GENERAL RATIO ANALYSIS OF PIONEER CEMENT COMPANY

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 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.

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.

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 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.

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.

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 90012000 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.