Question # 1:

HISTORY

Dawood Hercules Chemicals Limited was incorporated as a public limited company on 17 th

April 1968, as a joint venture between Dawood Group of Industries and Hercules Inc. USA. It
was the first private sector venture in Pakistan to receive a loan from the World Bank and was
the largest ammonia/urea plant in country at that time.

Initially the plant's capacity was 345,000 metric tons of

urea per annum. The plant was revamped in 1989 / 1991 to
enhance the capacity to 445,500 metric tons of urea per
annum. Also, it made the manufacturing facilities more
energy efficient and environment friendly.

In recent years, Dawood Hercules has made a colossal

investment to incorporate the latest technology, the most
significant are the construction of new Prilling tower in a
record time; the tallest industrial structure in Pakistan,
replacement of Primary Waste Heat Exchanger. Primary
Reformer Harps Assemblies and conventional
instrumentation (with Distributed Control System).

Dawood Hercules has the privilege of becoming the first

fertilizer manufacturing company to obtain ISO-9000:2000
certification. Dawood Hercules also won numerous safety
and excellence awards.

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VISION
To excel in the fertilizer and allied business at national and international level by maintaining
highest standards of product quality thereby playing our role in the development of the country's
economy and adding value to the shareholders' investment.

Mission

 To offer consistent dividends to the shareholders.

 To chalk out a plan to improve production techniques and quality standards.
 To provide career grooming opportunities to the talented professionals.
 To become a good corporate citizen.
 To develop long-term relationship with the employees.
 To create high performing organizational environment in which bright ideas are
generated and nurtured.
 To inculcate honest and ethical behaviour.
 To create safe and healthy environment and friendly atmosphere for the employees.
 To improve quality of life for the employees.

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ACCOMPLISHMENTS

 Dawood Hercules has the privilege of being the first fertilizer manufacturing company to
obtain ISO-9001:2000 certification in Pakistan.
 The Company has the honor of winning KSE Top 25 Companies Award for three
consecutive years.
 The Annual Reports of the Company for the year 2005, 2006, 2007, 2008 were ranked
amongst top 5 positions in the Chemicals and Fertilizer Category.
 The Company has been awarded the National Environment Excellence Award 2009 by
the National Forum for Environment and Health.

Installed capacity:

Company installed capacity of producing urea is 445000 MT per year.

Production Record:

The Company through operational excellence produced 456.12 M. Tons of urea. By this
company utilized 102% of its capacity.

Sales Record:
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Sales of Rs. 11,040 Million depicting an increase of 49% over last year is the highest in the
history of the Company.

Location :

Company’s plant is located near Shaikhupura, 28 km away from Lahore.

Question # 2:

Industry Performance:

Fertilizer is very important for our agriculture. Although our country is facing shortage of natural
gas therefore performance of industry is also decreasing. One of its examples is that dawood
Hercules produced 5133200 MT of urea in 2009 while in 2010 it produced 4565000 MT of urea.
Demand of urea is decreased by 6% in 2010 due to flood. But it is expected that demand will
increase in 2011 therefore new companies will be encouraged.

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Question # 3:

Imports

Raw material
Country Currency

Nitrogen N
U.S.A & China US$

Phosphorous P205 China

US$

Potassium K 20
U.S.A & China US$

Imports Amount in USD:

Company’s imports for 2010 are $43,435,276(Rs 3691998456).

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Question # 4

Liquidity:

Current Ratio:

Company’s current ratio for 2009 and 2010 are 2.01 and 2.46 respectively. Both years are
representing that company has enough resources to pay back its obligations.

Quick Ratio:

Company’s quick ratio for 2009 and 2010 are 1.24 and 1.59 respectively. Both years are
representing that company has enough cash and securities which can be utilized in order to
payback its obligations anytime.

Leverage:

Debt to Equity Ratio:

Company’s Debt to Equity Ratio for 2009 and 2010 are 0.35 and 0.26 respectively. Both years
are representing that company is depending more on its equity than debt.

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Total Liabilities/ Total Assets :

Company’s Total Liabilities/ Total Assets Ratio for 2009 and 2010 are 0.32 and 0.28
respectively. Both years are representing that company has more assets than its liabilities.

Time Interest Earned Ratio:

Company’s Time interest earned Ratio for 2009 and 2010 are -67 and 121 respectively.
Company suffered loss in 2009 therefore its showing negative in 2009. However company
earned good profit in 2010.

Efficiency:

Debtors Turnover Ratio:

Company’s Debtors Turnover Ratio for 2009 and 2010 are 1171.4(0.31 days) and 1433.6(0.25
days) respectively. Both years are representing that company is collecting its receivables very
efficiently.

Creditors Turnover Ratio:

Company’s Creditors Turnover Ratio for 2009 and 2010 are 5.69(64 days) and 1.99(183 days)
respectively. Both years are representing that company is paying its liabilities efficiently because
payment period is so huge than collection period efficiently.

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Working Capital :

Company’s Working capital for 2009 and 2010 are Rs 3.004 mn and Rs 3.376 mn respectively.
Both years are representing that company has good and enough operating liquidity.

Analysis of Cash Flow Statement :

Operating Activities:

Company’s cash flow from operating activities for 2009 and 2010 are Rs 1,260,397,000 and Rs
1,463,389,000 respectively. Company’s cash flow from operating activities has increased in 2010 than 2009. Which
is positive sign for company.

Investing Activities:
Company’s cash flow from investing activities for 2009 and 2010 are Rs -2,552,095,000 and Rs
1,847,925,000 respectively. Company’s cash flow from investing activities for 2009 is negative because company
invested Rs 1,623,148,000 in its associated company, while in 2010 company did not invested any amount is its
associated company.

Financing Activities:
Company’s cash flow from financing activities for 2009 and 2010 are Rs 635,905,000 and Rs

-2,339,196,000 respectively. Company’s cash flow from financing activities for 2010 is negative because company
paid short term and long term loans, while in 2009 company secured short term financing.

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Question # 5:

For Answers of questions of 5th part, I talked to Mr. Moeez Rehman. Who is chief accountant at
DHCL. The Information which he provided is as follows.

a) In our company finance department is handling treasury. Yes, import and finance
departments are interlinked. Its simple example is that whenever L.C’s are issued then
both departments communicate information with each other.
b) Company is mobilizing its resources very well. We have access liquidity therefore we
have placed our funds in Engro. For shortfall I’m not able to answer this question right
now but I will just say that in 2009 we faced loss but still we paid good dividend to our
share holders. By this I can say that we have enough funds so that we can control
shortfall.
c) For this both departments interlink with eachother. Mainly its responsibility of Finance
department. Because import department just inform us that how much material they need.
Then meetings are held between both departments.
d) Mainly we depend on bank department but we don not neglect market information.
e) I can not disclose this information.
f) No exports.
g) No exports.
h) Sorry, I’m not able to answer this question.

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Question # 6

Comments on Currencies :

USD

The dollar fell to a three-week low against the yen on speculation the Federal Reserve will
reiterate next week its intention to keep interest rates near zero, damping the appeal of U.S.
assets.

The Federal Open Market Committee announces its policy decision on April 27, when it will
likely hold the benchmark rate in a range of zero to 0.25 percent, according to all 80 economists
surveyed by Bloomberg. Most of the 50 analysts in a Bloomberg survey last month said they
expect the Fed will keep its bond portfolio stable for some time after its $600 billion purchase
program ends in June.

“The dollar is in a hopeless situation, paralyzed by low rates, a fact likely to be reaffirmed by the
FOMC next week,” analysts led by Robert Renniee, chief currency strategist in Sydney at
Westpac Banking Corp., wrote in a note dated April 21.

Standard & Poor’s this week put the U.S. government on notice that it risks losing its AAA
credit rating unless policy makers agree on a plan by 2013 to reduce budget deficits and the
national debt. S&P maintained its top rating on U.S. long-term debt while lowering the outlook
to “negative” for the first time.

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Yen:

The Japanese Yen has once again started to deviate from its relationship with risk sentiment, re-
coupling with the outlook for US interest rates. Indeed, a trade-weighted index of the Yen’s
average value against its major counterparts now shows a heavy correlation with the yield on the
2-year US Treasury note. The relationship makes sense considering the two currencies are both
stand-by funding vehicles for carry trades. While benchmark Japanese interest rates are surely
not going anywhere for the foreseeable future, those of the US will eventually rise as the Federal
Reserve unwinds stimulus and other forces (discussed below) put upward pressure on borrowing
costs. This makes US rates the barometer investors look at to gauge whether to fund yield-
seeking carry positions with short-JPY or short-USD exposure, making them critical for the
trajectory of the Japanese unit.

EURO

Continued US Dollar weakness pushed the Euro/US Dollar pair higher for the third week in four,
leaving the single currency just short of the 1.50 mark in what promises to be an exciting week
of trading. Markets anxiously await results from Tuesday’s US Federal Open Market
Committeea interest rate announcement and Wednesday’s German Consumer Price Index
inflation data. The FOMC is exceedingly unlikely to raise interest rates, but markets will keep a
close eye on ensuing commentary and the first-ever FOMC press conference by Chairman Ben
Bernanke. German inflation figures will likewise factor in European Central Bank interest rate
expectations, and any noteworthy surprises could force substantive moves across all Euro
currency pairs.

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Sterling

Much of the sterling’s price action in the coming days will be determined by market sentiment
on the US dollar as this week saw investors and traders alike continue to jettison the greenback
on concerns over domestic fiscal imbalances and ultra-loose monetary policy from the Fed. The
pound stalled out just short of the 1.66-handle on Thursday as dollar losses accelerated.

Traders will be eying economic data out of the UK next week for an update on the state of the
economy, with GDP figures on Wednesday headlining even risk. Consensus estimates call for
Q1 GDP figures to rise to 0.5% q/q, up from a previous contraction of 0.5%, while year-over-
year figures are expected to print at 1.8%, up from 1.5% y/y a month earlier. The data may shift
rate hike expectations for the Bank of England which is now widely seen holding rates in May.
Credit Suisse is factoring a 10% chance of a 25 basis point rate hike at the next central bank
meeting.

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References:
 Mr. Mooez Rehman
042-36301601-7
moeez@dawoodgroup.com
 http://www.bloomberg.com/news/2011-04-23/dollar-drops-to-three-week-low-versus-
yen-on-fed-rate-outlook-euro-jumps.html
 http://www.xe.com/news/2011/04/23/1856585.htm
 http://www.xe.com/news/2011/04/23/1856577.htm

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