krakatau steel b

Krakatau Steel (B)SituationKrakatau Steel has been claimed as the biggest steel company in Indonesia. Indonesias citizen also presumes Krakatau Steel as one of the valuable asset for Indonesia. However, Krakatau Steel must take another step to became the Global Company. By having corporation with POSCO, the biggest steel company in South Korea to make a joint venture to make a joint venture which requires 388 hectares land, has shown that Krakatau Steel is ready to go to the next level.Therefore Anto, a financial analyst in PT Krakatau Steel, would like to see the position and the opportunity of PT Krakatau Steel to compete with other global steel companies. This assessment will also be used as a mean to find an appropriate company as a benchmark. Anto will used 3 reputable global steel companies which come from different region in the world. The steel companies are Arcelor Mittal (Luxembourg), POSCO(Pohan Iron and Steel Company, South Korea), and U.S Steel (United States Steel Company). Anto also use PT Gunawan Dianjaya Steel Tbk and PT Jaya Pari Steel Tbk as a local comparison. Anto ask the help of Moodys Corporation too analysis this.AnalysisMoodys corporation is a reputable company which provides credit ratings, research, tools and analysis that contributes to transparent financial markets. Moodys also creates financial rating for steel industry that is used to measure the financial performance of steel industry globally. This measurement is made to help investors and others to assess the financial performance, specifically the credit risk of a steel company. Using moodys global steel measurement people can also assign rating to each company and rank it. In this rating methodology, there are 4 categories that Moody is focusing : 1. Size and Business Profile2. Operating Performance and Volatility3. Financial Policies4. Financial StrengthThe four categories will be broken down into 10 sub factors. Key rating factors including the weight score of each category:

To analyze using Moodys there are 7 ratings categories.

The result is PT Krakatau SteelWeightedKrakatau Steel

Size and Business ProfileNet Consolidated Sales ($USD billions)25% 1.74 B10.25

Operational Diversity, Regional Diversity, Import Threat/Export Reliant10% 5 A40.40

Operationg Performance and VolatilityEBIT Margin (3 year average)10%6.20%Ba20.20

Return on Average Tangible Assets (3 year average)5%7.22%Baa30.15

Volatility based on the Coefficient of Variation of CFO/Net Sales10%4.46%Aaa60.60

Financial PoliciesDebt / Capital15%47.15%Baa30.45

Debt / EBITDA (3 year average)10% 5.85 Caa00.00

Financial StrengthEBIT / Interest (3 year average)5% 3.01 Ba20.10

CFO-div / Debt (3 year average)5%7.77%Caa00.00

FCF / Debt (3 year average)5%-4.95%Caa00.00

100%2.15

Ba2

8910

div94142137872148402

PT Gunawan Dianjaya SteelWeightedGunawan Dianjaya Steel

Size and Business ProfileNet Consolidated Sales ($USD billions)25% 0.20 Caa00.00

Operational Diversity, Regional Diversity, Import Threat/Export Reliant10%3Baa30.30

Operationg Performance and VolatilityEBIT Margin (3 year average)10%9.70%Baa30.30

Return on Average Tangible Assets (3 year average)5%15.01%Aa50.25


Financial PoliciesDebt / Capital15%39.91%A40.60

Debt / EBITDA (3 year average)10% 4.03 B10.10

Financial StrengthEBIT / Interest (3 year average)5% 5.04 Baa30.15


FCF / Debt (3 year average)5%11.61%Baa30.15

100%2.45

Ba1

PT Jayapari SteelWeightedJaya Pari Steel

Size and Business ProfileNet Consolidated Sales ($USD billions)25% 0.05 Caa00.00

Operational Diversity, Regional Diversity, Import Threat/Export Reliant10%2 Ba 20.20


Return on Average Tangible Assets (3 year average)5%13.38%A40.20


Financial PoliciesDebt / Capital15%27.02%Aa50.75

Debt / EBITDA (3 year average)10% 2.04 Baa30.30

Financial StrengthEBIT / Interest (3 year average)5% 64.76 Aaa60.30

CFO-div / Debt (3 year average)5%54.28%Aa50.25

FCF / Debt (3 year average)5%56.04%Aaa60.30

100%3.20

Baa1

POSCOWeightedPOSCO

Size and Business ProfileNet Consolidated Sales ($USD billions)25% 53.43 Aaa61.50

Operational Diversity, Regional Diversity, Import Threat/Export Reliant10%7 Aa 50.50


Return on Average Tangible Assets (3 year average)5%10.22%A40.20


Financial PoliciesDebt / Capital15%48.64%Baa30.45

Debt / EBITDA (3 year average)10% 2.94 Baa30.30

Financial StrengthEBIT / Interest (3 year average)5% 11.12 Aa50.25

CFO-div / Debt (3 year average)5%19.87%Ba30.15

FCF / Debt (3 year average)5%10.90%Baa30.15

100%4.40

A1

Arcelor MittalWeightedArcelor Mittal

Size and Business ProfileNet Consolidated Sales ($USD billions)25% 78.03 Aaa61.50

Operational Diversity, Regional Diversity, Import Threat/Export Reliant10%7 Aa 50.50

Operationg Performance and VolatilityEBIT Margin (3 year average)10%5.50%Ba20.20

Return on Average Tangible Assets (3 year average)5%4.12%Ba20.10


Financial PoliciesDebt / Capital15%52.31%Ba20.30


Financial StrengthEBIT / Interest (3 year average)5% 2.55 Ba20.10

CFO-div / Debt (3 year average)5%12.18%B10.05

FCF / Debt (3 year average)5%1.29%B10.05

100%3.40

A3

U.S SteelWeightedU.S Steel

Size and Business ProfileNet Consolidated Sales ($USD billions)25% 17.37 A41.00

Operational Diversity, Regional Diversity, Import Threat/Export Reliant10%6A40.40

Operationg Performance and VolatilityEBIT Margin (3 year average)10%2.49%B10.10

Return on Average Tangible Assets (3 year average)5%2.82%B10.05


Financial PoliciesDebt / Capital15%74.91%Ba20.30


Financial StrengthEBIT / Interest (3 year average)5% 2.49 B10.05


FCF / Debt (3 year average)5%1.04%B10.05

100%2.55

Baa3

ConclusionFrom the table we can conclude that PT Krakatau Steel has strength is in Operating performance and volatility, but weak in its Financial Strength. The size and business profile and Financial policies is not good but not bad also. If compared to the other company Krakatau is still not ready yet to go global. The Krakatau steel can see the POSCO company as a benchmark for going global. Because the POSCO companies has the highest rating in from 4 categories that moody is focusing in steel industry.

krakatau steel b

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