the first quarter of 2012 by 11%, compared to the previous year, to $7.7 billion. Part of the increase in earnings comes from Shell's long-term projects that have just started producing: namely, a gas-to-liquids plant in Qatar and projects in the Canadian oil sands.

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