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Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC

1.0.

Introduction:

Performance evaluation of an organization means how the organization performs in terms


of all the financial aspects. Normally organizations evaluate their performance by ratio
analysis and trend analysis. A number of financial ratios are used to assess how well a
company is doing. Trend analysis includes analyzing the financial data over time. In this
report the assets, sales, net income and cash inflows and out flows of three units of
Bangladesh Chemical Industries Corporation (BCIC) has been focused. From these we can
get an idea about the capital budgeting decisions and investment decisions of the three
units.

1.1.

Background:

Most of the government industries have to maintain government rules and regulations
very strictly. That is why it is not always possible to do business in the way they want. In
June, 1993 the Government decided to further activate and strengthen the role of private
sector in trade and industry with a view to accelerating economic development. With this
end in view the Government adopted a comprehensive privatization policy and laid down
detailed procedure to facilitate the process of privatization. The policy is aimed at
relieving the financial and administrative burden of government, improving efficiency and
productivity, facilitating economic growth, reducing the size and presence of the public
sector in the economy and help meeting the national economic goals. There are two
methods of privatization:

Sale by international tender


Sale by public offer of shares (Business info Bangladesh, n.d.)

In present times many government organizations are turning into private organizations
following these procedures. In this study three units of BCIC: Ashuganj Fertilizer &
Chemical Co. Ltd.(AFCCL), Chittagong Urea Fertilizer Factory Ltd.(CUFFL), and Jamuna
Fertilizer Company Limited(JFCL.) have been chosen. An analysis on the financial
performance of these three units will help to find out if it will be better to turn them into
private organizations.

1.2. Objectives:
1.2.1. Broad Objective:
The general purpose of this study is the performance evaluation of these three units.
1.2.2. Specific Objective:
1. To evaluate the financial performance of the selected companies.
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Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC

2. To find out suitable strategies for those companies.

1.3. Methodology:
There are 13 units under BCIC. Three units will be focused in this report, because
information on these three units was highly available. Data has been collected from the
annual report and official documents. In the study, trend analysis has been shown
focusing the assets, sales, net income, cash inflows and outflows. From these variables
(assets, sales, net income, cash inflows and outflows) the financial performance and
condition of an organization can be judged easily. Stakeholders also emphasize on these
variables to judge an organization for further investment. In the ratio analysis part current
ratio, acid test ratio, working capital ratio asset turnover ratio, net profit ratio return on
equity, return on capital employed, return on equity employed and debt equity ratio has
calculated. In this context what kind of business strategy could help the units to do well
that has been suggested.
1.3.1. Data Sources:
The data will be collected from the annual report of the mentioned units and documents
from the head office. Though these three units of BCIC are state owned, they do not
publish their annual report every year. Among all financial data, most of the data have
been collected from the balance sheet , cash flow statement and income statement.
These balance sheets, cash flow statements and income statements have been collected
from the head office with the permission of respected authority. The background of the
organizations has been collected from the annual reports. No primary data has been used
in this study.
1.3.2. Research Approaches:
Research approach of the report will be exploratory in nature. From the annual financial
data of the units, their performance will be evaluated.
1.3.3. Research Instruments:
1.3.3.1. Annual Report:
Secondary data has been collected from the annual report.
1.3.3.2. Official Documents:
As these three units are state owned, they do not publish their annual report every year.
The other information is collected from the official documents from BCIC.

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Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC

2.0.

Bangladesh Chemical Industries Corporation (BCIC):

Bangladesh Chemical Industries Corporation (BCIC), fully owned by the Government, was
established in July, 1976 under the provision of Presidential Order 27 of 1972(Bangladesh
Industrial Enterprises Nationalization Order).The Corporation is now managing 13 large
and medium size industrial enterprises engaged in producing a wide range of products
like Urea, TSP, Paper, Cement, Insulator, Sanitary ware etc. They are:
Enterprise Name

Product

Installed capacity
(M.T./ Year)

Established
Year

1.

Chittagong Urea Fertilizer Factory

Urea

5,61,000

1987

2.
3.

Ltd.
Jamuna Fertilizer Company Ltd.
Ashuganj Fertilizer & Chemical Co.

Urea
Urea

5,61,000
5,28,000

1989
1981

4.
5.
6.
7.
8.
9.
10.

Ltd.
Urea Fertilizer Factory Ltd.
Polash Urea Fertilizer Factory Ltd.
Natural Gas Fertilizer Factory Ltd.
Karnaphuli Paper Mills Ltd.
Khulna Hardboard Mills Ltd.
Chhatak Cement Co. Ltd.
Bangladesh Insulator &

Urea
Urea
Urea, ASP
Paper
Hardboard
Cement
Sanitary

4,70,000
95,000
1,06,000 (Urea)
30,000
300 Lac Sft.
1,90,000
3,400

1970
1985
1961
1953
1964
1938
1979

Sanitaryware Factory Ltd.

ware

11.

Usmania Glass Sheet Factory Ltd.

Insulator
Glass

18.67

1959

12.
13.

TSP Complex Ltd.


DAP Fertilizer Co.Ltd.

Sheet
TSP, SSP
DAP

Lac.Sq.M./Year
1,00,000 M.T. (TSP)
5,28,000 M.T./Year

1976
2006

&

Besides, BCIC is involved in 10 joint venture enterprises to a varying degree of success


with local entrepreneurs and foreign investors having equity participation ranging from
20% to 40%. The joint venture enterprises are engaged in the manufacture of medicine,
insecticides, safety matches, paper, packaging, paper converting, etc.

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Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC

BCIC has joint venture programme with the following enterprises:


Enterprise Name

Equity Held By BCIC

1. KARNAPHULI FERTILIZER CO.LTD. (KAFCO)

Equity 43.51 %

2. AVENTIS LTD.

Equity 40.00 %

3. BAYER CROP SCIENCE (BANGLADESH) LTD.

Equity 40.00 %

4. NOVERTIES (BANGLADESH) LTD.

Equity 40.00 %

5. SYNGENTA BANGLADESH LTD.

Equity 40.00 %

6. DHAKA MATCH INDUSTRIES CO. LTD.

Equity 30.00 %

7. BUKL MANAGEMENT (BD) LTD.

Equity 30.00 %

8. MIRACLE INDUSTRIES LTD.

Equity 20.00 %

9. MAGURA PAPER MILLS LTD.


2.1.

Equity 49.76 %

Aims and Objectives of BCIC:

The basic objective of BCIC is to help building the national economy through:

Implementation of industrial policy to develop socio-economic condition.


Developing socio-economic infrastructure.
Ensuring operation of the enterprises at the optimum level of efficiency and

productivity.
Making available import substitute and products at reasonable prices.
Achieving the country towards food autarky by producing and supplying

agricultural inputs at the door steps of the people all over the country.
Earning foreign exchange through export of surplus industrial products after

meeting domestic demand.


Extending necessary techno-financial assistance to both local and foreign
entrepreneurs and establishing new industries as joint venture in chemical and
allied sectors and making optimum use of the natural and human resources of the
country.

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Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC

2.2.

Organization Structure of BCIC:


BCIC Board of Directors

Chairman

Director
(Finance)

2.3.

Director
(Production
& Research)

Director
(Commercial)

Director
(Planning &
Implementation)

Director
(Technical &
Engineering)

Facilities for The Employees:

All of the units of BCIC have their own compound with residential areas. They have
following welfare activities for their officers and stuffs:
1. Resident
2. School college
3. Library
4. Mosque
5. Medical Facilities
6. Entertainment Facilities
7. Projects for family planning & socio-economic development
8. Loan Facility
9. Subsidy
10. Cooperative Society
There are resident and club facilities for the officers and stuffs of BCIC. There are also
school, college, hospital and library. (Bangladesh Chemical Industries Corporation)

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Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC

2.4.

Ashuganj Fertilizer & Chemical Co. Ltd. (AFCCL):

Ashuganj Fertilizer & Chemical Co. Ltd.(AFCCL) has been established in 1981.It is situated
in Ashuganj, Brahmanbaria . The name of this industry was Zia Fertilizer & Chemical Co.
Ltd.(ZFCL), but this year its name has been changed into Ashuganj Fertilizer & Chemical
Co. Ltd.(AFCCL).The factory has an annual production capacity of 5,28,000 MT urea.
Organization chart
AFCCL Board
Managing Director

Administrati
on

Productio
n

Gener
al

Urea

Stuffs

Ammoni
a

Medic
al

Utility

Colleg
e

Finishin
g

Finance

MTS

Finance,
money & tax,
pay & bill,
salary,
insurance,
fund trust
management
Cost &
budget, MIS,
company
Store &
sell
account

Technical

Instrumen
t
Electrical
Plan
t
Machiner
y
Worksho
p
Civil

(Source: Annual Report of Ashuganj Fertilizer & Chemical Co. Ltd.)

Page 6 of 22

Research
& quality
control
Human
resource
developmen
t
Planning &
developmen
t
Fire &
safety

Commerc
e

Purchas
e

Sell

MPIC

Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC

2.5.

Chittagong Urea Fertilizer Factory Ltd.(CUFFL):

Chittagong Urea Fertilizer Factory Ltd.(CUFL) is Situated in Rangadia, Anwara,


Chittagong. This fertilizer factory of the country has an annual production capacity of
5,61,000 MT Urea went on stream in October,1987.
Organization chart
CUFFL Board
Managing Director

Chief
Medical
Officer

General
Manage
r
Adminis
tration

Commo
n
Service
Personnel

General
Manager
Account
s&
Finance

Cash,
Bank &
Finance
Genera
l
Accoun
ts, Tax
& Audit

Genera
l
Manag
er
Comme

General
Manage
r
Technic
al

Local
Sale

Inspec
tion

P&S
Mainten
ance

Qualit
y
Contr

Purchase
(Import)

Techni
cal
Librar
y

Finishe
d
Produc
t
Mainte
Instr
umen
t

Bill Pay &


P.F Fund

School
&
Colleg
e

Cost,
Budget
& MIS

Purchase
(Local)

Traini
ng

Compute
r

Material
P&I
Control

Technic
al
Service

Stores

Electrical
& Power
Generation

Fire &
Safet
y

(Source: Annual Report of Chittagong Urea Fertilizer Factory Ltd.)

2.6.

Jamuna Fertilizer Company Limited (JFCL.) :


Page 7 of 22

General
Manager
(Operation
)

Machinery
Maintena
nce

Export
Sale

Securit
y

Store
Accounts
&
Insuranc
e

Gener
al
Manag
er
(MTS)

Amm
onia
Plant

Urea
Plant

Utility

Finishe
d
Product

General
Manage
r
(Constru
ction)

Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC

Jamuna Fertilizer Company Limited(JFCL.) is situated in Tarakandi, Jamalpur, this factory


has annual production capacity of 5,61,000 MT. With the commissioning of the 6th Urea
Fertilizer plant Jamuna Fertilizer Company Ltd., Bangladesh has not only attained selfsufficiency in meeting a vital agriculture input, the country has attained the capability of
producing high quality granular urea.
Organization chart
JFCL Board
Managing Director

Administrati
on

Productio
n

Gener
al

Urea

Stuffs

Ammoni
a

Medic
al

Utility

Colleg
e

Finishin
g

Finance

MTS

Finance,
money & tax,
pay & bill,
salary,
insurance,
fund trust
management
Cost &
budget, MIS,
company
Store &
sell
account

Instrumen
t
Electrical
Plan
t
Machiner
y
Worksho
p
Civil

(Source: Annual Report of Jamuna Fertilizer Company Ltd.)

3.0.

Introduction:
Page 8 of 22

Technical

Research
& quality
control
Human
resource
developmen
t
Planning &
developmen
t
Fire &
safety

Commerc
e

Purchas
e

Sell

MPIC

Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC

In this part of the study the trend analysis and ratio analysis have been presented. Trend
analysis has been done focusing asset, sales, net income, cash inflows and cash outflows.
These variables have been focused because they are very important to assess the
financial condition of an organization. The growth rate of these factors has been showed
in a trend over time. Ratio analysis focused the current ratio, acid test ratio, working
capital ratio asset turnover ratio, net profit ratio return on equity, return on capital
employed, return on equity employed and debt equity ratio. A suitable business strategy
has been suggested for the units of BCIC.
3.1.

Trend Analysis:

A trend analysis has been done by 6 years financial information of the three units focused
on assets, sales, net income cash inflows and outflows. The trend of the variables has
been shown separately. The year to year change on the variable has been given in
percentage. The amount of taka has been given in million.
3.1.1. Assets:
First of all the assets of the three units have been focused. Which factors affected the
change of the asset that also has been also focused here.
Table 1: Assets
Year

AFCCL
Asset(tk. in

Growth

million)

CUFFL
Asset(tk. in
Growth

Asset(tk. in

million)

million)

12967

JFCL
Growth

2003-

8761

17754

04
2004-

8304

(5)%

12209

(6)%

18390

(4)%

05
2005-

8095

(3)%

11553

(5)%

18556

1%

06
2006-

7863

(3)%

10919

(5)%

17483

(6)%

07
2007-

8010

(2)%

10522

(4)%

11397

(35)%

08
2008-

9042

(13)%

10877

3%

11593

2%

09
(Source: Balance sheet of Ashuganj Fertilizer & Chemical Co. Ltd., Chittagong Urea
Fertilizer Factory Ltd., Jamuna Fertilizer Company Ltd.)

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Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC

Figure 1 : Assets

From the chart (Figure 1) it can be seen that AFCCL s asset growth rate is declining. In
the year 2004-05 the fixed assets and deferred expense was lower than year 200304.Same situation followed the year 2005-06 and 2006-07. The long term loans and
advances increased in year 2007-08 and 2008-09.CUFFLs asset growth rate is declining.
The amount of cash, fixed deposit and deferred expenses is lower than the year 200304.Fixed deposit is also lower in 2005-06.Loan to projects has been increased in the year
2006-07.Same situation followed the year 2007-08 and 2008-09. JFCLs asset growth rate
decreased in 2004-05, increased in 2005-06,again decreased in 2006-07 and 2007-08 and
increased in 2008-09.In 2004-05 fixed asset decreased. Deferred expense and fixed
assets decreased in 2005-06. Same situation followed in 2006-07 and 2007-08.

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Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC

3.1.2. Sales:
The sales have been focused next. As these are government industries, they have to sell
the products in the price set by the government. Thats why most of the cases they faces
loss.
Table 2: Sales
Year

AFCCL
Sales(tk. in

Growth

million)

CUFFL
Sales(tk. in
Growth

Sales(tk. in

million)

million)

2984

JFCL
Growth

2003-

2009

2625

04
2004-

2102

5%

2190

(27)%

2601

(1)%

05
2005-

1785

(18)%

2052

(6)%

2235

(14)%

06
2006-

1703

(5)%

1988

(3)%

2352

5%

07
2007-

2253

32%

2084

5%

2872

22%

08
2008-

3122

38%

3601

73%

4188

46%

09
(Source: Income statement of Ashuganj Fertilizer & Chemical Co. Ltd., Chittagong Urea
Fertilizer Factory Ltd., Jamuna Fertilizer Company Ltd.)

Figure 2: Sales

Page 11 of 22

Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC

From the chart it can be seen that AFCCLs sales percentage increased in 2004-05,
declined in the year 2005-06 and 2006-07 then again increased in the year 2007-08 and
208-09. CUFFLs sales percentage has been declined for 4 years and increased in the year
2008-09. JFCLs sales percentage has declined for first 3 years then increased in the last
two years.
3.1.3. Net Income:
The growth rate of net income has been shown below.
Table 3: Net Income
AFCCL
Year

Net

Growth

CUFFL
Growth

Net

income(tk in

income(tk in

million)

million)

JFCL
Net income(tk Growth
in million)

200304
2004-

100

57

(131)

05
2005-

177

77%

(106)

(285)%

(440)

(235)%

06
2006-

115

(35)%

(219)

(106)%

(668)

(51)%

07
2007-

119

3%

(405)

(84)%

(729)

(9)%

08
2008-

28

(76)%

(330)

(18)%

(780)

(7)%

877
532%
755
116%
637
108%
09
(Source: Income statement of Ashuganj Fertilizer & Chemical Co. Ltd., Chittagong Urea
Fertilizer Factory Ltd., Jamuna Fertilizer Company Ltd.)

Page 12 of 22

Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC

Figure 3: Net Income

From the chart (Figure 3: Net Income) we can see that AFCCLs net income growth rate
followed a jig jag trend while CUFL and JFCL followed a downfall trend. We can also see
that in the year 2008-09 all the three units made profit.

3.1.4. Cash Inflow:


Cash inflow indicates how much cash is in hand. It has been given below:
Table 4: Cash Inflow
Year

AFCCL
Cash Inflow

CUFFL
Cash Inflow
Growth

Cash Inflow

(tk in

(tk in

(tk in million)

million)

million)

Growth

JFCL
Growth

200304
2004-

3618

1356

2009

05
2005-

3139

(13)%

1164

(14)%

3555

77%

06
2006-

3234

3%

1517

30%

3108

(12)%

07
2007-

2691

(16)%

1494

(1)%

2724

(12)%

08
2008-

3041

13%

1565

4%

2821

3%

4663
53%
2898
85%
5947
110%
09
(Source: Cash flow statement of Ashuganj Fertilizer & Chemical Co. Ltd., Chittagong Urea
Fertilizer Factory Ltd., Jamuna Fertilizer Company Ltd.)

Page 13 of 22

Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC

Figure 4: Cash Inflow

We can see from the chart (Figure 3) AFCCLs cash inflow growth rate decreased and
increased in the last two years. CUFL is also in the same condition. First the growth
rate decreased then increased in the last two years. JFCLs growth rate increased in
the first year but decreased in the following two years and again increased in the last
two years.
3.1.5. Cash Outflow:
Cash outflow indicates the out flow of cash in an organization. The growth rate of Cash
out flow of AFCCL, CUFL and JFCL has been given below:
Table 5: Cash Outflow
Year

AFCCL
Cash

Growth

Cash

CUFFL
Growth

Outflow (tk

Outflow (tk

in million)

in million)

JFCL
Cash Outflow
Growth
(tk in million)

200304
2004-

1404

1191

05
2005-

4576

225%

1269

6%

1790

133%

06
2006-

1372

(70)%

1203

(5)%

1727

(3)%

07
2007-

979
682

(28)%
(30)%

1336
1182

11%
(11)%

1554
1644

(10)%
5%

Page 14 of 22

765

Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC

08
2008-

1737
154%
2208
86%
1241
(24)%
09
(Source: Cash flow statement of Ashuganj Fertilizer & Chemical Co. Ltd., Chittagong Urea
Fertilizer Factory Ltd., Jamuna Fertilizer Company Ltd.)

Figure 5: Cash Outflow


The chart (Figure 5 ) is showing that the growth rate of all the three units are high in
the first year then decreased with a very big difference then the previous years. In the
last year again the entire units cash outflow growth rate was high.
3.2.

Ratio Analysis:

We know that ratio analysis is a widely used method to evaluate organizational


performance. Here current ratio, acid test ratio and working capital ratio has been
calculated to analyze the liquidity performance of the three units. Asset turnover has
been calculated to evaluate the business activities efficiency. Net profit ratio, return on
capital employed and return on equity employed has been calculated to assess the
profitability situation. Lastly the debt equity ratio has been calculated to evaluate the
leverage situation.
3.2.1. Ratio analysis of AFCCL:
Table 6: Ratio analysis of AFCCL
Ratios

2003-

2004-

2005-

2006-

2007-

2008-

04

05

06

07

08

09

Page 15 of 22

Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC

Liquidity

Current Ratio

5.92:1

8.80:1

7.69:1

6.64:1

10.31:1

4.16:1

Ratio:

Acid Test

4.16:1

3.9:1

5.4:1

4.6:1

5.8:1

3.07:1

Working Capital

0.47:1

0.48:1

0.54:1

0.46:1

0.55:1

0.54:1

Inventory

Asset Turnover

23%

25%

22%

21%

28%

34%

Ratio:
Profitabilit

Net Profit Ratio

1.14%

4.47%

3.36%

4.81%

0.88%

47.27%

Return on

2.63%

(1.13)

(0.74)

(1.04)

(0.24)

16.32%

y Ratio:
Capital

Leverage

Employed
Return on Equity

0.28%

(1.23)

(0.78)

(1.07)

(0.26)

17.26%

Employed
Debt Equity

0.10:1

%
0.07:1

%
0.56:1

%
0.05:1

%
0.05:1

0.05:1

Ratio:
Ratio
(Source: Balance sheet, cash flow statement and income statement of Ashuganj Fertilizer
& Chemical Co. Ltd.)
From the table we can see that AFCCLs current ratio, acid test ratio and working capital
ratio is high all through 6 years. It means the companys ability to meet short term debt is
high. Inventory ratio, profitability ratio and leverage ratios are not very satisfactory. The
higher the ratio the better is the profitability. Return on capital employed and equity
employed is negative almost all the years.

3.2.2. Ratio analysis of CUFFL:


Table 7: Ratio analysis of CUFFL
Ratios

2003-

2004-

2005-

2006-

2007-

2008-

Liquidity

Current Ratio

04
9.56:1

05
9.47:1

06
7.59:1

07
6.14:1

08
6.41:1

09
4.62:1

Ratio:

Acid Test

6.80:1

6.71:1

5.65:1

4.32:1

4.85:1

3.66:1

Working Capital

0.34:1

0.36:1

0.37:1

0.38:1

0.43:1

0.51:1

Inventory

Asset Turnover

23%

17%

17%

18%

19%

33%

Ratio:
Profitabilit

Net Profit Ratio

1.91%

4.84%

10.18

20.12

15.83

33.54%

y Ratio:
Page 16 of 22

Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC

Return on

0.43%

0.86%

1.80%

3.66%

3.13%

11.10%

Employed
Return on Equity

0.71%

1.34%

2.73%

5.53%

4.78%

15.78%

Employed
Debt Equity

0.62:1

0.55:1

0.51:1

0.51:1

0.52:1

0.42:1

Capital

Leverage

Ratio:
Ratio
(Source: Balance sheet,cashflow statement and income statement of Chittagong Urea
Fertilizer Factory Ltd.)

CUFLs ability to meet short term debt is also high as the liquidity ratios are high. Debt
equity ratio is satisfactory. The net profit ratio tells us about how the company's profits
relate to their sales. The higher the ratio the better is the profitability. Here, the ratio is
high in the year 2003-04 and 2008-09.
The return on equity indicates how much profit a company generates with the money
invested by the shareholders. The return on equity ratio is low. The inventory ratio is not
very high. A higher asset turnover ratio symbolizes greater shareholder wealth.

3.2.3. Ratio analysis of JFCL:


Table 8: Ratio analysis of JFCL
Ratios

2003-

2004-

2005-06

2006-07

2007-08

2008-

Liquidity

Current Ratio

04
7.75:1

05
7.50:1

6.65:1

6.07:1

6.89:1

09
4.20:1

Ratio:

Acid Test

5.17:1

5.48:1

4.37:1

3.95:1

4.34:1

4.20:1

Working

0.13:1

0.14:1

0.15:1

0.24:1

0.14:1

0.14:1

Capital
Inventory

Asset Turnover

14%

14%

20%

21%

14%

20%

Ratio:
Profitabilit

Net Profit Ratio

10%

16%

(29)%

(30)%

(27)%

(24)%

y Ratio:
Page 17 of 22

Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC

Return on

1.59%

2.39%

(3.59)%

(4.07)%

(4.05)%

Capital
Employed
Return on

%
4.3%

6.69%

Equity
Employed
Debt Equity

Leverage

(4.92)

0.27:1

0.27:1

(10.16)

(10.82)

(11.64)

0.28:1

0.26:1

0.181

14.83%

0.20:1

Ratio:
Ratio
(Source: Balance sheet, cash flow statement and income statement of Jamuna Fertilizer
Company Ltd.)

JFCLs liquidity ratio is also high. Debt equity ratio is satisfactory. Profitability ratios are
negative in the last 4 years. Low net profit ratio means the firm shall not be able to
achieve a satisfactory return on its investment. This ratio also indicates the firm's
capacity to face adverse economic conditions such as price competition, low demand,
etc. Here, the low return on capital employed and equity employed indicates the
organization failed to generate enough money from the capital and equity invested by the
shareholders. Financial leverage situation is not very satisfactory.

3.3.

Suitable Business Strategy :

Recently government is emphasizing on privatization process of the public companies.


Many

public

companies

have

already

been

privatized.

Government

adopted

comprehensive privatization policy and laid down detailed procedure to facilitate the
process of privatization. (Business info Bangladesh, n.d.) The organization may follow
particular business strategy to achieve better performance.
The financial performance evaluation shows that the three units of BCIC: Ashuganj
Fertilizer & Chemical Co. Ltd. (AFCCL), Chittagong Urea Fertilizer Factory Ltd.(CUFL) and
Jamuna Fertilizer Company Limited(JFCL.) can do much better business as they are doing
now. From the ratio analysis it can be seen that all the companys short term debt
repaying ability is high. But they not doing very well in earning profit from the equity
invested by the shareholders. AFCCL and CUFFL is doing well in earning profit related to
their sales but JFCL is not doing very well in earning profit.
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Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC

In this situation, for the three units of BCIC divestiture can be a suitable business strategy
which means to sell of a firm or a major component of the firm. As their profit earning
situation and leverage situation is not very well they can sell the whole firm to any
private organization or sell a part of their firm. It could recover its financial efficiency and
stabilize the situation.

4.0.

Findings:
The trend analysis showed the growth rate of asset, sales, net income, cash in
flows and cash out flows of AFCCL, CUFL and JFCL for 6 years. Asset trend of all the
three units are declining. Sales trend is downward for the first 2-3 years and then
up warding. Net income trend is also the same. Cash inflow trend is up warding
and down warding for the first 3 years and then increased highly in the last 2
years. Cash outflow trend increased and decreased in a very up warding and down

warding way.
Ratio analysis focused the liquidity, inventory, profitability and leverage situation
of AFCCL, CUFL and JFCL. AFCCLs liquidity situation and inventory situation is
satisfactory but profitability situation and leverage situation is not satisfactory. The

Page 19 of 22

Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC

negative return on capital employed and equity employed indicates that the
company failed to generate enough profit by the equity and capital invested by
the shareholders. CUFLs liquidity, inventory, profitability and leverage situation is
normal. JFCLs profitability situation is not satisfactory. Net profit ratio, return on

capital employed and return on equity employed is negative in most of the years.
In this situation of business the units can adopt divestiture strategy to do better
business in future. It may help them to earn more profit and increase their
production.

5.0.

Conclusion:

BCIC is a state owned organization. All the units have to maintain strict rules and
regulations. Decision making process is very lengthy. So, it is not always possible to take
the right decision in the right time. Many units are closed because they lack of proper
production materials and marketing activities. It also has been seen that they have to
import products to meet the local demand because they failed to meet the targeted
production. It these barriers are removed BCIC could do better business than the present
situation .Govt. could take initiative to improve the situation by analyzing the problems
properly. Investment in this sector can be encouraged. New business strategy can be
adopted. Privatization can also help the circumstances to improve.
Page 20 of 22

Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC

References:
1. Bangladesh Chemical Industries Corporation. (2010).Annual Report of Ashuganj
Fertilizer

&

Chemical

Company

Limited,

Chittagong

Urea

Fertilizer

Limited .Retrieved June 10, 2010 from BCIC Head Office.


2. Bangladesh Chemical Industries Corporation. (2003-2008).Balance Sheet, Cash
flow Statement and Income Statement of Ashuganj Fertilizer & Chemical Company
Limited, Chittagong Urea Fertilizer Limited & Jamuna Fertilizer Company Limited
year. Retrieved June 12, 2010 from BCIC Head Office.
3. Business info Bangladesh (n.d.) Privatization Policy : Bangladesh Retrieved June
26,2010 from http://www.bizbangladesh.com/privatization_policy.php
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Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC

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