Capital Structure Analysis of Bangladesh Cement Industry

“Capital Structure of
Bangladesh Cement Industry”
Independent University, Bangladesh
Submitted to
Dr. Samiul Parvez Ahmed
Faculty of Corporate Finance (MBA 541)
School of Business
Independent University, Bangladesh
Submitted by
Name ID
1. Farabi Ahmed 121-121-8
2. Kazi Adnan Hossain 141-068-0
3. Md. Arifur Rahman 072-041-1
4. Younus Ahamed 143-100-7
Date of Submission: 5th August, 2015

Letter of Transmittal
5th
August, 2015.
Dr. Samiul Parvez Ahmed
Corporate Finance (MBA 541)
Faculty Member of School of Business,
Independent University Bangladesh.
Subject: A report on “Capital Structure of Cement Industry in Bangladesh”.
Dear Sir,
With due respect, we would like to inform you that we have completed report on “Capital
Structure of Cement Industry in Bangladesh”. It is immense pleasure for us because we have
successfully completed this report by receiving your continues guideline as a supervisor.
We have endeavored to prepare this report from my level of best to accumulate relevant &
insightful information. If we have included any wrong information in unconsciously so please
forgive us as your students. It is a great experience for us to make this report. We have tried to
make the report comprehensively within the schedule time & limited recourse.
You’re sincerely,
.......................................
Farabi Ahmed
(On behalf of the group)

Capital Structure of Cement Industry
In Bangladesh
“Confidence Cement Ltd.”
“Heidelberg Cement Bd. Ltd.”
“Lafarge Surma Cement Ltd.”
“M.I. Cement Factory Limited”
“Premier Cement Mills Limited”

Executive Summary
Capital structure, the mixture of a firm's debt and equity, is important because it costs company
money to borrow. Capital structure also matters because of the different tax implications of debt
vs. equity and the impact of corporate taxes on a firm's profitability. Firms must be prudent in
their borrowing activities to avoid excessive risk and the possibility of financial distress or even
bankruptcy. A firm's debt-to-equity ratio also impacts the firm's borrowing costs and its value to
shareholders. The debt-to-equity ratio is a measure of a company's financial leverage calculated
by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and
debt the company is using to finance its assets. A high debt/equity ratio generally means that
a company has been aggressive in financing its growth with debt. This can result in volatile
earnings as a result of the additional interest expense. The target (optimal) capital structure is
simply defined as the mix of debt, preferred stock and common equity that will optimize the
company's stock price. As a company raises new capital it will focus on maintaining this target
(optimal) capital structure.

Acknowledgement
All the praise and admiration for Almighty ALLAH the most gracious, most merciful that has
enabled us for successful completion and submission of this report timely. It is indeed a great
pleasure and honor on our part to have the opportunity to submit this report.
We would like to express profound gratitude and indebtedness to our honorable supervisor “Dr.
Samiul Parvez Ahmed” Associate Professor, Faculty of Business Administration, Independent
University, Bangladesh, for his direct concern, professional guidance, encouragement during our
analytical work and for his critical suggestions and corrections of the manuscript in the
preparation of this report.
Finally, we would like to thank our group members for their unconditional support, without them
we would not have been able to make it this far.

Table of Contents
No Subject Page No
1 Abstract 1
2 Introduction 1-2
3 Capital Structure 2
4 Literature Review 3-6
5 Capital Structure in Bangladesh Perspective 6
6 Cement Industry in Bangladesh 6-8
7 Objectives & Methodology 9
8 Variables & Hypotheses 10
9 Data Analysis (from Annual Report) 11-14
10 Result from E-Views & Interpretations 15-16
11 Conclusion & Recommendation 17
12 References 18

Capital Structure of Cement Industry in Bangladesh 1 | P a g e
1. Abstract
The purpose of this paper is to examine the relationship between capital structure and debt
lifetime among listed cement companies in “Dhaka Stock Exchanges”.
The study investigate firms that have been listed on the “Dhaka Stock Exchanges” named
Confidence Cement, MI Cement, Lafarge Surma Cement Ltd, Premier Cement & Heidelberg
Cement, in total 5 companies over a 6 years period (2009-20014). Variables used for the
analysis include profitability, leverage ratios, TD (total debt), STD (short-term debt) and
LTD (long-term debt), LQ (liquidity), age, asset structure and firm size and sales growth are
also included as control variables. The panel character of the data allows for the use of panel
data methodology. Panel data involves the pooling of observations on a cross section of units
over several times.
2. Introduction
Capital structure, the mixture of a firm's debt and equity, is important because it costs
company money to borrow. Capital structure also matters because of the different tax
implications of debt vs. equity and the impact of corporate taxes on a firm's profitability.
Firms must be prudent in their borrowing activities to avoid excessive risk and the possibility
of financial distress or even bankruptcy.
A firm's debt-to-equity ratio also impacts the firm's borrowing costs and its value to
shareholders. The debt-to-equity ratio is a measure of a company's financial leverage
calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion
of equity and debt the company is using to finance its assets.
A high debt/equity ratio generally means that a company has been aggressive in financing its
growth with debt. This can result in volatile earnings as a result of the additional interest
expense.

If a lot of debt is used to finance increased operations (high debt to equity), the company
could potentially generate more earnings than it would have without this outside financing. If
this financing increases earnings by a greater amount than the debt cost (interest), then the
shareholders benefit as more earnings are being spread among the same amount
of shareholders. However, the cost of this debt financing may outweigh the return that the
company generates on the debt through investment and business activities and become too
much for the company to handle. Insufficient returns can lead to bankruptcy and leave
shareholders with nothing.
The debt/equity ratio also depends on the industry in which the company operates. For
example, capital-intensive industries such as auto manufacturing tend to have a debt/equity
ratio above 2, while personal computer companies tend to have a debt/equity ratio of under
0.5. (Read more in Spotting Companies In Financial Distress and Debt
Ratios: Introduction.) A company can change its capital structure by issuing debt to buy back
outstanding equities or by issuing new stock and using the proceeds to repay debt. Issuing
new debt increases the debt-to-equity ratio; issuing new equity lowers the debt-to-equity
ratio.
3. Capital Structure
For stock investors that favor companies with good fundamentals, a strong balance sheet is an
important consideration for investing in a company's stock. The strength of a company's
balance sheet can be evaluated by three broad categories of investment-quality
measurements: working capital adequacy, asset performance and capital structure. In this
section, we'll consider the importance of capital structure. A company's capitalization (not to
be confused with market capitalization) describes its composition of permanent or long-term
capital, which consists of a combination of debt and equity. A company's reasonable,
proportional use of debt and equity to support its assets is a key indicator of balance sheet
strength. A healthy capital structure that reflects a low level of debt and a corresponding high
level of equity is a very positive sign of financial fitness.(Learn about market capitalization
in Market Capitalization Defined ).

4. Literature Reviews
Modigliani and Miller (M & M) (1958) wrote a paper on the irrelevance of capital
structure that inspired researchers to debate on this subject. This debate is still continuing.
However, with the passage of time, new dimensions have been added to the question of
relevance or irrelevance of capital structure. M&M declared that in a world of frictionless
capital markets, there would be no optimal financial structure (Schwartz & Aronson, 1979).
This theory later became known as the "Theory of Irrelevance'. In M & M's over-simplified
world, no capital structure mix is better than another. M & M's Proposition-II attempted to
answer the question of why there was an increased rate of return when the debt ratio was
increased. It stated that the increased expected rate of return generated by debt financing is
exactly offset by the risk incurred, regardless of the financing mix chosen. Jensen and
Meckling (1976) argue that the shareholders-lenders conflict has the effect of shifting risk
from shareholders and of appropriating wealth in their favor as they take on risky investment
projects (asset substitution). Hence, shareholders, and managers as their agents, are prompted
to take on more borrowing to finance risky projects. Lenders receive interest and principal if
projects succeed, and shareholders appropriate the residual income; however, it is the lender
who incurs the loss if the project fails. It is difficult and costly for debt holders to be able to
assess and monitor Firms in an oligopolistic market will follow the strategy of maximizing
their output in favorable economic conditions to optimize profitability (Brander & Lewis
1986). The theory also holds in unfavorable economic conditions; firms would take a cut in
production and reduce their profitability. Shareholders, though, while enjoying increased
wealth in good periods, tend to ignore a decline in profitability in bad times. This is due to the
fact that unfavorable consequences are passed onto lenders because of shareholders' limited
liability status. Therefore, the oligopolistic firms, in contrast to firms in competitive markets,
would employ higher levels of debt to produce more when opportunities to earn higher profits
arise. The implied prediction of the output maximization hypothesis is that capital structure
and market structure have a positive relationship. In corporate finance, the agency costs
theory supports the use of high debt, and it is consistent with the prediction of the output
maximization hypothesis. Brander and Lewis (1986) and Maksimovic (1988) provide the
theoretical framework that links capital structure and market structure. Contrary to the profit
maximization objective postulated in industrial organization literature, these theories are

similar to the corporate finance theory in that they assume that the firm's objective is to
maximize the wealth of shareholders. Furthermore, market structure is shown to affect capital
structure by influencing the competitive behavior and strategies of firms. Mohammed Omran
(2001) evaluates the financial and operating performance of newly privatized Egyptian state-
owned enterprises and determines whether such performance differs across firms according
to their new ownership structure. The Egyptian privatization program provides unique post-
privatization data on different ownership structures. Since most studies do not distinguish
between the types of ownership, this paper provides new insight into the impact that post
privatization ownership structure has on firm performance. The study covers 69 firms, which
were privatized between 1994 and 1998. For these newly privatized firms, these study
documents significant increases in profitability, operating efficiency, capital expenditures,
and dividends. Conversely, significant decreases in employment, leverage, and risk are found,
although output shows an insignificant decrease following privatization. The empirical results
also show that Egyptian state owned enterprises, which were sold to anchor-investors and
employee shareholder associations, seem to outperform other types of privatization, such as
minority and majority initial public offerings.. Huson Joher Aliahmed and Nazrul Hisyam Ab
Razak Sr. (2008) examines the relationship between ownership structure and company
performance has been issue of interest among academics, investors and policy makers
because of key issue in understanding the effectiveness of alternative governance system in
which government ownership serve as a control mechanism. Therefore, this paper examines
the impact of an alternative ownership/control structure of corporate governance on firm
performance among government linked companied (GLCs) and Non-GLC in Malaysia. It is
believed that government ownership serve as a monitoring device that lead to better company
performance after controlling company specific characteristics. We used Tobin's Q as market
performance measure while ROA is to determine accounting performance measure. This
study is based on a sample of 210 firms over a period from 1995 to 2005 Panel Based
regression approach was used to determine the impact of ownership mechanism on firm's
performance. Findings appear to suggest that there is a significant impact of government
ownership on company performance after controlling for company specific characteristics
such as company size, non-duality, leverage and growth. The finding is off significant for
investors and policy marker which will serve as a guiding for better investment decision. B.
Nimalathasan & Valeriu Brabete (2010) pointed out capital structure and its impact on
profitability: a study of listed manufacturing companies in Sri Lanka. The analysis of listed

manufacturing companies shows that Debt equity ratio is positively and strongly associated to
all profitability ratios (Gross Profit, Operating Profit & Net Profit Ratios). An alternative to
trade-off theory is the pecking order theory of Myers and Majluf (1984) and Myers (1984).
The pecking order theory is based on two prominent assumptions. First, the managers are
better informed about their own firm’s prospects than are outside investors. Second,
managers act in the best interests of existing shareholders. Under these conditions, a firm will
sometimes forgo positive net present value projects if accepting them forces the firm to issue
undervalued equity to new investors. This in turn provides a rationale for firms to value
financial slack, such as large cash and unused debt capacity. Financial slack permits the firms
to undertake projects that might be declined if they had to issue new equity to investors. The
pecking order theory predicts that firms prefer to use internal financing when available and
choose debt over equity when external financing is required. However, the Signaling Theory
states that, firm with the expectation of higher profit will expect to take more debt. So, the
news of taking more debt will signal the investors that the firm’s value is higher regardless of
the intention of firm to take debt where cost of debt will be determined by market
competition. According to Modigliani and Miller, in a perfect market and no taxes situation,
company’s capital structure does not influence the cost of capital and there is no optimal
capital structure in such a condition. However, with the recognition of corporate tax, the
value of a firm increases with the amount of debt under conditions of certainty and perfect
market because of the tax shield afforded by debt financing. It has been shown that the
optimal capital structure for a value maximizing firm is attained at less than a 100 percent
debt level, when certainty, market imperfection and personal taxes are also taking account.
Moreover, capital structure is influenced by the expected cost of financial distress according
to Bradly, Jarrel and Kim (1984) and Haugen and Senbet (1988) argued that indirect costs of
financial distress (extraordinary administrative costs, possible loss of key managers and
employees, loss sales, loss of total credit and reduced liquidly of the security) has a large
impact on the value of a firm which rises exponentially accelerating the process of
bankruptcy. Market imperfection is costly as there are various agency costs, variations in
personal and corporate tax rates and differences in utility curves. As a result, firm may
achieve the optimal financial structures at varying proportions of debt (Fischer et al., 1989
and Stiglitz, 1988). Firm’s size, industry and country have impact on the market imperfection
and taxes which has also impact on capital structure decision making. The notion of financial
leverage can be defined as the alternation in shareholder’s return which is caused by change

in profits. Therefore a proper balance is required among the return and risk. Capital structure
for every company is comprises with the portion that is contributed by shareholders funds
(i.e. equity) and creditor’s funds (I.e. debt), (Akhtar & Oliver, 2009). Besides, financing
decision for a company provides an insight to determining optimal capital mix of various
sources of funds required for financing the assets purchased, (Fernando, Rajini & Reha,
2011). Doukas and Pantzalis, (2003) and Mittoo and Zhang (2005), cited in Akhtar and
Oliver, (2009) suggest that the leverage as long term debt scaled by total debt plus market
value of equity. In fact, there are number of studies have been conducted to assert the
significant determinants of capital structure of a company. Further, (Ngyen and
Ramachandran, 2006), (Teker, Tasseven and Tukel, 2009), (Huang and Song, 2005), (Gaud,
Jani, Hoesli and Bender, 2003) in their studies postulated that, tangibility, non-debt tax
shields, growth opportunities, size of the company and profitability are some of significant
determinants of an optimal capital structure.
5. Capital Structure in Bangladesh Perspective
According to Chowdhury Anup and Chowdhury Paul (2010), maximizing the wealth of
shareholders requires a perfect combination of debt and equity, whereas cost of capital has a
negative correlation in this decision and it has to be minimized. This is also seen that by
changing the capital structure composition a firm can increase its value in the market.
6. Cement Industry of Bangladesh
6.1 Industry Overview
The development of cement industry in Bangladesh dates back to the early-fifties but its
growth in real sense started only about decade or so. Bangladesh has been experiencing an
upsurge in the use of cement in recent years. Increase in demand for cement has soared
mainly due to the property sector boom and infrastructure development concentrated in the
Dhaka Metropolitan area and other major urban areas of the country. The infrastructural

development at grass root level has led to an increased demand for cement at an average rate
of 8% per annum during the past decade.
6.2 Existing Industry Structure
In terms of cement production, Bangladesh ranks about 40th in the world. Cement
manufacturing is a highly fragmented business in Bangladesh. During the 1990s, many small
cement companies entered the market as soon as the government started encouraging local
production with favorable tariff differential. Currently 123 companies are listed as cement
manufacturers in the country. Of them 63 have actual production capacity while about 30 do
not have any production at all. The current installed capacity is 22.0 MMT. However,
because of supply constraints for power and clinkers, the actual capacity is about 17.0 MMT.
Bangladesh is one of the few sizable producers of cement that does not have its own supply
of limestone and cannot produce clinkers domestically. There is a strong tax-support for local
cement manufacturers in Bangladesh. They receive a significant import tax advantage over
finished cement (about 15% for raw-materials versus 100% for finished cement). This tariff
differential helps most to operate profitably. A change in the tariff structure is not anticipated
in the near future.
6.3 Market for Cement Industry
Construction takes up an important role in the economy (about 10% of the GDP). Annual
demand for cement in the country is about 10.0 MMT. Understandably the market has a
capacity overhang. There is a small market for export of cement, mainly to the small
northeastern states of India. However, the size of the export is quite small (about 200 KMT a
year). There are four categories of cement consumers in the country. The largest with
about60% of the consumption are the individual homebuilders. This is also the most price
sensitive segment. Real estate developers, especially in the country’s urban area constitute
about 8% of the market. Construction contractors constitute another 3% of the market. Lastly,
various government projects take up about 30% of the total cement construction.

6.4 Future Prospect
The industry realized about 20% sales growth in 2009, mostly because of the latent demand
from last years. On a secular basis, ongoing demand growth is expected to be about 8%, the
outlook for the cement industry seems positive for a number of reasons. First, the government
seems to be on a war footing to increase both the amount and the efficiency of spending in
social and physical infrastructure under the Annual Development Programs (ADP). Second,
the private sector is also energized because of certain tax advantages for undeclared funds if
they are invested in real estate. Third, a number of large infrastructure construction projects
(such as the Padma Bridge) are on the horizon. Both the government and the private sector
are soliciting funds for such projects. If implemented, these projects would significantly
improve demand for construction materials.
6.5 Market Share
The largest 10 cement manufacturers hold about 70% of the market share. While Heidelberg,
Holcim and Lafarge are the leaders among multinational cement manufacturers; Shah, Akij
and MI are the leading domestic manufacturers. Shah cement is the market leader with close
to 12% of the market share, closely followed by Heidelberg with about 10% of the market
share.

7. Objectives & Methodology
In this study, secondary data has been used which are the annual reports of the different
industry in Bangladesh. Each industry has been represented with some of the business firm
where the sample size is five which are randomly chosen. Moreover, the Microsoft Excel has
been used to analyze the secondary data.
7.1 Objectives
The study aimed at the following objectives which were the questions whose answers we
were investigating throughout the paper:
 To identify the capital structure of Bangladesh Cement Industry (6 cements
companies).
 To examine the factors influencing RTD, ROA, G, Age, Size, TAN, LQ etc.
 To analyze the actual positions of the working capital in the sample firms during
the study period 2009 to 2014.
7.2 Methodology
7.2.1 Target Population
The target population for fulfilling the objectives was the five leading Cement Companies
operating in Bangladesh which are enlisted in Dhaka Stock Exchange.
7.2.2 Sample Size
The present study has covered five cements companies. The Financial Statements of these
five cement companies in between the years 2009 and 2014 were analyzed.
7.2.3 Collection of Data
Mainly secondary data were used in this study which was collected from the Financial
Statements (Annual Report) of the selected cement firms. For literature review and other
purposes, different books, articles, manuals, World Wide Web and other secondary data
were used.

8. Variables & Hypotheses
8.1 Variables
 RTD is the ratio of TD to TA; TD is both LTD and STD.
 RSD is the ratio of STD to TD; STD includes all types of debt that mature in less than
one year.
 ROA is the return on TA as measured of profitability and defined as the ratio of
operating profit (EBIT) to TA.
 G stands for the growth opportunities facing a firm and they are measured by the
percentage change the TA over the last one years.
 Size refers to the size of the firm and is measured by the natural logarithm of assets,
i.e. size Ln. TA.
 Age refers to the age of the firm and is expressed in the number of years and is
calculated from (2014) minus the year of listing in stock market.
 TAN refers to the assets structure or asset TAN and is expressed as a ratio of fixed
assets to TA and severs as collateral. The TAN of assets is measured by percentage of
TA that is fixed.
 LQ refers to liquidity of the firm and is defined as a ratio of current assets to current
liability.
8.2 Hypotheses
 There is a positive relationship between RTD and ROA, G, Size, Age, Tan, LQ.
 There is a negative relationship between RTD and ROA, G, Size, Age, Tan, LQ.
 There is a Positive relationship between RSD and ROA, G, Size, Age, Tan, LQ.
 There is a negative relationship between RSD and ROA, G, Size, Age, Tan, LQ.
We will be testing one model to prove the hypotheses
RTD = a + B1ROA + B2G + B3Size + B4Age + B5TAN + B6LQ

9. Data Analysis (from Annual Report)
9.1 CONFIDENCE Cement - Report Analysis from 2009-2014 (6 years)
* All the data calculations & graphs have been done by Microsoft Excel.
Confidence Cement Listing year : 1995
Year EBIT Fix Asset Cur. Asset Total Asset Cur. Debt Total debt
2014
443,602,779 2,618,018,666 2,443,434,324 5,061,452,990 1,758,186,496 2,163,207,944
2013
606,983,653 2,556,245,153 1,954,064,295 4,510,309,448 1,282,123,029 1,692,127,494
2012
383,835,000 2,539,132,936 1,544,843,374 4,083,976,310 1,191,946,366 1,530,829,369
2011
220,181,000 2,603,174,639 1,131,359,647 3,734,534,286 915,339,475 1,219,591,619
2010
163,630,000 2,388,406,087 844,932,866 3,233,338,953 621,256,569 630,013,742
2009
175,905,000 1,678,957,451 646,508,246 2,325,465,697 455,366,237 455,366,237
Year RTD ROA G Size Age TAN LQ RSD
2014 0.43 0.09 0.12 22.34 19.00 0.52 1.39 0.81
2013 0.38 0.13 0.10 22.23 18.00 0.57 1.52 0.76
2012 0.37 0.09 0.09 22.13 17.00 0.62 1.30 0.78
2011 0.33 0.06 0.16 22.04 16.00 0.70 1.24 0.75
2010 0.19 0.05 0.39 21.90 15.00 0.74 1.36 0.99
2009 0.20 0.08 21.57 14.00 0.72 1.42 1.00

9.2 MI Cement - Report Analysis from 2009-2014 (6 years)
MI Cement Listing year : 2007
2014
937,105,000 4,018,305,000 7,328,701,000 11,347,005,000 4,393,286,000 5,671,594,000
2013
822,467,000 4,175,045,000 5,608,352,000 9,783,396,000 2,495,306,000 4,188,996,000
2012
574,892,000 4,135,528,000 5,785,951,000 9,921,479,000 2,551,430,000 4,520,602,000
2011
606,014,000 2,232,035,000 4,772,424,000 7,004,459,000 1,369,177,000 1,975,965,000
2010
570,930,000 1,147,167,000 1,135,269,000 2,282,436,000 881,779,000 946,438,000
2009
400,845,000 814,870,000 706,489,000 1,521,359,000 677,294,000 781,040,000
2014 0.50 0.08 0.16 23.15 7.00 0.35 1.67 0.77
2013 0.43 0.08
-
0.01
23.00 6.00 0.43 2.25 0.60
2012 0.46 0.06 0.42 23.02 5.00 0.42 2.27 0.56
2011 0.28 0.09 2.07 22.67 4.00 0.32 3.49 0.69
2010 0.41 0.25 0.50 21.55 3.00 0.50 1.29 0.93
2009 0.51 0.26 21.14 2.00 0.54 1.04 0.87
9.3 Heidelberg Cement - Report Analysis from 2009-2014 (6 years)
Heidelberg Cement Listing year : 1989
2014
1,200,399,000 3,724,986,000 6,447,873,000 10,172,859,000 2,760,608,000 3,648,851,000
2013
1,558,175,000 3,688,577,000 7,033,471,000 10,722,048,000 2,414,173,000 3,230,464,000
2012
1,461,527,000 3,537,828,000 5,643,683,000 9,181,511,000 2,137,157,000 2,881,468,000
2011
809,295,000 3,470,392,000 4,540,425,000 8,010,817,000 2,118,803,000 2,747,620,000
2010
1,408,886,000 3,329,307,000 3,853,392,000 7,182,699,000 1,853,775,000 2,426,198,000
2009
1,207,443,000 3,277,942,000 3,321,686,000 6,599,628,000 1,805,803,000 2,174,685,000

2014 0.36 0.12
-
0.05
23.04 25.00 0.37 2.34 0.76
2013 0.30 0.15 0.17 23.10 24.00 0.34 2.91 0.75
2012 0.31 0.16 0.15 22.94 23.00 0.39 2.64 0.74
2011 0.34 0.10 0.12 22.80 22.00 0.43 2.14 0.77
2010 0.34 0.20 0.09 22.69 21.00 0.46 2.08 0.76
2009 0.33 0.18 22.61 20.00 0.50 1.84 0.83
9.4 Lafarge Surma Cement - Report Analysis from 2009-2014 (6 years)
Lafarge Surma Cement Listing year : 2006
Yea
r
EBIT Fix Asset Cur. Asset Total Asset Cur. Debt Total debt
2014
3,778,223,000
13,490,215,00
0
6,505,784,00
0
19,995,999,00
0
4,568,162,000
2,172,198,00
0
2013
3,985,707,000
13,837,104,00
0
5,190,219,00
0
19,027,323,00
0
6,100,280,000
1,882,500,00
0
2012
3,336,088,000
13,611,362,00
0
3,912,006,00
0
18,523,368,00
0
8,443,980,000
1,698,144,00
0
2011
206,884,000
15,108,960,00
0
3,450,421,00
0
18,559,381,00
0
8,108,312,000
3,999,086,00
0
2010 (1,115,290,000
)
15,597,208,00
0
2,317,596,00
0
17,914,804,00
0
10,185,573,00
0
4,960,752,00
0
2009
2,333,044,000
14,898,223,00
0
2,393,392,00
0
17,291,615,00
0
7,724,594,000
5,136,139,00
0
2014 0.11 0.19 0.05 23.72 8.00 0.67 1.42 2.10
2013 0.10 0.21 0.03 23.67 7.00 0.73 0.85 3.24
2012 0.09 0.18 0.00 23.64 6.00 0.73 0.46 4.97
2011 0.22 0.01 0.04 23.64 5.00 0.81 0.43 2.03
2010 0.28 -0.06 0.04 23.61 4.00 0.87 0.23 2.05
2009 0.30 0.13 23.57 3.00 0.86 0.31 1.50

9.5 Premier Cement - Report Analysis from 2009-2014 (6 years)
Premier Cements Listing year: 2006
2014
1,106,101,327 5,945,057,531 3,858,362,266 9,803,419,796 5,041,160,783 6,498,143,143
2013
1,125,995,184 5,306,862,572 3,189,362,901 8,496,225,473 4,273,975,002 5,278,251,040
2012
482,843,286 4,399,501,404 2,202,563,160 6,602,064,564 3,217,020,223 4,343,592,696
2011
513,829,837 2,223,953,492 1,903,992,198 4,127,945,690 1,944,892,014 2,080,485,389
2010
350,836,984 997,092,676 881,774,118 1,878,866,794 856,743,356 898,497,528
2009
265,389,171 514,519,416 548,458,824 1,062,978,240 478,935,184 511,764,158
2014 0.66 0.11 0.15 23.01 8.00 0.61 0.77 0.78
2013 0.62 0.13 0.29 22.86 7.00 0.62 0.75 0.81
2012 0.66 0.07 0.60 22.61 6.00 0.67 0.68 0.74
2011 0.50 0.12 1.20 22.14 5.00 0.54 0.98 0.93
2010 0.48 0.19 0.77 21.35 4.00 0.53 1.03 0.95
2009 0.48 0.25 20.78 3.00 0.48 1.15 0.94

10. Results for E-views & Interpretation
10.1 Correlation Matrix:
In correlation matrix we will see the relationship between dependent and independent
variables. Correlation matrix gives out value between (+1) and (–1). The closer to +1 means
strong positive relationship between the variables and -1 means strong negative relation.
Relationship between the variables are presented below;
Variables RTD RSD
ROA There is a weak negative relation
between RTD and Roa (-0.10 )
There is a weak positive relation
between RSD and Roa 0.17
G There is a weak positive relation
between RTD and G 0.19
There is a weak negative relation
between RSD and G -0.25
Size There is a weak negative relation
between RTD and size -0.39
There is a moderate positive relation
between RSD and Size 0.53
Age There is a weak negative relation
between RTD and age -0.13
There is a weak negative relation
between RSD and age -0.3
TAN There is a weak negative relation
between RTD and age -0.29
There is a moderate positive relation
between RSD and Tan 0.56
LQ There is a weak or no relation
between RTD and Lq -0.07
There is a moderate negative relation
between RSD and Lq -0.48

10.2 Regression Analysis:
Regression analysis is done to provide validity of the relationship between variables. If the
probability value below 0.5, we will consider the relationship valid. The above chart is the
result of regression analysis for dependent variable RTD and validity of its relationship
between other variables. From above chart we can see that all the variables except growth and
age is not valid, as they shows a higher probability than 0.5.

11. Conclusion & Recommendations
This study was on cement industry of Bangladesh, particularly on capital structure of the
companies. The main objective of this study is to examine the relationship between the
capital structure and debt lifetime among Cement companies in Bangladesh stock market.
Five companies were selected for this study, they are Confidence Cement limited, Heidelberg
cement Bangladesh limited, Lafarge Surma Cement limited, MI cement limited, Premier
Cement limited.
From this study we now know that the Asset and debt of the cement companies are
interrelated. Company’s short term debt depend moderately on companies’ size and its asset
structure. Also when it comes to total debt to total asset, companies’ age, size or liquidity
does not matter much. We can see it from E-view results. Also the result shows that liquidity
have a negative relation with the short term debt.
This study was done only on five cement companies. In future study more companies’ data
should be included. Also only six year data was used for study, which was done because of
time constrain and data unavailability. Future study should include more than fifteen to
twenty years of data for higher accuracy in result. In this study the ownership of the company
was not discussed, as the locally owned company tend to be smaller than multinational
companies and their capital structure is different than MNC’s. All future study should
consider these factors.

12. References
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Surma Cement & Premier Cement.
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Reference to it Industry in India. Managing Global Transitions, 9 (4), 371–392.
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Ratings. Risk Publications, London.
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Barclay, M., Smith, C., 1995. The maturity structure of corporate debt. Journal of Finance 50, 609–631.
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www.dsebd.org
www.stockbangladesh.com

Capital Structure Analysis of Bangladesh Cement Industry

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