Al Anwar Ceramic Tiles Company SAOG is an Oman-situated firm
Introduction: Brief history of the company
Al Anwar Ceramic Tiles Company SAOG is an Oman-situated firm dealing with the manufacture and distribution of ceramic tiles. The firm offers a wide range of product lines under the Al-Shams brand, such as floor, highlighters, walls, and border tiles in various distinct designs, colors, fabrics, and sizes. The company was established in 1998 with its planting facilities being at the Nizwa region. Al Anwar Ceramic Tiles Company SAOG is highly equipped with the competencies, expertise, and state-of-the-art machinery of the top Italian firms with digital printing machineries. During 1998, the company started with a single manufacturing line with the daily quantity production of 6000 SQM as it grew to 55,000 SQM. In the region, the firm holds the largest unique Third Firing Unit producing skirtings, decors, and listellos. The firm has continuously been exporting its products to more than 21 nations in Africa and the Middle East. With its listing in the Oman Stock Exchange Market, the company financial statements and models are provided for every fiscal period.
The Company Financial Statements for the last two years
Al Anwar’s financial statements are comprised of the balance sheet, income statement, cash flow statement, and the statement of stockholders Equity. In this report, only tabulated summaries of the last two documents for the two years are provided. An analysis of the balance sheet and income statements for 2018 and 2019 indicates that the Oman-based company is enjoying market dominance. However, there are adjustments the firm can make in its operations to reduce its costs as well as opportunities it can exploit to expand its returns.
Al Anwar’s Balance Sheet
For the fiscal period ended 31st December 2019, Al Anwar Ceramic Tiles Company SAOG total assets, liabilities, owners’ equity, and shareholders’ equity increased by 1.04%, 1.23%, 1.02%, and 1.04% respectively from the previous financial year ended as at 31st December 2018. As a result, the company’s financial status is continuously at balance for the last two accounting periods.
Al Anwar’s Income Statement
Company’s Summary of Cashflow
Al Anwar’s 2018 and 2019 statements of cash flow depict significant disparities in the firm’s operating activities, investing activities, and financing activities. The negative values of investing activities in the two years imply that the firm continuously invests even though the returns are below the expected rates of returns. In 2019 the amount from investment activities increased, indicating increased returns from investment activities. The same applies to the financing activities. Notably, on operating activities, the firm posted an increase from OMR 2,263.099 million to OMR 4,570.115 million.
Statement of Stockholders Equity
Environmental Factors
The firm’s environmental factors are comprised of global economic factors, regional economic factors, and national economic factors. Additionally, the competitive market profile of the industry is also covered in this section.
Global economic factors
In business operations, many firms face various environmental factors that affect normal operational activities, such as management, production, and sales. Al Anwar Ceramic Tiles company is an international company serving the global market. The firm engages in the exportation of its products, such as tiles and fabrics, among other products. It is also involved in the importation of various resources that are used in their manufacturing processes. As a result, the company faces multiple global economic factors, such as economic exchange rates. Some countries, such as those in Europe, have more stable currencies, thus costing the firm more when importing products from European nations. Unfavorable exchange rates affect the company’s profit margins hence may translate to low or no profits in the business.
Regional Economic Factors
Many nations found in the Arabia Peninsula region suffer from adverse economic integration conditions. Regardless of most countries in the Arabian Peninsula region depending on foreign trading, they have not yet developed their mutual trading relationship that will necessitate their movement within the entire region. Within the Arabia Peninsula region, there is insufficiency in sea and air transportation routes and also land inadequacy. The countries within the Middle East region are yet to build an impassive and robust relationship, hence acts as a barrier for foreign trading among countries.
National Economic Factors
In Oman, no one is entitled to personal income tax, and the highest corporate tax is 12%. Additionally, the overall tax burden is 4.2% of the gross domestic income since the government expenditure amounts to 46.1% of the nation’s output in the recent past. As a result, the government runs a deficit that will result in high corporate tax charges to companies for the payment of debts. In Oman, the supervisory environment for firms is unproductive; hence companies face significant obstacles in terms of bureaucratic procedures and complex requirements that attest for the employment of the Oman citizens.
Competitive Market Profile of the industry
Al Anwar Ceramics Tiles Company relishes a leading position in Oman while facing a few competitions from the local companies such as Al Maha Ceramics. Nevertheless, the firm faces significant competition in the GCC ceramics market, especially against RAK Ceramics Company, the top global and GCC player. Despite this competition, AACT uses its most sophisticated machines in its production of high quality and designed products that are sustainable and unique globally. The company also makes good use of the top technology competencies and expertise in their production and distribution hence making them withstand in the market as the leading manufacturer of ceramic tiles in Oman.
Profitability Analysis
Level 1: Return on Assets
Al Anwar Ceramics Tiles Company’s return on assets (ROA) stands at 4.83% as at 31st December 2019 fiscal year. ROA is a profitability ratio used to determine and evaluate the efficiency of a firm and the percentage earnings it achieves with regard to its total assets. ROA is calculated by dividing the net income by the total assets of the company. Al Anwar records a 5% ROA and is considered to be positive towards the firm’s efficiency since high levels of investment would imply low returns on investment.
Level 2: Profit Margin, Assets Turnover
As at 31st December 2019 financial period, the company recorded a 1.14% profit margin. This figure is computed by dividing the gross profit as of the 2019 fiscal period by the total revenue or sales of the same accounting year. Increased profit margin mainly shows the improvement of the company in both operational profitability and efficiency. Additionally, the asset turnover of AACT Company as at 31st December 2019 recorded at 0.47. Asset turnover is obtained by dividing the total sales or revenue of the firm by the average assets, where the average asset is calculated by adding the fixed and current assets by two. It shows how effective the company uses its assets to produce sales.
Level 3: Days A/R Turnover
With a 2.40 ratio of the accounts receivables turnover in the 2019 accounting year, Al Anwar Ceramics Tiles Company collects its average accounts receivables 2.40 times. Accounts receivables are mainly calculated in terms of days only by most of the companies.
ROCE Analysis
Level A: ROCE Computation
Return on capital employed (ROCE) measures the efficiency of the firm in generating profits from the capital employed and comparing it to net operating profit. Moreover, ROCE is computed by dividing the firm’s revenues before tax and interest by the capital employed. In AACT Company, the ROCE as at 31st December 2019 stands at 4.80.
Share Price analysis
For the last five years, the company has been facing a fluctuation of the share prices from 0.12 OMR to 0.17 OMR, with the current share price being at 0.17OMR. The number of shares has as well steadily been increasing in the same trend with today’s total traded shares being 35000 shares worth 0.144 OMR, thereby leaving a deficit of 296,213,680 untraded shares. Moreover, AACT firm’s principal shareholders are Al Jazeera Services Co. SAOG holding 36.69% stake shares and Damac Investment Company Kuwait owning 5.57% shares stake.
Dividend Analysis
Risk Analysis
Quick Ratio (Acid Test Ratio)
The quick ratio, also called the acid-test ratio, is a liquidity ratio that assesses the company’s ability to meet its current liabilities by using the nearest cash or liquid assets. AACT Company records a 6.30 acid ratio in the 2019 fiscal year. The firm is in a better position of meeting its financial obligations by instant liquidation of its assets in paying off its current liabilities. Quick ratio is calculated by dividing the sum of cash, accounts receivables and marketable securities by the current liabilities the firm has.
Working Capital Activity Ratio
However, the working capital activity ratio also referred to as current ratio, is also a liquidity ratio but in this case; it assesses the firm’s ability to meet its current liabilities by paying off using current assets. AACT records a working capital activity ratio of 7.71where this is achieved by dividing the total current assets of the company by its total current liabilities.
Long-Term Solvency Risk-Debt Ratios
Long Term Debt Ratio
As at the 2019 financial year, AACT records a long term debt ratio of 1.28. Long term debt ratio, also known as long term debt to capital ratio, is achieved by dividing the company’s long-term debt with its total available capital. It majorly explains the firm’s monetary leverage.
Debt/Equity Ratio
Additionally, the debt-to-equity ratio of the firm is at 1.30, suggesting the proportion of equity and debt that the firm utilizes in financing its assets. It is computed by dividing the firm’s total liabilities by its total equity.
Long Term Debt/ Asset Ratio
Consequently, the company’s long term debt to total asset ratio shows its ability and financial position to reach its financial necessities. AACT’s long term debt to asset ratio is recorded at 0.01, and it is achieved by dividing the long term debt by the total company’s assets. It also denotes the firm’s percentage of assets financed with loans and other financial methods in the previous fiscal periods.
Multiple Discriminant Analysis
In the normal operations of a company, various activities are involved, which may include high risks that may lead the company to bankruptcy as a result of large monetary input. Altman’s Z- Score model brings the concept of measuring and analyzing the company’s possibilities of going bankrupt. Z-score majorly relies on the five main financial ratios, such as the efficiency, profitability, capital ratios, as it also depends on the 10-K report for some more information for its effectiveness and efficiency. Z-Score is computed by a complex formula; ζ = 1.2A + 1.4B + 3.3C + 0.6D + 1.0. The Z-Score for the years are as follows:
References
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Morningstar. (2020).Al Anwar Ceramic Tiles. Morningstar. Co.SAOG.morningstarhttps://www.morningstar.com/stocks/xmus/aact/dividends
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The Heritage Foundation. (2020).2020 Index of Economic Freedom: Oman. The Heritage Foundation. https://www.heritage.org/index/country/oman
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