Confidence Cement Limited (CCL) was formed as a public limited company incorporated in Bangladesh with primary objective to carry

on manufacturing and marketing of cement in and outside Bangladesh. CCL is listed in the Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited in 1995. The company commenced its business on May 02, 1991. In this write up, the performance of CCL has been analyzed through ratio analysis for the year 2006 to 2010. In addition, the industry analysis of cement sector of Bangladesh has been portrayed.

RATIO ANALYSIS
Financial Year Current Ratio Quick Ratio 2006 1.27 0.77 2007 1.29 0.71 2008 1.07 0.60 2009 1.42 0.83 2010 1.36 0.69 Remarks Significant drop in 2008 Remain in same level Highest on 2006, downward from 2009. Improved in 2010. Significant drop in 2009 Significant drop in 2009-10 Downward after 2008 Downward after 2008 Significant improvement from 2009 Dropped in 2008, above average in 2009. Dropped in 2008, above average in 2009. Dropped in 2008, improved in recent years. Negative on 2008, improved in recent years. Negative on 2008, improved in recent years Consistent improvement except from 2008.

Inventory Turnover Average Collection Period Fixed Asset Turnover Total Asset Turnover Debt Ratio Debt-to-Equity Times Interest Earned Gross Profit Margin Operating Profit Margin Net Profit Margin

5.00 53.30 1.74 0.95 0.34 0.52 4.38 11.16% 8.10% 4.33%

4.06 38.48 2.11 1.00 0.38 0.61 4.79 11.76% 8.67% 4.78%

4.87 42.56 2.51 1.07 0.46 0.84 -0.50 1.93% -1.08% -2.31%

3.66 51.90 0.79 0.52 0.20 0.24 21.41 18.83% 15.20% 11.81%

3.58 27.20 1.10 0.53 0.19 .24 15.49 13.77% 10.18% 14.02%

Return on Total Assets (ROA) Return on Equity (ROE)

4.09% 6.22%

4.79% 7.69%

-2.47% -4.53%

6.17% 7.67%

7.45% 9.26%

Earnings Per Share Price/Earnings Ratio

2.16 64.67

2.77 133.44

(1.50)

6.86 20.38

7.39 39.69

If we analyze the figures above, we will find that there are some significant deviations in some ratios in 2008. In 2008, the global economy was experiencing severe catastrophe and also since the country was under the Caretaker Government, infrastructural and related development work was almost at a minimum. This caused the consumption of cement to go down significantly. In addition, imported raw material of cement i.e. clinker, gypsum and slag s prices were high due to increase of oil price in global market. The company had to invest more in raw material and so the inventory cost soared.

The average collection period has been confined to 27.20 days thanks to sales growth of 41% and decline of 25% of accounts receivable in 2010 from 2009. CCL has invested 1.35 crore Tk in plant and machinery which affected Total asset Turnover in 2010. The same ratio is affected due to asset revaluation in 2009. CCL is basically an equity based company. Revaluation of asset in 2009 and issuance of right share @3R:10 in 2010 increased its equity base. DUPONT ANALYSIS
Net Profit /Sales Sales/Total Assets ROA Net Profit /Total Assets Total Assets/Stockholders Equity ROE 4.33% 94.55% 4.09% 4.09% 152.07% 6.22% 4.78% 100.20% 4.79% 4.79% 160.55% 7.69% -2.31% 106.56% -2.47% -2.47% 183.69% -4.53% 11.81% 52.22% 6.17% 6.17% 124.35% 7.67% 14.02% 53.16% 7.45% 7.45% 124.20% 9.26%

Intra Industry Rivalry: Compared to multinational cement companies who had access to cheaper source of working capital finance from overseas banks the locally owned companies had to pay much more causing the margins to fall and incur loss.

In Bangladesh, there are around 55 cement-manufacturing companies, most of which are in operations either on a large or small scale. A total of 34, including multinational cement manufacturers, are in commercial production. With high demand for cement comes greater competition. It is a market for 'maximum volume but minimum profit.

Among local brands, Shah Cement, Meghna Cement, Crown Cement, Fresh Cement, Premier Cement and Seven Circle Cement are famous across the country. The five multinational cement companies in operation are: Holcim, Heidelberg, Lafarge Surma, Cemex and Emirates.

Power of Suppliers:

Also, the delivery of raw material was not smooth as with increment of oil price the vessel freight increased significantly causing the bargaining leverage to be more on the side of the shipper. Although Bangladesh is self sufficient in cement production, it needs to import all the raw materials used in

cement manufacturing. The main ingredients for cement include clinker, gypsum and fly ash, which are mainly imported from Thailand, Malaysia, Vietnam and China. Bargaining power of Buyers: Bangladesh is self-sufficient in fulfilling local demand for cement. Even so, the installed production capacity is higher than local demand. Cement consumption was 1.3 crore tonnes in 2009 and 1 crore tonnes in 2008. Consumption for 2010 has been estimated at 1.45 crore tonnes, the cement association data shows.

Threats of New Entrants: We are seeing an ever-increasing growth in the cement sector, as the government looks seriously on some big infrastructure projects, such as flyover, airport, bridge and monorail, where cement will be a basic raw material. As it is a heavy industry, huge investment is needed to set up a unit with backward and forward linkage facilities. It will cost around Tk 1,000 crore, if a unit has the capacity to produce 10,000 tonnes of cement a day with adequate backward and forward linkages. The backward and forward linkages refer to the transportation of raw materials and shipment of finished products by a company's own transportation chain, in which, ocean going vessels are included. Bangladesh has surplus production capacity of cement, and with existing growth domestic demand can be met by local production in next 4 to 5 year, said Jasim Uddin Khandaker, vice-president of sales and marketing of Holcim. However, many companies are now going for expansion. Bangladesh will not face any problem meeting its local demand up to 2020, he added. The industry has been growing at 10-12 percent for the past several years, except for 2007 when demand for this construction material came down to its lowest. We expect cement consumption to grow by at least 15 percent in the next several years on rising demand for infrastructure projects. The industry has been growing at 10-12 percent for the past several years, except for 2007 when demand for th According to market players, the industry is saturated with nearly 120 companies registered with an annual capacity of 21 million tonnes against demand for around 11-12 million tonnes as per the 2009 consumption pattern. They said the companies plan to expand despite a saturated market, mainly because of reducing their production costs. Of the 120 cement companies registered with the relevant government agencies, around 80 companies are in operation. Some small manufacturing plants in northern and southern parts of the country had already been shut down in the last few years, as those lost out their competitiveness to big players.

Bargaining power of buyers: We are not only self sufficient in cement production, we also export to our neighbouring country, India. Every company cuts production in the rainy season. Real estate companies and individuals are the main consumer of cement, manufacturers said, pointing to the fact that government projects consumed a little during the past decade. Bangladesh exports around 12,000-14,000 tonnes of cement a month, mainly to India.

Strategy: