1.

0 Introduction:

Steel industry is an established and growing industry in Bangladesh. Predominantly based in the port city
of Chittagong the industry has emerged as a major contributor to the national economy. According to the
experts, the growth of steel industry in Bangladesh is mainly induced by the rapid expansion of the
country's shipbuilding and real estate sector, as well as the major investments in various infrastructure
projects throughout the country.

Bangladesh Steel industry is emerging as one of the major industrial sectors of the country. It consists of
small up to the largest scale of steel melting and re-rolling factories across the country that mostly produce
deformed bar rod of different grade (40, 60, 500), angel, channel and coil for the construction industry.
Though the history of Steel Industry is not older one but it can make a glorious future. Before 1971
Bangladesh did not have any steel mill and even after the liberation there were only a few steel factories
in the country. In 1990s the actual development began in this sector through a revolution. During that
period the building constructing agencies or developer companies came forward to build modern
infrastructure. Then with the increasing demand, new investors started investing in steel or rod
production. In 2012 we have almost 400 mills across the country including Dhaka, Chittagong. Although
most of them are manual steel plants, 30 mills among them are automated.

The report is based on the financial performance of Appollo ispat and GPH ispat and their head to head
comparison.

2.0 Objective:

The prime objectives of the study are given below:

 Determine ROE of the firms for last five years.

 Do ratio analysis.

 Making reformed balance sheet and income statement for both the firms.

 Compare the calculated values.

3.0 Methodology:

The report was completed after gathering sufficient amount data.

 Primary source of data was company annual report which was available in their website.

 DSE, class notes and lectures helped in a great extent.

4.0 Company Back Grounds:

Appollo Ispat Complex Limited is situated in Shimrail, Siddhirganj, Narayanganj, only 14km. away from
Dhaka. The project area is comprised of 17 acres of land. Appollo is pioneering the CI sheet business in
Bangladesh since 1997. Previously the promoters of Appollo Ispat started the C.I. Sheet business with the

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trading and then importing finished CI sheets during sixties. In 1987 Appollo began its own manufacturing
facility with a sheet-to-sheet CGI line In the name of Appollo Steel Mills Ltd. In 1993 Appollo expanded
the facilities into the second line. In 1997 the company established most modern and sophisticated
Continuous Galvanizing Line (CGL) which was first of its kind in Bangladesh. The new manufacturing plant
with complete modern technology was incepted and the new name of the journey was Appollo Ispat
Complex Limited. and today Appollo is much ahead by producing its own raw materials at its own art-of-
the-state Cold Rolling Mill. Appollo Ispat Complex Limited is now one of the largest CI sheet manufacturer
of the country.

The first manufacturing line established in 1997 is a continuous galvanized process. This entire facility was
imported from the world reputed Nippon Denro of Japan. In early 2002, the second line of manufacturing
facility went into operation. This installation was done by the Japanese technicians and at the same time
the first line was also re-flourished and upgraded. The entire production facility is highly sophisticated,
well operated by a group of skilled technician and managed by a resourceful management team. With the
best precession Japanese technology, sincere and skilled human resources, the company is proudly
producing the best quality CI sheets for the country. The reputed trading base and quality product helps
the company to achieve a large marketing network around the country.

GPH Ispat Ltd. One of the leaders of Bangladesh in manufacturing steel promises a super strong future
and economy with its world –class products. Not only structural bar, but GPH Ispat Ltd. is also one of the
producers of low & medium carbon and low alloy steel billets in Bangladesh, the main ingredient of
manufacturing graded steel bar. As GPH is ensuring the highest quality products in Bangladesh as per
various international and national standards, GPH steel billets and Bars is getting exported to other
countries after nourishing national demand. The introduction of GPH Ispat Ltd. has all the potentials to
take Bangladesh quite a few steps forward to a stronger, brighter tomorrow.

5.0 Vision, Mission & Values:

5.1 Appollo Ispat:

VISION

Vision is to create a strong foothold in the market by providing customer satisfaction in terms of product,
quality, economic price and service.

Mission

Mission is to escalate the standard of living by providing shelter for all in the country with innovative
business ideas.

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VALUES

Appollo is committed to their valued customers to deliver products and services that satisfy the presents
& future needs. They believe in professionalism, so that Appollo builds a unique management team that
would continuously work to serve the customers and its role in the market. The contribution to the socio-
economic sector is their ultimate goal.

5.2 GPH Ispat:

VISION

Vision is of GPH is “to enrich the steel sector of Bangladesh as a beacon of light for others and to help the
country in upcoming infrastructural development with upgraded Technologies”

Mission

The Mission is “to provide customers with excellent services and products resulting in constant,
improvement and innovation at the highest level of quality.

VALUES

 Committed to provide enjoyable work environment for our employees, our most important
resources. Will continually promote teamwork, quality improvement and excellence in all the
places of business for establishing good governance.

 Providing products and services of highest quality and value by respond to the customers with
promptness, sensitivity, respect & always with integrity.

 Enriching stakeholders’ interest where employees are the strength, customers are the Brand
Ambassador, and suppliers & service providers are value chain.

 Meeting the challenges of Earthquake with our quality products in strong infrastructure
development to secure the safety of country people.

 Maintaining a financially strong, growth – oriented company for the protection of company’s
shareholders & employees through leadership & innovation.

 Ensuring that production process is free from environmental pollution.

6.0 DuPont analysis:

DuPont analysis is a fundamental performance measurement framework popularized by the DuPont

Corporation and is also referred to as the "DuPont identity." DuPont analysis is a useful technique used
to decompose the different drivers of the return on equity (ROE).

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DuPont Analysis Components

DuPont analysis breaks ROE into its constituent components to determine which of these components is
most responsible for changes in ROE.

Profit margin: Expressed as a percentage of the total revenue, net margin is the revenue that remains
after subtracting all operating expenses, taxes, interest and preferred stock dividends from a company's
total revenue. Formula: NI / Sales

Total Asset turnover ratio: This ratio is an efficiency measurement used to determine how effectively a
company uses its assets to generate revenue. The formula for calculating asset turnover ratio is total
revenue divided by total assets. As a general rule, the higher the resulting number, the better the company
is performing.

Equity multiplier: This ratio measures financial leverage. By comparing total assets to total stockholders'
equity, the equity multiplier indicates whether a company finances the purchase of assets primarily
through debt or equity. The higher the equity multiplier, the more leveraged the company, or the more
debt it has in relation to its total assets.

6.1 3 Factor DuPont:

APPOLLO ISPAT

2013 2014 2015 2016 2017

NP Margin 0.071 0.076 0.099 0.142 0.084

TA TO 0.63 0.5 0.47 0.46 0.46

Leverage 2.13 1.56 1.57 1.52 1.59

ROE 0.0953 0.0593 0.073 0.099 0.0614

GPH ISPAT:

2013 2014 2015 2016 2017

NP Margin 0.046 0.0594 0.0488 0.0526 0.0729

TA TO 1.098 0.802 0.997 0.677 0.639

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Leverage 2.71 3.04 2.93 2.14 2.44

ROE 0.137 0.145 0.143 0.076 0.11

 The net profit margin for both the companies gradually increased. The NP margin of Appollo
experienced higher value because the sales amount was slightly less than the previous years.

 As for TATO, Appllo managed to keep their rates same over the years, meaning both their sales
and number of assets increased on the same level. On the other hand, in last 2 years GPH ispat’s
sales didn’t increase as much as their asset, so experienced a bit of fall in TATO value.

 A company would never want to be under extreme leverage. Both the companies maintained
their leverage ratio over the years.

 ROE illustrates how effective the company is at turning the cash put into the business into greater
gains and growth for the company and investors. The higher the return on equity, the more
efficient the company's operations are making use of those funds. GPH Ispat kept almost same
ROE for 5 years. Appollo had a fall in 2017. The reason behind it is that they had the highest equity
in in 2017 and comparably lower income than previous two years.

ROE
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
2013 2014 2015 2016 2017

Appollo GPH

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7.0 Ratio Analysis:

A ratio analysis is a quantitative analysis of information contained in a company’s financial statements.

Ratio analysis is used to evaluate various aspects of a company’s operating and financial performance
such as its efficiency, liquidity, profitability and solvency.

1. Liquidity Ratios: liquidity ratios measure a company's ability to pay off its short-term debts as they come
due using the company's current or quick assets. Liquidity ratios include current ratio, quick ratio, and
working capital ratio.

Current Ratio = Current Asset / Current Liability

Quick Ratio = (Cash+ Marketable securities+ Inventory) / Current Liability

Inventory Turnover = COGS / Inventory

2. Solvency Ratios: also called financial leverage ratios, solvency ratios compare a company's debt levels
with its assets, equity, and earnings to evaluate whether a company can stay afloat in the long-term by
paying its long-term debt and interest on the debt. Examples of solvency ratios include debt-equity ratio,
debt-assets ratio, and interest coverage ratio.

Debt to Asset Ratio = Total Debt / Total Asset

Debt to equity Ratio = Total Debt / Total Equity

Financial Leverage ratio = Total Asset / Equity

3. Profitability Ratios: these ratios show how well a company can generate profits from its operations.
Profit margin, return on assets, return on equity, return on capital employed, and gross margin ratio are
examples of profitability ratios.

Gross profit Margin = Gross Profit / Sales

Operating Profit Margin = Operating profit / Sales

Net Profit Margin = NI / Sales

ROA = NI / Total Asset

ROE = NI / Shareholder’s equity

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Liquidity Ratio

APPOLLO ISPAT

2013 2014 2015 2016 2017

Current Ratio 1.70 3.07 2.58 2.48 2.11

Quick Ratio 0.44 1.28 1.55 1.69 1.67

GPH ISPAT

2013 2014 2015 2016 2017

Current Ratio 1.13 1.104 1.28 1.63 1.38

Quick Ratio 0.35 0.35 0.405 0.81 0.77

Current Ratio
4

0
2013 2014 2015 2016 2017

Appollo GPH

Quick Ratio

1.69 1.67
1.55
1.28

0.81 0.77
0.44 0.35 0.35 0.405

2013 2014 2015 2016 2017

Appollo GPH

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Solvency Ratio

APPOLLO ISPAT

2013 2014 2015 2016 2017

Debt to asset 0.53 0.35 0.36 0.34 0.37

ratio

Debt to equity 1.0 0.46 0.49 0.45 0.51

ratio

Financial 2.13 1.56 1.57 1.52 1.59

Leverage
Ratio

GPH ISPAT

2013 2014 2015 2016 2017

Debt to asset 0.63 0.67 0.66 0.53 0.63

ratio

Debt to equity 1.17 2.036 1.94 1.13 1.56

ratio

Financial 2.71 3.04 2.93 2.14 2.44

Leverage
Ratio

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 Debt ratio
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2013 2014 2015 2016 2017

Appollo GPH

Debt to equity ratio

2.5

1.5

0.5

0
2013 2014 2015 2016 2017

Appollo GPH

Financial Leverage Ratio

3.5
3
2.5
2
1.5
1
0.5
0
2013 2014 2015 2016 2017

Appollo GPH

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Profitability Ratio

APPOLLO ISPAT

2013 2014 2015 2016 2017

Gross Profit 0.22 0.201 0.22 0.22 0.194

Margin

Operating 0.198 0.173 0.193 0.118 0.089

Profit Margin

Net Profit 0.071 0.076 0.099 0.142 0.084

Margin

ROA 0.044 0.038 0.047 0.065 0.039

ROE 0.0953 0.0593 0.073 0.099 0.0614

GPH ISPAT

2013 2014 2015 2016 2017

Gross Profit 0.16 0.19 0.151 0.17 0.175

Margin

Operating 0.133 0.151 0.122 0.13 0.14

Profit Margin

Net Profit 0.046 0.0594 0.0488 0.0526 0.0729

Margin

ROA 0.051 0.047 0.049 0.036 0.047

ROE 0.137 0.145 0.143 0.076 0.11

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 Gross Profit Margin
0.25

0.2

0.15

0.1

0.05

0
2013 2014 2015 2016 2017

Appollo GPH

Op. Profit Margin

0.25

0.2

0.15

0.1

0.05

0
2013 2014 2015 2016 2017

Appollo GPH

Net Profit Margin

0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
2013 2014 2015 2016 2017

Appollo GPH

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 ROA
0.07

0.06

0.05

0.04

0.03

0.02

0.01

0
2013 2014 2015 2016 2017

Appollo GPH

8.0 Reformation of Balance sheet:

Operating Asset Year: 2017 Appollo Year: 2017 GPH

Plant & plant equipment 2884022386 1645280683

Working Capital In progress 1927856014 2135692870

Inventory 2073061052 2454596163

A/C receivables 2933494369 1799922360

Advance deposits 2561727722 1110464916

Operating Cash and cash 405681.5 46699868.55

equivalent

Intangible Asset 999000

Other investment 364181373

Total Operating Asset 12380567220 9557837240

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Operating Liability Year: 2017 Appollo Year: 2017 GPH

Deferred TAX 71939980 126418102

Other current Liabilities 202525994

TAX payable 370565287 183382931

Total Operating Liability 11735535960 309801033

Financial Assets Year: 2017 Appollo Year: 2017 GPH

Investments in subsidiaries 100381538

Financial cash 19383658.5 264632588.5

Short term investment 2443736696

Total Financial Assets 119765196.5 2708369285

Financial Liabilities Year: 2017 Year: 2017 GPH

Interest bearing borrowings 992428084 1720967205

Lease Obligations 101164102

Long term loan payable within 1 802396307

year

Short term Loan 1914143972 4971423126

Trade Payable 16368582 644846114

Bank Loan 284054401

Current portion of interest 60340400

bearing borrowings

Lease Payable in 1 year 22001232

Total Financial Liabilities 4009391346 7520742179

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Appollo Ispat:

Net operating asset = 11735535960

Net financial liabilities = (3889626150)

Common Stock Holder’s Equity = 7845909809

GPH Ispat:

Net operating asset = 8757173357

Net financial liabilities = (4812372894)

Common Stock Holder’s Equity = 5055265379

8.1 Reformed Income Statement:

Year: 2017 (Appollo Ispat) Year: 2017 (GPH Ispat)

revenue 5714343956 7839566038

COGS 4603973528 6465845702

Gross Profit 1110370428 1373720336

Other Revenue & Profits 169844209 200927742

Operating Expense:

Distribution Expense 44716524 151075061

Administrative Expense 134903485 127880015

Other Expenses 428171662

Employee Benefit expense 33621148 40095644

Total Op. Expense 641412820 319050720

Operating Income (Before Tax) 638801817 1255597358

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 Income Tax 160076486 190513873

Operating Income (After Tax) 478725331 1065083485

Financial Expenses 0 493780124

Comprehensive Income 478725331 571303361

9.0 Determining ROCE:

ROCE is a useful measurement for comparing the relative profitability of companies. But ROCE is also an
efficiency measure of sorts; it doesn't just gauge profitability as profit margin ratios do.

A high ROCE indicates that a larger chunk of profits can be invested back into the company for the benefit
of shareholders. The reinvested capital is employed again at a higher rate of return, which helps to
produce higher earnings-per-share growth. A high ROCE is, therefore, a sign of a successful growth
company.

So if we measure ROCE and make a head to head comparison, we have to say GPH ispat stands on a better
position than Appollo ispat.

Formula Appollo 2017 GPH 2017

RNOA (Op. Income After Tax) / 0.041 0.122

NOA

FLEV NFO/CSE 0.0496 0.95

NBC NFE/NFO 0.00 0.103

Spread RNOA-NBC 0.041 0.225

ROCE RNOA + [FLEV x Spread] 0.1 0.335

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10. Conclusion:

It is a very difficult job to determine which company is doing better. As we have seen, they are making
improvements day by day and sure to reach newer heights. Financially speaking, both the firms are
experiencing growth, have a stable ROE, nowhere near being under stress and very much successful in
achieving early targets.

Doing the analysis was great, not only the performance of the two company was learned, also how a firm
should be evaluated was understood.

Though there are many steel mills in Bangladesh, Appollo and GPH both doing great in their own terms.

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