rap 8 acpl.pdf

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OXFORD BROOKS UNIVERSITY

Research and Analysis Project

Analysis of financial statements over a three year periodending June 2009, 2008 and 2007 of

ATTOCK CEMENT PAKISTAN Ltd.

A project for BSc. (Hons.) in applied accounting

Name:

ACCA Reg. no.

May 2010

Word count: 6,496

No. Contents PageNo.

1 Introduction1.1 Reasons for choosing the topic and company 3.1.2 Project objectives and research questions 3.1.3 Overall Research approach 4.

2 Information Gathering2.1 Sources of information (Primary and secondary) 5.2.2 Description of methods used to collect information 5.

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2.3 Limitations of information gathered 6.2.4 Ethical issues during information gathering 7.2.5 Accounting/business tech. used and their limitations 8.

3 Analysis

3.1 Over view of the economy3.2 Company history 9.3.3 Company products 9.3.4 Cement industry 9.3.5 Ratio analysis and competitor analysis 10.

Sales analysis and profitability analysisLiquidity and working capital analysisCapital and debt structure analysisValuation ratios

3.6 Porters five forces analysis 18.3.7 SWOT analysis 19.

4 Conclusion and suggestions 20.APPENDICES

A Referencing and bibliography 23.B Questionnaire 25.C Ratios 27.D Graphs 28.E Financial statements 29.

1. INTRODUCTION

1.1 Reasons for choosing the topic and company

One of the reasons for choosing this topic was that as anaccountancy student I always studied the analysis of a companyusing ratio analysis and other business tools but obviously thathas very little scope. Performing analysis of an actual company isa very challenging and it also involves analyzing the environmenttoo that is full of learning and that gives a wider scope.

Another reason for choosing the analysis of a companys

financial statement was the ease of availability of annualaccounts. Thats because companies today do not want to sharetheir internal information with outsiders and are reluctant toshare the documents that was important for other topics.

I foresee my future in the field of business analyst andperforming the analysis of a real entity was obviously my interest

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and gave me real insight of the work of this field that how thingshappen practically.

One of the very strong reasons of choosing the topic was that isrelated to my studies.

Reason for choosing the cement industry was that this industry isone of the biggest contributors to the economy of Pakistan.

One of the reasons for choosing ATTOCK CEMENT PAKISTANLIMITED (ACPL) was due to the up to date and readily availableinformation of this company through several sources.

1.2 Project objectives and research questionsThe project objective consists of the benefits that anorganization/person expects to achieve as a result of spending timeand exerting effort to complete a project.(www.mariosalexandrou.com)

The basic objective of the project is to analysis the financialstatements of ACPL and to analyze its business performance, sub-divided into:

Analyzing the financial position and performance of thecompany I need to do the following:

Sales analysis will be done to analysis the sales of thecompany its trend towards increase or decrease and the reason forthis.

Profitability ratios measure how well a company is performingby analyzing how profit was earned relative to sales, total assetsand net worth. (www.kbr.dnb.com)

Evaluation of ACPL short-term liquidity to assess the positionof company to pay off its short-term obligations on time. (Heitger,Matulich, 1987)

Long-term solvency and capital structure will be analyzed bycalculating the gearing ratio which indicates the companysfinancial structure and debt capital ratio.

Investors ratios will be used to give an examination of thecompany from the point of view of investors.

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SWOT analysis of the company will be done to analyze thestrengths, weaknesses in the company and opportunities andthreats that company faces in the environment in which itoperates. P3 Business analysis BPP 2008

Porters five forces analysis will be done to analyze thecompetitive environment and the strength of the competitionin the cement sector of Pakistan.

Conclusion will be devised on the bases of my analysis doneand some recommendations will be given if there is any roomfor improvement.

Research questions

To have a clear structure and objectives of the project in my mind I

devised the following questions: What information will be required initially and during the

project to start and assist me in the project? What will be the sources of information that I have to find out

and get sufficient information about the company and sector? What are the methods to gather the information? What will be the areas I have to focus in the financial

statements to get my work properly done? What will be the IT skills required to perform and present my

work properly?

What will be the communication skills required when meetingmy mentor and other people in the process of informationgathering?

How can I establish the strategic position of the company? What will be the level of learning in performing all the work?

Will it help me in the future? (Johnson, 2005) How the conclusion will be designed from the work done?

1.3 Overall research approach

It is very important to perform a task properly to plan all the workbefore it is started. As a saying goes that if you fail to plan you plan tofail. So the research approach I adopted helped me a lot to minimizethe wastage of time and energy.

Firstly I did some background research about the project and got theinformation about the options on which I can prepare my project. Forthis first of all I arranged a meeting with my mentor who helped me a

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lot in deciding me the topic. After selecting the topic I figured out theindustry and the company I will use in my project.

Then I started working on the sources of information from which I canget reliable information about the cement sector and ACPL. I used

many sources including internet, newspapers, magazines, accountingbooks, ACCA syllabus books, library and of course annual accounts ofthe company. I also interviewed personnel of ACPL and asked manyquestions to them that helped to increase my knowledge.

Then I selected the tools that I used during analysis. They include bothfinancial and non-financial. I used ratio analysis for the financialanalysis and SWOT and Porters five forces as non-financial tools. Igathered information about a competitor so that the analysis can becomparable.

Meanwhile I was in the contact with my mentor through a series ofmeetings who helped me in the issues that arose during the process.He guided me, referred me different books for referencing and alsohelped me plan my work.

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2. INFORMATION GATHERING

2.1 Sources of information - Primary and secondary

Primary sources of information allow the learner to access original and

unedited information. A primary source requires the learner to interactwith the source and extract information. Secondary sources are editedprimary sources, second-hand versions. They represent someoneelse's thinking. (www.graphic.org)

Primary sources that I used were interviews, questionnaires and visitsthat I made to the office of ACPL. First of all I arranged a meeting withthe managers of accounts and marketing department. Meeting thecompany personnel was very informative experience and theinformation I got helped me in performing my work. First of all Iidentified the informed persons of the company and asked them to fillthe questionnaire. Questionnaire included many questions about thecompany and its production.

Then I interviewed the persons I was supposed to meet. They firstlyprovided me the annual accounts for the year ended June, 2009. Whileinterviewing I got solved many problems that I was facing inunderstanding the annual accounts. Then I met manager marketingdepartment that helped me understand the companys strategy andalso the cement sector of Pakistan. The information helped me inperforming SWOT and Porters five forces analysis.

Secondary sources of information that I used were as follows:

Internet is the main source of information now days in allfields, and that helped me a lot throughout my work. The sitesI used to visit were www.google.com and www.wikipedia.org.The web site of ACPL and Karachi Stock Exchange were alsovery useful which are as follows: www.attockcement.com.

I used to study business magazines to be up to date with thechanging business environment.

Annual reports of the company over a three year period along

with the competitors report were really helpful in acquiringfinancial data of company.

Analyst reports were used to gain the industry and ACPLrelated information.

The newspapers business sections were also one of thesources of my information inputs.

The ACCA syllabus books and the ACCAs magazine studentaccountant was also a part of my study. I had to search the

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archive to refer the back issues of student accountantmagazine. Other business and accountancy related bookswere also used for this purpose.

2.2 Description of methods used to collect

information

I used different methods to gather the information as some of them arediscussed earlier but the main from which I got a lot of help were asfollows:

Interviews Books and newspapers and other literary sources Internet

2.3 Limitations of information gatheringThere were some limitations that I faced while collecting theinformation for my project.

One of main issues was the meeting with the required person. Theissue of non-availability of the personnel wasted a lot of my time.Another issue was that while interviewing, company managers werevery reluctant to provide the information. At times the personnel usedto window dress the companys positions so I was very conscious aboutsorting out true picture of company. Permission of senior manager to

fill the questionnaires was also an issue.

Internet was the main source of my information but I had loads ofinformation that I had to sort out carefully because many timesinformation was not up-to-date and reliability of data was an issue too.

2.4 Ethical issues during information gathering

Ethical issues arose while interviewing the company personnel. Asmentioned above, they were reluctant to share the sensitive andconfidential information without the consent of the senior managers.

So I met their seniors and told the purpose of the information i.e. touse it only for research work. My convincing argument to managerswas that as I am a student of a ACCA which is a professional body whois bound by a strong codes of ethics which are objectivity, integrity,confidentiality, professional behavior and professional competence anddue care. Then he agreed to provide me the information at someextent.

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2.5 Accounting/Business techniques used and theirlimitations

I basically used three types of tools to analyze the companys financialposition and its performance that are ratio analysis, SWOT analysis and

Porters five force analysis.

Ratio analysisA tool used by individuals to conduct a quantitative analysis ofinformation in a companys financial statements. Ratios are calculatedfor current year numbers and are then compared to previous years,other companies, the industry or even the economy to judge theperformance of the company. Ratio analysis is predominantly used byeproponents of fundamental analysis. (www.investopedia.com)

Limitations of ratios Most ratios by them selves are not highly meaningful. They

should be viewed as indicators, with several of them combined topaint a picture of the firms situation. (www.netmba.com)

Ratios dont capture significant off-balance sheet items(www.financialmodelingguide.com)

The difference of accounting policies used different companiescan distort the inter company comparison.

Ratios are not definitive measure and must be used carefully.They can just provide clues about position of the company.

Ratios don't always tell about changes that are coming - looking

at historical data does not predict the future. (www.college-cram.com)

Many large firms operate different divisions in differentindustries. For these companies it is difficult to find a meaningfulset of industry-average ratios. (www.investopedia.com)

Porters five forces analysisPorters five forces is framework of the industry analysis and businessstrategy development developed by M.E. Porter. It uses conceptsdeveloping industrial organization economies to derive five forceswhich determine the competitive intensity and therefore attractivenessof market. (Michael E. Porter, 1980)

Limitation of Porters five forces analysis One of the main limitations of the model is that it assumes the

market as a static market which is not practically possiblebecause the industrial and general environment is constantlychanging.

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In the economic sense, the model assumes a classic perfectmarket. The more an industry is regulated, the less meaningfulinsights the model can deliver.

The model is best applicable for analysis of simple marketstructures. A comprehensive description and analysis of all five

forces gets very difficult in complex industries with multipleinterrelations, product groups, byproducts and segments. A toonarrow focus on particular segments of such industries, however,bears the risk of missing important elements.(FTC, 2008)

SWOT analysisSWOT analysis can be used to gauge the degree of fit between theorganizations strategies and its environment, and to suggest ways inwhich the organization can profit from strengths and opportunities andshield itself against weaknesses and threats. (Adams, 2005)

Limitations of SWOT analysis The same factor can also be a strength and weakness.

The SWOT framework has a tendency to oversimplify thesituation by classifying the firms environmental factor intocategories in which they may not always fit.

The assessment of strengths and weaknesses may be unreliable,being base on aspiration, biases sand hopes. (Henry, 2007)

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3. ANALYSIS, RESULTS AND CONCLUSIONS

3.1 Overview of the economy

The year 2008-2009 was a difficult year for global economies as well asPakistan. The worst-ever global financial crisis has had extremelyserious repercussions for both developed and developing economies allover the Globe. This fall out created serious credit crunch through outthe world as all the global financial markets are closely interlinked. Inthe emerging markets like Pakistan the financial melt down resulted inflight of capital and corresponding steep fall in the local currencyagainst US$. Pakistans economy is not only affected due to this globalmeltdown but also due to the countrys active involvement in war onterror and therefore registered GDP growth of only 2%. (The Dawn,2009)

3.2 Company history

ACPL project was conceived and the company was incorporated in1981 the plant finally commenced commercial production on June 1,1988. The project involved an initial outlay of Rs.1.5billion with foreignexchange components of around US$45 million. The factory is locatedin the province of Balochistan.

ACPL is a part of Pharaon Group and is a Saudi-Pak joint project. Itsmajor shareholder Pharaon commercial Investment Company limited

holds 84.06% of total paid up share capital where as the general publicholds a total of 15.94% shares. Pharaon Group has a diversified stakesin Pakistan mainly in oil and gas sectors. (Business Recorder, 2009)

3.3 Company products

ACPL is currently engaged in the production and sales of followingthree products with the registered brand name of Falcon

Ordinary Portland cement (OPC)

Sulfate resistant cement (SRC)

Portland blast furnace slang cement (PBFSC)(www.attockcement.com)

3.4 Cement industry

Pakistan cement factories continue to make significant progress incement exports. Now Pakistan is ranked 5th in the worlds cement

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exports after a huge increase of 47% in exports during FY09. (DailyTimes, 2009)

Pakistan cement sector ended FY09 with local sales witnessing ameager 2% growth at 30.8 million tons, the growth in overall cement

sales mainly came from the record high cement exports during theyear. Though traditionally Pakistan has seen impressive consumptiongrowth of 7% in terms of CAGR (capacity growth rate) but the periodcommencing from FY02 through FY08 witnessed average growth ofaround 15%, which was un-precedent. However, in FY09 the localdemand registered a negative growth of 14%, which was mainlyattributable to political uncertainties coupled with global turmoil. (AllPakistan Cement Manufacturers Association, 2009)

After six years of consecutive growth, the domestic cement marketdepicted a declining pattern in the wake of lukewarm construction

activities amid economic slowdown, high interest rates, liquidity crunchand cut in infrastructure spending both in public and private sectors.(Muhammad Rehan Khan, 2009)

3.5 Ratio analysis

PROFITABILITY ANALYSIS

ACPL ACPL ACPL BWCL

FY07 FY08 FY09 FY09

PROFITABILITY ANALYSISNet Turnover (Rs. million) 4,560 5,001 8,510 14,814

Sales growth 31.29% 9.67% 70.16% 97.86%

Gross profit margin 34.10% 22.27% 31.83% 32.19%

Net profit before tax margin 26.16% 13.49% 23.37% 8.13%

Return on Capital employed(ROCE)

18.11% 10.00% 27.63% 4.95%

SALES ANALYSIS

The net sales of ACPL in the absolute terms were augmented toRs.8,501million during FY09 compared to Rs.5,001million in FY08. Theincrease was due to higher quantity sold and better retention duringthe year owing to higher selling prices of cement in the country but thedemand was remain depressed in the local market. The sales volumeof ACPL was increased by 25% in the year from 1,359,487tons in FY08to 1,719,162tons during FY09 mainly due to successful commissioningof Line-2, and net retention was also augmented by 37%. The reason

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of increase in volume was as a result of exports to other countries thatprovided better retention as compared to the domestic market. Thecement selling prices increased significantly in the domestic market asa result of cartelization between cement manufacturers during FY09.(Irfan Malik, 2008)

NET SALE

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2005 2006 2007 2008 2009

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The local currency rupee was highly depreciated against other majorcurrencies that contributed substantially towards the rise in netretention as a consequence of exports. The domestic sales volume ofACPL reduced by 1% because of lower demand owing to lessconstruction activities in the country. (Daily Times, 2009)

On the other hand, the export sales of ACPL increased by 412% and itcontributed 27% of total sales volume compared to 7% in FY08. Thedomestic sales percentage was 73% of total volume in comparisonwith 93% in FY08 that was a good sign as international prices arehigher as compared to local cement prices.

During FY08 the net turnover of ACPL elevated by 9.67%Rs.5,001million as compared to Rs.4,560million in FY07. The reason ofincreased revenue was attributable to higher quantity sold in the yearby 11% as 1,359,487tons of cement was sold by the companycompared to 1,228,793tons in FY07. The local cement market facedoversupply situation during FY08 as a result of expanded productioncapacity by all cement manufacturers, on the other hand demand was

lower and the prices were almost stable for the whole year. ACPL wasunable to explore new export markets to attain retention prices duringFY08 due to lower than expected production from one of its plant as aresult of technical problems. The export sales of the companycontributed 7% of the total sales volume during FY08 as compared to3% in FY07.

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BWCL also showed a remarkable growth in sales during FY09 evenmore than its rival company due to increased quantity sold and higherpercentage growth was attributable to incredible increase in cementprices both at local and international level as BWCL also exportscement to other countries.

GROSS PROFIT MARGIN

During FY09 ACPLs gross profit ratio enhanced to 31.83% as comparedto 22.27% in FY08. Owing to the huge demand of Pakistani cement inthe international market especially in the countries which are in theprocess of rehabilitation like Iraq and Somalia, ACPL increased itsexport sales to those countries, consequently it earned higher margins.The production costs also increased enormously by 49.25%, it wasprimarily increased due to higher fuel consumed during productionprocess which constitutes 60% of the total costs and further increased

by 60.40% in FY09 as compared to the last year. Coal is the basic fuelused by ACPL for the production of cement, though the internationalprices of fuel declined in FY09 but the depreciation of local currencyoffset its effect as all the companies import coal from other countriesthat affected adversely on the total costs. Overall capacity utilizationincreased by 18% during FY09, and higher absorption of fixedoverheads and higher selling prices contributed positively towardsgross margin.

The gross profit ratio of ACPL declined by 34.69% from 34.10% in FY07to 22.27% during FY08. The main reason behind the drop in margin

despite the growth in sales revenue was the higher cost of goods soldmainly as a result of increased fuel costs in the year that increased by57.68% during FY08 compared to FY07, as the international prices ofcoal were on a peak. (Monem Farooqi, 2008)

The cost of goods sold of ACPL increased by 29% including packingmaterial and raw material costs which was raised by 18.30% and thesetwo heads constituted 56% of the total costs.

The gross margin of BWCL was more or less same in FY09 as comparedto ACPL again due to higher selling prices despite escalating fuel and

energy costs.

NET MARGIN

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PROFIT BEFORE TAX

0 500 1000 1500 2000 2500

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2009

YEA

MILLION

The net margin of ACPL was 23.37% in FY09 as compared to 13.49% inFY08 showed an increase of 73.23%. The distribution expensesincreased by 250% in FY09 owing to higher exports in the year thatreached to Rs.311million as compared to Rs.78million in the last year,and the administration expenses were also enhanced by 36% ascompared to FY08 due to inflationary affect. The administrativeexpenses enhanced due to increase in minimum wage rate ultimatelyboosted the salaries and wages during FY09. The improvement inmargin was positively effected by higher growth in sales along withbetter gross margin in FY09. The finance charges for ACPL alsodeclined by 33% in 2009 as compared to the last year due to reducedmark up on short-term loans and running finance.

The net profit margin of ACPL deteriorated in FY08 by 51.56% to13.49% from 26.16% in FY07. The primary reason of this fall was thehigher interest charges that increased by 50% due to relatively higherinterest rates prevailed during FY09 attributable to poor economicconditions in the country. The distribution costs of the company wasalso increased by 37% and main portion comprised of export expensesthat formed 68% of total distribution costs and though slightlyaugmented by 5% as compared to FY07 as the export sales were quitelow in FY08. In case of administrative expenses, a hike was only seenunder the head of salaries and wages, as other remained almostconstant throughout the year.

The net margin of BWCL was lower than ACPL due to higher financecosts as a result of short-term borrowings to meet the working capitalrequirements in FY08.

ROCE

The better profitability during FY09 provided high returns as a result oftotal capital employed in the company that was increased to 27.63%compared to 10.00% in FY08. This remarkable improvement was as a

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result of higher profits earned during FY09, though the equity of thecompany also increased due to retained profits in the year.The ROCE showed a decline to 10.00% in FY08 as compared to ahigher figure of 18.11% achieved in FY07 this was due to the

deteriorating profitability owing to slow growth in sales and higherinput costs that worsened the margins and consequently the returnsdropped in the year.

The ROCE of BWCL was also lesser than ACPL during FY09 primarilybecause BWCL issued shares during the year for cash which led toincrease in equity.

LIQUIDITY ANALYSIS

ACPL ACPL ACPL BWCL

FY07 FY08 FY09 FY09

LIQUIDITY ANALYSIS

Current ratio 1.26:1 1.51:1 2.43:1 0.64:1

Acid test ratio 0.65:1 0.45:1 1.36:1 0.26:1

CURRENT RATIO

The liquidity ratio of ACPL is quite good at 2.43 even above than ideallevel of 2:1. The reason behind such positive results was incredibleincrease in current assets by 86% during FY09 on account of hugeshort-term investments made by the company. ACPL had capitalizedon high interest rates and have earned in short-term, getting bothprofits and liquidity. This was a good strategy of a company ascurrently money market is the safest investment with such highinterest rates. ACPL invested Rs.100million in a certificate ofinvestment that would offer 13.35% on maturity in FY09. LikewiseACPL also invested Rs.206 million in income funds, which allowed themto let their income grow along with receiving of periodic cash flows.The current liabilities also showed a nominal growth of 15% on accountof increase in accrued liabilities compared to FY08.

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CURRENT ASSET

837575

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The current ratio of ACPL was slightly improved to 1.51 in FY08compared to 1.26 in FY07. During the year current assets of thecompany were increased by 15.17% from Rs.1,480millionRs.1,285million on account of stores, spare and loose tools and stock-

in-trade due to production work stoppage by one of the companysplants as mentioned above and ACPL was incapable to book exportorders during the year. On the contrary, the current liabilitiesdecreased by 4% attributed that improved the current ratio marginally.The current ratio of BWCL was much worsened than its rival companydue to huge short-term borrowings.

QUICK RATIO

The quick ratio during FY09 was 1.36 which improved from 0.45 inFY08. The illiquid assets like stock-in-trade and stores, spares and

loose tools comprised 43% of the total current assets near to its half,but the cash and bank balances along with the other short-terminvestments made the quick ratio constructive as compared to the lastyear.

The quick ratio of the company declined in FY08 to 0.45 as comparedto 0.65 in FY07 as a result of huge inventory maintained by thecompany in terms of raw material and work in process due to lowerproduction by the company as a result of technical problems in one ofits plant. This item is highly illiquid so impacted negatively on quickratio of the company. Likewise, current ratio the quick ratio of BWCL

was much lower than ACPL.

WORKING CAPITAL RATIOS

ACPL ACPL ACPL BWCL

FY07 FY08 FY09 FY09


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Debtor collection days 2days 3days 2days 14days

Creditor payment days 24days 40days 18days 11days

Inventory holding days 33days 38days 38days 26days

DEBTOR COLLECTION DAYS

The debtor collection days of ACPL varying between 2days to 3days inall three years under review. The reason for such lower period is thatACPL operates on cash sales to distributors who sell to the widercommunity on retail basis. The small amount of debtors is due to a fewdays credit sales allowed to large and old customers. BWCL allowedlonger credit limits to its customers so its collection period was 14days.

CREDITOR PAYMENT DAYS

The creditor payment days stood at 40days in FY08, which wasincreased from 24days in FY07 due to increase in creditors by 135%,and most of this increase was attributable to fuel and power suppliers.ACPL decreased its creditor days considerably in FY09 to 18days ascompared to 40days in FY08. This was a deliberate step by thecompany to improve its goodwill in the eyes of its suppliers of importedcoal. BWCL paid its creditors earlier than ACPL.

INVENTORY HOLDING DAYS

The inventory holding days of ACPL were constant for FY09 if

compared with FY08 as the company is anticipated to receive moreorders from the regional market due to increasing demand of cement,so they built up the strategy to produce in bulk for the timely deliveryas country faced severe fuel and power shortages. Its inventoryincreased by 49.87% during FY09 compared to FY08.

The inventory holding days of ACPL enhanced by 5days and reached to38days during FY08 as compared to 33days in FY07. This increase wasdue to increase in inventory owing to lower export orders andunattractive demand in the domestic market. One of the reasons ofhigher inventory level was the lower production and hoarded raw

materials at the year end. BWCL sell its inventory within 26dayscompared to ACPL.

DEBT TO CAPITAL STRUCTURE

ACPL ACPL ACPL BWCL

FY07 FY08 FY09 FY09

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DEBT TO CAPITAL STRUCTURE

Debt to capital ratio 22:78 18:82 11:89 58:42

Interest cover12.65times

5.41times

17.71times

1.52times

DEBT-TO-CAPITAL RATIO

ACPL financed its activities through both equity and debts sources asdepicted from its long-term debt-to-equity ratio. But the debt portionconstituted a little amount in total capital of the company. Thecompany retained much of its profits earned during FY09 that boostedits overall equity, though its share capital remained the same. Thecompany acquired long-term loans for the capacity expansion projectin FY06 and now repaying its debts over the years. So thedisbursement of long-term loans and significant increase in equityduring the period reduced its reliance on debt and the ratio decreasedto 11:89 as compared to FY08.

The long-term debt-to-equity ratio in FY08 also declined slightly from22:78 to 18:82 this was also as a result of dual effect of increase inequity and decline in debt portion due to repayment of loans in theyear. ACPL is one of the low leveraged companies in the cementindustry of Pakistan ultimately retained low risk. BWCL was a highleveraged company due to acquisition of long-term loans for thecapacity expansion in FY09.

INTEREST COVER

The interest cover of ACPL improved drastically to 17.71times in FY09compared to 5.41times in FY08. This has been observed because of23% drop in companys finance costs. The reason behind fall infinancial charges was dearth of short-term borrowings that was takenby the company in last year. This was because of excess liquidity it haddue to higher sales revenue.

Similarly, in FY08 ACPL acquired short-term borrowings to fulfill theneeds of working capital as its liquidity deteriorated in the year. Higher

interest rates increased the borrowing cost for the company and itsinterest cover reduced to 5.41times in FY08 compared to 12.65times inFY07. The lower margins of the company during FY08 due to slowgrowth and higher costs also contributed in lowering the interest coverof the company during FY08.

VALUATION ANALYSIS

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ACPL ACPL ACPL BWCL

FY07 FY08 FY09 FY09

VALUATION ANALYSIS

Earnings per share Rs.11.04 Rs.6.03 Rs.20.69 Rs.3.17

Dividend per share Rs.4.50 Rs.1.50 Rs.3.25 0

Share valueRs.118.25

Rs.69.25 Rs.70.36 Rs.28.00

Price to earnings10.71times

11.48times

3.40times

8.83times

Dividend yield 3.80% 2.17% 4.61% 0

EARNING PER SHARE

ACPL had a earning per share of Rs.20.69 during FY09 that

improved from Rs.6.03 in FY08, the higher earnings against the equityinvested was due to improved profitability of the company as thenumber of shares was constant and higher margins gave high netprofits at the year end consequently build up earnings. The sharecapital remained stable in FY08 as compared to FY07 but the lowermargins weakened the earning per share that reduced from Rs.11.04to Rs.6.03. Earning per share of BWCL was quite lower than ACPL atRs.3.17.

DIVIDEND PER SHARE

The dividend policy of the company was consistent with an increase inearning per share of ACPL as it declared Rs.3.25 dividend per share inFY09 on account of better profits earned compared to the last year.Though, it also retained much of its profits as ACPL is anticipatinghigher demand from regional markets so it would be used to financefurther projects in the future.

The dividend per share was Rs.4.50 in FY07 that reduced to Rs.1.50 inFY08 due to lower profitability owing to lower margins but just tosatisfy the shareholders company provided the dividends when thelocal cement industry was in a difficult phase due to lower domestic

demand with oversupply and lower prices resulted in poor liquidityposition and losses incurred. BWCL had not provided any dividends inFY09.

SHARE VALUE

As a result of poor economic conditions in Pakistan during FY09, thestock market did not perform well witnesses the fall in share prices of

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almost all sectors; similarly the market vale of ACPLs share was alsoconstant despite the increase in earnings during FY09. However, duringFY08 the share price fell drastically to Rs.69.25 from Rs.118.25 duringFY07. The share price of BWCL was mush lesser than ACPL.

PRICE TO EARNING RATIO

The price earning ratio of the company has been very volatile with thechanges in market value and does not depict a true picture regardingthe investor confidence on the company.

DIVIDEND YIELD

Dividend yield of the company decreased in FY08 as compared to FY07as ACPL announced lower dividends however the market price ofshares also declined in the year. ACPL increased the amount of

dividends in FY09 ultimately improved the dividend yield compared tothe last year.

DISTRIBUTION OF TOTAL REVENUE

67%

17%

7%

8% 1%

Cost of sales

Operating expenses

Retained profit

Corporate taxes

Financial charges

3.6 Porters five forces model

THREAT OF SUBSTITUTE

There is no substitute of cement so the threat remained low since past

years.

BARGAINING POWER OF SUPPLIERS

Cement industry requires materials in an unrefined form. The basiccomponent of cement is limestone which is extracted directly fromridges and exists in a colossal quantity in Pakistan. Thus the bargainingpower of suppliers of limestone is low. In addition, the bargaining

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power of the suppliers of power and fuel is low as they cannot exerttoo much pressure upon ACPL because it uses coal as an alternateresource of fuel. As coal is traded in an open market so its suppliershave a low bargaining power they have to sell according tointernational prices.

BARGAINING POWER OF CUSTOMERS

The strength of customers depends on survival factors and the numberof customers. The cement industry of Pakistan is widely spread andhas a large number of customers who buy in small quantities.However, commercial use of cement is increasing and the switchingcost of customers is also low so their bargaining power goes up.Generally the price awareness of small customers is low and quality ofcement cannot be measured, moreover, the cartelization betweencement manufacturers further reduced the bargaining power.

THREAT OF NEW ENTRANTS

The barriers of entry in the cement industry are high because there are27 listed companies at stock exchange that are already engaged andhave developed a strong brand loyalty and well-established distributionnetworks. The cement industry has benefited a lot by shifting towardsdry process, installation of electrostatic precipitators and pre-heaters,automation of processes and installation of online analyzer which hasresulted in environmentally better and energy-efficient industry on theother hand high capital is required to enter in such situation.

RIVALRY AMONGST COMPETITORS

All the manufacturers have expanded their production capacities thatcreated an over supply situation in the country and now every firmtrying to get more market share in the presence of lower demand dueto reduced construction activities. Many of the companies are equallybalanced. There is oligopoly in cement sector in Pakistan. Therefore,the rivalry is very high. Now apart from the local competition manyfirms are competing for the regional market share and trying toexplore new markets for better retention keeping in view their

production capacity.

3.7 SWOT Analysis

STRENGHTS

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It is one of the most cost efficient companies in the industry.Cost efficiencies due to fuel-efficient plants and economies ofscale are the major reasons for this trend.

The company holds a strong position in the northern region,which caters to 80% of the total demand.

The sound market reputation of the company ACL claims pioneer status in bringing the pre-calcinations/pre-heating

dry process technology to Pakistan

Decreasing level of debt every year

Maximum returns to shareholders (www.kse.com.pk)

ACPL has managed to develop brand loyalty among itscustomers

Superior quality (Saad Hassan, 2010)

Management quality remains its core strength

WEAKNESSES

ACPL has faced some hindrances in the export of cement as itstransportation and loading facility is not too good.

The cost of manufacturing is too much dependant on energycosts; consists more than 60% of fuel and power.

OPPORTUNITIES

With the newly installed capacity, the company will be able tobenefit from greater exports.

A substantially higher Public Sector Development Programme(PSDP) allocation and development-oriented foreign assistanceduring 2009-10 will result in some improvement in the domesticdemand of cement. (Ijaz Kakakhel, 2010)

The State Bank has recently announced reduction in interestrates to stimulate growth in the industry. (Babar Farooq, 2010)

ACPL would be a high beneficiary in case of construction of damsin the country as it produces Portland Blast Furnace Slag Cementwhich is specifically used in construction of dams. (Appendix-B)

The company plans to takeover relatively weaker Al-Abbascement; this will give an edge to ACPL (Wasi Mehdi, 2010)

There is a hope for cement sector on the international front.Regional shortage of cement has presented a favorableopportunity for the cement manufacturers. (Global cement,2009)

THREATS

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Severe energy shortages (Hussain, 2010)

The declining GDP and volatile economic situation may restrictthe construction activities and may hit the demand for cement.(Jang, 2009)

Though the Government has announced a very ambitious PSDP

but because of poor law and order situation and the currentfinancial constraints of the government, the spending may not bematerialized to its fullest extent. (Arif Ahmad, 2009)

Higher coal prices

Depreciation of Pakistani Rupee against dollar

4. CONCLUSION AND SUGGESTIONS

THE COMPANY

The company was incorporated in Pakistan on October 1981 as apublic limited company and is listed on Karachi Stock Exchange. Itsmain business activity is manufacturing and sale of cement.

THE INDUSTRY

The marginal growth in cement industry during FY09 was achieved dueto higher exports. The local demand registered negative growth of 14%due to less construction activities, however, the cement prices both atlocal and international level increased during the year.

PROFITABILITY ANALYSIS

Looking at the overall position of this company, it can be concludedthat ACPLs sales grew in all three years. The company performedbetter in FY09 as compared to FY08 as its profitability positionimproved in terms of higher gross and net margin due to increasedselling prices and quantity sold that were witnessed as a result oftremendous growth in sales revenue, but during FY08 the position wasweakened as there was a surge in cement production capacity by allmanufacturers that created the oversupply situation in the country.Prices were stable; ACPLs sales grew with slower pace due to increase

in quantity sold during FY08. Despite the growing sales, the net profitwent down drastically due to increased costs of production (overallincreases in fuel costs and higher interest rates). BWCLs sales grew ata staggering rate as compared to its competitor, however, its grossmargin was not materially different from that of ACPL. Net margin waslower than ACPL basically because of higher finance costs. ROCE is lessbecause of issuance of shares.

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LIQUIDITY ANALYSIS

The minimum requirement of current ratio is at 2:1 but ACPLs ratiolingers above this requirement in FY09 due to huge short-terminvestments. The ratio was also stable in FY08 and FY07. The quick

ratio fell in FY08 due to higher inventory level whereas it improved inFY09. Stock management has been managed in all years owing to thefuture demand of cement in an efficient way and as most of the salesare done on cash basis debtor days were also on a lower side. Creditordays seemed to be on the higher side in FY08 as a result of weakenedprofitability but again managed considerably during FY09. BWCL haslesser liquidity because of higher short-term borrowings. Activity ratiosare not materially different from ACPL.

DEBT-TO-CAPITAL STRUCTURE

Expansions were done through equity and debt-finance in the pastyears. Although previous long-term loans are being repaid throughinternal cash flows, hence the company registered a lower debt-to-equity ratio during the years under comparison. Interest cover was alsoso much improved in FY07 due to higher operating profits anddeclining finance costs. BWCL has higher gearing because of loans forits expansion.

VALUATION ANALYSIS

ACPLs earning per share, dividend per share improved in FY09

compared to the last as result of higher profits but the share priceremained constant due to weakening market situation in the year.Dividend yield also improved in FY09 compared to last year. ACPLsperformance was much impressive than its rival company BWCL duringFY09.

FIVE FORCES MODEL

There is also no threat of substitutes and the bargaining power ofsuppliers and customers is also low. After analyzing factors it can beconcluded that competitive rivalry for ACPL is high. Also, as strength of

barriers to entry shows the threat of new entrants to the market is low.

SWOT ANALYSIS

ACPL is utilizing its strengths and opportunities, and also trying tomitigate the threats and weaknesses to make its position stronger.

SUGGESTIONS

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The company is performing well for the financial point of view. ACPLsdistribution channels are also effective, but it should pay greatattention towards the transportation and loading side for exportingcement and also take some steps to reduce its costs so that better

margins can be achieved. The cement industry is in a dire need ofgovernment support in the development of local coal mines andthereby reduces the dependence on imported coal.

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APPENDIX A: REFERENCING ANDBIBLIOGRAPHY

Anon. (n.d.) Project objectives, [Online]

http://www.mariosalexandrou.com/definition/project-objective.asp

Anon. (n.d.) Profitability ratios, [Online]http://kbr.dnb.com/help/Ratios/Profitability_Ratios.htm

Lester E. Heitger, Serge Matulich. (1987) Managerial Accounting,2nd Edition, McGraw Hill.

BPP (2008) P3 Business analysis, ACCA syllabus UK: BPPpublications.

Shane Johnson (06 Jun 2005), How not to rap, StudentAccountant, ACCA publications, UK

Anon. (n.d.) Primary sources, [Online]http://www.graphic.org/resources.html

Anon. (n.d.) Ratios, [Online]http://www.investopedia.com/terms/r/ratioanalysis.asp

Anon. (n.d.) Limitations of ratios, [Online]http://www.netmba.com/finance/financial/ratios/

Anon. (n.d.) Limitations of ratios, [Online]http://www.financialmodelingguide.com/financial-ratios/financial-ratio-limitations

Anon. (n.d.) Limitations of ratios, [Online] http://www.college-cram.com/study/help/weblog/ratio-analysis-concept-and-

limitations Anon. (n.d.) Limitations of ratios, [Online]

http://www.investopedia.com/exam-guide/cfa-level-1/financial-ratios/uses-limitations-ratios.asp

Michael E. Porter (1980), How Competition Forces ShapeStrategy, Harvard Business Review, SepOct 1980, USA

FTC (2008) P3 Business analysis, ACCA syllabus UK: Kaplanpublications.

Adams, J. (2005),Analyze Your Company Using SWOTs, SupplyHouse Times, Vol. 48 Issue 7, pg. 26-28.

Anthony Henry. (2008) Understanding Strategic Management,pg. 120, Oxford University Press, New York, USA.

The Dawn (2009) Business: Pakistans economic growth weak,The Dawn, Monday, 10th August, Karachi.

Staff reporter (2009) Business news: brief recordings, BusinessRecorder, 09the June, Karachi.

ACPL (2009) Company products, [online]http://www.attockcement.com/

26
http://www.mariosalexandrou.com/definition/project-objective.asphttp://www.mariosalexandrou.com/definition/project-objective.asphttp://kbr.dnb.com/help/Ratios/Profitability_Ratios.htmhttp://www.graphic.org/resources.htmlhttp://www.investopedia.com/terms/r/ratioanalysis.asphttp://www.netmba.com/finance/financial/ratios/http://www.financialmodelingguide.com/financial-ratios/financial-ratio-limitationshttp://www.financialmodelingguide.com/financial-ratios/financial-ratio-limitationshttp://www.college-cram.com/study/help/weblog/ratio-analysis-concept-and-limitationshttp://www.college-cram.com/study/help/weblog/ratio-analysis-concept-and-limitationshttp://www.college-cram.com/study/help/weblog/ratio-analysis-concept-and-limitationshttp://www.investopedia.com/exam-guide/cfa-level-1/financial-ratios/uses-limitations-ratios.asphttp://www.investopedia.com/exam-guide/cfa-level-1/financial-ratios/uses-limitations-ratios.asphttp://www.attockcement.com/http://www.mariosalexandrou.com/definition/project-objective.asphttp://www.mariosalexandrou.com/definition/project-objective.asphttp://kbr.dnb.com/help/Ratios/Profitability_Ratios.htmhttp://www.graphic.org/resources.htmlhttp://www.investopedia.com/terms/r/ratioanalysis.asphttp://www.netmba.com/finance/financial/ratios/http://www.financialmodelingguide.com/financial-ratios/financial-ratio-limitationshttp://www.financialmodelingguide.com/financial-ratios/financial-ratio-limitationshttp://www.college-cram.com/study/help/weblog/ratio-analysis-concept-and-limitationshttp://www.college-cram.com/study/help/weblog/ratio-analysis-concept-and-limitationshttp://www.college-cram.com/study/help/weblog/ratio-analysis-concept-and-limitationshttp://www.investopedia.com/exam-guide/cfa-level-1/financial-ratios/uses-limitations-ratios.asphttp://www.investopedia.com/exam-guide/cfa-level-1/financial-ratios/uses-limitations-ratios.asphttp://www.attockcement.com/


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Daily Times (2009) Pakistan ranked 5th in cement exports,surpasses Germany, Daily Times, 01st August, Karachi.

All Pakistan Cement Manufacturers Association (2009) Cementindustry, [online]http://www.apcma.com/pages/data_monthly.html

Muhammad Rehan Khan (2009) Analyst report: Cement industryof Pakistan, First Capital Equities Limited, 11th July Karachi.

Irfan Malik. (2008) Cartel increases cement prices, The Nation,22nd November, Lahore.

Daily Times (2009) Local cement demand fell 13 percent inFY09, Daily Times, 11th July, 2009, Karachi.

Monem Farooqi. (2008) Cement sector to face rising costs,slowdown in demand in FY09, The Nation, 10th July, Lahore.

KSE (2009) Strengths, [online] http://www.kse.com.pk/listing-companies/docs/comp_annual_rep/2009

Saad Hassan (2010) Business news: Attock cement,The News

International, 31st March, Karachi.

Ijaz Kakakhel (10th Jan 2010) Business: Government projectsRs.300billion PSDP utilisation for FY 2009-10. Sunday DailyTimes.

Babar Farooq. (2010) Analyst report: Domestic cement demandwill grow IGI Securities.

Wasi Mehdi. (2010) Analyst report: ACPL eyeing Al Abbas, InvisorSecurities, 31st March.

Global cement (2009) High cement demand in Iraq andAfghanistan, Global Cementmagazine for the month of March,

2009. Hussain Ahmed Siddiqui (May 03 2010) Business magazine

Economic and Business Review. Karachi.

Jang (2010) Trading news: stock market pressure andinvestment declined. The daily Jang Lahore. 21st April.

Arif Ahmad (2009) Analyst report: PSDP in 2009-2010 budget,Guardian Securities Pvt Limited, 11th August, Lahore.

Annual reports of Attock cement Pakistan Limited for the yearending June 2007, 2008 and 2009.

Annual report of Bestway Cement Company Limited (CompetitorCompany) for the year ending June 2009.

Andrew E. Schwartz (24th March, 2010) Ready set present, A.E.Schwartz & Associates of Boston [online]http://www.readysetpresent.com/products/articles/managingmeetings.htm

Anon. (n.d.) Research questions,http://geography.uoregon.edu/amarcus/geog620/Readings/handout-researech.pdf

27
http://www.apcma.com/pages/data_monthly.htmlhttp://www.kse.com.pk/listing-companies/docs/comp_annual_rep/2009http://www.kse.com.pk/listing-companies/docs/comp_annual_rep/2009http://www.readysetpresent.com/products/articles/managingmeetings.htmhttp://www.readysetpresent.com/products/articles/managingmeetings.htmhttp://geography.uoregon.edu/amarcus/geog620/Readings/handout-researech.pdfhttp://geography.uoregon.edu/amarcus/geog620/Readings/handout-researech.pdfhttp://www.apcma.com/pages/data_monthly.htmlhttp://www.kse.com.pk/listing-companies/docs/comp_annual_rep/2009http://www.kse.com.pk/listing-companies/docs/comp_annual_rep/2009http://www.readysetpresent.com/products/articles/managingmeetings.htmhttp://www.readysetpresent.com/products/articles/managingmeetings.htmhttp://geography.uoregon.edu/amarcus/geog620/Readings/handout-researech.pdfhttp://geography.uoregon.edu/amarcus/geog620/Readings/handout-researech.pdf


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Anon. (17th August 2009) Interpersonal skills, [online]http://www.cba.uni.edu/buscomm/Interpersonal/interpers.html

www.google.com.pk

http://www.accaglobal.com/students/bsc/rap/

28
http://www.cba.uni.edu/buscomm/Interpersonal/interpers.htmlhttp://www.google.com.pk/http://www.cba.uni.edu/buscomm/Interpersonal/interpers.htmlhttp://www.google.com.pk/


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APPENDIX B: QUESTIONNAIRE

1. Please provide a brief introduction of ACPL?2. Name the products of company it manufactures?3. What is the brand name of the company?

4. What are the reasons of lower demand in the country?5. What are the future expectation regarding local cement

demand?6. What are the future plans of ACPL?7. Please provide production and sales figures of ACPL (in

Tons) for last five years?

RESPONSE

1. ACPL was incorporated in 1981 as a public limited company. It islisted on the Karachi Stock Exchange. The Attock Cement projectwas a Pak-Saudi venture. The project was completed and the plantstarted commercial production on 1st June 1988. It is a part ofPharaon Group as the Pharaon Commercial Investment CompanyLimited has a majority stake of 84.06% in ACPL.

2. ACPL introduced the pre-calcination/pre-heating dry processtechnology in Pakistan. ACPL manufactures three types of cement:Ordinary Portland Cement which is used in general construction;Sulphate Resistant Cement is suitable for construction in sea ornear coastal areas and Portland Blast Furnace Slag Cement formassive constructions e.g. dams and canals. The company alsoproduces specially formulated mixes of cement to meet thedifferent customer requirements.

3. It markets its cement under the brand name of 'Falcon Cement.' Thecompany focuses on meeting the Pakistan and international qualitystandards and in 2002 it achieved the ISO 9001: 2000 certification.A visible slowdown has been observed in the local demand.

4. The main reasons behind this slowdown were the poor law andorder situation and political turmoil in the country. Anothersignificant reason for this slowdown is increase in overallconstruction cost due to higher inflation and interest rates.

5. It is anticipated that the local demand would continue to remainunder pressure because of higher interest rates and poor law andorder situation currently prevailing in the country. The export

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markets, in terms of prices, would remain sensitive because of stiffcompetition from regional capacities. Given cement status ascommodity in the regional countries, it can be assumed that anystruggle for market share will have to be conducted in term ofprices.

6. The key strategic factor is to sustain the business growth and toexplore more and more new markets for our products. Thegeographic location of our country is ideal for export in the regionand with the availability of surplus capacity we have potential forearning sizeable foreign exchange. We have seen a tremendousexport growth that has recognized Pakistan as potential cementexporting country. With the availability of infrastructure facilities atport the country has the potential to export 15million tons ofcement and clinker.

7.2009 2008 2007 2006 2005

Cement production(Tons)

1,712,665

1,364,511

1,234,878 842,296 728,487

Cement sales (Tons) 1,719,162

1,359,487

1,228,793 843,137 730,704

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APPENDIX C: RATIOS

ACPL ACPL ACPL BWCL

FY07 FY08 FY09 FY09PROFITABILITY ANALYSIS

Net Turnover (Rs.million)

4,560 5,001 8,510 14,814

Sales growth 31.29% 9.67% 70.16% 97.86%

Gross profit margin 34.10% 22.27% 31.83% 32.19%

Net profit before taxmargin

26.16% 13.49% 23.37% 8.13%

Return On Capitalemployed/ROCE

18.11% 10.00% 27.63% 4.95%

LIQUIDITY ANALYSISCurrent ratio 1.26:1 1.51:1 2.43:1 0.64:1

Acid test ratio 0.65:1 0.45:1 1.36:1 0.26:1


Debtor collection days 2days 3days 2days 14days

Creditor payment days 24days 40days 18days 11days

Inventory holding days 33days 38days 38days 26days

DEBT TO CAPITALSTRUCTURE

Debt to capital ratio 22:78 18:82 11:89 58:42

Interest cover12.65times

5.41times 17.71times

1.52times

VALUATION ANALYSIS

Earnings per share Rs.11.04 Rs.6.03 Rs.20.69 Rs.3.17

Dividend per share Rs.4.50 Rs.1.50 Rs.3.25 0

Share value Rs.118.25 Rs.69.25 Rs.70.36 Rs.28.00

Price to earnings10.71times

11.48times

3.40times 8.83times

Dividend yield3.80% 2.17% 4.61%

0

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APPENDIX D GRAPHSDISTRIBUTION OF TOTAL REVENUE

67%

17%

7%

8% 1%

Cost of sales

Operating expenses

Retained profit

Corporate taxes

Financial charges

NET SALES

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

2005 2006 2007 2008 2009

YEAR

MILL

ION

PROFIT BEFORE TAX

0 500 1000 1500 2000 2500

2005

2006

2007

2008

2009

YEA

MILLION

CURRENT ASSETS

837

575

12851480

2762

0

500

1000

1500

2000

2500

3000

2005 2006 2007 2008 2009

YEAR

MILLION

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APPENDIX E: FINANCIAL STATEMENTS

Balance Sheet

As at June 30,

2009 2008 2007

(Rupees '000')

Share Capital and ReservesAuthorized capital 125,000,000 ordinaryshares of Rs 10 each

1,250,000

1,250,000

1,250,000

Issued subscribed and paid up capital721

,629721

,629721

,629

Unappropriated profit

4,04

3,176

2,784

,754

2,67

4,462

Hedging reserve13

,06225

,196 (47)4,77

7,8673,531,579

3,396,044

NON-CURRENT LIABILITIES

Liabilities against assets subject to financeleases - 109

Long term murabaha422

,500622

,500822

,500

Deferred taxation

636

,870

736

,449

554

,2131,05

9,3701,358,949

1,376,822

CURRENT LIABILITIES

Trade and other payables856

,330767

,579819

,785

Accrued markup8

,91412

,73114

,413

Current maturity of liabilities against assets

-

Subject to finance leases

70

,320 109

1

,076

Current maturity of long term murabaha200

,000200

,000177

,5001,13

5,564980

,4191,01

2,7746,97

2,8015,87

0,9475,78

5,640

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NON CURRENT ASSETS

Fixed assets4,14

3,5344,333,363

4,443,222

Long term investment4

,5004,

5004

,500

Long term loans and advances19

,4389,

7759

,912

Long term deposits42

,98042

,98042

,9804,21

0,4524,390,618

4,500,614

CURRENT ASSETS

Stores, spares and loose tools599

,605622

,758348

,714

Stock-in-trade613

,934409

,498276

,428

Trade debts - considered good46

,48549

,79919

,897

Loans and advances26

,20821

,21335

,099

Short-term deposits and prepayments12

,36210

,3512

,894

Interest accrued7

,6762,

1542

,154

Other receivables26

,98849

,40323

,489

Taxation

-183

,950107

,073

Investments at fair value through profit or loss557

,26520

,246203

,502

Cash and bank balances871

,826110

,957265

,7762,76

2,3491,480,329

1,285,026

6,972,801

5,870,947

5,785,640

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Profit and Loss Account

For the year ended June 30,

2009 2008 2007(Rupees

'000')

Net Sales8,510,

0715,001,

3504,560,

402

Cost of sales5,801,

0993,887,

1473,005,

726

Gross profit2,708,

9721,114,

2031,554,

676

Distribution cost

437,

194

124,

744

83,

360

Administrativeexpenses

182,420

133,582

110,701

Other operatingexpenses

147,402

54,841

88,465

Other operatingincome

166,533

27,840

23,299

Operating profit2,108,

489828,

8761,295,

449

Finance cost119,

763153,

909102,

072

Profit before taxation1,988,

726674,

9671,193,

377

Taxation495,

775239,

942396,

944

Profit after taxation1,492,

951435,

025796,

433

Profit and Loss Account

For the year ended June 30,

FORMULAE:

2009 2008 2007

(Rupees '000')

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Net Sales 8510071 5001350 4560402

Cost of sales 5801099 3887147 3005726

Gross profit=SUM(B8-

B10)=SUM(C8-

C10)=SUM(E8-

E10)

Distribution cost 437194 124744 83360

Administrativeexpenses 182420 133582 110701

Other operatingexpenses 147402 54841 88465

Other operatingincome 166533 27840 23299

Operating profit 2108489 828876 1295449

Finance cost 119763 153909 102072

Profit before taxation 1988726 674967 1193377

Taxation 495775 239942 396944

Profit after taxation=SUM(B26-

B28)=SUM(C26-

C28)=SUM(E26-

E28)

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