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Strategic Thinking Roadmap for Successful Chemical Engineering Industries. Jamal Almutair Kanz Al-Ebdaa Consulting and Training Center . Managing Growth. More growth is not always a blessing. Without careful financial planning, companies can grow broke. Managing Growth.

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strategic thinking roadmap for successful chemical engineering industries

Strategic ThinkingRoadmap for Successful ChemicalEngineering Industries

Jamal Almutair

Kanz Al-Ebdaa Consulting and Training Center

managing growth
Managing Growth

More growth is not always a blessing. Without careful financial planning, companies can grow broke.

managing growth4
Managing Growth

When actual growth exceeds sustainable growth for longer periods, management must:

Sell new equity, or

Permanently increase financial leverage, or

Reduce dividends, or

Liquidate marginal operations, or

Outsource more activities, or

Increase prices, or

Find a merger partner with deep pocket

managing growth5
Managing Growth

When actual growth is less than the sustainable growth rate, management should find productive uses for cash flows:

Reduce liabilities, or

Increase assets, or

Repurchase common shares, or

Buy growth by acquiring other companies for their potential growth.

managing growth6
Managing Growth

Sustainable growth rate

G= PRAT

managing growth7
Managing Growth
  • P is the profit margin
  • R is the retention rate (1- dividends payout ratio)
  • A is the assets turnover rate
  • T is the financial leverage at the beginning of period ( assets÷ SH’s equity at the beginning of period)
profit margin
Profit Margin

Profit margin = net income ÷ sales

Advise on reducing cost of goods

Reducing manpower( mechanizing)

Alternative cheaper feed stocks

Alternative cheaper additives

Optimizing operation processes to reduce waste to the flare systems

asset turnover
Asset Turnover

Asset turnover = sales ÷ asset

Increasing capacity without adding more assets

Chemical reactors

Desiccants

Heat exchangers

Gas or liquid processing columns

financial leverage
Financial leverage

Financial Leverage

A company increases its financial leverage when it raises the proportion of debt relative to equity used to finance the business ( using OPM).

Well done feasibility studies

slide12

growth

PRAT

Profit Margin

Asset Turnover

Financial Leverage

(net income/ sales)

(sales/ assets)

(assets/ SH’s equity)

managing growth13

Managing Growth

There is no continuous growth, bur continuous improvement

discounted cash flow techniques

Discounted Cash Flow Techniques

A nearby penny is worth a distance dollar

discounted cash flow techniques16
Discounted Cash Flow Techniques

Money has a time value because:

risk customarily increases with the futurity of an event

Inflation reduces the purchasing power of future cash flows

Waiting for future cash flows involves a lost opportunity to make interim investments.