A financial performance analysis of bundura nickel ltd by mr lenon watambwa (2019) abstract
Analysis of BNC Capital Structure
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| Analysis of BNC Capital Structure: BNC capital structure is made up of Equity and Liabilities amounted to USD98.5m, USD96.23m and USD106m from 2016, 2017 and 2018 representing 11% growth in assets over the three years under review. Of this total capital employed 40%, 42% and 43% from 2016 to 2018 was financed by shareholders through issuance of shares and retained earnings. The remainder was financed through debt as follows Debt financing 2016 2017 2018 Average Long term/Capital 26% 27% 26% 26% Electronic copy available at https://ssrn.com/abstract=3521211 29 Short term/Capital 34% 32% 31% 32% Debt/Asset ratio 60% 58% 57% 58% Debt/Equity ratio 1.48 1.39 1.32 1.4 Retained earnings/Equity 18% 20% 30% 23% From the table above, in 2016, 60% of capital employed was through debt of which 26% was long term whilst 34% was short term debt financed mainly through a bank overdraft facility taken from local financial institution. At an average of 58% debt to equity ratio implies that capital at BNC is largely through debt financing. SWOT Analysis Strengths: o Strong Safety, Health, Environment and Quality programmes resulting in strong results o Strong cost cutting measures in place resulting in costs going down by 6%. o Good company employee relations high motivation and skills retention. o Sales growing by 18% Financial Year 2018. o Board diversity and good corporate governance practices. Weaknesses o Poor funding prospects for the shaft re- deepening project o Negative working capital in 2017 o Going concern threatened i) High power costs ii) High dependency on overdraft iii) Delays in completion of smelter project Opportunities o Increased international demand if the Philippines are restricted o Growth in global prices by tonne o London Metal Exchange cash settlement rose by 29% o World decline in the production of ore o High prospects of demand due to i) Growth in the Chinese stainless steel market ii) Growth in the use of nickel in batteries iii) Chinese production cut down o Huge mineral base o Compound minerals Threats o Unclear mining bill or act indigenisation o Existing threats to investment property rights) o General macroeconomic challenges o Currency challenges Given the opportunities According to the Zimbabwe Geological Survey, the country has got huge potential in komatiite and laterite and more than 30 nickel deposits are known Using Electronic copy available at https://ssrn.com/abstract=3521211 30 advanced SWOT model to identify the most significant factors of the analysis from all the items listed. The identified or highlighted strengths, weakness, opportunities and threats shall be prioritized. Prioritization The strengths and weaknesses are evaluated on 3 categories as follows Download 1.23 Mb. Share with your friends:
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