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Financial Analysis of


To fulfill the requirement of our course SECURITY ANALYSIS, me and my group member
make a group and prepare a report Financial Analysis of Lucky Cement.

Learning in practical side is somewhat that cannot be compared with books knowledge. MBA
program is designed in such a way that students are required to do the financial analysis of
different companies give their recommendation about their future growth, price and expansion. It
also provides student an opportunity to apply this knowledge in practical field.


Greatest thanks to Allah Almighty. Allah, Who bestowed me and my group members with the
ability and potential to complete this report. Before I go into thick of the things, I would like to
add a few deepest words for the people who were part of this report in numerous ways people
who gave unending support right from the stage the report was assigned.

We wish to express our sincere thanks to our respected Teacher Mr. Abdul Khalique for giving
us an opportunity to work on a practical approach, report on financial analysis of lucky cement
and giving us the guidance to complete the same.

Industry Profile
The history of cement industry in Pakistan dates back to 1921 when the first plant was
established at Wah. At the time of independence in 1947 there were four cement factories with
an installed capacity of 470,000 tons per annum. These units were located at Karachi, Rohri,
Dandot and Wah. In 1956 Pakistan Industrial Development Corporation (PIDC) established two
plants at Daudkel and Hyderabad and subsequently more plants were established in the private

Cement manufacturing is a high capital-and energy-intensive industry. The capital cost of a 2000
tons/day plant ranges between Rs. 3.5 billion to Rs. 4 billion whereas the capital cost of a
3000tons/day plant is estimated at more than Rs. 5.5 billion. Energy consumption by cement
manufacturing units based on 'wet process' is higher than 'dry process'. The 'dry process' is
estimated to be economical by 40% to 50% compared to 'wet process'.

By now it has exceeded 10 million tonnes per annum as a result of establishment of new
manufacturing facilities and expansion by the existing units. Privatization and effective price
decontrol in 1991-92 heralded a new era in which the industry has reached a level where surplus
production after meeting local demand is expected in 1997.

The debt, which was Rs 34 billion in 2003-04, has crossed Rs 120 billion this year. Cement
demand in the country is directly proportionate to the growth in GDP. Over the last 3-5 years, the
security situation in the country has resulted in low GDP growth. Despite this, the cement
industry contributed revenue amounting to approximately Rs15 billion in 2004, Rs17.5 billion in
2005, Rs 22b in 2006, Rs 26.3 billion in 2007 and Rs30 billion in 2008 to the national exchequer.

Cement industry is also following the rules and regulation implemented by FBR. Federal Board
of Revenue has the power to check the books of accounts of any company and the cement sector
remains under close scrutiny of the Federal Board of Revenue.

The cement industry in Pakistan faces two serious threats: closure of units based on wet process,
and poor cash flow rendering the units incapable of debt servicing due to increasing cost of
electricity, furnace oil and imported craft paper used for cement packing.

Pakistan's cement market is divided into two distinct regions, North and South. The northern
region comprises the Punjab, NWFP, Azad Kashmir and upper parts of Balochistan, whereas the
southern region comprises the entire province of Sindh and lower parts of Balochistan.
Traditionally, the southern region has always been surplus in cement production but with the
establishment of more plants in the northern parts of the country the region has become almost
self-sufficient in supply of cement.

Demand has grown at an average rate of 7%, with the Northern region averaging 8% and
Southern region lagging behind at 4%. The way new plants are being established and existing
plants are undertaking expansion, the demand-supply equation is bound to create surpluses.

Factors which can possibly change the surplus position into a near-equilibrium between demand
and supply are:-

1. Formation of manufacturers' cartel to avoid price decline;

2. Delay in implementation of planned additions and expansions;

3. Efforts to export cement; and

4. Increase in demand if construction of some of the mega-sized infrastructure projects


Opportunity for cement industry in Pakistan

Pakistan has one of the highest population growth rates in the world, touching 3%. This has
prompted a sizable demand for housing facilities in the country. According to estimates of
construction industry, there is a huge backlog of about 6.25 million housing units in the country.
Bulk of the current demand of 0.6 million units needed every year is for urban areas. With

greater urbanization the demand for cement is expected to grow at an average of nearly 7% per

Government Attitude towards Industry:

Tax structure:

Instead of providing any relief in the budget, the sector was further penalized with a 3% increase
in sales tax to 18% and an increase in excise duty to 35%.

Excise Duty:

In budget 2008-2009 the federal excise duty on cement has been to Rs 900 per tones from the
existing base of Rs 750 per tones.

Company Overview

Company Name: Lucky cement

Registered Office: The registered office of the Company is located at Pezu, District Lakki
Marwat in North West Frontier Province (NWFP).

Chairperson: Mr. Muhammad Yunus Tabba

Chief Executive: Mr. Muhammad Ali Taba

Board of Directors
Mr. Muhammad Sohail Tabba
Mr. Javed Yunus Tabba
Mr. Imran Yunus Tabba
Mariam Razzak
Rahila Aleem
Manzoor Ahmed

Company Profile

Company was founded in 1996 by Abdul Razzak Tabba. Company came into existence with
daily production of 4,200 Ton/Day, in Durra Pezu Dist: Marwat, NWFP.
Sponsored by YUNUS BROTHERS GROUP one of the largest export houses of Pakistan
Now Lucky cement is produce 21,000 Pons/Day, of which 13,000 Tons/Day in Pezu and 8000
Tons/Day in Karachi.
Company producer and seller of Ordinary Portland Cement, Sulphate Resistant Cement, and Slag
Pakistan cement industry concluded the financial year ended June 30, 2009 with an overall
meager growth of 2% with total sales volume of 30.77 million tons against last years sales
volume of 30.286 million tons. The demand in the domestic market witnessed a dismal negative
growth of 14% due to adverse economic, financial as well as law and order situation prevailed in
the country. On the export front, the industry witnessed a healthy growth of 47% with sales
volume of 11.381 million tons against last years sales volume of 7.716 million tons per annum.
The shortfall in domestic sales was compensated by exports which ended with a proportion of
37% of the total sales of the industry.
By the grace of Almighty Allah, Company managed a decent growth of 6.25% in overall sales
volume during the year under review as compared to same period last year. The local sales
witnessed a negative growth of 14% whereas exports registered a healthy growth of 29% during
the year under review as compared to same period last year. The ratio of exports to total sales
volume of your Company was 58% whereas the export market share of your Company was
30.18% during the year under review. The overall market share of your Company slightly
improved from 18.35% last year to 19.18% this year despite of addition of new capacities by
other peers.

We are pleased to report that the financial year under review was concluded as the best ever
performing year in the history of your Company inspite of difficult business environment
prevailed both in the domestic and export markets. Company was able to achieve following
significant performance during the year under review:
Record gross sales revenue of Rs.30.915 billion which is 48% higher than last year
Record net sales revenue of Rs.26.330 billion which is 55% higher than last year
Record operating profit of Rs.7.240 billion which is 135% higher than last year
Record after tax profits of Rs.4.596 billion with earnings per share of Rs.14.21.

Company was also able to complete following additional milestone projects which will pave a
long way to further enhance the financial performance of your Company:
Successful operation of 1.25 mtpa production capacity of Line G at Karachi Plant
making total capacity of your Company to 7.75 mtpa
Successful conversion of Pezu Plant Captive power generation units to gas based power
generation, first of its kind experience in Pakistan for such huge capacity generators
Inauguration of first ever loose cement export terminal owned by Company.

Capital Expenditures
The Company incurred total expenditures of Rs.8.4 billion as addition to buildings and plant &
machinery mainly consisted of Line G at Karachi plant, loose cement export terminal at
Karachi Port and conversion of dual fuel power generators.

Financial analysis:

Ratio Analysis of company:

Years 2005 2006 2007 8 2009
CR 0.63 0.94 0.85 1.09 0.86
LIQUIDITY RATIO QR 0.2 0.61 0.44 0.35 0.4
D/E 1.88 2.34 1.75 0.84 0.65
SOLVENCY RATIO EM 2.88 3.34 2.75 1.84 1.65
ARTO 6.34 5.01 12 19.5 17
ITO in days 21 20 23 21 21
TATO 0.27 0.34 0.49 0.61 0.81
EFFICIENCY RATIO Int/earning 8 30.83 3.12 18.2 4.19
PROFITABILITY GM 0.35 0.37 0.29 0.21 0.32
RATIO OP RATIO 0.33 0.34 0.24 0.15 0.23
NP RATIO 0.21 0.24 0.2 0.13 0.15
RoE 0.18 0.32 0.31 0.19 0.22
RoA 0.08 0.1 0.1 0.09 0.13
E/Share 3.52 7.35 9.6 9.12 14.21
Price/Earning 1 13.66 12.72 9.96 4.12
Dividend yield ---- 1% 1.02% --- 6.83%
13.61 12.93 28.15
Dividend payout --- % % ----- %
Dividend cover --- 7.35% 7.74% ----- 3.55%