Aman Cement Mills Limited - Credit Rating Agency of Bangladesh

CRAB Ratings
Corporate
Credit Rating Report
Aman Cement Mills Limited
Rating
Long Term
: A3
Date of Rating : 06 January 2010
Valid Till : 31 December 2010
Analysts:
Nur Elahee Molla
Financial Analyst
nur_elahee@crab.com.bd
Razib Ahmed
Senior Financial Analyst
Razib.ahmed@crab.com.bd
Mavin Ahmed
Financial Analyst
mavin@crab.com.bd
Financial Highlights
BDT in Million
2009 2008
Turnover 1,348.15 1,064.97
Gross profit 274.30 166.77
EBITDA 221.10 167.76
Total assets 932.89 851.70
Current liabilities 357.72 380.07
Long term liabilities 157.21 184.34
Shareholders equity 417.96 287.29
Gross profit margin 20.35% 15.66%
EBITDA to interest 4.54 3.57
Return on asset 14.65% 9.64%
Current ratio (times) 1.64 1.20
Quick ratio (times) 1.03 0.60
Debt ratio 55.20% 66.27%
1500
1000
500
0
2005 2006 2007 2008 2009
Revenue
Gross profit margin
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
RATIONALE
Credit Rating Agency of Bangladesh
Limited (CRAB) has assigned ‘A3’
(Pronounced single A three) rating in the
Long Term to Aman Cement Mills
Limited (hereafter referred to as ACML
or the Company) in view of the
performance of the Company for the
business year 2009 and other relevant
information.
Corporate entities rated ‘A3’ in the long
term belong to ‘strong capacity’ cohort.
Such companies have strong capacity to
meet financial commitments, but are
susceptible to the adverse effects of
changes in circumstances and economic
conditions. These companies are judged
to be of high quality and are subject to
low credit risk.
CRAB has performed the present rating
assignment based on audited financial
statements of June 2009 and other
relevant information. The rating also
takes into account business profile, past
record and trend of operating
performance, balance sheet strength
and loan payment history of the
Company.
Aman Cement Mills Limited was
incorporated as a private limited
company in 1999 with the machineries
imported from China to produce cement
and to sell in all the districts of Northern
part of the country. The factory is
located at Ullapara, Sirajganj on a total
area of 3.86 acre having a capacity of
producing 700 MT cement per day. The
Company produces cement using an
average ratio of Clinker (68%), Gypsum
(5%), Flyash (22%) and Lime stone
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CRAB Ratings
Corporate
(5%) which are ensured by automatic controlling system of raw material mixing in the
Closed Circuit Mill to ensure the quality of cement. Moreover the quality control process
and measures through well equipped laboratory and monitoring system facilitates the
Company to ensure the quality of the products. The rating considers the sponsors’
involvement in a wide range of trading activities and long experience in the concerned
sector while assessing the raw materials procurement efficiency.
The Company sold the cement through dealers in greater Rajshahi dividing into five
zones and through Aman Trading Company Ltd. In the financial year 2009 the Company
sold 1,89,981 MT cement which was 1,57,663 MT in 2008 registering a growth of 20%.
The sales revenue also increased to BDT 1,348.15 million in 2009 from BDT 1,064.97
million in 2008 registering a growth of 26.59%. Regional concentration of sales is
considered while assigning the rating. The cost of goods sold increased to BDT 1,073.86
million by 19.56% which was more than 80% of total sales only in 2008 (84.34%)
registering an average rate of 79.82% over the five-year period ended 2009. The gross
profit of the Company largely increased by BDT 107.53 million (64%) and stood at BDT
274.30 million in 2009. The gross profit margin was more than 20% over the period
under analysis (except 2008). The Company’s return on average assets and equity were
very sound over the year which was 14.65% and 37.06% respectively in 2009.
The current assets of the Company increased by 28% to BDT 585.05 million in 2009
mainly arising from 82% increase in accounts receivable which was BDT 315.87 million
(54% of current assets) in 2009 resulting in 66 days in receivable. The Company’s
current ratio improved to 1.64 times in 2009 compared to its marginal position in the
previous years’ trend. Therefore the Company’s financials are quite susceptible to
receivable collection.
The decreasing trend in the debt ratio over the year along with sound internal capital
generating ability of the Company is considered while assigning the rating. In 2009,
55.20% of the financing came from external sources including all liabilities which was
38.35% considering only long term debt. Total equity of the Company largely increased
to BDT 417.96 million in 2009 from BDT 287.29 million in the form of retained earnings.
The Company maintained EBIT-interest coverage ratio more than 2 times over the last
five years registering an average rate of 3 times. As per information provided by the
Bank it is found that the Company has satisfactory relationships in terms of good track
record of honoring debt obligations, timely payment of principal and interest payment.
The overall profitability position and fund from operation along with declining leveraged
capital structure and financial flexibility will eventually keep the financial risk of the
Company at low in the upcoming year.
The rating also considers the support from the group (Aman Group) regarding financial
issues, strong controlling and monitoring system, management support and
infrastructural facilities. The management of the Company is not likely to pose any
serious threat for ACML as it is an old and established organization. The labor retention
success, China based technology used, regional sales and operations, sound management
information system but weak financial reporting are also considered while assigning the
rating.
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