b accounting.lafarge

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.....................................................................................................................13

4.0 Discussion on Limitation of the Ratio Analysis......................................................................14

5.0 Conclusion...............................................................................................................................14

6.0 Bibliography...........................................................................................................................15

Mavlonbek Soliev


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 Company’s 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.

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(Lafarge Malaysian Berhad, 2013) With strong demand for Product Company net profit went up

by 10% for the year ended 2012. (The Star, 2013)

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 Ja’afar and executive management of the Lafarge is being led by CEO, Mr. B

Mulroney.

T T S Imran Ibni Almarhum Tuanku Ja’afar

Independent Non-Executive Director & Chairman

Age 66, Malaysian, He has been appointed as Non-

Executive 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.

Bradley Mulroney Chief Executive Officer & President

Age 51, British, He joined the company on July 2009

as an Executive Director of LMB. After three years on

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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 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

Mission…At 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)

Vision…At 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 organization’s success and it consists of

four main components: Customers, Suppliers, Pressure Group and Competitors.

2.2.1 Competitors

The Lafarge Malaysian Berhad is the Malaysian’s 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.

New entrant Hume Industries, which has built a new 1.6 M plants joined competition in the local

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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 =operating profit

sales×100 %

2.0 Return on capital employed

¿ PBITCapital employed

×100 %

395,884399,137

× 100 %=99,2%

387,787849,695+344,354

× 100 %=34.4 %

389,690393,892

×100 %=98,9 %

385,850849,695+256,090

× 100 %=25,6 %

Liquidity

306,727344,354

=0,89 :1

¿301,129256,090

=1,17 :13.0

Current ratios= current assetscurrent liability

=:1

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4.0 Quick ratio =cu rrent assets−stock

current liability=:1

306,727−849,7344,354

=1,40:1

301,129−849,7256,090

=0,62:1

Efficiency

1399,137

×365=0,9days

399,137122,4

=3,3times

1393,892

×365=2,5days

393,892116,3

=3,4times

5.0 Debtor collection=trade debtors

sale s×365=days

6.0 Fixed asset turnover= sales¿assets

=¿

Capital Structure49,718

49,718+849,695×100 %=85,1 %

387,7875,1

=76×¿

58,85858,858+849,695

×100 %=85,1%

385,8508,5

=45,3×¿

7.0 Gearing=longtermloan

longtermloan+shareholder×100 %

8.0 Interest cover=PBIT

interest expenses=¿

Investor Ratio

387,8642,236,637

×100 %=17,3% 377,7442,325,443

×100 %

=16,2%

9.0 Return on Equity PAT

Equity× 100 %

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10. Earnings per share(EPS)=PAT

number of ord shares×100 pence=pence

387,86437,41

× 100 %

=1036,7pence

377,74441,07

× 100 %

=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

all measures, containing taxes and interest cost, depreciation and calculation: (Ready Ratios,

2011)

Net profit margin =operating profit

sales×100 %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.

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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 firm’s 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. ROCE’s formula is that is coming next =

PBITCapital employed

×100 %.

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

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

¿Current Assets= ¿Current liability

÷ ¿

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

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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 = Current assets−stock= ¿Current liability

¿

(Finace Formulas, 2012)

3.3 Efficiency

Trade Debtor Collection Period Ratio

Using this ratio to define how long firm’s 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 firm’s 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 =

TradedebtorsCredit sales

×365=days (Bloomberg Businessweek, 2013)

3.3.1 Fixed Asset Turnover Ratio

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 = Sales∨turnover

¿assets=¿

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

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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 ratio’s method as:

Long termloanLongtermloan+shareholders funds

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 = EBIT

Interest Expense

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

Mavlonbek Soliev


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

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

Mavlonbek Soliev


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].

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).

Mavlonbek Soliev

http://investing.businessweek.com/research/stocks/financials/ratios.asp?ticker=LMC:MK

http://www.cemnet.com/News/story/151873/lafarge-malayan-cement-mulls-expansion.html

http://www.financeformulas.net/Quick_Ratio.html

http://www.readyratios.com/reference/profitability/net_profit_margin.html

http://www.researchandmarkets.com/

http://www.lafarge.com.my/wps/portal/my/1-About_us


Mavlonbek Soliev

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