Pakistan Tobacco Company

A subsidiary of British American Tobacco (BAT)

Usama Anwar 22010032

Linta Khawar 22010044
Abdul Rehman Hasham 22010059
Murtaza Haider Jafri 22010090
Muhammad Naveed 22010107
Agenda

A Brief Intro,
Audit Matters Vertical Prospective
& Accounting Analysis Analysis
Policy
Horizontal
01 Analysis 03 Ratio Analysis
05
02 04
Introduction

Largest Tobacco Manufacturer

British American Subsidiary.

KPMG Taseer Hadi & Co.

(Auditor)

Key Audit Matters

• Revenue recognition.
• Valuation of stock in Trade.
Accounting Policies
Revenue
The revenue is recognized when the goods are
in control of the customer and they can obtain
all the benefits from it.
05
Expenses
Financial liabilities are measured at amortized
cost or Fair value through profit or loss (FVTPL) 03
Investments
Short term investments 01
Long term investments

Inventories
Inventory costs are determined using the 04
weighted average method.

Property, Plant and Equipment

Owned assets costs are stated as cost less 02
accumulated depreciation.
Depreciation is at straight line method.
Horizontal Analysis
Horizontal Analysis of Income Statement of PTC – Cumulative & Year vs Year

Horizontal Analysis i) Cumulative - % Horizontal Analysis ii) Year vs Year - %

Income Statement
2016 2017 2018 2019 2016 17 vs 16 18 vs 17 19 vs 18
Net Turnover 100% -1% 18% 16% 100% -1% 20% -2%

Cost of Sales 100% 4% 35% 17% 100% 4% 29% -14%

Gross Profit 100% -7% 2% 15% 100% -7% 10% 13%

Selling & Distribution Costs 100% 1% 4% -2% 100% 1% 3% -6%

Administrative Expesnes 100% 22% 17% 27% 100% 22% -4% 9%

Other Operating Expenses 100% -1% 15% 56% 100% -1% 16% 35%

Other Income 100% -31% -50% 122% 100% -31% -27% 341%

Operating Profit 100% -14% -3% 18% 100% -14% 14% 21%

Finance Income 100% -45% 73% 90% 100% -45% 217% 9%

Finance Cost 100% 23% -26% 342% 100% 23% -40% 499%

Net Finance Income 100% -53% 85% 60% 100% -53% 299% -14%

Profit Before Income Tax 100% -15% -1% 19% 100% -15% 17% 20%

Income Tax Expense 100% -32% -2% 7% 100% -32% 44% 9%

Profit For the Year 100% -8% -0.2% 24% 100% -8% 8% 25%
 Vertical Analysis of Income Statements of PTC and KTC
Vertical Analysis
PTC - Vertical Analysis % KTC - Vertical Analysis %
Income Statement
2016 2017 2018 2019 2016 2017 2018 2019

100% 100% 100% 100% 100% 100% 100% 100%

Net Turnover
49% 52% 56% 50% 77% 62% 56% 83%
Cost of Sales
51% 48% 44% 50% 23% 38% 44% 17%
Gross Profit
11% 11% 9% 9% 3% 0.4% 6% 8%
Selling & Distribution Costs
4.9% 6.0% 4.8% 5.3% 9% 9% 15% 11%
Administrative Expesnes
2.7% 2.7% 2.6% 3.6% 1% 2% 2% 3%
Other Operating Expenses
0.8% 0.5% 0.3% 1.5% 1% 0.3% 4% 4%
Other Income
33% 29% 27% 34% 11% 28% 26% 1%
Operating Profit
0.1% 0.1% 0.1% 0.4% 0.6% 0.3% 0.9% 4.3%
Finance Cost
34% 29% 29% 35% 11% 27% 25% 5%
Profit Before Income Tax
11% 8% 9% 10% 2% 9% 7% 2%
Income Tax Expense
23% 22% 19% 25% 9% 18% 18% 4%
Profit For the Year
 PTC 2019
COGS
Net Income 22%
11%
Income Tax
Pie Charts EBIT
5%
16%

GP
Net Finance Income
1% 22%
Operating Profit
15%
Other Income Other Operating Expenses Admn Cost S & D Cost
1% 2% 2% 4%
EBIT
4%
Finance Cost
3%
Operating Profit
Income Tax Net Income
1%1% 3%
Other Income
3%
Other Operating
Expenses
2%
Admn Cost
8% COGS
S & D Cost 59%
6%
GP
12%
KTC 2019
 Horizontal Analysis

KTC - Horizontal Analysis

HORIZONTAL anALYSIS - pTC
Net Turnover Cost of Sales Net Turnover Cost of Sales
Gross Profit Selling & Distribution Costs
Gross Profit Selling & Distribution Costs
Administrative Expesnes Other Operating Expenses
60000000 Administrative Expesnes Other Operating Expenses
1200000
50000000
1000000
40000000
800000
30000000
600000
20000000

10000000 400000

0 200000
20 16 201 7 2018 2019

Years
0
2016 2017 2018 2019
 Activity Ratios
Inventory Turnover Accounts Receivable Turnover
Yr PTC Philip Morris KTC Yr PTC Philip Morris KTC
2019 1.20 1.49 1.48 2019 24.33 53.98 4.38
2018 1.61 1.75 0.85 2018 28.50 65.49 3.72
2017 1.60 1.43 1.20 2017 45.61 40.00 2.33
2016 1.62 1.13 1.06 2016 42.69 67.10 4.12
Total Asset Turnover
Yr PTC Philip Morris KTC
2019 1.29 0.82 0.57
2018 1.31 0.89 0.58
2017 1.38 0.85 0.60
2016 1.77 0.79 0.67

Days of Inventory on Hand Days of Sales Outstanding

Yr PTC Philip Morris KTC Yr PTC Philip Morris KTC
2019 303.48 245.13 247.36 2019 15.00 6.76 83.35
2018 226.25 208.07 429.91 2018 12.81 5.57 98.02
2017 228.74 254.79 304.47 2017 8.00 9.13 156.76
2016 224.99 324.05 342.84 2016 8.55 5.44 88.58
Liquidity Ratios
Current Ratio
Yr PTC Philip Morris KTC
2019 1.38 1.60 2.64
2018 1.39 1.82 2.94 Cash Ratio
2017 1.69 2.25 2.91 Yr PTC Philip Morris KTC
2016 1.52 1.96 2.51 2019 0.18 0.06 0.59
2018 0.41 0.49 0.18
2017 0.52 0.08 0.23
2016 0.10 0.02 0.06
Acid Test Ratio
Yr PTC Philip Morris KTC
2019 0.32 0.48 1.36
2018 0.54 0.77 1.20 2019 DSI DSO DPO CCC
2017 0.65 0.48 1.46 PTC 303 15 231 88
Philip Morris 245 7 171 81
2016 0.28 0.32 0.78
KTC 247 83 180 150
 Debt to Asset Ratio
Yr PTC Philip Morris KTC
Solvency Ratios 2019 0.55 0.35 0.32
2018 0.56 0.31 0.31
2017 0.47 0.21 0.32
2016 0.49 0.25 0.34

Debt to Equity Ratio

Yr PTC Philip Morris KTC
2019 1.21 0.54 0.48
2018 1.28 0.44 0.44
2017 0.90 0.27 0.48
2016 0.96 0.33 0.51

Interest Coverage Ratio

Yr PTC Philip Morris KTC
2019 87.26 -50.08 -0.22
2018 430.74 27.71 30.68
2017 227.80 6.36 80.18
2016 327.30 3.12 19.33
 Profitability Ratios
Operatig Profit Margin Return on Assets
Yr PTC Philip Morris KTC Yr PTC Philip Morris KTC
2019 0.34 -0.18 -0.01 2019 0.32 -0.12 -0.02
2018 0.27 0.04 0.26 2018 0.26 0.03 0.10
2017 0.29 0.04 0.28 2017 0.30 0.01 0.11
2016 0.33 0.08 0.11 2016 0.41 0.03 0.06

Gross Profit Margin Net Profit Margin Return on Equity

Yr PTC Philip Morris KTC Yr PTC Philip Morris KTC Yr PTC Philip Morris KTC
2019 0.50 0.31 0.17 2019 0.25 -0.15 -0.04 2019 0.70 -0.19 -0.03
2018 0.44 0.37 0.44 2018 0.19 0.03 0.18 2018 0.58 0.04 0.15
2017 0.48 0.36 0.38 2017 0.22 0.01 0.18 2017 0.57 0.01 0.16
2016 0.51 0.42 0.23 2016 0.23 0.04 0.09 2016 0.80 0.04 0.09
Dupont Decomposition

Total
Net Income Revenue
Dupont Asset
X X ROE
D.A. Total
Revenue Equity
Asset
PTC 0.25 1.29 2.21 0.71
Philip Mrs -0.15 X 0.82 X 1.54 -0.19
KTC -0.04 0.57 1.48 -0.03
Prospective Analysis

Inventory Accounts Receivables

Current 21.4 Bn Current 2.1 Bn
Increase 12 % Increase 15 %
Projected 24 Bn Projected 2.4 Bn

Property & Plant

Current 12.3 Bn
Sales Increase 0 %
Current 149 Bn Projected 12.3 Bn
Increase 10%
Projected 164 Bn
Trade Payables
Current 16.2 Bn
Increase 20 %
Projected 19.5 Bn
Thank you