Financial Anaylsis of Cement Industry

Financial Analysis of cement Industry
Acknowledgement
The completion of this project could not have been possible without the
participation and Assistance of so many people whose names may not all be
mentioned. Their contribution is sincerely appreciated and gratefully
acknowledged.
We would like to express our deepest gratitude to our supervisor. Dr. Sahar Munir
for his unwavering support, collegiality and mentorship throughout the project.
To our parents, friends and others who in one way or another shared their support,
either morally,
Financially and physically, thank you.
Above all, to the Great Almighty ALLAH, the author of knowledge and wisdom,
for his Countless love.
We thank you!
Abstract
The purpose of this research report is to evaluate, analysis and compare the financial statement 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 exchange of the country. After researching,
surveying, 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
statement and ratio. On the basis of above information, I have arrived on specific
recommendation from strategic management’s viewpoint. I have arrived on specific
recommendation from strategic management’s viewpoint. I have supported suggestions though
strategic theories, matrices and exhibits, present in the report.
Contents
Chapter 1
1.1 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 industry Co.Ltd & pioneer 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 ) . Income statement trend analysis (horizontal 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 balance of a sole
proprietorship, a business partnership or a company. Assets, liabilities and ownership equity are
listed as 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 basis financial statement; the
balance sheet is the only statement which applies to a single point in the time of a business
‘calendar year.
Income statement
Income statement (also referred as profit and loss statement (P&L), statement of financial
performance, earning statement, operating statement or statement of operation)
 Is a company 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
lines ’’) is transformed into the net income (the results after all revenues and expenses
have been accounted for, also known as the “bottom lines’’). 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 income statement is to show managers and investors whether the
company made or lost money during the period being reported .
 The important things to remember about an income statement is that it represents a
period of time . this contracts 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 ratio.
Vertical analysis
The comparison of a balance sheet accounts either using ratios or not , to get useful information
and draw useful conclusions.
Ratio analysis
A comparison of relationship among account balance.
Financial analysis
Financial ratios are helpful in analyzing the actual performance of the company compared to its
financial objectives. They also provide insight into the firm’s performance compared to other
firms in the industry.
Ratio simply means one number expressed in term of another. A ratio is a statistical yard sticks
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 shows 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 Ratio
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 parts of
accounting data. Ratios can be found out by dividing one number by another number. Ratios
show how one number is relate 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 statement.
Ratios tell the whole story of changes in the financial condition of the business.
Inter period comparison
It provide data for inter period companies.
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 firm 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 communication.
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.
Help in investment decisions
It helps in investment in the case of investors and lending decisions in the case of bankers etc.
1.2 DATA
1) I choose the cement sectors 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-
2005). The companies are as follows:
Pioneer Cement Ltd.
Pioneer cement limited was incorporated in 1986 as a public listed company as part of the noon
group of company, a prominent business group with bsidiasurie.
Cherat Cement Ltd.
Cherat Company limited has recently become the part of the conversation when talking about
the cement industry mainly.
1.3 Problem Statement
Analysis will made for balance sheet and profit &loss A/C. the following financial statement
analysis and also analysis will also be analyze
Trend analysis (Horizontal analysis)
Ratio analysis
 Liquidity ratios.
 Long term liquidity /Long term Debt paying ability.
 Activity ratios /Assets 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
The purpose of 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 major objective of this research is to find out the financial 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 suggested the improvement needed
to reach 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 in the secondary purpose of this report especially for those students who don’t 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.
Others 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 .
Chapter 2
2.1 LITERATURE REVIEW
Business recorder reported that Pakistan s cement exports witnessed a healthy growth of 65% to
over 6 million tons during 7 month 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 Manufactures Association also showed that cement exports
had mounted to over 6 million tons in 7 month 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 millions
tons of last fiscal year, depicting an increase of 37%
By September 2009after witnessing substantial growth in all three quarters of fiscal year
(FY)2008-09, cement sector concluded the fourth quarter with a handsome growth of 1492
percent on yearly basis (PCCL,2010). All Pakistan cement manufacturers association 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 exports 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 million or $78.2
million as compared to Rs 386 million or $6.2 million depicting a massive growth of 1492
percent (FCCL, 2010). Companies with profit in both the year posted 109percent earning
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 /tone also rose by 33 percent on yearly basis amid higher realized
coal prices and inflationary pressures, the analyst maintained.
2.2 Growth of Cement Industry
Growth of cement industry is rightly considered a barometer for economic activity. In 1947,
Pakistan had inherited 4 cement plans 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 1967-77and 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 millions tons .there are
four foreign companies ,three armed forces companies and 16 private companies listed in the
stock exchange (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 contribution 20 percent to the annual
cement sale.
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/with in mountainous region 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 150000 persons are employed directly or indirectly by the industry.
The industry had expressed 7.716million tons cement during the year 2007 -08 and had earned
$450 million while is expected to export 11.00 million tons of cement tons of cement during
2008-09 and earn approximately $700 million.
2.3 Exports & International Market
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 multinational (Adekoya , 2003 ). New avenues for
export of cement are opening up for a the indigenous industry as Sri Lanka market by supplying
360000 tons of cement annually (Adewuyi , 2002).
In 2007, 130000 tuns 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 Pakistan’s cement sectors
is still maintaining a healthy growth (Aigbedion , and Lyanyi ,2007) . Cement export to India has
already slowed after imposition of duty by Indian authorities.
2.4 National Scenario
CEMENT INDUSTRY in PAKISTAN
2.4.1 Production
In Pakistan, there are 29 cement manufactures that are playing a vital role in the building up the
country’s economy and contribution towards growth and prosperity. After 2002 -03 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 exceeding 45 million tons by the end of 2010. It may result in a supply glut
of seven million tons in 2009 and 2010.
Gopinathan Thachappilly (2009),he also state that the Liquidity Ratios help Good Financial .He
know that a business has high profitability, it can face short-term financial problems and its
funds are locked up in inventories and receivables not realizable for months. Any failure to meet
these can damage its reputation and creditworthiness and in extreme cases even lead to
bankruptcy. In addition to, liquidity ratios are work with cash and near-cash assets of a business
on one side, and the immediate payment obligations (current liabilities) on the other side. The
near-cash assets mainly include receivables from customers and inventories of finished goods
and raw materials. Coupled with, current ratio works with all the items that go into a business'
working capital, and give a quick look at its short-term financial position. Current assets include
Cash, Cash equivalents, Marketable securities, Receivables and Inventories. Current liabilities
include Payables, Notes payable, accrued expenses and taxes, and Accrued installments of term
debt). Current Ratio = Current Assets / Current Liabilities. Similarly, Quick ratio excludes the
illiquid items from current assets and gives a better view of the business' ability to meet its
maturing liabilities. Quick Ratio = Current Assets minus (Inventories + Prepaid expenses +
Deferred income taxes + other illiquid items) / Current Liabilities. In the final ratio under this
article is cash ratio .Cash ratio excludes even receivables that can take a long time to be
converted into cash. Cash Ratio = (Cash + Cash equivalents + Marketable Securities) / Current
Liabilities. (James Clasuen, 2009).
It divided into different types of categories. He state that about the used to analyze accounts
receivable and other working capital figures to identify significant changes in the industry
operations and financial accounts. He said that there are two categories about this ratio such as
account receivable turnover and average age of account receive. He measurement the ratio as,
Accounts receivable turnover = Sales / Average Accounts receivable. Average age of accounts
receivable/ collection period = 365 days / Accounts receivable Turnover. Jo Nelgadde (2009).
He said that learn how to perform inventory analysis and inventory turnover analysis to better
understand a business as well as to identify effective inventory management. He analyzing an
industry’s financial performance definitely includes performing inventory analysis. He know that
there are three types of business inventory: Raw Materials (RM),Work-In-Progress
(WIP),Finished Goods (FG).He give idea two types formula of ratio such as Inventory Turnover
= Cost of Goods Sold / Average Inventory, Average age of Inventory = 360 days / Inventory
Turnover.(Jo Nelgadde ,2010).
He denotes that about the total asset ratio. The calculation uses two factors, total revenue and
average assets to determine the turnover ratio. When calculating for a particular year, the total
revenue for that year is used. Instead of using the year ending asset total from the balance sheet,
a more accurate picture would be to use the total average assets for the year. Once the average
assets are determined for the same time period that revenue is compared, the formula for
calculating the assets turnover ratio is. Total Revenue / Average Assets = Asset Turnover Ratio.
(James Clausen, 2009).
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 companies’. I will begin by
looking at the comparative ratio of the company for a Five – years period by using trend analysis.
Trend analysis (horizontal analysis) .Ratio analysis
3.2 Financial analysis procedure
3.2.1 Percentage analysis
3.2.2 Trend analysis – horizontal analysis
For this purpose comparative financial statement are prepared horizontally.
3.2.3 Common Size Statement – Vertical Analysis
For this purpose comparative financial statement are prepared vertically.
3.2.4. Ratio analysis
A comparison of relationship among account balance. 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 the
income statement and the balance sheet, as well as other financial and nonfinancial indicators.
3.3 Data collection procedure
The data has been collected from the annual report of selected from the web site of the respective
company. Financial Statement in the annual report will be used as a main source for financial
ratio analysis. For this study, the financial statement for three years (2004 to 2008) will be used
to get the results.
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, 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 describes 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 ratio /acid test ratio
The test liquidity ratio defines that how quickly a firm or an organization transform its assets i.e.
cash securities ; inventory & other into the form of cash its also enable the decision maker to
maker corrective & proactive decisions which impact as increment in profitability of the
organization or firm .
Assets Turnover Ratio/Efficiency Ratio
Receivable turn over
Inventory turnover
The assets turnover ratio also knows 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
Time interest ratio
The financial leverage ratios including debt equity to assets & to time interest earned as a part
from those its essential to include the financial stability of the organization which might be
essential for the company’s whole structure including production , overhauling , forecasting &
utilizing the parameters into growth & corrective measures.
Dividend policy ratio
Dividend yield
Payout ratio
3.5 Sample
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 comparison analysis with Kohat cement & Cherat cement company
Ltd.
3.6 .Tools Of Analysis
Tools of Analysis
Percentage analysis Ratio Analysis
Percentage Analysis:
Horizontal analysis Trend analysis Vertical analysis
Ratio Analysis:
Profitability ratio Liquidity ratio Efficiency ratio Debt ratio

 Curre  Recievab  Debt
 Gross
nt ratio le turnover ratio -to-equity
profit ratio
 Quick  Turn ratio
 Operati
Ratio over days  Intere
ng profit ratio
 Total st coverage
 Return
assets turnover ratio
on equity
ratio
 Return
 Fixed
on assets
assets turnover
ratio
Liquidity ratios
Current Ratio:
Current Ratio= Current assets/ Current liabilities

Quick Ratio:
Quick Ratio= (Current assets-Inventories)/ Current liabilities
Working Capital Ratio:
Working Capital Ratio= Current assets-Current liabilities
Activity/ Operating performance Ratios
Accounts receivable turnover:
Accounts receivable turnover= Sales/ Accounts receivable
Average collection period:
Average collection period= 360 days / Accounts receivable turnover
Inventory Turnover Ratio:
Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
Accounts Payable turnover:
Accounts Payable turnover = Sales / Accounts Payable
Accounts Payable turnover in days:
Accounts Payable turnover in days = 360 / Accounts Payable turnover
Total asset turnover:
Total asset turnover = Sales / Total assets
Operating Cycle:
Operating Cycle= Inventory period + Accounts receivable period

Profitability Ratio
Net Profit margin:
Net Profit margin= Net Profit after tax/ Sales
Net Gross margin:
Net Gross margin=Gross Profit/ Sales
Return on Total Assets:
Return on Total Assets= Net Profit after taxes/ total assets
Return on common stock equity:
Return on common stock equity= Net Income/ Common stockholder equity
Operating Profit margin:
Operating Profit margin= Operating Profit/ Sales
Price earnings ratio= Market value per share/ Earning per share
Chapter 4
Data analysis, results / Finding and Discussion
4.1 FAUJI CEMENT COMPANY Ltd
FAUJI cement company head quarter in Islamabad, Operates a cement plant at JHNG BHATAR
,Tehsil Fateh Jang , district Attockin the provision 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 is incorporated in Rawalpindi in 1992.
Financial Analysis M/S FAUJI cement (balance sheet)
BALANCE Sheet
FAUJI CEMENT COMPANT LIMITED
BALANCE SHEET
AS On DECEMBER
2004 2005 2006 2007 2008
Current assets 574460 1172765 1579382 1953527 5294083
Cash &bank balance 197088 603110 847590 423133 37839090
Deposit account 137433 560177 798122 402907 3756611
Current account 21326 25840 49253 20048 27039
Collection account 38275 16831 0 0 0

Cash in hand 54 262 215 178 259
Advances ,deposit 73583 46041 70340 858758 345567

other receivable
To suppliers 34044 18148 31523 815588 15521
To employees 449 783 1639 621 2473
Due from associated 1127 1125 3190 0 0

undertaking
Deposit 1313 1486 1865 1795 5737
Payments 10606 4314 9937 3125 3966
Excise duty 9911 3057 0 0 0
Advance tax – net 0 7891 13874 13104 23303
Sales tax refundable – 3774 0 0 0 82719

net
Derivative foreign 0 0 0 o 84364

currency option used
as hedging instruments
Interest accrued 2175 1002 5476 5077 14828

Prepaid arrangement 0 0 0 11000 74670

fee for loans
Margin on letters of 0 0 0 0 29369

credit
Other receivables 645 8235 2836 2084 7179
Trade debts 44789 107231 25475 19558 26927
Unsecured 23833 25021 27042 16117 4848
Considered goods 22266 23454 25475 7769 0
Considered doubtful 1567 1567 1567 8348 4848
Secure-considered 22523 83777 0 11789 26927

goods
Less : provision for -1567 -1567 0 11789 26927

doubtful debt
Stock in Trade 61600 55931 145090 183309 230089
Raw & packing 15224 18469 28012 23931 31271

material
Work in process 27761 11624 93671 115221 152529
Finished goods 18615 25838 2 44157 46289

3407
Stores , spares 197400 360452 490887 468769 907591

&loose tools
Stores 71837 107633 198485 61997 415358
Spare 118324 244514 280183 394046 478579
Loose tools 7239 8305 12219 12726 13654
Deferred tax assets – 570039 337140 0 0 0

net long term deposit
Islamabad electric 21600 21600 21600 21600 21600

supply company
limited
Sui Northern gas 15000 25011 25011 25011 25011

pipelines limited
Long term advances 0 9000 9000 8100 7200

– considered goods
Sui northern gas 0 0 0 9000 8100

pipelines limited
Less : amount 0 0 0 -900 -900

receivable within 12
month shows under
current assets
Fixed assets - 4729254 465827 4563115 4392450 7106599

tangible
Property ,plant 4729254 465827 4563115 4392450 7106599

&equipment
Total assets 591035 6223788 6198108 6400688 12454493
CURRENT 372116 120694 1267198 1442287 2454761

LIABILITIES
Current portion of 86508 552995 550000 550000 550000

long term financing
Short term borrowing 0 308876 236353 375510 1378365

– secured :
Markup accrued 13132 69357 59771 48330 33186
Trade & other payable 272476 275718 421074 468447 493210
Creditors 45651 45969 59763 81766 65997
Accrued liabilities 63425 67119 63470 118828 174692

Retention money 10819 10533 12843 11986 15517
Security deposit 25462 28982 37986 39051 36916
Advances from 23121 42444 58744 67770 41344

customers
Workers participation 0 399490 935620 41483 24413

fund
Workers welfare fund 0 0 0 16085 25362
Sales tax payable 22304 31300 39235 32599 0
Excises duty payable 58 3537 10264 8582 57629
Other liabilities 81636 5885 9052 40708 45323
Compensated absences 0 0 33990 3626 3686
Unclaimed dividend 0 0 2165 5963 2331
Non -current 3599103 2567218 1648294 1223195 715751

liabilities
Retention money 0 0 0 0 18129

payable
Deferred tax liabilities 0 0 215381 339918 363154

payable
Deferred liabilities 40264 45213 7912 8277 9468
Long term financing 3558839 2522009 1425001 875000 325000

:
Loans from banking

companies
Habib bank limited 916667 598485 431818 265152
MCB bank limited 916667 598485 431818 265152
United bank limited 458333 299243 215909 132576
Loans from related

party
Fauji foundation – 50000 0 0 0

unsecured
Total liabilities 3971219 3774164 2915492 2665482 3170512
Less :amount payable -552995 -550000 -550000 -550000

with in 12 month show
under current
liabilities
Share capital and 1939134 2449624 3282616 3735206 9283981

reserve
Reserve 0 0 0 -459216 18640494

Accumulated loss 2255288 1744798 -911806 0 0
Share capital 4194422 4194422 4194422 4194422 7419887

+Owners equity
FAUJI CEMENT INDUSTRY LIMITED
INCOME STATEMENT
FOR THE YEAR ENDED JUNE……RS (000)
2004 2005 2006 2007 2008

Sales 3247262 3921362 568345 4780036 4749217
Less government levies -951031 -1076210 1397317 1316753 1203315
Net sales 2296231 2845143 4286138 3463283 3545902
Less : cost of sales 1555407 1763567 2095027 2371788 2887790
Cost of good 154202 1770790 2092597 2392538 2903436
manufactured
Gross profit 740824 1081576 2191111 1091495 658112
Other income 42744 11216 43323 73835 1075774
Distribution cost : 20416 21333 31694 40645 53383
salaries and wages 12011 11085 21388 20651 18791
Rent , rates and taxes 1114 1172 1112 1353 1468
Printing and stationary 509 640 403 416 545
Administration 39535 42292 6663 7111 76495
expenses
Other operating 533 40493 94127 58098 34290
expenses
Finance cost 204222 229633 264296 207105 146954
Fee &charge on loans 11615 10564 500 500 500
Interest on short term 873 3185 456 0 0
Borrowing & others
Interest on workers profit 0 0 2972 93 0
Guarantee commission 111947 32201 483 972 665
Bank charge and 4557 3547 4760 4119 4252
commission
Foreign exchange risk 17909 0 0 0 0
insurance
Amortization of 762152 0 0 0 0
deferred cost
Net profit before tax -243290 759041 1777690 788180 4544564
Less taxation 557439 -248548 -573951 -141857 -40966
Net profit after taxation 314149 510493 1203739 646323 413598
RATIO ANALYSIS
Liquidity Ratio
Current Ratio = current assets/current liabilities
FAUJI CEMENT COMPANY LIMITED
Liquidity ratio analysis
2004 2005 2006 2007 2008

Current ratio 1.54 0.97 1.25 1.35 2.16
Current assets 574460 1172765 1579382 1953527 5294083
Current liabilities 372116 1206946 1267198 1442287 2454761
Net Working capital = Current assets -current liabilities
Liquidity Ratio analysis
2004 2005 2006 2007 2008

Net working capital 202344 -34181 312184 511240 2839322
Current assets 574460 1172765 1579382 1953527 5294083
ACID RATIO = (current assets – inventory)/current liabilities
LIQUIDITY RATIO ANA LYSIS
2004 2005 2006 2007 2007

Acid Ratio 1.38 0.93 1.13 1.23 2.06
Current assets 574460 1172765 1579382 1953527 5294083
Stock in trade 61600 55931 145090 183309 230089
Cash ratio = (cash &cash equilent + market able securities / current liabilities
LIQUIDITY RATIO ANALYSIS
2004 2005 2006 2007 2008

Cash ratio 0.53 0.50 0.67 0.29 1.54
Cash and bank balance 197088 603110 847590 423133 3783909
Long term Liquidity /long term Debt Paying Ability
Debt /equity ratio = total liabilities /shareholder equity
Liquidity ratio Analysis
2004 2005 2006 2007 2008

Debt equity ratio 3.05 2.54 1.89 1.71 1.34
Share capital &reserve 1939134 2449624 3282616 3735206 9283981
Debt to tangible net worth = total liabilities /(shareholders equity -intangible assets )
2004 2005 2006 2007 2008

Debt to tangible net worth 3.05 2.54 1.89 1.71 1.34
Share capital & reserve 1939134 2449624 3282616 3735206 9283981
Intangible 0 0 0 0 0
Activity ratio
Day’s sales in account receivable = average account receivable /365 / net sales
2004 2005 2006 2007 2008

Day’s sales in account 7.12 13.76 2.17 2.06 2.77
receivable
Trade debts 44789 107231 25475 19558 26927
Net sales 229 2845143 42845143 3463283 3545902
Account receivable turnover = net sales /average account receivable
2004 2005 2006 2007 2008

Account receivable turnover ratio 51.23 26.56 168.25 177.08 131.69
Net sales 2296231 2845143 4286138 3463283 3545902
Trade debts 44789 107231 25475 19558 26927
Days sales in inventory = ending inventory /(CGS/365)
2004 2005 2006 2007 2008

Days sales in inventory 14.46 11.58 25.28 28.21 29.08
Stock in trade 61600 55931 145090 183309 230089
Cost of sales 1555407 1555407 2095027 2371788 2887790
Inventory turn over ratio= CGS /Average inventory
2004 2005 2006 2007 2008

Inventory turnover 61.46 79.34 85.08 70.21 63.86
Cost of sales 1555407 1763567 2095027 2371788 2887790
Stock in trade 61600 55931 145090 183309 230089
Total assets turn over = net sales / average total assets
2004 2005 2006 2007 2008

Total assets turnover 0.39 0.45 0.69 0.54 0.28
Net sales 2296231 2845143 4286138 3463283 3545902
Total assets 5910353 6223788 6198108 6400688 12454493
profitability
Gross profit margin = gross profit / net sales

2004 2005 2006 2007 2008

Gross profit margin (%) 32.6% 38.01% 51.12% 31.52% 18.56%
Gross profit 740824 1081576 2191111 1091495 658112
Net 2296231 2845143 4286138 3463283 3545902
Operating income statement = operating income /net sales
2004 2005 2006 2007 2008

Operating income margin 1.70% 34.75% 47.64% 28.74% 16.96%
Operating profit 39068 988673 2041984 995285 601518
Net sales 2296231 2845143 4286138 3463283 3545902
Net profit margin=net income
2004 2005 2006 2007 2008

Net profit margin 13.68% 17.94% 28.66% 18.66% 11.66%
Net profit after margin 314149 510493 1203739 646323 413598
Net sales 2296231 2845143 4286138 3463283 3545902
Return on assets = net income/ average total assets
RATIO ANALYSIS
2004 2005 2006 2007 2008

Return on assets(%) 5.32% 8.20% 19.42% 10.10% 3.32%
5910353 6223788 6198108 6400688 12454493
Return on sales to fixed assets = net sales / average total fixed assets
RATO ANALYSIS
2004 2005 2006 2007 2008

Return on sales to fixed assets 0.49 0.61 0.94 0.79 0.50
Net sales 2296231 2845143 4286138 3463283 3545902
Fixed assets – tangible 4729254 4658272 4563115 4392450 7106599
Return on total equity = net income – redeemable preferred stock dividend / average total
equity
RATIO ANALYSIS
2004 2005 2006 2007 2008

Return on total equity 16.20% 20.84% 36.67% 17.30% 4.45%
Share capital &reserve 1939134 2449624 3282616 3735206 9283981
Financial leverage ratio – analysis for inventory
Degree of financial leverage = %change in income /%change in EBIT
Ratio analysis
2004 2005 2006 2007 2008

Degree of financial leverage 0.20 0.68 0.50 0.70
Net profit after tax 314149 5109493 1203739 646323 413598
Net profit before tax -243290 759041 1777690 788180 454564
Dividend yield
The dividend yield indicate the relationship between the dividends per common share and the
market price per common share.
Dividend yield = dividend per common share/market per common share
Book value per share
It indicates the amount of shareholder‘s equity that relates to each share of outstanding common
stock .
Book value per share = total share holder’s 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 .
2004 2005 2006 2007 2008

Total shareholder’s equity 1624986 1939134 2449624 3282616 3735206
Preferred stock equity 486992 486992 486992 486992 486992
No of common share 370743 370743 370743 370743 370743
Book value per share 307 392 529 754 876
Ratio analysis charts
2004 2005 2006 2007 2008

Net working 202344 -34181 312184 511240 2839322
capital
Current ratio 1.54 0.97 1.25 1.35 2.16
Acid test ratio 1.38 0.93 1.13 1.23 2.06
Cash ratio 0.53 0.50 0.67 0.29 1.54
Debt /equity 3.05 2.54 1.89 1.71 1.34
ratio
Debt to tangible 3.05 2.54 1.89 1.71 1.34
net worth
Day’s sale in 7.119486 13.75653 2.16940635 2.061243 2.7717503
account
receivable
Account 51.2677443 26.532845 168.2487 177.077 131.6857
receivable turn
over
Day’s sales in 14.455380 11.5758658 25.27788 28.2098 29.0819
inventory
Inventory 61.4639611 79.3434561 85.0841489 70.2086 63.856665
turnover
Net profit 13.68% 17.94% 28.08% 18.66% 11.66%
margin
Total assets 0.39% 0.46% 0.69% 0.54% 0.28%
turnover
Return on assets 5.32% 8.20% 19.42% 10.10% 3.32%
Operating 1.70% 34.75% 47.64% 28.74% 16.96%
income margin
Return on sales 0.485537 0.6107721 0.93930089 0.788462 0.4989590
to fixed assets
Return on total 16.20% 20.84% 34.75% 17.30% 4.45%
equity
Gross profit 32.28% 38.01% 51.12% 31.52% 18.56%
Degree of 0.20 0.68 0.56 0.70
financial
leverage
Earning per 0.85 1.38 3.25 1.73 0.85
common share
CONCLUSION
From the above information we conclude that cement sector in one of the prosperous sector in
the Pakistan ‘s economy . the potential investors should take their chances investing in the
cement sector through stock exchange . the FAUJI cement country has proved itself as one of
the leading cement factory of the country . The trade mark of FAUJI Foundation gives a sign of
credibility in the minds of the investors .
Since Pakistan is a development country & for explaining 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 & BANGLADASH .
I forces growth in earning of cement companies in the year to come . similarly the said position
will be with FCC.
I expected positive earning of FCCL in the coming years;
Currently we maintain our stance by recommend “BUY’’ on FCCL .
4.2 Pioneer Cement Comparative Analysis (Compare with Kohat & Cherat Cement )
Pioneer Cement Limited
Five year Horizontal Analysis of income statement
For the year ended June 30 2004 2005 2006 2007 2008
Net sales 55% 2% 50% 55% 40%
Cost of good sold 54% 52% 34% 47% 31%
Gross profit 61% -74% 83% 74% 73%
Administrative & selling expenses 293% 25% -15% 55% 19%
Operating loss -124% -84% 107% 80% 91%
Other operating expenses 1997% -88% 13% 123% -5%
Other operating income -184% -84% 162% -65% 19%
Profit and loss from operating 189% -84% 120% 45% 84%
Financial &other voluntary 13% -286% 63% 3% 28%
separation scheme charge
Profit /loss before taxation 211% -120% 137% 65% 56%
Taxation 333% -135% 316% -13% -44%
Profit /loss after taxation 92% -114% 104% -22% 87%
ANALYSIS :
Sales of the company has shown increasing trend and has increased in 2004 to 2008 and also cost
of good sold increased during that 5 years the major reason of this increase in cost was the
plants shutdown due to irregular power supply of WAPDA & increase in prices of diesel and
empty bags.
The 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.
Company is good for long term benefits, because it declared bonus share for last five year . it has
a great capacity to produce cement they are improving technology . they had implemented
enterprise resources plan software to increase the efficiency and for better management planning
.
Horizontal analysis of Balance Sheet
BALANCE SHEET
As at June 30 2008 2007 2006 2005 2004

Equity & liabilities
Share capital & reserves
Authorized share capital 0% 0% 0% 0% 0%
Issued subscribed 18% 5% 5% 62% 25%
Reserves -22% -43% 845% -118% -56%
-10% -10% 43% 197% -26%
Non- current liabilities
Long term deposit -65% -7% -15% 187% 0.145%
Deferred liabilities -10% 17% -12% -21% 8.28%
Deferred tax liabilities - 100% 122% - -
-75% -124% -125 166% -8.13%
Current liabilities
Creditors against project -90% -5% -39% -
Trade other payable 120% 7% 27% 251% 10.98%
Interest markup accrued 54% 70% -44% -25% 0.11%

Short term Murabah -secured - - - -
Short term Musharaka – secured - - - --
Short term finance - - - - 4.90%
Short term borrowing - - -100% -
Current maturity of long term loan - - -100% 93%
Current portion of long term loan - -100% - - -
Current portion of deferred liabilities -100% -99% - - 26%
Assets
Non-current assets
Fixed capital expenditure
Property ,plant 27% -2% 20% 74% 52.52%
Long term loans -11% 43% -25% 13% 0%
Long term deposit -15% 28% 169% 55% 0%
Deferred tax assets 100%
27% -2% 21% 66% 52.52%
Current assets
Stock in trade -54% 55% 70% 12% 2.55%
Store and spare 3% 11% 31% 13% 8.01%
Assets held for deposit -100% - - - -
Trade debts 35% 138% -34% -23%
Loan & advances 156% 80% -78% 939% 0.21%
Deposit &prepayment -59% -33% -16% -32% 1.03%

Other receivable 8471% -87% -73% 22% -
Current portion of long term deposit -838% - - - -
Sales tax net -100% - - - -
Taxation – net - -100% -11% -8% -
Cash & bank -54% 325% 310% -53% 0.72%
22% 2% 22% 61% 23.83%
Analysis
1) The total non current assets show increase trend . this show heavy investment in
fixed assets by the management .
2) Current assets
Store and spare show the increasing trend , which show the company is in good position
as liquidity point of view . stock show increasing trend . this higher inventory is
indication of weak inventory management
3) Liquidity and liabilities
Shared capital show that issued subscribed and paid up capital increased through all the
year . due to expansion of project company has not stuffiest reserve and company has not
paid any dividend after
4)non-current liabilities
Non current liabilities also show the increasing trend in all five year deferred
liabilities decreased in 2005 and 2006 and increased in 2007 and decreased in 2008
5)current liabilities
This increasing trend with increase in current assets of the company . short term
financing is taken to meet the working capital requirement . company is meeting its
obligation on regards basis which is evident from an increase in the current portion of
long term debts under current liabilities
Finally size of the company Has increasing fduring the last five year . More investment is
made in capital assets . company is in expansion phase since the base year .
TREND ANALYSIS
Trend analysis is a comparative analysis of a company’s financial ratio over time .
SIGNIFICANT :
It is an aspect of technical analysis that tries to predict future movement of a stock based
on past data . trend analysis is based on the idea that has happened in the past given
traders as idea of that will happen in the future .
Pioneer cement industry limited

BALANCE SHEET
As at JUNE 30 2008 2007 2006 2005 2004
EQUITY & LIABILTIES
SHARE AND CAPITAL RESERVE
Authorized share capital 100% 100% 100% 100% 100%
Issue subscribe & paid up capital 209% 177.9% 170.3% -162.1% 100%
422.8% 384.5% 425.6% 297.3% 100%
Surplus on revaluation of fixed assets 0% 0% 0% 0% 0%
NON CURRENT LIABILTIES
Redeemable capital 0% 0% 0% 92.1% 100%
Long term financing 0% 39.1% 231.6% 0% 0%
Long term loans 89.02% 0% 0% 0% 0%
Long term Musharaka finance 0% 0% 0% 0% 0%
Liabilities against assets subject finance leasing 2439.6% 5102.5% 165.5% 2880.07 100%
Long term deposit 79.4% 226.1% 242.5% 286.5% 100%
Long term creditors – unsecured 0% 0% 0% 0% 0%
Deferred liabilities 73.2% 81.7% 69.8% 78.8% 100%
Deferred tax liabilities 0% 0% 0% 0% 0%
87.8% 108.01% 121.9% 109.01% 100%

CURRENT LIABILTIES
Creditors against expansion project 0% 0% 0% 0% 0%
Trade other payable 1046.2% 476.1% 446.5% 351.04% 100%
Interest 109.7% 71.38% 41.9% 75% 100%
Short term murabah secured 0% 0% 0% 0% 0%
Short term musharaka secured 0% 0% 0% 0% 0%
Short term borrowing 0% 0% 0% 0% 0%
Current maturity of redeemable capital 0% 0% 0% 192.9% 0%
Current portion of liabilities against assets 0% 0% 2158.4% 211.9% 100%

subjective to financing
Sales tax payable 0% 0% 710.9% 440.2% 0%
ASSETS
Non current assets
Property plant
Long term loans 261.6% 205.3% 210.1% 174.5% 100%
Long term deposit 256.5% 343.4% 268.6% 155.4% 100%
Deferred tax assets
249.6% 197.03% 121.2% 165.6% 100%
Current assets
Stock in trade 135.5% 295.5% 170.3% 111.6% 100%
Store and loose tools 167.6% 163.4% 130.9% 112.5% 100%
Assets held for deposit - - - - -
Trade debt 162.1% 120% 50.5% 76.7% 100%
Loans & prepayments 106.2% 414.9% 230.3% 1038.8% 100%
Other receivables 366.1% 4.27% 65.5% 121.6% 100%
Current portion of long term deposit - - - - -
Sales tax net - - - - -

Taxation net 80.8% 0% 82.16% 92.3% 100%
Cash &bank balance 372.4% 817.4% 192.4% 46..4% 100%

199.3% 244.6% 156.4% 117.4% 100%
244.9% 201.4% 196.6% 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 to
total assets with tittle deviation . The management is more focusing on fixed assets in past years .
as property , plant & 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 LIABILTIES
Issued subscribe and paid up capital showing mix trend in increases that there is increase in 2005
and in 2006 where as there is a decrease in 2007 and in 2008 in total liabilities as currently
company is not paying dividends to share holder .
NONCURRENT LIABILITIES:
Total long term liabilities of the company have shown decreasing trend in relation to total
liabilities.
CURRENT LIABILTIES:
Current liabilities have shown an substantially mix trend during the last five years from 2004 to
2008 as shown in the balance sheet of company they contribution in total liabilities .
PIONEER CEMENT COPANY
INCOME STATEMENT
FIVE YEAR POSITION OF INCOME STATEMENT
For the year ended June 30 2008 2007 2006 2005 2004
Gross turnover 337.4% 237.3% 212.0% 142.9% 100%
Excise duty 288.8% 238.6% 210.9% 115.6% 100%
Sales tax 261.8% 218.9% 192.2% 125.03% 100%
Commission 226.2% 227.1% 104.8% 98.18% 100%
275.9 23.78% 169.5% 118.78% 100%
Net turnover 367% 236.7% 232.5% 154.6% 100%
Cost of sales 467.6% 300.5% 197.1% 146.57% 100%
Gross profit 132.8% 82.3% 318.2% 174.08% 100%
Distribution cost 1649.1% 192.7% 138.2% 241.90% 100%
Administration and selling expenses 155.2% 149.8% 127.6% 112.69% 100%
131.2% 155.03% 100%
Other operating income 39% 14.8% 90.63% 34.63% 100%
- - - - -
Finance cost 315.8% 311.5% 167.7% 102.8% 100%
Other charges 639.9% 30.49% 25.12% 222.8% 100%
Profit before tax taxation -240.9% -77.4% 391.6% 165.3% 100%
Profit after taxation -42.41% 22.03% 159.3% 78.27% 100%
ANALYSIS
As we see from the income statement the gross turnover has increased fromm2004 to 2008 as
excise duty and sales tax has increased in the year where as there is a 1 % decrease in
commission in 2008 . there is a substantial increase in net turn over as trend of cost of sales has
increased . there was a increase in 2005 and 2006 in gross profit the company start facing losses
in 2007 and 2008 because there distribution cost and administration expenses increase whish was
due rto 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 is very
confident that they are working hard and the company well-prepared as most of the capital
worked will be in coming years
Ratio ANALYSIS:
Liquidity ratios
Liquidity ratio are the ratio for testing short term solvency or financial position of a business .
these are designed to test the ability of the business . generally, the higher the value of the ratio .
the larger the margin of safety that the company possesses to cover its short term debts .
CURRENT RATIO:
Current ratio mat be defined as the relationship between assets ana current liabilities . This ratio
is also knows as “Working capital ratio’’. Its 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 .
Years 2008 2007 2006 2005 2004

Pioneer cement 0.26 0.48 0.56 0.92 1.03
CHERAT Cement 1.07 2.28 2.45 3.07 2.47
KOHAT cement 0.66 2.56 2.56 1.47 1.24
ANALYSIS:
current ratio clears the extent to which the claims 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 ratio below standard . there is decrease in 2004 to 2008. Current ratio of kohat
are more than pioneer and cherat cement .
Current ratio also show that how 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 decreasing trend in current ratio .
kohat ratio also shows increasing trend in 2004 , 2005 and in 2006 but decrease in 2007
and 2008 which shows that it has less current assets liabilities increase .
QUICK RATIO :
Liquidity ratio also trended liquidity ratio . acid test ratio
It is the ratio of liquidity assets to current liabilities . the term liquidity refers to the ability
of a firm to pay its short term obligation as and when they become due .
= current assets – stock /current liabilities
Year 2008 2007 2006 2005 2004
Pioneer cement 0.24 0.41 0.47 0.81 0.9
Cherat cement 0.94 2.17 2.17 2.88 2.25
KOHAT cement 0.75 2.34 2.34 1.41 1.18
ANALYSIS:
The acid test ratio is also below standard due to heavy short term borrowing ,PIONEER
acid test ratio decreased in year 2005 to 2008 . the quick ratio of KOHAT cement shows
that sufficient liquid assets is available to discharge the rise in current assets due to
expansion of project and short term and long term financing . KOHAT cement liquid
ratio is more than PIONEER and CHERAT which shows thatc it has more liquidity .
PIONEER position is not considered point . it shows decreasing trend and less than 1:1.
TURNOVER ACTIVITY RATIO :
Inventory Days Is also knows as average inventory period and inventory holding period
=inventory /cost of sales *365
Years 2008 2007 2006 2005 2004

PIONEER Cement 6 20 19 15 20
CHERAT cement 24 40 21 23 6.67
KOHAT cement 49 38 28 8 6
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 .
KOHAT cement industry has less inventory days required to convert stock in sales
which shows that management is efficient but it decrease with the passage of time and
PIONEER is opposite to KOHAT it was low in beginning and it increase in 2008 , but
CHERAT cement shows mixed trend .
DEBTORS TURN OVERR RATIO
It indicate the number of times average debtors are turned over during a year .
The higher the ratio means the higher the value of debt , the more liquid the debtors .
=Trade debtors /credit sales *365
Years 2008 2007 2006 2005 2004
PIONEER cement 3 3 1 3 7
CHERAT cement 35 19 10 8 9
KOHAT cement 4 5 3 5 7
ANALYSIS:
The PIONEER cement has a good debtor management to receive the debet or collect the
receivable and shows positive trend and debtor ‘s collection period is less than creditor’s period .
KOHAT position is also considered but CHERAT management has more time to collect their
receivable which shows inefficient debtors management and in 2008 it is at highest point which
is a unfavorable situation regarding to debtors collection period .
TOTAL ASSETS TURNOVER RATIO:
Measure all assets in term of sales , by comparing sales with net total sales .
=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
ANALYSIS :
The point of turnover ratio of PIONEER cement company is higher than and better than
CHERAT AND KOHAT cement it is better in last two years .
KOHAT cement total assets at top so they use much of generating revenue .
PIONEER total turnover ratio is better than other two competitors .
FIXED ASSETS TURNOVER RATIO:
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 2.21 2.95 2.95 2.32
ANALYSIS:
It shows the utilization of fixed assets ,PIONEER increasing the utilization of its fixed assets
but it also lower time
Than KOHAT has more utilization of fixed assets and at high level in 2005 .
CHERAT cement shows the mixed trend and has utilization than KOHAT and PIONEER
cement
Profitability Ratios:
They give us an ideaof what make up a company’s income and are usually expressed as a
PORTION of each dollars of sales .
GROSS PROFIT RATIO:
Is the ratio of gross profit to net sales expressed as a percentage . it expresses the relationship
between gross profit
= Gross Profit / Sales *100
Years 2008 2007 2006 2005 2004

PIONEER cement 10.5% 10.16% 40.00% 32.91% 29.23%
Cherat cement 5.95% 14.41% 40.68% 35.67% 34.43%
KOHAT cement 6.35% 22.09% 51.55% 38.73% 35.45%
ANALYSIS:
Gross profit ratio of three competitors companies trend show increasing in 2004 to 2006 due to
good economies and financial SITUATION of world and good market situation
RETURN ON EQUITY RATIO :
Ordinally shareholder are a real owners of company thy assume the highest risk in the company .
the rate of dividend varies with the availability of profit in case of ordinary share only . Return
on equity capital which is the relationship between profit of a company and its equity , can be
calculated as follows ;
=[(net profit after tax – preference dividend )/ Equity share capital )] *100
Years 2008 2007 2006 2005 2004

PIONEER cement -7.80% -4.40% 29.11% 20.48% 77.81%
CHERAT cement 1.08% 29.77% 54.70% 77.80% 80.08%
KOHAT cement -9.55% 2.09% 34.56% 35.73% 42.09%
General Ratio Analysis:
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 this sector increased , the net sales revenue did not increase as much due to decrease in net
retention . over all year cement manufacture undertook huge capacity expansion plant which now
created a situation of excess supply in the local market . PIONEER’s rising operating expenses
and finance cost have led negative net profit margin similarly return on assets and equity fallen .
Liquidity Analysis :
The position of liquidity last 5 year weakening over the year , due to rise in current liabilities .
PIONEER felt a liquidity crunch , like many other companies in the cement sector due to price
war in 2008. The current liabilities of pioneer increase in 2008, increase in short term borrowing
by the company . To solve this problem pioneer has initiated a process of restructure its debts by
issuing Sukuk of Rs 2.5 billion in 2008 .
It help to control company’s financing cost also pioneer issue shares to National bank of
Pakistan due to inability to pay its loans . the PIONEER company is the only company in cement
sector which have a liquidity ratio below to 0.5 .
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 financing 87% OF ASSETS
WHILE in 2008 debt only contributed to 56 %to the total assets . the company’s debt to assets
ratio has not fluctuated much because over the year
The company is trying to restructure its financing compensation in favor of equity by issuing
Sukuk financing and convertible loan into equity . this will reduced the currently liabilities in the
future . in the wake of rising interest rates in the company , 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 , The share prices decline due to the losses during the fiscal years .
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 day to sell the average inventory were 19 days in 2007 where in 2008 it took the
company only 6 days to sell its inventory .
4.6 Company Analysis :
Pioneer cement limited fulfills all its targeted of suppliers in the market and also expands its
production with need of market . In these days company is in its growth stage . Now the
company has three production lines including one line for white cement produced and also for
grey cement . The growth in demand of cement in ASIA , INDIA and MIDDLE EAST , ,deficit
to India and china has geared opportunity for Pakistan cement industry Bureau of India standard
have approved pioneer cement for import to India . Being one of the big cement units of Pakistan
and due to its high quality pioneer cement is committed to provided high quality cement to its
international customers including America , British and India and European standard . Pioneer
cement is an ISO 9001-2000 and ISO 14001-2004 certified company and followers all rules and
regulation of government . company’s 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 .
Discussion:
India has huge potential in infrastructure and construction and the cement sector in India is set
toreceive a major boost. The overall study also provides the regional analysis of cement
consumption,production, capacity utilization, and installed capacity in the country. On analyzing
the regional trendof cement consumption, we observed that the southern region is creating
maximum demand, which isexpected to increase more in future. India's cement production has
increased at a Compound AnnualGrowth Rate (CAGR) of 9.7 per cent to reach 272 Million
Tonnes (MT) during 2006-13. Presently,India is the second largest producer of cement in the
world with a current capacity of around 370 MTwhich is expected to grow to 550 MT by 2020
ndia has huge potential in infrastructure and construction and the cement sector in India is set to
receive a major boost. The overall study also provides the regional analysis of cement
consumption,production, capacity utilization, and installed capacity in the country. On analyzing
the regional trendof cement consumption, we observed that the southern region is creating
maximum demand, which isexpected to increase more in future. India's cement production has
increased at a Compound AnnualGrowth Rate (CAGR) of 9.7 per cent to reach 272 Million
Tonnes (MT) during 2006-13.
Presently,India is the second largest producer of cement in the world with a current capacity of
around 370 MT which is expected to grow to 550 MT by 2020india has huge potential in
infrastructure and construction and the cement sector in India is set toreceive a major boost. The
overall study also provides the regional analysis of cement consumption,production, capacity
utilization, and installed capacity in the country. On analyzing the regional trendof cement
consumption, we observed that the southern region is creating maximum demand, which is
expected to increase more in future. India's cement production has increased at a Compound
Annual Growth Rate (CAGR) of 9.7 per cent to reach 272 Million Tonnes (MT) during 2006-13.
around 370 MTwhich is expected to grow to 550 MT by 2020india has huge potential in
infrastructure and construction and the cement sector in India is set toreceive a major boost. The
overall study also provides the regional analysis of cement consumption,production, capacity
utilization, and installed capacity in the country. On analyzing the regional trendof cement
consumption, we observed that the southern region is creating maximum demand, which
isexpected to increase more in future. India's cement production has increased at a Compound
AnnualGrowth Rate (CAGR) of 9.7 per cent to reach 272 Million Tonnes (MT) during 2006-13.
around 370 MT which is expected to grow to 550 MT by 2020.
Pakistan huge potential infrastructure and construction and the sector in Pakistan is set to receive
major boost. The overall study also provide the regional analysis of cement consumption,
production, capacity utilization, and installed capacity in the country. On analysis the regional
trend of cement consumption, we observed that the southern region is creating maximum
demand, which is expected to increase more in future. Pakistan cement production has increased
at a compound annual growth rate 24.3%. There is no reflective true performance of Cherat
against it competitors. Pioneer cement industry is the largest cement industry of Pakistan.
In the activity/operating performance ratio we measure into different categories, At first we

prove that the account receivable turnover the Fauji cement industry is better situation because
their sale and account receive is change more but Pioneer cement industry also change but not
more .the inventory turnover we mentioned that Unilever industry is better situation because
their cost of goods sold is decreasing more from the last year but Fauji cement industry increase
the same last year. So inventory condition is best on Fauji cement industry. In addition to,
account payable turnover is bed condition for both industries because their account payable is
decrease from the last year. If those are going to according this way those industries face lots of
financial problem. Furthermore, likewise, total asset is main factors for financial statement. It
main criteria is high ratio they company is achieving more profit but the National Food is not
maintain the criteria for that reason Fauji cement industry on the other hand, Pioneer cement
Industry maintain the criteria so it the better condition for control of asset. We presented the
profitability ratio is measured for determine how to earn profit of any industry use this ratio are
easily measurement the net profit margin, gross profit margin, return on assets, return on equity
and operating profit margin. The net profit margin is increase the Fauji cement industry because
their net profit and sale increase from the last year but the Pioneer cement Industry is chance
little bit. Moreover, gross profit margin main focus on higher gross profit margin efficiency to
control their material and labor. But the pioneer cement industry don’t adjust the criteria
therefore there are decrease and going to the bed condition but the Fauji cement industry
following the rule and regulation and finally their successes for gross profit earn. The main thing
of return on equity is how an industry to generate earning for investment fund. The Fauji cement
industry is better for earning their investment but pioneer cement industry fall up from the last
year. A high operating profit margin is allow for any Industry.
CHAPTER 5
5.1 CONCLUSION : plans due to which its capacity was increased to 2350 tons per day in 2005
and in 2006 a new production lines .
The company underwent many expansion f 4300 tons per day clinker capacity started
production . its share are quoted on all the three stock exchange of the country . it is the 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% share holding Financial institution ,
insurance companies and the general public , hold the rest of the shareholder . 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 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 award 2006’’ in cement sector in the national category .
Pioneer cement industry is ISO 9001:2000 QMS and ISO :141001:2004 certified . it meets local
as well as international quality standards . Pioneer cement produced 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,
However , there is no reflective true performance of CHERAT against its competitors; EPS
remained above the industry average . lower value of outstanding number of share rather than a
high net income is mainly responsible for the mentioned trend
Whereas for the Kohat cement company , by going forward , with additional capacities coming
on line , the gross margin are likely to decline . however , they are expected to sustain at a
responsible level , allowing a comfortable profitability and cash flow level for the industry , even
at low utilization levels , its achieving high level of sales volume even at low capacity
utilization . they should increase the overall profitability of the company as compare to its
competition .
5.2 Recommendations
 Cement industry is playing a vital role in the building up the country’s economy and
contribution towards growth
 My recommendation is fast construction of roads , buildings , dams , bridges to
increase the sale of cement industry .
 Slow construction activities in the country during the period badly upset domestic
sale of cement
 Government should reduce their taxes on cement sector . cement demands is
significantly affected by the public sector Development Program (PSDP), construction
as well exports.
 Foreign investment and transfer of technology.
Pioneer cement company limited fulfills all its targets of suppliers in the market
We recommend “BUY” for the scrip
FAUJI cement industry is neutral and it out of danger zone
It is strongly recommended that FAUJI cement should expand its business and should
established the strategies of going global.
5.3 FUTURE OUTLOOK
Cement dispatch are expected to continue growing in the future as the demand for
cement may increase in response to construction 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, Nigeria .
The company’s lavish expenditure on the social benefits when all the profitability ratios
are below the industry average is not a good decision at all . the goods asset and debt
management is the key to success in future . the current owner will also think about
increasing the free float of the economy , as there is a lot of room for equity in the
capital structure . this will have a positive effects on the net profit of the company , as
there interest cost will reduce a lot . the liquidity position should also be improving in
the next year owing to the dependency of the company in short term borrowing .
5.4 Limitations:
 This study is based on the secondary data from published reports and in journals
articles for the cement industry during 2004 to 2008.
 The secondary data such as problem of aggregation missing data and difference in
the same data collective from different sources are met with care was taken to minimize
the errors arising from those problems.
 There are also limitations of the tools analysis use the choice of trends equations
and methods of estimation and figures stated.
 These limitation as minimize explicitly stated where ever need
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Financial Anaylsis of Cement Industry

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Financial Analysis of cement Industry

These indicate a firm’s financial health and stability.

Two key financial statements are:

The analysis is based on a year to year comparison of a firm’s ratio.

A comparison of relationship among account balance.

ADVANTAGES of RATIOS Analysis

Simplifies financial statements

It simplifies the comprehension of financial statement.

Inter period comparison

It provide data for inter period companies.

Facilitates inter-firm comparison

Planning, co- ordination, control and communication.

Makes inter -firm comparison possible

Help in investment decisions

Pioneer Cement Ltd.

Cherat Cement Ltd.

1.3 Problem Statement

Trend analysis (Horizontal analysis)

1.4 Purpose of Study

1.5 Research Objectives

2.2 Growth of Cement Industry

2.3 Exports & International Market

2.4 National Scenario

CEMENT INDUSTRY in PAKISTAN

3.2 Financial analysis procedure

3.2.1 Percentage analysis

3.2.2 Trend analysis – horizontal analysis

For this purpose comparative financial statement are prepared horizontally.

3.2.3 Common Size Statement – Vertical Analysis

For this purpose comparative financial statement are prepared vertically.

3.2.4. Ratio analysis

3.3 Data collection procedure

3.4 Analysis procedures

Return on assets (ROA)

Return on Equity (ROE)

Earnings per share (EPS)

Quick ratio /acid test ratio

Assets Turnover Ratio/Efficiency Ratio

Receivable turn over

Financial Leverage ratio

Debt -equity ratio

Debt assets ratio

Time interest ratio

Dividend policy ratio

A) Fauji cement company Ltd. (Inter period analysis)

3.6 .Tools Of Analysis

Percentage analysis Ratio Analysis

Horizontal analysis Trend analysis Vertical analysis

Profitability ratio Liquidity ratio Efficiency ratio Debt ratio

Current Ratio= Current assets/ Current liabilities

Quick Ratio= (Current assets-Inventories)/ Current liabilities

Working Capital Ratio:

Working Capital Ratio= Current assets-Current liabilities

Activity/ Operating performance Ratios

Accounts receivable turnover:

Accounts receivable turnover= Sales/ Accounts receivable

Average collection period:

Average collection period= 360 days / Accounts receivable turnover

Inventory Turnover Ratio:

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

Accounts Payable turnover:

Accounts Payable turnover = Sales / Accounts Payable

Accounts Payable turnover in days: