Analysis of Heidelberg Cement Ltd

Ratio Analysis INDUSTRY
Units 2006 0.793 0.520 0.058 75.778 6.905 2007 0.725 0.465 0.131 25.213 4.730 2008 0.745 0.430 0.101 42.830 19.176

Average Hidelbarg 0.754 0.472 0.097 47.940 10.270
1.06 0.54 0.26

Liquidity Ratios
Current Ratio Quick Ratio Cash Ratio Rec. Turnover Period Inventory Turnover Ratio

times times times days times

36.79 5.47

From the above comparisons it can be said that Heidelberg Cement is in good shape regarding ‘liquidity management’. It has a very good current asset to current liabilities ratio then the industry average. It also has great in comparison to the industry regarding their ‘cash ratio’ and ‘quick ratio’. Their cash and quick ratio is greater than the other two companies and industry average. The calculations above also show that the company takes about 37 days to recover their receivables whereas the industry takes 48 days. It tells that management has some inefficiency while recovering their receivables. The inventory turnover ratio shows how almost half of the COGS are compared to the inventory. The industry average is 10.3 while Heidelberg has ITR of 5.47 times.

INDUSTRY
Debt Management Debt Equity Ratio Debt Ratio times % 2006 1.295 42.100 2007 1.806 35.800

Average Hidelbarg 2.537 4.511 0.06 34.061 24.283 0.44
2008

Heidelberg has very low debt compared to their equity. It means compared to the other companies of the industry Heidelberg has very low debt and they mostly depend on their own equity. 44% of their assets are financed by debt, whereas in the industry only 34% of the assets is financed by debt. The ratio shows that the company’s debt management is also in good shape and in case of bankruptcy there is low chance of equity holders of not recovering anything from the assets.

0 0.588 28. Seeing ROA and ROE. The ratio shows that they need to squeeze in more sales dollar from their fixed assets and total assets.789 0. the company actually lost money from the assets and of the shareholders.8029118 15.305 2007 1.066 908.290 0.24 2007 2008 DOL depends on fixed operating cost.487159194 -3.INDUSTRY Asset Management Fixed Asset Turnover Ratio Fixed Asset Turnover Period Total Asset Turnover Ratio Total Asset Turnover Period Units times days times days 2006 1.810 0. .211553601 0.628 Average Heidelberg -1.12 0.638 Average Heidelberg 1.10 0.010 34.511 0. It shows the organization’s incapability to apply its operating expenses from its earnings.048 12682.01 -1.33879134 -5.243 0.995427599 0.6 Heidelberg lacks from the industry in asset management too. INDUSTRY Units Profitability Net Profit Margin Basic Earning Power Return On Asset Return On Equity % % % % 2006 -2.993 0.110 862. so.358 28.555 14190.503 .652284656 0.46790876 -6.44105536 2.643 1061.715 699.7600189 2.45 0.807 2007 7.638 5317. The company has been highly inefficient in doing so.05 2.565 0.520371003 6.255 2008 1.288 679.12 4741.605 22. DFL of Heidelberg is also very low compared to the industry.148 0.04 In an average the whole industry had a bad ‘net profit margin’ but Heidelberg has good net profit margin.01 0.13 893.7 1.47076309 0. higher the fixed operating cost.20637367 1. LEVERAGES 2006 DOL=(sales-cogs)/EBIT DFL=EBIT/(EBIT-Interest) DCL=DOL*DFL INDUSTRY Average Heidelberg -20. Heidelberg is operating at a very high operating risk.58 -10. the higher the company’s operating leverage and its operating risk.065 -0.39 1.098 2008 -8.

 The average market return is 12.07 0. it is mainly due to the high deviation of stock price.06 which indicate that if the overall market risk increases by 1 unit the company’s risk will rise by 11.06 units.31 15.Risks and Returns 2006 87.67 0.05 12.06 0.06 -0. .01083108 8 2007 0.67 avg. return on Heidelberg(%) avg. Therefore.16 -0. but this does not show the real scene.61 0. return on Padma (%) avg.242.07299 Risk Analysis:  As the Z-score of Heidelberg is 0.  The WACC of Heidelberg decreased & average WACC of Heidelberg is 7.28 WACC using DGM 2006 0.66 -11.96 -1. they have lost value throughout the years.3%.55 2007 62.  From 2006 to 20008.72 0.96 -32.54 0.61 0.04 0.7.04294 0.32 0.17 0. return on Lafarge (%) avg.  Heidelberg has a Beta (β) of 11.01185456 5 Heidelber 2008 Average g 0.23.78 -2. had negative EVA and MVA.07 0.46 0.12 21.23 0.26 0. return of industry (%) beta of Padma beta of Heidelberg beta of Lafarge beta of Industry 50.30 0. which is lower than 2. and has very high chance of bankruptcy.52 1.6 where the Square has 50.06 -7.68 0.0086615 9 0.2% whereas the WACC of Industry average is 4.75 0.05 2008 Average 0. the cost of capital is almost double than the competitors.

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