Financial Performance Analysis

Premier Cement Mills Limited

 Daffodil international university
Course Title: Financial Analysis & Control
Course Code: FIN - 405

Prepared For:
Md. Kamruzzaman Didar
Senior Lecturer
Department of Business Administration
Faculty of Business & Economics

Prepared For by:

Md. Harunur rashid
ID-152-11-4677
Department of Business Administration
Faculty of Business & Economics

Submission Date: 20-April-2018

 Letter of Transmittal
April 20, 2018

Md. Kamruzzaman Didar

Senior Lecturer
Department of Business Administration
Daffodil International University
Subject: Submission of report on Premier Cement Mills Limited
Honorable sir,
This is a great pleasure for me to submit the report on “Analysis of Different Corporate Finance
Aspects” as a partial requirement for Financial Analysis and Control course with you. Writing this
report has been a great pleasure & an interesting experience. It enabled me to analyze a company
in different corporate finance aspects such as valuation, financial statement analysis, DuPont
analysis, Common size Analysis and Trend analysis. This project helped me tremendously to
understand the implication of theoretical knowledge in the practical field. It has also shaped some
of my basic views like how to communicate & carry oneself in the world of business.

I have undertaken sincere effort for successful completion of the report. It has to be mentioned
further that without your advice and cooperation it would not be possible for me to complete this
report. I shall be gratified to answer any sort of queries you think necessary regarding this report.

Therefore, I expect your kind consideration in this regard, I will be very grateful if you accept my
report and oblige thereby.

Sincerely,
Name: Md.Harunur Rashid
ID: 152-11-4677
Department of Business Administration,
Daffodil International University
1.1 Introduction:
Every decision made in a business has financial implications, and any decision that involves the
use of money is a financial decision. All businesses have to invest their resources wisely, find the
right kind and mix of financing to fund these investments, and return cash to the owners if there
are not enough good investments. Before making any type of decision like investment or financing
Decision Corporation must analyze the real condition of the firm with quantitative data. The
financing principle suggests that the right financing mix for a firm is one that maximizes the value
of the investments made. The dividend principle requires that cash generated in excess of good
project needs be returned to the owners. These principles are the core for corporate finance.

1.2 Objective:
The main objective of the study is to analyze financial condition of Premier Cement and cement
industry of Bangladesh specially 3 selected companies of identical sector.
The specific objectives are as follows:
• To analyze the ratios of Heidelberg cement Bangladesh
• To calculate the financial condition of the company
• To analyze the financial statements of the Heidelberg Cement Bangladesh
• To analyze sensitivity of ROE of Heidelberg cement
• To analyze trend and common size

1.3 Methodology:
I used Microsoft excel as my calculation tool and formatted all the information in Microsoft excel
and from that calculation I prepared this term paper and PowerPoint presentation.
1.3.1 Data Source:
The entire report is prepared depending solely on secondary data, taken from the Internet and
Premier Cement Mills Limited
-No primary data were obtained.
-The report will be descriptive.
2.1 Analysis of Economy:
Bangladesh’s economic freedom score is 55.1, making its economy the 128th freest in the 2018
Index. Its overall score has increased by 0.1 point, with improvements in the scores for judicial
effectiveness and government integrity outpacing declines in property rights, trade freedom, and
labor freedom. Bangladesh is ranked 29th among 43 countries in the Asia–Pacific region, and its
overall score is below the regional and world averages.
Bangladesh’s economy has grown by approximately 6 percent annually for two decades despite
prolonged political instability, poor infrastructure, endemic corruption, insufficient power
supplies, and slow implementation of economic reforms. The fragile rule of law continues to
undermine economic development. Corruption and marginal enforcement of property rights force
workers and small businesses into the informal economy. Despite some streamlining of business
regulations, entrepreneurial activity is also hampered by an uncertain regulatory environment and
the absence of effective institutional support for private-sector development.

2.2 Industry Analysis:

There are many competitors of Heidelberg Cement. Among them are both the establishes local
brands and also some multinational brands. The companies which are the competitors of Premier
Cement Mills Limited are mainly those companies which are on the higher rating scale of Premier
Cement like Shah Cement, Heidelberg Cement, Meghna Cement Mills (Bashundhara Group),
Holcim BD ltd, Seven Circle, Unique Cement Industries, M.I. Cement Factory and Akij Surma.
Be it in terms of brand image, product quality or Sales, each of these companies have their own
distinctive feature for which they are positioned in a higher rank than Premier Cement. Thus,
Premier Cement sees these Companies as their competitors as they are constantly fighting with
these companies to reach their desired position in the market. However, the cement companies
which are just below Premier Cement in ranking are also viewed as competitors and the company
always keeps a look out for these companies’ activities. It is so because these companies can take
the position of Heidelberg Cement any day. Thus, both the cement companies performing better
than Heidelberg Cement and the ones performing at the same level as Premier Cement are the
competitors of the company.
2.2.1 Porter’s five forces model

Threat from New Entrants (High)

Rivalry among Existing Firms (Low)

Threat from Substitute Products (Low)

Bargaining Power of Buyers (Low)

Bargaining Power of the Supplier (High)

 Threat of new Entrants:

Threat of new entrants in cement industry is high. Because of lower legal barrier. Demand for
cement is increasing day by day. As Bangladesh is a small country so transportation throughout
the country is easy. So, distribution access is easy in Bangladesh. It is a great opportunity for
potential competitors. That is why threat of new entrants is high
 Threat of substitute product:
Threat of substitute product for cement industry is very low because peoples are willing to
increase the height of building as it is fewer resources consuming. Land is limited but there is
no burden of height. So, buildings of wood is not suitable and others material for high heighted
building is much costly. So, threat of substitute product is very low.
 Rivalry among Existing firms:
Rivalry among existing Cement Company is high. Because their capacity to produce is higher
than the total demand from the market. Industry is also growing rapidly so competition is
growing. There is a little opportunity differentiate cement. They can only offer different size
of bags. So lower chance of innovation. It is one of the important reasons for high competition.
  Bargaining power of buyers:
Bargaining power of buyer is low. Because all the cements are relatively same price with no
differentiation. Importance of the product is high for construction. So, buyer has to purchase
it.

 Bargaining power of suppliers:

Bargaining power of suppliers is medium. Cement is created from different stones and these
stones are not available in Bangladesh. The number of suppliers are limited for these raw
material. So, switching cost is high also raw materials are necessary to produce that is why we
cannot deny its importance.

2.3 Selection of company:

Premier Cement Mills Limited, is one of the leading innovative cement manufacturers in
Bangladesh. Premier Cement Mills Limited started commercial production on 12th March 2004
with its 1st Unit having a production capacity of 0.6 million tons per annum. In January 2011,
Production Unit-2 was installed with a capacity of another 0.6 million ton per annum.
From November 2012 Premier Cement started production with its 3rd and 4th Units, having a
combined annual capacity of 1.2 million tons, in order to meet the additional market demand. Now
the company runs with an annual production capacity of 2.4 million tons (8,000 tons per day) with
700 employees involved in its operation at both home and abroad.

The company uses the most sophisticated cement plant namely FLS SMIDTH of Denmark, Packer
from HAVER & BOECKER GmbH Germany and machineries maintaining EUROPEAN
standards and qualities. The factory is located at West Muktarpur, Munshiganj. On the front side
of the factory land is the Dhaka-Munshiganj road and on the rear side is the river Shitalakhya
which meets with the river Dhaleshwari and further downstream, both the rivers fall into the
mighty Meghna. Thus, the factory site has marvelous accessibility both by land and river
2.4 Mission & Vision:
Work towards the development of the society through sustainable growth and high quality
performance.
Provide satisfaction to customers, an enjoyable working environment for the employees & to
create value for the stakeholders
We have very basic, well specified goals and objectives. These include:
• To improve comprehensively on our current success areas.
• To improve our brand image
• To satisfy our customers.
• To be among the top 5 cement manufacturers in Bangladesh,
• To earn reasonable profits.
• To capture the target market share

3.1 Ratio Analysis of the Company:

A. Liquidity Ratios:
Liquidity Ratio
Particulars 2012 2013 2014 2015 2016
Current Ratio 0.68 0.75 0.77 0.87 1.06
Quick Ratio 0.52 0.56 0.51 0.59 0.83
Cash Ratio 0.03 0.09 0.03 0.03 0.05

Interpretation:

Current Ratio: Refers to the ability to repay its current obligations by its current asset. When
current ratio increases than companies doesn’t increase profitability but increase liquidity. Here
2012 is the best because company invest money another sector. Current ratio is the small than
others years so 2012 is the best.
Quick Ratio: It Refers Capacity to repay current obligation by quick assets. Which asset have for
repay current liabilities. Here 2012 the best because company reinvest.
Cash ratio: It refers how much cash the company have to repay current liabilities. Here 2012 is
the best because company invest money another sector.
B. Efficiency & Activity Ratios:
Efficiency/Activity Ratio
Particulars 2012 2013 2014 2016 2016
Accounts Receivable Turnover 6.4 6.1 5.7 5.8 4.9
Average Collection Period 56.0 59.4 63.1 61.8 73.0
Inventory Turnover 7.0 6.7 4.9 5.3 7.5
Inventory Processing Period 51.4 54.0 73.9 68.4 48.2
Accounts Payable Turnover 9.2 6.5 22.3 19.6 14.2
Payable Payment Period 38.9 55.7 16.1 18.4 25.4
Total Asset Turnover 0.6 0.8 0.8 0.8 0.9
Fixed Assed Turnover 3.8 6.4 5.2 4.3 4.1
Current Asset Turnover 1.9 2.0 2.0 1.9 2.1
Equity Turnover 1.9 2.0 2.3 2.4 2.2

Interpretation:

A/R Turnover (Times): how many times a company collects money from its account receivable.
Here 2012 is better because it is higher than others
Collection Period (Days): It refers that after how many days a company collects money from its
A/R
It’s also low is better so 2012 is the best from other years.
Inventory Turnover (Times): It refers that how many times the company purchase inventory.
Higher one is beater so 2016s the best.
Inventory Conversion time (Days): It refers that after how many days the company purchase
inventory. Its low is better so 2016 is better.
Account Payable Turnover (Times): It refers that how many times a company make payment to
its account payable. Lower one is better so 2012 is best because it is lower than from others.
Payable Payment Period (Days): It refers that after how many days the company make payment
to its A/P.
Total Asset Turnover: It refers that how effectively a company can utilize its asset to generate
sells. Higher one is better so 2016 is better because it is higher than others.
Fixed Assed Turnover: It refers that how effectively a company can utilize its fixed asset to
generate sells. Higher one is better so 2013 is better because it is higher than others.
Current Asset Turnover: It refers that how effectively a company can utilize its current asset to
generate sells. Higher one is better so 2016 is better because it is higher than others
Equity Turnover: It refers that how effectively a company can utilize owner equity to generate
sells. Higher one is better so 2015 is better because it is higher than others.
C. Solvency Ratios:
Solvency/Leverage Ratio
Particulars 2012 2013 2014 2016 2016
Debt Ratio 0.66 0.62 0.66 0.66 0.60
Debt to Equity Ratio 0.42 0.19 0.33 0.44 0.36
TIE or Interest Coverage Ratio 27.63 29.47 2.69 46.13 33.22
Fixed Cost Coverage Ratio

Interpretation:

Debt Ratio: It refers that how much asset of total asset we purchase from liability/ is financed by
debt.
D to Equity Ratio: How much debt a company is using to finance its asset relative to the value
of shareholder’s equity. It’s also high is better than lower.so 2016 is better.
TIE or Interest Coverage Ratio: It refers that how much EBIT a company has to repay interest.

D. Profitability Ratio:
Profitability Ratio
Particulars 2012 2013 2014 2016 2016
Gross Profit Margin 12% 18% 17% 15% 21%
Operating Profit Margin 11% 18% 15% 11% 15%
Net Profit Margin 4% 8% 7% 5% 7%
Return on Asset 3% 6% 5% 4% 6%
Gross Return on Asset 7% 13% 11% 9% 13%
Return on Equity 8% 16% 15% 12% 16%

Interpretation:

Gross Profit Margin: It refers that how much profit a company makes after paying its cogs.
Operating Profit Margin: How much profit a company make after paying for variable costs of
production such as wages costs of production such as wages raw materials etc.
 Net Profit Margin: It measure how much net income a company makes from total sales
Its high better.so 2013 & 2016 is better than other years.

3.2 Du Pont Analysis:

3Factor DuPont Analysis
Particulars 2013 2014 2015 2016 2017
NPM 4% 8% 7% 5% 7%
TAT 0.6 0.8 0.8 0.8 0.9
EM 2.9 2.6 3.0 3.0 2.5
ROE 8% 16% 15% 12% 16%

Interpretation:

3.3 Sensitivity Analysis:

Sensitivity analysis of NPM
Year NPM TAT EM ROE Changes
2013 4% 0.6 2.9 8%
2014 8% 0.6 2.9 15% 0.91
2015 7% 0.6 2.9 13% -0.13
2016 5% 0.6 2.9 10% -0.25
2017 7% 0.6 2.9 14% 0.46
AVG 0.25
STD 0.54

Sensitivity analysis of TAT

Year NPM TAT EM ROE Changes
2013 4% 0.6 2.9 8%
2014 4% 0.8 2.9 9% 0.16
2015 4% 0.8 2.9 9% 0.02
2016 4% 0.8 2.9 10% 0.04
2017 4% 0.9 2.9 10% 0.08
AVG 0.08
STD 0.06
 Sensitivity analysis of EM
Year NPM TAT EM ROE Changes
2013 4% 0.6 2.9 8%
2014 4% 0.6 2.6 7% -0.10
2015 4% 0.6 3.0 8% 0.12
2016 4% 0.6 3.0 8% 0.00
2017 4% 0.6 2.5 7% -0.16
AVG -0.03
STD 0.12

Interpretation:

3.4 Common Size Analysis:

Premier Cement Mills Limited
Balance Sheet
Particulars 2012 2013 2014 2015 2016
Property Plant & Equipment 36% 61% 56% 58% 58%
Investments in Subsidiaries 0% 0% 0% 0% 0%
Capital Work in Progress 30% 2% 5% 1% 0%
Total Non-Current Assets 67% 62% 61% 59% 59%
Inventory 8% 9% 13% 13% 9%
Trade receivables 10% 12% 13% 14% 17%
Other receivables 1% 2% 2% 13% 11%
Short term investments 0% 0% 0% 0% 2%
Cash & cash equivalents 1% 5% 1% 2% 2%
Prepayments 13% 9% 10% 0% 0%
Total Current Assets 33% 38% 39% 41% 41%
Total Assets 100% 100% 100% 100% 100%
Share Capital 41% 33% 32% 31% 24%
Share Money Deposits 0% 7% 6% 6% 0%
Revaluation Reserve 16% 11% 11% 10% 23%
Retained Earnings 25% 33% 35% 37% 41%
Reserves 0% 0% 0% 0% 0%
Other Equity Components 0% 0% 0% 0% 0%
Reserve on Consolidation 0% 0% 0% 2% 0%
Share Premium 14% 14% 13% 13% 10%
Non-controlling interest 3% 2% 2% 0% 2%
Total Equity 100% 100% 100% 100% 100%
Long Term Debt 14% 7% 11% 15% 15%
Interest Bearing Borrowings to related parties 0% 0% 0% 0% 3%
Defferred Tax Liabilities 2% 4% 3% 3% 3%
Employee Benefits 0% 0% 0% 0% 1%
Deferred liability-Gratuity 0% 0% 1% 1% 0%
Total Non Current Liabilities 17% 12% 15% 19% 21%
Trade Payables 6% 10% 3% 3% 5%
Other payables 0% 0% 0% 1% 1%
Short term loans 0% 0% 0% 38% 27%
Payable for other finance 1% 1% 1% 0% 0%
Current tax liabilities 1% 0% 1% 0% 0%
Provision for other liabilities and charges 0% 0% 0% 0% 2%
Current portion of long term debt 2% 2% 2% 5% 4%
Short Term bank loan 38% 37% 44% 0% 0%
Total Current Liabilities 49% 50% 51% 48% 39%
Total Owners Equity & Liabilities 100% 100% 100% 100% 100%
Book Value Per Share 0% 0% 0% 0% 0%

Premier Cement Mills Limited

Income Statement
Particulars 2012 2013 2014 2015 2016
Revenue 100% 100% 100% 100% 100%
Costs of Sales 88% 82% 83% 85% 79%
Gross Profit 12% 18% 17% 15% 21%
Other Operating Income 4% 4% 2% 0% 0%
Other Operating Profit/ (loss) 0% 0% 0% 1% 0%
Distribution expenses 3% 3% 4% 4% 5%
General and administrative expenses 1% 2% 1% 1% 1%
Operating Profit/ (loss) 11% 18% 15% 11% 15%
Contribution to Workers' Profit Participation and 0% 1% 0% 0% 0%
Welfare Funds
Net Finance costs 0% 0% 5% 0% 0%
Finance Expenses 3% 5% 0% 6% 5%
Profit / (loss) Before Tax 8% 12% 9% 5% 10%
Income Tax Expense 3% 4% 2% 0% 2%
Profit / (loss) for the Period 4% 8% 7% 5% 7%
Profit Attributable to Equity Holders 4% 8% 7% 5% 0%
The number of shares 2% 2% 1% 1% 1%
Earnings Per Share - Basic 0% 0% 0% 0% 0%

3.5 Trend Analysis

Premier Cement Mills Limited
Balance Sheet
Particulars 2012 2013 2014 2015 2016
Property Plant & Equipment 100 214 227 245% 264%
% % %
Investments in Subsidiaries
Capital Work in Progress 100 8% 24% 3% 2%
%
Total Non-Current Assets 100 121 135 135% 145%
% % %
Inventory 100 147 239 243% 184%
% % %
Trade receivables 100 159 198 209% 285%
% % %
Other receivables 100 217 305 2160% 1923%
% % %
Short term investments
Cash & cash equivalents 100 468 155 190% 241%
% % %
Prepayments 100 95% 110 0% 0%
% %
Total Current Assets 100 145 175 189% 202%
% % %
Total Assets 100 129 148 153% 164%
% % %
Share Capital 100 113 113 113% 113%
% % %
Share Money Deposits
Revaluation Reserve 100 98% 97% 96% 269%
%
Retained Earnings 100 187 202 218% 308%
% % %
Reserves 100 100 0% 0% 0%
% %
Other Equity Components
Reserve on Consolidation
Share Premium 100 142 142 142% 142%
% % %
Non-controlling interest 100 108 115 0% 134%
% % %
Total Equity 100 142 146 150% 193%
% % %
Long Term Debt 100 65% 116 161% 169%
% %
Interest Bearing Borrowings to related parties
Deferred Tax Liabilities 100 221 191 185% 195%
% % %
Employee Benefits
Deferred liability-Gratuity 100 151 223 305% 0%
% % %
Total Non-Current Liabilities 100 89% 129 168% 204%
% %
Trade Payables 100 200 69% 86% 128%
% %
Other payables
Short term loans
Payable for other finance 100 88% 100 0% 59%
% %
Current tax liabilities 100 41% 162 0% 0%
% %
Provision for other liabilities and charges 100 219 192 277% 1055%
% % %
Current portion of long term debt 100 128 132 347% 333%
% % %
Short Term bank loan 100 126 174 0% 0%
% % %
Total Current Liabilities 100 133 157 149% 130%
% % %
Total Owners Equity & Liabilities 100 129 148 153% 164%
% % %
Book Value Per Share 100 126 130 133% 171%
% % %

Premier Cement Mills Limited

Income Statement
Particulars 2012 2013 2014 2015 2016
Revenue 100% 150% 176% 189% 218%
Costs of Sales 100% 140% 166% 183% 196%
Gross Profit 100% 217% 244% 233% 374%
Other Operating Income 100% 177% 120% 0% 20%
Other Operating Profit/ (loss)
Distribution expenses 100% 140% 191% 254% 327%
General and administrative expenses 100% 167% 171% 140% 202%
Operating Profit/ (loss) 100% 233% 229% 188% 285%
Contribution to Workers' Profit Participation and 100% 219% 192% 113% 237%
Welfare Funds
Net Finance costs
Finance Expenses 100% 229% 0% 320% 309%
Profit / (loss) Before Tax 100% 236% 215% 134% 277%
Income Tax Expense 100% 176% 125% 15% 136%
Profit / (loss) for the Period 100% 286% 292% 235% 396%
Profit Attributable to Equity Holders 100% 286% 292% 235% 0%
The number of shares 100% 113% 113% 113% 113%
Earnings Per Share - Basic 100% 253% 258% 207% 350%
4.1. Conclusion:
Financial analysis determines a company’s health and stability, providing an understanding of how
the company conducts its business. But it is important to know that financial statement analysis
has its limitations as well. Different accounting methods adopted by different firms’ changes the
visible health and profit levels for either better or worse. Different analysts may get different results
from the same information. Hence, we must conclude that financial statement analysis is only one
of the tools while taking an investment decision.

I have learned a lot of things like ratio analysis and which factors are responsible for outstanding
performance and which factors are causing lower profits. ROE decomposition and sensitivity of
ROE is one of the best learning by this report. By trend analysis and common size analysis I could
able to determine how much cost or investment a company does in particular sector also how much
the company growing each year.

I believe that this will be helpful for my future job life and this is one of my best learning as a
finance student.
Bibliography:
1. http://www.dsebd.org/
2. http://lankabd.com/
3. http://www.heidelbergcementbd.com/
4. http://www.lightcastlebd.com/insights/2016/03/28/market-insight-cement-industry
5. http://www.cementequipment.org/home/raw-materials-used-cement-production/
6. http://idlc.com/