Introduction:

Purposes & Objectives of this project:

The purpose and objective of this project is to fully analyze the financial data of two companies:
Lafarge Surma Cement Ltd. and Heidelberg Cement Bangladesh Ltd. The purpose of this project
also encompasses calculating five major ratios e.g. Productivity, Liquidity, Leverage, Market
Value and Profitability ratios. This will enable us to conclude which company is in a better
position among the two companies. Moreover, in this project we will focus on DuPont analysis
of the two selected companies which will help us to conclude whether the companies are fully
utilizing total asset, equity and profit margin.

Brief Overview of Lafarge Surma Cement Limited (Target Company):

Lafarge Surma Cement Limited (LSC) is one of the largest cement manufacturers of the country
which was incorporated on 11th November 1997 as a private limited company under the
Companies Act 1994 and with a registered office in Dhaka. On January 20, 2003 Lafarge Surma
Cement Ltd. was made into a public limited company. The company is now listed in both Dhaka
and Chittagong Stock Exchange. At present, this company has more than 20,000 shareholders.
The company is fortunate to have a blend of both international and local shareholders. The
international shareholders of the company bring in technological and management expertise
while the local partners provide deep insights of the economy of Bangladesh.
Presently the company is meeting about 6.7% of the total market need for cement and 10% of
total clinker requirements of Bangladesh market whereas they continue to enjoy strong growth
rates. By supplying clinkers to other producers of the market they contribute some USD 50-60
million per annum worth of foreign currency savings for the country. They are producing world
class clinker and cement which is a demonstration of the sophisticated and state-of-the art
machineries and processes of their production plants. They are contributing around BDT 1
billion per annum as government revenue to the national exchequer Bnagladesh. The present
cement manufacturing of this company is 1.20 Million Metric Tons per year.

Page 1

Brief Overview of Heidelberg Cement Bangladesh Limited (Competitor

Company):
Heidelberg Cement Bnagladesh Limited is one of the largest producers of quality cement in
Bnagladesh. Heidelberg Cement Bnagladesh Limited is a member of Heidelberg Cement Group,
Germany. This company is representing two reputed brands Ruby Cement and Scan Cement.
In 1998 Heidelberg Cement Group established its presence in Bnagladesh by setting up a floating
terminal with on board packing facilities in the port of Chittagong and by distributing the cement
to the key markets of Dhaka and Chittagong. The company is now listed in both Dhaka and
Chittagong Stock Exchange.
At present, the company is meeting 9.3% of the Bangladesh demand for cement from two plants
located at Dhaka and Chittagong. The company with 1.5 million tones of annual cement
production has become a major force in the Bangladesh cement industry over the last eight years.
Through acquisition of Chittagong Cement Clinker Grinding Company Ltd., it has brought
together regional manufacturing whose history stretches back to the very beginning of
commercial cement production of Bangladesh. In Bangladesh Heidelberg Group is one of the
largest foreign investors having an investment of 100 million US$ and more than 260 employees
working round the clock to materialize the mission of this great global company. By satisfying
the needs and aspirations of its customers, employees, shareholders, and the wider community,
the company is able to maintain its position of strength as a sustainable cement provider without
compromising commitment to long term stability and environmental responsibility.

Reasons for Choosing Lafarge Surma Cement Ltd. & Heidelberg Cement
Bangladesh Ltd.:
Currently 123 companies are listed as cement manufacturers in the country. Lafarge Surma
Cement Ltd. and Heidelberg Cement Bangladesh Ltd. are among two big players of the industry.
Heidelberg Cement Bangladesh Ltd. and Lafarge Surma Cement Ltd. have market shares
of 6.7% and 9.3% respectively. As their market shares are close to each other, we have
chosen the companies to get closer approximation of the ratios.
Both the companies are listed in Dhaka Stock Exchange (DSE).

Page 2

Both companies use similar type of raw materials for manufacturing cement. Moreover,
the production phases and production lines of their products are also similar. The quality
of their products is almost same.
Both companies have strong goodwill in the cement industry of Bangladesh.
There are resemblances between the marketing policies and strategic approaches of the
two companies.
The net income of the income of the companies are
Sales volume or revenues of the companies

Ratio Analysis
In this report we have calculated and analyzed five major ratios of both the companies. They
are:1.
2.
3.
4.
5.

Liquidity Ratio
Asset Management Ratios
Leverage Ratios
Profitability Ratios
Market Ratios

1. Liquidity Ratios
This ratio expresses a company's ability to repay short-term creditors out of its total cash. The
liquidity ratio is the result of dividing the total cash by short-term borrowings. It illustrates the
number of times short-term liabilities are covered by cash.
Three liquidity ratios are:
1. Working Capital Ratio
2. Current Ratio
3. Quick (acid-test) Ratio
1.1 Working Capital Ratio:
This ratio measures the percentage of total assets that is invested in current assets. It helps to
analyze capital intensity as well as corporate liquidity. This ratio is also a measurement of
companys efficiency and short term financial health.

Page 3

Formula Used: Working Capital Ratio =

Current Assets
Total Assets

Table for Working Capital Ratio of Heidelberg Cement Bangladesh Ltd. & Lafarge Surma Cement
Ltd. from Year 2009 - 2011

Company Names
Lafarge Surma
Cement Ltd.
Heidelberg Cement
Bangladesh Ltd.

Year 2009

Year 2010

Year 2011

0.136

0.135

0.194

0.560

0.624

0.566

Interpretation:
From the above table, we can see that for Lafarge Surma Cement Ltd. the Working Capital Ratio
was almost same for the years 2009 and 2010, but it increased to 0.194 in the year 2011. The
higher working capital ratio in 2011 has been resulted from an increase in total current assets in
that year. Almost all the components of current assets e.g. Inventories, Trade and other
receivables, cash and cash equivalents etc. increased significantly in 2011 which ultimately
resulted higher level of current assets in that year. This increased ratio reflects the farms
increased efficiency and healthier short term financial health.
For Heidelberg Cement Bangladesh Ltd. Working Capital Ratio increased from 0.560 in the year
2009 to 0.624 in the year 2010. In 2010, the companys current assets increased which increased
their working capital ratio in that year. In 2011, the ratio decreased to 0.566 which is actually the
result of an increased level of current liabilities in the year.
Among the two companies, Heidelberg Cement Bangladesh Ltd. is in a better position as they
have higher values of working capital ratio which means they are in a better position to meet
their short term liabilities.

2. Asset Management Ratios

These ratios measure how efficiently the firm is managing its assets. They are used to judge
whether the company has right amount of assets against its sales or not.
Five Asset Management ratios are:
1. Inventory Turnover Ratio
2. Receivable Turnover

Page 4

3. Days Sales Outstanding (DSO)

4. Total Asset Turnover (TATO)
5. Fixed Asset Turnover (FATO)
2.1 Inventory Turnover:
The ratio is considered as a test of efficiency of a company and indicates the rapidity of the
company to convert its ending inventories into sales. This ratio involves both stock and flow
values.
Formula used: Inventory Turnover =

Cost of Goods sold

Invent ory

Table for Inventory Turnover Ratio of Heidelberg Cement Bangladesh Ltd. & Lafarge
Surma Cement Ltd. from Year 2009 - 2011
Company Names

Year 2009

Year 2010

Year 2011

Lafarge Surma Cement Ltd.

4.7040

4.6033

3.8799

Heidelberg Cement
Bangladesh Ltd.

6.2884

5.2489

6.3975

7
6
5
Lafarge Surma
Cement Ltd.

4
3

Heidelberg Cement
Bangladesh Ltd.

2
1
0
2009

2010

2011

Figure: Trend Analysis for Inventory Turnover

Interpretation:
From the above table, we can see that for Lafarge Surma Cement Ltd. the Inventory Turnover
Ratio was almost same for the years 2009 and 2010, but it decreased to 3.8799 in the year 2011.
The lower inventory turnover ratio in 2011 has been resulted from a higher amount of inventory

Page 5

in their warehouse. The reason for higher inventory in the year 2011 is mainly because of the
higher amount of finished goods and work in progress and higher amount of raw materials than
these components of inventory account in the years 2009 and 2010. The lower inventory turnover
in 2011 is an indication of the farms decreased efficiency of converting their raw materials and
work in progresses to finished goods and finally into sales.
For Heidelberg Cement Bangladesh Ltd. Inventory Turnover Ratio was 6.2884 in the year 2009
but it decreased to 5.2489 in the year 2010. This has been resulted from higher amount of
inventory in 2010 due to a significant increase in the amount of raw materials in that year. In
2011, the ratio increased to 6.3975 which is actually the result of higher amount of sales and
lower amount of inventory in 2011. It illustrates their increased efficiency of converting their
inventories into sales.
If we compare the inventory ratio between the two companies, than we can see that Heidelberg
Cement Bangladesh Ltd. is in a better position as it has a higher ratio. It indicates the company is
more efficient than Lafarge Surma Cement Ltd. in managing their inventories.
2.2 Receivable Turnover:
This ratio is an accounting measure used to quantify a firms effectiveness in extending credits as
well as collecting debts. In fact, it is an activity ratio which reflects the amount of sales generated
by every dollar of receivables.
Formula used: Receivable Turnover =

Net Sales
Accounts Receivable

Table for Receivable Turnover of Heidelberg Cement Bangladesh Ltd. & Lafarge Surma
Cement Ltd. from Year 2009 2011
Company Names

Year 2009

Year 2010

Year 2011

Lafarge Surma Cement Ltd.

19.4382

42.4670

11.4315

Heidelberg Cement
Bangladesh Ltd.

12.2814

14.1209

10.6287

Page 6

45
40
35
30
25
20
15
10
5
0
2009

Lafarge Surma
Cement Ltd.
Heidelberg Cement
Bangladesh Ltd.

2010

2011

Figure: Trend Analysis for Receivable Turnover

Interpretation:
The Receivable Turnover Ratio of Lafarge Surma Cement Ltd. significantly increased from
19.4382 in 2009 to 42.4670 in 2010 which tells us that the companys ability to quickly convert
its credit sales into cash increased in 2010. The reason for the increase in the ratio in 2010 is
heavy fall of their accounts receivable in the year. In the year 2011, the companys receivable
ratio sharply decreased to 11.4315. The sharp fall of the ratio in 2011 has been resulted from a
fourfold increase in accounts receivable in the year than that of 2010.
The Receivable Turnover Ratio of Heidelberg Cement Bangladesh Ltd. increased from 12.2814
in year 2009 to 14.1209 in year 2010. Their sales increased in 2010 than the previous year which
ultimately increased their receivable turnover ratio in that year. The companys receivable ratio
dropped to 10.6287 in 2011 which has been resulted from a significant increase of accounts
receivable in 2011.
If we compare the receivable turnover ratio of the two companies we can see that Heidelberg
Cement Bangladesh Ltd. is in a better position having consistent values of ratios. But the overall
performance of Lafarge Surma Cement Ltd. is good as they have higher values of receivable
turnover ratio than their Heidelberg Cement Bangladesh Ltd. It means that they are generating
more sales form every unit of receivables than Heidelberg Cement Bangladesh Ltd. This is a
reflection of their increased efficiency in collecting credit sales in 2010.

Page 7

2.3 Days Sales Outstanding (DSO):

This ratio shows both the average time it takes to turn the receivables into cash i.e. how much
time it takes to collect money from the payers and the age, in terms of days, of a companys
accounts receivable. This ratio is of particular importance to credit and collection associates of a
company.
Formula used: Days Sales Outstanding =

Receivables
Annual Sales
365

Table for Days Sales Outstanding of Heidelberg Cement Bangladesh Ltd. & Lafarge Surma
Cement Ltd. from Year 2009 2011
Company Names

Year 2009

Year 2010

Year 2011

Lafarge Surma Cement Ltd.

18.7775 Days

8.5949 Days

31.9297 Days

Heidelberg Cement
Bangladesh Ltd.

29.7200 Days

25.8482 Days

34.3410 Days

40
35
30
25

Lafarge Surma
Cement Ltd.

20

Heidelberg Cement
Bangladesh Ltd.

15
10
5
0
2009

2010

2011

Figure: Trend Analysis for Days Sales Outstanding (DSO)

Interpretation:
From the table, we can see that the DSO ratio of Lafarge Surma Cement Ltd. sharply decreased
from 19 days in the year 2009 to 9 days in the year 2010. The companys accounts receivable
significantly decreased in 2010 which decreased their DSO ratio in 2010. The DSO ratio sharply
increased to 32 days in 2011. This has been resulted from a fourfold increase in accounts
receivable in 2011 than the previous year.
Page 8

The DSO ratio of Heidelberg Cement Bangladesh Ltd. decreased from 30 Days in 2009 to 26
days in 2010. This is the result of their increased sales in 2010. But the companys DSO ratio
increased to 34 days in 2011, which is the result of a higher amount of accounts receivable in
the year than that of 2010.
Comparing the DSO ratios of the two companies we can notice that Heidelberg Cement
Bangladesh Ltd. is more consistent than Lafarge Surma Bangladesh Ltd. in maintaining their
ratios. But the overall performance of Lafarge Surma Cement Ltd. is good as they have smaller
values of DSO ratio which reflects that they are more efficient in collecting their credit sales than
Heidelberg Cement Bangladesh Ltd.
2.4 Total Asset Turnover (TATO):
This ratio illustrates how much of sales have been generated from the total asset used. It
evaluates the efficiency of managing all the companys assets in generating sales or revenue the
higher the number the better. It also indicates pricing strategy: companies with low profit
margins tend to have high asset turnover, while those with high profit margins have low asset
turnover.
Formula used: Total Asset Turnover =

Sales
Total Assets

Table for Total Asset Turnover of Heidelberg Cement Bangladesh Ltd. & Lafarge Surma
Ltd. from Year 2009 2011
Company Names

Year 2009

Year 2010

Year 2011

Lafarge Surma Cement Ltd.

0.4434

0.3415

0.3500

Heidelberg Cement
Bangladesh Ltd.

1.1951

1.1586

1.0631

Page 9

1.4
1.2
1
Lafarge Surma
Cement Ltd.

0.8
0.6

Heidelberg Cement
Bangladesh Ltd.

0.4
0.2
0
2009

2010

2011

Figure: Trend Analysis for Total Asset Turnover (TATO)

Interpretation:
The total asset turnover ratio of Lafarge Surma Cement had fallen from 0.4434 in the year 2009
to 0.3415 in the year 2010 which had been resulted from their decreased sales in 2010. This
indicates their decreased efficiency of managing assets to generate sales in 2010. The ratio
slightly increased to 0.3500 in 2011 which is the result of an increased amount of sales in that
year.
The total asset turnover ratio of Heidelberg Cement Bangladesh Ltd. decreased from 1.1951 in
year 2009 to 1.1586 in the year 2010. This decrease occurred due to an increase in total assets in
2010. The increased amount of total assets was caused by increased level of capital work-inprogress, inventories, and advance, deposits and prepayments. The companys total asset
turnover ratio further decreased to 1.0631 in 2011 due to a further increase in the amount of total
assets.
Comparing the total asset turnover ratio of the two companies we can notice that Heidelberg
Cement Bangladesh Ltd. is in a better position having higher values of TATO ratio than Lafarge
Surma Cement Ltd. which illustrates that they are more efficient in managing their assets in
generating sales. But it is also noticeable that Heidelberg Cement Bangladesh Ltd. is not in a
good position due to decreasing TATO ratio from year to year.
2.5 Fixed Asset Turnover (FATO):
This ratio measures how much sales have been generated by using the fixed assets specifically
property, plant and equipment (PP&E) net of depreciation. A higher fixed asset turnover ratio

Page 10

shows that the company has been more effective in using the investment in fixed assets to
generate revenues.
Formula used: Fixed Asset Turnover =

Net
Sales
Assets

Table for Fixed Asset Turnover of Heidelberg Cement Bangladesh Ltd. & Lafarge Surma
Ltd. from Year 2009 2011
Company Names

Year 2009

Year 2010

Year 2011

Lafarge Surma Cement Ltd.

0.5314

0.3952

0.4345

2.7202

3.0817

2.4530

Heidelberg Cement
Bangladesh Ltd.

3.5
3
2.5
Lafarge Surma
Cement Ltd.

2
1.5

Heidelberg Cement
Bangladesh Ltd.

1
0.5
0
2009

2010

2011

Figure: Trend Analysis for Fixed Asset Turnover (FATO)

Interpretation:
The fixed asset turnover ratio of Lafarge Surma Cement Ltd. had fallen from 0.5134 in 2009 to
0.3952 in 2010. The reason of this decreased FATO in 2010 is decreased amount of sales in the
year. It illustrates their decreased efficiency in managing fixed assets to generate sales. The ratio
increased to 0.4345 in 2011 due to an increased level of sales and a decreased level of fixed
assets in the year.
The fixed asset turnover ratio of Heidelberg Cement Bangladesh Ltd. increased from 2.7202 in
the year 2009 to 3.0817 in year 2010 due to a significant increase in sales in year 2010. It reflects

Page 11

their increased efficiency in managing their fixed assets to generate sales in 2010. In 2011 the
companys fixed assets increased significantly which decreased their fixed asset turnover ratio to
2.4530 in the year. The increase in fixed assets occurred due to a huge increase in capital workin-progress in 2011.
Comparing fixed asset turnover ratio of the two firms, we can see that Heidelberg Cement
Bangladesh Ltd. is in a better position having higher values of fixed asset turnover ratio which
reflects their higher efficiency level in managing fixed assets to generate sales.

DuPont Analysis
DuPont Analysis is a method of performance measurement of a farm which reinforces the
concept that good financial analysis requires looking at each ratio in the context of the other.
Within this method, assets are measured at their gross book value rather than at net book value in
order to produce a higher Return on Equity (ROE).
According to DuPont Analysis ROE of a farm is affected by three measurements:
I.
Operating efficiency which is measured by profit margin
II.
Asset use efficiency, which is measured by Total Asset Turnover (TATO)
III.
Financial Leverage, which is measured by equity multiplier
Formula Used:
Return on Equity (ROE) = Net Profit Margin Total Asset Turnover Equity Multiplier
Net Income
Sales
Total Asset
=

Sales
Total Asset
Total Equity

DuPont Chart for Lafarge Surma Cement Ltd.

The DuPont
System
Year 2009
Year 2010
Year 2011

Net Profit
Margin

Total Asset
Turnover

Page 12

Equity Multiplier

Return on Equity

DuPont Chart for Heidelberg Cement Bangladesh Ltd.

The DuPont
System
Year 2009
Year 2010
Year 2011

Net Profit
Margin

Total Asset
Turnover

Equity Multiplier

Return on Equity

Interpretation:
As the DuPont System has three components e.g. Net Profit margin, Total Asset Turnover, and
leverage; we have divided our DuPont analysis in three following sections:
Profitability Analysis:

Conclusion

Page 13

Notes
All the comments we have made are on the comparative performance analysis of our two
chosen companies Lafarge Surma Cement Ltd. and Heidelberg Cement Ltd. where
Lafarge Surma Cement Ltd. is our target company whereas Heidelberg Cement Ltd. is the
competitor company.
The information of market price per share (year end closing price) has been directly
obtained from the website: http://www.bdstockprice.com
All the relevant data for comparative financial performance analysis have been obtained
from Annual Reports of both the companies of year 2009, 2010 and 2011.
Research paper on Cement Sector of Bangladesh published by IDLC Finance Ltd.
All relevant information about the companies have been obtained from their respective
websites
Lafarge Surma Cement Ltd.: http://www.lafarge-bd.com/
Heidelberg Cement Bangladesh Ltd.: http://www.heidelbergcementbd.com/

APENDIX
All the Ratios at a Glance:
Year 2009

Year 2010

Page 14

Year 2011

Comment

Lafarge
Surma
Cement
Ltd.

Heidelberg
Cement
Banglades
h
Ltd.

Lafarge
Surma
Cement
Ltd.

Heidelberg
Cement
Banglades
h
Ltd.

Lafarge
Surma
Cement
Ltd.

Heidelberg
Cement
Banglades
h
Ltd.

4.7040x

6.2884x

4.6033x

5.2489x

3.8799x

6.3975x

19.4382
x

12.2814x

42.4670
x

14.1209x

11.4315
x

10.6287x

18.774

29.7200

8.5797

25.8482

31.9297

34.3410

TATO

0.4434x

1.1951x

0.3415x

1.1586x

0.3500x

1.0631x

FATO

0.5134x

2.7202x

0.3952x

3.0817x

0.4345x

2.4530x

Liquidity
Ratios

Lafarg
e
Surma
Cemen
t Ltd.

Heidelberg
Cement
Bangladesh
Ltd.

Current Ratio
Quick Ratio
Working
Capital Ratio

Asset
Managemen
t Ratios
Inventory
Turnover
Ratio
Receivable
Turnover
Ratio
DSO Ratio
(Days)

Leverage
Ratios
Debt Ratio
Debt to
Equity Ratio
TIE
Cash Flow to
Debt Ratio

Profitability
Ratios
Profit Margin
Operating
Margin
ROA
ROE
Market
Valuation
Ratios

Page 15

BPS
P/E Ratio
Market Book
Ratio
Price-ToCash-Flow
Ratio

Financial Statements of Lafarge Surma Cement Ltd. & Heidelberg Cement

Bangladesh Ltd. from Year 2009 to 2011
Detailed Calculation of All The Ratios of Lafarge Surma Cement Ltd. &
Heidelberg Cement Ltd. for the Year 2011

Ratios
Liquidity Ratios
Current Ratio

Quick Ratio

Working Capital Ratio

Formula For Calculation

Current Assets
Current Liabilities
Current AssetsInventories
Current Liabilites
Current Asset
Total Asset

Lafarge Surma
Cement Ltd.

Heidelberg Cement
Bangladesh Ltd.

3385855
5921049 =0.571

4540425
= 2.142
2118803

1948170
=0.329
5921049

3418874
= 1.613
2118803

3385855
=0. 194
17421631

4540425
= 0.566
8010817

Asset Management
Ratios
Inventory Turnover
Ratio

Cost of Goods Sold

Inventory

5578134000
1437685000

3.8799
Receivable Turnover
Ratio

Net Sales
Accounts Receivable

6098478000
533487000

Accounts Receivable
Annual Sales
365

Page 16

533487000
609847800
365

6.3975
=

11.4315
DSO

7175151000
1121551000

8516206000
801247000

10.6287
=

801247000
8516206000
365

31.9297 Days
TATO

Sales
Total Asset

6098478000
17421631000

34.3410 Days
=

0.3500
FATO

Sales
Asset

6098478000
14035776000
0.4345

Leverage Ratios
Debt Ratio

Total Debt
Total Asset

Times-Interest-Earned
(TIE) Ratio

EBIT
Interest Rate

Debt-Equity Ratio

Total Debt
Total Equity

Cash Flow to Debt Ratio

Profitability Ratios
Net Profit Margin

Operating Margin

Cash Flow

Operations
Total Debt
Net Profit
Sales
Operating Income
Sales

Return on Asset

Net Profit
Total Asset

Return on Equity

Net Profit
Total Equity

Market Valuation
Ratios
P/E Ratio

Market Book Ratio

Price per share

Earning per share
Martket Price per Share
Book Value per Share

Page 17

8516206000
8010817000

1.0631
=

8516206000
3470392000
2.4530

Book Value per Share

Shareholde r ' s Equity

Number of SharesOutsatnding

Earnings Per Share

(EPS)

Net Profit After Tax

Number of SharesOutstanding

Page 18