FUNDAMENTAL OF COST ACCOUNTING

PROJECT
COMPANY NAME: ATTOCK CEMENT PAKISTAN LIMITED
SUBMITTED BY: ISMA ISHTIAQ
SUBMITTED TO: PROF. ZEESHAN
COURSE: ADP (AF/III)
RIPHAH INTERNATIONAL COLLEGE, SARAI ALAMGIR
ATTOCK CEMENT PAKISTAN LIMITED

HISTORY
Attock Cement was established in 1981 as a result of a joint venture with an initial capital outlay
of Rs 1.5 billion including a foreign exchange component of $45 million. The company started
commercial production in 1988 with a plant capacity of 2,000 tons per day of clinker (approx.0.6
million tons annually). It has since been beefing up its capacity with addition and modernization.
The company’s plant is located in Hub Baluchistan currently with a production capacity of 1.8
million tons per annum which comes about to 4 percent of the current market size. Attock is a
prominent supplier to markets in the South.

The company is part of the Pharaon Group (holding 84 percent of the company’s shares for the
year ending in June 2016). The group has vast investments in diversified fields such as cement,
oil & gas, power generation and information technology. The company also has several
subsidiaries including Pakistan Oilfields Limited set up in 1950, Attock Refinery that was
established in 1922, Attock Petroleum Limited that was established jointly by the Pharaon
Investment Group Limited Holding (PIGL) and Attock Oil Group of Companies (AOC) in 1995.
In 2005, the company also took over National Refinery Limited (NRL).

Attock Cement (PSX: ACPL) is located in Hub, Balochistan, Pakistan. This company is one of
the prominent manufacturers of cement with operations established in 1981 and commercial
production starting in 1988 with a capacity of 0.6 million tons per annum. Attock cement is
popularly known by its brand name Falcon Cement in Pakistan, which is supplied mainly to the
southern parts of the country (lower Punjab and upper Sindh areas) as well as abroad through the
sea ports of Pakistan.
Attock Cement went through a series of expansions, and now the company has a production
capacity of 3 million tons annually as of 2018. Its market share in the south region is around 25
percent or more. The company is running three manufacturing plants at Hub, Balochistan facility
with total production capacity of around 9 million tons per annum as of 2018.

PRODUCT PROFILE
Attock Cement Pakistan Limited is principally engaged in manufacturing and sale of cement.
The Company is also engaged in exporting clinker and cement both in bags and bulk to
the United Arab Emirates (UAE), Africa, Iraq, Sri Lanka and many other countries. The
Company also has the facility of supply of cement in bulk and also produces the low alkali
cement for some regions of its market.

COMPANY PRODUCTS

 Falcon brand cement used in general construction

 Sulfate resistant cement used in seaport and coastal areas because it provides resistance to
chemical attack from sulfates and dissolved salts present in sea water

Its products include Ordinary Portland Cement (OPC), which is a product under the Falcon
Brand used in all types of general construction. OPC can be used in concretes, mortars, grouts
and premix concrete.

The Company's Falcon Block Cement (FBC) product is offered for block and precast slab
makers.

ABOUT US
Since its inception, ACPL has attained new peaks every year through strong team efforts,
continuous modernization of plant to improve its efficiency and with continuous hard work.
ACPL has cemented its place not only in the local market but also in the regional markets
through selling quality products.

EXPORTS

In the highly competitive field of exports, ACPL has succeeded in exporting a huge quality of
clinker and cement both in bags and bulk to UAE, South Africa, Iraq, Srilanka and many other
countries. The company also has the facility of supply of cement in bulk besides producing the
low alkali cement for some of its market.

FINANCIALS

ACPL, has worked on several major government, semi-government and private projects across
the country and enjoys a very prominent position as a quality cement producer.

Information for our Valued Customers

Effective from October 19, 2020, the Maximum Retail Price and Sales Tax for our cement brand.

C O R P O R A T E S O C I A L R E SP O N S I B I L I T Y
We define Corporate Social Responsibility (CSR) as our commitment to work as partners with
all our stakeholders to effectively improve the quality of life of the members of our workforce,
their families and the local communities around our facilities.

CARING FOR THE ENVIRONMENT

Every endeavor is made to effectively maintain and continually improve our processes/ activities
with respect to environment and maintain greenery within and around plant premises. Company
had already planted trees in Factory premises on both sides of road from Factory to Sakran
Police Station. Attock Cement Pakistan Limited has planted more than 4000 plants during the
year 2017 to 2018. Current year plants target in line-3 area is about 5000. As a responsible
organization, ACPL fulfills all the applicable legal, social and moral obligations related to
environmental control. ACPL aims at contributing generously towards mitigating pollution
effects and thus save this world.

Composition of cement
Introduction
Portland cement gets its strength from chemical reactions between the cement and water. The
process is known as hydration. This is a complex process that is best understood by first
understanding the chemical composition of cement.

Manufacture of cement
Portland cement is manufactured by crushing, milling and proportioning the following materials:

o Lime or calcium oxide, CaO: from limestone, chalk, shells, shale or calcareous
rock
o Silica, SiO2: from sand, old bottles, clay or argillaceous rock
o Alumina, Al2O3: from bauxite, recycled aluminum, clay
o Iron, Fe2O3: from clay, iron ore, scrap iron and fly ash
o Gypsum, CaSO4.2H20: found together with limestone

The materials, without the gypsum, are proportioned to produce a mixture with the desired
chemical composition and then ground and blended by one of two processes - dry process or wet
process. The materials are then fed through a kiln at 2,600º F to produce grayish-black pellets
known as clinker. The alumina and iron act as fluxing agents which lower the melting point of
silica from 3,000 to 2600º F. After this stage, the clinker is cooled, pulverized and gypsum added
to regulate setting time. It is then ground extremely fine to produce cement.

Chemical shorthand
Because of the complex chemical nature of cement, a shorthand form is used to denote the
chemical compounds. The shorthand for the basic compounds is:

Compound Formula Shorthand

form

Calcium oxide (lime) Ca0 C

Silicon dioxide (silica) SiO2 S

 Aluminum oxide (alumina) Al2O3 A

Iron oxide Fe2O3 F

Water  H2O H

Sulfate SO3 S

Chemical composition of clinker

The cement clinker formed has the following typical composition:

Compound Formula Shorthand % by

form weight1

Tricalcium aluminate Ca3Al2O6 C3A 10

Tetracalcium aluminoferrite Ca4Al2Fe2O10 C4AF 8

Belite or dicalcium silicate Ca2SiO5 C2S 20

Alite or tricalcium silicate Ca3SiO4 C3S 55

Sodium oxide Na2O N ) 

Potassium oxide K2O K )Up to 2

Gypsum CaSO4.2H2O CSH2 5

Representative weights only. Actual weight varies with type of cement.

Properties of cement compounds

These compounds contribute to the properties of cement in different ways
 
 Tricalcium aluminate, C3A:-
It liberates a lot of heat during the early stages of hydration, but has little strength contribution.
Gypsum slows down the hydration rate of C3A. Cement low in C3A is sulfate resistant.

 Tricalcium silicate, C3S:-

This compound hydrates and hardens rapidly. It is largely responsible for portland cement’s
initial set and early strength gain.

 Dicalcium silicate, C2S:

C2S hydrates and hardens slowly. It is largely responsible for strength gain after one week.

 Ferrite, C4AF:
This is a fluxing agent which reduces the melting temperature of the raw materials in the kiln
(from 3,000o F to 2,600o F). It hydrates rapidly, but does not contribute much to strength of the
cement paste.

ACPL Balance Sheet

 

Annually

Assets

Fiscal year is July-

June. All values PKR
Millions. 2020 2019 2018 2017 2016

Cash & Short Term

1,501 450 634 1,246 4,855
Investments      

Cash Only 1,422 450 634 1,246 581      

Short-Term
79 - - - 4,273
Investments      
 Cash & Short - -
233.38 -  
Term Investments 29.02 49.09 -
% 74.33%
Growth % %      

Cash & ST
33.63
Investments / Total 4.68% 1.50% 2.30% 5.84%
%
Assets
     

Total Accounts
700 1,101 1,144 767 384
Receivable      

Accounts
548 795 710 180 211
Receivables, Net      

Accounts
548 795 710 180 211
Receivables, Gross

     

Other
152 306 434 587 172
Receivables      

Accounts - - 49.12 100.01  

-
Receivable Growth 36.40% 3.71% % %      

Accounts
34.19 18.87 14.51 19.21 36.29
Receivable Turnover
     

Inventories 4,948 3,421 3,667 1,946 1,941      

Finished Goods 197 169 200 105 101      

Work in Progress 914 975 529 183 302      

Raw Materials 1,371 275 249 169 196      

Progress
2,466 2,002 2,689 1,490 1,341
Payments & Other
     
Other Current Assets 2,910 2,657 1,482 265 18      

Prepaid Expenses 36 19 14 12 11      

Miscellaneous
2,875 2,639 1,467 253 6
Current Assets      

Total Current Assets 10,060 7,630 6,927 4,225 7,197      

Net Property, Plant &

21,848 22,269 20,425 17,020 7,141
Equipment      

Property, Plant &

30,313 29,534 26,894 22,974 12,682
Equipment - Gross
     

Buildings 3,832 3,264 3,188 1,555 1,500      

Land &
34 34 5 5 5
Improvements
     

Machinery
24,618 20,126 19,912 9,253 8,943
& Equipment
     

Construction
61 4,738 2,432 11,676 1,797
in Progress
     

Leases 97 27 27 21 21      

Transportati
147 129 116 101 82
on Equipment
     
 Other
Property, Plant & 1,525 1,215 1,214 363 335
Equipment

     

Accumulated
8,465 7,265 6,469 5,954 5,542
Depreciation      

Buildings 1,163 979 820 706 634      

Machinery
6,794 5,855 5,264 4,878 4,548
& Equipment
     

Transportati
83 60 52 48 45
on Equipment
     

Other
Property, Plant & 392 357 323 306 304
Equipment

     

Total Investments and

35 29 5 47 47
Advances      

LT Investment -
35 29 5 5 5
Affiliate Companies
     

Other Long-
- - - 43 43
Term Investments
     

Long-Term Note 39 48 47 49 42      
 Receivable
Other Assets 100 100 100 - -      

Tangible Other
100 100 100 - -
Assets      

Total Assets 32,082 30,076 27,635 21,351 14,436      

Assets - Total - 29.43

6.67% 8.83% 47.90% -
Growth %      

Asset Turnover 0.77 - - - -      

Return On
6.38% - - - -
Average Assets
     

Liabilities &
Shareholders' Equity

BESTWAY CEMENT PAKISTAN LIMITED

HISTORY

Bestway Cement Limited (the Company) is a public limited company incorporated in Pakistan
on 22 December 1993 under the Companies Act, 2017 (previously the Companies Ordinance,
1984) and is listed on the Pakistan Stock Exchange Limited since 9 April 2001. The Company is
principally engaged in production and sale of cement. Registered oce of the Company is located
at Bestway Building, 19-A, College Road, F-7 Markaz, Islamabad. The Company is a subsidiary
of Bestway (Holdings) Limited, U.K., which controls 56.41% shares in the Company.

 In April 1998, Bestway began cement production with the firing of Kiln at its Hattar plant, in
Haripur Khyber-Pakhtunkhwa. ... The Chakwal facility began with an investment of $140
million and marked the group's second Greenfield development project which began production
in June of 2006.

In September 2005, Bestway bid for 85.29 percent equity of Mustehkam Cement Limited under
the Privatization Scheme and acquired the company for $70.0 million.

In November 2013, the Mustehkam Cement was merged with Bestway Cement.

In April 2015, the company acquired Lafarge Pakistan and its plant in Kallar
Kahar, Chakwal, Punjab for US$329 million.

In June 2018, the company expanded its capacity by 1.8 million tons.

The plant began operations with an initial capacity of 1.0 million tons per annum which was
further enhanced to 1.15 million tons with a cap-ex of $20 million in 2002, and later to 1.25
million tons in 2004.
That same year, the company decided to set up 1.8 million tons per annum plant in the village of
Chakwal, Punjab. The Chakwal facility began with an investment of $140 million and marked
the group's second Greenfield development project which began production in June of 2006. The
same year, Bestway group acquired Mustehkam Cement in a privatisation bid--a government
owned cement facility located near Hattar. Post privatisation, the company began an ambitious
enhancement and modernisation programme, increasing Mustehkam's capacity to 1.2 million
tons per annum.

Soon after, the company announced an ambitious plan to establish a second 1.8 million tons per
annum capacity plant in Chakwal, adjacent to its existing facility. By 2008, Bestway Cement's
production capacity clocked in at 6.0 million tons, only second to market leader, Lucky Cement.
SOCIAL RESPONSIBILITY

At the heart of Bestway Group’s philosophy is the desire to help those less fortunate than others
by supporting charities and empowering local communities. This is manifested in the charter of
the Bestway Foundation established in 1987.

Welcome to the Careers Section of Bestway’s corporate website. Here you will find information
on employment opportunities and the key aspects of working for us.
Cement Industry is bound to play a pivotal role in the growth of our country and there is nothing
like working for one of the top players. Bestway Cement Limited is a team of over 3,000
committed employees. Our workforce comprises of diverse individuals who go on to deliver the
Bestway promise as defined in our corporate mission

At Bestway, we employ well-qualified staff to ensure that the required standards of job
performance are met. Bestway Cement is an Equal opportunity employer where employment
opportunities are provided for any potential candidate who is willing to be a part of its team. It is
incorporated in the policy of Bestway Cement to provide opportunities without any prejudice of
race, color, creed, religion, age, marital status or any other biases prohibited by provincial or
federal law.

All Purpose Cement

Bestway is well established in the local market for its quality, durability & strength and is the
prime choice of local consumers as well as international.
Management

 Bestway Cement began its operations in the country during the late 1990s in an inhospitable
environment. The company cites parent group's lack of track record in Pakistan that created
artificial challenges to its progress during the early years. The dismal macro economic conditions
of the country marked by high interest rates and

inflation also contributed to a situation of inertia. However, the company maintained a track
record of profitability despite operating at 60 percent level of utilisation during its early years.
The company has been one of the pioneers of systems management and cost efficiency in the
industry. In 2001, Bestway became one of the first to convert its production plants from furnace
oil to gas in anticipation of high international oil prices. Maintaining its record of cost efficient
production process, the company made a further investment in conversion of production facilities
from natural gas to coal based, with capital expenditure of $10 million.

Manufacture of cement
Portland cement is manufactured by crushing, milling and proportioning the following materials:

o Lime or calcium oxide, CaO: from limestone, chalk, shells, shale or calcareous
rock
o Silica, SiO2: from sand, old bottles, clay or argillaceous rock
o Alumina, Al2O3: from bauxite, recycled aluminum, clay
o Iron, Fe2O3: from clay, iron ore, scrap iron and fly ash
 o Gypsum, CaSO4.2H20: found together with limestone

The materials, without the gypsum, are proportioned to produce a mixture with the desired
chemical composition and then ground and blended by one of two processes - dry process or wet
process. The materials are then fed through a kiln at 2,600º F to produce grayish-black pellets
known as clinker. The alumina and iron act as fluxing agents which lower the melting point of
silica from 3,000 to 2600º F. After this stage, the clinker is cooled, pulverized and gypsum added
to regulate setting time. It is then ground extremely fine to produce cement.

BESTWAY CEMENT PAKISTAN LIMITED BALANCE SHEET

Assets

Fiscal year is July-June. All values

PKR Millions. 2020 2019 2018 2017 2016

Cash & Short Term Investments 348 463 290 208 383

Cash Only 348 463 273 190 375

Short-Term Investments - - 17 18 8

Cash & Short Term -

-24.89% 59.48% 39.25% -
Investments Growth 45.51%

Cash & ST Investments / Total

0.36% 0.50% 0.31% 0.25% 0.49%
Assets

Total Accounts Receivable 2,589 2,756 2,963 2,177 1,336

Accounts Receivables, Net 1,728 2,102 1,786 1,462 1,176

 Accounts Receivables,
1,736 2,105 1,789 1,465 1,179
Gross

Bad Debt/Doubtful
-8 -3 -3 -3 -3
Accounts

Other Receivables 861 654 1,177 715 160

Accounts Receivable Growth -6.07% -6.96% 36.08% 62.96% -

Accounts Receivable Turnover 14.34 19.45 17.85 23.71 34.22

Inventories 9,458 8,595 12,655 11,101 8,332

Finished Goods 580 589 680 651 217

Work in Progress 1,423 1,639 3,090 2,415 795

Raw Materials 324 504 632 473 440

Progress Payments & Other 7,132 5,863 8,254 7,561 6,880

Other Current Assets 4,840 3,239 3,395 - 1,714

Prepaid Expenses 15 9 10 12 12

Miscellaneous Current Assets 4,825 3,231 3,385 2,036 1,701

Total Current Assets 17,234 15,054 19,303 15,534 11,765

Net Property, Plant & Equipment 55,789 57,242 56,086 44,732 42,955

Property, Plant & Equipment -

75,526 74,132 70,183 56,812 53,284
Gross

Buildings 15,867 15,868 14,551 10,363 10,078

Land & Improvements 2,304 2,226 2,099 1,621 1,565

Machinery & Equipment 49,223 49,166 46,198 38,642 37,364

Construction in Progress 1,544 356 1,454 2,341 1,025

Leases 40 40 40 40 40

Transportation Equipment 592 692 666 541 334

Other Property, Plant &

5,956 5,785 5,174 3,265 2,880
Equipment

Accumulated Depreciation 19,736 16,890 14,097 12,080 10,329

 Buildings 3,937 3,376 2,856 2,494 2,191

Machinery & Equipment 12,759 10,956 9,279 8,013 6,754

Transportation Equipment 297 322 273 169 122

Other Property, Plant &

2,715 2,210 1,664 1,379 1,240
Equipment

Total Investments and Advances 13,954 12,774 11,633 - 12,014

LT Investment - Affiliate
13,688 12,512 11,375 11,851 11,593
Companies

Other Long-Term Investments 266 262 258 250 421

Intangible Assets 7,710 7,794 7,817 9,263 11,023

Net Goodwill 7,062 7,062 7,062 7,062 7,062

Net Other Intangibles 648 732 755 2,201 3,961

Other Assets 118 118 132 - 64

Tangible Other Assets 118 118 132 135 64

Total Assets 96,051 92,982 94,971 81,765 77,820

 Assets - Total - Growth 3.30% -2.09% 16.15% 5.07% -

Asset Turnover 0.39 - - - -

Return On Average Assets 0.05% - - - -

Liabilities & Shareholders' Equity

Comparison

To say, the financial performance for cement companies during FY20 was lackadaisical would
be an understatement. But to say, it comes as a surprise would be overdramatic. Though cement
companies with operations in the south (Attock, Lucky. Aug 26, 2020) have managed to turn a
profit during FY20 and performed reasonably better, companies in the north recorded the most
dismal year in recent past.

Both Cherat Cement (PSX: CHCC) and Bestway Cement (PSX: BWCL) with factories located
in the north and supplying mainly to that region are in pre-tax losses. Bestway received a tax
credit which covered the entirety of the loss and then some. Attock Cement however—despite a
fall in profits—outperformed its peers, almost in league with the likes of Lucky in terms of
earnings now.

Domestic market demand has been listless as construction projects across public and private
sector domains were not picking up. Companies in the north performed better domestically as
public sector spending concentrated in the region throughout the year while they lost on exports
due to the retraction of the Indian market and the general slowdown from Afghanistan and other
neighbouring markets. Cherat seems to have grown in both segments (up 15%), Attock shone in
exports (share in total: 58%) while Bestway recorded an overall decline in volumes (24%).

Attock being a major clinker exporter sold more to exporting markets than domestic ones.
Revenues however for all three companies is a different story. Typically, domestic markets grab
a higher price per ton sold compared to exports but price competition in the north was tough.
Low volume, low price retention translated to Bestway’s substantial drop in revenues. Cherat’s
revenues grew however, as volumes were strong.

By mixing these compounds appropriately, manufacturers can produce different types of

cement to suit several construction environments.

Year ending Attock Cement Cherat Cement Bestway Cement

June 2020 (ACPL) (CHCC) (BWCL)
(unconsolida
ted)
(Rs mn) FY20 FY19 chg FY20 FY19 chg FY20 FY19 chg
Sales 18,500. 20,780. - 17,090. 15,862. 8% 37,128. 53,601. -
6 9 11% 2 6 7 5 31%
Cost of Sales 14,251. 15,978. - 16,703. 12,979. 29 36,012. 37,556. -4%
5 0 11% 7 5 % 0 6
Gross Profit 4,249.1 4,802.9 - 386.5 2,883.1 - 1,116.7 16,045. -
12% 87 0 93%
%
Distribution 1,830.9 1,414.8 29% 362.0 396.3 -9% 794.2 1,339.1 -
cost 41%
Administrativ 0.5 505.1 - 271.8 293.9 -8% 579.3 711.4 -
e cost 100 19%
%
Finance cost 525.9 648.4 - 2,527.0 1,142.6 121 2,151.7 1,498.5 44%
19% %
Other 92.3 149.8 - 19.0 109.4 - 16.7 826.8 -
operating 38% 83 98%
expenses %
Other 293.8 - 70.6 106.8 - 247.6 122.2 103
operating 21% 34 %
income %
Profit(Loss) 233.5 2,403.2 - (2,722. 1,047.8 (506.5) 13,245.
 before 36% 7) 3
Taxation
Tax expense 425.0 330.0 29% 829.6 715.0 16 (555.7) 3,148.3
(credit) %
Profit(Loss) 1,107.5 2,073.2 - (1,893. 1,762.8 49.3 10,097. -
after 47% 1) 3 100
Taxation %
Earnings per 8.06 15.09 - -9.74 9.07 - 0.08 16.93 -
share (Rs) 47% 207 100
% %
Domestics 1,166,8 1,857,4 - 2,610,8 2,135,5 22 5,809,7 8,125,7 -
sales 69 71 37% 27 28 % 87 72 24%
Export sales 1,643,5 590,19 178 472,70 357,89 32 371,08
11 5 % 3 5 % 0
GP Margin 23% 23% -1% 2% 18% - 3% 30% -
88 90%
%
NP Margin 6% 10% - -11% 11% - 0% 19% -
40% 200 99%
%
Source: PSX, Company accounts, estimates for volumes FY20 are taken from Topline
Securities

On the other side, in exports, clinker units earn less dollars than cement which explains Attock’s
decline in the top-line given its leaning on overseas sales (Note: the actual volume data was not
available and the numbers used here and any calculations thereafter are estimates made by
Topline Securities).

Estimated revenue per ton for all three cement manufacturers fell (Attock: 22%, Cherat: 13%,
Bestway: 9%) due to the aforementioned price and volume plays. Costs per ton sold however
rose for Bestway (26%) and Cherat (4%) likely due to the depreciation of rupee. Attock’s costs
fell per ton by 22 percent. Costs should be lower given that coal prices in the international
markets have been falling for a good year now—standing at their lowest levels in the past five
years—which should have reduced energy costs for the companies. It seems it has worked for
Attock given its proximity to the port as well.

Due to these unique dynamics, while Cherat and Bestway are in hot water in terms of margins
landing at single digit numbers, Attock managed to keep its margins on the same level as last
year. This no doubt helped the company turn an eventual profit despite higher overheads as a
share of revenues during FY20 (Attock: 10%, Cherat: 4%, Bestway; 4%). Higher financial costs
also ballooned payments for both Cherat and Bestway; especially the former company which has
gone into expansions. Finance expense as a share of revenue expanded to 15 percent of the
cement player against 7 percent last year (Attock: 3%, Bestway: 6%).

Demand will rebound as the country goes into large construction and development projects after
the announcement of the PM’s Naya Pakistan Housing Program as well as the construction
package—with tax waivers and subsidies hoping to revive the construction economy. This will
attract some investment into prominent projects no doubt adding to domestic demand for cement.
Prices are also expected to be revised up as demand becomes stronger. This will reduce reliance
on exporting markets and together.