Krakatau Steel A and B

Syndicate 7 :
Langgeng Setyono [29116009]
Heda Kalenia [29116056]
Surya Nugroho [ 291106005]
Mardian Widiastuti [291106130]
KRAKATAU STEEL ( A) ANALYSIS

For investing to Krakatau Steel, it is should be better for checking the

financial condition of krakatau Steel

The Analysing of Krakatau Steel financial condition is with comparing the

growth of investment between a year. In this case, we could compare
the annual growth in 2009-2010 period.

A continually annual growth is the indicator of best company to invest

 Analysis Method
CAGS ( Trend Performance Analysis)
The Formula is

In analyzing the performance of trend company, classified into

four aspect :
a. Revenue
b. Return
c. Debt
d. Market

For this Trend Performance Analysis, the period use years

between 2008 to 2010 ( 2 period of time)
Four Basic Aspect To Determine in
Trend Analysis
Data From Financial Statement
PT. Guna One Djaya Steel
PT. Jaya Pari Steel
Trend Analysis
Trend Analysis

From the Table we can figure that :

In Revenue, Krakatau Steel have a CAGS that bigger than two others. In
Operating Profit Margin, growth annual of Krakatau steel is 560.14 %. Net
Profit Margin have 56.4 %. Even tough, Krakatau steel operate their producing
more expensive than the others
In Return and Debt, Krakatau have a lower performance than PT Jaya Pari
Steel. To returning the investment, between 2009-2010 krakatau steel have a
lowest point to return the invest.
In Liquidity, Krakatau Steel has a good condition while still lower than PT Jaya
Pari Steel. But annual growth showing that Krakatau Steel has a continually
growth in 8,31 %. So it is more safely for liquiding the asset.
BUMN Scoring

From the scoring Krakatau Steel has classified to BBB

or Less Healthty Company in 2009-2010 analyzis, but
if Bambang compare with two others, Krakatau Steel
have the highest point (58.5).

Conclusion & Reccomendation

Bambang could investing his money to Krakatau Steel, although the

CAGR of Krakatau Steels Returning number is much below to its
competitors the growth of investment is continually growth, it can
indicated from Total Asset and Revenue growth
The Krakatau Steel BUMN Scoring is at level BBB which is indicated as a
less healthy company, so it is indicated Bambang to do an analyzing his
investing after 2009-2010 period.
Bambang Supriyatno should invest to Krakatau Steel as their score is
better than the other Industries. As we can see, year 2009 and 2010,
Krakatau Steel has a good revenue and liquidity but in returning it could
take more period to be return
 Krakatau B

Objective
Krakatau Steel have to go global.
Anto as a Financial analyst in Krakatau Steel want to know the position and the
opportunity to compete in the global market and to find an appropriate company as a
benchmark.
Three company from different region as a comparison, such as Arcelor Mittal from
Luxemburg, Posco from South Korea, U.S Steel from U.S, PT Gunawan Dianjaya Stell and
PT Jaya Pari Steel.
Analysis
Measurement by Moodys assessment
Used Financial statement of 2008, 2009, and 2010
 Rating Factors/Sub factors Weighting

Gunawan Arcelor
Broad Rating Rating Krakatau Steel Jaya Pari Steel Posco Us Steel
Dianjaya Mittal
Categories
Factor Sub-factor Value Rating Value Rating Value Rating Value Rating Value Rating Value Rating

1. Net Consolidated Sales

1.74 B 0.20 Caa 0,05 Caa 53,43 Aaa 78.03 Aaa 17.37 Aaa
(USD Billion)

2. Operational Diversity
1 Size and Business Profile

3. Regional Diversity 5 A 3 Baa 2 Ba 7 Aa 7 Aa 6 A

4. Import Threat/Export
Reliant

10.65
1. Ebit Margin (3 Years) 6.2 % Ba 9.70 % Baa Baa 11.93 % Baa 5.50% Ba 2.49% B
%

2. Return on Average
15.01 13.38
2 Tangible Assets (3 years 7.22 % Baa Aa A 12.11% A 4.12% Ba 2.82% Ba
Operating Performance % %
average)
and Volatility

3. Volatility based on the
Coefficient of Variation of 32% A 917% Caa 119% Caa 87% B 39% A 345% Caa
CFO/Net Sales

47.15 39.91 27.03 52.31

1. Debt/Capital Baa Baa Aa 41.09% Baa Ba 69.57% Ba
3 % % % %
Financial Policies
2. Debt/EBITDA ( 3 years
5.85 Caa 4.03 Baa 2.04 Baa 2.94 Baa 7.21 Caa 121.90 Caa
average

1. Ebit/Interest (3 years) 3.01 Ba 5.04 Baa 64.76 Aaa 11.12 Aa 2.55 Ba 2.49 B

4 2. CFO-Div/Debt (3 years 54.28 12.18

9.28 % Caa 4.45% Caa Aa 19.88% Ba Ba 0.36% Caa
Financial Strength Average) % %

3. FCF/Debt (3 years 11.61 56.04
-4,95% Caa Baa Aaa 13.45% Baa 1.29% B 0.29% Caa
average) % %
Substitute rating appropriately with its own value
 Broad Rating Rating Gunawan
Categories Krakatau Steel Dianjaya Steel Jaya Pari Steel Posco Arcelor Mittal U.S Steel

Factor Sub-factor
Value Rating Value Rating Value Rating Value Rating Value Rating Value Rating
1. Net Consolidated Sales
1 0.25 0 0.00 0.00 0.00 6 1.50 6 1.50 6 1.50
(USD Billion)

2. Operational Diversity
1 Size and Business Profile
3. Regional Diversity
4 0.40 3 0.30 2 0.20 5 0.50 5 0.50 4 0.40
4. Import Threat/Export
Reliant

1. Ebit Margin (3 Years) 2 0.20 3 0.30 3 0.30 3 0.30 2 0.20 1 0.10

2. Return on Average
Tangible Assets (3 years 3 0.15 5 0.25 4 0.20 4 0.20 2 0.10 2 0.10
Operating Performance average)
2
and Volatility

3. Volatility based on the

Coefficient of Variation of 4 0.40 0 0.00 0 0.00 1 0.10 4 0.40 0 0.00
CFO/Net Sales

1. Debt/Capital 3 0.45 3 0.45 5 0.75 3 0.45 2 0.30 2 0.30

3 Financial Policies 2. Debt/EBITDA ( 3 years
0 0.00 3 0.30 3 0.30 3 0.30 0 0.00 0.00
average

1. Ebit/Interest (3 years) 2 0.10 1 0.05 6 0.30 5 0.25 2 0.10 1 0.05

2. CFO-Div/Debt (3 years
4 Financial Strength 0 0.00 0 0.00 5 0.25 2 0.10 2 0.10 0 0.00
Average)
3. FCF/Debt (3 years
0 0.00 3 0.15 6 0.30 3 0.15 1 0.05 0 0.00
average)

Total 1.95 1.80 2.60 3.82 3.25 2.45

Rating Ba2 Ba3 Baa3 A2 Baa2 Ba1

Compute the weighted sub-factor with its own

weight and also compute total score each of
steel company
1. Size and Business Profile

Size and business profile of Krakatau Steel is weak especially in Net

Consolidated Sales (USD Billion) than the international competitor.

In the local position Krakatau Steel place first position. Krakatau Steel
get point B in net Consolidated sale.

In Operational Diversity, Regional Diversity, Import Threat/Export

Reliant good performance, Krakatau Steel get A.
2. Operating Performance and
Volatility
Earning before income and tax of Krakatau steel is normal Ba it means
still good.

In Return on Average Tangible Assets (3 years average) get Baa. It is

lower than the local competitor that get A in this point.

In Volatility based on the Coefficient of Variation of CFO/Net Sales is

good performance rather than other company that get lower than A
point except Arcelor Mittal that get same score.
3. Financial Policy

In the debt/capital Krakatau steel in good position which get point Baa
but this point lower than Jaya Pari Steel that get A.

In the Debt/EBITDA is bad because get sore Caa than other competitor
higher than Caa except Arcerol Mitral and U.S Steel.
4. Financial Strength

In EBIT/interest Krakatau Steel get Ba point

In CFO-Div/Debt and FCF/Debt got score Caa means very weak.

Conclusion

In overall position Krakatau Steel in the middle position compare by

international competitor and local competitor.

In local competition Krakatau Steel has high rank than Gunawan

Dianjaya Steel and Jaya Pari Steel. Krakatau Steel get rating Ba2 and the
local competitor below this rating.

In the international competition below Posco and U.S Steel and same
rating with Arcerol Mittal.
Recommendation

To increasing performance and rating of Krakatau Steel this company should

increasing the sub factor that weak performance. Three lowest sub factors are
Debt/EBITDA, Ebit/Interest, CFO-Div/Debt and FCF/Debt.

In term of Debt/EBITDA Krakatau steel should decreasing average Debt or

Increasing average EBIT.

Average depreciation term of CFO Krakatau Steel should increase the average of
CFO or decrease the average of debt in the future.

In term of FCF should increasing average free cash flow or reducing the average
debt.