GRP MEMBERS:

MUHAMMAD SAAD
DUAA NADEEM
ALI SAEED
COURSE: CORPORATE FINANCE
TOPIC: REPORT ON FAUJI CEMENT COMPANY LIMITED
TEACHER: SIR RIAZ AHMED
CLASS: BS (A&F) 6-A
Table of Contents
1- INTRODUCTION:......................................................................................................................................3
2- ANALYSIS OF THE COMPANY FINACIAL STATEMENTS:............................................................................4
3. ANALYSIS OF CASH FLOW STATEMENT:.................................................................................................5
4- Financial Ratio Analysis:..........................................................................................................................5
5- CORPORATE VALUATION:........................................................................................................................8
6- CAPITAL STRUCTURE, DIVIDEND POLICY & CORPORATE GOVERNANCE:.................................................8
- Capital Structure:.................................................................................................................................8
- Dividend Policy:...................................................................................................................................9
- Corporate Governance:.......................................................................................................................9
- Corporate Governance and Capital Structure:...................................................................................10
7- RECOMMENDATION:............................................................................................................................10
8- CONCLUSION:........................................................................................................................................11
9- REFERENCES:.........................................................................................................................................11
 REPORT:
FAUJI CEMENT COMPANY LIMITED

1- INTRODUCTION:
A longtime leader in the cement manufacturing industry, Fauji Cement Company. Headquartered
in Islamabad, operates a cement plant at Jhang Bahtar. Tehsil Fateh Jang. District Attock in the
province of Punjab. The company has a strong and longstanding tradition of service, reliability,
and quality that reaches back more than 10 years. Sponsored by Fauji Foundation the Company
was incorporated in Rawalpindi in 1992.
The cement plant operating in the Fauji Cement is one of the most efficient and best maintained
in the country and has an annual production capacity of 1.165 million tons of cement. The
quality portland cement produced at this plant is the best in the Country and is preferred the
construction of highways, bridges, commercial and industrial complexes, residential homes, and
a myriad of other structures needing speedy strengthening bond, fundamental to Pakistan’s
economic vitality and quality of life.

As we look into the above graph, Fauji Cement GDP contributed to the economy as effectively
as professional firms or companies should. It contributed about approximately 20-25% in years
from 2016-2019. It represents good amount of economy contribution by the GDP of Fauji
Cement. But in fiscal year 2020, it’s contribution decreased and fall down about to 15% as the
major reason in this is the COVID-19 (Pandemic) factor. Due to pandemic many companies or
Firms GDP decreases as this also the same case with Fauji cement but they managed quite well
to decrease not by a very big amount.

In this above figure, we can see that the Sales projection of Fauji Cement is quite unusual as we
can see that in year 2014 the sales or the stock price started to rise and it eventually kept on
rising around next 2-3 years. But in 2018 the stock prices or sales started fall and it eventually
kept on falling during next 4-5 years. The projected sales or stock prices shown is also on the
down fall side by seating the current trend of the company.

2- ANALYSIS OF THE COMPANY FINACIAL STATEMENTS:

The analysis of Company’s Financial Statement are discussed below:
The Company’s Financial Statement are looking quite professional and balanced. First of all
Debt to equity ratio of the company is quite better it was 0.08 times in fiscal year 2022 and it
increases in 2023 to 1.36 times. It means that the company’s Capital Structure becomes more
stable and it will definitely helps company to increase their profit in future. The short term
business of the company is liquid as it has less amount of short term which will gradually helps
the company to effectively manage their financial issues and problems. Short term will have
negative impact also as sometimes company may slowdown in the decrease of short term
business. The percentage of the Tangible assets are somewhat near to 65% as it was recorded or
observed in 2022 it shows that the other assets or materials comes from the financial transactions
of the company. The time taken by company to receive outstanding payments from customers
and repay to the suppliers will majorly depend on the payments criteria, payments time period,
and strategies and policies of the company. Company should have a balanced strategy and
policies for effective business. The company or business will take definitely time to sell the
inventory that was on hand by the company. The time period will be decided or majorly depend
on the pricing strategy, product types, product demand, marketing efforts or strategies,
management efforts or practices and etc. These factors will play a huge and important role in
deciding the time period of the factors that effect company financial performance.

3. ANALYSIS OF CASH FLOW STATEMENT:

The analysis of Company’s Cash flow Statement are discussed below:
The liquidity situation of the company is looking like not so good as the Cash receiving from
Financing is decreasing as compared to the last year’s figures. Liquidity situation majorly relate
and depend on the financing cash, current assets, current liabilities, and other ratios related to it.
The company’s sources of cash are from Different sections such as from investing, Financing
and Operating activities. Sources of cash also includes short term investments, equipment,
payments from customers, employees and other many sources. The free cash flow that company
generates was decreased as compared to the last year. The free cash flow decrease will
negatively impact the company as it has less capacity of funds or assets that it can used in future
to invest in other financial sectors. If we talk about the cash of the company so it is observed that
overall cash of the company is decreased as compared to the last year’s overall cash balance. It
will also means that the company has the less capacity to initiate any big positive change. The
liquidity situation of the company also impacted by these factors discussed above.

4- Financial Ratio Analysis:

Category Formulas 2023 2022 Interpretition

Liquidity

Current Ratio Current 1.10 1.46 CL increased by 7% and CA decreased by

(Times) Assets/Current 18% as a result of which overall ratio fell to
 Liabilities 1.10.

Quick/Acid Test Current Assets- 0.38 0.65 Stock in trade/Inv increased by 92% so in
Ratio (Times) Inv/Current year 2023 a larger amount is reduced from
Liabilities CA to calculate this ratio which reduces the
overall ratio to 0.38

Long Term
Solvency

Debt to Equity Total 0.60 0.43 Long Term lonas increased by 62%, takwn
Debt/Shareholders out for expansion purposes, Whereas equity
Equity portion, share capital onluy increased by
12% only so as a result the debt to equity
ratio increased

Interest Coverage EBIT/Interest 4.54 10.59 It has decreased due to the fact that EBIT
ratio Expense has only increased by 34% and the net
finance cost has increased by 584%

Profitability

GP Margin Gross 30 28.51 It has improved a little as sales increased by

Profit/Revenue 25% whereas the gross profit has also
increased by 32%, which represent that
Variable Costs are controlled in a more
effective way that has increased CM and as
a result the Gross profit margin too.

OP to Sales Op.Profit/Revenue 10.93 13.11 It has decreased, which shows that the
indirect expense/operating expenses are
increased more than that to the increase in
Sales over two years. As sales increased by
25% and operating expenses increased by
157%

Turnover

Total Asset TO Net sales/Avg Total 0.08 0.10 Total assets increased by 22% and net sales
Assets increased by 25%, because of which it fell
by 2%.

Fixed Asset TO Net Sales/Avg 0.11 0.16 Fixed assets increased by 35% and sales
Fixed Assets increased by 25%, due to this F Asset TO
decreased
 Market Value

EPS Net Income-Pref 3.16 3.02 Profit after tax/net income increased only by
Divid/ W.Avg no of 5% and the outstanding no. of shares
shares outstanding increased by a value percentage change of
12%.

P/E Market 3.92 6 EPS of the co. increased by 5% and the

Price/Share/EPS MPS decreased by 31.63%. as shown.so the
PE ratio fell significantly
- 12.38(3.92*3.16) - 2023
- 18.12(6*3.02) - 2022

Capital Not Applicable - -

Adequacy Ratios

Non Perf Loan Not Applicable - -

Loan Loss Prov Not Applicable - -

- Source/Reference: Annual Report for year ended 30 June 2023

GRAPHICAL REPRESENTATION OF KEY RATIOS

 -

5- CORPORATE VALUATION:
 Market Capitalization Method:

Market Price/Share * No of Shares Outstanding

12.38*2,452,847,220 = 30366248583.6

-Total Enterprise Value:

market capitalization + total debt + preferred stock – cash and cash equivalents

30366248583.6 + (31777087000+7387000000+4530981000+4176493000)+ 0 -
3,560,524,000
= 74677285583.6

6- CAPITAL STRUCTURE, DIVIDEND POLICY &

CORPORATE GOVERNANCE:

- Capital Structure:

The Company’s aim when managing its capital is to safeguard the Company’s ability to
continue as a Going Concern so that it always can provide the best returns for the
shareholders and benefits for its stakeholders and to uphold a strong capital structure to
attain a sustainable development.
Company makes amendments to its capital structure by keeping the changes in the
Economic conditions and by considering whether the proposed change will benefit it more
than its costs.
 The current capital structure consists of lately introduced debt due to the fact the company
is focusing on its expansion in post-merger scenario with Askari Cement
And the debt-to-equity ratio has increased significantly as compared to last few years and
as a result of which the company can be said to be focusing more on expansions and hence
acquiring loans so eventually its current capital structure does not allows it to pay
dividends as the company is more focused on long term growth aspects and is kind of
reinvesting returns rather than distributing.

- Dividend Policy:
A zero or no dividend policy seems to be in place as for the last 3 to 4 years no cash
dividend is paid by the company to its shareholders, and financial year 2022 was no
change and this year due to the funding requirements of the ongoing expansion projects no
dividend was declared by the entity.
All these expansion projects undertaken are expected to to contribute positively to the
earnings of the company and also are focused on long term wealth maximization of the
shareholders and it may also mean that dividends may hopefully will be paid after these
expansions successfully work in the favor of the company and may be then a dividend
policy may come into effect once again as before.

- Corporate Governance:
It is the way an entity policy itself and lays the very foundation of the guiding principles
that it will follow for ethically doing business that is in the best interests of everyone
associated with it, primarily its stakeholders, whether internal or external.
Principles generally that reflected in a good corporate governance include following:

-Transparency and Fairness

-Accountability
-Risk Management
-Objectivity/Independence.
- Corporate Governance and Capital Structure:
As capital structure only contains equity and debt, so the corporate governance principles
that are affecting either of the two should be considered.

Risk management is one of the principles that is outlined in the corporate governance
principles, and a risk of the company can be assessed in two ways. One that comes with
equity which represents how risky a company’s stock is in comparison with the market.
Secondly, the risk also comes with increased financial distress when a company becomes
highly geared, so as a result of which the costs of the debt increase as the company is now
seemed to be riskier due to its increased financial gearing.

The relation between the two lies in a way that, when and if the risk is not managed by the
management of the company, and if the debt is increased without adequately considering
its adverse effects and also when the beta equity of the entity increases.
These overall hike in both of the risks, if not managed and mitigated as per defined in the
corporate governance, will eventually effect the returns to the shareholders, as increased in
risks will also increased the cost of the capital thus decreasing the profitability of the
company over time.

Moreover, principles of the corporate governance also include Transparency, and it may
also happen that due to the decreased transparency and increased biasness of the
management the capital structure changes made are not favorable to the entity but the
individuals in the senior management, for instance taking loans from related parties and
not disclosing it in order to reflect a lower gearing financially.
This way somehow corporate governance of an entity effects the capital structure of the
company.

7- RECOMMENDATION:
At FCCL Board, we have strengthened the strong governance and legal framework that
ensures compliance with applicable laws and regulations that are fundamental in achieving
long-term growth and success of the company.We prioritize the continuous professional
development of
our Directors and executives. As part of this commitment, we recommended mandatory
Directors’ Training Programs facilitated by PICG throughout the year.
8- CONCLUSION:
The management team of Fuji cement company supported by their energetic, higly
qualified and experienced professionals. They expert in the qualities like leadership,
collabration and project management etc. These professionals are proficient with technical
and entrepreneurial skills and are confident, dynamic and creative and ready to take future
challenges. They implement their strategies by putting people first and striving for
excellence in all they do as a result, they havce increased their profits and delivered on
return to their shareholders.
The review of the Financial Year 2022-23 which has further fortified the position of Fauji
Cement Company Limited (FCCL), consolidated its presence in the cement industry of
Pakistan and in achieving its key goals. Despite the market volatility and economic
challenges of the country, FCCL has continued to fulfill the promise and commitment to
all our stakeholders. The Board has played its vital role in it.

9- REFERENCES:
 https://dps.psx.com.pk/
 https://www.investopedia.com/
 https://www.wsj.com/market-data/quotes/PK/XKAR/FCCL/company-people
 https://finbox.com/KASE:FCCL/
 https://www.psx.com.pk/psx/files-attachment/?file=192400.pdf