Performance Evaluation and Ratio Analysis of

Meghna Cement Mills Limited

Prepared for:
Professor Dr. Md. Mohiuddin
Course Instructor: Financial Theory and Practices

Prepared by:
Fardan Abdullah; ZR1703022
Nawrin Nahar; RQ1703028
Ekram Ahmed Bhuyan; ZR1703035
EMBA (29th Batch)
IBA, DU, Dhaka.

September 15, 2018

Performance Evaluation and Ratio Analysis
Meghna Cement Mills Limited

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1. Introduction

1.2 Background

Meghna Cement Mills Ltd is the first manufacturing unit of Bashundhara Group and it
is one of the largest cement industries in the country producing nearly 1 million metric tons a
year. The Meghna Cement Mills Ltd is an International Standard Organization (ISO 9001:
2008) certified company having accreditation of manufacturing products for both domestic and
international markets. The company is listed with both Dhaka and Chittagong Stock
Exchanges, the two bourses of the country since 1995 and 1996 respectively. The company
markets its product under the registered trade mark "King Brand Cement".
There are 4 nos. of grinding mill in MCML having production capacity of 3000 MT/ day and
these mills are equipped with high efficiency separator to segregate fine particle from the coarse
one. The dimension of each of the 02 (two) mills is 3m diameter x 9m length (production
capacity 30 TPH) while the each of the rest 02 is 3m diameter x 11m length (production
capacity 40 TPH).
To ensure the product quality, the Quality Assurance (Q.A.) department collects
samples from different areas of mill house every after 1hrs. to evaluate quality of the crushed
product and thus feed back to the production department. Based on the quality report
determined by Q.A department, Production department acts accordingly.
There are 4 nos. of cement silo for cement storing purpose in MCML, where the capacity of
each of the first 02 silo is 3500 MT while the capacity of each of the rest 02 is 5000 MT.
Cement is extracted from the cement silo through extraction system which consists of roots
blower, inlet box, pneumatic shut off valve, flow control valve etc. which are controlled from
the control room of the pack house. There are 2 nos. of roto packer having packing capacity of
100 MT / Hr. and 110 MT / Hr. respectively. These packers are the equipments of modern
technology where weighing system of the delivered cement sack is fully electronic based to
ensure proper weight of every sack of cement.
Mainly paper made cement sacks are preferred for filling purpose although small
percentage of poly sack are also used based on the consumers’ demand. It may be mentioned
here that, the paper sacks are manufactured by the Sack plant of BG.
To assist the production process i.e. to enhance the mill output as well as for securing dust free
working environment there are several nos. of dust collectors with modern deducting system

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in the mill house area. Moreover there are several nos. of dust collector having larger capacity
of modern deducting system to secure almost dust free working environment.
There exists 02 modes of cement delivery system i.e. road delivery and vessel delivery
available in this plant. To prevent bag bursting while loading in vessel one spiral chute has
been designed with the barge loader.
To ensure smooth delivery of cement sacks 19 nos. ten wheeler and 16 nos. six wheeler
company delivery trucks are being used.
There exists a modern equipped jetty facility in this organization where the sea going vessel
can berth easily. There exists 02 nos. of hydraulic crane of modern technology of German
origin having unloading capacity of 250 MT/Hr each of which contribute a lot to faster
unloading.
Here it needs to mention that there exists a clinker shed having storing capacity of
35000 MT and for easy and faster conveying there exists a substantial numbers of belt
conveyors which has been designed technically and which lengths about 02 kilometers. Besides
the two nos. of hydraulic crane there also exists 02 nos. of mechanically driven crane namely
Fransiab Crane which are mainly engaged for limestone unloading.1

1.2 Objective of the Study

The primary objective of the study is to find out some in depth financial perspective
of the company by analyzing financial information over the tenure of last two years.

1.3 Scope of the Study

The scope of the study is the analysis of the financial information of the company and
infer some conclusive statements based on those data.

1.4 Methodology of the Study

1.4.1 Data Collection

The main source of the data was from the company website.

1.5 Limitations of the Study

The collected data are mainly found from the company website and the analysis is only
done for the year 2015 and 2017.

1
Source: http://www.meghnacement.com/about-us/

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2. Statement of Financial Position
2.1 Statement of Financial Position 2017
Following information are collected from audited financial report 2017 of Meghna
Cement Mills Limited:
2.1.1 Balance Sheet (Audited 2017)
30-Jun-17 30-Jun-16
ASSETS Taka Taka
Non-current assets
Property, plant and equipment - net 917,664,618 1,027,489,005
Capital work-in-progress 135,991,797 -
Intangible assets
1,053,656,415 1,027,489,005
Current assets
Inventories 530,670,035 707,772,509
Trade and other receivables 1,327,843,691 875,794,703
Advances and deposits 818,251,520 1,074,885,221
Advance Income Tax 753,602,995 646,576,503
Cash and cash equivalents 196,131,105 226,348,870
3,626,499,346 3,531,377,806
TOTAL ASSETS 4,680,155,761 4,558,866,811
EQUITY AND LIABILITIES
Shareholders' equity
Share capital 225,004,000 225,004,000
General Reserve 166,000,000 166,000,000
Share premium
Revaluation reserve 37,435,034 44,009,775
Retained earnings 397,542,580 359,286,692
825,981,614 794,300,467
Non-current liabilities
Long Term Borrowings 207,740,693 235,566,863
Gratuity Payable 94,999,268 80,472,480
Deferred tax liability 109,694,545 134,518,936
412,434,506 450,558,279
Current liabilities
Short Term Borrowings 2,306,623,255 2,660,563,960
Long term loan - current portion 21,672,942 18,671,428
Payable for other expenses 298,009,385 179,467,863
Income Tax Provision 155,107,361 108,472,388
Trade Payables 379,928,664 197,748,841
Payable for other finance 98,680,143 77,049,488
Provision for WPPF 8,731,462 11,192,501
Advance Received against Sales 172,986,429 60,841,596
3,441,739,641 3,314,008,065
TOTAL EQUITY AND LIABILITIES 4,680,155,761 4,558,866,811

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2.1.2 Statement of Profit or Loss (Audited 2017)

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2.1.3 Statement of Changes in Equity (Audited 2017)

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3. Financial Analysis
3.1 Horizontal Analysis:

An analysis of percentage financial statements where all balance sheet or income

statement figures for a base year equal 100.00 (percent) and subsequent financial statement
items are expressed as percentages of their values in the base year is called horizontal analysis
or trend/index analysis. In the following case of Meghna Cement Mills Limited., base year has
been taken of the financials of 2017.
3.1.1 Horizontal Analysis (Balance Sheet)
Description Audited 2016 (%) Audited 2017 (%)
Current Assets 100.00 102.69
Non-current Assets 100.00 102.55
Total Assets 100.00 102.66
Current Liabilities 100.00 103.85
Non-current Liabilities 100.00 91.54
Total Equity 100.00 103.99
Total Liability & Equity 100.00 102.66

3.1.2 Horizontal Analysis (Income Statement)

Description Audited 2015 (%) Audited 2017 (%)
Turnover 100.00 110.27
Cost of Sales 100.00 110.59
Gross Profit 100.00 134.07
Operating Profit 100.00 115.73
Profit after Tax 100.00 102.49

3.2 Vertical Analysis:

An analysis of percentage financial statements where all balance sheet items are divided
by total assets and all income statement items are divided by net sales or revenues is called
vertical analysis or common size analysis. In the following case of Meghna Cement Mills
Limited., vertical analysis have been computed for 02 (two) years i.e. 2016 & 2017.

3.1.1 Vertical Analysis (Balance Sheet)

Description Audited 2016 (%) Audited 2017 (%)

Current Assets 77.00 77.00
Non-current Assets 23.00 23.00
Total Assets 100.00 100.00
Current Liabilities 73.00 74.00
Non-current Liabilities 10.00 9.00
Total Equity 17.00 18.00
Total Liability & Equity 100.00 100.00

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3.1.2 Horizontal Analysis (Income Statement)
Description Audited 2015 (%) Audited 2017 (%)
Turnover 100% 100%
Cost of Sales 89% 89%
Gross Profit 9% 11%
Operating Profit 7% 7%
Profit after Tax 1% 1%

3.3 Ratio Analysis

Financial ratios are the tools used to analyze financial condition and performance. By
calculating ratios one can get comparisons that are more useful than the raw numbers by
themselves. Financial ratios can be divided into five basic types: liquidity, leverage (debt),
coverage, activity, and profitability. No one ratio is itself sufficient for realistic assessment of
the financial condition and performance of a firm. With a group of ratios, however, reasonable
judgments can be made.

Aspects Ratio Year 2015 Year 2017

Liquidity Current 1.087 1.053
Quick/Acid 0.842 0.899
Profitability Profit Margin 1.41% 1.31%
Return on Equity 8.07% 8.27%
Efficiency Total Asset Turnover 1.007 1.11
Inventory Turnover 7.18 7.047
Solvency Debt- total Asset 82.38% 82.35%
Debt-Equity 4.677 4.66

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 4. Comments on financial analysis
4.1 Horizontal analysis
From the trend of two years analysis we find that current asset, non-current asset were
stable however, there is fair amount of decrease in the debt of the company and a slight increase
in the equity of the company.

4.2 Vertical analysis

The vertical analysis indicates that almost 77% of the total assets is current assets
whereas non-current asset is 23% (apprx.)
In case of income statement, cost of sales is 89%, gross profit ranges from 9% to 11%, operating
profit were stable at 7% and profit after tax were also stable at 1% of the turnover for the last
02 (two) years.

4.3 Ratio Analysis

Meghna’a current ratio varies from 1.087 to 1.053 and it is in increasing trend from
2013. Industry average varies from 0.83-2.55.
Meghna’s quick ratio varies from 0.842-0.899 and it is in increasing trend from 2015. Industry
average varies from 0.38-2.16.
Meghna’a net profit margin varies from 1.41%-1.31%, which is usually low. Industry average
varies from 7.00% to 21%.
Meghna’a inventory turnover ratio varies from 7.18-7.047. Industry average varies from 3.95
to 9.68.
Meghna’a debt to total assets ratio varies from 26% to 83%.
Industry average varies from 25% to 60%. Meghna’a debt to total assets ratio far more than
industry average.
Meghna’a debt to equity ratio varies from 466% to 468%. Industry average varies from 35%
to 150%.

Meghna Cement Crown Cement Heidelberg Confidence Holcim

Aspects Ratio
Year 2015 Year 2017 Year 2016 Year 2017 Year 2016 Year 2017 Year 2016 Year 2017 Year 2016 Year 2017
Current 1.087 1.053 1.28 1.21 1.73 1.59 1.01 0.83 2.55 2.24
Liquidity
Quick/Acid 0.842 0.899 1.05 1.01 1.24 1.34 0.38 0.5 2.16 1.9
Profit Margin 1.41% 1.31% 8.25% 7.00% 14.22% 8.19% 12.72% 13.72% 20.80% 7.40%
Profitability
Return on Equity 8.07% 8.27% 11.81% 9.57% 26.52% 15.61% 14.87% 14.03%
Total Asset Turnover 1.007 1.11 0.69 0.59 1 1.12 0.9 1.01 0.51 0.51
Efficiency
Inventory Turnover 7.18 7.047 9.68 8.81 7.29 5.88 3.95 4.19 5.16 6.13
Debt- total Asset 82.38% 82.35% 52.51% 60.39% 45.00% 46.00% 46.79% 51.01% 26.70% 29.10%
Solvency
Debt-Equity 468% 466% 110.56% 152.46% 82% 86% 104% 88% 36.50% 41.10%

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5. Conclusion
This financial statement analysis part of this report explores the financial statements of
Meghna Cement Mills Limited. Analyzing the previous concepts and financial ratios is
important for organizations like Meghna Cement Mills Limited to understand their financial
position. It is imperative that constant monitoring of financial statement is conducted.
Organizations that conduct analyst allow for their operation to have a snap shot view of the
overall performance and give management a chance to make sound financial decisions.

From the Financial Statement Analysis, it can be ascertained that Meghna Cement Mills
Limited is a stable company which is evident from the increase of total comprehensive income.
Liquidity position of Meghna Cement Mills Limited has increased and it is a strong indicator
that the company’s current liabilities can be paid off by its current assets. However, most of
the profitability indicators of the company decreased compared to previous year, and the
company may focus on this arena for improvement. Debt Ratio indicates that the company is
reasonably a solvent company. The company has done good in managing its debt.

In a broader sense we can find out Meghna Cement Mills Limited’s growth is steady
and in some aspects it does not match with the industry averages. Thus, if the company closely
monitors those aspects of the financial matters the growth of the company will not be hindered
and the company can be more successful in the future.

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