OXFORD BROOKES UNIVERSITY

RESEARCH AND ANALYSIS

PROJECT
“AN ANALYSIS AND EVALUATION OF BUSINESS AND FINANCIAL
PERFORMANCE OF LUCKY CEMENT COMPANY LIMITED
BETWEEN 1ST JULY 2011 AND 30TH JUNE 2014 (TOPIC 8)”

Name: XXXXXXXX XXXXXX

ACCA ID: XXXXX
Words Count:
 Research and Analysis Project 1

Contents
1. Project Objectives and Overall Research Approach................................................................................2
1.1. Introduction......................................................................................................................................2
1.2. Reason for Choosing Topic, Industry, Organisation and Competitor.............................................2
1.3. Project Objectives............................................................................................................................3
1.4. Research Questions..........................................................................................................................3
1.5. Research Approach...........................................................................................................................3
2. Information gathering and Accounting/Business Techniques.................................................................4
2.1. Sources of Information and methods to collect it...........................................................................4
2.2. Limitations of Information Gathering.............................................................................................5
2.3. Ethical issues involved during Information Gathering...................................................................5
2.4. Accounting and Business Techniques used in their Limitation......................................................6
2.4.1. Ratios Analysis.........................................................................................................................6
2.4.2. SWOT Analysis........................................................................................................................6
2.4.3. Porter’s Fiver Forces................................................................................................................7
3. Analysis, Conclusion and Recommendations.........................................................................................8
3.1. Industry Profile.................................................................................................................................8
3.2. Company Profile..............................................................................................................................8
3.3. Competitor’s Profile.........................................................................................................................8
3.4. Financial Ratio Analysis..................................................................................................................9
3.4.1. Production and Sales Analysis.................................................................................................9
3.4.2. Profitability Analysis.............................................................................................................10
3.4.3. Liquidity Analysis..................................................................................................................12
3.4.4. Solvency Analysis..................................................................................................................13
3.4.5. Efficiency Analysis................................................................................................................14
3.4.6. Investor Analysis....................................................................................................................15
3.5. Business Analysis...........................................................................................................................16
3.5.1. SWOT Analysis......................................................................................................................16
3.5.2. Porter’s Five Forces Analysis................................................................................................17
3.6. Conclusion and Recommendations...............................................................................................18

Oxford Brookes University

 Research and Analysis Project 2

1. Project Objectives and Overall Research Approach

1.1. Introduction
The selected topic eight, talks about the analysis and evaluation of the business and financial
performance of an organization, over a three year of period. The two companies which are being
evaluated are Lucky Cement Limited (LCL) and Dera Ghazi Khan Cement (DGKC) used in this
thesis. The analysis of the business financial performance is analyzed to see companies
performance overall after three year.
1.2. Reason for Choosing Topic, Industry, Organisation and Competitor
Topic
I choose this topic due to many reasons which were benefit for me to work on. Firstly the
knowledge gain from Association of Chartered Certified Accountant (ACCA) was worth willing
to use as it gave me confidence to work on it. This topic is such topic which is the application of
the ACCA exams from F1 to F9. Although, I study and passed the exams of ACCA till F9 but
this was the situation to apply the knowledge into practical situation. Secondly, choosing this
topic was the main reason to have some good future perspective in the field of finance and stock
exchange. On the other side, this topic also consider the business performance of the company
which is other than the financial performance. It means this topic covers the wider range and also
covering such factors which related to the economy of the Pakistan.
Industry
Choosing this industry was a reason, that this industry has really good performances in Pakistan
after all the crisis going on. Pakistan facing many challenges like security threats [ CITATION
Mat141 \l 1033 ], energy crisis [ CITATION Pak154 \l 1033 ] and political instability
[ CITATION Dai145 \l 1033 ] etc. but still this industry performing so well under the tough
circumstances of the country. The other reason is that cement is such things which is the basic
necessity of human need to construct offices for work or shelters to live so that it created
interested in me to know about the cement industry. There are number of key players in the
cement industry which are into my eyes since childhood.
Company
LCL is one of the best choices to choose as it is registered with All Pakistan Cement
Manufacturing Association (APCMA) [ CITATION APC157 \l 1033 ]. Many other companies
are not registered and are not much popular like LCL. This company is also in comparison to
other stand up companies as of making good reputation of it in the market. I decided to choose
the top company of the cement industry as the main company because it is always interested to
know about the top company for everyone as compared to other companies.
Competitor
DGKC is the best competitor to LCL as it also have much reputation in market and it is much
older as compared to the LCL. It is also a registered company with APCMA [ CITATION
APC157 \l 1033 ] And a like to like best competitors to other companies. This company can also
be called a key strength as being much popular in the market and being a demand to. The other
reason to choose DGKC is that DGKC is the second largest company in the cement industry. It is

Oxford Brookes University

 Research and Analysis Project 3

much more like to like comparison between the two top companies rather than in the comparison
of top company against the low ranked company.
1.3. Project Objectives
 To see financial performance and evaluation in terms of ratios.
 To look for strategic position in business performance
 To see how a company’s competitive position after using five forces.
 To look forward on the analytical skills enhance and the decision making process in the
company.
1.4. Research Questions
 What production and performance is DGKC doing?
 What are the factors and situations which are affecting company’s performance?
 What is the company’s performance showing up as compare to its competitor?
 What is overall performance of the industry?
1.5. Research Approach
I was not experienced for such kinds of reports because ACCA gave me good knowledge at good
examination level but still I never write such report before. Due to this, my brain was blank for
the thesis. When I met with the research mentor then I got to know different things about the
project of the research. Although, I choose industry, topic and company but still there were a lot
of things in the project of the research in which mentor guided me properly. In the beginning, my
mind was blank related to this project and I was blind to plan out my project of the research.
When my mentor taught me many new things then I got to know the criteria and table of contents
for this research of the project. After all these things, I decided to make short term objectives
according to the official meetings with the project mentor as per recommended by the Oxford
Brookes University (OBU) pack. The experience mentor really helped me in the project of the
research. There were a number of factors which I got to learn in the official meetings and I
applied these factors throughout the project of the research according to the instructions of the
project mentor. At last, I started my project of the research according to the planned short term
objectives to achieve the ultimate one.

Oxford Brookes University

 Research and Analysis Project 4

2. Information gathering and Accounting/Business Techniques

2.1. Sources of Information and methods to collect it
The methods which are used by me are primary and secondary sources. These are basically the
main two sources which are mainly used for any research. These both research sources are good
enough to give much information or data for any document to be written. There are no issues
created to the information used by these sources as they are mostly correct and worth to use.
Primary
The primary research is the most authentic one and the information is factual mostly. As in the
word primary, Prime means first, information that is gather own its own efforts. The primary
source of information insist on own research rather than to use the material of others. These are
written or created on the time with first handed information. The data gathered by this source is
much time consuming as it finds out if it is the fact. This is based on different experiments
people had for example the original documents, creative works like interviews and
questionnaires [CITATION Jim159 \l 1033 ].
Secondary
Secondary source are basically the second handed documents or the information analyzed. This
information can be the interpreted of primary source. This source is more or mainly one step
removed from the paper or event. This source can include any graphical effect like pictures,
graphs, quotes and any kind of visual from a primary source even. Examples for this include a
magazine, an article, and a journal [ CITATION Ent15 \l 1033 ].
In the conclusion, I decided to use the secondary information throughout the project because
there were a number of factors which restricted me until secondary research. I tried to take the
information of the company many times through calls and personal visit but in vain. In fact, they
were busy in their daily routine of life so that I was time wasting for them. Finally, there was no
option for me to choose the secondary research throughout the project.
There are some methods of the secondary research which I choose for the project of the research
and some are as follows;
Annual Report – This was the main basic source of the information for the project of the
research because I extracted financial statement from the annual reports of the companies which
I downloaded from the official website of the company. As well as only the audited financial
statements of the company were the reliable source in the interpretation of the ratios because
only published annual reports of the company can be reliable source in the secondary research.
Newspapers – The newspapers were also the main source to extract data about the company’s
decision and performance because LCL and DGKC are the two top companies of the cement
industries so that both are eye catching for the newspapers. But in the newspapers, it’s really
difficult to gather the old data and search out because in the modern era, number of people
decreased which read out the newspaper in the paper form so that I decided to extract the
information from the newspaper from the online version from their official websites.
Search Engines – I used different ways of secondary information like newspapers and annual
reports but still I can’t forget to mention the services of the search engines because search

Oxford Brookes University

 Research and Analysis Project 5

engines was the basic ways to access data in the terms of time saving. Without the search
engines, it was hard for me to gather the data related to my analysis. I used different search
engines according to my need which are Google, Yahoo and AOL.
Study Texts and Information Pack of OBU – I got basic information from the OBU
information pack which I downloaded from the official website of the ACCA and read it
thoroughly. I got many basic information from the OBU information pack and such information
helped me at the each stage of the project of the research.
Study texts were also important to study the basic knowledge for the financial ratios and business
performance because it is also the part of the Continuous Professional Development (CPD) to
update the knowledge with the further changes related to the field. I clearly understand the basic
nature of all the ratios which I used in the project of the research and business models which
used in this thesis to provide the pure analysis of the financial and business performance of the
company.
2.2. Limitations of Information Gathering
Gathering information seems so easy in terms of analyzing data, but while taking information we
have to face some limitation to it. First of all, primary research is not accessible easily as it is the
factual and mostly everyone do not give out information like the companies. Secondly, the
information gather in secondary research was insufficient, as more information is needed to work
on the given task. Thirdly, many threads were to be faced and many security reasons were
occurred as both companies are registered and valid applied companies so that is why it was not
easy to take out information without any approval by the head of the department.
The major factor was on the attack of the institute of the Peshawar. Due to the attack on the
Peshawar, Government of Pakistan officially announced that all the educational institutes will
remain close till 11th of January [ CITATION Moh14 \l 1033 ]. My parents got scare and didn’t
permit to visit college immediately after the opening of all educational institutions. Due to this
major, many days wasted and it was the reason to restrict to access different libraries from the
different locations.
2.3. Ethical issues involved during Information Gathering
The ethics is the most fundamental principle of any profession and same case apply in the field
of accountancy. Ethics start where the law ends. Ethics is the choice between the right and wrong
in the specific situation. I also faced many kinds of ethical issues in this research project but I
tried my level best to overcome the ethical issues because my studies taught me Code of Conduct
in different situations. One of the main ethical issue was that my many friends asked me about
the information related to the company. Although, there were many kinds of information which
were easily available for the company but still I denied to my friends to give out the information
within the consideration of the ethics. Actually, I maintained the level of confidentiality and
protect the data and give out without any reason.
I also fulfilled the objectivity in the project of the research. Objectivity means the professional
should not be bias so that in the comparison of the both companies. I didn’t conclude anything

Oxford Brookes University

 Research and Analysis Project 6

according to my personal interests. I only conclude such things are in real terms either they in
favor of DGKC or LCL. I didn’t produced any result according to my personal decision making.
I also considered the professional competence and due care which is also the fundamental
principle of the ethics. It means I need to use updated knowledge and skills for the project of the
research. As I stated that I refreshed my knowledge and tried my level best to use the update
knowledge.
2.4. Accounting and Business Techniques used in their Limitation
2.4.1. Ratios Analysis
Ratio analysis is a form of financial statement analysis to figure out company’s financial position
over a year. This is a quantitative information analysis contained in the company’s financial
statement. This is a form to a various aspects of the company like efficiency, gearing, liquidity,
solvency and profitability. These ratios are used to analyze if company is deteriorating or
improving over time. These analyses are used to compare out with different companies to see the
comparative valuations in the same sector or market. These analyses are not useful until they are
not used to compare with other companies [ CITATION Inv1512 \l 1033 ].
Limitations of Ratios Analysis
 Some comparison can be misleading from different industries. This is because as
different companies have different environment like market structure or regulation
operating in different circumstances [CITATION Jim1510 \l 1033 ].
 Sometimes due to other reasons like assumptions and calculation may affect the financial
accounting information, so the estimated ratios are less useful [CITATION Jim1510 \l
1033 ].
 Past information and data is more shown in ratio analysis, but the users are interested in
new, future and current information [CITATION Jim1510 \l 1033 ].
 Ratio analysis use different accounting methods so while comparing it is not a like to like
comparison with other company [CITATION Jim1510 \l 1033 ].
2.4.2. SWOT Analysis
SWOT analysis is a structured method to evaluate and plan out the company’s strengths,
weaknesses, opportunities and threats. This analysis helps out to Figure Company’s strategy,
which can help the business to improve them in future. Strengths and weakness are more likely
for the internal environment of the business, these can be change over time. Whereas,
opportunities and are for external environment, which cannot be change by the company as they
are happening out in the market. This analysis is assist to achieve company’s objectives and try
to improve them as more likely as they can be. Figuring out SWOT analyses is helpful to
identify the obstacles faced by the company and then try to overcome those obstacles to achieve
goals [ CITATION Fra151 \l 1033 ].
Limitations of SWOT Analysis
 It does not priorities the identified factors or issues so that it’s not easy to identify that
which factor is more important as compared to others. It’s not right approach to prioritize
the factors on the random basis [ CITATION Mic152 \l 1033 ].

Oxford Brookes University

 Research and Analysis Project 7

 It does not give out alternative decisions or offer solutions. Although, there are number of
factors which identified by the SWOT analysis but the problem is that SWOT analysis
only focus on the identifications of the factors rather than any solution [ CITATION
Mic152 \l 1033 ].
 Highly subjective with lots of information, this makes it difficult. It may vary analyst to
analyst because at the some point, an analyst can make it weakness and strength at the
same time. So that it can be hard to decide out the right one [ CITATION Mic152 \l
1033 ].
2.4.3. Porter’s Fiver Forces
This model analyzes and identifies the five forces which are competitive to every industry or
business. This model was name after Michael E. Porter, who introduced these forces to a
business. These five forces are really helpful to determine company’s strengths and weaknesses.
The five forces include completion in the industry, customer’s power, supplier’s power,
substitutions treads and new entry threats. This tool is simple but powerful enough for the
business to understand where the business stands out. It really helps out to see where a business
lies in terms of strength position which is current competitive and working out on the
weaknesses to consider what position is moving up to. By knowing at what situation a business
lies, can help a business to take fair decisions as an advantage to it. Taking our best decisions
make business move in a right direction with a plan and it avoid out taking wrong steps which
can harm business somehow [ CITATION CGM151 \l 1033 ].
Limitations of Porter’s Five Forces
 This five force model cannot be used in a market level or to a smaller group. It is
designed and useful for broader level like an industry [ CITATION Man151 \l 1033 ].
 This model only shows the present day result, which is not reliable in future and mostly
industries need long term planning [ CITATION Man151 \l 1033 ].
 As a matter of fact this model shows out brainstorming, which does not help to decide
certainty of an industry [ CITATION Man151 \l 1033 ].
 The model is more based on completion, for which it figures out external factors and
ignores some specific firm’s internal factors [ CITATION Man151 \l 1033 ].

Oxford Brookes University

 Research and Analysis Project 8

3. Analysis, Conclusion and Recommendations

3.1. Industry Profile
The cement industry which is also the backbone of the Pakistan because when Pakistan came
into being in 1947 then there were only four production units in the Pakistan with the total
production capacity of half million tons [ CITATION Ade152 \l 1033 ] And then many
companies provide the boost to the economy of the Pakistan through its existence in Pakistan
like Bestway Cement [ CITATION Bes151 \l 1033 ] And Attock Cement [ CITATION Att15 \l
1033 ] Etc. On the other side, this industry is also helping Pakistan to reduce the unemployment
because there are almost one and half million people which are working in the cement industry
[ CITATION Lar123 \l 1033 ]. Pakistan’s cement industry also has the ranking of 5 th position in
the exports of the cement among all the other countries [ CITATION Lar123 \l 1033 ].
3.2. Company Profile
LCL is the part of the Yunus Brothers Group which has the competitive position in the field of
business [ CITATION Luc159 \l 1033 ]. As I stated that LCL is the top company of the cement
industry because LCL has largest cement production capacity among the other companies
[ CITATION GGM151 \l 1033 ]. It has not only the largest production capacity but also has the
largest market share in the field of cement which is helping it to expand into foreign [ CITATION
Bus15 \l 1033 ]. The main strength of the LCL is the loading and storage terminal at the Port of
Karachi [ CITATION Luc159 \l 1033 ] Which is playing significantly role for the LCL because it
is affecting its export sales as well as the saving inventory holding cost.
3.3. Competitor’s Profile
DGKC is the part of the Nishat Mills. Nishat Mills also has the strong position of the business in
the market with diversification portfolio [ CITATION DGK1514 \l 1033 ]. DGKC has the second
largest production capacity in the industry of cement [ CITATION The1511 \l 1033 ]. DGKC
also focusing on the different expansion plans to grow its business further [ CITATION Sal133 \l
1033 ]. DGKC introduced the waste heat and recovery system [ CITATION DGK1515 \l 1033 ]
And obtaining only 35% electricity from the national grid [CITATION Has15 \l 1033 ] which is
cost saving activity for the DGKC.

Oxford Brookes University

 Research and Analysis Project 9

3.4. Financial Ratio Analysis

3.4.1. Production and Sales Analysis

Production and Sales Analysis

7,000,000

6,621,000
6,000,000 6,150,440
5,935,791

5,000,000

4,132,000
4,000,000 3,722,420 3,769,880
Cement Production (Tons) 4,004,458
Local Sales (Tons) 4,031,801
Export Sales (Tons) 3,988,512

2,887,812 2,954,943
3,000,000 2,765,534

2,487,000
2,000,000 2,251,540 2,289,463

1,000,000 1,253,422 1,120,464 1,021,329

0
1 2 3 4 5 6
(Source: LCL, 2012:2014; DGKC, 2012:2014)

LCL representing the increasing direction for the production of the cement in FY13 as compared
to the FY12 [CITATION LCL133 \l 1033 ] but in the FY14 LCL maintain the same trend of
increasing and production increase to 6,621,000 tons [CITATION LCL143 \l 1033 ]. LCL has the
largest market share in the local and international market so that it is very necessary for the LCL
to maintain its production to fulfill the demand of the cement in the local and international
market [ CITATION Luc159 \l 1033 ]. The local demand of the Pakistan increasing because
Government of Pakistan increased the development budget which requires the construction of the
infrastructure [ CITATION Geo151 \l 1033 ].
The local sales are also increasing. In the FY13 local sales are increasing with little effect
[CITATION LCL133 \l 1033 ] but in the FY14 the local sales increased significantly and reached
up to 4,132,000 tons [CITATION LCL143 \l 1033 ]. The local sales are increasing because of the
construction boom in the local market of the Pakistan [ CITATION Ria135 \l 1033 ]. Although,
Government of Pakistan increased the development budget [ CITATION Geo151 \l 1033 ] Which
affected the local sales but on the other side, many private construction plans increased the local
demand due to new private housing schemes or infrastructure development [ CITATION
Bah151 \l 1033 ].
The export sales of the LCL increased and then again increased in the FY14 [CITATION
LCL143 \l 1033 ] which is showing the continuous trend of growth. In the FY14 the export sales

Oxford Brookes University

 Research and Analysis Project 10

of the LCL reached up to 2.487,000 [CITATION LCL143 \l 1033 ]. The export sales are
increasing because LCL has the loading and storage terminal at the Karachi Port [ CITATION
Luc159 \l 1033 ] And also has the largest market share [ CITATION Bus134 \l 1033 ] which is
very helpful for LCL to increase its export sales.
Competitor – DGKC
In comparison of the LCL, the production of the DGKC increased in FY13 [CITATION DGK133
\l 1033 ] and then decreased in FY14 [CITATION DGK143 \l 1033 ]. On the other side the
production of the LCL continuously increased. Basically, DGKC produced the cement according
to its normal capacity but the export sales decreased for the DGKC [CITATION The1322 \l 1033
] which piled up its stock and then in the FY14, DGKC reduced its production level according to
the demand [CITATION DGK143 \l 1033 ].
The local sales of the DGKC increasing which is same case like LCL. Because both companies
enjoying the taste of increasing local sales. The local sales of the DGKC increasing because the
local demand of the cement increase [CITATION Pak132 \l 1033 ] which affected the overall
local sales of the cement industry.
In the FY13, the export sales of the DGKC reduced [CITATION DGK133 \l 1033 ] and then
again reduced in FY14 [CITATION DGK143 \l 1033 ]. On the other side, LCL export sales
continuously grow each year. DGKC losing its export sales because DGKC has not the largest
market share like LCL and the cheaper Iranian cement available in Afghanistan [ CITATION
ICR122 \l 1033 ] which is the cause to decrease the export sales for the DGKC.
3.4.2. Profitability Analysis

Profitability Analysis
50%
45% 100% 200% 300% 400% 500% 600%
40% 44% 43%
35% 38% 37%
30% 33% Return on Capital Employed 35%
Gross Profit Margin Net Profit Margin
25%
26%26% 26%26%
20% 23% 22% 22%
15% 20%
18%
10% 14% 15% 13%
5%
0%
(Source: LCL, 2012:2014; DGKC, 2012:2014)

The gross profit margin (GPM) for the LCL increased in FY13 till 44% [CITATION LCL133 \l
1033 ] and reduced in FY14 and reached to 43% [CITATION LCL143 \l 1033 ]. There is slight
change in the FY14 in the comparison of the FY13 but there is significant change between the
FY12 and FY13. The GPM increased in the FY13 because the local sales of the LCL increasing
each year because of the increasing local demand in the Pakistan [ CITATION Pea14 \l 1033 ]

Oxford Brookes University

 Research and Analysis Project 11

and on the other side, the export sales of the LCL also increasing which also boost up the GPM.
The export sales are increasing because LCL has the loading and storage terminal at the Karachi
Port [ CITATION Luc159 \l 1033 ] Which is easier to export cement as compared to other
companies. In the FY14, the GPM reduced because cost of sales (COS) significantly increased
[CITATION LCL143 \l 1033 ]. The COS increased significantly in FY14 because the fuel tariffs
increased by Government of Pakistan [ CITATION The1323 \l 1033 ] as well as the power tariffs
[ CITATION Dun14 \l 1033 ] which increased the burden of the fuel and power tariffs and it is
uncontrollable by company.
The net profit margin (NPM) increased to 26% in FY13 [CITATION LCL133 \l 1033 ] and then
LCL maintain the increasing trend of the NPM at 26% in FY14 [CITATION LCL143 \l 1033 ].
The NPM increased because the LCL did the repayment of the loan [ CITATION Bus125 \l
1033 ] which affect the finance cost and reduce it significantly. The reducing finance cost
increase the profitability and obviously NPM.
The Return on Capital Employed (ROCE) also increased in FY13 to 26% [CITATION LCL133 \l
1033 ] and then again stable at FY14 [CITATION LCL143 \l 1033 ] which is same like NPM.
The ROCE increase because the profitability of the LCL increased significantly each year by
increasing the local sales due to increase in local demand [CITATION Pak132 \l 1033 ] and
increase in export sales due to loading and storage terminal at the Karachi Port [ CITATION
Luc159 \l 1033 ] As well as current portion of the non-current liabilities reduced by LCL did the
repayment of the loan [CITATION LCL143 \l 1033 ].
Competitor – DGKC
The GPM of the DGKC increased in FY13 to 37% [CITATION DGK133 \l 1033 ] and then
reduced in FY14 to 35% [CITATION DGK143 \l 1033 ]. The basic reason in the FY13 is that the
local sales increased of the DGKC due to the increase in the local demand [ CITATION Ria135 \l
1033 ]. On the other side the GPM is reducing in FY14 because the export sales of the DGKC
decreasing due to the availability of the cheaper Iranian cement for Afghanistan [ CITATION
Dai146 \l 1033 ] but LCL export sales still increasing each year.
The NPM of the DGKC increased in the FY13 to 22% [CITATION DGK133 \l 1033 ] and then
again stable at 22% in FY14 [CITATION DGK143 \l 1033 ]. DGKC has many associated
companies from which it is getting other income [ CITATION DGK1516 \l 1033 ] And reducing
the impact of decreasing export sales. The Government of Pakistan increase the minimum wage
rate [ CITATION Shu13 \l 1033 ] which also increase the salaries and wages for the DGKC.
Although, the NPM of DGKC increasing but the NPM of the LCL is slightly better.
The ROCE increase in FY13 [CITATION DGK133 \l 1033 ] and then reduced in FY14 to 13%
[CITATION DGK143 \l 1033 ]. The major reason is that the profitability of the DGKC increase
each due to increase in the local sales because of the boom of the local demand [ CITATION
Pak132 \l 1033 ] and increased the other income due to a number of associated companies

Oxford Brookes University

 Research and Analysis Project 12

[ CITATION DGK1516 \l 1033 ] But in the FY14, DGKC increased the level of equity through
its more profits [CITATION DGK143 \l 1033 ] which eliminate the effect of the increasing profit
over the ROCE.
3.4.3. Liquidity Analysis

Liquidity Analysis
6.00
5.00 6.00
5.405.17
4.00 5.00
4.374.01
Current Ratio Quick Ratio 4.00
3.00 3.383.01
2.00 2.642.28 3.00 2.772.59
1.00 2.00 1.631.54
- 1.00
(Source: LCL, 2012:2014; DGKC, 2012:2014)

The LCL’s current and quick ratio both increasing each year and especially significant increase
in the FY14 [CITATION LCL143 \l 1033 ]. In the quick ratio, inventory didn’t participate but
still the quick ratio increased with the same trend like current ratio. The main reason behind the
increase in the quick and current ratio is that trade debts increased significantly because the
export sales of the LCL increasing because of the loading and storage terminal at the Karachi
Port [ CITATION Luc159 \l 1033 ] And it is time taking way to recover amount from the export
debtors so that it increased over the period of the three years.
Competitor – DGKC
The current and quick ratio for the DGKC is above the standard of ‘:1’ but in the FY14 both
increased significantly [CITATION DGK143 \l 1033 ]. It is same scenario that inventory is not
playing important role because quick ratio increased with the same direction also. The main
reason is in the increase in Cash and Bank Balance as compared to the LCL. LCL’s trade debts
were increasing due to export sales but the DGKC cash and bank balance increased because
DGKC planned to acquire the Lafarge Cement but due to the unsuccessful plan [ CITATION
Dil141 \l 1033 ], the cash and bank balance increased significantly in the FY14.

Oxford Brookes University

 Research and Analysis Project 13

3.4.4. Solvency Analysis

Solvency Analysis
450.00
400.00 423.39
350.00
300.00
250.00 Gearing Interest Cover
200.00
150.00
155.90
100.00
50.00
-
- 33.87
0.012 1.00 0.003 2.00 3.00 0.1413.434.00 0.0608.135.00 13.906.00
0.021
(Source: LCL, 2012:2014; DGKC, 2012:2014)

The interest ratio for the LCL showing the increasing trend in the FY13 [CITATION LCL133 \l
1033 ] and FY14 [CITATION LCL143 \l 1033 ] both. Basically, gearing has the relation with the
debt. The gearing ratio decreased in FY13 and then eliminated in the FY14 because LCL did the
repayment of the loan [ CITATION Bus125 \l 1033 ] and interest cover increased against the
decreasing gearing ratio. It means LCL has the more capability to pay its interest in the FY14
[CITATION LCL143 \l 1033 ].
Competitor – DGKC
The gearing ratio of the DGKC also decreased each year through the repayment of the long term
loans [ CITATION Bus126 \l 1033 ] but it didn’t eliminated the effect of the gearing ratio which
is not the same case like LCL. Although, the interest cover ratio increasing for the DGKC each
year but there is far difference between the interest cover of DGKC and LCL.

Oxford Brookes University

 Research and Analysis Project 14

3.4.5. Efficiency Analysis

Efficiency Analysis
70

60 62
59 61
50 54 52
50
40 Debtor Collection Period Invetory Holding Period Creditors Payment Period
39
30
28
20 23 25 25 23
16 18
10 12
- 5 4 4 5 6
1 2 3 2
(Source: LCL, 2012:2014; DGKC, 2012:2014)

The debtor collection period for the LCL was 16 days in FY13 [CITATION LCL133 \l 1033 ]
and 18 days in FY14 [CITATION LCL143 \l 1033 ]. The debtor collection period increased
because the export sales for the LCL increased due to loading and storage terminal at the Karachi
Port [ CITATION Luc159 \l 1033 ] And again its time taking way to recover the amount from the
export customers as compared to the local customers.
The inventory holding period for the LCL increased in FY13 and then stable in the FY14.
Basically, LCL has the loading and storage terminal at the Karachi Port [ CITATION Luc159 \l
1033 ] Which is very helpful to keep the inventory at low holding cost.
The creditor’s payment increase in FY13 [CITATION LCL133 \l 1033 ] and then decreased in
FY14 [CITATION LCL143 \l 1033 ]. The major reason is that the Pakistan Rupee (PKR)
depreciated in the FY13 [ CITATION Ish132 \l 1033 ] which increase the payment level related
to the international supplier of the coal and in the FY14, the PKR appreciated through the efforts
of Government of Pakistan [CITATION Rup14 \l 1033 ] and it affected the payment for the
creditors and obviously reduced it.
Competitor – DGKC
The debtor collection period for the DGKC reduced in FY13 [CITATION DGK133 \l 1033 ] and
FY14 [CITATION DGK143 \l 1033 ]. It seems good apparently in the comparison of the LCL
but actually, DGKC has the increasing local sales due to increase in the local demand
[ CITATION Pak132 \l 1033 ] but decreasing export sales due to the availability of the cheaper
Iranian cement [ CITATION ICR122 \l 1033 ].
The inventory holding period increased in the FY13 [CITATION DGK133 \l 1033 ] of the
DGKC which is not seems good in the comparison of the LCL. Although, DGKC improved its

Oxford Brookes University

 Research and Analysis Project 15

inventory holding period in FY14 [CITATION DGK143 \l 1033 ] but still LCL is the leading.
The inventory holding period for the DGKC increased because the export sales for the DGKC
decreased due to availability of the cheaper Iranian cement [ CITATION ICR122 \l 1033 ] and
then in FY14, DGKC reduced the production level which ultimately reduced the inventory
holding period.
The creditor’s payment period is increased in FY13 [CITATION DGK133 \l 1033 ] and then
decreased in the FY14 [CITATION DGK143 \l 1033 ]. The PKR depreciated in the FY13
[ CITATION The1324 \l 1033 ] and appreciated in the FY14 [CITATION Rup141 \l 1033 ] which
affected the payment of the creditors. Although, both companies has the same trend for the
creditors payment period but LCL creditors payment period are good as compared to the DGKC
because LCL holding the payment and enjoying the return through different investments.
3.4.6. Investor Analysis

Investor Analysis
10.000
9.000
9.000
8.000
8.000
7.000
6.000
6.000
Earning/(Loss) per Share Dividenr per Share 6.000
5.000
5.000
4.000
4.000
3.000 3.500
3.000 3.000
2.000
2.000
1.000 1.500
1.000
-
0.022 0.032 0.037 0.009 0.013 0.014
(Source: LCL, 2012:2014; DGKC, 2012:2014)

The investor analysis showing the increasing trend for the LCL. The earning per share (EPS) and
dividend per share (DPS) both are increasing. Although, dividend increased but the increasing
profitability of the LCL showed that LCL has the expansion plan into other countries to capture
more market share as compared to before [ CITATION Bus15 \l 1033 ]. LCL also has the plan to
power plant with the 660 megawatt electricity [ CITATION Jav145 \l 1033 ]
Competitor – DGKC
The DGKC has also increasing trend but in there is major difference between the DPS of both
companies. The same scenario apply for the DGKC is that DGKC has the plan to expand its
operations in Africa [ CITATION Sal133 \l 1033 ] because to compete in the international market
and export sales for the DGKC already facing the decreasing trend.

Oxford Brookes University

 Research and Analysis Project 16

3.5. Business Analysis

3.5.1. SWOT Analysis
Strengths
 LCL has the capability to generate electricity and using its capability to generate more
income. LCL selling its electricity production to the different sectors of the Government.
This selling of electricity generating more other income and obviously increasing the
profitability level for the LCL [ CITATION PPI151 \l 1033 ][ CITATION The126 \l
1033 ].
 LCL is the group of Yunus Brothers Group [ CITATION Luc159 \l 1033 ] Which is the
strong group in the field of business because Yunus Brothers Group has the diversify
portfolio of investments which enable to overcome loss from any part. The expert
decisions for the Yunus Brothers Group is also key role for the LCL.
 LCL did the repayment of the loan [ CITATION Bus125 \l 1033 ] and made its status less
risky as compared to before. The repayment of the long term loans by LCL decreased the
finance cost each year which made its strength and obviously it increased the profitability
level with more proportion.
Weaknesses
 LCL cash and bank balances significantly increased each year [CITATION LCL133 \l
1033 ][CITATION LCL143 \l 1033 ]. It sounds that LCL may missing many good
opportunities to invest. The losing of opportunities means to get no return from the
existing cash and bank balance.
 LCL failed to pass the quality test of the cement in the South Africa. This is the weakness
of the LCL to failed the test but it’s already has good image and reputation in the cement
market [ CITATION The127 \l 1033 ].
Opportunities
 There is construction boom in the local market of Pakistan [ CITATION Pak132 \l 1033 ]
due to the increase in the development budget through Government of Pakistan
[ CITATION Geo151 \l 1033 ]And also many other private investors which are investing
in the housing schemes or infrastructure of the buildings [ CITATION Bah151 \l 1033 ].
These kinds of development affect the cement industry overall.
 The contract between the Government of China and Government of Pakistan to construct
a road between Gwadar and China [CITATION The1512 \l 1033 ] is the opportunity for
the cement industry to grow its local sales through this contract.
 Qatar is focusing on the infrastructure development due to the FIFA World Cup 2022
[ CITATION FIF151 \l 1033 ]. The Qatar is not able to fulfill its demand according to its
production capacity [ CITATION Neh131 \l 1033 ] so that Qatar need cement from the
various country and its’ also the opportunity for the industry of Pakistan to capture the
market share from the Qatar.

Oxford Brookes University

 Research and Analysis Project 17

Threats
 The energy crisis [ CITATION Pak154 \l 1033 ] in the Pakistan is the major problem for
all kind of businesses. Although, many companies able to generate its electricity but still
there are a lot of problems which industry is facing through the energy crisis.
 The security threats in Pakistan and especially attack on the children at 16th December
2014 [ CITATION Moh14 \l 1033 ] which caught the eyes of the international media. Due
to the more security threats, the security expenses are increasing for each company which
is also the threat.
3.5.2. Porter’s Five Forces Analysis
Bargaining Power of Supplier
There are two kinds of the suppliers in the cement industry. First one is the local supplier related
to the gypsum and second one is the international supplier which is related to the import of the
coal.
The local supplier has the low bargaining power because Pakistan is the rich country in terms of
minerals [CITATION Pak133 \l 1033 ] and there are a lot number of suppliers which selling its
product. So, that buyer’s switching cost is very low. Domestic supplier also cover the limited
market.
The international supplier has the high bargaining power because it cover the market from the
whole world and it is compulsory to use the market share. It is necessary to import coal
[CITATION Cem14 \l 1033 ] for the production.
Bargaining Power of Customer
There are also two kinds of the customers which are local customers and export customers.
The local customers has the low power of the bargaining because there is no price war in the
cement industry yet but it is expected in the future [ CITATION Far145 \l 1033 ]. This is the
scenario of the oligopoly and local customers has no availability of the cheaper prices.
The export customers focused on the market of the whole world so that the bargaining power of
the export customers are high. The other thing is that there is price difference between the local
customers and export customers. Export customers have the low price level as compared to the
domestic customers [CITATION Aam146 \l 1033 ]. It clearly showing that export customers
have the high bargaining power of the coal and on the other hand, cement industry facing the
decline in the export sales because the cheaper Iranian cement available for the Afghanistan.
Substitute
The basic necessity of the human life is the cement. There are numerous kind of innovations in
the modern era of the world but still there is no proper substitute of the cement yet.

Oxford Brookes University

 Research and Analysis Project 18

Oxford Brookes University

 Research and Analysis Project 19

Rivalry
There is no existing rivalry between the companies of the cement industry because this is the
situation of the oligopoly right now but it is expect that price war will be started in the near
future because every company trying to snatching the market share from each other [ CITATION
Far145 \l 1033 ]. If the price war started in the future then the intense competition will arise
between the companies against the low prices so that customer may have a lot choice at different
prices.
Threat for New Entrants
The threat for the new entry is low because first of all there is huge requirement for the capital.
It’s not easy to setup the cement company against the existing competitors and it may more
difficult to capture the market share with new brand name.
The energy crisis is the major threat because electricity is the basic necessity to run any business
[ CITATION Pak154 \l 1033 ]. If business already facing the issue of the electricity then it may
unable to fulfill its demand and it may unable to utilize its full production capacity.
The fuel and gas tariffs also increasing [ CITATION Zaf15 \l 1033 ]. Although, sometime it
decreased but when it decreased recently then Government of Pakistan impose the addition sales
tax over the petrol prices [CITATION Mub151 \l 1033 ]. It means if Government of Pakistan is
giving relief from one hand then it is also taking from the other hand with the different way.
3.6. Conclusion and Recommendations
The comparison between the LCL and DGKC in the context of the financial performance and
business performance. There can be no combine in conclusion in the terms of the financial ratios
because each ratio need to discuss separately.
The LCL is the leading party in the production and sales analysis because the export sales of the
DGKC declining but the export sales of the LCL increasing each year as well as the production
level of LCL is far better than DGKC.
The profitability of the both companies showing satisfied trend but DGKC declined in GPM and
ROCE. On the other hand, LCL maintain the increasing trend of the profitability ratios. Again,
the profitability ratios of the LCL is better than DGKC because LCL earning more profit against
the sales.
The liquidity analysis showing the increasing trend for the LCL and DGKC. Although, both
companies did the repayment of the loan but the material thing that DGKC leading the LCL in
the final year of the 2014.
The solvency analysis of the both companies showing the trend towards the improvement but the
LCL has the interest cover far better than DGKC because of the zero gearing ratio. Although, the
gearing of the DGKC also decreased but it’s not zero like LCL.

Oxford Brookes University

 Research and Analysis Project 20

The debtor collection period of the DGKC is better than LCL because DGKC can recover the
amounts more quickly from debtors as compared to the LCL but the things is that LCL export
sales are increasing which is increasing debtor collection period. Although, the debtor collection
period of the DGKC apparently seems good but the LCL enjoying the increasing sales which
good situation as compared to the DGKC.
The investor analysis improving for both companies but again this is the thing that both have the
different expansion plans to snatch the market share from the different location of the worlds as
well as from the local market.
The business performance of the LCL also analyzed and identified different factors within the
context of the Porter’s Five Forces and SWOT analysis. Although, there are many good things
which company is operating. These factors should consider but there also some limitations of the
business models. The limit of the knowledge also apply on the analysis on the models of the
business performance because it’s not necessary that an individual know about all the factors of
the environment or business models but still there are number of recommendations for the LCL
which are following;
 LCL should focus on the expected shortfall of the Qatar because Qatar is focusing on the
infrastructure development but cannot able to meet its demand so if LCL get the contract
for the Qatar as cement provider then the export sales will further increase for the longer
period because Qatar is focusing on the long term plans to develop its country.
 The LCL has increasing export sales and it is the material amount for the LCL and LCL
should use the hedging to reduce the risk of the foreign exchange because the
depreciation and appreciation of the Pak rupee in the international market may effect
badly to the LCL and should minimize this risk. Pakistan already facing the situation of
the uncertainty so that LCL should overcome such uncertainty to secure its position in the
market.
 LCL should advertise its product in the electronic media as well in the social media
because this is the way to catch the eyes of each individual. Marketing is also major part
for any business in the modern world so that LCL should not avoid such techniques to
boost up its local sales from the own home country. The major reason is that Pakistan
already facing the phase of the construction boom so that LCL should advertise its
products to maintain its largest market share in the market.
 The Government of Pakistan and Government of China did the contract for the road
construction between Gwadar to China. LCL should focus on this opportunity because
this is the construction of the hundred miles and one of the long term project. The LCL
should contact with the Government of Pakistan to provide the quality cement for the
construction of cement. If LCL able to get this contract from the Government of Pakistan
then LCL able to secure its position in the local market for the longer run.

Oxford Brookes University