CONTENTS

Preface.01 Acknowledgement..02 Executive Summary....03 Industry Profile...04 Govt. Attitude Towards Sector......09 Industry During FY 2009...10 Company Overview12 Company Profile.....................................14 Nishat Group..15 Acquisition of DGKCC by Nishat Group.............15 Brands....................16 Friendly Environment...17 Measures Taken in Protecting The Environment...17 Capacity Addition.........17 Environmental Management......19 Future Outlook..22 Mission and Vision Statement..23 Business Process.....................24 Steps of Production.......24 Flow Process of production...27 Cost of Production.29 Decision Making30 Hierarchy..32 Departmentalization.33 SWOT Analysis35 Tour to DGKCC41 Problems Identification.43 Recommendations.44 Conclusion..45 Bibliography..46 Appendix...47 Internship Offer Letter.48 Completion Letter.49 Evaluation Form Employer...50

Preface
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Learning in practical side is somewhat that cannot be compared with books knowledge. BBA program is designed in such a way that students are required to do the projects and researches then give their recommendation and conclusion. It also provides student an opportunity to apply this knowledge in practical field. Now to fulfill the practical requirement of this course, I successfully completed an internship report on DGKCC (Pvt). Limited a unit of Nishat Group. It was great opportunity for me to apply theoretical knowledge and get practical exposure. I have visited almost all the departments and studied function of each department at factory as well as at their head office in Lahore. The purpose of the report is to elaborate on my experience about DGKCC (Pvt.) Limited. I have tried to present the overview of the company and its operations and the task that are carried out during my stay at DGKCC (Pvt.) Limited. Although 6 weeks is a small time to completely understand the processes and philosophy of a company, but at least one gets a good overview about it, and I have tried to write all that grasped during this short time, in this report. This report includes DGKCC working way outs, information about their departments function and working. I have analyzed their working and have given certain recommendations on the basis of my observation. I have tried my level best to give real look about DGKCC while writing this report. May ALLAH succeed me while evaluation of this report.

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Acknowledgement
My greatest thanks to Allah Almighty. Allah who bestowed me with the ability and potential to complete this Internship. 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. Particularly I also wish to thank the managerial staff at Nishat House who helped me to gain a lot of information regarding the company and cement industry and also thankful to Mr. Inayat Ullah Niazi (CFO, DG Khan Cement Company) who provide me an opportunity to learn and understand the working of organization as an internee. I am also thankful to Mr. Elahi Buksh (Senior Manager Finince) who played a role of polar star for me in the organization and whose experience taught me a lot about the industry and the organization. I am especially thankful to Mr. Mukhtar Ahmad (Senior Manager Production) who helped me a lot in getting the knowledge of cement industry And finally deepest and warmest appreciation to the whole team of DG Khan Cement Company who helped me a lot in getting knowledge about the office working and about the cement plant at the site in Khairpur.

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Executive Summary
Dera Ghazi Khan Cement Company Limited is a strategic business unit of Nishat Group, which is the largest industrial group in Pakistan. D.G. Khan Cement Co. is market leader with respect to market share with about 11.4% market share. Apart from its competitors; its product is high priced yet it has highest market share because of good quality. Its plant is situated in Dera Ghazi Khan and KhairPur and head office is situated at Lahore. Factory site Unit 1and 2 that is situated in very remote area of Punjab, yet it proved a blessing for the company. Because it has all three basic raw materials i.e. Lime stone, Shale, and Gypsum at one place. It has three plants working two in D.G. khan and one in KhairPur. First plant is old one and it is Japanese plant. The other two plants are of F.L.Smiths, Denmark. Presently it has a total Installed capacity of 14000 tpd (tons per day). Presently the company is also exporting the cement to Afghanistan, Iraq, UAE and Russia. The team of the D.G. Cement is story of success of D.G. Cement. The whole team is self-motivated and had played a vital role in the success of the company.

Industry Profile
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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 sector. The industry was nationalized in 1972 and the State Cement Corporation of Pakistan (SCCP) was established following the Economic Reforms Order, 1972. As a result of nationalization, a total of 10 cement units with an installed capacity of 2.8 million tons per annum were transferred to the SCCP. Effective price control was also vested with the SCCP and for a long time the industry operated under a regime of strict regulation and price control. While the cement industry was working under state control, the SCCP established five new units with an installed capacity of 1.8 million tons per annum. In 1985-86 the cement industry was deregulated and private sector was allowed to establish cement plants. But bulk of the capacity was controlled by the SCCP which had effective control in the fixation of prices. Severe shortage of cement and price deregulation prompted the private sector to establish more plants. Seven units were established in the private sector before commencement of the process of privatisation in 1991. During the regime of Nawaz Sharif the industry went through major transformation. The government embarked upon an ambitious privatisation programme and eight units have been privatised so far. The SCCP at present controls less than 25% of the total installed capacity in the country which is shrinking with the establishment of more plants in the private sector and expansion in the privatised units. The units working under the SCCP control are old and inefficient using 'wet process' whereas the units established in the private sector are new, efficient and use 'dry process'. Cement manufacturing is a high capital- and energy-intensive industry. The capital cost of a 2000 tonnes per day (TPD) plant ranges between Rs. 3.5 billion to Rs. 4 billion whereas the capital cost of a 3000 TPD 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'.

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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 cement industry crossed the heavily burdened debt mark of Rs 120 billion from financial institutions. 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. There are 23 cement companies in the country out of which 4 are foreign companies and 3 are controlled by the armed forces under the aegis of Fauji Foundation and Army Welfare Trust. 19 of these companies are listed on the stock exchanges of the country and their working is regulated by strong professional and statutory bodies such as Securities and Exchange Commission of Pakistan, Stock Exchanges of Pakistan, Institute of Chartered Accountants of Pakistan and Institute of Cost and Management Accountants of Pakistan. Industry circle further added the companies file monthly, as well as, annual returns of income tax, sales tax and federal excise. 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. The cost of furnace oil alone has increased by nearly 100% in the last 15 months alone. With the increase in furnace oil the increase in electricity tariff has also become inevitable.

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In t ll C p c y s a a a it
4 0 3 5 3 0 2 5 2 0 1 5 1 0 5 0 C ac ap ity

Pakistan has remained a net importer of cement but due to the privatization of units operating
20 01 2 0 -0 02 4 5 2 0 -0 05 6 0 under-02 state control3and 2003-04 subsequent 200 -0 expansion programmes 20 6 the new owners supported by by -07

financial has pushed the industry to a point where the country is bound to reach an oversupply situation. However, the recent increase in energy cost provides opportunity for the efficient units based on dry process to sustain the situation for a relatively longer period. It would also be possible because the expansion by the existing units and establishment of new units are being delayed. 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. UNIVERSITY OF CENTRAL PUNJAB 7

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-Supply Gap
The demand-supply gap which for the last decade was in favor of manufacturers is now set to switch the other way with supply outpacing demand by the end of 1997. Historically, demand has grown at an average rate of 7%, with the Northern region averaging 8% and Southern region lagging behind at 4%. There is much pessimism about the industry's future due to a tremendous increase in supply expected by the end of next year. The way new plants are being established and existing plants are undertaking expansion, the demand-supply equation is bound to create surpluses. However, it has been observed that actual progress is slower than planned to avoid a possible glut situation. This will effectively narrow down the gap between demand and supply and thereby ease the pressure on prices. 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 starts.

Number of Units (Grey Cement)

2 0 1 8 1 6 1 4 1 2 1 0 8 6 4 2 0

North Zone South Zone Total

N m e o U it u br f n s

19 10 29

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North Zone

South Zone

Competition
As the cement market is moving from a virtual 'sellers' market' to an over-supply situation, it is expected that when prices stagnate and profitability becomes a function of volume and economies of scale, locational advantage and proximity to markets will become extremely important factors. At present the freight charges are a massive 20% of the retail prices. The plants located very close to each other and tapping the same market will have to expand their markets which will increase their freight expenses. Dandot, Pioneer, Maple Leaf and Garibwal are all located within a radius of 100 kilometers and are selling bulk of their production in the same areas and will thus face serious competition from each other.

Opportunity Aspect
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 annum. The demand for cement for infrastructure units is expected to grow with the commencement of work on motorways, power plants, Islamabad New City, Karachi Package and Ghazi Brotha dam. If all these projects are implemented as per schedule, the demand for cement is expected to grow at a higher rate.

Government Attitude Towards Sector Tax structure

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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%. So far, the manufacturers have been able to pass on the increase to consumers but the situation is unlikely to continue. However, the possibility of formation of a cartel cannot be ruled out. Since massive investment has been made in the sector, any reduction in price of cement can reduce profit margins of all the units.

Formation of Cartel
Formation of cartel and fixation of price at a level high enough to cover increasing costs of inputs and ensure reasonable profit margins may provide a short-term relief to the manufacturers. Such a cartel may be against the interests of consumers but can help the manufacturers to survive with some dignity. Formation and smooth operation of a cartel is generally difficult but in the case of cement industry it may not be so because the only restriction could be on the level of capacity utilization along with a modest uniform reduction in price of cement. However, the units are in diverse states of financial health, enjoy different levels to of competitive their advantage, and therefore need different prescriptions profitability. maintain

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.

Industry during FY 2009

As there is global economic crisis and ongoing unfavorable investments climate, severe crisis of electricity and deteriorating safety concerns led o poor economic progress during FY 2009.The UNIVERSITY OF CENTRAL PUNJAB 10

GDP growth during FY 2009 hovered around merely 2%, lowest during the last 7 years in the country. The manufacturing sector showed a negative growth of 4% compared with sizable positive growth of 5% last year. The growth in GDP was mainly contributed by outperforming progress made in agriculture sector during the period under the review which is nearly 4.7%against only 1.7% last year. Government spending of Rs. 550 billion on Public Sector Development Plan as announced in last year budget FY 2008 was cut down to a revised amount of Rs. 418 billion due to liquidity prices prevailing in the country. All these bode negatively on the cement sector in the country as well. Cement sales in local market during FY 2009 plunged by nearly 14%, first time during the last 7 years. The cement industry of the country sold over 19 million tons cement on the local market against about 23 million tons last year. On the other hand, exporters from the cement from the country are on rise. Total cement exporters from the country first time crossed 10 million marks. Overall capacity utilization of the available capacity declined to nearly 74% from last year of 93% mainly on account of less demand and further addition of new capacities during the period under report. Company has sold equal to 93% of its capacity which is significantly higher than industry average of 74%. This was only possible due to brand loyalty and customers satisfaction on the companys products.

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Company Overview
Company Name:
D.G. KHAN CEMENT COMPANY LIMITED

Legal Status:
Public Limited Company

Registered Office:
Nishat House, 53-A, Lawrence Road, Lahore, Pakistan. Phone: 92-42-6367812-20 Fax: 92-42-6367414 E-mail: info@dgcement.com Web: www.dgcement.com UNIVERSITY OF CENTRAL PUNJAB 12

Chairperson
Mrs. Naz Mansha

Chief Executive
Mr. Mian Raza Mansha

Directors
Khalid Qadeer Qureshi Mohammad Azam Zaka ud din

Inayat Ullah Niazi (CFO)

Nabiha Shahnawaz Cheema

Companys Secretary:
Mr. Khalid Mahmood Chohan

Auditors:
M/s A.F. Ferguson & Co.

Legal Advisor:
Mr. Shahid Hameed, Bar-at-Law

Bankers:

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Sales Offices

Royal Bank of Scotland

Allied Bank Ltd

Muslim Commercial Bank Ltd

Askari Bank Ltd

Bank Alfalah Ltd

Citi Bank N.A

Habib Bank Ltd

National Bank of Pakistan Ltd

Sandard Chartered Bank Ltd

The Bank of Punjab

United Bank Ltd

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Lahore Regional Sales Office Multan Regional Sales Office DG Khan Regional Sales Office Karachi Regional Sales Office

(Annual report 2009DG Khan Cement Company Ltd, p.2)

COMPANY PROFILE
DG Khan Cement Company Limited (DGKC) is a producer and seller of ordinary Portland and Sulphate-resistant cement. The company is a unit of Nishat group which is a leading and diversified business group with a strong presence in the three most important sectors of Pakistan: textiles, cement and financial services. The group also has considerable stake in insurance, power generation, paper products and aviation sectors. DGKCC is listed on the stock exchanges of Karachi, Lahore and Islamabad.

About
D.G. Khan Cement Company Limited (DGKCC), a unit of Nishat group, is the largest cementmanufacturing unit in Pakistan with a production capacity more than 5,500 tons clinker per day. It has a countrywide distribution network and its products are preferred on projects of national repute both locally and internationally due to the unparallel and consistent quality. It is listed on all the Stock Exchanges of Pakistan. D.G.Khan Cement Company has the largest cement manufacturing capacity in the country. Listed in 1992, D.G.Khan Cement was established by the State Cement Corporation of Pakistan

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(SSCP) at Dera Ghazi Khan in 1986. It was privatized to the Nishat group in 1994-95 at Rs35.90 per share. In 1995, D.G Khan Cement (DGK) was at the top of the 19 listed cement units in terms of profits earned and total assets and ranked second in respect of sales. The company then enjoyed excellent liquidity with no short-term borrowings; minimal long-term liabilities and a mountain of cash as high as Rs2.1 billion at end-December, 1995. By the middle of last decade, the days of sunshine and glory were all but over for the cement sector. Excess capacity; the teething competition; economic recession and the spiraling cost of production all pushed cement producing units in the quagmire of losses. The company is still market leader with respect to market share of 11.2% to 11.4%.

NISHAT GROUP
Nishat Group is one of the leading and most diversified business groups in South East Asia. With assets over PRs.300 billion, it ranks amongst the top five business houses of Pakistan. The group has strong presence in three most important business sectors of the region namely Textiles, Cement and Financial Services. In addition, the Group has also interest in Insurance, Power Generation, Paper products and Aviation. It also has the distinction of being one of the largest players in each sector. The Group is considered at par with multinationals operating locally in terms of its quality of products & services and management skills. Mian Mohammad Mansha, the chairman of Nishat Group continues the spirit of entrepreneurship and has led the Group successfully to make it the premier business group of the region. The group has become a multidimensional corporation and has played an important role in the industrial development of the country. In recognition of his unparallel contribution, the Government of Pakistan has also conferred him with Sitara-e-Imtiaz, one of the most prestigious civil awards of the country.

Acquisition of DGKCC by Nishat Group

Nishat Group acquired DGKCC in 1992 under the privatization initiative of the government. Starting from the privatization, the focus of the management has been on increasing capacity as

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well as utilization level of the plant. The company undertook the optimization by raising the capacity immediately after the privatization by 200tpd to 2200tpd in 1993.

Now a day the export demand of D.G cement is 2000 TPD. Presently D.G.K.C.C export cement to AFGHANISTAN, IRAQ AND UAE.

BRANDS (PRODUCT)
Two different products are produced at DGKCC namely Ordinary Portland Cement and Sulphate Resistant Cement. These products are marketed through two different brands: DG brand & Elephant brand Ordinary Portland Cement (It is also called the OPC and its demand is about 92% because of commonly used).

DG brand Sulphate Resistant Cement (It is also called the SRC and its demand is about only 8% because it is only used in standing the foundations its main work is to finish the pours produced while standing the foundations and made the foundations much strong).

In addition to following two brands they are also offering four different packaging which are as following: OPC SRC ELEPHANT BRAND DG PLASTIC BAG

FRIENDLY ENVIRONMENT

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Measures Taken in Protecting the Environment and Its Impact on Companys Performance
DGKCC is part of the solution and it has the track record to prove it. A leader in the fight against pollution, DGKCC has been a pioneer in developing innovative methods for recycling. Its patented cement-making process -- CemStar -significantly reduces carbon dioxide (CO2) and nitrogen oxide (NOx) emissions in the cementmaking kiln process. Today, cement producers throughout the PAKISTAN use that process, resulting in a cleaner environment nationally. The Company constantly seeks new ways to utilize innovative made technologies by D.G.K.C.C in to its The the environmental commitment protection programs.

environment is paramount, the Companys kilns use the most advanced air pollution control systems ever utilized by a cement plant in PAKISTAN.

Capacity Addition
To meet the increasing demand and to capitalize on its geographic location, the management further expanded the capacity by adding another production line with a capacity of 3,300 tons per day in year 1998. Design of the new plant is based on latest dry process technology, energy efficient and environmental protection from particulate pollution according to the international standards. The plant and machinery was supplied by M/s F.L. Smiths of Denmark. As a result, DGKCC emerged as the largest cement production plant in Pakistan with annual production capacity of 1,650,000 M tons of clinker (1,732,000 M.Tons Cement) constituting about 10% share of the total cement production capacity of the country. The optimization plan is still underway to increase the total capacity of the two units to 6700 TPD by mid of 2005 from 5500 TPD at present.

Expansion -Khairpur Project

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Furthermore, the Group set up a new cement production line of 6,700 TPD clinker near Kalar Kahar, Distt. Chakwal, the single largest production line in the country. First of its kind in cement industry of Pakistan, the new plant have two strings of pre-heater towers, the advantage of twin strings lies in the operational flexibility whereby production may be adjusted according to market conditions. The project is equipped with two vertical cement grinding mills. The cement grinding mills are first vertical Mills in Pakistan. The new plant would not only increase the capacity but would also provide proximity to the untapped market of Northern Punjab and NWFP besides making it more convenient to export to Afghanistan from northern borders.

Power Generation
For continuous and smooth operations of the plant uninterrupted power supply is very crucial. The company has its own power generation plant along with WAPDA supply. The installed generation capacity is 23.84 MW.

Sales and Production

In FY'09 DG Khan Cement hit a major land mark regarding growing sales, despite the severe power crises and security situation of the state. Moreover, due to global recession and the liquidity & credit crunch, the buying power of the major customers both at home and abroad was looking bleak. Local sales decreased by 14%, while the exports passed the 10 million ton mark. Also the company had to recover from a negative profit after tax due to a huge amount of debt leverage in the balance sheet. Despite all these factors the company due to sharp and effective steps recorded a huge boost in sales of 45%, a figure which even overshadowed the 17.86% rise in the operating cost thus registering a profit after taxes of Rs 525m. The exports also doubled playing a major part in the increasing sales. The company's production of both cement and clinker was less than the previous year. The cement production was 8.3% less than the year 2008-09 due to lack of resources like power and also due to the weakening buying powers of the customers because of inflation. The production of clinker followed similar trend being 4% less than FY'08 in FY'09.

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Environmental Management
DG Khan Cement Co. Ltd., production processes are environment friendly and comply with the World Banks environmental standards. It has been certified for Environment Management System ISO 14001 by Quality Assurance Services, Australia. The company was also certified for ISO-9002 (Quality Management System) in 1998. By achieving this landmark, DG Khan Cement became the first and only cement factory in Pakistan certified for both ISO 9002 & ISO 14001...

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ON GOING PROJECTS:
Work on Waste Heat Recovery project is underway. Civil work and fabrication is at full swing. Shipments of plant & machinery have already started reaching at plant site. The project is expected to complete as per schedule. Cement manufacturing is highly energy extensive. Therefore, focusing on non conventional fuels as alternative or substitute fuels to conserve energy is simply mandatory requirement of the day. Your management has decided to use Municipal Solid Waste as Refused Drive Fuel (RDF) as an alternative to Coal. This will not only reduce the rising cost of production but also provide an opportunity to dispose of permanently the waste material in a controlled environment friendly sustainable fashion. In this regard your management has singed an agreement with a German company for the supply of modular design machinery and equipment for RDF project.

FUTURE OUTLOOK
Current situation posed serious doubts for stable and sustained developmental and infrastructural projects in the country. Safe and secure environment is of pivotal importance for new investments. Entrepreneurs both local and foreigners pay high importance to conducive and safe working place. Ongoing war like situation in Northern parts of our country and severe security concerns in other areas of the country is hampering the overall economic activities. In addition liquidity crisis, increasing electricity tariff, power shedding and still higher cost of financing are serious impediments to economic growth in the country. Going forward, spending by Govt. under annual PSDP is reportedly much less than budgeted for the first quarter of FY 2010. All these factors will affect the cement demand in the periods to come. In export markets, specially, in Gulf region the competition is getting stiff after capacity additions by a few Gulf States. Recently Saudi Arabia has also allowed cement exports which is a setback for Pakistani cement manufacturers. Nevertheless, cement exports from the country are expected to achieve a decent growth in the current financial year as well.

Mission Statement
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To provide quality products to customers and explore new markets to promote/expand sales of the Company through good governance and foster a sound and dynamic team, so as to achieve optimum prices of products of the Company for sustainable and equitable growth and prosperity of the Company.

Vision Statement
To transform the Company into a modern and dynamic cement manufacturing company with qualified professionals and fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan. BUSINESS PROCESS
Cement acts as a binding agent, holding particles of aggregate together form concrete. Cement production is highly energy-intensive process and involves the chemical combination of calcium carbonate (limestone), silica, alumina and small amounts UNIVERSITY OF CENTRAL PUNJAB 23

of other materials. Burning limestone to make clinker produces cement, and the clinker is blended with additives and then finely ground to produce different cement types. KEY STEPS: There are following five steps given as under: The raw materials needed to produce cement are:

1) Shale

2) Limestone

3) Bauxite

4) Gypsum

5) Step 1: Extraction of raw

Iron ore materials.

The raw materials are extracted from the quarry by digging the holes through machines in mountains resources blasting. Step 2: Storage and blending of raw containing needed to be used limestone and other in process then they do

materials. Then all these raw materials are to be stored for the further process. Those raw materials are then crushed and then blend with each Then these are transported to the through machines and other. plant where they are stored forming piles homogenized.

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Step 3: Raw grinding and burning After that there will be grinding in a careful mixture which produces a very fine powder in a 2000 horse power roller mill, so this fine powder is known as Raw Meal. Next, the fine powder is heated as it passes through the Pre-Heater Tower into a large kiln, which is over half the length of a football field and 4.2 meters in diameter. In the kiln, the powder is heated to 1500 degrees Celsius. And being suddenly and dramatically cooled by bursts of air. Now this creates a new product, called Clinker. And is just like small black soft stones. It is the basic requirement for the production of all cements. Step 4: Cement grinding and storage. A small amount of gypsum (3-5%) is added to the clinker to regulate how the cement will set. The mixture is then very finely ground in a finishing mill. The mill is a large revolving cylinder containing 250 tons of steel balls that is driven by 4000 horse power motor. Then "pure cement" is obtained and is so fine that it can pass through a sieve that will hold water. During this phase, different mineral materials, called "cement additives", may be added alongside the gypsum. Used in varying proportions, these additives, gives the cement specific properties such as reduced permeability, greater resistance to sulfates and aggressive environments, improved workability, or higherquality finishes. Finally, the cement is stored in silos before being packing and delivers to the sites. Step 5: Packing and delivering. After being stored in silos there is a last phase of packing that cement and loading and delivering that very fine cement to the sites where it requires.

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The cement manufacturing process consists of many simultaneous and continuous operations using some of the largest moving machinery in manufacturing. Over 5000 sensors and 50 computers allow the entire operation to be controlled by a couple of operators from a central control room. Each tone of cement requires about 1.7 tone of limestone, gypsum and silica, etc. By volume limestone accounts for about 80% and clay 19% of the intermediate product clinker. Gypsum is later on added to clinker in the ratio of 4:96 to obtain cement.

Flow Process of Production

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Steps of Production

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Cost of production
Since the industry faces a situation where sales price will be fixed by mutual consensus, the cost of production will be the most critical factor of profitability. Energy cost is a major component of total cost of production. It contributes at an average 40 to 45 percent towards total cost of cement production. Energy cost is even higher in case of those plant which use wet process. A cement plant based on wet process consumes 165 kg of furnace oil to produce one tone of clinker as compared to 85 kg of furnace oil used in dry process to produce the same quantity of clinker. Since cement plants use both furnace oil and electricity, any increase in the prices of these two products is detrimental to profitability of the industry. Ever since October 1995, however, there has been more than 60% increase in the price of furnace oil. Another significant cost component is packaging material. Cement is rarely sold in bulk in Pakistan almost all cement sales are in four-ply paper sacks. Cost of paper sacks has gone up by almost 90% since December 1994. D.G. Khan Cement was the most prized unit out of the cement units privatized by the Nawaz Sharif government. Of all it was the most modern plant with bulk of depreciation amortized and interest charges paid for. The company enjoys a virtual monopoly in its sales territory. There is no other cement plant within a radius of 400 kilometers in Suleiman Range. The expansion will come on line at a time when there will be supply overhang in the industry. With margins coming under pressure it will have to bear the added brunt of higher financial charges and increased depreciation cost in the years to come. Analysis of the latest half-yearly results of the company shows that although sales of the company have gone up by 3.5%, the increase in cost of sales has reduced gross margin from 61% to 48%. With rising inputs cost not being matched by similar increase in price of cement, margins are expected to shrink further. The company, after the expansion is expected to face fiercer competition from Zeal Pak, Pioneer, Dandot and Wah. To wrest market share from the competitors, it is likely that D.G. Khan will have to reduce its cement prices.

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DECISION MAKING
The decision making style of D.G.K.C.C is DECENTRALIZATION. And the organizational structure is FLAT. Although all the employees have opportunity to give the decisions regarding the plant performance and for that also meetings are held every day between DIRECTOR and MANAGERS of the company in which they also discuss and made future plans of the daily routine work and they also check out their previous day work efficiency and performance, every manager is responsible to give the performance repot of every employee working under him. Also an annual meeting which is always announced by the chairperson is held between the chair person and directors of the Company in this meeting plan and goals to be achieve in the coming year are set and also they see and compare the Companys performance between the previous and next year and here the head give the certain target to be achieve in the coming year although the suggests are taken by the directors but these suggests are not give so much importance regarding production. And also there is a process of delegation within the company.

Top Management of DGKCC

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Hierarchy

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DEPARTMENTALISATION

SWOT ANALYSIS
SWOT stands for strengths, weaknesses, opportunities and threats. A SWOT analysis is a technique that many companies use during strategic planning; basically an organized way to evaluate where to focus time, money and energy to improve productivity and growth. A SWOT analysis can be a valuable tool for setting milestones or approaching a venture investor, because it demonstrates a solid understanding of your company performance and the factors influencing productivity.

Explanation of SWOT Analysis

STRENGTHS Availability of raw material
The easy availability of the key raw material Gypsum, Shale and limestone all over Pakistan gives a smoother start as which I think is a very good for any cement industry. And the plants are installed quite near to raw material which is a competitive edge.

Cheaper labor
As we all know the labor of Pakistan is very cheap. So this is a healthy sign for the company as the company has to pay less to their labor which result in saving of their income and later on can be utilized in the expansion of cement plant. Resultant increases the cement production.

Latest machinery
The plant of the company is equipped with the latest machinery having a latest technology in Pakistan as compared with others. Although it is expensive but it saves the cost by producing quality cement and creating value in mind of customers. UNIVERSITY OF CENTRAL PUNJAB 31

Quality Product
As the plant equipped with the modern technology so it has a capability to produce better quality using less energy than others. The company has been certified for Environment Management System ISO 14001 by Quality Assurance Services, Australia. The company was also certified for ISO-9002 (Quality Management System) in 1998. By achieving this landmark, DG Khan Cement became the first and only cement factory in Pakistan certified for both ISO 9002 & ISO 14001.

Self Power Generation

The company has its own power generation plants in the factory area so to meet the plant requirements and we all know that Pakistan these days suffer with serious energy crisis so the company do not totally depends upon WAPDA even from its own generation the company produces energy with much less cost so I think it is another main strength that DGKCC have if compared with other cement industry because not other cement plants in Pakistan have such energy generation system so they have to depend upon WAPDA.

Durability
Yes, DGKCC has a very good image in mind of its customers reason being they produce the finest quality since day first of its production and take steps to make it better and even charge less compared with its competitors. The company has its positioning through its slogan, which represents durability.

Competitive Edge
Company launches its new plant near chakwal, which double its production capacity. So this new plant helps in gaining the competitive edge over others in north region.

Profitable Organization
At present and from few years organization is earning profit which is its strength because in profitable organizations more and people invest more and more. So profitability is a good sign for the organization. Here are some figures to prove further:

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Use of Coal and Waste Products

Coal is found in all the four provinces of Pakistan. The country has huge coal resources, about 185 billion tonnes, out of which 3.3 billion tonnes are in proven/measured category and about 11 billion are indicated reserves, the bulk of it is found in Sindh. At present, DGKCC switch to coal and gas as basic fuel. According to data the cost of cement production per tonne by furnace oil was around Rs2, 083 whereas the cost of production per tonne by coal was Rs8,68,saving Rs1,215 per tonne. Similarly, the saving per bag was Rs60.75, which is a huge difference. Now husk is also introduce as basic fuel in order to minimize production cost as much as possible.

Own Paper Bag Plant

DGKCC has now installed its own paper bag plant and became pioneer in that to even minimize its bag cost even that plant also sells bags to other cement plants as per demand.

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WEAKNESESS
Low Promotional Campaign
If we analyze this they are not paying much attention to promotional campaign. They are not advertising their product as per requirement because through promotional campaign they can also gain more market. They are only using trade promotions, which are not enough to have a good positioning in the market.

No Performance Appraisal
There is no proper performance appraisal program. If one works hard and want to show creativity his performance is not appraised by any instrument. The managerial staff is not promoted on the basis of performance, as they have no any tool to measure performance of managers. They only one way to measure the performance which is annual confidential report, which is prepared by only one person who is immediate boss of any employee.

Seniority Issues
In management there is a seniority virus means there is no proper mechanism for the promotion of the seniors. Experienced persons have a lot of experience and they know the organization best and how to effectively run that organization. They know that what to promote and what not to promote about the organization. This irregularity in promotion of managerial staff creates job dissatisfaction and lowers down their productivity. It may happen that staff is not dissatisfied with the job but at the same time they may not be satisfied with their job.

Centralized Decision Making

Although the decision making style of DGKCC is decentralized that what the company says but the ground reality is that in decision making process the middle level management is not much consider by the upper management which creates sense of irresponsibility among the members of company. So ultimately it creates job dissatisfaction. Their decisions are not praised and honored much as they expect.

OPPORTUNITIES
Location of Project
Location always matters, if we see in southern Punjab there is not enough cement factories other than DG Cement. So we can say that there is somewhat monopolist in that part and it controls the UNIVERSITY OF CENTRAL PUNJAB 34

whole market. If the company upgrades its production capacity they have a good chance to cover the foreign market of Afghanistan from that plant.

Increase in demand of cement due to the upcoming sports event

South Africa is schedule to host the football world cup of 2010 due to which they need to make the football stadiums for the World Cup and Sri Lanka are also expected to approach Pakistani companies for cement imports because Sri Lanka to co-host the cricket world cup of 2011. So this is a good chance for a company to maximize profit.

Export Demand
As there is a war like situation in Afghanistan and Iraq so there is a huge demand of cement in rehabilitation process, most of Indian cement plants are in north region so from there it costs a lot to reach in southern region so this also again is a huge market to be capture, also there is a huge demand in UAE and Russia. Result there is a huge cake of international market which a company have a chance to cater.

Introduction to New Product Line

The company still produces OPC and SRC but there is also a room for producing the White Cement so I think by introducing the new product line they can also increase their sales and profit also

Rehabilitation and New Construction Projects in Country

As we all know theres started a rehabilitation phase in north areas of Pakistan after war against militants and in South Waziristan there is a rehabilitation phase to be coming and a lots of projects have started in the country. So this increase in demand creates a new opportunity for the company to earn more profit.

THREATS
Increase in Fuel Prices
Increase in the international prices of coal and oil is a major threat. As Pakistan coal contains high percentage of sulphur due to which the company is not able to use the local coal as a source of energy. So the company has to import the coal from different countries like South Africa, china and Indonesia at high prices. This will restrict the profit margin. UNIVERSITY OF CENTRAL PUNJAB 35

Economic Recession
There is a global recession going these days so this is also a threat to cement industry as it affects a lot to export market.

Political Instability
That instability always remains threat to Pakistan and its cement industry also because due to this theres not as much growth and now the war like situation in a country is really a big issue.

IMF Loan
IMF Package in Future can cause to decrease GDP and economical development in Pakistan. This will also be cause to stop development of infrastructure. So it will have huge effect on company also in fact on whole industry.

Increase in Interest Rates

Unanticipated increase in interest rates or less than expected demand growth might create severe crises for the sector couple of years forward.

Decrease profitability due to competition

The sharp decline in cement prices has been witnessed due to domestic competition among companies has dampened the profitability of the company. This increase in competition among the players have further decreased the prices of cement in the local market. So the company decrease the prices of products in order to get high market as compared to its competitor.

High level of taxation

Presently, the company is heavily burdened due to levy of Federal Excise Duty @ Rs. 750 per ton and General Sales Tax @ 15% on duty paid value. In addition to Federal Excise Duty and General Sales Tax, company is also paying the provincial levies (Royalty and Excise Duty) on acquiring of raw material for production of cement i.e. lime stone, shale and clay. Per ton cost impact of these taxes in four provinces of Pakistan is as follows: Punjab Lime Stone 24 NWFP 21 Sindh 17 Baluchistan 65 36

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A comparison of taxation and retail prices with other regional countries revealed that taxation in Pakistan is highest while cement retail prices are lowest.

Tour to DGKCC

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PROBLEMS IDENTIFICATION
As there are not many lope holes in the company because they strictly follow the standards. But still there are some tribulations that need to be viewed. They should have to pay their serious attention to their marketing in order to boost their sales and income of the company as the company also suffers very serious problems regarding sale of cement these days. Reason being due to: Economic recession all over the globe the company is in crisis these days. Instability of politics in Pakistan. Terrorism in Pakistan.

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 Energy crisis in Pakistan. There is a lot of problem regarding sitting arrangement of guests in the head office as even i internee had issue throughout my internship and this is just because they have a very conjusted place so they need to work on that. Though they have a very good record system but the file keeping is not so much good all the record files are placed randomly at the corner of finance department n whenever a file is needed then there would be a lot of problem in order to search that particular file. As NISHAT head office is not just only the head office of DG Cement but also the head office of Nishat Power, so now they are really running out of space from everywhere they had a major space issue regarding car parking, file keeping record, office space. There are many few people who are computer literate most of the employees doesnt operate the computer well though they use the computer but they dont have a good command on computer. So they need to be trained more regarding the use of OACLE software. Working after hours without any incentive. Multitasking continuously effects work.

RECOMMENDATIONS

They should pay much attention to their employees promotion. They should use performance appraisal system. Top management should use up-to-date marketing practices rather to use orthodox ideas. This is the age of advertisement and they should advertise their product rather use push strategy. They should emphasize on pull strategy as well. They have good, energetic, experienced marketing and sales team they should use it constructively. They should pay much attention to promotional tools. They should advertise their product. They are only using trade promotions, which are not enough to have a good positioning in the market. They should use other promotional tools as well UNIVERSITY OF CENTRAL PUNJAB 39

 The middle level management should be involved in decision-making. In this way they will feel sense of responsibility and their productivity will increase. Their loyalty with the organization will also increase. They should also introduce some employee recognition program. In this way the employees will be more satisfied with their jobs and ultimately will be beneficial for the organization in terms of high productivity. Skills and performance based performance appraisal program should be applied. Employees should be promoted on the basis of their achievement. Employees should be rotated in different jobs and tasks, as monotony decreases productivity.

CONCLUSION
Working at DG Cement has provided me with an invaluable experience of how the Financial matters are run and solved. I had chosen to go into this field because of the interest I have in Finance. From the whole analysis, company has growing potential. As Pakistani market is going to be liberalized, new players are entering all sectors including cement sector, competition is going to be very intensive and severe. To remain market leader DGKCC should reorganize its policies regarding pricing, placement, workforce management and development. To gain and sustain competitive advantage DGKCC should change itself continuously according to local as well as international market. DG Khan Cement factory is the leading company in the cement sector. UNIVERSITY OF CENTRAL PUNJAB 40

The company is performing very well for the financial point of view. It pays a huge amount annually in the form of taxes to the government of Pakistan. Companys distribution channels are very effective. The prices of D G Cement products are higher than the competitors due to the fine quality, it provides. It can also be concluded that D G Cement should reduce the prices of its products.

BIBLIOGRAPHY
WEB
[1. www.cementforum.com [2. http://www.cement.org/basics/images/flashtour.html [3. http://www.inlandcanada.com/NR/exeres/3E7E96B8-1DF4-4F8D-A5CA0FC35A4BDBD5.htm [4. http://www.cement.org/basics/howmade.asp [5. http://www.cement.org/basics/images/flashtour.html [6. http://www.brecorder.com/index.php? id=959953&currPageNo=1&query=&search=&term=&supDate= [7. http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ric=DGKH.KA [8. http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/Business/27-Oct2009/Cement-industry-crosses-Rs120-billion-debt-mark [9. http://www.pakistaneconomist.com/database2/cover/c96-97.asp [10.http://www.cement.com.pk/cement/pakistan-cement-industry.html [11.http://www.cementchina.net/news/shownews.asp?id=4144 [12.http://www.dgcement.com/financial-reports/AnnualReport2007-08.pdf UNIVERSITY OF CENTRAL PUNJAB 41

[13.http://www.dgcement.com/financial-reports/DG1stQurater2008-09.pdf [14.http://economicpakistan.wordpress.com/2009/02/01/cement-industry/ [15.Analysis of Financial Statement by Gibson [16.http://02e4f8d.netsolhost.com/financial-reports/AnnualReport2006-2007.pdf TEXT 1. Economic Survey Of Pakistan 2006-07 2. Economic Survey Of Pakistan 2007-08 3. Annual Report Of Lucky Cement 2007-08 4. Annual Report Of Fauji Cement 2007-08 5. Annual Report Of D.G Khan Cement 2007-08 6. Annual Report Of D.G Khan Cement 2008-09 7. Annual Report Of Pioneer Cement 2007-08 8. Budget Review 2008-09 PEOPLE I. I.U.NIAZI II. MUKHTAR AHMAD III. ELAHI BUKHSH IV. WASEEM

APPENDIX

INTERNSHIP OFFER LETTER. INTERNSHIP COMPLETION LETTER. EMPLOYER EVALUATION FORM.

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