Professional Documents
Culture Documents
in Asia.
To
deliver superior value to our customers, shareholders, employees and society at large.
Ordinary Portland cement Clinker 90.50% Gypsum 4.00% Fly ash 5.50% Portland blast furnace slag cement Clinker 70% Gypsum 6% Slag (Blast Furnace) 24%
To
be a premium global conglomerate with a clear focus on each business. Customerization Quality consistency Product range Cost competitiveness Employee empowerment
STRATEGIES
Cost efficiency Customer retention Business redefinition Innovation strategies Financial strategy
ORGANISATIONAL
STRUCTURE
Finance
Department Marketing Department Human Resource Department Research & Development Department Supply Chain Department
2009
Profit After Tax Gross Profit Net Sales EPS Current Assets Current Liability Equity Debt
2010 1093.24
1588.16 7049.68 87.82 1513.43 1138.08 124.49 1607.07
977.02
1361.49 6383.08 78.48 1400.35 1120.92 124.49 2142.87
1] To identify aspects of a businesses performance to aid decision making 2] Quantitative process may need to be supplemented by qualitative Factors to get a complete picture. 5 main areas:
Liquidity the ability of the firm to pay its way Investment/shareholders information to enable decisions to be made on the extent of the risk and the earning potential of a business investment Gearing information on the relationship between the exposure of the business to loans as opposed to share capital Profitability how effective the firm is at generating profits given sales and or its capital assets Financial the rate at which the company sells its stock and the efficiency with which it uses its assets
Classification of Ratio
Profitability Liqudity Ratio Leverage Ratio
Debt Equity Ratio
Activity Ratio
Coverage Ratio
Current ratio
Liquid Ratio
Profitability Ratio
Debtors Ratio
Creditors Ratio
Operating Ratio
Expenses Ratio
Both the companies on a whole have sound debt equity ratio but this shows both companies are moving at moderate risk and are not aggressive in raising capital.
Reason behind low debt-equity ratio might be very small amount of long term loans taken by firm from outside sources. Because of lower rational, benefit of trading on equity is not availed of and the rate of equity dividend might be comparatively lower in the future.
Current Ratio
Ultratech Cement 1472.00 1299.00 1.13 JK Cement 684.79 357.69 1.91 Binani Cement 721.35 569.89 1.27
Quick Ratio
Ultratech Cement 650.69 1299.00 0.50 JK Cement 447.17 357.69 1.25 Binani Cement 551.37 569.89 0.97
Ultratech has its current ratio to 1.13:1 to maintain adequate liquidity. As compared to the ideal ratio (2:1), The current ratios computed above are lower than the ideal ratio. It shows that the company is not sufficient to meet its short term obligations / creditors. It shows that the firm is very risky for the creditors. One reason for lower ratio method of accounting inventories, but they are using average costing method which give higher value of inventory than LIFO. So they are really poor at their current ratio. Though it may be because the industry average is such due to government interference in this industry.
It
is a very good sign to have liquid ratio near to one in case of any emergency the company will have liquid funds to finance the expenses. Though Ultratech cements have quick ratio of 0.50:1 which is less than ideal ratio which proves Ultratech is in not so better position to fund any contingency expense as they dont have enough liquidity.
All the Companies are showing more or less stable performance with almost a subtle change in the figures of ultratech cement and binani(20.5& 18 respectively). But the turnover ratio of JK cement is almost 2 times that of Binani Cements making it a better performer. The Fixed Asset Turnover ratio of all the companies is low with JK having very low figures showing that the investments in fixed assets is more than that is actually required. However the performance for other two is quite constant with a marginal difference in the numbers. The above ratios are desirable by any firm. Higher values of debtors turnover indicate more efficient management of credit. But sometimes higher ratio would result into higher working capital requirement and also high risk of bad debts. In this ratio clearly Binani & JK cements has amazing debtors turnover but they may be lagging behind in building strong customer relations as they offer less credit period and hence inventory cycle is very quick. Ultratech has Debtors turnover of 33.24 days which is not at all bad sign
ROA
Profit after Tax Avg. Total Assets Ratio Ultratech Cement 1096.84 6779.10 0.162 JK Cement 226.00 2232.16 0.101 Binani Cement 281.92 2406.49 0.117
Earning Power
PBIT Avg. Total Assets Ratio Ultratech Cement 1597.81 6779.10 0.236 JK Cement 458.40 2232.16 0.205 Binani Cement 591.78 2406.49 0.246
As
it can be seen from the other profitability ratios also Ultratech is better even in the Return on Capital employed ratio with lower rate of decrease as compared with the figures of JK and Binani Cements. Thus Ultratech is better in the profitability.
Price-Earning Ratio
Market Price EPS Ratio Ultratech Cement 920.550 87.820 10.482 JK Cement 156.800 32.110 4.883 Binani Cement 77.600 13.880 5.591
The ratio computed above of Ultratech is which shows that the EPS of the company is covered 10.48 times by the market price of the share of the company. The ratio in 2010 by all the companies which shows efficient work and good performance of the company to generate profit.
Investors look at the P/E ratio as future market expectations of a companys growth prospects in terms of profitability. If the P/E of a company is on the higher side when compared to its industry averages, it means the market is expecting some positive events from the company as far as earnings are concerned. In both companies case is the same; it is attracting more investors by increasing their P/E ratio.
STRENGTHS: Double digit growth rate Cement demand has grown in tandem with strong economic growth; derived from: -Growth in housing sector (over 30%) key demand driver; -Infrastructure projects like ports, airports, power projects, dam and irrigation projects -National Highway Development Program -Bharat Nirman Yojana for rural infrastructure -Rise in industrial projects -Export potential also demand driver Capacity utilization over 90%
WEAKNESS: Low value commodity Cement Industry is highly fragmented Industry is also highly regionalized Low value commodity makes transportation over long distances un-economical
OPPORTUNITIES: Demandsupply gap Substantially lower per capita cement consumption as compared to developing countries (1/3 rd of world average) Per capita cement consumption in India is 82 kgs against a global average of 255 kgs and Asian average of 200 kgs. Additional capacity of 20 million tons per annum will be required to match the demand Limited green field capacity addition in pipeline for next two years, leading to favorable demand supply scenario THREATS: Rising input costs Government intervention to adjust cement prices Possibility of over bunching of capacities in the long term as some of the players have already announced new capacities Transportation cost is scaling high; bottleneck due to loading restrictions Coal prices climbing up; industry players say current shortage of coal in the country is estimated to be over 10 million tones.
Ultratech Cements holds a larger market value in terms of sales, PBDIT, PAT and is clearly way ahead of India cements
Ultratech does not have very good debt equity ratio which proves that the company is not using the ability to trade on debt
The overall financial position of Ultratech is very good and prospects are seen for it to be improved in 2010.
In Ultratech cements the bifurcation of inventory is not given it is added to current assets so it is studied from the management report in order to calculate Debtors turnover Ratio
P/E ratio has increased in 2010 to 13.49 proving the efficient work and good performance of the company to generate profit. Investors look at the P/E ratio as future market expectations of a companys growth prospects in terms of profitability. If the P/E of a company is on the higher side when compared to its industry averages, it means the market is expecting some positive events from the company as far as earnings are concerned. In both companies case is the same; it is attracting more investors by increasing their P/E ratio.
Sources
of Information