Lcuky Cement Financial Highlight Repor

8/9/2019 Lcuky Cement Financial Highlight Repor

1/18

TABLE OF CONTENTS

Preface

01

Acknowledgement

. 02

Industry

Profile

..03

Company

Overview

... 06

Company

Profile......................................................

..........................07

1


2/18

Financial Analysis of

company

.09

PREFACE

To fulfill the requirement of our course SECURITY ANALYSIS, me and my group member

make a group and prepare a report Financial Analysis of Lucky Cement.

Learning in practical side is somewhat that cannot be compared with books knowledge. MBA

program is designed in such a way that students are required to do the financial analysis of

different companies give their recommendation about their future growth, price and expansion. It

also provides student an opportunity to apply this knowledge in practical field.

2


3/18

Acknowledgement

Greatest thanks to Allah Almighty. Allah, Who bestowed me and my group members with the

ability and potential to complete this report. Before I go into thick of the things, I would like to

add a few deepest words for the people who were part of this report in numerous ways people

who gave unending support right from the stage the report was assigned.

We wish to express our sincere thanks to our respected Teacher Mr. Abdul Khalique for giving

us an opportunity to work on a practical approach, report on financial analysis of lucky cement

and giving us the guidance to complete the same.

3


4/18

Industry Profile

The history of cement industry in Pakistan dates back to 1921 when the first plant was

established at Wah. At the time of independence in 1947 there were four cement factories with

an installed capacity of 470,000 tons per annum. These units were located at Karachi, Rohri,

Dandot and Wah. In 1956 Pakistan Industrial Development Corporation (PIDC) established two

plants at Daudkel and Hyderabad and subsequently more plants were established in the private

sector.

Cement manufacturing is a high capital-and energy-intensive industry. The capital cost of a 2000

tons/day plant ranges between Rs. 3.5 billion to Rs. 4 billion whereas the capital cost of a

3000tons/day plant is estimated at more than Rs. 5.5 billion. Energy consumption by cement

manufacturing units based on 'wet process' is higher than 'dry process'. The 'dry process' is

estimated to be economical by 40% to 50% compared to 'wet process'.

By now it has exceeded 10 million tonnes per annum as a result of establishment of new

manufacturing facilities and expansion by the existing units. Privatization and effective price

decontrol in 1991-92 heralded a new era in which the industry has reached a level where surplus

production after meeting local demand is expected in 1997.

The debt, which was Rs 34 billion in 2003-04, has crossed Rs 120 billion this year. Cement

demand in the country is directly proportionate to the growth in GDP. Over the last 3-5 years, the

security situation in the country has resulted in low GDP growth. Despite this, the cement

industry contributed revenue amounting to approximately Rs15 billion in 2004, Rs17.5 billion in

2005, Rs 22b in 2006, Rs 26.3 billion in 2007 and Rs30 billion in 2008 to the national exchequer.

Cement industry is also following the rules and regulation implemented by FBR. Federal Boardof Revenue has the power to check the books of accounts of any company and the cement sector

remains under close scrutiny of the Federal Board of Revenue.

4


5/18

The cement industry in Pakistan faces two serious threats: closure of units based on wet process,

and poor cash flow rendering the units incapable of debt servicing due to increasing cost of

electricity, furnace oil and imported craft paper used for cement packing.

Pakistan's cement market is divided into two distinct regions, North and South. The northern

region comprises the Punjab, NWFP, Azad Kashmir and upper parts of Balochistan, whereas the

southern region comprises the entire province of Sindh and lower parts of Balochistan.

Traditionally, the southern region has always been surplus in cement production but with the

establishment of more plants in the northern parts of the country the region has become almost

self-sufficient in supply of cement.

Demand has grown at an average rate of 7%, with the Northern region averaging 8% and

Southern region lagging behind at 4%. The way new plants are being established and existing

plants are undertaking expansion, the demand-supply equation is bound to create surpluses.

Factors which can possibly change the surplus position into a near-equilibrium between demand

and supply are:-

1. Formation of manufacturers' cartel to avoid price decline;

2. Delay in implementation of planned additions and expansions;

3. Efforts to export cement; and

4. Increase in demand if construction of some of the mega-sized infrastructure projects

starts.

Opportunity for cement industry in Pakistan

Pakistan has one of the highest population growth rates in the world, touching 3%. This has

prompted a sizable demand for housing facilities in the country. According to estimates of

construction industry, there is a huge backlog of about 6.25 million housing units in the country.

Bulk of the current demand of 0.6 million units needed every year is for urban areas. With

5


6/18

greater urbanization the demand for cement is expected to grow at an average of nearly 7% per

annum.

Government Attitude towards Industry:

Tax structure:

Instead of providing any relief in the budget, the sector was further penalized with a 3% increase

in sales tax to 18% and an increase in excise duty to 35%.

Excise Duty:

In budget 2008-2009 the federal excise duty on cement has been to Rs 900 per tones from the

existing base of Rs 750 per tones.

6


7/18

Company Overview

Company Name: Lucky cement

Registered Office: The registered office of the Company is located at Pezu, District Lakki

Marwat in North West Frontier Province (NWFP).

Chairperson: Mr. Muhammad Yunus Tabba

Chief Executive: Mr. Muhammad Ali Taba

Board of Directors

Mr. Muhammad Sohail Tabba

Mr. Javed Yunus Tabba

Mr. Imran Yunus Tabba

Mariam Razzak

7


8/18

Rahila Aleem

Manzoor Ahmed

8


9/18

Company Profile

Company was founded in 1996 by Abdul Razzak Tabba. Company came into existence with

daily production of 4,200 Ton/Day, in Durra Pezu Dist: Marwat, NWFP.

Sponsored by YUNUS BROTHERS GROUP one of the largest export houses of Pakistan

Now Lucky cement is produce 21,000 Pons/Day, of which 13,000 Tons/Day in Pezu and 8000

Tons/Day in Karachi.

Company producer and seller of Ordinary Portland Cement, Sulphate Resistant Cement, and Slag

cement

Pakistan cement industry concluded the financial year ended June 30, 2009 with an overall

meager growth of 2% with total sales volume of 30.77 million tons against last years sales

volume of 30.286 million tons. The demand in the domestic market witnessed a dismal negative

growth of 14% due to adverse economic, financial as well as law and order situation prevailed in

the country. On the export front, the industry witnessed a healthy growth of 47% with sales

volume of 11.381 million tons against last years sales volume of 7.716 million tons per annum.

The shortfall in domestic sales was compensated by exports which ended with a proportion of

37% of the total sales of the industry.

By the grace of Almighty Allah, Company managed a decent growth of 6.25% in overall sales

volume during the year under review as compared to same period last year. The local sales

witnessed a negative growth of 14% whereas exports registered a healthy growth of 29% during

the year under review as compared to same period last year. The ratio of exports to total sales

volume of your Company was 58% whereas the export market share of your Company was

30.18% during the year under review. The overall market share of your Company slightly

improved from 18.35% last year to 19.18% this year despite of addition of new capacities byother peers.

9


10/18

We are pleased to report that the financial year under review was concluded as the best ever

performing year in the history of your Company inspite of difficult business environment

prevailed both in the domestic and export markets. Company was able to achieve following

significant performance during the year under review:

Record gross sales revenue of Rs.30.915 billion which is 48% higher than last year

Record net sales revenue of Rs.26.330 billion which is 55% higher than last year

Record operating profit of Rs.7.240 billion which is 135% higher than last year

Record after tax profits of Rs.4.596 billion with earnings per share of Rs.14.21.

Company was also able to complete following additional milestone projects which will pave a

long way to further enhance the financial performance of your Company:

Successful operation of 1.25 mtpa production capacity of Line G at Karachi Plant

making total capacity of your Company to 7.75 mtpa

Successful conversion of Pezu Plant Captive power generation units to gas based power

generation, first of its kind experience in Pakistan for such huge capacity generators

Inauguration of first ever loose cement export terminal owned by Company.

Capital Expenditures

The Company incurred total expenditures of Rs.8.4 billion as addition to buildings and plant &

machinery mainly consisted of Line G at Karachi plant, loose cement export terminal at

Karachi Port and conversion of dual fuel power generators.

10


11/18

Financial analysis:

11


12/18

12


13/18

13


14/18

14


15/18

15


16/18

16


17/18

Ratio Analysis of company:

RATIO ANALYSIS

Years 2005 2006 2007200

8 2009

LIQUIDITY RATIO

CR 0.63 0.94 0.85 1.09 0.86

QR 0.2 0.61 0.44 0.35 0.4

SOLVENCY RATIO

D/E 1.88 2.34 1.75 0.84 0.65

EM 2.88 3.34 2.75 1.84 1.65

EFFICIENCY RATIO

ARTO 6.34 5.01 12 19.5 17

ITO in days 21 20 23 21 21

TATO 0.27 0.34 0.49 0.61 0.81

Int/earning55.7

8 30.83 3.12 18.2 4.19

PROFITABILITYRATIO

GM 0.35 0.37 0.29 0.21 0.32

OP RATIO 0.33 0.34 0.24 0.15 0.23

NP RATIO 0.21 0.24 0.2 0.13 0.15

RoE 0.18 0.32 0.31 0.19 0.22

RoA 0.08 0.1 0.1 0.09 0.13

17


18/18

E/Share 3.52 7.35 9.6 9.12 14.21

Price/Earning13.5

1 13.66 12.72 9.96 4.12

Dividend yield ---- 1% 1.02% --- 6.83%

Dividend payout ---

13.61

%

12.93

% -----

28.15

%Dividend cover --- 7.35% 7.74% ----- 3.55%

18

Documents

Lcuky Cement Financial Highlight Repor