Professional Documents
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Preface
As the world is growing rapidly, the businesses are also moving to
become the huge one. And by that result, more and more people want to
become a master in these businesses. The main purpose in the finance
field is to know how the financial analysis is done. We all know that
finance is the blood of any business and without it no business can run.
Financial analysis of a company is very difficult and the most important
task and by doing this I am able to know the whole financial position and
financial structure of the company.
Simply by looking at how much cash a company has does not provide
enough information. The financial statements need to be analyzed to
measure a company’s performance and to compare it with other firm’s in
the same industry. The resulting information is intended to be useful to
owners, potential investors, creditors, analysts, and others as the
analysis evaluates the past performance, future potential and financial
position of the firm.
This report is an analysis of financial statements of D.G. Khan Cement
Company Ltd. This report has been prepared with an objective to develop
analytical skills required to interpret the information (explicit as well as
implicit) provided by the financial statements and to measure the
company’s performance during the past few years. The financial
statements are analyzed using traditional evaluation techniques such as
horizontal analysis, vertical analysis and trend analysis. Ratios are an
important tool in analyzing the financial statements & the company’s
profitability, solvency & liquidity. Sincere attempts have been made to
make this report error free but if any errors and omissions are found then
I apologize for that.
Rabia Chaudhary
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Financial Analysis of DG Khan Cement Company Ltd.
Acknowledgement
In the name of “Allah”, the most beneficent and merciful who gave us
strength and knowledge to complete this report. This report is a part of
our course “Financial Statement Analysis”. This has proved to be a great
experience. I would like to express our gratitude to our Finance teacher
Mr. Waseem Rabani who gave us this opportunity to fulfill this report. We
would also like to thank our colleagues who participated in a focus group
session. They gave us many helpful comments which helped us a lot in
preparing our report.
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Financial Analysis of DG Khan Cement Company Ltd.
Table of Contents
.................................................................................................................................... ....2
Table of Contents..................................................................................................... .............3
Introduction............................................................................................................ ...............5
Mission Statement.................................................................................................... .........5
Vision Statement........................................................................................ .......................5
D.G. Khan Cement Company Limited................................................... ............................5
NISHAT GROUP.................................................................................................... ........5
D.G. Khan Cement Company................................................................ ........................6
Acquisition of DGKCC by Nishat Group............................................................ .............6
Capacity Addition........................................................................................... ................6
Expansion -Khairpur Project.................................................................. ........................6
Power Generation............................................................................................... ...........7
Environmental Management......................................................................... .................7
BOARD OF DIRECTORS........................................................................... ...................7
Why cement sector for our project.............................................................................. .......7
INDUSTRY REVIEW......................................................................................................... ..10
Overview of income statement......................................................................... ...................11
Overview of Balance sheet.............................................................................................. ....11
Liquidity Position with Graphical Presentation................................................................... ..12
Liquidity Position.................................................................................. ...........................12
Activity Ratios........................................................................................................... .......13
Operating Cycle............................................................................................................. ..14
Debt Ratios....................................................................................... ..............................14
Profitability Ratios......................................................................................................... ...15
Profitability - Financial Year 2002 to Financial Year 2008 ...................................... ......16
Assets Utilization.............................................................................................. ...............17
Return on Investment.................................................................................... ..................19
Return on total equity............................................................................................ .......19
Investment Ratios......................................................................................................... ...19
Investment Ratios......................................................................................................... ...21
Univariate Model................................................................................................... ..............23
Multivariate Model....................................................................................................... ........24
DuPont Analysis .......................................................................................................... .......26
SWOT ANALYSIS............................................................................................ ...................27
Strengths............................................................................................................... ..........27
Weaknesses............................................................................................................ ........30
Threats............................................................................................................. ...............32
Opportunities....................................................................................................... ............33
Recommendations................................................................................................ ..............37
International Trend.............................................................................. ............................38
FUTURE OUTLOOK............................................................................... ........................39
Annexure................................................................................................. ...........................41
Summarized Income Statement.............................................................. ........................41
Summarized Balance Sheet............................................................................ ................45
Horizontal Analysis of Income Statements...................................................................... .46
Vertical Analysis of Income Statements................................................................ ...........46
Horizontal Analysis of Balance Sheet.............................................................. ................47
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Financial Analysis of DG Khan Cement Company Ltd.
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Financial Analysis of DG Khan Cement Company Ltd.
Introduction
Mission Statement
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 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.
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
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Financial Analysis of DG Khan Cement Company Ltd.
contribution, the Government of Pakistan has also conferred him with “Sitara-e-Imtiaz”, one
of the most prestigious civil awards of the country.
DGKCC was established under the management control of State Cement Corporation of
Pakistan Limited (SCCP) in 1978. DGKCC started its commercial production in April 1986
with 2000 tons per day (TPD) clinker based on dry process technology. Plant & Machinery
was supplied by UBE Industries of Japan.
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.
Smidth 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.
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Financial Analysis of DG Khan Cement Company Ltd.
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.
Environmental Management
DG Khan Cement Co. Ltd., production processes are environment friendly and comply with
the World Bank’s 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...
BOARD OF DIRECTORS
• Mrs. Naz Mansha Chairperson/Director
• Mian Raza Mansha Chief Executive/Director
• Saqib Elahi Director
• Khalid Qadeer Qureshi Director
• Mohammad Azam Director
• Zaka ud din Director
• Inayat Ullah Niazi Director & Chief Financial Officer
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Financial Analysis of DG Khan Cement Company Ltd.
The cement industry is needed a highly important segment of industrial sector that plays a
pivotal role in the socio-economic development. Through the cement industry in Pakistan
has witnessed its lows and high in recent past, it has recovered during the last couple of
years and is buoyant once again.
There are total number of units are 23, from which 4 units are in the public sector while the
remaining 19 units are owned by the private sector. Two of the four units in the public sector
had to close down their operations due to stiff competition and heavy cost of production.
The cement plants are located in every province of Pakistan.
Three additional cement plants with installed capacity of over 2.1 million tons are in the final
stage of completion despite the available excess capacity in this sector. The following table
shows installation of new cement factories and expansion of the existing facilities during the
current decade.
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Financial Analysis of DG Khan Cement Company Ltd.
The industry is divided into two broad regions, the northern region and the southern region.
The northern region has over 87 percent share in total cement dispatches while the units
based in the southern region contributes 13 percent to the annual cement sales.
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Financial Analysis of DG Khan Cement Company Ltd.
INDUSTRY REVIEW
The cement industry of Pakistan again set a new record and sold 30.112M tons during FY
2008 against 24.222M tons last year, with a growth of over 24%. During the period under
report the capacity utilization of the industry was 81% against 79% last year. The slight
increase in capacity utilization is due to the fact that during the year industry added another
6.5M tons of new capacity.
Pakistani Cement industry fully tapped the export prospects of cement and managed to
export hefty 6.610M tons against 2.797M tons last year. The cement manufacturers fully
poised to explore new export markets. Contrary to past, now the cement is being exported
not only to regional neighboring countries, rather Pakistani cement is finding its place in
South East Asian countries, Russia and in African countries as well.
Clouds of recession are hovering over the economy of Pakistan and having achieved
consecutive growth of over 6% in real GDP during last four years, economic growth slowed
down to 5.8% in FY 2008 against 6.8% recorded last year. Demand of cement is directly
related with prevailing economic conditions. During FY 2008 cement sales in the country
remained bleak due to uncertainty in political and economic front coupled with fading law
and order situation. Total sales in the country were 22.395M tons against 21.034M tons last
year, witnessing an increase of only over 6%. Dilemma of price war among the cement
manufacturers to find out the market share has badly affected the financial health of the
cement sector. In addition, all time high oil and coal prices coupled with expanding
inflationary trend in the country hit badly the cost of production. Going forward, monetary
tightening stance of the State Bank of Pakistan to curb inflation in the country posed
additional burden in the form of increased lending rates.
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Financial Analysis of DG Khan Cement Company Ltd.
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Financial Analysis of DG Khan Cement Company Ltd.
2.5
2 current ratio
1.5 acid test ratio
1 cash ratio
0.5
0
2008 2007 2006 2005 2004
The liquidity position of DGKC deteriorated during the first nine months of FY'09. This was
due to a 40% decrease in current assets and a 14% increase in current liabilities if the
company. The current liabilities of the company increased due to 14% rise in trade
payables, 61% increase in accrued markup and around 7% increase in short term
borrowing by the company.
On the other hand, current assets of the company declined due to decrease in investments
from Rs 15 billion at the end of FY08 to Rs 7 billion at the end of March FY09. Also the cash
and bank balance of the company decreased by 22%. Thus, decrease in current assets and
a corresponding increase in current liabilities resulted in a less favorable liquidity position as
compared to that in FY08.
DGKC's liquidity stance had been strengthening since FY04 and in FY07 its liquidity
position was the most favorable. The increase in current assets had brought about this
change. There was a 98% increase in short term investments. Furthermore, the cash and
bank balances had also risen considerably.
In FY08 the current assets of the company declined slightly but a 63% rise in current
liabilities caused a decrease in the liquidity of the company. Investments constitute nearly
79% of the company's total current assets and they declined by 11% in FY08. The
investments decreased further from Rs 15 billion at year-end FY08 to Rs 10.9 billion by end
of 1Q09.
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Financial Analysis of DG Khan Cement Company Ltd.
Activity Ratios
120
100
days sales in
80 receivables
A/R turnover
60
20
0
2008 2007 2006 2005 2004
Activity
2008 2007 2006 2005 2004
Ratio
Inventory
Turnover in 27.66 days 21.69 days 14.96 days 21.89 days 43.63 days
days
Inventory
13.19 times 16.83 times 24.40 times 16.67 times 8.36 times
Turnover
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Financial Analysis of DG Khan Cement Company Ltd.
Days Sales
45.08 days 24.55 days 20.68 days 11.07 days 43.63 days
in Inventory
Operating Cycle
Activity
2008 2007 2006 2005 2004
Ratio
Operating
36.55days 27.89 days 18.41 days 26.34 days 48.58 days
Cycle
60
50
40
30 operating cycle
20
10
0
2008 2007 2006 2005 2004
Debt Ratios
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Financial Analysis of DG Khan Cement Company Ltd.
250
200
0
2008 2007 2006 2005 2004
The debt management ratios of DGKC showed a positive trend during FY07. The debt to
asset and equity ratios as well as the long-term debt ratio all receded during the period and
this reflected a reduction in the company's dependence on debt financing. However, during
FY08 the debt ratios of the company rose because the total debt increased in FY08 mainly
due to a 63% increase in the current liabilities which form 55% of the total debt.
Long term debt however decreased. The long term debt to equity increased because of a
decline in the equity base due to fall in reserves. The TIE ratio continued to fall in FY08
against a positive trend that prevailed before FY07. The reason is substantial rise in finance
charges due to high interest rates in the economy.
Also the operating income in FY08 decreased, thus reducing the extent to which operating
income can decline before the firm is rendered unable to meet its interest costs. Due to the
losses that DGKC experienced in FY08 and the decrease in profitability during July-March
FY09, its Earning per Share (EPS) and Price to Earning (P/E) Ratio have been negative.
During July-May 2009 the share price averaged around Rs 31.1.
This shows that the dismal profits of the company have started reflecting in the low investor
confidence and falling share price. The average share price of DGKC had hovered around
Rs 100/share except during the fourth quarter of FY08 when share price fell well below the
average. The management did not recommend any dividend for FY08 due to the dismal
profitability situation in the period.
Profitability Ratios
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Financial Analysis of DG Khan Cement Company Ltd.
140
120
gross profit margin
100
80 operating income
60 magin
40 net profit margin
20
0
2008 2007 2006 2005 2004
After experiencing declining profitability during FY08, the cement sector came back strongly
to post a growth of 167% in earnings during first quarter (July-September) of fiscal year
2009. The cement sector posted profit after taxation of Rs 1.3 billion in first quarter of FY09
as compared to Rs 500 million in the corresponding period of a year earlier.
This growth was mainly due to higher local retention prices and depreciation of the rupee
against the dollar that resulted in an increase of rupee-based export sales. The net sales of
the cement sector in the period July-March FY09 was 58% higher than the net sales
generated during the corresponding period of FY08. It is believed that the profits of cement
companies increased due to an arrangement among them to keep prices high in the local
market.
However, higher sales revenue could not be translated into an increase in profits during the
period. Increased costs of sales, operating expenses and finance expenses caused the
profitability of DGKC to remain low during July-March FY09. The cost of sales of the
company increased by 30% during the period and resulted in a gross profit of Rs 3,733
million.
The furnace oil/coal costs for the period July-March FY09 was Rs 5,258.6 million as
compared to Rs 3,095.7 million during the corresponding period of FY08. The electricity
and gas costs were lower, however, the cost of raw material and packing material
consumed increased by 12%. The administration expenses increased by 31% while the
selling & distribution expenses increased drastically by 456% (from Rs 246 million in July-
March FY08 to Rs 1,370 million in July-March FY09).
Selling expenses may have increased due to higher transportation costs involved with
exports and higher fuel costs. Also, the finance costs increased substantially by 77% as
interest rates rose owing to tight monetary policy and liquidity crunch in the market.
These rising costs greatly hampered the profitability of the company and resulted in a profit
after taxation of Rs 321 million in the period July-March FY09, which is 34% lower than the
profit (Rs 487 million) during July-March FY08. Therefore, the earning per share (EPS) of
the company declined from Rs 1.92 in July-March FY08 to Rs 1.27.
The profitability ratios of the company have shown a declining trend since after FY05. The
gross profit margin increased in FY06 only to fall in FY07 and FY08. The profit margin of
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Financial Analysis of DG Khan Cement Company Ltd.
the company has decreased continuously along with return on assets (ROA) and return on
equity (ROE).
The profit after taxation had declined by 33% in FY07 due to lower net retention prices
caused by a supply overhang in the overall industry. Also the problem of rising input costs
had begun in FY07. This rise in cost of production and raw material have continued into
FY08 and further aggravated, causing the declining trend of the profitability of DGKC.
Despite a strong growth in cement dispatches, the cement sector experienced declining
profitability during FY08. The profitability of the sector fell by 73.6% to Rs 562 million till
March 2008 from Rs 2,133 million in the corresponding period of FY07. Although the sales
volume of the cement companies increased, the net sales revenue did not increase to an
equal extent due to decrease in net retention prices in the sector.
Over the years all cement manufacturers undertook huge capacity expansion plans. This
created a situation of excess supply in the market. Companies resorted to price wars
leading to a fall in prices and reduced the profit margins for the companies. The average
cement price during the period July-March FY08 was Rs 128.3 per bag as compared to Rs
133.6 per bag in the same period in FY07.
Similar was the case with DGKCC. Increased production facilitated higher sales volume
which in turn translated into almost doubling of sales revenue in FY08. The company had
earned the highest sales revenue of Rs 12.445 billion in FY08. However, despite this, the
gross profit of DGKC in FY08 (amounting to Rs 1.9 billion) was around 6% lower than the
gross profit posted in FY07 (Rs 2.0 billion).
The reason for lower gross profit was a 140% increase in the cost of sales during the fiscal
year. Major input costs increased and dampened the profitability of DGKC and resulted in a
loss after taxation of Rs 53.230 million in FY08 against a profit after taxation of Rs 1.622
billion in FY07. The cement manufacturers in the industry were faced with rising fuel and
power costs during FY08.
The cost of production for the cement companies went up due to rise in the prices of
imported coal. The cement companies in Pakistan have shifted from oil to coal or gas
during the past few years. Coal is now used as a basic fuel by all cement manufacturers.
Pakistan has huge reserves of coal, but cement companies are compelled to import it, as
local coal has high sulphur content.
Crude oil prices shot up during FY08 and had its impact on prices of coal and natural gas.
The rise in the costs of international coal prices has been one of the biggest reasons behind
the dampening of gross margins of cement companies during FY08. There was a nearly
50% rise in the coal prices in FY08
Along with the hike in the international coal prices, the depreciation of the rupee against the
dollar also added to the cost of importing coal. Finance charges rose due to higher interest
rates, long term finances, short term borrowing and inclusion of workers' profit participation
fund in FY08.
Assets Utilization
Asset Utilization 2008 2007 2006 2005 2004
Sales to Fixed Assets 54 43 108 80 62
Return on Operating
24 33 10 13 11
Assets
Operating Asset
20 9.6 20 28 33
turnover
Return on Assets 18.5 3.8 23 11 6.60
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Financial Analysis of DG Khan Cement Company Ltd.
250
sales to fixed assets
200
return on operating
150 assets
operating assets
100 turnover
return on assets
50
The performance of DGKC in terms of asset management was weak during FY07. During
the year, the inventory turnover (days) of the company more than doubled compared to
FY06 when the management of inventory seemed most efficient (evident from the lowest
inventory turnover in days). This could be traced back to lower sales revenue for the period,
coupled with a higher stock of inventory.
At the same time, the average time taken by the company to recover cash from sales also
increased. The increase in inventory turnover in days and Days sales outstanding (DSO)
prolonged the operating cycle of the company in FY07.
However, in FY08 the asset management of DGKC improved as the inventory turnover rate
increased because the company earned sales revenue more in proportion to the increase
in inventory. Thus the days to convert inventory into sales became less (from approx. 100
days in FY07 to 79 days in FY08).
Although the days to convert sales into cash (DSO) increased slightly, the substantial
decrease in ITO (days) led to the shortening of the operating cycle in FY08. The days sales
outstanding was higher because the trade debt increased substantially (by 153%) during
FY08 as against sales.
Besides this the sales to equity and total asset turnover of the company which had a
declining trend till FY07 increased in FY08. The sales to equity ratio had been decreasing
because of an increase in the paid up capital. But the trend was reversed in FY08 because
the paid up capital remained same while the reserves fell, causing a decrease in the equity
base of the company.
Also higher growth in sales increased the sales/equity ratio. Total asset turnover also
improved because the management of the company's assets was effective in generating
higher sales revenue. The company's performance in the area has improved as full-scale
production from the newly inaugurated Khairpur plant has augmented the sales.
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Financial Analysis of DG Khan Cement Company Ltd.
Return on Investment
Return on total equity
Return
2008 2007 2006 2005 2004
Ratios
Return on
2.92 5.34 12.58 15.47 10.07
Investment
Return on
0.30 0.37 17 22 13
Total Equity
25
20
15
Return on investment
10 Return on total equity
0
2008 2007 2006 2005 2004
One of the most important profitability metrics is return on equity [or ROE for short]. Return
on equity reveals how much profit a company earned in comparison to the total amount of
shareholder equity found on the balance sheet. If you think back to lesson three, you will
remember that shareholder equity is equal to total assets minus total liabilities. It's what the
shareholders "own". Shareholder equity is a creation of accounting that represents the
assets created by the retained earnings of the business and the paid-in capital of the
owners. The return on Equity has decreased drastically and there is quite a hell of
decrement in ROE, which is not very much encouraging for the investors in shares.
Investment Ratios
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Financial Analysis of DG Khan Cement Company Ltd.
100%
60%
Earning per
common shares
40%
Degree of financial
20% leverage
0%
2008 2007 2006 2005 2004
A leverage ratio summarizing the affect a particular amount of financial leverage has on a
company's earnings per share (EPS). Financial leverage involves using fixed costs to
finance the firm, and will include higher expenses before interest and taxes (EBIT). The
higher the degree of financial leverage, the more volatile EPS will be, all other things
remaining the same. Most likely, the firm under evaluation will be trying to optimize EPS,
and this ratio can be used to help determine the most appropriate level of financial leverage
to use to achieve that goal.
The company’s ratio ha increased dramatically in the year 2008 by 15 times. So there is
quite a margin for company to get leveraged.
The portion of a company's profit allocated to each outstanding share of common
stock. Earnings per share serve as an indicator of a company's profitability.
Earnings per share are generally considered to be the single most important variable in
determining a share's price. It is also a major component used to calculate the price-to-
earnings valuation ratio. The EPS of company is fluctuating but in current year it has
decreed drastically which is not a good sign for share holders. An important aspect of EPS
that's often ignored is the capital that is required to generate the earnings (net income) in
the calculation. Two companies could generate the same EPS number, but one could do
so with less equity (investment) - that company would be more efficient at using its capital
to generate income and, all other things being equal would be a "better" company. Investors
also need to be aware of earnings manipulation that will affect the quality of the earnings
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Financial Analysis of DG Khan Cement Company Ltd.
number. It is important not to rely on any one financial measure, but to use it in conjunction
with statement analysis and other measures.
A valuation ratio of a company's current share price compared to its per-share earnings is
Price Earning ratio. In general, a high P/E suggests that investors are expecting higher
earnings growth in the future compared to companies with a lower P/E. However, the P/E
ratio doesn't tell us the whole story by itself. It's usually more useful to compare the P/E
ratios of one company to other companies in the same industry, to the market in general or
against the company's own historical P/E. It would not be useful for investors using the P/E
ratio as a basis for their investment to compare the P/E of a technology company (high P/E)
to a utility company (low P/E) as each industry has much different growth prospects.
The P/E is sometimes referred to as the "multiple", because it shows how much investors
are willing to pay per dollar of earnings. It is important that investors note an
important problem that arises with the P/E measure, and to avoid basing a decision on this
measure alone. The denominator (earnings) is based on an accounting measure of
earnings that is susceptible to forms of manipulation, making the quality of the P/E only as
good as the quality of the underlying earnings number.
Investment Ratios
• Dividend payout ratio
• Dividend yield ratio
• Book value per share
Investment
ratios 2008 2007 2006 2005 2004
Dividend payout
ratio 19.83 23.62 48.31 28.37 27.74
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Financial Analysis of DG Khan Cement Company Ltd.
60
50
40 Dividend payout ratio
30 Dividend yield ratio
20 Book value per share
10
0
2008 2007 2006 2005 2004
Indicates the proportion of earnings that are used to pay dividends to shareholders.
A reduction in dividends paid is looked poorly upon by investors, and the stock price usually
depreciates as investors seek other dividend paying stocks
.
A stable dividend payout ratio indicates a solid dividend policy by the company's board of
directors. The situation of DG Khan Cement Co. Ltd. Shows increment in 2006 but from
there is consistent decrement in this ratio by more than two times so company is trying to
build there retained earnings instead of giving dividend.
During bull markets the stock price is more likely to trade significantly higher than book
value, and in a bear market the two values may be close to equal. The dividend yield or the
dividend-price ratio on a company stock is the company's annual dividend payments
divided by its market cap, or the dividend per share divided by the price per share. It is
often expressed as a percentage. There is quite fluctuations in this ratio which shows there
is lack of stability in the company policy towards this section.
Now if we look at the book value per share, as we know that somewhat similar to
the earnings per share, but it relates the stockholder's equity to the number of shares
outstanding, giving the shares a raw value. Comparing the market value to the book value
can indicate whether or not the stock in overvalued or undervalued. During bull markets the
stock price is more likely to trade significantly higher than book value, and in a bear market
the two values may be close to equal.
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Financial Analysis of DG Khan Cement Company Ltd.
Univariate Model
Page 23
Financial Analysis of DG Khan Cement Company Ltd.
Multivariate Model
X1= Working Capital/Total Assets
X3=EBIT/Total assets
X5=Sales/Total Assets
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Financial Analysis of DG Khan Cement Company Ltd.
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Financial Analysis of DG Khan Cement Company Ltd.
DuPont Analysis
1. Dupont Return on Assets=Net profit margin*Total assets turnover
Dupont Return on
Year Calculation in (Rupees,000)
Assets
2008 7.84*0.24 1.88
2007 0.25*0.15 3.75
2006 0.31*0.74 22.94
2005 0.31*0.35 10.85
2004 0.20*0.33 6.60s
DuPont return on Assets has a decreasing trend. In 2008 net profit of co decrease due to
high cost of goods sold. Co does not utilize its assets properly in 2008. In 2007 trend of this
ratio is good. But in last 3 years it also has increasing trend.
Dupont Return on
Year Calculation in (Rupees,000)
operating Assets
2008
2007
2006
2005
2004
DuPont return on Operating Assets decrease in 2008 as compare to 2007. Co utilizes its
operating assets in 2007 as compare to 2008. Co invests in more long term investments. It
is necessary for the co to change its policy.
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Financial Analysis of DG Khan Cement Company Ltd.
SWOT ANALYSIS
Strengths
1. Availability of Raw Material.
2. Imported Machinery and plants in most of companies, which provide better
quality to over all process.
3. During fiscal year 2007-08, country exports stood at 7.712 million tones ($435
million) and Pakistan has already established its position as an exporter of
cement and clinker in the region, Sources said the industry projections
suggested that the cement industry exports would reach to $735 million by the
end of 2008-09 and it would touch $1.043 billion by the end of 2009-10.
4. Availability of foreign investment and loans has also played an important role in
softening the demand for bank credit. The moderation in fixed investment
demand in cement, construction and textile is more of a reflection of the fact that
these industries had already expanded their capacities in recent years and
floatation of debt instruments (e.g., chemical, cement, real estate and ship yard)
in the domestic market cement, real estate and ship yard) in the domestic
market
5. The compressive strength is a very important factor of cement. The Portland
cement achieves its maximum strength in 28 days. The Pakistan standard PSS
232-1883 (R) & British Standard BS 12: 1978 provides for 28 days strength of
5000Psi and 5950Psi respectively for mortar cubes.
6. Cement industries in Pakistan are currently operating at their maximum capacity
due to the boom in commercial and industrial construction within Pakistan.
7. Effect of GDP
Following effects of GDP will govern the growth of cement industry in
Pakistan
1. Higher GDP growth has positive impact on cement demand
2. Cement demand growth rate was double the GDP growth rate in last
three years
3. GDP growth is expected to continue to have same positive impact on
demand growth
8. Housing demand to grow:
Following indications have showed a considerable demand of cement in
Pakistan:
• Housing projects consume roughly 40% of cement demand
• Currently 0.3mn houses are built annually against demand of 0.5mn
• Low interest rates, post 9/11 remittances’ inflow, and real estate boom have
helped housing sector growth
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Financial Analysis of DG Khan Cement Company Ltd.
• Easy mortgage availability and announcement of low cost housing schemes will
determine housing sector growth in the long-run.
9. Government’s development spending shall continue to rise due to:
• Government development expenditures count for one third of total
cement consumption
• Increase in development expenditures has helped cement demand to
grow at very high rates
• Increase in PSDP- as announced in Medium Term Development
Framework 2005-10 will help cement demand to grow in the country
• Infrastructure development in a region triggers private development
projects having even positive impact on cement demand
10.Pakistan cement industry is one the largest exporter in Asia, major markets are
of Afghanistan and Iraq will be after peace. It’s increased GDP by exports,
providing cements in Large Dams Project and earthquake rehabilitations
projects.
11.Laboratory testing facilities meeting all American and European standards and
Vertical cement grinding mills.
12. Cement industry called major Performance Blue Chip in current economic
survey 2007-08 because during the first three quarters of the fiscal year 2007-
08, the combined paid-up capital of ten big companies was Rs. 91 billion, which
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Financial Analysis of DG Khan Cement Company Ltd.
constituted 13.17 percent of the total listed capital at KSE in which Fauji
Fertilizer, DG Khan Cement, Lucky Cement played major role.
13. Today, we find a relatively better scenario as compare to past. Most of the
cement plants, that used to operate on furnace oil, have now been converted
into coal system, which has substantially reduced cost of production.
14. The most modern selection of production equipment possible in every major
department of the plant.
15. Cement export to India through railway
• Most of the cement export to India is through railway. In order to facilitate
cement export to India, the railways has doubled its cement capacity and
increase its frequency of trains to India from Pakistan. This step has
been taken by Pakistan Railways in order to increase cement export to
India. Which is regarded as a highly profitable market?
16. Use of Coal
• Coal is found in all the four provinces of Pakistan. The country has huge
coal resources, about 185 billion tones, out of which 3.3 billion tones are
in proven/measured category and about 11 billions are indicated
reserves, the bulk of it is found in Sindh.
• The labor of Pakistan is very cheap. This is the important strength of the
cement industry as the cement companies of Pakistan has to pay less to
there labor which result in saving of there income which later on can be
utilized in the expansion of cement plant. Which will increase the cement
production?
• The export may reach to $ 500 million increase during 2008. Data for the
first quarter of FY08 shows that Afghanistan is Pakistan’s largest cement
export market. The prospects for cement exports seem bright in the
medium term due to rising domestic as well as regional cement demand.
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Financial Analysis of DG Khan Cement Company Ltd.
• Pakistan produces good quality of cement. This is the main reason due
to which recently Russia is offering high price for Pakistani cement.
Globally Pakistan is recognized for producing good quality of cement due
to which countries like Afghanistan, India, Middle East and some African
countries prefer to import cement from Pakistan.
Weaknesses
1. The stage of industrial development, in most of the segments, is still at a very low
level of technology and the existing industrial base is very narrow and consists of
very basic industries such as cement, sugar, textile, cigarette, edible oil, fertilizer,
soda ash, caustic soda, PVC etc.
2. Since cement is a specialized product, requiring sophisticated infrastructure and
production location. So, most of the cement industries in Pakistan are located
near/within mountainous regions that are rich in clay, iron and mineral capacity.
Structure of Cement industry in Pakistan is as such that there is not much
substitutability to buyers. Which shows that the Cross elasticity of demand is
negligible.
3. The customer has no choice at all to switch between two brands of cement due to
cartel of all of the cement manufacturers in Pakistan.
4. 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.
5. Consumers face a tough decision with regards to prefer which brand over which
because of the similar pricing of cement industry. The formation of cartel by the
cement manufacturers have exploited local consumers a lot and this has led to the
concentrated degree of oligopoly, where the firms are acting as a single unit to
perform their monopoly. Their combined market power is simply a diluted version of
the dominance that a single firm with a monopoly market share can exert.
6. Increase freight charges
• Exporters of the cement often complain that railways freight charges for
carrying cement from Lahore city to the border of India are Rs500 per ton
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Financial Analysis of DG Khan Cement Company Ltd.
($8 per ton) while it covers only 35 km. Against this, they say on the Indian
side, the freight is only $3 per ton for bringing goods from Chundrigar to the
border area. Cement exports have been badly hit by high fee that is being
charged by trucks and also by foreign shipping companies for the haulage of
cement from Pakistan to India. This increase in freight charges effect our
exports due to which our exports is declining
7. Logistic Problem
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Financial Analysis of DG Khan Cement Company Ltd.
Threats
1. Unanticipated increase in interest rates or less than expected demand growth might
create severe crises for the sector couple of years forward
2. Lack of demand or depressed demand in future will prove to be lethal for the sector
that has just started to recover from the miseries of 90s. Lack of demand forced
cement units to operate at very low capacity utilization in nineties. There was a
fierce competition among cement manufacturers.
3. A price war was witnessed which ended up with no conqueror. Similar
apprehensions exist for the future when there will be plenty of excess capacity. Any
hurdle in the growth of cement demand may force the sector into the price war. Yet,
we expect cement manufacturers to act prudent and learn lesson from the history.
Any mistake, similar to the one made in the last decade, will again coerce the sector
into the era where all are losers with no winner.
4. Main component of the cost is fuel. Pakistan's cement industry has converted their
plants to coal considering it to be the cheapest fuel, but its price in international
markets has gone up by more than 300 per cent in the last one year, which directly
relate increasing the cost of production.
5. The demand of cement falls heavily during rainy weather in the country, which
directly affects the running cost of a unit. It is only the rising levels of cement
exports, which are sustaining the industry.
6. Instead of appreciating the marketing skills of cement entrepreneurs to explore new
markets for cement, the industry is being pressurized constantly without realizing
that any reduction in cement exports from Pakistan will not only deprive the country
of foreign exchange ($2 billion this year), but will also result in losses to the industry.
7. The burden of increased input costs has to be borne by the consumers. It is only the
government, which can provide relief to the consumers by cutting down or
abolishing the central excise duty.
8. Problems of oversupply situation:
Following problems might arise with the oversupply situation in cement industry:
• Lower capacity utilization will reduce benefits of economies of scale.
High leverage will also adversely affect profitability of new plants.
• New plants will gain market share at the cost of older players, which are
not undergoing expansion. Large idle capacity is will create panic in
players and this may result in price wars in the coming years.
9. IMF Package in Future can cause to decrease GDP and economical development in
Pakistan. Which will also be cause to stop development of infrastructure? So it will
have huge effect on cement industry also.
10. Indian and Iran industry is also expanding its cement capacity
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Financial Analysis of DG Khan Cement Company Ltd.
• The sharp decline in cement prices has been witnessed due to domestic
competition among producers has dampened the profitability of the industry.
This increase in competition among the players has further decreased the
prices of cement in the local market. The cement manufacturers decrease
the prices of there products in order to get high market as compared to its
competitor.
Opportunities
1. The local cement industry faces high upfront fuel costs. In order to facilitate their
conversion to coal, which is widely available in the country, the government has
given incentives for imported plant and equipment for coal firing units.
2. The demand of Pakistani cement is expected to continue to grow at the rate of 20
per cent for about four years to come. It may then follow traditional growth rate of
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Financial Analysis of DG Khan Cement Company Ltd.
seven per cent per year. Announcement of major dams will dramatically increase
this demand.
3. Deregulation after accession of Pakistan to WTO is expected to open the window of
competition from cheaper markets. There may be no tariff after this deregulation on
import of cement allowing its entry into Pakistan from cheaper market at lower rate.
Cement from cheaper markets may also block Pakistan’s export of cement to its
neighboring countries. Global market has vigorously taken up the advantage of
economy of scales and multinational giants now control more than 40 per cent of
world production (China not included). The recent acquisition of Chakwal Cement by
an Egyptian giant, Orascom may be a beginning of such an entry in Pakistan by
multinationals. New avenues for export of cement are opening up for the indigenous
industry as Sri Lanka has recently shown interest to import 30,000 tons cement from
Pakistan every month. If the industry is able for avail the opportunity offered, it may
secure a significant share of Sri Lanka market by supplying 360,000 tons of cement
annually.
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Financial Analysis of DG Khan Cement Company Ltd.
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Financial Analysis of DG Khan Cement Company Ltd.
• Fresh enquiries have been received from Russia and buyers are quoting
very attractive prices as Pakistani cement quality is of very high standard
and holds good strength.
8. Earthquake in China
• In the month of May china is hit by severe earthquake having the magnitude
of 7.8 this earthquake has cause the serious destruction in china. This
disaster is also an opportunity for Pakistan cement industry to export cement
to china.
• Cement exports are expected to soar by a massive 107 per cent due to the
primary source of overall cement growth in FY08, the high exports owing to
the cement supply shortage in India and Middle East which lead to rocketing
cement prices in the region.
• 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.
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Financial Analysis of DG Khan Cement Company Ltd.
Recommendations
We would like to conclude this report by ranking overall sector as “Neutral”. We remain
neutral on the sector because on hand expansion is the need of hour. Due to expected
growth in demand, current capacity appears inadequate. On the other hand, expansion
plans set up by the various players of cement sector to grab demand expansion might
cause sector to overflow. Along with risk of being oversupplied, unanticipated increase in
interest rates or less than expected demand growth might create severe crises for the
sector couple of years forward. Weighing risks and rewards, we remain “NEUTRAL” on the
sector.
To break-up cement manufacturers cartel the Competition Commission of Pakistan raided
offices of Association of Cement Manufacturers of Pakistan and confiscated official record.
The association condemned this action and said it is against business norms. They
accused Commission for blaming cement manufacturers for making a cartel for the last 10
years but could not able to prove it. The capital structure of cement companies may
change, as most of the expansions during last two to three years have been debt financed
and companies are expected to retire these debts rapidly during next three to five years.
Moreover, the slow down in economy may occur due to political uncertainty, which might
result in reducing cement demand in future.
However, in case of construction of hydro-powered dams, there will be a sudden jump in
the local sales of those companies located near these dams.
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Financial Analysis of DG Khan Cement Company Ltd.
International Trend
Although international energy prices have declined recently, any beneficial impact on
margins has largely been negated by substantial depreciation of Pak Rupee. PACRA,
therefore, believes that the performance of cement companies could weaken further
impacting their financial profile. Pakistan's cement industry is poised to face a tough
challenge as the regional markets, mainly China and India, are likely to emerge as
competitors in the export market, following a slowdown in their domestic economies
and enhanced production capacity.
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Financial Analysis of DG Khan Cement Company Ltd.
FUTURE OUTLOOK
In the budget FY09 the central excise duty on cement was increased to Rs 900 per ton from
current Rs 750 per ton. On each bag the CED increased by Rs 7.50 per bag (from Rs 37.5
per bag to Rs 45 per bag). This increase was not expected to impact the profits of the
cement sector because this increment in CED was expected to be passed on to the
consumers. However, the rise in the GST by 1% was anticipated to cause an increase in
the local cement prices and dampen the demand for cement.
Local cement dispatches are expected to remain depressed due to slow down in economy
led construction activity in the country and also due to inflation. The government had
allocated Rs 550 billion for PSDP in the budget FY09, however owing to budgetary deficit;
the government later cut the PSDP expenditure.
Cement consumption is correlated to the GDP growth and as the economic condition now
stands, we can predict a slowdown in the GDP growth of the country. Thus the per capita
cement consumption will also fall during FY09. Exports have so far shown a strong growth
and supported the total cement dispatches. Cement manufacturers have been focusing on
the international markets to achieve growth in sales
Pakistan has been exporting to Afghanistan. Regional shortage of cement had presented a
favorable opportunity for our cement manufacturers. Cement demand in Afghanistan is
expected to be 1.5m-2.0m tons per annum for the next few years. Cement manufacturers
have growing opportunities in Middle East and African countries. New export markets like
Russia and European countries have been identified.
Growth in export sales may boost the margins of the industry and reduce the negative
impact of rising costs on its profitability. However, the effects of global recession have
started to impact international demand for cement. Indian market, which was a window of
opportunity for Pakistani cement manufacturers, has been closed as India banned import of
cement from Pakistan due to escalating tensions between the two countries.
Expenses are expected to increase for cement manufacturers. This will negatively impact
the gross margins of the cement sector. During the past, our cement manufacturers shifted
production from oil to coal or gas. Pakistan has huge reserves of coal but manufacturers
need to import coal because the local coal has high sulphur content.
The coal prices in the international market have fallen during the 3rd quarter of FY09 and
will result in lower cost of production in the future. However, the full positive effect of lower
coal prices may not be achieved because of the depreciation of Pakistani rupee which will
neutralize the impact of decreasing international coal prices. Also the government has
raised the power tariff by nearly 50% with variable rates for peak and off peak hours.
The gas prices have also risen. This will increase the cement manufacturers' cost of
production and impact their profitability in FY09. The recent cut of 100 basis points in the
discount rate by the SBP is expected to lead to further expansionary monetary policy.
Interest rates may go down and result in lower financial costs of debt for the company.
DGKC seems to be all set to tap new markets for cement exports. The company's largest
Vertical Cement Grinding Mill at D.G. Khan Site has started operations. After the start of
grinding mill additional quantities of cement will be available. Increased production will help
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Financial Analysis of DG Khan Cement Company Ltd.
DGKC to aggressively export to new markets and generate higher sales. Also, it will help
DGKC in energy saving and reducing maintenance cost.
DGKC is trying to cut down on costs that have significantly and adversely impacted its
profits in FY08. To reduce electricity cost, DGKC has started a project of power generation
from waste heat at DGK site. The project is expected to generate substantially cheap
electricity of about 10.4MW without using any fuel. This would help to cut down the cost of
production.
DGKC has also decided to use municipal solid waste as fuel for heating purposes. Thus,
negotiations with equipment suppliers are underway and expected to be finalized soon.
Also, DGKC is in contact with different city governments to enter into agreements for
acquiring solid waste.
This project will be beneficial, as it would bring down the company's costs of production,
help resolve the environmental issues related with disposal of solid waste and most
important, it would save huge foreign exchange spent on importing fossil fuels.
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Financial Analysis of DG Khan Cement Company Ltd.
Annexure
Summarized Income Statement
Summarized Income 2007
2008 2006 2005 2004
Statement Rs.
Rs. Rs. Rs. Rs.
In’000
In’000 in’000 In’000 In 000
Sales Net
Local Sales 14732445 8887306 10348119 6730756 5392393
Export Sales 2741111 511826 607817 641351 305191
Less.
Excise Duty 2729046 1679829 1509449 1141756 990124
Special Excised Duty 99556
Sales tax 1929858 1159214 1349755 877924 766497
Commission to stockiest 250749 140464 141067 72867 58207
Sales Net 12464347 6419625 7955665 5279560 3882756
-.Cost of Sales
Raw and Packing material 1368488 580717 464080 374287 330535
used 480352 293929 230854 185914 161919
Salaries and Wages 1644759 605335 470625 322979 217911
Electricity and Gas 4597486 1902567 2114667 1493514 1123716
Furnace oil 764204 383159 388113 357762 338970
Stores and Spares used 98530 22913 18233 9997 9637
Repair and maintenance 43904 21840 20542 23642 42235
Insurance 1354192 469367 341940 330100 317155
Deprecation on property
plant and Equipment 3331 13108 13203 11311 6923
Deprecation on assets
subjects to finance lease 83731 45349 43678 31652 30284
Royalty 25962 15373 16884 10450 5909
Excise Duty 15541 7159 6980 5724 5881
Vehicle Running 5389 1784 1774 1831 1374
Postage Telephone ,Telegram 3480 945 1492 1581 1276
Printing and Stationery 1499 499 884 548 507
Legal and Professional 9639 6227 4678 3930 3179
Charges 6982 4113 3879 3091 6150
Estate Development 5753 3396 5680 4139 4573
Rent, Rates and taxes 2079 9449 7651 4896 6742
Freight Charges 10534013 4387229 4155837 3177348 2614113
Other Expenses 142686 161989 50205 210983 88603
- 50462 - - -
Opening W.I.P (118292) (142686) (161989) (50205) (210983)
Transfer from Trail run 10558407 4456994 4044053 3338126 2491733
Closing W.I.P 107804 5058 19468 38616 44145
Cost of Goods Manufactured
Opening stock of finished 39300 - - -
goods (118863) (69728) (5058) (19468) (38616)
Transfer from Trail run (11059) (25370) 14410 19148 5529
Closing Stock of finished 19302 43984 65641 26505 -
goods 10528046 4387640 3992822 3330769 2497262
1936301 2031985 3962843 1948791 1385494
-)Own consumption
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Financial Analysis of DG Khan Cement Company Ltd.
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Financial Analysis of DG Khan Cement Company Ltd.
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Financial Analysis of DG Khan Cement Company Ltd.
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Financial Analysis of DG Khan Cement Company Ltd.
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Financial Analysis of DG Khan Cement Company Ltd.
Horizontal analysis of income statement shows that net sales of the Co has increasing
trend. But on the other hand Cost of goods sold jump quickly. This is not a good trend. Cost
of goods sold of the Co increases due to expensive raw materials. Gross profit of the co
decreases from last years due to high cost of goods sold. Administrative and selling
expense of the Co has decreasing trend. Other operating expenses of the Company are
increasing quickly. Company is also increasing trend in other operating income. Profit from
operations also decreases. Co also has high finance cost from last years. Income before
taxes has decreasing trend due to high cost of goods sold and finance cost. Net profit of the
Company is Very small as compare to last years.
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Financial Analysis of DG Khan Cement Company Ltd.
In vertical analysis of income statement shows that has high cost of goods sold from last
years. Gross Profit of the Co has decreasing trend. This is decrease due to high cost of
goods sold. Operative expense of the co has minimum portion in the income statement.
Profit from operations also has decreasing trend. Share of loss of associated co also
increases Income before taxes also decreases from last years. Provision for income taxes
also has decreasing trend.
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Financial Analysis of DG Khan Cement Company Ltd.
Liabilities and owner equity of the balance sheet shows that issued and paid up capital of
the company is increasing. And reserves of the co also jump 343% to 675% in the year of
2006 to 2007. Accumulated profits of the co have decreasing trend. And it is dangerous for
the co.
Non current liabilities of the co increases from 2004 to 2007 but there is a decline in 2008.
Current liabilities of the co also have increasing trend.
This horizontal analysis of balance sheet shows that Fixed Assets of the Co increase from
last years. It means Co have much productive assets. It shows a good trend of fixed assets.
On other side trend of assets subjects to finance lease going to decrease. Co also have
asset that are work in progress but trend of these assets also going to decrease. Co also
invests in long term investment and this asset also has increasing trend from 2004 to 2008.
Co also has long term deposits and these also have increasing trend.
Current Assets of the Co also have increasing trend. Trade debts of the Co also have
increasing trend and its debts are not in a good position. Short term investments of the co
also increase and Co use its idle cash in good manners.
.
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Financial Analysis of DG Khan Cement Company Ltd.
Vertical Analysis of the balance sheets shows that in 2008 that Equity portion of Co have
large portion of equity .And there is minimum portion of non current liabilities. And it shows
a good trend. Co finances his assets through equity and pay minimum amount of interest.
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Financial Analysis of DG Khan Cement Company Ltd.
Current liabilities of the co increase from last years. On current assets co do not pay
interest. Co pays his obligation timely and there is no chance of insolvency.
On the other side of balance sheet are assets of the Co. Co have more productive assets.
Analysis show that Company Finance minimum assets at lease. Current assets of the Co
slightly decrease from last year.
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Financial Analysis of DG Khan Cement Company Ltd.
Liquidity Ratios
1. Days, Sales in Receivables = Gross Receivables/Net Sales/365
Days, Sales in
Year Calculation in (Rupees,000)
Receivables
2008 463446/12464347/365 13.57days
2007 144245/6419625/365 8.20
2006 74165/7955665/365 3.40
2005 76238/5279560/365 5.27
2004 52622/3882756/365 4.95
Account Receivables
Year Calculation in (Rupees,000)
Turnover
2008 12464347/30384550 41.02times
2007 6419625/109205 58.78
2006 7955665/75201.50 105.79
2005 5279560/64430 81.44
2004 3882756/52622 73.78
Account Receivables
Year Calculation in (Rupees’000)
turnover in days
2008 30384.50/12464347/365 8.89days
2007 109205/6419625/365 6.20
2006 75201.50/7955665/365 3.45
2005 64430/5279560/365 4.45
2004 52622/3882756/365 4.95
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Financial Analysis of DG Khan Cement Company Ltd.
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Financial Analysis of DG Khan Cement Company Ltd.
2. Fixed Charge Coverage= Recurring Earnings, excluding Interest Expense, Tax expense
Equity earnings and minority earnings + interest portion of
Rentals/Interest expense including Capitalized interest +
Interest portion of rentals
Year Calculation in (Rupees’000 ) Fixed Charge coverage
2008 153505+8194330/1766298+8194330 0.84times
2007 2202393+3942972/467759+3942972 1.39times
2006 3908802+2613695/4500616+620534+2613695 0.84times
2005 2425312+960620/304041+75437+960620 2.53times
2004 13450+1360677/22460+2945+1360677 1.95times
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Financial Analysis of DG Khan Cement Company Ltd.
2006 15036176/19268200 78
2005 8698507/9317998 93
2004 5397564/6317055 85
Profitability Ratios
1. Net Profit Margin= Net Income before minority share of Earnings and Non
Recurring Items /Net Sales
Year Calculation in (Rupees’ 000) Net Profit Margin
2008 97753/12464347 7.84%
2007 1636634/6419625 25
2006 2428028/7955665 31
2005 1682078/5279560 31
2004 794493/3882756 20
3. Return on Assets =Net Income before minority shares of earning and nonrecurring
items /Average total Assets
Year Calculation in (Rupees’ 000) Return on Assets
2008 97753/52711214.50 18.5%
2007 1636634/43024353.50 3.8
2006 2428028/10723490.50 23
2005 1682078/14865562 11
2004 794493/11714619 6.8
Assets Utilization
1. Operating Asset Turnover =Net Sales /Average Operating Assets
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Financial Analysis of DG Khan Cement Company Ltd.
Operating Asset
Year Calculation in (Rupees’ 000)
turnover
2008 12464347/5367098-(6592332+524176+15082605+427832) 0.20times
2007 6419625/51744331-(8174474+196913+16933790+229315) 0.096times
2006 7955665/34304376-(4482213+335810+152465+8543763) 0.20times
2005 5279560/18016505-(2610634+271428+2769134+121486) 0.28times
2004 3882756/11714619-(1387681+25021+1386816+120329) 0.33times
4. 8.Return on Investment =Net Income before minority share of earning and non
recurring items + (Interest expense)*(1-tax rate)
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Financial Analysis of DG Khan Cement Company Ltd.
Investment Ratios
1. Degree of financial Leverage=EBIT/Earnings before tax
Degree of financial
Year Calculation in (Rupees’ 000)
leverage
2008 1513505/175273+8674-86194 15.48%
2007 2202807/1720471+14163 1.27
2006 3908802/3448533+9573 1.13
2005 2425312/2121271 1.14
2004 1345016/1120415 1.20
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Financial Analysis of DG Khan Cement Company Ltd.
6. Dividend yield= Dividend per common share/Market price per common share
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