Report on Lucky Cement Limited

Analysis of Financial statements MBA-4(B)

REPORT ON LUCKY CEMENT LIMITED

Submitted To : Mr Fazal ur rehman

Submitted By : M Farrukh Arif

Program : MBA(Finance), Section B

Enroll # : 01-222092-007

BAHRIA UNIVERSITY, ISLAMABAD CAMPUS

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INTRODUCTION OF AN ORGANZATION:Lucky Cement Limited is the largest cement producer in Pakistan. Its shares are traded on the Karachi Stock Exchange. Lucky Cement Limited has been sponsored by one of the largest business groups in Pakistan, the Yunus Brothers Group (YB Group), based in Karachi and has grown remarkably over the last 50 years. The YB Group is engaged in diversified manufacturing activities including textiles, spinning, weaving, processing, finishing, stitching and power generation.History:Lucky Cement Limited was founded in 1996 by Mr. Abdul Razzak Tabba. Mr. Abdul Razzak Tabba was the Chairman of YB Group. Mr. Tabba was awarded SITARA-I-IMTIAZ on 23rd March, 2005 for Public Service and the highest exports. Under the leadership of Mr. Abdul Razzak Tabba, the Group has received more than 20 Exports Trophies from the Government of Pakistan for the highest overall exports from the Country as well as the highest exports in Textile SectorThe company initially started with factories in the Pezu district of the North West Frontier Province (N.W.F.P). It now, also, owns a factory in Karachi.

The Group consists of a number of industrial establishments other then Lucky Cement Limited, they include:

1. Lucky Textile Mills 2. Fazal Textile Mills Limited 3. Gadoon Textile Mills Limited 4. Lucky Energy (Private) Limited 5. Yunus Textile Mills

Lucky Textile Mills - established in 1983

Fully computerized weaving and stitching unit Consists of 3 weaving plants comprising of 800 looms, 250 stitching machines, 3.4 million meter/month Grey fabric capacity, 83 million meters/ annum processing and 15 million meters/ annum made ups capacity Power generation capacity 6.20 MW Expertise in ready-made curtains and accessories for foreign markets

Fazal Textile Mills Limited - established in 1987

One of the top spinning mill in the country with 59,508 installed spindles Produces 100% Grey Cotton Ring Spun Yarn and wide range of Blended and Heather Yarns? ISO – 9001:2000 certified

Gadoon Textile Mills Limited - established in 1988

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First of the only two mills in the world producing Compact Core Spun yarn 194,392 installed spindles. Produces high quality Compact yarn, Murata Jet Spinning yarn, Core Spun yarn and 100% Grey Cotton Ring Spun yarn Also has a power plant of 34 MW OKO – Tex Standard 100 certified

- COMPETITORS :

Here is a list of competitors:

Best way cement

Fauji cement DG Khan cement

PRODUCT LINE:Lucky Cement aims at producing cement to suit every user. The following types of cement are available:

1. Ordinary Portland Cement 2. Sulphate Resistant Cement3. Slag Cement

ORDINARY PORTLAND CEMENT (OPC)

Ordinary Portland cement is available in darker shade as well as in light shades in Lucky Star with different brand names to suit the requirement of users.

It is used in all general constructions especially in major prestigious projects where cement is to meet stringent quality requirements; it can be used in concrete mortars and grouts etc. Ordinary Portland cement is compatible/consumable with admixture/ retarders etc.

SULPHATE RESISTANT CEMENT (SRC) Sulphate resistant Cement’s best quality is to provide effective and long lasting strength against sulphate attacks and is very

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suitable for constructions near sea shores as well as for canals linings. It provides very effective protection against alkali attacks.

SLAG CEMENT Slag cement is also available for specific user requirements. Slag cement, has been incorporated into concrete projects for over a century to improve durability and reduce life cycle costs. Among its measurable benefits in concrete are better workability and finish ability, higher compressive and flexural strengths, and improved resistance to aggressive chemicals.

BRANDS AVAILABLE AT LUCKY CEMENT

Lucky CEMENT (REGULAR) Lucky STAR

Lucky GOLDLucky SULPHATE RESISTANT CEMENT

(SRC)

CORPORATE SOCIAL RESPONSIBILITY:Being very conscious of social responsibility of corporate sector, Mr. A. Razzak Tabba had established “Aziz Tabba Foundation” for the welfare of the community at large, which is engaged in a number of social welfare activities for the benefit of poor and needy people. The major social welfare centers sponsored by the Aziz Tabba foundation are “Aziz Tabba Dialysis Centre” and “Tabba Heart Institute”. The Aziz Tabba Kidney Centre in Karachi having 20 modern Toray dialyses machines serving more than 200 patients every day and installed capacity for at least 240 patients.

Community Investment and Welfare Schemes

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During the year under review, the Company generously donated Rs.100 million to Karachi Education Initiative (KEI),a non-profit organization, with a goal to establish a world-class, international graduate level business institution in Karachi city with the name of Karachi School of Business and Leadership (KSBLEnvironmental Protection MeasuresCement production is one of the most energy intensive industrial processes; the Company through the commissioning of Waste Heat Recovery Projects is converting the waste heat into a primary source of fuel for power generation, thus,resulting in reduction of green house gases emission.As a part of environment protection measures, the Company has planted thousand of trees at both production facilities to make a green belt across the plant sites.

VISION

We envision being the leader of the cement industry by identifying and capitalizing on new market opportunities, meeting expectations of the stakeholders, contributing towards industrial progress and sustainable future, while being responsible corporate citizens.

MISSION

To be the leading exporter of cement from Pakistan for the regional countries as well as to explore other potential export markets. Our future strategy is to explore investment possibilities outside Pakistan in the cement industry to become a leading global producer.

Exploring and Establishing Export Markets

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Our mission is to expand our business network by forming strategic alliances in the global market. We endeavor to equip our business with the latest technology to produce quality cement while conserving energy and reducing CO2 emission to reinforce eco-friendly business practices; thus meeting international standards.


We have a firm commitment in exploring new markets for sustainable business growth. Lucky Cement has been successful in establishing its brand in several export markets including Middle East, India, Sri Lanka and East and South African countries. We are also planning to setup some offshore facilities to further strengthen our export business on regular basis

REWRITING OF ARTICLE ON LUCKY CEMENT PUBLISHED ON 19/03/11:

Lucky cement Limited is currently one of the largest manufacturer of cement in Pakistan. Recently in 2010,company implemented waste heat project in Karachi plant to minimize cost of production. The project uses wasted heat from the production system to run turbine engines. So in FY10,company’s production of cement increased by 13.05%.Cement sector in 1H11(1 st July to 30 TH Dec): The Cement industry overall faced negative growth of 11.2% in 1H11 in both local and exports sales comparatively with same last period. Exports to India suffered a decline of 1.779 million tons as compared to 2.771 million tons during the same last period.But exports to Afghanistan increased by 18% during the first five months of this fiscal year to 1.83 million tons.

The major reasons for decline in growth were flood, lack of government spending on public sector development projects, hyperinflation and bad law and order situation across the country. Another reason for the decline was the high transportation charges that made it difficult for the plants located in the northern areas to export cement through sea.Comparison with the industry:In domestic market ,market share of lucky cement increased 3 % as compared to last year.Although exports decreased in Middle east countries due to lack of construction.However the exports to Afghanistan increased 18% as compared to last financial year.PROFITABILITY RATIOS:

The profit after tax wasRs.1.46 million in 1H11 which was 24% lower as compared to 1H10.The reason behind increase in cost of production which includes Fuel cost and international coal process hike is one of the factors. So the company Gross profit decreased to 33% from 37% least year.So the earning per share is also declined to Rs. 4.52 which was Rs.5.9 last year.The decline can be linked with less profit made by lucky cement.

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One can easily observe from the graph that profits have been increasing at varying rates since FY03.From FY06 TO FY08,due to increase in cost of production ,profits were overall gone through decline. The reason behind dramatic decline of FY08 profits was massive growth in operation costs due to fuel and electricity costs But Lucky cement emphasized more on exports at that time period for mitigating the negative effects on profits. In 1H10, profit margin was 15.74% which fell to 12.14% in 1H11 so overall profitability of the company deteriorated .ROA and ROE both declined to 3.6% and 5.7% respectively during the period as compared to 5% and 7% during the corresponding period of last year because of less profitability. From FY05 to FY07, Return on assets and return on assets increased and showed healthy trend. But in FY10, ROE AND ROA Decreased due to lesser proportionate increase in profits as compared to increase in assets and equity.LIQUIDITY POSITION:The current ratio of lucky cement declined from 0.86 in FY09 to 0.71 in FY10 as there came decrease in current asset

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Report on Lucky Cement Limited