Essays on Performance of BlueScope Steel Ltd and GPT Group Case Study

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The paper "Performance of BlueScope Steel Ltd and GPT Group" is a great example of a finance and accounting case study.   In this report, I will examine the performance of two of the top construction companies; BlueScope Steel Ltd and GPT Group. The selected ratio will be calculated and a comparison between these two companies will be made based on these ratios. This will provide an understanding of the company’ s financial risk, profitability, cash flow and earnings over the past 5 years using the company’ s financial statements (MorningStar, 2016b). By comparing these two companies this report hopes to provide a transparent and balanced overview of the aforementioned ratios.

The ratio benchmarking and analysis will give us an insight into whether or not to acquire part of these companies as a reliable and profitable investment in the future. Total Operating Revenues Net Profit Net profit is the amount that is left over after the operating expenses have been subtracted from the gross revenue. Net profit or loss is used to provide important information about company viability (AAP, 2011). A company that is generating profit has a business model that works, but a company that operates at a loss needs to take a closer look at its spending and revenue before it runs out of funds. Net Profit (in Millions)   2016 2015 2014 2013 BlueScope Steel Ltd -1,044 -84 -82 136 GPT Group 595 572 645 868   2012 354 1,153 In the past 5 years, GPT Group its net profit has increased and this has been driven by the rise in commercial property values and improving comparable income growth, especially from its office property exposure (AAP, 2011).

In addition, in 2016, the group cut 50 employees and this enabled the company to reduce its cost of funding; thus the company was able to hold more cash as it prepares for higher volatility (AAP, 2011).

In addition, the GPT Group steady net profit has been boosted by portfolio occupancy, strong capital position, and fixed rental increases. BlueScope made a loss in three consecutive years i. e. from 2011 to 2013, but the company was able to bounce back with a profit in 2015 and 2016 (MorningStar, 2016). The reasons for this loss is due to intense competition and margin pressure as steel price fall (MorningStar, 2016b). In addition, the company has been negatively affected by the recently implemented carbon tax, despite government handout (AAP, 2011).

The further weak construction market has contributed to soft demand for steel products, and it does not appear the situation will improve in the near future. Earnings Per Share – EPS Earning per share is a ratio is used to measure the amount of net income earned per share of stock (MorningStar, 2016b). This indicator is used to show dollars of net income earned by a company in a period per share of its stock. Earnings per share = (Net Profit after Taxes – Preference Dividends)/Number of Equity Shares   2016 2015 2014 2013 BlueScope Steel Ltd 0.6 0.23 -0.14 -0.15 GPT Group 0.64 0.48 0.38 0.32   2012 -2.35 0.33 GTP Group earning per share is considered to be more excellent compared to BlueScope which in three financial years it's earning per share have been negative (AAP, 2011).

Bluescope earning per share from 2012 to 2013 shows excellent prospectus but from 2014 to 2016 it's earning per share has recorded negative figures which show a drastic change in the business operations or it may be due to the exogenous factors such as low demand of steel products especially in Australia and carbon tax which has ultimately affected the company’ s operations (MorningStar, 2016).

References

AAP (August 26th, 2011). GPT H1 profit jumps 67 per cent. Finance Nine. Retrived from

https://finance.nine.com.au/2016/10/27/16/07/gpt-h1-profit-jumps-67-per-cent

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MorningStar (2016). Bluescope Ltd. Retrieved from

http://financials.morningstar.com/ratios/r.html?t=bsl®ion=aus

MorningStar (2016b). GTP Group. Retrieved from

http://financials.morningstar.com/ratios/r.html?t=GPTGF

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