financial analysis of dewan mushtaq group

Farman Saddique 4293 Zubair Bajwa 4281 Waqas Tahir 4279 Syed Nayyar Sajjad 4253

Mr.Mazhar Hussain

Financial Analysis

Financial Analysis Of Dewan Cement Ltd.

History of Dewan Mushtaq Group:

The history of Dewan Mushtaq Group goes way back to the year 1916 to the State of Patiyala in the Punjab Province of India when a small cottage industry was set up by Dewan Mohammad and his son Dewan Mushtaq Ahmed to manufacture garments. During 1918, another establishment was started in Karachi to import clothing and other multifarious commodities which were then sold all over India.

In 1947, the Dewan family migrated to Pakistan. They settled in Karachi, formed Dewan Mushtaq Sons, and started trading in commodities like tea, sugar, second-hand clothing, garments and fabrics. Due to hard work and honest dealings of the family, the business rose to new heights and by late fifties, the turnover of the firm was as significant as Rs. 60 million per annum.

In 1968, the Dewan Family, under the leadership of Dewan Mohammad Umer Farooqui, ably supported by his younger brother, Dewan Salman Farooqui, decided to enter the industrial arena.

The first industrial unit was set up in 1970 under the name and style of Dewan Textile Mills Limited with a capacity of 25,080 spindles which has since been increased to 61,704 spindles. The Group strengthened its footing in the textile field by taking over another textile unit in 1975, now known as Dewan Mushtaq Textile Mills Limited with an installed capacity of 25,776 spindles. Thereafter, the Group established another spinning unit Dewan Khalid Textile Mills limited, consisting of 26,624 spindles.

By mid of 1980's, the Group with its characteristics of honesty, integrity and determination, became one of the major textile groups in the country. At this stage, the Group decided to diversify its activities to other spheres and entered the sugar industry. In 1987, the Group established Dewan Sugar Mills Limited with a sugar cane crushing capacity of 3,500 metric tons/day which has been gradually expanded to 9,000 metric tons/day, thus making it one of the largest sugar plants of the country. The Mills obtained ISO Certification in 1998.

The Group further diversified its range of business by setting up capital-intensive polyester staple fiber plant under the name and style of Dewan Salman Fiber Limited. The


Group's credibility is evident from the fact that Dewan Group was able to obtain the collaboration with the world's giant conglomerates like Mitsubishi Corporation of Japan and Sam Yang Company Limited, Republic of Korea and set up the state-of-the-art plant in 1990.

The Company signed an agreement with Messrs Noyvallesina Engineering, an Italian company, for establishing an Acrylic Fiber and Tow Plant as part of its expansion plan. The Acrylic Plant with an installed total capacity of 55,000 tons per annum commenced commercial production operations from 1st July, 2000. In the first phase, the Acrylic Plant is producing 25,000 tons acrylic fiber. In phase II, the output will be raised by 30,000 tons.

The Group manifested its decision to diversify into automobile industry of Pakistan through the incorporation of Dewan Farooque Motors Limited on December, 1998. Within this month, two more milestones were reached: the signing of Technical License and Exclusive Distributor agreements with Hyundai Motor Company, Korea's No. 1 and world's seventh largest automobile manufacturer.

1999 marked another important year in the history of the Group when Dewan Farooque Motors signed the Technical Collaboration Agreement with KIA Motors Corporation of South Korea, in July, 1999. Hyundai-Kia Together, are now the world's six largest automobile manufacturers.

Dewan Farooque Motors is now a key player in the automobile industry of the country offering an impressive lineup of passenger cars and commercial vehicles. Its state-of-the-art plant has a capacity of 10,000 vehicles per annum on single shift basis and is equipped with the latest facilities which include CED paint system and robots for the final coat.

June, 2000, marked another important milestone in the history of the Group when its flagship company Dewan Salman Fiber Limited, acquired Dhan Fiber Limited and fully merged and incorporated its facilities into its operations .The total output of Dewan Salman Fiber Limited's 3 polyester units is 700 tons per day. The company today enjoys a market leader's position and commands market share of 60% in the country's fiber industry.

Introduction to Dewan cement:

Dewan Cement Limited (DCL) – formerly Pakland Cement Limited, incorporated in 1980 and listed on the Karachi and Lahore stock Exchanges – is majority owned by Dewan Mushtaq Group through its different companies since 2004. The Group, a long established conglomerate in the country, has interests in synthetic fibers, automotive and allied, sugar and allied, textiles, oil and gas, cement, and general trading sectors. It also enjoys the privilege of having business associations with respected multinational corporations. The cement plant is located near Port Qasim, Sindh, mainly serving the country’s south zone.

Professionals, mainly serving the group in different capacities, dominate the company’s BOD, with only one member of Dewan family. The chief executive officer, a chartered accountant by


profession, joined the company in August 2004 and is supported by a team of experienced professionals.

Mission Statement:

The mission of Dewan Mushtaq Group is to be the finest Organization, and to conduct business responsibly in a straightforward way.

Our basic aim is to benefit the customers, employees and shareholders, and to fulfill our commitments to the society. Our hallmark is honesty, initiative and teamwork of our people and our ability to respond effectively to change on all aspects of life including technology, culture and environment.

We will create a work environment, which motivates, recognizes, and rewards achievements at all levels of the organization, because

IN ALLAH WE TRUST & IN PEOPLE WE BLIEVE


Vision:

I.T Department is dedicated to provide reliable information base using most modern technology to potential users at all levels. Our professionals individually and collectively, will constantly improve their competitive skills and excel in providing quality service covering all the aspects of the technology.

By embarking into the digital age we will accelerate the positive effects and mitigate the challenges as knowledge grows when shared.

We will innovate in a research-oriented manner with technologies to create our own future and value added activities for profitable relationships with our stakeholders, thus encouraging intellectual curiosity for our products, service and insight that will help people around the world, shape the ways business and education will be done in future. Our professionals and their competitive skills will be the hallmark that combined with technology innovation, expert skills and teamwork, will keep us leaders in "CHANGE" to open new doors.

Dewan Far Eastern Co. Ltd.

Dewan Far Eastern is the overseas sales office and responsible for obtaining export orders for cotton yarn, produced by DMG Textile Division. This office is looked after by Mr. Taro Ishikawa.

Business Intelligence Unit:

Business Intelligence Unit functions as the market research and intelligence cell of DMG. Though its principal responsibility is to collect and analyze the data about Fiber Industry, its key players including its users, namely fabric producers, it also carries out specialized market studies in other fields namely, textiles, automobiles, sugar etc, and it also performs financial analyses

Dewan Executive Development Centre:

Dewan Executive Development Centre was established in June 2000. It was formally inaugurated on July 28, 2000 by Mr. Dewan Mohammad Yousuf Farooqui and was followed by a seminar on the Seven Habits.


Objectives:

To spark a new and innovative ideas for the individuals so that they are competitive enough to face the global economic and market environment.

To equip DMG individuals with a thorough understanding of managerial and technological skills in a manner that has a profound effect on their personality and character.

To build leadership qualities in individuals so that they can make use of it efficiently and effectively in order to make every unit productive.

To help to bring about a paradigm shift by creating a dynamic and positive learning environment and changing our corporate culture.

To help DMG to cope with knowledge-based economy. To provide DMG staff with basic conceptual training and impart latest managerial

concepts / skills, so as to make them "knowledge workers" and on-line to deal with the challenges of modern business.

Our Assurance:


We believe that DMG members are our most precious resource, our human capital. We also believe 'human progress' to be the worthiest of goals through recruiting, developing, motivating, rewarding and retaining personnel of exceptional competence and providing them with a healthy working environment, competitive compensation, excellent opportunities for growth and a high degree of job security.

Seminars / Training Courses Conducted:

The Seven Habits of Highly Effective People Star Office Training Communication Concepts and Skills, Level-I Communication Concepts and Skills, Level-II Seminar on Business Ethics Finance for Non-Finance Executives Presentation Skills Office Etiquettes and Mannerism

Future Programs:

Teamwork Time Management Effective Meetings Basic Supervision Skills (Urdu) Industrial Safety, Firefighting & First Aid Motivation & Leadership Knowledge Management Emotional Intelligence Negotiation Skills Change Management Conflict Management Skills in Selling Customer Service

Social & Community Welfare:

The Group is fully committed to the vision and principles laid down by its founding fathers. In keeping with its corporate philosophy and the spirit of social service and human respect, it strives to fulfill its corporate social responsibility. As an exemplary corporate citizen, the Group has set high standards in the area of public service and community welfare through a variety of philanthropic contributions.

Dewan Group has made following humble contributions to the nation: -


Fully financed the construction (including purchase and installation of medical equipment) of Dewan Farooque Medical Complex near Civil

Hospital. This was the single largest donation of Rs. 250 millions. The Project was completed in a record time and handed over to the Sindh Institute of Urology and Transplantation (SIUT).

Played a key role in the realm of education, health and religion through setting up and financing of following projects:

A mosque at Sujawal, Dewan City, District Thatta Dewan Farooque Medical Centre ( 250-bed Hospital complete with Operation Theatre

and a Dialysis Unit), Sujawal, Dewan City, Thatta Dewan Farooque Memorial High School, Sujawal, Dewan City, Thatta Dewan Farooque Memorial High School, Hattar, District Haripur, NWFP Dewan Farooque Memorial High School, Hattar, District Haripur, NWFP Dewan Farooque Memorial High School, Kotri, Sindh Dewan Salman Dispensary Thatta, Sindh Dewan Mushtaq Coronary Care Unit (Civil Hospital) Hyderabad Dewan Mushtaq Coronary Care Unit (Civil Hospital) Sukkur Dewan Mushtaq Mosque at Old Clifton, Karachi Dewan Farooque Mosque at Federal 'B' Area, Karachi Dewan Mosque at Sector F-10, Markaz, Islamabad

DATA COLLECTION SOURCES

Main source of data collection [www.dewangroup.com.pk]

Net searching

Years of Analysis:

2007– 2009

RATIO ANALYSIS


Liquidity ratios Leverage ratios Activity ratios

Trend Analysis

Common Size Analysis

Index Analysis

Ratios

Dewan Cement Ltd.

Years

2009 2008 2007

Liquidity Ratio Current Ratio 0.29 0.39 0.75Quick Ratio 0.22 0.36 0.71Leverage Ratio Debt to Equity Ratio 3.16 3.718 2.846Total Debt to Assets 0.61 0.61 0.603Debt Ratio to Total Capitalization 0.08 0.68 0.74Coverage Ratio 0.93 (0.79) 1.298Activity/Turnover Ratio Receivable Turnover Ratio 5.5 7.5 10.7Average Collection Period 66 49 34Inventory Turnover Ratio 20.5 21.8 13.7Inventory Turnover Ratio Days 17 17 26Operating Cycle 83 66 60Assets Turnover Ratio 0.26 0.61 0.195Gross Profit Margin 7.6 (0.18) 14.1Net Profit Margin 2.87 (10.8) 4.77Return on Investment 0.75 (2) 0.93

Return on Equity 4.5 (11) 4.3


Interpretation of the ratios

2009 Interpretation of the ratios

1. Current ratio:The company is not in a good liquidity position, there efficient asset do not meet the liabilities. As the ratio is 0.29.But it also means the resources are not used by the company efficiently which means resources are idle.

2. Quick ratio:It is also not highly liquid because inventory is deducted from the current asset so, it do not becomes more liquid.

3. Debt to equity ratio:In this ratio the percentage of the debts is 3.16% in share holder equity which means company prefer borrowing.

4. Total debt to asset ratio:In this ratio the percentage of the debt in the total asset is 61%.It is anot a good sign for the company that the asset have high debt .Therefore element of the risk is there.

5. Debt ratio to total capitalization:This ratio relates to the capital structuring. As the ratio is 8% which means that there are 8% long term debts in the total capitalization.

6. Coverage ratio:Coverage ratio relates that how many times a company can meet its financial cost (interest expense).As the ratio is 93 times which means that a company meet its interest/financial cost 93 times.

7. Receivable turnover ratio:This ratio relates that how fast account receivable converting into cash as the ratio is 5.5 which mean it is below the benchmark average.

8. Average collection period:The ratio is 66 days, it is a very longer period for the collection, which means that the the acceptance standard s of the company are not good towards the account receivables.

9. Inventory turnover ratio:


This ratio means that how many times the inventory converted into sales. As the ratio is 20.5, which means that the sale is rapid.

10. Inventory turnover ratio in days:The ratio is 17 which mean that the demand of stock is too much high.

11. Operating cycle:The operating cycle of the company is 83.There we notice two things ,as in the previous two ratio s inventory turnover ratio is 20.5 & the average collection period is 66 which means that their inventory very rapidly out of stock but there collection method are not so good that’s why their operating cycle is lengthy.

12. Asset turnover ratio:The ratio is 26% which means that they do not use their assets well.

13. Gross profit margin:Gross profit relates to the operating expense .As the gross profit is 7.6% of the sales & our operating expense are 55% which means the cost f the company is not efficiently controlled.

14. Net profit/loss margin:Net profit/loss margin relates to the overall expenses of the business. As the net profit/loss are (78.99) % of the sales.

15. Return on investment:This ratio is 0.75% which means that company is in a good position & it is below the benchmark average.

16. Return on equity:This ratio increases the overall performance as it 4.5% & it is the above the industry average (19%) which means investors will not invest their investment.


1. Current ratio:The company is not in a good liquidity position, there efficient asset do not meet the liabilities. As the ratio is 0.39.But it also means the resources are not used by the company efficiently which means resources are idle.


2. Quick ratio:It is also not highly liquid because inventory is deducted from the current asset so; it does not become more liquid.

3. Debt to equity ratio:In this ratio the percentage of the debts is 3.718% in share holder equity which means company prefer borrowing.

4. Total debt to asset ratio:In this ratio the percentage of the debt in the total asset is 61%.It is anot a good sign for the company that the asset have high debt .Therefore element of the risk is there.

5. Debt ratio to total capitalization:This ratio relates to the capital structuring. As the ratio is 68% which means that there are 68% long term debts in the total capitalization.

6. Coverage ratio:Coverage ratio relates that how many times a company can meet its financial cost (interest expense).As the ratio is (.79) times which means that a company is not able to meet its interest/financial cost.

7. Receivable turnover ratio:This ratio relates that how fast account receivable converting into cash as the ratio is 7.5 which mean it is below the benchmark average.

8. Average collection period:The ratio is 49 days, it is a very longer period for the collection, which means that the the acceptance standard s of the company are not good towards the account receivables.

9. Inventory turnover ratio:This ratio means that how many times the inventory converted into sales. As the ratio is 21.8, which means that the sale is rapid.

10. Inventory turnover ratio in days:The ratio is 17 which mean that the demand of stock is too much high.

11. Operating cycle:The operating cycle of the company is 66.There we notice two things ,as in the previous two ratio s inventory turnover ratio is 21.8 & the average collection period is 66 which means that their inventory very rapidly out of stock but there collection method are not so good that’s why their operating cycle is lengthy.

12. Asset turnover ratio:


The ratio is 61% which means that they use their assets very well.

13. Gross profit margin:Gross profit relates to the operating expense .As the gross profit is (18%) of the sales & our operating expense are 97% which means the cost f the company is not efficiently controlled.

14. Net profit/loss margin:Net profit/loss margin relates to the overall expenses of the business. As the net profit/loss are (141%) of the sales.

15. Return on investment:This ratio is (2) % which means that company is not in good position & it is below the benchmark average.

16. Return on equity:This ratio increases the overall performance as it (-11%) & it is the above the industry average (+19%) which means investors will not invest their investment.


1. Current ratio:Current ratio is 0.75, in this year the company is not highly liquidity but there resources are under estimate.

2. Quick ratio:This ratio is 0.71, so it is not highly liquid.

3. Debt to equity ratio:This ratio 2.8% which means that there is 2.8% debt in shareholder equity.

4. Total debt to asset:This ratio is 60.3% which means that assets are 60.3% finance by debts.

5. Debt ratio to total capitalization:There are 74% long term debts in a capital structuring.

6. Coverage ratio:It is 1.298 times the company is not in a very good position as it can meet 1.298 times its financial costs.

7. Receivable turnover ratio:This ratio is 10.7 this is below the benchmark average.


8. Average collecting period:This ratio is 34 which mean that the acceptance standards are not good towards account receivable.

9. Inventory turnover ratio:This ratio is 13.7, it is not much high, this means that sales is not much rapid.

10. Inventory turnover ratio in days:It is 26 which mean that demand of stock is high but company is not meeting the market requirements.

11. Operating cycle:The operating cycle is 60 days. It is again not efficient for the company.

12. Asset turnover ratio:This ratio is 19.5% which means that assets are not efficiently used.

13. Gross profit margin:This ratio is 14.1%, here again the operating expense of the company is handled very well.

14. Net profit margin:It is 4.7% it includes overall expense of the business. This profit is very low as compared to benchmark.

15. Return on investment:This ratio 0.93% which means company is not in good position it is below the benchmark average.

16. Return on equity:The ratio is 4.3% which is below the benchmark average (20%) which can not help to attract the investors.

TREND ANALYSIS


Trend analysis of 2009, 2008, 2007

1. Current ratio:As in 2009 the ratio is 0.29 & in 2008 the ratio is 0.39 & in 2007 the ratio is 0.75. From the figure year of 2007 is the most liquid year for the company. Then 2009 & then 2008

2. Quick ratio:In 2009 it is 0.22 & in 2008 it is 0.36 & in 2007 it is 0.71. From the figures the 2007 is the most liquid year the 2009 &2008. It means that the company liquidity is high in 2007, decreases in 2008 & then increases in 2009.

3. Debt to equity ratio:In 2009 it is 3.16% & in 2008 it is 3.718% & in 2007 it is 2.846%, it means the debts are lowest in share holder equity in 2007, it increases in 2008 & decreases in 2009 again.

4. Total debt to asset:In 2009 it is 61% & in 2008 it is 61% & in 2007 it is 60%. It is clear from the figures the assets are financed by debts lowest in 2007 & then percentage of debts in total assets increases in 2008 & further increases in 2009 up to some extent.

5. Debt ratio to total capitalization:In 2009 it is 8%, in 2008 it is 68% & in 2007 it is 74%. It means that the percentage of the long term debts in the capital structuring is lowest in 2009, it increases in 2008 & it further increases in 2007.

6. Coverage ratio: In 2009 it is 93 times & in 2008 (79) times & in 2007 is 129.8 times. It is lowest in 2008 it increase in 2008 & it again increase in 2007.

7. Receivable turnover ratio:It is 5.5 in 2009 & in 2008 it is 7.5 & in 2007 it is 10.7.It is highest in 2007, it is the decreases in 2008 & further decreases in 2009.

8. Average collecting period:It is 66 days in 2009 & 49 in 2008 & 34 days in 2007.So, 2007 is the most efficient year as the number of days is minimum & then it increases in 2008 & it further increases in 2009.


9. Inventory turnover ratio:It is 21 in 2009, it is 22 in 2008 & it is 13.7 in 2007. The growth of the sales is lowest in 2007 & then it increases in 2008 & remains constant approx. in 2009.

10. Inventory turnover ratio in days:It is 17 days in 2009, it is 17 days in 2008 & it is 26 days in 2007. This shows that the inventory turnover is highest in 2008 & 2009 then lowers in 2007 also. But the expansion of the days is definite vice versa.

11. Operating cycle:It is 83 days in 2009, 66 days in 2008 & 60 days in 2007. It is maximum in 2009 & then decreases in 2008 & 2007. But the most efficient year is 2007.

12. Asset turnover ratio:It is 26% in 2009, it is 61% in 2008, it is 20% in 2007.It is lowest in 2007 & then increases in 2008 & then decreases in 2009.

13. Gross profit margin:It is 7.6% in 2009, it is (18%) % in 2008, & 14.1% in 2007.There is almost same trend accepted in 2008 as it is in loss.

14. Net profit margin:It is (2.87) % in 2009, it is (10.8%) in 2008 & it is 4.77% in 2007.It is highest in 2007, it then decreases in 2008 & then it increases in 2009.

15. Return on investment:It is 0.75% in 2009, (2%) in 2008, & 0.93% in 2007. It is best in 2007 it then decreases in 2008 & increases in 2009. It means that 2007 is the most efficient year for the company.

16. Return on equity:It is (4.5%) in 2009, it is (11%) in 2008 & it is 4.3% in 2007.There is almost the trend accepted in 2007, the return on equity in 2007 & 2009 is maximum which is the most attracted years for the investors.

COMMON SIZE ANALYSIS


Dewan Cement Ltd.Common Size Analysis

Balance Sheet Common Size %

Assets 2009 2008 2007 2009 2008 2007

NON - CURRENT ASSETS (Rs. in“000”) Property, plant and equipment 20015133 19927245 19304428 92% 92% 87%Intangible asset 70003 74369 28507 0.3% 0.34% 012%Long-term loans 1587 641 1062 0.007% 0.0029% 0.0047%

Total Non Current Assets 20086723 20002255 1933399792.307%

92.34% 87.12%

CURRENT ASSETS Stores and spares 379892 397500 683759 1.75% 1.83% 3.08%Stock-in-trade 384169 127802 302825 1.7% 0.59% 1.36%Trade debts 316485 715855 510335 1.46% 3.3% 2.3%Loans and advances 149209 130715 110071 0.6% 0.6% 0.49%Trade deposits and short-term prepayments 27978 32288 95333 0.12% 0.15% 0.28%Short Term Investment 2172 39143 9161 0.09% 0.18% 0.42%Other receivables 19959 4656 62202 0.01% 0.021% 0.413%Advance Tax 107826 17760 16328 0.49% 0.082% 0.087%

Cash and bank balances 122311 132572 224537 0.56% 0.61% 1.01%

Total Current Assets 1510001 1608832 2815543 7.69% 7.66% 13.04%

Total Assets 21596724 21611087 22187512100.00%

100.00%

100.00%


Balance Sheet Common Size %

EQUITY AND LIABILITIES 2009 2008 2007 2009 2008 2007

SHARE CAPITAL AND RESERVES

share capital 3573750 3573750 3573750 16.54% 16.5% 16.1%Capital Reserves 648287 334720 1130675 3.00% 3.34% 5.09%

Inappropriate profits 4007712 4014940 4090668 18.5% 18.57% 18.43%

Total Equity 8229749 8323410 4704425

NON-CURRENT LIABILITIESLong term financing 1701547 2275462 2430054 7.8% 10.5% 10.9%Deferred Employee Benefits 1750444 2065797 2192143 8.1% 4.2% 9.8%Debentures - 3850000 4110825 - 17.81% 18.52% Mark up payable - - 141252 - 9.6% 0.636%Long term deposits 923029 922894 861539 4.2% 0.4% 3.88%Liabilities against assets 31494 88949 120843 0.14% 17.8% 0.54%

CURRENT LIABILITIESTrade and other payables 1624625 1649766 1305183 7.5% 7.6% 5.8%Provision for Taxation - - - - - -Short term redeemable capital - - 497695 - - 2.24%

Short term borrowing 660875 348021 248644 3% 3.46% 1.12%

Markup payable 1042708 555916 345134 4.8% 2.57% 1.55%

Sales tax payable 35339 16850 14743 0.16% 0.077 0.066%

Current portion of borrowing 1746914 1114022 1124364 8% 5.15% 5.06%

Total Liabilities 5110461 4084575 3535763100.00%

100.00%

100.00%


Profit and Loss Account Common Size % 2009 2008 2007 2009 2008 2007

Sales net 5682571 4598002 4329503100.00%

100.00% 100.00%

Cost Of Sales 5249197 4706326 (3718979) (92.3%) (102.3%) (85.8%)

Gross Profit/Loss 433374 (108324) 610524 7.6% (2.35%) 14.10%

Distribution Cost 192475 94741 22210 (3.38%) (2.06%) (0.51%)Administrative Expenses 157534 246815 136223 (2.77%) (5.36%) (30.8%)Other Operating Expense 27609 88325 17745 (0.48%) (1.92%) (0.40%)Other Operating Income 30945 281025 283751 (0.54%) (6.11%) (6.5%)

Operating Profit/Loss (55756) (538205) 718097 (0.98%) (11.7%) 16.58%

Finance Cost 463191 325142 553115 (8.1%) (7.07%)(12.77%)

Profit/Loss Before Taxation (376490) (582322) 164982 (6.6%)(12.66%)

3.8%

Taxation Net 213282 83185 41624 3.7% 1.8% 0.96%

Profit/Loss for the Year (163208) (499137) 206606 (2.87%)(10.85%)

4.77%

Interpretations:

After completing common size analysis we came to know that company’s non-current assets increases during the time of 2007-2009 and its current assets decreases in same span of time. Non-current liabilities of the company also decreases which is a good sign for financial health but current liabilities increases which is not a good sign. Now we can see that company’s current assets had decreased and current liabilities had increased which shows that company’s liquidity is not good.

In profit and loss statement we can see that cost of goods sold had increased during the time of 2007-2009 it means company’s overall external expenses had increased. In the result Gross Profit had decreased. Administrative expenses had been controlled by the company durin the same span of time. Distribution cost had also increased which resulted in shrinkage of profit which is currently converted into loss.


INDEX ANALYSIS

Dewan Cement LimitedIndex Size Analysis

BALANCE SHEET Index Size %

Assets 2009 2008 2007 2009 2008 2007

NON - CURRENT ASSETS

Property, plant and equipment 20015133 19927245 19304428

103.68% 103.22% 100.00%

Long-term investments 70003 74369 28507 179.6% 140.39% 100.00%Long-term loans 1587 641 1062 149.4% 60.35% 100.00%

Total Non Current Assets20086723 20002255 19333997

432.68303.96%

100.00%

CURRENT ASSETS Stores and spares 379892 397500 683759 55.55% 58.13% 100.00%Stock-in-trade 384169 127802 302825 126% 42.20% 100.00%Trade debts 316485 715855 510335 62% 140.27% 100.00%Loans and advances 149209 130715 110071 135% 118.75% 100.00%Trade deposits and short-term prepayments 27978 32288 95333 29% 33.8% 100.00%Other receivables 2172 39143 9161 32.08% 62.92% 100.00%Short Term Investment 19959 4656 62202 23% 50.8% 100.00%Advance Tax 107826 17760 16328 - 108.7% 100.00%

Cash and bank balances 122311 132572 224537 53.54% 59.04% 100.00%

Total Current Assets1510001 1608832 2815543

53.63% 57.14%100.00%

Total Assets21596724 21611087 22187512

97.3% 97.4%100.00%


BALANCE SHEET Index Size %

EQUITY AND LIABILITIES 2009 2008 2007 2009 2008 2007

SHARE CAPITAL AND RESERVES share capital 3573750 3573750 3573750 100% 100% 100.00%Capital Reserves 648287 334720 1130675 57% 64.9% 100.00%Inappropriate profits 4007712 4014940 4090668 97% 98.14% 100.00%

Total Equity 8229749 8323410 4704425174.93%

176.92%

100.00%

NON-CURRENT LIABILITIES Long term financing 1701547 2275462 2430054 70% 93.63% 100.00%Deferred Employee Benefits 1750444 2065797 2192143 79% 94.2% 100.00%Debentures - 3850000 4110825 - 93.65% 100.00%

Mark up payable - - 141252- -

100.00%

Long term deposits 923029 922894 861539107% 107%

100.00%

Liabilities against assets 31494 88949 120843 26% 65.96% 100.00%

CURRENT LIABILITIES Trade and other payables 1624625 1649766 1305183 124% 126.4% 100.00% Provision for Taxation - - - - - -Short term redeemable capital - - 497695 - - 100.00% Short term borrowing 660875 348021 248644 132% 300.8% 100.00%

Markup payable 1042708 555916 345134302%

161.07% 100.00%

Sales tax payable 35339 16850 14743239%

114.29% 100.00%

Current portion of borrowing 1746914 1114022 1124364 155% 99% 100.00%

Total Liabilities 5110461 4084575 3535763144.5%

115.52%

100.00%


PROFIT AND LOSS ACCOUNT Index Size % 2009 2008 2007 2009 2008 2007

Sales net 5682571 4598002 4329503 131% 106%100.00%

Cost Of Goods Sold (5249197) (4706326) (3718979) 141% 126.54%100.00%

Gross profit 433374 (108324) 61042410% (20.54%)

100.00%

Distribution Cost 192475 94741 22210 866% 267%100.00%

Other Operating Expenses 27609 88325 17745 155% 497.7%100.00%

Administration and general expenses 157534 246815 136223 115% 181.18%100.00%

(377618) (429881) (176178)

Operating Profit/Loss 55756 (538205) 434346 12.8% (123.9%)100.00%

Other Operating Income 30945 281025 283715 10% 99.03%100.00%

Finance Cost (463191) (325142) (553115) 83.7% 58.78%100.00%

EBIT/ Loss Before Tax (376490) (582322) 164982(228.2%) (352.96)

100.00%

Taxation 213282 83185 41624 512% 199.84%100.00%

Profit/Loss for the Year (163208) (499137) 206606(78.99%)

(241.58%)

100.00%

Interpretations:

After completing Index analysis (taking 2007 as base year). we came to know that company’s non-current assets increases during the time of 2007-2009 and its current assets decreases in same span of time. Non-current liabilities of the company also decreases which is a good sign for financial health but current liabilities increases which is not a good sign. Now we can see that company’s current assets had decreased and current liabilities had increased which shows that company’s liquidity is not good.


In profit and loss statement we can see that cost of goods sold had increased during the time of 2007-2009 it means company’s overall external expenses had increased. In the result Gross Profit had decreased. Administrative expenses had been controlled by the company during the same span of time. Distribution cost had also increased which resulted in shrinkage of profit which is currently converted into loss. As we can see in the results the margin of loss is very high which shows that the company is currently in deep trouble. Company must start taking notice of its cost of the goods and operating expenses so that they can bring the company back on track.

Comparison with Benchmark

Dewaan Cement Limited Lucky Cement Limited

Years Years

Ratios 2009 2008 2007 Average 2009 2008 2007 Average

Liquidity Ratio Current Ratio 0.29 0.39 0.75 0.4766 0.86 1.08 0.85 0.93Quick Ratio 0.22 0.36 0.71 0.43 0.73 0.991 0.75 0.823Leverage RatioDebt to Equity Ratio 3.16 3.718 2.846 3.24 0.65 0.84 1.75 1.11Total Debt to Assets 0.61 0.61 0.603 0.607 0.39 0.46 0.64 0.50Debt Ratio to Total Capitalization

0.08 0.68 0.74 0.5 0.26 0.42 1.07 0.58

Coverage Ratio 0.93 (0.79) 1.298 0.479 5.83 24.27 3.55 11.36Activity/Turnover RatioReceivable Turnover Ratio 5.5 7.5 10.7 7.9 20.78 23.54 26.27 23.53Average Collection Period 66 49 34 50 18 15 14 16Inventory Turnover Ratio 20.5 21.8 13.7 18.6 17.33 18.18 16 17.17Inventory Turnover Ratio Days 17 17 26 20 21 20 23 21Operating Cycle 83 66 60 70 39 35 37 37Assets Turnover Ratio 0.26 0.61 0.195 0.355 0.69 0.5 0.48 0.56Gross Profit/Loss Margin 7.6 (0.18) 14.1 7.173 0.37 0.25 0.3 0.306Net Profit/Loss Margin 2.87 (10.8) 4.77 (1.053) 0.117 0.16 0.20 0.16

Return on Investment 0.75 (2) 0.93 (0.106) 14.21 9.84 9.67 11.24

Return on Equity 4.5 (11) 4.3 (0.733) 0.19 0.14 0.27 0.2

Interpretation

Liquidity Ratio

Current Ratio:


The Liquidity position of DCL is poor than LCL because LCL utilized there resources very well and the resources of the DCL are idle to more over we also analysis the risk factor in the DCL is high but it is low in LCL.

Quick Ratio:

As it is mentioned in the current ratio that DCL is not in good liquidity position as compared to the LCL and it is almost as the current ratio except it is not liquid.

Leverage Ratio

Coverage Ratio:

DCL have poor financial resources as compared to the LCL and it cannot meet its interest expense cost many times than LCL which means that in DCL there are more chances of

insolvency as compared to the LCL.

Activity/Turnover Ratio

Receivable Turnover Ratio:

This ratio of the DCL is not up to the mark as it is below the benchmark average but LCL is in a better edge.

Average Collection Period:

The collection procedure of the DCL is not efficient that’s why it is high but on the other hand the collection procedure of the LCL is better.

Inventory Turnover Ratio:

It is clear from the inventory turnover ratio that demand of the inventory of DCL is not high. Sales are not much rapid but it is opposite in LCL.


Inventory Turnover Ratio Days:

As it is stated in the previous ratio that demands of the inventory of DCL is not high as compared to LCL.

Operating Cycle:

This ratio is lower in DCL than LCL, which means that the collection procedures are better in LCL and inventory turnover ratio duration is higher in LCL, so there is lesser chance of inventory shortage in LCL that’s why this ratio is lower in DCL.

Assets Turnover Ratio:

This ratio tells us that DCL does not utilized its assets very well that’s why they do not contribute a major portion to generate sales but in LCL ratio is high and they contribute greater in generation of sales

Gross Profit Margin:

DCL does not handle very well its operating cost that’s why gross profit margin is poor. In LCL the operating cost is managed well that’s why it is high and we noticed that in 2008 & 2009 DCL suffered loss.

Net Profit Margin:

Again the same situation DCL does not handles its overall expense very efficiently that’s why it is low as compared to LCL and DCL suffered loss in 2008 & 2009 as it is mentioned.

Return on Equity:

The overall performance of DCL is not very well as compared to the LCL that’s why the return on equity is lower in DCL. There are good opportunities for the investors in LCL but it doesn’t mean that DCL is performing not well it is also performing well.


CONCLUSION

After having taking into account all the ratios, namely short term liquidity, long term debt paying

ability, profitability ratios and last but not the least the investor’s point of view, we have come to

the conclusion that the company does not holds great attraction for the investors, the reason

being that its short term liquidity is not good to say the least, its long term debt paying ability

does not looks good. It is also not doing well on its profitability front, and it is running a huge

risk by financing its assets by excessively putting the borrowed money to use. So all said and

done the future of the company does not look promising given its performance and its track

record on all fronts.

financial analysis of dewan mushtaq group

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