Strategic Thinking Roadmap for Successful Chemical Engineering Industries

1. Strategic ThinkingRoadmap for Successful ChemicalEngineering Industries Jamal Almutair Kanz Al-Ebdaa Consulting and Training Center

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

4. 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

5. 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.

6. Managing Growth Sustainable growth rate G= PRAT

7. 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)

8. What is your roll in managing growth?

9. 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

10. Asset Turnover Asset turnover = sales ÷ asset Increasing capacity without adding more assets Chemical reactors Desiccants Heat exchangers Gas or liquid processing columns

11. 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

12. growth PRAT Profit Margin Asset Turnover Financial Leverage (net income/ sales) (sales/ assets) (assets/ SH’s equity)

13. Managing Growth There is no continuous growth, bur continuous improvement

14. Evaluating Investment Opportunities

15. Discounted Cash Flow Techniques A nearby penny is worth a distance dollar

16. 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.

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