Page | 1

Table of Contents

CHAPTER 1 .............................................................................................................................. 2

1.1 Introduction ...................................................................................................................... 2

1.2 Objectives ......................................................................................................................... 2

1.3 Methodology .................................................................................................................... 2

1.3.1 Data sources .................................................................................................................. 2

1.3.2 Time Frame ................................................................................................................... 3

1.3.2 Scope of Report ............................................................................................................. 3

CHAPTER 2 .............................................................................................................................. 4

2.1 Analysis of Economic ...................................................................................................... 4

2.2 Industry Analysis.............................................................................................................. 4

2.2.1 Porter’s Five Forces Model ........................................................................................... 5

CHAPTER 3 .............................................................................................................................. 7

3.1 Ratio Analysis of the Company: ...................................................................................... 7

A. Liquidity Ratio .................................................................................................................. 7

B. Efficiency & Activity Ratio............................................................................................... 8

C. Leverage Ratio................................................................................................................. 10

D. Profitability Ratio ............................................................................................................ 11

3.2 DuPont 3 Factor ............................................................................................................. 12

3.3 DuPont 5 Factor ............................................................................................................. 12

3.4 Common Size Analysis .................................................................................................. 13

3.5 Sensitivity Analysis........................................................................................................ 14

CHAPTER 4 ............................................................................................................................ 15

4.1 Conclusion...................................................................................................................... 15

References: ........................................................................................................................... 15

Page | 2

CHAPTER 1

1.1 Introduction

In the current world, number of people are increasing. World is facing problem in

accommodating all these people. Therefore, there have been a gradual substitution of

traditional building structures or patterns by modern high-rise ones which has pushed up

the use of cement. A faster growth in demand for cement has been observed only since mid -

1980s, especially with implementation of large infrastructure projects, increased pace of

urbanization, construction of apartment buildings and multistoried shopping complexes in

urban areas and a shift in the taste of rural people for modern houses.

1.2 Objectives

For more in-depth knowledge about Heidelberg Cement Bangladesh Limited’s

performance and policy, I will have to conduct relevant ratio analysis with the help of data

presented in its financial statements.

To know the financial performance.

Better understanding of the ratio.

Assess Heidelberg Cement Bangladesh Limited dividend policy and any trend of

dividend.

Calculate Heidelberg Cement Bangladesh Limited financial ratio to estimate its

performance graph.

1.3 Methodology

The purpose of the report was to collect data, process them and reach a conclusion based

on facts. Basic form of data collection could have been used" Primary and secondary. But

collection of primary data is very difficult given the time constraint and due to the fact that

the company might not want to provide confidential information. Therefore, to work on the

report, secondary sources of information has been used which were mainly internet

journals, annual report of the company found on the internet.

1.3.1 Data sources

To complete my report the main source of data is:

Dhaka Stock Exchange

Company Website.

Annual Report.

Internet.

.

Page | 3

1.3.2 Time Frame

I took all data previous year from company website (2012-2016)

1.3.2 Scope of Report

To complete this report I have already done

Financial Position

Statement of comprehensive income

Financial Ratio

DuPont Three and Five factor.

Common size analysis

FCF method

DDM method

Page | 4

CHAPTER 2

2.1 Analysis of Economic

Bangladesh has shown remarkable macroeconomic resilience, and its economy has grown

steadily over the past five years. Overall entrepreneurial activity is disadvantaged by an

uncertain regulatory environment, poor infrastructure, and the absence of effective long- term

institutional support for private- sector development.

GDP- $ 226 billion (nominal 2017)

$ 686 billion (PPP 2017)

GDP Growth Rate- 7.28%

GDP per capita $ 1,602

Inflation 6.7% (2016)

2.2 Industry Analysis

Development of cement industry in Bangladesh dates back to the early-fifties but its growth in

real sense started only about a decade. The country has been experiencing an upsurge in cement

consumption for the last five years. Government gave permission for establishing cement

industries in Bangladesh in FY-1995. Initially the cement industry took place without the

proper analysis of the demand and supply of cement in the country. Within the span of the two

to three years, industry attained expanded capacity of the product with stable growth rate of

consumption. There were mainly four dominant players in the cement industry in the year 1998

that produced their own cement to meet the demand of their customers. These companies were:

Meghna Cement (Owned by Bashundhara Group)

Eastern Cement (Currently known as seven Horse)

Chatok Cement

Chittagong Cement (Taken over by Heidelberg)

At present, installed capacity of the Bangladesh cement industry is about 25 MN MT, whereas

demand for cement is about 15 MN MT. And, the total market size is nearly US$1.74bn.

Average capacity utilization rate is 65%-75% and some of the renowned companies are

producing at more than 100% capacity utilization level through sub-contract.

Page | 5

2.2.1 Porter’s Five Forces Model

The five forces were porter’s conclusions on the reasons for differing level of competition and

hence profitability in differing industries. They are empirically derived by observation of real

companies in real markets, rather than the result of economic analysis. Porter’s five forces is a

useful generic structure for thinking about the nature of industries.

1. Threat of New Enters

Power is also affected by the ability of people to enter market. If it costs little in time

or money to enter market and compete effectively, there are few economic of scale in

place or little protection for key technologies, then new competitors can quickly enter

market and weaken position. If company have strong and durable barriers to entry then

company can preserve a favorable position and take fair advantage.

2. Rivalry Among Existing Firm

Competitive Rivalry refers to the competitive struggle between companies in the same

industry to gain market share from each other.

Cost Conditions

High fixed costs – profitability leveraged by sales volume.

Slow demand and growth – can result in intense rivalry and lower profits.

3. Threats of Substitute Products

Substitute Products are the products from different businesses or industries that can

satisfy similar customer needs. The existence of close substitutes is a strong competitive

threat. Substitutes limit the price that companies can charge for their product.

Substitutes are a weak competitive force if an industry’s products have few close

substitutes

4. Bargain Power of Buyers

Industry Buyers may be the consumers or end-users who ultimately use the product or

intermediaries that distribute or retail the products. These buyers are most powerful

when buyers are dominant.

Buyers are large and few in number: The industry supplying the product is composed

of many small companies.

Buyers purchase in large quantities: Buyers have purchasing power as leverage for price

reductions

5. Bargain Power of Supplier

Suppliers are organizations that provide inputs such as material and labor into the

industry. These suppliers are most powerful when:

Page | 6

The product supplied is vital to the industry and has few substitutes. The industry is not

an important customer to suppliers. Suppliers are not significantly affected by the

industry.

High Barrier

Low

Moderate Low

High

Page | 7

CHAPTER 3

3.1 Ratio Analysis of the Company:

A. Liquidity Ratio

Liquidity ratio 2012 2013 2014 2015 2016

Current Ratio 2.64 2.91 2.33 1.96 1.73

Quick Ratio 3.02 2.64 2.98 1.77 1.07

Cash Ratio 1.62 2.08 1.57 1.28 1.00

Interpretation:

Current Ratio: One of the most general and frequently used of these liquidity ratios is the

current ratio. Organizations use current ratio to measure the firm’s ability to meet short-term

obligations. Current assets divided by current liabilities. It shows a firm’s ability to cover its

current liabilities with its current assets. 2013 is better for company.

Quick Ratio: A measure of liquidity calculated by divining the firm’s current assets minus

inventory by current liabilities. The quick ratio provides a greater measure of overall liquid ity

only when a firm’s inventory can’t be easily converted into cash. 2012 is better than other

years.

Cash Ratio: Cash ratio measures a company's total cash and cash equivalents to its current

liabilities. The cash ratio is most commonly used as a measure of company liquidity. It can

therefore determine if, and how quickly, the company can repay its short-term debt. A strong

cash ratio is useful to creditors when deciding how much debt, if any, they would be willing to

extend to the asking party. The cash ratio is generally a more conservative look at a company's

ability to cover its liabilities than many other liquidity ratios. So 2013 is better year than other

years.

0.00

1.00

2.00

3.00

4.00

1 2 3 4 5

Liquidity Ratio

Current ratio Quick ratio cash ratio

Page | 8

B. Efficiency & Activity Ratio

Active Ratio 2012 2013 2014 2015 2016

A/R Turnover 11.86 11.51 10.57 10.35 9.26

Average Collection Period

40.7 31.3 34.1 34.8 38.9

Inventory

Turnover

7.41 6.98 8.28 8.84 5.25

Inventory Processing Period

48.61 51.57 43.49 40.72 48.51

A/P Turnover 4.6 3.6 3.4 3.0 2.2

Payable Payment

Period

77.65 100.48 104.42 120.81 122.41

Operating Cycle 89.3 82.9 77.6 75.5 87.4

Cash Conversion Period

11.7 17.6 26.9 45.3 53.0

Total Asset

Turnover

1.2 0.9 1.0 1.7 1.0

Current Asset Turnover

1.93 1.42 1.63 1.95 1.59

Fixed Asset

Turnover

3.1 2.7 2.8 2.9 3.0

Equity Turnover 1.73 1.33 1.61 18.14 1.90

A/rTurno

ver

Average

collection

period

Inventory

Turnover

Inventory

processingperio

d

A/PTurno

ver

Payable

payment

period

operating

cycle

cashconversionperio

d

Totalassetturno

ver

current

assetturno

ver

fixedassetturno

ver

equityturno

ver

Series1 11.86 40.7 7.41 48.61 4.6 77.65 89.3 11.7 1.2 1.93 3.1 1.73

Series2 11.51 31.3 6.98 51.57 3.6 100.48 82.9 17.6 0.9 1.42 2.7 1.33

Series3 10.57 34.1 8.28 43.49 3.4 104.42 77.6 26.9 1.0 1.63 2.8 1.61

Series4 10.35 34.8 8.84 40.72 3.0 120.81 75.5 45.3 1.7 1.95 2.9 18.14

Series5 9.26 38.9 5.25 48.51 2.2 122.41 87.4 53.0 1.0 1.59 3.0 1.90

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

Activity Ratio

Series1 Series2 Series3 Series4 Series5

Page | 9

Interpretation:

Account Receivable Turnover: efficiency of extending credit and collecting same. Higher is

batter so 2015 is suitable for company.

Average Collection Period: Represent number of day to collect receivables. Lower time

period is better. 2013 is better in this case.

Inventory Turnover: Represent number of time. High ratio indicate company perform well.

So 2015 is best for this purpose.

Inventory Processing Period: How many day inventory sit in warehouse. So shorter is better.

2015 is best year than others.

Account Payable Turnover: Represent number of time to pay its account payable during year.

Low ratio is better for company. 2016 is better for company.

Payable Payment Period: Represent number of day paying obligation to supplier. Higher ratio

is better for company. 2016 is the beast year.

Operating Cycle: Company generate sales and collets cash faster so short time is better for

company. 2015 is suitable for company cycle.

Cash Conversion Cycle: How much day convert cash into more cash. So in this situation

shorter term is better for company. 2012 is suitable for company.

Total Asset Turnover: How efficiently your business generates sales on each dollar of assets.

Current Asset Turnover: Firms ability generating sales use its current asset. Higher is better

for company. So 2015 was suitable for company.

Fixed Asset Turnover: An increasing ratio indicates you are using your assets more

productively. 2012 was suitable for company operation.

Equity Turnover: Higher is better, because company sell and earn shareholder equity in time.

So 2015 is better year.

Page | 10

C. Leverage Ratio

Leverage Ratio 2012 2013 2014 2015 2016

Debt Ratio 2.7 2.5 1.8 1.3 1.8

Debt Equity

Ratio

1.0020 1.0017 1.0019 1.0022 1.0023

Time Interest Earned

1.2 1.9 1.5 0.09 0.890

Fixed Cost

Coverage Ratio

1.98 1.68 1.79 0.97 0.8

Interpretation:

Debt Ratio: debt ratio measures the proportion of total assets provided by the firm’s creditors.

So 2012 is better year for company.

Debt to Equity Ratio: The debt-equity ratio indicates the relationship between the long- term

funds provided by creditors and those provided by the firm’s owners. 2016 is suitable for

company.

Time Interest Earned: The Time interest Earned Ratio measures the ability to meet

contractual interest payments. 2013 was the best year for time interest earned.

Fixed Cost Coverage Ratio: The Fixed-Payment Coverage ratio measures the ability to meet

all fixed-payment obligations. 2012 was favorable for company.

0.0

1.0

2.0

3.0

1 2 3 4 5

Leverage Ratio

debt ratio Debt equity ratio Time interest earned Fixed cost coverage ratio

Page | 11

D. Profitability Ratio

Profitability

Ratio

2012 2013 2014 2015 2016

Gross Profit Margin

19% 23% 19% 24% 26%

Operating Profit

Margin

14% 17% 12% 16% 18%

Net Profit Margin 12% 15% 11% 13% 14%

Return on Asset 14% 14% 12% 16% 15%

Return on Equity 17% 13% 16% 18% 19%

Interpretation

Gross Profit Margin: The gross profit margin indicates the percentage of each sales remaining

after the firm has paid for its goods. The higher the gross profit margin the better, and the lower

the relative cost of merchandise sold. 2016 is best year for gross profit margin.

Operating Profit Margin: The Operating Profit margin represents what are often called the

pure profits earned on each sales. A higher operating profit margin is preferred. 2016 is good

for company operation.

Net Profit Margin: The net profit margin measures the percentage of each sales remaining

after all expenses, including taxes, have deducted. The higher the firm’s net profit margin is

better. The net profit margin is a commonly cited measure of the corporation’s success with

respect to earnings on sales. 2013 is favorable for company.

Return on Asset: The Return on investment (ROI), which is often called the firm’s return on

total assets, measures the overall effectiveness of management in generating profits with its

available assets. 2015 is more suitable for company.

Return on Equity: The Return of Equity (ROE) measures the return earned on the owner’s

(both preferred and common stockholder’s) investment. Generally, the higher this return, the

better off the owners. 2016 was better than others.

0%

5%

10%

15%

20%

25%

30%

gross pfofitmargin

operating profitmargin

net profit margin return on asset return on equity

Profitability Ratio

Series1 Series2 Series3 Series4 Series5

Page | 12

3.2 DuPont 3 Factor

DuPont 3 factor

2012 2013 2014 2015 2016

ROE 20% 20% 18% 24% 27%

Interpretation: We can see that 2016 is strong point of company than others. Others is weak

point company must improve it.

3.3 DuPont 5 Factor

DuPont 5 factor

2012 2013 2014 2015 2016

ROE 20% 20% 18% 24% 27%

Interpretation: Also we see hare 2016 is the best for company.

0%

5%

10%

15%

20%

25%

30%

2012 2013 2014 2015 2016

ROE

0%

5%

10%

15%

20%

25%

30%

2012 2013 2014 2015 2016

ROE

Page | 13

3.4 Common Size Analysis

Particular 2012 2013 2014 2015 2016

Revenue 100% 100% 100% 100% 100%

Costs of Sales 81% 77% 81% 76% 74%

Gross Profit 19% 23% 19% 24% 26%

Other Operating Income 0% 0% 0% 0% 1%

Distribution expenses 2% 2% 3% 4% 4%

General and administrative expenses 3% 5% 4% 5% 5%

Operating Profit/ (loss) 14% 17% 12% 16% 18% Contribution to Workers' Profit Participation and Welfare Funds 1% 1% 1% 1% 1%

Finance Expenses 0% 0% 0% 0% 0%

Finance Income 3% 5% 4% 3% 2%

Other revenues and profits 0% 0% 0% 0% 0%

Profit / (loss) Before Tax 17% 20% 16% 18% 20%

Income Tax Expense 5% 6% 5% 5% 5%

Profit / (loss) for the Period 12% 15% 11% 13% 14%

The number of shares 1% 1% 1% 1% 1%

Page | 14

3.5 Sensitivity Analysis

Base case of Hedelberg Cement

Particular NPM TAT EM ROE

2012 0.12 1.2 1.5 0.21

2013 0.15 0.9 1.4 0.19

2014 0.11 1 1.1 0.12

2015 0.13 1.7 1.7 0.37

2016 0.14 1 1.8 0.25

Sensitivity of NPM with ROE

Particular NPM TAT EM ROE Change

2012 0.12 1.2 1.5 0.22 0

2013 0.15 1.2 1.5 0.27 0.23

2014 0.11 1.2 1.5 0.20 -0.26

2015 0.13 1.2 1.5 0.23 0.15

2016 0.14 1.2 1.5 0.25 0.09

Average 21%

Sensitivity of TAT with ROE

Particular NPM TAT EM ROE Change

2012 0.12 1.2 1.5 0.22 0

2013 0.12 0.9 1.5 0.16 -0.27

2014 0.12 1 1.5 0.18 0.13

2015 0.12 1.7 1.5 0.31 0.72

2016 0.12 1 1.5 0.18 -0.91

Average 33%

Sensitivity of EM with ROE

Particular NPM TAT EM ROE Change

2012 0.12 1.2 1.46 0.21 0

2013 0.12 1.2 1.43 0.21 0

2014 0.12 1.2 1.12 0.16 -0.23

2015 0.12 1.2 1.69 0.24 0.5

2016 0.12 1.2 1.82 0.26 0.08

Average 35%

Interpretation: In this case company much use equity multiplier.

Page | 15

CHAPTER 4

4.1 Conclusion

Cement industry is one of the prominent manufacturing industry in Bangladesh. They are

contributing in the infrastructure development of the country. Although there are lots of cement

company exist in Bangladesh, only 7 of them are listed in the Dhaka Stock Exchange. More of

the companies should be listed in the capital market.

Cement companies have significant contribution to the economy of Bangladesh. These

companies have created lots of employment opportunities. Product of these companies are fully

consumed in Bangladesh. Moreover they are exporting their product to the outside world.

These way they are earning valuable foreign currency for the country.

When investing in these cement companies, an investor should first analyze the financ ia l

statements. They should understand the accounting environment and industry practice. After

these they should analyze the previous and prospective performance of the companies.

References:

http://www.dsebd.org/displayCompany.php?name=HEIDELBCEM

http://www.heidelbergcementbd.com/investors_relation.aspx

https://www.linkedin.com/company/heidelbergcement/