Capital Structure of Cement Industry in Bangladesh.

“Capital Structure of

Bangladesh Cement Industry”

Independent University, Bangladesh

Submitted to

Dr. Samiul Parvez Ahmed Faculty of Corporate Finance (MBA 541)

School of Business

Independent University, Bangladesh

Submitted by

Name ID

1. Farabi Ahmed 121-121-8 2. Kazi Adnan Hossain 141-068-0 3. Md. Arifur Rahman 072-041-1 4. Younus Ahamed 143-100-7

Date of Submission: 5th August, 2015

Letter of Transmittal

5th

August, 2015.

Dr. Samiul Parvez Ahmed

Corporate Finance (MBA 541)

Faculty Member of School of Business,

Independent University Bangladesh.

Subject: A report on “Capital Structure of Cement Industry in Bangladesh”.

Dear Sir,

With due respect, we would like to inform you that we have completed report on “Capital

Structure of Cement Industry in Bangladesh”. It is immense pleasure for us because we have

successfully completed this report by receiving your continues guideline as a supervisor.

We have endeavored to prepare this report from my level of best to accumulate relevant &

insightful information. If we have included any wrong information in unconsciously so please

forgive us as your students. It is a great experience for us to make this report. We have tried to

make the report comprehensively within the schedule time & limited recourse.

You’re sincerely,

.......................................

Farabi Ahmed

(On behalf of the group)

Capital Structure of Cement Industry

In Bangladesh

“Confidence Cement Ltd.”

“Heidelberg Cement Bd. Ltd.”

“Lafarge Surma Cement Ltd.”

“M.I. Cement Factory Limited”

“Premier Cement Mills Limited”

Executive Summary

Capital structure, the mixture of a firm's debt and equity, is important because it costs company

money to borrow. Capital structure also matters because of the different tax implications of debt

vs. equity and the impact of corporate taxes on a firm's profitability. Firms must be prudent in

their borrowing activities to avoid excessive risk and the possibility of financial distress or even

bankruptcy. A firm's debt-to-equity ratio also impacts the firm's borrowing costs and its value to

shareholders. The debt-to-equity ratio is a measure of a company's financial leverage calculated

by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and

debt the company is using to finance its assets. A high debt/equity ratio generally means that

a company has been aggressive in financing its growth with debt. This can result in volatile

earnings as a result of the additional interest expense. The target (optimal) capital structure is

simply defined as the mix of debt, preferred stock and common equity that will optimize the

company's stock price. As a company raises new capital it will focus on maintaining this target

(optimal) capital structure.

http://www.investopedia.com/terms/d/debtequityratio.asp

Acknowledgement

All the praise and admiration for Almighty ALLAH the most gracious, most merciful that has

enabled us for successful completion and submission of this report timely. It is indeed a great

pleasure and honor on our part to have the opportunity to submit this report.

We would like to express profound gratitude and indebtedness to our honorable supervisor “Dr.

Samiul Parvez Ahmed” Associate Professor, Faculty of Business Administration, Independent

University, Bangladesh, for his direct concern, professional guidance, encouragement during our

analytical work and for his critical suggestions and corrections of the manuscript in the

preparation of this report.

Finally, we would like to thank our group members for their unconditional support, without them

we would not have been able to make it this far.

Table of Contents

No Subject Page No

1 Abstract 1

2 Introduction 1-2

3 Capital Structure 2

4 Literature Review 3-6

5 Capital Structure in Bangladesh Perspective 6

6 Cement Industry in Bangladesh 6-8

7 Objectives & Methodology 9

8 Variables & Hypotheses 10

9 Data Analysis (from Annual Report) 11-14

10 Result from E-Views & Interpretations 15-16

11 Conclusion & Recommendation 17

12 References 18

Capital Structure of Cement Industry in Bangladesh 1 | P a g e

1. Abstract

The purpose of this paper is to examine the relationship between capital structure and debt

lifetime among listed cement companies in “Dhaka Stock Exchanges”.

The study investigate firms that have been listed on the “Dhaka Stock Exchanges” named

Confidence Cement, MI Cement, Lafarge Surma Cement Ltd, Premier Cement & Heidelberg

Cement, in total 5 companies over a 6 years period (2009-20014). Variables used for the

analysis include profitability, leverage ratios, TD (total debt), STD (short-term debt) and

LTD (long-term debt), LQ (liquidity), age, asset structure and firm size and sales growth are

also included as control variables. The panel character of the data allows for the use of panel

data methodology. Panel data involves the pooling of observations on a cross section of units

over several times.

2. Introduction

Capital structure, the mixture of a firm's debt and equity, is important because it costs

company money to borrow. Capital structure also matters because of the different tax

implications of debt vs. equity and the impact of corporate taxes on a firm's profitability.

Firms must be prudent in their borrowing activities to avoid excessive risk and the possibility

of financial distress or even bankruptcy.

A firm's debt-to-equity ratio also impacts the firm's borrowing costs and its value to

shareholders. The debt-to-equity ratio is a measure of a company's financial leverage

calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion

of equity and debt the company is using to finance its assets.

A high debt/equity ratio generally means that a company has been aggressive in financing its

growth with debt. This can result in volatile earnings as a result of the additional interest

expense.

http://www.investopedia.com/terms/d/debtequityratio.asp


If a lot of debt is used to finance increased operations (high debt to equity), the company

could potentially generate more earnings than it would have without this outside financing. If

this financing increases earnings by a greater amount than the debt cost (interest), then the

shareholders benefit as more earnings are being spread among the same amount

of shareholders. However, the cost of this debt financing may outweigh the return that the

company generates on the debt through investment and business activities and become too

much for the company to handle. Insufficient returns can lead to bankruptcy and leave

shareholders with nothing.

The debt/equity ratio also depends on the industry in which the company operates. For

example, capital-intensive industries such as auto manufacturing tend to have a debt/equity

ratio above 2, while personal computer companies tend to have a debt/equity ratio of under

0.5. (Read more in Spotting Companies In Financial Distress and Debt

Ratios: Introduction.) A company can change its capital structure by issuing debt to buy back

outstanding equities or by issuing new stock and using the proceeds to repay debt. Issuing

new debt increases the debt-to-equity ratio; issuing new equity lowers the debt-to-equity

ratio.

3. Capital Structure

For stock investors that favor companies with good fundamentals, a strong balance sheet is an

important consideration for investing in a company's stock. The strength of a company's

balance sheet can be evaluated by three broad categories of investment-quality

measurements: working capital adequacy, asset performance and capital structure. In this

section, we'll consider the importance of capital structure. A company's capitalization (not to

be confused with market capitalization) describes its composition of permanent or long-term

capital, which consists of a combination of debt and equity. A company's reasonable,

proportional use of debt and equity to support its assets is a key indicator of balance sheet

strength. A healthy capital structure that reflects a low level of debt and a corresponding high

level of equity is a very positive sign of financial fitness.(Learn about market capitalization

in Market Capitalization Defined ).

http://www.investopedia.com/articles/financial-theory/10/spotting-companies-in-financial-distress.asp



http://www.investopedia.com/university/ratios/debt/default.asp




http://www.investopedia.com/terms/b/balancesheet.asp

http://www.investopedia.com/terms/c/capitalization.asp

http://www.investopedia.com/terms/m/marketcapitalization.asp

http://www.investopedia.com/articles/basics/03/031703.asp#axzz1h6nnPVA1




4. Literature Reviews

Modigliani and Miller (M & M) (1958) wrote a paper on the irrelevance of capital

structure that inspired researchers to debate on this subject. This debate is still continuing.

However, with the passage of time, new dimensions have been added to the question of

relevance or irrelevance of capital structure. M&M declared that in a world of frictionless

capital markets, there would be no optimal financial structure (Schwartz & Aronson, 1979).

This theory later became known as the "Theory of Irrelevance'. In M & M's over-simplified

world, no capital structure mix is better than another. M & M's Proposition-II attempted to

answer the question of why there was an increased rate of return when the debt ratio was

increased. It stated that the increased expected rate of return generated by debt financing is

exactly offset by the risk incurred, regardless of the financing mix chosen. Jensen and

Meckling (1976) argue that the shareholders-lenders conflict has the effect of shifting risk

from shareholders and of appropriating wealth in their favor as they take on risky investment

projects (asset substitution). Hence, shareholders, and managers as their agents, are prompted

to take on more borrowing to finance risky projects. Lenders receive interest and principal if

projects succeed, and shareholders appropriate the residual income; however, it is the lender

who incurs the loss if the project fails. It is difficult and costly for debt holders to be able to

assess and monitor Firms in an oligopolistic market will follow the strategy of maximizing

their output in favorable economic conditions to optimize profitability (Brander & Lewis

1986). The theory also holds in unfavorable economic conditions; firms would take a cut in

production and reduce their profitability. Shareholders, though, while enjoying increased

wealth in good periods, tend to ignore a decline in profitability in bad times. This is due to the

fact that unfavorable consequences are passed onto lenders because of shareholders' limited

liability status. Therefore, the oligopolistic firms, in contrast to firms in competitive markets,

would employ higher levels of debt to produce more when opportunities to earn higher profits

arise. The implied prediction of the output maximization hypothesis is that capital structure

and market structure have a positive relationship. In corporate finance, the agency costs

theory supports the use of high debt, and it is consistent with the prediction of the output

maximization hypothesis. Brander and Lewis (1986) and Maksimovic (1988) provide the

theoretical framework that links capital structure and market structure. Contrary to the profit

maximization objective postulated in industrial organization literature, these theories are


similar to the corporate finance theory in that they assume that the firm's objective is to

maximize the wealth of shareholders. Furthermore, market structure is shown to affect capital

structure by influencing the competitive behavior and strategies of firms. Mohammed Omran

(2001) evaluates the financial and operating performance of newly privatized Egyptian state-

owned enterprises and determines whether such performance differs across firms according

to their new ownership structure. The Egyptian privatization program provides unique post-

privatization data on different ownership structures. Since most studies do not distinguish

between the types of ownership, this paper provides new insight into the impact that post

privatization ownership structure has on firm performance. The study covers 69 firms, which

were privatized between 1994 and 1998. For these newly privatized firms, these study

documents significant increases in profitability, operating efficiency, capital expenditures,

and dividends. Conversely, significant decreases in employment, leverage, and risk are found,

although output shows an insignificant decrease following privatization. The empirical results

also show that Egyptian state owned enterprises, which were sold to anchor-investors and

employee shareholder associations, seem to outperform other types of privatization, such as

minority and majority initial public offerings.. Huson Joher Aliahmed and Nazrul Hisyam Ab

Razak Sr. (2008) examines the relationship between ownership structure and company

performance has been issue of interest among academics, investors and policy makers

because of key issue in understanding the effectiveness of alternative governance system in

which government ownership serve as a control mechanism. Therefore, this paper examines

the impact of an alternative ownership/control structure of corporate governance on firm

performance among government linked companied (GLCs) and Non-GLC in Malaysia. It is

believed that government ownership serve as a monitoring device that lead to better company

performance after controlling company specific characteristics. We used Tobin's Q as market

performance measure while ROA is to determine accounting performance measure. This

study is based on a sample of 210 firms over a period from 1995 to 2005 Panel Based

regression approach was used to determine the impact of ownership mechanism on firm's

performance. Findings appear to suggest that there is a significant impact of government

ownership on company performance after controlling for company specific characteristics

such as company size, non-duality, leverage and growth. The finding is off significant for

investors and policy marker which will serve as a guiding for better investment decision. B.

Nimalathasan & Valeriu Brabete (2010) pointed out capital structure and its impact on

profitability: a study of listed manufacturing companies in Sri Lanka. The analysis of listed


manufacturing companies shows that Debt equity ratio is positively and strongly associated to

all profitability ratios (Gross Profit, Operating Profit & Net Profit Ratios). An alternative to

trade-off theory is the pecking order theory of Myers and Majluf (1984) and Myers (1984).

The pecking order theory is based on two prominent assumptions. First, the managers are

better informed about their own firm’s prospects than are outside investors. Second,

managers act in the best interests of existing shareholders. Under these conditions, a firm will

sometimes forgo positive net present value projects if accepting them forces the firm to issue

undervalued equity to new investors. This in turn provides a rationale for firms to value

financial slack, such as large cash and unused debt capacity. Financial slack permits the firms

to undertake projects that might be declined if they had to issue new equity to investors. The

pecking order theory predicts that firms prefer to use internal financing when available and

choose debt over equity when external financing is required. However, the Signaling Theory

states that, firm with the expectation of higher profit will expect to take more debt. So, the

news of taking more debt will signal the investors that the firm’s value is higher regardless of

the intention of firm to take debt where cost of debt will be determined by market

competition. According to Modigliani and Miller, in a perfect market and no taxes situation,

company’s capital structure does not influence the cost of capital and there is no optimal

capital structure in such a condition. However, with the recognition of corporate tax, the

value of a firm increases with the amount of debt under conditions of certainty and perfect

market because of the tax shield afforded by debt financing. It has been shown that the

optimal capital structure for a value maximizing firm is attained at less than a 100 percent

debt level, when certainty, market imperfection and personal taxes are also taking account.

Moreover, capital structure is influenced by the expected cost of financial distress according

to Bradly, Jarrel and Kim (1984) and Haugen and Senbet (1988) argued that indirect costs of

financial distress (extraordinary administrative costs, possible loss of key managers and

employees, loss sales, loss of total credit and reduced liquidly of the security) has a large

impact on the value of a firm which rises exponentially accelerating the process of

bankruptcy. Market imperfection is costly as there are various agency costs, variations in

personal and corporate tax rates and differences in utility curves. As a result, firm may

achieve the optimal financial structures at varying proportions of debt (Fischer et al., 1989

and Stiglitz, 1988). Firm’s size, industry and country have impact on the market imperfection

and taxes which has also impact on capital structure decision making. The notion of financial

leverage can be defined as the alternation in shareholder’s return which is caused by change


in profits. Therefore a proper balance is required among the return and risk. Capital structure

for every company is comprises with the portion that is contributed by shareholders funds

(i.e. equity) and creditor’s funds (I.e. debt), (Akhtar & Oliver, 2009). Besides, financing

decision for a company provides an insight to determining optimal capital mix of various

sources of funds required for financing the assets purchased, (Fernando, Rajini & Reha,

2011). Doukas and Pantzalis, (2003) and Mittoo and Zhang (2005), cited in Akhtar and

Oliver, (2009) suggest that the leverage as long term debt scaled by total debt plus market

value of equity. In fact, there are number of studies have been conducted to assert the

significant determinants of capital structure of a company. Further, (Ngyen and

Ramachandran, 2006), (Teker, Tasseven and Tukel, 2009), (Huang and Song, 2005), (Gaud,

Jani, Hoesli and Bender, 2003) in their studies postulated that, tangibility, non-debt tax

shields, growth opportunities, size of the company and profitability are some of significant

determinants of an optimal capital structure.

5. Capital Structure in Bangladesh Perspective

According to Chowdhury Anup and Chowdhury Paul (2010), maximizing the wealth of

shareholders requires a perfect combination of debt and equity, whereas cost of capital has a

negative correlation in this decision and it has to be minimized. This is also seen that by

changing the capital structure composition a firm can increase its value in the market.

6. Cement Industry of Bangladesh

6.1 Industry Overview

The development of cement industry in Bangladesh dates back to the early-fifties but its

growth in real sense started only about decade or so. Bangladesh has been experiencing an

upsurge in the use of cement in recent years. Increase in demand for cement has soared

mainly due to the property sector boom and infrastructure development concentrated in the

Dhaka Metropolitan area and other major urban areas of the country. The infrastructural


development at grass root level has led to an increased demand for cement at an average rate

of 8% per annum during the past decade.

6.2 Existing Industry Structure

In terms of cement production, Bangladesh ranks about 40th in the world. Cement

manufacturing is a highly fragmented business in Bangladesh. During the 1990s, many small

cement companies entered the market as soon as the government started encouraging local

production with favorable tariff differential. Currently 123 companies are listed as cement

manufacturers in the country. Of them 63 have actual production capacity while about 30 do

not have any production at all. The current installed capacity is 22.0 MMT. However,

because of supply constraints for power and clinkers, the actual capacity is about 17.0 MMT.

Bangladesh is one of the few sizable producers of cement that does not have its own supply

of limestone and cannot produce clinkers domestically. There is a strong tax-support for local

cement manufacturers in Bangladesh. They receive a significant import tax advantage over

finished cement (about 15% for raw-materials versus 100% for finished cement). This tariff

differential helps most to operate profitably. A change in the tariff structure is not anticipated

in the near future.

6.3 Market for Cement Industry

Construction takes up an important role in the economy (about 10% of the GDP). Annual

demand for cement in the country is about 10.0 MMT. Understandably the market has a

capacity overhang. There is a small market for export of cement, mainly to the small

northeastern states of India. However, the size of the export is quite small (about 200 KMT a

year). There are four categories of cement consumers in the country. The largest with

about60% of the consumption are the individual homebuilders. This is also the most price

sensitive segment. Real estate developers, especially in the country’s urban area constitute

about 8% of the market. Construction contractors constitute another 3% of the market. Lastly,

various government projects take up about 30% of the total cement construction.


6.4 Future Prospect

The industry realized about 20% sales growth in 2009, mostly because of the latent demand

from last years. On a secular basis, ongoing demand growth is expected to be about 8%, the

outlook for the cement industry seems positive for a number of reasons. First, the government

seems to be on a war footing to increase both the amount and the efficiency of spending in

social and physical infrastructure under the Annual Development Programs (ADP). Second,

the private sector is also energized because of certain tax advantages for undeclared funds if

they are invested in real estate. Third, a number of large infrastructure construction projects

(such as the Padma Bridge) are on the horizon. Both the government and the private sector

are soliciting funds for such projects. If implemented, these projects would significantly

improve demand for construction materials.

6.5 Market Share

The largest 10 cement manufacturers hold about 70% of the market share. While Heidelberg,

Holcim and Lafarge are the leaders among multinational cement manufacturers; Shah, Akij

and MI are the leading domestic manufacturers. Shah cement is the market leader with close

to 12% of the market share, closely followed by Heidelberg with about 10% of the market

share.


7. Objectives & Methodology

In this study, secondary data has been used which are the annual reports of the different

industry in Bangladesh. Each industry has been represented with some of the business firm

where the sample size is five which are randomly chosen. Moreover, the Microsoft Excel has

been used to analyze the secondary data.

7.1 Objectives

The study aimed at the following objectives which were the questions whose answers we

were investigating throughout the paper:

To identify the capital structure of Bangladesh Cement Industry (6 cements

companies).

To examine the factors influencing RTD, ROA, G, Age, Size, TAN, LQ etc.

To analyze the actual positions of the working capital in the sample firms during

the study period 2009 to 2014.

7.2 Methodology

7.2.1 Target Population

The target population for fulfilling the objectives was the five leading Cement Companies

operating in Bangladesh which are enlisted in Dhaka Stock Exchange.

7.2.2 Sample Size

The present study has covered five cements companies. The Financial Statements of these

five cement companies in between the years 2009 and 2014 were analyzed.

7.2.3 Collection of Data

Mainly secondary data were used in this study which was collected from the Financial

Statements (Annual Report) of the selected cement firms. For literature review and other

purposes, different books, articles, manuals, World Wide Web and other secondary data

were used.


8. Variables & Hypotheses

8.1 Variables

RTD is the ratio of TD to TA; TD is both LTD and STD.

RSD is the ratio of STD to TD; STD includes all types of debt that mature in less than

one year.

ROA is the return on TA as measured of profitability and defined as the ratio of

operating profit (EBIT) to TA.

G stands for the growth opportunities facing a firm and they are measured by the

percentage change the TA over the last one years.

Size refers to the size of the firm and is measured by the natural logarithm of assets,

i.e. size Ln. TA.

Age refers to the age of the firm and is expressed in the number of years and is

calculated from (2014) minus the year of listing in stock market.

TAN refers to the assets structure or asset TAN and is expressed as a ratio of fixed

assets to TA and severs as collateral. The TAN of assets is measured by percentage of

TA that is fixed.

LQ refers to liquidity of the firm and is defined as a ratio of current assets to current

liability.

8.2 Hypotheses

There is a positive relationship between RTD and ROA, G, Size, Age, Tan, LQ.

There is a negative relationship between RTD and ROA, G, Size, Age, Tan, LQ.

There is a Positive relationship between RSD and ROA, G, Size, Age, Tan, LQ.

There is a negative relationship between RSD and ROA, G, Size, Age, Tan, LQ.

We will be testing one model to prove the hypotheses

RTD = a + B1ROA + B2G + B3Size + B4Age + B5TAN + B6LQ


9. Data Analysis (from Annual Report)

9.1 CONFIDENCE Cement - Report Analysis from 2009-2014 (6 years)

* All the data calculations & graphs have been done by Microsoft Excel.

Confidence Cement Listing year : 1995

Year EBIT Fix Asset Cur. Asset Total Asset Cur. Debt Total debt

2014

443,602,779

2,618,018,666

2,443,434,324

5,061,452,990

1,758,186,496

2,163,207,944

2013

606,983,653

2,556,245,153

1,954,064,295

4,510,309,448

1,282,123,029

1,692,127,494

2012

383,835,000

2,539,132,936

1,544,843,374

4,083,976,310

1,191,946,366

1,530,829,369

2011

220,181,000

2,603,174,639

1,131,359,647

3,734,534,286

915,339,475

1,219,591,619

2010

163,630,000

2,388,406,087

844,932,866

3,233,338,953

621,256,569

630,013,742

2009

175,905,000

1,678,957,451

646,508,246

2,325,465,697

455,366,237

455,366,237

Year RTD ROA G Size Age TAN LQ RSD

2014 0.43 0.09 0.12 22.34 19.00 0.52 1.39 0.81

2013 0.38 0.13 0.10 22.23 18.00 0.57 1.52 0.76

2012 0.37 0.09 0.09 22.13 17.00 0.62 1.30 0.78

2011 0.33 0.06 0.16 22.04 16.00 0.70 1.24 0.75

2010 0.19 0.05 0.39 21.90 15.00 0.74 1.36 0.99

2009 0.20 0.08 21.57 14.00 0.72 1.42 1.00


9.2 MI Cement - Report Analysis from 2009-2014 (6 years)


MI Cement Listing year : 2007


2014

937,105,000

4,018,305,000

7,328,701,000

11,347,005,000

4,393,286,000

5,671,594,000

2013

822,467,000

4,175,045,000

5,608,352,000

9,783,396,000

2,495,306,000

4,188,996,000

2012

574,892,000

4,135,528,000

5,785,951,000

9,921,479,000

2,551,430,000

4,520,602,000

2011

606,014,000

2,232,035,000

4,772,424,000

7,004,459,000

1,369,177,000

1,975,965,000

2010

570,930,000

1,147,167,000

1,135,269,000

2,282,436,000

881,779,000

946,438,000

2009

400,845,000

814,870,000

706,489,000

1,521,359,000

677,294,000

781,040,000


2014 0.50 0.08 0.16 23.15 7.00 0.35 1.67 0.77

2013 0.43 0.08 -

0.01 23.00 6.00 0.43 2.25 0.60

2012 0.46 0.06 0.42 23.02 5.00 0.42 2.27 0.56

2011 0.28 0.09 2.07 22.67 4.00 0.32 3.49 0.69

2010 0.41 0.25 0.50 21.55 3.00 0.50 1.29 0.93

2009 0.51 0.26 21.14 2.00 0.54 1.04 0.87

9.3 Heidelberg Cement - Report Analysis from 2009-2014 (6 years)


Heidelberg Cement Listing year : 1989


2014

1,200,399,000

3,724,986,000

6,447,873,000

10,172,859,000

2,760,608,000

3,648,851,000

2013

1,558,175,000

3,688,577,000

7,033,471,000

10,722,048,000

2,414,173,000

3,230,464,000

2012

1,461,527,000

3,537,828,000

5,643,683,000

9,181,511,000

2,137,157,000

2,881,468,000

2011

809,295,000

3,470,392,000

4,540,425,000

8,010,817,000

2,118,803,000

2,747,620,000

2010

1,408,886,000

3,329,307,000

3,853,392,000

7,182,699,000

1,853,775,000

2,426,198,000

2009

1,207,443,000

3,277,942,000

3,321,686,000

6,599,628,000

1,805,803,000

2,174,685,000



2014 0.36 0.12 -

0.05 23.04 25.00 0.37 2.34 0.76

2013 0.30 0.15 0.17 23.10 24.00 0.34 2.91 0.75

2012 0.31 0.16 0.15 22.94 23.00 0.39 2.64 0.74

2011 0.34 0.10 0.12 22.80 22.00 0.43 2.14 0.77

2010 0.34 0.20 0.09 22.69 21.00 0.46 2.08 0.76

2009 0.33 0.18 22.61 20.00 0.50 1.84 0.83

9.4 Lafarge Surma Cement - Report Analysis from 2009-2014 (6 years)


Lafarge Surma Cement Listing year : 2006

Yea

r EBIT Fix Asset Cur. Asset Total Asset Cur. Debt Total debt

2014

3,778,223,000

13,490,215,00

0

6,505,784,00

0

19,995,999,00

0

4,568,162,000

2,172,198,00

0

2013

3,985,707,000

13,837,104,00

0

5,190,219,00

0

19,027,323,00

0

6,100,280,000

1,882,500,00

0

2012

3,336,088,000

13,611,362,00

0

3,912,006,00

0

18,523,368,00

0

8,443,980,000

1,698,144,00

0

2011

206,884,000

15,108,960,00

0

3,450,421,00

0

18,559,381,00

0

8,108,312,000

3,999,086,00

0

2010

(1,115,290,000

)

15,597,208,00

0

2,317,596,00

0

17,914,804,00

0

10,185,573,00

0

4,960,752,00

0

2009

2,333,044,000

14,898,223,00

0

2,393,392,00

0

17,291,615,00

0

7,724,594,000

5,136,139,00

0


2014 0.11 0.19 0.05 23.72 8.00 0.67 1.42 2.10

2013 0.10 0.21 0.03 23.67 7.00 0.73 0.85 3.24

2012 0.09 0.18 0.00 23.64 6.00 0.73 0.46 4.97

2011 0.22 0.01 0.04 23.64 5.00 0.81 0.43 2.03

2010 0.28 -0.06 0.04 23.61 4.00 0.87 0.23 2.05

2009 0.30 0.13 23.57 3.00 0.86 0.31 1.50


9.5 Premier Cement - Report Analysis from 2009-2014 (6 years)


Premier Cements Listing year: 2006


2014

1,106,101,327

5,945,057,531

3,858,362,266

9,803,419,796

5,041,160,783

6,498,143,143

2013

1,125,995,184

5,306,862,572

3,189,362,901

8,496,225,473

4,273,975,002

5,278,251,040

2012

482,843,286

4,399,501,404

2,202,563,160

6,602,064,564

3,217,020,223

4,343,592,696

2011

513,829,837

2,223,953,492

1,903,992,198

4,127,945,690

1,944,892,014

2,080,485,389

2010

350,836,984

997,092,676

881,774,118

1,878,866,794

856,743,356

898,497,528

2009

265,389,171

514,519,416

548,458,824

1,062,978,240

478,935,184

511,764,158


2014 0.66 0.11 0.15 23.01 8.00 0.61 0.77 0.78

2013 0.62 0.13 0.29 22.86 7.00 0.62 0.75 0.81

2012 0.66 0.07 0.60 22.61 6.00 0.67 0.68 0.74

2011 0.50 0.12 1.20 22.14 5.00 0.54 0.98 0.93

2010 0.48 0.19 0.77 21.35 4.00 0.53 1.03 0.95

2009 0.48 0.25 20.78 3.00 0.48 1.15 0.94


10. Results for E-views & Interpretation

10.1 Correlation Matrix:

In correlation matrix we will see the relationship between dependent and independent

variables. Correlation matrix gives out value between (+1) and (–1). The closer to +1 means

strong positive relationship between the variables and -1 means strong negative relation.

Relationship between the variables are presented below;

Variables RTD RSD

ROA There is a weak negative relation

between RTD and Roa (-0.10 )

There is a weak positive relation

between RSD and Roa 0.17

G There is a weak positive relation

between RTD and G 0.19

There is a weak negative relation

between RSD and G -0.25

Size There is a weak negative relation

between RTD and size -0.39

There is a moderate positive relation

between RSD and Size 0.53

Age There is a weak negative relation

between RTD and age -0.13

There is a weak negative relation

between RSD and age -0.3

TAN There is a weak negative relation

between RTD and age -0.29

There is a moderate positive relation

between RSD and Tan 0.56

LQ There is a weak or no relation

between RTD and Lq -0.07

There is a moderate negative relation

between RSD and Lq -0.48


10.2 Regression Analysis:

Regression analysis is done to provide validity of the relationship between variables. If the

probability value below 0.5, we will consider the relationship valid. The above chart is the

result of regression analysis for dependent variable RTD and validity of its relationship

between other variables. From above chart we can see that all the variables except growth and

age is not valid, as they shows a higher probability than 0.5.


11. Conclusion & Recommendations

This study was on cement industry of Bangladesh, particularly on capital structure of the

companies. The main objective of this study is to examine the relationship between the

capital structure and debt lifetime among Cement companies in Bangladesh stock market.

Five companies were selected for this study, they are Confidence Cement limited, Heidelberg

cement Bangladesh limited, Lafarge Surma Cement limited, MI cement limited, Premier

Cement limited.

From this study we now know that the Asset and debt of the cement companies are

interrelated. Company’s short term debt depend moderately on companies’ size and its asset

structure. Also when it comes to total debt to total asset, companies’ age, size or liquidity

does not matter much. We can see it from E-view results. Also the result shows that liquidity

have a negative relation with the short term debt.

This study was done only on five cement companies. In future study more companies’ data

should be included. Also only six year data was used for study, which was done because of

time constrain and data unavailability. Future study should include more than fifteen to

twenty years of data for higher accuracy in result. In this study the ownership of the company

was not discussed, as the locally owned company tend to be smaller than multinational

companies and their capital structure is different than MNC’s. All future study should

consider these factors.


12. References

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