Premier Cement Corporation

Premier Cement Corporation

Group 4

Analysis

        Premier Cement Corporation started in 1964 by a group of contractors and engineers. Their local goal is to meet the local demands of cement. After seven years, the company experienced a pitfall in their income statement. Industry experts felt that the cement industry’s average is not as pleasing as it was in the previous years. Sales are increasing, however the cost of sales are also significantly increasing to the point that the sales and cost of sales do not differ that much. Equities of the cement industry are also decreasing, from 204 million (1970) to 181 million (1971), thus decreasing their net worth by 12.7%.

        In their operations, their supplier of raw materials, such as pyrite and gypsum, is the G.M. Gamboa and Company. Other material requirements are obtained through a contract with the same supplier who agrees to transport limestone and other materials at P3.60 per metric ton. There is also one distributor of their product which is the Premier Marketing Corporation. The payment is due 180 days after delivery to the distributing firms, but the credit period is extended to accommodate the said distributor. It can be noted that both the supplier and distributor have the same Board of Directors with Premier Cement Corporation which leads to conflict of interest.

Exhibit

Recommended Actions

1. The company should find other suppliers for their raw materials at a minimum cost; however it should be with good quality.

Advantages: The Company’s Cost of Sales would lessen thus increasing their profit margin. They can also cope-up with the losses that they incurred for the years 1971 to 1972. They can now compete with their competitors such as Builders, Inc., one of the leading firms in the industry.

Disadvantages: There might be a conflict of interest as other board of directors would not want to get other suppliers. Building relationships to other suppliers would also be hard for the company since their income statement is decreasing.

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