Financial Analysis of CSR Ltd: Ownership, Governance, and Performance

This report provides a financial analysis of CSR Ltd, focusing on ownership and governance structure, significant shareholders, and financial performance. It includes calculations of fundamental ratios related to profitability, solvency, and efficiency, as well as a graphical representation of share price movement and significant announcements that influenced share price. The report concludes with a letter of recommendation for investment prospects.

Running head: ACCOUNTING FOR BUSINESS MASTERS
Accounting for Business Masters
Name of the Student:
Name of the University:
Author’s Note

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Table of Contents
Introduction:....................................................................................................................................3
Overview of the Company...............................................................................................................3
Ownership and Governance Structure:............................................................................................4
Substantial Shareholders:.............................................................................................................4
People involved in the governance of TPG Telecom Ltd Board:................................................5
Calculations of the Fundamental Ratios:.........................................................................................6
Liquid Ratios:..............................................................................................................................6
Financial Leverage Ratios...........................................................................................................7
Efficiency Ratios.........................................................................................................................7
Profitability Ratios:......................................................................................................................8
Market Value Ratios....................................................................................................................8
Graphical representation of movement in Share Price:...................................................................9
Movement in CSR Ltd Share Price Index to All Orders Index...................................................9
Significant Announcement that Influenced Share price of CSR Ltd.........................................10
Calculation of Beta and Required Rate of Return under CAPM:..................................................13
Calculation of Beta for CSK Ltd...............................................................................................13
Explanation behind Conservative Investment...........................................................................13
Calculations of Weighted Average of Cost of Capital..................................................................14
Debt ratio...................................................................................................................................15

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Dividend Policy of the Business....................................................................................................16
Letter of Recommendation............................................................................................................17
Reference.......................................................................................................................................18

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Introduction:
The main purpose of this report is to analyze the financial statements of CSR ltd. The
report will be focusing on the current financial position of CSR ltd so as to provide a means for
the shareholders to take effective decisions regarding investments. The report will be analyzing
the financial statement of CSR ltd so as to understand the corporate governance policies of the
business and also the ownership structure of the business (Tallon 2013). The report will also be
including calculations of significant ratios which are related to profitability, solvency and
efficiency of the company so as to have a basic understanding of the viability of the business.
A graphical representation of the shares prices of the company will be carried out and the
same will be compared against the all ordinary index to understand the movement in the share
prices over the years. In addition to this, emphasis will be provided on the debt structure of the
business along with the dividend policy of the business (Travlos, Trigeorgis and Vafeas 2015).
The report will be concluding with a letter of recommendations which will be including
significant recommendations regarding investments prospects in the company.
Overview of the Company
CSR limited is considered to be one of the major Australian company which is engaged
in the business of producing building products for the business. The head quarter of the company
is situated in Sydney, Australia. The company is listed in Australian stock exchange. The
company had started off as a sugar refining company as the colonial Sugar Refining Company
and the company expanded its business into milling of sugarcane business (Corporate. 2018).
The company in no time became one of the most important miller and refiner in Australia. With
a further view to diversify the business of the company the company moved to manufacture of

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building materials as early as 1942. The business acquired Bradford Insulation in 1959 which
was engaged in the manufacture of heart insulation materials for buildings and the company
established insulation business in China, Thailand, Malaysia. The other products of the company
which the business manufactures are cement sheeting, aerated concrete products, bricks and
system tom support plasterboard.
The company has performed excellently in terms of financial performance which is
depicted in the financial statements of the business for the year 2017. As per the chairman’s
report the business is has achieved growth for the continuous for four years including the
currentnyears performance of the business.
Ownership and Governance Structure:
Substantial Shareholders:
There are two substantial shareholders of the company as per the financial statements of the
business. The table which is presented below shows the shareholders of the company:
Name of the Shareholders Total number of Ordinary
shares held
Total percentage of the
capital held
HSBC Custody Nominees
(Australia) Limited
161,695,116 32.05%
J P Morgan Nominees
Australia Limited
81,826,711 16.22%
Citicorp Nominees Pty
Limited
53,131,022 10.53%

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National Nominees Limited 28,266,912 5.60%
The tabular representation which is shown above show that the substantial shareholder of
the business is HSBC custody Nominee (Australia) which holds more than 20% shares of the
business. The JP Morgan Nominee is shown to possess around 16.22% shares of the company
(Lim, How and Verhoeven 2014). In addition to this, there are tow shareholders of the business
which holds more than 5% shares which are Citicorp Nominees Pty Limited and National
Nominees Limited. CSR ltd can be considered to be a family company for HSBC Custody
Nominees (Australia) Limited as the company holds around 32.05% shares of the business.
People involved in the governance of TPG Telecom Ltd Board:
The structure of the board for CSR ltd is made up of both executive and non-executive
directors of the business along with the chairman for the business. The management of the
business is made up of the directors, chairman and the chief financial officers of the business.
Name Position Held
NON-EXECUTIVE DIRECTORS
Jeremy Sutcliffe Chairman
Christine Holman Director
Michael Ihlein Director
Rebecca McGrath Director
Matthew Quinn Director
Penny Winn Director
EXECUTIVE DIRECTORS
Rob Sindel Managing Director

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David Fallu Chief Financial Officer
Greg Barnes Chief Financial Officer
The above table shows the board of directors of CSR ltd and the classification as well
between the executive and non-executive directors of the business. The directors of the company
do not hold any shares of the company as per the financial statements of the company for the
year 2017. Therefore, it can be said judging by the directors not holding any shares in the
business, the company is not managed by any family member and such do not have a role in the
corporate management of the business.
Calculations of the Fundamental Ratios:
Liquid Ratios:
Liquidity Ratios:
Particulars` 2017 2016
$ $
Current Assets A 736.4 785.7
Current Liabilities B 513.6 488.8
Inventory C 385.7 348.8
Prepayments & Other Assets D 13.1 11.0
Cash & Cash equivalents E 19.1 73.1
Current Ratio F=A/B 1.43 1.61
Quick Ratio G=(A-C-D)/B 0.66 0.87
Cash Ratio H=E/B 0.04 0.15
Figure 1: (Table showing Profitability Ratio)
Source: (Created by the Author)

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Financial Leverage Ratios
Financial Leverage Ratio:
Particulars` 2017 2016
$m $m
Total Assets A 2097.1 2215.8
Total Equity B 1206.5 1317.2
Total Liabilities C 890.6 898.6
Debt-to-Equity Ratio D=C/B 0.74 0.68
Debt Ratio E=C/A 0.42 0.41
Equity Ratio F=B/A 0.58 0.59
Figure 2: (Table showing Financial Leverage Ratio)
Source: (Created by the Author)
Efficiency Ratios
Efficiency Ratio:
Particulars` 2017 2016
$m $m
Total Assets A 2097.1 2215.8
Fixed Assets B 1360.7 1430.1
Revenue C 2468.3 2298.8
Trade & Other Receivables D 312.1 319.6
Total Asset Turnover Ratio E=C/A 1.18 1.04
Fixed Asset Turnover Ratio F=C/B 1.81 1.61
Receivables Turnover Ratio G=C/D 0.13 0.14
Figure 3: (Table showing Efficiency Ratio)
Source: (Created by the Author)

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Profitability Ratios:
Profitability Ratios:
Particulars` 2017 2016
$M $M
Profit for the year A 205.1 169.3
Revenue B 2468.3 2298.8
Total Assets C 2097.1 2215.8
Total Equity D 1206.5 1317.2
Net Profit Margin E= A/B 8.31% 7.36%
Return on Equity (ROE) F=A/D 17.00% 12.85%
Return on Assets G=A/C 9.78% 7.64%
Figure 4: (Table showing Profitability Ratio)
Source: (Created by the Author)
Market Value Ratios
Market Value Ratio:
Particulars` 2017 2016
Earning per Share A 0.353 0.282
Dividend per Share B 0.26 0.24
Market Value per Share C 4.23 3.6
Dividend Payout Raio D=B/A 73.65% 83.33%
Dividend Yield Rate E=B/C 6.15% 6.46%
Price-to-Earning Ratio F=C/A 11.98 12.91
Figure 5: (Table showing Market Value Ratio)
Source: (Created by the Author)

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Graphical representation of movement in Share Price:
12/1/2015
1/1/2016
2/1/2016
3/1/2016
4/1/2016
5/1/2016
6/1/2016
7/1/2016
8/1/2016
9/1/2016
10/1/2016
11/1/2016
12/1/2016
1/1/2017
2/1/2017
3/1/2017
4/1/2017
5/1/2017
6/1/2017
7/1/2017
8/1/2017
9/1/2017
10/1/2017
11/1/2017
12/1/2017
-20.00%
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
Stock Returns
CSR Limited All Ord Index
Figure 6: (Graphical Presentation showing Stock fluctuation in comparison to All Ordinary
Index)
Source: (Created by the Author)
Movement in CSR Ltd Share Price Index to All Orders Index
The movement in the share price of the business is plotted in the graph above in order to
show changes in the shares prices due with respect to changes in the all ordinary index. The
graph portrays that the share price of the company has fluctuated in the two years period which is
shown in the graph above. As per the graph the share price line has against started to go up from
1.10.17 and is shown to be on an increasing trend. The share price has mostly been above the all
ordinary index line (Pozzi, Di Matteo and Aste 2013). There is a period between 1st December
2015 and 1st April 2016 where the share price of the company is above all ordinary stock index
line. Then there is a period of 1st July 2016 when there is a sharp fall in the share prices of the
business and the share price line falls below the all ordinary index line. There has been a as high

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as 16-17% change which is depicted in share price line in comparison to all ordinary index line
in the month of August 2017 and this represents the highest point in the graph as portrayed and
plotted. The lowest point which can be identified is when the share prices of the business fall and
the same is shown in the graph as -15% fall in the month of April 2017.
The graphical movement of stock prices which is depicted in the graph above of CSR ltd
shows that the fluctuation in prices are on a random basis which suggest that the stock is volatile
in nature. This can be one of the reasons due to which the shares prices of the business has fallen
on certain occasions. The movement in the stock prices suggest that the stocks of the business
are undervalued considering the future cash flow expectations of the business.
Significant Announcement that Influenced Share price of CSR Ltd
CSR ltd is engaged in producing building materials for the business and the company has
been performing well in financial terms. In addition to this, the financial statements of the
business reveal that the company is in its growing phase and has been able to achieve continuous
growth in profitability and revenue generation for a continuous period of four years. However,
the business has faced the fall in the stocks prices of the company in spite of better performance
from the business.
In March 2017, CSR ltd announced that the company was entering into an agreement
with the Federal Government of Australia for a project for which the government has sanctioned
a grant which is worth $ 3 million as per the estimation. The project is about innovation and
development of Australian first high-performance building façade system. This resulted in rise in
the stock prices of the business and the investors were willing to invest more in the stock prices
of the company as the government was involved in the project and as they had approved the

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grant this surely meant that the project was an important one which could lead to development of
the buildings in Australia. In addition to this, the company enjoy positive responses from the
general investors as the government trusted the company with an important project. Therefore,
there was an increase in the stock prices of the business as the investors wanted to be a part of
the growth which the business would be able to achieve when the project was completed. This is
evident from the graph which is shown in figure 6 where the stock prices of the business have
increased in the month of March 2017. Moreover, the management of the CSR ltd also
responded that such a project is quite innovative in nature and the business will greatly benefit
from such a project. In addition to this, it is estimated when the project is completed than such
will make the construction market in Australia competitive against the global manufacturers and
reduce the overall costs for the range of products.
There have also been significant changes in the share prices of the business which is due
to the regular commitment of the business in corporate social responsibility of the business. The
business has been committed towards ensuring that the activities of the business do not harm the
environment or society as a whole. The policies of the business is focused towards sustainable
development and only those activities are undertaken which are considered to be sustainable in
nature. The management of the company follows a sustainability program which is published
along with the financial statements of the business. The sustainability report shows the
commitment of the business towards sustainable practices and saving the environment and at the
same time pursuing the goals of the business. The sustainability report of the company focuses
on issues such as greenhouse gas emissions, energy consumption and water and waste
management. These are the areas which can be affect an environment. The policies of the
business creates an awareness and a positive image of the company in the mind of the general

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people and naturally the company is rewarded with higher share prices as shown in figure 6 as
well. Moreover, the new project which the company has received from the government will be
requiring quite significant employees for which recruitment will be made. This will result in
employment generation and the country will be benefiting from such a project. In addition to
this, this will also develop skills in the workers and the overall efficiency of the business is likely
to increase.
In the month of April 2017 there was an announcement made which stated that the
management of CSR ltd was intending on selling the Monier Roofing Rosehill site where the
business was engaged in manufacturing activities. The management reasoned that the property
was sold off to facilitate better services to the customers as the business was looking for a
potential replacement of the site in New South Wales area of Australia. This might be one of the
reasons fro the fall in the prices of shares which is noticeable in figure 6 after the month of April.
The sale o a working and functioning site is not a favorable sign from the view point of the
investors and therefore there is a fall in the share prices of the business.
Another factor which may have impacted the share price of the business is the level of
competition which the company faces from the potential competitors in the industry. The market
always has been pretty much competitive in nature and in addition to this, the global construction
manufacturers are also entering the market which further makes the level of competition in the
market intense (Boons et al. 2013). The competitors make the market conditions intense and
attracts the investors and customers with different sort of strategies which are followed by such
businesses.

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Calculation of Beta and Required Rate of Return under CAPM:
Calculation of Beta for CSK Ltd
Particulars Amount
Beta of the company A 1.07
Risk Free Rate B 4%
Market Risk Premium C 6%
Required Rate of Return D=B+[AxC] 10.42%
Figure 7: (Table showing Calculation of Required rate of return for CSR ltd)
Source: (Created by the Author)
The beta of the company as per the calculated figure for CSR ltd is shown in the table
above is shown to be 1.95 (Johnstone 2016).
The above table shows that the calculation of return rate of return for the business. The
calculated required return is shown to be 10.42% and the risk-free rate of return is shown to be
4% and the market risk premium is shown to be 6%.
Explanation behind Conservative Investment
The rationale for making the investment in the CSR ltd is because the company has better
earnings in comparison to other business which are present in the industry. The return on
earnings of the business is also appropriate as shown in the calculations above (Eisdorfer,
Giaccotto and White 2013). In addition to this, the company has been achieving growth for the
last four years consecutively and the net profit of the business has increased tremendously from
the previous year’s estimate as shown in the profit and loss account of the business for the year
2017 (Mwangi, Muathe and Kosimbei 2014).

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Another factors which can be considered for estimating the rational for investment is that
the company is developing which is shown in the growth of business and profitability during the
year 2017. There has been an 8% increase in the EBIT of the business from the previous year’s
estimate. The net profit after tax for the business has also increased from the previous year and
the growth in the net profit after tax as shown in the financial statements of the business is
around 11% (Summers 2014). The earning per shares of the business is also shown to be
appropriate which is shown to be 36.5 cents per share.
Calculations of Weighted Average of Cost of Capital
Particulars Amount Weightage Cost
Return
Rate
Tax
Rate WACC
Total Long Term Debt 30.5 2.47% 3.4 11.15% 30.00% 0.19%
Total Equity 1207 97.53% 10.42% 10.16%
TOTAL 1237 100% 10.36%
Figure 8: (Table showing Calculation of Weighted Average Cost of Capital for CSR ltd)
Source: (Created by the Author)
As per the above table, the calculations for weighted average cost of capital is shown
which is shown to be 12.63%. The WACC of the company is an aggregate of the cost of equity
and cost debt and the weightage for the same is also considered. In case a business has a higher
WACC signifies that the level of risks which the business faces is high. Such risk is associated
with the operations of the organization (Hann, Ogneva and Ozbas 2013). The WACC of the
business is considered to be an important tool for estimating the expected cost which is involved
in financing the overall resources of the business (Frank and Shen 2016). The cost of equity is
shown in the above table as 10.42% and the cost of debt which is shown in the table above shows

15ACCOUNTING FOR BUSINESS MASTERS
11.15% as the cost of debt of the business. The computation of cost of debt considers the total
debt which the business has undertaken for the period.
Alternative definition of WACC states that it is the measure of the expenditure which the
business needs to incur for the purpose of raising one added dollar of money. The WACC of the
business reflects the level of risks which the business faces and it is always suggested that the
business needs to keep the overall cost of capital at a minimum (Cheynel 2013). This can be
done by formulating an appropriate capital structure for the business and attaining a balance
between the equity share capital and debt capital of the business (Brotherson et al. 2015).
Debt ratio
Debt ratio of the business refers to the financial leverage of the business that is the debt
which is employed by the business. The ratio shows relation between total debts of the business
to the total assets of the business (Pescatori, Sandri and Simon 2014). The debt ratio of the
business is shown to be 0.42 for the year 2017 and the same is shown to be 0.41 for the year
2016. The debt rati0o has slightly increased which suggest that the debts which are employed by
the business has increased from the previous year (Obradovich and Gill 2013). The financial
statement of the business reveals the key measures for the business performance which includes
capital gearing ratio which proves that the business has taken loan during the year and the capital
gearing ratio is shown as 0.9 for the year 2017 whereas the same was not applicable in the 2016.
The level of debts which is taken by the business as per the five years performance
statement which is provided in the financial statement of the CSR ltd shows that the business has
only taken a loan in 2017 which is of $ 11.4 million. The interest for the same is also paid as per
the financial statement of the business.

16ACCOUNTING FOR BUSINESS MASTERS
Dividend Policy of the Business
The dividend per share which is paid by the business during 2017 as shown in the five
years performance statement prepared by the business is 26 cents per share which has increased
from the previous year’s estimate which was 23.5. The dividend payout ratio of the company is
more or less same as per the financial statement of the company (Masum 2014). The board of
directors is committed towards fulfilling the needs of the shareholders of the company. The
company has declared a dividend of 13% due to the overall increase in the profits of the business
as shown in the notes to accounts part of the financial statement (Bradford, Chen and Zhu 2013).

17ACCOUNTING FOR BUSINESS MASTERS
Letter of Recommendation
To ABC
Sydney Australia
Dear Sir,
This letter is written with the intention of informing you about the performance of CSR
ltd and also to recommended to you whether you should invest in the shares of the company or
not. The share price of the company is gradually rising but still the same is comparatively
cheaper. This would be a great time for purchasing the shares of the company as the share price
is on the rise and the investors will be able to trade and make profits from the same.
In addition to this, the net profit of the business has grown by 11% which suggest that the
company can be a fruitful investment for future as the share price is anticipated to rise further.
Moreover, the company has offered an attractive dividend during the year of 13 % which shows
the intention of the company and the management plans to do the same in coming years. We
expect that you will invest in the company.
Thank you.

18ACCOUNTING FOR BUSINESS MASTERS
Reference
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models and economic performance: an overview. Journal of Cleaner Production, 45, pp.1-8.
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19ACCOUNTING FOR BUSINESS MASTERS
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