Comprehensive Review On Bangladesh Cement Industry, August 2019 PDF

EBL Securities Limited
Bangladesh Cement Industry:

Resilient; Better Days Await
51
187
45
172
39
33
33
31
142
27
27
25
125
23
22
118
20
19
16
16
15
101 102
95
2011 2012 2013 2014 2015 2016 2017 2018 2011 2012 2013 2014 2015 2016 2017 2018
Sales Vol (Mn MT) Effective Capacity (Mn MT) Per Capita Cement Consumption (KG)
Growth Drivers:
• Massive Infrastructure Investment
• Growth of Real Estate Sector
Masud Khan, FCA, FCMA • Rising Inward Remittance
Chief Executive Officer, • Increasing Personal Income
Crown Cement Group • Huge Home Loan Interest Rate Cut for
Govt. Employees
Expert’s View: Interview with Masud Khan • Growing Urban Population
“Cement industry in Bangladesh has come a long way over
the years. Once a cement importing nation, Bangladesh is Challenges:
now exporting cement to its neighboring countries. The • Mounting Overcapacity
outlook for the industry is very robust; we are expecting • Intense Competition among Industry
double digit industry growth mainly driven by government Players
• Price Volatility of Imported Raw Materials
demand. But, Profitability still remains a worry for all. The
• Foreign Exchange Risk
scenario shall change in the coming days.”
EBL Securities Research
Bangladesh Cement Industry Review
Executive Summary
Bangladesh cement industry, one of the fastest growing cement markets in the world, grew at
approximately 11.5% CAGR over the last seven years as demand doubled from 14.6 million MT per
year to around 31.3 million MT per year. Per capita cement consumption in Bangladesh almost
doubled from 95 KG in 2011 to 187 KG in 2018. Despite huge growth of the industry in last two
decades, Bangladesh is still one of the lowest consumers of cement in the world.
Approximately 81% of the total market share is held by top ten manufacturers. By the end of 2018,
local manufacturers had grabbed 86% of the market, a reversal in scenario from 15 years earlier.
Once a cement importer, Bangladesh is now a cement exporting nation. Bangladesh exported
cement worth US$12.59 million during FY17-18, compared to US$10.79 million earned in the year
before representing 16.68% growth in export earnings YoY with India being the main destination for
cement exports.
On the back of massive infrastructure investment by the government, rising remittance income,
growing urban population and impressive GDP growth, cement demand is expected to grow at even
higher than the historical rate.
Although self-sufficient in cement production, Bangladesh needs to import almost all of the raw
materials used in cement manufacturing. Moreover, increased raw materials price and intense price
war have squeezed the profit margin for cement manufacturers. Recent changes in tax laws, higher
fuel & transportation cost and cost of fund have added more sufferings for the industry players.
Hence, although the outlook for cement demand growth is very robust; profitability still remains a
concern for all.
This research report is a property of EBL Securities Ltd.

N.B.: Disclaimer of EBL Securities Ltd, author(s) certification and rating definition have been provided at the end of the report.
Recent Developments in the Cement Industry
Gas Price Hike Changes to Tax laws
Government increased gas price (per cubic meter) for - - 5% AIT (Advance Income Tax) paid on imported raw
materials will be considered minimum tax from FY
- Industries: BDT 7.76 to BDT 10.7 (38% increase) 2019-20.
- Power: BDT 3.16 to BDT 4.45 (41% increase) - Additional 5% advance tax (AT) has been levied on
- Captive Power: BDT 9.62 to BDT 13.85 (44% increase) import of raw materials and other ingredients
Probable Impact Probable Impact
 Minimal for grinders  Major negative impact on cement manufacturers.

 Manufacturers with gas based captive power plants  Companies will have to pay tax on raw materials
are likely to face higher impact import even if they don’t make any profit.
 Integrated plants use gas as a raw material. Hence,  Manufacturers will have to increase cement price by
expected impact for Lafarge Holcim Bangladesh approximately BDT 42 for such adjustment.
Limited was supposed to be higher. But, LHBL have
got long term fixed price gas supply agreement with
Jalalabad Gas Transmission and Distribution System Remittance Hits All Time High
Limited which is valid until end of 2025. So, the Remittance inflow grew by 9.47% to hit record $16.4
impact is expected to be minimal for them as well. billion in fiscal year (FY) 2018-19. In 2017-18 fiscal year
 As per the estimation of BCMA, production cost for remittance was $14.98 billion.
cement manufacturers may go up by 11 taka per bag
on average.
Probable Impact
 Cement consumption by Individual Home Builders’
Expatriates to receive 2% incentive on remittance (IHB) may increase following such surge in
The government is going to provide 2% incentive on remittance. IHBs consume approximately 30% of the
money remitted by expatriate Bangladeshis from FY 2019- total cement produced in Bangladesh.
20 onwards
According to Cement manufacturers association (BCMA),

Probable Impact Cement production cost may go up as high as BDT 53 per
 Declared cash incentive would encourage expatriates bag following gas price hike and changes to tax laws.
to send more remittance to Bangladesh. Hence, However, industry players could not increase price by that
individual home builders’ spending power is expected much due to intense competition.
to increase.
Analyst:
Asif Islam
Research Analyst,
EBL Securities Limited
asif@eblsecurities.com

BANGLADESH CEMENT INDUSTRY: RESILIENT; BETTER DAYS AWAIT

Despite getting battered by skyrocketing raw materials price, escalating interest rate, price
hike of complementary goods, overcapacity and weakening domestic currency,
Bangladesh cement industry posted 15.49% growth in 2018. Annual cement consumption
stood at about 31.3 million MT in 20181. Bangladesh exported cement worth US$12.59 Annual consumption of cement
million during FY17-18, compared to US$10.79 million earned in the year before according was around 31.3 million MT in 2018
to Export Promotion Bureau. This
Industry Demand represent a growth of 16.68% in
35 22.5% 25%
export earnings YoY with India being

30
16.4% 15.5% the main destination for cement

20%
14.3%
25 exports. 15%
7.4% 7.6%
20 10%
Bangladesh is one of the fastest

15
3.0% 5% growing cement markets in the
15 16 16 19 20 23 27 31 world and the industry grew at
10 0%
2011 2012 2013 2014 2015 2016 2017 2018

approximately 11.5% CAGR over the
Sales Vol (Mn MT) Growth %
last seven years as demand doubled
from 14.6 million MT per year to
Source: Annual Reports of listed companies, BCMA, Newspapers &
EBLSL Research
around 31.3 million MT per year.
But until the first half of 1990s, approximately 95% of the country's cement demand were
met through import. After getting positive nod from the Government, several
multinational manufacturers and local entrepreneurs rushed into the industry in late 90’s.
Since 1994, more than 120 companies registered as cement manufacturer, out of which
The industry grew at
75 came into operation. In the following years, dependency on import diminished approximately 11.5% CAGR over
significantly and local companies started flourishing. Later in 2003, Bangladesh started the last seven years
exporting cement for the very first time. Presently, cement is reportedly being exported to
India, Myanmar, Nepal, Maldives and Sri Lanka. At present, largest global players like
LafargeHolcim Ltd. and HeidelbergCement Ltd. along with 30 other local and Multinational
manufacturers are operating in Bangladesh cement industry. Seven cement manufacturing
companies are currently listed on stock exchanges.
Demand is forecasted to remain strong in most Asian markets; Global demand may slow down as
consumption in China is expected to fall in the coming years
World Cement Production, 2017 Cement production reached an
estimated 2.4 billion metric tons in
America Cement markets will remain
Africa 7%
China in 2018, compared to 4.1
Oceania attractive, with high single-digit or
5% billion metric tons of cement
0% double-digit growth in India,
Europe produced worldwide. Chinese Vietnam, Indonesia, the
6% economy, representing more than Philippines, and Bangladesh
50% of world cement demand, has according to World Cement
Association
slowed down and the country’s
cement market has become
Asia stagnant. The World Cement
82% Association (WCA) expects Chinese
Source: European Cement Association (CEMBUREAU) demand to grow by only 0.5% in
2019. However, WCA forecasts solid cement demand growth for Asian markets. It expects
1
Annual Report 2018, LafargeHolcim Bangladesh Limited
Page 1 of 19
that cement markets will remain attractive, with high single-digit or double-digit growth in
India, Vietnam, Indonesia, the Philippines, and Bangladesh.
Meanwhile Business Wire, a Berkshire Hathaway Company, opines that the global cement
market is expected to reach over US$ 725 billion by 2025, expanding at a CAGR of 7.3% Global cement market is expected
from 2017 to 2025. Factors such as increasing urbanization and industrialization are to reach over US$ 725 billion by
currently fueling the growth of the global cement market. 2025
Per Capita cement consumption is increasing but still way below the
world average; indicating huge scope for growth
Per capita cement consumption in Bangladesh almost doubled from 95 KG in 2011 to 187
KG in 2018. Despite huge growth of the industry in last two decades, Bangladesh is still one Per capita cement consumption in
of the lowest consumers of cement in the world. 2 Ongoing construction projects are Bangladesh almost doubled from
contributing towards the growing demand of cement but delayed implementation of 95 KG in 2011 to 187 KG in 2018
projects are curtailing the full potential and speed of the consumption growth of cement.
Per Capita Cement Consumption (KG) 187 Per Capita Cement Consumption (KG) in 2018
172 World Average 563
Bangladesh 187
142
Mayanmar 270
125
118 India 312
101 102 Thiland 500
95
Malaysia 800
South Korea 1250
China 1700
2011 2012 2013 2014 2015 2016 2017 2018
Source: World Bank Database, Annual Reports of listed companies & EBLSL Research Source: thedailystar.net, World Bank, International Cement Review &
EBLSL Research
Industry getting concentrated; Top 10 producers meet approximately 81% of total demand
Approximately 81% of the total market share is held by top ten Market Share of Listed Companies
manufacturers. Among the top 10 cement market players in Heidelberg
Cement,
Bangladesh, 8 are local and 2 are multinational.3 Multinational cement 5.14% LafargeHolcim,
8.31%
Crown
companies are facing intense competition from local companies which Cement,
are gaining more business through lower pricing, superior products 7.03%
Confidence
offerings, extensive branding and better relationship marketing. Cement,
1.82%
Aramit
By the end of 2018, local manufacturers had grabbed 86% of the Cement,
0.99%
market, a reversal in scenario from 15 years earlier, when the Meghna
Cement,
multinational companies ruled the industry, according to data from 2.91%
the Bangladesh Cement Manufacturers Association 4. After failing to Premier
Others, Cement,
penetrate the market, two of the global cement group, UAE based 71.74% 5.36%
Emirates Cement and Mexico-based cement manufacturer Cemex
divested their Bangladesh operations by 2016. Source: Annual Reports of listed companies (2017-18), Newspapers & EBLSL Research
2 https://www.thedailystar.net/business/cement-consumption-grow-steadily-1581961
3 https://www.dhakatribune.com/business/2018/11/11/local-cement-companies-thriving-over-multinationals
4 https://www.thedailystar.net/business/news/local-cement-makers-edge-out-global-giants-1705267
Page 2 of 19
Industry players are expanding capacities aggressively speculating future growth

In recent years, cement producers have significantly increased production capacity
anticipating huge demand in the industry given soaring income level, outstanding
economic growth, and the number
Effective Capacity (Million MT) and Growth of mega-projects being undertaken.
60
25% Total cement production capacity
45
51 Though over-capacity exists in the
50
is expected to reach about 65
39
20% industry, market demand is almost
million tons by 2019
33 equal to the effective capacity
40
33
15%
27
25
30
22 during peak season. Total cement

10%
20
production capacity is expected to

5%
10
reach about 65 million tons by

0
0% 2019.5 However, due to
2011 2012 2013 2014 2015 2016 2017 2018
interruption in power supply and
Capacity Growth %
other constraints, effective capacity
Source: Annual Reports of listed companies & EBLSL Research
is expected to be lower.
Source: EBLSL Research and Annual Reports

Major Cement Companies, Installed Capacity & Expansion Plan
Installed
Post-Expansion Expected
Major Cement Capacity (Million
Promoter Brand Capacity* Year of
Companies MT/Year)
(Million MT/Year) Completion
Up to May, 2019
Bashundhara Cement Bashundhara Cement 5.05 5.65 2020
Bashundhara Group
Meghna Cement King Brand Cement 0.90 2.90 2019
Shun Shing Group International
Seven Rings Cement Seven Rings Cement 3.50 8.50 N/A
Ltd.
Premier Cement Premier Cement Mills Limited Premier Cement 3.00 8.00 2019
Shah Cement Abul Khair Group Shah Cement 6.05 - -
Crown Cement M. I. Cement Factory Ltd. Crown Cement 3.30 5.80 2021
Aman Cement Aman Group Amancem 3.76 - -
Unique Cement (Fresh) Meghna Group Fresh Cement 3.60 -
Supercrete (PLC);
Holcim Strong Cement: 3.4 - -
LafargeHolcim LafargeHolcim and Cementos Structure (PCC);
Bangladesh Ltd. Molins Holcim Red (OPC);
Holcim Grey; Clinker: 1.4 - -
PLASTERCRETE
HC Netherlands Holding B.V
HeidelbergCement Scan Cement & Ruby
(39.8%), HC Asia Holding GmbH, 2.38 2.85 Sept, 2019
Bangladesh Limited Cement
Germany (20.86%)
Akij Cement Akij Group Akij Cement 1.20 - -
Confidence Cement Confidence Group Confidence Cement 1.05 - -
Royal Cement Kabir Steel Group & BSA Group Royal Cement 1.00 - -
Aramit Cement Aramit Group Camel Brand Cement 0.61 - -
Anwar Cement Anwar Group Anwar Cement 0.60 - -
Tiger Cement Madina Cement Industries Ltd. Tiger Cement 0.36 - -
Source: Annual Reports of Listed Companies (2017-18), Company Websites & EBLSL Research
PLC=Portland Limestone Cement; PCC= Portland Composite Cement; OPC=Ordinary Portland cement;
*Ranked Based on Post-expansion capacity
5 Annual Report (2017-2018), M. I. Cement Factory Ltd.
Page 3 of 19
[9] Annual Report I 2017-2018, M. I. Cement Factory Ltd.
Cement industry witnessed price hike due to increased cost of raw materials, transportation and
fuel & power
Price of all major raw materials such as clinker, slag, fly ash, gypsum and limestone went
up significantly in last two years. 90% of the clinker, the main raw material for cement, is
imported from Vietnam. In late 2017, Chinese government started to discourage clinker
production from integrated plants having wet kilns to reduce environmental damage.
Later, Chinese manufacturers started importing clinker from its nearest source – Vietnam.
Following the sudden increased demand, Clinker price rose by almost $10 per ton. So,
cement manufacturers had to increase cement price in the beginning of 2018. Now, clinker
is being imported at around $47 - $50 per ton.
600 0
Import Price (BDT Per MT)
500 0
2013 2014 2015 2016 2017 2018

400 0
300 0
200 0
4,971
5,152
4,910
4,200
4,275
4,683
2,760
2,597
2,481
2,302
2,245
2,575
2,015
2,017
2,148
2,150
2,025
2,119
2,763
2,885
2,613
2,102
2,245
2,706
2,185
2,015
2,020
2,409
100 0
0
0
0
Clinker Gypsum Fly ash Slag Lime stone

Source: Annual Reports of Premier Cement Mills Limited & EBLSL Research
Additionally, Govt has recently decided to increase gas price from BDT 7.76 to BDT 10.7
(37.89%) for manufacturing industries, from BDT 3.16 to BDT 4.45 (40.82%) for power
generation companies and from BDT 9.62 to BDT 13.85 (43.97%) for captive power
companies. According to industry experts, impact of such move is going to be minimal for
grinders. However, manufacturers with gas based captive power plants are likely to face
higher impact. As per the estimation of BCMA (Bangladesh Cement Manufacturers’ Impact of gas price hike is going to
Association), production cost for cement manufacturers may go up by 11 taka per bag on be minimal for grinders. However,
average as a result of such gas price adjustment. manufacturers with gas based
captive power plants are likely to
Moreover, until the current fiscal year, cement manufactures paid 5 percent advance face higher impact.
income tax (AIT) to import raw materials and the tax was adjustable. The AIT to be paid by
the cement makers to import raw materials will be treated as the minimum tax from the
fiscal year of 2019-20, according to the proposal of the National Board of Revenue (NBR).
According to industry insiders, the bid to consider 5 percent AIT as the minimum tax will
put increased burden on them. They already pay source tax against the supply of cement
locally. In addition, manufacturers will have to pay 5 percent advance tax (AT) while
importing raw materials and other required ingredients. This will increase the operational
cost and thus the prices of cement, according to the BCMA.
To combat increased gas price and impact of changes to Tax law, manufacturers may have
to increase cement price by 53 Taka per bag of cement. But, given the existing rivalry and
price war among industry players, it is very unlikely that cement manufacturers would be
able to increase cement price by that much.
Freight costs have also increased sharply due to higher fuel and charter cost. The situation
has been exacerbated by the major devaluation of taka versus the US dollar, sharp rise of
transportation cost due to weight restriction imposed by the government on highways,
and spiraling financing costs due to huge liquidity crisis.
Page 4 of 19
According to a survey of The Daily Star in February 2019, local brands' cement were selling
for BDT 395 to BDT 420 per bag. In contrast, each bag of cement of multinational brand
costs BDT 418 to BDT 450.6 As per another report published in The Daily Star on 7th July
2019, retail price of each 50-kg bag of cement has edged up 12 percent, or Tk 50, to Tk
460-470 - a development that will push up construction costs, be it the government’s mega
projects or private buildings.7
Retail Price of Cement in Dhaka (BDT per 50 KG Bag)

Price in 2015 Price in 2016 Price in 2017 Price in 2018 Price in 2019
510
485
490
470
460 460 463
470 455 455
450 450
450 440 440 440 440 440440 437
435 435 435
430 425 430 430 430 430 430
430 420 420
415
410 410 410 410
400 405 405 390 390
410 400 400 400
395
390 390 390 390
385 385
390 380
370
370
Holcim Supercrete Scan Fresh Akij Crown Bashundhara Premier Shah Cement Confidence Cement
Source: EBLSL Research
Technological shift is taking place

Larger cement manufacturers including Shah Cement, Bashundhara Cement and MI
Cement have started implementing Vertical Roller Mill (VRM), one of the most advanced Larger cement manufacturers are
technology in cement production. VRM technology ensures high fineness, better Particle implementing VRM technology
Size Distribution (PSD), faster setting time, and less energy consumption.8 This technology
also enables cement manufacturers to produce Slag cement as well as use higher amount
of slag in PCC (Portland composite cement). Hence, VRM technology is expected to lower
production cost for cement manufacturers.
6 https://www.thedailystar.net/business/news/local-cement-makers-edge-out-global-giants-1705267
7 https://www.thedailystar.net/business/news/cement-price-rises-tk-50-bag-1767622
8 http://bashundharacement.com/vrm-the-latest-Technology
Page 5 of 19
Nearly 60% of the cement is consumed during winter

Winter (November to April) is considered to be the peak season while demand for cement
plummets during the monsoon (June to October). This sharp decline in demand during the
monsoon is due to slowdown in construction activities. According to the industry experts, 60% of the total yearly sales is
60% of the total yearly sales is generated in the first half of the year while the rest is generated during the first half of the
generated in the second half. year while the rest is generated in
the second half
Peak Season Dull/off season
November to June to October
April/May (Depends on monsoon)
Market demand soars during peak season to match or even cross the effective capacity at Seasonality of cement demand is
times. Manufacturers give incentive, commission and foreign trip campaign to the decreasing, thanks to the growing
employed executives and dealers/distributors/traders over the year while taking government demand for cement in
promotional activities in off peak season. However, seasonality of cement demand is ongoing infrastructural projects.
decreasing, thanks to the growing government demand for cement in ongoing
infrastructural projects.
Mega projects consume the biggest portion of cement produced; Demand is still concentrated in
Dhaka and Chittagong
In broader aspect cement consumers in Bangladesh can be grouped into two large
segments- private and public. Previously individual homebuilders made highest Public sector consumes nearly 35%
contribution towards demand for cement but recent mega projects undertaken by the of cement manufactured
government have helped public sector to be the biggest consumer of cement. According
to industry insiders, individual home builders (IHB) and commercial real estate developers
consume nearly 30% and 35% of the total cement produced while the public sector
consumes almost 35% of cement manufactured.
In Bangladesh, business operation of most cement manufacturers is geographically

concentrated. Cement consumption also varies regionally. Approximately, three-fourth of Approximately, three-fourth of the
the cement produced is consumed in Dhaka and Chittagong division alone. However, with cement produced is consumed in
growing income level a major change is now apparent in the rural economy of Bangladesh Dhaka and Chittagong division
alone
that resulted into increased consumption of cement in remote areas as well. Especially,
cement demand is growing fast in the northern, western and southern parts of Bangladesh.
Diminishing quality of cement with time and high transportation cost make it harder for
the manufacturers to supply cement to distant areas from the plant location.
Cement Consumption (%)
35% 30% Individual Home Builders

Commercial Developers
Public Sector
35%
Source: Industry experts & EBLSL Research
Page 6 of 19
Cost Structure
The industry is largely dependent on import to meet raw materials requirement; hence, highly
susceptible to raw materials price hike and foreign exchange movement
Although self-sufficient in cement production, Bangladesh needs to import almost all of Prime raw materials of cement –
the raw materials used in cement manufacturing. Bangladesh has scarcity of mineral Clinker, Limestone, Gypsum, Slag
resources, such as limestone, and hence, is not capable of meeting demand for clinker, and Fly Ash - are mostly imported
the prime material of cement. Only two companies have clinker production facilities at
their plants: Chhatak Cement Factory Ltd, a government owned company, and Lafarge
Surma Cement Ltd. Lafarge Surma Bangladesh produces 1.3 million tons to 1.4 Raw Materials Consumption, Metric Ton (%)
million tons of clinker a year, accounting for 7-8 percent of the yearly market
Fly Ash,
demand.9 Limestone ,
11.8%
5.9%
As a result, major cement manufacturers are importing required raw materials

including clinker, gypsum, fly ash and iron slag from abroad and using grinding
technology to produce cement. Most of the manufacturers import clinker from Slag, 11.2%
Vietnam, China, Hong Kong, India, and Indonesia. Few manufacturers use local
Clinker,
limestone collected from Sylhet. Majority portion of imported fly ash is sourced Gypsum, 66.8%
4.3%
from India; slag is imported from China, India, Japan and Singapore while
Gypsum is sourced from China, India, Indonesia and Japan.
Source: Annual Reports of listed companies (2017-18) & EBLSL Research
Brent Crude Oil USD Per Barrel Crude oil and clinker price movement
5600 Source: EBLSL Research and Annual Reports 140
110.8 5300 120
109.95
5000 100
93.23 4700 80
108.09 4400 60
55.27 72.21
66.73 4100 40
3800 20
77.91
50.57 3500 0
37.28
Dec
Dec
Dec
Mar
Mar
Dec
Mar
Dec
Mar
Dec
Sept
Sept
Sept
Sept
Sept
Sept
June
March
June
June
June
June
June
March
56.82
35.82
Dec, Dec, Dec, Dec, Dec, Dec, Dec, Dec, Dec, Dec, Dec, May, 2012 2013 2014 2015 2016 2017 2018 2019
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Brent Crude Oil Price per barrel ($) Clinker Per MT (BDT)
USD Per Barrel Average Expon. (Clinker Per MT (BDT))
Source: MacroTrends, businessinsider & EBLSL Research
As cement is a low margin product, any increase in raw materials cost seriously affects the Correction in clinker price might
profitability of cement manufacturers. Price of all major cement ingredients - Clinker, slag not be as large as expected as
and gypsum – went up in the international market in 2018. Moreover, from the end of China has been concentrating on
2017 China started importing clinker from Vietnam, the main source of clinker for importing from neighboring
Bangladesh. To add to the woes, BDT/USD exchange rate skyrocketed and crude oil price countries as opposed to
manufacturing clinker
reached two-year high in 2018 forcing production and transportation cost to increase
significantly. Although, Crude oil price showed a huge decline during the last quarter of
2018, the situation started to reverse from the beginning of 2019. As crude oil price and
Clinker price showed a correlation coefficient of 0.66 (based on data from Dec 2012 to Sept
2018), clinker price may rise following the slight correction observed recently.
9 https://www.thedailystar.net/business/cement-consumption-grow-steadily-1581961
Page 7 of 19
Transportation cost and Fuel & Power price movement also has significant impact on
cement manufacturers. Higher oil price might also result in increased Transportation and
Fuel & Power cost for the industry. Transportation and Fuel & Power costs as % of COGS
are highest for LafargeHolcim Bangladesh Limited (LHBL) and lowest for Confidence
Cement.
Power, Fuel and Freight cost as % of COGS USD to BDT Exchange Rate 84.5
30% 83.9
25% 82.7
20%
% of COGS
15%
79.75
10% 78.5 78.7
5% 77.95
77.75
0%
HBL Crown Confidence Premier LHBL
Freight 1.9% 0.2% 0.2% 0.5% 7.9% Dec, 2012 Dec, 2013 Dec, 2014 Dec, 2015 Dec, 2016 Dec, 2017 Dec, 2018 May, 2019
Power & Fuel 8.3% 7.1% 2.7% 9.4% 16.6%
USD to BDT Linear (USD to BDT)
Source: Annual Reports of Listed Companies (2017-18) & EBLSL Research

LHBL – LafargeHolcim Bangladesh Limited, HBL – Heidelberg Cement Bangladesh Limited Source: Bangladesh Bank & EBLSL Research
CON – Confidence Cement Limited, Meghna – Meghna Cement, Premier – Premier Cement
Scenario Analysis Source: Bangladesh Bank
Increase in raw materials price would have negative impact on grinders the most.
Increase in raw materials cost may put higher negative impact on grinders (e.g. Confidence
Cement Limited, HeidelbergCement Limited, M.I. Cement Limited, and Premier Cement
Limited) the most. On the other hand, fully integrated cement plant, LafargeHolcim
Bangladesh Limited which has its own quarry of limestone would absorb the lowest
magnitude of impact even if the raw materials cost increases.
Potential Impact of Increased Raw Material Cost*
Erosion in GPM if Product Price Not Adjusted (Other things held constant)
Scenario CONFIDCEM HEIDELBCEM LHBL MICEMENT PREMIERCEM
CONFIDCEM = Confidence Cement Limited
1% 0.70% 0.72% 0.25% 0.75% 0.65%
HEIDELBCEM = HeidelbergCement
2% 1.39% 1.44% 0.50% 1.49% 1.30% Bangladesh Limited
LHBL = LafargeHolcim Bangladesh Limited
3% 2.09% 2.16% 0.76% 2.24% 1.95% MICEMENT= M.I. Cement Limited
4% 2.78% 2.87% 1.01% 2.99% 2.60% PREMIERCEM = Premier Cement Limited
GPM = Gross Profit Margin
5% 3.48% 3.59% 1.26% 3.73% 3.24% Data Source: Consolidated Financial
Statements of Listed Companies, 2017-18
6% 4.17% 4.31% 1.51% 4.48% 3.89%
7% 4.87% 5.03% 1.76% 5.22% 4.54%
8% 5.57% 5.75% 2.01% 5.97% 5.19%
9% 6.26% 6.47% 2.27% 6.72% 5.84%
10% 6.96% 7.19% 2.52% 7.46% 6.49%
Integrated plants are least affected by clinker price hike while grinders which consume
larger portion of clinker would suffer the most. Other things held constant, if Clinker price
goes up by 5% for example, Premier cement would lose around 2.78% of its GPM. GPM of
MI Cement, Heidelberg Cement and Confidence cement would shrink approximate by
2.52%, 2.41% and 2.49% respectively.
Page 8 of 19
Potential Impact of Increased Clinker Price

Scenario CONFIDCEM HEIDELBCEM LHBL* MICEMENT PREMIERCEM
1% 0.50% 0.48% 0.16% 0.50% 0.56%
2.0% 1.00% 0.96% 0.33% 1.01% 1.11%
3.0% 1.50% 1.45% 0.49% 1.51% 1.67%
4.0% 1.99% 1.93% 0.66% 2.01% 2.22%
5.0% 2.49% 2.41% 0.82% 2.52% 2.78%
6.0% 2.99% 2.89% 0.99% 3.02% 3.33%
7.0% 3.49% 3.38% 1.15% 3.52% 3.89%
8.0% 3.99% 3.86% 1.31% 4.03% 4.44%
9.0% 4.49% 4.34% 1.48% 4.53% 5.00%
10.0% 4.99% 4.82% 1.64% 5.03% 5.55%
* LHBL produces clinker using limestone collected from its own quarry. In 2018, LHBL imported small amount of clinker for
its Holcim plant.
Impact of power & fuel price hike would be minimal for cement producers
For grinders the Impact of power & fuel price hike would be minimal. But, integrated plants
would be most affected by any rise in power and fuel cost considering their higher level of
gas consumption. But, LafargeHolcim Bangladesh Limited (only integrated plant in
Bangladesh) is almost immune to gas price hike as the company has a long term fixed price
contract with Jalalabad Gas Company as per which LHBL is supplied with 16 million cubic
feet or 435,129 cubic meter natural gas per day approximately at BDT 7.80 per cubic meter.
However, in recent development Jalalabad Gas (Gas Provider for LafargeHolcim) is
contemplating to increase the price of gas supplied to the company from the current
subsidized price [11]. LafargeHolcim has also introduced Geocycle project, a waste
management solution for industrial units. The waste can be converted into alternative fuel
for LafargeHolcim’s plant but the extent of cost reduction by using alternative fuel (from
waste recycling) is seemed to be minimum [12].
Potential Impact of Increased Power and Fuel Cost
Scenarios CONFIDCEM HEIDELBCEM LHBL* MICEMENT PREMIERCEM
10% 0.41% 0.53% - 0.62% 0.53%
20% 0.82% 1.06% - 1.24% 1.06%
30% 1.23% 1.59% - 1.85% 1.59%
40% 1.64% 2.12% - 2.47% 2.12%
50% 2.05% 2.65% - 3.09% 2.65%
60% 2.46% 3.17% - 3.71% 3.18%
70% 2.87% 3.70% - 4.33% 3.71%
80% 3.28% 4.23% - 4.94% 4.24%
90% 3.69% 4.76% - 5.56% 4.76%
100% 4.10% 5.29% - 6.18% 5.29%
* LHBL is almost immune to increase in gas price as the company has long term agreement with Jalalabad Gas Company
Page 9 of 19
Demand Drivers
Bangladesh has experienced tremendous growth during the last decade with an average
GDP growth rate of 6.5%. According to a recent forecast by HSBC, Bangladesh would be
the biggest mover in the global GDP rankings in 2030 and its economy would become 26th
largest in the world. Bangladesh is also expected to have the highest real GDP growth rate
of 7.1% per year up to 2030 and size of its economy is forecasted to grow by 2.5 times from
300 Billion to 700 Billion in the meantime. In the process, the economy of Bangladesh is
tipped to be larger than that of Australia, Malaysia, Netherlands and Spain by 2050 at PPP
terms.
GDP Growth Rate (%)
8.5 0% 8.3% To support its incremental To support its incremental
8.0 0%
7.9%
economic activities, economic activities, Bangladesh
7.3% Bangladesh has huge need for has huge need for building basic
7.1%
7.5 0%
infrastructure and therefore,

7.0 0%
6.5% 6.5% 6.6% building basic infrastructure

6.4% robust growth of cement
6.5 0%
6.0% 6.0% 6.1% and therefore, robust growth of demand is expected in the
6.0 0%
5.6% demand for cement is expected ensuing years.

5.5 0%
5.0% in the ensuing years. To tap this

opportunity, most of the large
5.0 0%
cement manufacturers have

4.5 0%
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19*
already undertaken major

capacity expansion plan in last
Source: Bangladesh Bank & * Government’s expectation five years.
Growth of construction and real estate sectors have driven cement demand in Bangladesh
OnSource:
theBangladesh
back of Bank *As per Government’s expectation
rapid urbanization, improved living standard and increased purchasing
power, construction sector of Bangladesh is passing a shining period. Construction and real Growth of construction sector
estate sectors are two major drivers of cement consumption. Growth of construction has been greater than GDP
sector has been greater than GDP growth rate. Hence, construction sector’s share of GDP growth rate
has been growing gradually over the years. Growth of construction sector has mainly been
accelerated by the government development projects that have been undertaken recently.
Construction Sector of Bangladesh 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
Size of Construction Sector (BDT billion) 447 483 522 567 615 670 737
Share of GDP at Constant Prices 6.49% 6.62% 6.74% 6.87% 6.97% 7.06% 7.22%
Growth Rate of Construction Sector 8.42% 8.04% 8.08% 8.60% 8.56% 8.77% 10.11%
Source: Bangladesh Bank
On the other hand, growth of real estate sector has been lower than GDP growth rate and
consequently real estate sector’s share of GDP has been declining over the years. Real
estate
Source: sectorBankin Bangladesh has been growing steadily mainly owing to growing housing
Bangladesh
demand, expanding middle class and spiraling per-capita income and the trend is expected
to continue in the future. Real estate developers contribute 15,000 housing units (appx.)
per year. Most of the families living in real estate apartments are headed by businessmen
(51%) and service holders (40%). Majority of the apartments are being sold in Dhaka and
Chittagong.10
Real Estate Sector of Bangladesh 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
Size of real estate (BDT billion) 476 495 516 539 563 590 618
Share of GDP at Constant Prices 6.91% 6.78% 6.67% 6.53% 6.37% 6.22% 6.06%
Growth Rate of Real Estate Sector 3.92% 4.04% 4.25% 4.40% 4.47% 4.80% 4.80%
10 http://ibtbd.net/present-condition-and-future-prospects-of-real-estate-in-bangladesh/
Page 10 of 19
Housing demand is on the rise as urban population & personal income have been increasing
consistently over the years
Rapid urbanization in
Urban Population (%)
Bangladesh has stimulated
36.5% 37.2%
35.7%
34.1%
34.9% growth of building materials
30.3%
sector and has generated
considerable demand for Bangladesh experienced faster
26.8%
cement and other urbanization than South Asia as
23.7%
21.9% construction materials. a whole between 2000 and
20.0%
Urban population has grown 2010
at a tremendous speed over
1990 1995 2000 2005 2010 2015 2016 2017 2018 2019
the years. By the end of 2019
Source: worldometers.info urban population in
Bangladesh is expected to be
37.2% of total population and the portion is expected to get bigger in following years. The
country experienced faster urbanization than South Asia as a whole between 2000 and
Source: World Bank
2010, according to a 2015 World Bank report.
Improved transportation system will fuel housing demand on the outskirts of major cities
Dhaka is now growing with an unprecedented rate accommodating more than 600,000
people per year. It means that every year more than 120,000 household units are required
to house the added population in Dhaka. In this situation, supply of housing in the city is Housing demand is expected to
only around 25,000 units, According to structure plan (draft) of RAJUK by the year 2030 grow on the outskirts of major
cities with improved
housing demand in DMDP area is expected to be 1,260,000 units per annum.11 To improve
transportation system
the deteriorating traffic condition of Dhaka city, 5 MRT and 3 BRT routes are being planned
within DMDP area. According to the structure plan, transit-oriented development is
proposed along BRT/MRT stations which may create a vast scope of urban development in
the corridor areas when implemented.12
Growing remittance income might drive demand for cement in rural areas
Total Inward Remittance in USD Billion Individual homebuilders’ ability to
17
16.40
40% spend on construction is directly
15.32 14.93 14.98
15
14.46 14.23
30%
linked with the flow of inward
13
12.84 12.77
20%
remittance. As almost 30% of the
11.65
10.99 cement is consumed by Individual Growing Remittance income
11 9.69 10%
homebuilders, any disruption in might drive demand for cement in
9 7.91 0%
inflow of remittance may seriously rural areas
7 -10%
harm the prospect of this industry.
5 -20%
Inward remittance has increased by
9.42% in fiscal year 2018-19 13 which
will ultimately enhance the
Remittance (USD Billion ) Growth
homebuilders’ ability to spend on
construction. Moreover,
government has recently declared 2% incentive on money remitted by expatriate
Bangladeshis from the FY2019-20 onwards.
11 DMDP: Dhaka Metropolitan Development Plan; RAJUK: Rajdhani Unnayan Kartripakkha; MRT: Mass Rapid Transit; BRT: Bus Rapid Transit
12 http://ibtbd.net/present-condition-and-future-prospects-of-real-estate-in-bangladesh/
13 https://www.dhakatribune.com/business/economy/2019/07/03/remittance-hits-record-16-4b-in-fy19
Page 11 of 19
Lowered Interest rate for housing loan for govt. employees may have a longer-lasting impact on
construction sector
Home loan interest rate is another important determinant of Housing demand.
Government has incentivized the real estate sector by reducing the home loan interest Home loan interest rate for
rate for Government employees (Govt. employees will get home loan at only 5% interest Government employees has been
rate) while the minimum loan amount has been increased to 30 Lac taka.14 According to lowered to only 5% while the
REHAB (Real Estate and Housing Association of Bangladesh), during the last six months of minimum loan amount has been
2018 business of REHAB members grew by about 25% mainly fueled by lowered interest increased to 30 Lac taka
rate for government employees. This trend is expected to persist in the future.
Housing Loan
Interest Rate & Home loan growth
700 35.0% 35% 35%
600 30.0% 30% 30%
500 25.0% 25% 25%

BDT, BILLION
400 20.0% 20% 20%

300 15.0% 15% 15%
200 10.0% 10% 10%
100 5.0%
5% 5%
0 0.0%
0% 0%
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
BHBFC DBH NHF
Growth Interest Rate
SCBs PCBs FCBs
Micro Credit NBFI Growth
Source: Bangladesh Bank & EBLSL Research
Mega projects are expected to be the major driver of cement industry

To support its huge economic growth, Bangladesh has undertaken some large
infrastructure projects. In the recent budget (2019-20) government has allocated BDT
2,027 billion for annual development project (ADP) which is 17.18% higher than the In FY 2019-20, government
allocated BDT 2,027 billion for
original ADP of last fiscal year. Budget allocation to transportation and communication has
annual development project
undergone a massive growth over the years and hence, government development
(ADP) which is 17.18% higher
projects’ contribution towards demand for cement has turned out to be the highest in the than the original ADP of last fiscal
recent year overtaking individual homebuilders’ contribution. Government allocation for year
infrastructure development is set to grow even more in coming years as Bangladesh aims
to attain developed country status by 2041.15
Projects Project Cost (BDT Crore) Tentative Completion
Padma Multipurpose Bridge 30,193 December, 2019
Payra Deep Sea Port 3,350 June, 2020
Rampal Power Plant 16,000 June, 2020
Metro Rail 21,985 December, 2021
Padma Rail Link Project 34,988 June, 2024
Matarbari Coal Power Plant 35,984 June, 2023
Rooppur Nuclear Plant 113,092 December, 2025
Source: Newspapers & EBLSL Research
14 https://www.thedailystar.net/country/government-enacts-low-interest-housing-loan-its-staff-1613842
15 https://www.dhakatribune.com/business/2018/11/11/bangladesh-won-t-become-developed-by-2041-sans-9-growth
Page 12 of 19
Government has also undertaken Delta Plan 2100, a long term strategy to prevent flood,
soil erosion and water supply. Nearly 80% of the plan will be implemented within 2030 at
cost of US$ 37.5 Billion.16 The government is now implementing an ambitious scheme to
build a network of 100 special economic zones around the country; 11 of them have been
completed while 79 are under construction.
Government approved some 79 economic zones including 56 public and 23 private

economic zones till June 2018 and aims to establish 100 economic zones on 30,000
hectares of land by 2030. The incentive package, which includes tax and duty benefits, is
the main reason behind the growing interest of entrepreneurs to set up private economic
zones according to BEZA.
Export Scenario
Bangladesh started exporting cement in 2003. Presently, cement is reportedly being
exported to India, Myanmar, Nepal, Maldives and Sri Lanka. Bangladesh exported cement
worth US$ 12.59 million during FY17-18, compared to US$ 10.79 million earned in the year Export earnings has grown by
before. This represent a growth of over 16.68% in export earning YoY with India being the 16.68% YOY to US$ 12.59 m in FY
main destination for cement exports. Government has set export target of US$ 14.00 17-18 from US$ 10.79 m in FY
million for FY 2018-19 based on expected growth rate of 11.2%. With transit facility, India 2016-17
is now being able to shift cement at lower costs to the “Seven Sister States” of north-
eastern India through Bangladesh. Hence, cement export to India might decline in coming
days. Myanmar has appeared to be a good prospect for cement export from Bangladesh.
Annual report of Crown Cement (a brand of M.I. Cement) claims that the company
accounts for nearly 50% of the total export volume of cement.17 Other major cement
exporters are Shah Cement, Bashundhara cement and Fresh cement.
16 https://www.dhakatribune.com/business/2019/03/07/government-to-spend-37-5bn-on-delta-plan-by-2031
17 Annual Report (2017-18), M.I. Cement Factory Limited
Page 13 of 19
Industry Concerns
Although a booming sector with great potential, cement industry has some risk factors as
well. Currently, the industry is experiencing overcapacity of cement production. Average
capacity utilization rate of cement industry as a whole has been around 60% over last five
years. Moreover, almost all the major industry players are making huge capacity
expansion. Roughly, 30% capacity is likely to be added to the current capacity by the end
of 2019. If the demand does not go up in line with the capacity enhancement, huge surplus
capacity of cement production will remain unused in coming years. This can lead to a fall
in cement prices, and the industry could face a downturn, leading to reduced profitability.
Capacity Utilization - Industry Capacity Utilization

90%
67%
77% 76%
63% 76%
76%
73%
61% 61% 61% 72%
70% 71%
59% 59% 68%
67%
57% 61%
2011 2012 2013 2014 2015 2016 2017 2018 HBL LHBL MI Cement Confindence Aramit Cement Meghna Cement
Cement
Capacity Utilization - Industry 2016-17 2017-18
Source: Annual reports of listed companies & EBLSL Research; For LHBL – Only Cement production capacity and utilization data has been considered.
Secondly, almost all raw materials of cement are imported, if the supplies are cut-off due
to adverse political situation or other disturbance, the industry may face serious downturn.
Besides, given the high contribution of raw materials in the cost structure, any upward
movement in the price of clinker and other raw materials will eventually affect the
profitability and performance of the cement manufacturer. As nearly all the raw materials
for cement production are being imported, any further devaluation of Bangladeshi Taka Overcapacity, higher cost of
borrowing, Raw materials price
against foreign currencies will also seriously harm the overall profitability of cement
hike, slow remittance inflow may
makers.
inhibit industry growth
Again, as approximately 30% of overall cement is consumed by individual homebuilders
and majority of customers of real estate industry are middle class people, home loan
interest rate acts as a major determinant of demand for cement among residential home
owners. Any escalation in interest rate will limit overall growth of the industry.
Export from Bangladesh has been limited to India and few other neighboring countries.
Unless cement export is diversified, serious downturn in export earnings may ensue if one
of the countries stop importing cement from Bangladesh. As construction sector is highly
sensitive to political turmoil, overall dynamic of cement industry may get affected due to
political instability.
Page 14 of 19
Industry Outlook
According to industry specialists, outlook of cement industry for next five years remains
promising with an expected double digit growth in demand mainly driven by mega projects
and residential sector. Industrial construction and increased activity in economic zones are Although potential of the country’s
also accelerating the growth. At the same time, major infrastructural projects are also in cement industry is very strong,
the pipeline to support economic growth of Bangladesh. Thanks to rapid urbanization, concern remains as profit margin of
industrialization, large-scale infrastructural and Governmental development projects as cement manufacturers have shrunk
due to increased raw materials &
well as construction of various commercial and residential buildings, demand for cement
fuel price and greater competition
has markedly increased over the years and such growth is expected to continue in future. among industry players.
Although potential of the country’s cement industry is very strong, concern remains as
profit margin of cement manufacturers have shrunk due to increased raw materials & fuel
price and greater competition among industry players.
Page 15 of 19
Capital Market Performance

As on 19 August, 2019
Confidence Premier Meghna Aramit
Particulars LHBL* MI Cement HBL*
Cement Cement Cement Cement
Current Price (BDT) 40.4 62.1 150.2 65.1 91.9 229.9 17.6
52 Week Price Range (BDT) 36.0-55.1 52.2- 87.0 128.1-243.4 58.0-84.7 77.0-129.0 192.1-385.0 16.1-28.0
Number of Shares Outstanding
1,161.3 148.5 64.8 105.5 24.8 56.5 33.9
(Million)
Market Cap (Million) 46,916.5 9,221.9 9,731.6 6,864.8 2,274.5 12,990.3 596.3
Market Weight 1.2% 0.2% 0.3% 0.2% 0.1% 0.3% 0.0%
Authorized Capital (Million) 14,000.0 5,000.0 1,000.0 5,000.0 5,000.0 1,000.0 500.0
Paid up Capital (Million) 11,613.0 1,485.0 647.9 1,054.5 247.5 565.0 338.8
EPS (BDT) 0.96 2.1 5.8 4.2 3.6 14.3 (4.6)
P/E 42.1 29.2 26.0 15.5 25.4 16.0 -
NAV Per Share (BDT) 13.4 48.0 63.3 40.6 38.3 82.7 6.0
Last Dividend 10% C 15% C 15%C, 20%B 10% C 10% B 75% C N/A
Dividend Yield 2.3% 1.9% 1.0% 1.3% N/A 3.1% N/A
Payout Ratio 104.2% 70.4% 21.7% 23.9% 0.0% 52.3% 0.0%
Category A A A A A A Z
Source: DSE and EBLSL Research
* LHBL – LafargeHolcim Bangladesh Limited, HBL – HeidelbergCement Bangladesh Limited
Source: DSE and EBLSL Research
Shareholding pattern (%)

LHBL – Lafarge Holcim Bangladesh Limited, HBL – Heidelberg Cement Bangladesh Limited
March, 2019 June, 2018

Sponsors Govt. Institute Foreign Public Sponsors Govt. Institute Foreign Public
HeidelbergCement
60.67 0.00 26.03 1.31 11.99 60.67 0.00 26.66 1.49 11.18
Bangladesh Ltd
LafargeHolcim
64.68 0.00 15.38 0.96 18.98 64.68 0.00 15.73 1.14 18.45
Bangladesh Limited
MI Cement Ltd. 67.08 0.00 17.39 0.30 15.23 67.08 0.00 17.16 0.31 15.45
Confidence Cement Ltd. 29.88 0.00 27.28 0.00 42.84 25.5 0.00 23.54 0.00 50.96
Aramit Cement Ltd. 47.14 0.00 17.13 0.00 35.73 47.14 0.00 15.55 0.00 37.31
Meghna Cement Ltd. 49.77 0.00 32.69 0.00 17.54 49.81 0.00 11.37 0.00 38.82
Premier Cement Ltd. 55.13 0.00 17.20 0.01 27.66 55.13 0.00 17.07 0.01 27.79
Source: DSE
Page 16 of 19
Dividend History
MI Confidence Premier Meghna Aramit
Year LHBL HBL
Cement Cement Cement Cement Cement
2011 N/A 15% C, 35% B 20% C, 20% B N/A 25% C 45% C 10% B
2012 N/A 35% C, 10% B 20% C N/A 25% C 50% C 10% C
2013 N/A 40% C 27.5% C 40% C 15% C 380% C 10% C
2014 10% C 30% C 25% C 30% C 15% C 380% C 10% C
2015 10% C 25% C N/A 20% C N/A 300% C N/A
2016 10% C 20% C 37.5% C 15% C 15% C 300% C 12% C
2017 10% C 20% C 15% C, 20% B 20% C 20% C 150% C N/A
2018 10% C 15% C 15% C, 20% B 10% C 10% B 75% C N/A
Source: DSE;
C – Cash Bonus, B – Stock Bonus, LHBL – LafargeHolcim Bangladesh Limited, HBL – HeidelbergCement Bangladesh Limited
Source: DSE;
Financial Highlights of Listed Companies
C – Cash Bonus, B – Stock Bonus, LHBL – Lafarge Holcim Bangladesh Limited, HBL – Heidelberg Cement Bangladesh Limited
Based on Annual Reports (2017-18, Consolidated)
Particulars MI Confidence Premier Meghna Aramit

LHBL* HBL*
(BDT Million) Cement Cement Cement Cement Cement
Revenue 16,631.53 12,559.31 3,916.78 10,049.87 5,533.35 11,151.29 1,723.28
Gross Profit 4,099.95 1,643.42 328.64 1,516.88 568.93 1,931.51 272.60
Operating Income 4,276.59 1,790.82 336.83 1,529.72 701.90 1,949.68 276.92
Profit Before Tax 1,882.74 410.23 410.61 578.46 108.60 1,177.34 (132.28)
Net Income 1,114.65 315.61 374.24 442.18 81.45 809.76 (154.61)
Total Assets 26,888.23 19,713.91 8,200.82 13,468.00 6,881.42 8,641.42 4,100.33
Current Assets 7,149.19 11,304.32 3,183.25 6,658.34 5,148.85 4,654.11 3,024.62
Fixed Assets 19,739.04 8,409.59 5,017.57 6,809.65 1,732.57 3,987.31 1,075.72
Total Liability 11,309.91 12,589.56 4,097.48 9,190.75 6,018.99 3,969.55 3,897.12
Current Liability 6,977.70 9,829.56 3,733.96 8,557.80 4,566.49 3,250.49 3,144.66
Long Term Liability 4,332.21 2,760.00 363.51 632.95 1,452.50 719.06 752.46
Equity 15,578.32 7,124.36 4,103.34 4,277.24 862.43 4,671.87 203.22
Total Debt 2,977.00 10,718.00 3,070.00 7,052.00 4,388.00 135.00 2,986.00
Retained Earnings 3,666.29 2,047.15 1,995.83 2,282.94 439.83 3,477.57 (246.29)
Source: Annual Reports of listed companies (2017-18)

LHBL – LafargeHolcim Bangladesh Limited, HBL – HeidelbergCement Bangladesh Limited
Page 17 of 19
Comparative Financial Ratios


Financial Ratios & Other Data (000) LHBL HBL
Liquidity Ratios
Current Ratio 1.02 1.15 0.85 0.78 1.13 1.43 0.96
Quick Ratio 0.42 0.76 0.38 0.40 0.49 0.79 0.71
Cash Ratio 0.06 0.44 0.01 0.01 0.19 0.54 0.02
Operating Efficiency Ratios
Inventory Turnover Ratio 5.27 10.37 4.74 17.23 6.69 5.03 7.38
Inventory Conversion Period(Days) 69.26 35.20 76.93 21.18 54.52 72.63 49.48
Receivable Turnover Ratio 8.81 5.24 3.83 4.18 4.02 13.65 1.00
Average Collection Period (Days) 41.43 69.61 95.24 87.33 90.86 26.74 365.74
Operating Cycle (Days) 110.70 104.81 172.17 108.51 145.38 99.37 415.22
A/C Payable Turnover Ratio 2.90 25.25 7.51 12.91 6.69 3.17 1.82
Payables Payment Period (Days) 125.72 14.46 48.63 28.28 54.56 115.30 200.26
Cash Conversion Cycle (Days) (15.03) 90.35 123.54 80.23 90.82 (15.92) 214.96
Total Asset Turnover 0.62 0.64 0.48 0.75 0.80 1.29 0.42
Fixed Asset Turnover 0.84 1.49 0.78 1.48 3.19 2.80 1.60
Operating Profitability Ratios
Gross Profit Margin (GPM) 24.65% 13.09% 8.39% 15.09% 10.28% 17.32% 15.82%
Operating Profit Margin (OPM) 13.89% 7.97% 0.95% 9.99% 6.35% 9.33% 9.01%
Pre Tax Profit Margin 11.32% 3.27% 10.48% 5.76% 1.96% 10.56% -7.68%
Net Profit Margin (NPM) 6.70% 2.51% 9.55% 4.40% 1.47% 7.26% -8.97%
Leverage Ratios
Total Debt to Equity 19.11% 150.44% 85.18% 164.87% 508.78% 2.95% 1469.38%
Debt to Total Assets 11.07% 54.37% 42.62% 52.36% 63.76% 1.60% 72.82%
Coverage Ratios
Times Interest Earned (TIE) 5.33 1.51 4.48 2.45 1.41 - 0.54
Valuation Ratios
P/NAV Ratio 2.77 1.26 2.21 1.62 2.12 2.70 2.78
NAVPS 13.41 47.98 63.33 40.56 38.33 82.68 6.00
EPS (Diluted) 0.96 2.13 5.78 4.19 3.62 14.33 (4.56)
Dividend per Share 1.00 1.50 1.50 1.00 - 7.50 -
Dividend Payout Ratio 104.19% 70.58% 21.64% 23.85% 0.00% 52.33% 0.00%
Retention Rate -4.19% 29.42% 78.36% 76.15% 100.00% 47.67% 100.00%
Trailing P/E 38.76 28.51 24.24 15.64 22.49 15.57 N/A
EV/Sales 2.75 1.23 3.20 1.38 0.96 0.99 2.02
Source: Annual Reports of listed companies (2017-18)
LHBL – LafargeHolcim Bangladesh Limited, HBL – HeidelbergCement Bangladesh Limited, CON – Confidence Cement Limited, Meghna – Meghna Cement, Premier – Premier Cement
Page 18 of 19
Common Size Income Statement

Particulars LHBL HBL
Revenue 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of Goods Sold 75.35% 86.91% 91.61% 84.91% 89.72% 82.68% 84.18%
GROSS PROFIT 24.65% 13.09% 8.39% 15.09% 10.28% 17.32% 15.82%
Other Operating Income 1.06% 1.17% 0.21% 0.13% 2.40% 0.16% 0.25%
Administrative Expenses 8.75% 2.45% 2.75% 1.07% 3.44% 4.46% 2.58%
Selling and Distribution Expenses 3.08% 3.83% 4.91% 4.17% 2.89% 3.70% 4.48%
OPERATING PROFIT 13.89% 7.97% 0.95% 9.99% 6.35% 9.33% 9.01%
Financial Expenses 2.62% 6.36% 3.01% 3.96% 4.80% 0.00% 16.69%
Financial Income 0.04% 1.56% 0.20% 0.00% 0.51% 1.71% 0.00%
Other Non-Operating Income 0.00% 0.00% 1.16% 0.00% 0.00% 0.00% 0.00%
Other Non-Operating Expenses / loss on disposal of PP&E 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Share on profit (loss) on associate (net of tax) 0.00% 0.25% 11.19% 0.00% 0.00% 0.00% 0.00%
PROFIT BEFORE WPPF 11.32% 3.43% 10.48% 6.03% 2.06% 11.04% -7.68%
Allocation for WPPF 0.00% 0.16% 0.00% 0.27% 0.10% 0.48% 0.00%
PROFIT BEFORE TAX 11.32% 3.27% 10.48% 5.76% 1.96% 10.56% -7.68%
Income Tax Expense 4.62% 0.75% 0.93% 1.36% 0.49% 3.30% 1.30%
Current Tax 4.62% 0.01% 0.61% 1.02% 0.66% 3.53% 0.60%
Prior Year 0.00% 0.00% 0.00% 0.00% 0.00% 0.12% 0.69%
Deferred Tax income/(expense) 0.00% 0.74% 0.32% 0.34% -0.17% -0.35% 0.00%
NET INCOME 6.70% 2.51% 9.55% 4.40% 1.47% 7.26% -8.97%
Source: Based on latest Annual Reports of listed companies (2017-18)

LHBL – LafargeHolcim Bangladesh Limited, HBL – HeidelbergCement Bangladesh Limited
Page 19 of 19
Expert’s View: Interview with Masud Khan, CEO of Crown Cement Group
EBL Securities Limited Research Team had the opportunity to talk to Mr. Masud Khan, CEO of Crown Cement Group & Chairman
of GSK Bangladesh. He shared his thoughts on the present condition and future prospect of cement industry in Bangladesh.
We take the pleasure to share an excerpt of the interview.
“Cement industry in Bangladesh has come a long way over the years.
Once a cement importing nation, Bangladesh is now exporting cement
to its neighboring countries. The outlook for the industry is very robust;
we are expecting double digit industry growth mainly driven by
government demand. But, Profitability still remains a worry for all. The
scenario shall change in the coming days.”
Masud Khan, FCA, FCMA

Chief Executive Officer,
Crown Cement Group
Vastly experienced in business management Mr. Masud Khan is currently working as CEO of Crown Cement Group. Prior to that, he was the
advisor to CEO of LafargeHolcim BD Ltd. Mr. Khan also served as Chief Financial Officer of LafargeHolcim Bangladesh Ltd. He is also serving
as Chairman of GlaxoSmithKline Bangladesh and independent director of Marico Bangladesh Ltd., Berger Paints Bangladesh Ltd. and
Viyellatex Group. He has more than 38 years of professional experience in different key positions in several multinational companies
including British American Tobacco Bangladesh, Monrovia Tobacco Corporation, Liberia and PricewaterhouseCoopers (PwC), Kolkata.
He became a chartered accountant from The Institute of Chartered Accountants of India after serving as an article assistant of
PricewaterhouseCoopers (PwC), Kolkata, and cost accountant from The Institute of Cost and Works Accountants of India. He is also a guest
faculty of The Institute of Chartered Accountants of Bangladesh (ICAB).
EBLSL Research: At present per capita consumption of cement in Bangladesh is significantly lower than the world average.
However, current industry capacity is almost double the estimated annual demand for cement, meaning overcapacity exists
in the industry. Meanwhile most of the major players are increasing their capacity. What would you like to say in this regard?
Is the industry oversupplied? Please evaluate the present scenario of cement industry in Bangladesh.
Masud Khan: Current effective capacity of the industry is almost 58 million metric ton, which is approximately 80% of installed
capacity. On the other hand, annual demand is around 31 million metric ton. So, of course overcapacity exists. But if we look
at the broader picture, we would see that the market has grown at double digit rate over the last decade. This year the growth
rate is approximately 10.06%. Bangladesh has just building its infrastructure from the scratch. So, I believe, cement demand
will continue to rise in the future. To keep the current market share, industry players need to keep on increasing their
production capacity. Moreover, there is lead time in such expansion. We may see more and more capacity expansion from
industry players in the future. Major consumer segments are 30% Individual Home Builders (IHB), 35% Commercial Developers
and 35% Government infrastructures. Government demand is expected to outstrip demand from other consumer groups.
EBLSL Research: Power and Gas crisis is a major problem for cement industry players in Bangladesh. Meanwhile, the
government has recently increased the price of gas per cubic meter for industries to BDT 10.7 from BDT 7.76 (38% increase),
for power BDT 4.45 from BDT 3.16 (41% increase) and for captive power BDT 13.85 from BDT 9.62 (44% increase). What is the
probable impact of Gas price hike on the profitability of cement manufacturers? What is your opinion in this regards?
Masud Khan: Impact of such move is going to be minimal for grinders. However, manufacturers with gas based captive power
plants are likely to face higher impact. Integrated plants on the other hand use gas as a raw material. Hence, expected impact
for Lafarge Holcim Bangladesh Limited was supposed to be higher. But, LHBL have got long term fixed price gas supply
agreement with Jalalabad Gas Transmission and Distribution System Limited which is valid until end of 2025. So, the impact is
expected to be minimal for them as well. As per the estimation of BCMA, production cost for cement manufacturers may go
up by 11 taka per bag on average.

EBLSL Research: Recently cement manufacturers have decided to increase the prices of cement by BDT 50 per bag. What is
the price elasticity of cement? Is it possible to sustain healthy profit margin without hampering volume growth by such price
hike?
Masud Khan: Yes, cement demand may decrease following such price hike. Demand from Individual Home Builders (IHB) &
Commercial Builders is likely to slow down. But, I am not sure whether such move to increase price will sustain. The industry
is already oversupplied, and price war exists among competitors. Hence, some companies may offer higher discount to grab
more customers. Consequently, gross profit may fall.
EBLSL Research: Prices of the major raw-materials of cement has been experiencing an increasing trend since 2016. What is
your expectation regarding the future price of major raw-materials? If the raw-material price continue to increase how the
profit margins of cement manufacturers may be affected? Is there any possibility for further upside price adjustment amidst
increased competition and overcapacity scenario?
Masud Khan: All our raw materials are imported. 90% of the clinker, the main raw material for cement, is imported from
Vietnam. What happened in late 2017 is that Chinese government started to discourage clinker production from integrated
plants having wet kilns to reduce environmental damage. Later, Chinese manufacturers started importing clinker from its
nearest source – Vietnam. Following the sudden increased demand, Clinker price rose by almost $10 per ton. So, we had to
increase cement price in the beginning of 2018. Now, clinker is being imported at around $47 - $50 per ton. Clinker trades like
a commodity, hence its price move cyclically. Predicting clinker price is difficult, clinker price is a factor of many things –
including FOB price and freight. We cannot reduce clinker price risk by importing large volume when price is low because of
limited storage facilities. Hedging through forward contract is also very challenging for Bangladeshi cement manufacturers.
EBLSL Research: Why the margin of cement companies in Bangladesh is so narrow? What was the situation in the past? What
do you expect in coming years?
Masud Khan: It may take some time to improve GPM, It is difficult to say how long. The good news is seasonality of cement
demand is less than the past, thanks to the growing government demand. GDP of Bangladesh has been growing at more than
8% and per capita consumption is very low compared to world average. So we are expecting 10-12% growth per annum.
EBLSL Research: How will you evaluate latest fiscal measures from the national budget 2019-20 for the overall cement industry
and MI Cement? Is there any positive or negative regulatory Impact?
Masud Khan: Changes to Income Tax laws will have a major negative impact on us. Previously, the AIT (Advance Income Tax)
was adjustable, but the new AIT is not. Hence companies will have to pay 10-12% advance VAT on raw materials import even
if they don’t make any profit. The new VAT law requirement relates to 5% advance tax on imports. This will put additional
cash burden on us in terms of financing. We will have to increase cement price by 53 Taka for such adjustment. BCMA has
recently decided to increase cement price by 50 Taka per bag.
EBLSL Research: The cement industry in Bangladesh is increasingly getting concentrated while being dominated by local
players. Why the participation of multinational companies is insignificant in the industry?
Masud Khan: Multinationals are interested in profit margin while locals are concerned about market share. To keep and grow
market share locals are going for capacity expansion. Local companies are gaining more business through superior products
offerings, extensive branding and better relationship marketing.
EBLSL Research: What is your expectation regarding the industry and overall construction sector? How do you see the industry
in the next five years? What are the growth drivers as well as major concerns for the industry? Do you expect any
consolidation/ M&A/ divestment in the Industry?
Masud Khan: Possibility of merger & acquisition with older plants is less likely. The main reason is technology. Most of the
older plants are using ball mills while most players are moving towards VRM technology. VRM is more flexible in terms of
product mixture and produces better quality products. Electricity cost savings from VRM is minimal, the only advantage being
we can grind more slag.

EBLSL Research: MI cement is the pioneer as well as largest cement exporter from Bangladesh. Is there any scope to increase
cement export or expand export destination in the future?
Masud Khan: Crown cement is a pioneer in cement export. Almost 50% of the total cement export is done by our company.
Cement is mostly exported to seven sisters region of north-eastern India. Crown cement has strong presence in those areas.
You will be glad to know that Tripura is sometimes called Crown City. Most of the development in Tripura is being done using
our cement. We expect 15-20% export growth in coming days. For us, Myanmar is not a very attractive destination for cement
export.
EBLSL Research: Do you think that export is beneficial compared to local sales assuming growing local demand driven by
government mega projects? What are the major mega projects for which MI cement is currently supplying cement?
Masud Khan: Our participation in mega projects is good. Currently, 56% of our cement is being consumed by individual home
builders, the rest is consumed by commercial developers and government infrastructures.
EBLSL Research: How is the bulk cement market evolving in Bangladesh? What share of sales are coming from bulk sales in
the industry? What is the scenario for MI cement in bulk cement market?
Masud Khan: Bulk cement market is growing fast thanks to mega projects. Currently, 13% of total cement sale is bulk. Few
years back it was less than 1%. As the country moves to further development, bulk cement sale will rise. Bulk cement is
beneficial for both the buyer and seller in the sense that it lowers cost and facilitates transportation.
EBLSL Research: According to a newspaper report in April 2016, a limestone mine was found in Naogaon having a deposit of
50-100 billion tons. Is the extraction process economically viable? What could be the potential impact on the cement industry,
if the extraction comes to light?
Masud Khan: We need to remember that Bangladesh is a very densely populated country. Hence, I personally don’t think
limestone extraction will be economically viable in our country. Even if we suppose that the extraction process is economically
viable, there is the issue of energy consumption and transportation cost. River access is very important for limestone mines.
We cannot transport limestone using road networks. Road transportation will be very costly. Some manufacturers also thought
of importing limestone from India. But, Indian environmental laws has become very strict and they are also considering value
addition instead of exporting limestone. So, challenges exist there as well.
EBLSL Research: Cement companies are increasingly concentrating on ready-mix concrete (RMC) solution business? What is
your expectation regarding the future potential of this business model? How much of the cement produced by MI Cement is
directly sent to its RMC business?
Masud Khan: Ready-mix concrete (RMC) solution business is gaining momentum in Bangladesh. RMC solution has bright future
and more and more people will be using it. RMC is more convenient and cost saving for builders. National Development
Engineers Ltd. is the major player in the market. Crown cement, Confidence cement, Shah cement and Akij cement are also
engaged in RMC solution business.
EBLSL Research: What is the main goal of MI Cement? What are challenges for the industry and MI Cement in the years ahead?
Masud Khan: Our goal is to be in the top three cement players in the next one to two years. We will continue our focus on
quality and customer satisfaction. At the same time, we will continue to invest in our people, processes and technology to
ensure that we are the best in everything we do. The main challenge for the industry is price war; supply capacity is almost
double the industry demand. Increased raw material price is also a major concern us. VAT issue, gas price hike, devaluation of
taka, higher borrowing cost, truck load restriction have added more sufferings for the cement manufacturers.
Cement industry in Bangladesh has come a long way over the years. Once a cement importing nation, Bangladesh is now
exporting cement to its neighboring countries. The outlook for the industry is very robust; we are expecting double digit
industry growth mainly driven by government demand. But, Profitability still remains a worry for all. The scenario shall change
in the coming days.

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EBL Securities Limited

Bangladesh Cement Industry:

This research report is a property of EBL Securities Ltd.

Recent Developments in the Cement Industry

Gas Price Hike Changes to Tax laws

Probable Impact Probable Impact

 Minimal for grinders  Major negative impact on cement manufacturers.

According to Cement manufacturers association (BCMA),

This research report is a property of EBL Securities Ltd.

BANGLADESH CEMENT INDUSTRY: RESILIENT; BETTER DAYS AWAIT

export earnings YoY with India being

16.4% 15.5% the main destination for cement

Bangladesh is one of the fastest

2011 2012 2013 2014 2015 2016 2017 2018

Industry players are expanding capacities aggressively speculating future growth

22 during peak season. Total cement

production capacity is expected to

reach about 65 million tons by

Source: EBLSL Research and Annual Reports

*Ranked Based on Post-expansion capacity

5 Annual Report (2017-2018), M. I. Cement Factory Ltd.

2013 2014 2015 2016 2017 2018

Clinker Gypsum Fly ash Slag Lime stone

Retail Price of Cement in Dhaka (BDT per 50 KG Bag)

Source: EBLSL Research

Technological shift is taking place

Nearly 60% of the cement is consumed during winter

In Bangladesh, business operation of most cement manufacturers is geographically

Cement Consumption (%)

35% 30% Individual Home Builders

Source: Industry experts & EBLSL Research

As a result, major cement manufacturers are importing required raw materials

Source: MacroTrends, businessinsider & EBLSL Research

Source: Annual Reports of Listed Companies (2017-18) & EBLSL Research

Scenario Analysis Source: Bangladesh Bank

Potential Impact of Increased Clinker Price

infrastructure and therefore,

6.5% 6.5% 6.6% building basic infrastructure

5.6% demand for cement is expected ensuing years.

5.0% in the ensuing years. To tap this

cement manufacturers have

already undertaken major

600 30.0% 30% 30%

500 25.0% 25% 25%

400 20.0% 20% 20%

Source: Bangladesh Bank & EBLSL Research

Mega projects are expected to be the major driver of cement industry

Government approved some 79 economic zones including 56 public and 23 private

Capacity Utilization - Industry Capacity Utilization

Capital Market Performance

Source: DSE and EBLSL Research

Shareholding pattern (%)

March, 2019 June, 2018

2018 10% C 15% C 15% C, 20% B 10% C 10% B 75% C N/A

Based on Annual Reports (2017-18, Consolidated)

Particulars MI Confidence Premier Meghna Aramit

Revenue 16,631.53 12,559.31 3,916.78 10,049.87 5,533.35 11,151.29 1,723.28

Gross Profit 4,099.95 1,643.42 328.64 1,516.88 568.93 1,931.51 272.60

Operating Income 4,276.59 1,790.82 336.83 1,529.72 701.90 1,949.68 276.92

Net Income 1,114.65 315.61 374.24 442.18 81.45 809.76 (154.61)

Total Assets 26,888.23 19,713.91 8,200.82 13,468.00 6,881.42 8,641.42 4,100.33

Current Assets 7,149.19 11,304.32 3,183.25 6,658.34 5,148.85 4,654.11 3,024.62

Fixed Assets 19,739.04 8,409.59 5,017.57 6,809.65 1,732.57 3,987.31 1,075.72