Qatar National Cement Company - Case Study Example

Abstract

National Cement Company is located in Qatar and is ranked amongst the best companies regarding sales and production. It is a transnational firm that is mainly engaged in the production and marketing of cement. National Cement has its stakes traded on the Qatar Exchange. It is among the leading merchandised companies in the country through Market capitalization. This paper examines various factors regarding the enterprise. Some of the aspects appraised comprise of the business’s background, industry scrutiny of the company, its SWOT analysis. Concerning the SWOT analysis, the Strengths, weaknesses, opportunities and threats of the company are evidently observed. Likewise, the economic ratio analysis which covers the liquidity, profitability, asset and debt management of the studies company, stock estimate, discounted cash flow breakdown, and capital asset pricing model. Lastly, a conclusion is made on all the conversed subjects in the paper.

Background

National Cement Company, a publicly held company, has its share quoted at the Qatar Exchange. Share capital stands at 49.1 million shares 10 each fully paid of Qatari. Market rate of these shares is tracked on Qatar official stock exchange. For more than twenty six years, the Company has an outstanding dividend payout record. The company was first developed according to the Emiri Decree No.07 in the year 1965 to manufacture regular Portland cement products that is enough to carter for the needs of the nation of Qatar (Gulfbase, 2016).

Qatar National Cement Company Subsidiaries and ownership

Qatar National Cement Company is an enormous company and thus has many subsidiaries and associates in various firms and countries. The table provides the company’s subsidiaries and ownership in terms of percentage.

Company

Principal Activity

Nation

Equity

Qatari Saudi Gypsum Industry 

Cement

Qatar

100%

National Leasing Holding Co QSC (2.67%)

Real Estate

Qatar

100%

Qatar Quarries and Building Materials (20.00%)

Construction materials

Qatar

100%

(Gulf Base, 2016)

Members

Board of Directors

Salem Butti Al-Naimi

Chairman and Managing Director, Representative of Qatar Government

Sulaiman Khalid Al Mana

Deputy Chairman and Director, Representative of Private Sector

Bader Ahmed Al Qayed

Member, Representative of Qatar Government

Abdul Latif I. Al-Mohanadi

Member, Representative of Qatar Government

Sh. Abdulaziz Bin Jassim Al-Thani

Member, Representative of Qatar Government

A.Aziz Ibrahim Radwani

Member, Representative of Private Sector

Saad Mohd. S.J.Al-Romihi

Member, Representative of Private Sector

Mohd. A. Alattif A. Al-Mana

Member, Representative of Private Sector

(Gulf Base, 2016)

Stock Market

Qatar Exchange

Official Sector:

Industrial

Market Cap Size:

Micro Cap

Paid up Capital

QAR 564, 234,000

Par value per share

QAR 12.00

Outstanding shares (000)

57,192

(Gulf Base, 2016)

Industry analysis

National Cement Company is the main producer of the hydrated lime, Ordinary Portland Cement, washed sand, Sulphate Resistant Cement and Calcined lime in the State of Qatar. Manufacturing units of the company are located at Umm Bab, near the rich raw material deposits which is 82 kilometers away from Doha, western coast of Qatar and for the washed sand Al-Boaadiat (“Qatar National Cement Co. - QNCD | Financial Highlights,” n.d.). The Company had been established in accordance with the Emiri Decree Number seven in the year 1965 for the production Ordinary Portland Cement in enough quantity to deal with the cement demand in the State of Qatar.

SWOT analysis

The SWOT Analysis is the structured method for planning and evaluates the four elements of business venture. It involves making the specification for the business goals and identifies external and internal factors that favor or do not supports achieving the business objectives.

SWOTs identifications are vital since they provide the information that will help in making unusual planning steps to achieve goals. The decision makers should be in a position to know if the goals are attainable or not. If they are not, they should choose different purposes and repeat the process. The users of SWOT analysis ought to ask and answer the questions generating useful information to make analysis meaningful and get the competitive advantage.

The Qatar National Cement company was established in the year 1965 and adopted its modern name. This company has approximately 46,000 workers as at December 2014, each day operating more than 3,800 productions (“Qatar National Cement Company,” n.d.). Qatar National Cement Company is different from other cement industries because it offers its customers value for their money through excellent customer service, timely delivery, and loyalty schemes.

Strengths

• National Cement Company has a high employee-oriented culture and a mission statement that focuses on every aspect of the business to ensure both employee and customers are contented.
• Hardships that the company faced during the early years enabled it to adopt a cost leadership strategy that provides an operating cost for the company is 15-20% below industry averages (“Qatar National Cement Company,” n.d.).
• The company has embraced computer technology that allows quick communication with the customers.
• National Cement Company has a reputation for offering quality services to its customers. The company has developed a delivery system that ensures reliability.
• The company operates in line of 100,000 tpa capacity across the country and services more than 50 million customers every year. National Cement Company records fifth consecutive profits as per 2014. This persistence profitability and the balance sheet strength had made the airline hold the position of being the only Qatar cement company to achieve the investment grade status. This performance clearly gives credit to the company’s goodwill.
• The Company maintains profitable during financial downturn in 2014 and 2015 and surplus of US $754 million being the highest recorded by all cement companies since 2008 (“Qatar National Cement Co. - QNCD | Financial Highlights,” n.d.).
• Besides, the Southwest has also sustained measurable firm balance sheet. At the end of 2014, it had a leverage of 37%, cash in hand amounting to US$ 4 billion. However, during 2015, it raised US$ 1.6 billion of cash flow, and by 30-Jun-2014, it had reduced capital lease and the debt obligations by US$ 1.5 billion (“Qatar National Cement Co. - QNCD | Financial Highlights,” n.d.).
• The Company is among the most known brands in Qatar, and it persistently works towards the exploitation of its heritage through the advertisement in social media and during profile sporting events. This gives significant differentiation in the commoditized industry. Currently, National Cement Company is gaining benefits from the high demand for the cement.

Weaknesses

• The company has a remarkable model, which is the reason for its success; however, other companies are emulating its model, enabling them to be as competitive as National Cement Company.
• The company’s competitors are also offering cheaper services and forming alliances with regional carriers to increase their competitiveness (“Qatar National Cement Company,” n.d.).
• Qatar National Cement Company employs a steady growth plan that ensures the company enters a market only if it can maintain regular flights to a destination. The strategy results in numerous untapped domestic markets.
• The rising operational cost is making it hard for the company to maintain low cost per order, which is the company’s total mark as a low cement delivery.
• National Cement Company has denied product unbundling which nearly all the other counterparts have embraced the cement industry. Cement factory is in the design that allows the clients tailor their experience (“Qatar National Cement Company,” n.d.). The reality is for major airlines ultra-low cost, hybrid and full-service presents largest opportunities to improve the revenue over the long and medium term. Cement top line surplus increased just by 3.6%, during the 2013 year on year after peaking at twenty-nine percent growth in 2011.
• National Cement Company has tried to pull ancillary levels usually better way selling boarding at the gate positions, tightening flexibility around the prohibitive delivery costs and improving other fee revenue. In the year, 2013 Qatar approximated that changes would lead to roughly US$ 175 incremental revenue on a yearly basis.
• National Cement Company about 133 million people in 2013. Its revenues outside cement customers fell 2.5% to the US $ 815 million (“Qatar National Cement Co. - QNCD | Financial Highlights,” n.d.). Moreover, the ideal customer has successfully grown ancillary income through coming up with the products that customer’s value instead of making them feel dime and nickel. Also, it is not stretch to conclude National Cement Company could create some added value for legions of fans.

Opportunities

• National Cement Company has many possibilities for expansion into new markets. It focuses on low prices and reliability, which is a trend that most of the population favor because the consumers seek convenience.
• The company has an opportunity for increasing domestic market share because its competitions are looking to exploit international markets. The company can improve its computer technology to facilitate cement order using mobile applications and personal computers.
• National Cement Company can also consider skilled applicants even if they lack the level of enthusiasm the company desires in its employees.
• The company is in a position of offering the direct cement to its firm markets without necessarily connecting services. Opportunity also emerges on the Company’s introduction of its brand, international service after several years planning the expansion to adjacent global markets. The new system has played a significant role in accelerating this process, and currently, the Qatar National Cement Company offers service conveniently (“Qatar National Cement Company,” n.d.).
• This additional service is an excellent network diversification for the National Cement Company as has arguably penetrated major domestic Qatar. This includes the 85 domestic destinations by 21st September 2014, the ability to provide its large customer base and access to the natural development. It has facilitated the cement industry to create revenue upside.
• Recently, the study demonstrated several cement industries that are currently underserved by the foreign distributors. The Company frequently is the dominant cement company operating domestic services. For various reasons like the opposition from employees’ team group, the Company has not allowed such possibilities. Substantial opportunity is there for the enhanced traffic flows within relationships.

Threats

• National Cement Company cost leadership position is threatened from many different angles. Labor is the largest cost component, which could influence the cost upwards because of union actions. More than 85% of Qatar employees belong work unions (“Qatar National Cement Co. - QNCD | Financial Highlights,” n.d.).
• Fuel is the second largest cost component, which could influence the company’s position negatively because of the rising fuel cost. New government regulations focusing on safety could increase operational cost because of the expensive retrofits required. The government is also raising tax rates, which will result in higher costs. Proposed regulations, if passed, will limit the company’s ability to respond to underpricing by new entries.
• Improved telecommunication is reducing the demand for air travel because business meetings can be done through email and teleconferencing. The development of alternative means of transport that offer similar advantages, such as high-speed rail, could weaken demand for Southwest services.

Historical performance

Revenues

An analysis of National Cement Company’s financial statements for the periods covering 2012-2016 shows a downward tendency in its revenues. The development of income as at 31st December 2013 was at 12% which is the uppermost growth achieved as likened to similar companies (“Qatar National Cement Co. - QNCD | Financial Highlights,” n.d.).

Net profit

A breakdown of National Cement Company’s financial statements in the periods covering 2012-2016 also displays a reduction in the business’s earnings, with 2016 showing the lowest level of net profit made. There is, however, a notable increase in 2014 at an amount of 9,361,193,000, a 26% increase from the previous year (“Qatar National Cement Co. - QNCD | Financial Highlights,” n.d.).

Debt

Further analysis of the company’s equity shows that both the long term and short term debts are increasing, leading to concern about the business’s level of risk (“Qatar National Cement Company,” n.d.).

Income statement analyses

The evaluation of the income statement is concerned about how the company has received returns throughout their history. The major focus is on the periods which the company received fewer profits and the reasons behind the drop in sales. This paper concentrates on the recent years of the enterprise working (Gulfbase, 2016). A breakdown of National Cement Company’s financial statements between the periods spanning 2010-2014 shows that year upon year, National Cement Company’s revenues fell 14.44%from 7.86bn to 7.12bn along with an upsurge in the cost of goods sold subsidizing to a reduction in net income from 8.23bn to 6.33bn, a 27.82% reduction. The analysis shows its gross margin at 23.75%, net profit margin at 79.97% and its operating margin at 21.09% (“Qatar National Cement Co. - QNCD | Financial Highlights,” n.d.)

Price performance

An evaluation of the price performance of the company shows significant fluctuations within the year 2015 and 2016, with a downward trend evidently in play. The highest price being 151.79 and the lowest price being 88.6 and average price 99.90 (“Qatar National Cement Co. - QNCD | Financial Highlights,” n.d.). The observed decline in the market price of the company’s stock can be attributed to various factors such as, Brent oil prices which might be considered as a critical factor since Qatar is an oil-dependent country. However, it should be found that oil prices will impact the macroeconomic variables and thus will have an indirect impact on stock prices which are listed in Qatar Exchange (“Qatar National Cement Company,” n.d.)

Growth rates analyses

The evaluation of growth rate tries to look at how the company has been fairing on regarding growth and development. It examines the years at which the company performed well in the market and the years at which the company performed off-color in the market (Gulfbase, 2016). In the period of the years between 2010 and 2014, both earnings per share and dividends per share growth dropped 29.91% and 28.57% respectively (“Qatar National Cement Co. - QNCD | Financial Highlights,” n.d.). This particular analysis excludes the unexpected items that were transacted by the company. However, they both ranked superior to all its industry aristocrats despite the drop that had been experienced. The study shows its dividends income (5 years average) at 5.21%, dividend growth rate in 5 years average at 0.01%, payout ratio at 0.00%, EPS growth at ( 5yr Avg) -3.1931 and EPS (TTM) VS TTM 1 year ago -25.6533 (“Qatar National Cement Co. - QNCD | Financial Highlights,” n.d.).

Cash flow analyses

Cash flow analysis is all about examining the rates of sales that the company made in the particular period within and defined timeframe. The cash reserves in National Cement Company fell by 389.20m in 2015 (Gulfbase, 2016). However, its total cash flow from investments were 2.92bn, indicating that the company earned more from the sale of existing assets than had been spent in the purchase of new assets. Also, the company generated1.52bn in cash from various operations while cash used for financing it totaled 5.73bn. The analysis shows its cash flow per share at 8.12, price/cash flow per share at 14.07, book value per share at 51.68 and tangible book value per share at 51.68 (“Qatar National Cement Co. - QNCD | Financial Highlights,” n.d.)

Balance sheet analyses

National Cement Company practices little debt in its capital structure as apparent from its debt to capital ratio of 5.21%.The study shows its current ratio at 8.04, quick ratio at 6.28, total debt/total equity at 0.0412 and total debt/total capital at 0.0308 (“Qatar National Cement Co. - QNCD | Financial Highlights,” n.d.). From the balance sheet breakdown, it is vividly brought out that the company has good records assessed from the balance sheets.

Stock valuation

Stock assessment is a factor in the financial markets. The word refers to the technique used in calculating the theoretical values of a particular company firm and their assets (Gulfbase, 2016). As of April 15, 2016, the harmonious forecast amongst analysts covering National Cement Company advise investors to hold their position in the company as the sentiments on the company’s expectations to outperform the market deteriorated on January 3, 2016. As of March 4, 2016, National Cement Company has a stock volume of 89000, with each stock selling at a 103.70-open price, 103.70-high price and 101.20-close price (“Qatar National Cement Co. - QNCD | Financial Highlights,” n.d.).

Industry analysis

An investigation of the domestic industry shows that Qatar is one of the most commercially valuable companies concerning securing the financial state of the Middle East. Additional analysis on the company designates that National Cement Company is an attractive place to investors for its growing economy and well-developed infrastructure, all-encompassing macroeconomic environment, high labor output and a simple tax system that offers low tax rates (“Qatar National Cement Company,” n.d.)

As stated earlier, Industries Qatar as a major headquarter has various branches within the country. Moreover, the companies under Industries Qatar deal in different products such as petroleum, steel, and fertilizer. This paper briefly looks at this company working under the major Industries Qatar (Gulfbase, 2016).

Conclusion

The paper has evidently penetratingly analyzed several factors surrounding National Cement Company. Some of the influences plainly offered comprise of the background of the firm, its strengths in the market, weakness, opportunities and threats among many other things such as the cash flow and balance sheet analysis. From the analysis, it can be concluded that National Cement Company is a profitable company and is expected to continue doing well in the industry if everything will be kept constant or even improved. The firm has remained and will continue being among the leading companies in the petrochemical industry.