This report shows the growth and performance of cement industry in Bangladesh and other parts of the world. For the purpose of the report the corporate websites have been used as source of information for the listed companies and shows the activities of three listed cement company in Bangladesh.
Chapter One portrays the definition of growth, performance and way to measure the organizational performance. Then the chapter shows the research work of an industry. Chapter Two discusses the objectives, methodology and limitations of the report. Chapter Three overview of cement industry in the world and also Bangladesh. The growth and performance of three listed cement company in Dhaka stock exchange. And their comparative analysis, common size analysis and ratio analysis. Chapter Four draws conclusion to the report by placing some initiatives for improvement of cement industry in Bangladesh.
The report shows that cement industry bringing substantial foreign remittance to Bangladesh and make our economy stronger compare to other countries.
1.1 Meaning and Definition of growth
1. That which has grown or is growing; anything produced; product; consequence; effect; result.
2. The process of growing ; the gradual increase of an animal or a vegetable body ; the development from a seed, germ, or root, to full size or maturity; increase in size, number, frequency, strength, etc.; augmentation; advancement; production; prevalence or influence; as, the growth of trade; the growth of power; the growth of intemperance. Idle weeds are fast in growth.
Growth: words in the definition
Advancement, Consequence, Development, Effect, Fast, Frequency, From, Full, Gradual, Growing, Grown, Growth, Influence, Intemperance, Is, Maturity, Number, Power, Prevalence, Process, Produced, Product, Production, Result, Root, Seed, Size, Strength, Development, Emergence, Growing, Increase, Increment, Maturation, Ontogenesis, Ontogeny, Outgrowth,
Economic Growth is an increase in the ABILITY to produce goods and services.
This type of Economic Growth is caused by:
a) More resources
b) better resources
c) better technology
Three Definitions of Economic Growth
- Increasing our POTENTIAL OUTPUT
- Increasing Output, and
- Increasing Real GDP per capita
1 Increasing our POTENTIAL OUTPUT: ability to produce more
3. Increasing output or increasing Real GDP (ACHIEVING our potential)
a. achieving “full employment” and “productive efficiency”
(1) Producing at a minimum cost to achieve productive efficiency
(a) Not using more resources than necessary
(b) Using resources where they are best suited
(c) Using the appropriate technology
(3) Increasing Real GDP per capita
This means increasing output per person. GDP per capita is calculated by dividing output by the population.
1.2 Definition of Business Performance
It is important for managers within organizations to identify whether the organization is achieving its strategic objectives, to understand how others may view the organizations progress, and to be able to assess the performance of competitors or other organizations. Performance measurement needs to recognize both financial and non-financial measures of performance and be balanced in its approach. Used appropriately, performance measurement systems can be the foundation of an integrated and iterative strategic management system.
- Way to measure business performance
- The link between performance measurement systems and strategy – the role of performance measurement in the development of an integrated and iterative strategic management system.
- The concept of the balanced scorecard – financial perspective, customer perspective, internal business perspective and the innovation and learning perspective. Develop the concept that the scorecard is a management system aimed at streamlining and focusing strategy in a way that can lead to breakthrough competitive performance. Use of different, but similar frameworks, to analyze performance in different commercial contexts.
- Ratio analysis, cash flow analysis, stock market analysis and strategic financial analysis – used to critically evaluate the performance of an organization and it’s competitors.
- The effects of accounting choice and creative accounting on financial statements (and the analysis thereof)
- Measures of financial performance – return on investment, residual income and shareholder value analysis.
- Customer perspective – examples; on time delivery, customer partnerships, time spent with customer.
- Internal business perspective – examples; new product introduction, productivity, capacity versus competition.
- Innovation and learning perspective – examples; new product lead times, employee suggestions, staff development.
- Dysfunctional aspects of performance measurement systems and the identification of ways in which such this functionality can be addressed
1.3 Literature Review: Trend of Growth and performance of Garments Industry in Bangladesh
It would be an unjust to give all the credits to any single part (e.g., global market, Bangladesh business community, or the government policy) for the boom of Bangladesh textile & RMG industry. In fact, a range of internal and global factors & issues combined has caused it to happen. Bengali’s have century long history of mechanized tailoring and several thousand years of experience in hand stitching. The aptitude and art of sewing/stitching has genetically transmitted through the females of this land. Even today, one can hardly find a rural female adult who does not know hand stitching or embroidery work. From long since the textile industry and garmenting have been in this very land that has past export experience too. By exploiting the demand of the global apparel market, the local manufacturers/exporters backed by the responsive state polices have successfully utilized the skilled but cheap manpower resource to recover the land’s lost pride, once again.
Ancient Bengal: Handloom had been in operation in the territory now comprising Bangladesh before the inception of the Christian era, believe many. The history and literature contain some piecemeal abstract information about hand loom weaving of Sulatni era in between 1000 BC to 1600 BC.
Mughal Era: The word muslin reminds the glorious days of Bengal textiles, particularly of Dhaka, during the Mughal era and the early colonial period. Muslin is an exceptionally high quality fabric of plain construction, woven in hand loom with finest yarn measuring up to 250 Ne. The modern cotton spinning is able to spin cotton yarn only up to 120 Ne. Muslin and other textiles were exported in mass scale to different parts of India, Europe, and Central & West Asia. At that time Bengal also became the world famous silk producers because of huge sericulture concentration in Rajshahi & Murshidabad regions. Indigenous technology based (but high accuracy oriented) manual cotton spinning, quality katgahi silk-reeling and decorative handloom weaving were the causes of Bengali’s in textiles advantage over any Asian & European nations of the time.
Bengal muslin and other textiles boomed at that time because of the business friendly environment created by the Mughal regime. Under the umbrella of the social security and political blessing to business, Bengali’s felt convenience to make investment in the sector and applied their inherited talent.
British Era: In the middle of the British colonial era, the muslin technology was lost from the Bengal due to the tyrannies of the colonial rulers and marketing agents of UK based textile industries, and also the uneven competition with the low cost products of the mechanized textiles. Lack of political support, state’s non-cooperation and lack of social initiatives (at least for lack of documentation through literature) have deprived Bangladesh and the world from muslin.
The Singer’s sewing machines created new era of mechanized tailoring in the land by the end of 19th century. The colonial regime also introduced Bengal with the mechanized textile industry since 1930s. But the participation of local investors in establishing mechanized textile industry was constrained due to break out of the World War-II and the division of India in 1947.
Pakistan Era: The supply of raw cotton from the then West Pakistan to Bangladesh opened new avenue for developing cotton spinning industry in the then East Pakistan, where hand loom weaving was again on the verge of revival. Mostly the non-Bengali entrepreneurs availed the scope of establishing mechanized textile industry, which was blessed by the liberal business policies issued by the then Pakistan government and technical cooperation extended by East Pakistan Industrial Development Corporation (EPIDC). As a result, prior to 1971, Bangladesh had 858,000 spindles and 7,400 power looms and 375,00 operable hand looms, registering a good growth as compared to 1947 situation when the country had only 110,000 spindles and 2,700 power looms comprising 11 Textile Mills. Early 1960s was the beginning of ready-made garments manufacturing, which was then simply an initial venture of the local investors aiming to capture a share of the domestic market that remained under the custody of West Pakistani apparel manufacturers.
Bangladesh Era: As compared to 1972-73, today’s capacity of Bangladesh Textile & RMG industry is mammoth.
The landscape changed largely in the last 22 years. The export oriented RMG started its journey only since 1977-78 with 6 manufacturing units. As a matter of fact, the Bangladesh Primary Textile (PT) & RMG industry started to be a little dynamic since 1983-84 when the country started earning some significant proceed (116.203 US $) through exporting RMG. At that time, the country’s spinning sub-sector manufactured only 60.13 million kg of yarn and the power loom weaving produced 109.63 million meters of fabrics and hand loom in excess of 600 million meters of finished textiles (national assortments like sari, lungi, towel/gamcha, wrapper/chador, etc.).
Contrasting to that scenario, Bangladesh RMG industry exported in excess of US$ 8 billion in 2005-06; the primary textile as a partner of export oriented RMGs and domestic apparel industries produced 538 million kg yarn and 6,515 million meters of fabrics. However, the hand loom production has declined from 630 million to 480 million meters in this period of time.
Bangladesh RMG, Textile & Accessories Industries together now;
Account for 77% of the total national export earning
Contribute 38 percent value addition of the industrial sector;
Provide some 63 percent employment in the whole industrial sector of the country.
Factors of Success & Failure of Bangladesh Textiles
The First Decade Progress: 1972-73 to 1982-83
For the development of formal textile sector, Bangladesh initially proceeded with a mindset of state-owned entrepreneurship spirit and established Bangladesh Textile Mills Corporation (BTMC) in 1972 as a controlling organization. Except hand loom and few small industries, the all medium to large PT industrial units were under the control of BTMC. Prior to 1981-82, BTMC activated some 74 industries by creating considerable number of new textile mills of economic size and by modernizing and balancing the rest ones. But the corporation’s industry did not have any competitive edge and survived in the local market under the tariff protection. By the end of 1981-82, BTMC produced 60.13 million kg of yarn and 109.63 million meters of fabrics, which in 1972-73 were 39.14 million kg of yarn and 97.92 million meters of fabrics. The export oriented RMG industry that came into being in 1977-78 with 6 units in the private sector grew to 67, producing 34.62 million of pieces of garments.
The production growth of the first decade Bangladesh Textiles could not be characterized as any thing closer to impressive, not to speak of booming.
The public sector endeavor for development of textile industry in the first decade of Bangladesh was an aftermath of the political philosophy of production imposed by the first government of the country. Inefficiency, corruption and strong trade unionism were the other real barriers to the potential growth of production. Female participation was not significant in this decade.
The Second Decade Progress: 1983-84 to 1992-93
This decade provides a better feature of production and export performance as compared to the previous time span. The growth of spinning and apparel industries was remarkable in this decade; yarn production grew by 129% and RMG production by about 1600%. In 1992-93, Bangladesh exported 582 million pieces of apparel (woven RMG formed the lion share) and earned foreign nearly US $ 1.5 billion.
The success of this decade woes to the government policy that started divesting public sector since 1981-82 to original Bengali ownership. The government also allowed private sector investment for creation of large-scale spinning and weaving industries and especially encouraged setting up export oriented RMG. The textile policy declared in 1989 encouraged setting up of export-oriented textile mills and instructed the financial institutes for funding such projects at rational equity- up to 30%. Facilities such as duty draw back, back-to-back letter of credit facility for import of RMG inputs, and bonded warehouse provisions were the other important catalytic policy incentives.
The global market, particularly the US apparel importers took interest about Bangladesh RMG because of its protected access to US Market. Moreover, the Hong Kong based buyers’ and their agents or the middlemen who did the business in Srilanka discovered Bangladesh a place better than the war prone zone.
The country’s overall political whims by and large started favoring privatization. Labor unionism and labor unrest was controlled in the private sector with the blessing of the government.
The business was well accepted socially; many skilled personnel switched over their professions from public to private sector for better career and earning. As cheap workforce females were found very suitable to form the main RMG workforce.
The Third Decade Progress: 1993-94 to 2002-03.
The inefficiency of the state owned enterprises and the impulse of the open market economy led the government to undertake more liberalized policy since 1990-91 towards encouragement of private sector investment in textile & RMG industries. Subsequently, the government started privatization of the remaining mills under BTMC from 1993-94. In this decade, the tax/duty on raw cotton was made zero. As a result, there was remarkable increase in the establishment of the state-of-the-art technology based spinning, shuttle less weaving Knitting and more sophisticated RMG industries.
In this decade, huge yarn and fabric production capacity was created to meet the demand of export oriented RMG industry that grew by 196%. The yarn production increased by 148% while fabric production increased by 38 times thanks to huge demand necessitated by the rapid growing knitting and modern shuttle less weaving.
The increasing export of RMG thanks to the speedy growth of the knit RMG necessitated huge supply of yarn and fabrics; the RMG companies wanted to rely more on the local textile industry to have ensured supply of yarn and fabrics in time against the short lead-time. A real boom of the industry took place in this decade.
For the development of this decade, credit should be given to several dynamics that not only sustained the private PT industry and the export oriented RMG industry but also caused real boom of the sector. These are:
International Trade Treaty & Agreement
- Bangladesh RMG export availed the generalized system of privilege (GSP) in the EU countries as a member of least developing country (LDC); this was not given to its nearest core competitors such as India, Pakistan, or Srilanka.
- Quota facility in USA market was enjoyed, although that was reducing year after year.
- Rules of origin also favored Bangladesh in developing own backward linkage industry.
Bangladesh Government Policy
- Textile was declared as the thrust sector to extend all out cooperation to the export oriented RMG and the backward linkage industry.
- Provisions of cash incentives (initially to the extent of 25% of the export value) to the exporters and backward supply chains by the government o f Bangladesh.
- Extended bonded warehouse provisions.
- Rationalized tariff on textile & garments inputs.
International Supply Chain Hong Kong based deal makers for their own business interest tried Bangladesh RMG export to expand in the EU, USA, Australia and Canada.
Local Situational Aspects
· Bangladesh by middle of this decade had already built up a sizable backward linkage capacity- both PT & accessory industry, which similar non-fiber producing countries like Srilanka, Vietnam, and Mauritius & other potential African countries could not develop.
· Bangladesh was able to proof itself as a country having cheapest skilled work force having better attitude than any competitor’s countries.
In the mean time, 3 strong stakeholders associations (BGMEA-Bangladesh Garments Manufacturers & Exporters Association, BKMEA-Bangladesh Knit Manufacturers & Exporters Association and BTMA-Bangladesh Textile Mills association) became very active for advocacy. They have kept strong role in eradicating systemic bottlenecks and acted as efficient pressure group to undertake policies in their favor by the government.
Bangladesh political parties did not oppose mass privatization; rather many political leaders openly or in anonymity started becoming textile Or RMG entrepreneurs. The workers’ union-activities were not counter-productive as in the early Bangladesh period and females’ participation in the RMG & textile industry was not strongly discouraged by the religious sector.
The Recent Progress: 2003-04 to 2005-06
It was grossly apprehended that the Bangladesh RMG business would start collapsing with the start of GATT i.e., the Post MFA era. The researchers of GTO (Gherzi Textile Organization-a Swiss consultancy firm) and PPMA (a Bangladesh consultancy firm) predicted that by 2008-09 the export would reach to US$ 10 billion if reforms, suggested by them, were undertaken and implemented- otherwise the export would gradually decline. But the actual scenario was a bit different. The production of yarn, fabric and apparels registered increase by 58%, 39% and 47% respectively in the last 3 years and the total export of textiles and RMG rose to in excess of US$ 8 billion.
As a matter of fact, the government has implemented some of the recommendations made by GTO & PPMA. For example, the government has imposed more importance on activities of EPB, one-stop-shop service has improved, port complications have reduced, bank interest in some case has lowered down to 9% for export oriented industries; and the government, the donors (World Bank/SEDF & UNIDO) & the stakeholders associations have jointly started revamping the training centers/HRD institutions, extending quality support programs to improve quality, cooperating to strengthen accreditation and compliance issues, etc.
On the other hand, the outbreak of SAARS virus in China & Hong Kong, war in Srilanka & Afghanistan, and the tensions in between India & Pakistan etc. have pushed many buyers to come Bangladesh, a comparatively a better place enriched with long RMG experience and built up backward supply industry.
Finally, low cost of captive power generation and cheap labour (as shown below) in Bangladesh do really mater in a RMG business- that well understands the buyers or their agents who once did the business in this country. Together with all this, the continuation of the GSP support by the EU up to 2015 has caused buyers to rethink about Bangladesh once again. This is why in the recent time FDI (foreign direct investment) has happened in the textile & RMG sector.
SWOT Analysis of Bangladesh Textiles & RMG Industry
Advantage over China, Pakistan & India
- Adequate supply of labour force of both sexes, attributed with less attitudes problem (less absenteeism and, aptitude for learning, and loyal) and high morale
- Cheaper labour cost
- Low cost of captive power generation using gas as fuel
- GSP facility up to 2015
Bangladesh produce mostly basic products- which are low cost items; the share of fashion products i.e., high value
added product is very low.
- Bangladesh does not produce the basic raw materials (only a negligible quantity of cotton but no manufactured fiber) and as such has to depend totally on sensitive global market.
- Because of inadequate backward linkage, lead-time happens to be long, nearly 3 months.
- Public power supply is erratic.
- Bank interest rate is still high enough, particularly of private sector bank, for investment of export oriented high value
- HRD facility, productivity and quality support, testing and accreditation support, design support and compliance’s are yet to be enhanced.
- Cost of doing business is high because of under table money
- Bangladesh has now a scope to go for more fashion oriented products deserving high price in the global market.
- With the help of further increase of productivity & quality and design support, Bangladesh can minimize cost and maximize profit and export value.
- Bangladesh, as a proven experienced RMG & Textile manufacturer, can expand share in the existing market (USA, EU, Australia, Canada, etc.) and can also explore opportunity in Japan & CIS countries.
- In the long run, Bangladesh has a scope to target huge populated country like China and India- where demand as well as cost of manufacturing will be wider.
- Unless new strong market is explored in home or abroad, any non-cooperation from USA & EU may jeopardize the whole Bangladesh RMG export business and consequently the textile manufacturing.
- Sudden price hike of cotton and yarn in the global market may push Bangladesh to a very awkward situation to devastate the business.
- The type of labour and political anarchies of the recent days if prevails in the future, Bangladesh may lose the business in the way Srilanka has lost.
- Growing terrorism, or its false/amplified propaganda, is also a big threat.
Scope of further Boom
The Demand-Supply Gap
The growth of domestic consumption depends upon a set of complex factors that include among others, the growth of population, per capita income, growth of foreign exchange remittance, change of tastes etc. Some of these are not well graspable factors for future demand estimation through dependable prediction models. Similar is the case with the export-oriented RMG growth, which is more complicated as access to international market depends not only upon the scale of demand or competitiveness but also on global trade policies, regional treaties, bilateral relations, non-tariff barriers, image of exporters, etc.
The major factors, which influence the growth of Bangladesh PTS are:
- Domestic Consumption of apparels, home textiles and technical textiles.
- Growth of RMG export from Bangladesh and direct export of various textile products (finished fabrics, saris, lungis, etc.)
- Importing countries’ market characterizations, which is highly influenced by demand trend, visible and invisible regional factors and bilateral or multilateral trade pacts.
- Domestic factors of production (cost of production, local export enabling factors, etc.) and sociopolitical issues
Earlier a common misapprehension existed among the most people that Bangladesh export-oriented RMG would face a sort of catastrophe in the Post-MFA era due to implementation of WTO (complete abolishment of MFA i.e., withdrawal of quota from USA), marginalization of cash incentives and impacts of various regional blocks and Free-Trade Agreement (FTA). Firstly, EU has extended duty free access of apparel, which will exist until 2015. On the other hand, now it is understood that the abolishment of quota will initially retard the growth of woven RMG mainly due to loss of control over quota distribution by some local large RMG quota dealers; but this is creating better opportunity for the real RMG manufacturers (not the quota sellers) to compete with more cost advantage in the US market in the near future. For knit RMG export, so far nothing happened to be panic; the growth has rather enhanced in the recent period despite a little price fall. In fact, except China there are a few countries those have PT industry and enough RMG experience to throw Bangladesh out of competition from US and UK markets. Bangladesh RMG has to scare for the dangers that have correctly been anticipated so far, but there is no valid reason for being disappointed.
Anticipation of the demand, therefore, could be done based on Naive (Time Series) model of forecasting reinforced by forecasting methods based on behavioral dimensions, which depends on historical data and intuitive assumptions made by experts having long presence in the sector. So, we can have a look on the MOT&J’s recent projection style for of forecasting the demand-production gaps of yarn and fabrics by 2009-10. The projection estimates the demand of fabrics and yarns based on two-tire demand models: in the short-term and in the long-term perspectives. The later model indicates that total demands will comprise 9,115 million meters of fabrics & 1,519 million kg of yarn in 2009-10, of which 2,475 million meters of fabrics for domestic consumption and 6,640 million meters for consumption of export-oriented RMG industry.
Prospect for Creation of New Capacity in Different Sub-sectors of Textile Industry
the potentiality of the industrial sector could be anticipated based on the demand-production gaps of yarn and fabrics by 2009-10.
Bangladesh PT industry now lives in a demand driven expanding market thanks to the boom of export-oriented RMG industry that has developed a global network for export of apparels mostly to USA, EU, Canada, Australia and many other countries of the world. In addition, Bangladesh is also exporting home textiles (furnishing fabrics and other household goods made of textile fabrics), the demand of which is increasing in the overseas market.
In order to make further boom, Bangladesh has to create new capacities and modernize & balance the existing ones. Encouragement of FDI from ethnic Bengali’s in foreign countries would be one of the best options for the needed financing in addition to the local banks’ efforts. Power supply has to be ensured.
Bangladesh needs to develop capacities to provide the industries with a sustainable supply of resource personnel and support services in regard of research, design, testing & standardization, accreditation, compliance’s, etc.
Bangladesh has to improve the port efficiency further and gear up domestic transportation. Labour crisis, labour safety, social rights and gender issues have to be dealt with more efficacious. It is important that the buyers should have a preferred access to the country; starting from reception on arrival to facilities such as hotel/rest house, tourism and recreation should be improved.
Side by side exploring new markets in abroad, Bangladesh needs to undertake long-term comprehensive policies to create a strong domestic and regional market for RMGs and finished textiles, especially targeting China & India. On the other hand, to shorten the lead-time Bangladesh need to have a strong backward supply chain that in turns demand sustainable supply of textile fibers. Bangladesh either has to produce cotton and manufactured fibers or should make a long-term cont-actual arrangement with some preferred fiber supplier countries. For all this, a comprehensive policy is now to be formulated without further loss of time.
Cement industry in Bangladesh
Cement industry in Bangladesh is not very old industry. Producing cement and establishment of cement factory started from 1992.Athough it has done well in its sector.
Cement industry is a blooming sector in Bangladesh.This report on cement industry has following objectives:
· to know the growth and performance of cement industry in Bangladesh
· To compare the position of Bangladesh in cement industry with other countries cement industry in the world
· how to become the cement industry a source of foreign money
· To make our economy be strong by developing cement industry.
· To encourage all to invest their money in this sector
The source of data of the reporter as followings:
· The internet.
- The websites of Cement industry ,Dhaka stock exchange, Bangladesh bank
- To collect annual report- 2009 of cement industry
- A publication of Bangladesh economic review 2009
Findings & Solutions
3.1 Overview of cement industry in the world
3.1.1 Cement industry in Chaina
China is, by far, the world’s largest cement producer with an estimated production of over 570 million tons in 2000.Per capita cement output has reached 448 kg, which is about 200 kg higher than the world average. At the founding of the People’s Republic of China in 1949, total national production was only 660,000 tons per year. By 1985, China had become the world’s leading producer. It has retained the leading position for sixteen years, and now produces about 36 percent of the world’s cement. The next three largest producers— the United States, India, and Japan—produce less than 20 percent of the world’s cement combined.
Chinese planners project that cement output will increase by 3.4 percent annually during the Tenth Five-Year Plan (2001–2005) and by 2.9 percent during the Eleventh Five-Year Plan (2006–2001). They anticipate producing 660 million tons by 2005, 750 million tons by 2010, and 800 million tons by 2015. .Clinker production is to increase by 10 million tons per year from 2001 to 2005. Other forecasters suggest that China will hold production close to 2000 levels while upgrading technology and efficiency throughout the industry.7 So far, the conservative production estimates seem more likely.
Cement Products and Quality
China produces several strength grades of cement including #325, #425, #525, and #625. General types include silicate cement, general silicate cement, slag silicate cement, volcanic ash silicate cement, powdered coal silicate cement, and compound silicate cement. Special types include oil well cement, medium-low heat cement (dam cement), fast solid cement, antisulfate.
Overall, Chinese cement is not of particularly high quality. This can be attributed to the widespread use of vertical kilns. According to 1997 data, only about 10 percent of production was high-grade #525 cement. Medium quality #425 cement makes up 62.7 percent of Chinese production and low-grade #325 cement makes up the remainder. There are surpluses and low prices for low-quality cement, and shortages and higher prices for higher-quality cements.
3.1.2 Cement industry in INDIA
Indian cement accounts for not more than 0.2 per cent of total world cement exports. The sector is relatively insulated from international markets. Given the bulky nature of the commodity and the inadequacy of transport infrastructure in the country, international trade has been limited to neighbouring states in small quantities. Even that miniscule volume of exports took a beating after the south-east Asian crisis, though the situation has improved gradually and the export figures (including clinker) have touched 9 million tonnes in 2003-04 (Table 5).
Exports have been mostly restricted to those large companies that own jetties. Companies like Gujarat Ambuja and L&T have been major exporters, who export mainly to get incentives like duty-free import of high grade coal and
|Table 5: Exports of Cement (in million tonnes)|
|Source: Economic Survey 2005-06, GoI and CMA|
3.3.3 Cement industry in Pakistan
The industry comprises of 29 firms (19 units in the north and 10 units in the south), with the installed production capacity of 44.09 million tons. The norths with installed production capacity of 35.18 million tons (80 percent) while the south with installed production capacity of 8.89 million tons (20 percent), compete for the domestic market of over 19 million tons. There are four foreign companies, three armed forces companies and 16 private companies listed in the stock exchanges. The industry is divided into two broad regions, the northern region and the southern region. The northern region has around 80 percent share in total cement dispatches while the units based in the southern region contributes 20 percent to the annual cement sales.
Fiscal Performance 2008-09
Business Recorder reported that Pakistan’s cement exports witnessed a healthy growth of 65%, to over 6 million tons during 7 months of the current fiscal year mainly due to rise in international demand. The exports may reach to 11 million tons and earn approx $ 700 million during 2008-09.
The statistics of All Pakistan Cement Manufacturers Association also showed that cement exports had mounted to over 6 million tons in 7 months as compared to 3.62 million tons of same period of last fiscal year, depicting an increase of 2.38 million tons. Cement exports during January 2009 went up by 30% to 0.81 million tons as compared to 0.623 million tons in January 2008.
However, slow construction activities in the country during the period badly upset domestic sale of cement, which depicted decline of 15%, to 10.77 million tons as compared to 12.59 million tons of last fiscal year.
By September 2009, after witnessing substantial growth in all three quarters of fiscal year (FY) 2008-09, cement sector concluded the fourth quarter with a handsome growth of 1,492 percent on yearly basis, All Pakistan Cement Manufacturers Association’s report revealed on 29th September 2009.
Higher retention prices (up 59 percent) and high rupee based export sales amid rupee depreciation (20 percent) drove profits up north. However, this growth is magnified, as FY2007-08 was an abnormally low profit period for the sector.
Moreover, the performance is skewed towards large players with export potential as profitable companies in both years posted increase of just 109 percent, said analyst at JS Research Atif Zafar.
He said that cumulative profitability of companies in FY09 stood at Rs 6.2 billion or $78.2 million as compared to Rs 386 million or $6.2 million depicting a massive growth of 1,492 percent. Companies with profits in both the years posted 109 percent earnings improvement.
Though total dispatches were down 2 percent, net sales grew by 55 percent to Rs 101.4 billion or $1.3 billion on the back of higher net retention prices (up 59 percent) and improved export based revenues. Cost of sales ton also rose by 33 percent on yearly basis amid higher realized coal prices and inflationary pressures, the analyst maintained.
In Pakistan, there are 29 cement manufacturers that are playing a vital role in the building up the country’s economy and contribution towards growth and prosperity. After 2002-3, most of the cement manufacturers expanded their operations, and increased production. This sector has invested about $1.5 billion in capacity expansion over the last six years.
The operating capacity of cement in 1991 was 7 million tons, which increased to become 18 million tons by 2005-06 and by end of 2007 rose to above 37 million tones, and currently the production capacity is 44.07 million tones.
Cement production capacity in the north is 35.18 million tons (80 percent) while in the south it is only 8.89 million tons (20 percent).
The cement manufacturers in 2007-08 added above eight million tons to the capacity and the total production was expected to exceed 45 million tons by the end of 2010. It may result in a supply glut of seven million tons in 2009 and 2010.
Actual Cement Production (in million tons)
According to Government Board of Investment,
History of Cement Industry in Bangladesh
Cement is the latest addition in the list of export commodities in Bangladesh. Our country started exporting cement from January 2003. Earlier, apart from some production of state-owned Chatak Cement Factory, the country was dependent on its import. In this context, local investors took the initiative for setting up cement factories and starts producing cement in 1992. The production in eight private factories stood 34 lakh tons in 1997, So far, about 100 Factories got government’s approval of which 56 factories are on production with a production capacity of 1.30 crore metric tons against a domestic demand of 60 lakh tons in a year.
Beyond the border
Research shows that there is a 12 percent increase in domestic demand of cement every year. But the investors cannot rely on only the domestic demand of the cement. They have to look for markets abroad. It is understood that there is no way to get the market abroad without producing international standard quality cement.
The company has completed a very successful year of commercial operation. During the period, the Company sold out its product “Camel Brand Cement” both in local market and export to India. Management of the Company made tremendous effort to popularize the Brand both in local and export market overcoming all setbacks and unstable conditions prevailing thereat.
On the other hand, price of raw materials in the world market was lower as compared to last year which had helped to reduce the production cost of the cement. In this circumstances, the company to keep the price of the product within affordable limit that helped to increase sales revenue resulting achieving stronger position to complete with other giants in this sector and also helped to earn net profit (after tax) amounting to Tk.60,685,253 which is much higher compared to last year’s profit.
During the year the Company was able to produce a total of 162,445 metric tons of cement, which was 77.35% of installed capacity as against 136,713 metric tons in 2008 which showed 19% increase compared to last year. In fact, production largely depends on demand and it could have been increased in demand of cement in the market was more. However, achievement of production is appreciable in respect of capacity of machinery and present requirement of local market. Productions of the last five years have been summarized in the following table:
Comparative Statement of Production
|Installed Capacity (in metric tons)||210, 000||210, 000||210, 000||210, 000||210, 000|
|Actual Production (in metric tons)||162,445||136,731||127,581||138,248||119,383|
|Capacity Utilization (in %)||77||65||61||66||57|
It appears from the above that production of cement has been increasing gradually from the year 2005 to 2009 and slightly decreased in the year 2007, which reflects gradual improvement of production performance of the Company.
During the year under review total sales comes to 162,445 metric tons of cement as against 136,731 metric tons in 2008. Accordingly, net turnover in 2009 stands at Tk. 843.84 million against Tk. 762.61 million in 2008. Sales activities were accomplished through dealers and large number of non-dealers throughout the country during the year under review. Moreover, the Company exported 16,610 metric tons of cement to India during the year against 17,945 metric tons in last year. The company has arranged Indian dealer conference both in Agartala India and Coxs Bazar to explore the export market.
Financial performance of the Company during the year 2009 along with previous years is briefly summarized below:
|Particulars||2009 Taka||2008 Taka||2007 Taka||2006 Taka||2005 Taka|
|Gross profit/ (loss)||194, 767,412||58, 540,578||72,948,414||47,811,209||610,823|
|Trading profit/ (loss)||163,092,343||31,688,961||54,702,446||33,295,240||(11,868,094)|
|Profit/ (loss) before income tax||103,377,053||12,012,618||30,516,878||14,921,807||(26,840,998)|
|Provision for income tax||42,691,800||9,600,000||16,500,000||7,950,000||–|
|Profit/ (loss) after income tax||60,685,253||2,412,618||14,016,878||6,971,807||(26,640,998)|
Contribution to the National Exchequer
The Company contributed an amount of Tk 192,035,302 to the National Exchequer in the form of Customs Duty. Value Added Tax (VAT) and Advance Income Tax deducted at source during the year under review. Contributions to the national exchequer made under various heads during the last five years have been mentioned below:
Contribution to the National Exchequer
|Particulars||2009 Taka||2008 Taka||2007 Taka||2006 Taka||2005 Taka|
|Value Added Tax||128,785,590||128,250,859||95,143,766||87,809,441||67,832,435|
|Duties at impost stage||48,851,621||46,414,898||41,696,758||54,869835||44,361,711|
|Advance Income Tax Adjustable/ Refundable||14,398,091||15, 838,757||4,200,000||2,641,629||1,201,679|
The company could not pay any dividend to the honorable shareholders due to insufficient profit earning in the last year. During the year under report the Board of Directors has recommended 12% cash dividend out of the profit for the year ended on 31st December, 2009. The amount of dividend to be paid to the shareholders will stand at Tk. 1.68 crore.
Current Year’s Activities
It may be pointed out that the prices of clinker and other raw materials has gone up by 10-15 US Dollar per Mt. Therefore, with the same volume of production and sales, profitability as that of last year can not be sustained Considering the present pace of infrastructural development in the country, the demand for cement has increased considerably as compared to last year and accordingly the Company has planned to produce and sell 2 lakhs Mt of cement this year utilizing about 95% of its installed capacity in order to increase profitability and improve the overall performance of the Company.
Welfare activities extended to employees
- Picnic: The management, officers, staff and workers of the Company are enjoying picnic once in every two years. Annual cultural program is held in the picnic spot.
- Haj program: One person from the permanent employees of he group (whose age is 40 and above) is sent to perform Holly Haj once in every year by selection through lottery of the cost of Company.
Corporate Social Responsibility
- Blood donation: The managers, officers, staff and workers of the Company donate blood once in a year to the “Sandani” infactory premises.
- Relief distribution: As the part of Corporate Social Responsibility, the Company distributed blankets and warm cloths in winter season to the distressed and winter affected people. In rainy season relief is also distributed to the flood affected people of various areas of the country.
Key operating and financial data of last five years have been presented below in summarized form:
|Particulars||2009 Taka||2008 Taka||2007 Taka||2006 Taka||2005 Taka|
|Net sales||843,836,346||762,612,203||597,500,92 7||561,102,750||457,558,571|
|Cost of goods sold||649,068,944||704,071,625||524,552,513||513,291,541||456,947,748|
|Gross profit/floss)||1 94,767,41 2||58,540,578||72,948,414||47,811,209||610,823|
|Financial expenses||4 1, 9/7, 143||24,454,370||25,924,996||19,496,976||14,881,458|
|Other income/charges) – operating (net)||7,702,760||5,385,612||3,345,580||1,908,901||108,554|
|Contribution @ 5% to WPP & WF||5,440,897||607,585||1,606,152||785,358||__|
|Profit/(loss) before income tax||103,377,053||12,012,618||30,516,878||14,921,807||(26,640,998)|
|Provision for income tax||42,691,800||9,600,000||16,500,000||7,950,000||—|
|Profit/(loss) after income tax||60,685,253||2,412,618||14,016,878||6,971 ,807||(26,640,998)|
|Transferred from Tax holiday reserve||41,000,000||—||—||—||—.|
|(Loss) balance to date||(99,155,037)||(174,040,290)||(176,452,90)||(184,469,786)||(191,441,593)|
|Total fixed assets & properties||349,982,716||347,658,121||318,143,881||315,084,118||309,376,576|
|Total current assets & properties||368,889,041||306,178,916||200,542,971||150,168,808||118,037,786|
|Total current liabilities||540,917,308||518,342,101||422,423,826||343,833,723||274,693,852|
|Total non current liabilities||111, 109,486||112,535,226||75,715,934||108,888,989||147,162,103|
|Earning / (loss) per share (basic)||43.35||1.72||10.01||4,98||(19.03)|
|Dividend per share||12.00||—||7.50||—||—|
|Quoted price per share ( year end ) DSE & CSE||565.25&571.25||1 77.50 &180.00||150.74&154.00||73.25 & 76.00||40.00 & 40.00|
Comparative (Taka in 000)
|Tangible fixed assets||1,678,957||590,057||564,885||580,334||570,818|
|Net current assets||191,142||38,288||121,405||91,232||53,536|