"AN ANALYSIS AND EVALUATION OF THE BUSINESS ANDFINANCIAL PERFORMANCE OF ATHI RIVER MINING LIMITEDBETWEEN 1 JANUARY 2009 AND 31 DECEMBER 2011(TOPIC 8) Declaration of authorshipThis project is an original piece of work done by me. All work done is original and any borrowed workhas been cited, acknowledged and appropriately referenced.AcknowledgementsI wish to acknowledge my family and friends who supported me while doing this project. Iwould also like to appreciate my mentor, for the invaluable support and guidance given to me.Glossary of termsARM: Athi River Mining LimitedPESTEL: Political, Economic, Social, Technological, Environmental and Legal factors SWOT: Strengths, Weaknesses, Opportunities and ThreatsBCL: Bamburi Cement LimitedKES: Kenya ShillingsEBIT: Earnings before interest and taxationROCE: Return on capital employedEPS: Earnings per shareEAC: East African CommunityUS Dollar: United States of America dollarsKAM: Kenya Association of Manufacturers ContentsPART 1: PROJECT OBJECTIVES AND OVERALL RESEARCH APPROACH..................................... 4Introduction ............................................................................................................................................... 5Reasons for choice of topic ....................................................................................................................... 5Reasons for chosing athi river mining limited .......................................................................................... 5Background information ........................................................................................................................... 5Project objectives and research questions ................................................................................................. 6Overall research approach ......................................................................................................................... 6PART 2: INFORMATION GATHERING AND ACCOUNTING TECHNIQUES USED ......................... 7Sources of information .............................................................................................................................. 7Observations ......................................................................................................................................... 8Internet .................................................................................................................................................. 8Study texts and published material ....................................................................................................... 8Ethicalissues .............................................................................................................................................. 9Business and accounting techniques used ................................................................................................. 9Financial ratio analysis ............................................................................................................................. 9Limitations of ratio analysis .................................................................................................................. 9PESTEL analysis .................................................................................................................................... 10Limitations of PESTEL analysis ......................................................................................................... 10SWOT analysis ....................................................................................................................................... 11Limitations of SWOT analysis ............................................................................................................ 12PART 3: RESULTS, ANALYSIS, CONCLUSION AND RECOMMENDATIONS ............................... 12Results and analysis ................................................................................................................................ 13Ratio analysis .......................................................................................................................................... 13Revenue............................................................................................................................................... 13Profitability ratios ............................................................................................................................... 14Liquidity ratios .................................................................................................................................... 17Cash flow analysis .............................................................................................................................. 18Efficiency ratios .................................................................................................................................. 20Gearing ratios ...................................................................................................................................... 22Investor ratios ...................................................................................................................................... 23PESTEL analysis .................................................................................................................................... 23Political Factors .................................................................................................................................. 23 Economic Factors ................................................................................................................................ 23Social Factors ...................................................................................................................................... 24Technological factors .......................................................................................................................... 24Environmental factors ......................................................................................................................... 24Legal factors ........................................................................................................................................ 25SWOT analysis ....................................................................................................................................... 25Strengths ............................................................................................................................................. 25Weaknesses ......................................................................................................................................... 25Opportunities ....................................................................................................................................... 26Threats................................................................................................................................................. 26Conclusion .............................................................................................................................................. 26Recommendations ................................................................................................................................... 27Reference list .............................................................................................................................................. 27PART 1: PROJECT OBJECTIVES AND OVERALL RESEARCH APPROACH INTRODUCTIONI chose topic eight “Analysis of business and financial performance of an organization over a three yearperiod” This project focuses on the financial and business performance of Athi River Mining Limited for theyears 2009 to 2011.The main aim is to use both financial and business data available to evaluate the company’s current andpast performance as well as to assess its business strategic choices and position.REASONS FOR CHOICE OF TOPICThe topic earns an exceptionally high interest from me; this is because I have always been intrigued byfinancial and business performances of organizations. I have an innate desire to see how well or bad anorganization is doing, especially if it is a public interest organization.Another reason for choosing this topic is that it would help me refine and use the skills I gained duringmy study of the ACCA course. I am also hoping that it will benefit me in the other ACCA papers I amgoing to undertake in the near future.The topic is also in line with my career goals. I aim to be a financial and business consultant and thisproject will put heavy weight in my curriculum vitae as well as give me hands on experience which willbe an added advantage for me when seeking for a job.REASONS FOR CHOSING ATHI RIVER MINING LIMITEDI chose ARM as my research company due to various reasons. ARM has been in the mining industry andstock exchange for a number of years and every year they have been able to post better and improvedresults. However, I was very interested to see how the company has been performing over the last fewyears due to stiff competition, harsh foreign exchange rates and other adverse conditions. Another reason for choosing ARM was that one of its manufacturing plants is located near my residenceand therefore, I have got strong background information of the company. I have known the company,some of its products and other things for a number of years now. Also, since ARM is listed, someinformation like the financial statements are easier to obtain than if it was a private company.ARM is also involved in corporate social responsibility and that is one reason that pulled my attentiontowards it. I wanted to know how and what the company does to help the society.BACKGROUND INFORMATIONAthi River Mining Limited was founded in 1974 by Mr. H. J. Paunrana (ARM, 2011). It was listed in theNairobi Stock Exchange and ever since it has strived to become one of East and Central Africa’s leadingcement producer. It has also diversified into other business activities like the fertilizer industry andindustrial chemicals. ARM has also got a clinker production plant which is the main raw material forcement. The company has a number of plants in Kenya and has managed to move well into othercountries like Tanzania, Rwanda and South Africa(ARM, 2011). It is currently building the largest singlecement plant in East Africa in Tanga, Tanzania (ARM, n.d.).Its subsidiaries include: "