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Pakistan Tobacco Company

Dedicated To
My Sweat Mother, whose prays, affection and
Support is always besides me, and
My friends who were always there to help me and to the one
Who taught me life.

Ifzal Ahmed
BBA Batch-4
COMSATS Institute Of Information Technology, Lahore.

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It has been a great source of information and learning for me to remain an internee in Pakistan
Tobacco Company.

I am grateful to my Allah for providing me all the skill and support to be able to comprehend and
conduct this task.

It was a true guidance and trust of my Head Supervisor Sir Naseer (FSM AKF) Ali and my Line
Manager Sir Sarfaraz Khan in me which led me to carry out this Report and exercises for the first
time in my life, which I was quite hesitant to do. Surely the Boss has the in sight, which makes an
internee fly rather than just to hop.
A bundle of thanks to Sir Shakeel Aslam (Internship Advisor) who led me throughout my entire
internship period.

This Report has inculcated in me a high degree of sense for management, and I now have the
knowledge for that how an organization operates their activities.
Being a student of business now I feel more confident and capable to deal with finance activities.

May God bless my teachers and my Boss for making me what I am today.

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One can learn through different ways. But to get the first hand knowledge, one
should put itself in practical and natural environment. This is the utmost purpose of
internship, which we supposed to do for at least six to eight weeks.

Pakistan Tobacco Company (PTC) a member of British American Tobacco (BAT)

group is a well-reputed multinational organization. PTC uses state of art technology
in every department. It is great prestige and honor for me to work in an
environment, which has utilized our energies to fullest. Being internee here I have
learnt a lot, and environment here was friendly and conducive for learning. In
finance department learnt about the manufacturing expenses which mainly consist
of production expenses, production wages, and depreciation and other part of my
work I spent with leaf financing, accounts payable and vouchers section. This
introduction is regarding to report, which consists of Background of study, Purpose
of Study, Scope of Study, Methodology of Research.

I spend 6 weeks of my internship at AKF. I visited each and every section of the
factory. First week was introductory, I visited different departments i.e. SECURITY,
GLT, PMD, SMD, QUALITY, SCD, HRD. The rest of all weeks I worked at finance
department. All the employees and the unionized worker that I met with were very

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Objective is to understand the background, purpose and scope of the report. To study
the methods and tools used in report.


COMSATS Institute of information technology Lahore requires its student of

business administration to undergo six to eight-weeks internship programme.
Selection of organization depends upon the interest of the student as well as the
field of specialization. This six week practical experience is then documented in the
written form known as “Internship Report” which is based on theoretical and
practical learning of the internee. To-Day professional fields are becoming more and
more challenging. To survive and get success in any field, you should have the
deep knowledge and appropriate skills of the concern field. In fact this is very true
about the field of management studies. Knowledge and skills of a person can be
polished, if he goes through some practical experiences. Internship provides an
excellent opportunity to students of professional field especially management
studies, to polish their skills and concrete their theoretical knowledge. Student gets
the opportunity to match their knowledge with the actual happening of the fields.
Internship program is the exposure for the students to the real working condition,
and the chance to learn the practical work and know about the culture, working
conditions, processes, and procedures of an organization to fulfill the demand of a
job. All these things are very important for the student to pursue a good career.


The purpose of the report is to study the management practices, processes and
procedures followed by PTC. The study is intended to analyze PTC in terms of its
strength and weaknesses. The report also discusses the financial position of the
company. The SWOT analysis is done with recommendations and suggestions.

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The reader can have a brief introduction to the PTC Akora Khattak Complex form this
report. It encompasses the various departments of Akora Khattak Complex, their
processes and procedures, and the various human resources policies adopted by PTC.
It also encompasses the SWOT analysis of the company, and recommendations.


Up-to-date information is one of the limitations of the study because the information,
which is available, is not sufficient to fulfill the requirement of the report, and as all know
PTC is such a large organization and the span of operation is too big so to cover it in
little time is one of the limitation of the study, because it is very difficult to cover each
and every aspect of an organization in allotted tome. The internship program was
limited to the Akora Khattak Complex only so the review section only contains data
about the AKF Complex and does not cover the whole of the organization.


The report has authentic data of managerial position of the company, and this analysis
will of great usage to management, creditors, investors and the students of
management sciences and for those who are interested in management particularly.


The method for data collection is central theme of the study. No study is completed
without using the scientific and systematic ways to get latest knowledge about the
study. So the methodology for data collection is based on the traditional categories
1. Primary Data Collection
2. Secondary Data Collection.

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In primary data collection I used the techniques of:

i. Personal observation.
ii. Briefing and discussion during the internship with BSO’s and MTO’s
iii. Unstructured interview technique is also used when I faced any
problem during work.

In secondary data collection method I get information from:

i. Annual reports of different years.
ii. Brochures for information to customers.
iii. Inter organization memos.

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The business of British American Tobacco was originally established in 1902, when-
to end an intense trade war. The Imperial Tobacco Company of the United Kingdom
and the American Tobacco Company of the United States agreed to form a joint
venture, the ‘British-American Tobacco Company Limited’.

The BAT business began life in countries as diverse as Canada, China, Japan,
Denmark, Germany, New Zealand, South Africa and Australia – but not the UK or
the USA. By 1910, its operations had extended to the West Indies, India, Ceylon
(now Sri Lanka). East Africa, Java, Malaya (now Malaysia) and Nigeria. BAT listed
on the London Stock Exchange in 1912 and British investors acquired most of its
American parent’s shares.

BAT held strong market positions around the world and had leadership in more then
50 markets. Since 1994, the group has grown global market share from 10.7
percent to over 15 percent. BAT has 86 factories in 64 countries. BAT uses more
than 700 million kilos of tobacco and has 25 leaf growing projects and 23 leaf
processing plants, with over 300 brands in BAT portfolio and a market share of 15
percent, make the cigarette chosen by one in seven of the world’s one billion adult
smokers. BAT differentiated portfolio of brands included well established
international brands such as Lucky Strike, Kent, Dunhill, Benson & Hedges, 555,
Viceroy, Pall Mall. John Player Gold Leaf (JPGL). BAT is the second largest quoted
tobacco group with annual shipment of more than 800 billion cigarettes.


Pakistan Tobacco Company is the first-multinational company of Pakistan and

recently completed 54 years of its operations in the country. The company is the
member of the multinational British American Tobacco group, which employs over

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100,000 people, operates in 180 countries and is one of the top 5 FMCG trade-
marketing companies in the world.

2.2.1 History of Pakistan Tobacco Company

PTC was incorporated in Pakistan and is listed on the three stock exchanges of the
country. It was established in the same year when Pakistan took its birth in 1947, and
took over the business of Imperial Tobacco Company (India). It had three branches –
Karachi, Jehlum and Akora Khattak, but Karachi factory however has been closed since
1992 due to heavy losses and some other reasons.

The first plant was set in a warehouse in Karachi port with monthly production of 30
million cigarettes against sales of 60 million, the gaps being filled up by import. When
Pakistan came into being all tobacco was imported in for production of cigarettes. But in
1952, a development project was initiated in N.W.F.P. and the top quality American
Tobacco found way to Pakistan.

A factory was established in 1955 at Jehlum, and PTC became a Public Limited
Company in the same year. In1975 a new cigarette factory was set up at Akora Khattak
to meet the increasing demand. Akora Khattak factory is now one of the largest
factories of N.W.F.P.

Pakistan Tobacco Company has divided the whole country into 5 regions (Central
Punjab, Southern Punjab, Northern Region, Lower Sindh and Upper Sindh). Within
each region, there are four to six areas, and each area is further sub-divided into direct
delivery and wholesale. In total, the company has five regions, 22 areas, 355
distributors and 12 area warehouses.
After six years of serial losses (1997-2002), Pakistan Tobacco Company Limited had
managed to swing back to a profit of Rs354 million in 2001. The accounts for the six
months to end-June 2002, released recently, show 2% slip in the top line to Rs10.8
billion, from Rs.11.0 billion for the corresponding period of last year. Pre-tax profit,

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nonetheless, rose sharply by 175 % to Rs.417 million, from Rs.152 million and after tax
profit showed growth of 92 % to Rs.248 million, from Rs.129 Million.

New products introduced during the past two years accounted for 33 % of PTC's sales
during the six months under review, during which the company said to have
unparalleled performance in new product innovation in the cigarette industry. The
company has continued to claim that four out of the five top selling brands in Pakistan
are those of PTC. They include Gold Flake, Capstan, John Players Gold Leaf and
Embassy. The company had paid the last cash dividend in 1995. The 10- rupee share in
PTC had hit its record high at Rs.162 in 1994. The price slipped over the years to hit the
lowest Rs8.50 in 2000; but the stock has now recovered to Rs60.25.

The Board did not declare a dividend for shareholders for 2001 and used all of the profit
to wipe out the huge accumulated deficit of Rs.337 million on the balance sheet. But the
important thing is that the shareholders' equity is back in the black. At end-June 2002,
shareholders' equity amounted to Rs2.820 billion, with Rs.2.555 billion being the paid up
capital. For PTC, it isn't still a smooth journey. "We reiterate that tax evading sector
remains a major threat to the government revenue and to our business," directors
complain in their half term report, adding that the steps taken by the government in the
past to check evasion had been encouraging. However, recent increase in activities of
the tax-evading sector was stated to be alarming; the company urging government
support in the matter.

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2.2.2 Mission statement of Pakistan Tobacco Company

1st choice


Transform PTC to perform with the speed, flexibility and enterprising sprite
of an innovation, consumer-focused company


Our strategy reflects our vision, being the champions of growth,

productivity, Responsibility and the wining organization.

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Diagram 1: vision, Mission, and key Objectives of PTC


First choice
For every one

Transform PTC to perform

with speed, flexibility and
enterprising sprit of

Regain volume leadership by positioning

viable brands in all consumer- relevant

Drive W/C standards in products, processes &

services through passionate, skilled and confident

Strive to meet stakeholders Expectation

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2.2.3 Business Principles

PTC follows three fundamental business principles:

• Mutual Benefit
• Responsible Product Stewardship
• Good corporate Conduct
Each Principle is supported by a series of core Beliefs, which are explained below

Mutual Benefit:
The principle of mutual benefit is the basis on which we build our relationship with our
stakeholders. We are primarily in business to build long term shareholder value and we
believe the best way to do this to understand and take account of the needs and desires
of all our stakeholders.
Core Beliefs:

I. Creating long term shareholder value

II. Engaging constructively with our stakeholders
III. Creating inspiring work environment of our people
IV. Adding value to the communities in which we operate
V. Ensuring that suppliers and other business partners have the opportunity to
benefit from relationship with us.

Responsible product stewardship:

The principle of responsible stewardship is the basis on which we meet consumer
demand for legal product that, put simply, is cause of serious disease. Therefore, our
products and brands should be developed, manufactured and marketed in a responsible
manner. We aspire to develop tobacco products with critical mass appeal that will, over
time, be recognized by scientific and regulatory authorities as posing substantially
reduced risks to health.

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Core Beliefs:
I. Provision of accurate, clear health messages about risks of tobacco
II. Reduction of the health impact of tobacco consumption whilst respecting the right
of informed adults to choose the products they prefer.
III. Continued availability of relevant and meaningful information about our products.
IV. Underage people should not consume tobacco.
V. Responsible marketing of our brands and products and directed at adult
VI. Appropriate taxation of tobacco products and elimination of illicit trade.
VII. Regulation that balances the interests of all sections of society, including tobacco
consumers and the tobacco industry.
VIII. Approach public smoking in a way that balances the interest of smokers and non-

Good Corporate Conduct:

The principle of Good Corporate Conduct id the basis on which all our business should
be managed. Business success brings with it an obligation for high standards of
behavior and integrity in everything we do and wherever we operate. These standards
should not be compromised for the sake of results.
Core Beliefs:
I. Our business upholds high standards of behavior and integrity
II. High standards of corporate social responsibility to be promoted within the
tobacco industry
III. Universally recognized fundamental human rights to be respected.
IV. Tobacco industry to have a voice in the formation of government policies
affecting it.
V. Achieving world class standards of environmental performance

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2.2.4 Guiding Principles

PTC follow four guiding principle that represents:

• Strength from diversity
• Open minded
• Freedom through Responsibility
• Enterprising spirit
Our guiding principles describe the organization we are and the type of organization we
want to be. They represent the common value at the heart of our success.

• Strength from diversity:

Strength from diversity reflects the culture mix within the company and the work
environment that respects employees’ individual differences. It also reflects our vision of
harnessing diversity-of people, cultures, viewpoints, brands, markets and ideas.

• Open minded:
Open minded reflects our openness to change, opportunities and new ideas, including
ways of addressing regulatory issues and changing social expectations. We seek to
listen without prejudice, actively and genuinely considering other viewpoints.

• Freedom through Responsibility:

Freedom through responsibility describes how we make decisions: as close to the
consumer as possible. It also affirms our belief that decision-makers should accept
responsibility for their own decisions.

• Enterprising spirit:
Enterprising spirit has been a characteristic of our business for more than a century. It is
reflected in our ability to grow our business and its value within challenging
environments-in the confidence to seek out opportunities for success, to strive for
innovation and to accept considered risk-taking as part of doing business.

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2.2.5 Business Process Re-engineering

Appreciating the importance to change the status quo for continuous improvement and
deliver strong business results in a sustainable way, PTC has always been on the
lookout for opportunities to enhance the speed, efficiency and reliability of PTC’s
Process. Several BPR projects were undertaken during 2006 and 2007 including the
setting up of the Enterprise Programme Office (EPO), project slender at Akora Khattak
Factory and the supply chain Operations References (SCOR) Model implementation.
EPO puts in Place a new way working, which keeps corporate strategy at the forefront
and ensure that all the initiatives are aligned to support the strategy though effective
programme management and allocates resources to the best fit priority areas. Project
slender entails relocation of the machinery and resources, changing the layout of
production floor in a way to boost process efficiencies and achieve higher productivity
without employing additional resources. SCOR model is being implemented all across
the supply chain i.e. from seed to smoke, for achieving cost optimization and improved
process efficiencies.

2.2.6 Corporate Social Responsibility

PTC has been at the forefront of CSR subsequent to its initiatives of afforestation,
mobile free dispensaries, eye care via Layton Rehmutullah Benevolent Trust, Learning
Resource Centre, non formal education through the NGO Adult basic education society,
supporting citizen’s foundation to prove educational facilities for the children and
installation of water filtration units.
Rehabilitation of earth quack Affectees’ in Battagram, inaugurated in September 2006.
In November 2006 PTC undertook a project to combat the spread of viral hepatitis in
northern Areas. In 2005 PTC became the first company in Pakistan to publish a duly
audited social report. Second cycle of the social reporting dialogue, based on issues
identified in the stakeholders mapping classification exercise, was competed in
November 2006 and the social report is planned for publication in early 2008. Best
practices of Good Corporate Conduct Governance being adhered to include producing
an Annual Report that provides quality information to all stakeholders.

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2.2.7 Environment, Health & Safety (EH&S)

Being fully alive to its role as a responsible corporate citizen PTC has implemented a
well structured EH&S programme in addition to embedding internationally recognized
best practices. PTC is committed to ensure that it nurture an environment where its
employees and surrounding communities are safe from any hazards that may affect
their health and minimize the impact of its operation on biodiversity.
PTC’s commitment to EH&S was further strengthened during 2006 as PTC achieved
significant improvements on the EH&S road map. Both its production facilities were
rectified with ISO 14001 earning the “Evergreen” status. PTC has consistently sustained
its accreditation in last seven surveillance audits with zero major and minor points.
PTC’s efforts has further been sustained with National Forum for Environment & Health
awarding PTC the Annual Environment Excellence award on “Health, Safety and
Environment” for second consecutive year in 2006.
Through out the company’s history, it has maintained a strong stance on corporate and
social responsibility, it strongly believes in building effective and constructive
partnership with communities by helping address various EH&S issues. Over the years
the company has invested substantial resources in terms of finances and manpower in
various initiatives like Mobile Free Dispensaries, Learning Resource Centre and
Portable Water.

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Environment, Health & Safety (EH&S) Policy:

It is PTC’s Policy to:

9 Provide and maintain a safe and healthy working environment including use of
cleaner technologies and safe systems of work for all its employees and non-
company personnel on the company premises.
9 Pay due regard to all impact of its activities on the physical environment.
9 Comply with all applicable National laws and regulations and BAT policy pertaining
to Environment Health and Safety.
9 Establish procedures to regularly assess and reviewing the EH&S impact of its
present and future and seek continuous improvement to its EH&S performance.\
9 Adopt a pro-active role to continually identify cost-effective measure, which it can
take to reduce pollution, safeguard the health and safety of its employees, non –
company personnel on company premises, the neighboring communities and the
physical environment.

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Managing Director

Deputy M.D Marketing Finance H.R Director SupplyChain

Director Director Director

Non-Exec Non-Exec Non-Exec Non-Exec CORA

Director Director Director Director Director

Non-Exec Non-Exec
Director Director

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Factory Manager

SC Manager PMD Security SMD QA Manager Training FPSM

Manager Manager Manager Manager

Logistics Assistant Project EHS

Manager Manager Manager Manager

MT SC Assistant Trainer Project

Manager Manager

Mfg Ser

Prod Prod Prod Prod CMD CPD

Manager (A) Manager (B) Manager (C) Manager (D)

T/L Shift A T/L Shift B T/L Shift C T/L Shift D T/L Making T/L Packing

T/L Shift A T/L

T/L Shift B
Shift B T/L Shift C T/L Shift D T/L Making T/L Packing

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Financial Services Manger

Leaf Finance Manger

Manufacturing Finance Analyst

Senior Accounts Senior Accounts Senior Accounts

Officer Officer Officer

Accounts Accounts Accounts Accounts Accounts Accounts

Officer Officer Officer Officer Officer Officer

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9 Continuous learning and improvement.
9 Sustainable growth.
9 Environmental standards achievement.
9 Market leadership in the world.
9 Being beneficial to the community (Corporate Social Responsibility)
9 Diversified workforce and environment.
9 Technologically advanced machinery and equipments.
9 Good salaries packages.
9 Focus on health and safety on the company premises.
9 Training and development of its employees.

9 Salaries difference between workers who work more and the one who put minimum
9 Technological advancement would decrease the workforce and unemployment will
9 Very minimum marketing as compare to its competitors.

9 Workers are always under threat because of downsizing.

9 Improper distribution of work

9 Greater opportunity of promoting lower brands in rural region.
9 PTC has the potential to further improve the cost reduction method.
9 Create a better work environment in GLT department because of more hazards in
this department.
9 Lowering the downsizing will create a good image in the eye of regulatory authorities
and government.
9 Focus on its key brands i.e. high growth like Gold Flack this year’s growth was
around 27%.
9 Export of premium brands
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9 Some of its competitors are also producing high quality brands like Marlboro by
9 Internationally some countries are continuously promoting anti-smoking slogans like
the ban of smoking in Bhutan in 2002.
9 Better marketing campaigns by rivals.

9 Their well-established brands are highly copied by some local manufacturer.

9 The political, economic situation is not stable in Pakistan.

9 Limitation of their product,

9 Decline in tobacco growth

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So from this it is provide that PTC is not has no intensive competition.


Strengths Weights Rating Weighted

Continuous learning and improvement. 0.09 3 0.27

Sustainable growth. 0.07 3 0.21
Environmental standards achievement. 0.03 2 0.06
Market leadership in the world. 0.06 3 0.18
Being beneficial to the community (Corporate 0.06 3 0.18
Social Responsibility)
Diversified workforce and environment. 0.05 3 0.15
Technologically advanced machinery and 0.10 3 0.30
Good salary packages. 0.09 3 0.27
Focus on health and safety on the company 0.05 2 0.10
Training and development of its employees. 0.04 1 0.04
Improper distribution of work 0.04 2 0.09
Salaries difference between workers who 0.05 3 0.15
work more and the one who put minimum
Technological advancement would decrease 0.05 3 0.15
the workforce and unemployment will
Very minimum marketing as compare to its 0.03 2 0.08
0.05 2 0.09
Workers are always under threat because of
0.22 0.56
Total Weighted Score 2.7

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Table – 2: External factor evaluation matrix for Pakistan Tobacco Company

Opportunities Weights Rating Weighted

Greater opportunity of promoting lower brands in 0.06 3 0.18

rural region.
PTC has the potential to further improve the cost 0.09 2 0.18
reduction method.
Create a better work environment in GLT 0.06 2 0.18
department because of more hazards in this
Lowering the downsizing will create a good image 0.12 3 0.36
in the eye of regulatory authorities and
Focus on its key brands i.e. high growth like Gold 0.08 2 0.16
Flack this year’s growth was around 27%.
Export of premium brands 0.05 2 0.10
0.46 1.16

Competitors are also producing high quality 0.13 3 0.39

brands like Marlboro by Lackson.
Anti-smoking slogans like the ban of smoking in 0.13 4 0.52
Bhutan in 2002.
Better marketing campaigns by rivals. 0.02 2 0.04
0.08 2 0.16
Copying of high established brands
0.04 1 0.04
The political, economic situation is not stable in
Limitation of their product, 0.12 3 0.36
Decline in tobacco growth 0.05 2 0.10
0.57 1.51
Total Weighted Score 2.77

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3.2.1 Political
Pakistan’s political situations have always been in fluctuation. Even then PTC is long
since contributing in the country’s wealth in terms of taxes and providing employment to
hundreds of people. Although it is never denied that tobacco is hazardous to health but
PTC’s aim is not to create more customers but to provide quality of tobacco to those
who are already addicted.
Marketing Standards: PTC has long accepted that smoking is risky.
“Its business is not about persuading people to smoke; it is about offering
quality brands to adults who have already taken the decision to smoke. “

3.2.2 Economical

As a company it understands that its roots are firmly embedded with the nation’s, it
has been the part of industrial development in the country. Pakistan tobacco has
maintained its growth momentum during the years scaled new heights with the
achievement of millstone and made progress in the every facets of its business.
PTC has contributed RS 26,472 m in year 2007 in the form of government levies
and taxes which is the indicator of how PTC is contributing in the economic
development of the country along with the job creation and installation of advanced
and sophisticated machinery and equipments.

3.2.3 Sociological

PTC’s marketing is not designed to “sell smoking”. It is marketing in a long

established, mature product category, where people already know what the basic
product is. There would be no commercial sense in trying to market to informed
consumers who do not want the product. Its marketing is about its brands: retaining
the loyalty of the consumers to the brands, and winning consumers from competing
brands. Wherever British American Tobacco markets, its takes the greatest care to
ensure that its advertising and promotion complies with local laws, regulations and
voluntary agreements. As a company with long international traditions and roots,
PTC is also sensitive to local customs and cultures. It is working with other

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companies in the tobacco industry to establish a common basis for clearly
understood conduct, which would set the baseline for acceptable tobacco marketing
worldwide. Following are the key features of the Voluntary Code of Conduct:

• No TV/Radio advertising of the products before 2130 hrs.

• No advertising designed to appeal specifically to minors (<18 years of age).
• No advertisements in the magazines and newspapers, which are directed
principally towards minors.
• No models under 25 years of age to be used to promote the products.
• No promotional events of particular appeal to minors.
• Celebrities not to be used for promotional purposes.

3.2.4 Technological
IT is the backbone of every business; with out it concept of successful business is
becoming impossible in modern business environment.
Process Technology:
• System Application Program (SAP)
• SAP the world leading ERP system.


The company undertook the mammoth task in 2004 to replace the existing
enterprise resource planning (ERP) system with SAP, world leading ERP system. A
smooth implementation across the organization, in short period it was possible
though excellent cross functional efforts by the projecting the Sap will greatly
facilitate the achievement of further efficiencies in all key business process.

Process technology

MARK 9 plants are used for the production. The manufacturing machine
manufacture 8500 cigarettes per minute - a packing machine makes between 300 &
400 packets per minute. The process technology consists of GLT, PMD and SMD.

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The PTC have a stretched product line covered every segment but comparative to its
competitor its lower segment is very short. PTC generates most of its revenue from
middle slap. The following are the product line segmented into upper slap, middle slap,
and lower slap.

Upper slap

• Benson & Hedges 20HL

• Benson & Hedges 10HL
• Benson & Hedges light
• Gold leaf 20HL
• Gold leaf 10HL
• Gold leaf flavor

Middle Slap

• Capstan int. kS FT 20HL

• Capstan int. kS FT 10HL
• Capstan LSFT 10SS
• Capstan by Pall Mall 20HL
• Capstan by Pall Mall 10HL

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• Wills kings 20HL
• Wills Navy Cut 10SS
• Will international 20HL
• Will international 10HL
• Gold flake 20SC
• Gold flake 10HL
• Gold flake 20HL
• Gold flake Supreme 10HL
• Gold flake Supreme 20HL

Lower Slap

• Embassy kings 20HL

• Embassy kings 10HL
• Embassy 10SS

The cigarettes are packed in two different style boxes. They are called Sheel in slide
(SS), Henge led (HL). The interesting thing is that the different plants are installed for
the both style packing. Sheel in Slide is imported while Henge led is made in the

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According to PTC Market Research Department the total market is expanding at

approximately 1% per annum. The overall market volume is expected to increase in line
with current trends during the next 12 months.

Statistical information in Volumes

Regions Total Market Billion (₤) Percentage

2007 2008

America-Pacific 20.1 20.2 +1

Asia-Pacific 74.4 76.5 +3

Latin-America 74.0 71.4 -4

Europe 114.6 116.5 +2

Africa and middle east 46.6 49.1 +5

Total 333.7 329.7 +1

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Net Revenue

Regions ₤m Percentage

2007 2008 change

America-Pacific 557 477 +17

Asia-Pacific 1,038 932 +10

Latin America 1,056 944 +12

Europe 2.071 1,708 + 21

Africa and middle east 745 664 +12

Total 5,457 4,725 + 15

Profit By Region

Regions ₤m Percentage

2007 2008 change

America-Pacific 192 235 +22

Asia-Pacific 335 403 +20

Latin America 386 381 -1

Europe 404 530 +31

Africa and middle east 249 259 +4

Total 1,566 1,808 +16

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Akora Khattak factory manufacture cigarettes according to the demand of the marketing
department. AKF also kept in mind the machines capacity. AKF change its machines
due to the increase of demand. Recently Akora Khattak Factory establishes GDX2
machines in its production department, which produce 10,000 cigarettes per minute.

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LTC is PTC’s largest competitor and the second legal cigarette manufacturer in the
Pakistan besides PTC. Marlboro and Red & White are a few of its brands. LTC used to
be affiliated with Phillip Morris, the giant in the global cigarette market; however, this
association was dissolved few years ago. Its market share is actually greater than PTC,
around 46.2%. The main goal of LTC is money making and it believes in short-term
gains rather than long-term benefits. Surprisingly, LTC uses quite unethical marketing
strategies – for example – a number of “under-the-table” deals are made with the
retailers to convince them to take off PTC’s merchandize from their store, and to accept
LTC’s merchandize. This obviously results in a huge loss to PTC as it costs around Rs.
100 000 to fully merchandize a small shop


These brands are manufactured in Mardan and thus are called the “Mardanwallas.”
These are normally low category cigarettes (under Rs. 10) for example Gold Street.
The goal of the Mardanwalls is solely money-making, and are not concerned about
acquiring a strong position in the market. These are also 100% tax evaded. The
government has made legislation regarding this issue; however, nothing has been done
so far. Secondly, their factories are located in the northern areas so tax evasion
becomes very easy. No proper marketing structure or strategies exist for these brands.
Their ATL activities, which include electronic and print media, are extremely low. These
brands usually survive on BTL activities, which mainly consist of posters.

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Counterfeit brands emerge as a threat for PTC, and later become competition as well.
In Pakistan, the concept of copyright laws and its implications is almost non-existent.
As a result, these brands are manufactured without any fear. As a result, PTC has
suffered a huge loss in the recent years as its premium brand Gold Leaf, has been
copied in three different qualities with three different prices for each. These brands are
normally sold in thickly populated villages to uneducated and low-income people, and at
interchanges and motorways. There are also other tax evaded – that is – smuggled
brands in the market. These are called ITBs (International Transit Brands). These are
usually smuggled from Peshawar through Afghanistan or Dubai.

Market Shares:

Market Share of PTC and its Competitors

Pakistan Tobacco 45.70%

Lackson Tobacco 44.20%

Mardanwalls 2.20%

Counterfeit/other 1.8%

Tax evaded brands 5.90%


• To regain volume and value leadership by positioning viable brands in all consumer
related segments of the market. The focus is on the light segment, ASU 30(adult
smokers under 30 years), and premier brands.
• To drive world class standards in products process and services through passionate
skilled and confident people
• To meet stake holders expectations
• To be seen as a responsible company in a controversial industry.

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To meet these objectives, PTC is taking the following initiatives:
Establish a focused segment and differentiated brand portfolio

• Create a winning cooperate culture which focus on vision, mission and values.

• Restructure PTC cost bases to become competitive locally and globally


3.5.1 Corporate strategy

• Good corporate strategy

• Responsible product stewardship
• Mutual benefit

3.5.2 Operating Strategy

The operations strategy of PTC (Akora Khattak factory) is “Make to stock”. The entire
production is stored in the finished goods godown and then it is supplied in the market
according to the demand.

3.5.3 Core Competencies

Following are the core competencies of the AKF factory:

• Quality
• Cost
• Delivery speed
• Flexibility (in terms of volume)

3.5.4 Flow strategy

Fixed flow strategy is used in the production process, as the production is done for
“Make to stock”. The strategy is fixed because only one product i.e. cigarette is

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produced. The brands of cigarette are different depending upon the type of tobacco
3.5.5 Porter’s Strategies:

1. Rivalry among Competitors:

Pakistan Tobacco Company has only having one big competitor which is Lackson
Tobacco Company. Approximately 92% of the total market share is captured by these
two firms.

2. Potential Entry of New Competitors

Entry of new competitors is not as much difficult into the Tobacco industry. But PTC has
an edge over the new entrance because of the economies of scale. And also the
availability of raw material.

3. Potential Development of Substitute Products

There are no such substitutes available for tobacco in the market. So PTC is facing no
problem is this regard.

4. Bargaining Power of Suppliers

Suppliers of PTC Tobacco Growers have an intensive bargaining power, because they
are large in number. And there is no substitute of raw material available for P.T.C. So in
this case it will be suitable for the organization to pursue a backward integration strategy
to take control of suppliers and get a competitive advantage over its competitors.

5. Bargaining Power of Consumers

The consumers of PTC’s product have no bargaining power, because they are not
purchasing in bulk, and the competitors cannot provide any warranties etc. So PTC is
free of competition in this case.

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Marketing at PTC is divided into three further categories: marketing research, brand
marketing and trade marketing the marketing research department carries out its
surveys and other such activities to find out the demand for each brand, and to discover
the potential cigarette market. The brand-marketing department comprise of brand
managers who have the responsibility for success and health of their individual brands.
Each brand manager designs and executes promotions to increase the sale of his brand.
Advertising through different media’s and sponsorships of event is also the job of brand
marketing. The trade marketing staff works direct in the field and interacts with the
distributors, wholesalers, retailers, and the customers.

PTC has been consistently meeting consumer expectations for the past ten years with
the popular international brand names like Benson and Hedges, John Players Gold Leaf,
Wills, Capstan, and Embassy which is the largest selling brand in the market. PTC,
through 343 distributors, services a very large retail and wholesale network across the

PTC has always been looked upon as one of the most dynamic organizations with its
exuberance to quickly adapt to the changing needs of the market. PTC has also been a
harbinger in establishing scientific methods of marketing research to focus on the
changing consumer requirements. As part of this tradition, the company recently
conducted a detailed urban and rural retailer census, a gigantic task never undertaken
by any business outfit in Pakistan. The census facilitated in determining the volume of
business, region wise requirements/demands and also helped in streamlining PTC’s
current distribution network thereby reducing costs. Total of about 270,000 retailers and
over 7000 wholesalers were surveyed. PTC is also a pioneer in introducing filter
cigarettes in Pakistan as early as 1955. More recently, keeping in view the shift towards
light, gold leaf lights has been introduced in the market representing the house of gold
leaf as a truly international offer keeping with the times and remaining in tune with the
changing needs, and tastes of PTC’s consumers.

In keeping up with its tradition of being in the cutting edge of marketing innovation, PTC
co-sponsored the launch of the epic movie Titanic in Pakistan, thereby setting a singular
precedent of providing quality entertainment to the nation. And this was within three
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months after the “Explore the World” promotion campaign for Gold Leaf was ran, to
which PTC received in excess of 1500, 000 consumer entries. PTC is constantly
endeavoring to introduce novel and innovative measures to further the marketing graph
and offset the extraneous adverse affects.

PTC is one of a very few companies in Pakistan which is paying a great deal of attention
to the retail marketing. It started a retail excellence program, which is a set of structured
presentations covering subjects such as business ethics, trends, customer focus and
how to satisfy customer needs profitably. It enables PTC to develop and roll out best-
practiced retailer methods, which will enhance retailer profitability and their relationship
with the company in order to regain market leadership in the future. The focus is how to
provide a “world-class” service to consumers, sharing company information and plans,
and gaining feedback. PTC holds numerous trade meetings with its distributors and
retailers, which no doubt helps to strengthen the relationship and be responsive to their
requirements better than any other FMCG company in the market place. These
meetings are held at high quality venues and a gift from PTC is given to each retailer as
a token of appreciation for their attendance.

This is a unique concept in the market as PTC is the only comp- any in Pakistan to
embark on such a program for retailers working in line with the company’s vision to be
“first choice for everyone”. The intention is to transform PTC’s field staff role into
business advisor rather than a mere salesman.

In short, the program focuses on business building as a whole rather than a propaganda
forum for selling cigarettes. PTC stresses the importance of expanding customer base
through good service and the removal of counterfeit cigarettes from the market. Overall,
the key goal is not to deceive a trusted consumer for short-term goals.

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PTC has always considered it-selves a consumer-focused company. They aim to offer a
product that excels in all aspects and exceeds the expectations of the consumer. In this
section, you will find the story of our brands and their origins. PTC has particular
emphasis on its five national drive brands.

4.2.1 Benson & Hedges:

In 1873, Richard Benson & William Hedges started a partnership in London. From the
very start, the idea was to make Benson & Hedges a style statement, which is why the
business started from London’s fashionable West End. PTC launched Benson &
Hedges in Pakistan in March 2003. Made with the finest hand picked golden Virginia
tobacco from across three continents, the brand is packed with perfection to seal its
freshness. The objective of introducing this brand is to establish the locally
manufactured B&H Lights as the most preferred offer amongst consumers, in the
premium lights segment and to add image to the B&H family by offering a wider product
range. It was launched in the three metros of Karachi, Lahore and Islamabad/


The story of John Player Gold Leaf has to start from the story of its founder, John
Player. An enterprising businessman, John Player started a small tobacco selling
business in 1877 and turned it into a thriving cigarette company, John Player and Sons.
With a distinct lifebuoy and sailor trademark, John Player Gold Leaf has an identity
entrenched in sailing and maritime adventure. Thus staying true to John Player’s very
first big brand -Player’s Gold Leaf Navy Cut cigarettes. Gold leaf is the key value and
volume contributor for PTC. It remains the most aspire brand in Pakistan. From 2000,
the brand is showing continuously growth.

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4.2.3 Capstan:
Capstan has a rich heritage, originating in Britain in the 19th century. The brand was
created under the auspices of W.D. & H.O. WILLS at Bristol and London. Capstan has
grown by leaps and bounds to become the fastest growing brand of Pakistan Tobacco
Company (PTC) in the year 2001, recording a staggering growth rate of 104%,
overtaking sales volume of the major competitive brand in the early part of the year, and
consistently outselling it throughout.

4.2.4 Gold Flake:

Gold Flake, like many of our brands, also boasts its origins at W.D. & H.O. WILLS
where it was a premium brand around the end of the 19th century. Launched in 1982,
in a 'soft cup' packaging, the brand took off when it was repositioned in the value for
money segment and later a 'hinge lid' variant was introduced in 2000. Gold Flake is
PTC’s largest brand in volume terms and is also a significant contributor towards the
value share. A highly successful pack design change in 2004, soon after the new pack
was lunched in the market and Gold Flake smokers accept the new design of the pack,
at this point an aggressive promotion in the market that would ensure the maximum
exposure of competition smokers to the new pack. There are three new variants were
added into the family; Gold Flake 14HL, Gold Flake 10HL and Gold Flake 10SC, in
order to offer the consumers a wider choice.

4.2.5 Wills King:

WILLS takes its name from the heritage of one of the original Imperial Tobacco
Company families: the Wills Brothers of London. Wills is also a well known brand in
4.1.6 Embassy:
The third leading volume brand in Pakistan is most popular in the Punjab where it
enjoys a leading position due to its equity and loyalty. Embassy continued its growth in
the year 2001fortifying its position in the market. The brand registered a growth of 3%
over 2000. Major focus during the year remained on the introduction of more consumer
relevant packaging variants. In the 3rd quarter of 2001 the brand family was extended
with the introduction of Embassy filter 16ss pack followed by Embassy kings 14HL

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variant. With the launch of these variants, the family now offers more choice to its
consumer at affordable price.
The different types of marketing activities are:


By packing the product in the different packs and in different quantity to meet the
demand of the different and segmented consumer

Point of Purchase Display

By placing products trail packs on the different shops to promote the sales.

Posters and Leaflets

Display posters and fliers in fronts of shops.


By giving the incentives to the distributors, whole sellers and retailers like to get the
product on credit and sell to the consumer and enhance their and the Company sales.

Contests and lotteries

PTC uses different schemes, providing gifts in the packs and by giving winning prizes
by means of lotteries to promote sale and to beat competitor.

They usually provide the rebates to the retailers and whole sellers who want to establish
their business on their own or who usually contact with them directly.

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SP’s Objective:
Toping up:
Talking with shopkeeper, tell them about their company, brand and advantages of the
brand. The SP will bring awareness, if the shopkeeper did not know about the company
and their brand. Pack Display/Pack facing: Small 4 or 3 row displays at hotspots in
which prescribed plaogram is implemented.

Brand Availability:
To conform from the shopkeeper that all the brands are available or not, means to
ensure all time availability of the stocks in the respective beats by doing the exercise of
toping up.

Consumer Contact:
It is the SP activity that he will contact the consumers and will write their names,
complete addresses, phone no and will also write the competitors brand which the
consumers use and will also get the consumers feed back after testing their own brand.

Market Intelligence:
The SP is also responsible to note the competition Activity of their competitors and look
at their promotional tools they use. And also give market intelligence report to TMO
about the competitors which they use in the market.

Temporary Merchandizing Activity:

The following tools include in temporary merchandizing activity.
Mobile (Rounder)
Permanent Merchandizing Activity:
Tube shade

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Tailor – made
Direct Sales Delivery (DSD):
As my third tour with DSD, salesman is consider the backbone of the company
because he produce demand and distribute the brands of the company in an efficiently
way, the DSD will cover a beat of (50-60) shops per day but salesman also visit daily
shops, some salesman also cover three beats the reason is that demand is not too
Five Steps for DSD:
Every salesman must care these steps when they go on beat.
1. Preparation
The company prepare short term and long term plan, these plan are yearly, monthly,
weekly and daily bases.
Steps in preparation:
I. Decide your target/set your target first.
II. Analyze the current situation.
III. Set your aim for achievement of your aim study all aspects and arrange your view.
IV. Before meeting Review your aim and remember of its details and try to make the
meeting personal, consider it first where you are going to perform work each and check
that every necessary resources are available.
V. Before contact Prepare your aim and make list of activities by the help of previous
contact information, make sure that you have fulfilled the promise which you made in
the previous meeting with your consumer or shopkeeper.

2. Approach

The duration of meeting/toping up, the salesman must study the surrounding area of the
meeting; he must collect such information before meeting which can be helpful during
meeting with shopkeeper. The salesman must put on shoes of consumers and must see
that which one method is most attractive to attract him. Salesmen also study the internal
environment of the store and analyze the situation as per consumer view.

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3. Stock check

Salesman will check the stock every time and must sure that the stock is according to
beat demand, he will also notice the competitor’s brands (Port Folio) with shopkeeper
that how much stock he buy and how much is available now.

4. Presentation

During this stage salesman will present his brands to shopkeeper and he must present
his brand in such a way that the shopkeeper doesn’t refused their brand.

4.3.3 Marketing Research

Recently PTC has launched their new designed, new packed and quality improved
product of gold flake. For this new launched product they have conduct a survey form
people and in the first stage of the launch they distribute their product through their
three areas all over the Pakistan. They selected the Bahawalpur, Shukkar and Sahiwal.
In these areas they first introduce their product on the basis of their segmentation and
the use of that product.

Research work
For this research purpose they get the services from the AC Neilson research company.
It is a retail audit company. There services range from finding brand equity, market
shares and conducting market research. This company is usually conducting their
business in marketing research and development.

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Every organization is comprised of people. Acquiring their services, developing their

skills, motivating them to high levels of performance, and ensuring that they
continue to maintain their commitment to the organization are essential to achieving
organizational goals and objectives.
Human Resources Department is the part of the organization that is concerned with
the people dimension. It is a staff or support function in the organization. Its role is
to provide assistance in HR matters to line employees or those directly involved in
producing organization goods and services. The main functions of HRD are to
resolve the workers grievances and care of disciplinary procedures, misconduct,
faults and omissions. The HR department provides an opportunity for the employee
and performance manager to discuss development goals and jointly create a plan
for achieving those goals. Development plans should contribute to organizational
goals and the professional growth of the employee.

Core Function of HRD

ƒ Industrial Relationship
ƒ Recruitment
ƒ Selection
ƒ Training & development
ƒ Placing
ƒ Promotion
ƒ Transfer
ƒ Salary statement
ƒ Agreement with Collective Bargaining Agents
ƒ Occupational health programme
ƒ Legal affairs

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5.2.1 Mission:
According to the board of Human Resources Department, the mission of the Human
Resources Department is;
“To attract, recruit, develop and remunerate the best suitable talent at all levels and
build a culture that triggers our corporate values in order to achieve the company’s
overall objective.”1

5.2.2 Product:
According to the Department, the product of the Human Resources Department is
Passionate, skilled, confident and excellent employees.

5.2.3 Customers:
Customers of Human Resources Department are, Finance Department, Engineering
Department, Information Technology Department, Production Department, Leaf
Department, Green Leaf Thrashing Department, Materials Management Department,
and Marketing Department.

5.2.4 Processes:
The processes of Human Resources Department include Recruitment, remuneration &
benefits, training and development, industrial relation, recreation & welfare, and record
management. Human Resource Department is the most important asset of each
organization. The role of this department is like the backbone in the organization. It
provides the most competent people to the organization to get their strategic goals and
to get loyalty for the organization.

5.2.5 Composition of Employees

In PTC Akora Khattak Factory, there are 37 grades. Out of these 37 grades,

• Grade 1 to 10 includes general workers to senior supervisors and clerks.

• From 30 to 33 includes BSO's (Business Support Officers) and

• From 34 to 37, MOM's (Members of Management).

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When an employee of grade 10 gets promotion he directly jumps to grade 30 and is
designated as Business Support Officer, The HR Department of AKF is concerned with
the hiring of employees who fall into the category of grade 1 to 10. and also BSO’s as
per requirement The minimum qualification that is required for a permanent employee is
SSC plus Physical suitability.


The workers employed in PTC Akora Khattak Factory and Leaf areas are classified into
two categories:

• Permanent or non- seasonal workers.

• Temporary or seasonal workers.

5.3.1 Permanent Workers:

Permanent workers are hired by HRD. The factory employs them directly on permanent
basis. Therefore, they are required to meet all the requirements that the company has
established for a worker. New workers when hired are properly trained and closely
watched at work during the early period of their job.

5.3.2 Temporary Workers

The temporary workers are hired by HRD as seasonal workers. They are on the job for
six months in a year i.e. from July to December now this period has declined to only 3
months. . At depots they are hired for buying tobacco and doing other jobs in the Leaf
areas. At factory they are hired normally for GLT services.
If a temporary worker works for the whole season, he gets the benefit of special bonus.
If he remains absent for 10 consecutive days, another worker for the rest of the season
replaces him. If a seasonal worker remains absent for three consecutive seasons, his
license is cancelled. The wage level and terms and conditions for the temporary
workers are nearly the same as that of permanent workers.

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Recruitment is mainly concerned with securing the potential candidates. It is the

process of contacting the public and encouraging suitable candidates to come forward
for final selection.
Organizations succeed largely through the efforts of the individuals working with in
them. It follows that hiring the right individuals is of fundamental importance and a
cornerstone of good management.
The consequences of good selection are often clear, whereas those of poor selection
are not always obvious. The cost of advertising, the management time involved in
selection and training, and the expense of dismissal are easy to calculate, but the
longer-term effects such as lowering of morale, reduced business opportunities and
reduced quality of product or service are possibly more serious.

In PTC for recruitment, first of all there is a requisition from a department for a post
which if approved by the HRD and then advertised by the head office. Thereafter there
is a short-listing from a pool of candidates. The remaining candidates undergo tests and
interviews, after which there is a call, a medical test and at the end the best candidate is


• Employee Referrals
• Advertising
• Employment Agencies


• Preliminary Selection
• Filling Up The Application Form
• Wide Range Interview
• Employment Proffer

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An employee is trained in accordance with the needs of the concerned department. The
HRD specifies needs of training and arranges courses, which can be carried out in the
country or abroad also. The annual report of the employee includes the courses he/she
has received. The courses include office management, communications, etc.
Other thing is the employee development. The difference between the employee
training and development is that, that training is present oriented activity while
development is future oriented. Employee development helps the employees and
enables them to cope the future challenges and perform the activities in the coming


The employees having a good performance are promoted to next higher post there are
two factors for promotions service/seniority, which is the time that employee has spent
the organization. Performance, which is based on workability, efficiency of an employee,
certain jobs require special training while some not .
In case of workers annual assessments from is field in service record at the beginning
of every year. Line managers do their assessments, their immediate bosses. That is
from January to December having remarks of unit manager, sign of in charge of
department, marks according to percentage point system. In production upgrading is
easy, group operator to machine controller.
A8-A9-A10 while training promotion. A1-A6- takes nine months. A8-A9- takes eighteen
months. Training performance report A-10 supervisor. BSO’s & MOM’s. 1st April to 1st
April annual two percent pay increase , three days assessments center after which if
promoted then pay is revised by finance department .


Transfer and movements takes place from team to team inter departmental and from
one department to another e.g. depot change in leaf area. The transfer may be one
complete grounds, job relation, and complete scuffing of development.

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One of the major aims of Human Resources Department is to ensure the better working
condition and to take care of welfare of the workers. Therefore, special attention is paid
to those activities that help in generating enthusiasm in the workers and keep their
loyalty to the company. For the sack of this a special post of Welfare Officer is there in
HR department. Following are some of the welfare activities provided by PTC to its

• Learning Resource Center for employees, their dependants and the community.

• Dastakari Center for girls.

• Provision of free of cost, clean and Hygienic food for employees.

• Free first aid services.

• Mobile Dispensary for treatment of diseases for inhabitants of the community.

• Arrangement of medical & blood donation camps.

• Arrangement of sport tournaments.

• Conveyance facilities/allowances for the workers.

• Uniform allowance for the workers.

• Hajj Scheme for workers.

• Jahaize Grant to the workers for their daughters’ marriages.

• Smoking allowances.

• Burial and funeral allowances.

• Arrangement is made for distribution of Long Service Awards for the workers who
have worked for at least 25 years at PTC.

• Arrangement of Bara Khana on any major achievement.

• Eid Millan programs.

• Arrangement of retirement parties.

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• Maintenance of Factory Mosque.

• Scholarships for dependents of the workers.

• Enrolment of workers with Employees Old Age Benefit Institute & Employees Social
Security Institute.

5.4.7 Health Aids:

a. First aiders are trained from Alshifa their presence is around the clock for each shift,
common, red and green. They help in medical check ups typing health records.

b. Medical examinations for workers twice a year January/July treatment allowance in

pay. For a new recruit the doctor who is medical officer of the factory does health
checkup. For canteen workers laboratory checks like urine, blood, hepatitis, x-ray is

5.4.8 Preparation of ID Cards:

When a person is employed in any section of grade, even contractors are issued
security cards with date of validity, passport size photograph, and NIC number and
signed by issuing authority duly by HR Department.

5.4.9 Internship Handling:

Commonly internship period is eight weeks but it may vary subjects to the requirement
of the institution. When applications are found legible, the students are informed with
the joining latter, when they report they are dealt accordingly and paid duly at the end of
the internship if successful, they are given certificates.


To keep good and friendly working atmosphere aiming healthy to wards production is
necessary to have cordial relation with workers, whenever a issue, problem, a grievance

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or misunderstanding is developed between management and unionized staff it is taken
over by understanding, reforming and stress relieving manner through a specifies
process. The industrial relations officers follows the industrial relations ordinance 1969.

5.4.10 CBA UNION:

CBA stands for Collective Bargaining Agents as the provision of law (IR Ordinance
1969) provides workers the freedom to form their own union that can talk to the
management on their behalf. If union work in a friendly supporting atmosphere they can
rise to sky. Elections are held after two years to determine the authority of a union. For
leaf area there is separate Karcoon Union. In AKF there are three labor federations:

• Muthaheda Mazdoor Union.

• Pak Tobacco Mazdoor Union.

• Pak Labor Union.


a. Steadfast singing of documents without writing them.

b. Illegal strike

c. Stoppage of work.

d. Wages, rent, allowance.

e. Meal regulation.

f. Special attendance allowance.

g. Hajj allowance.

h. Leaves.

i. Financial assistance.

j. Basic pay increase.

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The CBA and management sign agreement regarding the working conditions, wages,
and other affairs likely. The validity of an agreement is 25 month after it a new is signed,
the stepwise procedure is following:

1. Informal Character of Demand.

2. Formal Character of Demand.

3. By Lateral Recognition.

4. If fails conciliation.

5. If fails judicial process start with NIRC. (National Industrial Relation Commission),
which is federal labor institution with powers equal to trial court or lower court of
labor while the while the process is speedy and stead fast.

6. After conciliator another way is arbitrator who is usually a retire judge appointed by
the Govt.

7. Finally agreement reached which is a 25 months agreement with a fact from expiry
of previous agreements.
Copies of agreement are sent to provincial and central labor departments.


There is a limit in individual life for doing a job. No individual can work throughout his life
therefore every one. In PTC the age of compulsory retirement is 58 years for workers
and managers, first extension is given at the age of fifty-five years, second at 56, third at
57, subjected to his performance and medical fitness. The retirement can also be on
medical board examination/ recommendation basis.


The company has a scheme for voluntary separation, under this scheme the employees
has the opportunity of early retirement, he is paid more percentage of his salary plus

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provident fund. The %age of salary to be paid to them depends upon the years
remaining to his retirement. The percentage is as below: 2

• Up to 5 years 75%
• to 8 years 40%
• 9 to 10 years 36%
• 11 to 15 years 25%
• 16 to 20 years 18%
• 1 to 25 years 15%


9 Boredom
9 Noise of machinery and smell of leaf
9 Excessive downsizing
9 Job insecurity

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“To excel as a first choice value adding business partner.”

Value adding finance services to our customers. To provide accurate, timely and
relevant information for strategic decision-making.

For every business enterprise the management of the finance is considered to be the
most important and demanding task. Because it depends on your budget what you
ought to do and what ought not to do. But more important than this is the management
of your finance. No matter how much money you have got if it is not managed properly,
loss is inevitable. It is the function of the Finance department of a company to keep a
close check on the inflow and outflow of the fund, to allocate the budgets properly, to
maintain all the records and above all to keep itself clean. The Finance department of
the Pakistan Tobacco Company has a very wide range of activities. A hard working and
enthusiastic team is managing quite efficiently. The head of the Finance department is
the Finance Manager. Under him is one Cost accountant, one leaf finance manager and
seven BSO’s.

The major functions of this department are:

• Performance measurement and reporting.

• Excise management.
• Funds management.
• Strategic planning input.
• Investment analysis.
• Payments to suppliers.
• Receipts from customers.
• Planning and financial management.
• Import and Export management.

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• Risk management.
• Internal audit.
• Maintenance of financial records.
• Fixed assts management.

The Finance department of the AKF has been divided into seven major sections

1. Production expenses.
2. Cash.
3. Variable cost and Excise duty
4. Ledger.
5. The Leaf section.
6. Fixed assets.
7. Payroll

6.1.1 Production Expenses:

This section of the finance department deals with the recording of all the expenses that
are related to the production. The expenses are recorded by the concerned person of
the production expenses section and punched into the CS/3 system, which transfers the
data directly into the general ledger. When these expenses are verified any rectification
required takes place and posting into the trial balance is done.
The production expenses are divided into three basic categories.

1. The process related expenses

2. Supporting expenses
3. Other expenses

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6.1.2 Cash Section:

Cash is one of the important sections of finance department. It deals with all the
incoming and outgoing cash in the AKF. Any kind of entry related to cash is punched
into the CS/3 system, which makes a direct recording into the ledger account and then
recorded in the trial balance.
The inflow of cash in the AKF is basically done through three sources. It either arrives
through the sales revenues, auctions or through selling. The sales revenue is generated
through the sales department situated in Bahawalpur, Faisalabad and Peshawar. They
transfer their reserves to the AKF. Other sources of cash include the auction. There are
certain items that are either wasted to protect the rectification and ensure the security.
These items are put to auction by the MMD and the cash is sent to the Finance
department. Similarly some products that cannot be auctioned like dust, wastes of
wrapping materials etc are sold to different parties. That amount is also sent to the cash
section of Finance department.
The Finance department makes payments of cash to the Leaf grower. This section also
pays the different expense incurred by different people in the AKF. These expenses are
called PETTY CASH. It is allowed to make payment up to five lacks. Amount greater
than five lacks is paid through the head office.

6.1.3 Variable cost and excise duty:

Talking in terms of Finance, variable cost means the cost on those items, which can be
varied in order to increase or decrease the production level. The AKF has kept a
separate section in the Finance department that deals with the variable cost. This
section deals with the wrapping material and the excise duties.
The company pays excise duty on Tobacco and cigarette to the government. When the
trucks are leaving the shipping Godown AR (application for removal of consignment) is
made according to the excise rate.

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The excise rates per ten cigarettes are as follow:

1. If retail price of locally produced cigarettes exceed 13 Rupees per cigarettes. 63 %

of the retail price
2. If retail price of locally produced cigarettes exceed Rs 5.74 per 10 cigs but does not
exceed Rs 13 per 10 cigs. Rs 2.45 per ten cigs plus 69 % per incremental Rupees or
part thereof.
3. If retail price of locally produced cigarettes does not exceed Rs 5.74 per 10 cigs Rs
2.45 per ten cigs

After that a summary of shipment is send to the finance department through AR-1 to
inform that how many cigarettes are manufactured. AR-1 shows sales tax in addition to
excise duty.

6.1.4 Ledger section:

The main function of this section is the closing of all accounts at the end of the month
and the making of the trial balance. The activities and the information from all the
departments are transferred to this section either through the CS/3 system or it is done
manually. This information is then recorded and after verification it is entered into the
trial balance, which is then, sent to the head office.

6.1.5 The Leaf Section:

This section of the Finance department is concerned with the purchase and the
payment of the green leaf.

A) - The Purchase Process

PTC has some verified depots where tobacco is grown and then it is purchased from
those growers on the basis of an agreement. In the purchase of tobacco a rule named
MLO783 is followed. Thos rule has two basic and clear points.

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1. The company cannot purchase less quantity of tobacco from a grower than that of
the previous year.

2. If the Company has bought some tobacco from a grower and some of the tobacco of
that grower is left un purchased, then the Company is bound to purchase the same
percentage of remaining tobacco. Whether they need it or not. E.g. the Company
buys 46 %. 10% of the grower’s tobacco is left un purchased. Now the Company is
bound to purchase 46 % of that 10 %.

The tobacco purchased from different Depots is graded on the basis of its quality.
Different grades of tobacco are

• VFC Virginia Flue Cured.

• VAC Virginia air Cured.
• CAC Country air Cured.
• White Patta
• Burley

The VFC, which is grown, is Mansehra is considered the best tobacco in Pakistan. After
the tobacco is purchased its physical inspection takes place and it is brought to the GLT
for processing the moisture level at this point of time is 13 to 14 %, which is brought
down to 12 % in the GLT.
In every 100 kilo gram of leaf, there is 70 kg of Lamina, 20 kg of stem, 2 to 3 kg of dust;
2 to 3 kg of by products and 2 to 3 kg is loss. Thus the price revaluation is also done in
the GLT, which is a necessary process as nearly 10 kg of leaf is wasted in the process.

B) - Cost Revaluation

The total cost of 100 kg is divided by 70 kg, which increases the cost per kg. The cost of
stem is fixed for all type of tobacco e.g. Rs 8 per kg is the cost of FCV, is also added
with the per kg cost and thus the average per kg adjusted cost is calculated.
C) - The Payment Process

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The payment to the growers is done with in seven to thirty days of the purchase through
the DPLV account. The special feature of this DPLV account is the credit allowed by the
bank of about 20 million. This gives the Company the flexibility in making the payments.
The payments of the other expenses of the godowns in depots are also paid through

D) - The Process

The introduction of the Galaxy software has made the process of leaf (purchase and
payment) quite simple. After the issuance of the agreement to the growers the crop of
each grower is placed on the belts and six bale cards are issued to the grower. After the
physical inspection is done, the rejected bales are returned to the grower while the
accepted bales are moved further, where its price is shown on the big screen. If the
grower rejects the price he takes his bales back, other wise they are moved further. But
the grower least took their bails back. The computer then issues a voucher one copy of
which is given to the grower and the other is send to the Pakistan Tobacco Board. It
also issues form ‘A’. The copies of which are given to the AKF, Bank and the concerned
depots respectively. The grower in order to get the payment takes the voucher to the
bank that on the presentation of that voucher pays the amount to the grower and issues
a token along with the form ‘B’ to the depot. This verifies the document and transfers
them to AKF Finance department.

6.1.6 The Fixed Assets:

This is a very important section of the Finance Department. The major jobs of this
section are:
• Acquisition of Assets.
• Disposal Of assets.
• Transfer of Assets.
• Depreciation.

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6.1.7 Payroll section:

Payroll section is responsible for providing timely wages to workers and maintaining
their records. Wages are paid at the last day of the month. Last two days of the month
are very critical for the wage department. They have to prepare a statement, which will
clarify the exact amount to be paid. This is done through the help of time office, which
closes its whole monthly time cards. Summing up the wages to be paid to each one is
then known and the wage department is sure that the required amount to be paid is
assessed and so the amount to be draw from the bank is cleared.
The amount drawn (which will actually be done at the e second last working day of the
month) arrives at the office. The money is then placed in the envelops which are colored
for the purpose of identification. The picks are filled in by the office staff and then
actually distributed. Payroll includes the following documents

1. Payroll control and change summary.

2. Pay slips.
3. PF balance.
4. over time.

The different allowances given in the payroll section are as follows:

• House rent allowance: 100% of basic
• Medical allowance: 7% of basic
• Smoking allowance: 100 rupees
• Funeral allowance: 15000/ incidents.
• Utility allowance: 5% of basic.
• Uniform allowance n: 2500/ annum.
• Special incentive allowance: 1500/month.
• Attendance allowance: 500/ month
• Lunch disturbance allowance: Rs 39/incident.
Government Levies:

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In almost all of the civilized countries of world there is the concept of Govt taxes, and
where there is Govt there has to Govt levies or taxes are in different forms. Being a
Pakistan we are than liable to pay certain taxes. Tax bracket of cigarette in Pakistan is
in one of highest in the world. It pays the 2nd largest amount of money in government
exchequer in form of different taxes. The main heads or main forms of taxes as follows.

1. Central excise duty

2. General sales tax
3. Custom duty
4. Employee old age benefit and social security.

Only to last one is not directly paid to the government. All Though Govt still gets its
share from it. For payment of the each of the above-mentioned levies there is set
pattern provided by the government to units of the factory. These patterns are to be
strictly followed by the companies. If the company does not follow its one part it will be
liable to the Govt fury, it is the form of penalties.

Being an ethical company PTC pays its all levies with utmost sincerity. Its AKF, branch
pays the most tax an N W F P and together the whole PTC gained pays the most taxes
after oil sector
Items Custom Duty Sales Insurance Loading
Tax Charges
Cigarette papers 30% 15% 1% 1%
Plug wrap 30% 15% 1% 1%
Cigarette tipping paper 30% 15% 1% 1%
Aluminum foil 30% 15% 1% 1%
AF W/O paper back 20% 15% 1% 1%
Polypropylene film 30% 20% 1% 1%
Self Adhesive 30% 20% 1% 1%
Adhesive DA 102 ADH 30% 20% 1% 1%
Adhesive 30% 20% 1% 1%
Tear tap 30% 20% 1% 1%
Acetate Tow 20% 20% 1% 1%
All the imported are not duty paid are kept in “bounded godown where they are cleared
as per usages. When these material arrives from the ports to the godowns they comes

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with a bill of entry which is known as “In bound bill of entry” when they are cleared the
BOE is turn in to “Ex Bound of Bill of Entry”.

At the receipt of the material the inbound bill of entry is sent to the finance department.
The actual amount is in pound sterling (₤) which are converted in to rupees and above
mention rates to each items on its assessable value.
Despite a ban on advertisements promoting cigarettes, the number of cigarette users
increased by over 18 percent last year, generating more money than the target fixed by
the government. The cigarette industry has paid central excise duty (CED) of Rs 21.875
billion against the annual target of Rs 19.713 billion for the fiscal year 2004-2005.

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Current Ratio: (current Assets / current liabilities)

2004 2005 2006 2007

1.0 1.1 1.1 1.0

There is slight decrease in the current ratio but this ratio is acceptable for the creditors
because the standard ratio for any efficient firm is 1. Ratio figure has decreased
because both current assets and the current liabilities have increased accordingly which
has balanced out the ratio to the same level.
Firm is still able to pay its short term payables.

Quick Ratio: (current Assets - inventory / current liabilities)

2004 2005 2006 2007

--- ---- 0.10 0.13

Quick ratio in 2007 has increased due to decrease in inventory which shows that the
inventory in 2007 was not the major part of the assets. Where as in 2006 inventory is in
high ratio. The increase in firm quick ratio is a good sign for the firm. Firm is now much
able to pay the short term liabilities through its most liquid assets.

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Cash Ratio: (cash / current liabilities)

2004 2005 2006 2007

--- ---- 0.016 0.034

In 2007 the cash and bank balances of company is increased from 0.016 to 0.034
that shows that company has increased its liabilities through short term loans and
financing ,where as the inventory in 2007 has been increased for the purpose of
sales. Creditors are very much interested in cash ratio.
The figure has increased but not so much, It has increased because cash and bank
balance has increased but at the same time the current liabilities has also increased
accordingly. Current liabilities have increased because trade and other payables has
increased which means they purchased inventory on credit. LONG TERM SOLVENCY MEASURES:

Total Debt Ratio :( Total Assets -Total equity / Total Assets)

2004 2005 2006 2007

--- ---- 0.67 0.72

The ratio has increased in 2007 from 0.67to 0.72This increase is due to increase in both
the short term and long term liabilities.

Debt-Equity Ratio :( Total Debt / Total Equity)

2004 2005 2006 2007

0.5 0.3 0.3 0.3

The ratio has decreased due to the increase in debt and decreased in equity. The debt
has also increased as the firm has financed its operation from the banks loan and less

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dependent on shareholders. It shows that most of the firm’s financing is provided by
debt not by shareholders.

Equity Multiplier: (1 + Debt-Equity Ratio)

2004 2005 2006 2007

1.5 1.3 1.3 1.3

It will be briefly discussed in Du Pont Analysis.

Interest Coverage Ratio :( EBIT / Interest)

2004 2005 2006 2007

29.9 46.9 57.0 74.8

This ratio determines the firm’s ability to pay its interest obligations. The interest
coverage ratio in 2007 has increased to 57.0to 74.8 times. As the ratio has increased
it’s a favorable sign for the firm. Previously firm was not in better position to pay its
interest liabilities .As the firm is meeting the standard of 3, the credibility of the firm is
high and investor would invest in the company.. This ratio determines the firm’s ability to
pay its interest obligations. ASSETS MANAGEMENT / TURNOVER MEASURES:

Inventory Turnover :( Cost of good sold / Inventory)

2004 2005 2006 2007

6.0 6.1 6.7 7.2

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The ratio in 2007 has increased a little from 6.7times to 7.2times. The increase in ratio
is due to a decrease in inventory which has lowered the cost of goods sold. As this
there is a slight increase in value, the firm has a good effect towards the liquidity.

Days sales in inventory :( 365 / ITR)

2004 2005 2006 2007

60.83 59.83 57.47 50.69

The inventory turnover in days has decreased from 57.47 to 50.69 in 2007 which is a
good sign for the firm. The decrease is of almost 7 days. This decrease is suitable for
the firm as it can spoil the inventory by keeping it in hand.

ITR = Inventory Turnover Ratio

Total Assets Turnover :( Sales / Total Assets)

2004 2005 2006 2007

3.6 3.8 4.2 4.2

This ratio has increased because of high level of increase in sales in relation to assets.
There is a decrease in denominator due to which ratio is higher. This shows that
company is efficient in using its assets to generate sales.

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Pakistan Tobacco Company PROFITABILITY MEASURES:

Net profit Margin :( Net income / Sales)*100

2004 2005 2006 2007

--- --- 5.33 5.90
This ratio has also increased which shows that company is in favorable position.

Return on Assets :( Net income / Total assets)

2004 2005 2006 2007

--- --- 0.218 0.245

There is an increase in ratio in 2007 that shows that the firm has managed its resources
efficiently and effectively. Firm has increased its assets in 2007.

Return on Equity :( Net income / *Total Equity)

2004 2005 2006 2007

17.1 30.3 38.2 48.2

There is increase in ratio of return on equity this increase in ratio in 2007 shows that the
common stockholders are now earning 48.2% on common stock equity, which was
previously 38.2%. This increase in value is due to increase in net income as well as
sales. The value of earning per share has also increased in 2007.

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Pakistan Tobacco Company MARKET RATIOS

Earning Per share :( Net income / *Shares outstanding)

2004 2005 2006 2007

2.6 5.2 7.5 9.4

The earning on share is increased in 2007 from 7.5 to 9.4 because the net income is
increased. This increased in earning on share has also in creased the return on
common equity. The firm is earning Rs.9.4 on behalf of each share. This decrease in
earning per share would positively affect the trust of the investors towards the firm and
would build the repute of the company.

Price - Earning Ratio :( Price per share / Earning per share)

2004 2005 2006 2007

23.6 13.3 9.7 16.5

Price earning ratio has increased which means investors are now wiling to pay Rs 16.5
on each Rupee of earning, which shows that investors trust have increased and they
are willing to pay.
Share price = 155.5 PKR (2007)

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For 2006


5.33% x 4.2 8,734,400 / 4,139,187

20.03 2.02


FOR 2007


5.90% x 4.2 9,826,232 / 4,022,857

23.05 x 2.2


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¾ Firstly the question is that why we why we use Du Pont system of Analysis, the
answer is simple: Du Pont Analysis enables us to dissect the firm’s financial
statements to assess its financial conditions.
¾ It merge two financial system i.e. balance sheet and income statement into two
summery measure of profitability ROA and ROE.
¾ Analyzing the financial statement of Masood Textile Mill give us a sort image.
¾ Now through Du Pont Analysis we would combine different ratios and would discuss
its effects on ROA and ROE.
¾ By going through financial of the firm we discovered that its ROE -increased by
almost 8-10 points which is a good sign.
¾ We see that in 2006 its ROA was lower than 2007 and low FLM which produced low
value of ROE, while in 2007 FLM was high and ROA also which produced change
in ROE.
¾ We that in 2007 firm is better utilizing its assets and profit margin is also high while
in 2007.

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2007 2006

Non Current Assets

Property, Plant, and Equipment 52.45% 51.85%
Long term Investment in Subsidiary company 0.05% 0.68%
Long term loans 0.12% 0.21%
Long term deposits and prepayments 0.13% 0.09%

Current Assets
Stock in trade 40.68% 43.40%
Stores & spare parts 1.43% 1.62%
Trade debts 0.024% 0.027%
Loans & advances 0.235% 0.137%
Prepayments 0.816% 0.82%
Other receivables 2.33% 1.05%
Cash & bank balance 1.69% 0.719%

Total Assets 100% 100%

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2007 2006
Share capital & reserves
Issued sub and paid up share 26.0% 29.25%
Reserves 14.93% 21.22%

Non Current liabilities

Differed taxation 9.97% 9.67%

Current liabilities
Trade & other payables 36.90% 25.32%
Interest Accrued 0.085% 0.128%
Short term financing 10.56% 14.80%
Income tax payable 2.31% 2.67%

Total Equity and Liabilities 100% 100%

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2007 2006

Gross Turnover 100% 100%

Sales tax 13.53% 13.53%
Net Turnover 86.16% 86.16%
Cost of sales 70.54% 70.97%
Marketing & Distribution cost 4.39% 5.08%
Administrative 1.80% 1.80%
Operating profit 9.71% 8.60%
Other income 0.251% 0.19%
Other expenses 0.76% 0.80%
Finance cost 0.123% 0.142%
Profit before taxation 9.08% 8.00%
Taxation 3.18% 2.67%
Profit for the year 5.90% 5.33%

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¾ Common size analyses tell us how much percentage every item in balance sheet
is of total assets and in income statement we take every element as percentage
of sales. This gives us a picture of how much firm spends on each element last
year and this year.
¾ We can also figure out any trend with respect to relative impotence of these
items over time.
¾ In our common size balance sheet we see that our long term assets increased
from previous year and most definitely this increase occurred due to increase
property, plant and equipment. While other long term assets remained almost the
¾ While our current assets decreased from previous figure.
¾ This decrease had occurred due to decreased in inventory by too much, our
other receivables have increased by a small figure that’s why because of
extending the credit period by one day.
¾ On the equity & liabilities sections we see that our equity didn’t change by too
much, it decreased.
¾ Our non current liabilities had increased which is because of increase in Differed
¾ Our current liabilities also increased by a large figure.
¾ Common size income statement shows as decreased trend in the cost of sales
that’s why our gross profit had increased.
¾ The firm’s operating profit didn’t change by small amount.
¾ Firm’s EBT has increased that’s because our financing cost has decreased from
previous year but our net income had increased by almost a tiny amount.

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BLANACE SHEET (2006, 2007)

BALANCE SHEET (Pakistan Tobacco Company)

2007 2006 Inc/Dec(in %)
Non Current Assets
Property, Plant, and Equipment 5,1543,26 4,529,366 113.80
Long term Investment in Subsidiary
company 5,000 5,000 100.00
Long term loans 12,513 18,660 67.06
Long term deposits and
prepayments 13,025 8,424 15461.78
Current Assets
Stock in trade 3,998,181 3,790,853 105.47
Stores & spare parts 140,777 140,008 100.55
Trade debts 2,386 2,406 99.17
Loans & advances 23,187 12,205 189.98
Prepayments 80,280 72,235 111.14
Other receivables 229,891 92,360 248.91
Cash & bank balance 166,666 62,883 265.04
Total Assets 9,826,232 8,734,400 112.47


Share capital & reserves

Issued sub and paid up share 2,554,938 2,554,938 100.00
Reserves 1,467,919 1,584,249 92.66
Non Current liabilities
Differed taxation 98,0435 84,5004 116.03
Current liabilities
Trade & other payables 3,548,237 2,212,241 160.39
Interest Accrued 8,401 11,115 75.58
Short term financing 1,038,550 1,293,141 80.31
Income tax payable 227,752 233,712 97.45
Total Equity and Liabilities 9,826,232 8,734,400 112.50

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¾ According to the Index Analysis of the whole Balance Sheet, we get to know that
in the comparison of year 2006 and 2007 the value of total equity that comes
from the value of capital and issued, subscribed and paid up share capital
reserves remains almost the same.
¾ The value of Non-Current liabilities increase by 16%
¾ Same as the value of TOTAL LIABILITIES comes from Current liabilities value
which is Interest Accrued, short term financing, Trade and Income tax payable in
which only Trade & other payables increased while other decreased .So the
TOTAL ASSETS value comes from the value of fixed and current assets which
also increased.



2007 2006 Inc/Dec (in %)
Gross Turnover 40,889,275 35,715,451 114.49
Sales tax 5,534,452 4,833,285 114.51
Net Turnover 35,354,823 30,882,166 114.48
Cost of sales 28,844,866 25,348,646 113.79
Marketing & Distribution cost 1,798,045 1,816,198 99.00
Administrative 739,280 64,4981 114.62
Operating profit 3,972,632 307,2341 129.30
Other income 102,634 68,088 150.74
Other expenses 311,374 288,696 107.86
Finance cost 20,317 51,060 39.79
Profit before taxation 3,713,575 2,860,673 129.81
Taxation 1,300,517 955,685 136.08
Profit for the year 2,413,058 1,904,988 126.67
¾ According to the Index Analysis of the whole Income Statement we get to know
that in the comparison of year 2006 and 2007 the difference of sales and cost of
sales value increased.
¾ The value of total profit also increased by 26% from previous year
¾ The value of operating profit increased by 29% as compared to 2006,
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As a business integrated function to add value by ensuring that people, assets, vital
information and operational activities are protected, as a part of a multi functional
management team, contribute to achieve the company goals
The security duties are conducted by Securities 2000. Securities have the following
ƒ Security
ƒ Fire Guards

Security Staff:

Security plays a vital role in the stability of the company. If the security of the company
is not performed well then the company can be liquidated. All PTC employees work like
a team. They are responsible for their own territory and safety. Security staff protects
the personal of PTC, due to the strict checking on the main gate of every person.
Security staff also protects the fixed asset of the company from theft.


PTC gives a best training to its security staff. Fire safety training is also given to the
security members. The PTC security staffs are well polished trained and ethical. PTC
has a good system for the visitor the make a visitor card. If the visitor come inside the
gate security person verified from the person on phone to whom he want to meet. After
verification he gives a visitor card to him/her. Security person properly check the person
who goes outside the gate.

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Physical Security:

Security staff physically protects the PTC. They have made fences on the confined
walls of PTC. They monitor the patrolling of the personal. Every person has a security
torch light at the night duty. They also secure the personal who are also the physical
asset of the PTC. There is key control system on the main gate of PTC. When the fixed
asset is going out side the PTC they properly check the gate passes to the concern

Electro mechanical Security:

PTC has electrical access control system. There is a CCT (close circuit television)
system on the main gate, when the vehicle come inside or goes out side the company.
It is controlled and checks in the CCT to view the vehicle plate No and the lower
surface. There are guards monitoring system. Inside the PTC, the security persons are
on duty at different places. They all are monitored on the main gate by the adhesive
cameras located at different places in PTC. There is a good system of communication
among the security staff. Every person has a wireless sets while he is on duty. They
inform each other through this wireless sets.


# Internal projects
# Camera systems for security purpose at different locations in factory
# Access control
# Human and materials

Yearly Based report:

# Total requirements of securities

# Proposed budget
# Giving only proposed data
# Fire equipments
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# Repair and maintenance
# Security and services


Main objective of the material management department are:

• To maintain record and inventory of incoming wrapping materials and other
Items according to the company inventory policy.
• To educate and work closely with suppliers for the improvement of material in
The quality items.
• To try for keeping minimum cost of material s without damaging the
Manufacturing operations.

This department is responsible for local purchase and as its function is obvious from
it name, to provide materials to all departments and to manages the entire
inventory. By managing means that it is responsible for the purchase of materials,
storage and inventory control. In PTC the valuation methods of inventory is FIFO
(first in first out) method of inventory costing.

MMD Products

ƒ Supply of wrapping material & dispatch of finished.

ƒ Goods to warehouses all over the country.

MMD controls three main areas, which are:

# Wrapping Material Store

# Baling Material Store
# Cigarette Shipping Go downs

Bailing Material Store contains Gunny bags, cotton thread, water proof paper, fiber
bud cases, Poly-Thene (plastic) bags, plastic strapping, scrap bags, etc. When this
store receives any material it records it in Goods Receiving Sheet and issues according

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to requisition made by different departments. They use document for filing any thing
demanded from any department is Requisition CP-38.And when any material or thing is
not required or it is excessive, then Bailing/wrapping material store return/goods
receiving sheet (Gen 90) is used.
Wrapping Material Store contains all materials that are used in manufacturing
department except tobacco. Wrapping material store have a system for material
receiving, it has a Goods Receiving Sheet (GR Sheet) for receiving goods and record it
in it. This store contains tear of ribbon, poly propylene, cigarette paper, tipping paper,
filter paper, aluminum foil, slide, and flats also called blanks. This store gets material
from suppliers and punch in computer by dispatch sheet from supplier. Main supplier is
Packages Limited Lahore for local materials that are produced with in Pakistan.
Shipping Godown contains finished Cigarette packs, which are then transferred for
shipment to Shipping Godown from SMD. They receive packed goods in CBC’s and
stock according to their capacity. They issue stock to their sellers /distributors according
to their requirement and Head Office order. They pay duty to Govt. and use a book for
duty payment when they remove goods from godown called AR-1 book.


To provide engineering services with speed and flexibility by means of passionate
and skilled people to PMD, SMD, GLT and LEAF AREA, hence enabling them to
deliver quality products at minimum supply chain cost.

Engineering department is responsible for consistent supply of services to

ƒ Production department
ƒ GLT department
ƒ Residential area
ƒ Leaf area.

In AKF engineering department provide following services;

• Civil services
• Electrical services

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• Mechanical services
These services are provided to following areas.
• Boiler House.
• Electrical side.
• Air conditioning.
• Vehicles.
• Engineering store
• Water pumps
• Telephones.
• Generators.
• Compressors

They provide different types of spare parts to all types of machinery through their
store which is called engineering store.

Engineering items/spare parts have been divided into three categories:

I. Local items.
II. Foreign/imported items
III. Propitiatory items

Spare parts are sub-categorized on the basis of their consumption:

• Fast
• Regular
• Medium
• Slow
• Dead
• New

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Store has its own process, which are consisting in the following:

• Demand for spare parts (demand is made to SPM Lahore or Jehlum factory)
• Goods received (machinery spare parts are checked by a person, and inform
supplier of shortage/excess or satisfaction of parts.)
• Goods received (machinery spare parts are checked by a person, and inform
supplier of shortage/excess or satisfaction of parts.)
• GR sheet (when spare parts are physically checked then it is GR sheeted and
recorded in a book)
• Binning (when every spare part is placed in its respective Bin)
• Issue of spare parts (when requisition is made to store, spare part or machinery
is checked and issued. One copy of requisition is place in record)


“To provide business consultancy with a technical infrastructure that enables PTC to
perform with speed and flexibility of an integrated virtual team”

IT is the backbone of every business; with out it concept of successful business is

becoming impossible in modern business environment. The information technology
does a great work in today’s modern industrial world. To be competent and
successful every business needs to have a computerized system. Every moderate
and large size business needs;

1. Accurate and timely information

2. Accurate transfer of information
3. Processing of data
4. Proper record keeping

The instant retrieval of information, processing of data at a high speed and accuracy
and the proper system of record keeping is only possible through information

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technology. At AKF the computer system was launched in 1986 with IBM 34. At that
time, the computers were used only for business application purposes like, payroll
and costing etc. The technology was limited only to the IT department. All the works
of business application were used to be performed within the department.
With the passage of time the technology was improved and thereon, the information
technology at AKF also improved. In 1988, the PC’s were introduced in the factory
ant the use of computers for other purposes like worksheet etc. also started. It was
the time of the PC XT computers.
In 1994, novel 36 network system was replaced with the UNIX and all the
computers were linked up.

Electronic Data Interchange

Software is made for this purpose to handle inventory management of PTC. It helps in
fast and reliable tracking of inventory levels, outstanding customer orders, and
backorders. It helps the company to decrease lead times for order processing and is
more reliable for due-date quotation. Minitab is used for the communication between
Manufacturing Plant, Akora Khattak and Head office in Islamabad. Then it is used for
data analysis. Effective Internet facility is provided for better Communication between
head office and the other manufacturing departments.
SAP (System Application Program)
The company undertook the mammoth task in 2004 to replace the existing enterprise
resource planning (ERP) system with SAP, world leading ERP system. A smooth
implementation across the organization, in short it was possible though excellent cross
functional efforts by the projecting the Sap will greatly facilitate the achievement of
further efficiencies in all key business process.


This is very first department which supports the main function of Pakistan Tobacco
Company i.e., manufacturing of cigarette. The function of this department is to
purchase Tobacco leaf from growers and then bring it down to factory. Leaf logistics

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office executes the documentation of leaf purchase and supply. They purchase leaf
from leaf area and then transport it to factory. They use different documents for the
documentation, which are called LD (leaf document).

Leaf purchase is done at depots, which are located at different areas of N.W.F.P
and Punjab; these areas are called Leaf areas. Leaf, which is purchased, is called
“Un worked leaf”. Trucks bring in this leaf and they are in the form of bales, that is
checked by the supervisor of leaf operation office and keep it in pallets in the “Un
worked leaf storages”(ULS).

There are different grades of tobacco and they are purchased according to which
portion of plant the leaf belongs. If leaf belongs to middle or upper portion of plant
then it is priced higher and lower portion plant leaf is priced lower.
The four different varieties of tobacco leaf are FCV, WP, Br, and DV. And each
variety contains different grades.
Leaf purchase is done for 3 months i.e., July to September of every year on the
price set by Pakistan Tobacco Board.

When truck arrives at gate then it is recorded in Marshalling area leaf register,
which contains Truck number, weight of tobacco, depot code and grade of tobacco.
There are 3.0 million kg green leaf stock spaces.
These leaf tobaccos is placed at Godown, from where they are shifted to GLT plant
for processing, a sheet is attached called LD 61 which includes
• From (from which Godown they are transferred).
• Variety
• Grade
• Category
• Pallet number
• Total bales issued
• Total weight in Kilo-grams

And at the end of working day daily green leaf stock (LG80) position is made by leaf
logistics office is made.
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Purchase of tobacco
(Leaf Department)

Receipts of tobacco

GLT Conditioning
Pressing In GLT


PMD Conditioning

Cut Tobacco Store

Filter Rods SMD (Cig: making) Wrapping Material

Packing Packing material

Shipping Godown

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Process and deliver quality tobacco satisfying customer demands at minimum supply
chain cost.

“Processed Tobacco”

• Blending and feeding of green leaf
• Conditioning, searching, threshing & classifying.
• Lamina and stem re-drying
• Grade change over and process set up
• Product verification process (quality assurance)
• Over hauling and maintenance of plants
• Process review and continuous improvement
• New and modified equipment introduction
• Training gap analysis and skill enhancement of people
• Provision of material processes



Provide secondary department the best-valued product in order to gain their respect.
Pursue continuous improvement of performance to best international practice standards
in all operating and end market companies achieve a high level of environmental, health
and safety performance as BAT guidelines.

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“Cut tobacco blend, SX, CH, CL, AY, NT & BP blend”

• Lamina /stem conditioning & casing
• Lamina /stem cutting
• Stem expansion
• Lamina/stem drying
• Final blending of lamina and stem
• Cigarette ripping
• W/R processing


“We are willing to change, dedicated to become the lowest cost, highest quality, highest
manufacturing of MESCA Region”


• Cigarette paper
• Filter paper
• Glue
• Filter
• Ink

• Blanks/ Flats
• Aluminum foil
• Inner collar board
• Gum

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• Wrapper (plastic)
• EOD(easy open device)


Filter rod department works as a subsidiary department to the SMD. The filter rod
department prepares the filter rod. The Material Management Department supplies the
raw materials, which are mainly acetate Tow, plug warp, till box, hot melt and
adhesives. The filter rod is manufactured in two sizes, one is a 54mm and other is
66mm. The filter rod hence produced, is sent to the SMD through filter rod treys. There
is machine that adds the filter rod to cigarettes.


PTC is known for its high quality products, which are meticulously controlled at all
stages of production. PTC quality control section checks every 125th cigarette. The
quality control section has automatic laser machines which automatically select
cigarette for quality assurance. – Quality “the totality of characteristics of an entity that
bears on its ability to satisfy stated and implied needs”.

Excellence in production of goods and services for the satisfaction of consumer is called
quality. Quality is necessary for the success of any organization. PTC management
ensures that quality checks are there at every stage of production process.

Quality control = Measurement + Corrective action

Some of the major defects are, lose end, tight filling, poor sealing of polypropylene,
code date missing or miss position of tear off strip. Outer visual quality is also checked
properly. Faults in outer are categorized into A, B, and C faults.
Everyone observes fault A at a greater distance non-smoker can also observe that
defect. Fault B is observed at arm length only and by smoker, who is conscious about
smoking. C fault is detected at closer inspection or only quality conscious people can
only point out this defect by experts.
The quality department ensures that the cigarette is free from all the defects and the
production is according to the specified instructions in this regard. Statistical, process

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control is introduced in order to collect statistical data and communicate it to all those
who are concerned with it.

BAT’s Sensory Approach (OMEGA System):

All cigarette types

Standardised vocabulary
Standardised scoring & scaling
Each attribute defined
Definition supported by exemplar cigarettes
Standard procedure

What types of sensations are assessed?

Smoking mechanics
Strength factors
Irritation factors
Tobacco flavour character
Added flavour character

OMEGA Standards:

1. Draw Resistance 5
2. Draw Effort 5
3. Mouthful of Smoke 5
4. Irritation 5
5. Impact 5
6. Flue-cured amplitude 3
7. US Blended amplitude 3
8. Top Notes 10

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Draw Resistance:

The perceived amount of effort required to draw on a cigarette. Simply the

resistance to the passage of air and/or smoke through the cigarette and into the
Assessment performed on the unlit cigarette.


Supply Chain in PTC

• Plan
• Source
• Make
• Deliver

> 12,000 Farmers,
14 Depots,
(> Rs 2.8 Bln/ Anm)

Shipping Distributors
Factory Warehouse - 2
W/ Hs - 2 300

GLT Factory - 1 End market

Cig. Factory - 2 Warehouse - 13
(Capacity - 36 (GTO: Rs. 34
Bln/Anm) Bln/Anm)
Local Suppliers: 13
Imported Suppliers: 14
(Rs 3.0 Bln/ Anm)

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Pakistan Tobacco Company is part of a growing industry and the trends in the sales
for the five years studied have been positive. As said earlier the company is
enjoying a major share of the market through most of its brand being the market
leader. Thus the company did not let go of the opportunity of the trends in the
market growth and started invested in new and improved capital. The major
competitors of the company are importing their finished goods stock from their
operations in other countries and are well-established companies too. PTC still
enjoys the control over the local market, but today’s customer is more price
conscious and if PTC’s competitors give competition through improved production
facilitates and reduction in costs PTC might not be able to transform to low cost
production facilities in short span of time. Thus for the last six years PTC has been
investing in new tangible assets. To do so the company has been taking advantage
of long term loans and leasing. This has led to an increase in company’s financial
expenses. The company also had to take short term loans to run day to day
expenses as most of its operative income is unstable and cannot be reliable for day
to day expenses. The need for short term financing also escalated due to increased
financial expenses as a result of long term borrowing. Thus short term financing
also resulted in an increase in financial charges.

The company on the whole is a good venture for investing as it is showing a

potential for growth in the future. The investment into fixed assets during the
previous years has lead to a growth in sales. Thus as the firm comes out of its long
term financing burden the interest expense for long term financing will decrease.
The company is also gaining reputation in South Asian markets and with growth in
production it will also be able to explore international markets. Thus the growth in
the markets catered by the company when will go international the sales revenue of
the company will grow significantly. But from an investor’s point of view the most
important thing to be considered is that the company is part of a highly taxed
industry. This taxes and duties will always take away a major part of company’s

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On the other hand the company is also an attractive prospect for financing
institutions. The company has taken advantage of the long term debt to grow and
the investment from the company has shown positive results. Thus the investment
and growth are synonymous for the company. Therefore this puts the company in a
good position to be able to pay back its long term obligations. As the company
decides to go international in its operations the need for further growth will be very
essential. Thus financial institutions can keep their eye of PTC for long term
financing with a high assurance for timely payback of principal and interest


It is hard to be perfect as it is not stagnate but is possible to reach to high degree.

8.2.1 GLT

• Working environment needs improvement is tried with heavy dust which may cause
lungs and eyes problems. It needs top level commitment to train employees and to
focus on implementation of health and safety policies.

• The job of GLT Labor is more hard and dangerous for health, as compared to other
production unit of the AKF. The GLT labors should be provided additional

8.2.2 PMD

• A conveyer needs to be built between the C-5 Godown and PMD. This mechanism
will save time, money and loss of tobacco during manual transfers.

• The elevation of warning signs should be at relaxing height and the sign should be
printed also in local languages to become easily understood by floor labors.

• Adequate arrangement is needed so that reweighing is not done again and again as
this causes loss of tobacco.

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• The department has the potential to further improve the cost reduction method.

• Efforts should be made to an order to enhance the speed and efficiency of the SAP.

• The SAP comprehensive training must be arranged.

• SAP is new in Pakistan even in world; the internee should be benefited by SAP.

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While during internship in Pakistan Tobacco Company all of the internees are given
research based projects. And internees are liable to work on it during his/her whole
internship period. In the first week in order to have acquaintance with the organization
and to understand the processes followed at your concerned department a brief
introduction is given by each staff member of his/her job responsibilities and activities.
After the first week I was given four projects one after one and I was to submit the
findings in the form of report to the concerned supervisor. During my internship period I
was given the following research based projects:

Project Name Submission Date

Bar coding of fixed assets and DOFA procedure August 05th, 2008
Taxes on Tobacco Purchase Up to Finished Goods August 12th, 2008
Comparison of Air and Sea Freights for Imported Spares August 19th, 2008
Handling of Waste Material August 25th, 2008


At the end of my internship I learnt many things that were theoretically difficult to
understand. After the completion my internship I was able to Understand:

How fixed assets are acquired and disposed.

How they can be better managed so that their record can be easily maintained.
How taxes are levied on tobacco.
Manufacturing expenses or in other words conversion Expenses
Production wages expenses allocation
Leaf financing Procedure
Production process and waste management

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at the end of my internship I was able to understand the functioning of finance

department along with the manufacturing process also.


(Dealed by Sir Sarfaraz)

Manufacturing expenses includes these three types of expenses;
Production wages
Production expenses
In these expenses only production expenses was dealed by Sir Sarfaraz khan while
Production wages were dealed by sir Dilawer Abbas. Along with this I also analyzed the
trend and percentage change of these expenses. Similarly sir Manzoor also told me
about the accounts payable and general ledger activities i.e.


(Dealed by Sir Manzoor)

The invoices less than 100,000 rupees so they are signed by BSO.
The invoices more than 100,000 so they are signed by the Grade 34 officer.
The invoices equal or more than 500,000 are signed by grade 35-36 officer.
1. They received different invoices and registered it. After that they enter IR in SAP
2. They send the invoices to concerned departments like prized leaf, GLT etc.
3. The head of concerned department sign the invoices and returned back the invoices
to sir Manzoor.
4. Mr. Manzoor stamps the invoices and sends it to Jehlum.
5. These invoices are signed by the concerned staff in Jehlum.
6. Then payment has done by the Karachi DEUTCHI Bank.
7. The queries are settled if there is problem.
8. Advance payment is done credit note base.
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9. Employees, who stay or tour Nathiya Gali, use the company vehicles etc so specific
amount is deducted from their salary.


(Dealed by Sir Manzoor)

The main activities perform by Mr. Manzoor are

1. Prepare and input journal Entries

• The general entry sheet is used for journal entries of all the departments.
• Mostly it’s used when staff goes to Nathiya Gali so for charging amount.

2. Prepare and input standard Entries

• Standard entries are used only at the end of month.
• Standard entries can be leaf, GLT, payroll etc.

3. Prepare and allocate debit Notes to/ from other location

• They receive the debit notes from head office, then they allocate to the
concerned department.
• They also send the debit note to Jehlum.

4. Reconciliation of Account current

• They check the debit note once a month but the concerned department must
enter the debit note into system.
• Otherwise the reconciliation can not be done.

5. Prepare monthly schedules

• The monthly schedule deals mostly in rent, insurance, wages, fixed assets etc.

6. Review relevant accounts for hygiene check

• They check the relevant accounts for confirmation.

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7. Coordinate interim/ Final Audit
• The audit is done mostly when the month of Decembers ends. So the audit team
visits in January.
• International audit is done after 4 years .the auditors visit the finance department.
• They check all the operations done in past.

RECURRING JOURNALS: In case of missing entry in the journals, account can not be
reconciled. So missing entry is made and then account can be reconciled.

DEBIT/ CREDIT: Debit/ credit notes are issued to concerned department for example
leaf, GLT etc there is any mistake current account can not be reconciled.

CORRECTING JOURNALS: If there are any mistakes in journal they correct it.
Otherwise account will not be reconciled.


Mr.Dilawar (Deals in production Wages)

In Pakistan tobacco company two types of labour work, seasonal labour and permanent
labour. Permanent labour receives the facility of provident fund while the seasonal
labour is excluded from it.
10 % amount is deducted from the basic salary of permanent employees and is added
in provident fund. Company also contributes 10 % in the provident fund of permanent
employees. Employees can withdraw this loan for two times consecutively.
1. Permanent current employees in AKF are 538.
2. GLT Permanent employees are 36.
3. Leaf permanent employees are 8.

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Different types of provident fund withdrawals are as under:

• Illness of subscriber or family member
• Purchase of motor cycle, house, land and share etc.
• For education from abroad, for performance of hajj.
• For ceremonies (marriage or funerals).
• For maintenance of house.
• For repayment of financial institution debt. .
• Without assigning any reason. .


• They submit, signed and stamped by HRD.

• Provident fund withdrawal application is also attached with it.
• Payroll section checks particular application with last salary slip.
• Payroll section deducts the outstanding loan and interest if the same type of loan
is applied by the employees.
• They put the application in provident withdrawal register.
• Payroll section separates the applications with net payable value more than Rs.
99,999. Prepare separate cash vouchers and payment is done through cross
• They prepare combine cash vouchers for remaining applications and payment is
done through cash.
• Then they put the registered vouchers and applications on line manager’s desk
for approval.
• After approval from line manager the vouchers with loan applications are sent to
cashier for cash and preparation of cheques accordingly.
• The payroll section collects the cash and gives it to the applicants.
• At the end all data of provident fund withdrawal is Registered in the payroll

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Before that, the income tax ordinance restricted payment in cash for transaction
exceeding Rs 10,000. All payments above 10,000 were supposed to be made through
cross cheques or demand draft. Because of this restriction the employees of the factory
were facing difficulties. This process was very time consuming. Now the task is
successfully achieved and the payment is made in cash if the amount is less than Rs,


Little access to system because of confidentiality

Busyness of the staff (because of making company plan)
Very little cross communication (internal communication)
Unavailability of some of the data for the project.


Well my first professional exposure at PTC was a fantastic experience I learned a lot
about the professional and corporate life. And every staff member was very much
cooperative and friendly. Besides this I have been working with other internees, which
was another excellent exposure to professional world. It can never be denied that the
things which are learnt thorough demonstration are never forgotten and that’s what
internship is all about. It makes you professional, aware you of time management, how
to discuss anything with upper management or lower management. Internship is a step
to the professional world while in the midst of your studies. It brings commitment and
professionalism in ones life and makes one prepare for the thick and thin of future life.

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• Annual Reports of PTC for the year 2006, 2007
• Internship Report by Ahmed Shah
• Internship report By Yawar Khan
• Mr. Sarfaraz Khan (Production Expenses)
• Mr. Dilawer Abbas (Production wages)
• Mr. Mian Sabir shah (Leaf Financing)
• Mr. Manzoor Ali (Accounts Payable and G/L)
• Mr. Dost Muhammad (Cash)
• Mr. Aamir Iqbal (Manufacturing Finance Analyst)
• Ms. Bushra (MTO)

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