Financial Analysis of Steel Industry - Arcelormittal and Us Steel Essay Example for Free

Financial Analysis of Steel Industry Arcelormittal and Us Steel Essay Stock Evaluation Project Steel Industry Industry Analysis Steel is a part of metals and mining industry which is highly cyclical in nature, and when the economy at large suffers, this industry suffers with it. The most recent five years have been a struggle for this particular industry along with uncertain economic indicators, and steel companies’ stocks have trended downwards. The metals and mining industry is comprised of companies that engage in exploration, mine development, and ore mining. The industry includes precious metals mining for metals such as gold, silver, platinum as well as mining and processing industrial metals such as steel, copper, aluminum. The industry is mature, cyclical, capital intensive and dominated by large companies. Some of the major names in the Steel Sector of this industry are Commercial Metals (CMC), Steel Dynamics (STLD), Reliance Steel (RS), AK Steel (AKS), ArcelorMittal (MT), U.S.Steel (X). The US steel industry is currently worth more than $50 billion with annual growth rates around 1% to 2%. Process chains are long with high production volumes. Recently, large quantities of low-cost imports have impeded growth. However, the industry has seen enhanced productivity, energy efficiency, and higher yield due to restructuring, downsizing, and widespread implementation of new technologies. In the coming years, overcapacity and price instability may remain critical. Thereby, efficient production, better-suited products, enhanced capacity utilization and environmentally friendly practices are vital factors to future success. Demand comes from transportation, packaging, consumer electronics, construction, aerospace and power companies, which leads industry, overtly responsive to economic conditions. Companies are responding to pricing pressures through consolidation and vertical integration, which is aimed at streamlining the supply chain. Future growth for the US metals and mining industry also depends upon demand from BRIC nations, developing countries, and domestic consumers. The industry has always faced a number of challenges including environmental concerns, deteriorating ore grades, overproduction, technological changes, and the global economy. Intense competition from nations such as Canada, Russia, China and Mexico pose threats to the US mining industry because those nations have lower labor costs, lax  environmental regulations and lower operating costs. Sustainability of high prices, resurgent global demand, particularly from the Asia-Pacific region, and signs of increasing industrial output across Europe and the United States may boost industry performance. Conclusively, in anticipation of J-curve yield in the industry index, we can expect greater demand in near future due to a combination of rising GDP, another increase in auto sales, and inventory accumulation by distributors, which would further lead to an increase in the volume of steel shipped in 2013. In the Figure 1.1 below, one could clearly see the downward trend of the Dow Jones US Steel Index for the last five years. And as we all know, what goes down comes back up therefore, we must rebalance our portfolios along with this cyclicality. Figure 1.1 Dow Jones US Steel Index (Point and Figure Chart) U.S.Steel (X) United States Steel was founded in 1901 and is headquartered in Pittsburgh, Pennsylvania. United States Steel Corporation, through its subsidiaries, engages in the production and sale of steel products primarily in North America and Europe. The company has gone through a business cycle in the past 10 years and currently at its low yet a stable condition. This is due to several reasons, which are explained clearly by the ratios and the Z-score, as plotted by the help of Altman Z’s Model. The companys liquidity has been fairly stable besides the times of 2008-2009 financial crises. If we smooth out an average for turnover measure, we could also conclude that the company’s management is doing fairly well in using the assets. Financial Leverage measure seems to be the only component affecting the Altman Z Score significantly, inflicting a bias in the usage of the model to solely depend on this method of deriving the company health. Also, if we draw a line at 2.0 ratio level, there is a bubble growth in the Z-score during 2005 and 2008, as shown in the figure 1.2 below. Figure 1.2 Altman Z-score Model for U.S.Steel ArcelorMittal (MT) ArcelorMittal engages in the production and marketing of finished and semi-finished carbon steel and stainless steel products worldwide. The company serves automotive, appliance, engineering, construction, energy, and machinery industries. The company, formerly known as Mittal Steel Company N.V., was founded in 1989 and is headquartered in Luxembourg, Luxembourg. The stock performance has been quite interesting for this company over past 10-12 years. From $0.63/per share in 2001 to the highs of $97 just prior to its downfall, to $12/share approx. after 12 years, tells us a lot about the business cycle of steel sector. As plotted by the ratios derived by Altman Z-Score model below, it is very clear that besides Turnover and Financial Leverage ratios, no other ratio changed significantly in last 10 years and the company stock performed rationally if we consider business cycle but irrationally, if we consider the all other financial measures. Again the spike in the Z-score in the early 2000s reflects the spike in Financial Leverage of the company. However, at this point in time, the company looks as in congruence to the low levels of the industry, yet healthy and we could anticipate an upcoming up-trend in its performance. Figure 1.3 Altman Z-Score model for ArcelorMittal

Maquiladoras & NAFTA Essay -- essays research papers

MAQUILADORAS AND THE NAFTA'S IMPACT: Introduction In this paper I will discuss the history and practices of the Maquiladora industry. I will discuss its background, its problems, the benefits it offers to United States companies, and the impact the NAFTA has and will have on the industry. In addition, I will make a suggestion on a possible strategy the Maquiladoras can adopt in order to address the challenges brought on by the NAFTA, to ensure it remains a strong force in the future. Background Mexican agricultural workers had been granted temporary work visas allowing them to work in the United States' agricultural industries through a program called the Bracero Program until 1965 when this program was terminated. As a result of this termination, the unemployment rate had exceeded 70% in certain border cities. In May of 1965 the Border Industrialization Program was established as a replacement for the Bracero program. It was later renamed the Maquiladora Program. The program was established by the Mexican government to provide employment for Mexico's rapidly growing population along its border with the United States. This Program was utilized to keep Mexicans from entering the United States. The idea was that Mexican workers would be kept on the Mexican side of the border if they were given factory jobs on the Mexican side. The Maquiladora program also wanted to attract foreign manufacturing facilities, technology, and know-how by giving a permanent tax holiday to manufact uring companies that would set up "twin plants" on the Mexican side of the border. In the beginning of the program, all foreign-owned operations had to be located within a 20-kilometer strip along the US-Mexican border. Since 1972 they can be located anywhere in Mexico. In 1996 there were around 2,500 Maquiladoras - 35% of them were located in the interior states of Mexico. Last year there were over 3,000 and more and more of these operations are being located outside of the border regions. Each of Mexico's 31 states has at least one Maquiladora. What is a Maquiladora? Maquiladoras, also referred to as "in bond" or "twin" plants, are allowed to temporarily import into Mexico (free of tax) machinery, equipment, replacement parts, raw materials, and just about anything that was used in the assembly or manufacture of semi-finished or finished products... ...on between the non-Maquiladora and Maquiladora industries I feel the inefficient producers will be wiped out. Therefor, Maquiladora employees will need better training, education, incentives as well improved working conditions and higher wages. Operations will also have to be streamlined in order to reap the benefits of economies of scale and scope. In addition, Mexicans as well as US citizens will start to demand more accountability from the Mexican government and the Maquiladora industry. They need to be more responsible for their actions. What will the U.S. corporations do when human rights activists and environmentalists start lobbying and protesting on their US sites? Do they want to risk losing their shareholders to this type of negative attention? References Benitez, Gerardo, Latin American Perspectives: The Maquiladora Program Its Challenges Ahead, THE WHARTON JOURNAL, December 11, 1995. Clifford, Frank and Mary Beth Sheridan, Borderline Efforts on Pollution, THE LOS ANGELES TIMES, June 30, 1997, 1. Naumann, Ann K. and Mireille Hutchinson, The Integration of Women into the Mexican Labor Force Since NAFTA THE AMERICAN BEHAVIORAL SCIENTIST, June/July 1997, 950-956.

Construct the Efficient Frontier

Construction a. Estimation The goal is to obtain the raw ingredients – expected returns, standard deviations and correlations. Historical data are used for this purpose. As a rule of thumb, five years of daily data are probably right (one year should be the absolute minimum). Keep in mind the following: 1) make sure to use the adjusted close prices to calculate returns (so that you won’t have large, spurious negative returns due to dividend payments or splits), and 2) calculate log returns (so that you can aggregate daily returns to obtain holding period returns, if ever needed).In Excel, the function for mean and standard deviation are â€Å"= average (range)† and â€Å"stdev(range). † To calculate the correlation matrix, use â€Å"correlation† under â€Å"data analysis. † Please note, in practice, the estimates can be adjusted in view of economic outlooks. This is especially so for expected returns. Sometimes, the realized historical return s are negative or below the risk-free rate. They must be adjusted upward – who would ever buy a stock and expect to receive a return less than the risk-free rate (if the beta is not negative)!? II.Efficient frontier construction Step 1. Variance/covariance matrix, The expected return and variance for the portfolio are: You can think of the variance as the â€Å"weighted average† of all the covariances, ? i? j? ij where the weights are xi and xj. Of course, the variance terms are special cases of the covariances when i=j, and ? ij=1. You can calculate the portfolio variance in the spreadsheet in many different ways. The way I do it is to first calculate the variance/covariance matrix, whose entries are ? i? j? ij and ? i2. To this end, we first construct the tandard deviation (std) matrix and the correlation matrix, as shown in the spreadsheet. Then, first multiple the std matrix to the correlation matrix to obtain (multiply the range of b3.. g8 to the range of b10.. g15). Then, multiple matrix to the std matrix again (multiply the range of b17.. g22 to the range of b3.. g8) to obtain the variance/covariance matrix in b24.. g29. Step 2. Portfolio's return, variance, standard deviation and slope To obtain the portfolio variance, we need to further multiply each entry of the variance/covariance matrix by their corresponding weights, xi and xj.Remember, those n portfolio weights are what we are trying to solve for. So we put them in a column (a34.. a39). To facilitate the calculations, I also place the weights at the top of the matrix. The variance/covariance matrix is simply copied from Step 1. Since we will also need the security returns to calculate the portfolio return, they are placed in j33.. j39. Now, we multiply the weights to each column of the variance/covariance matrix using the function â€Å"=sumproduct. † This â€Å"sumproduct† results in each weight in (a34.. 39) being multiplied to each entry in the variance/covarian ce column, and then all summed up. The variance/covariance terms will have only one weight being multiplied to. So we need to multiply this sum by another weight at the top of the matrix (remember: multiplying the sum by something is equivalent to multiplying each individual item by the same thing). Summing all the items in b40.. g40, we obtain the portfolio’s variance, and taking square root of it, we have its standard deviation, in cell b45. The portfolio’s return in b44 is calculated as the weighted average of individual security returns.The slope of the CML is simply the rise (i. e. , portfolio’s return minus the risk-free rate) over run (i. e. , the portfolio’s std). Step 3. Obtain minimum variance portfolio: minimize STD subject to sum of weight = 1. 0 The minimum variance portfolio is the one that has the lowest variance among all possible portfolios. We use the â€Å"Solver† in Excel to find this portfolio. We would like to vary the weights in a34.. a39 so that the variance (or equivalently, std in cell b45) is minimized. In the â€Å"Solver,† enter b45 as the target, and choose â€Å"min. The range for â€Å"Changing cells† should be a34.. a39. The only constraint is: all the weights sum to one, i. e. , set cell b42 equal to 1. 0. Then simply click on â€Å"solve. † The solutions will be in a34.. a39. Of course, the portfolio’s return and std are simultaneously calculated in cells b44 and b45, and the slope linking the portfolio and the T-bill is in cell b46. Step 4. Obtain market portfolio: maximize Slope subject to sum of weight = 1. 0 Follow the same logic/procedure as in Step 3, except that you want to maximize cell b46. Step 5.Obtain market portfolio with no short selling: maximize Slope subject to sum of weights = 1. 0 and all weight being positive This part is just for completeness: to show you how to construct the market portfolio when short selling is prohibited. Here you also ma ximize cell b46, except that, aside from the weights-summing-to-one constraint, you would add six more constraints: a34 ;gt; 0, a35 ;gt; 0, †¦, a39 ;gt; 0. It turns out that, the weights on Securities 2 and 3 are zero, since they command the most amount of short selling in the unconstrained case (Step 4).However, it is not always true that any security that is being shorted in the unconstrained case will have a weight of zero in the constrained case. Security 5 is a case in point. Step 6. Generating efficient frontier Here, everything is already self-explanatory. Essentially, we need to plot the parabola and the CML. To this end, we first get the functions for each, and then use Excel to generate some points (50 in my example) within the reasonable range of returns and std.

How to Learn Multiplication Timestables in 21 Days

Lets face it, when you dont know your times tables, it slows down your progress in math. Some things you just have to know and committing the times tables to memory is one of them. Today, were in an information age, information is doubling faster than it ever used to and our math teachers no longer have the luxury of assisting us to learn the times tables. In case you havent noticed, the math curriculum is much larger than it ever was. Students and parents are now left with the task of helping to commit the times tables to memory. So lets get started: Step 1 First of all, you will need to be able to skip count or count by a certain number. For instance 2,4,6,8,10 or 5, 10, 15, 20, 25. Now you will need to use your fingers and  skip counting. Remember back in grade 1 when you used to use your fingers to count to 10? Now youll need them to skip-count. For example, use your fingers to count by 10. First finger or thumb is 10, second is 20, third is 30. Therefore 1 x 10 10, 2 x 10 20 and so on and so forth. Why use your fingers? Because its an effective strategy. Any strategy that improves speed with your tables is worth using! Step 2 How many skip counting patterns do you know? Probably the 2s, 5s and 10s. Practice tapping these out on your fingers. Step 3 Now youre ready for the doubles. Once you learn the doubles, you have the counting up strategy. For instance, if you know that 7 x 7 49, then youll count up 7 more to quickly determine that 7 x 8 56. Once again, effective strategies are almost as good as memorizing your facts. Remember, you already know the 2s, 5s and 10s. Now you need to concentrate on 3x3, 4x4, 6x6, 7x7, 8x8 and 9x9. Thats only committing 6 facts to memory! Youre three-quarters of the way there. If you memorize those doubles, youll have an effective strategy to quickly obtain most of the remaining facts! Step 4 Not counting the doubles, you have the 3s, 4s, 6s, 7s and 8s. Once you know what 6x7 is, youll also know what 7x6 is. For the remaining facts (and there arent many) you will want to learn by skip-counting, in fact, use a familiar tune while skip counting! Remember to tap your fingers (just as you did when  counting) each time you skip count, this enables you to know which fact youre on. When skip counting by 4s and when youve tapped on the fourth finger, youll know that its the 4x416 fact. Think of Mary Had A Little Lamb in your mind. Now apply 4,8, 12, 16, (Mary had a....)and continue on! Once youve learned to skip-count by 4s as easily as you can by 2s, youre ready for the next fact family. Dont worry if you forget the odd one, you will be able to fall back on your doubling strategy and counting up. Remember, being able to do math well means having great strategies. The above strategies will help you learn the times tables. However, you will need to commit daily time to these strategies to learn your tables in 21 days. Try some of the following: Each day when you wake up, skip count the fact family youre working on.Each time you walk through a doorway, skip count again (silently)Each time you use the washroom, skip count!Each time the phone rings, skip count!During every commercial when youre watching TV, skip count! When you go to bed each night, skip count for 5 minutes.If you stick it out, youll have your tables memorized in 21 days!Here are a few multiplication tricks to help you. Try these worksheets which are developed to correspond to the correct way of learning your multiplication tables.