Fin 201 Term Paper Group A PDF
Fin 201 Term Paper Group A PDF
Fin 201 Term Paper Group A PDF
Prepared for
Leo Vashkor Dewri
Senior Lecturer
Department of Business Administration
Submitted by
Group A
Section: 03
Name ID
Aysha Akter 2016-1-10-132
MD. Asif Ali 2017-2-10-229
Gopal Dey 2019-1-10-134
Introduction………………………………………………………………………………….1
Net Sales Revenue…………………………………………………………………….1
Net Profit Earning…………………………………………………………………….2
Returns………………………………………………………………………………...3
Financial Leverage…………………………………………………………………….3
Ratio Analysis…………………………………………………………………………….…..6
Short-term Solvency Ratios……………………………………………………………6
Profitability and Activity Ratios……………………………………………………….7
Financial Leverage Ratios……………………………………………………………..8
Share of Equity Evaluation…………………………………………………………….9
Competitor Analysis………………………………………………………………….10
Cash Flow……………………………………………………………………………………12
Non-financial Performance Indicators……………………………………………….……14
Growth or Reduction of last five years Business………………………………..……16
Growth or Reduction in Manpower Position and Value …………………………..…17
Community …………………………………………………………..........................18
Health & Safety………………………………………………………………………18
Suggestions………………………………………………………………………...…18
Lists of Graphs
Graph 5.1 Graphical representation of Production Utilization of Cement and Ready mix
Plant during 2015 to 2019……………………………………………………………………………….
1. Introduction
Confidence Cement Limited is the first ISO 9002 certified cement manufacturing company in
Bangladesh. Today the company has the production capacity 1,050,000 Metric Tons annually.
It’s aim to be the finest cement manufacturing company of Bangladesh through the continuous
development and producing high level and consistent quality cement to satisfy all customer’s
need. Its’ overall strategic vision is durable and prosper in the market and tackling the internal
and external encounters along the way. [Source: Confidence Cement Limited Annual report 2018-2019]
During last five years period Confidence Cement Limited’s has generated remarkable cash
flows and stayed in a strong financial position. CCL’s financial performance also noteworthy
over the year. Company able to give dividend 30% to its shareholders, which is great profitable
significance for them and push them to competitive advantages. Analysis of CCL’s financial
key performance indicators is illustrated below:
5,000,000,000
Revenue (BDT)
4,000,000,000
3,000,000,000
2,000,000,000
1,000,000,000
-
2015 2016 2017 2018 2019
Revenue 3,637,270,887 3,613,744,024 3,629,375,210 3,916,783,517 4,832,893,768
Net Profit calculation after tax & interest from 2015 to 2019
600,000,000
500,000,000
400,000,000
300,000,000
200,000,000
100,000,000
-
2015 2016 2017 2018 2019
A higher net profit margin determines that a company is able to successfully manage over its
costs and provide goods or services at a price significantly higher than its costs. The bar chart
shows that CCL net profit after tax and interest is highest in FY 2017 and the lowest in FY
2018 (Tk. 305 million). In FY 2016-17, net profit after tax of the Company was Tk. 498 million
while Tk. 459 million in FY 2015-16. During the recent five years’ time period the company
net profit increased only by 119.36% where during FY 2015 to 2017 that net profit was
increased by 152.73%.
Table 1.3 Profitability Ratios during 2015 to 2019
Year of
2015 2016 2017 2018 2019
operation
Return on Assets
5.86% 7.37% 6.45% 3.76% 4.28%
(ROA)
Return On Equity
10.51% 13.86% 13.16% 7.58% 8.94%
(ROE)
Return on Capital
6.07% 8.22% 6.54% 3.81% 4.74%
Employed
Source: http://lankabd.com and Confidence Cement Limited Annual Report from 2014-15 to 2018-19
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2015 2016 2017 2018 2019
The ROA ratio represent the rate of return on company total investment after paid interest and
taxes. Higher the ROA percentage is better for business because that the way asset utilization
seems properly. The percentage of ROA ratio was fluctuated over the last five years. In FY
2016, the ROA of CCL Company is highest with 7.37% but it dropped to 4.28% in FY 2019.
Return on equity (ROE) is not steady over the five years’ time period. ROE stayed in the middle
of 7.58% to 13.86%. Decreasing ROE indicates that Confidence Cement Ltd. becoming less
capable for making profits and increasing shareholders value. In FY 2018, ROCE hit the lowest
percentage of the last five years and it is continuously decreasing over this time.
Table 1.4 Financial Leverage Ratios in 2015 to 2019
Year of
2015 2016 2017 2018 2019
operation
Cash Coverage
6.447 - - 4.555 3.926
Ratio
Source: http://lankabd.com and Confidence Cement Limited Annual Report from 2014-15 to 2018-19
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2015 2016 2017 2018 2019
Debt Ratio 0.08% 0.05% 0.00% 1.10% 15.96%
Confidence Cement Ltd. debt ratio was stable from the year FY 2015(0.08%) to FY
2018(1.10%). But in FY 2019 the debt ratio increased in an extreme way and that is 15.96%.
High debt ratio indicates that CCL may be driving itself at risk of default on its loan if interest
rates were to increase unexpectedly.
In recent five year (2015-2019), CCL’s Interest coverage ratio changes between 1.96 times to
4.27 times. In FY 2015, company has experienced topmost interest coverage ratio (4.27 times)
where in FY 2019 that is lowermost (1.96 times) compare to recent years. In FY 2019, the
reason of lowest interest coverage ratio was the interest expense almost double (Tk.
238,096,429) comparing with last fiscal year (2017-18). CCL have to generate higher profit
rapidly or company might face financial difficulties in short term period.
56.00%
54.00%
52.00%
50.00%
48.00%
46.00%
44.00%
2015 2016 2017 2018 2019
Gearing Ratio
CCL’s Cash Coverage Ratio has fluctuated during last five year time period. In FY 2015,
company has experienced highest cash coverage ratio (6.44 times) where in FY 2019 that has
hit the lowest (3.92 times) compare to recent years. Due in increase interest expenses over the
years, the result is Cash coverage ratio affected for that. Decrease in cash coverage ratio
indicates company has less ability to meet the interest expense with its cash.
During last five years gearing ratio has aggravated due to increase in amount long-term
liabilities every year. In FY 2015, company’s gearing ratio was 48.89% but in FY 2019 it was
55.79%. That means around 7% increase in company recent five years’ time period.
Overall, Confidence Cement Ltd is generating a significant amount of profit from its
operations. Hence, some of these ratio indicates management must concerns about future threat
of financial conditions.
2. Strategy and Forward Planning
Strategy:
1. Manufacturing and selling the products to the customers with no compromise in the quality
and by continuing follow the code of business principle. [Source: Confidence Cement Limited Annual
Report from FY 2018-19]
2. Company will endure and tackle all the internal and external challenges along the way to
success. [Source: Confidence Cement Limited Annual Report from FY 2018-19]
3. To boost up the sales management of the company stated various sales schemes to dealers
and by improving the relationship with the respected customers to ensure future market growth.
[Source: Confidence Cement Limited Annual Report from FY 2018-19]
Forward Planning:
1. CCL aims that they will be number one cement manufacturing company in Bangladesh by
constant development and by steadily producing high quality products. [Source: Confidence Cement
Limited Annual Report from FY 2018-19]
2. The Company and its Board of Directors would like to extend its foremost regard and
appreciation to the valued Shareholders and other stakeholders of the Company for their present
support and guidance to the Company that led to the cumulative achievements. [Source:
Confidence Cement Limited Annual Report from FY 2018-19]
3. The board of directors agreed to acquisition of 51,00,000 ordinary shares of Tk. 10 each of
the Zodiac Power Chittagong Limited.
[source:https://www.cemnet.com/News/story/167263/confidence-cement-acquires-zodiac-
power-chittagong-ltd.html?fbclid=IwAR2vXpb]
4. The board of directors has decided and authorized to sell of 816.73 decimals of land of the
company situated at Danga Mouza, Polash Upazilla, Narishingdi, Dhaka in service of
Confidence Cement Dhaka.
[source:https://stockbangladesh.com/news/search?keyword=&instrument_id=60&from_date
=&to_date=&page=4&fbclid=IwAR2ZYoUijWNUeBOG3OF1I1ZC2iglkZa2pSzjjZDJayrJR
UoYURzuVkUnHRM]
5. CCL will install brand new slag dryer at its cement plant in Sitakunda to ensure constant
assembly of the present Lines 2 and 3.
[source:https://www.cemnet.com/News/story/165224/confidence-cement-to-install-slag-
dryer-close-line1.html?fbclid=IwAR02fcMCj0nHNzA2bRMhdmrvUigxFy1QNOXgyvJBHN_N-
flAfjCHNYiR_hg]
Evaluation:
CCL company focusing to expand its business in whole country also they are concentrate their
focus on exporting. To serve the large number of people, Company has also focus on build a
factory in Dhaka.
3. Ratio Analysis
Table 3.1 Ratio analysis during 2015 to 2019 [source: Confidence Cement Limited Annual Report 2014-15 to 2018-19]
Short-term Solvency Ratios:
Confidence Cement Ltd.’s Current and Quick assets ratios in FY 2019 are 1.20 and 1.01 respectively
which is way above the normal. Higher current and quick ratio indicates that company has greater
liquidity, however if the current ratio is too high (above 2), it might be that company is unable to use
its current assets efficiently. Due to increase in current assets and decrease in current liabilities in 2019
company has more money in hand to pay its short term obligations compare to last year’s (2015 to
2018) current ratio.
In last five years Quick ratio has fluctuated, as we know more the quick ratio is better off for business.
Quick ratio of CCL has witnessed a steady decrease from 2016 to 2018. This suggest that in this year’s
company might face difficulties over inventory management and total current liabilities is much
higher. Hence, in 2019 company quick ratio increase to 1.01 and that make company is financially
more secure and stable in short term future.
1.20
1.00
0.80
0.60
0.40
0.20
0.00
2015 2016 2017 2018 2019
In FY 2019, CCL’s activity ratios illustrate that CCL pay the debt to their lender in 29 days but collect
the money in 71 days which reflect poor financial management over collection the receivable money
and payment due so early. If we compare this five year time period activity ratio then the Average
collection period and Average pay period of CCL improved over the years except 2019. As a result,
CCL shouldn’t pay before the collection period, or it will increase the company credit risk.
20.00%
15.00%
10.00%
5.00%
0.00%
Gross Profit Margin Operating Profit Margin Net Profit Margin
100.000
80.000
Days
60.000
40.000
20.000
0.000
2015 2016 2017 2018 2019
CCL debt ratio extremely increase in 2019 due to increase the debt in great amount. High debt ratio
indicates that CCL may be driving itself at risk of default on its loan if interest rates were to increase
unexpectedly. Other hand cash coverage ratio deceased over the year. In future for the decreasing of
cash coverage ratio, company will have less ability to meet the interest expense with its cash. Increase
in profit before tax can help to hold more cash in pay the interest expense.
25.000
20.000
15.000
10.000
5.000
0.000
2015 2016 2017 2018 2019
Graph 3.2 Graphical representation of Share or Equity Evaluation during 2015 to 2019
Confidence Cement Ltd.’s share price has been fluctuating over the recent five year’s time period.
Company share price from 2015 to 2019 increased by 179.6% where the highest in year 2018 with
market price per share at Tk. 156.50. Company has experienced highest EPS in FY 2017 where the
company’s net income is highest among the recent years and the lowest EPS in FY 2018 where the net
income is the lowest. In FY 2019 CCL’s net income increase in compare to 2018 and that’s why EPS
has also seen increased in 2019. On the other hand Price earnings ratio was stable from FY 2015 to
FY 2017. Then in FY 2018 P/E ratio has dramatic increased to 27.63. But next year in 2019 price
earnings ratio dropped to 25.90. The reason for that CCL’s market price per share was highest (Tk.
156.50) in FY 2018 but it dropped only Tk. 1 in 2019 with increase in EPS (Tk. 6.01).
Table 3.3 Competitor Analysis
Based on fiscal year 2018-19 annual reports
On the other hand, the CCL’s current and quick ratio against liability is higher than Meghna Cement
Bangladesh Limited. That indicates CCL seems to have a higher liquidity than MCML. Higher current
and quick ratio indicates that company has greater liquidity. The current and quick ratio of CCL is 1.2
and 1.01 respectively whereas MCML has 0.80 and 0.70 respectively. CCL has much more ability to
survive in future business from uncertainty rather than MCML.
MCML’s total asset turnover is much higher that CCL, which indicates that MCML utilize its total
assets effectively to generating sales revenue for the company. MCML Company has greater control
over average inventory, collection and pay period than CCL Company. MCML collect their money in
average 55 days where CCL collect their money from retailers and dealers in average 71 days and pay
in 52 days compare to CCL’s 29 days’ pay period.
CCL gearing ratio, cash and interest coverage ratio is in better position than MCML. CCL interest
coverage ratio is 5.20 times higher in comparison with MCML. The MCML cash coverage ratio is
0.782 times where CCL cash coverage ratio in FY 2019 is 3.926 times. Gearing ratio indicates that
MCML financial risk is much higher than CCL. This excessive debt can lead the business to financial
difficulties than CCL.
4. Cash Flow
Table 4.1 Cash flow statement of fiscal 2019
Net cash generated from operating activities stay in negative figure because of cash received from
customer and others is Tk. 4932.40 million while high amount of payment to the suppliers, employees
and other is Tk. 5141.92 million. Confidence Cement Ltd.’s interest amount paid to the lenders in
2018-19 fiscal year is Tk. 216,100,881 and income tax paid to the government is Tk. 48,568,148.
Confidence cement Ltd.’s invested significant amount of money is to increase property and equipment
and the amount is Tk. 153,755,538 in 2019 while company earned cash inflow from proceeds on sale
of property, plant & equipment is Tk. 5,357,226. Company give dividend to the shareholders in FY
2019 is Tk. 1,733,933. From sale the investment company earned Tk. 16,886,449 while outflow of
cash payment to associate companies Tk. 41,000,000. In last, for the purchase of property and
equipment and paid to associated companies significant amount causes high amount of cash outflow
and net cash flow from investing activities stay in negative figure.
In FY 2019, Confidence Cement Ltd. repayment short term debts is Tk. 573,951,465 and dividend
paid to the preference shares is Tk. 78,842,025. Long term loan & lease finance is Tk. 1,361,780,079.
After all of that calculation the net cash flow financing activities account stay in positive figure.
Beginning of the fiscal year 2019 the cash and cash equivalents was Tk. 49,425,599 but end of the year
figure is Tk. 113,443,036 because of most of cash inflow during time period. If we compare cash flow
end of the period balance with last year (2018) to this year (2019) cash flow end balance, then we can
say that the amount is increased by 229.52%.
5. Non-financial Performance Indications
Table 5.1 Cement Plant Production capacity and Utilization percentage during 2015 to 2019
Table 5.2 Ready Mix Plant Production capacity and Utilization percentage during 2015 to 2019
Year of Operation 2015 2016 2017 2018 2019
Production Capacity
3,612,834 3,588,737 2,398,435 2,403,767 24,007,700
(CFT)
Actual Production
1,264,492 1,076,621 1,151,249 1,514,373 17,285,544
(CFT)
Utilization of capacity
35% 30% 48% 63% 72%
(%)
Sales Quantity (CFT) 1,120,637 1,264,456 1,151,249 1,514,373 1,728,544
Source: Confidence Cement Limited Annual Report from 2014-15 to 2018-19
60%
50%
40%
30%
20%
10%
0%
2015 2016 2017 2018 2019
Cement Plant utilization (%) 63% 78% 70% 55% 68%
Ready mix Plant utilization (%) 35% 30% 48% 63% 72%
Graph 5.1 Graphical representation of Production Utilization of Cement and Ready mix Plant
during 2015 to 2019
Growth or Reduction of last five years Business:
CCL doesn’t grow that much in recent five years’ time period. The Production capacity of cement
plant has reduced by 6.91% in the last five years. As well as CCL company didn’t utilize its capacity
properly; however the utilization of production capacity growing by years. The sales suggests that
CCL’s cement sales increased by 100.84%. In 2019 the sales increased by 123.12% which a positive
sign for growth of CCL compare to 2018. Increase in sales and utilizing the capacity indicate that how
CCL has progressed.
In Ready mix plant utilization of the production capacity is increased along with the sales over the five
years. Sales suggest that it has increased by 154.24% in that time period. Because of better utilization
of the capacity revenues and net profit earning increase over the year.
Community:
As Confidence Cement Limited is a flagship company of Confidence group, most CSR activities work
contribution done by the name of parent company (Confidence Group). This company is very much
engaged with organization like JAAGO Foundation, Blood donation campaign for Thalassemia
patients, Sponsor of Bangladesh Premier League.
[Source:https://www.confidencegroup.com.bd/csr.php?fbclid=IwAR2F6TfVlw9RsR4zVPScYxg6aNn
cwDjB7ELmNTaITFAMTbLox2LyDMLpho]
Health & Safety:
CCL always taken care of its employees and workers health and other safety issue. Company has
several policies to mitigate regarding the safety issues. [Source: Confidence Cement Limited Annual Report
from FY 2018-19]
Suggestions:
1. CCL could speak about how does the Health and safety helps the workers and employees to mitigate
their problems and disclose about the financial facilities.
2. CCL should mention what is the possible steps they taken for environment protect.
Raw Materials Consumed, which represents the cost of ingredients directly need to produce Cement
and Ready mix. Confidence Cement Limited depended on import of raw material mostly. In cement
plant, the major required raw materials are Clinker, Gypsum, Lime stone, Grinding Aid and Slags
which are fully imported from other country. Total raw materials consumed for cement plant is Tk.
3,061,605,413 from that imported purchase amount is Tk.2,869,518,500 and local purchase amount is
Tk.171,914,000.
At Ready mix plant the major ingredients required are Cement, Chemicals, Stone Chips (20 mm) and
Stone Chips (10 mm). On this raw materials, CCL purchase Cement and Chemicals full amount from
the Local companies and for the other products CCL mostly rely on imports.
Company purchased packaging materials mainly from Local companies. In FY 2018-19 CCL
purchased 12,262,200 Pcs. of materials for cement packaging. Compare to last year, this year
purchased of packaging materials in quantity increased by 1,680,650 Pcs.
Factory overhead costs, this represent the total cost that are involved in producing Cement and Ready
mix products. In FY 2018-19, CCL has manufacturing cost for cement plant is Tk. 642,143,387. In
cement plant manufacturing costs are like gas, salaries, wages, benefits, insurances, repairing cost,
entertainment, power, traveling, gratuity and other expenses are included. For ready mix plant CCL
spends Tk. 68,055,589 in FY 2019, which is lower than last fiscal year.
Administrative cost indicates the cost for front office, salaries and wages of employees & directors,
gratuity cost, ISO expenses, printing, amortization, electricity, repairing etc. costs that are not involved
in productions. CCL administrative salaries, wages and benefits costs is Tk. 35,146,654 which is
increased by 119.50% comparing with last FY 2018.
Selling and distribution expenses are those expenses that are incurred in promote sales and give the
services and deliver the goods to customers. CCL expense for the Cement sales promotion in 2019 Tk.
2,802,954 whereas for ready mix sales promotion CCL spend nothing. For advertisement cement plant
cost Tk. 10,863,730 and for Ready mix plant Tk. 457,240 which is way more lower than Cement plant.
In cement plant for entertainment CCL cost Tk. 302,064.
Suggestions: Confidence Cement Ltd. can reduce their operating cost by self-dependency of
producing raw materials products rather than import them from foreign countries. Increase the
bargaining power in spite of purchasing packaging materials. This will help to reduce operating cost
and generate extra revenue.
Confidence Cement Limited started their business in aiming to number one cement brand in
Bangladesh based on the quality product ensure with value for customers money. After the 26+ years
journey of their business, it can say that they are in the right direction to achieving their goal. CCL has
generated noticeable growth over the years.
Moreover, the company might need some restructuring to get more benefited and gain maximum profit
like by inventory management system and credit control management system, cut off amount of current
and long term liabilities. As CCL is a fruitful company with generating effectively amount in growth
profit margin, they must handle the difficulties in future with effective management. Apart from the
financial performance, CCL has exemplary non-financial performance matters. However Confidence
cement Limited company need better financial structure with terms of healthy inventory and credit
management system to embellishment to its prospective.
8. References
1.
https://lankabd.com/?fbclid=IwAR3JbXQlpq6Lw0eQ4evd6qgmQ7REvvgL0wF1E34ksR2jWoFTIez
We1go3k
2.
https://www.amarstock.com/?fbclid=IwAR0GTe96oB0WJLBaclCPx27rhzPtaUQbENwwJU0MCq5
NDW3uLJUPoCjCGo
3. https://www.tbsnews.net/feature/panorama/how-junior-executive-became-trusted-ceo-confidence-
cement-198307?amp&fbclid=IwAR2X5e8fLBRsGAkbD9PLJEpVYVfcGv3l-
tprcA6JppFqtQ5RUn6yB80615k
4.
https://www.confidencegroup.com.bd/csr.php?fbclid=IwAR2F6TfVlw9RsR4zVPScYxg6aNncwDjB
7ELmNTaITFAMTbLox2LyDMLpho
5.
https://stockbangladesh.com/news/search?keyword=&instrument_id=60&from_date=&to_date=&pa
ge=4&fbclid=IwAR2ZYoUijWNUeBOG3OF1I1ZC2iglkZa2pSzjjZDJayrJRUoYURzuVkUnHRM
6.
https://www.dhakatribune.com/business/2019/09/04/confidence-cement-buys-51-stake-in-zodiac-
power?fbclid=IwAR0MGC03KMSNQbXpJ4PLF-BrpQYGuiVcfBXAb0W136utmkIGr_x_9pvYiVk
7.
https://www.cemnet.com/News/story/167263/confidence-cement-acquires-zodiac-power-chittagong-
ltd.html?fbclid=IwAR2vXpb
8.
https://www.cemnet.com/home/tags/Confidence%20Cement%20Ltd?fbclid=IwAR2QSsBeAj0XlWk
CJd0r98SXjRIhzEf7Pp8iVYlscYRUgOG0JJVGuKPX_AM
9.
https://www.cemnet.com/News/story/165224/confidence-cement-to-install-slag-dryer-close-line-
1.html?fbclid=IwAR02fcMCj0nHNzA2bRMhdmrvUigxFy1QNOXgyvJBHN_N-flAfjCHNYiR_hg