Financial Analysis of Heidelberg Cement, Bd

Topics: Financial ratios, Balance sheet, Generally Accepted Accounting Principles Pages: 39 (11744 words) Published: December 26, 2010
Chapter-1: Introduction
Chittagong Cement Factory one of the pioneer cement industries in the country was established in 1966 and was placed under control and management of Bangladesh Mineral Oil and Gas Corporation and subsequently of BMEDC. The factory was converted into and incorporated as a private limited company on 30 June 1979. Thereafter the company converted into a public limited company in February 1989 with the shareholding of 51% by Bangladesh Chemical Industries Corporation (BCIC), 34% by General Public and 15% by officers, staff and workers of the company. Under the privatization policy of the Government, BCIC sold and transferred its 51% shares to Local investors on 27 June 1993.

HCBL is subsidiary of HeidelbergCement Group in Germany with a 61% stake in the entity. HeidelbergCement Group with interests in cement, ready-mixed concrete, aggregates and related activities is one of the leading producers of building materials worldwide with manufacturing bases in over 50 countries. In 1998, HeidelbergCement Group started its operations in Bangladesh by setting up a floating terminal in the port of Chittagong and distributing the cement to the key markets of Dhaka and Chittagong. Subsequently it built a greenfield manufacturing plant “Scancement International Ltd” and acquired a controlling stake in the formerly state owned Chittagong Cement Clinker Grinding Co Limited (CCCGCL). In 2003, the two companies were amalgamated and the company’s name was changed to HCBL. HCBL currently operates two plants with a total annual capacity of 2 million tons of cement, offering multiple blended cement options like Ordinary Portland Cement (OPC), Portland Composite Cement (PCC) through its two cement brands Scan and Ruby Cement.

1.1 Difference in Book Value and Market Value of HCBL
The book value shows us what the shareholders' stake is worth in the firm or it is the accounting value of the firm, i.e. the per-share value of a stock based on the figures shown on a firm's balance sheet. On the other hand, the market value of a company's share refers to the price that is quoted in a recognized stock exchange (such as DSE in Bangladesh) that deals with the shares of the company. The market value is determined on the principle of `outlook', whereas book value is the result of `historical' analysis. The corporation's bookkeeping or accounting records do not generally reflect the market value of assets and liabilities, and the trade value of the corporation's stock is subject to variations.The market price of a publicly traded company is a better measure of the company value or net worth than the book value. Market value is more accurate, scientific and reveals the current situation because it is determined by market supply and demand; thus depends upon the expectations of buyers and sellers. The expectations of the company's future and recent performance, including potential growth; perceived risk, including risk due to high leverage and prospects for companies of this type, the market sector and also certain other intangible factors broadly called the `market sentiment'. The market value or stock price per share of Heidelberg Cement Bangladesh Ltd. is BDT 1,218.00, almost 1.17 times larger than the book value per share of BDT 1,039.00 as of December 31, 2008.

1.2 Objective
The objective of this case study is to perform strategic analysis which include industry analysis and positioning, degree of actual and potential competition, relative bargaining power in input and output markets. In addition, asset analysis, expense analysis with particular focus on manipulation in reporting. To rationalize the movement of stock price of the selected company through financial analysis such as ratio analysis, cash flow analysis, and balance sheet analysis and draw conclusions about the financial position of the company in terms of the changes in market price. The aim is to identify and justify through several analyses the discrepancy...

References: 1. Annual Report of Heidelberg Cement of 2008-2009, 2008-2007, 2007-2006, 2006-2005, 2005-2004
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