Company Profile & Preliminary Review (Term Paper Sample)

Bradken Limited
Company profile & Preliminary review
History[Yahoo Finance. (n.d.). Bradken Ltd: Business summary. Retrieved May 27, 2015 from http://finance.yahoo.com/q/pr?s=BRKNF+Profile]
The history of Bradken Limited dates from early 2000 when the then, Smorgon Steel Group, strategically acquired the infamous ANI Group. At the time, the Smorgon Group specialized in steel engineering works while the ANI Group majored in the manufacture of resistant wear products. The new entity operated under the name Bradken Business. A later buyout of Bradken Business, by a CHAMP/ESCO Corporation & Management Consortium positioned the new entity, Bradken Limited, for listing in the Australian Securities Exchange (ASX), where the company has been listed since 2004. Today, Bradken Limited has retained its merged operational scope and specialises in mineral processing, cast metal supplies and manufacture of engineering, mining, and transport and industrial products.
Economic outlook
Over the last five years, Bradken Limited, like other industry players has been adversely affected by the decline in major mining projects where they primarily supply capital equipment. Consequently, the turbulent time for the company has constituted up to 14% decline in sales of Ground Engaging Tools, 47% decline in Crawler Systems sales and a 6% decline in mineral processing revenues in 2014. Despite the tough economic times, Bradken’s aggressive approach to business saw 11% increase in Fixed Plant sales and a 10% increase in its Canadian Oil & Gas sales. Nonetheless, the company’s disciplined approach and commitment to bettering the strength of its financial performance, radicle measures have constantly been employed over time. These include closure of several facilities, reduction in its staff as well as tightening of its budgetary allocations aimed at cutting on the operational cost. With the company’s portfolio being highly diversified in cross-jurisdictional mineral processing and engineering operations, an aggregate 0.2% marginal increase in revenues was realized in 2014.
Business speciality (Operations and products)
Bradken Limited has operations spanning mineral processing and cast supply as well as manufacturing. The mineral processing division specializes in the design and manufacture of mill and crush liners and their assorted spares for use in mineral processing and quarrying industries. Additionally, the company has operations in the manufacture of capital rail, transit, industrial, military and energy generation products. Despite Bradken being a distinguished mineral processing and engineering firm, it also supplies raw materials, technology and consumables to other business specialties.
Market positioning
Bradken Limited is a small entity in the Australian advanced manufacturing and capital equipment market and controls less than 2%.
Strategic focus
To strategically position itself for expansion and growth in the otherwise, volatile advanced manufacturing market, Bradken committed adequate resources to on-course activities. However, with the industry remaining highly volatile, Bradken has shelved capital intensive projects till when the economy will be adequately responsive enough for the implementation of such projects. In retaining its strategic market positioning and competitiveness, the company has since embarked on cost-cutting. The existing projects have also been consistently restructured in a bid to leverage on any budgetary point reductions.
Cost of capital
Over the past five to 2014, Bradken had declining cost of capital, mainly due to some loans clearing –off. Over the period, the cost of capital averaged at approximately $34 million.
Cash flow analysis
In 2014, Bradken’s major cash flows consisted of receipts as payments from customers as payment for goods amounting to $1.25billion, down from $1.59billion in 2013. Over the period, payments to employees and suppliers amounted to $1.06 billion (2014) and $1.32 billion (2013). In support of its production activities, Bradken committed $0.053 billion to property, plant & equipment (2013) and 0.104billion 92013) on the same.
Contents TOC \o "1-3" \h \z \u Company profile & Preliminary review PAGEREF _Toc420671812 \h iHistory PAGEREF _Toc420671813 \h iEconomic outlook PAGEREF _Toc420671814 \h iBusiness speciality (Operations and products) PAGEREF _Toc420671815 \h iMarket positioning PAGEREF _Toc420671816 \h iiStrategic focus PAGEREF _Toc420671817 \h iiCost of capital PAGEREF _Toc420671818 \h iiCash flow analysis PAGEREF _Toc420671819 \h iiExecutive Summary PAGEREF _Toc420671820 \h 1Key Economic Indicators, PAGEREF _Toc420671821 \h 1Country and Economic Outlook PAGEREF _Toc420671822 \h 1Key Indicators PAGEREF _Toc420671823 \h 2Industry Analysis PAGEREF _Toc420671824 \h 3Industry Overview PAGEREF _Toc420671825 \h 3Industry Capacity PAGEREF _Toc420671826 \h 3Key Competitors PAGEREF _Toc420671827 \h 4Industry Prospects PAGEREF _Toc420671828 \h 4Business Risk Analysis PAGEREF _Toc420671829 \h 4Company Analysis PAGEREF _Toc420671830 \h 6Business description and Information PAGEREF _Toc420671831 \h 6Management and Governance PAGEREF _Toc420671832 \h 7Financial Analysis PAGEREF _Toc420671833 \h 7Forecast Analysis and Assumptions PAGEREF _Toc420671834 \h 7Valuation Model Choice PAGEREF _Toc420671835 \h 7Economic assumptions PAGEREF _Toc420671836 \h 9Risk Free Rates PAGEREF _Toc420671837 \h 9Discount Rates PAGEREF _Toc420671838 \h 9Other Facts PAGEREF _Toc420671839 \h 10Discounted Cash Flow Valuations PAGEREF _Toc420671840 \h 10Introduction PAGEREF _Toc420671841 \h 10Analysis PAGEREF _Toc420671842 \h 10Discussion PAGEREF _Toc420671843 \h 10Relative Valuation PAGEREF _Toc420671844 \h 10Key Points PAGEREF _Toc420671845 \h 10Analysis PAGEREF _Toc420671846 \h 10Discussion PAGEREF _Toc420671847 \h 10Recommendation PAGEREF _Toc420671848 \h 10Investment Summary PAGEREF _Toc420671849 \h 10Key Points PAGEREF _Toc420671850 \h 10Main Recommendations PAGEREF _Toc420671851 \h 11Limitations and Risks PAGEREF _Toc420671852 \h 11Further reading PAGEREF _Toc420671853 \h 11
Executive Summary
Bradken Limited specializes in the manufacture and supply of consumer and capital products for the mining, engineered, mineral processing, and transportation industries. The mining products division undertakes design, supply and servicing of earth moving wear components for both quarry and mining industries. Whist the mineral processing division engages in the manufacture of hard-rock crushing, grinding and conveyor equipment, the company’s Engineered Steel division specializes in the manufacture of assorted consumer products for the mining, transport, resource and energy industries. The company’s profitability is, thus, segmentally sourced from each of the company’s operational divisions. This equity evaluation report adopts a technical analysis approach where both discounted cash flow and relative valuation techniques will be employed. The recommendation will be inferentially made based on the technical analysis report, the company’s key-performance indicator sensitivity analysis on forecasts as well as the overall company’s risk profile.
Key Economic Indicators,[PWC. (2007). Guide to key performance Indicators. London: PriceWaterHouseCoopers] [Amrina, E., & Yusof, S.M. (2011). Key performance indicators for sustainable manufacturing evaluation in Automobile companies. IEEE, 978(1), 1093-1097.]
Like other industry players, Bradken’s performance is pegged on:
Revenue: The Company’s five-year revenue has been on the decline with the 2014 figure amounting to $1.36billion down from the $1.31billion amount in 2013.
EBITDA: Following the industry’s slackening, Bradken’s profits were adversely affected leading to an extremely shrunk $0.173 billion EBITDA (2014) down from the $0.214billion EBITDA in 2013.
Net Profit after Tax: The consequential net profit after tax realized in 2014 amounted to $55million, down from $96million in 2013.
Operating cash flow: The 2014 operating cash flow amounted to $155.1 million down from the 2013’s $217.6million.
Country and Economic Outlook
The Australian ERP by September 30, 2014 constituted of 23.581m people of whom 12% constituted overseas immigrants. This led to an overall 1.5% growth in the population by the end of September. The country’s overall GDP increased 0.4% over the last quarter of 2014, while the terms of trade fell 1.9% and a noted 0.1% growth in the gross value added per hour worked. There was also a general increase in the demand for consumer products while the international trade exposure fell 1.2%, with the goods and services component dominating the tradables. These mainly constituted increases in pharmaceuticals, vegetables and tobacco that offset the 3.0% decline in international holiday tradables decline.
Key Indicators
The Australian economic landscape currently consists of highly constrained
Unemployment rate: This constituted approximately 767,500 and 11,725,000 persons being part of the monthly unemployment and employment rates respectively over the last fiscal year to April 2015. This led to seasonal monthly surges of 0.1% or less between 5.8 and 6.4% being recorded over the period.
Producer Price Index: There was a general increase in the fixed demand for local products by 0.5% (attributable to: +7.5% change in computer and manufacturing equipment, +0.8% in construction costs and +7.4% in manufacturing costs). The increases were offset by declines in petroleum prices (-17%), and pharmaceutical and medicinal manufacturing costs (-12.8%). The intermediate demand declines by 0.3% by the close of March 2015 Quarter 1 while the preliminary demand fell 0.8% over the same per...