Southern Provision Cement

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timer Asked: Mar 4th, 2019
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Question Description

Financial Analysis Project – Guidelines

Preamble:

In this project, you form a team of four students, select a publicly traded Saudi company that has inventories and receivables (a manufacturing or retail company) and collect its annual financial statements for the last five years (income statements, balance sheets and cash flow statements) and do the same for other companies in the same industry. As well, you need to obtain the board of directors’ annual report for your company for the same periods.

The scope and structure of your report:

Your report should be double spaced report using Times New Roman, 12-point font size and include three main sections: introduction, analysis and discussion, and conclusions. The first and second sections combined should not exceed 14 pages while your conclusion should not exceed two pages. This means your project should not exceed 16-page long report, excluding the reference list and appendices.

Introduction:

Your introduction should include a short, brief preamble about the objectives of your report followed by two sections: Industry () and your company (Southern Provision Cement)


…….Industry:

This part should include a summary description of your industry (the industry to which your company belongs). This summary (industry analysis) should address the followings:

  • Before describing the detailed operations and strategies of an individual company (your company), it is important to understand the industry in which your firm belongs.
  • Industry analysis has three primary objectives and should begin by finding out how the industry operates: What is the nature of the production process that takes place in the industry? What are the key inputs in the production process? What is the nature of marketing and distribution process?
  • How your company positions itself in the industry? Strategy: there are three common strategies:
  • Understanding the sensitivity of the industry to key macroeconomic factors (the world and domestic economic growth, geopolitical environment and the like).
  • Understanding how the industry operates and the key performance measures for evaluating these operations. For example, in the oil production industry, key statistics include oil prices, the current demand for oil, crude oil and petroleum inventory, oil refinery capacity utilization rates, and oil service equipment utilization rates. Another example, in the semiconductor industry, key ratios and statistics include semiconductor industry monthly global sales report, the semiconductor equipment book-to-bill ratio, wafer fabrication plant utilization rates, the purchasing mangers’ index and business capital spending.
  • Understanding the competitive structure of the industry (you should look for characteristics that might allow firms to generate abnormal profits over a prolonged period of time, demands, population growth, rivalry among existing firm, threats of new entrants, availability of substitute products, bargaining power with suppliers, and bargaining power with customers).

………Company:

This part should be focused on your selected company. In this section, you may answer the following questions:

  • What does your company do?
  • What is the market share of your company? Example, the percentage of your company’s total sales revenue to the total sales revenues of its industry.
  • Cost leadership - a cost leadership strategy aims for low production costs and thin margin, with profits coming from a high volume as customers are attracted by the low price.
  • Product differentiation - this strategy is achieved by producing a product with unique attributes that are valued by buyers who will pay a premium price for such quality, resulting in a high profit margin.
  • Focus - The idea behind focus is to develop a niche strategy that supplies one segment of the market with exactly what they want such as low cost or differentiated product. Apple successfully implemented such a strategy in the PC industry.

Analysis and discussion:

This section should start by developing average financial ratios for your industry (e.g., an industry average liquidity and profitability ratios). Your ratios should be arranged in groups, i.e., liquidity ratios, solvency ratios and the like (individual ratios). Once you have completed your industry average ratios; then calculate the financial ratios for your company and assess them against the average ratios of the industry. The financial ratios, analysis and discussions should be integrated into a well written and organized report. I expect a very well-developed analysis and discussion report.

Your analysis should be time-series (trend) and cross-sectional analysis, i.e., comparing your Company’s performance over time (time series analysis) and to its industry (cross-sectional analysis) respectively.

Conclusions:

Your conclusion should be a summary of your findings.

References:

Your report should be very well-referenced and documented.

Appendixes:

The calculations of your industry ratios must be done in an excel spreadsheet and a copy of it must be included as an appendix A to your report. As well, the financial statements for your selected company (not the entire industry) + the board of directors’ annual report of your company must be included as an appendix B to your report.


Dear I have worked on this assignment & develop attached excel , please I need your support to complete the missing Ratios ( please add complete formula & source of your data) , Also I have added the word document I have created for my assignment to be completed by you.


Also I have attached another example Alqassim for you may use it as guideline

Unformatted Attachment Preview

Southern Provision Cement Balance Sheet Balance Sheet Current Assets 935,791,693 Inventory Recievable Investments 684,760,733 26,644,452 117,611,424 Fixed Assets Other Assets Total Assets 2,440,301,965 0 3,376,093,658 Current Liabilities 517,352,476 Non-Current Liabilities 97,144,411 Other Liabilities 0 Total Liability 614,496,887.00 Shareholders Equity 2,761,596,771 Total Liabilities and Shareholder Equity 3,376,093,658 STATEMENT OF INCOME Sales 2013 1,775,144,704 Sales Cost (cost of goods sold) Total Income ( Gross profit) Admin and Marketing Expenses STATEMENT OF INCOME 2013 Depreciation 762,293,212 1,012,851,492 34,865,479 0 Other Expenses 4,654,698 Profit from Operation Other Revenues 973,331,315 58,911,431 Net Income Before Zakat Zakat 1,032,242,746 26,149,935 Net Income 1,006,092,811 Balance First Period Reserves Cash Dividends 973,275,005 Other Distributions Balance End Period Cash Flow Net Income Depreciation Accounts Receivable Inventory Cash flow Prepaid Expenses 2013 1,032,242,746 144,301,346 1,800,226 243,703,312 89,415,925.00 Cash flow Accounts Payable 33,402,157 net cash flow from operational activity 873,069,549 Other Changes in Oper. Activity Purchases of Fixed Assets 373,377,625 Other Changes in Investing Act. Increase in Debts Other Changes in Financing Act. Cash at Begining of Period Cash at End of Period Liquidity Ratios Current Ratio Quick Ratio Working Capital Ratio Operating cash flow ratio Inventory turnover days in inventory Receivable turnover Average collection period 2013 1.808808765 0.485222303 418,439,217 1.420 0.84 433.47 43.44 8.40 Solvency ratios Debit to total assets ratio Time Interest cash Debit Coverage ratio 0.18 NOT AVALIBAL 1.19 Profitability ratios Profit Margin Gross profit Return on Assets Assets turnover Return on Equity Quality of Erning Ratio Earning per share Price Earning Ratio payout ratio Market value ratios 57% 57% 1.368363939 2.41433392 0.867782315 2017 Market Price Share outstanding average total current laibility average inventory Average net recievabble 685,683,894.50 905,289,443.50 40,866,791.00 Average total assets Average total liability total libility inventory recievable total assets total liability 735,252,356.50 735,252,356.50 2012 336,662,837.00 441,057,421.00 28,444,678.00 3,164,445,388.00 428,003,913.00 Southern Provision Cement 2014 2015 2016 2017 967,300,319 1,044,384,665 846,390,553 807,226,813 620,956,930 519,043,571 560,578,599 658,140,716 39,113,247 41,785,098 39,707,245 31,686,581 0 0 5,437,625 5,437,625 2,922,241,476 3,354,569,523 3,427,174,801 3,349,435,957 0 0 0 0 3,889,541,795 4,398,954,188 4,273,565,354 4,156,662,770 325,915,282 632,868,130 613,098,254 530,711,475 602,649,621 583,296,997 393,898,616 453,898,470 0 0 0 0 928,564,903.00 1,171,165,127 1,006,996,870 984,609,945 2,960,976,892 3,227,789,061 3,266,568,484 3,172,052,825 3,889,541,795 4,398,954,188 4,273,565,354 4,156,662,770 2014 2015 2016 2017 1,878,346,161 2,047,273,784 1,776,054,849 1,063,816,610 883,208,215 937,915,092 843,694,901 640,113,362 995,137,946 1,109,358,692 932,359,948 423,703,248 42,509,862 51,633,648 53,846,599 45,851,116 0 0 0 4,189,832 4691843 4,385,185 4,635,507 948,438,252 1,053,033,201 874,128,164 373,216,625 124,253,665 12,516,605 14,980,528 11,081,725 1,072,691,917 1,065,549,806 889,108,692 384,298,350 2,727,242 26,937,637 8,529,269 4,614,149 1,069,964,675 1,038,612,169 880,579,423 379,684,201 836,013,908 755,854,125 835,900,550 460,961,943 2014 2015 2016 2017 1,072,691,917 1,065,549,806 889,108,692 384,298,350 162,971,467 169,198,330 204,567,590 186,729,122 12,468,795 2,671,851 2,077,853 8,020,663 63,803,803 101,913,359 74,364,678 97,562,117 67,853,487.00 21,630,543.00 16,268,225 13,623,596 49,761,666 5,872,404 36,696,156 19,432,514 1,189,360,726 1,317,239,674 1,020,013,530 438,790,669 763,977,862 603,943,792 232,901,845 109,029,383 2014 2015 2.967950177 1.062679193 641,385,037 1.498 2016 2017 0.93 390.55 140.99 2.59 1.650240572 0.830095669 411,516,535 0.864 1.11 327.99 97.99 3.72 1.380513723 0.466176428 233,292,299 0.783 1.25 291.67 89.46 4.08 1.521027622 0.280917418 276,515,338 0.365 0.82 446.46 67.15 5.44 0.24 0.27 0.24 0.24 0.36 0.35 0.27 0.12 57% 53% 0.408912282 0.717854368 51% 54% 0.308134801 0.60738389 50% 52% 0.280102154 0.564942555 36% 40% 0.123960651 0.347318638 1.111588778 1.268269055 1.15834359 1.155672709 2016 2015 2017 2015 633,163,725.50 945,029,987.50 13,322,226.00 1,218,450,693.50 1,116,596,689.00 1,023,016,447.50 842,818,782.50 674,187,915.50 782,968,828.00 20,892,549.00 19,853,622.50 15,843,290.50 2,616,611,732.00 3,268,225,335.50 2013 614,496,887.00 684,760,733 26,644,452 3,376,093,658 614,496,887.00 3,370,642,221.00 3,143,779,547.00 3,062,941,330.00 3,813,371,624.50 3,770,066,919.00 3,664,357,797.50 2014 1,171,165,127 519,043,571 41,785,098 4,398,954,188 1,171,165,127 2015 1,006,996,870 560,578,599 39,707,245 4,273,565,354 1,006,996,870 984,609,945 658,140,716 31,686,581 4,156,662,770 984,609,945 PROFITABILITY Earnings per Share = Net Income - Preferred Dividen Price-Earnings Ratio = Stock Price per Share Gross Profit Margin = Gross profit Profit Margin Ratio = Net Income Return on Assets = Net Income Asset Turnover Ratio = Net Sales = Payout Ratio Return on Equity = Quality of Earnings Ratio = Cash Dividends for CS Net Income - Preferred Dividends Net Operating Cash Flows LIQUIDITY RATIO Working capital = Current ratio = Quick Ratio = Operating Cash Flow Ratio = Inventory Turnover Ratio = Days in Inventory = Receivables Turnover Ratio = Average Collection Period = SOLVENCY RATIOS Free Cash Flow = Debt to Total Assets Ratio = Cash Debt Coverage Ratio = Time Interest Earned Ratio = me - Preferred Dividends Average Comment Share Outstanding per Share Earnings per Share Net sales Net sales Average Total Assets Average Total Assets Cash Dividends for CS Net Income e - Preferred Dividends Average CS Holders' Equity ng Cash Flows Net Income Total Current Assets - Total Current Liabilities Total Current Assets Total Current Liabilities Total Current Assets - Inventory - Prepaid Total Current Liabilities Cash Provided by Operations Average Total Current Liabilities Cost of Goods Sold Average Inventory 365 Days Inventory Turnover Ratio Net Credit Sales Averaage Net Receivables 365 Days Receivable Turnover Ratio Cahs from Operation - Capital Expenditure - Div Total Liabilities Total Assets Cash Provided by Operations Average Total Liabilities Net Income + Interest Expense + Tax Expense Interest Expenses Southern Saudi 14.7 13.4 Southern Province Cement Co. A Financial Analysis Study Table of Contents Introduction ……………………………………………………………………………………………….. Historical look at Cement industry in Saudi Arabia……………………………………… The current Saudi Cement Market……………………………………………………………… New Challenges facing the industry ………………………………………………………….. Top Ranked cement companies in Saudi …………………………………………………… Southern Province Cement Co…………………………………………………………………… ‫بسم هللا الرحمن الرحيم‬ Introduction Cement was discovered in 1759 by Smeaton who built the third Eddystone lighthouse of the coast of Cornwall in Southwestern England, and who found that a mix of lime, clay and crushed slag from iron-making produced a mortar which hardened under water. Later Joseph Aspdin took a patent in 1824 for "Portland Cement," a substance he made by firing finely-ground clay and limestone until the limestone was calcined. He called it Portland Cement for the concrete made from it looked like Portland stone, a very commonly-used building stone in England. Historical look at Cement industry in Saudi Arabia Cement industry in Saudi Arabia started in 1955 when Arabia Cement started its first factory in Jeddah to meet the blooming demand over cement in the Country. the expanding of the infrastructure in Saudi Arabia encouraged the industry and more factories where built to satisfy the increasing need for Cement. In the beginning of the 80’s Saudi Arabia reached self-sufficiency and started to export cement in 1990. And became the biggest producer in the Gulf area and the third on the middle east after Iran and Egypt till 2012 when Saudi government banned the export of the Saudi cement. Currently, There are 16 cement companies in the Saudi marker that are operating to satisfy the demand on the cement with total production of 3.44 MT as of May 2018 with almost 25% reduction than the total production as of May 2017 according to Maal website.website. The current Saudi Cement Market In 2018 Cement sales in Saudi Arabia dropped to 28.0 million tons during the first eight months of 2018, compared to 32.1 million tons during the same period in 2017. One of the major reasons behind this decline in cement demand was the lower government spending on infrastructure sector in 2018, along with the rising interest rates on loans to construction activity. As a result, Cement prices dropped to SAR 12.24 per 50 kg bag in July 2018. Which is the second-lowest price since January 2007. Due to this and to the ban on exporting Cement, the lower demand and the increasing supply led to huge inventory accumulating in the warehouses of the cement companies. In February 2018, the Saudi government has lifted the ban on exporting cement and stopped charging the exporting tax. This new regulation has strongly contributed to the increase in the cement and clinker exported quantity during 2018 as it reached 3.2 MT which is the highest in almost 11 years. Many of the Saudi cement companies start exporting their production due to the huge inventory accumulating during 2018 since the local demand decreases 13.3%. Moreover, the start of the initial stages of the NEOM project helped the cement companies in the Northern and Eastern region to improve their market share in 2018 A recovery is expected during the second half of 2019, caused by the higher government spending on infrastructure, exports of cement and new construction work starting in USD 500 billion NEOM Mega City project. New Challenges facing the industry The production cost of cement is expected to increase due to proposed cuts in energy. To overcome this rise in the production cost, cement companies are focusing now on the construction of low power consuming plants. According the technavio website report Al-Yamama Cement and Saudi Cement have already started investing in infrastructure development to reduce power consumption and improve production efficiency. In 2018, Saudi Cement signed a contract with GE to upgrade its Hofuf plant. By implementing GE’s Advanced Gas Path (AGP) solutions, which will increase the efficiency of the plant by 16.9%, as well as decrease their power consumption. In 2016, Al-Yamama Cement is also building two new cement plants with a capacity of 20,000 tons of clinker. These plants will consume less than 100 kW per hour for producing one ton of cement. Thus, the construction of low power consuming plants by major cement manufacturing companies in Saudi Arabia to balance the increasing production costs will drive the growth of the cement market Top Ranked cement companies in Saudi Arabia: According to Aljazira report of 2018 , Southern Cement ranked on top of the 16 companies followed Saudi and Yamama. In term of the Market Share Cement market segmentation based on application • • Residential Commercial The residential segment occupies the maximum market share of the cement market in Saudi Arabia. This segment is expected to increase its market share and dominate the market as the government is focusing on the housing sector with the launch of several large-scale residential projects during the next five years. Southern Province Cement Co. Southern Cement was established in 24/03/1397 H in Abha. its one of the largest cement companies in Saudi Arabia and in the middle east. The Company has three factories in Saudi Arabia in the area of Jazan , Asier and Gunfitha . With a market share of 14.5% Southern cement ranked the highest in the Saudi cement market followed by the Saudi Cement with market share of 11.4% according to Aljazirah Bank report of Cement industry as of December 2018. For FY2018 Southern and Saudi cement recorded the highest market share of 14.5% and 11.4% followed by Yanbu cement with market share of 10.6% Products of Southern Cement: The company is producing 2 types of cement, SULFATE RESISTANT CEMENT (TYPE – V ) which is used in the presence of sulfates in soil and groundwater that may cause damage to ordinary Portland cement which is wildly used in residential construction and concert . Qassim Cement Financial Analysis Project Ibrahim Al Thagafi G185052 Mohammed Abanmi G185008 Table of Contents Description ❖ Introduction Page 2 of 23 Page Number 3 ❖ Saudi Cement Industry 4 ❖ Qassim Cement 8 ❖ Discussion & Analysis 10 ❖ Conclusion 18 ❖ References 19 ❖ Appendix 20 Introduction Saudi Arabia is known to be one of the largest economy in world. Saudi’s economy depends on the huge oil and its reserves, bearing in mind that Saudi is one of the largest producer and exporter of oil. Based on that, the dependent on oil can affect the economy when there is any decline in the prices and it will be considered as a challenge. The government is taking a lot of initiatives and actions to have a more diversified economy. Comparing the contribution of manufacturing to the Saudi economy when can see it rose from 4.3 billion $ in 1975, to approximately 29.5 billion $ by 2010. The gross domestic product is an important measure of the economy, we can see how the manufacturing sector had a contribution to the overall GDP by increasing from 4.1 percent in 1975 to 12.6 percent in 2010. Page 3 of 23 ❖ Saudi Cement Industry: Saudi Arabia has a very huge construction market wither that it’s due to government projects or from the private sector. Cement market depends heavily on government spending in projects. The Saudi cement industry is considered to be highly competitive comparing to other industry markets in the world. The average cement production cost per tone of USD30.9 in 2010 and comparing this number to other countries in the GCC its considered the lowest. A competitive advantage that Saudi cement companies have over other companies is the government support and the low cost of electricity, Fuel and raw materials. These costs are known to have a huge percentage of production expense. The Kingdom of Saudi Arabia cement market was calculated to have reached US$3.98 bn by the end of 2016. As per history, the cement industry began in the Kingdom in the beginnings of 1955, with the establishment of Al Arabiya Cement Factory in Jeddah, to cover the huge local demand that increased gradually, Companies in the Kingdom produce a variety of cement types, and we mention the following: ❖ PORTLAND CEMENT. ❖ SULFATE RESISTING CEMENT. ❖ WHITE CEMENT. ❖ RAPID HARDENING CEMENT. ❖ LOW HEAT CEMENT. ❖ SULFATE RESISTING CEMENT. Page 4 of 23 The cement is produced in the following stages: Now the industry consists of 15 companies, with total inventory of 20-25 millions of Tons, and all are listed in the Saudi market. Due to the decrease in profits that reached (-17%) on 2016, the five greatest companies of the sector decided to decrease production a portion of 5-10%, with total sales of 60 Tons in 2017. The main reasons of this revenues decrease are: 1- Decrease in Sales due to decrease in local demand. 2- Increase of production costs due to increase in energy costs. On the other hand the government in order to help restore the market share and promote revenues, it canceled the exporting fees that are collected, to help Saudi firms Page 5 of 23 sell more in the region, where Saudi firms used to pay 85-133 Saudi Riyals per Ton as exporting fees, and by this cancellation new markets will be penetrated, such as, Jordan and East Africa. Factors Affecting Saudi Cement Industry: As a huge industry like the cement, a lot of economic factors will affect the companies in terms of sales, cost of sales and net profits. The rise in fuel and electricity had a strong hit on the industry, because it was an advantage to them. The government spending on projects decreased due to the drop in economic which affected the cement industry. Now with “Vision 2030” we will have a stronger economy that isn’t just based on oil, with the vision we will have a lot of new major projects that will impact positively on the cement industry. Also, due to the vision we will see high raise in employment and youth empowerment. The government has a focus on the cement industry due to its importance. The government tracks the main performance indicators of the cement industry, and they are: 1- Level of profits & Sales. 3- Amount of exports & imports. Page 6 of 23 2- Levels of inventory. 4- Local consumption. ❖ SWOT Analysis for the Cement Industry in KSA: Strength Weakness Available Raw Materials Decline in profits Cost of production Strong competition Opportunities Threats Governmental support High energy Prices Ability to export ❖ Porter’s Analysis for the Cement Industry in KSA: New Entrants Low, huge industry Power of Buyers High, 2016 demand change Competitive Rivalry High, 15 Saudi companies Power of Suppliers Low, govermental support Page 7 of 23 Threats of Substitutes Low, essential substance ❖ Qassim Cement: Introduction: Qassim Cement Company is a publicly Saudi Joint Stock company that is listed on the Saudi Market, and operates in the fields of Cement and its related products. It was established 42 years ago. Qassim Cement has a large team and it’s around 650 employee. The registered capital is SAR 900 Million, and 90 million share that each worth SAR 10 par value. The main value of Qassim Cement Company is to improve environmental performance. The quality control is highly measured in each step in the production process to insure having high quality in the final product. As being a part of the Saudi company they take the social responsibility aspect very important and we can see that through Qassim Cement investments in controlling all pollution sources. A live example is the dust emission reduction to less than 30 mg/m3. Main Cement products of Qassim: Ordinary Portland Cement (OPC/Type I( Sulphate Resistant Cement (SRC/Type V( Limestone Cement - Finishing Cement Page 8 of 23 - Market Share Based on Bank Al Jazeera Capital report for 2017, Qassim Cement is ranked the Fourth biggest company in Saudi cement industry in the past year, with merely 8% of market share, 2016 data on the report showed an increment of 2% in the market share for Qassim Cement. The main huge competitors for Qassim Cement are: - # Company Market Share 1 Southern Province Cement 12% 2 Saudi Cement Company 11% 3 Yanbu Cement 9% Position It is hard to define a specific strategy for qassim cement, but based on a small cost to sales analysis between al qassem cement and its competitors we found that qassem cement has 56% and it’s better than southern province cement and Yanbu cement 60% and 61% respectively, whereas Saudi cement company has 52% which is close to Qassim cement. Also, we notice its factories’ location selection, terms of service it obtains and stable level of quantity. Based on the above we believe that th ...
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