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Analysis of Indian cement Industry & Financial performance of ACC LTD

BUILD WITH CONFIDENCE

Presented by:Neeraj Soni Sem-III MBA ARNI University Kathgarh (Indora) H.P

Contents: Introduction To The Study Overview of Indian CEMENT Industry SWOT Analysis ACC Brief History Map of ACC & 5 years performance highlights Plants & capacity Working Capital Management Research methodology Financial Analysis Analysis :-Findings & observations Limitations & Suggestions

Objective of the study: To determine the amount of working capital requirement and to calculate various ratios related to working capital. To analyze the Indian Cement Industry. To evaluate the financial performance of ACC limited using financial tools. To study liquidity position of the company by taking various measurements. To suggest the steps to be taken to increase the efficiency in management of working capital.

Overview of Indian CEMENT Industry India is the world's second largest producer of cement with total capacity of 219 million tones (MT) at the end of FY 2009, according to the Cement Manufacture s Association. Dispatches during 2009-10 were 159.43 million tones (MT) increasing by 12 per cent over 142.23 in 2008-09. Cement production during 2009-10 was 160.31 MT an increase of 12.37 per cent over 142.65 MT in 2008-09. According to ACC -the government s continued thrust on infrastructure will help an annual growth of 9-10 per cent in 2010, In the Union Budget 2010-11, US$ 37.4 billion has been provided for infrastructure development.

Top ten companies :

ACC Limited Gujarat Ambuja Cements Ltd Ultratech Grasim India Cements JK Cement Ltd Jaypee Group Century Cement Madras Cement Birla Corp.

SWOT ANALYSIS:Strengths: Growth momentum Government initiative in the infrastructure Huge potential for export. Capacity utilization: over 90% Opportunities:Substantially low per capita cement consumption (82 kg against 250kgs) Boom in Infrastructure sector For current fiscal year ,the demand-supply Gap is 40 mt. Weaknesses:Highly regionalized industry. High capital & investment cost The complex Excise Duty structure The recent ban on export of cement clinker Threats:The recent moves by the Central Government in making the import of the cement total duty free Recent changes in the Central Excise Duty Increased railway freight, coal prices

ACC company Profile: ACC (ACC Limited) is India's foremost manufacturer of cement and concrete. ACC's operations are spread with 14 modern cement factories, 19 Ready mix concrete plants, 19 sales offices & a workforce of about 9000 persons . ACC s brand name is synonymous with cement and enjoys a high level of equity in the Indian market. It is the only cement company that figures in the list of Consumer Super Brands of India ACC has also extended its services overseas to the Middle East, Africa, and South America ACC was formally established on August 1, 1936. Sadly, F E Din Shaw, the man recognized as the founder of ACC, died in January 1936. Just months before his dream could be realized.

The success came as the historic merger of ten companies to form a cement giant. These companies belonged to four prominent business groups Tatas, Khataus, Killick Nixon and F E Din Shaw groups. ACC, with an installed capacity of 22.63 MTPA (with 13 plants), enjoys an 11% market share in India, which with its total installed capacity of 207 MTPA . A new association was formed between ACC and The Holcim group of Switzerland in 2005 Vision:- To be one of the most respected companies in India . Mission includes Leadership, Profitability ,Growth, Quality , Equity , Pioneering & Responsibility .

Map of ACC & 5 years performance highlights:Particulars 2005 2006 2007 2008 2009 Rs Crore 8,027 2,204 2,643 NET SALES PBT OPERATING PROFIT 3,221 684 616 5,803 1,620 1,717 6,991 1,930 1,993 7,283 1,737 1,899

PAT CAPITAL EMPLOYED

544 3,502

1,232 4,234

1,439 4,791

1,213 5,746

1,607 6,932

BASIC EARNINGS Per Share(Rs.)

30.02

66.02

76.75

64.63

85.60

Working Capital Management :Working capital means the part of the total assets of the business that change from one form to another form in the ordinary course of business operations. Two different concepts of working capital :a) Balance sheet or Traditional & b) Operating cycle concept. SIGNIFICANCE OF WORKING CAPITAL: INCREASE DEBT CAPACITY INCREASE IN FIXED ASSETS INCREASE EFFECIENCY EASY LOAN FROM BANKS PAYMENT TO SUPPLIERS DIVIDEND DISTRIBUTION

Research MethodologyData Collection Primary data is unstructured interview with managers to get information regarding all variables for working capital management. Secondary data is collected from annual reports, relevant records of ACC ltd, journals & articles. Scope: -

The study has got a wide & fast scope. It tries to find out the players in the industry & focuses on the upcoming trends. It also tries to show the financial performance of the major player of the industry (ACC).

Financial Analysis & findings , using different tools as: Common size statement ( Vertical Analysis) Trend Analysis (Horizontal) Ratio Analysis using:a) b) c) d) Liquidity Ratio Solvency Ratio Activity/mgmt efficiency Ratio Profitability Ratio

Interpretation Of Common size statementThere is a significant increase in shareholder s fund & decrease in loan funds continuously over a period of time. There is also a significant increase in the amount invested by the company for the purpose of future growth. There is a significant decrease in current asset over a period of time.

Trend Analysis:-

Interpretation of trend analysis :Over a period of years ,there is an increasing trend in all the Balance sheet items other than Investment & Current assets.

Interpretation of working capital:-

WORKING CAPITAL RATIOS AND ITS INTERPRETATION:Liquidity Ratio Current Ratio Quick Ratio Solvency Ratio Debt-Equity Ratio Dec 0 Dec 06 5 0.58 0.42 0.77 0.61 Dec 07 0.86 0.55 Dec 08 0.89 0.61 Dec 09 0.67 0.42

0.50

0.25

0.07

0.10

0.09

Activity ratios:Dec 05 Inventory Turnover Ratio Debtor Turnover Ratio Investment Turnover Ratio 5.37 16.34 12.29 Dec 06 9.33 27.75 22.40 6.96 Dec 07 24.85 27.40 24.85 18.25 Dec 08 27.51 24.12 27.51 17.02 Dec 09 25.22 31.22 25.22 54.17

Working Turnover 27.93 Ratio

Profitability Ratio:Profitability Ratio Gross profit ratio Net Profit Ratio Dec 05 17.32 16.85 Dec 06 Dec 07 Dec 08 28.97 21.16 23.72 20.44 20.59 16.29 Dec 09 27.68 19.69

30 25 20 15 10 5 0 2005 2006 2007 2008 2009 Gross profit ratio Net profit ratio

Observations: Position of the stock is increasing per year that is good sign to sustain as the leader ahead. Lack of advertisement can be said as weak point of the ACC. ACC s investment policies are very much reliable. The additional capacity of cement production at New Wadi plant will create new milestones for the ACC. Overall all ratios of the company are good and company need to work with more efficiency. The company is more dependent on outsider s fund. There is a significant amount of increase in Basic earnings per share ,Capital employed ,PAT( profit after tax) ,Operating Profit & Net Sales.

Limitations: The study has taken the data for a limited period of 5years i.e., Dec.2005 to Dec.2009 performance of the company. The data collected were mostly secondary in nature. This study in conducted within a short period. During the limited period, the study may not be retailed, full fledged and utilization in all aspects. Financial accounting does not take into account the price level changes.

Suggestions: It is suggested that the company has to increase its current assets to meet its short-term obligations. Company has to improve debtors collection period continuously so that effective receivable management will possible. Reserves should be utilized for the growth of the company. While forecasting cash flow, the management should take into account the impact of unforeseen events, market cycles and actions by competitors. Low Investment in innovative R&D. Company should invest more in R&D. Manufacturing concern require more investment in capital goods

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