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INDUS INSTITUTE OF HIGHER EDUCATION KARACHI.

Financial Analysis of Cement Industry of Pakistan

Fauji Cement & Pioneer Cement (Comparison With Kohat & Cherat Cement)
(This thesis is submitted in partial fulfillment of requirements for the MBA. Degree in Finance).

SUPERVISED BY:
SIR. TARIQ MEHMOOD. FACULTY MEMBER. Email:tariqphdszabist@gmail.com

SUBMITTED BY:

Zahoor Ahmed IIHE/08E/2008

Email:zahoor_gr8@yahoo.com

MBA (Finance)

A PROJECT SUBMITTED TO
THE FACULTY OF BUSINESS ADMINISTRATION.
Zahoor Ahmad Page 2 24-06-2011

JUNE, 2011. INDUS INSTITUTE OF HIGHER EDUCATION KARACHI.

Financial Analysis of Cement Industry of Pakistan

(This thesis is submitted in partial fulfillment of requirements for the MBA. Degree in Finance).

SUPERVISED BY:
SIR. TARIQ MEHMOOD. FACULTY MEMBER. Email:tariqphdszabist@gmail.com

SUBMITTED BY:

Zahoor Ahmed IIHE/08E/2008

Email:zahoor_gr8@yahoo.com

MBA (Finance)

A PROJECT SUBMITTED TO
THE FACULTY OF BUSINESS ADMINISTRATION. JUNE, 2011.
Zahoor Ahmad Page 3 24-06-2011

ABSTRACT SUBMITTED BY:

ZAHOOR AHMAD.

DISCIPLINE:

MBA (FINANCE).

TITLE OF PROJECT REPORT:

FINANCIAL ANALYSIS OF
CEMENT INDUSTRY OF PAKISTAN.

(Fauji Cement & Pioneer Cement Compare with Kohat & Cherat)
MONTH OF SUBMISSION:

JUNE , 2011.

NAME OF PROJECT SUPERVISOR:

SIR. TARIQ MEHMOOD.

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Faculty of Business Administration INDUS INSTITUTE OF HIGHER EDUCATION Karachi.

Certificate I am pleased to certify that Mr. Zahoor Ahmed s/o Muhammad Maroof has satisfactorily carried out a research work, under my supervision on the topic of Financial Analysis of Cement Industry of Pakistan. (Surway of two units): (2004 to 2008) I further certify that his distinctive original research and his thesis is worthy of presentation to the Faculty of Business Administration,
INDUS INSTITUTE OF HIGHER EDUCATION Karachi for the degree of MBA(Finance).

Dean Business Administration: ---------------------------

HOD Business Administration: ----------------------------

Supervisor:

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

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ACKNOWLEDGEMENT
God Almighty is worthy of all acknowledgments.. No one can say that I am perfect, everyone should admit that without the help of ALLAH and His people a man cant get anything so I bow my head before almighty Allah with gratitude. I am also very much thankful and presents salute to many individuals who have helped me in shaping this research paper I am gratitude to Almighty ALLAH, Who has given me strength and mentor to accomplish this mammoth task. I extend my thanks to SIR. TARIQ MEHMOOD for his candid guidance and continuous support and encouragement during the accomplishment of my Project Report on Financial Analysis of Cement Industry of Pakistan (Survey of Two Units), which is compulsory for my degree of M.B.A (Finance). I am thankful to my teacher for giving me this opportunity and build up confidence. I hope this effort on my part will come up to your expectations. The last but not least, I would feel incomplete without thanking to my parents who pray for my brilliant success and bright future. By: Zahoor Ahmad. INDUS INSTITUTE OF HIGHER EDUCATION KARACHI. DATED: 10TH JUNE 2011.

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2. Dedication

I dedicate this research to our parents and teachers, who taught us to think, understand and express. I earnestly feel that without their inspiration, able guidance and dedication, I would not be able to pass through the tiring process of this research.

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3. ABSTRACT
The purpose of this research report is to evaluate, analyze and compare the financial statements of M/S Fauji Cement Company Limited & (Pioneer Cement Comparison with Kohat & Cherat Cement comparative analysis. I have chosen these two companies on the basis of their financial performance, they are also listed on all major stock exchanges of the country. After researching, surveying, observing, collection of data, I have arrived at the written analysis follows hereafter. As the requirement of the report, I have conducted a detailed study of the analysis the financial statements and ratios. On the basis of above information, I have arrived on specific recommendations from strategic managements viewpoint. I have supported suggestions through strategic theories, matrices and exhibits, present in the report. The report includes the whole financial status of both the companies through which a reader can get the financial strengths & weakness of both the organizations. The fundamentals of the research is to build the readers capability to evaluate the financial data & information into projective manner as to compare the financial stability & growth with each other in consequence either for enhancement & for decrement. Pakistan currently has a per capita consumption of 120kg of cement, which is comparable to that for India at 135kg per capita but substantially below the World Average 270kg and the regional average of over 400kg for peers in Asia and over 600kg in the Middle East. Over the years a number of tax policy and administrative measures have been introduced to attract investment and facilitate growth of the cement industry. The Government has reduced central excise duty (CED) on cement in the budget for 2007-08 in order to boost construction activity.

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In Pakistan APCMA plays a significant role in projecting the cement industry to the Government and coordinating various activities in respect of formulation of Government policies for the cement industry. Cement demand is significantly affected by the Public Sector Development Program (PSDP), construction of dams, elevated and concrete roadways, residential construction as well as exports.

Table Of Contents

S.# 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Chapter Acknowledgement Dedication Abstract Chap-1 - 1.1 1.2 1.3 1.4 1.5 1.6 Chap-2 - 2.1 2.2 2.3 2.4 2.4.1 Chap-3 3.1 3.2 3.2.1 3.2.2 Introduction Data Problem Statement Purpose of Study Research objective Limitation of research Literature review Growth of Cement Industry

Title

Page 1 2 3 7 9 10 10 11 12 12 13 14 15 15 17 17 17 17

Export & International Market National Scenario Production Methodology (Theories) Financial Analysis Procedure Percentage Analysis Trend Analysis (Horizontal Analysis)

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19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43

3.2.3 3.2.4 3.3 3.4 3.5 3.6 Chap-4 4.1 (1) - 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.9.1 4.9.2 4.9.3 4.9.4 4.9.5 4.9.6 4.9.7 4.9.8 (2) - 4.2.1 4.2.2

Common Size Statement Vertical Analysis Ratio Analysis Data Collection Procedure Analysis Procedure Sample Test of Analysis Data analysis, results / findings and Discussion. Fauji Cement Company Limited. Financial Analysis M/S Fauji Cement (Balance Sheet) Income Statement Balance Sheet Trend Analysis(Horizontal Analysis) Balance Sheet Vertical Analysis Income Statement Trend Analysis(Horizontal Analysis) Income Statement (Vertical Analysis) Ratio Analysis Liquidity Ratio Longterm Liquidity / Long Term Debt Paying Ability Activity Ratio / Asset Turnover Ratio/ efficiency Ratio Profitability Ratio Financial Leverage Ratio. Dividend Policy Ratio Ratio Analysis Chart Conclusion (Fauji Cement) Pioneer Cement Limited (Comparative Analysis with Kohat & Cherat Cement) Five Years Horizental Analysis of Income Statement

17 17 18 18 20 21 22 22 22 25 26 30 33 35 37 37 42 45 50 60 61 63 64 65 65

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44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69

4.2.3 4.2.4 4.2.5 4.2.6 4.2.7 4.3 4.3.1 4.3.2 4.3.3 4.3.4 4.3.5 4.3.6 4.3.7 4.4.1 4.4.2 4.4.3 4.4.4 4.4.5 4.4.6 4.4.7 4.5 4.6 Chap-5 - 5.1 Chap-6 6.1 6.2 6.3

Five Years Horizental Analysis of Balance Sheet Vertical Analysis of Income Statement Vertical Analysis of Balance Sheet Trend Analysis (Balance Sheet) Trend Analysis (Income Statement) Ratio Analysis Liquidity Ratios Current Ratio Quick Ratio Turnover /Activity Ratio Debtors Turnover Ratio or Receivable Turnover Total assets Turnover Ratio Fixed Assets Turnover Ratio Profitability Ratio Gross Profit (GP) Ratio Operating Profit ratio Return on Assets Return on Equity (ROE) Ratio Debt Ratio Debt Service Ratio Interest Coverage Ratio General Ratio analysis Company Analysis Conclusion Recommendation Future Outlook Bibliography (References)

67 71 73 77 80 81 81 81 84 86 87 89 91 92 93 94 95 96 98 100 101 103 104 105 106 107

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Chapter.1
Introduction The research report is carried out as the analysis of cement industry of Pakistan by comparing the financial performance of two units (Fauji Cement Co. Ltd. & Pioneer Cement Ltd.) Analysis will be made for Profit and Loss A/c, Balance Sheet and Cash flow statement; the following financial ratios will also be analyzed. Balance Sheet Trend Analysis (Horizontal Analysis / Vertical Analysis). Income Statement Trend Analysis (Horizontal Analysis / Vertical Analysis). Ratio Analysis. FINANCIAL ANALYSIS Financial Analysis is the summary of all transactions that have occurred over a particular period. Financial Analysis refers to the assessment of a business to deal with the planning, budgeting, monitoring, forecasting, and improving of all financial details within an organization. These indicate a firm's financial health and stability. Two key financial statements are: BALANCE SHEET A balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership or a company. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a "snapshot of a company's financial condition. Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business' calendar year. Page 12 24-06-2011

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A standard company balance sheet has three parts: assets, liabilities and ownership equity. The main categories of assets are usually listed first and typically in order of liquidity. Assets are followed by the liabilities. The difference between the assets and the liabilities is known as equity or the net assets or the net worth or capital of the company and according to the accounting equation, net worth must equal assets minus liabilities.

INCOME STATEMENT Income statement (also referred as profit and loss statement (P&L), statement of financial performance, earnings statement, operating statement or statement of operations)

Is a company's financial statement that indicates how the revenue (money received from the sale of products and services before expenses are taken out, also known as the "top line") is transformed into the net income (the result after all revenues and expenses have been accounted for, also known as the "bottom line"). It displays the revenues recognized for a specific period, and the cost and expenses charged against these revenues, including write-offs (e.g., depreciation and amortization of various assets) and taxes. The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported. The important thing to remember about an income statement is that it represents a period of time. This contrasts with the balance sheet, which represents a single moment in time

Horizontal Analysis
The analysis is based on a year-to-year comparison of a firm's ratios,

Vertical Analysis
The comparison of Balance Sheet accounts either using ratios or not, to get useful information and draw useful conclusions

RATIO ANALYSIS: A comparison of relationship among account balances.

FINANCIAL RATIOS
Financial Rations are helpful in analyzing the actual performance of the company compared to its financial objectives. They also provide insights into the firms performance compared to other firms in the industry. Ratio simply means one number expressed in Zahoor Ahmad Page 13 24-06-2011

term of another. A ratio is a statistical yardstick by means of which relationship between two or various figures can be compared or measured. The term accounting ratio is used to describe significant relationship between figures shown on a balance sheet, profit and loss account or in any other part of accounting organization. Accounting ratio thus shows the relationship between the accounting data. ACCOUNTING RATIOS The term "accounting ratios" is used to describe significant relationship between figures shown on a balance sheet, in a profit and loss account, in a budgetary control system or in any other part of accounting organization. Accounting ratios thus shows the relationship between accounting data. Ratios can be found out by dividing one number by another number. Ratios show how one number is related to another. It may be expressed in the form of co-efficient, percentage, proportion, or rate. ADVANTAGES OF RATIOS ANALYSIS Ratio analysis is an important and age-old technique of financial analysis. The following are some of the advantages of ratio analysis: SIMPLIFIES FINANCIAL STATEMENTS It simplifies the comprehension of financial statements. Ratios tell the whole story of changes in the financial condition of the business. INTER PERIOD COMPARISON It provide data for inter period comparison. FACILITATES INTER-FIRM COMPARISON It provides data for inter-firm comparison. Ratios highlight the factors associated with successful and unsuccessful firm. They also reveal strong firms and weak firms, overvalued and undervalued firms. HELPS IN PLANNING It helps in planning and forecasting. Ratios can assist management, in its basic functions of forecasting. Planning, co-ordination, control and communications. MAKES INTER-FIRM COMPARISON POSSIBLE Ratios analysis also makes possible comparison of the performance of different divisions of the firm. The ratios are helpful in deciding about their efficiency or otherwise in the past and likely performance in the future.

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HELP IN INVESTMENT DECISIONS It helps in investment decisions in the case of investors and lending decisions in the case of bankers etc 1.2. DATA. 1) I chose the cement sector of Fauji Cement for inter period analysis from 2004 to 2008 2) Three cement industries for their comparative financial analysis(Inter firm & inter period Analysis). We have collected the annual reports of our respective companies for five years (2004-2008) .The companies are as follows: Pioneer Cement Ltd. Kohat Cement Ltd. Cherat Cement Ltd. 1.3 .Problem Statement Analysis will be made for Balance Sheet and Profit & loss A/c .the following financial statement analysis and ratio analysis will also be analyze. Trend analysis (Horizontal Analysis). Common size statement (Vertical Analysis) Ratio Analysis

Liquidity ratios. Long term Liquidity / Long term Debt paying ability. Activity ratios / Asset turnover ratios / Efficiency ratios. Profitability ratios. Financial leverage ratios. Dividend policy ratios Comparison will be made on the entire above ratio to find how good the business of the company is going.

1.4 Purpose of Study

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The purpose of the this research report is to extract the most out of the financial performance of the Cement Industry by comparing the performance of the surveying units (Fauji Cement Co. & Pioneer Cement Co. Ltd.Comparison with Kohat & Cherat). Fauji Cement analysis will be made by inter period analysis from 2004 to 2008 and the other same unit / sector is Pioneer Cement comparative analysis will be made by both inter period and inter firm analysis is comparison with kohat Cement & Cherat Cement. The main objective of this research is to find out the financially analysis of cement Industry of Pakistan and also the current position of the cement industry in comparison of highly developed and automated cement industry of the world and suggest the improvements needed to reach at the same level, in term of trading process, trading volume and automation as well in term of recognition as other the cement Industry have. Financial literacy for the business students is the secondary purpose of this report especially for those students who dont select course related to the finance. 1.5. Research Objectives

The objective of this study is to analyze the financial performance of the companies based on the financial ratio during the period of 2004 to 2008. Other objectives of this research report is to give the better investment opportunities to the investors as well as to give the opportunity to the students to learn and have some knowledge about the financial & comparative analysis of the industries. 1.6. Limitations of Report

There are many performance measurements using financial ratio analysis. There might be difficult to use all the measure. This study will select a certain financial ratio only. So, different performance measurement will give different result. This study based on the data collected through annual report, there could be some error in the data sources, which could make the result not accurate.

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This study limited to Five years research period from 2004 to 2008 for the ratio analysis in order to determine the analysis and conclusion. This research report is only the comparison of financial performance of two units of the Cement Industry (i.e. Fauji Cement Co. Ltd. & Pioneer Cement compare with Kohat & Cherat.) and not the analysis of Cement Industry as a whole.

Chapter .2
2.1 LITERATURE REVIEW

Business Recorder reported that Pakistans cement exports witnessed a healthy growth of 65%, to over 6 million tons during 7 months of the current fiscal year mainly due to rise in international demand. The exports may reach to 11 million tons and earn approx $ 700 million during 2008-09 (PCMA, 2010). The statistics of All Pakistan Cement Manufacturers Association also showed that cement exports had mounted to over 6 million tons in 7 months as compared to 3.62 million tons of same period of last fiscal year, depicting an increase of 2.38 million tons (PCMA, 2010). Cement exports during January 2009 went up by 30% to 0.81 million tons as compared to 0.623 million tons in January 2008. However, slow construction activities in the country during the period badly upset domestic sale of cement, which depicted decline of 15%, to 10.77 million tons as compared to 12.59 million tons of last fiscal year (FCCL, 2010). On MoM basis, local dispatches of cement during January 2009 showed a decline of 8%, to 1.51 million tons from 1.65 million tons of January 2008. Overall dispatches, including export and local sales, reached 16.77 million tons during July to January of 2008-09 as against 16.20 million tons of last fiscal year, depicting an increase of 3%.

By September 2009, after witnessing substantial growth in all three quarters of fiscal year
(FY) 2008-09, cement sector concluded the fourth quarter with a handsome growth of 1,492 Zahoor Ahmad Page 17 24-06-2011

percent on yearly basis (PCCL, 2010). All Pakistan Cement Manufacturers Associations report revealed on 29th September 2009. Higher retention prices (up 59 percent) and high rupee based export sales amid rupee depreciation (20 percent) drove profits up north. However, this growth is magnified, as FY2007-08 was an abnormally low profit period for the sector. Moreover, the performance is skewed towards large players with export potential as profitable companies in both years posted increase of just 109 percent, said analyst at JS Research Atif Zafar. He said that cumulative profitability of companies in FY09 stood at Rs 6.2 billion or $78.2 million as compared to Rs 386 million or $6.2 million depicting a massive growth of 1,492 percent (FCCL, 2010). Companies with profits in both the years posted 109 percent earnings improvement. Though total dispatches were down 2 percent, net sales grew by 55 percent to Rs 101.4 billion or $1.3 billion on the back of higher net retention prices (up 59 percent) and improved export based revenues. Cost of sales/tonne also rose by 33 percent on yearly basis amid higher realised coal prices and inflationary pressures, the analyst maintained.

2.2. Growth of Cement Industry

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Growth of cement industry is rightly considered a barometer for economic activity. In 1947, Pakistan had inherited 4 cement plants with a total capacity of 0.5 million tons. Some expansion took place in 1956-66 but could not keep pace with the economic development and the country had to resort to imports of cement in 1976-77 and continued to do so till 1994-95 (PCCA, 2010). The industry was privatized in 1990 which led to setting up of new plants. Although an oligopoly market, there exists fierce competition between members of the cartel today. The industry comprises of 29 firms (19 units in the north and 10 units in the south), with the installed production capacity of 44.09 million tons. The north with installed production capacity of 35.18 million tons (80 percent) whiles the south with installed production capacity of 8.89 million tons (20 percent), compete for the domestic market of over 19 million tons. There are four foreign companies, three armed forces companies and 16 private companies listed in the stock exchanges (PCCL, 2010). The industry is divided into two broad regions, the northern region and the southern region. The northern region has around 80 percent share in total cement dispatches while the units based in the southern region contributes 20 percent to the annual cement sales. Cement industry is indeed a highly important segment of industrial sector that plays a pivotal role in the socio-economic development. Since cement is a specialized product, requiring sophisticated infrastructure and production location. Mostly of the cement industries in Pakistan are located near/within mountainous regions that are rich in clay, iron and mineral capacity. Cement industries in Pakistan are currently operating at their maximum capacity due to the boom in commercial and industrial construction within Pakistan. The cement sector is contributing above Rs 30 billion to the national exchequer in the form of taxes (KCC, 2010). Cement industry is also serving the nation by providing job opportunities and presently more than 150,000 persons are employed directly or indirectly by the industry. The industry had exported 7.716 million tons cement during the year 2007-08 and had earned $450 million, while is expected to export 11.00 million tons of cement during 2008-09 and earn approximately $700 million.

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2.3. Exports & International Markets

The cement industry of Pakistan entered the export markets a few years back, and has established its reputation as a good quality product. Deregulation after accession of Pakistan to WTO is expected to open the window of competition from cheaper markets (Baughn, Bodie, and McIntosh, 2007). The recent acquisition of Chakwal Cement by an Egyptian giant, Orascom may be a beginning of such an entry in Pakistan by multinationals (Adekoya, 2003). New avenues for export of cement are opening up for the indigenous industry as Sri Lanka has recently shown interest to import 30,000 tons cement from Pakistan every month. If the industry is able to avail the opportunity offered, it may secure a significant share of Sri Lanka market by supplying 360,000 tons of cement annually (Adewuyi, 2002). In 2007, 130,000 tons cement was exported to India. In 2007, the exports to Afghanistan, UAE and Iraq touched 2.13 million tons. At present, the economies of major countries are facing recession, but Pakistans cement sector is still maintaining a healthy growth (Aigbedion, and Iyanyi, 2007). Cement export to India has already slowed after imposition of duty by Indian authorities.

Export of Clinker and Cement

(Qty/Tonnes )

|------------------Cement-------------------| Years
2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 Afghanistan Via Land 106,620 430,322 1,118,293 1,407,900 1,413,994 1,725,526 2,777,826 3,201,953 India Via Sea & Land 786,672 669,700 Other Countries Via Sea 157,270 91,165 1,071,928 3,045,995 6,567,042

|---Clinker---| Other Countries Via Sea 41,500 390,973 1,106,127 942,137

Total 106,620 471,822 1,118,29 3 1,565,17 0 1,505,15 9 3,188,42 7 7,716,62 0 11,380,83 0

%age Incr/(Decr) 100.00% 342.53% 137.02% 39.96% -3.83% 111.83% 142.02% 47.48%

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2.4. National Scenario. CEMENT INDUSTRY IN PAKISTAN 2.4.1 Production

In Pakistan, there are 29 cement manufacturers that are playing a vital role in the building up the countrys economy and contribution towards growth and prosperity. After 2002-3, most of the cement manufacturers expanded their operations, and increased production. This sector has invested about $1.5 billion in capacity expansion over the last six years. The operating capacity of cement in 1991 was 7 million tons, which increased to become 18 million tons by 2005-06 and by end of 2007 rose to above 37 million tones, and currently the production capacity is 44.07 million tons. Cement production capacity in the north is 35.18 million tons (80 percent) while in the south it is only 8.89 million tons (20 percent). The cement manufacturers in 2007-08 added above eight million tons to the capacity and the total production was expected to exceed 45 million tons by the end of 2010. It may result in a supply glut of seven million tons in 2009 and 2010.

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CHAPTER .3
3.1. Methodology:

This study used a comparative analysis (horizontal analysis) as a methodology because it is most suitable and easy to interpret and compare the performance of this companions. I will begin by looking at the comparative ratios of the company for a Five -Years period by using trend analysis. Trend Analysis (Horizental) & ( Common size statement or Vertical) Ratio Analysis Zahoor Ahmad Page 22 24-06-2011

3.2. FINANCIAL ANALYSIS PROCEDURE 3.2.1. PERCENTAGE ANALYSIS 3.2.2. TREND ANALYSIS - HORIZONTAL ANALYSIS For this purpose comparative financial statements are prepared horizontally. 3.2.3.COMON SIZE STATEMENT - VERTICAL ANALYSIS For this purpose comparative financial statements are prepared vertically. 3.2.4. RATIO ANALYSIS A comparison of relationship among account balances. The term accounting ratio is used to describe significant relationship between figures shown on a balance sheet, profit and loss account or in any other part of accounting organization. 1. Profitability its ability to earn income and sustain growth in both short-term and long-term. A company's degree of profitability is usually based on the income statement, which reports on the company's results of operations; 2. Solvency Its ability to pay its obligation to creditors and other third parties in the long-term; 3. Liquidity Its ability to maintain positive cash flow, while satisfying immediate obligations; 4. Stability The firm's ability to remain in business in the long run, without having to sustain significant losses in the conduct of its business. Assessing a company's stability requires the use of both the income statement and the balance sheet, as well as other financial and non-financial indicators 3.3. Data Collection Procedures The data has been collected from the annual report of selected company from the web site of the respective company. Financial statement in the annual report will be used as a main source Zahoor Ahmad Page 23 24-06-2011

for financial ratio analysis. For this study, the financial statement for three years (2004 to 2008) will be used to get the result. I choose one industry of Fauji Cement for their financial analysis by inter period. And choose Pioneer Cement comparative analysis with kohat & Cherat Cement. Data has been collected from annual report (Balance Sheet & Income Statement) of five years 2004 to 2008 will be used to get the result. 3.4. Analysis Procedures The financial ratio will be used in the analysis of the performance for the companies. The selected company will be tested on the Trend Analysis / Vertical Analysis , profitability, liquidity and solvency; certain financial ratio will be used such as; Test of profitability Return on Assets (ROA) Return on Equity (ROE) Profit margin Earnings per share (EPS) The test profitability ratios as its self described which include that how a company or an organization can get its profitability factor enhance which influenced by its return on assets; equity; margin & earning per share. The whole mechanism directly proportional to the capability of firm or organization. Test of liquidity Current ratio Quick/ acid test ratio The test liquidity ratio defines that how quickly a firm or an organization transform its assets i.e. cash securities; inventory & others into the form of cash its also enable the decision maker to make corrective & proactive decisions which impact as increment in profitability of the organization or firm.

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Assets Turnover Ratio / Efficiency Ratio Receivable Turn Over Inventory Turn Over The asset turnover ratio also known as efficiency ratio, the main emphasize in both the ratio on the capability of how the company receivable convert quickly from the suppliers & the inventory in similar way. Financial Leverage Ratio Debt-equity ratio Debt-assets ratio Times Interest Earned The financial leverage ratios including debt-equity to asset & to time interest earned as a part from those its essential to conclude the financial stability of the organization which might be essential for the companys whole structure including production, overhauling; forecasting & utilizing the parameters into growth & corrective measures. Dividend Policy Ratio Dividend Yield Payout Ratio 3.5. S a m p l e For this study, two companies, which are randomly selected, will be used as a sample for the test. Both companies are selected from the same sector. The names of the companies are as follows; a.Fauji Cement Company Ltd.(Inter Period Analysis). b.Pioneer Cement Comparative Analysis with Kohat Cement & Cherat Cement Company Ltd.(Inter Period & Inter firm Analysis).

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3.6. TOOLS OF ANALYSIS

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PERCENTAGE ANALYSIS:

RATIO ANALYSIS:

Chapter .4
4.1 Data Analysis , Results / Findings and Discussions.

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4.2 Fauji Cement Company Ltd A longtime leader in the cement manufacturing industry, Fauji Cement Company, headquartered in Islamabad, operates a cement plant at Jhang Bahtar, Tehsil Fateh Jang, District Attock in the province of Punjab. The Company has a strong and longstanding tradition of service, reliability, and quality that reaches back more than 11 years. Sponsored by Fauji Foundation, the Company was incorporated in Rawalpindi in 1992. 4.3. Financial Analysis M/S Fauji Cement (Balance Sheet) Balance Sheet Fauji Cement Company Limited Balance Sheet As on December.. 2004 2005 117276 CURRENT ASSETS 574460 5 Cash and bank balances 197088 603110 Deposit accounts 137433 560177 Current accounts 21326 25840 Collection accounts 38275 16831 Cash in hand 54 262 Advances, Deposits, prepayments and other receivables: 73583 46041 To suppliers 34044 18148 To employees 449 783 Due from associated undertaking - unsecured 1127 1125 Deposits 1313 1486 Prepayments 10606 4314 Excise duty 9911 3057 Advance tax net 0 7891 Sales tax refundable -net 3774 0 Derivative foreign currency options used as hedging instrument 0 0 Interest accrued 2175 1002 Prepaid arrangement fee for loans 0 0 Margin on letters of credit 0 0 Other receivables- Considered goods 645 8235 Others 9539 0 TRADE DEBTS 44789 107231 Unsecured 23833 25021 Considered goods 22266 23454 Zahoor Ahmad Page 28

RS(000) 2006 2007 157938 195352 2 7 847590 423133 798122 402907 49253 20048 0 0 215 178 70340 31523 1639 3190 1865 9937 0 13874 0 0 5476 0 0 2836 0 25475 27042 25475 858758 815588 621 0 1795 3125 0 13104 0 0 5077 11000 0 2084 6364 19558 16117 7769 24-06-2011

2008 5294083 3783909 3756611 27039 0 259 345567 15521 2473 0 5737 3966 0 23302 82719 84364 14828 74670 29369 7179 1439 26927 4848 0

Considered doubtful Secure-considered goods Less: Provision for doubtful debts STOCK IN TRADE Raw and packing material Work in process Finished goods STORES, SPARES AND LOOSE TOOLS Stores Spares Loose tools DEFERRED TAX ASSETS - NET LONG TERM DEPOSITS Islamabad Electric Supply Company Limited Sui Northern Gas Pipelines Limited LONG TERM ADVANCES - Considered goods Sui Northern Gas Pipelines Limited Less: Amount receivables within 12 months shown under current assets FIXED ASSETS - Tangible: Property, Plant and equipment Total Assets

1567 22523 -1567 61600 15224 27761 18615 197400 71837 118324 7239 570039 36600 21600 15000 0 0 0 472925 4 472925 4 591035 3

1567 83777 -1567 55931 18469 11624 25838 360452 107633 244514 8305 337140 46611 21600 25011 9000 0 0 465827 2 465827 2 622378 8

1567 0 -1567 145090 28012 93671 23407 490887 198485 280183 12219 0 46611 21600 25011 9000 0 0 456311 5 456311 5 619810 8

8348 11789 -8348 183309 23931 115221 44157 468769 61997 394046 12726 0 46611 21600 25011 8100 9000

4848 26927 -4848 230089 31271 152529 46289 907591 415358 478579 13654 0 46611 21600 25011 7200 8100

-900 -900 439245 0 7106599 439245 0 7106599 640068 8 12454493

CURRENT LIABILITIES Current portion of long term financing: Short term borrowings - secured: Markup accrued: Trade and other payables: Creditors Accrued liabilities Retention money Security deposits Advances from customers Workers' (Profit) Participation Fund Workers' Welfare fund Sales tax payable- net Excise duty payable Other liabilities Zahoor Ahmad

372116 86508 0 13132 272476 45651 63425 10819 25462 23121 0 0 22304 58 81636 Page 29

120694 6 552995 308876 69357 275718 45969 67119 10533 28982 42444 39949 0 31300 3537 5885

126719 8 550000 236353 59771 421074 59763 63470 12843 37986 58744 93562 0 39235 10264 9052

144228 7 550000 375510 48330 468447 81766 118828 11986 39051 67770 41483 16085 32599 8582 40708 24-06-2011

2454761 550000 1378365 33186 493210 65997 174692 15517 36916 41344 24413 25362 0 57629 45323

Compensated absences Unclaimed dividend NON - CURRENT LIABILITIES Retention money payables: Deferred tax liability - net: Deferred liability Long term financing: Loans from banking companies - Secured: Habib Bank Limited MCB Bank Limited United Bank Limited Bank Al Falah Limited NIB Bank Limited PICIC Commercial Bank Limited Loan from related party: Fauji Foundation- Unsecured Total Liabilities Less: amount payable within 12 months shown under current liabilities SHARE CAPITAL AND RESERVES Reserves: Accumulated loss Share capital:

0 0 359910 3 0 0 40264 355883 9

0 0 256721 8 0 0 45213 252200 5 916667 916667 458333 458333 0 275000 50000 377416 4 -552995 244962 4 0 174479 8 419442 2 622378 8

33990 2165 164829 4 0 215381 7912 142500 1 598485 598485 299243 299243 0 179545 0 291549 2 -550000 328261 6 0 -911806 419442 2 619810 8

3626 5963 122319 5 0 339918 8277 875000 431818 431818 215909 215909 129546 0 0 266548 2 -550000 373520 6 -459216 0 419442 2

3686 2331 715751 18129 363154 9468 325000 265152 265152 132576 132576 79544 0 0 3170512 -550000 9283981 1864094 0 7419887

397121 9

193913 4 0 225528 8 419442 2 591035 3

Total Liabilities + Owner's Equity

640068 8 12454493

Zahoor Ahmad

Page 30

24-06-2011

4.4. Income Statement Fauji Cement Company Limited Income Statement For the Year Ended June RS(000) 2004 2005 2006 2007 324726 392136 568345 478003 Sales 2 2 5 6 107621 139731 131675 Less: Government Levies -951031 9 7 3 229623 284514 428613 346328 Net Sales 1 3 8 3 155540 176356 209502 237178 Less: Cost of sales 7 7 7 8 Raw material Consumed 115164 136819 205751 235379 Packing material consumed 155487 147994 182873 221116 Stores and spares consumed 5285 6573 6052 11171 Spares written off 0 0 18528 931 Salaries, wages and benefits 91289 87091 142070 133780 Rent, rates and taxes 952 1378 2562 2213 Insurance 14920 18078 12689 12363 Fuel consumed 564591 699818 843909 979044 Power consumed 310041 332383 393785 431609 Depreciation 243056 251981 261566 276244 Others 63185 72538 104859 110238 156397 175465 217464 241408 0 3 4 8 Add: Opening work-inprocess 5817 27761 11624 93671 Less: Closing work-inprocess -27761 -11624 -93671 -115221 Cost of goods 154202 177079 209259 239253 manufactured 6 0 7 8 Add: Opening finished goods 31996 18615 25838 23407 Less: Closing finished goods -18615 -25838 -23408 -44157 Zahoor Ahmad Page 31

2008 4749217 1203315 3545902 2887790 227413 281916 10914 0 133451 5284 12221 1441919 451419 290477 85730 2940744 115221 -152529 2903436 44157 -46289

24-06-2011

155540 7 Less: Own consumption capitalized 0 155540 7 740824 42744 20416 12011 0 1034 0 1144 411 509 781 4526 39535 21817 2053 0 312 1064 711 856 1969 10753 533 533 0 0 204222 11615 57324 873 0 Page 32

176356 7 0 176356 7 108157 6 11216 21333 11085 0 1857 0 1172 872 640 734 4973 42292 21835 3319 0 356 1250 1110 868 3568 9986 40493 544 39949 0 229633 10564 175784 3185 4352

209502 7 0 209502 7 219111 1 43323 31694 21388 0 1488 0 1112 625 403 1083 5595 66627 35663 4769 0 532 4302 2304 1463 3883 13711 94127 565 93562 0 264296 500 254030 456 1095

237178 8 2901304 0 -13514 237178 8 2887790 109149 5 658112 73835 107574 40645 53383 20651 18791 0 705 2745 1353 173 416 1746 12856 71302 42439 3487 2385 594 5934 960 1941 5464 8098 58098 530 41483 16085 207105 500 200642 0 779 24482 1127 1641 1468 288 545 2704 2337 76495 41153 7483 2145 602 6465 590 1318 9475 7264 34290 600 24413 9277 146954 500 129928 0 11609

Gross profit Other income Distribution cost: Salaries, wages and benefits Export freight and other charges Traveling and entertainment Vehicle running and maintenance expenses Rent, rates and taxes Repairs and maintenance Printing and stationery Depreciation Others Administrative expenses: Salaries, wages and benefits Traveling and entertainment Vehicle running and maintenance expenses Insurance Rent, rates and taxes Repairs and maintenance Printing and stationery Depreciation Others Other Operating expenses: Audits' remuneration Workers' (Profit) Participation Fund Workers' Welfare Fund Finance Cost: Fee and charges on loans Interest/mark-up on long term finance Interest/mark-up on long term loan from related party Interest on short term Zahoor Ahmad

24-06-2011

borrowings and other charges Interest on Workers' Profit Participation Fund Guarantee commission Bank charges and commission Foreign exchange risk insurance(FERI) contract Amortization of deferred cost Net profit before taxation Less: Taxation Net profit after taxation

0 111947 4557 17906 762152 -243290 557439 314149

0 32201 3547 0 0 759041 -248548 510493

2972 483 4760 0 0 177769 0 -573951 120373 9

93 972 4119 0 0 788180 -141857 646323

0 665 4252 0 0 454564 -40966 413598

4.5 . Balance Sheet (Trend Analysis) Formula Trend Analysis (Horizontally)= Trend Analysis (Horizontally=
CurrentYea r X 100 BaseYear

1172765 X 100 = 204 .15 % 574460

Fauji Cement Company Limited Balance Sheet (Trend Analysis) As on December..

CURRENT ASSETS Cash and bank balances Deposit accounts Current accounts Collection accounts Cash in hand Advances, Deposits, prepayments and other receivables: To suppliers To employees Due from associated undertaking unsecured Zahoor Ahmad

RS(000) 2004 2005 100.00 % 204.15% 100.00 % 306.01% 100.00% 407.60% 100.00% 121.17% 100.00% 43.97% 100.00% 485.19% 100.00 % 62.57% 100.00% 53.31% 100.00% 174.39% 100.00% Page 33 99.82%

2006 274.93% 430.06% 580.74% 230.95% 0.00% 398.15% 95.59% 92.59% 365.03% 283.05%

2007 340.06% 214.69% 293.17% 94.01% 0.00% 329.63% 1167.06% 2395.69% 138.31% 0.00% 24-06-2011

2008 921.58% 1919.91% 2733.41% 126.79% 0.00% 479.63% 469.63% 45.59% 550.78% 0.00%

Deposits Prepayments Excise duty Advance tax net Sales tax refundable net Derivative foreign currency options used as hedging instrument Interest accrued Prepaid arrangement fee for loans Margin on letters of credit Other receivables- Considered goods Others TRADE DEBTS Unsecured Considered goods Considered doubtful Secure-considered goods Less: Provision for doubtful debts STOCK IN TRADE Raw and packing material Work in process Finished goods STORES, SPARES AND LOOSE TOOLS Stores Spares Loose tools DEFERRED TAX ASSETS NET LONG TERM DEPOSITS Islamabad Electric Supply Company Limited Sui Northern Gas Pipelines Limited LONG TERM ADVANCES Considered goods Sui Northern Gas Pipelines Limited Less: Amount receivables within 12 months shown under current assets FIXED ASSETS Tangible: Zahoor Ahmad

100.00% 100.00% 100.00% 100.00%

113.18% 40.68% 30.84% 100.00% 0.00%

142.04% 93.69% 0.00% 175.82% 0.00%

136.71% 29.46% 0.00% 166.06% 0.00%

436.94% 37.39% 0.00% 295.30% 2191.81% 100.00% 681.75% 678.82% 100.00% 1113.02% 15.09% 60.12% 20.34% 0.00% 309.38% 119.55% 309.38% 373.52% 205.41% 549.44% 248.67% 459.77% 578.20% 404.46% 188.62% 0.00% 127.35% 100.00% 166.74% 80.00% 90.00% 100.00% 150.27%

100.00%

46.07%

251.77%

233.43% 100.00% 323.10% 66.72% 43.67% 67.62% 34.89% 532.74% 52.34% 532.74% 297.58% 157.19% 415.05% 237.21% 237.47% 86.30% 333.02% 175.80% 0.00% 127.35% 100.00% 166.74% 90.00% 100.00% 100.00%

100.00% 100.00% 100.00 % 100.00 % 100.00% 100.00% 100.00% 100.00% 100.00 % 100.00% 100.00% 100.00% 100.00 % 100.00% 100.00% 100.00% 100.00 % 100.00 % 100.00% 100.00%

1276.74% 0.00% 239.41% 104.98% 105.34% 100.00% 371.96% 100.00% 90.80% 121.32% 41.87% 138.80% 182.60% 149.83% 206.65% 114.73% 59.14% 127.35% 100.00% 166.74% 100.00%

439.69% 0.00% 56.88% 113.46% 114.41% 100.00% 0.00% 100.00% 235.54% 184.00% 337.42% 125.74% 248.68% 276.30% 236.79% 168.79% 0.00% 127.35% 100.00% 166.74% 100.00%

100.00 % Page 34

98.50%

96.49%

92.88% 24-06-2011

Property, Plant and equipment Total Assets

100.00% 100.00 %

98.50% 105.30%

96.49% 104.87%

92.88% 108.30%

150.27% 210.72%

100.00 CURRENT LIABILITIES % 100.00 Current portion of long term financing: % Short term borrowings secured: 100.00 Markup accrued: % 100.00 Trade and other payables: % Creditors 100.00% Accrued liabilities 100.00% Retention money 100.00% Security deposits 100.00% Advances from customers 100.00% Workers (Profit) Participation Fund Workers Welfare fund Sales tax payable- net 100.00% Excise duty payable Other liabilities Compensated absences Unclaimed dividend NON CURRENT LIABILITIES Retention money payables: Deferred tax liability net: Deferred liability Long term financing: Loans from banking companies Secured: Habib Bank Limited MCB Bank Limited United Bank Limited Bank Al Falah Limited NIB Bank Limited PICIC Commercial Bank Limited Loan from related party: Fauji Foundation- Unsecured Zahoor Ahmad 100.00% 100.00%

324.35% 639.24% 100.00% 528.15% 101.19% 100.70% 105.82% 97.36% 113.82% 183.57% 100.00% 140.33% 6098.28% 7.21%

340.54% 635.78% 76.52% 455.16% 154.54% 130.91% 100.07% 118.71% 149.19% 254.07% 234.20%

387.59% 635.78% 121.57% 368.03%

659.68% 635.78% 446.25% 252.71% 181.01% 144.57% 275.43% 143.42% 144.98% 178.82% 61.11% 157.67% 0.00% 99360.34% 55.52% 10.84% 107.67% 19.89% 100.00% 168.61% 23.51% 9.13%

171.92% 179.11% 187.35% 110.79% 153.37% 293.11% 103.84% 100.00% 175.91% 146.16% 14796.55 17696.55% % 11.09% 49.87% 100.00% 10.67% 100.00% 275.43% 45.80% 100.00% 33.99% 157.82% 20.56% 24.59%

100.00 %

71.33%

100.00 % 100.00 %

112.29% 70.87%

19.65% 40.04%

100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Page 35

65.29% 65.29% 65.29% 65.29% 65.29% 0.00%

47.11% 47.11% 47.11% 47.11% 100.00% 0.00% 0.00% 24-06-2011

28.93% 28.93% 28.93% 28.93% 61.40% 0.00% 0.00%

Less: amount payable within 12 months shown under current liabilities SHARE CAPITAL AND RESERVES Reserves: Accumulated loss Share capital: 100.00 % 100.00 % 100.00 % 100.00 %

100.00% 126.33%

99.46% 169.28%

99.46% 192.62% 100.00% 0.00% 100.00%

99.46% 478.77% -405.93% 0.00% 176.90%

77.36% 100.00%

40.43% 100.00%

Total Liabilities + Owners Equity

105.30%

104.87%

108.30%

210.72%

4.6.

Balance Sheet (Vertical Analysis) Formula Common Size Statement(Vertically)= Example:- Vertical Analysis =
Item X 100 TotalAsset .

574460 X 100 = 9.72 % 5910353

Zahoor Ahmad

Page 36

24-06-2011

Fauji Cement Company Limited Balance Sheet (Vertical Analysis) As on December.. RS(000) 2004 2005 2006 CURRENT ASSETS 9.72% 18.84% 25.48% Cash and bank balances 3.33% 9.69% 13.67% Deposit accounts 2.33% 9.00% 12.88% Current accounts 0.36% 0.42% 0.79% Collection accounts 0.65% 0.27% 0.00% Cash in hand 0.00% 0.00% 0.00% Advances, Deposits, prepayments and other receivables: 1.24% 0.74% 1.13% To suppliers 0.58% 0.29% 0.51% To employees 0.01% 0.01% 0.03% Due from associated undertaking unsecured 0.02% 0.02% 0.05% Deposits 0.02% 0.02% 0.03% Prepayments 0.18% 0.07% 0.16% Excise duty 0.17% 0.05% 0.00% Advance tax -net 0.00% 0.13% 0.22% Sales tax refundable -net 0.06% 0.00% 0.00% Derivative foreign currency options used as hedging instrument 0.00% 0.00% 0.00% Interest accrued 0.04% 0.02% 0.09% Prepaid arrangement fee for loans 0.00% 0.00% 0.00% Margin on letters of credit 0.00% 0.00% 0.00% Other receivables- Considered goods 0.01% 0.13% 0.05% Others 0.16% 0.00% 0.00% TRADE DEBTS 0.76% 1.72% 0.41% Unsecured 0.40% 0.40% 0.44% Considered goods 0.38% 0.38% 0.41% Considered doubtful 0.03% 0.03% 0.03% Secure-considered goods 0.38% 1.35% 0.00% Less: Provision for doubtful debts -0.03% -0.03% -0.03% STOCK IN TRADE 1.04% 0.90% 2.34% Raw and packing material 0.26% 0.30% 0.45% Work in process 0.47% 0.19% 1.51% Finished goods 0.31% 0.42% 0.38% STORES, SPARES AND LOOSE TOOLS 3.34% 5.79% 7.92% Stores 1.22% 1.73% 3.20% Spares 2.00% 3.93% 4.52% Zahoor Ahmad Page 37

2007 30.52% 6.61% 6.29% 0.31% 0.00% 0.00% 13.42% 12.74% 0.01% 0.00% 0.03% 0.05% 0.00% 0.20% 0.00% 0.00% 0.08% 0.17% 0.00% 0.03% 0.10% 0.31% 0.25% 0.12% 0.13% 0.18% -0.13% 2.86% 0.37% 1.80% 0.69% 7.32% 0.97% 6.16%

2008 42.51% 30.38% 30.16% 0.22% 0.00% 0.00% 2.77% 0.12% 0.02% 0.00% 0.05% 0.03% 0.00% 0.19% 0.66% 0.68% 0.12% 0.60% 0.24% 0.06% 0.01% 0.22% 0.04% 0.00% 0.04% 0.22% -0.04% 1.85% 0.25% 1.22% 0.37% 7.29% 3.34% 3.84%

24-06-2011

Loose tools DEFERRED TAX ASSETS - NET LONG TERM DEPOSITS Islamabad Electric Supply Company Limited Sui Northern Gas Pipelines Limited LONG TERM ADVANCES Considered goods Sui Northern Gas Pipelines Limited Less: Amount receivables within 12 months shown under current assets FIXED ASSETS - Tangible: Property, Plant and equipment Total Assets CURRENT LIABILITIES Current portion of long term financing: Short term borrowings - secured: Markup accrued: Trade and other payables: Creditors Accrued liabilities Retention money Security deposits Advances from customers Workers' (Profit) Participation Fund Workers' Welfare fund Sales tax payable- net Excise duty payable Other liabilities Compensated absences Unclaimed dividend NON - CURRENT LIABILITIES Retention money payables: Deferred tax liability - net: Deferred liability Long term financing: Loans from banking companies Secured: Habib Bank Limited MCB Bank Limited United Bank Limited Zahoor Ahmad

0.12% 9.64% 0.62% 0.37% 0.25% 0.00% 0.00% 0.00% 80.02% 80.02% 100.00 % 6.30% 1.46% 0.00% 0.22% 4.61% 0.77% 1.07% 0.18% 0.43% 0.39% 0.00% 0.00% 0.38% 0.00% 1.38% 0.00% 0.00% 60.89% 0.00% 0.00% 0.68% 60.21%

0.13% 5.42% 0.75% 0.35% 0.40% 0.14% 0.00% 0.00% 74.85% 74.85% 100.00 % 19.39% 8.89% 4.96% 1.11% 4.43% 0.74% 1.08% 0.17% 0.47% 0.68% 0.64% 0.00% 0.50% 0.06% 0.09% 0.00% 0.00% 41.25% 0.00% 0.00% 0.73% 40.52%

0.20% 0.00% 0.75% 0.35% 0.40% 0.15% 0.00% 0.00% 73.62% 73.62% 100.00 % 20.44% 8.87% 3.81% 0.96% 6.79% 0.96% 1.02% 0.21% 0.61% 0.95% 1.51% 0.00% 0.63% 0.17% 0.15% 0.55% 0.03% 26.59% 0.00% 3.47% 0.13% 22.99%

0.20% 0.00% 0.73% 0.34% 0.39% 0.13% 0.14% -0.01% 68.62% 68.62% 100.00 % 22.53% 8.59% 5.87% 0.76% 7.32% 1.28% 1.86% 0.19% 0.61% 1.06% 0.65% 0.25% 0.51% 0.13% 0.64% 0.06% 0.09% 19.11% 0.00% 5.31% 0.13% 13.67%

0.11% 0.00% 0.37% 0.17% 0.20% 0.06% 0.07% -0.01% 57.06% 57.06% 100.00% 19.71% 4.42% 11.07% 0.27% 3.96% 0.53% 1.40% 0.12% 0.30% 0.33% 0.20% 0.20% 0.00% 0.46% 0.36% 0.03% 0.02% 5.75% 0.15% 2.92% 0.08% 2.61%

0.00% 0.00% 0.00% Page 38

14.73% 14.73% 7.36%

9.66% 9.66% 4.83%

6.75% 6.75% 3.37%

2.13% 2.13% 1.06%

24-06-2011

Bank Al Falah Limited NIB Bank Limited PICIC Commercial Bank Limited Loan from related party: Fauji Foundation- Unsecured Less: amount payable within 12 months shown under current liabilities SHARE CAPITAL AND RESERVES Reserves: Accumulated loss Share capital:

0.00% 0.00% 0.00% 0.00% 0.00% 32.81% 0.00% -38.16% 70.97% 100.00 %

7.36% 0.00% 4.42% 0.80% -8.89% 39.36% 0.00% -28.03% 67.39% 100.00 %

4.83% 0.00% 2.90% 0.00% -8.87% 52.96% 0.00% -14.71% 67.67% 100.00 %

3.37% 2.02% 0.00% 0.00% -8.59% 58.36% -7.17% 0.00% 65.53% 100.00 %

1.06% 0.64% 0.00% 0.00% -4.42% 74.54% 14.97% 0.00% 59.58%

Total Liabilities + Owner's Equity

100.00%

4.7. Income Statement (Trend Analysis) Fauji Cement Company Limited Income Statement (Trend Analysis) For the Year Ended June RS(000) Zahoor Ahmad Page 39 24-06-2011

Sales Less: Government Levies Net Sales Cost of sales Raw material Consumed Packing material consumed Stores and spares consumed Spares written off Salaries, wages and benefits Rent, rates and taxes Insurance Fuel consumed Power consumed Depreciation Others Add: Opening work-in-process Less: Closing work-in-process Cost of goods manufactured Add: Opening finished goods Less: Closing finished goods Less: Own consumption capitalized

2004 100.00% 100.00% 100.00 % 100.00 % 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00 % 100.00% 100.00% 100.00%

2005 120.76% 113.16% 123.90% 113.38% 118.80% 95.18% 124.37% 95.40% 144.75% 121.17% 123.95% 107.21% 103.67% 114.80% 112.19% 477.24% 41.87% 114.84% 58.18% 138.80% 113.38%

2006 175.02% 146.93% 186.66% 134.69% 178.66% 117.61% 114.51% 100.00% 155.63% 269.12% 85.05% 149.47% 127.01% 107.62% 165.96% 139.05% 199.83% 337.42% 135.70% 80.75% 125.75% 134.69%

2007 147.20% 138.46% 150.82% 152.49% 204.39% 142.21% 211.37% 5.02% 146.55% 232.46% 82.86% 173.41% 139.21% 113.65% 174.47% 154.36% 1610.30% 415.05% 155.16% 73.16% 237.21% 152.49%

2008 146.25% 126.53% 154.42% 185.66% 197.47% 181.31% 206.51% 0.00% 146.19% 555.04% 81.91% 255.39% 145.60% 119.51% 135.68% 188.03% 1980.76% 549.44% 188.29% 138.01% 248.67% 186.53% 100.00% 185.66% 88.84% 251.67% 261.48% 156.45% 100.00% 108.99% 59.78% 128.32% 70.07% 107.07% 346.22%

Gross profit Other income Distribution cost: Salaries, wages and benefits Export freight and other charges Traveling and entertainment Vehicle running and maintenance expenses Rent, rates and taxes Repairs and maintenance Printing and stationery Depreciation Zahoor Ahmad

100.00% 100.00 % 100.00 % 100.00 % 100.00% 100.00%

113.38% 146.00% 26.24% 104.49% 92.29% 179.59%

134.69% 295.77% 101.35% 155.24% 178.07% 143.91%

152.49% 147.34% 172.74% 199.08% 171.93% 68.18% 100.00% 118.27% 42.09% 81.73% 223.56%

100.00% 100.00% 100.00% 100.00%

102.45% 212.17% 125.74% 93.98%

97.20% 152.07% 79.17% 138.67%

Page 40

24-06-2011

Others Administrative expenses: Salaries, wages and benefits Traveling and entertainment Vehicle running and maintenance expenses Insurance Rent, rates and taxes Repairs and maintenance Printing and stationery Depreciation Others Other Operating expenses: Audits' remuneration Workers' (Profit) Participation Fund Workers' Welfare Fund Finance Cost: Fee and charges on loans Interest/mark-up on long term finance Interest/mark-up on long term loan from related party Interest on short term borrowings and other charges Interest on Workers' Profit Participation Fund Guarantee commission Bank charges and commission Foreign exchange risk insurance(FERI) contract Amortization of deferred cost Net profit before taxation Less: Taxation Net profit after taxation

100.00% 100.00 % 100.00% 100.00%

109.88% 106.97% 100.08% 161.67%

123.62% 168.53% 163.46% 232.29%

284.05% 180.35% 194.52% 169.85% 100.00% 190.38% 557.71% 135.02% 226.75% 277.50% 75.31% 10900.19 % 99.44% 103.84% 100.00% 101.41% 4.30% 350.01% 0.00% 17.90% 3.13% 0.87% 90.39% 0.00% 0.00% -323.97% -25.45% 205.74%

51.63% 193.49% 188.63% 364.49% 89.94% 192.95% 607.61% 82.98% 153.97% 481.21% 67.55% 6433.40% 112.57% 61.11% 57.67% 71.96% 4.30% 226.66% 0.00% 266.75% 0.00% 0.59% 93.31% 0.00% 0.00% -186.84% -7.35% 131.66%

100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00 % 100.00%

114.10% 117.48% 156.12% 101.40% 181.21% 92.87% 7597.19 % 102.06% 100.00%

170.51% 404.32% 324.05% 170.91% 197.21% 127.51% 17659.85 % 106.00% 234.20%

100.00 % 100.00% 100.00% 100.00%

112.44% 90.95% 306.65% 364.83% 100.00%

129.42% 4.30% 443.15% 52.23% 25.16% 100.00% 0.43% 104.45% 0.00% 0.00% -730.69% -102.96% 383.17%

100.00% 100.00% 100.00% 100.00 % 100.00 % 100.00% 100.00 %

28.76% 77.84% 0.00% 0.00% -311.99% -44.59% 162.50%

Zahoor Ahmad

Page 41

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4.8. Income Statement (Vertical Analysis) Fauji Cement Company Limited Income Statement (Vertical Analysis) For the Year Ended June RS(000) 2004 2005 2006 100.00 100.00 100.00 Sales % % % Less: Government Levies -29.29% -27.45% -24.59% Net Sales 70.71% 72.55% 75.41% Less: Cost of sales 47.90% 44.97% 36.86% Raw material Consumed 3.55% 3.49% 3.62% Packing material consumed 4.79% 3.77% 3.22% Stores and spares consumed 0.16% 0.17% 0.11% Spares written off 0.00% 0.00% 0.33% Salaries, wages and benefits 2.81% 2.22% 2.50% Rent, rates and taxes 0.03% 0.04% 0.05% Insurance 0.46% 0.46% 0.22% Fuel consumed 17.39% 17.85% 14.85% Power consumed 9.55% 8.48% 6.93% Depreciation 7.48% 6.43% 4.60% Others 1.95% 1.85% 1.84% 48.16% 44.75% 38.26% Add: Opening work-in-process 0.18% 0.71% 0.20% Less: Closing work-in-process -0.85% -0.30% -1.65% Cost of goods manufactured 47.49% 45.16% 36.82% Add: Opening finished goods 0.99% 0.47% 0.45% Less: Closing finished goods -0.57% -0.66% -0.41% 47.90% 44.97% 36.86% Less: Own consumption capitalized 0.00% 0.00% 0.00% 47.90% 44.97% 36.86% Gross profit 22.81% 27.58% 38.55% Other income 1.32% 0.29% 0.76% Distribution cost: 0.63% 0.54% 0.56% Salaries, wages and benefits 0.37% 0.28% 0.38% Export freight and other charges 0.00% 0.00% 0.00% Traveling and entertainment 0.03% 0.05% 0.03% Zahoor Ahmad Page 42

2007 100.00 % -27.55% 72.45% 49.62% 4.92% 4.63% 0.23% 0.02% 2.80% 0.05% 0.26% 20.48% 9.03% 5.78% 2.31% 50.50% 1.96% -2.41% 50.05% 0.49% -0.92% 49.62% 0.00% 49.62% 22.83% 1.54% 0.85% 0.43% 0.00% 0.01%

2008 100.00% -25.34% 74.66% 60.81% 4.79% 5.94% 0.23% 0.00% 2.81% 0.11% 0.26% 30.36% 9.51% 6.12% 1.81% 61.92% 2.43% -3.21% 61.14% 0.93% -0.97% 61.09% -0.28% 60.81% 13.86% 2.27% 1.12% 0.40% 0.52% 0.02%

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Vehicle running and maintenance expenses Rent, rates and taxes Repairs and maintenance Printing and stationery Depreciation Others Administrative expenses: Salaries, wages and benefits Traveling and entertainment Vehicle running and maintenance expenses Insurance Rent, rates and taxes Repairs and maintenance Printing and stationery Depreciation Others Other Operating expenses: Audits' remuneration Workers' (Profit) Participation Fund Workers' Welfare Fund Finance Cost: Fee and charges on loans Interest/mark-up on long term finance Interest/mark-up on long term loan from related party Interest on short term borrowings and other charges Interest on Workers' Profit Participation Fund Guarantee commission Bank charges and commission Foreign exchange risk insurance(FERI) contract Amortization of deferred cost Net profit before taxation Less: Taxation Net profit after taxation

0.00% 0.04% 0.01% 0.02% 0.02% 0.14% 1.22% 0.67% 0.06% 0.00% 0.01% 0.03% 0.02% 0.03% 0.06% 0.33% 0.02% 0.02% 0.00% 0.00% 6.29% 0.36% 1.77% 0.03% 0.00% 0.00% 3.45% 0.14% 0.55% 23.47% -7.49% 17.17% 9.67%

0.00% 0.03% 0.02% 0.02% 0.02% 0.13% 1.08% 0.56% 0.08% 0.00% 0.01% 0.03% 0.03% 0.02% 0.09% 0.25% 1.03% 0.01% 1.02% 0.00% 5.86% 0.27% 4.48% 0.08% 0.11% 0.00% 0.82% 0.09% 0.00% 0.00% 19.36% -6.34% 13.02%

0.00% 0.02% 0.01% 0.01% 0.02% 0.10% 1.17% 0.63% 0.08% 0.00% 0.01% 0.08% 0.04% 0.03% 0.07% 0.24% 1.66% 0.01% 1.65% 0.00% 4.65% 0.01% 4.47% 0.01% 0.02% 0.05% 0.01% 0.08% 0.00% 0.00% 31.28% -10.10% 21.18%

0.06% 0.03% 0.00% 0.01% 0.04% 0.27% 1.49% 0.89% 0.07% 0.05% 0.01% 0.12% 0.02% 0.04% 0.11% 0.17% 1.22% 0.01% 0.87% 0.34% 4.33% 0.01% 4.20% 0.00% 0.02% 0.00% 0.02% 0.09% 0.00% 0.00% 16.49% -2.97% 13.52%

0.03% 0.03% 0.01% 0.01% 0.06% 0.05% 1.61% 0.87% 0.16% 0.05% 0.01% 0.14% 0.01% 0.03% 0.20% 0.15% 0.72% 0.01% 0.51% 0.20% 3.09% 0.01% 2.74% 0.00% 0.24% 0.00% 0.01% 0.09% 0.00% 0.00% 9.57% -0.86% 8.71%

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4.9. Ratio Analysis 4.9.1. Liquidity Ratio Current ratio =

CurrentAss ets CurrentLia bilities

Fauji Cement Company Limited Liquidity Ratio Analysis 2004 2005 2006 CURRENT RATIO 1.54 0.97 1.25 CURRENT ASSETS 574460 1172765 1579382 CURRENT LIABILITIES 372116 1206946 1267198

2007 1.35 1953527 1442287

2008 2.16 5294083 2454761

liquidity Ratio
2.50 2.00 1.54 Ratios 1.50 1.00 0.50 0.00 2004 2005 2006 Years 2007 2008 0.97 1.25 1.35 Current Ratio 2.16

The amount of Current Assets in the year 2004 was Rs.574460 and the amount of current liabilities in the first year 2004 was Rs.372116 and current ratio was 1.54 in the year 2004.

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And the amount current assets increases to Rs.1172765 in the year 2005 with an increment of Rs.598305 and the amount of current liabilities becomes Rs.1206946 in the year 2005 with increment of Rs.834830 and current ratio becomes 0.97 in the year 2005. And the amount of current assets increases to Rs.1579382 in the year 2006 with an increment of Rs.406617 and the amount current liabilities becomes Rs.1267198 in the year 2006 with increment of Rs.60252 and the current ratio becomes 1.25 in the year 2006. The amount of current assets increases to Rs.1953527 in the year 2007 with an increment of Rs.374145 and the amount of current liabilities becomes Rs.1442287 in the year 2007 with increment of Rs.175089 and current ratio becomes 1.35 in the year 2007. And the amount of current assets increases to Rs.5294083 in the year 2008 with an increment of Rs.3340556 and the amount of current liabilities becomes Rs.2454761 in the year 2008 with increment of Rs.1012474 and the current ratio becomes 2.16 in the year 2008.

Net Working Capital = current assets current liabilities

Fauji Cement Company Limited Liquidity Ratios Analysis 2004 2005 2006 Net Working Capital 202344 -34181 312184 CURRENT ASSETS 574460 1172765 1579382 CURRENT LIABILITIES 372116 1206946 1267198

2007 2008 511240 2839322 1953527 5294083 1442287 2454761

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Liquidity Ratio
3000000 2500000 Net Working Captical 2000000 1500000 Net Working Capital 1000000 500000 0 -500000 2004 -34181 2005 2006 Years 2007 2008 202344 312184 511240 2839322

The amount of Current Assets in the year 2004 was Rs.574460 and the amount of current liabilities in the first year 2004 was Rs.372116 and Net Working Capital was 202344 in the year 2004. And the amount current assets increases to Rs.1172765 in the year 2005 with an increment of Rs.598305 and the amount of current liabilities becomes Rs.1206946 in the year 2005 with increment of Rs.834830 and Net Working Capital becomes -34181 in the year 2005. And the amount of current assets increases to Rs.1579382 in the year 2006 with an increment of Rs.406617 and the amount current liabilities becomes Rs.1267198 in the year 2006 with increment of Rs.60252 and the Net Working Capital becomes 312184 in the year 2006. And the amount of current assets increases to Rs.1953527 in the year 2007 with an increment of Rs.374145 and the amount of current liabilities becomes Rs.1442287 in the year 2007 with increment of Rs.175089 and Net Working Capital becomes 511240 in the year 2007. And the amount of current assets increases to Rs.5294083 in the year 2008 with an increment of Rs.3340556 and the amount of current liabilities becomes Rs.2454761 in the year 2008 with increment of Rs.1012474 and the Net Working Capital becomes 2839322 in the year 2008.

Acid ratio =

(CurrentAss et Inventory ) CurrentLia bilities

Fauji Cement Company Limited Zahoor Ahmad Page 46 24-06-2011

Acid Ratio CURRENT ASSETS STOCK IN TRADE CURRENT IABILITIES

Liquidity Ratios Analysis 2004 2005 2006 1.38 0.93 1.13 574460 1172765 1579382 61600 55931 145090 372116 1206946 1267198

2007 2008 1.23 2.06 1953527 5294083 183309 230089 1442287 2454761

Liquidity Ratio
2.50 2.06 2.00 1.50 1.00 0.50 0.00 2004 2005 2006 Years 2007 2008 1.38 1.13 0.93 1.23

Ratio

Acid Ratio

The amount of Current Assets in the year 2004 was Rs.574460 and the amount of current liabilities in the first year 2004 was Rs.372116 and the amount of Stock In Trade in the first year 2004 was Rs.61600 due to witch the Acid Ratio becomes 1.38 in the year 2004 And the amount current assets increases to Rs.1172765 in the year 2005 with an increment of Rs.598305 and the amount of current liabilities becomes Rs.1206946 in the year 2005 with increment of Rs.834830 and the amount of Stock In Trade decreases to Rs.55931 in the year 2005 with decrement of Rs.5669 and the Acid Ratio becomes 0.93 in 2005. And the amount of current assets increases to Rs.1579382 in the year 2006 with an increment of Rs.406617 and the amount current liabilities becomes Rs.1267198 in the year 2006 with increment of Rs.60252 and the amount of Stock In Trade increases to Rs.145090 in the year 2006 with increment of Rs.55931 and the Acid Ratio becomes 1.13 in 2006. The amount of current assets increases to Rs.1953527 in the year 2007 with an increment of Rs.374145 and the amount of current liabilities becomes Rs.1442287 in the year 2007 with

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increment of Rs.175089 and the amount of Stock In Trade becomes Rs.183309 in the year 2007 with increment of Rs.38219 and the Acid Ratio becomes 1.23 in 2007. And the amount of current assets increases to Rs.5294083 in the year 2008 with an increment of Rs.3340556 and the amount of current liabilities becomes Rs.2454761 in the year 2008 with increment of Rs.1012474 and the amount of Stock In Trade becomes Rs.230089 in the year 2008 with increment of Rs.46780 and Acid Ratio becomes 2.06 in 2008.
(cash & cashequile nt + marketable sec urities ) currentlia bilities

Cash ratio

Fauji Cement Company Limited Liquidity Ratios Analysis 2004 2005 2006 2007 2008 Cash Ratio 0.53 0.50 0.67 0.29 1.54 Cash and bank balances 197088 603110 847590 423133 3783909 CURRENT LIABILITIES 372116 1206946 1267198 1442287 2454761

Liquidity Ratio
1.80 1.60 1.40 1.20 Ratio 1.00 0.80 0.60 0.40 0.20 0.00 2004 2005 2006 Years 2007 2008 0.53 0.50 0.29 0.67 Cash Ratio 1.54

The amount of Cash and bank balances in the year 2004 was Rs.197088 and the amount of current liabilities in the first year 2004 was Rs.372116 due to which the Cash Ratio becomes 0.53 in the year 2004.

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And the amount of Cash and bank balances increases to Rs.603110 in the year 2005 with an increment of Rs.406022 and the amount of current liabilities becomes Rs.1206946 in the year 2005 with increment of Rs.834830 and Cash Ratio becomes 0.50 in the year 2005. And the amount of Cash and bank balances increases to Rs.847590 in the year 2006 with an increment of Rs.244480 and the amount current liabilities becomes Rs.1267198 in the year 2006 with an increment of Rs.60252 and the Cash Ratio becomes 0.67 in the year 2006. The amount of Cash and bank balances decreases to Rs.423133 in the year 2007 with decrement of Rs.424457 and the amount of current liabilities becomes Rs.1442287 in the year 2007 with an increment of Rs.175089 and Cash Ratio becomes 0.29 in the year 2007. And the amount of Cash and bank balances increases to Rs.3783909 in the year 2008 with an increment of Rs.3360776 and the amount of current liabilities becomes Rs.2454761 in the year 2008 with an increment of Rs.1012474 and the Cash Ratio becomes 1.54 in the year 2008. 4.9.2. Long Term Liquidity / Long Term Debt Paying Ability
totalliabi lities

Debt/equity ratio = shareholde r ' sequity

Debt/Equity Ratio Total Liabilities SHARE CAPITAL AND RESERVES

Fauji Cement Company Limited Liquidity Ratios Analysis 2004 2005 2006 3.05 2.54 1.89 5910353 6223788 6198108 1939134 2449624 3282616

2007 2008 1.71 1.34 6400688 12454493 3735206 9283981

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Debt Ratio
3.50 3.00 2.50 Ratios 2.00 1.50 1.00 0.50 0.00 2004 2005 2006 Years 2007 2008 1.89 1.71 1.34 Debt/Equity Ratio 3.05 2.54

The amount of Total liabilities in the first year 2004 was Rs.5910353 and the amount of SHARE CAPITAL AND RESERVES was Rs.1939134 due to which Debt/Equity Ratio becomes 3.05 in the year 2004. And the amount of Total liabilities becomes Rs.6223788 in the year 2005 with an increment of Rs.313435 and the amount of SHARE CAPITAL AND RESERVES becomes Rs.2449624 in the year 2005 with an increment of Rs.510490 and the Debt/Equity Ratio becomes 2.54 in the year 2005. And the amount of Total liabilities becomes Rs.6198108 in the year 2006 with decrement of Rs.25680 and the amount of SHARE CAPITAL AND RESERVES becomes Rs.3282616 in the year 2006 with an increment of Rs.832992 and the Debt/Equity Ratio becomes 1.89 in the year 2006. And the amount of Total liabilities becomes Rs.6400688 in the year 2007 with an increment of Rs.202580 and the amount of SHARE CAPITAL AND RESERVES becomes Rs.3735206 in the year 2007 with an increment of Rs.452590 and the Debt/Equity Ratio becomes 1.71 in the year 2007. And the amount of Total liabilities becomes Rs.12454493 in the year 2008 with an increment of Rs.6053805 and the amount of SHARE CAPITAL AND RESERVES becomes Rs.9283981 in the year 2008 with an increment of Rs.5548775 and the Debt/Equity Ratio becomes 1.34 in the year 2008.

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Debt to tangible net worth = ( shareholde r ' sequity int angibleass ets ) Fauji Cement Company Limited Liquidity Ratios Analysis 2004 2005 2006 Debt to tangible net worth 3.05 2.54 1.89 591035 619810 Total Liabilities 3 6223788 8 193913 328261 SHARE CAPITALAND RESERVES 4 2449624 6 Intangible assets 0 0 0

totalliabi lities

2007 2008 1.71 1.34 640068 8 12454493 373520 6 9283981 0 0

Debt Ratio
3.50 3.00 2.50 Ratios 2.00 1.50 1.00 0.50 0.00 2004 2005 2006 Years 2007 2008 1.89 1.71 1.34 Debt to tangible net worth 3.05 2.54

The amount of Total liabilities in the first year 2004 was Rs.5910353 and the amount of SHARE CAPITAL AND RESERVES was Rs.1939134 due to which Debt/Equity Ratio becomes 3.05 in the year 2004. And the amount of Total liabilities becomes Rs.6223788 in the year 2005 with an increment of Rs.313435 and the amount of SHARE CAPITAL AND RESERVES becomes Rs.2449624 in the year 2005 with an increment of Rs.510490 and the Debt/Equity Ratio becomes 2.54 in the year 2005.

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And the amount of Total liabilities becomes Rs.6198108 in the year 2006 with decrement of Rs.25680 and the amount of SHARE CAPITAL AND RESERVES becomes Rs.3282616 in the year 2006 with an increment of Rs.832992 and the Debt/Equity Ratio becomes 1.89 in the year 2006. And the amount of Total liabilities becomes Rs.6400688 in the year 2007 with an increment of Rs.202580 and the amount of SHARE CAPITAL AND RESERVES becomes Rs.3735206 in the year 2007 with an increment of Rs.452590 and the Debt/Equity Ratio becomes 1.71 in the year 2007. And the amount of Total liabilities becomes Rs.12454493 in the year 2008 with an increment of Rs.6053805 and the amount of SHARE CAPITAL AND RESERVES becomes Rs.9283981 in the year 2008 with an increment of Rs.5548775 and the Debt/Equity Ratio becomes 1.34 in the year 2008. 4.9.3. Activity Ratio
averagegro ssaccountr eceivable (netsales / 365 )

Days Sales in account receivable =

Fauji Cement Company Limited Liquidity Ratios Analysis 2004 2005 2006 Day's Sales in account receivable 7.12 13.76 2.17 TRADE DEBTS 44789 107231 25475 Net Sales 2296231 2845143 4286138

2007 2008 2.06 2.77 19558 26927 3463283 3545902

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Activity Ratio
16.00 14.00 12.00 Ratios 10.00 8.00 6.00 4.00 2.00 0.00 2004 2005 2006 Years 2007 2008 2.17 2.06 2.77 7.12 Day's Sales in account receivable 13.76

The amount of Trade debts in the year 2004 was Rs.44789 and the amount of Net Sales in the first year 2004 was Rs.2296231 and the Day's Sales in account receivable becomes 7.12 in the year 2004. And the amount Trade debts increases to Rs.107231 in the year 2005 with an increment of Rs.62442 and the amount of Net Sales becomes Rs.2845143 in the year 2005 with increment of Rs.548912 and the Day's Sales in account receivable becomes 13.76 in the year 2005. And the amount Trade debts decreases to Rs.25475 in the year 2006 with decrement of Rs.81756 and the amount of Net Sales becomes Rs.4286138 in the year 2006 with increment of Rs.1440995 and the Day's Sales in account receivable becomes 2.17 in the year 2006. And the amount Trade debts decreases to Rs.19558 in the year 2007 with decrement of Rs.5917 and the amount of Net Sales becomes Rs.3463283 in the year 2007 with decrement of Rs.8228885 and the Day's Sales in account receivable becomes 2.06 in the year 2007. And the amount Trade debts increases to Rs.26927 in the year 2008 with increment of Rs.7369 and the amount of Net Sales becomes Rs.3545902 in the year 2008 with increment of Rs.82619 and the Day's Sales in account receivable becomes 2.77 in the year 2008.
netsales

Account receivable turn over= averageacc ountreceiv ables

Fauji Cement Company Limited Zahoor Ahmad Page 53 24-06-2011

Liquidity Ratios Analysis 2004 2005 2006 Account Receivable Turn Over 51.27 26.53 168.25 284514 428613 Net Sales 2296231 3 8 TRADE DEBTS 44789 107231 25475

2007 2008 177.08 131.69 346328 3 3545902 19558 26927

Activity Ratio
200.00 180.00 160.00 140.00 120.00 100.00 80.00 60.00 40.00 20.00 0.00 177.08 131.69 Account Receivable Turn Over 51.27 26.53

168.25

Ratios

2004

2005

2006 Years

2007

2008

The amount of Trade debts in the year 2004 was Rs.44789 and the amount of Net Sales in the first year 2004 was Rs.2296231 and the Account Receivable Turn Over becomes 5.27 in the year 2004. And the amount Trade debts increases to Rs.107231 in the year 2005 with an increment of Rs.62442 and the amount of Net Sales becomes Rs.2845143 in the year 2005 with increment of Rs.548912 and the Account Receivable Turn Over becomes 26.53 in the year 2005. And the amount Trade debts decreases to Rs.25475 in the year 2006 with decrement of Rs.81756 and the amount of Net Sales becomes Rs.4286138 in the year 2006 with increment of Rs.1440995 and the Account Receivable Turn Over becomes 168.25 in the year 2006. And the amount Trade debts decreases to Rs.19558 in the year 2007 with decrement of Rs.5917 and the amount of Net Sales becomes Rs.3463283 in the year 2007 with decrement of Rs.8228885 and the Account Receivable Turn Over becomes 177.08 in the year 2007. And the amount Trade debts increases to Rs.26927 in the year 2008 with increment of Rs.7369 and the amount of Net Sales becomes Rs.3545902 in the year 2008 with increment of Rs.82619 and the Account Receivable Turn Over becomes 131.69 in the year 2008.

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Days sales in inventory

endinginve ntiry (CGS / 365 )

Fauji Cement Company Limited Liquidity Ratios Analysis 2004 2005 2006 Day's sales in inventory 14.46 11.58 25.28 STOCK IN TRADE 61600 55931 145090 Cost of sales 1555407 1763567 2095027

2007 2008 28.21 29.08 183309 230089 237178 8 2887790

Activity Ratio
35.00 30.00 25.00 Ratios 20.00 15.00 10.00 5.00 0.00 2004 2005 2006 Years 2007 2008 14.46 11.58 Day's sales in inventory 28.21 25.28 29.08

The amount of Stock In trade in the year 2004 was Rzs.61600 and the amount of Cost of sales in the first year 2004 was Rs.1555407 and the Day's sale in inventory was 14.46 in the year 2004. And the amount Stock in trade decreases to Rs.55931 in the year 2005 with decrement of Rs.5669 and the amount of Cost of sales becomes Rs.1763567 in the year 2005 with an increment of Rs.208160 and the Day's sale in inventory becomes 11.58 in the year 2005. And the amount Stock in trade increases to Rs.145090 in the year 2006 with an increment of Rs.89159 and the amount of Cost of sales becomes Rs.2095027 in the year 2006 with an increment of Rs.331460 and the Day's sale in inventory becomes 25.28 in the year 2006. And the amount Stock in trade increases to Rs.183309 in the year 2007 with an increment of Rs.38219 and the amount of Cost of sales becomes Rs.2371788 in the year 2007 with an increment of Rs.276761 and the Day's sale in inventory becomes 28.21 in the year 2007.

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And the amount Stock in trade increases to Rs.230089 in the year 2008 with an increment of Rs.46780 and the amount of Cost of sales becomes Rs.2887790 in the year 2008 with an increment of Rs.516002 and the Day's sale in inventory becomes 29.08 in the year 2008. Inventory turn over = averageinv entory Fauji Cement Company Limited Liquidity Ratios Analysis 2004 2005 2006 Inventory turnover 61.46 79.34 85.08 Cost of sales 1555407 1763567 2095027 STOCK IN TRADE 61600 55931 145090
CGS

2007 2008 70.21 63.86 2371788 2887790 183309 230089

Activity Ratio
90.00 80.00 70.00 60.00 Ratios 50.00 40.00 30.00 20.00 10.00 0.00 2004 2005 2006 Years 2007 2008 Inventory turnover 61.46 79.34 85.08 70.21 63.86

The amount of Stock In trade in the year 2004 was Rs.61600 and the amount of Cost of sales in the first year 2004 was Rs.1555407 and the Inventory turnover was 61.46 in the year 2004. And the amount Stock in trade decreases to Rs.55931 in the year 2005 with decrement of Rs.5669 and the amount of Cost of sales becomes Rs.1763567 in the year 2005 with an increment of Rs.208160 and the Inventory turnover becomes 79.34 in the year 2005. And the amount Stock in trade increases to Rs.145090 in the year 2006 with an increment of Rs.89159 and the amount of Cost of sales becomes Rs.2095027 in the year 2006 with an increment of Rs.331460 and the Inventory turnover becomes 85.08 in the year 2006. And the amount Stock in trade increases to Rs.183309 in the year 2007 with an increment of Rs.38219 and the amount of Cost of sales becomes Rs.2371788 in the year 2007 with an increment of Rs.276761 and the Inventory turnover becomes 70.21 in the year 2007.

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And the amount Stock in trade increases to Rs.230089 in the year 2008 with an increment of Rs.46780 and the amount of Cost of sales becomes Rs.2887790 in the year 2008 with an increment of Rs.516002 and the Inventory turnover becomes 63.86 in the year 2008 Total asset turn over = averagetot alassets Fauji Cement Company Limited Liquidity Ratios Analysis 2004 2005 2006 2007 2008 Total asset turnover 0.39 0.46 0.69 0.54 0.28 Net Sales 2296231 2845143 4286138 3463283 3545902 Total Assets 5910353 6223788 6198108 6400688 12454493
netsales

Activity Ratio
0.80 0.70 0.60 Ratios 0.50 0.40 0.30 0.20 0.10 0.00 2004 2005 2006 Years 2007 2008 0.46 0.39 0.28 Total asset turnov er 0.69 0.54

The amount of Net Sales in the year 2004 was Rs.2296231 and the amount of Total Assets in the first year 2004 was Rs.5910353 and Total asset turnover was 0.39 in the year 2004. And the amount Net Sales increases to Rs.2845143 in the year 2005 with an increment of Rs.548912 and the amount of Total Assets becomes Rs.6223788 in the year 2005 with increment of Rs.313435 and Total asset turnover becomes 0.46 in the year 2005. And the amount Net Sales increases to Rs.4286138 in the year 2006 with an increment of Rs.1440995 and the amount of Total Assets becomes Rs.6198108 in the year 2006 with decrement of Rs.25680 and Total asset turnover becomes 0.69 in the year 2006. And the amount Net Sales decreases to Rs.3463283 in the year 2007 with decrement of Rs.822855 and the amount of Total Assets becomes Rs.6400688 in the year 2007 with increment of Rs.202580 and Total asset turnover becomes 0.54 in the year 2007.

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And the amount Net Sales increases to Rs.3545902 in the year 2008 with an increment of Rs.82619 and the amount of Total Assets becomes Rs.12454493 in the year 2008 with increment of Rs.6053805 and Total asset turnover becomes 0.28 in the year 2008. 4.9.4. Profitability Gross profit margin =
grossprofi t netsales

Fauji Cement Company Limited Liquidity Ratios Analysis 2004 2005 2006 2007 2008 Gross profit margin (%) 32.26% 38.01% 51.12% 31.52% 18.56% Gross profit 740824 1081576 2191111 1091495 658112 Net Sales 2296231 2845143 4286138 3463283 3545902

Profitability Ratio
60.00% 50.00% 40.00% Ratios 30.00% 20.00% 10.00% 0.00% 2004 2005 2006 Years 2007 2008 18.56% 38.01% 32.26% 31.52% Gross profit margin

51.12%

The amount of Gross Profit in the year 2004 was Rs.740824 and the amount of Net Sales in the first year 2004 was Rs.2296231 and Gross Profit Margin was 32.26% in the year 2004. And the amount of Gross Profit increases to Rs.1081576 in the year 2005 with an increment of Rs.340752 and the amount of Net Sales becomes Rs.2845143 in the year 2005 with increment of Rs.548912 and the Gross Profit Margin becomes 38.01% in the year 2005. And the amount of Gross Profit increases to Rs.2191111 in the year 2006 with an increment of Rs.1109535 and the amount of Net Sales becomes Rs.4286138 in the year 2006 with increment of Rs.1440995 and the Gross Profit Margin becomes 51.12% in the year 2006. Zahoor Ahmad Page 58 24-06-2011

And the amount of Gross Profit decreases to Rs.1091495 in the year 2007 with decrement of Rs.1099616 and the amount of Net Sales becomes Rs.3463283 in the year 2007 with decrement of Rs.822855 and the Gross Profit Margin becomes 31.52% in the year 2007. And the amount of Gross Profit decreases to Rs.658112 in the year 2008 with decrement of Rs.433383 and the amount of Net Sales becomes Rs.3545902 in the year 2008 with increment of Rs.82619 and the Gross Profit Margin becomes 18.56% in the year 2008. Operating income margin =
operatingi ncome netsales

Fauji Cement Company Limited Liquidity Ratios Analysis 2004 2005 2006 Operating income margin (%) 1.70% 34.75% 47.64% Operating Profit 39068 988673 2041984 Net Sales 2296231 2845143 4286138

2007 2008 28.74% 16.96% 995285 601518 346328 3 3545902

Profitability ratio
60.00% 50.00% 40.00% Ratios 30.00% 20.00% 10.00% 0.00% 2004 2005 2006 Years 2007 2008 1.70% 34.75% 28.74% 16.96% Operating income margin 47.64%

The amount of Operating Profit in the year 2004 was Rs.39068 and the amount of Net Sales in the first year 2004 was Rs.2296231 and Operating Income Margin was 1.70% in the year 2004. And the amount of Operating Profit increases to Rs.988673 in the year 2005 with an increment of Rs.949605 and the amount of Net Sales becomes Rs.2845143 in the year 2005 with increment of Rs.548912 and the Operating Income Margin becomes 34.75% in the year 2005. Zahoor Ahmad Page 59 24-06-2011

And the amount of Operating Profit increases to Rs.2041984 in the year 2006 with an increment of Rs.1053311 and the amount of Net Sales becomes Rs.4286138 in the year 2006 with increment of Rs.1440995 and the Operating Income Margin becomes 47.64% in the year 2006. And the amount of Operating Profit decreases to Rs.995285 in the year 2007 with decrement of Rs.1046699 and the amount of Net Sales becomes Rs.3463283 in the year 2007 with decrement of Rs.822855 and the Operating Income Margin becomes 28.74% in the year 2007. And the amount of Operating Profit decreases to Rs.601518 in the year 2008 with decrement of Rs.393767 and the amount of Net Sales becomes Rs.3545902 in the year 2008 with increment of Rs.82619 and the Operating Income Margin becomes 16.96% in the year 2008

Net profit margin

netincome netsales

Fauji Cement Company Limited Liquidity Ratios Analysis 2004 2005 2006 Net profit margin 13.68% 17.94% 28.08% Net profit after taxation 314149 510493 1203739 Net Sales 2296231 2845143 4286138

2007 2008 18.66% 11.66% 646323 413598 346328 3 3545902

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Profitability Ratio
30.00% 25.00% 20.00% Ratios 15.00% 10.00% 5.00% 0.00% 2004 2005 2006 Years 2007 2008 13.68% 17.94% 18.66% 11.66% Net profit margin 28.08%

The amount of Net Profit after taxation in the year 2004 was Rs.314149 and the amount of Net Sales in the first year 2004 was Rs.2296231 and Net Profit Margin was 13.68% in the year 2004. And the amount of Net profit after taxation increases to Rs.510493 in the year 2005 with an increment of Rs.196344 and the amount of Net Sales becomes Rs.2845143 in the year 2005 with increment of Rs.548912 and the Net Profit Margin becomes 17.94% in the year 2005. And the amount of Net profit after taxation increases to Rs.1203739 in the year 2006 with an increment of Rs.693246 and the amount of Net Sales becomes Rs.4286138 in the year 2006 with increment of Rs.1440995 and the Net Profit Margin becomes 28.08% in the year 2006. And the amount of Net profit after taxation decreases to Rs.646323 in the year 2007 with decrement of Rs.557416 and the amount of Net Sales becomes Rs.3463283 in the year 2007 with decrement of Rs.822855 and the Net Profit Margin becomes 18.66% in the year 2007. And the amount of Net profit after taxation decreases to Rs.413598 in the year 2008 with decrement of Rs.232725 and the amount of Net Sales becomes Rs.3545902 in the year 2008 with increment of Rs.82619 and the Net Profit Margin becomes 11.66% in the year 2008
netincome averagetot alassets

Return on asset

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Fauji Cement Company Limited Ratio Analysis 2004 2005 2006 Return on asset (%) 5.32% 8.20% 19.42% Net profit after taxation 314149 510493 1203739 Total Assets 5910353 6223788 6198108

2007 2008 10.10% 3.32% 646323 413598 6400688 12454493

Profitability Ratio
25.00% 20.00% Ratios 15.00% 10.00% 5.32% 5.00% 0.00% 2004 2005 2006 Years 2007 2008 3.32% 8.20% 10.10% Return on asset 19.42%

The amount of Net Profit after taxation in the year 2004 was Rs.314149 and the amount of Total Assets in the first year 2004 was Rs.5910353 and the Return on asset was 5.32% in the year 2004. And the amount of Net profit after taxation increases to Rs.510493 in the year 2005 with an increment of Rs.196344 and the amount of Total Assets becomes Rs.6223788 in the year 2005 with increment of Rs.313435 and the Return on asset becomes 8.20% in the year 2005. And the amount of Net profit after taxation increases to Rs.1203739 in the year 2006 with an increment of Rs.693246 and the amount of Total Assets becomes Rs.6198108 in the year 2006 with decrement of Rs.25680 and the Return on asset becomes 19.42% in the year 2006. And the amount of Net profit after taxation decreases to Rs.646323 in the year 2007 with decrement of Rs.557416 and the amount of Total Assets becomes Rs.6400688 in the year 2007 with increment of Rs.202580 and the Return on asset becomes 10.10% in the year 2007. And the amount of Net profit after taxation decreases to Rs.413598 in the year 2008 with decrement of Rs.232725 and the amount of Total Assets becomes Rs.12454493 in the year 2008 with increment of Rs.6053805 and the Return on asset becomes 3.32% in the year 2008

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Return on sales to fixed assets = averagetot alfixedass ets

netsales

Fauji Cement Company Limited Ratio Analysis 2004 2005 2006 Return on Sales to fixed assets 0.49 0.61 0.94 Net Sales FIXED ASSETS - Tangible 2296231 4729254 2845143 4286138 4658272 4563115

2007 2008 0.79 0.50 346328 3 3545902 439245 0 7106599

Profitability Ratio
1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 0.94 0.79 0.61 0.49 0.50 Return on Sales to fixed assets

Ratios

2004

2005

2006 Years

2007

2008

The amount of Net Sales in the year 2004 was Rs.2296231 and the amount of Fixed Assets in the first year 2004 was Rs.4729254 and the Return on Sales to fixed assets was 0.49 in the year 2004. And the amount Net Sales increases to Rs.2845143 in the year 2005 with an increment of Rs.548912 and the amount of Fixed Assets becomes Rs.4658272 in the year 2005 with decrement of Rs.70982 and the Return on Sales to fixed assets becomes 0.61 in the year 2005. And the amount Net Sales increases to Rs.4286138 in the year 2006 with an increment of Rs.1440995 and the amount of Fixed Assets becomes Rs.4563115 in the year 2006 with decrement of Rs.95157 and the Return on Sales to fixed assets becomes 0.94 in the year 2006. And the amount Net Sales decreases to Rs.3463283 in the year 2007 with decrement of Rs.822855 and the amount of Fixed Assets becomes Rs.4392450 in the year 2007 with decrement of Rs.170665 and the Return on Sales to fixed assets becomes 0.79 in the year 2007.

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And the amount Net Sales increases to Rs.3545902 in the year 2008 with an increment of Rs.82619 and the amount of Fixed Assets becomes Rs.7106599 in the year 2008 with increment of Rs.2714149 and the Return on Sales to fixed assets becomes 0.50 in the year 2008
netincome redeemable preferreds tockdivide nd averagetot alequity

Return on total equity =

Fauji Cement Company Limited Ratio Analysis 2004 2005 2006 Return on total equity 16.20% 20.84% 36.67% Net profit after taxation 314149 510493 1203739 193913 SHARE CAPITAL AND RESERVES 4 2449624 3282616

2007 17.30% 646323

2008 4.45% 413598

3735206 9283981

Profitability Ratio
40.00% 35.00% 30.00% Ratios 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2004 2005 2006 Years 2007 2008 4.45% 16.20% 20.84% 17.30% Return on total equity 36.67%

The amount of Net Profit after taxation in the year 2004 was Rs.314149 and the amount of Share Capital and Reserves in the first year 2004 was Rs.1939134 and the Return on total equity was 16.20% in the year 2004. And the amount of Net profit after taxation increases to Rs.510493 in the year 2005 with an increment of Rs.196344 and the amount of Share Capital and Reserves becomes Rs.2449624 in the year 2005 with increment of Rs.510490 and the Return on total equity becomes 20.84% in the year 2005. Zahoor Ahmad Page 64 24-06-2011

And the amount of Net profit after taxation increases to Rs.1203739 in the year 2006 with an increment of Rs.693246 and the amount of Share Capital and Reserves becomes Rs.3282616 in the year 2006 with increment of Rs.832992 and the Return on total equity becomes 36.67% in the year 2006. And the amount of Net profit after taxation decreases to Rs.646323 in the year 2007 with decrement of Rs.557416 and the amount of Share Capital and Reserves becomes Rs.3735206 in the year 2007 with increment of Rs.452590 and the Return on total equity becomes 17.30% in the year 2007. And the amount of Net profit after taxation decreases to Rs.413598 in the year 2008 with decrement of Rs.232725 and the amount of Share Capital and Reserves becomes Rs.9283981 in the year 2008 with increment of Rs.5548775 and the Return on total equity becomes 4.45% in the year 2008 Earning Per Common Share = weightaver agenoofcom monshareou ts tan ding Fuji Cement Company Limited Ratio Analysis 2004 2005 2006 Earning per common share 0.85 1.38 3.25 31414 51049 120373 Net profit after taxation 9 3 9 No. of common shares 37074 37074 3 3 370743
netincome preferredd ividend

2007 2008 1.73 0.85 64632 3 413598 37447 3 489456

Profitability Ratio
3.50 3.00 2.50 Ratios 2.00 1.50 1.00 0.50 0.00 2004 2005 2006 Years 2007 2008 0.85 1.38 0.85 1.73 Earning per common share 3.25

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The amount of Net Profit after taxation in the year 2004 was Rs.314149 and the Number of common shares in the first year 2004 was 370743 and the Earning per common share was 0.85 in the year 2004. And the amount of Net profit after taxation increases to Rs.510493 in the year 2005 with an increment of Rs.196344 and the Number of common shares becomes 370743 in the year 2005 and the Earning per common share becomes 1.38 in the year 2005. And the amount of Net profit after taxation increases to Rs.1203739 in the year 2006 with an increment of Rs.693246 and the Number of common shares becomes 370743 in the year 2006 and the Earning per common share becomes 3.25 in the year 2006. And the amount of Net profit after taxation decreases to Rs.646323 in the year 2007 with decrement of Rs.557416 and the Number of common shares becomes 374473 in the year 2007 with increment of 3730 and the Earning per common share becomes 1.73 in the year 2007. And the amount of Net profit after taxation decreases to Rs.413598 in the year 2008 with decrement of Rs.232725 and the Number of common shares becomes 489456 in the year 2008 with increment of 114983 and the Earning per common share becomes 0.85 in the year 2008 Price/earning ratio =
Market Pr icePerComm onShare DilutedEPS

Fauji Cement Company Limited Ratio Analysis 2004 2005 Price/earning ratio Market price Earning per share - Diluted 18.89 14.15 0.75 10.48 12.76 1.22

2006 6.75 19.3 8 2.87

2007 13.1 7 20.0 9 1.53

2008 20.91 16.06 0.77

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Profitability Ratio
25.00 20.91 20.00 Ratios 15.00 10.48 10.00 5.00 0.00 2004 2005 2006 Years 2007 2008 6.75 18.89 13.17 Price/earning ratio

The market price in the year 2004 was Rs.14.15 and the Earning per share in the first year 2004 was 0.75 and Price/earning ratio was 18.89 in the year 2004. And the market price decreases to 12.76 in the year 2005 with decrement of 1.39 and the Earning per share becomes 1.22 in the year 2005 with increment of 0.47 and the Price/earning ratio becomes 10.48 in the year 2005. And the market price increases to 19.38 in the year 2006 with increment of 6.62 and the Earning per share becomes 2.87 in the year 2006 with increment of 1.65 and the Price/earning ratio becomes 6.75 in the year 2006. And the market price increases to 20.09 in the year 2007 with increment of 0.71 and the Earning per share becomes 1.53 in the year 2007 with decrement of 1.34 and the Price/earning ratio becomes 13.17 in the year 2007. And the market price decreases to 16.06 in the year 2008 with decrement of 4.03 and the Earning per share becomes 0.77 in the year 2008 with decrement of 0.76 and the Price/earning ratio becomes 20.91 in the year 2008. 4.9.5. Finencial Leverage Ratio - Analysis for Investor Degree of financial leverage =
%changeinne tincome %chandeinEB IT

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Fauji Cement Company Limited Ratio Analysis 2004 2005 2006 Degree of financial leverage 0.20 0.68 51049 Net profit after taxation 314149 3 1203739 75904 Net profit before taxation -243290 1 1777690

2007 0.56 64632 3 78818 0

2008 0.70 413598 454564

Ratio Analysis
0.8 0.7 0.6 Ratios 0.5 0.4 0.3 0.2 0.1 0 2004 2005 2006 Years 2007 2008 Degree of financial leverage

Percentage of earnings Retained Percentage of earnings retained = Net income All dividends / Net income It is better for trend analysis if non recurring items are remove.

4.9.6. Dividend Policy Ratio Dividend payout Ratio The dividend payout ratio measures the portion of current earnings per common share being paid out in dividends. Dividend payout = Dividend per common share / Diluted earnings per share Zahoor Ahmad Page 68 24-06-2011

Dividend yield The dividend yield indicates the relationship between the dividends per common share and the market price per common share. Dividend yield = Dividend per common share / market price per common share Book Value per Share It indicates the amount of shareholders equity that relates to each share of outstanding common stock. Book value per share= Total shareholders equity-preferred stock equity/Number of common share outstanding Book value is of limited use to the investment analyst since it is based on Historical cost. When market value is below book value, investors view the company as lacking potential. A market value above book value indicates that investors view the company as having enough potential to be worth more than the un recovered cost. Book Value Per Share (Amounts in Rs. 000) 2003 2004 2005 2006 Total Shareholder's Equity 1,624,98 1,939,13 2,449,62 3,282,61 6 4 4 6 Preferred Stock Equity 486,992 486,992 486,992 486,992 No. of Common Stock O/S 370743 370743 370743 370743 Book Value Per Share 3.07 3.92 5.29 7.54
Book Valur Per Share

2007 3,735,206 486,992 370743 8.76

10.00 8.00 6.00 4.00 2.00 0.00 2003 2004 2005 Years 3.07 3.92 5.29

7.54

8.76

Series1

2006

2007

The book value per share is increasing in the coming years. The reason of that rise is that the total common shareholders equity is increasing in the coming years. That is very good for the investors to earn more on their investments. The owners of the cement company are increasing as compared to the base year Zahoor Ahmad Page 69 24-06-2011

4.9.7. Ratio Analysis charts. 2004 202344 1.54 1.38 0.53 3.05 3.05 7.11948623 6 51.2677443 1 14.4553804 9 61.4639611 2 2005 -34181 0.97 0.93 0.50 2.54 2.54 13.7565370 2 26.5328403 2 11.5758658 4 79.3434561 6 Page 70 2006 312184 1.25 1.13 0.67 1.89 1.89 2.16940635 1 168.248792 9 25.2778842 5 85.0841489 7 2007 511240 1.35 1.23 0.29 1.71 1.71 2.06124362 3 177.077564 2 28.2098505 4 70.2086318 2 2008 2839322 2.16 2.06 1.54 1.34 1.34 2.771750319 131.6857429 29.08192251 63.85666586

Net Working Capital Current Ratio Acid Ratio Cash Ratio Debt/Equity Ratio Debt to tangible net worth Day's Sales in account receivable Account Receivable Turn Over Day's sales in inventory Inventory turnover Zahoor Ahmad

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Net profit margin Total asset turnover Return on asset Operating income margin Return on Sales to fixed assets Return on total equity Gross profit margin Degree of financial leverage Earning per common share Price/earning ratio

13.68% 0.39 5.32% 1.70% 0.48553767 7 16.20% 32.26%

17.94% 0.46 8.20% 34.75% 0.61077219 2 20.84% 38.01% 0.20

28.08% 0.69 19.42% 47.64% 0.93930089 4 36.67% 51.12% 0.68 3.25 6.75

18.66% 0.54 10.10%

11.66% 0.28 3.32%

28.74% 16.96% 0.78846270 3 0.498959066 17.30% 4.45% 31.52% 18.56% 0.56 1.73 13.17 0.70 0.85 20.91

0.85 18.89

1.38 10.48

4.9.8. Conclusion
From the above information we conclude that cement sector in one of the prosperous sector in the Pakistans economy. The potential investors should take their chances investing in the cement sector through stock exchanges. The Fauji cement country has proved itself as one of the leading cement factories of the country. The trade mark of Fauji Foundation gives a sign of credibility in the minds of the investors. Since Pakistan is a developing country and for expanding infrastructure and developmental projects, the need of the cement is very obvious. Fauji cement has been providing 63% of the cement in the country as well as exporting to countries like Afghanistan and Bangladesh. I foresee growth in earrings of cement companies in the years to come. Similarly the said position will be with FCC. I expect positive earnings of FCCL in the coming years; currently we maintain our stance by recommend BUY on FCCL. Zahoor Ahmad Page 71 24-06-2011

4.2.1. Pioneer Cement Comparative Analysis (Compare with Kohat & Cherat Cement) PIONEER CEMENT LIMITED
4.2.2. FIVE YEARS HORIZONTAL ANALYSIS OF INCOME STATEMENT

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PIONEER CEMENT COMPANY LIMITED FIVE YEAR POSITION OF INCOME SATEMENT For the year ended June 30 Net Sales Cost of goods sold Gross Profit Administrative And Selling expenses Operating Operating/Loss Other operating expenses Other operating income Profit/loss from operations Financial & Other Voluntary separation scheme charges Profit/loss before taxation Taxation Profit/loss after taxation 2008 55% 54% 61% 293% 124% 1997 % 162% 189% 13% 211% 333% 92% 2007 2% 52% -74% 25% -84% -88% -84% -84% -286% -120% -135% -114% 2006 50% 34% 83% -15% 107 % 13% 162% 120 % 63% 137 % 316% 104 % 2005 55% 47% 74% 55% 80% 123% -65% 45% 3% 65% -133% -22% 2004 40% 31% 73% 19% 91% -5% 19% 84% 28% 56% -44% 87%

ANALYSIS: Sales of the Company has shown increasing trend and has increased up to 40% in 2004,55% in 2005 and 50% in 2006 and 2% in 2007 and 55% in 2008 and respective from previous years Cost of sales has also shown an increasing trend. In 2004 it is 31%, 2005 it increased 47%, in 2006 in increased 34%, 52% increase in 2007 and 54% in 2008 from respective years cost of sale increase more than increase in sales which result there is loss in 2007. The major reason of this increase in cost was the plant shutdown due to irregular power supply of WAPDA and increase in prices of diesel and empty bags. Gross profit of the company has also shown a increasing trend in from 2004 to 2005 up to 2006 respectively and then decrease and got loss in 2007 and then gross profit increase 61% in 2008 Zahoor Ahmad Page 73 24-06-2011

company cost of sale increases but sale decrease, in 2007 gross profit decreases -74% and it was 61% in 2008.Selling and distribution expenses also increases in 2008 as 293% and 25% in 2007 respectively. This decrease in gross profit was due to the increase in cost of goods sold and also administrative and selling expenses which cause company got loss. Operating profit showing increasing trend from 2004 to 2006 as 91%, 80% and 107% respectively and then it decrease in 2007 and 2008 as -84% and -124% which show big loss in the year of 2008. Finance cost Decrease in 2007 as 286% and increased in 2008 as 13% which is not at higher side but it is at higher side in 2004 to 2006 as 63% for expansion of new grey and white cement plants. There is a great increase in 2008 which cause the loss of the company. Profit before tax shows decrease in 2007 as 120% and increase in 2008 as 211% and company got loss in 2008. Profit after tax decreased in 2007 by 114% and it was increase 92% in 2008. Company management tries to expand its operations so it needs more finds that were got from short and long term financing. Due to economic crises and dispute with unionized permanent workers, company faces losses. Company is good for long term benefits, because it had declared bonus shares for last five years. It had a great capacity to produce cement and they are improving technology. They had implemented Enterprise Resource Planning software to increase the efficiency and for better management planning.

4.2.3. HORIZONTAL ANALYSIS OF BALANCE SHEET BALANCE SHEET BALANCE SHEET As at June 30 2008 2007 EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVE Authorized Share Capital 0% 0% Issue Subscribed & Paid Up Capital Reserves 18% -22% 10% 290% 5% -43% -10% -5%

2006

2005

2004

0% 5% 847% 43% -4%

0% 62% -118% 197% -

0% 26% -28% -2% -

Surplus on Revaluation of fixed assets-net of tax NON-CURRENT LIABILITIES Zahoor Ahmad Page 74

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Redeemable capital Long term financing-secured Long term loans-secured Long term Musharaka finance Liabilities against assets subject to finance lease Long term deposits Long term creditor-unsecured Deferred liabilities Deferred tax liabilities CURRENT LIABILITIES Creditors against expansion project Trade and other payables Interest/ Mark up accrued Short term Murabah-secured Short term Musharaka secured Short term finances Short term borrowings Current maturity of redeemable capital Current maturity of long term loan Current portion of long term loan Current portion of liabilities against assets subject to finance lease Current portion of deferred liability Sales tax payable

6% -26% -100% -51% -65% -30% -10% -25% -90% 120% 54% -73% 39% -100% 49% 22%

-83% 27% 7% -7% -26% 17% -100% -3% -5% 7% 70% -100% -100% 761% -99% -100% 43% 2%

-100% -8% 65% -15% -12% 122% 12% -39% 27% -44% -100% -100% -36% 919% 62% 41% 22%

-8% 3% 2780% 187% -21% 9% 251% -25% 93% -64% 112% 340% 158% 61%

9.61% 10.44 % 4.41% 0.145 % 8.28% 32.8%

10.98 % 0.11%

4.90% 3.24 % 2.11 % 21.34 % 11.46 %

ASSETS NON CURRENT ASSETS FIXED CAPITAL EXPENDITURE Property, plant and equipment Long term loans Long term deposits Zahoor Ahmad Page 75

27% -11% -15%

-2% 43% 28%

20% -25% 169%

74% 52.31 % 13% 0.10% 55% 0.105 24-06-2011

Deferred tax assets

27%

-2%

21%

% -100% 66% 52.52 % 12% 13% -23% 939% -32% 22% -8% -53% 17% 2.55% 8.01% -

CURRENT ASSETS Stock in trade Store, spare and loose tools Assets held for disposal Trade Debts Loan & advances Deposits & prepayments Other receivables Current portion of long term deposits Sales tax net Taxation-net Cash & bank balance

-54% 3% -100% 35% 156% -59% 8471% 838% -100% -54% -19% 22%

55% 11% 138% 80% -33% -87% -100% 325% 56% 2%

70% 31% -34% -78% -16% -73% -11% 310% 34% 22%

0.21% 1.03% 0.72% 12.52 % 61% 23.83 %

ANALYSIS: 1) NON-CURRENT ASSETS: As we can see from the horizontal balance sheet analysis of five years, the total non-current assets have shown increasing trend. In 2004 it is 52.52%, 2005 it is 66% than it increase 21% in 2006, 21% in 2006 and then it decrease in 2007 by 2% and then again increase in 2008 by 27% as compare to 2007. This shows heavy investment in fixed assets by the management. Operating fixed assets showed increasing trend in from 2004 to 2006 by 74%, 20% respectively it decreases 2% in 2007 and then again increase in 2008 from 2007 by 27%. Long term loans showing mix trend it increased by 13% in 2005 and then it decreased 25% in 2006 and increased by 43% in year 2007 and decrease 11% respectively. Lon-term deposit has shown an increasing trend from 2005 to 2007 by 55%, 169% and 28% from respective years, and it decrease in 2008 by 15% from 2007. Deferred tax assets just in 2005 than no more 2006, 2007, 2008 so it decrease almost 100% 2) CURRENT ASSETS: Store, spare and tools has shown increasing trend from 2004 to 2008 by 13%, 31%, 11%,and 3% from their respective years, which shows that company is in good position as liquidity point of view. Stock in trade shows increasing trend from 2005 to 2007 by 12% in 2005, 70% in 2006, 55% in 2007 and decrease 54% in 2008.This higher inventory is indication of weak inventory management. Trade debts has shown decreasing trend in 2005 from 2004 by 23% and then decrease by 34% from 2005 an it increased by 138% in 2007 which is at higher side and then it increase by 35% in 2008 from 2007.Receivable management is inefficient in 2007 Zahoor Ahmad Page 76 24-06-2011

and 2008 by showing increasing trend as compare it with 2005 and 2006.Loan and advances shown increasing trend in 2005 in huge amount it increase 939% from 2004 which means company made advances and loans to the employees in huge amounts than it decrease in 2006 by 78% and in 2007 again increase by 80% and also increase in 2008 by 156%.deposits and prepayment showing decreasing trend from 2005 to 2008 by 32%, 16%, 33% and 59% by respective years. Other receivables also showing decreasing trend from 2006 to 2008 just increased in 2005 from 2004 by 22%. Cash and bank balance first decreased in 2005 by 53% from 2004 than it showing increasing trend from 2006 to 2007 by 310% and 325% from respective years and then again it decreased in 2008 54% from 2007. Over all current assets showing increasing from 2004 to 2007 by 17%, 34% and 56% from respective years and it decrease in 2008 by 19% from 2007 which means current assets are decreased in 2008. 3) EQUITY AND LIABILITIES: Share capital show an increasing trend it increases in 2004 by 42% ,2005 in 62% and 5% in 2006 and 2007 respectively and 18% in 2008 which means that issued subscribed and paid up capital increased throughout all the years. Reserves have decreased in year 2005 by 118% and increased in 2006 by 847%, after that it decreased in next two years in 2007 and 2008 by 43% and 22% respectively which shows that company has utilized all its reserves for expansion of project. Due to expansion of project company has not sufficient reserves and company has not paid any dividend after 2004. 4) NON-CURRENT LIABILITIES: Non-current liabilities have also shown an increasing trend from 2004 to 2006 by 32.8%, 9% and 12% and decreased in 2007 and 2008 by 3% and 25% from respective years. Capital showing decreasing trend in 2005 and 2006 by 8% and 100%. Long term loans secured increase by 3% in 2005 and then it decreased 8% in 2006 it again increased in 2007 by 27% and decreased in 2008 by 26%. Liabilities against assets subject to finance lease increased from 2005 to 2007 by 2870%, 65% and 7% respectively and it decreased by 51% in 2008 from 2007. Long term deposits increased 187% in 2005 and then it decreased in 2006 to 2008 by 15%, 7% and 65% from respective years. Deferred liabilities decreased in 2005 and 2006 by 21% and 12% and increased 17% in 2007 and decreased 10% in 2008 from respective years. 5) CURRENT LIABILITIES: Total current liabilities have also shown an increasing trend. This is also in line with increase in current assets of the company. Short term financing is taken to meet the working capital requirements. Company is meeting its obligation on regular basis which is evident from an increase in the current portion of long term debts under current liabilities head of the balance sheet. Trade payables decreased in 2005 by 251% which is at higher side and increased 27%, 7%, and 120% in 2006, 2007 and 2008 where as 10.98% in 2004 which is unfavorable for the company. Interest and mark up accrued decrease in 2005 by 25% and 44% in 2006 and increase in 2007 and 2008 by 40% and 54% respectively. Sales tax payable increase 340% in 2005 from 2004 which is huge change in 2006 it also increases 62% from 2005 and decrease 100% in 2007.

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Finally, size of the company has increased during the last five years. More investment is made in capital assets. Company is in expansion phase since the base year. Investment in new expansion project and technology is being made in order to keep pace with changing business environment.

4.2.4 VERTICAL ANALYSIS OF INCOME STATEMENT

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2.11.1

Vertical Analysis of Pioneer Cement Company Limited

Five Year Position Of Income Statement For the year ended June 30 Sales- Net Cost of goods sold Gross Profit Administrative And Selling expenses Operating Operating/Loss Other operating expenses Other operating income Profit/loss from operations Financial & Other Voluntary separation scheme charges Profit/loss before taxation Taxation Profit/loss after taxation 2008 -2697% -2412% -285% -309% 2007 -3349% -3009% -340% -151% 2006 455% 273% 182% 17% 2005 616% 413% 203% 40% 2004 312% 221% 91% 20%

24% 83% -17% 89% 230%

-189% 8% -13% -194% 391%

165% -9% 11% 167% 29%

162% -16% 8% 155% 36%

71% -5% 19% 84% 28%

319% 219% 100%

197% 97% 100%

138% 38% 100%

119% 19% 100%

56% -44% 100%

ANALYSIS: As we can see from the vertical income statement the sales revenue increased from 2004 to 2006 by 312%, 6165 and 455% respectively and decreased by 3349% and 2697% in 2007 and 2008 respectively. Cost of sales also increased in 2004 by 221% in 2005 by 413% and in 2006 by 273% and in next two years it decrease in 2007 by 3009% and in 2008 by 2412%. Gross profit increase in 2004 by 91% 203% increase in 2005, 182% increase in 2006 and in 2007 and 2008 it decreased 340% and 285% respectively. Administrative and Selling expense also increase in 2004 to 2006 by 20%, 40% and 17% respectively and it decreases in 2007 by 151% and in 2008 by 309% from respective years. Other operating expense decreases from 2004 to 2006 by 5% in 2004, 16% in 2005 and 9% in Zahoor Ahmad Page 79 24-06-2011

2006; it increased in 2007 by 8% from 2006 and increase in 2008 by 83% from 2007. Other operating income increased from 2004 to 2006 by 19%, 8% and 11% and decreased in 2007 by 13% and 17% in 2008. Financial and other voluntary separation charges showing increasing trend all five years it increased by 28% in 2004 36% in 2005, 29% in 2006, 391% in 2007 and 230% in 2008 from their respective years. .Profit before taxation has increased by 56% in 2004 119% in 2005, 138% in 2006, 197% in 2007 and 219% in 2008. Profit after taxation the company recorded loss in 2007 and in 2008 from their respective years. Finally the company is improving with the passage of time. Although the profits are not very adequate but the management is very confident that they are working hard and the company will prosper in coming years as most of the capital work has been completed.

4.2.5. VERTICAL ANALYSIS OF BALANCE SHEET VERTICAL ANALYSIS VERTICAL ANALYSIS FOR PAST FIVE YEARS OF PIONEER CEMENT FOR LAST FIVE YEARS Zahoor Ahmad Page 80 24-06-2011

BALANCE SHEET As at June 30 EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVE Authorized Share Capital Issue Subscribed & Paid Up Capital Reserves Surplus on Revaluation of fixed assets-net of tax NON-CURRENT LIABILITIES Redeemable capital Long term financing-secured Long term loans-secured Long term Musharaka finance Liabilities against assets subject to finance lease Long term deposits Long term creditor-unsecured Deferred liabilities Deferred tax liabilities CURRENT LIABILITIES Creditors against expansion project Trade and other payables Interest/ Mark up accrued Short term Murabah-secured Short term Musharaka secured Zahoor Ahmad 0% 8% 1% 0% 0% Page 81 3% 5% 1% 1% 0% 4% 4% 1% 0% 0% 7% 4% 1% 0% 0% 0% 2% 2% 0% 0% 0% 1% 16% 0% 2% 0% 0% 9% 0% 28% 0% 1% 27% 1% 6% 0% 0% 12% 0% 46% 0% 5% 22% 1% 5% 0% 0% 10% 5% 49% 2% 0% 29% 1% 4% 0% 0% 14% 3% 53% 4% 0% 45% 0% 0% 0% 0% 29% 0% 78% 0% 19% 3% 22% 26% 0% 20% 5% 24% 7% 0% 19% 8% 28% 9% 0% 22% 1% 24% 15% 0% 22% -10% 13% 0% 2008 2007 2006 2005 2004

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Short term finances Short term borrowings Current maturity of redeemable capital Current maturity of long term loan Current portion of long term loan Current portion of liabilities against assets subject to finance lease Current portion of deferred liability

3% 0% 0% 0% 0% 15%

0% 0% 0% 0% 0% 13%

0% 0% 0% 0% 4% 2%

0% 0% 0% 1% 0% 0%

0% 0% 0% 4% 0% 0%

0%

0%

2%

0%

0%

Sales tax payable

0% 29% 105%

0% 23% 100%

0% 17% 102%

0% 14% 106%

0% 9% 100%

ASSETS NON CURRENT ASSETS Property, plant and equipment Long term loans Long term deposits Deferred tax assets

91% 0% 1% 0% 92%

87% 0% 1% 0% 89%

91% 0% 1% 0% 93%

93% 0% 1% 0% 93%

86% 0% 1% 5% 91%

CURRENT ASSETS Stock in trade Store, spare and loose tools Assets held for disposal Trade Debts Loan & advances Zahoor Ahmad

1% 4% 0% 0% 1% Page 82

2% 5% 0% 0% 0%

1% 4% 0% 0% 0%

1% 4% 0% 0% 1%

1% 6% 0% 1% 0%

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Deposits & prepayments Other receivables Current portion of long term deposits Sales tax net Taxation-net Cash & bank balance

0% 0% 0% 0% 0% 1% 8% 100%

0% 0% 0% 0% 0% 4% 11% 100%

0% 0% 0% 0% 0% 1% 7% 100%

0% 0% 0% 0% 0% 0% 7% 100%

0% 0% 0% 0% 0% 1% 9% 100%

ANALYSIS: NON-CURRENT ASSETS: As we can see from the vertical balance sheet of the company total fixed assets are constant in relation to total assets with little variations. The management is more focusing on working capital management than on fixed asset in last two years as shown by the vertical balance sheet. Property, plant and equipment have shown an increasing trend it increased in 2004 by 86% in 2005 by 93% in 2006 by 91% 87% in 2007 and 91% in 2008. CURRENT ASSETS: Total current assets have shown an increasing trend over the last five year period. Stores and spares decreased in year 2008, 2005 and 2006 by 4% and increased in 2004 by 6% and 2007 by 5%.Stock in trade has shown an increasing with a same sequence at the rate of 1% all the years except 2007 which is 2%. Stock in trade is about 1% of the total current assets in 2004, 2005, 2006 and 2008 and it was 2% of total assets in 2007. Stores and spares have the largest portion than stock of the total current assets. Trade debts 1% of total assets in 2004 and then no other year has significant effect on total current Asset affected by trade debts. Cash and bank balance were 1% in 2005, 1% in 2006 and 2008 and 4% in 2007. This trend shows that more funds are tied in receivable, inventories and in stores & spares. EQUITY AND LIABILITIES: Issued Subscribed and paid up capital showing mix trend in increase 22% in 2004 and 2005 contribute in total liabilities and then it decrease in 2006 by 19% contribution and in 2007 by 20% and in 2008 19% in total liabilities. Currently company is not paying dividends to shareholders. Reserves also decreased in 2004 by 10% and no major contribution in total liabilities in coming years. NON-CURRENT LIABILITIES: Zahoor Ahmad Page 83 24-06-2011

Total long-term liabilities of the company have shown decreasing trend in relation to total liabilities. It contributes in total liabilities by 78% in 2004, 53% in 2005, 49% in 2006, 46% in 2007 and 28% in 2008. CURRENT LIABILITIES: Current liabilities have shown an increasing trend during the last five years from 2004 to 2008 as shown in the vertical balance sheet of the company they contribute in total liabilities by 9% in 2004, 14% in 2005, 17% in 2006, 23% in 2007 and 29% in 2008 which is maximum and company got loss in 2007 and 2008. Trade and other payables have shown an increasing trend with a marginal increase in last five years. Trade and other payables increase in 2008 by 8% and 2007 by 5% than their respective years, in 2006 and 2005 they were 4% and 2%in 2004.

4.2.6. TREND ANALYSIS

Trend Analysis is a comparative analysis of a company's financial ratios over time.

SIGNIFICANCE: It is an aspect of technical analysis that tries to predict the future movement of a stock based on past data. Trend analysis is based on the idea that what has happened in the past gives traders an idea of what will happen in the future. Zahoor Ahmad Page 84 24-06-2011

BALANCE SHEET BALANCE SHEET As at June 30 2008 2007 EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVE Authorized Share Capital 100% 100% Issue Subscribed & Paid Up Capital Reserves 209% -75.8% 422.8% 0% 177.9% -97.3% 384.5% 0%

2006

2005

2004

100% 170.3% -170.4% 425.9% 0%

100% 162.1% -17.9% 297.3% 0%

100% 100% 100% 100% 0%

Surplus on Revaluation of fixed assetsnet of tax NON-CURRENT LIABILITIES Redeemable capital Long term financing-secured Long term loans-secured Long term Musharaka finance Liabilities against assets subject to finance lease Long term deposits Long term creditor-unsecured Deferred liabilities Deferred tax liabilities

0% 0% 89.02% 0% 2493.6 % 79.4% 0% 73.2% 0% 87.8%

0% 39.1% 0% 0% 5102.5% 226.1% 0% 81.7% 0% 108.01 % 0% 476.1% 71.38% 0% 0% 0% 0% 0% 0% 0% 0% 0%

0% 231.6% 0% 0% 165.3% 242.5% 0% 69.8% 0% 121.9%

92.1% 0% 0% 0% 2880.07 % 286.5% 0% 78.87% 0% 109.01%

100% 0% 0% 0% 100% 100% 0% 100% 0% 100%

CURRENT LIABILITIES Creditors against expansion project Trade and other payables Interest/ Mark up accrued Short term Murabah-secured Short term Musharaka secured Short term finances Short term borrowings Current maturity of redeemable capital Current maturity of long term loan Current portion of long term loan Current portion of liabilities against assets subject to finance lease Current portion of deferred liability Zahoor Ahmad

0% 1046.2 % 109.7% 0% 0% 0% 0% 0% 0% 0% 0% 0% Page 85

0% 446.5% 41.9% 0% 0% 0% 0% 0% 0% 0% 2158.4 % 0%

0% 351.04% 75% 0% 0% 0% 0% 192.9% 35.6% 0% 211.9% 0%

0 % 100% 100% 0% 0% 100% 0% 0% 100 % 0% 100 % 0%

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Sales tax payable

0% 779.8% -

0% 521.9% -

710.9% 287.1% 364.9%

440.2% 130.7% 258.3%

0% 100% 100%

ASSETS NON CURRENT ASSETS FIXED CAPITAL EXPENDITURE Property, plant and equipment Long term loans Long term deposits Deferred tax assets

261.6% 107.7% 456.5% 249.6%

205.3% 121.7% 343.4% 197.03 % 295.8% 163.4% 120% 414.9% 38.8% 4.27% 0% 817.4% 244.6% 201.4%

210.1% 75.37% 268.6% 121.2%

174.5% 112.8% 155.4% 165.6%

100% 100% 100% 100%

CURRENT ASSETS Stock in trade Store, spare and loose tools Assets held for disposal Trade Debts Loan & advances Deposits & prepayments Other receivables Current portion of long term deposits Sales tax net Taxation-net Cash & bank balance

135.2% 167.6% 162.3% 1062.1 % 15.9% 366.1% 80.8 % 372.4% 199.3% 244.9%

170.3% 130.9% 50.5% 230.3% 57.8% 65.5% 82.16% 192.4% 156.4% 196.6%

111.8% 112.6% 76.7% 1038.6%

100% 100% 100% 100%

68.4% 100% 121.8% 100 % 92.3% 100% 46.9% 100% 117.1% 100% 161.1% 100%

ANALYSIS: NON-CURRENT ASSETS: As we can see from the balance sheet of the company total fixed assets are constant in relation Zahoor Ahmad Page 86 24-06-2011

to total assets with little deviations. The management is more focusing on fixed asset in past years. As property, plant and equipment have shown an increasing trend. CURRENT ASSETS: Total current assets have shown an increasing trend over the last five year period. Stores and spares increased consistently over the years. Stock in trade has shown an increasing with a same sequence. Loans and advances have the largest portion than stock of the total current assets. This trend shows that more funds are needed. EQUITY AND LIABILITIES: Issued Subscribed and paid up capital showing mix trend in increase that there is increase in 2005 andin2006 where as there is a decrease in 2007 and in increase in 2008 in total liabilities as currently company is not paying dividends to shareholders NON-CURRENT LIABILITIES: Total long-term liabilities of the company have shown decreasing trend in relation to total liabilities. CURRENT LIABILITIES: Current liabilities have shown an substantially mix trend during the last five years from 2004 to 2008 as shown in the balance sheet of the company they contribute in total liabilities.

4.2.7. INCOME STATEMENT

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PIONEER CEMENT COMPANY LIMITED FIVE YEAR POSITION OF INCOME STATEMENT For the year ended June 30 Gross Turnover Excise Duty Sales Tax Commission Net turnover Cost of sales Gross Profit Distribution Cost Administrative And Selling expenses Other operating incomenet Finance Cost Other Charges 2008 337.4% 288.8% 261.8% 226.2% 275.9% 367% 463.6% 132.8% 1649.1% 155.2% 39% 351.8% 639.3% Profit before taxation Taxation Profit after taxation -240.9% -211.7% -42.41% 2007 237.3% 238.6% 218.9% 227.1% 23.78% 236.7% 300.5% 82.3% 192.7% 149.8% 14.8% 311.5% 30.49% -77.4% -48.8% 22.03% 2006 212.0% 210.9% 192.2% 104.8% 169.5% 232.5% 197.1% 318.2% 138.8% 127.6% 131.2% 90.63% 313.65% 167.7% 25.12% 181.55% 391.6% -138.18% 159.3% 2005 142.9% 115.6% 125.03% 98.18% 118.78% 154.6% 146.57% 174.08% 241.90% 112.69% 155.03% 34.63% 149.5% 102.8% 222.8% 122.7% 165.3% -33.23% 78.27% 2004 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

ANALYSIS: Zahoor Ahmad Page 88 24-06-2011

As we can see from the income statement the gross turnover has increased from 2004 to 2008 as excise duty and sales tax has increased in these years where as there is a 1%decrease in commission in 2008.There is a substantial increase in net turnover as trend of cost of sales has increased. There was a increase in 2005 and 2006 in gross profit then company start facing losses in 2007 and 2008 because there distribution cost and administrative expenses increases which was due to the flaw in the management of the company. The finance cost and other charges have also increased which assist the losses of the company. Finally the company is improving with the passage of time. Although the profits are not very adequate but the management is very confident that they are working hard and the company will prosper in coming years as most of the capital work has been completed. 4.3. RATIO ANALYSIS 4.3.1. LIQUIDITY RATIOS Liquidity ratios are the ratios for testing short term solvency or financial position of a business. These are designed to test the ability of the business to meet its short term obligation promptly, a class of financial metrics that IS used to determine a company's ability to pay off its shortterms debts obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the company possesses to cover its short-term debts 4.3.2. CURRENT RATIO:

Current ratio may be defined as the relationship between current assets and current liabilities. This ratio is also known as "working capital ratio". It is a measure of general liquidity and is most widely used to make the analysis for short term financial position or liquidity of a firm. It is calculated by dividing the total of the current assets by total of the current liabilities.

COMPONENTS: The two basic components of this ratio are current assets and current liabilities. Current assets include cash and those assets which can be easily converted into cash within a short period of time, generally, one year, such as marketable securities or readily realizable investments, bills receivables, sundry debtors, (excluding bad debts or provisions), inventories, work in progress, etc. Prepaid paid expenses should also be included in current assets because they represent payments made in advance which will not have to be paid in near future. Current liabilities are those obligations which are payable within a short period of tie generally one year and include outstanding expenses, bills payable, sundry creditors, bank overdraft, accrued expenses, short term advances, income tax payable, dividend payable, etc. However, sometimes a controversy arises that whether overdraft should be regarded as current liability or not. Often an arrangement with a bank may be regarded as permanent and therefore, it may be treated as long term liability. At the same time the fact remains that the overdraft facility may be cancelled at Zahoor Ahmad Page 89 24-06-2011

any time. Accordingly, because of this reason and the need for conversion in interpreting a situation, it seems advisable to include overdrafts in current liabilities. LIMITATIONS OF CURRENT RATIO: This ratio is measure of liquidity and should be used very carefully because it suffers from many limitations. It is, therefore, suggested that it should not be used as the sole index of short term solvency 1. It is crude ratio because it measures only the quantity and not the quality of the current assets. 2. Even if the ratio is favorable, the firm may be in financial trouble, because of more stock and work in process which is not easily convertible into cash, and, therefore firm may have less cash to pay off current liabilities. 3. Valuation of current assets and window dressing is another problem. This ratio can be very easily manipulated by overvaluing the current assets. An equal increase in both current assets and current liabilities would decrease the ratio and similarly equal decrease in current assets and current liabilities would increase current ratio. SIGNIFICANCE: This ratio is a general and quick measure of liquidity of a firm. It represents the margin of safety or cushion available to the creditors. It is an index of the firms financial stability. It is also an index of technical solvency and an index of the strength of working capital. A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its current obligations in time and when they become due. On the other hand, a relatively low current ratio represents that the liquidity position of the firm is not good and the firm shall not be able to pay its current liabilities in time without facing difficulties. An increase in the current ratio represents improvement in the liquidity position of the firm while a decrease in the current ratio represents that there has been deterioration in the liquidity position of the firm. A ratio equal to or near 2: 1 is considered as a standard or normal or satisfactory. The idea of having double current assets as compared to current liabilities is to provide for the delays and losses in the realization of current assets. However, the rule of 2:1 should not be blindly used while making interpretation of the ratio. Firms having less than 2 : 1 ratio may be having a better liquidity than even firms having more than 2 : 1 ratio. This is because of the reason that current ratio measures the quantity of the current assets and not the quality of the current assets. If a firm's current assets include debtors which are not recoverable or stocks which are slow-moving or obsolete, the current ratio may be high but it does not represent a good liquidity position.

Current Ratio.

4.3.2. CURRENT RATIO

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Zahoor Ahmad

Formula Years Pioneer Cement Cherat Cement Kohat Cement 2008 0.26 1.07 0.66

Current Assets/Current Liabilities 2007 0.48 2.28 1.00 2006 0.56 2.45 2.56 2005 0.92 3.07 1.47 2004 1.03 2.47 1.24

ANALYSIS: Current Ratio clears the extent to which the claim of short term creditors can be met by assets that are to become cash within a year. The best standard ratio is 2:1 so, the Pioneer Cement has current ratio below standard. There is a decrease in 2004 to 2008. Current Ratio of Kohat Cement is more than Pioneer and Cherat cement. Current ratio shows that how many times current assets are available to meet its current liabilities. Pioneer cement current ratio shows decreasing trend and it has less than 1:1 but only in 2004 it is more than 1:1. Cherat cement also shows decreasing trend in current ratio. Kohat cement current ratio shows increasing trend in 2004, 2005 and in 2006 but decreases in 2007 and 2008 which shows that it has less current assets or current liabilities increases.

4.3.3. QUICK RATIO:

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Liquid ratio is also termed as "Liquidity Ratio, Acid Test Ratio" or "Quick Ratio". It is the ratio of liquid assets to current liabilities. The true liquidity refers to the ability of a firm to pay its short term obligations as and when they become due

COMPONENTS: The two components of liquid ratio (acid test ratio or quick ratio) are liquid assets and liquid liabilities. Liquid assets normally include cash, bank, sundry debtors, bills receivable and marketable securities or temporary investments. In other words they are current assets minus inventories (stock) and prepaid expenses. Inventories cannot be termed as liquid assets because it cannot be converted into cash immediately without a loss of value. In the same manner, prepaid expenses are also excluded from the list of liquid assets because they are not expected to be converted into cash. Similarly, Liquid liabilities means current liabilities i.e., sundry creditors, bills payable, outstanding expenses, short term advances, income tax payable, dividends payable, and bank overdraft (only if payable on demand). Some time bank overdraft is not included in current liabilities, on the argument that bank overdraft is generally permanent way of financing and is not subject to be called on demand. In such cases overdraft will be excluded from current liabilities SIGNIFICANCE: The quick ratio/acid test ratio is very useful in measuring the liquidity position of a firm. It measures the firm's capacity to pay off current obligations immediately and is more rigorous test of liquidity than the current ratio. It is used as a complementary ratio to the current ratio. Liquid ratio is more rigorous test of liquidity than the current ratio because it eliminates inventories and prepaid expenses as a part of current assets. Usually a high liquid ratio an indication that the firm is liquid and has the ability to meet its current or liquid liabilities in time and on the other hand a low liquidity ratio represents that the firm's liquidity position is not good. As a convention, generally, a quick ratio of "one to one" (1:1) is considered to be satisfactory. Although liquidity ratio is more rigorous test of liquidity than the current ratio, yet it should be used cautiously and 1:1 standard should not be used blindly. A liquid ratio of 1:1 does not necessarily mean satisfactory liquidity position of the firm if all the debtors cannot be realized and cash is needed immediately to meet the current obligations. In the same manner, a low liquid ratio does not necessarily mean a bad liquidity position as inventories are not absolutely non-liquid. Hence, a firm having a high liquidity ratio may not have a satisfactory liquidity position if it has slow-paying debtors. On the other hand, a firm having a low liquid ratio may have a good liquidity position if it has a fast moving inventory. Though this ratio is definitely an improvement over current ratio, the interpretation of this ratio also suffers from the same limitations as of current ratio

QUICK RATIO Zahoor Ahmad Page 92 24-06-2011

Quick Ratio. Formula Years Pioneer Cement Cherat cement Kohat Cement 2008 0.24 0.94 0.57 Current Asset-stock/current liabilities 2007 0.41 2.07 0.78 2006 0.47 2.17 2.34 2005 0.81 2.88 1.41 2004 0.9 2.25 1.18

ANALYSIS: The acid test ratio is also below standard due to heavy short term borrowings. Pioneer acid test ratio decreased in year 2005, 2006, 2007 and in 2008. The quick ratio of Kohat cement shows that sufficient liquid asset is available to discharge and settle its current obligation. The rise in current liabilities is due to the expansion of project and short and long term financing. Pioneer Cement liquidity is less than standard. Kohat and Cherat cement liquidity is on considerable point. Kohat cement liquid ratio is more than pioneer and Cherat which shows that it has more liquidity. Cherat liquidity position is considerable because it is near to 1 which shows that it has liquid assets to meet its current liabilities. Pioneer position is not at considerable point. It shows decreasing trend and less than 1:1.

4.3.4. TURNOVER/ACTIVITY RATIOS: Zahoor Ahmad Page 93 24-06-2011

Activity ratios are measures of how well assets are used. Activity ratios -- which are, for the most part, turnover ratios can be used to evaluate the benefits produced by specific assets, such as inventory or accounts receivable. Or they can be use to evaluate the benefits produced by all a company's assets collectively.
These measures help us gauge how effectively the company is at putting its investment to work. A company will invest in assets e.g., inventory or plant and equipment and then use these assets to generate revenues. The greater the turnover, the more effectively the company is at producing a benefit from its investment in assets INVENTORY DAYS: The number of days inventory is also known as average inventory period and inventory holding period. A high number of days inventory indicates that there is a lack of demand for the product being sold. A low days inventory ratio (inventory holding period) may indicate that the company is not keeping enough stock on hand to meet demands. The number of days inventory and inventory turnover ratios are included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.

INVENTORY DAYS Formula Inventory Days = Inventory / Cost of Sales*365

Years Pioneer Cement Cherat Cement Kohat Cement

2008 6 24 49

2007 20 40 38

2006 19 21 28

2005 15 23 8

2004 20 6.67 6

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ANALYSIS: Pioneer inventory days decreased in 2005 as compare to 2004 and increased in 2006 and in 2007 and show decreasing in 2008 which shows that management is efficient for managing inventory period. The above diagram shows that in 2004 and 2005 Kohat cement has less inventory days required to convert stock in sale which shows that Kohat management is efficient but it decreases with the passage of times and Pioneer trend is opposite to Kohat. It was low in beginning and it increases in 2008, but Cherat Cement shows mixed trend. 4.3.5. DEBTORS TURNOVER RATIO OR RECEIVABLES TURNOVER RATIO: Debtors turnover ratio indicates the velocity of debt collection of a firm. In simple words it indicates the number of times average debtors (receivable) are turned over during a year.

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SIGNIFICANCE OF THE RATIO: This ratio indicates the number of times the debtors are turned over a year. The higher the value of debtors, turnover the more efficient is the management of debtors or more liquid the debtors are. Similarly, low debtors turnover ratio implies inefficient management of debtors or less liquid debtors. It is the reliable measure of the time of cash flow from credit sales. There is no rule of thumb which may be used as a norm to interpret the ratio as it may be different from DEBTOR DAYS

Formula Years 2008

Trade debtors/Credit sales*365 2007 2006 2005 2004

Pioneer Cement

Cherat Cement

35

19

10

Kohat Cement firm to firm.

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ANALYSIS: Graph shows that Pioneer cement has good debtor management to receive the debt or collect the receivables and shows positive trend and debtors collection period is less than creditors period. Kohat position is also considerable but Cherat management has more time to collect their receivables whish shows inefficient debtor management and in 2008 it is at highest point which indicates unfavorable situation regarding to debtor collection period.

4.3.6. TOTAL ASSETS TURNOVER RATIO: The total assets turnover ratio measures the use of all assets in terms of sales, by comparing sales with net total assets. This interactive tutorial walks you through the calculations as well as where on the financial statements to find the numbers.

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TOTAL ASSET TURNOVER

Formula

Sales/ Total Assets

Years

2008

2007

2006

2005

2004

Pioneer Cement

0.46

0.36

0.37

0.30

0.31

Cherat Cement

0.68

0.74

0.67

0.74

0.95

Kohat Cement

0.18

0.26

0.76

1.04

1.10

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ANALYSIS: In the above graph we can see that total asset turnover ratio of Pioneer cement company showing mix trend in the year 2008 total asset total asset turnover ratio is at highest level and as it compare it with Cherat and Kohat cement it is better in the last two year 2007,2008 so we can say it is using its assets for generating the revenue in a better way than Kohat and Cherat cement in 2004,2005 and 2006 Kohat cement total asset turnover ratio at top so they use much of it for generating revenue. But pioneer overall situation regarding to total asset turnover ratio is better than other two competitors. 4.3.7. FIXED ASSETS TURNOVER RATIO: Fixed assets turnover ratio is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the concern. Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under-utilization of fixed assets

FIXED ASSETS TURNOVER RATIO Fixed Asset Turnover Ratio Formula Cost of sales / Fixed Assets

Years

2008

2007

2006

2005

2004

Pioneer Cement

0.51

0.42

0.41

0.32

0.36

Cherat Cement

0.39

0.2

0.35

0.51

0.61

Kohat Cement

1.46

1.52

2.12

2.95

2.32

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ANALYSIS: It shows the utilization of fixed assets, Pioneer increasing the utilization of its fixed assets but it has lower times than Kohat cement which has more utilization of fixed assets and at highest level in 2005. Cherat Cement shows the mixed trend and has less utilization than Kohat and Pioneer cement. 4.4.1. PROFITABLITY RATIOS: Profitability ratios (also referred to as profit margin ratios) compare components of income with sales. They give us an idea of what makes up a company's income and are usually expressed as a portion of each dollar of sales. The profit margin ratios we discuss here differ only by the numerator. It's in the numerator that we reflect and thus evaluate performance for different aspects of the business: The gross profit margin is the ratio of gross income or profit to sales. This ratio indicates how much of every dollar of sales is left after costs of goods sold.

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4.4.2. GROSS PROFIT (GP) RATIO: Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a percentage. It expresses the relationship between gross profit and sales. COMPONENTS: The basic components of the calculation of gross profit ratio are gross profit and net sales. Net sales means sales minus sales returns. Gross profit would be the difference between net sales and cost of goods sold. Cost of goods sold in the case of a trading concern would be equal to opening stock plus purchases, minus closing stock plus all direct expenses relating to purchases. In the case of manufacturing concern, it would be equal to the sum of the cost of raw materials, wages, direct expenses and all manufacturing expenses. In other words, generally the expenses charged to profit and loss account or operating expenses are excluded from the calculation of cost of goods sold. SIGNIFICANCE: Gross profit ratio may be indicated to what extent the selling prices of goods per unit may be reduced without incurring losses on operations. It reflects efficiency with which a firm produces its products. As the gross profit is found by deducting cost of goods sold from net sales, higher the gross profit better it is. There is no standard GP ratio for evaluation. It may vary from business to business. However, the gross profit earned should be sufficient to recover all operating expenses and to build up reserves after paying all fixed interest charges and dividends. GROSS PROFIT TO SALES Gross profit to Sales: Formula Years Pioneer Cement Cherat Cement Kohat Cement

2008 10.58% 5.95% 6.35%

Gross profit/Sales*100 2007 2006 2005 10.16% 14.41% 22.09% 40.00% 40.68% 51.55% 32.91% 35.67% 38.72%

2004 29.23% 34.33% 35.45%

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Analysis: Gross profit of Pioneer cement company increasing in 2004 to 2006 but decrease in 2007 to 2008. Due to inflation and economic instability in Pakistan and irregular power supply of WAPDA in 2007 and 2008. Gross Profit ratio of three competitors show increasing trend in 2004 to 2006 due to good economic and financial situation of world and good market situation in Pakistan. Kohat position is more considerable up to 2006 but shows decreasing trend in 2007 and 2008, and Cherat Cement also has same situation. 4.4.3. OPERATING PROFIT RATIO: Operating ratio is the ratio of cost of goods sold plus operating expenses to net sales. It is generally expressed in percentage. It measures the cost of operations per dollar of sales. This is closely related to the ratio of operating profit to net sales. COMPONENTS: The two basic components for the calculation of operating ratio are operating cost (cost of goods sold plus operating expenses) and net sales. Operating expenses normally include (a) administrative and office expenses and (b) selling and distribution expenses. Financial charges such as interest, provision for taxation etc. are generally excluded from operating expenses. SIGNIFICANCE: Operating ratio shows the operational efficiency of the business. Lower operating ratio shows higher operating profit and vice versa. An operating ratio ranging between 75% and 80% is generally considered as standard for manufacturing concerns. This ratio is considered to be a yardstick of operating efficiency but it should be used cautiously because it may be affected by a number of uncontrollable factors beyond the control of the firm. Moreover, in some firms, non-operating expenses from a substantial part of the total expenses and in such cases operating ratio may give misleading results Zahoor Ahmad Page 102 24-06-2011

OPERATING PROFIT RATIO

Operating Profit Margin Formula Years Pioneer Cement Cherat Cement Kohat Cement Operating Profit Margin = Operating profit /Sale*100 2008 -3.13% 4.38% 1.57% 2007 5.79% 4.18% 17.91% 2006 36.74% 34.14% 49.24% 2005 25.16% 29.57% 35.86% 2004 26.89% 32.31% 32.25%

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Pioneer cement company operating profit increasing in 2004 to 2006 and decreasing in 2007 and 2008 and in 2008 they suffer loss by 3.13% due to increase in prices of coal, diesel and empty bag in 2007-2008 Operating profit of all three organization show increasing trend in 2004, 2005, and 2006 but decreases in 2007 and 2008due to increase in operating expenses.

4.4.4. RETURN ON ASSETS: Where asset turnover tells an investor the total sales for each $1 of assets, return on assets tells an investor how much profit a company generated for each $1 in assets. The return on assets figure is also a sure-fire way to gauge the asset intensity of a business. Companies such as telecommunication providers, car manufacturers, and railroads are very asset-intensive, meaning they require big, expensive machinery or equipment to generate a profit. Advertising agencies and software companies, on the other hand, are generally very asset-light.

RETURN ON ASSETS Return on Assets: Formula Net Income / Total Assets*100 Years 2008 2007 2006 Pioneer Cement Cherat Cement Kohat Cement -1.72% 0.23% -2.92% -1.10% 5.21% 0.83% 8.00% 14.88% 25.68%

2005 4.80% 15.99% 23.40%

2004 9.90% 19.50% 22.97%

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This ratio measures the return of total investment of the business. Pioneer cement company show mix trend in 2004 it is at maximum point than decrease in 2005 and again increase in 2006 and then become negative in 2007 and 2008. Kohat cement company return on asset is much better than Cherat and pioneer it decreases in 2004 to 2006 and then decrease in 2007 and becomes negative in 2008, it is at highest point in 2006, Cherat also increase in 2004 to 2005 and then it little decrease in 2006 and at goes down in 2007 and becomes negative in 2008. 4.4.5. RETURN ON EQUITY (ROE) RATIO: In real sense, ordinarily shareholders are the real owners of the company. They assume the highest risk in the company. (Preference share holders have a preference over ordinary shareholders in the payment of dividend as well as capital. Preference share holders get a fixed rate of dividend irrespective of the quantum of profits of the company). The rate of dividends varies with the availability of profits in case of ordinary shares only. Thus ordinary shareholders are more interested in the profitability of a company and the performance of a company should be judged on the basis of return on equity capital of the company. Return on equity capital which is the relationship between profits of a company and its equity, can be calculated as follows. COMPONENTS: Equity share capital should be the total called-up value of equity shares. As the profit used for the calculations are the final profits available to equity shareholders as dividend, therefore the preference dividend and taxes are deducted in order to arrive at such profits. SIGNIFICANCE: This ratio is more meaningful to the equity shareholders who are interested to know profits earned by the company and those profits which can be made available to pay dividends to them. Interpretation of the ratio is similar to the interpretation of return on shareholder's investments and higher the ratio better is. RETURN ON EQUITY RATIO (ROE) Formula Years Pioneer Cement Cherat Cement Kohat Cement [(Net profit after tax Preference dividend) / Equity share capital] 100 2008 -7.80% 1.08% -9.55% 2007 -4.46% 29.77% 2.09% 2006 29.11% 54.70% 34.58% 2005 20.48% 77.04% 35.73% 2004 77.81% 80.08% 42.09%

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ANALYSIS: In 2004 Pioneer cement company return on equity ratio is at highest point and better, in 2005 it decreases and in 2006 it is better than 2005 but in 2007 and 2008 it goes down and become negative. Kohat Cement Company also shows decreasing trend it is highest point in 2004 and then decrease in 2005 to 2007 and it becomes negative in 2008. Cherat cement company return on equity ratio has mix trend in 2004 it is at lower side and then it increase in 2005 and it decrease in 2006 and it goes down and become negative in 2007 and 2008. 4.4.6. DEBT RATIOS: A company can finance its assets either with equity or debt. Financing through debt involves risk because debt legally obligates the company to pay interest and to repay the principal as promised. Equity financing does not obligate the company to pay anything -- dividends are paid at the discretion of the board of directors. There is always some risk, which we refer to as business risk, inherent in any operating segment of a business. Financial leverage ratios are used to assess how much financial risk the company has taken on. There are two types of financial leverage ratios: component percentages and coverage ratios. Component percentages compare a company's debt with either its total capital (debt plus equity) or its equity capital. Coverage ratios reflect a company's ability to satisfy fixed obligations, such as interest, principal repayment, or lease payments. Zahoor Ahmad Page 106 24-06-2011

Debt to Equity Ratio: Debt-to-Equity ratio indicates the relationship between the external equities or outsiders funds and the internal equities or shareholders funds. It is also known as external internal equity ratio. It is determined to ascertain soundness of the long term financial policies of the company.

DEBT TO EQUITY RATIO:

Formula Years Pioneer Cement Cherat Cement Kohat Cement 2008 31:69 13:20 67:33

Total Long Term Debts / Shareholders Funds 2007 52:48 39:50 55:45 2006 48:52 1:9:50 10:90 2005 52:48 1:51:100 10:90 2004 86:14 37:50 22:78

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ANALYSIS: Pioneer cement debt to equity ratio is higher point in 2004 and after that it has improved its situation in next coming years and decreases, but Kohat shows increasing trend from 2004 to 2008 which shows that they increasing their debts for expansion of project and their short and long term debts increased. Cherat computation of the ratio brings to life the fact that Cherat cement has not been able to feed its financing through equity as its ratios are considerable higher than the favorable 1 or less. The initial year shows that there was less dependency of debt but there has been a visible increase in the ratio ever since, the last year shows a phenomenal increase and highly unfavorable. The firm must by all means try and reduce its portions as the dependency on debt causes the firm to lose its control and will over the organization as it is then driven to feed the debt.

4.4.7. DEBT SERVICE RATIO OR INTEREST COVERAGE RATIO: Interest coverage ratio is also known as debt service ratio or debt service coverage ratio. This ratio relates the fixed interest charges to the income earned by the business. It indicates whether the business has earned sufficient profits to pay periodically the interest charges. SIGNIFICANCE OF DEBT SERVICE RATIO:The interest coverage ratio is very important from the lender's point of view. It indicates the number of times interest is covered by the profits available to pay interest charges.

INTEREST COVERAGE RATIO

Formula Years Pioneer cement Cherat Kohat Cement

Net Profit Before Interest and Tax / Fixed Interest Charges] 2008 0.39 0.30 -4.71 2007 0.31 4.27 1.23 2006 5.73 9.94 20.21 2005 4.26 21.10 25.17 2004 3.03 30.96 17.22

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ANALYSIS: Interest Cover Ratio shows that how many times interest is earned by the company. Pioneer cement company shows increasing trend from 2004 to 2006 which indicates positive sign and beneficial for the company and it has availability of the funds to pay interest expense. In 2007 and 2008 it goes down which means it is not good sign for the company to pay the interest expense. Kohat Cement Company and Cherat Cement is in better position to Cherat and pioneer cement, In year 2005 Kohat Cement earned 17.22 times interest which is higher among all year and easy to pay the interest expense. In 2007 and 2008 Interest cover ration of all the company is not very healthy and it shows that the financial costs are very high and earnings are very low. Management must look into the matter and should improve this ratio. Cherat cement was able to very comfortably cover this cost in the early years but by its growth the inabilities started to show although revenues are rising but the interest charges to be paid by the enterprise are also rising as the revenues are only resulting due to the rising financing through debt. The debt, especially the short term financing, needs to be curtailed as they will not result in Cherat Cements well being. 4.5. GENERAL RATIO ANALYSIS 4.5.1. PROFITABILITY ANALYSIS: According to the scenario, the cement sector is experiencing strong growth in cement dispatches, but at the same time, is facing decline in profitability during 2008. Although the sales volume in the sector increased, the net sales revenue did not increase as much due to decrease in net retention. Over the years all cement manufacturers undertook huge capacity expansion plans which have now created a situation of excess supply in the local market. Companies resorted to price wars and this led to a fall in prices. As per the industry trend of declining profitability, Pioneer Cement also posted an overall loss of 179 million in 2008. The Profitability ratios of Pioneer Cement indicate that Pioneer, like many other companies in the cement sector, has been plagued by lower earnings. The gross profit margin fell drastically in Zahoor Ahmad Page 109 24-06-2011

2007 and fell slightly in 2008 as well. Pioneer's rising operating expenses and finance costs have led negative net profit margin. Similarly return on assets and return on equity have also fallen. The prices of imported coal had shot up during the last fiscal year and caused a major rise in the cost of production. Crude oil prices had also seen an extraordinary rise last fiscal year. As fuel costs are the largest portion of production costs of the Pioneer Cement, the price increase had deeply hit the profitability of the company in 2008. For Pioneer Cement, the prices of packaging material went up and formed 14% to total production costs. Fuel and electricity costs form 60% of the cost of sales and higher electricity tariffs and fuel costs affected the earnings of the company in 2008.The cost of production went up due to rise in the prices of imported coal. Company had an impact of Rs 149 million on earnings due to devaluation of rupee against the US dollar and Japanese yen in the form of exchange losses. Financial cost also increased due to higher interest rates in the economy. The profitability ratios indicate that Pioneer Cement, like many other companies in the cement sector, has been weighed down by lower earnings. Pioneer's rising operating expenses and financial costs have led to negative impact on the net profit margins. Similarly, return on assets and return on equity have also fallen. 4.5.2. LIQUIDITY ANALYSIS: The liquidity position of the company has been weakening over the years, due to substantial rise in the current liabilities. Pioneer felt a liquidity crunch, like many other companies in the cement sector due to the price war and losses caused by that in 2008. The current liabilities of Pioneer have also increased to Rs 2.987 billion during 2008, backed mainly by increased short-term borrowings by the company. To solve the liquidity problem, Pioneer has initiated a process of restructuring its debt by issuing Sukuk of Rs 2.5 billion in 2008. This will help the company to liquidate its excessive current liabilities. It will also help to control company's finance costs. Also, Pioneer will issue shares to the National Bank of Pakistan due to its inability to pay its loans. This restructuring would give a breather to the company whose current ratio was steadily moving downhill. During 2008, the composition of current assets changed such that the most liquid assets: cash and bank balances constituted 18%, trade debts 5% and inventory 9% of total current assets. Stores, spares and tools are highly illiquid assets and they form a major portion of the company's current assets. Industrys position, though not ideal, is at least much better than the Pioneer Cement. In fact, it is the only company in the cement sector, which has the liquidity ratio of below 0.5. 4.5.3. DEBT ANALYSIS: The debt to assets ratio depicts how Pioneer Cement financed. Each year, the company is being increasingly financed by equity rather than debt. In 2004, debt financed 87% of assets while in 2008 debt only contributed to 56% of the total assets. The company's debt to asset ratio has not fluctuated much because over the years because assets and liabilities have grown more or less in the same proportions. The debt to equity ratio fell during 2005 and 2006 indicating that the company was financing its growth by equity. In 2005, the equity of the company rose by 197% while liabilities Zahoor Ahmad Page 110 24-06-2011

increased only by 11%. In 2007 the equity fell as the reserves fell owing to the loss made during that fiscal year. This caused a slight increase in Debt to Equity ratio in 2007. In 2008 the debt to equity ratio has declined owing largely to a fall in the debt. The company is trying to restructure its financing composition in favor of equity by issuing Sukuk financing and convertible loan into equity. This will reduce the current liabilities in the future. In the wake of rising interest rates in the economy, this strategy will prove to be beneficial for Pioneer in the future. The average price/share fell during 2007 to Rs 31.78 and in 2008, it remained around Rs 31.84. The share prices declined due to the losses incurred during both the fiscal years. 4.5.4. ASSETS: The asset management of the company seems to be quite effective during 2008 as the operating cycle of Pioneer decreased to 9 days from 23 days in 2007. The operating cycle, however, has reduced due to faster sales turnover while days to collect trade debt remained the same in 2008. The days to sell the average inventory were 19 days in 2007 whereas in 2008 it took the company only 6 days to sell its inventory.

4.6. COMPANY ANALYSIS

Pioneer cement limited fulfills all its targets of supplies in the market and also expands its production with the needs of market. In these days company is in its growth stage. Now the company has three production lines including one line for white cement produce and also for grey cement. The growth in demand of cement in Asia, India and Middle East, particularly supply deficit in India and China has geared up export opportunities for Cement Industry of Pakistan. Supply deficit in India has resulted in significant demand for Pakistani Cement due to India's geographic proximity with Pakistan. Bureau of Indian standards have approved Pioneer Cement for import to India. This demand will also be supported by closing down of some cement units in Europe due to their strict laws governing pollution control and other environment hazards. Being one of the big cement units of Pakistan and due to its high quality Pioneer Cement is the prime of choice of the International buyers all over the world. Pioneer Cement is committed to provide high quality cement to its international customers and is being exported to Afghanistan, India, Middle East, Europe and Africa. Pioneer Cement conveniently meets all the International standards including American, British, and Indian and European standards. Pioneer cement is an ISO 9001-2000 and ISO 14001-2004 certified company and follows all rules and regulations of the government. Companys social performance is also good. It has good cooperation with community and the environment. Company has a good relation with their workers and also trying for their welfare.

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Chapter .5
5.1. CONCLUSION
The company underwent many expansion plans due to which its capacity was increased to 2350 tons per day in 2005 and in 2006 a new production line of 4300 tons per day clinker capacity started production. Its shares are quoted on all the three stock exchanges of the country. It is a part of the Noon group, which holds the majority stake of 60% in the company, followed by a leading brokerage house, First National Equity Limited (FNE) 9% shareholding. Financial institutions, insurance companies and the general public, hold the rest of the shareholding. Pioneer is involved in the manufacturing and marketing of cement. Its products include ordinary Portland cement, suitable for concrete construction and sulphate resistant cement, ideal for construction in or near sea. Thus, the company's sulphate resistant cement is highly preferred in important projects such as the Thai Greater Canal project. PIOC's products are sold under the brand name of 'Pioneer Cement' and it was the winner of "Brand of the Year Awards 2006" in cement sector in the national category. Pioneer Cement is ISO 9001:2000 QMS and ISO: 14001:2004 certified. It meets local as well as international quality standards. Pioneer Cement produces and sells used coal and cement domestically and internationally. The cement sector had shown an impressive growth of 24.3% in the cement dispatches during 2008, owing to a strong demand in the local market and supply deficits in the regional markets. The major boost had come from the export sales (a growth of 142%) while local cement dispatches grew nominally by 6.5%.exports showed a growth of 59.5% and export market share rose from 21.5% in 2008 to 34.1% . However, there is no reflective true performance of Cherat against its competitors; EPS remained above the industry average. Lower value of outstanding number of shares rather than a high net income is mainly responsible for the mentioned trend. The same argument holds true for the higher than average book value per share as well. It has a declining trend. This again can be attributed to shareholder pattern of the company. The outlook for local demand growth for Cherat remains positive as a number of mega housing projects are in their initial stages whereas the government has also started a lot of infrastructure developments projects and might even go for mega water reservoir projects in the future. This would keep the demand upbeat. Earthquake reconstruction in the Northern Areas further strengthens the demand growth. Whereas for the Kohat Cement Company, by going forward, with additional capacities coming on line, the gross margins are likely to decline. However, they are expected to sustain at a reasonable level, allowing a comfortable profitability and cash flow levels for the industry, even at low capacity utilization levels. As Kohat Cement Company is going under sustainable capacity expansion, relative to its existing size, its market share in the production sharing arrangement is expected to increase, signifying ability to achieve higher sales volumes even at low capacity utilization. They should increase the overall profitability of the company as compare to its competitors.

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Chapter .6 6.1. Recommendations

Cement Industry is playing a vital role in the building up the Country's economy and contribution towards growth & prosperity. My recommendation is fast construction of roads, building, Dams, bridges to increase the sale of Cement Industry. Slow construction activities in the Country during the period badly upset domestic sale of Cement, which depicted decline of 15% to 10.77 million tons as compared to 12.59 million tons of last fiscal year. Government should reduce their taxes on Cement Sector. Cement demand is significantly affected by the public sector Development Program (PSDP), construction as well as exports. Foreign investment and transfer of Technology. The reduction in the prices of coal will also be also helpful in reducing the costs of the company Pioneer cement limited fulfills all its targets of supplies in the market and also expands its production with the needs of market. We recommend BUY for the scrip, although we are bullish viewing that most of the cement stock often trade below the sector PER and this is also true for Fauji Cement, but as far as growth sector is concerned our stance for fauji cement is neutral, even though the stock market is currently not at bullish, fauji cement is out of danger zone as they have reprofiled its debts which ultimately reduce its cost of borrowings thus, moving towards sound fundamentals. It is strongly recommended that Fauji Cement should expand its business and should establish the strategies of going global.

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6.2. FUTURE OUTLOOK

Cement dispatches are expected to continue growing in the future as the demand for cement may increase in response to construction activities in the private sector. Despite this, the local cement dispatches may be depressed due to slowdown in the economy-led construction activities in the country and also due to inflation. But exports are expected to maintain their strong growth and support the total cement dispatches. Pioneer Cement is expected to have increased exports as it has received orders from new buyers such as Russia, Central Asia, Madagascar and Nigeria. In the budget 2009 the central excise duty on cement was increased to Rs 900 per ton from current Rs 750 per ton Expenses are expected to increase for cement manufacturers due to the hike in coal prices and higher interest rates in our economy. This will negatively impact the gross margins of the cement sector. During the past, our cement manufacturers shifted production from oil to coal or gas. Pakistan has huge reserves of coal but manufacturers need to import coal due to high sulphur content. Coal prices more than doubled during 2008 with average coal prices being around US $176/ton during the fiscal year. Rising coal prices coupled with a depreciating rupee will increase the cost of production for the cement companies and hit their gross margins hard. From a wider perspective, the cement consumption in the domestic market is expected to fall because of the shocking economic situation in the country. The company's lavish expenditure on the social benefit when all the profitability ratios are below the industry average is not a good decision at all. The good asset and debt management is the key to success in future. The current owners will also have to think about increasing the free float of the company, as there is a lot of room for equity in the capital structure. This will have a positive effect on the net profit of the company, as the interest costs will reduce a lot. The stock market recovery should boost this decision. The liquidity position should also be improving in the nest year owing to the dependency of the company in short term borrowings. The impediments in the good future income are of course the power shortages and the fluctuating oil prices but these factors are faced by the industry as a whole. But the local demand will of course pick up due to the construction work in Swat and NWFP. The reduction in the prices of coal will also be also helpful in reducing the costs of the company. However, there is hope for cement sector on the international front. Presently, Pakistan is exporting to Afghanistan and India. Regional shortage of cement has presented a favorable opportunity for our cement manufacturers.

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6.3. BIBLIOGRAPHY

REFERENCE & SOURCES USED Abimbola, A.F., Kehinde-Phillips, O.O. and Olatunji, A.S. (2007), The Sagamu Cement Factory, SW Nigeria: is the dust generated a potential health hazard?, Environmental Geochemistry and Health, Vol. 29 No. 2, pp. 163-7. Adekoya, J.A. (2003), Environmental effect of solid minerals mining, J. of Phys. Sci Kenya, pp. 625-40. Adelegan, O.J. (2007), Corporate governance in Nigeria, in Kostyuk, A.N., Braendle, U.C. and Apreda, R. (Eds), Corporate Governance, Virtus Interpress, Sumy. Adewuyi, A.O. (2002), The implications of crude oil exploitation and export on the environment and level of economic growth and development in Nigeria, Proceedings of the Annual Conference of the Nigerian Economic Society. Aigbedion, I. and Iyanyi, S.E. (2007), Environmental effect of mineral exploitation in Nigeria, International Journal of Physical Science, Vol. 2 No. 2, pp. 033-8. Aigbedion, I.N. (2005), Environmental pollution in the Niger-Delta, Nigeria, Interdisciplinary Journal of Enugu, Nigeria, Vol. 3 No. 4, pp. 205-10. Baughn, C.C., Bodie, N.L. and McIntosh, J.C. (2007), Corporate social and environmental responsibility in asian countries and other geographical region, Corporate Social Responsibility and Environmental Management, Vol. 14, pp. 189-205. Boele, R., Fabig, H. and Wheeler, D. (2001a), Shell, Nigeria and the Ogoni, a Study in unsustainable development (I): the story of Shell, Nigeria and the Ogoni peopleenvironment, economy relationship and prospect for resolution, Sustainable Development, Vol. 9 No. 2, pp. 74-86. Zahoor Ahmad Page 115 24-06-2011

 Boele, R., Fabig, H. and Wheeler, D. (2001b), Shell, Nigeria and the Ogoni, a study in unsustainable development (II): the story of Shell, Nigeria and the Ogoni peopleenvironment, economy relationship and prospect for resolution, Sustainable Development, Vol. 9 No. 2, pp. 121-35. Bruntland, G. (Ed.) (1987), Our Common Future: The World Commission on Environment and Development, Oxford University Press, Oxford. Clarkson, M. (1995), A stakeholder framework for analyzing and evaluating corporate social performance, Academy of Management Review, Vol. 20 No. 1, pp. 92-117. Donaldson, T. and Preston, L. (1995), the stakeholder theory of the modern corporations: concepts, evidence and implications, Academy of Management Review, Vol. 20 No. 1, pp. 65-91. Earthtrends (2003), Climate and atmosphere Nigeria, available at: http://earthtrends.wri.org (accessed 13 June 2011). Fleishman-Hillard (2006), Rethinking CSR: A Fleishman-Hillard/National Consumers League Study, Fleishman-Hillard, St Louis, MO. Frederick, W. (1994), From CSR1 to CSR2, Business and Society, Vol. 32 No. 2, pp. 15064. Frooman, J. (1999), Stakeholder influence strategies, Academy of Management Review, Vol. 24 No. 2, pp. 191-245. Hassanein, A., Lundholm, G., Willis, G. and Young, C. (2007), CSR and the Canadian International Extractive Sector: A Survey, The Canadian Centre for the Study of Resource Conflict, Revelstoke.

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Hess, D., Rogovsky, N. and Dunfee, T.W. (2002), The next wave of corporate community involvement, California Management Review, Vol. 44 No. 2, pp. 110-25. Ite, U.E. (2004), Multinationals and corporate social responsibility in developing countries; a case study of Shell in Nigeria, Corporate Social Responsibility and Environmental Management, Vol. 11 No. 1, pp. 1-11. Ite, U.E. (2007), Changing times and strategies: shell contribution to sustainable development in the Niger Delta, Nigeria, Sustainable Development, Vol. 15, pp. 1-14. Iyawe, V.I., Ebomoyi, M.I.E., Chiwuzie, J.C. and Alakija,W. (2000), Some factors which may affect blood pressure in Nigerian cement factory workers, African Journal of Biomedical Research, Vol. 3 No. 2, pp. 117-21. Ahuja, I.P.S. and Khamba, J.S. (2008), An evaluation of TPM initiatives in Indian industry for enhanced manufacturing performance, International Journal of Quality & Reliability Management, Vol. 25 No. 2, pp. 147-72. Ahuja, I.P.S. and Kumar, P. (2009), Reviews and case studies a case study of total productive maintenance implementation at precision tube mills, Internal of Quality in Maintenance Engineeing, Vol. 15 No. 3, pp. 241-58. Al-Habaibeh, A. and Parkin, R.M. (2005), An evaluation of a heat transfer process using sensor fusion of thermocouples and infrared thermography, Proceedings of the International Conference on ConditionMonitoring 2005, KingsCollege,Cambridge,UK, pp. 229-33. Al-Habaibeh, A., Cai, R., Jackson, M.R. and Parkin, R.M. (2004), Modern development in sensor technology and its applications in condition monitoring, Invited Keynote Paper, abstract accepted for the 7th International Conference on Monitoring and Automatic Supervision in Manufacturing, Zakopane, 19-21 August.

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Al-Habaibeh, A., Parkin, R.M., Jackson, M.R., Whitby, D.R., Mansi, M. and Coy, J. (2002), The application of an autonomous low cost infra-red thermal imager for condition based maintenance of machinery, Proceedings of the Mechatronics 2002 Conference, Enschede, The Netherlands, June. Al-Muhaisen, M. and Santarisi, N. (2002), Auditing of the maintenance system of Fuhais plant/Jordan Cement Factories Co, Journal of Quality in Maintenance Engineering, Vol. 8 No. 1, pp. 62-76. Alsyouf, I. (2009), Maintenance practices in Swedish industries: survey results, International Journal of Production Economics, Vol. 121, pp. 212-23. Bamber, C.J., Sharp, J.M. and Hides, M.T. (1999), Factors affecting successful implementation of total productive maintenance a UK manufacturing case study perspective, Journal of Quality in Maintenance Engineering, Vol. 5 No. 3, pp. 162-81. Fauji Cement Company (FCCL) Annual report. Retrieved: June, 04, 2010: 08:12 PM Pioneer Cement Company limited (PCCL) website (www.pioneercement.com). Retrieved: June, 03, 2010: 08:52 PM Kohat Cement Company (KCC) website (www.kohatcement.com): Retrieved: June, 04, 2010: 09:36 PM All Pakistan Cement Manufacturing Association (APCMA). www.apcma.com: Retrieved: June, 04, 2010: 10:22 PM

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