Saudi Cement Company (SCC) is established in 1955 by Saudi Joint Stock Company. The principal product of the company is the production of cement, cement products and investments to fields that are related to the cement industry.
The company's mission is to be one of the most premier producers of cement in Saudi Arabia. It aims to be recognized as the best cement company in the region. This shall be done with the company having the reputation of achieving the highest standards of the requirements in Safety, Health, Environment, Quality, Costs and Advanced Operation. This is achieved through a team with high performance who is committed and motivated. Finally, the company aims in exceeding the expectations of its employees, customers, shareholders and its community.
The organization aims in achieving sufficient profit so that it can provide very attractive returns to is shareholders as well as financing the company's growth. For the company, profit is the organization's reward for their effort in offering the consumers the right kinds of products and services. For the long term, profit is the one absolute measure of their corporate performance. It is the organization's belief that in continually meeting their profit objective, other corporate objectives shall follow as well.
Customers
SCC believes that as a company is their duty to provide their clients with quality products and services. The organization values that customers shall always come first. The customers' interest should be the company's interest as well, and this should provide them with a long-term partnership with one another. The organization is committed in earning a preferred position with each of their clients by offering a consistently highest quality and reliability of service. SCC ensures that they products always represent the best value for money. It is SCC's strategy in exerting its efforts only to those markets, industries and products wherein the organization can excel.
People
SCC believes in providing its people an environment wherein they can excel, develop and have growth in the company. SCC considers its human resources as its most important asset. It aims in attracting people, developing them and retaining those with the highest foundations of character and competence. It does its best in providing training and opportunity to the people for development in improving themselves so that they could expand in their career opportunities. It is expected that their manpower will be full of initiative and drive and is eager in staying and growing with SCC. It ensures that the people of SCC get the recognition they deserve and that the people should be grateful with their accomplishments and that the company has its best choice with them.
Management Philosophy
SCC is geared towards providing an environment that encourages and gives merit to team efforts. They are committed in having consultative and participative management instead of directive management. They also encourage appropriate authority delegation and decision making on the lowest possible member of the organization. Collective effort and teamwork is being insisted. It is SCC's belief that a rich network of communication which is informal and open can lead into greater trust, learning and innovation. SCC supports the concept of attractive compensation to a great performance.
Corporate Culture
SCC cultivates a set of beliefs that are shared within the organization wherein all policies and actions are based. It is believed that success is the goal for each effort and that determination in improving and innovating are constant challenges and stimuli. It is also believed that integrity, objectivity and fair play in business as well as in relationships with staff are very important. Mutual trust and respect are also very vital culture being practiced. Work in the company is perceived as enjoyable. Finally, SCC believes with the perpetuity of its organization.
Current Workforce
SCC has a workforce of 1,730 employees. SCC continued its diligent efforts in 2003 to attract manpower and to train Saudis, both in-house (on-the-job training) and externally, by requiring them to attend courses in seminars in Saudi Arabia and Abroad.
The Company had recently signed a contract with Saudi Human Resources Development Fund and a number of Saudis were enrolled. These employees are now being trained by an International Training Firm under contract with SCC. The percentage of Saudis as of 2003 year end exceeded 59%.
SCC was ranked number one in Saudization in the cement manufacturing sector in Saudi Arabia, for the year 1420H, and received the Prince Nayef Ibn Abdulaziz prize in recognition of its role in hiring and training Saudis.
Organizational Structure
Figure 1 shows the organizational structure of Saudi Cement Company:
SCC has eleven directors that comprise the Board of Directors. The members of this Board are prominent business executives from Saudi Arabia, the Gulf as well as internationally. The board members are:
Chairman:
Sheikh Walid Ahmed Juffali.
Members:
Sheikh Khaled Suliman Olayan
Shekh Mohanned A. Al-Zamil
Sheikh Adbulrahman M. Al-Abdulkaraim
Sheikh Abdulkaraim A. El-Khereji
Sheikh Suleiman Al-Gosaibi
Sheikh Mohammed Abdullah Al-Faraj
Sheikh Mohammed S. Baighonaim
Sheikh Omar Sulaiman Al-Rajhi
Sheikh Hatim All Juffali
Mr. Nooruddain A. Nooruddain
These board members are directly elected by stockholders, and they represent the stockholders' interests in the Company. Its position at the apex of decision making within SCC allows the board to monitor corporate strategy decisions and ensure that they are consistent with stockholders' interests. If the board's sense is that corporate strategies are not in the best interest of stockholders, it can apply sanctions such as voting against management nominations to the board of directors. Moreover, the board has the legal authority to hire, fire, and compensate corporate employees.
Authority is centralized at SCC, as managers at the upper levels of the organizational hierarchy retain the authority to make important decisions. Centralized decision making allows easier coordination of the organizational activities needed to pursue the company's strategy.
Centralization also means that decisions fit broad organization objectives. Furthermore, in times of crisis, centralization of authority allows strong leadership because authority is focused on one person or group. This focus allows for speedy decision-making and a concerted response by the whole organization.
SCC groups people on the basis of common expertise and experience (Functional Structure). Such a structure has several advantages.
First, if people who perform similar tasks are grouped together, they can learn from one another and become more productive at what they do.
Second, they can monitor each other to make sure that all are performing their tasks effectively and are not shrinking their responsibilities. As a result, the work process becomes more efficient.
Finally, functional structures give managers greater control of organizational activities.
Organizational Culture and Control Systems
Managers at SCC use a number of strategic control systems to monitor and coordinate organizational activities at three levels in the organization: the corporate, functional and individual levels. The following table shows the various types of control systems used by SCC managers.
SCC's culture is transmitted through its code of ethics, which states acceptable behavior, and disciplinary actions in cases of violations. Also, culture is transmitted through its reward system.
At SCC the annual incremental salary increase and bonus are based on the outcome of the annual appraisal review of employees' performance Offering incentives based on performance has just been implemented in the year 2003.
It must be noted that management has proposed a stock based compensation plan for SCC's Saudi employees, but the board of directors declined such proposal.
The Organization's Current Operation
The demand for cement improved in Saudi Arabia during 2003 reaching approximately 22.7 million tons (of which imported cement constituted 0.5 million tons), compared to 20.8 million tons in 2002 (a 9.1% increase).
However, the increase in demand was offset by the high production in Saudi Arabia which reached about 22.2 million tons of clinker (equivalent to about 23.2 million tons of cement). As a result, there was a surplus of 1 million tons of cement in 2003, compared to a total of 1.9 million tons for 2002.
The National Cement Companies, through their spectacular marketing efforts, succeeded in exporting the entire surplus in addition to a quantity from their previous stock. Hence, the clinker closing stock by end of 2003 dropped to a level of 4.9 million tons compared to 6.2 million tons by end of 2002 (a 21% decrease).
For 2003, total cement sales amounted to 4,582,544 tons compared to a quantity of 4,479,677 tons sold in 2002 (a 2.3% increase).
SCC has secured its market share in Bahrain (80% of the market) by acquiring an ownership interest of 36% in United Cement Company (Bahraini Closed Corporation). Total quantity of cement exported to Bahrain for the year 2003 amounted to 502,238 tons compared to total exports in 2002 of 406,258 tons (a 23.6% increase).
The total quantity of clinker exported amounted to 137,236 tons compared to 94,428 tons in 2002 (a 45.3% increase).
The total quantities of cement exported during 2003, excluding exports to Bahrain and oil well cement exports, were 656,764 tons compared to 1,135,945 tons in 2002 (a 42.2% decrease).
Of these quantities, 534,570 tons were exported to Kuwait, 86,657 tons to Qatar; and 35,537 to Nigeria. In comparison, the total quantity of clinker exported, excluding exports to Bahrain amounted to 195,953 tons compared to 180,968 tons during 2002. The marketing department decided to reduce export sales in 2003 in order to meet the increase in domestic sales (i.e. higher profit margins).
In order to boost its export activities, SCC has commissioned a terminal for exports at King Abdulazziz Port that is located in Dammam. The terminal has the ability in loading cements and clinker at the rates of 800 tons/hr and 700 tons/hr respectively.
The terminal is considered exceptional. Cement and clinker are transported by railway wagons from both SCC plants to the terminal.
SCC produces its Ordinary Portland Cement and Sulphate Resisting Cement in accordance with the American Society for Testing and Materials C-ISO, British Standards (BS-12), European Standards, and Saudi Arabian Standards Organization (SASO), specifications.
Oil-well cement (OWC) class G, is produced as per American Petroleum Institute (API) specifications, under API license to use API program.
SCC has since 7 years acquired the ISO 9001:1994 certification for both of its Hofuf and Ain Dar plants. SCC is currently revising the quality system manual and procedures to comply with ISO 9000:2000 (version). Certification to ISO is being carried by the German firm TUV.
SCC has continued to coordinate with the concerned Authorities on issues of environmental protection and pollution control, and has finalized a five year special program on these issues.
SCC has successfully achieved the international standards (5Omilligram/cubic meter) in this regard - a fact that has been recognized by MEPA Authorities in Saudi Arabia. Such compliance has cost the company about $40 million riyals.
SCC is continuing its efforts to achieve much stricter and more stringent achievable limits for dust and pollution control. Such efforts will be realized in the planned project for upgrading of SCC's facilities in the near future.
Saudi Cement Company has the most modem and efficient Quality Control System in the Laboratory consisting of automatic sampling system, analyzing system and computer controlled "quality control system", including the most important Fully Automatic Sample Preparation System.
The Fully Automatic Sample Preparation System in the Laboratory consists of pneumatic tube receiving form dispatch station, grinding mills, powder press, sample input box, ROBOT with control unit, conveyor belts, sample online X-Ray diffraction analyzer with goniometer, a dust controller, and controllers.
The Robotics Control System is the heart of the quality control of the cement produced as, due to full automation of sample preparation, and analysis any human error, during the basic step of sample preparation, is totally eliminated. Thereby, quality control is made most reliable.
The Accounting & Finance departments produced a set of financial statements - that present, fairly, in all material aspects, the financial position of the Company as of December 31, 2003. The results of its operations and its cash flow for the year ended in conformity with generally accepted accounting principles relevant to the nature of the Company, and the articles of the Company as these relate to the preparation and presentation of these financial statements. The company maintains Arabic accounting records required by the relevant regulations and the financial statements are in agreement therewith.
SCC settled the final installment of the loan of SR 20 million with SIDF for its latest expansion on its due date in 2003.
Moreover, during 2003, SCC paid SIDF two installments (SR 5 million each) of the loan allocated for the Dammam Export Terminal Project.
The balance of this additional loan is payable in 4 installments of different values, the last of which is due in November 2005.
The Finance Department utilized the Company's liquid reserves in servicing the 2002 dividend of SR12 per share amounting to SR 244.8 million and the final installment of capital reduction repayment of SR5/share amounting to SR 02 million.
The Finance department forwarded Budget Computation forms together with the relevant expense printouts to proponent departments. These forms and printouts assisted proponent departments in the formulation of their budgets.
Non-budgeted expenditures were only considered for items that were unforeseen at the time of budget preparation and that have become operationally unavoidable. Approval for such items was obtained from the authorized officials through the Finance Department as per Finance Policies and Procedures.
Conclusion
Currently, Saudi Cement Company pursues a cost-leadership strategy to outperform competitors by doing its utmost to produce cement at a cost lower than its competitors. Two advantages accrue from pursing this strategy. First, this allows SCC to make higher profits than its competitors, because of its lower costs. Second, if rivalry within the industry increases and other cement companies start to compete on price, SCC will be able to withstand competition better than the other cement companies because, again, of its lower costs. For these reasons, SCC is likely to earn above-average profits.
