FINANCIAL MANAGEMENT

Ahmad Danu, Mba

KRAKATAU STEEL (A) CASE STUDY REPORT

Syndicate2

MASTER OF BUSINESS ADMINISTRATION

SCHOOL OF BUSINESS AND MANAGEMENT
INSTITUT TEKNOLOGI BANDUNG
2016
EXECUTIVE SUMMARY

I. Objective
In this case, Bambang Supriyatno who is an is an investor with a
moderate risk profile want to invest a big amount on his money on the
right stock. Checking the background and the financial record of a
company are several things that he always do before deciding to invest
his money on certain stocks.
Currently Bambang has been considering on investing on Krakatau
Steels stock. What he knows is that this company is the largest steel
manufacturer in Southeast Asia. So he intends to do a background check
on the company. Bambang decides to compare it to the financial
performance of PT Gunawan Dianjaya Steel and PT Jaya Pari Steel as the
steel companies which were already settled in BEI before PT Krakatau
Steel.
II. Analysis
Bambang

wants

to

compare

PT

Krakatau

Steels

financial

performance to PT Gunawan Dianjaya Steel and PT Jaya Pari Steel as the

steel companies which were already settled in BEI before PT Krakatau
Steel. He use three analysis in this case, which are :
a. Trend analysis
For the trend analysis Bambang is going to use year 2007 2010
for the three steel companies (PT Krakatau Steel, PT Gunawan
Dianjaya Steel and PT Jayapari Steel). In this trend analysis
Bambang will compare the CAGR of Krakatau Steel to other two
local steel companies mentioned above.
Trend analysis use for analyze the company continuous growth,
the higher the growth rate, the better the stability of the companys
performance. In analyzing the performance trend of a company,
Bambang will use several ratios which can be classified into four
main aspects which
performance.

are revenue, return, market and debt

Revenue
Gross Profit
Margin
Operating
Profit Margin
Net Profit
Margin
COGS to
Revenue
Operating
Expenses to
Revenue
Market
Earnings per
share
Book value per
share
Return
Return on
Assets (ROA)

Krakatau Steel Tbk.

2007
2008
2009
2010
15.04
%

11.95%

13.16%

7.01%

5.34%

6.59%

0.15%

2.11%

2.23%

2.94%

88.09%

86.84%

92.99%

6.68
%
7.15
%
84.96
%

6.60%

6.57%

6.86%

8.36
%

Rp
31.00
2,537,
166

Rp
46.00
2,719,
881

Rp
39.00
2,902,
919

6.15%

Rp
81.00

Rp
38.02

589

N/A

2.82%

2.99%

3.87%

6.04
%

6.18%

8.45%

8.52%

11.43
%

Debt to Equity

118.79
%

181.94
%

119.69
%

Debt to Capital

54.30%

64.53%

44.25%

Return on
Equity (ROE)
Debt

Gunawan Dianjaya Steel

2007
2008 2009 2010
21.01 18.54
11.44 17.36
%
%
%
%
14.86 13.80
16.66 12.05
%
%
%
%
2.75
- 10.02
7.76%
% 9.14%
%
78.99 81.46
111.4 82.64
%
%
4%
%

87.78
%
46.75
%

4.73
%

5.22%

Rp
24.59

Rp
25.98

N/A

Rp 82

18.19
%

3.97
%

38.02
%

24.59
%

N/A

N/A

N/A

N/A

15.46
%
25.98
%
104.6
7%
51.14
%

2007

Jaya Pa
2008

16.17
%

15.75
%

12.82
%
9.60
%
83.83
%

13.42
%
6.71
%
84.25
%

5.31
%

3.35
%

2.32
%

Rp
20.91
Rp
79

Rp
55.42
Rp
295

Rp
65.54
Rp
360

15.95
%

15.46
%

12.31
%

20.91
%

55.41
%

65.54
%

66.42
%
39.91
%

21.84
%
17.92
%

48.03
%
32.45
%

GPM= (pendapatan bersih-beban pokok pendapatan )/ pendapatan bersih

=(14836019-13063417 ) / 14836019 = 11,95%
OPM= Laba rugi usaha / pendapatan bersih
=

CAGR
Krakatau
Steel

Gunawan
Dianjaya

Jayapari
Steel

Revenue ratio
Gross profit margin
Operating profit margin
Net profit margin
COGS to revenue
Operating expenses to revenue
Market ratio
Earning per share
Book value per share
Return ratio
Return on assets
Return on equity
Debt ratio
Debt to equity
Debt on capital

8%
8%
50%
-1%
8%

-6%
-6%
9%
2%
-5%

-7%
-11%
-12%
1%
5%

38%
-89%

-92%
-

-12%
11%

29%
23%

-4%
-

-24%
-21%

-10%
-5%

19%
15%

b. BUMN Financial Scoring

In BUMN Scoring Framework, performance of company is
based on three aspects, financial aspect which contributes 70% of
the

total

score,

Operational

and

administration

aspect

with

contribution of 15% each.

Krakatau

Gunawan

Steel
ratio
score
11.43

Dianjaya
ratio
score
26.64

Jaya Pari
ratio
score
9.31

Return on equity
Return on

%
11.29

16

%
30.44

20

%
13.37

14

investment

%
60.51

15

12

Cash ratio

%
177.29

1%
169.03

12%

Current ratio
Collection period
Inventory turnover
total asset

%
29.1
160.92

5
%
5
19.19
3 118.87

5
5
4

2.77
79.87
99.58

5
4.5
4

Criteria

turnover
total equity/total
asset
Rating

0.84
52.85

3.5

1.59

4.5

1.04

8.5
55
A

0.601

8
61.5
AA

0.73

7.5
53
A

(Healt
(Classification)

(Healt

(Healt

hy)

hy)

hy)

The table above presents the result of BUMN health Classification

using adjusted score for health classification. From the table above we
know that in the year of 2010, Krakatau Steel has a total score 55 which
classified as grade A that means that Krakatau Steel is a healthy company.
In the meantime, Gunawan Dianjaya Steel has a total score 61.5 Grade
AA , that means also a healthy company. Jaya Pari Steel has a total score
Grade A, that means also healthy company but the score is lesser than
Krakatau Steel. Gunawan Dianjaya is the most welfare company.
c. DuPont Formula
DuPont formula is a common model to measure a companys
financial performance. DuPont analysis calculates the ROE where in
business world it is one of the important ratios for investors since it
gives a brief look on how profitable the company to the investors
interest.
ROE is affected by three things:
1. Operating Efficiency (represented by the Profit Margin
Ratio)
2. Asset used

efficiency

(represented

by

Total

Asset

Turnover)
3. Financial Leverage (represented by the Equity multiplier)
KRAKAT

GUNAWA

AU

STEEL
11.43%
7.15%

DIANJAYA
26.64%
10.06%

9.31%
6.53%

TURNOVER
FINANCIAL

0.84

1.59

1.04

LEVERAGE

1.89

1.66

1.37

ROE
PROFIT MARGIN
TOTAL ASSET

JAYA PARI

From the calculation above, we know that Krakatau Steel have

ROE by 11,43% which is lower than Gunawan Dianjaya Steel. The
highest ROE based on the Dupont Analysis is Gunawan Dianjaya Steel.
A company with good ROE indicates that the company has good
financial performance. Gunawan Dianjaya Steel also manage their
asset better indicated by the turnover ratio and profit margin.

III.

Conclusion and Recommendation

3.1 Conclusion
By looking at the analysis result, our conclusions is:

Krakatau steels profit margin ratio (7,15%) is too small. Probably because
they had a lot of operating cost created by high debt interest or maybe
management inefficacy.

Total asset turnover at Krakatau steel is 84,49%. Its means that asset usage
efficiency to create revenue is the lowest compare to GD at 159,13% and JP
at 104,01%, the asset use is not efficient enough.

Equity multiplier (Leverage) at Krakatau steel is 2.89 the highest among

others, it indicate that the company have a lot of capital debt. Large debt
mean larger risk and interest to pay that can reduce companys profit.

3.2 Recommendation :
Based on our fundamental analysis we recommend that Bambang should
NOT make an investment at Krakatau Steel. First of all, Krakatau Steels ROE is
far from optimum value if compared with GD. This gap is showing management
inefficiency at KS part.
Even though BUMN Financial Framework states that Krakatau steel is a
healthy company, current KS management will make their performance declining
even more in the future. KS need to find and implement more efficient management
strategy especially for managing their assets. However, assuming that they will
continue with current management and management system, its hard for them to
prevail in the future.
Second, the financial leverage for Krakatau steel at 1.89 is too high. It
indicates that this company has a lot of debt, now the question is how the company
can pay dividend to investors if they do have small ROE and a lot of debt? The

answer is they cannot. And if the investor didnt get dividend most probably they will
withdraw their investment that will cause the company to decline or even collapse.