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Westminster

International College
Assignment of Business Accounting

Mavlonbek SOLIEV 0086MWMW0612 Bachelor of Arts /HONS/ Business studies Business Accounting The First Semester Submission on 20th of August Lecturer is Mr. Francis Asirvatham

Constructions Material Industry

Contents
1.0 Introduction ............................................................................................................................... 4 1.1 Company Background ........................................................................................................... 4 1.2 Board of directors in Lafarge ................................................................................................ 5 1.3 Vision and Mission of the company...................................................................................... 6 2.0 The Business Environment ....................................................................................................... 6 2.1 The General Environment ......................................................................................................... 6 2.1.1 Political Factors .............................................................................................................. 7 2.1.2 Social Factors ................................................................................................................. 7 2.2 The Specific Environment ..................................................................................................... 7 2.2.1 Competitors .................................................................................................................... 7 2.2.2 Customers ....................................................................................................................... 8 3.0 Ratio analysis of LMB .............................................................................................................. 8 3.1Profitability........................................................................................................................... 10 3.1.1 Net profit Margin .......................................................................................................... 10 3.1.2 Return on Capital employed Ratio ............................................................................... 11 3.2 Liquidity .............................................................................................................................. 11 3.2.1 Current Ratio ................................................................................................................ 11

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3.2.2 Quick Ratio ................................................................................................................... 12 3.3 Efficiency ............................................................................................................................ 12 3.3.1 Fixed Asset Turnover Ratio .......................................................................................... 12 3.4 Capital Structure.................................................................................................................. 13 3.4.1 Capital Gearing Ratio ................................................................................................... 13 3.4.2 Interest Cover ............................................................................................................... 13 3.5 Investors Ratio..................................................................................................................... 14 4.0 Discussion on Limitation of the Ratio Analysis ..................................................................... 14 5.0 Conclusion .............................................................................................................................. 14 6.0 Bibliography .......................................................................................................................... 15

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1.0 Introduction
Since down of civilization, people have been achieved to make their life easier. They build high story buildings, streets and alleys, better cities under the housing programs that are accessible for everyone. There are many of companies that contribute to improve cities, offer more housing, more beautiful, and more tolerant also better connected. It is the fact that Lafarge Malaysia Berhad which also known as Lafarge Malayan Cement Berhad one of the leader construction materials company today in Malaysian industry. Company is engaged in the manufacturing cement, ready mixed concrete and other building materials. This assignment will give specific facts and information about Lafarge Cement Companys management team, key environmental factors, ratio analysis of this business.

1.1 Company Background


Leader of the Malaysian construction material industry, LMCB was incorporated in the second quarter of the last century (1950 years). But company has waited for eleven years to be listed, is a part of Lafarge Group. Membership of the Lafarge group presented access to operational and technical experience, innovations, brilliant practices and also trading network of Lafarge group in worldwide. With 60 year experience today company has durable consumer foundation, trusted construction brand and a head than competitors to meet needs of its consumers. It is manufacturing more than 13 million of cement tones in 36 plants over east and peninsular Malaysia that almost 1200 employees work in. Among the cement plants Rawang Kilang is the first plant which established in 1953 years and its annual production was 110.000 tonnes. (Lafarge Malaysian Berhad, 2013) With strong demand for Product Company net profit went up by 10% for the year ended 2012. (The Star, 2013)
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1.2 Board of directors in Lafarge

The responsibilities and main role of the directors is to exemplify stockholders and to encourage and care for the interests of the Company. The directors Board is so responsible to the shareholders for the routine of the company. Currently, the board includes 9 member encompassing, 3 non-executive directors, 4 independent directors, 2 executive directors. The Board is controlled by Chairman who is Y.T.T Sri Imran Ibni Tuanku Jaafar and executive management of the Lafarge is being led by CEO, Mr. B Mulroney.

Independent Non-Executive Director & Chairman Age 66, Malaysian, He has been appointed as NonExecutive Director 34 years before in 1979 and as a chairman in 2003. He holds a degree Bachelors of Law from University of Nottingham in 1970. Five years after graduating he worked in several positions in Perbadan National Berhad and Haw Par Sdn Bhd.

Chief Executive Officer & President Age 51, British, He joined the company on July 2009 as an Executive Director of LMB. After three years on first January 2012 he has been introduced as a president and CEO. He holds a degree from the University of London, Great Britain, in 1985. He made a start career

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in Redland PLC, UK from graduating year. Until 1999 he worked as a General Manager and several positions in PLC. In 1999 he has served in Lafarge Aggregates and Concrete, UK, that in Regional Director position.

1.3 Vision and Mission of the company

MissionAt LMB mission is carrying on handling the leadership in Malaysian industry for Helping its consumers to find a value in own business Giving a chance to employee to support themselves Making a value for its stockholders. (Lafarge Malaysian Berhad, 2012) VisionAt company vision was created for... Helping the human being Regardless of income Reaching better quality housing at a price the everyone can give. (Lafarge Malaysian Berhad, 2012)

2.0 The Business Environment


Multinational Business Organizations control in different difficult domestic and global environment. Numerous factors influence the marketing environments that organization does not control them. Business environment of the company appears in two groups: The Specific and The General Environment. (Stephen P Robins, 2003)

2.1 The General Environment


The general environment contains Political/Legal, Economic, Sociocultural, Demographic, Technological and Global conditions that may affects the organization.

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2.1.1 Political Factors


The Malaysian government is pushing for more inexpensive housing within the country and this contains public and private part housing. It can be said that good or decent housing needs to the people of the country is significant political issue. Malaysian construction industry is quite enough in terms of employment, income generation and significance to the economy. The continuously growth prices of housing within the country points to the requirement of having reasonably priced housing. Reasonably priced housing structures means extra houses will be build and it has an effect on all parts of the building industry containing which of Lafarge.

2.1.2 Social Factors


The changes in society have brought and still been bringing about a change in the housing needs for people. As quite more people want to live alone, marrying later and people living longer, distinctive changes in housing outline can be understood. It will increase the need for single residence housing thus this needs assumed of by all components of the construction business. (Stephen P Robins, 2003) So it can be said that the last decade had much affect in construction industry in country which completely shows itself in annual income of the company and increasing in production of company as Lafarge.

2.2 The Specific Environment


The specific environment is straightly relevant to the organizations success and it consists of four main components: Customers, Suppliers, Pressure Group and Competitors.

2.2.1 Competitors
The Lafarge Malaysian Berhad is the Malaysians top cement manufacturer at present occupies more than 40% share of the market. It competes against several competitors are YTL Cement and Cement Industries of Malaysia / CIMA/, this two company intended capacity developments.

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New entrant Hume Industries, which has built a new 1.6 M plants joined competition in the local market, too. In order to develop the competition, several construction manufacturers have taken to providing returns to defense market share even later rising price last year in August. CEO expects prices to step by step coming back to a better stable condition. For the year ended last year, Lafarge reported a 10% growth, which is as expected, according to net profit when income raised 7 per cent to MYR 2.75bn. (CN cement, 01 April 2013)

2.2.2 Customers
There are largely effects of the customer needs on the operational planning of the Lafarge Malayan Berhad. Consumers always demand safer, quality construction materials that company produces cement, concrete, aggregate at cheaper prices, which pushes the Lafarge to find lower price of production containing outsourcing parts of its productions.

3.0 Ratio analysis of LMB

Profitability

2011

2012

1.0 Net profit margin =

2.0 Return on capital employed

Liquidity
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3.0 Current ratios=

4.0 Quick ratio =

Efficiency

5.0

Debtor collection=

days

days

6.0 Fixed asset turnover=

times

times

Capital Structure

7.0

Gearing=

8.0 Interest cover=

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Investor Ratio

9.0 Return on Equity

=17,3% =16,2%

10.

Earnings per share(EPS)=

=1036,7pence

=919,8pence

3.1Profitability
Profitability is that able to get great revenue reconfirms organizations to give investors and security pouches will go on to offer funding for the benefit of the company is also thoroughly concomitant to shortage of liquidity, since takings in the long term functioning cash flows. In order to be agree with this reason, this is the important to appraisal the takings for the stockholders and moneylenders. In business profitability is called that it is the one of the main areas of business. Profitability in business for the its success or to survive the business, profit must be earned. (Research and Markets , 2013)

3.1.1 Net profit Margin


Cost-benefit analysis is the ratio of net income is most often used. Net profit margin displays which the dollar value of trades, net profit after all costs are. For instance, whether, a net profit margins of 6% means that 6 cents for each dollar of revenue. Net income after bearing in mind
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all measures, containing taxes and interest cost, depreciation and calculation: (Ready Ratios, 2011) Net profit margin = two supporters of the cash from the returns

declaration. Lafarge Malayan Berhad PLC: Public Limited Company has had a ratio of 99.2 % and 98, 9 % from the year 2011 to 2012 individually. But it does not mean company has had a much of profit on each dollar of sales. Net profit margin declined because in 2011 year the expenses of the firm increased and the spillover effect affected ROCE. However, In order to develop the firms profitability the Lafarge must control its expenses

3.1.2 Return on Capital employed Ratio


ROCE is Return on Capital Employment ratio demonstrations, which have been taken from the stock of stockholders in their firms. There are several purposes of the capitalizing in some business to get an acceptable profit on speculation. Thus, the coming back on speculation will be used as a measure of business achievement in appreciating this aim. Relationship among revenue and homecoming on devoted investment. (Sangster, 2002) These expressions the percentage of profit on capital in the business, and it is usually used for demonstration the cost-effectiveness and general business presentation. ROCEs formula is that is coming next = .

3.2 Liquidity
Ability of the firms in order to pay on time and to meet unpredicted needs for cash is called Liquidity. All associates connected to liquidity and functioning center or share of the functioning capital debt. Liquidity is thoroughly linked to cash flow, too. (Sangster, 2002)

3.2.1 Current Ratio

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Current ratio means whether the company has sufficient cash to run the business day to day basis. Normally, division amount should be 2:1. Whether, the division is more than the usual level means which assets is not enough being used by the firms, whether it is less than the level there is not sufficient cash to drive the business, the company will be face on problems of liquidity. Current assets ratio is calculated according to this following formula

The Current ratio of Lafarge Malayan Berhad has ratio of 0, 89 and 1, 17 from 2011 to 2012 singly. The business of the Lafarge M B has been run better than 2011, but now also company has had sufficient cash to control the business in that both two years. (Lafarge Malaysian Berhad, 2012)

3.2.2 Quick Ratio


Liquidity is a quantity of how a business can come across its fiscal duties. Also known as the quick ratio is calculated with following formula = (Finace Formulas, 2012)

3.3 Efficiency
Trade Debtor Collection Period Ratio

Using this ratio to define how long firms credit cash to the company belongs to the customers. This shortens the exploration of accounts receivable that might not constantly be the same credit terms, what firms has done for consumers. In association with the terms of firms loan, they can evaluate the "quality" of the gathering of accounts receivable obligation. Dated "attitude," that means that ideas to the effectiveness. Effectiveness and recital associated, corporate productivity, tend to be more commercial. This ratio is deliberated with following formula = (Bloomberg Businessweek, 2013)

3.3.1 Fixed Asset Turnover Ratio

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This is the how assets is being used by the firms, whether the failure, turnover, is higher the exploitation of assets is better. The formula = The Assets Turnover of LMB has had a ratio of 3, 3 and 3, 4 from 2011 to 2012 individually. The Assets turnover of LMB has had improved by 0.1, which is respectable for the company.

3.4 Capital Structure


Capital structure, called a balance of different types of companies to raise long-term funds. Structure, there are two solutions: Kind of safeties to issue preference stocks and long-term debt (bonds). The comparative amount of the safeties in the capital of the firm is divided into two or A high attentiveness of the market value of the firm is only a minor portion. Funding firm concentrating in infection regulator of money.

3.4.1 Capital Gearing Ratio


Diligently related to the constancy of monetary debt to equity ratio. Principal gearing ratio is mostly used for the analysis of the money edifice. Money gearing ratios method as:

3.4.2 Interest Cover


This element shows if the firm is able to pay off the entirely welfares. Dealers who give loan are more attentive in this ratio, and whether the ratio is as expected means firm is doing fine, it has sufficient cash to emolument off. Interest Coverage Ratio =

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3.5 Investors Ratio


Earnings per Share It can be known that this ratio how much takings on share charges is. One of the crucial ratio is this that familiar stakeholders are concerned in. the retributions each ordinary share is what are they involved in. how many times can investments be enclosed by the company.

4.0 Discussion on Limitation of the Ratio Analysis


There is nothing perfect in the world, and also ratio analysis. The first limitation for the ratio is which every company might use dissimilar methods, unlike policy organisation and intercompany contrast might be a lesser amount of correct. One organization might use direct method and other company might practise reducing balance method. Another limitation is which for the problems any solutions will be given by the ratio; it provides reports on the enactment of the firm. There is another limitation also that is called out-dated information; the current economic situation will not be presented by the ratios that were premeditated in the past, what does it mean is collected information in the past cannot match present-day time. The fourth limitation that is the last of it are indiscriminate, for instance Lafarge Malayan Berhad has enough stock turnover and material goods industries has a low stock turnover, it does not say which material goods industries is doing well why? Because is goods are traded or made a purchased exact fast.

5.0 Conclusion
There are none firm can be shown containing LMB international can check whether is it making a benefit or loss, this is a so public for the business called liquidity ratios. Liquidity ratios are used in each business institutions. After all calculations will be done and companies might know where are they in the business environment or where their position is? Only the way of the improving economic situation of the firm is checking its results. No doubt, they aware how
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assets are being used, how money are being collected from the debtors and paying credits. Return on investments may be known by the directors, that means cash from the marketing stocks. How efficiently productivity is being used, which cash to drive the industry. Also stockholders are interested in the ratios such as receiving each share. Whether the arrival is huge the connection among consumers and firm will improve advance. All that above, which are the ways how to analyse the industry actions for creating benefit.

6.0 Bibliography
Bloomberg Businessweek, 2013. LMC kuala lumpur. [Online] (1.15) Available at: http://investing.businessweek.com/research/stocks/financials/ratios.asp?ticker=LMC:MK [Accessed 06 august 2013]. CN cement, 01 April 2013. Lafarge Malayan Cement mulls expansion. [Online] (1.15) Available at: http://www.cemnet.com/News/story/151873/lafarge-malayan-cement-mulls-expansion.html [Accessed 31 July 2013]. Finace Formulas, 2012. Quck Ratio. [Online] (1.15) Available at: http://www.financeformulas.net/Quick_Ratio.html [Accessed 10 august 2013]. Lafarge Malaysian Berhad, 2012. annual report. pdf. petaling jaya: P.O. Lafarge Malaysian Berhad, 2013. About us. [Online] (1.15) Available at: http://www.lafarge.com.my/wps/portal/my/1-About_us [Accessed 21 july 2013].

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Ready Ratios, 2011. Net Profit Margin. [Online] (1.5) Available at: http://www.readyratios.com/reference/profitability/net_profit_margin.html [Accessed 05 august 2013]. Research and Markets , 2013. Lafarge Malayan Cement. [Online] (1.15) Available at: http://www.researchandmarkets.com/ [Accessed 05 august 2013]. Sangster, F.W.&.A., 2002. Business Accounting. ninth edition ed. Edinburgh: Pearson education limited. Stephen P Robins, M.C., 2003. Environment. 3rd ed. Australia: Pearson Education Centre. The Star, 2013. The Business News. The Star, (12).

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