Professional Documents
Culture Documents
1.0.
Introduction:
1.1.
Background:
Most of the government industries have to maintain government rules and regulations
very strictly. That is why it is not always possible to do business in the way they want. In
June, 1993 the Government decided to further activate and strengthen the role of private
sector in trade and industry with a view to accelerating economic development. With this
end in view the Government adopted a comprehensive privatization policy and laid down
detailed procedure to facilitate the process of privatization. The policy is aimed at
relieving the financial and administrative burden of government, improving efficiency and
productivity, facilitating economic growth, reducing the size and presence of the public
sector in the economy and help meeting the national economic goals. There are two
methods of privatization:
In present times many government organizations are turning into private organizations
following these procedures. In this study three units of BCIC: Ashuganj Fertilizer &
Chemical Co. Ltd.(AFCCL), Chittagong Urea Fertilizer Factory Ltd.(CUFFL), and Jamuna
Fertilizer Company Limited(JFCL.) have been chosen. An analysis on the financial
performance of these three units will help to find out if it will be better to turn them into
private organizations.
1.2. Objectives:
1.2.1. Broad Objective:
The general purpose of this study is the performance evaluation of these three units.
1.2.2. Specific Objective:
1. To evaluate the financial performance of the selected companies.
Page 1 of 22
Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC
1.3. Methodology:
There are 13 units under BCIC. Three units will be focused in this report, because
information on these three units was highly available. Data has been collected from the
annual report and official documents. In the study, trend analysis has been shown
focusing the assets, sales, net income, cash inflows and outflows. From these variables
(assets, sales, net income, cash inflows and outflows) the financial performance and
condition of an organization can be judged easily. Stakeholders also emphasize on these
variables to judge an organization for further investment. In the ratio analysis part current
ratio, acid test ratio, working capital ratio asset turnover ratio, net profit ratio return on
equity, return on capital employed, return on equity employed and debt equity ratio has
calculated. In this context what kind of business strategy could help the units to do well
that has been suggested.
1.3.1. Data Sources:
The data will be collected from the annual report of the mentioned units and documents
from the head office. Though these three units of BCIC are state owned, they do not
publish their annual report every year. Among all financial data, most of the data have
been collected from the balance sheet , cash flow statement and income statement.
These balance sheets, cash flow statements and income statements have been collected
from the head office with the permission of respected authority. The background of the
organizations has been collected from the annual reports. No primary data has been used
in this study.
1.3.2. Research Approaches:
Research approach of the report will be exploratory in nature. From the annual financial
data of the units, their performance will be evaluated.
1.3.3. Research Instruments:
1.3.3.1. Annual Report:
Secondary data has been collected from the annual report.
1.3.3.2. Official Documents:
As these three units are state owned, they do not publish their annual report every year.
The other information is collected from the official documents from BCIC.
Page 2 of 22
Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC
2.0.
Bangladesh Chemical Industries Corporation (BCIC), fully owned by the Government, was
established in July, 1976 under the provision of Presidential Order 27 of 1972(Bangladesh
Industrial Enterprises Nationalization Order).The Corporation is now managing 13 large
and medium size industrial enterprises engaged in producing a wide range of products
like Urea, TSP, Paper, Cement, Insulator, Sanitary ware etc. They are:
Enterprise Name
Product
Installed capacity
(M.T./ Year)
Established
Year
1.
Urea
5,61,000
1987
2.
3.
Ltd.
Jamuna Fertilizer Company Ltd.
Ashuganj Fertilizer & Chemical Co.
Urea
Urea
5,61,000
5,28,000
1989
1981
4.
5.
6.
7.
8.
9.
10.
Ltd.
Urea Fertilizer Factory Ltd.
Polash Urea Fertilizer Factory Ltd.
Natural Gas Fertilizer Factory Ltd.
Karnaphuli Paper Mills Ltd.
Khulna Hardboard Mills Ltd.
Chhatak Cement Co. Ltd.
Bangladesh Insulator &
Urea
Urea
Urea, ASP
Paper
Hardboard
Cement
Sanitary
4,70,000
95,000
1,06,000 (Urea)
30,000
300 Lac Sft.
1,90,000
3,400
1970
1985
1961
1953
1964
1938
1979
ware
11.
Insulator
Glass
18.67
1959
12.
13.
Sheet
TSP, SSP
DAP
Lac.Sq.M./Year
1,00,000 M.T. (TSP)
5,28,000 M.T./Year
1976
2006
&
Page 3 of 22
Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC
Equity 43.51 %
2. AVENTIS LTD.
Equity 40.00 %
Equity 40.00 %
Equity 40.00 %
Equity 40.00 %
Equity 30.00 %
Equity 30.00 %
Equity 20.00 %
Equity 49.76 %
The basic objective of BCIC is to help building the national economy through:
productivity.
Making available import substitute and products at reasonable prices.
Achieving the country towards food autarky by producing and supplying
agricultural inputs at the door steps of the people all over the country.
Earning foreign exchange through export of surplus industrial products after
Page 4 of 22
Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC
2.2.
Chairman
Director
(Finance)
2.3.
Director
(Production
& Research)
Director
(Commercial)
Director
(Planning &
Implementation)
Director
(Technical &
Engineering)
All of the units of BCIC have their own compound with residential areas. They have
following welfare activities for their officers and stuffs:
1. Resident
2. School college
3. Library
4. Mosque
5. Medical Facilities
6. Entertainment Facilities
7. Projects for family planning & socio-economic development
8. Loan Facility
9. Subsidy
10. Cooperative Society
There are resident and club facilities for the officers and stuffs of BCIC. There are also
school, college, hospital and library. (Bangladesh Chemical Industries Corporation)
Page 5 of 22
Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC
2.4.
Ashuganj Fertilizer & Chemical Co. Ltd.(AFCCL) has been established in 1981.It is situated
in Ashuganj, Brahmanbaria . The name of this industry was Zia Fertilizer & Chemical Co.
Ltd.(ZFCL), but this year its name has been changed into Ashuganj Fertilizer & Chemical
Co. Ltd.(AFCCL).The factory has an annual production capacity of 5,28,000 MT urea.
Organization chart
AFCCL Board
Managing Director
Administrati
on
Productio
n
Gener
al
Urea
Stuffs
Ammoni
a
Medic
al
Utility
Colleg
e
Finishin
g
Finance
MTS
Finance,
money & tax,
pay & bill,
salary,
insurance,
fund trust
management
Cost &
budget, MIS,
company
Store &
sell
account
Technical
Instrumen
t
Electrical
Plan
t
Machiner
y
Worksho
p
Civil
Page 6 of 22
Research
& quality
control
Human
resource
developmen
t
Planning &
developmen
t
Fire &
safety
Commerc
e
Purchas
e
Sell
MPIC
Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC
2.5.
Chief
Medical
Officer
General
Manage
r
Adminis
tration
Commo
n
Service
Personnel
General
Manager
Account
s&
Finance
Cash,
Bank &
Finance
Genera
l
Accoun
ts, Tax
& Audit
Genera
l
Manag
er
Comme
General
Manage
r
Technic
al
Local
Sale
Inspec
tion
P&S
Mainten
ance
Qualit
y
Contr
Purchase
(Import)
Techni
cal
Librar
y
Finishe
d
Produc
t
Mainte
Instr
umen
t
School
&
Colleg
e
Cost,
Budget
& MIS
Purchase
(Local)
Traini
ng
Compute
r
Material
P&I
Control
Technic
al
Service
Stores
Electrical
& Power
Generation
Fire &
Safet
y
2.6.
General
Manager
(Operation
)
Machinery
Maintena
nce
Export
Sale
Securit
y
Store
Accounts
&
Insuranc
e
Gener
al
Manag
er
(MTS)
Amm
onia
Plant
Urea
Plant
Utility
Finishe
d
Product
General
Manage
r
(Constru
ction)
Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC
Administrati
on
Productio
n
Gener
al
Urea
Stuffs
Ammoni
a
Medic
al
Utility
Colleg
e
Finishin
g
Finance
MTS
Finance,
money & tax,
pay & bill,
salary,
insurance,
fund trust
management
Cost &
budget, MIS,
company
Store &
sell
account
Instrumen
t
Electrical
Plan
t
Machiner
y
Worksho
p
Civil
3.0.
Introduction:
Page 8 of 22
Technical
Research
& quality
control
Human
resource
developmen
t
Planning &
developmen
t
Fire &
safety
Commerc
e
Purchas
e
Sell
MPIC
Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC
In this part of the study the trend analysis and ratio analysis have been presented. Trend
analysis has been done focusing asset, sales, net income, cash inflows and cash outflows.
These variables have been focused because they are very important to assess the
financial condition of an organization. The growth rate of these factors has been showed
in a trend over time. Ratio analysis focused the current ratio, acid test ratio, working
capital ratio asset turnover ratio, net profit ratio return on equity, return on capital
employed, return on equity employed and debt equity ratio. A suitable business strategy
has been suggested for the units of BCIC.
3.1.
Trend Analysis:
A trend analysis has been done by 6 years financial information of the three units focused
on assets, sales, net income cash inflows and outflows. The trend of the variables has
been shown separately. The year to year change on the variable has been given in
percentage. The amount of taka has been given in million.
3.1.1. Assets:
First of all the assets of the three units have been focused. Which factors affected the
change of the asset that also has been also focused here.
Table 1: Assets
Year
AFCCL
Asset(tk. in
Growth
million)
CUFFL
Asset(tk. in
Growth
Asset(tk. in
million)
million)
12967
JFCL
Growth
2003-
8761
17754
04
2004-
8304
(5)%
12209
(6)%
18390
(4)%
05
2005-
8095
(3)%
11553
(5)%
18556
1%
06
2006-
7863
(3)%
10919
(5)%
17483
(6)%
07
2007-
8010
(2)%
10522
(4)%
11397
(35)%
08
2008-
9042
(13)%
10877
3%
11593
2%
09
(Source: Balance sheet of Ashuganj Fertilizer & Chemical Co. Ltd., Chittagong Urea
Fertilizer Factory Ltd., Jamuna Fertilizer Company Ltd.)
Page 9 of 22
Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC
Figure 1 : Assets
From the chart (Figure 1) it can be seen that AFCCL s asset growth rate is declining. In
the year 2004-05 the fixed assets and deferred expense was lower than year 200304.Same situation followed the year 2005-06 and 2006-07. The long term loans and
advances increased in year 2007-08 and 2008-09.CUFFLs asset growth rate is declining.
The amount of cash, fixed deposit and deferred expenses is lower than the year 200304.Fixed deposit is also lower in 2005-06.Loan to projects has been increased in the year
2006-07.Same situation followed the year 2007-08 and 2008-09. JFCLs asset growth rate
decreased in 2004-05, increased in 2005-06,again decreased in 2006-07 and 2007-08 and
increased in 2008-09.In 2004-05 fixed asset decreased. Deferred expense and fixed
assets decreased in 2005-06. Same situation followed in 2006-07 and 2007-08.
Page 10 of 22
Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC
3.1.2. Sales:
The sales have been focused next. As these are government industries, they have to sell
the products in the price set by the government. Thats why most of the cases they faces
loss.
Table 2: Sales
Year
AFCCL
Sales(tk. in
Growth
million)
CUFFL
Sales(tk. in
Growth
Sales(tk. in
million)
million)
2984
JFCL
Growth
2003-
2009
2625
04
2004-
2102
5%
2190
(27)%
2601
(1)%
05
2005-
1785
(18)%
2052
(6)%
2235
(14)%
06
2006-
1703
(5)%
1988
(3)%
2352
5%
07
2007-
2253
32%
2084
5%
2872
22%
08
2008-
3122
38%
3601
73%
4188
46%
09
(Source: Income statement of Ashuganj Fertilizer & Chemical Co. Ltd., Chittagong Urea
Fertilizer Factory Ltd., Jamuna Fertilizer Company Ltd.)
Figure 2: Sales
Page 11 of 22
Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC
From the chart it can be seen that AFCCLs sales percentage increased in 2004-05,
declined in the year 2005-06 and 2006-07 then again increased in the year 2007-08 and
208-09. CUFFLs sales percentage has been declined for 4 years and increased in the year
2008-09. JFCLs sales percentage has declined for first 3 years then increased in the last
two years.
3.1.3. Net Income:
The growth rate of net income has been shown below.
Table 3: Net Income
AFCCL
Year
Net
Growth
CUFFL
Growth
Net
income(tk in
income(tk in
million)
million)
JFCL
Net income(tk Growth
in million)
200304
2004-
100
57
(131)
05
2005-
177
77%
(106)
(285)%
(440)
(235)%
06
2006-
115
(35)%
(219)
(106)%
(668)
(51)%
07
2007-
119
3%
(405)
(84)%
(729)
(9)%
08
2008-
28
(76)%
(330)
(18)%
(780)
(7)%
877
532%
755
116%
637
108%
09
(Source: Income statement of Ashuganj Fertilizer & Chemical Co. Ltd., Chittagong Urea
Fertilizer Factory Ltd., Jamuna Fertilizer Company Ltd.)
Page 12 of 22
Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC
From the chart (Figure 3: Net Income) we can see that AFCCLs net income growth rate
followed a jig jag trend while CUFL and JFCL followed a downfall trend. We can also see
that in the year 2008-09 all the three units made profit.
AFCCL
Cash Inflow
CUFFL
Cash Inflow
Growth
Cash Inflow
(tk in
(tk in
(tk in million)
million)
million)
Growth
JFCL
Growth
200304
2004-
3618
1356
2009
05
2005-
3139
(13)%
1164
(14)%
3555
77%
06
2006-
3234
3%
1517
30%
3108
(12)%
07
2007-
2691
(16)%
1494
(1)%
2724
(12)%
08
2008-
3041
13%
1565
4%
2821
3%
4663
53%
2898
85%
5947
110%
09
(Source: Cash flow statement of Ashuganj Fertilizer & Chemical Co. Ltd., Chittagong Urea
Fertilizer Factory Ltd., Jamuna Fertilizer Company Ltd.)
Page 13 of 22
Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC
We can see from the chart (Figure 3) AFCCLs cash inflow growth rate decreased and
increased in the last two years. CUFL is also in the same condition. First the growth
rate decreased then increased in the last two years. JFCLs growth rate increased in
the first year but decreased in the following two years and again increased in the last
two years.
3.1.5. Cash Outflow:
Cash outflow indicates the out flow of cash in an organization. The growth rate of Cash
out flow of AFCCL, CUFL and JFCL has been given below:
Table 5: Cash Outflow
Year
AFCCL
Cash
Growth
Cash
CUFFL
Growth
Outflow (tk
Outflow (tk
in million)
in million)
JFCL
Cash Outflow
Growth
(tk in million)
200304
2004-
1404
1191
05
2005-
4576
225%
1269
6%
1790
133%
06
2006-
1372
(70)%
1203
(5)%
1727
(3)%
07
2007-
979
682
(28)%
(30)%
1336
1182
11%
(11)%
1554
1644
(10)%
5%
Page 14 of 22
765
Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC
08
2008-
1737
154%
2208
86%
1241
(24)%
09
(Source: Cash flow statement of Ashuganj Fertilizer & Chemical Co. Ltd., Chittagong Urea
Fertilizer Factory Ltd., Jamuna Fertilizer Company Ltd.)
Ratio Analysis:
2003-
2004-
2005-
2006-
2007-
2008-
04
05
06
07
08
09
Page 15 of 22
Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC
Liquidity
Current Ratio
5.92:1
8.80:1
7.69:1
6.64:1
10.31:1
4.16:1
Ratio:
Acid Test
4.16:1
3.9:1
5.4:1
4.6:1
5.8:1
3.07:1
Working Capital
0.47:1
0.48:1
0.54:1
0.46:1
0.55:1
0.54:1
Inventory
Asset Turnover
23%
25%
22%
21%
28%
34%
Ratio:
Profitabilit
1.14%
4.47%
3.36%
4.81%
0.88%
47.27%
Return on
2.63%
(1.13)
(0.74)
(1.04)
(0.24)
16.32%
y Ratio:
Capital
Leverage
Employed
Return on Equity
0.28%
(1.23)
(0.78)
(1.07)
(0.26)
17.26%
Employed
Debt Equity
0.10:1
%
0.07:1
%
0.56:1
%
0.05:1
%
0.05:1
0.05:1
Ratio:
Ratio
(Source: Balance sheet, cash flow statement and income statement of Ashuganj Fertilizer
& Chemical Co. Ltd.)
From the table we can see that AFCCLs current ratio, acid test ratio and working capital
ratio is high all through 6 years. It means the companys ability to meet short term debt is
high. Inventory ratio, profitability ratio and leverage ratios are not very satisfactory. The
higher the ratio the better is the profitability. Return on capital employed and equity
employed is negative almost all the years.
2003-
2004-
2005-
2006-
2007-
2008-
Liquidity
Current Ratio
04
9.56:1
05
9.47:1
06
7.59:1
07
6.14:1
08
6.41:1
09
4.62:1
Ratio:
Acid Test
6.80:1
6.71:1
5.65:1
4.32:1
4.85:1
3.66:1
Working Capital
0.34:1
0.36:1
0.37:1
0.38:1
0.43:1
0.51:1
Inventory
Asset Turnover
23%
17%
17%
18%
19%
33%
Ratio:
Profitabilit
1.91%
4.84%
10.18
20.12
15.83
33.54%
y Ratio:
Page 16 of 22
Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC
Return on
0.43%
0.86%
1.80%
3.66%
3.13%
11.10%
Employed
Return on Equity
0.71%
1.34%
2.73%
5.53%
4.78%
15.78%
Employed
Debt Equity
0.62:1
0.55:1
0.51:1
0.51:1
0.52:1
0.42:1
Capital
Leverage
Ratio:
Ratio
(Source: Balance sheet,cashflow statement and income statement of Chittagong Urea
Fertilizer Factory Ltd.)
CUFLs ability to meet short term debt is also high as the liquidity ratios are high. Debt
equity ratio is satisfactory. The net profit ratio tells us about how the company's profits
relate to their sales. The higher the ratio the better is the profitability. Here, the ratio is
high in the year 2003-04 and 2008-09.
The return on equity indicates how much profit a company generates with the money
invested by the shareholders. The return on equity ratio is low. The inventory ratio is not
very high. A higher asset turnover ratio symbolizes greater shareholder wealth.
2003-
2004-
2005-06
2006-07
2007-08
2008-
Liquidity
Current Ratio
04
7.75:1
05
7.50:1
6.65:1
6.07:1
6.89:1
09
4.20:1
Ratio:
Acid Test
5.17:1
5.48:1
4.37:1
3.95:1
4.34:1
4.20:1
Working
0.13:1
0.14:1
0.15:1
0.24:1
0.14:1
0.14:1
Capital
Inventory
Asset Turnover
14%
14%
20%
21%
14%
20%
Ratio:
Profitabilit
10%
16%
(29)%
(30)%
(27)%
(24)%
y Ratio:
Page 17 of 22
Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC
Return on
1.59%
2.39%
(3.59)%
(4.07)%
(4.05)%
Capital
Employed
Return on
%
4.3%
6.69%
Equity
Employed
Debt Equity
Leverage
(4.92)
0.27:1
0.27:1
(10.16)
(10.82)
(11.64)
0.28:1
0.26:1
0.181
14.83%
0.20:1
Ratio:
Ratio
(Source: Balance sheet, cash flow statement and income statement of Jamuna Fertilizer
Company Ltd.)
JFCLs liquidity ratio is also high. Debt equity ratio is satisfactory. Profitability ratios are
negative in the last 4 years. Low net profit ratio means the firm shall not be able to
achieve a satisfactory return on its investment. This ratio also indicates the firm's
capacity to face adverse economic conditions such as price competition, low demand,
etc. Here, the low return on capital employed and equity employed indicates the
organization failed to generate enough money from the capital and equity invested by the
shareholders. Financial leverage situation is not very satisfactory.
3.3.
public
companies
have
already
been
privatized.
Government
adopted
comprehensive privatization policy and laid down detailed procedure to facilitate the
process of privatization. (Business info Bangladesh, n.d.) The organization may follow
particular business strategy to achieve better performance.
The financial performance evaluation shows that the three units of BCIC: Ashuganj
Fertilizer & Chemical Co. Ltd. (AFCCL), Chittagong Urea Fertilizer Factory Ltd.(CUFL) and
Jamuna Fertilizer Company Limited(JFCL.) can do much better business as they are doing
now. From the ratio analysis it can be seen that all the companys short term debt
repaying ability is high. But they not doing very well in earning profit from the equity
invested by the shareholders. AFCCL and CUFFL is doing well in earning profit related to
their sales but JFCL is not doing very well in earning profit.
Page 18 of 22
Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC
In this situation, for the three units of BCIC divestiture can be a suitable business strategy
which means to sell of a firm or a major component of the firm. As their profit earning
situation and leverage situation is not very well they can sell the whole firm to any
private organization or sell a part of their firm. It could recover its financial efficiency and
stabilize the situation.
4.0.
Findings:
The trend analysis showed the growth rate of asset, sales, net income, cash in
flows and cash out flows of AFCCL, CUFL and JFCL for 6 years. Asset trend of all the
three units are declining. Sales trend is downward for the first 2-3 years and then
up warding. Net income trend is also the same. Cash inflow trend is up warding
and down warding for the first 3 years and then increased highly in the last 2
years. Cash outflow trend increased and decreased in a very up warding and down
warding way.
Ratio analysis focused the liquidity, inventory, profitability and leverage situation
of AFCCL, CUFL and JFCL. AFCCLs liquidity situation and inventory situation is
satisfactory but profitability situation and leverage situation is not satisfactory. The
Page 19 of 22
Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC
negative return on capital employed and equity employed indicates that the
company failed to generate enough profit by the equity and capital invested by
the shareholders. CUFLs liquidity, inventory, profitability and leverage situation is
normal. JFCLs profitability situation is not satisfactory. Net profit ratio, return on
capital employed and return on equity employed is negative in most of the years.
In this situation of business the units can adopt divestiture strategy to do better
business in future. It may help them to earn more profit and increase their
production.
5.0.
Conclusion:
BCIC is a state owned organization. All the units have to maintain strict rules and
regulations. Decision making process is very lengthy. So, it is not always possible to take
the right decision in the right time. Many units are closed because they lack of proper
production materials and marketing activities. It also has been seen that they have to
import products to meet the local demand because they failed to meet the targeted
production. It these barriers are removed BCIC could do better business than the present
situation .Govt. could take initiative to improve the situation by analyzing the problems
properly. Investment in this sector can be encouraged. New business strategy can be
adopted. Privatization can also help the circumstances to improve.
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Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC
References:
1. Bangladesh Chemical Industries Corporation. (2010).Annual Report of Ashuganj
Fertilizer
&
Chemical
Company
Limited,
Chittagong
Urea
Fertilizer
Assessment of Financial Performance of State Owned Enterprise: A Study on Selected Units of BCIC
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