Acknowledgement

Pakistan Tobacco Company | Final Project

1

Pakistan Tobacco Company
Pakistan Tobacco Company Limited (PTC) is a part of British American
Tobacco - the world's most international tobacco group - with brands sold
in 180 markets around the world. Pakistan Tobacco's operations in
Pakistan began in 1947, making it one of Pakistan's first foreign
investments.
The company produces high quality tobacco products to meet the diverse
preferences of millions of consumers, and it works in all areas of the
business - from seed to smoke.
The company provides a number of reputed brands of cigarettes to
consumers in Pakistan, including Benson and Hedges, Embassy, Gold
Flake, Capstan and Gold Leaf.

Vision
“Like a lighthouse in a dark, stormy sea... Our vision serves
as a beacon of light and hope, helping us navigates the
waters”

Mission Statement

“Transform PTC to perform responsibly with the speed,
flexibility and enterprising spirit of an innovative, consumer
focused Company”

Strategic Objectives
“Our strategy reflects our vision of being the champions of
Growth, Productivity, Responsibility and a Winning
Organisation”

Pakistan Tobacco Company | Final Project

2

Company’s Brands
“We have always considered ourselves a consumer focused
company. We aim to offer a product that excels in all
aspects and exceeds the expectations of our consumers”
Pakistan Tobacco Company invests in trying to understand the
consumers’ preferences and ensures that adult smokers make informed
choices about different brands available in the market. We have put in
particular effort in promoting two of our Global Drive Brands, Dunhill and
Pall Mall; and two of our great value for money brands, John Player Gold
Leaf and Gold Flake.

Dunhill
Dunhill, a premium global brand, celebrated its centenary in 2007.
2008 was an exceptional year for Dunhill in Pakistan as the brand
witnessed exponential growth; fuelled by its re-launch in July. Going
forward, Dunhill is poised to strengthen its foothold in the premium
segment.

Benson & Hedges
In 1873, Richard Benson & William Hedges started a partnership in
London.
Benson & Hedges was launched in Pakistan in March 2003 and has since
been able to build strong brand loyalty among its consumers showing
excellent year on year growth.

Gold Leaf
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.
John Player Gold Leaf has become an institution in itself, becoming one of
the most recognisable cigarette brands in the country. John Player Gold
Leaf has recently been declared the largest Urban Brand in Pakistan,
beating out products across the F.M.C.G. spectrum.

Pakistan Tobacco Company | Final Project

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.

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 'soft cup' packaging, the brand took off when it was
repositioned in the Value For Money (VFM) segment and later a 'hinge lid'
variant was introduced in 2000.
Gold Flake has grown tremendously as a brand since 2004, making it the
largest volume brand in Pakistan, and the second largest brand in British
American Tobacco's Asia Pacific region. The key to Gold Flake’s success
has been its novel engagement schemes which have fuelled growth over
the years. Through consumer relevant initiatives, Gold Flake has
established itself as a fresh and modern offering in the VFM segment and
is all set to consolidate its position as the major volume driver for
Pakistan Tobacco Company.

Embassy
Embassy, is a leading volume brand in Pakistan, and is most popular in
Punjab where it enjoys a leading position. Having built its heritage over a
number of years, Embassy thrives on its brand loyalty and locally tailored
taste characteristics.

Financial Highlights
Gross Turn Over
Pakistan Tobacco Company | Final Project

4

Year
2004
2005
2006
2007
2008
2009

Gross Turnover
25,453 Million Rupees
30,615 Million Rupees
35,715 Million Rupees
40,889 Million Rupees
49,054 Million Rupees
57,544 Million Rupees

Financial Highlights
Property Plant and Equipment (Fixed Assets)
Years
2004
2005
2006
2007
2008
2009

Property Plant and Equipment
3,564
3,798
4,529
5,154
5,600
5,952

Million
Million
Million
Million
Million
Million

Rupees
Rupees
Rupees
Rupees
Rupees
Rupees

Earnings per Share and Dividend Yield
Year
2004
2005

Earnings
2.60/Share
5.17/Share

Dividend Yield
3.25%
5.37%

Pakistan Tobacco Company | Final Project

5

2006
2007
2008
2009

7.46/Share
9.47/Share
9.91/Share
11.83/Share

7.64%
6.37%
9.08%
9.10%

Gross Volume
Year
2004

Volume
27 Billion

2005

31 Billion

2006

35 Billion

2007

37 Billion

2008

41 Billion

2009

41 Billion

Gross Profit
Operating Profit
3,483 Million
1,077
Million
4530 Million
2,081
Million
5534 Million
2,841
Million
6516 Million
3,720
Million
7277 Million
3,860
Million
8224 Million
4,589
Million

After Tax Profit
665 Million
1,322
Million
1,905
Million
2,420
Million
2,532
Million
3,022
Million

Financial Analysis 2004-2005
Pakistan Tobacco Company | Final Project

6

Balance Sheet (Horizontal Analysis)
ITEMS

2004

2005

Horizontal Analysis

Property plant and
Equipment
Investment in
Subsidiary
Company
Long term Loans

3,564,4
07
5,000

4,529,3
66
5,000

4529366 - 3564407÷
3564407
5000 – 5000 ÷ 5000

27.07%

16,324

17,782

17782 – 16324 ÷ 16324

8.93%

Long Term Deposits

4,433

11,365

11365 – 4433 ÷ 4433

156.3%

3,074,0
52
131,464

3,780,9
31
125,232

22.99%

Trade Debts

12,486

2,894

3780931 – 3074052 ÷
3074052
125232 – 131464 ÷
131464
2894 – 12486 ÷ 12486

Loans and Advances

32,273

32,676

32676 – 32273 ÷ 32273

Short term
Payments
Other Receivables

36,003

31,987

31987 – 36003 ÷ 36003

119,126

104,791

Cash and Bank

39,197

57,605

104791 – 119126 ÷
119126
57605 – 39197 ÷ 39197

Total Current Assets

3,434,6
01
7,024,7
65

4,136,1
16
7,968,4
53

4136116 – 3434601 ÷
3434601
7968453 – 7024765 ÷
7024765

NON CURRENT
ASSETS
---

CURRENT
ASSETS
Stock in Trade
Stores and Spares

Total Assets

(4.70%
)
(76.82
%)
1.24%
(11.15
%)
(12.03
%)
46.96
20.42%
13.43%

Balance Sheet

Pakistan Tobacco Company | Final Project

7

ITEMS

2004

2005

Horizontal Analysis

2,554,9
38
707,885

2,554,9
38
1,084,4
56

2554938 – 2554938 ÷
2554938
1084456 – 707885 ÷
707885

53.19
%

---

---

---

---

624,475

724,673

724673 – 624475 ÷
624475

16.04
%

2,056,2
98
5,041

2,515,8
24
10,911

2515824 – 2056298 ÷
2056298
10911 – 5041 ÷ 5041

22.34
%
116.44
%

Short term running
finance

996,579

400,662

400662 – 996579 ÷
996579

(59.79
%)

Income tax liability

79,549

676,969

676969 – 79549 ÷ 79549

75.10
%

Total Current
Liabilities

3,137,4
67

3,604,3
66

3604366 – 3137467 ÷
3137467

14.88
%

Total Liabilities

7,024,7
65

7,968,4
53

7968453 – 7024765 ÷
7024765

13.43
%

SHARE CAPITAL
AND RESERVES
Share Capital
Revenue Reserves

---

NON CURRENT
LIABILITIES
Retirement Benefits
Deferred Taxation
CURRENT
LIABILITIES
Trade and other
payables
Accrued Interest

Profit and Loss Account

Pakistan Tobacco Company | Final Project

8

ITEMS

2004

2005

25,452,6
34
12,466,9
12
3,413,14
6
9,572,57
6
6,089,95
5
3,482,62
1
1,442,35
6

30,615,0
62
14,758,5
58
4,103,32
4
11,753,1
80
7,223,57
6
4,529,60
4
1,578,65
6

30615062 – 25452634 ÷
25452634
14758558 – 12446912 ÷
12446912
4103324 – 3413146 ÷
3416146
11753180 – 9572576 ÷
9572576
7223576 – 6089955 ÷
6089955
4529604 – 3482621 ÷
3482621
1578656 – 1442356 ÷
1442356

20.28
%
18.57
%
20.20
%
22.77
%
18.61
%
30.06
%
9.44%

595,637

573,285

573285 – 595637 ÷ 595637

(3.75
%)

Other Operating
Income

14,590

8,100

8100 – 14590 ÷ 14590

(44.48
%)

Other Operating
Expense

381,914

304,462

304462 – 381914 ÷ 381914

(20.27
%)

Operating Profit

1,077,30
4
---

2,081,30
1
26,317

2081301 – 1077304 ÷
1077304
---

93.19
%
100

Finance Cost

21,265

25,554

25554 – 21265 ÷ 21265

Profit Before
Tax
Income Tax
Expense
Profit of the
Year

1,056,03
9
390,812

2,082,06
4
760,145

2082064 – 1056039 ÷
1056039
760145 – 390812 ÷ 390812

665,227

1,321,91
9

1321919 – 665227 ÷
665227

20.16
%
97.15
%
94.50
%
98.77
%

Gross turnover
Excise Duties
Sales Tax
Net Sales
Cost of Sales
Gross Profit
Selling and
distribution
Administrative
Expenses

Finance Income

Horizontal Analysis

Financial Analysis 2004–2005
Pakistan Tobacco Company | Final Project

9

Balance Sheet (Vertical Analysis)
ITEMS

2004

2005

Vertical Analysis

Property plant and
Equipment
Investment in
Subsidiary
Company
Long term Loans

3,564,4
07
5,000

4,529,3
66
5,000

4529366 ÷ 7968453

56.84%

5000 ÷ 7968453

0.006%

16,324

17,782

17782 ÷ 7968453

0.22%

Long Term Deposits

4,433

11,365

11365 ÷ 7968453

0.14%

3,074,0
52
131,464

3,780,9
31
125,232

3780931 ÷ 7968453

47.57%

125232 ÷ 7968453

1.57%

Trade Debts

12,486

2,894

2894 ÷ 7968453

0.03%

Loans and Advances

32,273

32,676

32676 ÷ 7968453

0.41%

Short term
Payments
Other Receivables

36,003

31,987

31987 ÷ 7968453

0.40%

119,126

104,791

104791 ÷ 7968453

1.31%

Cash and Bank

39,197

57,605

57605 ÷ 7968453

0.72%

Total Current Assets

3,434,6
01
7,024,7
65

4,136,1
16
7,968,4
53

4136116 ÷ 7968453

51.90%

7968453 ÷ 7968453

100%

NON CURRENT
ASSETS

CURRENT
ASSETS
Stock in Trade
Stores and Spares

Total Assets

Balance Sheet

Pakistan Tobacco Company | Final Project

10

ITEMS

2004

2005

Vertical Analysis

2,554,9
38
707,885

2,554,9
38
1,084,4
56

2554938 ÷ 7968453

---

---

---

---

624,475

724,673

724673 ÷ 7968453

9.09%

2,056,2
98
5,041

2,515,8
24
10,911

2515824 ÷ 7968453
10911 ÷ 7968453

31.57
%
0.13%

Short term running
finance

996,579

400,662

400662 ÷ 7968453

5.03%

Income tax liability

79,549

676,969

676969 ÷ 7968453

8.49%

Total Current
Liabilities

3,137,4
67

3,604,3
66

3604366 ÷ 7968453

45.26
%

Total Liabilities

7,024,7
65

7,968,4
53

7968453 ÷ 7968453

100%

SHARE CAPITAL
AND RESERVES
Share Capital
Revenue Reserves

1084456 ÷ 7968453

32.06
%
13.62
%

NON CURRENT
LIABILITIES
Retirement Benefits
Deferred Taxation
CURRENT
LIABILITIES
Trade and other
payables
Accrued Interest

Profit and Loss Account
Pakistan Tobacco Company | Final Project

11

ITEMS

2004

2005

25,452,6
34
12,466,9
12
3,413,14
6
9,572,57
6
6,089,95
5
3,482,62
1
1,442,35
6

30,615,0
62
14,758,5
58
4,103,32
4
11,753,1
80
7,223,57
6
4,529,60
4
1,578,65
6

30615062 ÷ 11753180

595,637

573,285

573285 ÷ 11753180

4.8%

Other Operating
Income

14,590

8,100

8100 ÷ 11753180

0.06%

Other Operating
Expense

381,914

304,462

304462 ÷ 11753180

2.59%

Operating Profit

1,077,30
4
---

2,081,30
1
26,317

2081301 ÷ 11753180
---

17.70
%
0.22%

Finance Cost

21,265

25,554

25554 ÷ 11753180

0.21%

Profit Before
Tax
Income Tax
Expense
Profit of the
Year

1,056,03
9
390,812

2,082,06
4
760,145

2082064 ÷ 11753180

17.71
%
6.46%

665,227

1,321,91
9

1321919 ÷ 11753180

Gross turnover
Excise Duties
Sales Tax
Net Sales
Cost of Sales
Gross Profit
Selling and
distribution
Administrative
Expenses

Finance Income

Vertical Analysis

14758558 ÷ 11753180
4103324 ÷ 11753180
11753180 ÷ 11753180

260.48
%
125.57
%
34.91
%
100%

7223576 ÷ 11753180

61.46
%
62.70
%
13.43
%

4529604 ÷ 11753180
1578656 ÷ 11753180

760145 ÷ 11753180

11.24
%

Financial Analysis 2005-2006
Pakistan Tobacco Company | Final Project

12

Balance Sheet
ITEMS

2005

2006

Horizontal
Analysis

Vertical
Analysis

Property plant and
Equipment
Investment in Subsidiary
Company
Long term Loans

4,529,3
66
5,000

4,529,3
66
5,000

19.25

51.86

---

0.006

17,782

18,660

4.94

0.21

Long Term Deposits and
Payments

11,365

8,424

(25.88)

0.10

3,690,8
93
140,00
8
2,406

0.26

43.40

11.80

1.60

Trade Debts

3,780,9
31
125,23
2
2,894

(16.86)

0.03

Loans and Advances

32,676

12,205

(62.65)

0.14

Short term Payments

31,987

72,235

125.83

0.83

Other Receivables

104,79
1
57,605

92,360

(11.86)

1.06

62,883

9.16

0.72

4,136,1
16
7,968,4
53

4,172,9
50
8,734,4
00

0.89

47.78

9.61

100

NON CURRENT
ASSETS

CURRENT ASSETS
Stock in Trade
Stores and Spares

Cash and Bank Balances
Total Current Assets
Total Assets

Balance Sheet
Pakistan Tobacco Company | Final Project

13

ITEMS

2005

2006

Horizontal
Analysis

Vertical
Analysis

2,554,9
38
1,084,4
56

2,554,9
38
1,584,2
49

---

29.25

46.08

18.14

---

---

---

---

724,67
3

845,00
4

16.60

9.67

2,212,2
41
11,115

(12.07)

25.23

Accrued Interest

2,515,8
24
10,911

1.87

0.13

Short term running
finance

400,66
2

1,293,1
14

222.75

14.81

Income tax liability

676,96
9

233,71
2

(65.48)

2.68

Total Current liability

3,604,3
66

3,750,2
09

4.05

42.94

Total Liabilities

7,024,7
65

8,734,4
00

9.61

100

SHARE CAPITAL
AND RESERVES

Share Capital
Revenue Reserves
NON CURRENT
LIABILITIES

Retirement Benefits
Deferred Taxation
CURRENT
LIABILITIES
Trade and other
payables

Profit and Loss Account
Pakistan Tobacco Company | Final Project

14

ITEMS

2005

2006

Horizontal
Analysis

Vertical
Analysis

Gross turnover

30,615,062

35,715,451

16.66

---

Excise Duties

14,758,558

16,991,172

15.13

---

Sales Tax

4,103,324

4,833,285

17.79

---

Net Sales

11,753,180

13,890,994

18.19

100

Cost of Sales

7,223,576

8,357,747

15.70

60.16

Gross Profit

4,529,604

5,533,520

22.16

39.84

Selling and
distribution
Administrative
Expenses

1,578,656

1,816,198

15.05

13.07

573,285

644,981

12.75

4.64

Other Operating
Income

8,100

20,686

155.38

0.15

Other Operating
Expense

304,462

251,932

(17.25)

1.81

Operating Profit

2,081,301

2,841,095

36.51

20.45

Finance Income

26,317

47,402

80.12

0.34

Finance Cost

25,554

27,824

8.88

0.20

Profit Before Tax

2,082,064

2,860,673

37.40

20.59

Income Tax
Expense
Profit of the Year

760,145

955,685

25.72

6.88

1,321,919

1,904,988

44.11

13.74

Financial Analysis 2006-2007
Pakistan Tobacco Company | Final Project

15

Balance Sheet
ITEMS

2006

2007

Horizontal
Analysis

Vertical
Analysis

Property plant and
Equipment
Investment in
Subsidiary Company
Long term Loans

4,529,3
66
5,000

5,154,3
26
5,000

13.80

52.45

---

0.05

18,660

12,513

(32.94)

0.13

Long Term Deposits
and Payments

8,424

13,025

54.62

0.13

3,998,1
81
140,77
7
2,386

5.47

40.69

0.55

1.43

Trade Debts

3,690,8
93
140,00
8
2,406

(0.83)

0.02

Loans and Advances

12,205

38,580

216.10

0.39

Short term Payments

72,235

64,887

(10.17)

0.66

Other Receivables

92,360

148.91

2.34

Cash and Bank
Balances
Total Current Assets

62,883

229,89
1
166,66
6
4,641,3
68
9,826,2
32

165.04

1.70

11.23

47.23

12.50

100

NON CURRENT ASSETS

CURRENT ASSETS
Stock in Trade
Stores and Spares

Total Assets

4,172,9
50
8,734,4
00

Balance Sheet
Pakistan Tobacco Company | Final Project

16

ITEMS

2006

2007

Horizontal
Analysis

Vertical
Analysis

2,554,9
38
1,584,2
49

2,554,9
38
1,149,7
42

---

26.00

(27.43)

11.70

---

1,149,7
42
809,109

100

4.98

(4.25)

8.23

60.39

36.11

(24.42)

0.09

SHARE CAPITAL AND
RESERVES

Share Capital
Revenue Reserves
NON CURRENT
LIABILITIES

Retirement Benefits
Deferred Taxation

845,00
4

CURRENT
LIABILITIES
Trade and other
payables
Accrued Interest

2,212,2
41
11,115

3,548,2
37
8,401

Short term running
finance

1,293,1
14

1,038,5
50

(19.69)

10.57

Income tax liability

233,71
2

227,752

(2.55)

2.32

Total Current
liabilities

3,750,2
09

4,822,9
40

28.60

49.08

Total Liabilities

8,734,4
00

9,826,2
32

12.50

100

Profit and Loss Account

Pakistan Tobacco Company | Final Project

17

ITEMS

2006

2007

Horizontal
Analysis

Vertical
Analysis

35,715,45
1
16,991,17
2
4,833,285

40,889,275

14.49

--

19,311,946

13.66

--

5,534,452

14.51

--

16,042,877

15.49

100

Cost of Sales

13,890,99
4
8,357,747

9,527,306

14.00

59.39

Gross Profit

5,533,520

6,515,571

17.75

40.61

Selling and
distribution
Administrative
Expenses

1,816,198

1,795,793

(1.12)

11.19

644,981

736,147

14.13

4.59

Other Operating
Income

20,686

71,756

246.88

0.45

Other Operating
Expense

251,932

335,763

33.28

2.09

Operating Profit

2,841,095

3,719,624

30.92

23.19

Finance Income

47,402

30,878

(34.86)

0.19

Finance Cost

27,824

25,928

(6.81)

0.16

Profit Before Tax

2,860,673

3,724,574

30.20

23.22

Income Tax
Expense
Profit of the Year

955,685

1,304,367

36.49

8.13

1,904,988

2,420,207

27.05

15.09

Gross turnover
Excise Duties
Sales Tax
Net Sales

Pakistan Tobacco Company | Final Project

18

Financial Analysis 2007-2008
Balance Sheet
ITEMS

2007

2008

Horizontal
Analysis

Vertical
Analysis

Property plant and
Equipment
Investment in
Subsidiary Company
Long term Loans

5,154,3
26
5,000

5,599,75
8
5,000

8.64

53.87

---

0.05

12,513

9,244

(26.12)

0.09

Long Term Deposits
and Payments

13,025

41,172

216.10

0.40

4,059,06
3
190,646

1.52

39.05

35.42

1.83

Trade Debts

3,998,1
81
140,77
7
2,386

2,666

11.74

0.03

Loans and Advances

38,580

65,917

70.86

0.63

Short term Payments

64,887

105,728

62.94

1.02

Other Receivables

229,89
1
166,66
6
4,641,3
68
9,826,2
32

246,675

7.30

2.37

69,172

(58.50)

0.67

4,739,86
7
10,395,0
41

2.12

45.60

5.79

100

NON CURRENT ASSETS

CURRENT ASSETS
Stock in Trade
Stores and Spares

Cash and Bank
Balances
Total Current Assets
Total Assets

Pakistan Tobacco Company | Final Project

19

Balance Sheet
ITEMS

2007

2008

Horizontal
Analysis

Vertical
Analysis

Share Capital

2,554,9
38

2,554,93
8

---

24.58

Revenue Reserves

1,149,7
42

1,053,39
3

(8.38)

10.13

Retirement Benefits

1,149,7
42

739,133

51.00

7.11

Deferred Taxation

809,10
9

836,939

3.44

8.05

Trade and other
payables

3,548,2
37

4,324,70
4

21.88

41.60

Accrued Interest

8,401

10,354

23.25

0.10

Short term running
finance

1,038,5
50

572,397

(44.88)

5.51

Income tax liability

227,75
2

303,183

33.12

2.92

Total Current Liability

4,822,9
40

5,210,63
8

8.04

50.13

Total Liabilities

9,826,2
32

10,395,0
41

5.79

100

SHARE CAPITAL AND
RESERVES

NON CURRENT
LIABILITIES

CURRENT
LIABILITIES

Pakistan Tobacco Company | Final Project

20

Profit and Loss Account
ITEMS

2007

2008

Horizontal
Analysis

Vertical
Analysis

Gross turnover

40,889,275

49,053,928

19.97

--

Excise Duties

19,311,946

23,351,734

20.92

--

Sales Tax

5,534,452

6,829,699

23.40

--

Net Sales

16,042,877

18,872,495

17.64

100

Cost of Sales

9,527,306

11,595,736

21.71

61.44

Gross Profit

6,515,571

7,276,759

11.68

38.56

Selling and
distribution
Administrative
Expenses

1,795,793

1,933,364

7.66

10.24

736,147

928,358

26.11

4.92

Other Operating
Income

71,756

60,551

(15.62)

0.32

Other Operating
Expense

335,763

615,458

83.30

3.26

Operating Profit

3,719,624

3,860,130

3.78

20.45

Finance Income

30,878

59,600

93.02

0.32

Finance Cost

25,928

26,013

0.33

0.14

Profit Before Tax

3,724,574

3,893,717

4.54

20.63

Income Tax
Expense
Profit of the Year

1,304,367

1,361,422

4.37

7.21

2,420,207

2,532,295

4.63

13.42

Pakistan Tobacco Company | Final Project

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Financial Analysis 2008-2009
Balance Sheet
ITEMS

2008

2009

Horizontal
Analysis

Vertical
Analysis

Property plant and
Equipment
Investment in Subsidiary
Company
Long term Loans

5,599,75
8
5,000

5,952,10
8
5,000

6.29

48.68

9,244

7,310

(20.92)

0.06

Long Term Deposits and
Payments

41,172

19,915

(51.63)

0.16

4,059,06
3
190,646

5,765,36
7
218,375

42.04

47.15

14.54

1.79

2,666

1,684

(36.83)

0.01

Loans and Advances

65,917

48,598

(26.27)

0.40

Short term Payments

105,728

72,483

(31.44)

0.59

Other Receivables

246,675

88,147

(64.27)

0.72

69,172

47,874

(30.79)

0.39

4,739,86
7
10,395,0
41

6,242,52
8
12,226,8
61

31.70

51.06

17.62

100

NON CURRENT ASSETS

0.04

CURRENT ASSETS
Stock in Trade
Stores and Spares
Trade Debts

Cash and Bank Balances
Total Current Assets
Total Assets

Pakistan Tobacco Company | Final Project

22

Balance Sheet
ITEMS

2008

2009

Horizontal
Analysis

Vertical
Analysis

2,554,93
8
1,053,39
3

2,554,93
8
1,705,29
6

---

20.90

61.89

13.95

Retirement
Benefits

739,133

---

(100)

0.00

Deferred Taxation

836,939

1,109,84
7

32.61

9.08

4,324,70
4
10,354

5,037,46
9
27,659

16.48

41.20

167.13

0.23

Short term
running finance

572,397

1,300,83
7

127.26

10.64

Income tax
liability

303,183

490,815

61.89

4.01

Total Current
Liability

5,210,63
8

6,856,78
0

31.59

56.08

Total Liability

10,395,0
41

12,226,8
61

17.62

100

SHARE CAPITAL
AND RESERVES

Share Capital
Revenue Reserves
NON CURRENT
LIABILITIES

CURRENT
LIABILITIES
Trade and other
payables
Accrued Interest

Pakistan Tobacco Company | Final Project

23

Profit and Loss Account
ITEMS

2008

2009

Horizontal
Analysis

Vertical
Analysis

Gross
turnover
Excise
Duties
Sales Tax

49,053,928

57,544,309

17.31

--

23,351,734

27,654,345

18.43

--

6,829,699

8,223,439

20.41

--

Net Sales

18,872,495

21,666,525

14.80

100

Cost of Sales

11,595,736

13,442,066

15.92

62.04

Gross Profit

7,276,759

8,224,459

13.02

37.96

Selling and
distribution
Administrati
ve Expenses

1,933,364

2,246,014

16.17

10.37

928,358

1,100,814

18.58

5.08

Other
Operating
Income
Other
Operating
Expense
Operating
Profit
Finance
Income
Finance Cost

60,551

226,499

274.06

1.05

615,458

514,665

(16.38)

2.38

3,860,130

4,589,465

18.89

21.18

59,600

102,826

72.53

0.47

26,013

43,802

68.39

0.20

3,893,717

4,648,489

19.38

21.45

1,361,422

1,626,083

19.44

7.51

2,532,295

3,022,406

19.35

13.95

Profit Before
Tax
Income Tax
Expense
Profit of the
Year

Pakistan Tobacco Company | Final Project

24

Financial Analysis 2009-2010
Balance Sheet
ITEMS

2009

2010

Horizontal
Analysis

Vertical
Analysis

Property plant and
Equipment
Investment in
Subsidiary Company
Long term Loans

5,952,10
8
5,000

5,680,29
6
5000

(4.5)

39.58

---

0.03

7,310

4170

(42.9)

0.02

Long Term Deposits
and Payments

19,915

29,721

49.2

0.20

5,765,36
7
218,375

7,255,00
7
249,632

25.83

50.55

14.31

1.73

1,684

1,554

(7.71)

0.01

Loans and Advances

48,598

68,559

41.07

0.47

Short term Payments

72,483

135,267

86.61

0.94

Other Receivables

88,147

124,896

41.69

0.87

Cash and Bank
Balances
Total Current Assets

47,874

56,910

18.87

0.39

6,242,52
8

7,893,82
5

26.45

55.01

NON CURRENT ASSETS

CURRENT ASSETS
Stock in Trade
Stores and Spares
Trade Debts

Pakistan Tobacco Company | Final Project

25

Total Assets

12,226,8
61

14,349,4
73

17.72

100

Balance Sheet
ITEMS

2009

2010

Horizontal
Analysis

Vertical
Analysis

2,554,93
8
1,705,29
6

2,554,93
8
1,313,95
5

---

17.80

(22.94)

9.15

---

---

---

---

1,109,84
7

1,113,83
3

0.35

7.76

5,815,86
7
53,648

15.45

40.53

Accrued Interest

5,037,46
9
27,659

93.96

0.37

Short term
running finance

1,300,83
7

2,561,36
2

96.90

17.84

Income tax
liability

490,815

199,409

(59.37)

0.13

Total Current
Liability

6,856,78
0

8,630,28
6

25.86

60.14

SHARE CAPITAL
AND RESERVES

Share Capital
Revenue Reserves
NON CURRENT
LIABILITIES

Retirement
Benefits
Deferred
Taxation
CURRENT
LIABILITIES
Trade and other
payables

Pakistan Tobacco Company | Final Project

26

Total Liability

12,226,8
61

14,349,4
73

17.36

100

Profit and Loss Account
ITEMS

2009

2010

Horizontal
Analysis

Vertical
Analysis

Gross
turnover
Excise
Duties
Sales Tax

57,544,309

44,458,074

(22.74)

283.24

27,654,345

22,347,073

(19.9)

142.37

8,223,439

6,414,894

(21.99)

40.86

Net Sales

21,666,525

15,696,107

(27.25)

100

Cost of Sales

13,442,066

10,789,048

(19.73)

68.73

Gross Profit

8,224,459

4,907,059

(40.33)

31.26

Selling and
distribution
Administrati
ve Expenses

2,246,014

2,007,158

(10.63)

12.78

1,100,814

943,256

(14.31)

6.00

Other
Operating
Income
Other
Operating
Expense
Operating
Profit
Finance
Income
Finance Cost

226,499

158,253

(30.13)

1.00

514,665

24,193

(95.29)

0.15

4,589,465

1,822,585

(60.28)

11.61

102,826

34,669

(66.28)

0.22

43,802

101,415

131.5

0.64

4,648,489

1,755,839

(62.22)

11.18

Profit Before
Tax

Pakistan Tobacco Company | Final Project

27

Income Tax
Expense
Profit of the
Year

1,626,083

614,218

(62.22)

3.91

3,022,406

1,141,621

(62.22)

7.2

Ratio Analysis 2005-2010
Liquidity Ratios
1. Current Ratio
Years

Current Assets

Current Liabilities

Current Ratio

2004

3,434,601

3,137,467

1.094

2005

4,136,116

3,604,366

1.147

2006

4,172,950

3,750,209

1.112

2007

4,641,368

4,822,940

0.962

2008

4,739,867

5,210,638

0.909

2009

6,242,528

6,856,780

0.910

2010

7,893,825

8,630,286

0.914

2. Quick Ratio
Years

Quick Assets

Current Liabilities

Quick Ratio

2004

3,60,549

3,137,467

0.1149

2005

3,55,185

3,604,366

0.098

2006

3,82,097

3,750,209

0.101

2007

6,43,187

4,822,940

0.133

Pakistan Tobacco Company | Final Project

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2008

6,80,804

5,210,638

0.130

2009

4,77,161

6,856,780

0.069

2010

6,38,818

8,630,286

0.074

Liquidity Ratios
3. Inventory Turnover
Years

Cost of Sales

Average Inventory

Inventory Turnover

2004

6,089,955

3,069,090

1.98

2005

7,223,576

3,427,491

2.10

2006

8,357,474

3,785,892

2.20

2007

9,527,306

3,894,517

2.44

2008

11,595,736

4,028,622

2.87

2009

13,442,066

4,972,215

2.70

2010

10,789,048

6,510,187

1.67

4.

Average Account Receivables Turnover

Years

Credit Sales

Average A/R

A/R Turnover

2004

9,572,576

1,05,266

90.93

2005

11,753,180

1,11,958

104.97

2006

13,890,994

98,575

140.91

2007

16,042,877

1,61,125

99.56

2008

18,872,495

2,38,282

117.15

2009

21,666,525

1,67,411

129.41

2010

15,696,107

1,06,521

147.34

Pakistan Tobacco Company | Final Project

29

Profitability Ratios
1.

Assets Turnover
Years

Sales

Average Total
Assets

Assets Turnover

2004

9,572,576

6,641,792

1.45

2005

11,753,180

7,496,609

1.56

2006

13,890,994

8,351,426

1.66

2007

16,042,877

9,280,316

1.78

2008

18,872,495

10,110,636

1.86

2009

21,666,525

11,310,951

1.91

2010

15,696,107

12,964,936

1.21

2. Profit Margin
Years

Sales

Cost of Goods Sold

Profit Margin

2004

9,572,576

6,089,955

36.38 %

2005

11,753,180

7,223,576

38.53 %

2006

13,890,994

8,357,474

39.83 %

2007

16,042,877

9,527,306

40.61 %

2008

18,872,495

11,595,736

38.55 %

2009

21,666,525

13,442,066

37.95 %

2010

15,696,107

10,789,048

31.27%

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Profitability Ratios
3. Return on Assets
Years

Net Income

Average Total
Assets

Return on Assets

2004

665,227

6,641,792

0.10

2005

1,321,919

7,496,609

0.17

2006

1,904,988

8,351,426

0.22

2007

2,420,207

9,280,316

0.26

2008

2,532,295

10,110,636

0.25

2009

3,022,406

11,310,951

0.27

2010

1,141,621

12,964,936

0.80

4. Return on Common Stockholder’s Equity
Years

Net Income

Average Stock
Holders’ Equity

Return on Stock
holders’ Equity

2004

665,227

3,262,823

0.20

2005

1,321,919

3,451,118

0.38

2006

1,904,988

3,889,300

0.48

2007

2,420,207

4,081,022

0.59

2008

2,532,295

3,656,505

0.69

2009

3,022,406

3,934,282

0.76

2010

1,141,621

4,065,563

0.28

Profitability Ratios
Pakistan Tobacco Company | Final Project

31

5. Earnings per Share
Years

Net Income

Average Shares
Outstanding

Earnings per Share

2004

665,227

2,55,494

2.60

2005

1,321,919

2,55,494

5.17

2006

1,904,988

2,55,494

7.46

2007

2,420,207

2,55494

9.47

2008

2,532,295

2,55,494

9.91

2009

3,022,406

2,55,494

11.83

2010

1,141,621

2,55,494

4.47

6. Payout Ratios
Years

Dividends per
Share

Earnings per Share

Payout Ratio

2004

1.61

2.60

0.61

2005

3.69

5.17

0.71

2006

5.48

7.46

0.73

2007

7.88

9.47

0.83

2008

11.62

9.91

1.17

2009

9.53

11.83

0.80

2010

5.99

4.47

1.34

Profitability Ratios
7. Price Earnings Ratio
Pakistan Tobacco Company | Final Project

32

Years

Market Price of
Share

Earnings per Share

2004

2.60

2005

5.17

2006

7.46

2007

9.47

2008

9.91

2009

11.83

2010

4.47

Price Earnings
Ratio

Solvency Ratios
1.

Debt to Assets Ratio

Years

Total Debts

Total Assets

Debt to Assets Ratio

Pakistan Tobacco Company | Final Project

33

2004

1,896,686

7,024,765

0.27

2005

2,916,486

7,968,453

0.33

2006

3,505,382

8,734,400

0.40

2007

4,586,767

9,826,232

0.46

2008

4,897,101

10,395,041

0.47

2009

6,338,306

12,226,861

0.51

2010

8,377,229

13,613,012

0.61

2. Times Interest Earned
Years

Operating Income

Interest Expense

Times Interest Earned

2004

1,056,039

390,812

2.70

2005

2,082,064

760,145

2.73

2006

2,860,673

955,685

2.99

2007

3,724,574

1,304,367

2.85

2008

3,893,717

1,361,422

2.86

2009

4,648,489

1,626,083

2.85

2010

1,755,839

614,218

2.85

Interpretation of Analysis
Liquidity Ratios

Pakistan Tobacco Company | Final Project

34

The analysis of Pakistan Tobacco Company’s financial statement shows
that it has a high tendency to pay its debts and to convert assets into
liquid form within short intervals of time.

The current ratio of PTC remained between 0.90 – 1.14 in the last
six years and it shows its ability to pay short term liabilities.
Current Ratio= Current AssetsCurrent Liabilities

The quick ratio of PTC ranged between 0.069– 0.133 from 2005 to
2010. It shows the company’s ability to convert its current assets
into liquid form (cash form) in order to meet current liabilities.
Quick Ratio= Current Assets-InventoryCurrent Liabilities

On yearly basis from the year 2005 – 2010, we observed that the
number of times the total inventory or stock of the company was
sold on the average of 2.25 times/year. It shows the sales of the
company are on a very large scale and also gives rise to the
company opportunity to generate huge profits in the long run.
Inventory Turnover= Cost of SalesAverage Inventory

Average Account Receivables Turnover shows that how many times
a company is able to recover the amount of credit sales to people.
PTC has shown a high Accounts Receivables turnover rate which
shows its high liquidity transformation rate.
Accounts Recieveables Turnover= Credit SalesAverage Accounts Recieveables

Profitability Ratios
Pakistan Tobacco Companies Profitability ratios clearly reflect it’s great
ability to generate huge profits and of generating dividends for its
shareholders.

Average Assets turnover of the company ranges between 1.21 1.91 times per year. It shows the generation of huge sales from the
Pakistan Tobacco Company | Final Project

35

worth of assets of the company and in the case of Pakistan Tobacco
Company, it shows the firm's efficiency at using its assets in
generating sales or revenue - the higher the number the better.
Assets Turnover= Net SalesAverage Total Assets

The profit margin of PTC lies between 31.27% - 40.61% in previous
six years. It measures the percentage of each dollars of sales that
results in net income. A higher profit margin indicates a more
profitable company that has better control over its costs compared
to its competitors.
Profit Margin= Net SalesCost of Goods Sold

The return on assets of PTC ranges among 0.80 to 0.27 according to
preceding six years record. An overall measure of profitability is
return
on
assets.
ROA
gives
an
idea as
to
how
efficient management is at using its assets to generate earnings.
This number tells you what the company can do with what it
has, i.e. how many rupees of earnings they derive from each rupee
of assets they control.
Assets Turnover= Net IncomeAverage Total Assets

Return on common stockholder’s equity of PTC varies between 0.28
– 0.76 between the years 2005 to 2006. Another widely used
profitability ratio is return on common stockholder’s equity. It
measures profitability from common stockholder’s point of view.
Return on equity measures a corporation's profitability by
revealing how much profit a company generates with the money
shareholders have invested. Averaging ROE over the past 5-10
years can give you a better idea of the historical growth.
Return on comon stock holders Equity= Net IncomeAverage Stock Holders Equity

Earnings per share are a measure of net income earned on each
share of common stock. PTC’s earning per share of last six years
lies among 4.47 - 11.83. The EPS formula does not include
preferred dividends for categories outside of continued operations
and net income. Earnings per share serve as an indicator of a
company's profitability.
Pakistan Tobacco Company | Final Project

36

Earnings per Share= Net IncomeAverage shares Outstanding

Payout ratio of this company ranges from 0.8 - 1.34. It measures
the percentage of earnings distributed in the form of cash
dividends. The amount of earnings paid out in dividends to
shareholders. Investors can use the payout ratio to determine what
companies are doing with their earnings. Dividend payout
ratio is the fraction of net income a firm pays to its stockholders in
dividend.
Payout Ratio= Dividend per ShareEarnings per Share

Price earnings ratio is an oft-quoted measure of the ratio of the
market price of each share of common stock to the earnings per
share. It is also called its "P/E", or simply "multiple". The P/E ratio is
a vital ratio for investors. Basically, it gives us an indication of the
confidence that investors have in the future prosperity of the
business. A P/E ratio of 1 shows very little confidence in that
business whereas a P/E ratio of 20 expresses a great deal of
optimism about the future of a business. It is the valuation ratio of a
company's current share price compared to its per-share earnings.
Price Earning Ratio= Market Price of ShareEarnings per Share

SOLVENCY RATIOS
Solvency ratios measure the ability of a company to survive over a long
period of time. It provides a measurement of how likely a company will
be to continue meeting its debt obligations. Different countries use
different methodologies to calculate the solvency ratio, and have
different requirements.
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37

Debt to total assets ratio measures the percentage of total assets
that creditors provide. A metric used to measure a company's
financial risk by determining how much of the company's assets
have been financed by debt. If the ratio is less than one, most of
the company's assets are financed through equity. If the ratio is
greater than one, most of the company's assets are financed
through debt. Calculated by adding short-term and long-term debt
and then dividing by the company's total assets.
Debt to Asset Ratio= Total DebtsTotal Assets

The average value of Times interest earned of PTC is approximately
2.8 for previous six years. IT PROVIDES COMPANY’S ABILITY TO
MEET interest payments as they come due. Times interest earned
(TIE) or interest coverage ratio is a measure of a company's ability
to honour its debt payments. The times interest earned lets the
creditor understand whether or not a company has sufficient
income to cover its interest payments requirements. It is calculated
by taking a company's earnings before interest and taxes (EBIT)
and dividing it by the total interest payable on bonds and other
contractual debt.
Times Interest Earned= Operating IncomeInterst Expenses

Pakistan Tobacco Company | Final Project

38

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