Case Study 3 Essay

1060 Words May 27th, 2015 5 Pages
Case study 3
Lafarge-Aget Heracles Case

a. Use Exhibits H and I, estimate and evaluate ratios for ROI, Profitability, liquidity, and financial strength.

ROI is 5.18 in 2003 and 5.42 in 2004. It is slightly increase. The investment gains high profit to investment cost. Compared to 2003, the net income also growth 4.6 percent in 2004 since the mainly part is interest deduction. The sale revenue decreases 3,344 EURO, but the cost has a higher reduction by 4,400 EURO. Thus, its profitability essentially unchanged but still strong. Aget’s quick ratio is 2.4 in 2004 and 1.64 in 2003. Current ratio is 2.97 in 2004 and 2.07 in 2003. From the quick ratio and current ratio, Aget’s liquidity is very good. In 2003, it is nearly the ideal, but in
…show more content…
How might such an increase affect price competitiveness?

Aget can reduce its price since its cost decrease and other companies do not have such cost efficiencies. Thus, Aget’s price must lower than its competitors. Cement or concrete buyers enjoy guaranteed low price, so they will buy more commodities from Aget since it has lower price, which means Aget has stronger competitiveness than other companies.

4. Assuming that Aget’s sales by 2008 will have grown at the forecasted global market rate increase of 22.6% over those of 2004, what will be its production and utilization rate?

From the Exhibit D and E, in 2008, the sum of non-residential and non-building of total market is 71.96 mmt. If Aget’s sales by 2008 will have increased 22.6 percent over the 2004, the total market share of Aget is 34.2 percent. Thus, the sum of Aget could be around 24.6mmt. But in Exhibit E, the sum of non-residential and non-building of Aget is only 9.37mmt. So if the growth of 22.6 is true, its utilization rate will be 2.63.

c. If Aget does capture 20% market share in the markets of Lebanon, Kuwait and UAC, as estimated, at what sales – units and revenues, will it break-even? What is the B/E market share?

If Aget capture 20 percent market share in the Lebanon, Kuwait and UAC, it will sell 1.94mmt cement. In the reading, its expected investment will be $6.3 million, which means if its price is equal to $3.25 per ton, Aget will

More about Case Study 3 Essay

Open Document