Effective financial leverage of cement company listing - reality and solutions

Abstract

Vietnam cement sector has been struggling through a double recession and oversupply of cement in the country during the 2011-2013 period. Thanked to the sharp increase in input prices, slow output, and out-of-reached capital market, listed cement companies saw a deep decline in their yearly profit. According to a survey by the State Securities Commission, these firms are facing clear challenges and showing strong tendency to use more debts. This paper finds that most firms are using loan to offset the shortage of capital, to increase the margin equity (ROE), or earnings per share. It also stresses the urgent need of capital and financial risks, as well as low capital efficiency of cement producers. The paper also suggested some measures to increase efficiency of these companies’ financial leverage.