Internship Report

1.0 CORPORATE OVERVIEW

CIMA GROUP

Cement Industries of Malaysia Berhad (“CIMA Group” or “the Group”) has been involved in the manufacturing and distribution of cement and related activities since 1975. The Group effectively combines people skills and technological capabilities to become the third largest cement manufacturer in Malaysia, enjoying approximately 18% of the country’s cement market share. The Group also ventures into international markets, such as Singapore, Indonesia and Middle East.

THE TEAM

In the Quarrying and Ready mixed Concrete Division, Cimaco Quarry Sdn Bhd provides the required limestone for the Manufacturing Division, whilst Unipati Concrete Sdn Bhd manufactures the ready mixed concrete for sale in the Peninsular Malaysia. In the meantime, Pemasaran Simen Negara Sdn Bhd as the Trading Division of the Group, co-ordinates customer-oriented services such as the marketing, selling, and distribution of the Group’s cement, under the brand names of ‘Blue Lion’ and ‘NS Cement’.

THE TEAM DIVISIONS

The Group is divided into three main divisions comprising Manufacturing, Quarrying and Ready mixed concrete, and trading. Negeri Sembilan Cement Industries Sdn Bhd leads the Manufacturing Division with its cement plants in Bukit Ketri, Perlis and Bahau, Negeri Sembilan. The two plants combined, make up a total clinker production capacity of 2.8 million tonnes per annum and a total production cement capacity of 3.4 million tonnes per annum, comprising Ordinary Portland Cement (“OPC”), Type II OPC and Masonry Cement and Portland Composite Cement (PCC).

PLANTS

The Group commands a strong market presence with two strategically located plants in the north and south of Peninsular Malaysia. Moreover, it’s extensively developed distribution networks of marketing offices and packing depots nationwide, further strengthens the Group’s standings, given the more efficient means in reaching its customers CIMA recognizes that satisfying customer needs is crucial to its well-being. As such, CIMA is continuously seeking new and improved ways of producing and delivering its product and service exceeding customer satisfaction. Furthermore, CIMA believes that establishing smart partnership will help in fulfilling its strategic intent. It is going to involve the sharing of risks and rewards, of technology and innovation, leading to the ultimate creation of synergy and competitive advantage.

1 Industrial Training Final Report (NSCI Sdn. Bhd.)

1.1 CIMA LOGO

THE LOGO & ITS PHILOSOPHY

The triangle signifies togetherness. CIMA group is a solid company, whereby the base of the triangle represents the workers that support the senior management at the top whilst the top management of the company oversees everybody's welfare and interest. It also means that they are respect and work closely with each other whilst following the chain of commands. They work together to reach a common goal

CIMA CORPORATE COLOUR

Blue and Yellow are the colours of Perlis flag. They incorporated the colours in their logo because the company was established in Perlis. Blue represents courage and perseverance. It is those two qualities that make them who they are today and excel in the future. Yellow represent honour and of the highest standard. They take pride in their products because they know that how important they are in their customers' everyday lives. From the buildings that they work in, to bridges and schools that their children use everyday, to impressive structures like KLIA and KLCC, people depend on the quality of their product.


1.2 MISSION, VISION AND VALUE OF ORGANIZATION

MISSION

To be a producer of high quality cement

To produce high grade-ready mixed and concrete product

To produce concrete products and cement based building materials

To deliver innovative solutions, high quality of cement and concrete to construction

industries

VISION

To be one of leading construction and building materials in the region

VALUE

Integrity

Sincerity

Teamwork

Passion for success

(4Es + 1P)


1.3 CIMA BRANDS

CIMA Group has produced some type of cement. The brand is based on the quality of the product. There are 3 type of brand such as below:

Blue Lion Cement

Ordinary Portland cement (“OPC”) Type I is normal, general-purpose cement suitable for all uses. It is used in general construction projects such as buildings, bridges, floors, pavements, and other precast concrete products. It complies with MS522 as well as BSEN 196. The OPC Type I cement produced by CIMA is packed under the brand name “Blue Lion” Cement. The product is available in 50kg and in bulk form.

Blue Lion Masonry Cement

Blue Lion Masonry Cement - complies with MS794 and is use for plastering purposes. It is widely use in plastering of wall, beam, etc. in various type of buildings and structures. The masonry cement is not intended to be used in load bearing structure due to its low strength characteristic. It is available in bags of 50kg.


Twin Lion Cement

Both Blue Lion OPC Type I and Blue Lion Masonry cement is being tested based on accredited

standard under the MS ISO 17025 requirements in order to ensure product of highest quality is

delivered to the customer.

(Refer to Diagram 1: CIMA Quality Statement)


2.0 CORPORATE STRUCTURE


2.1 ORGANIZATIONAL CHART NS PLANT(DONE)


2.2 ORGANIZATIONAL CHART FINANCE (DONE)


2.3 BOARD OF DIRECTOR

EN. ABDUL KADIR MD KASSIM

(Chairman)

Abdul Kadir Md Kassim was appointed to the Board of CIMA Group on 23

April 2009 and he is also a board member of UEM Group. He is a member of

the Audit Committee of the Company. Kadir holds a Bachelor of Laws degree from the

University of Singapore. He served in the Malaysian Administrative and Diplomatic Service and

in the Judicial and Legal Service between 1966 and 1973, holding various positions.

He is currently the managing partner of Messrs Kadir, Andri & Partners. He is also a Director of

UEM Group Berhad (formerly known as United Engineers (Malaysia) Berhad), Proton Holdings

Berhad, Suria Capital Holdings Berhad, Ho Hup Construction Company Berhad, TIME dotCom

Berhad, Sino Hua-An International Berhad, Petroliam Nasional Berhad (Petronas) and a few

private limited companies, including being Chairman of the Committee of Labuan International

Financial Exchange.

DATO' CHE HALIN MOHD HASHIM

(Managing Director)

Dato’Che Halin was appointed as the Managing Director of Cement Industries

of Malaysia Berhad (CIMA) on 1 July 2006. He holds a Bachelor of Science in Mechanical

Engineering from the University of Leeds, Yorkshire, UK and a Masters in Business

Administration from Ohio University, United States of America (USA).Prior to joining the UEM

Group, he worked with several leading banking and insurance companies namely, MIDF Berhad,

Affin Merchant Bank Berhad and Sime AXA Assurance Berhad. He started his career in the

UEM Group in 1997, where he held various positions within the TIME Group of Companies till


December 2005. He was then transferred to CIMA and was appointed as Chief Operating Officer

in December 2005 and was subsequently promoted to Chief Executive Officer in January 2006.

DATO’ IZZADDIN IDRIS

(Non-Independent Non-Executive Director)

Dato’ Izzaddin Idris was appointed to the Board of CIMA Group on 7 July

2009 and he is also a Group Managing Director and Chief Executive Officer of UEM Group

Berhad. He has over 20 years experience in the field of investment banking, financial and

general management.Dato’ Izzaddin holds a Bachelor of Commerce Degree (First Class Honours

in Finance) from the University of New South Wales, Australia and is a member of CPA

Australia and Malaysian Institute of Accountants. After graduating in June 1985, Dato’ Izzaddin

served at a local merchant bank ( Malaysian International Merchant Bankers Berhad) for almost

11 years which included a 3-year secondment in the late 1980s to Barclay de Zoete Wedd

Limited, a London-based investment bank and a subsidiary of Barclays Bank PLC then.He has

served on the Board of Proton Holdings Berhad, and is currently a Director of Kumpulan Wang

Persaraan (Diperbadankan) since it was corporatized. In addition, Izzaddin currently represents

Tenaga on the Board of several subsidiaries and investee companies including 2 independent

power producers in Malaysia (Teknologi Tenaga Perlis Consortium and Jimah Energy ventures)

as well as Shuaibah Water & Electricity Company, the USD2.5 billion independent water and

power project in the Kingdom of Saudi Arabia.

PN. LILA AZMIN ABDULLAH

(Non-Independent Non-Executive Director)

Puan Lila Azmin Abdullah was appointed to the Board of CIMA Group on 4

December 2009 and she is also a Senior General Manager, Corporate Finance

in UEM Group Berhad. She graduated from University of Warwick, England with a degree in

Accounting and Financial Analysis (BSc Honours) and is a fellow member of Association of

Chartered Certified Accountants (ACCA). Prior to assuming her role at UEM Group, she was the


Vice President of Corporate Finance at Axiata Group Berhad. Before that, she was heading the

project and Corporate Finance Department at Malakoff Corporate Berhad.

ROZAHAN OSMAN

(Chief Financial Officer)

Rozahan Osman, age 44, holds Chartered Certified Accountants (ACCA),

Certified Management Accountant (CMA) and Chartered Financial Analyst

(CFA) qualifications. He joined the company on 1 July 2007 as Head of Finance and Corporate

services and was subsequently promoted to Chief Financial Officer position on 1 January 2008.

He has extensive experience in financial and cost management for large companies and prior to

joining CIMA he has served various companies such as Ernst & Young, Malakoff Berhad,

Magna Prima Berhad and Malaysia Marine and Heavy Engineering Sdn Bhd. He is presently in

charge of finance, performance management and business development functions for CIMA

Group of Companies.

KHAIRIL ANWAR ABD. HAMID

(Senior General Manager Marketing & Managing Director's Office)

Khairilanwar bin Abdul Hamid, graduated with Bachelor of Accounting, Second

Class Honours from Eealing College of Higher Education, London, UK. He joined

Time Reach Sdn. Bhd. a subsidiary of UEM Group as Senior Manager, Operation Support

Services on 1.3.2003 and was subsequently transferred to CIMA as General Manager, CEO’s

Office on 1st March 2006. He had served various companies such as Price Waterhouse, Sime

Darby, Sime Axa Assurance Berhad and Prudential Assurance Malaysia Berhad prior to joining

UEM Group. He presently heads the Marketing and Distribution of CIMA Group of Companies.


CHOW KIAN CHONG (Head of Group Technical Support

Negeri Sembilan Cement Industries Sdn Bhd)

Mr Chow Kian Chong, graduated with Bachelor of Science (Honours) in

Mechanical Engineering from Portsmouth Polytechnic, England. He joined

CIMA on 16 September 1980 as Mechanical Engineer and since then has held various positions

including heading the Research & Development Department. He was appointed the Plant

Manager of NSCI, Perlis Plant on 1 October 2006 and was subsequently promoted to Senior

General Manager, Perlis Plant on 1 January 2007.He is currently the Head of Technical Support

for Plant and Quarry for CIMA Group of Companies.

GEORGE DECRUZ

(Head of Group Cement Manufacturing Negeri Sembilan Cement Industries Sdn Bhd)

Mr George DeCruz, graduated with Honors Degree in Chemical Engineering

from Universiti Malaya in 1983 and Masters in Science Management from Universiti Utara

Malaysia in 1997 with award of Vice Chancellor’s Gold Medal. He joined CIMA in 1983 as

Assistant Engineer and has been in the cement production field for the last 26 years. He was

appointed the Plant Manager of NSCI Bahau Plant in 2004 and was subsequently promoted to

Senior General Manager, Bahau Plant in 2005. He is currently the Head of Cement

Manufacturing for CIMA Group of Companies.


NOOR HARLINA ISMAIL

Company Secretary

Upon graduation, Harlina was exposed to the business world as an external

auditor in the manufacturing and banking sector for four years. She then

moved on to be in the manufacturing companies as an accountant and has been in the field of

finance and accounting in CIMA Group for eleven years. Concurrent to the position as the head

of finance, in 2002, she was appointed as the company secretary of CIMA Group until present.

In 2008, she gradually moved from Finance to the field of Corporate Communications while still

holding the post as Company Secretary in CIMA Group of companies. She is currently the Head

of Group Support Service division which is in charge of Corporate Communications, Company

Secretarial matters as well as the liaison between the Company and the lawyers for all legal

matters in the Group.

AZIZ ABAS

(Group Procurement)

Aziz bin Abas, age 48, graduated with a Certificate for Foreign-Going

Shipping Engineer (Motor). He had served in various companies as Shipping

Engineer, and was with MISC for 6½ years and as International Technical Coordinator at MSE

Pasir Gudang, Johor for 2 years. He is a Registered and Certified Safety and Health Officer for

the Department of Occupational Safety and Health (DOSH) and a Registered Competent Health

and Safety Trainer with the Construction Industry Development Board (CIDB). He joined CIMA

on 13 September, 1990 as the Mechanical Engineer and since then has lead several departments

including as Assistant Manager of the Mechanical Department (1997- 1998) , Acting Safety and

Health Manager (1998-2000), Senior Manager of Safety and Health (2003-2005), and Head of

Personnel/Administration Department (2005-2008). He is presently the Head of the Group

Procurement.


ZOLKEFLI DAUD

(Group HR & Admin)

Zolkefli bin Daud, age 53, graduated from the Royal Military College in 1976

and served the military for 17 years and left with the rank of Major. Since

then, he joined Plus Berhad in 1993 as the Head of the Human Resource Department, which

oversaw two sectors, Industrial Relations and Compensation & Benefit. He received his Diploma

in Industrial Relations from the Malaysian Employer Federation (Persekutuan Majikan-Majikan

Malaysia) in 2002. In 2004, he lead the Human Resource Department for Teras Teknologi Sdn.

Bhd. Having had vast experience in the field of Human Resources, he joined CIMA as the Head

of Group Human Resources in 2007 until the present day. Apart from implementing the Group

and company policies and procedures, he is also responsible for planning, executing and

controlling all the Human Resource functions of the Group, in line with the Group business plan.


3.0 JOB DESCRIPTION

Chart of accounts

IntroductionRelates to policies for the coding and classification of accounting data for posting into accounting system. It facilitate identification of expenditure to the respective cost centres or general ledgers.

PurposeTo establish effective guidelines that will ensure all account codes or general ledger codes are valid combination and properly use in recording accounting transactions. These policies will be recorded as part of the chart of accounts management.

Policies

1. The chart of accounts is adopted from the Immediate holding Company i.e. Cement Industries of Malaysia Berhad. It was designed initially inline with the requirements of the Ultimate Holding company i.e. UEM World Berhad.

2. The coding system and classification of accounts are as follows:

XXXX XXX XXXX X XXXXX

Cost Centre Activity Code Product Code Cost BehaviorExpense Element

(Refer to Table 1 for the above coding system)

3. Any amendments to reflect the changes in operation and accounting requirements are forwarded to the immediate holding. The Group’s System Accountant will do the amendments.

4. Allocation of the correct coding system in all source documents such as purchase requisition, warehouse requisition, work order, journal and others is vital important. The accounts staff and other staff involve in the collection, assembly and processing of accounting transaction should be adequately familiar with the use of coding system.

5. The Finance Department is liable / responsible to educate the end users and Head of Departments on the correct allocation coding system and implication of the wrong account codes.

6. Any uncertain relating to the coding system should be referred to the Accounts Executive or Head of Finance.


Coding System

a) Cost Centre The cost centre is use for grouping of accounts responsibility reporting. The code reflects the organization’s responsibility reporting structure and is made up of the first two (2) numerical characters. Examples of cost codes are as follows:

From To Description

1100 1116 Human Resources

1200 1211 Management Information System

1300 1312 Finance Corporate

2100 2615 Plant Division

b) Activity Code The activity code is use to reflect the nature of activity for each of expenditure incurred.Examples are as follows:

Code Activity Description

100 Process300 Non-Process210 Maint-Mechanical220 Maint-Electrical230 Maint-Instruments240 Maint-General


c) Product Code The Product code is use to facilitate the classification of expenditure which has been incurred to the respective product. Examples of Product code are as follows:

Code Description

0000 Non-product

1000 Limestone2000 Raw Meal3100 Clinker3200 Clinker purchased

4100 Ordinary Portland Cement – Bulk4200 Ordinary Portland Cement – Bag4300 Purchased OPC5100 Masonry Cement – Bagged6100 Blue Lion Bag6200 NS Cement Bag

d) Cost behavior The cost behavior is use to reflect the behavior of expenses for each of expenditure incurred. Examples of cost behavior are as follows:

Code Description

0 Selling Expenses1 Variable Cost2 Manufacturing Fixed Cost3 Overhead4 Depreciation5 Revenue


e) Expense Element The expense element is use to express the type of expenses incurred. It can be illustrated as follows:-

From To Description

41000 41999 Sales Turnover

42000 42999 Other Income

51000 51999 Raw Materials Cost

52001 52999 System Generated GL

53000 53999 Transport Expenses

61000 61999 Staff Compensation

62000 62999 Benefit in kind

63000 63999 Traveling expenses & Entertainment

64000 64199 Office Expenses

65000 65099 Maintenance cost

65100 65299 Utilities & Services

66000 66199 Depreciation charges

67000 67999 Misc. Expenses

68000 68999 Misc. Fees

69000 69999 Misc. Interest charges


f) GL codes The GL code is used to classify the accounting data for posting into integrated system.The GL code is as follows:-

From To Description

11000 11930 Fixed Assets

12000 12100 Allowance for Depreciation

13100 13899 Inventory

13900 13999 Inter-District accounts

14000 14011 Trade Debtors

14012 14599 Non-trade debtors

15000 15199 Deposits & Prepayments

15200 15299 Fixed Deposits & Placements

15300 15390 Cash & Bank balances

15400 15499 WIP Access Road Project

16100 16199 Investment in subsidiaries

16300 16399 Advanced to / (from) subsidiaries

16500 16799 Investment in associates

16801 - Preliminary Expenses

16802 - Rights issue expenses

16803 - Shares issue expenses

16804 - Deferred expenses

16900 - Goodwill

21000 21999 Trade Creditors

22000 22999 Other Trade creditors

23000 23299 Borrowing liabilities


Inventory

IntroductionDeals with the policies and procedures that relate to the maintenance of a perpetual inventory record, valuation and recording of inventory in the integrated general ledger system.

PurposeTo establish effective guidelines that will ensure the inventory record in the integrated general ledger system is reflecting the current inventory level and accurately valued in accordance with the Financial Reporting Standard and policies adopted by the Group.

Responsibility

1. Accounts Managera) Review reconciliation between the integrated system general ledger and the

raw materials stock cards and Consumables Spares Report generated by Store Department.

b) Review and approve Cost of Goods Sold Schedule (COGS)

2. Accounts Executivea) Approve and post Journal entry to update the system’s raw materials general

ledger.b) Generate Cost of Goods Sold Schedule (COGS) and calculate the value of

Work In Progress and Finished Goods on a weighted average basis.c) Prepare MPJ to update the system’s general Ledger for WIP and FG.

3. Accounts Assistanta) Update raw materials stock cards based on the suppliers invoice, posted

receiving and the Monthly Production Report.b) Prepare Journal entry.c) Prepare reconciliation between raw materials general ledger and Stock Cards.d) Generate Monthly Inventory Issues Report (R,CMR17AA) and Monthly

Inventory Movement Report (R,CMR17AB) for Consumables spares.e) Reconcile the monthly balance between Consumable Spares GL and the

Consumables Spares Report generated by Store Department.

4. Store Department


With the integrated system being implemented, the accounting transaction for consumables spares general ledger is generated by Store Department via Warehouse Management Module. The Store Department responsibilities are as follows:-

a) To post the receiving, issuance and other movements of Consumables Spares.b) To generate the manual Consumable Spares Report based on the Monthly

Inventory Movement Report (R,CMR17AB).

Frequency

Item Description Frequency

1 Monthly Production Report Monthly

2 Raw Materials Stock Cards Monthly

3 Standard Raw Materials Journal (SRMJ) Monthly

4 Production Statistic Journal (PDNJ) Monthly

5 Electricity Consumptions Schedule (ECS) Monthly

6 Standard Electricity Journal (SNEJ) Monthly

7 Monthly Inventory Issues Report (MIIR) Monthly

8 Store Requisition Journal (ISS) Daily

9 Monthly Inventory Movement Report (MIMR) Monthly

10 Cost of Goods Sold Schedule Monthly

11 Stock Movement Journal (SMJ) Monthly

12 Reconciliation’s (Production Materials and Spare Parts) Monthly

(Refer to Appendix 1, Appendix 2, Appendix 3, and Appendix 4)

Distribution


Item Description Distribution

1 Monthly Production Report (MPR)

Filed in monthly accounts’ file

2 Raw Materials Stock Cards

3 Electricity Consumptions Schedule (ECS)

4 Reconciliation’s (Production Raw Materials And Spare parts)

5 Cost of Goods Sold Schedule

6 Manual Journal Entries (MPJ)

7 Monthly Inventory Movement Report (MIMR) Filed in monthly Store GL’ file

Policies1. Inventories are measured at the lower of cost and net realizable value.

2. Cost of inventories is based on the weighted average cost and includes overheads expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.

3. In the case of work in progress, manufactured inventories, finished goods the cost includes an appropriate share of production overheads based on normal operating capacity.

4. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and selling price expenses. Consumables are stated at cost.

Procedures Flowchart

(Refer to Appendix 5)

Procedures1. The inventory is classified into 3 categories:-

Raw Materials Work In-Progress & Finished Goods Consumables Stores


Raw Materials

a) At each monthly closing of accounts, the Accounts Assistant will update the raw materials stock cards. Stock Card is a schedule used to record the quantity and value of each raw material received by Store Department and consumed by Production Department during the month

b) The Monthly Production Report and Raw Materials Incoming Report are of vital in updating the stock cards. The Monthly Production Report shows the quantity of raw materials received and consumed during the month. While, the Raw Materials Incoming Report shows the quantity of materials by Supplier’s Purchased Order.

c) The quantity disclosed in the Monthly Production Report is verified against the Raw Materials Incoming Report to verify the accuracy of quantity received. Any disputes are inform directly to Production and Store for corrective action promptly.

d) Cost of raw materials is calculated on a weighted average basis. The cost of consumption and the stock balance at any point of time are automatically calculated as follows:

Cost per Unit =Balance B/F + Receipt (value)

Balance B/F + Receipt (Quantity)

e) All particulars in the stock card such as date, period and Purchased Order should be changed to reflect the latest current period transactions.

f) For raw materials which was fully received and posted into the integrated system, the particulars is extracted directly from the system by reviewing the respective general ledger.

g) If the materials were physically received at the plant but un-posted in the system, accrued accounting is implemented. Basis of the accruals are the un-posted quantity received multiply with the reasonable price in the Purchased Order (PO) or Purchased Requisition (PR) which available.

h) The completed stock card, attached with the Raw Materials Incoming Report and Monthly Production Report is submitted to Accounts Executive. The major concern would be the closing stocks and the vitality of unit cost.


i) After amendments are being done, Account Assistant will prepare the raw materials incoming journal i.e. accrued transaction and consumption journal.

j) The Accounts Executive has to approve the Raw Materials Incoming Journal and subsequently check the available stock in GL is in accordance with the Stock Card disclosure. Then, the Materials Consumption journal is posted into the system.

k) The Accounts Assistant has to reconcile the raw materials balance as per integrated system GL and the stock cards at each month if there are disputes. The reconciliation has to be received by the Accounts Manager and looked into disputes promptly.

Work-in-progress (WIP) & Finished Goods (FG)

Work-in-progress (WIP)The cost of WIP is calculated on the weighted average basis. The costing is done in the Integrated System via a Report-writer facility (the program) formatted by the Accounts Manager (referred to as Cost of Production Schedule-COPS) and it’s linked to the General Ledger. There are two stages in WIP:-

i. Raw Mealii. Clinker

1. Raw meal

i) Raw meal is actually a mixture of the following crushed raw materials:-

Raw Materials Proportion (%)

Limestone 70

Shale & Mining Sand 15

Iron Ore & Laterite 15

ii) In the first part of the COPS for Raw Meal, the program extract the quantity and value issued of the above raw materials together with the Electricity consumed at Raw Mill area during the month.

Unit cost/MT =Total cost as above


(For the month) Total quantity or raw materials (Quantity)

iii) The second part of the COPS computes the weighted average cost per metric tonne of raw meal as follows:

Description Quantity Amount (RM)

Balance B/F XX XX

Production Cost XX XX

Available Raw Meal A B

Weighted average unit cost per metric tonne of raw meal = B/A

iv) The program automatically generates the value of raw material issued to clinker production i.e. Kiln cost centre based on the quantity issued to Kiln and weighted average unit cost.

v) The program at each month end also calculates the quantity and value of the Raw Meal closing stock at Raw Mill cost center.

2. Clinker

Clinker is the result of heating raw meal. Besides heating the raw meal to bond them together, crushed coal is also injected into the mixture.

Approximately 120 kg of coal is added to 1 tonne (1000 kg) of clinker.


The residue of coal burnt i.e. ash, is approximately 12% of actual coal injected.

The total residue of coal to clinker is 120kg * 12% = 1.44% to every tonne of clinker produced.

Due to the small portion and the nature of ash, the weight of coal is ignored for valuation purposes.

The COPS format for on clinker is similar to that of raw meal.

Raw meal issued from Raw Mill is picked by the integrated system. The quantity is reduced by a factor of 1.57 i.e. 63.7% of raw meal produced.

This is due to normal loss of moisture from limestone in which 1.57 tonnes of raw meal would generate approximately 1.0 tonne of clinker.

Cost of raw meal is based on the weighted average cost of raw meal issued from Raw Mill.

Other direct costs are picked up by the program such as the values of electricity, coal, fuel oil, alternative fuel, and clinker purchased consumed during the month.

a. Firebricks are red bricks used to line the kiln (rotating cylinder to heat the raw meal). The firebricks are changed when production stops i.e. twice a year in March/April and September/October. The cost of firebricks issued is apportioned to its useful life of six month. Accounting entries are:

Issue of firebricks from store

Dr. Sundry Prepayment 100-XXXX-15104-3100

Cr. Inventory – Firebricks 100-XXXX-13611-3100

Monthly allocation of firebricks

Dr. Cost of production 100-XXXX-51340-3100

Cr. Sundry prepayment*1/6 100-XXXX-15104-3100

b. A portion of fixed production cost is included in this cost centres it is near completion stage and work was involved in the processing. Total fixed cost for the month is automatically picked up by the system by the aggregation of all accounts code 100-2XXX-6XXXX-0000. Fixed production cost is apportioned at fixed rates of 67% to WIP (clinker) and 33% to Finished Goods. Total cost and unit cost per metric tonne are calculated by the program.


c. The calculation of the weighted average cost for clinker is similar to that of raw meal. The program automatically generates the value of clinker issued to the Finished Goods cost centre based on the quantity issued and the weighted average unit cost, the quantity and value of the clinker stock balance at Kiln cost centre are also calculated by the program.

d. The Accounts Executive has to approve the journal entry entered by the Accounts Assistant before the RGLS can be updated. In order to approve the journal entry, he ahs to key in his user name, password and then execute the posting after he has reviewed the journal entry from the RGLS.

Finished Goods (FG)

There are two kinds of finished goods :

Masonry Cement – rough texture to plaster walls, etc. Ordinary Portland Cement – fine cement

In this process, 94% of clinker is mixed with 4% gypsum (to slow down solidification) and 2% limestone. The mixture is crushed and the result is cement.

COPS for FG is similar to WIP COPS. Calculations are the same and there is no normal loss in this process. Hence, total costs are clinker issued, gypsum, limestone, cement purchased and 33% of fixed costs. The values and quantities are picked up from the RGLS and the month end valuation is posted via journal entry into the RGLS.

Goods-in-transit

Goods-in-transit account is printed from the RGLS monthly by the Accounts Assistant and each transaction is traced to source document to ensure correct posting and that goods-in-transit paid are reversed out into the respective inventory accounts.


Electricity

Electricity cost is inventorised under WIP and Finished Goods. Based on Electricity Consumption Report from Electrical Department monthly, the Accounts Executive keys in power consumed in kilowatt hours (KWH) according to various cost centres, range used, unit cost per KWH for each range and production quantity for various cost centres into Electricity Consumption Schedule (ECS) – TNB’s readings are used. ECS is a separate spreadsheet program from the RGLS. This report is formatted by the Accounts Manager and is similar to Lotus 123.

Unit costs for electricity are standard based on the range used. The present rates used are:

On peak load in KWH * 15 sen per unit

Off peak load in KWH * 7 sen per unit

Maximum Demand in KWH * RM15.00 per unit

------------------------------------ -------------------------

Total consumption in KWH Gross value

- Rebate (@10%)

-------------------------

Net value

==============

Cost per KWH = Net value/Total consumption

The ECS then values each cost centres electricity consumption.

Based on the ECS, the accounting entries are updated via Standard Electricity Journal (SBEJ). Accounting entry is:

Dr. Production Cost Centres 100-22XX-51170-XXXX

Non-Production Cost Centres 100-1XXX-65120-XXXX

Cr. Provision for Electricity 100-1312-22313-0000


Limestone

a. Every month, a copy of Cimaco Quarry Sdn Bhd’s (CQ) Production Report accompanying CQ’s invoice is received by the Accounts Assistant. The quantity and value is posted into RGLS by the Accounts Supervisors.

b. Royalty on limestone consumed has to be included as a direct cost in the electronic stock card. The Accounts Assistant has to input the estimated rate, currently at 51 sen per metric tonne of limestone consumed.

Royalty cost = Quantity per material * RM0.51

Closing of Accounts

IntroductionRelated to the policy and procedures for closing of monthly accounts.


PurposeTo establish effective guidelines that will ensure the closing of accounts is accurately executed in line with the Financial Reporting Standard and the requirement by the ultimate holding company. These policies will be recorded as part of the closing of accounts management.

Frequency/Distribution

Item Accounts Report Frequency Distribution

1 Monthly Production Report (MPR)

MonthlyFiled in monthly sequence.

2 Raw Materials Incoming Report

3 Payroll Register & Summary of Allocation

4 Sales Distribution & Reconciliation Report

5 Electricity Report

6 Stock Cards

7 Cost of Good Sold Schedule

8 Sales Statements

9 Bank Statements

10 Official Receipts Listing

(Refer to Appendix 5)

Policies1. The monthly cut-off date for closing of accounts is 25th of the month.


2. The full-set of management accounts has to be submitted to HOMM, CIMA by 30 th of the month provided the following reports are received by 27th of the month:-

Report Department

Production monthly report Production

Electricity Report Electrical

Sales Distribution & Reconciliation Report PSN Distribution

Salary Register & Allocation Summary Human Resource

Raw Material Incoming Report Store

3. The abovementioned report has to be verified by the respective Head of Department.

4. Prior to the cut-off date, the Accounts Assistant or Accounts Supervisor should review the accounting transaction created in the integrated system, which created by end-user from various departments. Any irregularities or errors should be informed to the Accounts Executive and correction can be made promptly.

5. The Head of Finance should be informed if the irregularities or errors involved or carried a higher risk which projected future liabilities or not in line with the Company or Group operation.

6. The Accounts executive is responsible to ensure that all the accounting transaction created accurately and in accordance with the Financial Reporting Standard (FRS) adopted.

7. The Accounts Assistant should prepare all the non-process MPJ and get it posted by the 25th of the month.

8. The completed full-set should be authorized by the Head of Finance.

Procedures


1. Based on the Sales Distribution & Reconciliation Report and Production Report, the Monthly Sales Statement is prepared by the Account Receivable (AR) section. The invoices generated are loaded into the integrated system on urgent basis. The updated modules will provide the Sales Turnover and cash receipts generated during the month.

2. The Account Assistant based on the Monthly Production Report and Raw Materials Incoming Report prepares the Raw Materials Stock Cards. The tonnages of opening and closing stock in the Stock Cards must be the same as per Production Report. Based on the authorized Stock Cards, the accrual MPJ for received materials but un-posted in the integrated system is prepared. The Raw Materials Consumption journal is then prepared to reflect the tonnages and variable cost (VC) incurred during the month.

3. Electricity Report is used to prepare the electricity consumption’s MPJ. In the MPJ, power consumed in KiloWatt hours (KWh) and power cost is keys in according to various cost centers in cement production. The electricity cost will be part of the variable cost (VC) in producing the cement.

4. The Salary Register and Allocation Summary is used to keys in the payroll expenses to the respective cost center in the integrated system by the Account Assistant. Any deduction or disbursement of bonus must be correctly stated in the Salary Allocation Summary in order to ensure the accounting transaction is accurate.

5. The Accounts Supervisor should maintain a MPJ checklist to avoid any omission of expenses or provision.

6. After the abovementioned transaction entered and posted, the following schedule of fixed expenses is generated by using Corvu Report:

Schedule of Plant Fixed Expenses Schedule of Human Resources Fixed Expenses Schedule of Finance Fixed Expenses Schedule of Purchasing Fixed Expenses

From these report, any omission, wrong cost allocation or underprovided of expenses can be reviewed. The error is investigated immediately and the required correction is entered accordingly.


7. Based on the Schedule of Variable Cost Report or Raw Materials Stock Cards and the Monthly Production Report, the Cost of Good Sold (COGS) Schedule is prepared which calculate the value of WIP and FG on a weighted average basis. The COGS will provide the tonnages and value of the increase and decrease of WIP and FG, which also called as “Stock Movement Accounts”. The COGS MPJ is keys in to update the general ledger of WIP and FG.

8. After the COGS MPJ is posted, the full-set of management accounts is prepared and submitted to the Head of Finance (HOF) for review and authorization. The authorized management accounts then submit to the Group Accountant.

Documents Retention

All the above mentioned documents shall be retained for a minimum period of seven years from the date of transaction.


3.1 SPECIAL TASK

Stock Take

1. Stock take exercise should be carried out twice a year i.e. half year and final year.2. The inventories that accountable for the exercise are as follows:

Raw materials at plant; Raw materials on transit; All type of work in progress; All type of Finished Goods; All type of Finished Goods in transit; All consumables spares in warehouse; All consumables spares in transit; and / or All type of packaging inventories

3. The Stock Take Report that shows the differences in term of volume and value between the physical count and book figures should be prepared timely.

4. The accountability on the differences arises from the stock take are view as follows:

i) The threshold limit is RM1.0million (+/-);ii) The differences reported during the half year exercise will not be adjusted

in the accounts unless it exceeded the threshold limit;iii) Regardless of the differences amount reported during the final exercise,

adjustment will be made in the accounts;iv) The Head of Business Unit should rectify the unadjusted differences.

5. All documents in relation to the exercise should be maintained safely for 7 years.


Budget 2011

IntroductionThis section deals with the policies and procedures that relate to the preparation of business plan.

PurposeThe purpose of preparing business plan is to produce a forecast to assist management in future planning and to facilitate control over the company’s cash flow and performance by way of comparison and justification.

Responsibility

1. Group Finance Manager

a) To review the business plan prepared in accordance with the Renong Group’s guidelines

2. Accounts Manager

a) To assist the preparation of business plan

3. Division Head

a) To review and approve the divisional forecast

4. Department Head

a) To review and approve the departmental forecast

5. Section Head

a) To obtain the first 9 months results of the section and prepare a forecast


Frequency

1. Business Plan - Annually

2. Division Forecast Report - Annually

DistributionBusiness Plan and Division Forecast Report are kept by Group Finance Manager, Account Manage, Division Head, Department Head and Section Head.

Policies

a) The Section Head must prepare the business plan annually. The business plan covers 1 year planning horizon and 4 years forecast.

b) The business plan forecast must be prepared in the period between September to December every year. They will determine the business plan submission deadline on a year to year basis.

c) The business plan should include the following:

i) Financial Highlights, Action Plans and Action Programmesii) Balance sheet and profit & loss accountiii) Cash flow statementiv) Capital expenditurev) Manpower requirements

d) The cost centre is the smallest cost absorption unit and the same cost centres should be used consistently

e) Any change to the cost centre has to be approved before hand by the management

f) Before the management approves the business plan, they must ensure that the plan accounts for the affect of foreseeable material changes in the company’s business environment and is consistent with the group’s future plan and business strategies.

g) Once the business plan is approved and adopted, it will not be revised until next financial year.


h) In the first budgeted year, the budget should be compared to actual operation results and any deviation exceeding approved limits must be explained.The approved limits are as follows:

i) Variable Cost < or > than RM50,000ii) Fixed Cost > than RM10,000

Procedures

Business Plan

a) The Section Head should start to prepare a 1 year budget (planning horizon) for their section in October based on the first 9 months (January to December) actual operation results and 4 years forecast.

b) The draft forecast is then adjusted to account for the planned cash movement

c) The adjusted forecast is then submitted to the Department Head and Division head in turn for their approval.

d) Before the Department Head and Division Heads approve, they have to ensure that the forecast accounts for the foreseeable external impact on the Company (inflation, interest rate fluctuation, foreign currency conversion ratio, etc) and is consistent with the Company’s future plan.

e) The Division Head should then submit the approved forecast to the Accounts manager for compilation of the business plan.

f) The sales forecast should be obtained from Pemasaran Simen negara (PSN), the wholesales agent of CIMA.

g) Then the Accounts manager should ensure all information required is received and is approved by the Division Head.

h) The related Accounts Clerk should then key in the data into the Budget Data Entry in the computer and a printout of the entry will be generated out for checking.

i) The Accounts Manager should match the printout with the supporting documents to ensure data are completely and accurately captured by the computer data storage. If the completeness and accuracy is assured the Accounts Manager will execute the posting in to RGLS.


j) A copy of the immediate year budget (for the Board of Directors to approve) and 4 years forecast (to be retained by management for planning purposes) are the printed out and submit to the Group Finance Manager for him to review and submit to the Board of Directors for approval.

Variance

a) At every month end of the first budgeted year, the budget is compared to the actual operation results. Any deviation noted must be stated as variance.

b) All variable cost that has a variance of RM50,000 and above has to be explained by the responsible personnel.

c) All fixed cost that is greater than the budgeted by RM10,000 has to be explained by the responsible personnel.

Record RetentionThe Business Plan and Division Forecast Report shall be retained for a minimal period of seven years from the date of preparation.


4.0 FINANCIAL RATIO

2009

Total Debt Ratio Year 2009

Formula Total Asset (RM)

Total Equity(RM)

Calculation

(Total Asset –Total Equity) / Total Asset

919,654,229 818,491,315 919,654,229 – 818,491,315 919,654,229

= 0.1100

Debt to Equity Ratio Year 2009

Formula Total Debt Total Equity Calculation

Total Debt/ Total Equity

0.1100 0.8900 0.11000.8900= 0.1236

Equity Multiplier Year 2009

Formula Total Asset Total Equity Calculation

1/ Total Equity 1 0.8900 1/0.8900

= 0.1236

2008



Formula Total Asset (RM) Total Equity (RM)

Calculation

(Total Asset –Total Equity) / Total Asset

1 746,565,696 851,397,275- 746,565,696 851,397,275

= 0.1231




0.1231 0.8769 0.12310.8769= 0.1404



1/Total Asset 1 0.8769 1/0.8769

= 1.1404

2007


Formula Total Asset (RM) Total Equity (RM)

Calculation


(Total Asset –

Total Equity) / Total Asset

801,415,111 674,365,020 801,415,111-674,365,020

801,415,111

= 0.1585




0.1585 0.8415 0.15850.8415= 0.1884

4.1 PROFITABILITY RATIO

2009

Return on Asset Year 2009 (ROA)

Formula Net Income(RM)

Total Asset (RM)

Calculation




1/ Total Equity 1 0.8415 1/0.8415

= 1.1884

Net Income / Total Asset 75,209,219 919,654,229 75,209,219/919,654,229

=0.0818

Return on Equity Year 2009 (ROE)


Total Equity (RM)

Calculation

Net Income / Total Equity 75,209,219 818,491,315 75,209,219 / 818,491,315

=0.0919

2008



Total Asset (RM)

Calculation



=0.0852



Total Equity (RM)

Calculation

Net Income / Total Equity 72,565,156 746,565,696 72,565,156/746,565,696

=0.0972

2007



Total Asset(RM)

Calculation



=0.0490



Total Equity (RM)

Calculation

Net Income / Total Equity 39,301,240 674,365,020 39,301,240/674,365,020

=0.0583

4.2 RATIO ANALYSIS Total Debt Ratio Analysis

YEAR

RATIOS

2007

(%)

2008

(%)

2009

(%)


TOTAL DEBT RATIOS

0.1585 0.1231 0.1100

2007 2008 2009

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

TOTAL DEBT RATIOS

This debt ratio explain how much debt is being use to finance a firm’s assets. Analyzing using of debt on the year 2007 until 2009, there are decreasing total usage each year. As we can see in year 2007, NSCI uses RM 0.1585 in debt for every RM 1 in asset and decreased to RM 0.1100 in debt for every RM 1 in asset. We should note that CIMA had finance 80 percent of their asset with their debt and 20 percent in equity.

Debt Equity Ratio Analysis

YEAR 2007 2008 2009


RATIOS (%) (%) (%)

DEBT EQUITY RATIOS

0.1884 0.1404 0.1236

2007 2008 2009

00.020.040.060.08

0.10.120.140.160.18

0.2

DEBT EQUITY RATIOS

Debt equity ratio is a medium which can analyze what proportion of equity and debt the

company is using to finance its assets. A high debt/equity ratio generally means that a company

has been aggressive in financing its growth with debt. As we can see the trend from the year

2007 until 2009, the debt equity is decreasing from 0.18 percent to 0.12 percent. The debt-equity

relationship is an important one to lenders and investors to evaluate their financial performance.

Equity Multiplier Analysis

YEAR

RATIOS

2007

(%)

2008

(%)

2009

(%)


EQUITY MULTIPLIER

0.1884 0.1404 0.1236

2007 2008 2009

00.020.040.060.08

0.10.120.140.160.18

0.2

EQUITY MULTIPLIER

The equity multiplier is a measure of leverage. The higher the ratio is the more the company is

relying on debt to finance its asset base. This ratio shows a decreasing usage of debt where in the

year 2007 the ratio is 18.84 percent, in the year 2008 is 14.04 percent and decreased to 12.36

percent on the year 2009. A lower equity multiplier indicates lower financial leverage, which

means NSCI is relying less on debt to finance its assets.


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