1. CHAPTER - I
1-BACKGROUND OF THE STUDY
2-STATEMENT OF PROBLEM
3-OBJECTIVES OF THE STUDY
4-HYPOTHESIS
5-METHODOLOGY
6-LIMITATIONS OF THE STUDY
7-STRUCTURE OF THE WORKS.
1.1 BACKGROUND OF THE STUDY.
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2. “THE MAJOR OBJECTIVE OF THIS STUDY IS FOR THE PROPER UNDERSTANDING OF THE WORKING CAPITAL OF ARABIAN
INDUSTRIES LLC AND TO SUGGEST NECESSARY MEASURES TO OVERCOME THE SHORTFALLS IF ANY IN THE INDUSTRY.”
The project undertaken is on “Working Capital Management of Arabian Industries LLC.”. It describes
about how the company manages its working capital and the various steps that are required in the
management of working capital. Cash is the lifeline of a company. If this lifeline deteriorates, so does
the company's ability to fund operations, reinvest and meet capital requirements and payments.
Understanding a company's cash flow health is essential to making investment decisions. A good way
to judge a company's cash flow prospects is to look at its Working Capital Management (WCM).
Working capital refers to the cash of a business requires for day-to-day operations or, more
specifically, for financing the conversion of raw materials into finished goods, which the company
sells for payment. Among the most important items of working capital are levels of inventory,
accounts receivable, and accounts payable. Analysts look at these items for signs of a company's
efficiency and financial strength.
The working capital is an important yardstick to measure the company’s operational and financial
efficiency. Any company should have a right amount of cash and lines of credit for its business needs
at all times. This project describes how the management of working capital takes place at Arabian
Industries LLC..
There are numerous instances in the history of business world where inadequacy of working capital
has led to business failures when a firm finds it difficult to meetings day to day affairs. Operating
expenses essential out lays may have to be postponed for want of funds, operating plans will go out of
gear & enterprise objectives on investment slumps the suppliers & creditors of the firm may have to
wait longer to raise their dues & will hesitate to extend further credit to the firm.
Thus efficient management of working capital in an important prerequisite for successful working of a
business concern it reduces the chances of business failure generates a felling of security and
confidence in the minds of personnel in the organization it assurance solvency of steady of the
organization.
1.2 STATEMENT OF PROBLEM
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3. In the management of working capital, the firm is faced with two key problems:
1. First, given the level of sales and the relevant cost considerations, what are the optimal amounts of
cash, accounts receivable and inventories that a firm should choose to maintain?
2. Second, given these optimal amounts, what is the most economical way to finance these working
capital investments? To produce the best possible results, firms should keep no unproductive assets
and should finance with the cheapest available sources of funds. Why? In general, it is quite
advantageous for the firm to invest in short term assets and to finance short-term liabilities.
Besides this followings are some other problem , a firm is facing. Through this study we try to find
answer for these problems.
1. What are root causes of working capital on business?
2. What are the major effects on accounts receivable?
3. What is the nature of relationship between working capital and capital employed
4. What steps should be taken to ensure that it effect on the profit of the firm will not be
negative?
5. How can working capital be managed?
6. What make up the working capital cycle?
7. How can debtors be controlled?
1.3 NEED AND IMPORTANCE OF THE STUDY.
1.This projects is helpful in knowing the companies position of funds maintenance and setting the
standards for working capital inventory levels, current ratio level, quick ratio, current asset turnover
level & size of current liability etc.
2. This project is helpful to the managements for expanding the dualism & the project viability &
present availability of funds.
3. This project is also useful as it combines the present year data with the previous year data and there
by it show the trend analysis, i.e. increasing fund or decreasing fund.
4. The project is done as a whole entirely. It will give overall view of the organization and it is useful
in further expansion decision to be taken by management.
1.4 OBJECTIVES OF THE STUDY
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4. The main objective of the study is to determine the effect of working capital on business profitability
which has to do with:-
1. Maintenance of working capital at appropriate level, and
2. Availability of ample funds as and when they are needed
To accomplishment of these two objectives, the management has consider the composition of current
assets pool. The working capital position sets the various policies in the business with respect to
general operations like purchasing, financing, expansion and dividend etc,
The subsidiary Objective of Working Capital Management is to provide adequate support for the
smooth functioning of the normal business operations of a company. This Objective can be sub-
divided into 2 parts:-
1. Liquidity
2. Profitability
1) Liquidity
The quantum of Investment in Current Assets has to be made in a manner that it not only meets the
needs of the forecasted sales but also provides a built in cushion in the form of safety stocks to meet
unforeseen contingencies arising out of factors such as delays in arrival of Raw Material, sudden
spurts in demand etc. Consequently, the investment in current assets for a given level of forecasted
sales will be higher if the management follows a conservative attitude than when it follows an
aggressive attitude. Thus, a company following a conservative approach is subject to a lower degree of
risk than the one following an aggressive approach. Further, in the former situation the high amount of
Investment in Current Assets imparts greater liquidity to the company than under the latter situation
wherein the quantum of investment in Current Asset is less. This aspect exclusively covers the
liquidity dimension of Working Capital.
2) Profitability
Once we recognize the fact that the total amount of financial resources at the disposal of a company is
limited and these can be put to alternative uses, the larger the amount of investment in current assets,
the smaller will be the amount available for investment in other profitable avenues at hand with the
company. A conservative approach in respect of Investment in Current Assets leaves fewer amounts
for other Investments than an aggressive approach does.
1.5 HYPOTHESIS
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5. Hypothesis is a conjectural statement of the relationships between two or more variables. It is testable,
tentative problem explanation of the relationship between two or more variables that create a state of
affairs or phenomenon.E,C, Osuola said hypothesis should always be in declarative sentence form, and
they should relate to them generally or specially variable to variables.
Hypothesis thus:-
1. Explain observed events in a systematic manner
2. Predict the outcome of events and relationships
3. Systematically summarized existing knowledge.
In essence, there exist null hypothesis set up only to nullify the research hypothesis and the alternative
hypothesis, for the purpose of the study. For the efficiency of the study, the hypothesis is as follows:
H0
1. Working capital does not help the business concern in maintaining the goodwill
2. Working capital does not create an environment of security, confidence, and overall efficiency
in a business
H1
1. Working capital helps the business concern in maintaining the goodwill.
2. Working capital creates an environment of security, confidence, and overall efficiency in business.
1.6 METHODOLOGY
Methodology may be a description of process, or may be expanded to include a philosophically
coherent collection of theories, concepts or ideas as they relate to a particular discipline or field of
inquiry. This project requires a detailed understanding of the concept – “Working Capital
Management”. Therefore, firstly we need to have a clear idea of, what is working capital, how it is
managed in Arabian Industries LLC, what are the different ways in which the financing of working
capital is done in the organization etc.
To recognize the various type of information which are necessary for the study of working capital
management.
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6.  The management of working capital involves managing inventories, accounts receivable and
payable and cash. Therefore one also needs to have a sound knowledge about cash
management, inventory management and receivables management.
 Then comes the financing of working capital requirement, i.e. how the working capital is
financed, what are the various sources through which it is done.
 And, in the end, suggestions and recommendations on ways for better management and
control of working capital are provided.
Collection of data from various department of AILLC to analyze the working capital management of
the firm.
1.6.1 COLLECTION OF DATA
There are several ways of collecting both data-Primary and Secondary datas, which differ
considerably in context of money, cost, time and other sources at the disposable of the researcher.
There are two types of data:
· Primary data
· Secondary data
1-Primary Data
Definition:-
The first handed information/Fresh data collected through various methods is known as primary data.
In respect of primary data which the researchers are directly collects data that have not been
previously collected.
The primary data was gathered through personal interaction with various functional heads and other
technical personnel. Some information was also collected by observation.
2-Secondary Data :
Definition:-
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7. The data which have been already collected & comprised for another purpose. Secondary data
was collected various reports, annual reports, documents charts, management information systems, etc
in AI LLC, And also collected various magazines, books, newspapers etc.
The analysis of the information gathered has been made on the basis of the clarifications sought during
the personal discussions with the concerned people and perception during the personal visits to the
important areas of services.
In marking observations identifying problems and suggesting certain remedies such emphasis was
given on the basis of opinions gathered during the personal discussions and with the personal
experience gained during the academic study of M.B.A course.
1.6.2 TOOLS EMPLOYED
The data presentation tools are mainly Mathematical tools, Tables and Charts are used for this study.
The most important parts of tools include;
a) Table numbers
b) Title of the table
c) Caption
d) Stub or the designation of the rows and columns
e) The body of the table
f) The head note or prefatory note or explanatory just before the title.
g) Source note, which refers to the literally or scientific source of the table has observed that a
table has the following merits over a prose information that;
h) A table ensures an easy location of the required figure;
i) Comparisons are easily made utilizing a table than prose information;
j) Patterns or trends within the figures which cannot be visualized in the prose information can
be revealed and better depicted by a table; and a table is more concise and takes up a less
space than a prose formation:
1.6.3 TIME SPAN
A period of six year i.e. 2004-2009 has been taken for the study.
1.7 LIMITATIONS OF THE STUDY.
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8. The following are the various limitations involved in the study.
.
1. The study in limited 4 years (2004-2005) to (2005-2006) performance of the company.
2. The data used in this study have been taken from published annual report only.
3. This study in conducted within a short period. During the limited period the study may not be
retailed, full fledged and utilization in all aspects.
4. Financial accounting does not take into account the price level changes.
5. We cannot do comparisons with other companies unless and until we have the data of other
companies on the same subject.
6. Only the printed data about the company will be available and not the back–end details.
7. Future plans of the company will not be disclosed to us.
8. Lastly, due to shortage of time it is not possible to cover all the factors and details regarding the
subject of study.
1.8 CHAPTERIZATION
This research work is to be organized in nine chapters as follows:
 Chapter – 1 - Introduction
 Chapter-II - Manufacturing Industry in Oman – A profile
 Chapter-III - Arabian Industries LLC-A Profile
 Chapter-IV - A Theoretical Perspective of Working Capital Management
 Chapter – V - Research methodology
 Chapter VI - Analysis of Working Capital Level
 Chapter VII - Analysis of Financial Statement
 Chapter – VIII - Management of working capital and it’s Financing and Estimation
 Chapter – IX - Findings, Conclusion and Recommendations
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9. CHAPTER – II
1-Introduction
2-Present Scenario
3-Foreign Investment
4-Oman Economy
5-Major Diversification
6-Oman Industry- An over view
7-ManufacturingIndustry in Oman
8-The Scope of Oil and Gas Industry.
2.1 OMAN PETROLEUM INDUSTRY - INTRODUCTION
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10. Oman's petroleum deposits were discovered in 1962, decades after most of those of its neighbours.
Moreover, Oman's oil fields are generally smaller, more widely scattered, less productive, and more
costly per barrel than in other Persian Gulf countries. The average well in Oman produces only around
400 barrels per day (bbl/d), about one-tenth the volume per well of those in neighboring countries. To
compensate, Oman uses a variety of enhanced oil recovery (EOR) techniques. While these raise
production levels, they increase the cost.
According to the 2008 BP Statistical Energy Survey, Oman had proved oil reserves of 5.572 billion
barrels at the end of 2007, the bulk of which are located in the country's northern and central regions.
The largest and traditionally most reliable fields are in the north. These fields, which include Yibal
(the biggest), Fahud, al-Huwaisah, and several others, are now mature and face future declines in
production. In spite of declining production, Oman remains a significant non-
OPEC oil exporter. According to the 2008 BP Statistical Energy Survey, Oman produced an average
of 717.8 thousand barrels of crude oil per day in 2007, 0.9% of the world total and a change of -4.6 %
compared to 2006./P> /P>Oman exports significant amounts of liquefied natural gas and, according to
the 2008 BP Statistical Energy Survey, had 2007 proved natural gas reserves of 0.69 trillion cubic
metres and 2007 natural gas production of 24.1 billion cubic metres./P> .
2.2 PETROLEUM INDUSTRY – PRESENT SCENARIO.
The petroleum industry forms the backbone of Oman's economy. Over the past three decades, the oil
reserve has helped the Sultanate move from strength to strength economically. But can Oman depend
wholly on its natural resources or it needs to diversify into other areas to sustain and bolster its
economy is an important question mark.
The oil price slump in 1998-99 forced Oman to take steps to diversify and put greater emphasis on
other industries, such as tourism and liquid natural gas. Oman's Basic Statute of the State expresses in
Article 11 that "The National Economy is based on justice and the principles of a free economy."
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11. Recent official statistics reveal that the oil sector's share in the GDP has risen to 49 per cent in 2005
from 42.2 per cent in 2004. According to the 2006 annual report of the Central Bank of Oman (CBO),
"The fiscal position remained strong in 2005, with the fiscal recording a surplus of about 2.6 per cent
of GDP. As against a budgeted deficit of RO540 million in 2005, there was a net surplus of RO303
million."
Revenues from the petroleum sector rose 44.3 per cent in 2005. Non-oil revenues rose 9.2 per cent,
driven by a strong 17.8 per cent growth in non-oil industrial activities. The average price of Omani
crude was about US $50.26 per barrel in 2005, representing a 46 per cent rise over the average price of
US $34.42 in 2004. As a result, the share of oil and gas sector in the GDP, exports and net government
revenue rose to 49 per cent, 84.2 per cent and 79 per cent, respectively, in 2005. After a period of
subdued inflation, 2004 saw signs of minor rise in prices, which persisted in 2005. Consumer price
inflation rose from 0.7 per cent in 2004 to 1.9 per cent in 2005. But the Sultanate's inflation at 2.3 per
cent was still lower than the average inflation in advanced countries in 2005.
A VIEW OF OIL DRILLING AREA
A close look at the June 1995 “Vision Conference: Oman 2020” reveals that a lot of strategic planning
went into the formulation of initiatives aimed at securing Oman's future prosperity and growth. These
include:-
 To have economic and financial stability.
 To reshape the role of the government in the economy and to broaden private sector
participation.
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12.  To diversify the economic base and sources of national income.
 To globalise the Omani economy.
 To upgrade the skills of the Omani workforce and develop human resources.
It is expected that by 2020 the economy will not be reliant on oil, but rather diversified into non oil
sectors, raising higher levels of savings and investments. Studies reveal that the crude oil sector's share
of GDP is estimated to drop to 9 per cent in 2020, compared with 41 per cent in 1996. Also, the gas
sector is expected to contribute around 10 per cent to GDP, compared with less than 1 per cent in
1996, while the non-oil industrial sector's contribution is expected to increase from 7.5 per cent to 29
per cent.
2.3 INCENTIVES FOR FOREIGN INVESTMENT
In a bid to reinforce the existing set-up as well as make room for further development in the petroleum
sector, the government has undertaken a string of measures to provide incentives to foreign investors.
These include:
1. Tax exemption for five years (sometimes renewable for a further five years) for industrial
enterprises which contribute to Oman's economy.
2. Foreign investors allowed to hold 49 per cent of equity, which could be increased in
mitigating circumstances.
3. Concessional financing may be arranged through the Ministry of Commerce and Industry and
Oman Development Bank.
4. A clear and efficient legal network which offers advice on company law, copyright law,
arbitration and agency law.
5. A diverse economy which encourages privatisation of infrastructure and services.
6. Price stability, with an inflation rate of not more than 1 per cent since 1992.
7. Stable currency with full convertibility.
8. No personal income tax and no foreign exchange controls.
9. Tax and import duty exemptions.
10. Interest-free long-term loans to partly foreign-owned industrial and tourism projects.
Foreign business participation in Oman is encouaged provided the company is established in
accordance with the Foreign Business and Investment Law of 1974. Foreign companies are formed as
an incorporation of a local company or other commercial entity. They may also exist as a branch
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13. office, a consultancy or by appointing a commercial agent, ensuring that the company only supplies
services and/or goods to be imported into the Sultanate.
PDO – HEAD QUARTERS
Airline and shipping offices as well as companies with occasional business are not governed by the
Foreign Business and Investment Law. Potential businesses should supply the company's articles of
incorporation and other pertinent information when applying for authorisation to the Foreign Capital
Investment Committee at the Ministry of Commerce and Industry.
2.4 OMAN ECONOMY AND PETROLEUM INDUSTRY – A REVIEW
According to the CBO annual report, the improved macroeconomic environment has been reflected in
the upgrading of the Sultanate's rating by Moody's from Baa2 to Baa1 in October 2005. In January
2006, Standard and Poor's also reaffirmed their local and foreign currency sovereign credit ratings for
Oman at "A-/A-2" and "BBB+/A-2", respectively, with a "stable" outlook. It may be noted that the
government debt as a percentage of GDP continued to decline and, by the end of 2005, fell to 8.6 per
cent.
The most striking aspect of the developments in the banking system in 2005 relates to the surge in
profits. Net profits of banks rose from RO79.4 million in 2004 to RO123.2 million in 2005 while net
foreign assets of commercial banks rose by 127.9 per cent, from RO256.6 million in 2004 to RO584.9
million in 2005.The current account (comprising trade, services, income and transfers) showed a
surplus of RO1813 million in 2005 as against RO219 million in 2004. The trade account, reflecting the
excess of export earnings over merchandise imports, showed a high surplus of RO4100 million in
2005 as against a surplus of RO2118 million in 2004.
The nominal GDP, exports and government revenue are expected to benefit further from the
favourable oil price scenario in 2006. This favourable phase provides an opportune time to use the
surplus oil revenue in diversifying the economy. Greater openness to trade and foreign investment,
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14. phased implementation of the privatisation programme of the government, and reversing the declining
trend in oil production will help strengthen the growth impulses in the economy.
In 2002, the petroleum ministry took big steps to encourage international companies to invest in
abandoned concession onshore and offshore areas. Oil and Gas Minister Dr. Mohammed Bin Hamad
al-Rumhi had then called on Petroleum Development Oman (PDO) and international companies
operating in oil and gas exploration and production to continue their efforts to discover new fields and
improve extracting methods and techniques.
The minister upheld his ministry's resolve to provide necessary infrastructure and the government
constructed three pipelines to transport gas from the central region to Sur, Sohar and Salalah for
existing industrial estates and power plants.
The transported gas was to be used to operate power plants in Salalah and Barka, and petrochemical,
aluminum, cement factories, oil refinery and other industries in Sohar and Raysut industrial estates.
With the new infrastructure in place, the scene has improved significantly. Foreign investors are now
keen on joint ventures in these regions.
2.5 ECONOMY ON THRESHOLD OF MAJOR DIVERSIFICATION
When His Majesty Sultan Qaboos Bin Said assumed power in 1970, he embarked on his vision of
putting the Sultanate on a progressive path of making the country economically stable. He left the
doors open for other countries to join hands with the local government in constructing Oman into a
nation that would stride comfortably into the 21st century.
In his zeal for economic development and modernization, he launched a programme to built and
expand the country's almost non-existent infrastructure. As the 70s rolled on, the country achieved
substantial progress in developing physical and social infrastructure. New roads, a new deepwater
port, an international airport, electricity-generating plants, schools, hospitals and low-cost housing
were built from money that came exclusively from oil receipts.
2.6 THE MANUFACTURING INDUSTRY - AN OVERVIEW
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15. The manufacturing sector is part of the goods-producing industries super sector group. The
Manufacturing sector comprises establishments engaged in the mechanical, physical, or chemical
transformation of materials, substances, or components into new products. Establishments in the
Manufacturing sector are often described as plants, factories, or mills and characteristically use power-
driven machines and materials-handling equipment. However, establishments that transform materials
or substances into new products by hand or in the worker's home and those engaged in selling to the
general public products made on the same premises from which they are sold, such as bakeries, candy
stores, and custom tailors, may also be included in this sector. Manufacturing establishments may
process materials or may contract with other establishments to process their materials for them. Both
types of establishments are included in manufacturing.
. The manufacturing industry - the powerhouse driving many economies - has been reeling under the
most challenging time in its history. Manufacturers are striving to be more innovative, compete
globally, and expand and market their products to emerging markets worldwide. Intense pressure to
reduce costs and the need to effectively manage a complex supply chain have manufacturers shifting
their production bases and spreading out operations well beyond their home grounds. This course
provides an overview of the manufacturing industry. It first examines the state of affairs in the
manufacturing industry, including its subsectors, key players, and trends. The course then reflects on
the main issues and challenges facing the industry, and, finally, it examines strategic solutions that
successful companies are employing to overcome these challenges.
2.7 INFRASTRUCTURE INDUSTRY FOR CRUDE AND GAS EXPLOITATION
The depletion of the sultanate's crude oil reserves accelerated the government's bid to increase the use
of gas in electric power generation and industry. In the early 1970s, the sultanate began to use gas in
electric power generation. Gas pipelines were laid, and generators were converted from diesel to gas.
This was done in the Muscat metropolitan area just before the second oil price shock despite resistance
by importers of diesel. Plans were to increase gas use by extending the government gas grid linking
the south and the east to the north. Power generation facilities north of Muscat in 1992 were using gas
as a feedstock, and plans were to increase gas-fired units elsewhere. Although the government has
promoted the industrial use of gas, oil firms remain the principal consumers, using a total of 8.5
million cubic meters per day of associated gas. Gas is required for re-injection, compression fuel, and
power generation to support facilities at producing fields.
This is likely to continue in the short term, given the slow pace of switching industrial use from
petroleum. The government's focus in the 1990s on exploiting natural gas reserves and increasing
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16. output to meet rising demand complements its priority in maintaining current oil output levels. It seeks
to do this without depleting crude reserves by using gas produced in association with oil output for
reinjection at mature fields to increase production and, by substituting gas for oil, to release greater
volumes of crude oil for export.
OFFSHORE OIL RIG
The Sultanate’s industrial strategy is multi-pronged. Besides utilising locally available natural
resources such as oil, gas and minerals, it aims at diversification of products for local consumption as
well as exports. While industrial projects based on fossil fuels and their derivates provide tremendous
impetus to the economic development of a country, small and medium units play a supportive but
significant role in the industrialization process. Mega projects like oil refineries and their downstream
industries and steel mills require massive investments whereas medium and small units could be set up
with less capital in areas where indigenously available resources could be made use of.
2.8 THE AIM OF THE MANUFACTURING INDUSTRY IN OMAN.
 To achieve an average annual growth of 14,3 % in domestic product of manufacturing
industry.
 To increase the manufacturing industry exports at an annual average growth rate of 18, 2%.
 To achieve regional equilibrium in industrial development.
 To transfer and domesticate foreign and local capital in the industrial sector.
 To develop educational syllabus and introduce industry subject for trade orientation with its
different aspects as a basic subject in all educational stages.
 To reduce cost of the industrial production and develop the competitiveness of industrial
products.
 To provide the infrastructure services of the industry.
Despite a sharp fall in average oil prices in 2009, the Omani govt. has managed to keep it’s fiscal
amount close to balance. Oman’s economy has navigated through the global economic crisis in
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17. relatively good shape. Although country’s real non oil growth fell sharply in 2009, it remained in
positive territory. Oman’s financial sector was less affected by the global economic crisis and the
countries modest level of indebtedness has limited it’s external vulnerability.
2.9 THE SCOPE OF OIL AND GAS INDUSTRY IN OMAN – AN OVERVIEW
The continued growth in demand and an industry struggling to meet this voracious demand have
pushed oil prices to an all-time high. Big oil companies, even while investing heavily in exploration,
technology, operational improvement, and research and development, are still left with huge surpluses
in an industry so far known only as a modest return. In reality, there has never been a more
challenging time for the oil and gas industry. While oil companies face tough challenges in finding
new sources of oil and gas to replace the old ones, the emerging oil demand and supply equation
renders some of the world's most powerful nations increasingly dependent on some of the world's most
unstable regions.
As a result, companies are applying advanced technologies and improved processes to meet growing
demand, as well as working to keep abreast of the constantly shifting geopolitical landscape so critical
to success in this sector. This course provides a high-level view of the industry environment, including
its scope and structure, and navigates learners through relevant business and regulatory issues. Also
examined are the forces shaping this industry, its key players, business drivers and challenges, and the
strategic solutions for these challenges? A report on the state of affairs in the oil and gas industry and
analysis based insights are also presented. The overall purpose of this course is not to make learners
industry experts, but to help them get a feel of the industry and learn some of the winning strategies
the key players are successfully applying.
CRUDE OIL DRILLING
CHAPTER - III
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18. 1-Introduction
2-Industry Profile
3-Subsidiary and Joint Venture
4-Mission and Vision
5-Objectives and Goals
6-Product and Project Profiles
7-Financial Highlights
8-Literature Review
3.1 INTRODUCTION TO ARABIAN INDUSTRIES LLC
Arabian Industries LLC is a leading engineering company catering to the needs of the energy sector
for the MENA region. It has facilities and expertise to meet the varied client needs of the Oil/Gas and
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19. other energy sectors in the production, Processing and delivery phases. Started in 1991 in The
Sultanate of Oman, they have grown steadily and won many accolades and appreciations. The most
prestigious achievement is the Year 2008 “His Majesty Cup award for best five factories”. Their
commitment to the job, quality of work, earnestness to provide Total Solutions and desire to surpass
client expectations has consistently earned repeat business from their esteemed clients. These qualities
enable them to compete in international markets and succeed.
Arabian Industries LLC – Company Structure
Arabian Industries LLC
(Holding Company)
Arabian Industries Arabian Industries Arabian Industries Arabian Industries
Project LLC Manufacturing LLC Technical Support LLC Joint Venture
“Arabian Industries LLC” is an Oman’s Prestigious Engineering and Manufacturing Company;
established in the year 1991, is a well established engineering company. It is 100% Omani company
which always maintained the highest international standards of excellence through quality, technology
and innovation. It has the ability to provide the best in engineering and back up services for the
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20. petroleum and allied industries. The company has ISO 9001-2000 certification and has executed
projects in various Middle East countries. It captured the various facets of the Oman economy in
sectors ranging from maintenance, manufacturing, fabrication and infrastructure, etc.
“Arabian Industries LLC and its subsidiaries are committed to become one of the leading companies
providing complete solutions to the energy sector by enhancing customer satisfaction, strengthening
employee & supplier relations and continually improving its product & services through the Quality
Continuous Improvement, Enhancing Employees Safety, Providing proper resources & suitable
working environment, achieving national development and improving profitability and budget”.
3.2 PROFILES OF ARABIAN INDUSTRIES LLC.
Arabian Industries LLC is a leading engineering company catering to the needs of the energy sector
for the MENA region with active participation in Oman’s Hydrocarbon, Petrochemical and Energy
Sector industries. .. Started in 1991 in The Sultanate of Oman, they have grown steadily and won
many accolades and appreciations. Arabian Industries LLC clientele include all major operating
companies in Oman including Petroleum Development Oman /Shell, Oman Gas Company, Occidental
of Oman, Occidental Mukhaizna, Oman Refinery and other Omani Oil, Gas, Water and Process Sector
clients.
The Company posted a growth of approximately 200% during the period from 1991 to 2009 and is
currently rated one of the leading EPC Contractors in the Region. Their commitment to the job, quality
of work, earnestness to provide Total Solutions and desire to surpass client expectations has
consistently earned repeat business from their esteemed clients. These qualities enable them to
compete in international markets and succeed.
Arabian Industries LLC, is currently executing a number of major contracts in Oman for
activities, which include Greenfield and Brownfield EPC & CME&I Construction Contracts for
Facilities, Pipelines and Process Plant, Long Term Maintenance Contracts for Oil & Gas facilities,
Pipeline Integrity Management Services including rehabilitation and routine / planned maintenance of
cross country pipelines and Environmental Services.
Arabian Industries LLC, owns one of the biggest fleet of plant and equipment amongst the oil and gas
sector contractors in Oman and directly employs approximately 2500 multi-disciplined experienced
staff personnel. Apart from the Head Office located at Al Khuwair House, various site, Arabian
Industries LLC, currently have a Project Coordination office, Staff Camp, Fabrication Shop, Vehicle
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21. Maintenance Workshop and other related facilities in Rusayl, Sultanate of Oman. These are in addition
to on-site offices, accommodation, workshops and warehouses throughout its operating areas in the
Country.
Arabian Industries LLC, is one of the first companies in the Sultanate of Oman to have ISO 9002
Quality System Certification of Compliance for its entire scope of activities. This System was updated
to ISO 9001 in the year of 2000. The The Company’s Health, Safety, Environmental & Waste
Management standards are one of the most effective amongst the Omani contracting community with
a number of major milestone achievements to its credit.
3.3 SUBSIDIARY COMPANIES & JOINT VENTURES
 SUBSIDIARY COMPANIES
1. ◙ARABIAN INDUSTRIES MANUFACTURING LLC
Arabian Industries Manufacturing Co. LLC (AIM) (a subsidiary of Arabian Industries LLC), is the
manufacturing division providing complete solutions for engineering, procurement and fabrication of
equipments to cater to clients in the Oil & Gas, Petrochemicals, Power , Fertilizer, Chemicals, and
Refinery industries..
2. ◙ ARABIAN INDUSTRIES PROJECTS LLC
Arabian Industries Projects LLC (AIP), a subsidiary of Arabian Industries LLC, is the Projects
Division providing Engineering, Procurement, Construction and commissioning services, to cater to
clients in the Oil & Gas, Petrochemicals, Power, Fertilizer, Chemicals and Refinery Industries.
21

22. 3. ◙ ARABIAN INDUSTRIES TECHNICAL SUPPORT LLC
Arabian Industries Technical Support LLC (AITS), a subsidiary of Arabian Industries LLC, is a
provider of total maintenance solutions under one roof to cater to clients in the Oil & Gas,
Petrochemicals, Power, Fertilizer, Chemicals and Refinery Industries.
 JOINT VENTURES
Arabian Industries LLC has entered into a JV with two foreign companies. They are listed below.
1. WORLEY PARSONS –ARABIAN INDUSTRIES J.V. (WPAI J.V.)
The WPAI - J.V. was formed between Arabian Industries LLC. and Worley Parsons (Oman) during
the middle of 2005 as a framework to cater to the Engineering, Maintenance and Construction contract
for Petroleum Development of South Oman, awarded by PDO. This is a five year contract which can
be extended to 7 years.
2. NORM PROJECT J.V.
This is another J.V. formed between Arabian Industries LLC. and an International institution
(specializing in the treatment of radioactive contamination). NORM stands for “Naturally
Occurring Radioactive Materials” which are found in the PDO sites during production of Oil from
oil-wells.. This entails suitable investments in setting up decontaminating facilities and developing the
required infrastructure in PDO sites for the said purpose.
• CREDENTIALS OF ARABIAN INDUSTRIES LLC.
• ASME ‘U’, 'U2' ‘S’ & ‘R’ Stamps: For the manufacture and repair of Pressure Vessels at their
state-of-art facilities at Rusayl & Sohar work centre.
22

23. • Society is their cradle so they need to preserve and enrich it; Customers are their Patrons so
they need to honor their commitments with them;
• The employees are their biggest assets, so they need to nourish and help them grow.
3.4 CORPORATE PHILOSOPHY
A corporate philosophy is — Creating Jobs, Adding Value to the Individual, and Contributing to
Society inspires Temp Holdings to become a company that helps people fulfill their dreams and find
happiness through work. Based on this philosophy, Arabian Industries LLC, will enter the future as a
trusted and reliable company throughout Oman and the rest of the world. We will also pursue business
activities that emphasize corporate social responsibility (CSR) in order to contribute to a better
society.
1 Creating Jobs
Arabian Industries LLC, creates various types of employment by examining working arrangements,
working environment, job content, and conditions of employment
2 Contributing to society
Arabian Industries LLC, contributes to society’s betterment by creating jobs and developing effective
human resources
3 Adding Value to the individual
Arabian Industries LLC, supports people who want to improve themselves through their work,
regardless of age, sex, or nationality.
3.4.1 CORPORATE MISSION AND VISION
Overview
23

24. Arabian industry is a leading EPC Contracting Company, specialized in design, engineering,
project construction, fabrication, and testing activities in Oil and Gas, Refineries,
Petrochemicals and Power sectors.
1 Mission
To achieve market leadership through excellence in the quality of product and services by adopting
state of the art technologies and innovative management approaches aim towards customer
satisfaction.
2 Vision
Arabian Industries LLC is committed to providing their clients with the best possible service and
results at a competitive price, without compromising on quality, health, safety, environment,
24

25. business ethics or welfare of their staff. “As a recommended supplier, and a preferred employer, AI
LLC is meeting the objectives and needs of their clients & employees.”
3 Policy
Arabian Industries LLC and its subsidiaries are committed to become one of the leading company
providing complete solutions to the energy sector by enhancing customer satisfaction, strengthening
employee & supplier relations and continually improving its product & services.
4 Strength
Integrity in diversity. Though their business expands to diverse sectors they still abide by their
vision & policy and maintain integration of their Quality management system and consistency of
operations through empowerment, motivated & dedicated peers and strong leadership
25

26. 5 Approach
AILLC is a customer-focused organization nurturing the culture of internal-customers & external-
customers through out the organization. They achieve this through team-building, supply chain
management and continual training & development of their employees.
6-Credentials
AI LLC’s quality management system established since 1996 has been certified to ISO 9001 – 2000.
Their pressure equipments manufacturing facilities are accredited by ASME for U, U2, S and R
26

27. stamps. Oil & Gas field equipments manufacturing facilities are certified by API for conformance to
6A, 6D and 16A requirements.
3.5 CORPORATE OBJECTIVE
1 A To be of service to the nation and to contribute effectively to its economic well being and
growth through the production, supply and marketing of infrastructure facilities to Petroleum
Production and it’s allied industries in Sultanate of Oman.
2 To sustain and improve its pioneering role in the development of engineering and technology
in manufacturing industry through continuous research and development.
3 To improve productivity and maintain high standards of quality and adopt effective measures
for controlling cost in all aspects.
4. To ensure for its customers the availability of its products and services on reasonable terms,
for its shareholders a fair return on capital invested and, for itself, development of adequate
internal resources for continual growth and expansion.
27

28. CORPORATE OBJECTIVE
3.5.1 CORPORATE GOALS
1 To achieve a net profit of OMR: One Million per year with a turnover of OMR: 100 Million by the
year of 2010
2. To focus on cost reduction and technology up gradation in order to become competitive in each
line of business.
3. To constantly innovate and develop new technology and services to satisfy customer requirements.
4. To invest in new business lines, where profit can be made on sustainable basis over the long te rm.
5. To compete through speed, agility and flexibility in recognizing and capturing opportunities in
existing markets.
6.
CORPORATE GOALS
3.5.2 QUALITY PERFECTIVE
A dedicated team of Quality Assurance and Quality Control Engineers (lead by the Company’s
QA/QC Manager and Quality Systems Engineer) supports the implementation and monitoring of
Quality Management of the Company. All departments in the Company are certified to ISO 9001 and
regular internal and external audits are conducted to check the compliance and renewal of certificate.
28

29. ISO 9001:2000 requires that an organization’s quality policy provide a framework for reviewing the
company’s quality objectives. The policy should give an overall direction for the organization, and its
objectives should flow in that direction. But because of outside forces such as customer requirements
and market environments, business conditions can change. If this happens, the alignment between
quality policy and objectives can become off-centered. So, the standard requires that management
periodically review changes to both the policy and objectives. An organization’s objectives must be
measurable and its quality management system processes designed to meet those objectives.
3.5.3 MAJOR CLIENTS OF ARABIAN INDUSTRIES LLC
Since the company began operations in 1991, it has successfully executed numerous projects for
clients within the Gulf region. It includes some of the most reputed industrial entities like:-
In achieving the objectives of Centre, they promise to:
 Attending clients promptly and courteously
 Respond to complaints/suggestions from the clients within a reasonable time
 Continuously evaluate the effectiveness of company’s programmes
 Provide timely support to staff and workers of the firm.
29

30.  Generate Performance report every two weeks after launching the project works.
 Provide technical advice to the clients on various issues.
MAJOR CLIENTS
1. Petroleum Development Oman LLC (PDO)
2. Sohar Aluminium Company LLC (SAC)
3. Oman Refinery Company LLC (ORC)
4. Oman Gas Company LLC (OGC)
5. Occidental Oman LLC
6. Qatar Petroleum (QP)
7. Oman LNG LLC
8. Daleel Petroleum LLC
9. Enerflex Systems Pty Ltd
10. Petrofac Engineering & Construction Ltd
11. Japan Gas Corporation
12. Hanover Company ,USA
Major Clients
3.6 PRODUCT AND PROJECT PROFILES
AI LLC offers complete engineering and maintenance management services under one roof. By
optimizing its experience and technical know-how, the company provides complete assistance on
following matters
30

31. A project is a series of activities aimed at bringing about clearly specified goals within a defined time-
period and with a defined budget.
A project has: a primary target group and final beneficiaries, clearly defined coordination,
management and financing arrangements, a monitoring and evaluation system financial and economic
analysis, showing that benefits will exceed costs.
3.6.1 MAJOR PROJECTS OFFERED BY ARABIAN INDUSTRIES LLC
1. Projects and Construction (Including EPC)
2. Service Contracts
3. Civil & Building Works
4. Workshop Fabrication
5. Tank Fabrication, Construction & EPC Services
6. High Density Polyethylene Pipe Lining
7. Maintenance & Process Plant Turnaround Services
8. Aluminum Component Fabrication & Installation Services
3.6.2 Major Projects & Products details
1
Project C31/0606: Engineering and Maintenance Contract (EMC
31

32. JV Partner Worley Parsons
Project Value US$ 240 million
2
Name of Project DCME & I Engineering Service Contract No. C-680046,
Type of Contract Main sub-contractor for complete mechanical works
Approximate Value US$ 40 million (Mechanical)
3
Name of Project Fahud Steam Injection Project
Type of Contract EPC Lump sum
Project Value US$ 143 million
4
Project C31/1097: Hubara -Saih Rawl - 132 kv Overhead line,
Type of Contract EPC , Lump sum
Project Value US$ 38 million
5
Name of Project Barik Central Gathering Station Construction
Type of Contract Sole Construction Contractor
Project value US $ 11.3 Million
6
Name of Project Yibal Brownfiled Expansion – C-980033
Type of Contract Sole Construction Contractor Lump sum
Project value US $ 16 Million
7
Name of Project Security Upgrade in Oman LNG
Type of Contract Sub contractor
Project value USD.1 3.51 million
8
Name of Project Additional AR Pipeline Construction work
Type of Contract Main Contractor
Project value US $ 1 2.5 Million
3.6.3 MAJOR ACHIEVEMENTS
1-Engineering capabilities
 Mechanical design of process equipments like pressure vessels, heat exchangers, separators,
 Design of Shop and site Storage tanks as per international standards API 650, 653, EN 14015
32

33.  Design of direct and indirect heaters, fuel gas treatment plants
 Packages: PV Elite, Stadd Pro, AUTOCAD and piping software’s
 Regular association with reputed international process owners and licensors in the Oil & Gas,
Refinery and Petrochemical industry for the design of equipment internals.
2-Welding and joining technology
 Core competency and expertise in welding and joining technology of all construction metals,
especially in DSS,CRA and special alloy steels
 Qualified for a wide range of welding procedures up to 200 mm thickness
 SMAW /SAW/GTAW/FCAW/MIG facilities
 Strip cladding and special weld metal overlays
 GRP piping fabrication and bonding facilities
3-Testing
 Hydro/pneumatic testing bays and facilities
 RT/MT/UT/PT/PWHT/PMI and other NDT facilities
 PWHT facilities by Internal and external firing methods
 Local stress relieving facilities by electrical methods
 Gas fired PWHT furnaces adjustable to equipment sizes.
4-Major Services Offered
 Maintenance of Static Equipments
 Maintenance of Heat Exchangers including Tube Cleaning, Re-tubing and Plugging
 Maintenance, Overhauling and Monitoring of Compressors, Pumps, and Turbines ..
 Maintenance and Overhauling of Oilfield Equipments;
 Design, fabrication, erection and commissioning of oil and petroleum storage tanks,
MAJOR ACHIEVEMENTS
33

34. 34

35. 3.7 FINANCIAL HIGHLIGHTS FOR 2009
[SOURCE: COMPANY REPORT]
• FINANCIAL PERFORMANCE REVIEW 2009
 BUSINESS PLAN – 2010
 New project inflows (excluding EMU) at RO 41.58 million for the year 2008 vis-à-vis RO 20.977
million in the year 2008 – 103.4% growth year on year.
 Backlog of works at RO 40.216 million as at December 2008 (of which RO 37.352 million is
expected to be executed in 2009) against RO 9.98 million as at December 200 – 347.2% growth
year on year.
 Projected Gross Sales at RO 42.70 million in 2008 vis-à-vis RO 38.14 million in the previous year
– 113.44% growth year on year
 Forecasted Net Profit Before Tax at RO 5.33 million in 2008 as against RO 3.58 million in the
previous year – 59.8% growth over 2008.
35

36. BUSINESS UNITS
1. FABRICATION BUSINESS UNIT
2. TECHNICAL SUPPORT UNIT
3. PROJECT DEVELOPMENT UNIT
4. ENGINEERING MAINTENANCE UNIT
3.7.1 PERFORMANCE REVIEW FOR 2009
 Fabrication Business Unit
 Chart-3-1- PERFORMANCE REVIEW FOR 2009-FABRICATION BUSINESS UNIT

P e rfo rm ance R e vie w -M B U
1 00 0
6
1 00 0
4
684 1 Forecasted
1 00 0
2 574 9 Dec'08
1 00 0
0
800 0
Planned
600 0
900 4
82 04
400 0
200 0 1 92
0
80 0
0
Revenue Co st M arg in
Table-3-1-Performance Review-FBU Value in RO, 000
Revenue Cost Margin
Planned 10084.48 9188.48 896
Forecasted Dec'08 7661.920 6438.88 1223
 Margins were better than the original business plan based in spite of a lower turnover as the
contracts were taken at better margins.
3.7.2 Performance Review for 2009
 Technical Support Unit
 Chart-3-2- Performance Review for 2009-Technical Support Unit

36

37. P RFORMA NCE RE IE
E V W-MBU-ITS
1600 1502
1400
1200 1098 1066 Planned
1000
800 704
Forecasted
600
Dec'08
435
394
400
200
0
Revenue Cos t Margin
 Table-3-2-Performance Review-Technical Support Unit Values in OMR
Revenue Cost Margin
Planned 1727 1225 487
Forecasted Dec'08 1229 810 453
 Better marketing strategy and business tie-up’s have been planned for the year 2009 to have a
better turnover to counter the underperformance in terms of planned revenue by this Business
Unit.
3.7.3 Performance Review for 2009 of Projects Development Unit
Chart-3-3- Performance Review for 2009-PDU
P ER FO R M AN C E R EVIEW-2 008-P B U
100%
90% 5618 4400
80%
1218 Forecasted
70% Dec'08
60%
50% Planned
12489 11032
40%
1457
30%
20%
10%
0%
Revenue Cost Margin
 Table-3-3-Performance Review-PDU Values in OMR

Revenue Cost Margin
Planned 14363 12686 1676
Forecasted Dec'08 6460 5060 1400
 Smaller Contracts were executed under this business with higher profit margin as the carry
forward jobs from 2007 to 2008 were limited. However the firm expects a better turnover in
the year 2009 based on a healthy order book for the year ended 2008.
3.7.4 Performance Review for 2009 Engineering Maintenance Unit
Chart-3-4- Performance Review for 2009-EMU
37

38. PERFORMA NCE REVIEW-EMC(jv)
24569
25000
22000
21287
19449
20000
Planned
15000
Forecasted
10000
Dec'08
5000 2550 3282
0
Revenue Cost Margin
 Table-3-4-Performance Review-EMU Values in OMR

Revenue Cost Margin
Planned 25300 22366 2932
Forecasted Dec'09 28254 24480 3774
 Engineering Maintenance Contract has delivered results better than expected.
3.7.5 Forecasted Revenue for 2009
(Figures of 2008 are based on forecast)
Planned T/O RO 51.75million Anticipated Turnover for 2008 RO 44.85 million
Planned Profit RO 5.55 million Anticipated Profit for 2008 RO 5.55 million
Net Profit Margin target 10.45% Anticipated Net Profit Margin for 2009 14.5%.
Table—3-5 Division Wise Performance
Turnover Planned Forecasted-2009
Fabrication 10,354,829 7,867,448
Technical 1,727,767 1,262,931
Projects 14,362,451 6,460,212
EMU Division 25,300,000 28,254,687
Total 51,745,047 43,845,278
Cost - -
Fabrication 9,434,365 6,611,701
Technical 1,226,996 809,529
Projects 12,687,019 5,059,821
EMU Division 22,367,418 24,480,246
Total 45,715,798 36,961,296
Overhead 986,375 997,875
Directors Fees 353,002 412,039
Net Profit Before Tax 4,689,873 5,474,238
Business Plan 2010
1 Complete the construction works.
2 New Office block.
3 New lease land at Industrial Estate.
38

39. 4 New land acquired will use to setup facility for new projects.
5 Open offices in other GCC countries.
3.7.6 Financial Performance 2002 to 2009
Table-3-6-Financial Performance
2002 2003 2004 2005 2006 2007 2008 2009
Turnover 4216 5455 4900 6928 11280 25000 39166 43845
Net Profit after tax 555 184 145 125 285 1695 2649 5095
Net Worth (1591) (633) 571 1501 1785 4136 5241 8555
Chart-3-5-Financial Performance
FINANCIAL SUMMARY
45000
40000
35000
30000 Turnover
25000
20000 Net Profit after
tax
15000
Net Worth
10000
5000
0
-5000
2002 2003 2004 2005 2006 2007 2008 2009
FINANCIAL SUMMARY ASSETS & LIABILITIES
 The total Assets (Fixed and Current) as on 31st Dec.2009 RO 3.5 million
 Total Liabilities (Long Term & Current) as on 31st Dec .2009 RO 2.5 million
 Equity and accumulated Reserves as on 31st Dec. 2009 RO 1 million
3.7.7 Future Financial Planning
1. Approval of Capital Expenditure for OMR- 3 million
2. Approval of acquisition of Proposed Land and Building at Salalah.
3. Proceed with the setup of representation Office in all GCC Countries.
39

40. 4. Raise the Share Capital to RO 5 Million in the year 2010.
5. Payment of Dividend of 75% proposed share holders
Table 3-7-Financial Summary
2005 2006 2007 2008 2009
TURNOVER 1748 2227 3163 4720 4231
NET PROFIT 6 65 111 389 445
Chart-3-6 Financial Summary
FINANCIAL SUMMARY
5000 4720 500
4500 4231
445 450
4000 389 400
3500 3163 350
VALUES
3000 300 TURNOVER
2500 2227 250
2000 1748 200 NET PROFIT
1500 150
1000 111 100
65
500 50
0 6 0
2005 2006 2007 2008 2009
YEARS
ARABIAN INDUSTRIES HOLDING COMPANY STRUCTURE
ARABIAN INDUSTRIES LLC
HOLDING CO.
PROJECT UNIT FABRICATION UNIT TECHNICAL UNIT
ARABIAN INDUSTRIES ARABIAN INDUSTRIES
ARABIANINDUSTRIES
PROJECT LLC MANUFACTURING CO. LLC
TECHNICAL SUPPORT LLC
NORMS
EMU
PARSON- NORM
ARABIANINDUSTRIES - JV ARABIAN INDUSTRIES JV
40

41. OBJECTIVES FOR 2010
• Executing jobs in hand in line with schedule & budgets
• Secure at least 5 projects in the range of 30 Million USD under EMU.
• Achieve a net profit of RO 6.5 Million (before tax and after adjustment of Management fees)
• Expand client base especially for the Fabrication Shop.
• Buildup strong management at various levels to meet the Company long term objectives.
3.7.8 FIVE YEAR PLANNED TURNOVER
Table-3-8-Future Plan
Value in RO Million
BUSINESS UNIT 2010 2011 2012 2013 2014
Engineering Maintenance Contract 20.000 25.000 25.000 25.000 25.000
Arabian Industries Manufacturing 10.000 13.000 15.000 18.000 20.000
Arabian Industries Technical Support 2.500 3.000 3.500 4.000 5.000
Arabian Industries Projects 30.000 35.000 40.000 45.000 50.000
Total 62.500 75.000 83.500 92.000 100.000
Chart-3-7 - Cash Flow Analysis
CASH FLOW 2009
600000
500000
CASH INFLOW
400000
300000 Series2
200000
100000
0
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
MONTHS
Table – 3-9 Cash Flow Analysis
41

42. Jan/10 Feb/10 Mar/10 Apr/10 May/10 Jun/10
301900.3 511660.3 352984.5 289537.8 225635.8 179465.6
Jul/10 Aug/10 Sep/10 Oct/10 Nov/10 Dec/10
143654.6 90899.45 192841.2 278427.7 347378.2 571331.5
CASH FLOW ANALYSIS – 2009
CASH FLOW FORECAST FOR THE YEAR 2009 CURRENCY IN OMANI RIYAL
PERT. JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Projects Division 920,000 920,000 920,000 920,000 920,000 1,012,000 1,012,000 1,012,000 1,012,000 1,012,000 1,012,000 1,012,000
Manufacturing
345,000 345,000 345,000 345,000 345,000 379,500 379,500 379,500 379,500 379,500 379,500 379,500
Division
Maintenance
172,500 172,500 172,500 172,500 172,500 172,500 189,750 189,750 189,750 189,750 189,750 189,750
Division
NORM Contract 540,499 405,374 270,250 #VALUE! 0 0 0 0 0 0 0 0
Engineering &
Maintenance 5,060,000 5,060,000 5,060,000 5,060,000 5,060,000 5,060,000 5,060,000 5,060,000 5,692,500 5,692,500 5,692,500 6,325,000
Contract
Total Inflow
( collection from
7,037,999 6,902,874 6,767,750 6,497,500 6,497,500 6,624,000 6,641,250 6,641,250 7,273,750 7,273,750 7,273,750 7,906,250
contract
Receivables)
Salary & Wages
(excluding 1,446,953 1,461,422 1,476,037 1,623,640 1,623,640 1,639,877 1,656,275 1,672,838 1,689,566 1,706,462 1,723,527 1,740,762
Gratuity)
Suppliers / Sub
Contractors -
4,926,599 4,832,011 4,737,425 4,548,250 4,548,250 4,636,800 4,648,875 4,648,875 5,091,625 5,091,625 5,091,625 5,534,375
Creditors LC &
LTR
Other Expenses
(including Fuel +
Vehicle 211,140 207,086 203,033 194,925 194,925 198,720 199,238 199,238 218,213 218,213 218,213 237,188
ministrative
Overheads)
Income Tax 25,000
Bank Charges &
44,249 42,880 43,967 44,419 44,873 45,059 45,327 45,708 45,058 44,518 44,089 42,626
Bank Interest Cost
Total Out Flow 6,628,940 6,543,400 6,776,711 6,411,234 6,411,688 6,520,456 6,549,715 6,566,659 7,044,462 7,060,817 7,077,453 7,554,950
Net Inflow / Out
409,058 359,474 -8,961 86,266 85,812 103,544 91,535 74,591 229,288 212,933 196,297 351,300
Flow
MONTH 10-Jan 10-Feb 10-Mar 10-Apr 10-May 10-Jun 10-Jul 10-Aug 10-Sep 10-Oct 10-Nov 10-Dec
Opening Balance -107,158 152,186 361,946 203,271 139,824 75,922 52,119 16,308 -36,447 65,495 151,081 220,032
42

43. Inflow 7,037,999 6,902,874 6,767,750 6,497,500 6,497,500 6,624,000 6,641,250 6,641,250 7,273,750 7,273,750 7,273,750 7,906,250
Outflow 6,628,940 6,543,400 6,776,711 6,411,234 6,411,688 6,520,456 6,549,715 6,566,659 7,044,462 7,060,817 7,077,453 7,554,950
Surplus / (deficit) 301,900 511,660 352,984 289,538 225,636 179,466 143,655 90,899 192,841 278,428 347,378 571,332
BUSINESS PLAN - 2010
Table-3-10-Business Plan
Business Unit Planned VOWD Planned Cost Planned Margin
Arabian Industries Fabrication Unit 8,945,451 7,737,077 1,208,374
Arabian Industrial Maintenance Unit 1,614,118 1,161,660 452,457
Arabian Industries Projects Unit 29,690,189 26,765,988 2,924,202
EMU 23,000,002 19,872,181 3,127,822
Total 63,249,760 55,536,905 7,712,855
Overhead 1,220,241 -1,220,241
Management Fees 454,483 -454,483
Net Profit before Tax 4,528599 6,038,131
3.7.9 CAPITAL EXPENDITURE
Table-3-11-Capital Expenditure
Business Unit Amount in RO
ARABIAN INDUSTRIES MANUFACTURING UNIT 1,018,613
INVESTMENT – AIR COOLERS INTL 517,500
ARABIAN INDUSTRIES TECHNICAL SUPPORT UNIT 572,355
INVESTMENT IN NEW TECHNOLOGY 697,475
ARABIAN INDUSTRIES PROJECT DEVELOPMENNT UNIT 616,613
NEW PROJECT 2,535,893
ENGINEERING MAINTENANCE UNIT 718,520
CORPORATE 46,000
TOTAL 6,722,968
FUTURE PROJECT
 Investment in proposed project OMR 6 Million
 Equivellant to USD#15,463,917.00
FINANCING PROPOSED FOR THE CAPITAL EXPENDITURE
Total Capital Expenditure planned for 2010 6,000,000
Term Loan for New Project-1 2,500,000
43

44. Term loan for New Project 2 3,000,000
Term loan for New project 3 1,500,000
Balance financed by Cash generated from operations 500,000
3.7.10 FUTURE PROPOSALS
 Approval of Capital Expenditure RO 6,000,000
 Approval of acquiring of shares in new company.
 Proceed with the setup of representation Office in all GCC countries
 Raise the Share Capital to RO 5 Million by allocating RO 500,000 from the profits of year 2010.
 Approval of payment of Management fees to CMD 10% of Net Profit before tax.
 Adjust the management fees payable to directors with the amounts receivable from sister co.
 Payment of Dividend of RO 5,000,000/ to the members by 31st March 2010.
3.8 LITERATURE REVIEW - AN OVER VIEW
“A literature review is an essay or is part of the introduction to an essay, research report, or thesis.
It provides an overview and critical analysis of relevant published scholarly articles, research
reports, books, theses etc on the topic or issue to be investigated. A detailed guide to the literature
review is available on the Language and Learning services website. Literature search: A
systematic and exhaustive search for published material on a specific topic.”
44

45.  It discusses published information in a particular subject area, and sometimes information in a
particular subject area within a certain time period. It is a summary of research that has been
published about a particular subject. It provides the reader with an idea about the current situation
in terms of what has been done, and what we know. Sometimes it includes suggestions about what
needs to be done to increase the knowledge and understanding of a particular problem.
 It gives an overview of what has been said, who the key writers are, what are the prevailing
theories and hypotheses, what questions are being asked, and what methods and methodologies are
appropriate and useful. As such, it is not in itself primary research, but rather it reports on other
findings. Literature reviews can give you an overview or act as a stepping stone. It also provide a
solid background for a research paper's investigation.
A LITERATURE REVIEW MUST DO THESE THINGS:
 be organized around and related directly to the thesis or research question you are developing
 synthesize results into a summary of what is and is not known
 identify areas of controversy in the literature
 formulate questions that need further research
Structuring a literature review
 It is often difficult to decide how to organize the huge amount of information you have collected.
 The structure of each dissertation will be different but there are some general principles and these
are really the guidelines you should use for any piece of academic writing.
Structuring a literature review
 Introduction to the literature review
 Main part
 Conclusions
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46.  A literature review is a piece of discursive prose, not a list describing or summarizing one piece of
literature after another.
 It's usually a bad sign to see every paragraph beginning with the name of a researcher. Instead,
organize the literature review into sections that present themes or identify trends, including
relevant theory.
3.9 ABSTRACT OF LITERATURE REVIEW
The current study contributes to the literature by examining impact of working capital management on
the operating performance and growth of new public companies. The study also sheds light on the
relationship of working capital with debt level, firm risk, and industry. Using a sample of a
manufacturing, the study finds a significant positive association between higher levels of accounts
receivable and operating performance. The study further finds that maintaining control (i.e. lower
amounts) over levels of cash and securities, inventory, fixed assets, and accounts payables appears to
be associated with higher operating performance, as well. We find that the firms which are
experiencing unusually high growth tend not to perform as well as those with low to moderate growth.
Further firms which are experiencing high growth tend to hold higher levels of cash and securities,
inventory, fixed assets, and accounts payables. These findings tend to suggest that firms are willing to
sacrifice performance (accept low or negative operating returns) to increase their growth levels. The
higher level of growth is also associated with higher operating and financial risk. The findings of this
study suggest that perhaps the firms should stay more focused on their operating performance than on
maintaining high growth levels.
3.10INTRODUCTION AND LITERATURE REVIEW
Working capital policy refers to the firm's policies regarding 1) target levels for each category of
current operating assets and liabilities, and 2) how current assets will be financed. Generally good
working capital policy (i.e. under conditions of certainty) is considered to be one in which holdings of
cash, securities, inventories, fixed assets, and accounts payables are minimized.
The level of accounts receivables should be used as a means of stimulating sales and other
income. Previous literature on working capital management has found a negative association, overall,
between level of working capital and operating performance as measured by operating returns and
operating margins (Peterson and Rajan, 1997). Under conditions of certainty (i.e. sales, costs, lead
times, payment periods, and so on, are known), firms have little reason to hold more working capital
than a minimum level.
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47. 3.11AN ANALYSIS OF WORKING CAPITAL MANAGEMENT RESULTS ACROSS INDUSTRIES :-
INTRODUCTION
The importance of efficient working capital management (WCM) is indisputable. Working capital is
the difference between resources in cash or readily convertible into cash (Current Assets) and
organizational commitments for which cash will soon be required (Current Liabilities). The objective
of working capital management is to maintain the optimum balance of each of the working capital
components.
Business viability relies on the ability to effectively manage receivables, inventory, and payables.
Firms are able to reduce financing costs and/or increase the funds available for expansion by
minimizing the amount of funds tied up in current assets. Much managerial effort is expended in
bringing non-optimal levels of current assets and liabilities back toward optimal levels. An optimal
level would be one in which a balance is achieved between risk and efficiency.
A recent example of business attempting to maximize working capital management is the
recurrent attention being given to the application of Six Sigma® methodology. When used to identify
and rectify discrepancies, inefficiencies and erroneous transactions in the financial supply chain, Six
Sigma® reduces Days Sales Outstanding (DSO), accelerates the payment cycle, improves customer
satisfaction and reduces the necessary amount and cost of working capital needs. There appear to be
many success stories, including Jennifer Towne’s (2002) report of a 15 percent decrease in days that
sales are outstanding, resulting in an increased cash flow of approximately 2 million dollars at
Thibodaux Regional Medical Center. Furthermore, bad debts declined from 3.4 million dollar to o
600,000 dollar.
Even in a business using Six Sigma® methodology, an “optimal” level of working capital
management needs to be identified. Industry factors may impact firm credit policy, inventory
management, and bill-paying activities. Some firms may be better suited to minimize receivables and
inventory, while others maximize payables. Another aspect of “optimal” is the extent to which poor
financial results can be tied to sub-optimal performance. Fortunately, these issues are testable with
data published by CFO magazine (Mintz and Lazere 1997; Corman 1998; Mintz 1999; Myers 2000;
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48. Fink 2001), which claims to be the source of “tools and information for the financial executive,” and
are the subject of this research.
The following section presents a brief literature review. Next, the research method is described,
including some information about the annual Working Capital Management Survey published by CFO
magazine. Findings are then presented and conclusions are drawn.
 Many researchers have studied working capital from different views and in different
environments. The following are some useful research:
3.12RELATED LITERATURE
The importance of working capital management is not new to the finance literature. Over twenty years
ago, Largay and Stickney (1980) reported that the then-recent bankruptcy of W.T. Grant, a nationwide
chain of department stores, should have been anticipated because the corporation had been running a
deficit cash flow from operations for eight of the last ten years of its corporate life. As part of a study
of the Fortune 500’s financial management practices. Following are the important views of scholars
about working capital management.
1 GILBERT AND REICHERT (1995) :
Find that accounts receivable management models are used in 59 percent of these firms to improve
working capital projects, while inventory management models were used in 60 percent of the
companies. More recently, Farragher, Kleiman and Sahu (1999) find that 55 percent of firms in the
S&P Industrial index complete some form of a cash flow assessment, but did not present insights
regarding accounts receivable and inventory management, or the variations of any current asset
accounts or liability accounts across industries. Thus, mixed evidence exists concerning the use of
working capital management techniques. Theoretical determination of optimal trade credit limits are
the subject of many articles over the years (e.g., Schwartz 1974; Scherr 1996), with scant attention
paid to actual accounts receivable management. Across a limited sample,
2 WEINRAUB AND VISSCHER (1998) :
Observe a tendency of firms with low levels of current ratios to also have low levels of current
liabilities. Simultaneously investigating accounts receivable and payable issues, Hill, Sartoris, and
Ferguson (1984) find differences in the way payment dates are defined. Payees define the date of
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49. payment as the date payment is received, while payers view payment as the postmark date. Additional
WCM insight across firms, industries, and time can add to this body of research. Maness and Zietlow
(2002, 51, 496) presents two models of value creation that incorporate effective short-term financial
management activities. However, these models are generic models and do not consider unique firm or
industry influences. Maness and Zietlow discuss industry influences in a short paragraph that includes
the observation that, “An industry a company is located in may have more influence on that
company’s fortunes than overall GNP” (2002, 507).
3 ELJELLY, 2004 :
Elucidated that efficient liquidity management involves planning and controlling current assets and
current liabilities in such a manner that eliminates the risk of inability to meet due short-term
obligations and avoids excessive investment in these assets. The relation between profitability and
liquidity was examined, as measured by current ratio and cash gap (cash conversion cycle) on a
sample of joint stock companies in Saudi Arabia using correlation and regression analysis.
The study found that the cash conversion cycle was of more importance as a measure of liquidity than
the current ratio that affects profitability. The size variable was found to have significant effect on
profitability at the industry level. The results were stable and had important implications for liquidity
management in various Saudi companies. First, it was clear that there was a negative relationship
between profitability and liquidity indicators such as current ratio and cash gap in the Saudi sample
examined. Second, the study also revealed that there was great variation among industries with respect
to the significant measure of liquidity.
4 BERGAMI ROBERT (2007) :
Analysis that that international trade transactions carry inherently more risk than domestic trade
transactions, because of differences in culture, business processes, laws and regulations. It is therefore
important for traders to ensure that payment is received for goods dispatched and that the goods
received and paid for comply with the contract of sale. One effective way of managing these risks has
been for traders to rely on the letter of credit as a payment method. However for exporters in
particular, the letter of credit has presented difficulties in meeting the compliance requirements
necessary for the payment to be triggered.
The current rules that govern letter of credit transactions(UCP 500) have been under review for the
past three years and an updated set of rules (UCP 600) is expected to be introduced on 1July 2007.
This paper focuses on the changes mooted for 2007and compares these main issues with the existing
rules and other associated guidelines and regulations governing this method of payment. This paper
considers the implication to changes of letter of credit transactions and the sharing of risk. Firstly the
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50. paper provides some background to letters of credit, then comments on existing literature and models,
and subsequently an analysis of the most important changes to the existing rules, before reaching a
conclusion. The conclusion is that the UCP 600 have not paid enough consideration to traders and
service providers and are likely to engender an environment of uncertainty for exporters in particular.
CHAPTER 4
1-INTRODUCTION
2-NEED OF WORKING CAPITAL
3-CONCEPT OF WORKING CAPITAL 50
4-CLASSIFICATION OF WORKING CAPITAL
5-DETERMINANTS OF WORKING CAPITAL

51. 4.1 INTRODUCTION- WORKING CAPITAL MANAGEMENT
“Working capital occupies a peculiar position in the capital structure of a company. The decision as
to the adequacy of working capital is a complicated and yet a very important decision”.
Working capital is the life-blood of all types of enterprises, manufacturing and trading both. It is
constantly required to buy raw materials for payment of wages and other day-to-day expenses.
Without adequate working capital, manufacturing operations will be crippled. For trading enterprises,
the capacity to stock a variety of goods for sale depends upon its working capital. It is a base on which
all the activities of business enterprise depend.
Many companies still under estimate the importance of working capital management as a lever for
freeing up cash from inventory, accounts receivable, and accounts payable. By effectively managing
these components, companies can sharply reduce their dependence on outside funding and can use the
released cash for further investments or acquisitions. This will not only lead to more financial
flexibility, but also create value and have a strong impact on a company’s enterprise value by reducing
capital employed and thus increasing asset productivity.
High working capital ratios often mean that too much money is tied up in receivables and inventories.
Typically, the knee-jerk reaction to this problem is to apply the “big squeeze” by aggressively
collecting receivables, ruthlessly delaying payments to suppliers and cutting inventories across the
board. But that only attacks the symptoms of working capital issues, not the root causes. A more
effective approach is to fundamentally rethink and streamline key processes across the value chain.
This will not only free up cash but lead to significant cost reductions at the same time.
Only those enterprises which have adequate working capital can survive in times of depression. The
investment in raw materials becomes long- term investments during depression and cash flow declines
due to fall in sale. In such circumstances only enterprises with adequate working capital can survive.
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