Assignment on Corporate Finance - Discussion

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

CORPORATE FINANCE
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

CORPORATE FINANCE
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