Individual Report to undertake a Financial Analysis on a public listed company “BlueScope Steel Ltd”
Observation by teacher on this report, kindly see this feedback and make correction and improve the report.
There are small errors throughout that will save you marks if corrected.
Also be careful of your use of capitals Please ensure your executive summary includes the main findings and conclusions of your report.
The introduction refers to the economic report of the company, is this what you have used to complete the assignment or have you used the financial report? Kindly use Financial report.
The background could contain more detail about the history of the company and that of the industry.
Financial analysis – I have not calculated or looked at the formulas you have used. I like that you have used tables as this makes it clear to the reader the ratios that are being discussed. Please use excel sheet
In the liquidity ratio, you mention a comparison to competitors, however there is no data to support this.
By comparing ratios to competitors or industry benchmarks adds value to your analysis, so I would encourage you to do this in other areas as well.
You do not appear to have conducted an analysis on Market Performance. It will also improve your report if you are able to link multiple ratios to support your conclusions.
You can add more references if needed.
Contents
2. Executives summary 3
3. Introduction 4
4. BlueScope Steel limited and Business Background 5
4.1 BlueScope Steel limited Background 5
4.2 Business Background 5
5.0 Financial report analysis 6
5.1 Profitability 6
5.2 Efficiency of Operation 8
5.3 Liquidity 9
5.4 Gearing 10
6. Cash flow 10
7.0 Other Information 11
As an investor, would you invest money in Bluescope Steel? 12
Major Change -Changes in Gender diversity 12
8. Conclusion 13
9. Appendices 14
Appendix A: Ratio calculations 14
A.1 Profitability 14
A.2 Efficiency of operation 14
A.3 Liquidity 15
A.4 Gearing 15
Appendix B: Financial statements 16
Appendix C : Investment Decision Supporting Articles 18
Appendix D. Changes in Gender Diversity 21
References 22
2. Executives summary
The key objective of this report is to undertake a financial analysis about the stability and the financial health of the BlueScope Steel limited since it observes the financial performance of the company fo the year 2018 and 2019. The report covered data from most recent two years 2018 and 2019, intending to find the performance, profitability, asset, liquidity, capital structure and market performance of the BlueScope steel limited and discussion regarding the current position in the market. The financial position of the BlueScope Steel limited is determined through the incorporation of multiple effective tools.
BlueScope limited has a solid foundation for growth, with different business elements in the world’s current growth economy. From their global partnership, BlueScope Steel limited has prospered with the widely diverse markets. They established a joint venture in India (Bluescope conglomerate) that has opened new market opportunities in Asia. These are some of the strategic managerial decisions that have contributed significantly to the organizational success despite operating in highly competitive market.
BlueScope Steel’s limited strengths are its global networks that comprise 100 facilities within 18 countries, with employees of up to 16,000. This corporation and systems gather great products of BlueScope brands, such as Clean COLORBOND®, COLORBOND®, and ZINCALUME® steels, LYSAGHT® steel building products, and Butler® and Varco Pruden® engineered buildings(BlueScope, 2019).Australian Securities Exchange (ASX)officially listed the BlueScope Steel limited onJuly 15, 2002, as a publicly-traded company(BlueScope, 2019). Besides the firms does not only target Australian and Indian market but the global setting.
3. Introduction
The BlueScope Steel Limited is an Australian flat product steel manufacturer and sources the materials from different countries comprising of New Zealand, Pacific Islands, North America, and Asia. The firm demerged from BHP Billiton in 2002 as BHP stell but in 2003 the name changed to BlueScope steel limited. The organization’s headquarters are based at 120 Collins Street, Melbourne, Victoria. Since 2003, the organization has achieved outstanding milestone in the Australian steel industry, a factor that has resulted to launching other branches such as the Indian Bluescope conglomerate. As a result, this report anticipates reviewing and critically analyzing the financial performance fosucing on the past two financial years. The financial analysis report objective is find out the economic health and stability of the BlueScope Steel limited. Therefore, this is to be done by observing the organization economic report from past period, which is the 2018 and 2019 financial years, and compared with the fiscal years to determine the financial stability of the company in the current year.
This analysis will feature a little history of the company partnership networks which is a key indicator of performance. Then this will be followed by thorough investigation of the institution liquidity, gearing ratios, profitability, and Efficiency. There will also be some information concerning the Account ratios that will also help to examine the performance of the BlueScope Steel limited and finally will provide recommendations that will help to improve the performance and operation of the company. Furthermore, there will be a conclusion that will also give some important information about the company from the analysis done.
4. BlueScope Steel limited and Business Background
4.1 BlueScope Steel limited Background
BlueScope Steel Limited is a worldwide dominator in premium branded and painted steel products. The company is rated amoung the biggest producers of coated and painted steel products globally (IBISWorld, 2019). BlueScope Steel limited great strengths are in the building and construction markets. The factor that the building and contruction industry is substantially growing facilitated by modern technology has proven to be a key strength and opportunity for the BlueScope Steel Limited.
BlueScope Steel limited has five businesses: Australia Steel Products, Building North America, Building Products Asia, North America, New Zealand, and the Pacific Islands, and North Star BlueScope Steel.The different businesses are involved in diverse operations such as delivery of the raw materials to the plants while other are precisely involved in production and supplies (BlueScope, 2019). The report only deals with the business in Australia, which pursue in flat steel commodities such as; cold rolled coil, hot-rolled coil, slab, plate, and value-added metallic coated and painted steel solutions(BlueScope, 2019).BlueScope Steellimited yearly manufacturing capacity is approximately 2.0 million tonnes of raw Steel that produces hot-rolled coil, plate products, and slabs.
4.2 Business Background
BlueScope Steel limited finds itself primarily within the Australia manufacturing and construction market that produces a highly ranked standard steel product. The group company has been showing positive performance in the EBIT due to the higher-margin partly offset by lower dispatch volumes and higher cost(EBIT, 2019). This performance is a positive impacton other manufacturing companies, but this is a positive impact on the group. A productive manufacturing sector is always an important component when it comes to the growing economy(Syverson, 2010).The future success and viability of the group on its productivity and competitiveness(Silva, 2013).
BlueScope Steel Limited is a manufacturing industry that featured in the top ten manufacturing industries with a worth of $11.5 billion in Australia (IBISWorlds, 2019). The report is a lodge with ASIC for the financial year. The top competitors consist of the JWS steel, Olympic steel, JFE holdings and RHP technology. Although the competition is stiff, BlueScope’s management is keen to formulate strategic decisions aiming to maximize on the strengths and make good use of opportunities while eliminating the risks and improving weaknesses.
5.0 Financial report analysis
The data from BlueScope Steel limited financial report for the years 2018 and 2019 is examined in this section. Moreover, the data can be used as points for trend analysis and economical rates.
5.1 Profitability
Profitability Ratios helps to measure on the whole profitability of the organization (Asogwa & Onyekwelu, 2019). Higher profitability ratios indicate positive returns and performance of the company (Haddad A, Shibly & Haddad R, 2020 ). These ratios consider directs costs as well as indirect costs. Bluescope Steel has some positive and some declining profitability ratios for 2019 and 2018. However, the one the whole, the ratios show a decreasing trend indicating diminishing profitability. This is a serious issue which the management must not overlook and take adequate steps to enhance profitability
From the calculations of rates that which is stated in Appendix A.1, is as follows;
| Year | 2019 | 2018 |
| Return on equity | 14.51% | 25.10% |
| Return on assets | 9.11% | 15.82% |
| Net profit margin | 10.40% | 12.02% |
Profit ratio shows decreased from 12.02% to 10.40% in the year 2018 and 2019 consecutively, as shown above, this is the same for Return in Equity (REO) from 25.10% to 14.51%. In 2018, an investment of $1 from a stakeholder would reward 25.10 cents, whereas in the year 2019 would pay 14.51 cents, which is somehow discouraging to the stakeholders. From the above ROE,the output indicates that BlueScope Steel Limited does not maximize the return they get from every dollar invested in the company, which then leads to the decline of its profitability and Efficiency, which makes it less worthy to the stakeholders.
Furthermore, the cost of 1 dollar worth on assets investment by the BlueScope Steel limited is also reducing. In 2018, the BlueScope Steel limited could achieve a recovery of 15.82 cents, and in 2019 there was a return of only 9.11 cents. This calculation of return on assets (ROA) is also shown in the appendix below. The decline in ROA has mainly resulted from the decrease in EBIT figures. BlueScope Steel Limited is therefore recommended to reduce overhead cost and operation cycles to use their assets more efficiently.
As mentioned in the above table , it is clear that the net profit margin has also fluctuated from the year 2018 and 2019 by 2.38%, indicating that there is inconsistency in the rate of sales to profit over the given time. 12.02 centswas recovered from every dollar in sales in 2018, while there was a decrease of 2.38 cents in 2019. With this decrease, it is clear that there is a decrease in additional cost and return of goods sold for the BlueScope Steel limited (BlueScope Corporate.(n.d.).
From the above figure, the company’s net worth is that the profitability ratio decreases for the 2019 reporting period. 2.38% sank in the profit margin, which is very alarming to the company’s financial health.
5.2 Efficiency of Operation
Efficiency Ratios helps the management with information on how the company is managing its assets and liabilities (Haddad A, Shibly & Haddad R, 2020 ). The management can know about individual efficiencies of assets like inventory, cash and receivables and overall efficiency like total assets, equity etc
In this section, the calculation is well illustrated in Appendix A.2, and the figure below shows the summary.
| Year | 2019 | 2018 |
| Asset turnover | 107.50% | 105.45% |
In regard to percentage of the asset turnover by BlueScope Steel limited’s report, sales grew from 2018 to 2019, and the mean of the total assets and the comparable trajectory. Managing a constant growth in assets turnover during the two years shows positive growth in the enforcement of assets to develop revenue. A stable and steady growth rate is a great guage of the consistency and efficiency of operations (Reynolds, 2007). Moreover, BlueScope Steel limited can continue to increase assets profits if the constant pace is correctly maintained.
5.3 Liquidity
Liquidity ratios present the capability of the organization to overcome its current dues. Usually, liquid assets like cash, receivables and short-term investments are used by a company to meet its current debt obligations(Share Price Information, 2020). The liquidity ratios are analyzed below.
| Year | 2019 | 2018 |
| Current ratio | 1.75 | 1.72 |
| Acid test | 1.04 | 0.98 |
The fluctuations can see the brekdown of the liquidity rates of BlueScope Steel, which is limited by the rates in which groups use their money and investments(Share Price Information, 2020).BlueScope Steel’s limited current ratio as of 2018 was 1.72, and in 2019, there was an increase of 0.03. This increase shows that the BlueScope Steel limited spends a higher amount on investors than many other competitors; also, this increase is since BlueScope Steel limited could hold a large amount of inventory(Chiaramonte & Casu, 2017).
In the year 2018, the ratio is 0.98, which is lower as compared to the year 2019, which presented a rate of 1.04, and this increase is mostly as a result of investments in the expansion of its brands overseas. The acid test ratio over the two years shows there is strong liquidity over the years, with the rate being above average, which enables the company to pay off its short term liabilities.
5.4 Gearing
The gearing calculations are summarized here for easy understanding and readability.
| Years | 2019 | 2018 |
| Debt ratio | 37.2% | 36.9% |
| Gearing | 16.6% | 17.2% |
This gearing ratio determines the length of an company’s debt to its equity (Amba, 2014). This rates also suggest the entity’s economical risk when the company is subjected to an extreme liability that will coax economic hitches (Amba, 2014). For an instant, a small gearing ratio suggests that there is a small debt to equity ratio, which suggest that the company borrows minimal amount to fund its services as compared to its equity.
Therefore, for BlueScope Steel limited gearing ratio shows that it’s steady in handling its equity rather than the debt. The gearing ratio in the year 2019 registered an increase of 0.3% as compared to that of the year 2018 showing that the company has heightened its assets finance through debt at a slight move. On the other hand, an increase in equity ratio does not necessarily indicate continuing financial viability of the equity is uncertain; therefore, an entity must have a stable gearing ratio to access further continuing debt.
6. Cash flow
BlueScope Steel limited has experienced constant growth in the last 2018 and 2019 financial year. Its revenues are at $1643.5 million in the year 2019, and in 2018, it was at $943.0 million, and this shows significant improvement to the company. BlueScope Steel limited also divided itself into five structures that isAustralia Steel Products, Building North America, Building Products Asia, North America, New Zealand, and the Pacific Islands, and North Star BlueScope Steel (Annual report, 2018). This expansion in there business and the sales strategies is to improve the margin by reducing capital investment in the coming years.
The extension in BlueScope Steel limited indicated in their annual reports. During development, there is an increase in the number of employees in the company, and there is growth in liabilities and debt indicated in the year 2018.
7.0 Other Information
Considering Year 1 as 2019 (Latest Year) and Year 2 as 2018 (Previous Year), Year 2 has been better than Year 1 only in terms of efficiency, liquidity and debt situations. However, the dividend per share has increased, the operating overall cash flows have increased, and there have been improvements in turnover ratios in year 2019 as compare to 2018. In all other aspects, Year 1 has seen a decline as compared to Year 2. As a results appropriate mechanisms should be established to enhance performance in future years and also ensure that the company is not exposed to stiff competition.
BlueScope Steel limited has several strategies plans for the short and long term that is already in place. The primary strategy being the financial strength and support of value creation for the investors(Reynolds, 2007). The BlueScope Steel limited scheme for the value creation is mainly by returns on invested capital, revenue, power in the balance sheet, and increase in the growth plans.Another strategy is the other businesses that will lead to a growth of BlueScope Steel limited, and this engineered building business serves as market leaders in North America and China.
As an investor, would you invest money in Bluescope Steel?
Yes, looking at the current financial position, I would invest in the company. Bluescope Steel is a regular dividend paying company with a positive economic outlook. It has high growth prospects in the future since the demand of steel, alloys and other minerals is never ending. However, I would invest after an assessment of the current market price of the company through various parameters of investment financing like dividend method, residual income method, discounted cash flow method etc. through which I can ascertain the valuation of the company and compare with the current market prices. See Appendix C.
Major Change -Changes in Gender diversity
Gender diversity results to innovative thinking as a result where both the gender are included in decision making in the company, thus making a good indicator to the investors (Khanna, Y., & Varghese, 2017). Bluescope Steel has a strategy of improvement of workforce diversity. The diversity is seen from the graph in Appendix D, whereby from the year 2016 to 2019 the company has recruited more females from 23% in 2016 to 43% in 2019.
In terms of workforce, cultural diversity has been focused on Executive Leadership Team there was an increase of 29% from the year 2016, followed by an increase of 13% in the Board, 8% in Executives, 7% in operator workforce and finally 3% increase in the salaried workforce.
From the outcome of the performance of the Bluescope Steel there was an improvement in cash flow and also turnover ratios in the year 2019 as compared to the other years. Therefore it is wise to conclude that gender diversity has a positive impact on the company’s goals, and it is seen where the company now recruiting 43% female gender which is almost a half ratio to that of the male gender. Due to the cultural diversity improvement in the Bluescope Steel that has to lead to strong competitiveness with the other manufacturing company, investors are now advised to venture into the business with the company.
8. Conclusion
In conclusion, the financial report of BlueScope Steel limited shows the economic outlook of the company from the last two years. Therefore, for the company’s future growth and to improve lead customer times, there should be a continued investment in capacity. The company should also focus on growing BPG, and this is achieved by delivering returns in the company’s rights and even downstreaming demands for network builders.Finally, it is also vital for BlueScope Steel limited to counter check their intercessory management to stabilize their profit. But still, this report does not mean that the financial state of the BlueScope Steel limited is negative; the company still maintains its strong liquidity in the group. However, the financial statements should be used to make forecasts to formulate informed decisions. The recommendations should also be incorporated to enhance the organization’s performance and avoid stiff competition.
9. Appendices
Appendix A: Ratio calculations
In this section, there will be details on ratios for section 5 were calculated, regarding the lecture notes and from the unit textbook.
A.1 Profitability
The calculation for Returns on Equity (ROE), is given by the formula:
ROE Ratio = (Net Income/ Shareholder’s Equity) × 100
Where the net income = the company’s income minus dividends and other expenses.
Shareholder’s equity = total value of all stocks held by the shareholder.
The calculation for Returns on Assets (ROA), is given by the formula:
ROA = (Net income/ average total assets) × 100
ROA can also be represented as a product of the total asset turnover and the profit margin.
The other calculation was the net profit margin which is given by;
Total sales – (cost of goods sold + operating costs) = net income
Then Net income ÷ sales = net profit margin
A.2 Efficiency of operation
The calculation of the Asset Turnover ratio is given by;
Assets Turnover = sales/ average of total Assets
The asset turnover is a good indicator of how the company is deploying its held assets in generating revenue.
A.3 Liquidity
Liquidity calculation formular;
Current ratio = current assets/ current liabilities
Acid ratio calculation is given by;
A.4 Gearing
The calculation here was for the debt ratio, and its formula is given by;
Debt ratio = (Total liabilities/ Total assets) × 100
Gearing ratio = (All Long – Term Debt + All Short – Term Debt) ÷ Shareholders’ Equity
| Profitability | 2019 | 2018 |
| Return on equity | 14.51% | 25.10% |
| Return on assets | 9.11% | 15.82% |
| Net profit margin | 10.40% | 12.02% |
| Effeciency | 2019 | 2018 |
| Asset turnover | 107.50% | 105.45% |
| Liquidity | 2019 | 2018 |
| Current ratio | 1.75 | 1.72 |
| Acid test | 1.04 | 0.98 |
| Gearing | 2019 | 2018 |
| Debt ratio | 37.20% | 36.90% |
| Gearing | 16.60% | 17.20% |
Appendix B: Financial statements
Appendix C : Investment Decision Supporting Articles
Courtesy of the mortley fool (Mitchel, 2018).https://www.fool.com.au/2019/07/11/bluescope-steel-shares-selling-at-a-38-discount/
Courtesy of simply wall street. Available at https://simplywall.st/stocks/au/materials/asx-bsl/bluescope-steel-shares/news/read-this-before-you-buy-bluescope-steel-limited-asxbsl-because-of-its-p-e-ratio-2/
Appendix D. Changes in Gender Diversity
References
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Annual Report 2018 | BHP.(n.d.). Retrieved May 14, 2020, from https://www.bhp.com/investor-centre/annual-report-2018/
Asogwa, J. O., & Onyekwelu, U. L. (2019). Relationship between Fundamental Accounting Ratios and Firms’ market Valuation in Brewery Firms in Nigeria. Adv. J. Manag. Account. Financ, 4(7). file:///C:/Users/Rte/Downloads/sustainability-11-07193.pdf
BlueScope 1H FY2019 financial results – BlueScope Corporate.(n.d.). Retrieved May 14, 2020, from https://www.bluescope.com/investors/financial-information/2019/02/fy-2019/
Chiaramonte, L., & Casu, B. (2017). Capital and liquidity ratios and financial distress. Evidence from the European banking industry. The British Accounting Review, 49(2), 138-161.
Haddad, A. E., Shibly, F. B., & Haddad, R. (2020). Voluntary disclosure of accounting ratios and firm-specific characteristics: the case of GCC. Journal of Financial Reporting and Accounting.
IBISWorld Releases Top 100 Manufacturers List | IBISWorld … (n.d.). Retrieved on May 14, 2020, from https://www.ibisworld.com/industry-insider/press-releases/ibisworld-releases-top-100-manufacturers-list/
Khanna, A., Ashwini, Y., & Varghese, J. (2019). Gender diversity and organizational performance: a study of IT industries in Bangalore. Marketing, 13(3), 33-41 http://dx.doi.org/10.21511/im.13(3).2017.04
Mitchell perry. (2019 July). BlueScope Steel shares selling at a 38% discount fromhttps://www.fool.com.au/2019/07/11/bluescope-steel-shares-selling-at-a-38-discount/
Reynolds, K. M. (2007). Sustainable forestry from monitoring and modelling to knowledge management and policy science.Wallingford: CABI.
Simply Wall street. (2019 September 22). Read This Before You Buy BlueScope Steel Limited (ASX:BSL) Because Of Its P/E Ratio.https://simplywall.st/stocks/au/materials/asx-bsl/bluescope-steel-shares/news/read-this-before-you-buy-bluescope-steel-limited-asxbsl-because-of-its-p-e-ratio-2/
Share Price & Information – ASX. (n.d.). Retrieved May 14, 2020, from https://www.asx.com.au/asx/share-price-research/company/BSL
Silva, R. V. (2013).Competitiveness in the real economy: Value aggregation, economics and management in the provision of goods and services. Farnham, Surrey: Gower.
Syverson, C. (2010). What Determines Productivity? https://www.nber.org/papers/w15712.pdf
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