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NORTHSOUTH UNIVERSITY

Company Names:

HEIDELBERG CEMENT BANGLADESH LTD.


PREMIER CEMENT MILLS LTD.
LAFARGE SURMA CEMENT LTD.
CROWN CEMENT LTD.
CONFIDENCE CEMENT LTD.

Prepared for:
Dr. Fahim Faisal (Ffa)
Department of finance
School of Business
North South University

Project submission date: 17th April, 2018

Prepared By:
Sefat Noor Azad 1510428630
Ratri Saha 1712431030
Humaira Taj 1711389630
Fardin Kibria 1712435030

Course Name: FIN 254

17th April, 2018

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Dr. Fahim Faisal
Lecturer
School of Business
North South University

Subject: Report submission on financial ratio analysis.


Dear Sir,
In accordance to your advice we have prepared a report on the 5 cement companies
which are Heidelberg, Crown, Confidence, Premier and Lafarge Surma cement.
We have done the financial analysis of all the 5 comapies. In preparing this report,
we have followed your guidelines. As per your direction, we have added a lot of
information as you suggested. From this report we have achieved a lot of basic
knowledge about financial report analysis. We think that it will help us a lot in our
future career.
We sincerely hope this report will fulfill the requirements suggested by you. We
truly appreciated this attempt. If you have any question after reading this report, let
us know.

Sincerely yours,

Fatema Binty Masud 1512514030


Sefat Noor Azad 1510428630
Ratri Saha 1712431030
Humaira Taj 1711389630
Fardin Kibria 1712435030

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ABSTRACT

The report is done on the basis of annual report of 3 years from 2014-2016 of 5 companies from

the Cement industry namely Lafarge Surma Cement, Premier Cement Mills Ltd, Heidelberg

Cement and Crown Cement. We began the report with the description of all the companies and

then we did the time series analysis for each of them. Under the time series we calculated the

liquidity ratio. In liquidity ratio we did the Current ratio. Then we calculated the Activity ratio.

Under activity ratio we calculate (Industry Turnover, Avg. Collection Period, Total Asset Turn

Over). After Activity we calculated the Debt Ratio. Under Debt Ratio we can see that (Debt.

Ratio, Debt to Equity Ratio). After Calculating the time series we did a cross sectional analysis

for all the companies on the basis of 3 years analysis. Based on the analysis and the calculations,

we have added some recommendation for both the companies. We finish the report through the

conclusions.

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INTRODUCTION OF THE COMPANIES

CROWN CEMENT

M. I. Cement Factory Ltd. is a public limited company and one of the leading manufacturers of

cement in Bangladesh. On December 31, 1994, it started its journey with the commitment for

providing high quality cement to the country. Its brand "Crown Cement" has own renown both at

home and abroad. With the passing of time the demand of Crown Cement increased day by day.

Therefore, the sponsors expanded the project thrice. The company has been listed in Dhaka

Stock Exchange Ltd. and Chittagong Stock Exchange Ltd. in 2011. Its high growth agenda have

been highly appreciated by the shareholders, and have won investors trust. Its backward and

forward integration endeavors have given new dimensions to its growth platform. Crown Cement

Concrete & Building Products Ltd. have been set up and are already in operation. The Company

has also acquired two handy max size ocean going mother vessels to facilitate transportation of

raw materials from abroad. It is expected that these new growth platforms will facilitate creation

of new dimensions and frontiers to the mother company, M. I. Cement Factory Limited. Crown

Cement pioneered in export of Cement in 2003 and paved the way for earning hard-earned

foreign currency. Crown Cement achieved the National Export Trophy (Gold) twice in

consecutive two years for attaining the top most place among the cement exporters in

Bangladesh. The factory possesses well communications facility both through water and road. It

is located at West Mukterpur, Munshi Ganj on the bank of the river Dhaleswari. It is connected

by a metal road (Dhaka-Munshi Ganj Highway) which is linked with the whole country.

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Lafarge Surma Cement Limited

Lafarge Surma Limited, a joint venture of Lafarge Holcim and Cementos Molins is the only fully

integrated cement company in Bangladesh producing clinker and cement of high premium

quality. Since the beginning in 1997, Lafarge Surma Cement has contributed to millions of lives

by providing durable, affordable and accessible building materials and solutions as well as by

undertaking initiatives for the betterment of the economy, society and environment. They are the

leading brand that is building materials and serving masons, builders, architects and engineers.

Group operations produce cement, aggregates and ready mix concrete which are used in building

projects ranging from affordable housing and small, local projects to the biggest, most

technically and architecturally challenging infrastructure projects. With leading positions in all

regions, Lafarge Surma employs around 90,000 employees in more than 80countries and has a

portfolio that is equally balanced between developing and mature markets.

HEIDELBERG CEMENT BANGLADESH LIMITED

Heidelberg Cement Bangladesh Limited, one of the group companies of Heidelberg Group,

founded in Germany in 1873, with its core product being cement, ready-mixed concrete,

aggregates and related activities, is one of the leading producers of building materials worldwide.

The group employs 60,000 people in 3000 locations of 60 countries.

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PREMIER CEMENT MILLS LIMITED

This company is one of the leading innovative cement manufacturers in Bangladesh. They

manufacture European Standard product using the best raw materials and technical excellence

for ensuring dependability and superiority of its outputs. Their product provide strength and

durability to buildings and high dimensions, roads, bridges and infrastructures that speeds up the

line of commerce and the houses providing comfort and security to families across Bangladesh,

India, Myanmar etc.

Contents
ABSTRACT .................................................................................................................................... 3
INTRODUCTION OF THE COMPANIES ................................................................................... 4
LAFARGE SURMA CEMENT LTD. (Sefat Noor Azad- 1510428630) ....................................... 7
HEIDELBERG CEMENT FINANCIAL RATIO ANALYSIS (RATRI SAHA-1712431030) .. 12
PREMIER CEMENT FINANCIAL RATIOS-( FARDIN KIBRIA-1712435030) ...................... 16
Cross Sectional Analysis............................................................................................................... 18
Recommendations ......................................................................................................................... 22

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LAFARGE SURMA CEMENT LTD. (Sefat Noor Azad- 1510428630)

CURRENT RATIO: Means the firm’s ability to meet its short-term obligations. Current ratio is

always good when it is higher than 1 times.

Year 2014 2015 2016

Ratios 2.29 2.96 1.7

In the above table we get to see the current ratios of Lafarge Surma Cement company from 2014

– 2016. The liquidity ratio increased in the year 2015 and the decreased to 1.7 from 2.96 in the

year 2016. Since the ratio is greater than 1 then, the company is doing better in the industry.

INVENTORY TURNOVER: means the activity, or liquidity of a firm’s inventory. The higher

the inventory turnover is, the better it is.

Year 2014 2015 2016

Ratios 5.44 6.22 7.31

In the above table, we can see that the inventory turnover has been increasing with years. We

can surely assume that the company is doing really well in terms of sales. So the activity of the

company is improving over time.

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AVERAGE COLLECTION PERIOD:

Average collection means the approximate amount of time that it takes for a business to receive

payments owed. Every company wants to sell their products faster and get the payment faster. So

the lower the avg. collection period is, the better it is.

Year 2014 2015 2016

Ratios 85.2 88.61 99.61

In the above table we can see that the collection period is increasing from 2014 to 2015 with 85

to 88 days and in 2016 to approximately 100 days which is not a good sign in terms of collecting

the inventories. In this case, the company is not doing that well comparing to the industry.

TOTAL ASSET TURNOVER

Total Asset Turnover means the efficiency with which the firm uses its assets to generate sales.

The higher the T.A.T.O. is, the better it is.

Year 2014 2015 2016

Ratios 63.76% 59.1% 57.5%

In the above table, we can see that the total asset turnover in decreasing with years from 63.76%

to 57.5% in 3 years. This is not a good indication that the company is doing bad in terms or total

asset turnover. They need to improve in order to get more asset turnovers.

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DEBT RATIO

Debt ratio means the proportion of total assets financed by the firm’s creditors. We know that,

the lower the debt Ratio is, the better it is.

Year 2014 2015 2016

Ratios 25.4% 24.85% 24.1%

From the box above, we can clearly see that the company’s debt ratio has decreased in 2015 from

25.4% to 24.85% and in 2016 o 24.1 %. So, we can say it is good for a company to have a lower

debt ratio.

GROSS PROFIT MARGIN

Gross profit margin means the percentage of each sales dollar remaining after the firm has paid

for its goods. The higher the gross profit is, the better it is.

Year 2014 2015 2016

Ratios 28.76% 26.34% 24.8%

As we can see, the gross profit margin has decreased from 28.76% to 26.34% from 2014 to 2015

and 24.8% in 2016. It is not good that it is declining over time. Lafarge is performing poorer than

the industry. This way the cost of goods will be higher and the product cost will also go up in the

market.

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NET PROFIT MARGIN

Net profit margin measures the percentage of each sales dollar remaining after all costs and

expenses, including interest, taxes, and preferred stock dividends, have been deducted. Like the

GPM and OPM, the upward slope is better for NPM.

Year 2014 2015 2016

Ratios 4.93% 4.03% 2.31%

Net income to sales ratio is very important in operating performance measurement. The Above

table reflects that, the N.P.M. of Lafarge Cement Limited declined from 4.93 to 2.31 over the

past 3 years. So Lafarge Cement Limited’s the generation of profit also increases slowly and it is

performing better than the industry.

RETURN ON TOTAL ASSET

Return on Total Asset means the overall effectiveness of management in generating profits with

its available assets. The higher the ROA is, the better it is.

Year 2014 2015 2016

Ratios 3.14% 2.38% 1.33%

The Above table reflects that, the ROA of Lafarge decreases from 3.14% to 1.33% in 2016. So,

we can say that Lafarge was not generating profit with its available assets effectively compared

to the Industry average.

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RETURN ON EQUITY

Return on equity means the return earned on the common stockholders’ investment in the firm.

The higher the ROE is, the better it is.

Year 2014 2015 2016

Ratios 4.22% 3.2% 1.75%

A return on 1 dollar means that every dollar of common stockholders' equity generates 1 dollar

of net income. The higher the ratio indicates higher the shareholders wealth maximization. The

above table illustrates that the ROE of Lafarge Surma Cement Limited decreased from 4.22% in

2014 to 1.75% in 2016. It kept on declining. The shareholder’s wealth is not maximized

compared to the industry average. Managers should use money effectively.

PRICE EARNING RATIO:

IT measures that one can analyze the market's stock valuation of a company and its shares

relative to the income the company is actually generating. The higher the ratio is, the better it is.

Year 2014 2015 2016

Ratios 6.71 7.25 8.26

The above table illustrates that the ROE of Lafarge Surma Cement Limited continued to increase

from 2014 to 2016. It is also noticeable that they also have higher confidence form shareholders

in terms of the industry average. So the overall performance of Lafarge Surma Limited was

good.

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HEIDELBERG CEMENT FINANCIAL RATIO ANALYSIS (RATRI SAHA-
1712431030)

CURRENT RATIO
YEAR 2014 2015 2016
2.33 1.96 1.73

3
2
1
0
2014 2015 2016

The current ratio is a liquidity and efficiency ratio that measures a firm's ability to pay off its
short-term liabilities with its current assets. Heidelberg Cement had experienced a steady
decrease in its current ratio from the year 2014-2016. It is evident that liquidity was low,
which might have led to difficulty in paying off debtors.

DEBT RATIO
YEAR 2014 2015 2016
0.36 0.40 0.45

Debt ratio
0.5

0.4

0.3

0.2 Debt ratio

0.1

0
2014 2015 2016

Debt Ratio is a debt management ratio that measures the amount of total liabilities
compared to the total assets of a company. The debt ratio kept rising from 2014-2016.
However, the change was slightly greater between the years 2015 to 2016. This might be
due to Heidelberg Cement issuing debentures or bonds.

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ACTIVITY RATIO
Year 2014 2015 2016
Inventory Turnover 8.27 8.08 5.25
Average collection 31.07 39.85 35.28
Period
Total Asset Turnover 1.03 1.07 1.04
Ratio

Average Collection Period


45
40
35
30
25
Average Collection
20
Period
15
10
5
0
2014 2015 2016

Inventory Turnover- Inventory turnover ratio is an efficiency ratio that shows how effectively
inventory is managed by comparing cost of goods sold with average inventory for a period.
This measures how many times average inventory is "turned" or sold during a period. The
Inventory turnover ratio of the company had a steady decrease over the years from 2014-
2016, suggesting they were lacking efficiency in selling their inventories. The company
experienced the lowest turnover in 2016, which is 5.25 times.

Average collection period- Average collection period is the average number of days
between 1) the date that a credit sale is made, and 2) the date that the money is received
from the customer. In 2014, the average collection period was 31.07 days, which meant that
it took approximately 1 month to recover the debt. The ratio raised to 39.85 days in 2015
however Heidelberg could not maintain the increase as the ratio again dropped in 2016.This
indicates that the company has inadequately managed the credit department. But relating
the increase in inventory turnover in 2015 and the average collection period, we get a
picture that in order to increase the sales the company has given its customers more time to
payback the debt, which can create chances of bad debt. The corrective measures that
could be taken are offering discounts and sending frequent reminders to customers, though
offering discount can affect the profitability of the company.

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PROFITABILITY RATIOS

YEAR 2014 2015 2016


Gross Profit Margin 19 24 26
Net Profit Margin 11 13 14
Return on asset 12 14 15
Return on equity 18 24 27

30

25

20

2014
15
2015
10 2016

0
Gross Profit Net Profit Margin Return on asset Return on equity
Margin
2
0

Gross Profit Margin: Gross profit margin is a profitability ratio of revenues remaining after
deducting the cost of goods sold to revenues. As for Heidelberg Cement Ltd. we can see
that the GP margin of the company is steadily rising which is a positive sign that the
company is working effectively. According to the report of the company, the gross profit has
been increased due to low cost of sales meaning, a better distribution channel has been
settled by the company.

Net Profit Margin: Net profit margin is the percentage of revenue left after all expenses have
been deducted from sales. The measurement reveals the amount of profit that a business
can extract from its total sales. In case for Heidelberg cement, in the year of 2014 to 2016
the net profit margin increased up to 14%. It means the company is getting highly efficient in
controlling its expenses over the years which resulted in the highest net profit for the year
ended 2016.

Return on equity: Return on Equity (ROE) is the most important of all the financial ratios to
investors in the company measures the return earned on the common stockholders’
investment in the firm.The ROE of the company has increased from 2014 to 2016. The
rising trend is due to the increase in profit margins and paying lower taxes in the respective
years.

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Price Earnings Ratio:
Year 2014 2015 2016
23.76 22.48 20.45

Price earnings ratio


25

24

23

22

Price earnings ratio


21

20

19

18
2014 2015 2016

Price earnings ratio: The price-earnings ratio (P/E Ratio) is the ratio for valuing a company
that measures its current share price relative to its per-share earnings. The price-earnings
ratio is also sometimes known as the price multiple or the earnings multiple. In essence, the
price earnings ratio indicates the dollar amount an investor can expect to invest in a
company in order to receive one dollar of that company’s earnings. The com[any’s P/E
ratios were pretty depressing over the years.. In 2014, the company had the highest ratio,
which shows that the expected price the investors were willing to pay for the return Tk.1
was Tk.23.76.

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PREMIER CEMENT FINANCIAL RATIOS-( FARDIN KIBRIA-1712435030)
Current Ratio:
The current ratio is the liquidity ratio of a company where the current assets are
divided by the current liabilities. The current ratio of Premier cements has
increased over the time. In 2014 it was 0.77:1 where as in 2015 it became 0.87:1.
In 2016 it improved more and became 1.05:1 which means that the current assets
were more than the current liabilities. In 2014 and in 2015 the current assets were
less than the current liabilities which means that the cash in hand and bank or the
trade receivables were very less. It also means that the had high number of trade
payables or creditors as well as bank overdraft etc. In 2016 they had more cash,
bank, trade receivables and as well as closing inventories. The overall current ratio
has improved over the years.
Average collection period:
The average collection period is the time or the amount of days by when the
debtors needs to pay back for the goods that they have purchased from Premier
cements on credit. The average collection period of 2014 and 2015 were almost the
same which means that they had the same debtors and sales per day in both of the
years. In 2016 the collection period rose from 64 days to 72 days which means
now it takes more time to collect the money from the debtors.
Gross profit margin:
The gross profit margin is the profit margin that we get by dividing the gross profit
by sales. The gross profit margin of Premier cements has fell from 2014 which was
17.19% to 15.29% in 2015. This means that their cost of sales has rose from 2014
to 2015 or the sales might have fallen. In 2016 the gross profit margin increased to
21.68% which means they might have increased their sales over the period of time
or maybe the cost of sales have decreased.
Net profit margin:
The net profit margin is the profit margin we get by dividing the net profit by sales.
The net profit margin of premier cements has decreased from 6.75% in 2014 to
5.04% in 2015. This means that the expenses and cost of sales has increased from
2014 to 2015 and also the sales may have fallen. The net profit margin in 2016 has
risen and almost doubled from 5.04% to 9.92%. This means that the sales may
have increased over the time and the expenses and cost of sales might have
decreased. So the business is improving.
Total asset turnover:
The total asset turnover is calculated by dividing Sales by total assets. The total
asset turnover has decreased in a huge number from 2014 which was 0.77 times to
0.08 times in 2015. This means that premier cements had a lot of assets but there

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sales were very less in 2015. In 2016 the turnover again rose to 0.95times. This
means that suddenly the sales of this company have risen in a huge number.
Debt Ratio:
The debt ratio is calculated when we divide the total liabilities by the total assets.
The debt ratios of premier cements were same in 2014 and 2015 which was 66%.
This means that the total assets and total liabilities were almost the same both of
the years. In 2016 the debt ratio fell to 57% which means that the business has
improved in 2016. The lesser the debt ratio the more better for a business.

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Cross Sectional Analysis
Current Ratio

Year 2014 2015 2016


Heidelberg 2.33 1.96 1.73
Premier 0.77 0.87 1.05
Crown 1.65 1.28 1.28
Lafarge 2.29 2.96 1.7
Industry Average 1.76 1.76 1.44

Comparing by the initial current ratios of all the companies, Heidelberg had a much
better liquidity position than all of its competitors and was relatively more solvent.
Premier has the lowest current ratio compare to the benchmark which indicates that the
company must have faced difficulties paying off its short-term obligations. However the
trend changed in 2015 where Lafarge company was ruling the industry with a higher
current ratio amount which is away above the benchmark but it failed to continue the
growth and in 2016, Heidelberg once again reached the top position and all the other 3
companies had current ratios which are below the bench mark.

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Activity Ratios
Inventory Turnover Ratios
12

10

2014
6
2015
2016
4

0
Heidelberg Premier Crown Lafarge

Heidelberg followed a decreasing trend over the years wheres Lafarge’s inventory
turnover ratio followed an increasing trend. This indicates that Hedelberg took much
longer to sell its inventory than its rival. The reason could be that it was charging too high
a price. However, having a high inventory turnover may not always be a good thing as it
could mean that inventories are being sold off cheaply and not necessarily reflect better
inventory control. Premier cement kept on fluctuating its values over the years. On the
other hand crown cement succeeds to maintain the top position from its competitors in all
the 3 years from 2014-16.

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Average Collection Period
120

100

80

2014
60
2015
2016
40

20

0
Heidelberg Premier Crown Lafarge

In 2016, all the companies had a greater average collection period compare to the
previous years which means all of them wanted to boost their sales by selling more items
on credit. Lafarge might have experienced cash flow problems as money took longer to
be received. On the other hand Heidelberg has a better average collection period ratio
compare to its competitors.

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Debt Ratio

0.7

0.6

0.5

0.4 2014
2015
0.3
2016

0.2

0.1

0
Heidelberg Premier Crown Lafarge

Lafarge, in comparison to its competitors, is in a less risky position as its debt financing
is relatively low. Overall, an incredible proportion of Premier is financed by debt.
However, low debt ratios may also indicate that Lafarge is not taking advantage of the
increased profits that financial leverage may bring.

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Gross Profit Margin

It can be seen Heidelberg was doing better in terms of profitability than its competitors as
Year 2014 2015 2016
Heidelberg 0.19 0.24 0.26
Premier 0.17 0.15 0.21
Crown 0.15 0.18 0.18
Lafarge 0.28 0.26 0.24
it generated more profit from revenues after deduction of cost of goods sold. Therefore it
was selling its inventory much more profitably than its rival.

Net Profit Margin


Year 2014 2015 2016
Heidelberg 0.11 0.13 0.26
Premier 0.06 0.05 0.21
Crown 0.08 0.08 0.18
Lafarge 0.04 0.04 0.24

Crown cement mostly had the lowest net profit margin compare to its rivals. This shows
that crown needs to control its expenditure and try to cut down on unnecessary costs as
well as increase its selling prices to boost its sales revenue if it plans to improve its net
profit margin. Lafarge showed a tremendous growth starting from being lowest in 2014 to
reaching above the benchmark in 2016. It means it has controlled its expenses really well.

Recommendations
Lafarge needs to pay close attention to some key profitability, liquidity, activity, debt and
market ratios if it plans to improve its current unprofitable business situation.
The following recommendations are suggested:
Reduce debt ratio by:
Increasing the amount paid monthly toward its debt. Extra payments can help lower its
overall debt more quickly.
Avoiding more debt financing.
Postponing large purchases so you're using less credit
Increase gross profit margin by:
Readjusting sales mix
Increasing prices
Reducing costs of goods sold by switching to cheaper supplies
Reducing inventory waste

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Increase operating profit margin by:
Reducing cost of goods sold. Review all of the expenses that relate to its cost of goods
sold.
Increasing sales revenue.
Reducing labor and operations costs.

Increase earnings per share by:


Revenue growth, perhaps by increasing sales prices.
Margin expansion where it must lower its costs as a percentage of revenue.

Increase total asset turnover:


Increasing sales revenue by raising prices.
Improving efficiency. Find ways to use its assets more efficiently.
Selling assets not needed.

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