ASSIGNMENT TASK This assignment task is a written report and analysis of the financial performance of one selected listed company on the ASX in order to provide financial and investment advice to a...

Financial Analysis of Boral Limited (BLD.AX)
Assessment of the financial health
Company Analysis-
Boral Limited is an Australia-based company, which is engaged in the provision of building and construction materials. The Company's products include ash, asphalt, blocks,
icks, cement, cement additives, cement dry mixes, concrete, decorative concrete, lime and minerals, oxides, pavers, pool surfacing, qua
y products, retaining walls, roof tiles, stone, structural timber, timber cladding, timber decking and timber flooring. The Company's building solutions include infrastructure solutions and commercial solutions. The Company offers various services, including material technical services, empty pallet pick-up and roof tiling installers. Its commercial construction solutions include industrial, commercial and residential, office blocks and towers, institutional, sporting complexes, and retail and entertainment. The Company manufactures and supplies building products for factory buildings, manufacturing plants and warehouses.
Identifying the key quantitative variables
1. Operating Cash flows
Operating cash flows mostly include the sales of the building materials and solutions providing around the infrastructure and commercial problems. Over the period of time, the operating activities has been stable and the top line has been growing steadily over the period of time.
2. Revenue Drivers –
Building Materials sales
Solutions to the infrastructure and commercial problems
3. Operational Efficiencies (Net profit Margins)-
The biggest cost driver in this industry is the raw materials costs and then hence, this industry is capital intensive, we look at the depreciation as well as the biggest component of the costs. The transportation costs are also a major prat of the cost drivers.
4. Financial Analysis
This will be covered in the ratio and risk analysis section.
Identifying the key qualitative variables
1. Business Analysis - As per above
2. Growth Strategy –
Firm looks into organic as well as inorganic growth strategies like mergers and acquisitions to sustain the growth and realise the synergies from the same.
3. Competitive Advantage
The competitive advantage of the firm lies in the leading position they have maintained over the period of the time in the Australian markets. Apart from this, the firm has made significant investment in the innovation which could create a moat.
Boral has in place various strategies to manage these risks, including the commercial excellence and customer centricity program, seeking to sustain and improve margins by reducing costs, optimising capacity in line with projected demand, and increasing the size and share of our higher-margin businesses.
Value Chain Analysis
Industry Analysis-
Industry analysis needs to be performed before the valuation to ensure the threat from the external factors and the lucrativeness of the industry. This can be performed using Porter’s five forces model. A spider chart for the same with 5 forces is shown below. Each value on the factor describes the degree of the threat. 5 stand for the highest threat and 1 for the lowest threat.
Ratio Analysis-
Liquidity Ratios (2019)-
Cu
ent ratio = (Cash + Marketable Securities + Inventories + Account receivables) / Cu
ent Liabilities
= 1.30
This ratio tells us about the short term liquidity of the firm and if there is any short term risk the company is facing as far as the debt obligations and account payables are concerned
Quick Ratio = (Cash + Marketable Securities + Account receivables) / Cu
ent Liabilities
= 0.81
The assumption here is that the inventories might not be very quick to sell off and hence we remove that from the calculations.
Cash Ratio = (Cash + Marketable Securities) / Cu
ent Liabilities
= 0.6
Cash Conversion Cycle = Days Inventory in Hand + Days of Sales Outstanding - Days of Payables Outstanding
= 41.8 days
Cash conversion cycle tries and understand about how much time a company takes in order to convert the cash to inventories, then goods and then account receivables and how effectively they are able to get that cash back.
Here we try and understand how much days it take for the days inventory in hand, how much is the credit period offered to the customers, how much payables are outstanding to the vendors.
These metric is used by the company across the industry competitors since for every company these ratios might be different and for this industry this ratio comes down to somewhere 70 days and hence, that...