Deltic Timber Corporation Credit Analysis Research Paper

Deltic Timber Corporation Credit Analysis - Research Paper Example In line with this, it is recommended for the company to take up proactive strategic management options that will push its fortunes higher, especially when it comes to dealings with competitors. Currently, the company finds itself in a business environment where talks of monopoly are far from the argument. Due to this, the greatest hindrance faced by the company has been found to be that of the creation of a competitive advantage. Using a strategic management option that will make the company the focus of customers is thus the saving path for the company in years to come. Indicative with the ratios of the company given in the paper, it would be realised that the company continue to have high debt financing, which creates a decline for profit utilisation. This means that even though revenues are high, these are hardly translated into profits because of higher debts and other expenses. 1.0 Organizational Overview Listed on the New York Stock Excahnge, Deltic Timber Corporation engages i n forestry industry where its major activities include the ownership and management of timberland. The specialisation that the company gives to this venture has resulted in the useful management of 445,800 acres of timberland over the past years. As a means of gaining diversification in its core business operation, which is the ownership and management of timberland, the company also owns two sawmills and is actively involved in real estate1. This said diversification has been the main source of financial capitalisation for the company because it has always been offered the opportunity of internally funding the running of its parent operations using revenues from diversified business. Currently, the company is headquartered in El Dorado, Arkansas. The market segment of the company has largely been focused on Arkansas and north Louisiana with very limited external and international markets. This situation comes with its own advantages and disadvantages for the company but the company has largely tried to live within its means of operations. This report is thus focused on critiquing the current credit situation of the company and offer recommendations. 2.0 Corporate Segment Deltic Timber Corporation’s corporate segment is reflected in its total asset as represented in the graph below. Generally, there are four segments that the company emphasises on. These are manufacturing segment, which takes 9% of total asset, corporate business, which is responsible for 7% of total asset, real estate, which accounts for 17% of the total asset, and woodlands, which take the highest portion of 68% of total revenue2. It is important to establish that the percentage gain of total assets as given above is not a direct reflection of the percentage of focus or corporate segment that the company gives to the various segment. Rather, the figures given above are a result of the contributions of gains that the various segments make to the company’s total asset. For instan ce in the 2012 Annual Report of the company, it was established that even though manufacturing is responsible for 9% of total assets, the company actually gives higher corporate segmentation focus to that segment than it gives to real estate, which earns the company 17% of its total assets. 3.0 SWOT Analysis 3.1 Strengths The company has an effective internally generated funding policy that is motivated by the fact that there are diversifying businesses that are managed under the franchise of Deltic Timber Corporation. The company has kept a very steady rise in revenues and operating incomes, making it have a very strong competitive engagement with its key competitions. 3.2 Weaknesses The company lacks