Thursday, March 26, 2020

Risk Management Bart Erry Ltd

Risk management is defined as the process used to identify, assess and prioritize risks. Risks are normally handled or given attention according to the priority they are given. There are several steps involved in each of the processes of risk management.Advertising We will write a custom report sample on Risk Management: Bart Erry Ltd specifically for you for only $16.05 $11/page Learn More In the identification of the risks, one has to consider their causes, the disruptions they cause to the company’s operations, the reasons for their occurrence, and the resultant changes (Haslet 2010, p. 12). In risk assessment, hazards consist of the harm that might be encountered in the course of managing the risk. Therefore, precautions, implementation and re-evaluation of all the stages and close monitoring, are the steps that need to be taken. All these factors are also considered in prioritizing risks (Lark, Galai Crouhy 2000, p. 110). Political Risks The location of the company’s production and manufacturing unit near Pluwer River is likely to raise concerns in the society. Operating restrictions may be a big setback and they could hinder the company’s expansion plans. The surrounding neighborhood complains of the risks of disease outbreak due to chemicals that have been spilled into the waters. The states and countries that use the Pluwer River’s waters are likely to file these complaints in court (Moran 2004, p. 65). Therefore, the company needs to re-examine its level of preparedness in managing these risks. The controls operating currently also need to be examined. The decision making operations should continue without failure as this may help solve the problem and improve the economy of the people living in this area, who depend on the company for employment (Henisz Zelner n.d., p. 3). Economic Risks The likelihood of the company having economic problems is another factor that should be considered. Due to the changes that have occurred in the global market, the organization must put in place new prizes for the company’s products. This is a risk that must be made by the company to avoid losing its trusted customers. The competition it gets from other car battery manufacturing companies is fierce.Advertising Looking for report on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Demand is likely to go down due to the relatively cheaper products of other companies, which are available in the market. Another way to solve the economic crisis this company is facing is the production of high quality products. The name of the company is a household brand in many countries, and this is one of the areas it could exploit (Rudolf, Hommel Frenkel 2005, p. 212). Social Risks The requisite measures should be taken to protect the vulnerable people in Puma Township. The social protection criterion has to be presented as safety for t he poor and the employees living in Puma town. The program should aim at improving the quality and standard of living of the people in this town. This could help promote cohesion between the company and the society (Lynch 2009, Para. 1-4). Technological Risks One of the technological risks facing this company is the production of batteries of poor quality. This might be a little higher in expenditure cost, but it could help in maintaining the customers’ trust and confidence. The reason behind this is the stiff competition from other manufacturing companies in the market. Since the prices of its batteries are relatively high, coming up with high quality products can enable it to record more sales without necessarily lowering its prices (Chapman 2011, p. 312). Legal Risks The company faces various legal risks, which need to be resolved. Product and employee liability risks are among the various legal dangers it faces. The product liability risk can be minimized by the company t hrough outsourcing. This absolves the company from being legally responsible for the final products. The employee’s liability refers to the deduction of their payments so that the company can invest more in regaining its economic stability (Dilanchian 2009, Para. 2). All companies must comply with the companies’ act of legislation and The Bart Err Limited is not an exception to this rule. If it fails to comply with this act, the company risks being subjected to legal action by the government or the other authorities involved (Padmanabhan, Lakshmikumaran Sridharan n.d., p. 1).Advertising We will write a custom report sample on Risk Management: Bart Erry Ltd specifically for you for only $16.05 $11/page Learn More Environmental Risks Environmental protection is very important to any organization or company. The Bart Erry Ltd. Company has a legal responsibility in protecting the environment from pollution. The risk of spillage of the company ’s chemical storage tanks to the Pluwer River is an environmental problem that must be tackled at once. The company is likely to be fined according to the law governing the environmental management and responsibility of such companies. This is an inescapable risk that the company has to take (Petley Smith 2009, p. 122). Competitive Risks The risk of competition is likely to see the company reduce the price of its batteries and their components. This will help attract customers who might consider buying batteries from the new companies that sell their products at cheaper prices. The company may experience an income reduction but at least maintain its market segment (Kytle Ruggie 2005, p. 2). Disaster Recovery Plan The Company should employ environmental hazard management experts to help in detoxification of Pluwer River. Appropriate anti-toxins should be used to reduce the level of the toxins released by the chemicals the company manufactures (Fischbacher-Smith Fischbacher- Smith 2012, Para. 1). The company can also decide to compensate the small scale fishermen in Puma town and encourage them to stop fishing until detoxification is completed. Taking into account the technical hazards that normally emerge, the company will have to construct a wall surrounding its storage facilities. This wall will prevent any future disasters from occurring in the future. The Bart Erry Ltd. Company has an obligation to ensure that the storage systems of its chemicals are improved so as to eliminate the possibility of spilling. The tanks should be closed with tight lids that should not break open, even under high pressure (Holzmann, Sherburne-Benz Tesliuc 2003, p. 3). The value chain analysis involves the manufacture, distribution, and supply of products to the consumers. The main parties involved in the chain are the shareholders of the company. In addition to manufacturing, the company also carries out distribution in order to reduce the cost of its batteries at the consumers’ level. The chemicals used by the company are produced by the same factory (Holzmann Jorgensen 2000, p. 4).Advertising Looking for report on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More This reduces the expense incurred in buying finished chemical products as the cost of producing them is cheaper. The employees are directly linked to the company and can directly by doing business with it. The company employs these four principles for effective chain business running: auctions and bidding, chain coordination and supplying in e-business, multiple channels of supply and network design. These methods are yet to be fully implemented, even though some of them are underway (Simchi-Levi, Wu Shen 2004, p. 3). In summary, the Bart Erry Ltd Company is a blooming business oriented project with a vision of improving the lifestyle of people around Puma town and the world at large. Unanticipated disasters and other risks that occur in this type of business are to be expected. However, the effective management of the risks involved and the implementation of its well thought out strategies will see its expansion plans become a reality. References Chapman, R, J 2011, Simple tools a nd techniques fro enterprise risk management, John Wiley Sons, Chichester, UK. Dilanchian, N 2009, ‘Business law loegal risk management framework’, Dilanchian.com. Web. Fischbacher-Smith, D Fischbacher-Smith, M 2012, ‘Risk management’, Palgrave- journals.com. Web. Haslet, WV 2010, Risk management: foundations for a changing financial world, CFA Institute, Hoboken, NJ. Henisz, WJ Zelner, BA n.d., Political risk management: a strategic perspective, Wharton Publishers, Philadelphia, PA. Holzmann, R, Jorgensen, S 2000, Social risk management: a new conceptual  framework for social protection, and beyond, The World Bank, Washington, DC. Holzmann, R, Sherburne-Benz, L, Tesliuc, E 2003, Social risk management: the world  bank’s approach to social protection in a globalizing world, The Pennsylvania State University, Washington, DC. Kytle, B, Ruggie, JG 2005, Corporate social responsibility as risk management, Harvard University, Cambridge, MA. Lark , R, Galai, D, Crouhy, M 2000, Risk management, McGraw-Hill Inc., New York, NY. Lynch, GS 2009, Risk management and economic change: a catalyst for re-evaluating  business preparedness, mitigation and response, Marsh McLennan Companies, Inc., New York, NY. Moran, TH 2004, International political risk management: the brave new world, The International Bank for Reconstruction and Mangement/ The World Bank, Washington, DC. Padmanabhan, TK, Lakshmikumaran, D, Sridharan, F n.d., Corporate legal risk-  management and mitigation, North Dakota, New Delhi. Petley, DN, Smith, K 2009, Environmental harzards: assessing risk and reducing  disaster, Routledge, New York, NY. Rudolf, L, Hommel, U Frenkel, M 2005, Risk management: challenge and opportunity, Springer Berlin, New York, NY. Simchi-Levi, D, Wu, S, D Shen, Z, M 2004, Supply chain analysis and e-business, Kluwer Academic Publishers, New York, NY. This report on Risk Management: Bart Erry Ltd was written and submitted by user Aria Richardson to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.

Friday, March 6, 2020

How to Design a Pen Pal Program for Your Classroom

How to Design a Pen Pal Program for Your Classroom A pen pals program is one of the most fun ways to give your kids a real-life lesson in Social Studies, Language Arts, Geography, and more. Begin working on pen pals with your students as early in the school year as possible, so that you can maximize the number of letters that the participants can exchange. The Benefits of Pen Pals Pen pal relationships offer a number of significant inter-disciplinary benefits for your students, including: valuable practice at writing letters in the proper format (Language Arts standard)increased awareness of societies and cultures from around the world (can be tied into Social Studies, Geography, and more!)a chance to maintain ongoing communication with people who live far awayincreased odds that your students will continue to be letter writers for the rest of their lives Email or Snail Mail? As a teacher, you must decide if you want your students to gain practice at writing traditional letters or at composing emails. I prefer to use pencil-and-paper pen pals because I want to contribute to keeping the lost art of traditional letter writing alive. Youll want to consider: the grade level you are teachingthe availability of computers at your schoolthe level of computer literacy of your students Finding Pen Pals for Your Kids Using the Internet, its fairly simple to find enthusiastic counterparts from around the world who would like to partner up with your classroom. Post an announcement on an education-related Message Board. Simply put the word out about where you are, the grade level of your students, and what kind of pen pal relationship you seek. Every summer, our Message Board bustles with pen pal activity, so it should be fairly easy for you to partner up.Sign up with a Pen Pal matching service. For example,​ ​International Pen Friends shuns email pals in favor of keeping the art of traditional letter writing alive. Fill out their School Class Application Form and, for a fee, youll be matched up with other interested students from around the world. ePALS is one of the largest email pen pal sites, so its definitely worth a visit if you want to go the email route. Keep Pen Pals Safe and Secure In todays society, you need to take extra precautions in order to keep activities safe, especially where children are concerned. Read Internet Safety Tips for Kids in order to minimize the risks involved with pen pal communications. You should also read through the letters your students write to make sure they arent giving away any personal information, such as their home addresses, or family secrets. Its better to be safe than sorry. Get Connected and Get Started As your Pen Pal program continues, one of the keys to success is keeping in close contact with the teacher you are working with. Drop him or her a quick email to let them know when they can expect your letters to arrive. Determine ahead of time if you are going to send each letter individually or in one big batch. I would recommend sending them in one big batch just to keep it simpler for you. Explore the wide world of Pen Pal resources on the web and get ready for a school year full of new friends and fun filled letters. No matter how you choose to design your classrooms pen pal program, your students are sure to benefit from the interactions you facilitate.

Wednesday, February 19, 2020

Evolution Coursework Example | Topics and Well Written Essays - 250 words - 1

Evolution - Coursework Example Another major influence on Darwin’s observation was drawn from reading Thomas Malthus’s article which stated that human population was growing at a very rapid pace and resources such as food and water would be scarce (Goldsmith & Bradshaw, 2009). From these facts he came up with a conclusion that humans compete with each other for scarce resources. He also performed cross breeding to observe further variation in different plants and animals where he made a conclusion that the individual are inherited from parents to off springs (Goldsmith & Bradshaw, 2009). To support his observations and experiments, Darwin collected a wide variety of facts from reports by other naturalists as well as reports from his own experiments (Zimmer & Doughlas, 2013). Charles Darwin was reluctant to publish and make his discovery public until 1858 when a similar theory was discovered by Alfred Russel. Darwin avoided publishing because he was afraid of the reactions from his scientific colleagues. He was also afraid of damaging his own reputation, upsetting his religious wife, religious perception as well as destroying the social order (Zimmer & Doughlas,

Tuesday, February 4, 2020

The Impact of the Sarbanes-Oxley Act on Auditing Research Paper

The Impact of the Sarbanes-Oxley Act on Auditing - Research Paper Example Within this context of understanding there are a number of specific requirements. These elements are the necessity of auditors to identify all significant financial reporting elements, including both accounts and disclosures ("Sarbanes-oxley section 404:," 2008). Within these accounts and disclosures, the relative level of risks associated with a potential accounting error must be designated ("Sarbanes-oxley section 404:," 2008). After the identification of these risks have been established, entity-level controls must be established as a means of mitigating accounting error risk with effectiveness ("Sarbanes-oxley section 404:," 2008). This ensures that situation and organizationally specific auditing and accounting measures are developed to further improve accurate financial statements ("Sarbanes-oxley section 404:," 2008). Similarly, transaction-level controls must be implemented in situations where entity-level controls do not apply ("Sarbanes-oxley section 404:," 2008). Finally a comprehensive assessment mechanisms must be implemented that takes into account the nature, extent, and timing of the financial accounting inputs to assure accuracy and precision. the Sarbanes-Oxley Act demonstrates a drastic shift in accounting and auditing standards. In this context of understanding, before the implementation of SOX corporate firms, while required to record financial measures, were oftentimes able to escape stringent account practices by intentionally or unintentionally neglecting the efficient recording of financial inputs. Before SOX corporations such as Enron and WorldCom were able to strategically create inefficient processes wherein aspects of corporate financial inputs that reflected unfavorably on the organization were able to conveniently implement outdated or poor assessment procedures ("Sox 404 reduces," 2010). Conversely, after the passage of SOX 404 top-down risk assessment, auditors were required to not simply examine an

Monday, January 27, 2020

Negative Effects Of Modern Day Testing | Education

Negative Effects Of Modern Day Testing | Education Using standardized tests to evaluate students and teachers has been an extreme mistake of the educational system. The seemingly flawless idea that high test scores show effective teaching and competent students has failed to be accurate. According to Alfie Kohn in The Case Against Standardized Testing standardized tests cant measure initiative, creativity, imagination, conceptual thinking, curiosity, effort, irony, judgment, commitment, nuance, good will, ethical reflection, or a host of other valuable dispositions and attributes. Students memorize more than they learn and retain and do not learn the same and even teachers have been caught cheating to keep their jobs. Many benefactors even use standardized tests to take advantage of the education system. Standardized tests have undermined education and the success of many students. While the majority of modern peoples and teachers have accepted standardized tests to be the best method for evaluating students mental ability, the reali ty is that they fail to exemplify the true ability of individual students and teachers while also impacting them negatively. Standardized tests distributed by the state are known as high stakes tests. They are called so because schools with high outcomes can get praise and financial rewards while schools with low outcomes are declared unsatisfactory and may receive sanctions. Furthermore, students with low scores may be held back in a certain grade. These are a few of the many stakes on the line with standardized tests. It has only been recently that schools have replaced use of standardized tests for academic placement and for determining student needs, with judging students intelligence and holding them back from diplomas (Kohn). Effects Against Students To most, this idea seems fine, but there are many problems with it. Gregory J. Merchant states that the National Association of School Psychologists believes holding students back is bad policy with devastating effects (3). Many cities have failed students for underachieving in standardized tests. In Baltimore, 20,000 students were held back. For the student, being picked out as the dumb one could damage them psychologically. Individual students could get left behind by the peers and friends they value most in their own grade level. Not only will this effect individuals, but large masses of students get held back leading to anxiety about standardized tests. Students in same level grades might be at different levels of their cognitive development, but due to grade levels use of age instead of intelligence level, many of those students are stuck taking tests created for the upper hand of the class and leaving them the consequences of biological factors. . While it is good to have stude nts be at their own intelligence level with peers, it would be better to change age level based grades. An increase of failure and retention from grade level to grade level could also lead to an increase of dropout rates due to pressure. In Boston, the dropout rate was increased by 300 percent which was directly attributed to standardized tests (Merchant 3). It has also been examined that tests created for educational purposes were biased on minority comprehension (Myers 334). In other words minorities generally do worse on these tests than many of the dominant white majority. This also causes many of those minorities, to feel unsatisfactory and overall dumber. Being Hispanic in high school and observing many of my friends, siblings, and relatives who have dropped out, there have been many occasions in which Hispanics believe they could not further their education. My peers also had the mindset that they were to dropout or just enter the workforce immediately after high school. These stakes not only make students further fear tests but make them wonder, as they drift through school, I this going to be on the test? Anxiety, fear, and anger towards standardized tests are overflowing students minds. Attitudes towards test not only manifest themselves in students through cheating and loafing but also inhibit success on tests by plummeting students with anxiety. (Merchant 4). Ten million students in elementary and secondary schools performed below ability on tests because of anxiety (Merchant 4). Merchant explains a possible increase due to the increased emphasis and importance of testing (4). Tests have shown to cause a lot of physical and psychological problems for students. Truancy and stress all make the education system negatively impact students, especially the young ones. The extent that modern schools make students strive for excellence beyond the busy work of the classroom is pitiful. The most any student needs to know is an equation and numbers to plug in, but there is no actual knowledge of the actual equation used. Now, all that matter is what is going to be on the test. What does mx + b mean when all you do is plug in numbers accordingly. In my experience with school I have never truly needed to know and understand material fully to achieve a good grade even though I have strived to do so. Furthermore I have only had to think critically in a handful of situations. There has been A statistical association between high scores on standardized tests and relatively shallow thinking (Kohn). Although many creative thinkers also score well on tests and many shallow thinkers sometimes score high, the bases that someone can do well on a test by merely copying down answers, guessing a lot, and skipping the hard parts creates an extreme gap in accurate meas urements of students knowledge (Kohn). Many students understand little of the subject or methods being used. While individually effective teachers do help, it is still incredibly difficult to achieve proper measurements in a contemporary day classroom focusing on state tests and other agendas. Tests are now used as a measuring stick for students and teachers achievement but the scores do not properly reflect the quality of academia. To begin with, tests are a comparison of one person relative to the rest of the population of students. This in turn makes it incredibly difficult to set up a test according to the knowledge that should be established at each level. One reason for that being that not everyone at the same age is at the same level. Potential is not measured by where someone is but where they can go. Another negative effect of this idea is that if a state with 140,000 students rose the standard cutoff score for a certain grade to be five more percentiles, 7,000 students would not pass to the next level or be considered average (Merchant 2). For these reasons, students also do not learn what they should learn or gain actual intelligence. Gregory states that basic items that students should master do not show up on tests, and due to limits of time, any certain questions striving to measure knowledge may be too few to have reliable measurements of specific skill (Merchant 3). Gregory even goes on to say that a few good guesses or skipped answers may determine the skill level of students. Standardized tests then show their limitations in assessing real student growth (3). Effects on Teachers For the eighteen years I have been in school striving toward academic achievement and scoring big numbers on standardized tests, the focus has been cognitive development, understanding through thought. Although this is not bad, the ways schools have gone about it is terribly wrong. School, through my experience, has consisted of countless hours of sitting in a room looking up at what teachers were saying. This method, while working for some students, has failed to truly challenge students mentally as well as not significantly teach others. One of the main reasons for these, frankly, boring classes is standardized tests. These functions will ultimately hurt the students. Do teachers try to teach a well-rounded student or a good test taker? Effects of standardized tests are easily found in the classroom. It is also thought that good scores reflect the teachers effectiveness. Waiting time on preparing for tests rather than learning other material is a serious factor. Teachers worried about bad tests scores spend an incredible amount of time teaching students how to take tests instead of teaching learning skills and knowledge (Merchant 4). Teachers begin to focus on materials students need on the tests. The curriculum then starts to be narrowed down. Gregory states that teachers even stop focusing on creative learning, such as projects, to reinstate lecture methods (4). The bad part of this is bad teachers focused on tests could get passed off as good teachers when in fact they are not. Schools cut out music, art, and social studies to focus on reading and math for tests and teach them accordingly to do well on tests, which in turn cuts a major opportun ity of learning for students. Even the ACT science test focusses on students ability to read rather than knowledge of science. These methods do not just hurt students by neglecting countless areas of study but also by subjecting them as equal learners. The theory of Multiple Intelligence tells us that different people think and understand differently. Howard Gardner a well-known psychologist expresses intelligence in eight different packages, one being bodily-kinesthetic which requires movement unlike that of a classroom. Another psychologist, Robert Sternberg, proposed three intelligences. Sternberg called one of these intelligences analytical intelligence which expresses what would be known as intelligence geared for modern school classroom (Myers 330 333). One of the possibly worst outcomes of this new found method is the cheating by teachers throughout the states. Because many states now use tests to measure teachers too, teachers begin to cheat to keep their jobs as well as get better funding. While this idea is not very prevalent there have been a few cases amongst cheating teachers. After asking teachers in two school districts how prevalent they felt cheating on standardized tests was, they responded with multiple cases of belief of cheating as well as witnessing cheating. (Brian 2-3). Jacob Brian in Rotten Apples also goes on to reveal cheating cases in four separate states (2) It is also seen that teachers and many people have found methods for taking tests. In effect, teachers begin to teach these methods in place of critical thinking and real knowledge. Pointing to the conclusion that students, again, do not learn important subjects but methods they might not even understand. Another problem with the teacher side of standardized testing is the parallels needed to be held with state curriculums. One teacher using the methods for student success on tests might look more successful than the ones who teach effectively but not geared for tests. A Possible Politics Angle Politics has also affected the use of standardized tests in the class room. Not for the good cause of not leaving a child behind, but to manipulate schools accordingly. Recently, tests have been overthrowing the education seen but only in the United States. Few countries today give these formal examinations to students before the age of sixteen or so, (Kohn). For the most part the intent of standardized enthusiasts is to raise school standards. There might be some other unseen agenda too though. Some ideas as proposed by Alfie Kohn state that some people intend to use standardized tests to form negative perceptions of public schools in hopes of privatizing education. While schools are still dominated by standardized tests the outcome is looking bright. Hundreds of schools have begun to drop tests like the ACT and SAT from their admissions forms (Kohn). It is seen that standardized tests bring forth more negative effects than they do good. Albeit proponents of standardized tests express concern for incentives to learn, and inhibiting unqualified students from bringing down their peers, using standardized tests produce false measurements and negative effects. .

Saturday, January 18, 2020

Liberty vs Security Essay

When the founding fathers created the government of the United States, they wanted the government not to be so constricting with its rule. In other words, freedom, but freedom in its purest can be dangerous so they had to put some security to their newly made country. They did this by giving the executive branch the power to enforce laws and keep the peace. In the beginning, it was all good but things have changed throughout the years where security had to be increased. Now-a-days, some people think security has been increase to such a point that there isn’t fair anymore but that just isn’t the case. There is now terrorism in the world people live in and the Executive branch is taking the necessary precautions to stay safe. With the Obama Administration’s war on terror, the executive branch is taking the necessary precautions to keep the nation safe with drone attacks, warrantless wiretapping, and advanced interrogation techniques. [Drone essay Ms. Devine has don e] Wireless wiretapping also keeps the peace of the United States. As Steven G. Bradbury states in the pro CQR Essay about wiretapping, â€Å"taking precautions, such as wiretapping, helps keep America from suffering another 9/11† (Clemmitt). He also brings up another point about the enemies being more sophisticated now because of the â€Å"advancements in communication causing and allowing the enemies operate in obscurity† (Clemmitt). This is dangerous for the American public so this wiretapping is necessary but that is not the point the con CQR essay brings up. Koh, the author of the con essay, mentions that â€Å"FASA was made to stop spying on the American public and permit a warrant if surveillance on an American citizen is to be done, it should not be done warrantless† (Clemmitt). Koh doesn’t take into account that the enemy could be an American citizen which would be dangerous to leave unchecked. Koh’s point has been the source of many lawsuits in America but has not gone through thanks to some judges. An issue in San Francisco federal court happened where â€Å"a group of AT&T costumers filed a lawsuit against the N.S.A. but the U.S. government stopped them† (Levine). This is necessary so America can keep their security intact. After 9/11 happened, America was scarred for life. It had cause America do begin a war on terror which were the like no one has seen. â€Å"One of the things the military did was hold detainees at Guantanamo Bay to interrogate them. The detainees would be brought to interrogation rooms in shackles and would get extensively questioned† (Kirk). In the pro essay about the CIA amounting to torture Kaye states that â€Å"these enhanced interrogation techniques are inhumane and wrong† (Jost). As bad as they may seem, according to CIA veteran John Brennan, during a 2007 CBS television interview, â€Å"the enhanced interrogation techniques were able to produce useful information, worked against real hardcore terrorists, and saved lives† (Zakaria and Hosenball). If these techniques got that type of information, then it is keeping the nation safe. And thusly, America has been kept a safer place. There are still some problems but terrorism has been controlled to not happen often. With the executive branch’s moves to use drones, wiretap, and enhanced interrogation techniques, America is in a necessary state of security. Even though some freedoms don’t seem to be, it is only to keep the peace in the United States and to have a safer nation.

Friday, January 10, 2020

Cement Sector in Pakistan

1. INTRODUCTION 2. 1 Objective and Scope The report will present a holistic overview of the industry; current situation, industry structure, critical revenue and cost drivers, exposure of BOP in the sector and its future outlook. 2. 2 Cement Sector of Pakistan The Cement sector of Pakistan has 23 players, operating 29 units, with a total production capacity of 44. 8 million tons, divided into North and South, as follows: North Zone| South Zone| * Punjab and Khyber Pakhtoon Khwa| * Sindh and Baluchistan| * 19 manufacturing units| * 10 manufacturing units| * 80% of rated capacity, i. . 35. 9 million tons| * 20% of total rated capacity, i. e. 8. 9 million tons| The overall capacity utilization of the sector, as per FY-10 dispatches is at 76%. The basic raw materials for cement include limestone (upto 80%), clay (upto 15%) and gypsum (5%), all of which are abundant in Pakistan making basic raw material very cheaply available to cement manufacturers. None of the cement producers in Pakist an enjoys any material product differentiation because of the highly standardized nature of product therefore consumers usually regard ‘price’ as a key determinant. Major constituents of the cost are energy & power – over 60% of cost of production of cement – and transportation costs. In addition to these elements efficiency of production process is critical in keeping the overall cost structure competitive. In this regard, size of the plant, its age, and origin – European or Chinese – are of importance. Until recent years, almost all the plants operating in the country were based on furnace oil, but the increasing furnace oil prices forced the cement industry to switch over to Coal-powered/dual-fuel plants. However, the price of coal has shown significant volatility over the recent periods therefore, some producers, having dual-fuel plants, use a mixture of coal and gas, alternating between the two as per changes in prices and availability. 2. 3 Cement Sales during FY-10 Compared To FY-09 Source: All Pakistan Cement Manufacturers’ Association As per All Pakistan Cement Manufacturer’s Association (APCMA), the cement sales in FY-10 totaled 34. 20 million tons, registering a decent Year-on-Year (YoY) growth of 9. 30% compared to 31. 29 million tons in FY-09. The local dispatches remained at 23. 54 million tons, up YoY 14. 63% compared to 20. 53 million tons in FY-09 whereas export sales in FY-10 remained almost flat with a minor decline at 10. 66 million tons, down YoY 0. 89% compared to 10. 75 million tons in the previous year. As shown in the table, the local sales were the primary driver behind the growth. It is pertinent to note that the growth on the local front was mainly private-sector driven rather than Government’s infrastructure spending, showing signs of recovery in the construction sector. 2. INDUSTRY STRUCTURE 3. 4 Industry Characteristics Cement industry is highly cyclical in nature and its performance depends largely upon the economic growth of the country. There is a high degree of correlation between the GDP growth and the growth in local cement consumption. Source: State Bank of Pakistan & All Pakistan Cement Manufacturers’ Association Cement exports depend largely upon the demand/supply situation, price levels and economic situation in the export regions. Cement, being a voluminous product, is a regional commodity. 3. 5 Critical Factors The cyclical nature of the sector along with excess supply situation, whenever it persists, makes cement price a very critical factor. Some level of industry ‘co-opetition’, i. e. cooperative competition, is evident in cement industries globally such as consensual pricing. In the absence of such an arrangement, along with a supply glut, cement industries have witnessed intense price wars. * Power & Energy costs c onstitute over 60% – 65% of the total cost of cement production. Therefore, smart inventory management of coal, along with hedging techniques etc. lead to significant savings in energy costs. * Plants closer to the port have cheaper access to exports and can maintain higher profit margins. Therefore, distance to port is an important consideration. * Leverage, both financial and operating, is a major concern owing to the price-sensitivity of the sector. Pakistan’s cement sector is highly leveraged. Cautious capital structure management and utilization of relaxations / incentives provided by the government, whenever possible, such as Export Refinance facility offered by the State Bank of Pakistan, create a significant difference. . 6 Industry Concentration Concentration refers to the number of major competitors in a given industry. This has important implications for the inherent profitability of a sector. We have applied the Eight-Firm concentration ratio to determine c oncentration in the cement sector. Concentration ratios can generally be categorized into low, medium, and high concentration being 0% – 50%, 50% – 80% and 80% and above, respectively. An eight-firm concentration ratio over 90% is a good indication of oligopoly, i. e. an industry dominated by a small number of sellers. Based on FY10 market shares, the Eight-Firm concentration ratio in cement sector is 80% which show clear signs of high industry concentration. Therefore, cement sector has an oligopolistic structure. However, given the excess capacity situation cement industry has been behaving like a ‘low concentration industry’ from time to time such as the intense price war in the recent past, spanning nearly a year, with participants vying for higher volumes. 3. 7 Market Share The following pie-charts show the local, export and total market shares of top 8 players in the sector for FY-10. The charts show that D. G. Khan Cement is the leading player in the local market (17% market share) closely followed by Bestway (16. 7%) and Lucky Cement (13. 3%). In the export market, Lucky cement leads with its roaring 32. 8% share, followed by D. G. Khan and Bestway cement’s 9. 3% share each. Overall, Lucky Cement appears to hold the highest market share (19. 4%), followed by D. G. Khan (14. 6%) and Bestway (14. 4%). Maple Leaf Cement ranks fourth in all three categories with 9%, 11. 1% and 9. 7% market share in the local, export and overall market. Source: Fortune Securities . SECTOR OVERVIEW – FY10 Cement Sector in FY-10 witnessed low prices, rising energy costs, slowdown in construction activities locally and regionally and a large amount of new supply availability in regional markets resulting in drying out of certain lucrative export avenues especially the Middle East. However, exports to African countries, Iraq, Sri Lanka etc. mitigated the effect and exports remained flat at 10. 66 million tones (YoY down 0. 89%). As expected by market participants and analysts local sales picked up to close the year at 24. 53 million tons (YoY up 14. 63%). Overall, the sector closed the year at 34. 20 million tones, registering a decent YoY increase of 9. 30%. Cement prices and energy costs remained the key issues in FY-10. Since the dismantling of the alleged cement cartel, after Competition Commission of Pakistan imposed a fine in the colossal sum of Rs. 6. 35 billion on 20 cement manufacturers (equivalent to 7. 5pc of each company’s FY08 net revenue), in August 2009, cement prices plunged and went down to Rs. 249/bag in North and Rs. 280/bag in the South zone, compared to Rs. 335/bag and Rs. 370/bag in FY09 in North and South, respectively. CCP’s decision has been challenged by the cement manufacturers on a number of grounds in the Lahore High Court, the Sindh High Court and the Supreme Court of Pakistan. In all these cases stay orders have been granted by the Courts and the matter awaits court’s verdict. Given the increased overall supply in the regional markets, the cement export price hovered around $47-$52 per tone, compared to average export price of $60-$62 in FY09. On the other hand, energy costs remained on the rising trend and coal prices averaged around $88 (FoB) per ton compared to 2nd half FY-09 average of $70. Australian (Newcastle) coal price made its 18-month high of $108 (FOB) per ton on April 27, 2010, after making a low of around $61 (FoB) per ton in Mar-09 last year. Thus, as a result of subdued prices and increasing energy costs a sub-breakeven scenario prevailed in the industry for the most part of FY-10. In 9 months FY10, cement companies posted cumulative losses of Rs. 3. 3 billion compared to profits of Rs. 3. 7 billion in the corresponding period last year, YoY down 189%. Cement prices hiked by Rs. 40 per bag in North in June 2010. With no price moves in South – a region that was already enjoying higher prices due to lower intensity of price war largely for its geographical advantages – prices in the two regions finally came at par. FY-10 also saw the announcement of 35% inland freight subsidy, during March 2010, on cement exports. It is likely to make Pakistan’s cement exports more competitive in the regional market, as cement manufacturers will be able to reduce their export prices by almost 10% going forward, if needed, without hurting their margins. However, the government needs to make timely payments to the manufacturers for the subsidy to be of much use. Source: Invisor Securities Source: Federal Bureau of Statistics & Invisor Securities 4. SECTOR OUTLOOK 5. 8 Local market * Short Term Cement prices have risen by Rs. 24 per bag since the beginning of ongoing financial year to Rs. 312 and Rs. 325 per bag in North and South, respectively. This bodes substantially well for the sector after bleeding profusely in a price war and indicates a price consensus among the manufacturers. Also, we believe there is limited appetite for price wars going forward especially as seasonal 1Q demand slowdown kicks in (Monsoons, floods, Ramadan etc. ). The recent floods have severely affected the roads and the distribution network which will inevitably hurt the local cement sales as well as export sales to some extent. We expect cement demand from local market to remain subdued during first half of FY11, due to monsoons, flood related issues, slowdown in construction during winters etc. , and start picking up from 3Q FY-11, in the wake of reconstruction activities. Overall, we expect local dispatches to remain flat during FY-11 and believe that the real impact of the increased demand from reconstruction activities will materialize during FY-12. We believe the cement prices have hit the ceiling for now and do not expect further increase in them and expect the recent price hikes to sustain for a relatively longer time than the one-step ahead, two steps back situation that prevailed throughout FY-10. Going forward, Fauji Cement’s capacity expansion, due in FY-11, of 2. 27 million tons, would create downward pressure on utilization levels. However, we expect capacity utilization levels to remain between 70% to 75% range. * Medium to Long Term We have a positive outlook for the local market on a medium to long-term basis. The rehabilitation work along with construction of dams will boost demand and possibly push prices upwards as cement manufacturers operate on higher and higher capacity utilization levels. Construction of dams seems inevitable given the power crisis and the recent flood. The Council of Common Interests (CCI) unanimously approved the construction of Diamer Bhasha dam on July 18, 2010, leading the way for the release of funds from the Asian Development Bank (ADB). The projected timeline for completion is stated till the end of 2019. Manufacturers estimate a total requirement of 9. 0 to 11. million tons cement for the project with annual demand in between 1. 0 to 1. 5 mn tons. While all northern manufacturers would directly or indirectly benefit from the project, we believe the big players such as Askari and Bestway would be the key beneficiaries with proximity to the project. 5. 9 Export Market We are pessimistic about the export dispatches during FY-11 owing to i) increased availabili ty of cement in the regional markets, especially after lifting of export ban in Saudi Arabia, ii) slowdown in construction in the Middle East and iii) local transportation problems ensuing from the flood. Therefore, we expect a decline of 10-15% in exports during FY-11. Our export price outlook remains flat around $45, keeping in view the competitive environment in the export market. During FY-10 exports to Qatar, Oman, UAE and Kuwait declined whereas exports to Afghanistan, Djibouti, Sudan, Sri Lanka and other African Countries increased, as shown in the chart. We expect the trend to continue going forward as cement producers penetrate further into the African markets. Source: TDAP 5. FINANCIAL ANALYSIS – CEMENT MAJORS 6. 10 Financial Analysis 6. 11. 1 Liquidity On 9M-FY10 basis, the top-7 cement players face a tight liquidity situation with Current ratio at 0. 71x, Quick ratio at 0. 63x, Cash Ratio at 0. 05x and an Operating Cash Flow ratio at 0. 16x. Among the Top-7, Attock Cement is most liquid with Current ratio at 2. 67x, Quick ratio at 2. 33x, Cash ratio at 0. 66x and Operating Cash Flow ratio at 1. 02x. Overall, the Top-7 Average liquidity ratios show a low ability to settle short-term financial obligations as well as finance additional sales without incurring further debt. 6. 11. 2 Financial Leverage Financial leverage (average) among the top-7 cement players is at 0. 1x, which seems moderate. Bestway, Maple Leaf and Pioneer Cement have financial leverage at 2. 32x, 3. 56x and 1. 64x, respectively, which is high. Lucky and Attock Cement have financial leverage in control, at 0. 35x and 0. 25x, whereas D. G. Khan Cement’s financial leverage stands at 0. 67x. The average Interest Coverage ratio is at 1. 04x, which means, on aver age, the cement players barely have enough earnings to meet their financial charges. Given the high financial leverage and low Interest Cover, we believe cement companies’ ability to take on further financing is highly subdued, with the exception of Lucky and Attock Cement. 6. 1. 3 Asset Utilization We have adjusted the Asset Utilization ratios to reflect the full year (extrapolated) sales by a 4/3 adjustment factor. The resulting ratios, fixed asset turnover at 0. 65x and total assets turnover ratio at 0. 45x, suggesting overall low asset utilization, point towards the capital intensive nature of the industry marred with low capacity utilization levels. Among the top-7 players, Lucky Cement seems to have the most efficient asset utilization with fixed assets turnover at 0. 90x and total assets turnover at 0. 75x levels. Lafarge Pakistan cement’s asset utilization ratios rank lowest among the Top-7, being 0. 3x and 0. 11x on a fixed and total assets turnover basis, res pectively. Lafarge’s extremely low asset utilization levels call for further investigation into the causes. 6. 11. 4 Profitability We have adjusted the Return on Assets (ROA) and Return on Equity (ROE) ratios to reflect the full year (extrapolated) sales by a 4/3 adjustment factor. The resulting ratios suggest moderate gross profitability and basic earnings power, at 21. 26% and 9. 68%, respectively. However the final profitability is extremely low at 0. 03% reflecting the sky-rocketing financial charges. Bestway, Maple Leaf, Lafarge and Pioneer have negative net margins at -6. 7%, -18. 33%, -24. 86% and -14. 38%. Attock Cement appears most profitable during the period under review, with Net margins at 13. 32% followed by Lucky Cement at 12. 02%. Both these players have managed to post decent net profitability partially due to higher retention prices in South, compared to North, and higher export contribution margins. During 9M-FY10, Maple Leaf, Lafarge and Pioneer Cement pos ted negative Basic earnings power at -3. 14%, -13. 94% and -10. 95%, respectively, which points towards the intense price war, especially in North, throughout the period under review. D. G. Khan cement has managed to post a decent EBIT margin, at 16. 91%, however, the financial charges, which amount to Rs. 1. 5 billion for 9M-FY10, have left only 3. 79% in net margin. 6. 11. 5 DuPont Analysis DuPont analysis is an expression which breaks Return on Equity (ROE) into three parts, profit margin, asset turnover and equity multiplier representing, the operating efficiency, asset utilization efficiency and financial leverage, respectively. Our DuPont analysis of the top-7 players suggests that the main reason behind the low industry ROE during the period under review has been low profitability. The price wars during the period under review, along with high financial charges have severely affected the ROE. Asset utilization is not too healthy either, but is moderate. 6. 11. 6 Conclusion Based on our financial analysis, we have a liking for Lucky and Attock Cement and feel that these are safe companies to lend to. D. G. Khan Cement seems to be under stress at the moment due to its current maturity of long-term debts, worth Rs. 4 billion (approx. ), and an O/S Forex loan of US$ 40 million (FY-09 carrying value Rs. 3. 5 bn), payments commencing June, 2011, therefore it is expected to go for re-financing arrangements with banks. However, strong sponsors’ support, good reputation, largest local and 2nd largest total market share, large portfolio of liquid investments worth Rs. 17 billion (approx. ), and Income from investments serve as strong mitigating factors. Bestway, Maple Leaf and Pioneer Cement have financial leverage ratios at 2. 32x, 3. 56x and 1. 64x levels which are certainly not sustainable. The DuPont suggests both profitability and leverage are a cause of concern for these companies. Lafarge Pakistan’s low profitability and poor asset utilization have greatly affected its financial results. Overall, we recommend caution for the above three players.