Assignment on Corporate Finance - Discussion

Running head: CORPORATE FINANCE
Corporate finance
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction:...............................................................................................................................2
Discussion:.................................................................................................................................2
Company background and history:............................................................................................2
Background of industry:.............................................................................................................4
Corporate current creditors:.......................................................................................................5
Corporate market share:.............................................................................................................5
Conduct SWOT analysis:...........................................................................................................8
Evaluating the financial position of company using appropriate financial ratios:...................10
Recommendation and conclusion:...........................................................................................17
References and Bibliography list:............................................................................................20

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Introduction:
The report demonstrates the critical assessment and evaluation of overall financial
position of one of the non-financial corporation listed on the main stock exchange of Saudi
Arabia. Such assessment has been carried out to make recommendations for the credit
proposal from the bank to finance the future project. The chosen company seeking and
applying for the loan of amount 35 million SR is Saudi Cement Company operating in
materials sector. Discussion section incorporates the presentation of the history and
background of corporation along with providing the industrial background. In addition to this,
the current creditor of corporate used for financing is discussed and the market share of the
companies is compared with other companies operating in the same sector. Hence, the
objective of preparing this report is to determine the rejection and approval of the financial
proposal. Internal environmental analysis is done identifying the strength, weakness,
opportunities and threats faced by the corporation using SWOT analysis. The later section of
the discussion demonstrates the financial position of Saudi Cement by comparing the
financial performance with its competitor such as Arabian cement for a period of three years.
Discussion:
Company background and history:
In this section, the background and history of Saudi cement is detailed by outlining
the year of establishment, its business model, product and services, market value,
management team and owner. Saudi cement was established in the year 1955 and since that
time, the company is relishing consistent profitability and expansions of capacity. In terms of
profitability, quality and efficiency, the company is the leader operating in the cement and
material industry and is one of the most trusted companies of Gulf Cooperation Council. The
company is located strategically in the eastern province of KSA (Kingdom of Saudi Arabia).

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An important milestone was achieved by the company in its history in year 2008 due to the
installation of new lines of production that has a combined capacity (Saudicement.com.sa
2020). The reason that attributes to the milestone achievement by the company is that such
expansion is considered to be the largest in the world. The available capacity of the Saudi
cement enhanced because of the expansion and positioned the company uniquely in terms of
efficiency in production and economies of scale.
The primary activities of the company is to manufacture cement, make investment in
field related to cement and cement product. Two cement plants in the country is operated by
Saudi cement. The company is engaged in the production of any type of cement which the
market requires as it’s possess the required technologies. Portfolio of primary product
involves sulphate resistant cement, cement clinker and ordinary Portland cement. When it
comes to export clinker and cement, the corporation is highly capable. Competitive edge over
other producers is enjoyed by Saudi cement for export opportunities in the global market.
This is because of reliable infrastructure that helps in transferring the stock promptly because
of the connection of export terminal to Hofuf plant (Saudicement.com.sa 2020).
The business model of the entity is used for the classification of the financial assets
possessed by the entity which helps in the financial asset management. Saudi cement is
strongly interested in regional building material development and this is done by making
strategic investment in the supply chain.
Amongst the manufacturers of cement, the local market share of Saudi cement is the
largest and the market capitalization of the company is 7042 and the enterprise value stood at
9149.73. The owner and the founder of Saudi cement is King Abdulaziz bin Abdulrahman Al
Faisal Al Saud. The board of director comprise of one chairman, vice chairman and nine

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other board members and one board member being the chief executive officer of the company
(Saudicement.com.sa 2020).
Background of industry:
The corporate operates in the cement industry of the material sector and the critical
factor determining the local contractor bottom line is the material sector which also serves as
the barometer of the construction industry. Cement industry is the essential and vital sector to
economy of Saudi Arabia. Cement in the subsector of the material industry that is in the
period of uncertainty. Producers across the country have been challenged due to the
uncertainty surrounding the global oil price and labour market. In year 2018, several
influential difficulties and challenges were encountered by the cement industry due to the
falling local demand and this in turn increased the cost of goods sold for the manufacturers of
cement and resulted in lower efficiency. Companies operating in this particular sector
generated loss because of the price war due to the creation of tremendous pressure. However,
Saudi cement under such circumstances took every possible measures to improve its
operational efficiency by adopting strategies and maintained the highest profitability level.
The higher cost of goods sold was offset by increasing sales by Saudi cement. However,
falling selling price, the increase in the stock level and enormous decline in demand lowered
the net profit and sales revenue generated.
The availability of supplies of natural gas at the subsidized price provides cement
industry of Saudi Arabia with the cost advantage. A stable political climate of the country
offers the industry with stability. The industry is offered with wide range of opportunities
because of investments being backed by the government and it helps in adding the growth if
long term projects of constructions (Hassan et al., 2019). Furthermore, the strategic location

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of the country for exporting cement to the countries in the Gulf cooperation council and its
expansion to other continents provides organization with greater cost advantage.
In year 2019, Saudi cement posted a net profit of US $ 120 million and this marked a year on
year 13% growth. As identified from TASI, all the listed companies operating in the same
industry includes Arabian cement, SABIC, Chemanol, QACCO, Southern cement, EPCCO,
Tabuk cement, Yanbu cement, YSCC, Jouf cement, HCC, Narjan cement, UACC, Northern
cement and City cement.
Corporate current creditors:
The corporate creditors of Saudi cement comprised of trade payables, Islamic
financing, accruals and other payables, dividends payables and provision for Zakat. Amount
of financing received by the corporate from Islamic financing in year 2018 and 2017 stood at
SR 620000 and SR 55000 thousands. Financing by way of dividend payables for the two
consecutive period stood at SAR 219183 thousands and SAR 196601 thousands respectively.
Trade payables on other hand generates financing of the amount of SAR 79811 thousands
and SAR 91744 thousands. Amount of financing received from accruals and other payables
include SAR 130498 thousands and SAR 107558 thousands for two consecutive years.
Lastly, provisions were also make for zakat in year 2018 and 2017 and this is recorded at
amount of SAR 15939 thousands and SAR33079 thousands respectively. It can be observed
from the financial figures of current creditors that the total amount of financing raised
through current creditors have increased in the recent years.
Corporate market share:
The cement market of Saudi Arabia is facing stiff competition and Saudi cement has
tried to maintain its position by developing strategies so that its profitability level is not

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hampered. Saudi cement is the largest producer of cement due to its clinker capacity of 11.2
mtpa and its industrial share stood at 16.8% (User, 2020). Organization is involved in
continuously investing their efforts to maintain their share of market, improve the efficiency
in the operations and along with maintaining the leading position at regional and local levels.
Due to its excessive production capacity, Saudi cement is able to record a level clinker. It
maintained the competitive level by managing the total level of sales at some predetermined
level. In addition to this, there has been significant improvement in the total and overall
demand for cement and also due to the continuous development of the construction project
across the country. In such competitive scenario, Saudi cement was able to maintain its share
of market compared to its competitors and other companies operating in the sector. The
company would be able to increase in total volume of sales in the upcoming years because of
an increase in the demand of cement from the local market (Us-sabc.org, 2020). The
company update their equipment of production, managerial technologies and machineries in
the process and plants and such efforts are taken by adding up the expenditure annually. It is
required by the company to develop and acquire some new technologies for competing with
other companies operating in the industry. A vital role has been played by the company
construction project development for more than half a century across the kingdom. This
makes the company a pioneer in the supply and manufacture of higher quality of cement and
clinker. Capacity of the company has been expanded by taking the additional efforts in the
form of self-sufficiency, greater cost efficiency achievement and aligning the supply chain of
the company with the goal of national transformation program. All these helps in improving
the utilization of fuel in the generation of electricity.
Customers of Saudi cement are provided with the solution of advancements in the
performance from AGP and such advancement is based on the business, operations and needs
of energy market. Various considerable market based benefits have been delivered by Saudi

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cement over the past five eight years and tis has helped in maintain its competitive position.
Installation of technology has been done across various gas turbines fleet in as many as thirty
nine countries. Even in the situation of stiff competition, positive has been generated by the
company by taking efforts to maintain its supremacy in production of higher quality of
cement products along with the expanding capacity of producing other types of cement by
expanding the capacity and its overall flexibility (ArgaamPlus, 2019). Furthermore,
continuous endeavours are taken by Saudi cement along with the preventive maintenance
jobs that is widely scheduled.
Saudi cement is the market leader of the material sector and it also enjoys the largest
market capitalization compared to all its competitors. This implies that it holds a majority of

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the market share and also enjoys competitive position due to its location and other cost
advantage. It is easily identified from the financial report of the company how the company
took all possible measures to maintain its competitive position (Aina et al., 2019).
Analysing the movement of stock for the last eight years:
The chart presented below represents the movement of stock of Saudi cement for over
a period of eight years. The current market value of share as on 15th March, 2020 is recorded
at SR 49.450 with the opening value and the highest value of SR 51 and lowest value is
recorded at 43.4 and the closing value is at SR 44.2. It is clearly identified from the chart
depicted below that there has been volatility in the share price of Saudi cement over the last
eight years. Looking at the initial years of analysis, it is observed that the share price
witnessed an upward trend since year 2012 as depicted by the formation of higher highs
every passing years. It was year 2014, the share price started falling with the lowest value
being recorded at 37 on 21st October, 2018. End of year 2018 marked the rise in price of
shares of Saudi cement when the highest price was recorded at 79.9 on 14th July in year 2019.
However, the current scenario marks a fall in the price of shares.

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Share price movement over the last eight years:
(Source: finance.yahoo.com 2020)
As on current date that is 22nd march, 2020, the price of share is recorded at SR 43.55.
Comparing the market share of Saudi cement for three years:
The market share of Saudi cement is compared over the period of three years using
three method of measurements that is book measure, market measure and competition
measure. Book measure is obtained by dividing share price of company by the net book value
per share. It is observed from the table given below that the market share of Saudi cement has
decreased initially from 13% in year 2016 to 11% in year 2017 and it further increased to
12% in year 2018. Now, looking at the book measure, it is observed that there has been a
continuous fall in the market share as per book value from 9.9 in year 2016 to 5.2 in year
2018.
2018 2017 2016
Market measure 12% 11% 13%
Book measure 5.2 7.5 9.9
Now, the market share of Saudi cement is compared using the competition measure
where the market share of a company is compared with other. It is observed from the table
that market share of Saudi cement in terms of competition measure is highest compared to its
competitors such as Yanbu cement and Arabian cement.
2018 2017 2016
Saudi cement 12% 11% 13%
Arabian cement 7% 7% 8%
Yanbu cement 10% 11% 12%

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Market share of Saudi cement declined from 13% from 2016 to 11% in year 2017 and
then it increased to 12% in year 2018. As against Arabian cement, it is observed that there
has been a decline in the market value from 8% in year 2016 to 7% in year 2017 and 2018
respectively. On other hand, Yanbu cement market share has declined consistently from 12%
in year 2016 to 11% and 10% in year 2017 and 2018 respectively.
Conduct SWOT analysis:
Strength:
 The company is efficient in maintaining its profitability level as it has adequate level
of inventory to meet any sudden rise in demand for cement. Saudi cement takes every
suitable measures under adverse circumstances and develops appropriate strategies so
that their operational efficiency is enhanced.
 In terms of quality, efficiency and profitability, Saudi cement is the leader in the
cement industry of Saud Arabia (Buallay et al., 2017).
 Saudi Cement Company owns majority of the market share in the cement industry at
the value of 14.3%. 40.4% of the share of domestic cement sector is commanded by
the top three players in the industry including Saudi cement.
 Saudi cement has a large production capacity and the location of the company can
also be regarded as its strength. This is so because the location of the company is the
area rich in high grade raw materials. Many Middle East construction project is
supported by the company and they are considered to be a dynamic association in the
supply chain of the industry (Badawi et al., 2019).
 Being one of the trusted companies of the Gulf cooperation council, there is
increasing reliance of the contractors and end users on the quality and consistency.

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Products of the company is utilized by the end users for developing major airports,
bridges, highways, commercial and numerous housing projects.
Weakness:
 In Saudi Arabia, given the heavy fuel subsidy, inefficiency is being experienced by
the cement industry as a whole in terms of the practice of managing the energy.
However, if there is a lift on the subsidy of fuel, company would be impacted
negatively.
 Revenue growth of the Saudi cement company is restricted because of the price cap of
SAR 240 per tonne.
 The average weak sales price of Saudi cement in year 2018 continued to remain
concern as it lowered the overall profitability reported compared with few previous
years. Ongoing pressure on the company due to weakening overall demand of cement
is pressuring the company and causing a weaker sales prices.
 There is increasing co petition amongst the manufacturers of cement in the areas such
as central and western Saudi Arabia is posing a challenge to the producer such as
Saudi cement combined with weakening demand. An increase in the cost of
transportation has further added to the woes of the company due to the reduction in
the subsidies of energy (Alshahri, 2019).
 The main focus of the producers is pricing instead of volume as the current sales
prices are expected to remain firm. The preference of the producers to postpone the
price war and maintaining higher price is weakening the overall production of the
company.
Opportunities:

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 Demand for cement would be driven by initiatives taken by the government for
infrastructural investment and building housing units.
 Saudi cement looks forward to further expanding its capacity due to the replacement
of the combine capacity with the existing capacity and thereby there is an expansion
in the overall capacity of the organization.
 The company has been provided with an opportunity for further enhancing its stream
of revenue due to the current announcement made by the king to import some extra
tons from the existing players. This is because the efforts has been taken by the
government to curtail the rising demand of cement in the country by importing extra
volume of cement form the other players outside the market of Saudi Arabia.
 Some of the positive momentums in the upcoming years is provided by the total
volume of contracts, export ban lifting and increasing cement price. This would help
in contributing to the rebuilding of the cement company such as Saudi cement.
Threats:
 Saudi Cement Company faces the threat of hampered operations due to increase in
price of fuel and raw materials. Operating risks faced by the company can be
identified as one of the threats. In addition to this, financing risk is also faced by the
company due to rise in the rates of Murabaha because of outstanding Islamic loans.
 The changes in the policy of government makes the company highly susceptible in
terms of its operations, profit generation and overall growth. There also exist the risk
of sudden stoppage of production lines and is not scheduled.
 Saudi cement would be impacted multiple fold due to the subsidy removal by the
government because it will results in compressing the profit margin. This is also
because the issue of an increase in the cost of goods sold has not been dealt and no

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efforts such as adoption of technological advancements has been done to mitigate
rising costs (Sarhan et al., 2017).
 The market share of Saudi Cement Company can be negatively impacted due to the
continuous expansion of the companies located in the central and eastern regions.
Evaluating the financial position of company using appropriate financial ratios:
This section demonstrates the evaluation of the financial position of Saudi cement and
its comparison with one of its competitors such as Arabian cement for over the period of
three years. The objective of analysing the financial position is in response to the credit
proposal of amount SR 35 million loan made by the company to a local bank. Assessment of
the financial position has been done by applying the tool of ratio analysis. In this regard, the
liquidity, asset management position, efficiency and debt utilization ratios have been assessed
by computing different ratios that helps in identification of the trend (Afaneh, 2019).
Profitability ratios:
The profitability position of Saudi Cement has been assessed by computing the ratios
such as gross profit margin and net profit margin. This is an important measure for
identifying the performance of the company in generating profits.
Gross profit evaluates the performance of company when it comes to generate profit
by selling its inventory. It is considered as an important measure to identify the cost of sales
and its movement and impact on the gross profit margin generated. It is always preferred by a
company to experience higher level of gross profit margin as this indicates that stocks held
are sold at somewhat higher price and also identifies the contribution of coast of sales to the
gross margin generated (Alsultanny & AlZuhair, 2017). The table below identifies the gross
profit percentage of Saudi cement and Arabian cement for over the period ranging from 2016
to 2018. Looking at the figures, it can be easily made out that the gross profit margin of Saudi

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cement is much higher than generated by Arabian cement. However, the percentage of profits
computed has been falling year on year for both the companies. This is attributable to the
overall weakening performance of cement industry in Saudi Arabia. In year 2016, gross profit
margin reported at 58% which fell to 48% in year 2017 and 2018 respectively compared to
30% gross profit margin reported by Arabia cement in year 2016 and it also declined to 14%
in the next two financial years. This declining figures is attributable to lowering gross profit
and overall sales made by the companies.
Gross profit
Year 2018 2017 2016
Saudi cement 48% 48% 58%
Arabian cement 14% 14% 30%
Table 1: Gross profit figures
The table below demonstrates the net profit percentage and it is observed from the
figure that there has been significant decline in net profit for Saudi cement from 51% in year
2016 to 38% and 36% in year 2017 and 2018 respectively. As against this, Arabian cement
also reported a falling figure from 10% in year 2016 to 8% and 7% in year 2017 and 2018.
This higher variation in the net profit of Saudi cement reported is attributable to the rising
expenses which has lowered the net profit in recent years. Arabian cement has also identified
a fall in net profit margin but the fall is not much as compared to Saudi cement.
Net profit
Year 2018 2017 2016
Saudi cement 36% 38% 51%
Arabian cement 7% 8% 10%
Table 2: Net profit figures

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From the analysis of the figures, it is suggested that both the profitability ratios have
declined recently. However, the level of overall profitability of Saudi cement is considerably
higher than Arabian cement.
Liquidity ratios
Liquidity ratios are considered as an important measure to assess the position of
liquidity that is the capability of the companies to meet the obligations (Kumaraswamy,
2016). For the assessment of liquidity position, ratios such as current and quick rations have
been computed for both Saudi cement and Arabian cement. Such ratios assesses the cash
position and its adequacy for meeting the liabilities.
Current ratio is considered as a crucial measure for evaluating the ability of entities to
meet their present obligations using current assets. It is observed that for Saudi cement, there
has been a fall in current ratio from 1.36 in year 2016 to 1.16 in year 2017 and further, an
increase to 1.18 in year 2018. This is suggested by the figure that the current assets is
sufficient to meet the liabilities for the shorter duration. On other hand, current ratios reported
by Arabian cement is much lower than Saudi cement and the figures being reported at 0.43
and 0.42 in year 2016 and 2017 and further increase in figure to 0.52 in year 2018.
Companies’ find highest value of current ratios reported to be favourable as the fixed assets
are not burdened to be sold off for the payment. Looking at the figure, Saudi cement has
adequate amount of current assets to do the payment as against Arabian cement that has
inadequate current assets to obligate the payment in short term. An increase in the ratio in the
recent figures is due to increase in the current assets compared to current liabilities that
should be paid off (Asquith & Weiss, 2019).
Current ratio

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Year 2018 2017 2016
Saudi cement 1.18 1.16 1.36
Arabian cement 0.52 0.42 0.43
Table 3: Current ratio figures
Quick ratio assesses the ability of the quick assets for meeting the payments due and it
is favourable to have higher quick ratios. Quick ratio of Saudi cement is higher than Arabian
cement as identified from the figures depicted in the table below. For both the companies, it
is observed that the figures of quick ratio is lower than one which has the implication that
quick assets are not sufficient for meeting the current obligations. Saudi cement reported a
declining quick assets from 0.55 in 2016 to 0.40 and 0.42 in year 2017 and 2018 respectively.
Contrary to this, Arabian cement reported an increase in quick ration fro, 0.20 in year 2016
and 2017 to 0.30 in year 2018 respectively. The figures suggest an increasing burden on the
long term assets of the company as they might be required to sell off for meeting the short
term liabilities.
Quick ratio
Year 2018 2017 2016
Saudi cement 0.42 0.40 0.55
Arabian cement 0.30 0.20 0.20
Table 4: Quick ratio figures
It is identified from the above figures that the adequacy of quick assets is not in par
with the current obligations and they are not enough to pay off any short term business
liabilities.

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Asset management ratios:
Asset management ratios helps in assessing the ability and sufficiency of the assets
for generating sales and thereby income. It helps in comparing the assets of the company by
its revenue and how the company manages such assets for revenue generation. It is preferable
to have higher value of ratios as it determines the efficiency of the company in exploiting the
assets to generate income. For evaluating the utilization of company’s asset, ratios such as
total assets turnover and inventory turnover are computed.
Total assets turnover helps in assessing the strength and weakness of the total assets
of the company in producing sales. Higher assets utilization implies the efficiency of
organization in generating sales and income using assets. It is identified from the figures
displayed in the table that total assets turnover of Saudi cement has declined year on year
from 0.41 in year 2016 to 0.29 and 0.28 in year 2017 and 2018 respectively. This fall in ratio
is attributable to fall in total value of assets reported and falling sales revenue due to
declining sales volume in the recent years. Contrary to this, it is identified that the figures for
Arabian cement has increased from 0.68 and 0.75 in year 2016 and 2017 to 0.92 in year 2018
respectively. This is because compared to Saudi cement, the total assets reported for Arabian
cement has not declined much and also sales revenue generated in the recent year has
increased.
Total assets turnover
Year 2018 2017 2016
Saudi cement 0.28 0.29 0.41
Arabian cement 0.92 0.75 0.68
Table 5: Asset turnover figures

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Inventory turnover is used to identify the total number of times inventory is sold by
the organization and helps in determining the practice of inventory management and buying
practices. It is identified from the figures displayed in the table that inventory turnover has
fallen from 1.01 to 0.84 in year 2016 and 2017 and there has been further decline in the figure
to 0.75 in year 2018. This indicates that the total number of times inventory has been sold is
reduced and implies that the merchandise is not effectively managed by the organization.
Now, looking at the figures for Arabian cement, it is observed that the figures has
considerably increased from 6.91 in year 2016 to 8.43 and 10.36 in year 2017 and 2018
respectively. Such increase in the figures implies that the number of times inventory is being
sold off is increasing year on year and the inventories bought are sold effectively without any
wastage.
Inventory turnover
Year 2018 2017 2016
Saudi cement 0.75 0.84 1.01
Arabian cement 10.36 8.43 6.91
Table 6: Inventory turnover figures
From the figures suggested, it has been deduced that the overall efficiency position of
Saudi cement has declined in the recent years as the assets are not effectively utilized by the
company. Contrary to its competitors that is effectively utilizing the assets for producing
sales and generating income.
Debt utilization ratios:
A comprehensive picture of the overall solvency position of the companies is deduced
using the debt utilization ratios. It evaluates the capital structure of the company and the total
debt possessed in relation to the assets held (Hosaka, 2019). For the assessment of financial
leverage, debt ratio and debt to equity ratios have been computed.

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The table depicting the figures of debt ratio identifies that Saudi cement has
considerably lower debt ratio compared to Arabian cement. Debt ratio evaluates the ability of
the existing total assets of the company to pay the total liabilities incurred. Company prefers
to have a lower debt ratio to make the business financially sound as lower ratio ensures its
longevity (Amin & Hamdan, 2018). However, debt ratio of Saudi cement has increased
consistently from 0.23 in year 2016 to 0.27 and 0.29 in year 2017 and 2018 respectively. It is
suggested by the figures that Saudi cement owns twice as much assets compared to its total
debt. On other hand, Arabian cement has reported higher debt ratio but the figure is declining
from 0.64 in year 2016 to 0.63 in year 2017 and 2018 respectively.
Debt ratio
Year 2018 2017 2016
Saudi cement 0.29 0.27 0.23
Arabian cement 0.63 0.63 0.64
Table 7: Debt ratio figures
Debt to equity ratio determines the proportion of debt and equity in the capital
structure of the company and the contribution of the investors. It is favourable on part of
business to have a balance between equity and debt and thereby debt equity ratio should not
be high. Lower debt equity ratio favours the business operation as it indicates that investors
are willingly contributing the money into the business and operations are being funded
without relying much on external borrowings (Alawi, 2019). Debt to equity ratio of Saudi
cement has increased over time from 0.30 in year 2016 to 0.37 and 0.41 in year 2017 and
2018 respectively. Arabian cement on other hand has also identified its debt to equity ratio to
increase from 0.36 in year 2016 to 0.37 in years 2017 and 2018 respectively. This increasing
figure of ratio implies a reducing contribution of the investors to the funding of operations.
Debt to equity ratio

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Year 2018 2017 2016
Saudi cement 0.41 0.37 0.30
Arabian cement 0.37 0.37 0.36
Table 8: Debt to equity ratio figures
From the overall analysis of the figures, it is observed that the financial leverage of
Saudi cement is increasing year on year. However, the figure does not marks the situation
unfavourable as the company has adequate assets in relation to debt for managing business.
Arabian cement has higher level of debt utilization ratios which marks higher financial
leverage compared to Saudi cement.
Recommendation and conclusion:
The level of capacity utilization of Saudi cement and the competitive advantage
enjoyed by the company place it in a superior position. In addition to this, being the market
leader, the company enjoys highest market capitalization and it has the highest utilization
level of capacity. The paper evaluating the overall financial position of Saudi cement for
acceptance or rejection of loan proposal by the local banks has outlined various financial
ratios depicting the financial position over the period of three years. The overall profitability
position of Saudi cement has outperformed its competitor Arabian cement as the total
amounts of profit and net income generated is sufficiently higher. When assessing the
liquidity position, Saudi cement is an advantageous place as the amount of current assets held
by the company is capable of paying off all the short term liabilities incurred. Furthermore,
the financial leverage of Saudi cement is much lower as the fewer amount of debts is
leveraged by the company and the desirability of the company to raise funds to finance future
project using external borrowing is reasonable. The lower financial leverage implies a better
credit worthiness of the company compared to its competitor (Sciglimpaglia, 2018).

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The overall performance of the business in the current scenario is affected by the
ongoing trend in the cement industry of Saudi Arabia, which has impacted their sales volume
and pricing strategies. The falling demand for cement in the last few years along with
lowered spending on the infrastructure by the government has hindered the overall business
growth. Nevertheless, Saudi cement has still managed to maintain its profitability level in
such surging industry by developing the strategies that contributes to improve the operational
efficiency. It is expected that the demand would pick up in the upcoming years due to
undertaking of some infrastructural projects by the government and contributing to the sales
performance of the company (Häcker & Ernst, 2017).
The overall assessment of the financial performance of Saudi cement identifies that
the company’s financial stability is strong. Some factors include the benefits received in the
form of comparative advantage and cost situation. One thing that has been ascertained from
the analysis of the financial figure is that the assets of Saudi cement is not being utilized
effectively. Some of the recommendations made are as follows:
Saudi cement should take steps for generating the income utilizing the assets with the
same resources. Inefficiency in assets utilization might be due to the problem in production. It
is therefore suggested to develop some appropriate strategy to address such issue. The credit
proposal of amount SR 35 million forwarded by Saudi cement to a local bank to finance its
future project should be accepted. Saudi cement has been financially sound in terms of
profitability and financial leverage. It has a record of generating year on year profit and have
adequate assets that could also be used to generate income. Hence, based on the overall
analysis, it is recommended to approve the financing proposal.

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