Ratio analysis of Cement Industry of Bangladesh

1.0

INTRODUCTION

1.1 BACKGROUND OF THE STUDY: This This term term paper paper has been made made as a part part of our course course Manageri Managerial al Financ Finance e (FIN201). Our course instructor Ms. alma aharat!ho"dhur# assigned us to de$elop a term paper based on ratio anal#sis of a corporation and anal#%e and interpret the current financial situation of that corporation.

1.2 PURPOSE OF STUDY: Through this term paper "e "ant to gain practical &no"ledge of the financial aspects of a corporation through ratio anal#sis. The perspecti$e of such a report is to ma&e us familiar "ith the financial instruments along "ith ratio anal#sis to measure the financial situation of corporation.

1.3 SCOPE OF THE STUDY: To acco accompl mplish ish the report report "e ha$e ha$e been been ass assign igned ed to !ement !ement Indust Industr# r# "hich "hich includ includes es 'afarge 'afarge urma !ement !ement 'td as the base compan compan# # and for indust industr# r# a$er a$erag age e "e choo choose se Me Megh ghna na !emen !ement t !onf !onfid iden ence ce !eme !ement nt and and eid eidel elbe berg rg !ement. *e use annual reports of these corporations to find out the financial situat situation ion of our base base compan compan# # throug through h ratio ration n anal#s anal#sis is compar comparing ing "ith "ith the industr# a$erage.

1.4 METHODOLOGY: To ac+uire data for our report primaril# "e use the annual reports of 'afarge urma !ement Meghna !ement !onfidence !ement and eidelberg !ement. The annual reports that "e use as our source are gi$en belo", • • • •

'afarge urma !ement -nnual eport 200/ 200  200. Meghna !ement -nnual eport 200. !onfidence !ement -nnual eport 200. eidelberg !ement -nnual eport 200.

*e ha$e ha$e also also coll collec ecte ted d the the nece necess ssar ar# # and and rele rele$a $ant nt data data from from diffe differe rent nt secondar# sources. These sources are, • • • •

'arfargeurma !ement *ebsite (""".lafarge3bd.com) Meghna !ement *ebsite (""".bg.com.bd) !onfidence !ement *ebsite (confidencegroupbd.com4cement4inde5.html) eidelberg !ement *ebsite (""".heidelbergcement.com)

1.5 LIMITATIONS OF STUDY: Ratio Analysis of Lafarge Surma Cement Ltd.

Page 1

The limitations of the stud# are defined b# the e5tensi$e of the facts co$ered b# the stud# and those that left out. o"e$er these limitations can be presented in the follo"ing lines, •

The first limitation is the lac& of intellectual thought and anal#tical abilit# to ma&e it the most perfect one.

•

2.0

*e ha$e to offset "ith the +ualit# due to time constraint.

COMPANY OVERVIEW EW::

For our term paper "e ha$e chosen 'afarge urma !ement 'td as our base comp compan an# # and and for for ou ourr indu indust str# r# a$er a$erag age e "e ha$e ha$e chose chosen n Me Megh ghna na !eme !ement nt !onfidence !ement and eidelberg !ement. The o$er$ie" of these companies are gi$en belo",

2.1 LAFARGE SURMA CEMENT: 'afarge urma !ement 'td. ('!) "as incorporated on 11 No$ember 1/ as a pri$ate limited compan# in 6angladesh under the !ompanies -ct 17 ha$ing its registered office in 8ha&a. On 20 9anuar# 200: 'afarge urma !ement 'td. "as made made into into a publ public ic limi limite ted d comp compan an# #. The The !omp !ompan an# # is list listed ed in 8ha&a 8ha&a and and !hittagong toc& ;5change. Toda# 'afarge urma !ement 'td. has more than 11000 shareholders. In No$ember 2000 the t"o ri$ate 'td. ('=M>') being registered in India "hich operates its +uarr# at Nongtrai in Meghala#a. This commercial $enture "ith an in$estment of =8 20 million "hich is one of the largest foreign in$estments in 6angladesh has been financed b# 'afarge of France France "orld leader in building building materials !ementosMolins !ementosMolins of pain pain leading leading 6angladeshi 6angladeshi business business houses houses together together "ith Internatio International nal Finance Finance !orporati !orporation on Ratio Analysis of Lafarge Surma Cement Ltd.

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(IF! ? The *orld 6an&
6an& 6a n&

(8;<) 8;<)

;uro uropea pean

In$e In$est stme ment nt

6an& 6a n&

(;I6) ;I6)

and

the the

Netherlands 8e$elopment Finance !ompan# (FMO). 'afarge
2.2 MEGHNA CEMENT: Megh Me ghna na !emen !ementt Mill Mills s 'td. 'td. (M!M (M!M') ') the the firs firstt manu manufa fact ctur urin ing g ente enterp rpri rise se of 6ashundhara ashur i$er and in the industrial %one of Mongla >ort on .: acres of land to produce >ortland cement. M!M' has an e5cellent communication facilit# connecting all parts of the countr# through ri$er and roads. M!M' has started its commercial operation on 1Bth 9anuar# 1@. Follo"ing a successful successful public offerings offerings the compan# compan# "as listed "ith 8ha&a toc& ;5change ;5change

Ratio Analysis of Lafarge Surma Cement Ltd.

Page 3

and !hittagong toc& ;5change the t"o bourses of the countr# in 1B and 1@ respecti$el#. The !ompan# mar&ets its products under the registered trade mar& GIN< 6-N8H. The manpo"er of Meghna !ement Mills 'td. is 720 persons out of "hich there are 0 Officers and :70 staff4"or&ers. The industr# enDo#s a uni+ue facilit# in cargo handling both in recei$ing ra" materials and in dispatching finished product through its o"n 02 nos. of Detties suitable for berthing sea going $essels. -t present the production capacit# of M!M' is appro5.1.0 million MT4annum. There are 7 nos. of grinding mill in M!M' ha$ing production capacit# of :000 MT4 da# and these mills are e+uipped "ith high efficienc# separator to segregate fine particle from the coarse one. The dimension of each of the 02 (t"o) mills is :m diameter 5 m length (production capacit# :0 T>) "hile the each of the rest 02 is :m diameter 5 11m length (production capacit# 70 T>). To ensure the product +ualit# the ualit# -ssurance (.-.) department collects samples from different areas of mill house e$er# after 1hrs. to e$aluate +ualit# of the crushed product and thus feed bac& to the production department. 6ased on the +ualit# +ualit# report report determi determined ned b# .- departmen department t

>roduction >roduction depart department ment

acts accordingl# acc ordingl#.. There are 7 nos. of cement silo for cement storing purpose in M!M' "here the capacit# capacit# of each of the first 02 silo is :B00 MT "hile the capacit# of each of the rest 02 is B000 MT. !ement is e5tracted from the cement silo through e5traction s#stem "hich consists of roots blo"er blo"er inlet bo5 pneumatic shut off $al$e flo" control $al$e etc. "hich are controlled from the control room of the pac& house. There are 2 nos. of roto pac&er ha$ing pac&ing capacit# of 100 MT 4 r. and 110 MT 4 r. respecti$el#. These pac&ers are the e+uipments of modern technolog# "here "eighing s#stem of the deli$ered cement sac& is full# electronic based to ensure proper "eight of e$er# sac& of cement. Mainl# paper made cement sac&s are preferred for filling purpose although small percentage of pol# sac& are also used based on the consumersA demand. It ma# be mentioned here that the paper sac&s are manufactured b# the ac& plant of 6<. To assist the production process i.e. to enhance the mill output as "ell as for securing dust free "or&ing en$ironment there are se$eral nos. of dust collectors "ith "ith modern modern deductin deducting g s#stem s#stem in the mill house house area. area. Moreo$ Moreo$er er there there are


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se$eral nos. of dust collector ha$ing larger capacit# of modern deducting s#stem to secu secure re almo almost st dust dust free free "or& "or&in ing g en$i en$iro ronm nmen ent. t.Th Ther ere e e5is e5ists ts 02 mode modes s of cement cement deli$er# deli$er# s#stem i.e. road deli$er# deli$er# and $essel $essel deli$er# deli$er# a$ailable a$ailable in this plant. To pre$ent bag bursting "hile loading in $essel one spiral chute has been designed "ith the barge loader. To ensure smooth deli$er# of cement sac&s 1 nos. ten "heeler and 1@ nos. si5 "heeler compan# deli$er# truc&s are being used.

There e5ists a modern e+uipped Dett# facilit# in this organi%ation "here the sea going $essel can berth easil#. There e5ists 02 nos. of h#draulic crane of modern techno technolog log# # of
belt belt con$e con$e#or #ors s "hich "hich has been designed designed technical technicall# l# and "hich

lengths lengths about 02 &ilometers. &ilometers. 6esides 6esides the t"o nos. of h#drauli h#draulic c crane there there also e5ists 02 nos. of mechanicall# dri$en crane namel# Fransiab !rane "hich are mainl# engaged for limestone unloading.

2.3 CONFIDENCE CEMENT: !onf !onfid iden ence ce

!eme !ement nt

'imi 'imite ted d

(!!' (!!'))

is

the the

fir first

pri$ ri$ate ate

sec ecttor

cem ce ment ent

manufa manufactu cturin ring g compan compan# # in 6angla 6anglades desh h establ establish ished ed in earl# earl# 0Js 0Js "ith "ith ha$ing ha$ing 700 70000 00 M4T annual annual product production ion capacit capacit# # at chitta chittagon gong g 1@ G.M a"a# a"a# from from chittagong port besides 8ha&a chittagong high"a#. !!' is the first IO3002 certif certified ied cement cement manufa manufactu cturin ring g in 6angla 6anglades desh. h. It has a uni+ue uni+ue manage managemen mentt s#stem in +ualit# -ssurance Mar&eting ales >rocurements. It manufactures ordinar# >ortland cement. Our compan# aims to be the number one cement manufacturing compan# in 6angladesh through continuous de$elopment and b# producing high  consistent +ualit# cement to meet all customers re+uirement at all time. To achie$e these obDecti$es !!' uses modern machineries calibrated testing e+uipmentJs computeri%ed pac&ing  ra" materials mi5ing de$ices in its produc productio tion n proces process. s. -dditi -dditiona onall# ll# the compan compan# # fre+ue fre+uentl ntl# # arrang arranges es intern internal al e5ternal training program for the staff of all le$el to de$elop the potentialit# and s&ill of its human resources. !!' is al"a#s &een to &eep the customers satisfied b# pro$ing the best possible ser$ice.


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In 17 after commencement of production !!' "as able to ma&e t"o most popular brands is cement in this countr#. No" 'ion brand is the brand leader in all o$er the countr#. aDmistr# brand is popular leading brand in o"n territories as "ell "ell as othe otherr part parts s of the the coun countr tr# #. !!' manu manufa fact ctur ures es Ordi Ordina nar# r# >o >orl rlan and d !ement (O>!) in conformance "ith 6TI re+uirements. It is noted that !!'Js cement cement specifi specificat cation ions s is much much higher higher than than the parame parameter ters s specif specified ied b# 68 2:2,1: or meets the 612,1@  -TM !1B0,B t#pe31. To ensure best +ualit# +ualit# !!' maintains a uni+ue computeri%ed ra" material mi5ing process to get the finest finest  high high +ualit +ualit# # cement cement "ith "ith compre compressi ssi$e $e streng strength. th. The clin&e clin&err is graine grained d throug through h clo close se circui circuitt ball ball mills mills "ith "ith unifor uniform m blains blains "hich "hich gi$es gi$es the cement better spread. The uniform fineness of !!' cement helps in cutting do"n construction costs as onl# small +uantities are re+uired to co$er large areas. -part -part from the most modern modern techn technolo olog# g# the paper bags used b# !!' ha$e additional features. The bags ends are pasted not stitched. >asted means all the pile piles s of pape paperr are are o$ o$er erla lapp pped ed upon upon ea each ch othe otherr and and glue glued. d. 8ue 8ue to this this pilferage4-dulteration pilferage4-dulteration in a pasted sac& is protected.

2.4 HEIDELBERG CEMENT: eidelberg !ement 6angladesh 'td is one of the largest producers of +ualit# cement in 6angladesh. eidelberg !ement is a member of eidelberg group

manu manufa fact ctur urin ing g

plan plantt

near near

8ha&a ha&a

nam namel# el#

ca can n

!eme !ement nt

International 'tdH "ith an installed capacit# of 0./B million tones per #ear. In 2000 it brought !hittagong !ement !lin&er ortland !omposite !ement into the


Page 6

mar&et. The !ompan# also produces other t#pes of cement namel# Ordinar# >ortland !ement. The compan# further increased increased the capacit# capacit# of its Ganchpur Ganchpur plant b# setting setting up another grinding unit of 0.7B million tones per #ear that "as commissioned in 200. The compan# is also currentl# increasing the capacit# of its !hittagong plant b# installing another grinding unit of 0./B million tones per #ear e5pected to be commissioned b# end of 2011.

3.0 PRODUCTS AND SERVICES 3.1 LAFARGE SURMA CEMENT PRODUCT  SERVICES: 'afarge 'afarge cements cements are designed designed to respon respond d to the re+uirem re+uirement ents s of all of the o >ort rtla land nd ceme cement nts, s, high high3+ 3+ua uali lit# t# basi basic c buil buildi ding ng mate materi rial als s that that are are both both efficient and $ersatile 2. !eme !ement nts s for for diff differ eren entt t#pe t#pes s of en$i en$iro ronm nmen ents ts,, prod produc ucts ts suit suitab able le for for e5posure to sea "ater "ater sulfates and other aggressi$e en$ironments :. pec pecia iall ceme cement nts s for for spec specifi ific c appl applic icat atio ions ns,, incl includ udin ing g "hit "hite e ceme cement nts s for for archit architect ectur ural al proDec proDects ts cement cements s for "ell "ell drilli drilling ng opera operatio tions ns cement cements s containing silica fume or fl# ash po%%olan cements and cements for road surfacing that incorporate slag and h#draulic binders 7. !ement !ements s for masonr# masonr# and mortar mortars s for concret concrete e bloc&s bloc&s tiles tiles renderin rendering g stucco etc. These different cements can all be used to produce concretes "ith a $ariet# of characteristics and properties.

5.S!" 5.S!"#$% #$%&'( &'( ) "!* "!* +!"!,) +!"!,)-$ -$" " / !&!" !&!"-: -: S!"#$% S!"#$%& & -!" -!" +$ +$) ) !&!"-# *!,! )%"! $" F,)"! $" 200. T! ),! $""6)-$6! $" 3 7! ,!#8!-#: 

!leaner and more comfortable to use their dust3free composition ma&es it easier to obtain an e5cellent finish


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

Mortar Mortar that is easier easier to handle handle and more "or&able concrete concrete "hich is more fluid and easier to spread. ensiumK re+uires less effort during application and ma&es construction "or& easier easier



-cce -c cele lerrated ated hard harden enin ing g

and and

incr increa ease sed d

resi resist stan ance ce resu result lts s

in a

substantial gain in producti$it# on building sites.

S%88,- )" )##$#-)"! L)/),+! //!,#: 1. Technica chnicall and logistic logistical al suppor supportt for orders orders and deli$eri deli$eries es so custom customers ers recei$e their cement at the right place and the right time 2. 8ocume 8ocumenta ntatio tion n demons demonstr trati ations ons and training training in the characte characteris ristic tics s and correct use of the
3.2 MEGHNA CEMENT PRODUCTS  SERVICES: Meehan !ement Mills 'td "hich are3 is manufacturing t"o t#pes of cement3 

>ort >o rtla land nd !omp !ompos osit ite e !eme !ement nt (>!! (>!!), ), Ingr Ingred edie ient nts s used used in >!! >!! are are !lin&er @B3/C lag Fl# -sh limestone 213B2C  <#psum 030BC.



Ordinar# >ortland !ement (O>!), Ingredients used in O>! are !lin&er B3100C <#psum 030BC.

>!! are "idel# used in our countr# in all sorts of construction. 6ut no" fe" de$eloper use O>! for impro$ing strength of their construction.

3.3 HEIDELBERG CEMENT PRODUCTS  SERVICES: 

P,-)" C&8#$-! C!&!"- 9PCC: -s part of its relentless pursuit for inno inno$a $ati tion on and and cons consta tant nt dri$ dri$e e to impr impro$ o$e e +ual +ualit it# # eid eidel elbe berg rg !ement !ement has introd introduce uced d >o >ortl rtland and !ompos !omposite ite !ement !ement (>!!) (>!!) during during 200: 200:..

-bso -bsorrbin bing

;uro uropea pean

Nor Norms

in

ceme ce ment nt

pro produci ducin ng

made made

eidelberg !ement 6angladesh 'td. the pioneer in this sector. No"3a3 da#s all the cement factories of 6angladesh are producing cement as per ;uropean Norm. The categor# >ortland !omposite !ement (!;M II) is the mar&et leader in ;urope.


Page 8



C!&!"- 8,%! ),$"+ - -! BDS EN: can !ement and ub# !ement are designed to achie$e the best characteristics for its customersL this this result result is achie$e achie$ed d b# design design using clin&er clin&er and high +ualit +ualit# # other other constituents. >!! has the optimum of, 8urabilit# 'ong3term strength and "or&abilit#. "or&abilit#. can !ement and ub# !ement are produced according to the ;uropean norm.



L$&!;#-"! )" $&!;8,%-#: 'imestone aggregates limestone sand sa nd pul$ pul$er eri% i%ed ed lime limest ston one e burn burntt lime limest ston one e "hit "hite e pul$ pul$er eri% i%ed ed limestone and limestone h#drate.



S)";$&! S)";$&! <,$7#: <,$7#: and3lim and3lime e bric& constructio construction n s#stems s#stems solid solid perforated o$ersi%e and facing sand lime bric&s.



E"6$,"&!"-) -!"+: -!"+: pecialt# products and ser$ices for "aste stabili%ation landfill construction and immobili%ation of to5ic compounds.

3.4 CONFIDENCE CEMENT PRODUCTS  SERVICES: !onfidence !) (>!) pole :. >aint 7. o >ole le fitti fittings ngs and and hard" hard"ar are e 10.

;lectr ;lectroni onic c and and elect electro3 ro3mec mechan hanica icall meter meters s e etc. tc.


Page 

4.0 PERFORMANCE EVALUATION OF LAFARGE SURMA CEMENT LTD THROUGH RATIO ANALYSIS: 4.1 CURRENT RATIO: !urren !urrentt ratio ratio indica indicates tes the e5tent e5tent to "hich "hich curren currentt liabil liabiliti ities es are co$ere co$ered d b# assets e5pected to be con$erted into cash in the near future. The current ratio of three #ears of 'afarge urma !ement is gi$en belo", 200 0.:15

200 0.:25

200/ 0.2@15

Industr# -$erage 1.B5

T)<!;1

F$+%,!;1

-t 200/it is re$ealed that the firm has used a huge amount of debt because of poor li+uidit# condition "ithin the firm. It couldnAt use its assets properl# to co$er the current liabilities b# con$erting current assets into cash. Though its 8O is less or e+ual to da#s in$entories are not used properl# to generate the sales. o all means of generate the returns is depressing. Thus has a $er# poor current ratio is .2@1C less than industr# a$erage rate.


Page 1!

6ut in 200 though the 8O is presenting a high deliberate in pa#ing cash credit usage of current assets and fi5ed assets start impro$ing for pa#ing the debt interest someho". -nd in$entor# turno$er is also increased. Thus the ratio is also increased in 200 is .:2C. -nd managing of both financial and current assets are impro$ing in 200 and 8O is e+ual to the a$erage industr# point. -nd the order of the debt ratio is also increased in 200 and it all paid in li+uid cash. 6ut the usage of in$entories is more than last t"o #ears in 200. -nd a large portion of debt is paid on cash. It sho"s the reason "h# the firmAs current ratio is some"hat less than from 200 is .:1C.

4.2 =UICK 9ACID TEST RATIO: The ratio is calculated b# deducting in$entories from the current assets and di$iding the result b# current liabilities. It is a $ariation of the current ratio. The +uic& ratio of three #ears of 'afarge urma !ement is gi$en belo", 200 0.17/5

200 0.1/5

200/ 0.12/5

Industr# a$erage 1.0B5

T)<!;2

F$+%,!;2

In 200/ the amount if in$entor# used is less than an# other #ear in the firm but still firm has lac&ed behind in managing in asset both fi5ed and current assets that can meet the current liabilities. -nd the account recei$ables are also $er#


Page 11

lo". Thus compan# has poor amount of li+uidit# cash in hand. -ll this turns the ratio 0.12/ in 200/. In 200 the compan# has started impro$ing its asset management. Thus the recei$ables also in increased but 8O is ta&ing a long time to pa#ing the credit sale. -nd its li+uidit# of mone# is still lac&ed behind. -nd still the firm has to pa# a huge current liabilities or debt interest. Thus its ratio has come in a slight impro$ed "a# and it is 0.1/. 6ut in 200 the compan# has managed its debt interest b# managing its current asset. 6ut as firm has paid huge amount of interest interest automatical automaticall# l# the firm has less li+uidit# of cash in hand. ThatAs "h# its ratio is decreased to 0.17/ times.

4.3 DAYS SALES OUTSTANDING 9DSO: The ratio indicates that the a$erage length of time it ta&es the firm to collect its credit sales. The 8O of three #ears of 'afarge urma !ement is gi$en belo", 200 1 da#s

200 :/ da#s

200/  da#s

Industr# a$erage 1 da#s

T)<!;3

F$+%,!;3

The 8O represents the a$erage length of the time the firm must "ait after ma&ing sales before recei$ing cash "hich is the a$erage collection period. -t


Page 12

200/ firm has  da#s outstanding customers pa#ing credit sales much earlier at da#s comparing to industr# period. 6ut at 200 the customers are dela#ing the credit sales. Thus it ta&es :/ da#s much than a$erage rate. -nd the last #ear -t 200 it sho"s that the compan# managed to collect itAs credit sales in 1 da#s "hich is e+ual to the industr# a$erage.

4.4 INVENTORY TURNOVER: Theratio is calculated b# di$iding cost of goods sold b# in$entories. The in$entor# turno$er of three #ears of 'afarge urma !ement is gi$en belo", 200 : . / 75

200 :.75

200/ 2./5

Industr# a$erage B . 0 25

T)<!;4

F$+%,!;4

In 200/ it is sho"n on the anal#sis that the firm is not used its current assets properl# as "ell as cannot utili%ed its in$entories properl# to generated sales. Ma# be there are some unused in$entories or some obsolete in$entories. Thus the ratio is less then industr# le$el is 2./5. In 200 compan# has started using its asset management in an e5act "a#. -lso increased increased its in$entor in$entor# # utili%atio utili%ation. n. Thus it generated generated sales greater greater than 200/. -nd it sho"s the ratio to increased to :.75. :. 75.


Page 13

-nd lastl# in 200 the firm has met its financial obligations in a better "a#. -nd used its in$entor# to generate a better sales. Thus the ratio is impro$ed to :./7C. 6ut still less than industr# le$el cause there must be some problem lies "ith the entire firmAs management of both financial current assets and debt management. - great share of income is used for pa#ing the interest. o there is automaticall# alteration in the income statement "here it is sho"n that the contribution margin is still undersi%ed to co$er up the "hole fi5ed e5penses or it be con$ con$er erte ted d into into in a small smaller er perc percen enta tage ge "ith "ith rela relati tion on of ea earn rn a high higher er profitabilit# margin.

4.5 FI>ED ASSET TURNOVER: The ratio ratio measur measures es ho" efficien efficientl# tl# the firm firm uses uses its fi5ed assets assets to help to generate sales. The fi5ed asset turno$er of three #ears of 'afarge urma !ement is gi$en belo", 200 0.B15

200 0.715

200/ .1B5

Industr# -$erage 2.B5

T)<!;5

F$+%,!;5

The The fi5e fi5ed d asse assett turn turno$ o$er er rati ratio o measu measure res s the the comp compan an#Js #Js effe effect cti$ i$en enes ess s in genera generatin ting g sales sales from from its in$estmentsin in$estmentsin plant propert# and e+uipment. From the abo$e table "e can see that in 200/ fi5ed assets turno$er is $er# lo" "hich is e+ual to 0.1B times. The reason of lo" fi5ed assets turno$er is that the# had in$ested more on fi5ed assets but proportion to in$estment in fi5ed assets the sales is $er# lo" "hich indicates the# are not utili%ing their fi5ed assets properl#.


Page 14

In 200 fi5ed asset ratio ratio increased to 0.71 times that means the compan# has been able to increase their sales and started to lo"er their in$estment in fi5ed assets. 6ut the score is not good enough because it is less than one times.

In 200 fi5ed assets turno$er is 0.B1 times "hich indicates that it is graduall# increasing their sales b# using their fi5ed assets properl#. 6ut the# are not using their fi5ed assets li&e the other firms of the industr#. The industr# a$erage of fi5ed asset turno$er is 2.B times "hereas the fi5ed assets turno$er for 'afarge urma !ement is onl# 0.B1 times "hich indicates that the# are not efficient to utili%e their fi5ed assets li&e the other firms in the industr#.

4.? TOTAL ASSETS TURNOVER: The ratio measures the turno$er of all the firm assets. The total asset turno$er of three #ears of 'afarge urma !ement is gi$en g i$en belo", 200 0.775

200 0.:B5

200/ 0.1:B5

Industr# -$erage 2.@25

T)<!;?

F$+%,!;?

The total asset turno$er ratio measures the abilit# of a compan# to use its assets to generate sales. In 200/ it is onl# 0.1:B times. The reason of lo" total asset turno$er is that there is a problem of using us ing the assets properl#.

In 200 the total asset turno$er has increased from 0.1:B times to 0.:B times "hich indicates that the firm is able increase their sales in this #ear but not good enough.


Page 15

In 200 200 tota totall asse assett turn turno$ o$er er has has incr increa ease sed d from from 0.:B 0.:B to 0.77 0.77 time times s b# increasing their sales but still it is belo" the industr# a$erage. The reason of lo" total total ass asset et turno$ turno$er er is a proble problem m "ith "ith the ass asset et catego categori ries es compos composing ing total total asse assets ts 3 in$e in$ent ntor or# # rece recei$ i$ab able les s or fi5ed fi5ed asse assets ts..

Ther There e is a prob proble lem m "ith "ith

in$entor#. The firm is holding obsolete in$entor# and not selling in$entor# fast enough enough.. *ith *ith regard regard to acc accoun ounts ts recei$ recei$ab able le the firmJs firmJs col collec lectio tion n period period is fluctuating and credit accounts ma# be on the boo&s too long. Fi5ed assets such as plant and e+uipment could be sitting idle instead of being used to their full capacit#. There is also li+uidation problem of current assets. -ll of these issues lo"er the total asset turno$er ratio of 'afarge urma !ement.

4. DEBT RATIO: The ratio measures the percentage of funds pro$ided b# creditors. The debt ratio of three #ears of 'afarge urma !ement is gi$en g i$en belo", 200 / 7C

200 0./C

200/ 1.@C

Industr# a$erage 7BC

T)<!;

F$+%,!;

It sho"s the debt financing in the firm. -t 200/ compan# has used 1.@Cdebt. Means its creditors ha$e supplied about most of the firmAs total financing. It sho"s that it is the sales are lo"er lo"er or the net income is also lo"er. lo"er. -nd e5pected costs are also high as there is a problem lies "ith operational obligations and


Page 16

current asset management. Thus it sho"s that there is a ban&ruptc# position in 200/. 6ut graduall# in 200 it has started to use itAs current assets a better "a# than 200/. -nd also successes in rising the#Are income or sales or both. Thus in 200 the debt ratio has come 0./C. -nd -n d at 200 200 it has has incr increa ease sed d itAs itAs sale sales s or inco income me and and usag usage e of asse assets ts management at a healthier position than pre$ious #ears. -nd it becomes /7C "hich sho"s a decreasing rate of using debt finance. f inance.

4.@ TIMES INTEREST EARNED: It measures the abilit# of the firm to meets its annual interest pa#ments. The TI; of 'afarge urma !ement for three #ears is gi$en belo",

200

200

200/

Industr# a$erage

/./5

1.75

30.:5

10.0:5

T)<!;@

F$+%,!;@

-s in 200/ firm has a negati$e operating income. It is occurred due to decrease in sales or decrease in income and the cost of both operating and financial "as high in 200/. -nd the interest "as so high as the debt ratio sho"n a higher percentage. o TI; become negati$e in 200/ is 30.:C.


Page 17

6ut in 200 compan# has started pa#ing its debt interest and sales "as raising or net income "as rising. Thus usage of assets both current and fi5ed "as increased in 200. o the change is ta&en place in 200 and the TI; has come 1.7C. -nd in 200 the firm has earned a greater operating profit due to increase in sales and it helps to co$er the fi5ed operating cost. -nd also the debt ratio has redu reduce ced d to /7C. /7C. -s the the oper operat atin ing g prof profit it has has incr increa ease sed d thus thus it resul results ts an impr impro$ o$ed ed perc percen enta tage ge in TI; TI; and and this this is 2.@C. 2.@C. 6u 6utt stil stilll lac&i lac&ing ng behi behind nd the the indu indust str# r# le$e le$el l caus cause e ma# ma# be the# the# used used a huge huge amou amount nt of debt debt and and the the management does not properl# finance the management of operation. -nd there is insufficienc# of li+uid cash. !ertainl# firm has a great difficult# dealing "ith this under3poor situation. o the firm has lac& behind.

4. RETURN ON ASSET 9ROA: The ratio of net income to total assetsit pro$ides an idea of the o$erall return on in$estment earned b# the firm. The O- of 'afarge urma !ement for three #ears is gi$en belo",

200 B./BC

200 1C

200/ [email protected]

Industr# -$erage .1BC

T)<!;

F$+%,!;


Page 18

In 200/ O- is [email protected] it indicates that the# ha$e incurred loss in 200/ and the reason is using of huge debt and poor asset management to generate sales.

In 200 the increase to 1C because the# ha$e use lot of debt "hich is almost 0C and the current assets ha$e been used for the problem of huge debt for that their sales gone do"n and net income decline.

In 200 the O- has again increased to B./BC because the# ha$e lo"ered their debt and paid up some debt and sales and net income also increased but that is still belo" the industr# a$erage. The reason is that the firm is not using their assets ass ets effici efficient entl# l# to increa increase se the re$enue re$enue of the firm. firm. The# The# ha$e ha$e li+uid li+uidati ation on problem of current assets and also using huge debt abo$e the a$erage le$el of industr# a$erage.

4.10 RETURN ON E=UITY 9ROE: The ratio of net income to common e+uit# it measures the rate of return on common stoc&holdersA in$estment. The O; of 'afarge urma !ement of three #ears is gi$en belo",

200 22.7C

200 B.1BC

200/ 3::.@C

Industr# -$erage 1/.0BC

T)<!;10

F$+%,!;10


Page 1

In 200/ O; for 'afarge urma !ement is 3::.@C. O; is negati$e because firm is using 1.@C debt "hich is $er# higher the# are using more debt for their in$estment rather than common e+uit# and for using more debt and poor asset management the# ha$e incurred loss as a result there is no earning a$ailable for common stoc&holders in 200/.

In 200 O; increased to B.1BC. It indicates that for each dollar of common e+uit# there is a return of t&. 0.0B1B. The# ha$e profit in this #ear because the# ha$e impro$ed their asset management and Dust able to ma&e a profit though the# ha$e huge debt.

In 200 O; increased to 22.7C and it is abo$e industr# a$erage. It indicates that the# are able to use the common e+uit# efficientl# than the other firms. The# ha$e paid up some.>rofit goes up as a result O; also goes up.

4.11 NET PROFIT MARGIN ON SALES: This ratio measures net income per dollar of sales. The net profit margin on sales of 'afarge urma !ement for three #ears is gi$en belo",

200 1:.1C

200 2.7C

200/ 37B.@C

Industr# a$erage .::C

F$+%,!;11

In industr# a$erage it is .::C. Thus at 200/ the compan# has huge gap in managing their operational obligations and asset management. The usage of debt debt is also also high. high. For larg large e amou amount nt of debt debt it has has to pa# pa# a larg large e inte intere rest st


Page 2!

pa#ment. Thus compan#As ;6IT is also lo". -nd all these caused a negati$e or loss in profit margin on sale and it is ?7B.@C. 6ut as it has mentioned that compan# graduall# starts using its current assets in$entor# or fi5ed assets a good "a# it caused the profit margin to increased b# 2.7C. -nd at the end #ear at 200 it has come 1:.1C. That indicates the compan# is increasingl# boosted its current asset management as "ell as its operational functions. Thus manage its in$entor# to generate the sales largel#. Thus ;6IT also increased. o it has crossed the industr# le$el a$erage.

4.12 PRICEEARNINGS RATIO: The ratio of the price per share to earnings per share. It sho"s the amount in$estors "ill pa# for each dollar of current earnings. The >4; ratio of 'afarge urma !ement is gi$en belo" for three #ears. 200 2.7@5

200 1@./B5

200/ N4-

Industr# -$erage /1.125

T)<!;12

F$+%,!;12

8ue to a huge loss in 200/ the compan# does not pro$ide the >4; ratio. Thus it cannot be determinened. 6ut in 200 the compan# ma# gain fa$orable earnings that can satisf# the shareholders "ealth. Thus demands on in$esting the shares on 'afarge !ompan#


Page 21

ha$e 1@./B "hich is greater than the industr# a$erage le$el. It sho"s that compan# ma# ha$e a potential high gro"th that fascinated the in$estorAs mind for in$est mone# at this point. For e$er# dollar of earnings earnings in$estors in$estors are li&e to pa# 1@./BC. In 200 the compan# has paid a huge amount of debt as interest. -nd it decreases the amount of profit or income though the sales are high in 200. It reduced the income of shareholders or ma# be for unfa$orable circumstance in econom# or mar&et condition. o the >4; ratio has decreased to 2.7@C less than industr# le$el.

4.13 MARKETBOOK RATIO: The ratio of a stoc&As mar&et price to its boo& $alue. It indicates that ho" the in$estors regard the compan#. The M46 ratio of 'afarge urma !ement is gi$en belo" for three #ears. 200 @.@25

200  . @ 5

200/ N4-

Industr# -$erage 7.@5

T)<!;13

F$+%,!;13

In 200 the M46 ratio is .@ times "hich means for each dollar of boo& $alue b# .@ times larger price the share is selling in the mar&et. In 200 "e can see that the M46 ratio decreased to @.@2 times "hich is abo$e the industr# a$erage but the ratio is fluctuating. That means in 200 people Ratio Analysis of Lafarge Surma Cement Ltd.

Page 22

"ere "ere more more e5ci e5cite ted d abou aboutt the the futu future re pros prospe pect cts s of the the commo common n stoc stoc& & as an in$estment than in 200. The reason fluctuating ma# be people ma# feel that the firm has poor asset management and li+uidit# problems.

5.0 FINDINGS AND RECOMMENDATIONS: F$"$"+#: I.

-sset -ss et mana managem gement ent is e5tr e5treme emel# l# in in a poor poor condit condition ion.. The The "a# "a# of using using it it is not that much effecti$e.

II.

In$ent In$entor# or# is is utili% utili%ed ed in a good good "a# "a# in recent recent #ears. #ears. 6ut 6ut it it is not not appl applica icable ble because of poor asset management.

III. III.

Thus Thus compa compan# n# is is using using the the debt debt to fin finan ance ce the the compa compan# n#As As "or "or&l &loa oad d in a large amount. It can be more dangerous for ban&ruptc#.

I. I.

The 8O 8O is is also also $er# $er# fluct fluctuat uating ing o$er o$er time. time. It coul couldnAt dnAt fi5 fi5 its its time time of cred credit it period.

".

The price price earnin earnings gs ratio ratio is fluctu fluctuate ated d b# ha$ing ha$ing a great great differ differenc ence e in compan# in$estment. The compan# ma# loss the financial in$estment due to ha$ing fluctuating earnings.

R!&&!")-$"#: I.

!ompan !ompan# # shoul should d manag manage e its its both both curren currentt asset asset manage managemen mentt and and fina financi ncial al obligations efficientl#.

II. II.

The The perc percen enta tage ge of debt debt rati ratio o must must be lo"er lo"ered ed for for sa$in sa$ing g the the compa compan# n# from the ris& of ban&ruptc#.

III. I. I.

-nd the# the# s shou hould ld be strict stricter er in recei$ recei$ing ing their their credit credit sales. sales. Firm Firm ma# tr# to boos boostt its its posi positi tion on "here "here it can can auto automa mati tica call ll# # attr attrac acte ted d more in$estors for further e5pansion.

.0 CONCLUSION:


Page 23

From the abo$e content "e can conclude that in li+uidit# ratios 'afarge urma !ement 'td are belo" industr# a$erage and the $alues are far a"a# from the ind industr ustr# #

a$er $erage. ge.

o

the# the#

defi efinite nitel# l#

ha$ ha$e

li+u li+uiidit dit#

pro problem blem..

In

asse as sett

management 'afargeAs position is not good. The# are lagging behind from the other companies in this industr#. Their in$entor# turno$er fi5ed asset turno$er and total asset turno$er are impro$ing e$er# #ear but good enough. There 8O is Dust as the industr# a$erage but it is fluctuating e$er# #ear. o the# ha$e poor asset management. The# are inefficient in managing current and fi5ed assets. The# are using a huge debt "hich is a great ris& of ban&ruptc# to the compan#. Their debt ratio is higher than the industr# a$erage. Times interest earned is belo" the industr# a$erage but it is impro$ing each #ear. In profitabilit# ratios O- is belo" industr# a$erage but O; and profit margin is abo$e industr# "hich means the# are tr#ing to impro$e their asset management and li+uidit# position. In mar&et ratios "e can see that the# ha$e a good position in 200 but in 200 it declined though the ratios are abo$e industr# a$erage. That means people are becoming less interested to the compan# than the pre$ious #ear. o to impr impro$ o$e e from from the the curr curren entt situ situat atio ion n the# the# need need to impr impro$ o$e e thei theirr asse assett management li+uidit# position and use lo" debt and must be strict in recei$ing credit sales and finall# tr# to attract the customers through e5pansion of firm.


Page 24

APPENDI>

CURRENT RATIO


Page 25

200:

!urrent atio 



 0.2@15

200@:

!urrent atio 



 0.:25

200:

!urrent atio 



 0.:15


Page 26

=%$7 R)-$

200:

uic& atio 



 0.12/5

200@:

uic& atio 



 0.1/5

200:

uic& atio 


Page 27



 0.17/5

I"6!"-, T%,"6!,

200:

In$entor# Turno$er atio 



 2.//5

200@:





Page 28

 :.75

200:




 :./75

D)# S)!# O%-#-)"$"+ 9DSO

200:

8O 



 .7 8a#s

200@:


Page 2

8O 



 :/ 8a#s

200:

8O 



 1 8a#s

F$! A##!- T%,"6!,

200:

Fi5ed -sset Turno$er 


Page 3!



 0.175

200@:




 0.70/5

200:

Fi5ed -sset Turno$er Turno$er 



 0.B0@5

T-) A##!- T%,"6!,


Page 31

200:

Total -sset Turno$er 



 0.1:B5

200@:




 0.:B5

200:

Total Total -sset Turno$er Turno$er 



 0.7:@5


Page 32

D!<- R)-$

200:

8ebt atio 



 1.@7C

200@:

8ebt atio 



 0.0  0C

200:

8ebt atio 


Page 33



 0./7  /7C

T$&!# I"-!,!#- E),"! 9TIE

200:

TI; 



 30.:5

200@:

TI; 



 1.75


Page 34

200:

TI; 



 2.@5

R!-%," " A##!-# 9ROA

200:

O- 



 3.0@1  [email protected]

200@:


Page 35

O- 



 0.01  1C

200:

O- 



 0.0B/B  B./BC

R!-%," " E%$- 9ROE

200:

O; 




Page 36

 30.::@  3::.@C

200@:

O; 



 0.0B1B  B.1BC

200:

O; 



 0.227  22.7C

N!- P,/$- M),+$" " S)!#

200:


Page 37

Net >rofit >rofit Margin on ales 



 30.7B@  37B.@C

200@:




 0.027  2.7C

200:




 1:.1C


Page 38

P,$! E),"$"+# R)-$ 9PE

200:

>rice ;arnings atio 

 N4-

200@:




 1@./B5

200:





Page 3

 2.7@5

M),7!-B7 9MB R)-$

200:

Mar&et46oo& atio 

 N4-

200@:




 .@B5

200:


Page 4!




 @.@25

INDUSTRY AVERAGE OF THE RATIOS CURRENT RATIO

M!+") C!&!"-:

!urrent atio 



 1.25

H!$!
!urrent atio 



 2.0:5


Page 41

C"/$!"! C!&!"-:

!urrent atio 



 1.725

I"%#-, A6!,)+! 

 1.B5

=%$7 R)-$

M!+") C!&!"-:

uic& atio 



 0./B5

H!$!
uic& atio 


Page 42



 1.B25

C"/$!"! C!&!"-:

uic& atio 



 0.:5

I"%#-, A6!,)+! 

 1.0B5

I"6!"-, T%,"6!,

M!+") C!&!"-:





Page 43

 B.05

H!$!



 @.25

C"/$!"! C!&!"-:




 :.@@5

I"%#-, A6!,)+! 

 B.025

D)# S)!# O%-#-)"$"+ 9DSO

M!+") C!&!"-:


Page 44

8O 



 22 8a#s

H!$!
8O 



 2 8a#s

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Page 47

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Page 48

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Page 51

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Page 52

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Page 56

Ratio analysis of Cement Industry of Bangladesh

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