A comparison of three cement industries are present in the Emirates today and this report is

an analysis of the different financial statements and ratios. The companies chosen are Union
Cement Company, RAS Al Kamiah Cement Company, Fujairah and Gulf Cement Company.

 Financial ratios were calculated to analyze trends and to compare the firm’s financials
to that of other firms.

 The trend analysis of all the years was calculated to examine the percentage
improvements of each company.

 The comparative analysis is then done to compare all the compiled data calculated for
all the companies to estimate the crucial factors, assumptions and forecasts.

Comparison of GCC with UCC and RAKCC for Cross sectional Analysis .

Neel and Sajid were right while comparing Gulf Cement Company with RAK Cement or
UCC because for cross – sectional analysis, it is most effective when 2 companies of the
same industries are compared since a better estimate of the financial position of the company
can be deduced. Additionally, it is equally important that they compare the financial
statements of the company in the same year to have a better understanding and comparison of
its position in the market. When comparing the target firm to competitors, the analyst must be
careful to consider the unique operating characteristics of each company and how that will
affect any comparative metrics used.

Criteria to be followed for selection of the company for

Comparison

It is an analysis an investor, analyst or portfolio manager may conduct on a company in

relation to that company's industry or industry peers. The analysis compares one company
against the industry it operates within, or directly against certain competitors within the same
industry, in an attempt to discover the best of the breed. When conducting a cross-sectional
analysis, the analyst seeks to identify, by using comparative metrics, the valuation, debt-load,
future outlook and/or operational efficiency of the target company. This allows the analyst
to evaluate the target company's efficiency in these areas, and to make the best investment
choice among a group of competitors or the industry as a whole.

While selecting the company for comparison, the following criteria should be followed:

1. It should belong to the same industry and comparisons should be made amongst
companies within the same financial year
2. The company should identify the Average performer in its segment so as to compare
itself to the same
3. It should also compare itself with its close competitors to understand its lead and lag
and the percentage of the variance. The same could be done with its Industry leaders
to note the difference in competition within the same industry.

VARIOUS RATIOS TO BE CONSIDERED FOR THE COMPARISION .

1. Profitability Ratio ( Gross profit margin , Net profit margin , Return of assets ,
Return of equity )
2. Liquidity Ratio (Current ratio ,Quick ratio , Cash ratio )
3. Solvency Ratio ( Total Debt Ratio , Debt to equity ratio , Interest coverage ratio ,
)
4. Efficiency Ratio (Total Assets , Inventory turnover ratio , Receivables turnover
ratio )

Ratios GCC UCC RAK

2007 2008 2007 2008 2007 2008
PROFITABILITY RATIO
GROSS
29.22 30.55 22.7 19.07 18 21
MARGIN
NET MARGIN 0.502 0.002 25.54 13.99 16.39 18.79
RETURN ON
0.205 0.001 0.116 0.101 0.07 0.0885
ASSETS
RETURN ON
0.2338 0.0013 0.12 0.109 0.075 0.0996
EQUITY
EPS 0.50 0.003 0.27 0.24 0.11 0.17
LIQUIDITY RATIO
CURRENT
8.69 7.455 4.5 3.899 4.72 3.461
RATIO
QUICK
7.748 5.947 3.36 2.35 3.8 2.86
RATIO
CASH RATIO 5.59 3.45 0.768 0.306 1.429 0.9344
 SOLVENCY RATIO
TOTAL DEBT
0.074 0.316 0.07 0.11 0.07 0.11
RATIO
DEBT
EQUITY 0.409 0.30 0.187 0.207 0.075 0.122
RATIO
EFFICIENCY RATIO
ASSET
TURNOVER 0.409 0.595 0.457 0.724 0.4294 0.4712
RATIO
INVENTORY
TURNOVER 5.884 4.717 6.612 6.169 5.73 3.07
RATIO
RECEIVABLE
S TURNOVER 2.555 3.079 4.7 4.631 2.63 2.25
RATIO
AVERAGE 118.5
- 89.79 - 57.3 -
SALE PERIOD

The ratios of Gulf Cement company is very high. This means that the company has huge
amount of current assets as compared to their liabilities. The company is in a good liquidity
state though its net profit is low. This implies that incase of a short term loan, it would
receive a grant from the bank easily since it is in a good financial position.

However, on the other hand, the company is not using its assets to efficiently and effectively,
since its Return On Assets is very low. It implies that the company’s assets are not utilized.

PROFITABILITY COMPARISION

The Return on Investments of GCC was higher. But in 2008, there was recession and hence,
the cement company suffered. This was because, the revenue was received by the company
since, much of the revenue has been increased because of the boom in the cement industry in
2007. Hence, the market value of its stock has increased which has generated revenue. There
was a huge profit on the investment. However, in 2008, because of the recession, the gross
margin decreased considerably.

Solvency comparison

For GCC, the debts would have increased considerably. However, the assets would have
decreased only marginally for GCC. While comparing the ratios, we observe that in GCC, the
debt ratio has increased over the year. This does not signify a good financial position of the
company. However, for the other 2 companies, the ratios have increased, but not to an extent
of the GCC.

Efficiency Comparison

Average Receivable turnover ratio increasing in GCC since, the company is unable to recover
their money from the debtors. This in turn, has caused a decrease in the working capital. The
same has not been observed with RAK Cement or UCC

The Average Sale period of GCC is 89 days, which implies that it takes 89 days for the
company to sell of its products. However, UCC takes 57.3 days and RAK Cement takes
118.5 days to sell of its products. This implies that UCC is a more stable company than GCC
or RAK Cement, since it takes lesser time to sell of its products.

we have used the original three step calculation method for DuPont analysis, which is
affected by the following:

Dupont Analysis :-

we have used the original three step calculation method for DuPont analysis, which is
affected by the following:

 1.      Operating efficiency, which is measured by profit margin

Profit margin = Net profit

Sales                                  
 
2.      Asset use efficiency, which is measured by total asset turnover

Total Asset Turnover =    Sales

                                         Assets
 
3.      Financial Leverage, which is measured by the equity multiplier
Equity Multiplier = Assets
                                 Equity
 
If Return on Equity is unsatisfactory, the DuPont analysis helps locate the part of the business
that is underperforming. Therefore, shows us the real picture behind ROE. The formula for
ROE under DuPont is:

ROE = Operating efficiency X Asset use Efficiency X Financial Leverage

 1.      Operating efficiency, which is measured by profit margin

Profit margin = Net profit

Sales                                  
 
2.      Asset use efficiency, which is measured by total asset turnover

Total Asset Turnover =    Sales

                                         Assets
 
3.      Financial Leverage, which is measured by the equity multiplier
Equity Multiplier = Assets
                                 Equity
 
If Return on Equity is unsatisfactory, the DuPont analysis helps locate the part of the business
that is underperforming. Therefore, shows us the real picture behind ROE. The formula for
ROE under DuPont is:

ROE = Operating efficiency X Asset use Efficiency X Financial Leverage

Sajid can remove the size effect by preparing common size statement, which is expressed in
terms of percentages.

This statement is useful when there are companies of different size than directly comparing
them becomes very difficult because there might be company whose profit in thousands is
very high and a company whose profit in crores may be vey less. At that point we should
prepare common size statement

Common size income statement and common size balance sheet will be very helpful while
comparing companies assets and profits the company is making during the financial period.