This research study contributes towards the “ Research and Analysis Project ” for entry to the Oxford Brookes University. This research study, in all respects, is prepared in conformity with the codifications and guidelines prescribed by the University and does non transgress confidentiality and namelessness of the organisation ( s ) involved and the industry being analysed. This study gives an penetration into the fiscal & A ; concern public presentation over the last three old ages of DG Khan Cement Company Limited ( DGKCCL ) , one of the taking cement companies of Pakistan.
THE TOPIC AND THE ORGANIZATION
The reappraisal of the concern & A ; fiscal state of affairs of DG Khan was deemed as the most desirable pick for this research paper due to the undermentioned grounds.
The cement industry being the biggest industrial sector of Pakistan ‘s economic system is of extreme importance & A ; draws acute involvement.
This subject is good focussed and is most suited to the classs studied.
This subject gives a practical application of the studied classs. The analytical tools used were portion of the ACCA.
DG Khan being largest maker in the cement industry has good exposure to both the domestic & A ; export markets, therefore giving an penetration into the local every bit good as the international challenges faced by cement companies.
The primary beginnings of information were non used due to some restrictions but secondary information sing the company were easy accessible from a broad scope of beginnings.
THE OBJECTIVES AND THE APPROACH
The major purpose of this undertaking was to analyse the past three old ages public presentation of the company i.e. from FY08 to FY10 and so to compare it with the public presentation of its rival, viz. Lucky cement Limited.
The undertaking was made with the following purposes and aims:
Get a thorough apprehension of the company and the cement industry of Pakistan.
Measure the fiscal public presentation of the company by analysing production and quantitative gross revenues analysis and utilizing ratio analysis to measure the company in footings of profitableness, liquidness, debt direction, efficiency and investors perspective.
AA tool used by persons to carry on a quantitative analysis of informationA in a company ‘s fiscal statements. Ratios areA calculated from current twelvemonth Numberss and were so compared to old old ages, other companies, the industry, or even the economic system to judge the public presentation of the company.A
hypertext transfer protocol: //www.investopedia.com/terms/r/ratioanalysis.asp ( Accessed on 20 October 2010 )
Profitableness analysis: measures how good a company is executing by analysing how net income was earned comparative to gross revenues, entire assets and net worth.
hypertext transfer protocol: //kbr.dnb.com/help/Ratios/Profitability_Ratios.htm ( Accessed on 20 October 2010 )
Liquidity analysis Liquidity refers to the ability of an plus to be easy converted to hard currency without conveying about a major motion in monetary value and with the lowest loss in value. Liquidity besides refers to a company ‘s ability to run into its duties in footings of possessing sufficient liquid assets.
hypertext transfer protocol: //www.qfinance.com/cash-flow-management-checklists/measuring-liquidity ( Accessed on 20 October 2010 )
Debt direction analysis: A step of the extent to which a house uses borrowed financess to finance its operations. Owners and creditors are interested in debt direction ratios because the ratios indicate the peril of the house ‘s place.
hypertext transfer protocol: //financial-dictionary.thefreedictionary.com/Debt+Management+Ratio ( Accessed on 21 October 2010 )
Efficiency analysis: step the quality of a concern ‘ receivables and how expeditiously it uses and controls its assets, how efficaciously the house is paying providers, and whether the concern is overtrading or undertrading on its equity.
hypertext transfer protocol: //kbr.dnb.com/help/Ratios/Efficiency_Ratios.htm ( Accessed on 21 October 2010 )
Investor ‘s analysis: These are the ratios which help equity stockholders and other investors to measure the value and quality of an investing in the ordinary portions of a company.
( BPP: Paper P2 Corporate Reporting 2008/2009 )
Evaluate the concern public presentation of the company by utilizing the SWOT and PESTLE concern theoretical accounts ;
A strategic planning method used to measure the Strengths, Weaknesses, Opportunities, and Threats involved in the concern.
www.en.wikipedia.org ( Accessed on 23 October 2010 )
A PESTEL analysis is an analysis of the external macro-environment that affects all houses. P.E.S.T.E.L is an acronym for the Political, Economic, Social, Technological, Environmental and Legal factors of the external macro-environment. Such external factors normally are beyond the house ‘s control and sometimes present themselves as menaces.
hypertext transfer protocol: //www.netmba.com/strategy/pest ( Accessed on 24 October 2010 )
To pull decisions based on this survey and do necessary recommendations to farther heighten the public presentation of the company
The subject and the company for this undertaking were selected after making a small background research on the cement industry and besides after confer withing my wise man.
To successfully finish the undertaking and to guarantee that it to the full addresses all the needed facets, it was ensured that the undertaking aims are used as the foundation pillars of the research attack formulated for this undertaking.
This research attack included a conceptualisation of the overall layout of the undertaking and a elaborate specification of the stairss required for successful executing of this research.
The information beginnings were critical in fixing this study as they are the existent determiners of the effectivity of these studies, so these were carefully selected. The filtering of relevant and dependable informations beginnings proved to be really clip devouring. A batch of information was available on the web which needed to be exhaustively checked before it could hold been used for this study. The published informations proved to be really good. After the finalisation of the information beginnings, the accounting and concern techniques for an effectual analysis were identified. The different tools used to analyse the public presentation of the company were Ratio analysis, SWOT analysis and Pestle theoretical account. All this analysis required the usage of the class books and making the cyberspace to review constructs and besides to guarantee that everything was done right. Decisions were made after the analysis and eventually a few recommendations were suggested.
The undermentioned research inquiries were used to guarantee a proper, consistent and relevant model for the whole undertaking while maintaining the aims in position:
What are my research aims?
What beginnings can be utilized to garner the most appropriate, dependable and up-to-date information about the undertaking?
What is the credibleness of these beginnings of information?
Which ratios and theoretical accounts can be used to thoroughly analyze the company ‘s public presentation?
What factors affect these ratios and in bend the company ‘s public presentation?
What are the strengths and failings of the company?
What opportunities and menaces are faced by the company?
What competition is being faced by the company?
How is the company public presentation compared to its rivals?
Which accomplishments are necessary to fix this undertaking?
Beginnings USED AND DATA COLLECTION TECHNIQUES
Data is the cardinal determiner for the effectivity every bit good as the truth of analysis. Therefore, relevant and dependable informations is of extreme importance for a meaningful analysis. Merely secondary informations beginnings were used for this undertaking.
Multiple beginnings were selected to garner secondary informations relevant to this subject. A major focal point during the choice of these informations beginnings was the dependability and nonpartisanship of these beginnings. Though secondary information was easier to roll up, it required a batch of testing to guarantee dependability & A ; relevancy.
The published one-year studies of DGKCCL dwelling of the Balance sheet, Profit & A ; loss history, hard currency flow statement & A ; the statement of alterations in equity along with the notes to these statements. These fiscal statements for the past three old ages were the footing of the fiscal analysis carried out in this undertaking. These were collected from the web site of DGKCCL.
Newspapers, concern magazines & A ; reappraisals on different Television channels on the cement industry provided an penetration into the tendencies, challenges and chances faced by the cement industry.
Internet besides proved to be a major beginning for the market intelligence & A ; tendencies. It non merely gave an penetration into the current scenario, instead it provided cognition of the past patterns, current tendencies every bit good as the future outlooks from this industry.
The ACCA text editions, ACCA Student Accountant magazine were used for a thorough apprehension of the legion theoretical accounts available for analysis.
LIMITATIONS OF INFORMATION GATHED
Searching the cyberspace for relevant & A ; dependable information was really clip devouring. I had to screen legion web sites to pull out little spots of information.
Dependability of some of the web sites used for this research undertaking was non known & A ; the web sites were selected based on my judgement.
Finding relevant articles from newspapers & A ; concern magazines was really clip devouring & As ; non all could be analyzed due to clip restraints.
DG Khan ‘s fiscal study merely gave the historic public presentation of the company and failed to give an penetration into the hereafter.
I kept myself to the full abided by the University ‘s Code of Practice, Ethical criterions for Research affecting Human Participants and forbear myself from any act which could except my profession. During the procedure of information assemblage, I came across informations which was capable to right of first publication and that stuff could non be used or copied without the express consent of the organisation involved. This proved to be a barrier to the analysis as I decided non to utilize any of the copyrighted stuff. Therefore in this undertaking, all of the information gathered is free to utilize and is publically available. During the procedure there was no entree to confidential information, information was free from fiscal incentives and the research complied to the full with the ethical criterions published by the University.
TOOLS AND MODELS FOR ANANLYSIS AND LIMITATIONS
Enables the concern owner/manager to descry tendencies in a concern and to compare its public presentation and status with the mean public presentation of similar concerns in the same industry.
hypertext transfer protocol: //www.zeromillion.com/business/financial/financial-ratio.html ( Accessed on 26 October 2010 )
Gross Profit Margin: Tells us the net income a concern makes on its cost of gross revenues. It besides tells us how much gross net income per ?1 of turnover our concern is gaining.
Net Net income Margin: Tells us the sum of net net income per ?1 of turnover a concern has earned.
hypertext transfer protocol: //www.bized.co.uk/compfact/ratios/profit4.htm ( Accessed on 26 October 2010 )
Tax return on Assetss: measures the sum of net income made per dollar of assets that they own.
Tax return on Equity: measures the sum of net income that a company generates through the usage of stockholders ‘ equity.
hypertext transfer protocol: //www.mysmp.com/fundamental-analysis/financial-ratios ( Accessed on 26 October 2010 )
Current ratio: is used chiefly to determine a company ‘s ability to pay back its short-run liabilities with its short-run assets.
Quick ratio: A rigorous trial to find whether a house has plenty short-run assets to cover its immediate liabilities without selling stock list ;
hypertext transfer protocol: //financial-dictionary.thefreedictionary.com/Acid-Test+Ratio ( Accessed on 26 October 2010 )
Debt direction ratio
Debt to equity ratio: step of the extent to which a house ‘s capital is provided by proprietors or loaners.
hypertext transfer protocol: //www.entrepreneur.com/encyclopedia/term/82208.html ( Accessed on 27 October 2010 )
Interest screen ratio: step of a company ‘s ability to run into its involvement payments. A higher ratio indicates a better fiscal wellness as it means that the company is more capable to run intoing its involvement duties from runing net incomes.
hypertext transfer protocol: //www.wikinvest.com/metric/Interest_Coverage_Ratio ( Accessed on 27 October 2010 )
Inventory Employee turnover: shows how many times in one accounting period the company turns over ( sells ) its stock list
Dayss Inventory: identifies the mean length of clip in yearss it takes the stock list to turn over. As with stock list turnover ( above ) , fewer yearss mean that stock list is being sold more rapidly.
Histories Receivable Employee turnover: shows the figure of times histories receivable are paid and reestablished during the accounting period.
Histories Receivable Collection Time period: This reveals how many yearss it takes to roll up all histories receivable.
Histories Collectible Employee turnover: This ratio shows how many times in one accounting period the company turns over ( repays ) its histories collectible to creditors.
Dayss Collectible: This ratio shows how many yearss it takes to pay histories collectible.
hypertext transfer protocol: //www.missouribusiness.net/sbtdc/docs/financial_ratios.asp ( Accessed on 28 October 2010 )
Cash runing rhythm: is the period of clip which elapses between the point at which hard currency Begins to be expended on the production of a merchandise and the aggregation of hard currency from a buyer.
( BPP: F9 Financial Management 2008/2009 )
Entire Assets turnover: indicates how expeditiously the company generates gross revenues on each dollar of assets
hypertext transfer protocol: //www.missouribusiness.net/sbtdc/docs/financial_ratios.asp ( Accessed on 29 October 2010 )
Fixed assets turnover: : measures the company ‘s effectivity in bring forthing gross revenues from its investings in works, belongings, and equipment.
hypertext transfer protocol: //bizfinanc.about.com/od/financialratios ( Accessed on 29 October 2010 )
Investor ‘s ratios
Net incomes per portion ratio: represents the part of a company ‘s net incomes, cyberspace of revenue enhancements and preferable stock dividends, that is allocated to each portion of common stock. hypertext transfer protocol: //www.investinganswers.com/term/earnings-share-eps-1003 ( Accessed on 30 October 2010 )
Price net incomes ratio: measures the monetary value of a portion comparative to company net incomes on a per portion footing. A higher P/E ratio indicates a willingness by investors to pay more for a unit of income.
hypertext transfer protocol: //www.stockresearchpro.com/price-earnings-ratio-definition ( Accessed on 30 October 2010 )
Dividend output: indicates how much one gets for a certain stock. It is computed as dividends that are given out yearly, divided by the monetary value per portion
Dividend screen ratio: shows how many times the ordinary dividend is covered by net incomes available.
hypertext transfer protocol: //www.financeglossary.net/definition/1145-Dividend_Cover ( Accessed on 30 October 2010 )
The base information is frequently out of day of the month.
Historic cost information may non be the most appropriate information.
Information in publish histories is by and large summarized information.
Analysis of accounting information merely identifies symptoms non do and therefore is of limited usage.
Consequence of monetary value alteration makes comparing hard unless accommodation made.
Impacts of alterations in engineering on monetary value of assets, the likely return and future markets.
Impacts of altering environment on consequences reflected in accounting information.
Potential consequence of alterations in accounting policies on reported consequences.
Problems with set uping a normal base twelvemonth.
Choice of industry norms and the utility of norms based on norm
Different houses holding different fiscal and concern hazard profile and accounting policies.
Impact of size of the concern and its comparators on hazard, construction and return.
Impact of different environment on consequences. e.g different states or place based vs transnational houses.
( BPP: Paper P2 Corporate Reporting 2008/2009 )
SWOT isA the first phase of planning and helpsA determination makersA to concentrate on cardinal issues. SWOT method is a cardinal tool for company top functionaries to explicate strategic programs. Each missive in the word SWOT represents one strong word: SA =A strengths, WA =A weaknesses, OA =A chances, T = menaces. SWOT theoretical account analyzes factors that are internal to your concern and besides factors that affect your company from exterior. Strengths and failings in the SWOT matrix are internal factors. Opportunities and menaces are external factors.
hypertext transfer protocol: //www.maxi-pedia.com/SWOT+analysis+matrix+method+model ( Accessed on 1 Nov 2010 )
One major job with the SWOT analysis is that while it emphasizes the importance of the four elements associated with the organizational and environmental analysis, it does non turn to how the company can place the elements in their ain company. Many organisational executives may non be able to find what these elements are, and the SWOT model provides no counsel. SWOT analysis is merely the first measure in developing and implementing an effectual organisational scheme. After a thorough SWOT analysis, the following measure is to rank the strengths, failings, chances, and menaces and to document the standards for ranking. hypertext transfer protocol: //www.encyclopedia.com/doc/1G2-3273100290.html ( Accessed on 1 Nov 2010 )
A tool that is used to place and analyse the cardinal drivers of alteration in the strategic or concern environment. The abbreviation stands for Political, Economic, Social, Technological, Legal, and Environmental factors. The tool allows the assessing of the current environment and possible alterations. The thought is, if the undertaking is better placed than its rivals, it would be able to react to alterations more efficaciously.
It allows users to over-simplify the information. It is easy possible to lose of import informations.
It needs to be updated on a regular basis to be effectual.
It is most effectual when users come from different positions and sections.
It requires users to hold entree to informations beginnings which could be clip devouring and expensive.
Much of the informations used by the tool is on an premise footing.
The concern environment is altering drastically. Therefore, it is going progressively hard for undertakings to expect developments
hypertext transfer protocol: //www.brighthub.com/office/project-management/articles/51754.aspx ( Accessed on 1 Nov 2010 )
Research AND ANALYSIS
THE CEMENT INDUSTRY
There are four foreign, three armed forces and 16 private companies listed in the stock exchanges. The industry is divided into northern and southern part.
Daily times: Growth chances for cement industry bright on int’l demand By Sajid Chaudhry:7/10/2009
Production of north zone is 80 % and of south zone is 20 % of entire capacity of cement sector. ( hypertext transfer protocol: //www.apcma.com/pages/data.html ) ( Accessed on 3 Nov 2010 )
The cement sector posted a sensible growing of 9.4 % as entire gross revenues volume increased by 2.94m.t to make 34.22m.t by June 2010 from 31.28m.t. Local cement demand increased by 14.6 % to 23.53 million dozenss in FY10 against 19.4 million dozenss in FY09 chiefly due to increased disbursement in the private sector and higher agricultural support monetary values provided by the authorities to the rural sector.
Export gross revenues were at 10.7 million dozenss compared to 11.4 million dozenss ie a bead of 6.1 % from the old twelvemonth chiefly due to a bead in exports to India by 52 % . However in the Middle East, Iraq and Afghanistan, the export demand was comparatively similar.
Overall capacity use of cement workss increased to 76 % in FY10 from 74 % in FY09 due to increase in domestic demand with capacity enlargements in the sector. Harmonizing to APCMA, 3m.tons of capacity enlargement took topographic point in FY10 The entire cement production capacity of industry bases at 45m.tons at FY10 as against 42m.tons in FY09.
www.brecorder.com ( Accessed on 3 Nov 2010 )
DGKCC is listed on all the Stock Exchanges of Pakistan.
DGKCC was established under the direction control of State Cement Corporation of Pakistan Limited in 1978. DGKCC started its commercial production in April 1986. Nishat Group acquired DGKCC in 1992 under the denationalization enterprise of the government.A
Ordinary Portland Cement
Sulphate Resistant Cement
It has two workss are at Dera Ghazi Khan and 3rd at Khairpur small town commenced commercial production in June 2007.
hypertext transfer protocol: //www.dgcement.com ( Accessed on 3 Nov 2010 )
FINANCIAL TREND ( RATIO ) Analysis
DG Khan Cement Company Limited
Lucky Cement Limited
Financial Old ages
( hypertext transfer protocol: //www.apcma.com/pages/data.html ) ( Accessed on 4 November 2010 )
In FY2008, the company availed benefit of new perpendicular grinding works at Khairpur location and utilized more capacity upto 2.01mt and this capacity was exploited to run into bumper demand in this twelvemonth both in domestic and international market.
The production of cement and cinder were tumbled down by 8.3 % and 4 % severally in FY2009. This autumn in production was in correlativity with worsening demand in domestic market. However, demand in international market supported the company and averted it from significant autumn in production.
In FY 2010, the production of cinder depicted 23.4 % growing and cement production was boosted up by 20.8 % which is due to this twelvemonth company has witnessed 23 % addition in volumetric gross revenues due to cheaper monetary values.
Over three old ages, the company has been running its works at more than its rated capacity. In FY 2009, a meager autumn in capacity use was noted because of lower demand.
In twelvemonth 2008, higher demand leads to running the works at above 300 yearss and accordingly 103.1 % capacity use.
FY2010 was exceptionally good that all three workss operated at above their mean capacity. The new kiln at Khairpur site tallies at 347 yearss which is of all time higher in company ‘s history. The quality squad of professionals kept preventative care.
Comparison with Competitor
The cinder and cement production of lucky cement is about 23.3 % and 38 % higher than that of DGKCC severally. This fluctuation contributes to heighten available capacity of rival to run into higher international demand. However, DGKCCL is more expeditiously using its capacity than that of its rival. DGKCC is about 16 % higher and LCL is 20 % lower than rated capacity.
Gross saless ANALYSIS
DG Khan Cement Company Limited
Lucky Cement Limited
Financial Old ages
Local gross revenues
Export gross revenues
Entire gross revenues
( Annual Reports )
In FY2008, the proportion of local and export gross revenues was 83 % and 17 % severally, this was altered by important rise in export gross revenues and go 70:30 in FY2009. In FY2010, once more diminution in international demand caused this ratio autumn to at 83:17 despite addition in overall gross revenues.
In FY2008, higher demand and available capacity give rise to higher sale.
In FY2009, there was a autumn in cement demand of 22 % in domestic market. This depression was due to slouch in existent estate market due to abnormally high monetary values of cement, rising prices, security menaces, declining state of affairs of economic system due to overall universe recession and energy crises. Further, the authorities has chopped allocated budget for development outgos and taken no action to cut down to a great extent taxed industry. Export demand increased by 59 % due to researching new markets of South Africa and Siri Lanka in contrast with traditional markets of Afghanistan and UAE and debut of export discount by authorities acted as a accelerator.
DGKCCL registered 45 % rise in local gross revenues and export gross revenues come down by 27 % . The significant volumetric growing is a consequence of abundant private sector disbursement and authorities scheme to supply higher subsidy to back up agribusiness sector, which in bend converted in growing of rural economic system. The down autumn of existent estate sector in Middle East, lesser demand in India and delayed in leting inland cargo subsidy by the authorities to exporters contributed towards lesser export gross revenues in FY 2010.
( Daily times: Cement exports autumn, local despatchs up By Moonis Ahmed:22 July 2010 )
Comparison with Competitor
DGKCC is largest marketer of cement in domestic market as it is apparent even lucky cement as market leader, has about 1.1 M.T lesser local gross revenues. In export gross revenues, company is well lagged behind 2.63 M.ton as the LCL trade name is extremely recognized international
DG Khan Cement company limited
Lucky cement Limited
Financial Old ages
Gross net income border
Net net income border
( 0.43 ) %
Gross net income
This reached to 31.49 % in 2009 and so down to 16.62 % in 2010.
In FY2010, Gross saless gross was down by 9.78 % . However, quantitative gross revenues growing of 23 % was shown compared to FY2009 due to worsening cement monetary values in 2010. Cement monetary values dropped as a consequence of competition amongst makers to derive market portion taking to monetary value war.
Overall cost of gross revenues of industry was inactive benefiting from decrease in coal monetary values which touched lowest and so crossed USD115/ton, mean 16 % diminution ; nevertheless DGKCCL availed merely 8 % decrease in monetary values and the cost of gross revenues of DGKCCL increased by 9.80 % which chiefly was due to 39 % rise in electricity and gas and 19 % addition in cost of packaging stuffs.
A terrible monetary value war triggered due to inordinate supply in market in FY2008. In FY2009, the cement monetary values started to increase both in domestic and international markets which affected gross which showed positive growing of 45 % . However, entire despatchs were tumbled by 8.4 % in this twelvemonth. The company depicted an addition of 63 % and 34 % in mean gross revenues realisation of local and export gross revenues severally.
Cost of gross revenues upsurged by 17.36 % chiefly due to mounting fuel and coal monetary values worldwide and devaluation of Pak rupee. The oil/coal and transit charges soared by 44 % in contrast to 2008 due to higher monetary values of coal. Shops and Spare parts and Repairs and Maintenance increased by 15 % and 34 % . The company utilized imported shops and spare parts and hired care services from foreign states for which DGKCCL had to pay in foreign currency. The devaluation impacted on these disbursals. Further, more care were required to run the Khaipur works at full capacity.
Net net income
Net net income showed positive growing and was from 0.43 % to 2.91 % in 2009 and so down to 1.43 %
In FY2010, The fluctuation between net net income and gross net income reduced from 28 % to 15 % as compared to FY2009 due to diminish in merchandising and distribution disbursals ( S & A ; D ) and Finance cost. S & A ; D declined as compared to 2009 by 38 % due to fall in cargo charges as export of cement was down. The diminution of 27 % has witnessed in finance cost due to refund of long-run finance and strategically pull offing the fund.
( Daily times: Cement exports autumn, local despatchs up By Moonis Ahmed:22 July 2010 )
In FY 2009, rise in selling disbursal was due to high cargo and increased export gross revenues ; ratio of selling disbursal to gross revenues was at 10.37 % , being 4.5 % in 2008.
Finance cost swelled by 49 % up to 2.6 billion from 1.7 billion in FY2008. The ground behind such addition was high adoption rate in FY 2009.
ROA and ROE
ROA and ROE fluctuated with net incomes of the company that were high in 2009 and declined in 2010. The same form was shown by these ratios.
Comparison with Competitor
There is a immense difference between gross net income and net net income of both companies due to efficiency in cost control by LuckyCement due to buying coal at a point of clip when its monetary values were at a lowest degree. Difference in operating disbursals in relation to gross revenues of both companies is 3 % approx by which it is concluded that same ground resulted in difference in net net income.
The DGKCCL ‘s ROA and ROE is extremely unsatisfactory compared to rival.
D G Khan Cement Company limited
Lucky Cement Limited
The liquidness place had deteriorated in FY2009 which improved in FY 2010.
In FY2010, the current ratio was favourable due to increase in current assets with the sum of RS3.1 billion but comparatively less addition in current liabilities of 2 billion doing the liquidness better. The rise in current assets is due to increased value of 3 billion in investing of associate and autumn due to refund of loan of around RS2 billion.
In 2009, the current ratio fell from 1.59 to 0.84 due to increase in current liabilities by 31.4 % as comparison to FY 2008. This addition in current liabilities was because of availing short term finance and accumulated involvement thereon to run into on the job capital demands. The short term debt and involvement accrued grew by 20 % picturing 61 % . Decrease of 30 % in current assets was noted in 2009 due to disposing of about 50 % of shareholding in associates.
A rigorous trial of liquidness is speedy ratio which shows the extent creditors can be instantly paid out of liquid assets. Investing in stock list is non readily encashable. In FY2009, It was greater deteriorated and dropped to.6, nevertheless in FY2010 it has approached about tantamount to 1. The DGKCCL even of its low set up, has strong liquidness place than its rival, Lucky liquidness has dropped to endangering terminal. DGKCCL has screen of its assets to pay off its liabilities.
DEBT MANAGEMENT ANALYSIS
D G Khan Cement Company Limited
Lucky Cement Limited
Debt equity ratio
Long term debt to equity
Interest screen ratio
Debt to Equity
The company was extremely geared in FY 2009 as its debt/equity reached to 87 % up from 63 % .
In FY2010, The dependance on debt funding was reduced by 8 % but considerable diminution of 24 % in D/E ratio which was due to 31 % addition in equity because of high just value modesty of investing.
In FY 2009, there were no alterations in debt funding but debt ratio showed important upward tendency. This rise was attributable to sale of investing in associates which caused just value modesty to diminish by 10 billion.
In FY2008, the long-run debt was RS8.4 billion down to RS4.3 billion in FY2009, about 47 % lessening and equity was besides reduced by 30 % which decline long-run debt to equity.
In 2009, the company replaced long-run finance with short-run debt maintaining in position the lifting involvement rate.
In FY2010, even an addition of long-run debt by 16 % , long-run debt to equity decreased which is due to increased equity by 31 % .
In 2010, nominal autumn in screen ratio was due to 33 % diminution in net income before involvement and revenue enhancement and 27 % autumn in finance cost. This autumn was due to effectual fiscal direction.
A 48 % rise in finance cost was observed but the screen ratio improved due to higher profitableness in FY2009. In 2008, looming monetary values affect the profitableness and higher involvement rate caused high finance cost and merely 0.86 screen ratio. This shows finance cost non wholly covered by net incomes.
Comparison with Competitor
DGKCCL has more trust on debt than that of its rivals which is depicted by merely 32 % debt ratio of LuckyCement. Bing market leader and higher export portion and less debt funding, LuckyCement had higher net incomes and less involvement cost hence higher involvement screen.
D G Khan cement Company limited
Lucky Cement Limited
Financial Old ages
stock turnover in no of yearss
Debtor turnover in no of yearss ( yearss )
Collectible turnover ratio
Collectible turnover in no of yearss
Entire plus turnover
Fixed assets turnover
Stock yearss has increased over the twelvemonth from 13 to 26 yearss and debitors collection yearss increased by merely 2 yearss and about no alteration in payment yearss. This scenario consequences in runing rhythm from -21. to -6 yearss. Company has to pay creditors merely after 6 yearss of aggregation, which is still favourable.
The entire plus s and fixed assets turnover was up in FY 2009 which is due to high monetary values of cement in 2009 increasing the topline and the company expeditiously utilizing its assets. In 2010, competition declined the monetary values and down gross revenues were shown and therefore lower turnover resulted.
A fringy difference lies between creditor ‘s payment yearss of both companies which made runing rhythm of DGKCCL of -6.68 yearss and Lucky of -28 yearss.
D G Khan cement Company limited
Price net incomes ratio
Market value per portion
EPS of DGKCCL improved in 2009 due to high cement monetary values in same period. The EPS once more dropped down to 0.72 per portion which was non attractive to bing and possible investors. This is apparent from worsening market value per portion and high PE ratio. This crisp diminution was non merely due to company public presentation but besides overall crashed stock exchange due to legion factors.
DGKCCL due to nominal net incomes and tight liquidness place did non declare the dividend over three old ages. This shattered down the assurance of short term investors who switched from that company.
Comparison with Competitor
We inferred that higher profitableness of rival caused favourable EPS and monetary value earning and accordingly declaration of divided to stockholders. The consequence of investor ‘s involvement reflected in the market value per portion.
Pakistan is undergoing terrible energy deficit. DGKCCL owns separate power coevals works with WAPDA supply holding 23.84 MW Capacity installed.
DGKCCL has installed capacity of 4,042,000m.ton which is ranked as 2nd largest capacity.
ISO 14001 ( Environment Management System ) awarded by Quality Assurance Services, Australia
ISO- 9002 ( Quality Management System ) in 1998
Brand acknowledgment in local market is matchless and DGKCCL is the largest marketer of cement in domestic market.
DGKCCL has Waste heat recovery works which has started commercial operations from June 2010. The undertaking is bring forthing electricity which is virtually free of cost except for some care costs. This will extenuate the impact of lifting cost of production.
DGKCCL has programs to put in new waste heat coevals works and MOU signed for power coevals of 10 MW at Khairpur cement works.
Nishat group which owns DGKCCL, has multi facet investing and has sound terms and ranked in top five groups in Pakistan.
DGKCCL make distribution in all states particularly Punjab, Sind and Baluchistan. It has its regional gross revenues offices in all large metropoliss of Pakistan. These offices operate in specified district to accomplish maximal gross revenues.
The Clinker works at Khairpur is known as individual largest production line in the state.
The perpendicular cement crunching factory at DGKCCL site which started commercial operations in March 2009 is universe ‘s largest factory.
DGKCCL has skill direction as it is apparent by the fact that in 2009 they attained above standard 300 tally yearss. In 2010, the new kiln at Khairpur site runs 347 yearss, highest in company ‘s history.
Newspaper: Daily Times & A ; Annual study and hypertext transfer protocol: //www.dgcement.com ( Accessed on 6 November )
The abundant natural stuff of Gypsum, Shale and limestone etc existed in Pakistan. The company has strategically placed its works at ( D G Khan and Khairpur ) sites where these are overly available.
DGKCCL is 2nd largest maker after LuckyCement but meager market portion of export gross revenues as it is indicated by the export gross revenues dispatches about A? of LuckyCement. It has to concentrate on export gross revenues.
DGKCCL has reduced its trust on debt to some extent but still extremely geared. The more trust on short term debt and speedy ratio less than 1, are the index against which company has to do exchequer map more effectual.
Profitableness, return on assets and equity is well lower than its rivals and no dividend over last three twelvemonth which declined its portion monetary value.
When we analyze its advertizement disbursals, we conclude that it has scheme to concentrate on retail merchant non on end consumer. It has extended disbursal on trade publicity ( committee ) .
The Pakistan cement companies besides produce white cement ; low base and oil good cement. The company may see bring forthing other types to gain more net income by diversifying as it merely produces OPC and SRC.
The company can be the market leader by put ining new capacity but the first attempt to be so, is to heighten its export gross revenues.
The strategic location of its works and possible demand in Afghanistan provide chance to do export gross revenues.
The recent desolation will follow rehabilitation of the affected countries of the state would make demand.
At present, Pakistan ‘s cement sector bears the highest incidence of revenue enhancement. Almost Rs90 is taken as indirect revenue enhancements on the Rs300 per 50 kilogram bag, which include 17 % GST, one per centum particular federal excise responsibility, and provincial revenue enhancements on the history of royalty and excise responsibility. This is biggest menace as regional participant like India and China can do Pakistani merchandise less competitory.
www.brecorder.com Cement sector needs alleviation to run into high local demand by IQBAL MIRZA 16/10/2010 On concern recording equipment ( Accessed on 5 Nov 2010 )
Common External Duty on import of cement in East Africa is likely to be increased from 25 % to 35 % that may ache state ‘s exports.
Daily Timess: CET on cement imports in East Africa Pakistan ‘s exports to endure By Moonis Ahmed 3 October 2010
Increasing involvement rate and heavy debt construction may do fiscal restraint.
If authorities does non continued inland cargo subsidy, the meager export gross revenues portion may farther come down.
The economic crisis, unsure political state of affairs, security menaces, rising prices and rigorous policy imposed by IMF to derive more debt may impact development plan, therefore cement demand.
Political and Economic
The Pakistan has extremely debt ridden state and its debt has reached to around 10.2 trillion and its ever has inauspicious balance of payment. To run into the disbursals, it ever face fiscal crunch. There is ever a hazard that authorities may enforce revenue enhancement on the high earning companies and cut down announced development outgo.
The State Bank of Pakistan ( SBP ) said in its Annual Report 2009-10 on the province of economic system
The inconsistent authorities policy majorly due to altering authorities caused by political instability is the factor which demur all the planned development undertakings.
Federal Budget FY 2011 set the GDP mark of 4.5 % for the following twelvemonth which was 4.1 % in 2010. We can anticipate that development budget would non be cut down particularly as a consequence of lay waste toing inundation across Pakistan.
The economic state of affairs does non favor this sector as rising prices, devaluation in currency and involvement rate would impact cost of concern particularly coal, gas, oil, bringing charges and finance cost.
The sector has 10.2 m.ton abundant capacity and 3 million is under procedure which may worsen the state of affairs in current economic conditions.
( hypertext transfer protocol: //www.apcma.com/pages/data.html ) ( Accessed on 5 Nov 2010 )
Social and Technological
In the sphere of 2004-2007, the existent estate sector was on roar. However, the state of affairs turned over and now people, even holding involvement to populate in planned and province of art towns, do non that much buying power. This has tumbled down due to bad economic status.
The major part of population is immature in Pakistan and they prefer to populate independent which is positive mark for existent estate concern and so cement sector. But still Pakistan has lower per capita ingestion of cement.
The works of the DGKCCL is based on high engineering of dry procedure and consumes less energy. The company installed origin European works by M/s F.L. Smidth of Denmark alternatively of Chinese or intercrossed.
( Annual Report )
Environmental and Legal
Cement sector is to a great extent revenue enhancement sector, as it is capable to Companies regulation 1984, Income revenue enhancement, gross revenues revenue enhancement, excise and usage responsibility, legion labour Torahs, naming ordinance of stock exchange and Pakistan Environmental Protection Act 1997.
The major legal instance which is faced by overall sector is allegation of making trust. The Competition Commission of Pakistan ( CCP ) took suo moto action under Competition Ordinance, 2007 on 28 October 2008 for doing trust to increase monetary values. The Lahore High Court ( LCH ) decided against the company and CCP imposed a punishment of 933 million on Company. The instance is in entreaty.
DGKCCL to the full recognized the importance of environment hazard and has environment direction system to follow with Natural Environmental Quality Standards. Traditionally environmentally risky workss are replaced by most modern and province of the art equipment for dust aggregation. The waste gases and dust are collected by bag filters and electrostatic precipitators which feed them once more in the system.
Waste heat recovery workss and ISO 14001 as discussed in strengths.
( Annual study )
CONCLUSION AND RECOMMENDATIONS
FY2010, The export gross revenues of sector has declined to 6 % However ; export gross revenues of company have well declined by 27 % . The company has shown growing in local gross revenues. This growing has contributed in the overall addition in despatchs of the company. The company must hold a program to increase export despatchs. Had in any twelvemonth the local demand affected, the company would endure considerable hit on its net incomes.
The profitableness of DGKCCL has declined due to cheaper cement monetary values and in contrast with industry where cost of gross revenues remain inactive which supported the bottom-line, cost of gross revenues of DGKCCL has increased. This is chiefly due to blemish in procurance planning as its rivals took advantage of lowest degree coal monetary values which so reached to highest degree in FY2010. This suggests that company must hold effectual buying schemes.
The liquidness of DGKCCL has improved a batch but it must take into history the fact that it is small fall short of liquid assets to pay its duty. There must be schemes to counter any forced state of affairs. However the liquidness of DGKCC is far better than rivals.
The company has reduced its trust on debt as comparison to last twelvemonth. It ‘s involvement screen a spot lessening due to lesser net income in FY2010. It should concentrate to diminish this trust farther as it is extremely debt finance company, as compared to lucky cement. Overall the company is on save side in assets direction as its ‘ operating rhythm is favourable even stock yearss has been increasing. The company must negociate with creditors to widen payment clip because if any rise would see in approaching old ages in stock and debitors yearss, the company may confront troubles. The lucky has 63 yearss payment clip, this show potency for its farther extension.
In comparing with lucky, The DGKCC must see heightening its capacity and therefore production, but this be good when it would tap new market particularly international market like lucky cement.
The market monetary value of DGKCCL has come down to Rs.23 which depicts non attractive pick of investing for investors. This is due the company has non declared dividend for 3 old ages. It must believe to declare in subsequent old ages to demo better market capitalisation.
The company may turn to the chances to diversity its merchandise line and by aiming terminal clients as the DGKCCL is 2nd largest company and portion of group ranked in top five concerns. The Reconstruction after inundation and high allocated development fund are the index of higher demand which company can provide by effectual schemes. The menaces must be counter by seasonably providing the demand and strong trade name acknowledgment at international degree.
The premier hazard faced by the company is menace of any new revenue enhancement by financially weakened and inconsistent authorities. The inauspicious economic index may set force per unit area on cement monetary value every bit good as cost. This is chiefly due to falling buying power of client and volatile coal monetary values. The instance by CCP must be earnestly countered as it involves high sum. DGKCCL has province of art engineering and follow international environmental processs.
( End of Report )