Abstract

This paper focuses on investigating the effect of the revenue, Expenses, Liquidity, leverage, interest rate, GDP growth & Large Scale Manufacturing Growth on the Profitability of the firm of Fauji Cement Company. To proceed with this, the capital structure of this firm has been analyzed by adopting an econometric framework over a period of twenty quarters. We used pooled regression in order to check the reliability of our model and found that the, liquidity has positive impact on the firms profitability and DFL. These results might provide a useful guide to the Cement firms managers in designing the strategies in a way which may boost profit.

Introduction
Liquidity refers to how quickly and cheaply an asset can be converted into cash. Money (in the form of cash) is the most liquid asset. Assets that generally can only be sold after a long exhaustive search for a buyer are known as illiquid. In business, economics or investment, market liquidity is an asset's ability to be sold without causing a significant movement in the price and with minimum loss of value. Money, or cash on hand, is the most liquid asset. An act of exchange of a less liquid asset with a more liquid asset is called liquidation. Liquidity also refers both to a business's ability to meet its payment obligations, in terms of possessing sufficient liquid assets, and to such assets themselves. A liquid asset has some or more of the following features. It can be sold rapidly, with minimal loss of value, any time within market hours. The essential characteristic of a liquid market is that there are ready and willing buyers and sellers at all times. Another elegant definition of liquidity is the probability that the next trade is executed at a price equal to the last one. A market may be considered deeply liquid if there are ready and willing buyers and sellers in large quantities. This is related to the concept of market depth that can be measured as the units that can be sold or bought for a given price impact. The opposite concept is that of market breadth measured as the price impact per unit of liquidity. Speculators and market makers are key contributors to the liquidity of a market, or asset. Speculators and market makers are individuals or institutions that seek to profit from anticipated

increases or decreases in a particular market price. By doing this, they provide the capital needed to facilitate the liquidity. The risk of illiquidity need not apply only to individual investments: whole portfolios are subject to market risk. Financial institutions and asset managers that oversee portfolios are subject to what is called "structural" and "contingent" liquidity risk. Structural liquidity risk, sometimes called funding liquidity risk, is the risk associated with funding asset portfolios in the normal course of business. Contingent liquidity risk is the risk associated with finding additional funds or replacing maturing liabilities under potential, future stressed market conditions. When a central bank tries to influence the liquidity (supply) of money, this process is known as open market operations.

Liquidity is a prime concern in a banking environment and a shortage of liquidity has often been a trigger for bank failures. Holding assets in a highly liquid form tends to reduce the income from that asset (cash, for example, is the most liquid asset of all but pays no interest) so banks will try to reduce liquid assets as far as possible. However, a bank without sufficient liquidity to meet the demands of their depositors risks experiencing a bank run. The result is that most banks now try to forecast their liquidity requirements and maintain emergency standby credit lines at other banks. Banking regulators also view liquidity as a major concern.

The Background of Pakistans Cement Industry

The cement industry has grown leaps and bounds in the last few years from a total capacity of a mere 15mntpa in 2003 to a generously growing sector of 36mntpa in 2007; cement industry has become one of the most flourishing sectors in the country. Being an integral part of the growing economy of Pakistan, the cement industry responded well to the high asks of the market and looks prepared to do so in the future too. Dynamics have changed considerably in the past 5 years; a supply glut which lasted for almost a decade in the 90s, finally disappeared when the government of Pakistan aggressively approached the improvement of infrastructure in the country. Combined with a hike in demand for housing, the industry is in for good times. Pakistan secured 5th position because of high demand of cement in nearby countries and by capturing new markets such as African countries, Qatar & Iraq. Pakistan could achieve the mark of 13 to 14 million tonnes exports by the end of the fiscal year keeping in view Indian market

which has once again started importing cement from Pakistan. The export of cement from Pakistan to India showed a sharp decline after Mumbai attacks.

Country Wise Production (mtpa)

30 25 20 15 10 5 0 China Japan Thailand Turkey Pakistan Germany

SECTOR OUTLOOK
GDP
GDP growth has a high correlation with cement consumption of a country. Pakistans GDP growth has averaged around 7% in the past 4 years and in the same period domestic demand for cement rose at an average of 15% per annum. The per capita consumption of cement in 2003 was 75kg which increased briskly to 110kg in 2007. Despite such hefty increase, per capita consumption remains to be one of the lowest in the region, which leaves a lot of room for improvement.

PSDP
PSDP (Public Sector Development Projects) has been a trigger in the revival of the cement industry in Pakistan. Since the Government initiated an expansive plan for improvement in infrastructure, the industry has been bearing its fruit. The expenditure on PSDP has bloated from PKR 82bn in FY03 to PKR 520bn in FY08, an increase of more than five folds. Its high correlation with cement demand exhibited prosperity for the industry.

The industry responded well to this sudden increase in demand as major companies underwent timely expansion plans and besides a few glitches, the demand was always met successfully. The cement production in the country went up from 11mntpa in FY03 to 24mntpa by FY07. These expansions made sure that the high expenditure on construction activity did not convert into a negative balance of trade hence it encouraged the government to continue its approach. We expect the PSDP to increase in the coming years, although at a lower rate. The PSDP expenditure is forecasted to cross the PKR 700bn mark by FY12 and if the recent surge is anything to go by it may well surpass our expectations. As mentioned before the cement industry is well equipped to handle this growth due to excess supply, the current capacity of 36mn tons per annum is expected to elevate to 55mn tons per annum over the next 5 years. All the economic indicators point in the right direction for the cement Industry and we believe industrys production will grow at a robust rate of 12% per annum for the next 5 years.

HOUSING SECTOR
Housing sector is one of the major drivers of growth for the cement industry. GOP has been very active in encouraging the private sector investment in real estate. Incentives announced for the housing sector include the improvement in availability of housing finance by encouraging commercial banks to extend housing loans. This factor is again closely linked with GDP growth in the country, as the economy blossoms the housing sector should thrive along with it. Having one of the lowest cement prices in the region and emergence of international builders on the local scenario should further push for a smooth growth rate in the housing sector.

Current demand for housing is estimated at 570,000 units/annum vis--vis about 300,000 units being built annually, mostly in urban areas. The housing backlog, estimated at 4.3 mn units in 1998, has thus increased to around 6.5 mn units in 2006 and is likely to increase further. Thus, there is a lot of scope for heavy escalation in real estate business in Pakistan to meet this backlog. The financial institutions in the country are showing keen interest in private housing sector too.

DAMS
Construction of dams is another avenue of profitability for cement manufacturers. Although the impact is not as big as the chain effect of PSDP and housing sector, it is still significant. The government is considering building 5 major dams out of which 3 are in Punjab and 1 each in Sindh and NWFP.

All these factors indicate that dams will become inevitable for the country and government will soon commence their construction. The total cement requirement for these projects is approximately 15mn tons and this will be spread over 7-10 years (approximately 1.5 - 2.1mntpa additional consumption), hence we do not expect a large impact instead we think individual manufacturer will benefit over a long period of time.

Review of Literature

Variable description, Methodology and Sample

This section presents the measurement of the variable and discussion of different measures of the variables, null hypothesis and methodology used to test the hypothesis and provides information about the source of data.

Explanation of Variables
We use eleven variables in the final model of our study namely Profitability, sales revenue, Cost of goods sold, Selling expenses, Administrative expenses, Financial charges, Quick ratio, Total Debt to Total Assets, Average Market Interest Rate, GDP growth, Large Scale Manufacturing Growth Rate of Pakistan in our econometric model (as explained below) to identify their relative impact (negative or positive) on the profitability of the Cement Company of Pakistan. The measurement of variables such as profitability, itself is a hot debate among the financial economics as practitioners. We apply debt ratio also as a measure of leverage but it doesnt make our model significant so we follow the existing literature as mention and adopted simple but effective measures of the said variable as used in Mr. Jamal Zubairi research paper.

Profitability (as Dependent Variable)

Profitability refers to the ability of a company to earn profit. Profitability is expressed in terms of several popular numbers that measure one of two generic types of performance: "how much they make with what they've got" and "how much they make from what they take in". We take profitability as Net Profit Margin. The Net profit margin tells you how much profit a company makes for every $1 it generates in revenue or sales. Profit margins vary by industry, but all else being equal, the higher a company's profit margin compared to its competitors, the better.

Sales Growth (as Independent Variable)

Sales revenue is the total amount of money that the firm has earned from the sale of all its goods and services during a given time period. This is usually six months or a year. If a firm produced just one product or service the sales revenue would be the price of the product multiplied by the number of the product sold. In the case of more than one product or service the revenue from each needs to be added together. The figure for sales revenue in the profit & loss account does not necessarily mean that the firm has received all that money because although they may have sold that quantity of the product they may still be owed some of the money as debtors.

Cost of goods sold (as Independent Variable)

An income statement figure which reflects the cost of obtaining raw materials and producing finished goods that are sold to consumers. Cost of goods sold (COGS) includes the direct costs attributable to the production of the goods sold by a company. This amount includes the materials cost used in creating the goods along with the direct labor costs used to produce the good. It excludes indirect expenses such as distribution costs and sales force costs. COGS appear on the income statement and can be deducted from revenue to calculate a company's gross margin.

Selling expenses (as Independent Variable)

Selling expenses represent expenses needed to sell products (e.g., sales salaries, commissions and travel expenses, advertising, freight, shipping, depreciation of sales store buildings and equipment). Cost incurred to sell (e.g., advertising, salesperson commission) or distribute (e.g., freight-out ) merchandise. It is one of the types of operating expenses and is a period cost.

Direct selling expenses are expenses that can be directly linked to the sale of a specific unit such as credit, warranty and advertising expenses. Indirect selling expenses are expenses which cannot be directly linked to the sale of a specific unit, but which are proportionally allocated to all units sold during a certain period, such as telephone, interest and postal charges. General and administrative expenses include salaries of non-sales personnel, rent, heat and lights.

Administrative expenses (as Independent Variable)

The expenses that an organization incurs not directly tied to a specific function such as manufacturing/production or sales. These expenses are related to the organization as a whole as opposed to an individual department; also referred to as "administrative cost". An expense related to the enterprise as a whole, as opposed to expenses related to specific functions such as manufacturing. Administrative Expense is the "A" of the major income statement cost/expense category "SG & A" (See Selling, general, and administrative expenses).

Financial charges (as Independent Variable)

The finance charge, or total dollar amount you pay to borrow, includes the interest you pay plus any fees for arranging the loan. Total cost of borrowing, including interest charges, commitment fees, and other charges paid by the borrower for availing the loan facility. A finance charge is expressed as an annual percentage rate (APR) of the amount you owe, which allows you to compare the costs of different loans. The cost of obtaining and using credit; typically applied to credit cards or other consumer loans, such as car loans. Finance charges typically include interest due on outstanding balances as well as fees for special services, such as cash advances. The federal Truth in Lending Act requires that the finance charges must be disclosed to customers before issuing credit.

Quick ratio (as Independent Variable)

An indicator of a company's short-term liquidity. The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets.

Also known as the "acid-test ratio" or the "quick assets ratio".

In finance, the Acid-test or quick ratio or liquid ratio measures the ability of a company to use its near cash or quick assets to immediately extinguish or retire its current liabilities. Quick assets include those current assets that presumably can be quickly converted to cash at close to their book values.

Total Debt to Total Assets (as Independent Variable)

Measure of a firm's assets financed by debt and, therefore, a measure of its financial risk. The lower this ratio, generally the better off the firm. A metric used to measure a company's financial risk by determining how much of the company's assets have been financed by debt.

The debt to total assets ratio is an indicator of financial leverage. It tells you the percentage of total assets that were financed by creditors, liabilities, debt. A debt ratio of greater than 1 indicates that a company has more debt than assets; meanwhile, a debt ratio of less than 1 indicates that a company has more assets than debt. Used in conjunction with other measures of financial health, the debt ratio can help investors determine a company's level of risk.

Average Market Interest Rate (as Independent Variable)

Interest is a fee paid on borrowed assets. It is the price paid for the use of borrowed money or money earned by deposited funds. Assets that are sometimes lent with interest include money, shares, consumer goods through hire purchase, major assets such as aircraft, and even entire factories in finance lease arrangements. The interest is calculated upon the value of the assets in the same manner as upon money. Interest can be thought of as "rent of money". When money is deposited in a bank, interest is typically paid to the depositor as a percentage of the amount deposited; when money is borrowed, interest is typically paid to the lender as a percentage of the

amount owed. The percentage of the principal that is paid as a fee over a certain period of time (typically one month or year), is called the interest rate.

Interest is compensation to the lender for the risk of not being paid back, and for forgoing other useful investments that could have been made with the loaned asset. These forgone investments are known as the opportunity cost. Instead of the lender using the assets directly, they are advanced to the borrower. The borrower then enjoys the benefit of using the assets ahead of the effort required to obtain them, while the lender enjoys the benefit of the fee paid by the borrower for the privilege. The amount lent, or the value of the assets lent, is called the principal. This principal value is held by the borrower on credit. Interest is therefore the price of credit, not the price of money as it is commonly believed to be.

GDP growth (as Independent Variable)

GDP (Gross Domestic Product) is the total dollar amount of all goods and services produced. The growth rate is the percentage increase or decrease of GDP from the previous measurement cycle. Even though the BEA reports quarterly, the growth rate is annualized so it can be compared to the previous year. The GDP growth rate is driven by retail expenditures, government spending, exports and inventory levels. Rises in imports will negatively affect GDP growth. The GDP growth rate is the most important indicator of economic health. If GDP is growing, so will business, jobs and personal income. If GDP is slowing down, then businesses will hold off investing in new purchases and hiring new employees, waiting to see if the economy will improve. This, in turn, can easily further depress GDP and consumers have less money to spend on purchases. If the GDP growth rate actually turns negative, then the U.S. economy is heading towards a recession. Economic growth can either be positive or negative. Negative growth can also be referred to by saying that the economy is shrinking. Negative growth is associated with economic recession and economic depression.

Economic growth is a term used to indicate the increase of total GDP. It is often measured as the rate of change of gross domestic product (GDP). Economic growth refers only to the quantity of goods and services produced; it says nothing about the way in which they are produced.

Economic Development, a related term, refers to change in the way goods and services are produced; positive economic development involves the introduction of more efficient or "productive" technologies or forms of social organization.

Large Scale Manufacturing Growth Rate (as Independent Variable)

The manufacturing sector grew at an average rate of 8 percent from the sixties to the eighties, but fell to 3.9 percent during the nineties. This was mainly caused by reduction in investment levels due to lack of continuity and consistency in policies. Political instability law and order position in the major industrial centers, transport bottlenecks, as well as unreliability and inadequate availability of power supply at affordable rates were additional factors pulling down the sector. The sector has shown impressive recovery recently and has grown at a compound rate of 10.9 percent per annum during 2001 05, with Large Scale Manufacturing (LSM) growing even faster, becoming 19.9% in 2005. The contribution of Large-Scale Manufacturing at basic prices stand at Rs 844 billion as compared with Rs 264 billion in 2000-01, figures from the Census of Large-Scale Manufacturing Industries (CMI) 2005-06 show. LSM contribution to GDP also called as Gross Value Added (GVA) at producers prices has been estimated at Rs 912 billion as compared with the previous Census 2000-01 amount of Rs 280 billion. Political and macroeconomic stability, rationalization of tariffs, increase in investments, improved utilization of productive capacity, and growth in demand for manufactured products, resulting from higher exports and consumer financing have been the major factors leading to this growth.

Methodology and Hypotheses

The main object of the study is to know whether the revenue, Expenses, Liquidity, leverage, interest rate, GDP growth & Large Scale Manufacturing Growth affects the profitability of the firms in the automobile sector of Pakistan.

Hypotheses
1. Hypothesis (Ho): Profitability of the firm is not significantly positively affected by the Sales Growth. 2. Hypothesis (Ho): Profitability of the firm is not drastically affected by the Cost of Sales. 3. Hypothesis (Ho): Profitability of the firm is not significantly affected by the Selling Expenses. 4. Hypothesis (Ho): Profitability of the firm is not considerably affected by the Administrative Expenses. 5. Hypothesis (Ho): Profitability of the firm is not extensively affected by the Finance Cost. 6. Hypothesis (Ho): Short Term Liquidity does not have a significant impact on the Profitability of the firm. 7. Hypothesis (Ho): Profitability of the firm is not significantly affected by the Debt Ratio. 8. Hypothesis (Ho): Market Interest Rate Profitability of the firm is not significantly affected by the Interest Rate. 9. Hypothesis (Ho): GDP of the country doesnt have a significant impact on firm profitability. 10. Hypothesis (Ho): Profitability of the firm is not significantly affected by the LSM Growth.

We ran the panel regression to test the above hypotheses. Panel data analysis facilitates analysis of cross-sectional and time series data. The pooled regression, also called the Constant Coefficients model, is one where both intercepts and slopes are assumed constant. The cross section company data and time series data are pooled together in a single column assuming that there is no significant cross section or inter temporal effects. Specifically, the econometric model is defined as follows:

P 0 1SG 2CGS 3 SE 4 ADE 5 FC 6QR

7 DA 8 MIR 9GDP 10 LSM

Where P: SG: Profitability Sales Growth

CGS: Cost of Goods Sold SE: Selling Expenses

ADE: Administrative Expenses FC: QR: DA: Finance Cost Quick Ratio Total Debt to Total Assets

MIR: Market Interest Rate GDP: Gross Domestic Product LSM: Large Scale Manufacturing

The possible expected effects of the said variables on firms profitability are reported in Table 1.

Variable

Measure

Expected Relationship with Profitability

Sales Growth COGS Selling Expenses Administrative Expenses Finance Cost Quick Ratio

Qtr to Qtr in % of Sales Qtr to Qtr in % of Sales Qtr to Qtr in % of Sales Qtr to Qtr in % of Sales Qtr to Qtr in % of Sales (Current Assets Inventories)/Current Liabilities

Positive Negative No Effect Negative Positive/Negative Positive

Total Debt to Total Assets Average Market Interest GDP Growth Large Scale Manufacturing

Total Liabilities/Total Assets Qtr to Qtr in % Qtr to Qtr in % Qtr to Qtr in %

Positive/No Effect No Effect Positive Positive

Regression Analysis Results

Using pooled regression technique, we ran the regression of the profitability on sales revenue, Cost of

goods sold, Selling expenses, Administrative expenses, Financial charges, Quick ratio, Total Debt to Total Assets, Average Market Interest Rate, GDP growth, Large Scale Manufacturing Growth Rate with an aim to investigate whether these ten variables have or do not have a significant
impact. The regression estimates thus provide the information about the elasticity rather than the slope of the relevant variables. The estimated results are reported in Table 2.

Dependent Variable: NET_PROFIT_MARGIN Method: Least Squares Date: 12/13/09 Time: 10:32 Sample: 1 20 Included observations: 20

Variable
C I__Y_TO_Y_GROWTH_IN_SALE II__COGS____OF_SALES_REV III__SELL_EXP____OF_SALE IV__ADM_EXP__OF_SALES_ V__FIN_CHARGES____OF_SAL VI__QUICK_RATIO__IN___ VII__T_D_TO_T_A__IN___ VIII__AVG_MKT_I____ IX__GDP_GROWTH____ X__LSM_GROWTH_RATE____

Coefficient
0.139343 0.057609 -0.002569 12.31759 -11.37144 0.894365 -0.034363 0.160098 1.142096 -1.893334 0.979050

Std. Error
25.90398 0.118870 0.109091 5.339808 5.285597 0.921052 0.028027 0.218699 1.337310 1.531132 6.600098

t-Statistic
0.005379 0.484638 -0.023552 2.306748 -2.151401 0.971026 -1.226087 0.732046 0.854025 -1.236558 0.148339

Prob.
0.9958 0.6395 0.9817 0.0465 0.0599 0.3569 0.2513 0.4828 0.4152 0.2475 0.8853

R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Durbin-Watson stat

0.614542 0.186255 5.066807 231.0528 -52.84791 1.487576

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic)

13.99626 5.616816 6.384791 6.932444 1.434884 0.299224

It can be observed from the table that estimated value of the R-square is approximately 0.61. It implies that the 61 percent variation in profitability of the firms is jointly determined by the said 10 variables and the remaining 39 percent is unexplained. The value of F-statistic (1.434884) indicates that the overall model is good. The Durbin-Watson statistic is also close to 1.5 that implies that the successive values of estimated residuals are not dependent on each other. It means that there is strong evidence to accept the null hypothesis that there is no autocorrelation problem in the estimated model. Regarding the significance of individual variables, the empirical results show that the firms profitability is not significantly associated with the Sales Growth. The p-value is 0.639, as can be seen from the table, implies that the null hypothesis that the Sales Growth has no significant impact on profitability, is accepted at 5 percent level of significance. A one percent increase in Sales Growth leads to about 0.06percent growth in profitability, as the estimated coefficient of year to year sales growth.

It can be observed that the profitability of the firm is not drastically affected by the cost of sales. The p-value is .981, as can be seen from the above table, implies that at 5 percent level of significance we failed to reject null hypotheses and it tells that cost of sales has no drastic impact on profitability. A one percent increase in Cost of Sales leads to about a negligible .2 percent decline in profitability.

Regarding the significance of Selling Expense, the empirical results show that the firm profitability is not significantly associated with the selling expenses. The p-value is 0.046, as can be seen from the table, implies that the null hypothesis that the selling expenses has significant impact on profitability, is rejected at 5 percent level of significance. A one percent increase in Sales Growth leads to about 12.31 percent growth in profitability, as the estimated coefficient of Selling Expenses. The relationship between profitability and selling expense is positive as seen in the table as coefficient of selling expenses.

It can be observed that the profitability of the firm is not drastically affected by the Administrative expenses. The p-value is .059, as can be seen from the above table, implies that at

5 percent level of significance we failed to reject null hypotheses and it tells that administrative expenses has no severe impact on profitability. A one percent increase in administrative expenses leads to about an 11.37 percent decline in profitability. So this also tells that the administrative expenses have a negative relationship with profitability.

An interesting finding in this research is that the profitability of the cement company is positively and significantly related to the financial charges of the firm. It is noticeable that the coefficient of financial charges is positive which tells that the relationship between the financial charges and profitability of the firm is positive. A one percentage increase in the financial charges of the firms leads to almost 0.89 percent growth in profitability of the firm. Since the pvalue is 0.356 so we can conclude that at 5 percent level of significance we failed to reject the null hypotheses as came on the conclusion that financial charges has no significant impact on the profitability of the firm.

The estimated model also shows that there is no statistical significant association between the profitability of the cement company and the quick ratio. On the one hand, the estimated coefficient of the quick ratio is negative which tells that a one percent increase in the quick ratio will reduce profitability of the firm by 0.034 percent, and on the other hand, the estimated pvalue is 0.251 which tells that we are not able to reject the null hypothesis that the quick ratio has no statistical significant effect on the profitability.

As it is also clear from the pooled regression table that the coefficient of total debt to total assets is positive which shows that the relationship between the total debt to total assets and profitability is positive. On the other hand we see that the p-value of total debt to total assets is 0.482 and we see that at 5 percent level of significance we accept the null hypotheses and conclude that the total debt to total assets have no significant effect on the profitability of the firm. A one percent increase in the total debt to total assets will increase the profitability of the firm by 0.160 percent.

Regarding the significance of Average Market Interest, the empirical results show that the firm profitability is not significantly associated with the average market interest. The p-value is 0.415,

as can be seen from the table, implies that the null hypothesis that the average market interest has no considerable impact on profitability, is accepted at 5 percent level of significance. A one percent increase in average market interest leads to about 1.41 percent growth in profitability, as the estimated coefficient of average market interest. The relationship between profitability and average market interest is positive as seen in the table as coefficient of selling expenses.

The estimated model also shows that there is no statistical significant association between the profitability of the cement company and the GDP growth. On the one hand, the estimated coefficient of the GDP is negative which tells that a one percent increase in the GDP will reduce profitability of the firm by 1.89 percent, and on the other hand, the estimated p-value is 0.247 which tells that we are not able to reject the null hypothesis that the GDP has no statistical major effect on the profitability. Since the GDP coefficient is negative as well this tells that the relationship between GDP and profitability of the firm is negative.

It can be observed that the profitability of the firm is not drastically affected by the LSM growth. The p-value is 0.885, as can be seen from the above table, implies that at 5 percent level of significance we failed to reject null hypotheses and it tells that LSM growth has no drastic impact on profitability. A one percent increase in LSM growth leads to about a 0.979 percent increase in profitability.

Conclusion and Policy Implications

Bibliography

Annexure
Income Statement and Balance Sheet
Income Statement
Sales Less: Government Levies Less: Cost of Sales Gross Profit Other Income Distribution Cost Administrative Expenses Other Operating Expenses Profit From Operations Finance Cost Net Profit Before Taxation Taxation Current Taxation Deferred Net Profit After Taxation 1Q 0405 992560 272275 444354 279930 6038 285968 4866 7466 2Q 0405 890807 250657 397270 242879 3104 245984 5883 11320 9114 219665 49153 170511 3440 46173 120898 2Q 0405 5.96 0.05 2.25 3Q 0405 909194 235070 422130 233992 1182 235174 4746 12077 8645 209705 45989 163715 3600 55468 104647 3Q 0405 6.47 0.05 2.25 4Q 041Q 052Q 0505 06 06 1128800 1306743 1459544 300216 321982 355520 503811 492759 539697 324774 492001 564327 890 6594 9938 325663 498596 574265 5836 7260 9793 11428 11903 23823 12434 20626 23360 295965 66852 229115 4550 5864 148701 4Q 0405 5.18 0.05 2.25 458805 67381 391424 5600 126012 259812 1Q 0506 10.14 0.02 1.45 517289 78179 439110 6400 132074 300636 2Q 0506 9.68 0.02 1.45 2Q 0506 1023039 67282 1126109 3004048 5822697

267596 67639 195696 4060 55392 136243 1Q 0405 7.75 4.98 2.25

Average Market Interest Rates, LSM Growth and GDP Growth

Avg. Market Interest Rates LSM growth GDP growth

Balance Sheet
1Q 0405 Current Assets 705968 Inventory / Stock in Trade 59350 Current Liabilities 981156 Total Liabilities 3862007 Total Assets 5937384 2Q 043Q 044Q 041Q 0505 05 05 06 1148111 721838 1113721 940294 99955 91380 55931 58067 1295297 1004746 1206945 933617 2839306 3572960 3774164 3177913 6330878 5873883 6233788 5887349

Income Statement
3Q 054Q 051Q 062Q 063Q 064Q 061Q 0706 06 07 07 07 07 08 1329872 1587297 1473219 1042043 1085203 1179570 1168580 320403 399413 375323 306040 297875 337514 323337 492468 517001 10152 527153 8318 14653 21948 482234 62861 419373 3500 127340 288533 3Q 0506 10.02 0.02 1.45 570102 617781 16639 634421 6324 16250 28192 583655 55875 527780 5931 167094 354755 4Q 0506 9.18 0.02 1.45 607805 490091 22176 512266 9740 18098 29483 454946 57136 397810 5500 123334 268976 1Q 0607 10.49 0.02 1.70 523033 212970 17278 230248 7180 14778 10657 197633 53849 143784 3700 42963 97121 2Q 0607 11.08 0.02 1.70 554408 232920 17852 250772 6514 14051 12348 217859 51569 166290 3900 60339 102051 3Q 0607 10.57 0.02 1.70 686539 155517 16529 172046 17211 24376 5610 124849 44868 79981 4220 102099 177860 4Q 0607 10.63 0.02 1.70 680111 165132 11004 176136 7445 22114 7367 139210 43657 95553 4226 28338 62989 1Q 0708 11.66 0.01 1.03

Sales Less: Government Levies Less: Cost of Sales Gross Profit Other Income Distribution Cost Administrative Expenses Other Operating Expenses Profit From Operations Finance Cost Net Profit Before Taxation Taxation Current Taxation Deferred Net Profit After Taxation

Average Market Interest Rates, LSM Growth and GDP Growth

Avg. Market Interest Rates LSM growth GDP growth

Balance Sheet
Current Assets Inventory / Stock in Trade Current Liabilities Total Liabilities Total Assets 3Q 054Q 051Q 062Q 063Q 064Q 061Q 0706 06 07 07 07 07 08 1105783 1579381 1388840 1588593 1208793 1953527 1970285 76496 145090 142920 140610 201099 183309 160032 1318600 1267198 912551 1140476 893375 1442287 1590726 2830182 2915491 2409219 2680943 2220546 2665482 2568101 5758045 6198107 5960811 6144285 5786254 6400688 6366296

Income Statement
2Q 0708 1031661 264013 618341 149307 1395 150702 4664 15891 6363 123784 33639 90145 3826 31572 54747 2Q 0708 10.88 0.01 1.03 3Q 07-08 1195895 292353 777964 125578 2319 127897 15245 17033 4465 91154 31331 59823 4518 14140 41165 3Q 07-08 10.83 0.01 1.03 4Q 07-08 1353081 321147 811398 220536 92856 313392 26029 21457 16095 249811 38327 211484 5160 50814 257138 4Q 07-08 10.46 0.01 1.03 1Q 08-09 1626362 357573 873150 395639 63161 458800 16719 23671 23894 394516 72121 322395 2Q 08-09 1619097 368159 801430 449508 95333 544841 10375 24083 29953 480430 92596 387834 6719 87024 294091 2Q 08-09 14.82 -0.02 0.50 3Q 08-09 1823147 445557 1045906 331684 20915 352599 7333 21501 19639 304126 37798 266328 2752 76668 186908 3Q 08-09 14.86 -0.02 0.50 4Q 08-09 1884717 467496 906624 510597 11015 521612 15833 33931 4687 467161 22201 444960 39423 99199 306338 4Q 08-09 14.34 -0.02 0.50

Sales Less: Government Levies Less: Cost of Sales Gross Profit Other Income Distribution Cost Administrative Expenses Other Operating Expenses Profit From Operations Finance Cost Net Profit Before Taxation Taxation Current Taxation Deferred Net Profit After Taxation

102109 220286 1Q 08-09 13.57 -0.02 0.50

Average Market Interest Rates, LSM Growth and GDP Growth

Avg. Market Interest Rates LSM growth GDP growth

Balance Sheet
2Q 07- 3Q 07-08 4Q 07-08 1Q 08-09 2Q 08-09 3Q 08-09 4Q 08-09 08 Current Assets 899261 3982369 5294083 4252059 2706981 1541678 1654014 Inventory / Stock in Trade 173336 142366 230089 257149 337508 197635 137451 Current Liabilities 1987707 956397 2454761 2148419 2504454 1696540 2628010 Total Liabilities 2996735 1704998 3170512 2709722 3461775 4274619 11755812 Total Assets 6847211 10656016 12454493 12142730 13066422 14175521 21446501

Data Used for Pooled Regression and other Tests

Year
1Q 0405 2Q 0405 3Q 0405 4Q 0405 1Q 0506 2Q 0506 3Q 0506 4Q 0506 1Q 0607 2Q 0607 3Q 0607 4Q 0607 1Q 0708 2Q 0708 3Q 0708 4Q 0708 1Q 0809 2Q 0809 3Q 0809 4Q 0809

NPM i) SG ii) CGS iii) SE iv) ADE v) FC vi) QR

13.726 13.572 11.510 13.173 19.882 20.598 21.696 22.350 18.258 9.320 9.404 15.078 5.390 5.307 3.442 19.004 13.545 18.164 10.252 16.254

vii) TDTA
65.046 44.849 60.828 60.544 53.979 51.592 49.152 47.038 40.418 43.633 38.376 41.644 40.339 43.766 16.000 25.457 22.316 26.494 30.155 54.815

viii) AMI ix) GDP x) LSM

7.750 5.957 6.473 5.183 10.137 9.680 10.023 9.177 10.493 11.077 10.573 10.627 11.660 10.880 10.827 10.463 13.573 14.817 14.863 14.337 4.975 0.050 0.050 0.050 0.022 0.022 0.022 0.022 0.022 0.022 0.022 0.022 0.012 0.012 0.012 0.012 -0.019 -0.019 -0.019 -0.019 2.250 2.250 2.250 2.250 1.450 1.450 1.450 1.450 1.700 1.700 1.700 1.700 1.025 1.025 1.025 1.025 0.500 0.500 0.500 0.500

5.757
10.252 2.064 24.154 15.764 11.693 -8.884 19.357 -7.187 29.268 4.142 8.696 -0.932 11.717 15.919 13.144 20.197 -0.447 12.603 3.377

44.768 44.597 46.429 44.632 37.709 -36.977 37.031 35.917 41.257 50.193 51.088 58.202 58.200 59.936 65.053 59.967 53.687 49.499 57.368 48.104

0.490 0.660 0.522 0.517 0.556 -0.671 -0.625 0.398 0.661 0.689 0.600 1.459 0.637 0.452 1.275 1.924 1.028 0.641 0.402 0.840

0.752 1.271 1.328 1.012 0.911 -1.632 -1.102 1.024 1.228 1.418 1.295 2.067 1.892 1.540 1.424 1.586 1.455 1.487 1.179 1.800

6.815 5.518 5.058 5.922 5.156 -5.356 -4.727 3.520 3.878 5.168 4.752 3.804 3.736 3.261 2.620 2.833 4.434 5.719 2.073 1.178

65.904 80.920 62.748 87.642 94.496 84.873 78.059 113.186 136.532 126.963 112.796 122.737 113.800 36.521 401.507 206.293 185.947 94.610 79.223 57.708