Professional Documents
Culture Documents
Joseph-Auguste Pavin de Lafarge established the organization Lafarge in 1833in the city of Le
Teil in France with the result of limestone. Progressively the organization extended and procured
its first concrete plant in 1987. Presently it is working its business in 62 nations alongside
Bangladesh. Cement, construction aggregates, asphalt and concrete are main products of Lafarge.
Nation savvy these items fluctuate.Anticipate needs to drive advances in construction methods"
is the mission of Lafarge Group. Respect, Care and Rigor are the strong estimations of
Lafarge. The workers of Lafarge all through the world additionally have faith in honesty, morals,
fearlessness, sympathy, openness, duty, execution, esteem creation, regard for representatives
and nearby societies, natural assurance, protection of regular assets and vitality. The Group
portfolio of businesses is as follows:
Cement: 63.5%,
Aggregates and concrete: 35.9%,
Other: 0.6%.
At present Bruno Lafont is the Chief Executive Officer of Lafarge gathering. From the record of
2013, Lafarge has 64000 representatives all through the globe. In 2013, its deals were 15.2
billion Euros. It has 1636 generation locales in diverse nations. Lafarge head office is presently
in Paris, France.
Lafarge assembled the first research habitat for building materials where the workers are
attempting to add to their items without hampering the earth.
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.
LSC Products
SUPERCRETE:
Local Sponsors
Islam Group and Sinha Group with shareholding of 2.8% and 3% respectively are the local
sponsors. The equity partners of the project:
Nationality incorporated in
The Netherlands
58.87%
International Finance Corporation; 1.22%
USA
Bangladesh
Bangladesh
Bangladeshi &NRB
Short term financing is arranging of available External funds to meet the needs of a firm for a
year or less time. Short-term financing can be used over a period of up to a year to help
corporations increase inventory orders, payrolls and daily supplies.
Why Do Firms Need Short-term Financing?:
Income from operations may not be sufficient to stay aware of development related
financing needs.
Firms may want to acquire now for their stock or other fleeting resource needs as
opposed to hold up until they have sufficiently spared.
Firms may lean toward fleeting financing rather than long haul wellsprings of financing.
Some major short term sources of financing used by Lafarge Surma Cement Limited (LSC) are
discussed below:
Trade Credit:
It is a credit that a customer gets from supplier of
financing. Over the last five years trade credit was one of the major short sources of fund for
Lafarge Surma Cement Limited (LSC). This grants the business the time to be able to deal with
their finances, and balance their cash flows more efficiently. The amount of trade credit was
increasing year by year. In 2012, 29% of total short term financing came from trade credit.
Bank overdrafts:
Another way of short term financing for LSC is bank overdrafts. Every banking institution is
mindful that organizations don't generally get cash from deals straight away. Because of the
distinctions in its returns and its expenses the association can regularly confront issues. This
issue can be tackled by organizing an overdraft.
Throughout the last five years LSC is highly dependable on bank overdrafts. In many ways it
benefited them but in 2011 and 2012 they had to bear high interest expense because of their high
dependability on bank draft.
Short-term debt:
This account is comprised of any debt incurred by a company that is due within one year. The
debt in this account is usually made up of short-term bank loans taken out by a company. Its the
main sources of LSCs short term financing. From the last five years data we can see that LSC
short term debt is larger than the company's cash and cash equivalents, this suggests that the
company is in poor financial health and does not have enough cash to pay off its short-term
debts.
Financing Strategy
Many organizations oversee income from various distinctive financing and account sources from gifts, contracts, contracts and pay created from exchanging. A financial strategy empowers
an association to evaluate monetary needs and the sources of support needed to meet their goals
and satisfy the hierarchical mission, whilst likewise anticipating proceeded with development to
empower steadiness.
Lafarge Surma Cements financing strategy is to provide timely, cost efficient and secure
financial resources to the Group and to manage its capital structure in line with its targeted low
single A credit rating.
The Groups policy is to borrow centrally using a mixture of long-term and short-term capital
market issues and borrowing facilities to meet anticipated funding requirements. In respect of
certain emerging markets it may elect to borrow on a non-recourse basis
Risk management is at the core of their financing policies. They use derivative instruments to
manage their currency and interest rate risk and collateral support agreements to mitigate the
credit risk of banking counterparts. Liquidity risk on long term borrowings is managed by
maintaining a disciplined maturity profile.
Although an LSC main policy was to manage its risk through effective financing strategy, they
were highly depended on short term financing. Over the last five years financial statement we
observed that LSCs short-term funding requirements are met through bank overdrafts and trade
credit. It indicated that their financing strategy was aggressive and risky. By the time they
realized the facts these strategy put their business in losses respectively in 2010 and 2011. It
occurred because of their over tendency to depend on short term financing which indeed
increased their financing cost.
Investment in Marketable
Securities
Marketable securities are securities or debts that are to be sold or redeemed within a year. These
are financial instruments that can be easily converted to cash such as government bonds,
common stock or certificates of deposit.
Lafarge Surma Cement doesnt have any investment in marketable securities. Most of their
investment is based on long term asset. It represents their weakness in liquidity. It also showed
that they were highly depending on cash for liquidity.
Treasury Bills:
T-bills are issued through a competitive bidding process at a discount from par, which means that
rather than paying fixed interest payments like conventional bonds, the appreciation of the bond
provides the return to the holder.
Short-term Bonds:
Short term bonds are the most common form of marketable debt security and are a useful source
of debt capital to businesses that are looking to grow. A bond is a security issued by a company
or government that allows it to borrow money from investors.
Certificates of Deposit:
A certificate of deposit is a promissory note issued by a bank. It is a period store that confines
holders from withdrawing subsidizes on interest. In spite of the fact that it is still conceivable to
withdraw the cash, this activity will regularly acquire a punishment.
Bankers Acceptances:
It is a short-term debt instrument issued by a firm that is ensured by a commercial bank. Banker's
acceptances are issued by firms as a major aspect of a business exchange.
Preferred Shares:
Preference shares, also called preferred shares, have the benefit of a fixed dividend, much like a
bond. Unlike a bond, the shareholder's initial investment is never repaid, making it a hybrid
security.
PART-B
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
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.
Formula Used: Working Capital Ratio =
Current Assets
Total A ssets
Table for Working Capital Ratio of Lafarge Surma Cement Ltd. from Year 2009 - 2013
Company
Names
Lafarge Surma
Cement Ltd.
Year 2009
Year 2010
Year 2011
Year 2012
Year 2013
0.136
0.135
0.194
0.227
0.285
Current Assets
Current Liabilities
Table for Current Ratio of Lafarge Surma Cement Ltd. from Year 2009 - 2013
Company
Names
Lafarge Surma
Cement Ltd.
Year2009
Year2010
Year2011
Year2012
Year2013
0.325
0.246
0.571
0.631
1.266
Quick Ratio:
This ratio measures the ability of a company to use its near cash or quick assets to extinguish or
retire its current liabilities immediately. Quick assets include those current assets that presumably
can be quickly converted to cash at close to their book values.
Formula Used: Quick Ratio =
Current AssetsInventorries
Current Liabilities
Table for Quick Ratio of Lafarge Surma Cement Ltd. from Year 2009 2013
Company
Name
Lafarge Surma
Year2009
Year2010
Year2011
Year2012
Year2013
0.157
0.127
0.329
0.365
0.879
Cement Ltd.
Cash Ratio:
The cash ratio or cash coverage ratio is a liquidity ratio that measures a firm's ability to pay off
its current liabilities with only cash and cash equivalents. The cash ratio is much more restrictive
than the current ratio or quick ratio because no other current assets can be used to pay off current
debt--only cash.
CashCash Equivalents
Current Liabilities
Table for Cash Ratio of Lafarge Surma Cement Ltd. from Year 2009 2013
Company
Names
Lafarge Surma
Cement Ltd.
Year 2009
Year 2010
Year 2011
Year 2012
Year 2013
0.98%
1.80%
3.99%
2.29%
28.91%
Solvency Ratios
The solvency ratio indicates whether a companys cash flow is sufficient to meet its short-term
and long-term liabilities. The lower a company's solvency ratio is, the greater the probability that
it will default on its debt obligations.
1. Debt to equity
2. Debt to assets
3. Interest coverage ratio
Debt to Equity:
This proportion shows the level of financial leverage being utilized by the business and
incorporates both short-term and long-term obligation. A rising debt-to-equity ratio infers higher
interest costs, and past a certain point it may influence an organization's credit rating, making it
more extravagant to raise more obligations.
Total Debt
Formula Used: Debt to equity = Total Equity
Table for Debt to equity of Lafarge Surma Cement Ltd. from Year 2009 2013
Company
Year2009
Year2010
Year2011
Year2012
Year2013
Name
Lafarge Surma
1.677
1.906
0.477
0.141
0.213
Cement Ltd.
Debt to Assets:
Another leverage measure, this ratio measures the percentage of a companys assets that have
been financed with debt (short-term and long-term). A higher ratio indicates a greater degree of
leverage, and consequently, financial risk.
Total Debt
Formula Used: Debt to assets = Total Assets
Table for Debt to Assets of Lafarge Surma Cement Ltd. from Year 2009 2013
Company
Names
Lafarge Surma
Cement Ltd.
Year 2009
Year 2010
Year 2011
Year 2012
Year 2013
0.469
0.487
0.242
0.084
0.149
Operating Income
Interest Expense
Table for Interest coverage ratioof Lafarge Surma Cement Ltd. from Year 2009 2013
Company
Names
Lafarge Surma
Cement Ltd.
Year 2009
Year 2010
Year 2011
Year 2012
Year 2013
2.546
(0.068)
0.421
8.455
17.889
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
3. Days Sales Outstanding (DSO)
4. Total Asset Turnover (TATO)
5. Fixed Asset Turnover (FATO)
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 =
Table for Inventory Turnover Ratio of Lafarge Surma Cement Ltd. from Year 2009 - 2013
Company Names
Lafarge Surma
Year 2009
Year 2010
Year 2011
Year 2012
Year 2013
4.7040
4.6033
3.8799
4.307
4.979
Cement Ltd.
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 Lafarge Surma Cement Ltd. from Year 2009 2013
Company Names
Year 2009
Year 2010
Year 2011
Year 2012
Year 2013
Lafarge Surma
Cement Ltd.
19.4382
42.4670
11.4315
14.952
14.171
Receivables
Annual Sales
365
Table for Days Sales Outstanding of Lafarge Surma Cement Ltd. from Year 2009 2013
Company Names
Year 2009
Year 2010
Year 2011
Year 2012
Year 2013
Lafarge Surma
Cement Ltd.
18.7775 Days
8.5949 Days
31.9297 Days
24.412 Days
25.756 Days
Sales
Total Assets
Table for Total Asset Turnover of Lafarge Surma Ltd. from Year 2009 2013
Company Names
Year 2009
Year 2010
Year 2011
Year 2013
Year 2013
Lafarge Surma
Cement Ltd.
0.4434
0.3415
0.3500
0.609
0.635
Heidelberg
Cement
Bangladesh Ltd.
1.1951
1.1586
1.0631
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
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 Lafarge Surma Ltd. from Year 2009 2013
Company Names
Year 2009
Year 2010
Year 2011
Year 2012
Year 2013
Lafarge Surma
0.5314
0.3952
0.4345
0.788
0.889
2.7202
3.0817
2.4530
Cement Ltd.
Heidelberg Cement
Bangladesh Ltd.
Year 2009
Year 2010
Year 2011
Year 2012
Year 2013
Lafarge Surma
68.007
96.330
97.814
92.489
95.119
Cement Ltd.
Heidelberg Cement
Bangladesh Ltd.
shows how effectively their assets are used in a form of inventory. In order to get a more precise
value of the ratio using average inventory, it is better instead of inventory at the end of the
period.
Inventory
Formula used: Days Inventory Outstanding = COGS
365
Table for Days Inventory Outstanding (DIO) of Lafarge Surma Ltd. from Year 2009 2013
Company Names
Year 2009
Year 2010
Year 2011
Year 2012
Year 2013
Lafarge Surma
85.699
79.290
94.074
84.755
73.308
Cement Ltd.
Heidelberg Cement
Bangladesh Ltd.