Financial Analysis of DG Khan Cement Factory Ratio Analysis

Financial Analysis of DG Khan Cement Company Ltd.
Preface
As the world is growing rapidly, the businesses are also moving to

become the huge one. And by that result, more and more people want to
become a master in these businesses. The main purpose in the finance
field is to know how the financial analysis is done. We all know that
finance is the blood of any business and without it no business can run.
Financial analysis of a company is very difficult and the most important
task and by doing this I am able to know the whole financial position and
financial structure of the company.
Simply by looking at how much cash a company has does not provide
enough information. The financial statements need to be analyzed to
measure a companys performance and to compare it with other firms in
the same industry. The resulting information is intended to be useful to
owners, potential investors, creditors, analysts, and others as the
analysis evaluates the past performance, future potential and financial
position of the firm.
This report is an analysis of financial statements of D.G. Khan Cement
Company Ltd. This report has been prepared with an objective to develop
analytical skills required to interpret the information (explicit as well as
implicit) provided by the financial statements and to measure the
companys performance during the past few years. The financial
statements are analyzed using traditional evaluation techniques such as
horizontal analysis, vertical analysis and trend analysis. Ratios are an
important tool in analyzing the financial statements & the companys
profitability, solvency & liquidity. Sincere attempts have been made to
make this report error free but if any errors and omissions are found then
I apologize for that.
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Acknowledgement
In the name of Allah, the most beneficent and merciful who gave us
strength and knowledge to complete this report. This report is a part of
our course Financial Statement Analysis. This has proved to be a great
experience. I would like to express our gratitude to our Finance teacher
Mr. Waseem Rabani who gave us this opportunity to fulfill this report. We
would also like to thank our colleagues who participated in a focus group
session. They gave us many helpful comments which helped us a lot in
preparing our report.
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Table of Contents
Preface..................................................................................Error! Bookmark not defined.
Acknowledgement................................................................................................................ 2
Table of Contents.................................................................................................................. 3
Introduction........................................................................................................................... 5
Mission Statement............................................................................................................. 5
Vision Statement...............................................................................................................5
D.G. Khan Cement Company Limited...............................................................................5
NISHAT GROUP............................................................................................................ 5
D.G. Khan Cement Company........................................................................................6
Acquisition of DGKCC by Nishat Group.........................................................................6
Capacity Addition........................................................................................................... 6
Expansion -Khairpur Project..........................................................................................6
Power Generation..........................................................................................................7
Environmental Management..........................................................................................7
BOARD OF DIRECTORS..............................................................................................7
Why cement sector for our project.....................................................................................7
INDUSTRY REVIEW.......................................................................................................... 10
Overview of income statement............................................................................................11
Overview of Balance sheet.................................................................................................11
Liquidity Position with Graphical Presentation....................................................................12
Liquidity Position............................................................................................................. 12
Activity Ratios.................................................................................................................. 13
Operating Cycle.............................................................................................................. 14
Debt Ratios..................................................................................................................... 15
Profitability Ratios........................................................................................................... 16
PROFITABILITY - FINANCIAL YEAR 2002 TO FINANCIAL YEAR 2008.....................17
Assets Utilization............................................................................................................. 18
Return on Investment......................................................................................................19
Return on total equity...................................................................................................19
Investment Ratios........................................................................................................... 20
Univariate Model................................................................................................................. 23
Multivariate Model............................................................................................................... 24
DuPont Analysis.................................................................................................................. 26
SWOT ANALYSIS............................................................................................................... 27
Strengths......................................................................................................................... 27
Weaknesses.................................................................................................................... 30
Threats............................................................................................................................ 31
Opportunities................................................................................................................... 33
Recommendations.............................................................................................................. 36
International Trend.......................................................................................................... 37
FUTURE OUTLOOK.......................................................................................................38
Annexure............................................................................................................................ 40
Summarized Income Statement......................................................................................40
Summarized Balance Sheet............................................................................................44
Horizontal Analysis of Income Statements......................................................................45
Vertical Analysis of Income Statements...........................................................................45
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Table of Contents
Horizontal Analysis of Balance Sheet..............................................................................46
Vertical analysis of balance sheet...................................................................................47
Liquidity Ratios................................................................................................................ 49
Long Term Debt Paying Ability.........................................................................................51
Profitability Ratios........................................................................................................... 52
Assets Utilization............................................................................................................. 52
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Introduction
Mission Statement
To provide quality products to customers and explore new markets to promote/expand sales
of the Company through good governance and foster a sound and dynamic team, so as to
achieve optimum prices of products of the Company for sustainable and equitable growth
and prosperity of the Company.
Vision Statement
To transform the Company into modern and dynamic cement manufacturing company with
qualified professionals and fully equipped to play a meaningful role on sustainable basis in
the economy of Pakistan.
D.G. Khan Cement Company Limited

NISHAT GROUP
Nishat Group is one of the leading and most diversified business groups in South East Asia.
With assets over PRs.300 billion, it ranks amongst the top five business houses of
Pakistan. The group has strong presence in three most important business sectors of the
region namely Textiles, Cement and Financial Services. In addition, the Group has also
interest in Insurance, Power Generation, Paper products and Aviation. It also has the
distinction of being one of the largest players in each sector. The Group is considered at par
with multinationals operating locally in terms of its quality of products & services and
management skills.
Mian Mohammad Mansha, the chairman of Nishat Group continues the spirit of
entrepreneurship and has led the Group successfully to make it the premier business group
of the region. The group has become a multidimensional corporation and has played an
important role in the industrial development of the country. In recognition of his unparallel
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contribution, the Government of Pakistan has also conferred him with Sitara-e-Imtiaz, one
of the most prestigious civil awards of the country.
D.G. Khan Cement Company

D.G. Khan Cement Company Limited (DGKCC), a unit of Nishat group, is the largest
cement-manufacturing unit in Pakistan with a production capacity of 5,500 tons clinker per
day. It has a countrywide distribution network and its products are preferred on projects of
national repute both locally and internationally due to the unparallel and consistent quality. It
is list on all the Stock Exchanges of Pakistan.
DGKCC was established under the management control of State Cement Corporation of
Pakistan Limited (SCCP) in 1978. DGKCC started its commercial production in April 1986
with 2000 tons per day (TPD) clinker based on dry process technology. Plant & Machinery
was supplied by UBE Industries of Japan.
Acquisition of DGKCC by Nishat Group

Nishat Group acquired DGKCC in 1992 under the privatization initiative of the government.
Starting from the privatization, the focus of the management has been on increasing
capacity as well as utilization level of the plant. The company undertook the optimization by
raising the capacity immediately after the privatization by 200tpd to 2200tpd in 1993.
Capacity Addition
To meet the increasing demand and to capitalize on its geographic location, the
management further expanded the capacity by adding another production line with a
capacity of 3,300 tons per day in year 1998. Design of the new plant is based on latest dry
process technology, energy efficient and environmental protection from particulate pollution
according to the international standards. The plant and machinery was supplied by M/s F.L.
Smidth of Denmark. As a result, DGKCC emerged as the largest cement production plant in
Pakistan with annual production capacity of 1,650,000 M tons of clinker (1,732,000 M.Tons
Cement) constituting about 10% share of the total cement production capacity of the
country. The optimization plan is still underway to increase the total capacity of the two units
to 6700 TPD by mid of 2005 from 5500 TPD at present.
Expansion -Khairpur Project

Furthermore, the Group is also setting up a new cement production line of 6,700 TPD
clinker near Kalar Kahar, Distt. Chakwal, the single largest production line in the country.
First of its kind in cement industry of Pakistan, the new plant will have two strings of preheater towers, the advantage of twin strings lies in the operational flexibility whereby
production may be adjusted according to market conditions. The project will be equipped
with two vertical cement grinding mills. The cement grinding mills are first vertical Mills in
Pakistan. The new plant would not only increase the capacity but would also provide
proximity to the untapped market of Northern Punjab and NWFP besides making it more
convenient to export to Afghanistan from northern borders.
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Power Generation
For continuous and smooth operations of the plant uninterrupted power supply is very
crucial. The company has its own power generation plant along with WAPDA supply. The
installed generation capacity is 23.84 MW.
Environmental Management
DG Khan Cement Co. Ltd., production processes are environment friendly and comply with
the World Banks environmental standards. It has been certified for Environment
Management System ISO 14001 by Quality Assurance Services, Australia. The company
was also certified for ISO-9002 (Quality Management System) in 1998. By achieving this
landmark, DG Khan Cement became the first and only cement factory in Pakistan certified
for both ISO 9002 & ISO 14001...
BOARD OF DIRECTORS
Mrs. Naz Mansha
Chairperson/Director
Mian Raza Mansha
Chief Executive/Director
Saqib Elahi
Director
Khalid Qadeer Qureshi
Director
Mohammad Azam
Director
Zaka ud din
Director
Inayat Ullah Niazi
Director & Chief Financial Officer
Why cement sector for our project

At the time of independence in 1947, only one or two units were producing grey cement in
the country. During the decade of 1948-58, the number of cement units increased to six.
During the Ayub era the economy started to grow and the construction activities underwent
a boom. To meet the growing demand of cement new units were set up. During the decade
of 1958-68, the number of cement units increased from 6 to 9. During the following period
of Zulfiqar Ali Bhutto all the industrial units, including cement industry, were nationalized,
therefore, no new unit was set up during 1971-77. During the period of General Zia-ul-Haq,
1977-88, denationalization of industrial units boosted the investments. Housing and
construction industries picked up and the demand for cement increased. Thus, the number
of cement units increased from 9 to 23 and finally 24.
The cement industry in Pakistan has become a long way since independence when country
had less than half a million tones per annum production capacity. By now it has exceeded
10 million tones per annum as a result of establishment of new manufacturing facilities and
expansion by existing units. Privatization and effective price decontrol in 1991-92 heralded
a new era in which the industry has reached a level where surplus production after meeting
local demand is expected in 1997.
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The cement industry is needed a highly important segment of industrial sector that plays a
pivotal role in the socio-economic development. Through the cement industry in Pakistan
has witnessed its lows and high in recent past, it has recovered during the last couple of
years and is buoyant once again.
There are total number of units are 23, from which 4 units are in the public sector while the
remaining 19 units are owned by the private sector. Two of the four units in the public sector
had to close down their operations due to stiff competition and heavy cost of production.
The cement plants are located in every province of Pakistan.
The province-wise distribution of cement plant is as under.
Providence
Punjab
Sindh
NWFP
Baluchistan
Total
Units
8
8
6
1
23
Capacity (Million Tons)

7.488
3.851
4.945
0.758
17.040
Three additional cement plants with installed capacity of over 2.1 million tons are in the final
stage of completion despite the available excess capacity in this sector. The following table
shows installation of new cement factories and expansion of the existing facilities during the
current decade.
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The industry is divided into two broad regions, the northern region and the southern region.
The northern region has over 87 percent share in total cement dispatches while the units
based in the southern region contributes 13 percent to the annual cement sales.
Name of company
Northern Region
Askari Cement
Askari cement
Bestway cement
D.G Khan cement
Fauji cement
Lucky cement
Maple Leaf cement
Pioneer cement
Sub-Total
Southern Region
Essa cement
Total
New/ Expansion
Year
Commission
of
New
Capacity
Created(Tons)
Expansion
New
New
Expansion
New
New
Expansion
New
1964
1996
1988
1988
1997
1996
1998
1994
945,000
630,000
1,039,500
1,039,500
945,000
1,260,000
1,039,500
630,000
7,528,500
Expansion
1988
315,000
7,843,500
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INDUSTRY REVIEW
The cement industry of Pakistan again set a new record and sold 30.112M tons during FY
2008 against 24.222M tons last year, with a growth of over 24%. During the period under
report the capacity utilization of the industry was 81% against 79% last year. The slight
increase in capacity utilization is due to the fact that during the year industry added another
6.5M tons of new capacity.
Pakistani Cement industry fully tapped the export prospects of cement and managed to
export hefty 6.610M tons against 2.797M tons last year. The cement manufacturers fully
poised to explore new export markets. Contrary to past, now the cement is being exported
not only to regional neighboring countries, rather Pakistani cement is finding its place in
South East Asian countries, Russia and in African countries as well.
Clouds of recession are hovering over the economy of Pakistan and having achieved
consecutive growth of over 6% in real GDP during last four years, economic growth slowed
down to 5.8% in FY 2008 against 6.8% recorded last year. Demand of cement is directly
related with prevailing economic conditions. During FY 2008 cement sales in the country
remained bleak due to uncertainty in political and economic front coupled with fading law
and order situation. Total sales in the country were 22.395M tons against 21.034M tons last
year, witnessing an increase of only over 6%. Dilemma of price war among the cement
manufacturers to find out the market share has badly affected the financial health of the
cement sector. In addition, all time high oil and coal prices coupled with expanding
inflationary trend in the country hit badly the cost of production. Going forward, monetary
tightening stance of the State Bank of Pakistan to curb inflation in the country posed
additional burden in the form of increased lending rates.
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Overview of income statement

Overview of Income statement
Sales
2008
12,445,996
Cost of sales
-10,530,723
Gross profit
Administrative expenses
Selling and distribution expenses
Other operating expenses
Other operating income
Profit from operations
Finance cost
Share of loss of associated companies
Profit\ Loss before tax
1,915,273
-111,658
-561,465
-581,913
847,344
1,507,581
-1,749,837
-8,674
-250,930
2007
6,419,625
4,387,640
2,031,985
-104,169
-65,122
(139,721
479,420
2,202,393
-467,759
-14,163
1,720,471
Taxation
197,700
-98,000
Profit\ Loss for the year

Basic earnings per share Rupees
Diluted earnings per share
-53,230
-0.21
1,622,471
6.43
6.43
2006
7,955,665
3,992,822
3,962,843
-121,953
-34,352
-191,850
294,114
3,908,802
-450,696
-9,573
3,448,533
1,030,078
2,418,455
10.37
9.14
2005
5,279,560
3,330,769
1,948,791
-76,480
-60,905
-93,786
707,692
2,425,312
-304,041
2004
3,882,756
2,497,262
1,385,494
-68,645
-38,560
-61,735
128,462
1,345,016
-224,601
2,121,271
1,120,415
-439,193
-325,922
1,682,078
9.12
7.82
794,493
4.31
3.78
Overview of Balance sheet

Overview of Balance sheet
2008
2007
2006
2005
2004
30528440
33923185
19268200
9317998
6317055
Non-current Liabilities
10250352
10430917
9020740
5642649
3020575
Current Liabilities
12899306
7390229
6015436
3055858
2376989
Non-current Assets
33835927
32529377
24394481
13819736
8833476
Current Assets
19842171
19214954
9909895
4196769
2881143
Capital and Reserve
Assets
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Liquidity Position with Graphical

Presentation
Liquidity Position
Liquidity Position
2008
2007
2006
2005
2004
Current Ratio
Acid Test Ratio
Cash Ratio
1.54
1.22
1.18
2.60
2.33
2.31
1.65
1.44
1.43
1.37
0.96
0.94
1.21
0.64
0.62
The liquidity position of DGKC deteriorated during the first nine months of FY'09. This was
due to a 40% decrease in current assets and a 14% increase in current liabilities if the
company. The current liabilities of the company increased due to 14% rise in trade
payables, 61% increase in accrued markup and around 7% increase in short term
borrowing by the company.
On the other hand, current assets of the company declined due to decrease in investments
from Rs 15 billion at the end of FY08 to Rs 7 billion at the end of March FY09. Also the cash
and bank balance of the company decreased by 22%. Thus, decrease in current assets and
a corresponding increase in current liabilities resulted in a less favorable liquidity position as
compared to that in FY08.
DGKC's liquidity stance had been strengthening since FY04 and in FY07 its liquidity
position was the most favorable. The increase in current assets had brought about this
change. There was a 98% increase in short term investments. Furthermore, the cash and
bank balances had also risen considerably.
In FY08 the current assets of the company declined slightly but a 63% rise in current
liabilities caused a decrease in the liquidity of the company. Investments constitute nearly
79% of the company's total current assets and they declined by 11% in FY08. The
investments decreased further from Rs 15 billion at year-end FY08 to Rs 10.9 billion by end
of 1Q09.
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Activity Ratios
Activity Ratios
Days Sales in
Receivables
Account
Receivables
Turnover
Account
Receivables
Turnover in Days
Activity
Ratio
Inventory
Turnover in
days
Inventory
Turnover
2008
2007
2006
2005
2004
13.57 days
8.20 days
3.40 days
5.27 days
4.95 days
41.02 times
58.78
times
105.79 times
81.94 times
73.78
times
8.89 days
6.20 days
3.45 days
4.45 days
4.94 days
2008
2007
2006
2005
2004
27.66 days
21.69 days
14.96 days
21.89 days
43.63 days
13.19 times
16.83 times
24.40 times
16.67 times
8.36 times
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Days Sales
in Inventory
45.08 days
24.55 days
20.68 days
11.07 days
43.63 days
Operating Cycle
Activity
Ratio
Operating
Cycle
2008
2007
2006
2005
2004
36.55days
27.89 days
18.41 days
26.34 days
48.58 days
Debt Ratios
Debt Ratios
2008
2007
2006
2005
2004
Debt to Tangible net worth
77
52
78
93
85
Debt To Equity Ratio
76
53
78
93
85
Debt Ratio
43
34
44
48
46
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The debt management ratios of DGKC showed a positive trend during FY07. The debt to
asset and equity ratios as well as the long-term debt ratio all receded during the period and
this reflected a reduction in the company's dependence on debt financing. However, during
FY08 the debt ratios of the company rose because the total debt increased in FY08 mainly
due to a 63% increase in the current liabilities which form 55% of the total debt.
Long term debt however decreased. The long term debt to equity increased because of a
decline in the equity base due to fall in reserves. The TIE ratio continued to fall in FY08
against a positive trend that prevailed before FY07. The reason is substantial rise in finance
charges due to high interest rates in the economy.
Also the operating income in FY08 decreased, thus reducing the extent to which operating
income can decline before the firm is rendered unable to meet its interest costs. Due to the
losses that DGKC experienced in FY08 and the decrease in profitability during July-March
FY09, its Earning per Share (EPS) and Price to Earning (P/E) Ratio have been negative.
During July-May 2009 the share price averaged around Rs 31.1.
This shows that the dismal profits of the company have started reflecting in the low investor
confidence and falling share price. The average share price of DGKC had hovered around
Rs 100/share except during the fourth quarter of FY08 when share price fell well below the
average. The management did not recommend any dividend for FY08 due to the dismal
profitability situation in the period.
Profitability Ratios
2008
2007
2006
2005
2004
Gross Profit Margin

Operating Profit Margin
Net Profit Margin
15
12
7.84
32
34
25
49
49
31
37
46
31
36
35
20
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After experiencing declining profitability during FY08, the cement sector came back strongly
to post a growth of 167% in earnings during first quarter (July-September) of fiscal year
2009. The cement sector posted profit after taxation of Rs 1.3 billion in first quarter of FY09
as compared to Rs 500 million in the corresponding period of a year earlier.
This growth was mainly due to higher local retention prices and depreciation of the rupee
against the dollar that resulted in an increase of rupee-based export sales. The net sales of
the cement sector in the period July-March FY09 was 58% higher than the net sales
generated during the corresponding period of FY08. It is believed that the profits of cement
companies increased due to an arrangement among them to keep prices high in the local
market.
However, higher sales revenue could not be translated into an increase in profits during the
period. Increased costs of sales, operating expenses and finance expenses caused the
profitability of DGKC to remain low during July-March FY09. The cost of sales of the
company increased by 30% during the period and resulted in a gross profit of Rs 3,733
million.
The furnace oil/coal costs for the period July-March FY09 was Rs 5,258.6 million as
compared to Rs 3,095.7 million during the corresponding period of FY08. The electricity
and gas costs were lower, however, the cost of raw material and packing material
consumed increased by 12%. The administration expenses increased by 31% while the
selling & distribution expenses increased drastically by 456% (from Rs 246 million in JulyMarch FY08 to Rs 1,370 million in July-March FY09).
Selling expenses may have increased due to higher transportation costs involved with
exports and higher fuel costs. Also, the finance costs increased substantially by 77% as
interest rates rose owing to tight monetary policy and liquidity crunch in the market.
These rising costs greatly hampered the profitability of the company and resulted in a profit
after taxation of Rs 321 million in the period July-March FY09, which is 34% lower than the
profit (Rs 487 million) during July-March FY08. Therefore, the earning per share (EPS) of
the company declined from Rs 1.92 in July-March FY08 to Rs 1.27.
Profitability - Financial Year 2002 to Financial Year 2008

The profitability ratios of the company have shown a declining trend since after FY05. The
gross profit margin increased in FY06 only to fall in FY07 and FY08. The profit margin of
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the company has decreased continuously along with return on assets (ROA) and return on
equity (ROE).
The profit after taxation had declined by 33% in FY07 due to lower net retention prices
caused by a supply overhang in the overall industry. Also the problem of rising input costs
had begun in FY07. This rise in cost of production and raw material have continued into
FY08 and further aggravated, causing the declining trend of the profitability of DGKC.
Despite a strong growth in cement dispatches, the cement sector experienced declining
profitability during FY08. The profitability of the sector fell by 73.6% to Rs 562 million till
March 2008 from Rs 2,133 million in the corresponding period of FY07. Although the sales
volume of the cement companies increased, the net sales revenue did not increase to an
equal extent due to decrease in net retention prices in the sector.
Over the years all cement manufacturers undertook huge capacity expansion plans. This
created a situation of excess supply in the market. Companies resorted to price wars
leading to a fall in prices and reduced the profit margins for the companies. The average
cement price during the period July-March FY08 was Rs 128.3 per bag as compared to Rs
133.6 per bag in the same period in FY07.
Similar was the case with DGKCC. Increased production facilitated higher sales volume
which in turn translated into almost doubling of sales revenue in FY08. The company had
earned the highest sales revenue of Rs 12.445 billion in FY08. However, despite this, the
gross profit of DGKC in FY08 (amounting to Rs 1.9 billion) was around 6% lower than the
gross profit posted in FY07 (Rs 2.0 billion).
The reason for lower gross profit was a 140% increase in the cost of sales during the fiscal
year. Major input costs increased and dampened the profitability of DGKC and resulted in a
loss after taxation of Rs 53.230 million in FY08 against a profit after taxation of Rs 1.622
billion in FY07. The cement manufacturers in the industry were faced with rising fuel and
power costs during FY08.
The cost of production for the cement companies went up due to rise in the prices of
imported coal. The cement companies in Pakistan have shifted from oil to coal or gas
during the past few years. Coal is now used as a basic fuel by all cement manufacturers.
Pakistan has huge reserves of coal, but cement companies are compelled to import it, as
local coal has high sulphur content.
Crude oil prices shot up during FY08 and had its impact on prices of coal and natural gas.
The rise in the costs of international coal prices has been one of the biggest reasons behind
the dampening of gross margins of cement companies during FY08. There was a nearly
50% rise in the coal prices in FY08
Along with the hike in the international coal prices, the depreciation of the rupee against the
dollar also added to the cost of importing coal. Finance charges rose due to higher interest
rates, long term finances, short term borrowing and inclusion of workers' profit participation
fund in FY08.
Assets Utilization
Asset Utilization
Sales to Fixed Assets
Return on Operating
Assets
Operating Asset
turnover
Return on Assets
2008
54
2007
43
2006
108
2005
80
2004
62
24
33
10
13
11
20
9.6
20
28
33
18.5
3.8
23
11
6.60
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The performance of DGKC in terms of asset management was weak during FY07. During
the year, the inventory turnover (days) of the company more than doubled compared to
FY06 when the management of inventory seemed most efficient (evident from the lowest
inventory turnover in days). This could be traced back to lower sales revenue for the period,
coupled with a higher stock of inventory.
At the same time, the average time taken by the company to recover cash from sales also
increased. The increase in inventory turnover in days and Days sales outstanding (DSO)
prolonged the operating cycle of the company in FY07.
However, in FY08 the asset management of DGKC improved as the inventory turnover rate
increased because the company earned sales revenue more in proportion to the increase
in inventory. Thus the days to convert inventory into sales became less (from approx. 100
days in FY07 to 79 days in FY08).
Although the days to convert sales into cash (DSO) increased slightly, the substantial
decrease in ITO (days) led to the shortening of the operating cycle in FY08. The days sales
outstanding was higher because the trade debt increased substantially (by 153%) during
FY08 as against sales.
Besides this the sales to equity and total asset turnover of the company which had a
declining trend till FY07 increased in FY08. The sales to equity ratio had been decreasing
because of an increase in the paid up capital. But the trend was reversed in FY08 because
the paid up capital remained same while the reserves fell, causing a decrease in the equity
base of the company.
Also higher growth in sales increased the sales/equity ratio. Total asset turnover also
improved because the management of the company's assets was effective in generating
higher sales revenue. The company's performance in the area has improved as full-scale
production from the newly inaugurated Khairpur plant has augmented the sales.
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Return on Investment
Return on total equity
Return
Ratios
Return on
Investment
Return on
Total Equity
2008
2007
2006
2005
2004
2.92
5.34
12.58
15.47
10.07
0.30
0.37
17
22
13
One of the most important profitability metrics is return on equity [or ROE for short]. Return
on equity reveals how much profit a company earned in comparison to the total amount of
shareholder equity found on the balance sheet. If you think back to lesson three, you will
remember that shareholder equity is equal to total assets minus total liabilities. It's what the
shareholders "own". Shareholder equity is a creation of accounting that represents the
assets created by the retained earnings of the business and the paid-in capital of the
owners. The return on Equity has decreased drastically and there is quite a hell of
decrement in ROE, which is not very much encouraging for the investors in shares.
Investment Ratios
Degree of financial leverage
Earning per common shares
Price earning ratio
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Investment ratios
Degree of financial leverage
Earning per common shares
Price earning ratio
2008
2007
2006
2005
2004
15.48
1.27
1.13
1.14
1.20
0.017
0.60
0.10
0.76
0.35
258.08
4.81
3.38
3.96
8.19
A leverage ratio summarizing the affect a particular amount of financial leverage has on a
company's earnings per share (EPS). Financial leverage involves using fixed costs to
finance the firm, and will include higher expenses before interest and taxes (EBIT). The
higher the degree of financial leverage, the more volatile EPS will be, all other things
remaining the same. Most likely, the firm under evaluation will be trying to optimize EPS,
and this ratio can be used to help determine the most appropriate level of financial leverage
to use to achieve that goal.
The companys ratio ha increased dramatically in the year 2008 by 15 times. So there is
quite a margin for company to get leveraged.
The portion of a company's profit allocated to each outstanding share of common
stock. Earnings per share serve as an indicator of a company's profitability.
Earnings per share are generally considered to be the single most important variable in
determining a share's price. It is also a major component used to calculate the price-toearnings valuation ratio. The EPS of company is fluctuating but in current year it has
decreed drastically which is not a good sign for share holders. An important aspect of EPS
that's often ignored is the capital that is required to generate the earnings (net income) in
the calculation. Two companies could generate the same EPS number, but one could do
so with less equity (investment) - that company would be more efficient at using its capital
to generate income and, all other things being equal would be a "better" company. Investors
also need to be aware of earnings manipulation that will affect the quality of the earnings
number. It is important not to rely on any one financial measure, but to use it in conjunction
with statement analysis and other measures.
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A valuation ratio of a company's current share price compared to its per-share earnings is
Price Earning ratio. In general, a high P/E suggests that investors are expecting higher
earnings growth in the future compared to companies with a lower P/E. However, the P/E
ratio doesn't tell us the whole story by itself. It's usually more useful to compare the P/E
ratios of one company to other companies in the same industry, to the market in general or
against the company's own historical P/E. It would not be useful for investors using the P/E
ratio as a basis for their investment to compare the P/E of a technology company (high P/E)
to a utility company (low P/E) as each industry has much different growth prospects.
The P/E is sometimes referred to as the "multiple", because it shows how much investors
are willing to pay per dollar of earnings. It is important that investors note an
important problem that arises with the P/E measure, and to avoid basing a decision on this
measure alone. The denominator (earnings) is based on an accounting measure of
earnings that is susceptible to forms of manipulation, making the quality of the P/E only as
good as the quality of the underlying earnings number.
Investment Ratios
Dividend payout ratio
Dividend yield ratio
Book value per share
Investment ratios
Dividend payout ratio
Dividend yield ratio
2008
2007
2006
2005
2004
19.83
23.62
48.31
28.37
27.74
7.68
4.90
14.23
7.17
3.38
18.74
20.87
16.62
7.80
5.29
Indicates the proportion of earnings that are used to pay dividends to shareholders.
A reduction in dividends paid is looked poorly upon by investors, and the stock price usually
depreciates as investors seek other dividend paying stocks
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.
A stable dividend payout ratio indicates a solid dividend policy by the company's board of
directors. The situation of DG Khan Cement Co. Ltd. Shows increment in 2006 but from
there is consistent decrement in this ratio by more than two times so company is trying to
build there retained earnings instead of giving dividend.
During bull markets the stock price is more likely to trade significantly higher than book
value, and in a bear market the two values may be close to equal. The dividend yield or the
dividend-price ratio on a company stock is the company's annual dividend payments
divided by its market cap, or the dividend per share divided by the price per share. It is
often expressed as a percentage. There is quite fluctuations in this ratio which shows there
is lack of stability in the company policy towards this section.
Now if we look at the book value per share, as we know that somewhat similar to the earnings per
share, but it relates the stockholder's equity to the number of shares outstanding, giving the
shares a raw value. Comparing the market value to the book value can indicate whether or
not the stock in overvalued or undervalued. During bull markets the stock price is more
likely to trade significantly higher than book value, and in a bear market the two values may
be close to equal.
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Univariate Model
1. Cash flow/Total debt
Year
2008
2007
2006
2005
2004
Calculation in (Rupees 000)

(641970)/23149658
475661/17821146
4190452/15036176
2484759/8698507
945521/8698507
Values
-2.773%
2.67
27.869
28.57
10.8
2. Net Income/Total Assets (Return on Assets)

Year
2008
2007
2006
2005
2004

25685/53678098
1622471/51744331
2418455/34304376
1682078/18016505
794493/11714619
Values
0.047%
3.13
7.05
9.34
6.78
3. Total debt/Total Assets (debt ratio)

Year Calculation in (Rupees 000)
2008 23149658/53678098
2007 17821146/51744331
Values
43.13%
34.44
2006 15036176/34304376
2005 8698507/18016505
2004 5397564/11714619
43.83
48.28
46.07s
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Multivariate Model
X1= Working Capital/Total Assets
Year
2008
2007
2006
2005

6942865/53678098
11824725/51744331
3894459/34304376
1140911/18016505
X1
12.934%
22.85
11.35
6.33
2004
504154/11714619
4.30
X2=Retained Earning/Total Assets

Year
2008
2007
2006
2005
2004

30202533/53678098
33923185/51744331
19259849/34304376
9317998/18016505
6317055/11714619
X2
56.27%
65.56
56.144
51.72
53.9
X3=EBIT/Total assets
Year
2008
2007
2006
2005
2004

1513505/53678098
2202393/5174
3908802/34304376
2425312/18016505
1345016/11714619
X3
2.82%
4.26
21.69
13.46
11.48
X4= Market value of equity/Book value of total debt

Year
2008
2007
2006
2005
2004

253541157*30.97/23149658
253541157*30.97/17821146
184393569*30.97/1503176
184393569*30.97/8698507
167630518*30.97/5397564
X4
339.19%
440.60
379.79
656.51
961.82s
X5=Sales/Total Assets
Page
Year
2008
2007
2006
2005
2004

12464347/53678098
6419625/51744331
7955665/34304376
5279560/18016505
3882756/11714619
X5
23.22%
124.79
23.19
29.30
33.14
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DuPont Analysis
1. Dupont Return on Assets=Net profit margin*Total assets turnover
Year
Calculation in (Rupees,000)
2008
2007
2006
2005
2004
7.84*0.24
0.25*0.15
0.31*0.74
0.31*0.35
0.20*0.33
Dupont Return on
Assets
1.88
3.75
22.94
10.85
6.60s
DuPont return on Assets has a decreasing trend. In 2008 net profit of co decrease due to
high cost of goods sold. Co does not utilize its assets properly in 2008. In 2007 trend of this
ratio is good. But in last 3 years it also has increasing trend.
2. DuPont returns on Operating Assets

Year
Dupont Return on
operating Assets
2008
2007
2006
2005
2004
DuPont return on Operating Assets decrease in 2008 as compare to 2007. Co utilizes its
operating assets in 2007 as compare to 2008. Co invests in more long term investments. It
is necessary for the co to change its policy.
Page
SWOT ANALYSIS
Strengths
1. Availability of Raw Material.
2. Imported Machinery and plants in most of companies, which provide better
quality to over all process.
3. During fiscal year 2007-08, country exports stood at 7.712 million tones ($435
million) and Pakistan has already established its position as an exporter of
cement and clinker in the region, Sources said the industry projections
suggested that the cement industry exports would reach to $735 million by the
end of 2008-09 and it would touch $1.043 billion by the end of 2009-10.
4. Availability of foreign investment and loans has also played an important role in
softening the demand for bank credit. The moderation in fixed investment
demand in cement, construction and textile is more of a reflection of the fact that
these industries had already expanded their capacities in recent years and
floatation of debt instruments (e.g., chemical, cement, real estate and ship yard)
in the domestic market cement, real estate and ship yard) in the domestic
market
5. The compressive strength is a very important factor of cement. The Portland
cement achieves its maximum strength in 28 days. The Pakistan standard PSS
232-1883 (R) & British Standard BS 12: 1978 provides for 28 days strength of
5000Psi and 5950Psi respectively for mortar cubes.
6. Cement industries in Pakistan are currently operating at their maximum capacity
due to the boom in commercial and industrial construction within Pakistan.
7. Effect of GDP
Following effects of GDP will govern the growth of cement industry in
Pakistan
1. Higher GDP growth has positive impact on cement demand
2. Cement demand growth rate was double the GDP growth rate in last
three years
3. GDP growth is expected to continue to have same positive impact on
demand growth
8. Housing demand to grow:
Following indications have showed a considerable demand of cement in
Pakistan:
Housing projects consume roughly 40% of cement demand
Currently 0.3mn houses are built annually against demand of 0.5mn
Low interest rates, post 9/11 remittances inflow, and real estate boom have
helped housing sector growth
Easy mortgage availability and announcement of low cost housing schemes will
determine housing sector growth in the long-run.
9. Governments development spending shall continue to rise due to:
Government development expenditures count for one third of total
cement consumption
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Increase in development expenditures has helped cement demand to

grow at very high rates
Increase in PSDP- as announced in Medium Term Development
Framework 2005-10 will help cement demand to grow in the country
Infrastructure development in a region triggers private development
projects having even positive impact on cement demand
10.Pakistan cement industry is one the largest exporter in Asia, major markets are
of Afghanistan and Iraq will be after peace. Its increased GDP by exports,
providing cements in Large Dams Project and earthquake rehabilitations
projects.
11.Laboratory testing facilities meeting all American and European standards and
Vertical cement grinding mills.
12. Cement industry called major Performance Blue Chip in current economic
survey 2007-08 because during the first three quarters of the fiscal year 200708, the combined paid-up capital of ten big companies was Rs. 91 billion, which
constituted 13.17 percent of the total listed capital at KSE in which Fauji
Fertilizer, DG Khan Cement, Lucky Cement played major role.
13. Today, we find a relatively better scenario as compare to past. Most of the
cement plants, that used to operate on furnace oil, have now been converted
into coal system, which has substantially reduced cost of production.
14. The most modern selection of production equipment possible in every major
department of the plant.
15. Cement export to India through railway
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Most of the cement export to India is through railway. In order to facilitate

cement export to India, the railways has doubled its cement capacity and
increase its frequency of trains to India from Pakistan. This step has
been taken by Pakistan Railways in order to increase cement export to
India. Which is regarded as a highly profitable market?
16. Use of Coal
Coal is found in all the four provinces of Pakistan. The country has huge
coal resources, about 185 billion tones, out of which 3.3 billion tones are
in proven/measured category and about 11 billions are indicated
reserves, the bulk of it is found in Sindh.
At present most of the cement companies have switch to coal or gas as

their basic fuel; the process has been completed in the last 6 to 7 years.
According to the data of the All Pakistan Cement Manufacturing
Association of mid-2007, the cost of cement production per tone by
furnace oil was around Rs2, 083 whereas the cost of production per tone
by coal was Rs8, 68, saving Rs1, 215 per tone. Similarly, the saving per
bag was Rs60.75, which is a huge difference. Reserves of coal can
become strength for Pakistani cement industry if Pakistan import sulphur
washing plant from European country than Pakistan cement industry is
able to utilize local coal to meet its energy requirement
17. Cheaper labor
The labor of Pakistan is very cheap. This is the important strength of the
cement industry as the cement companies of Pakistan has to pay less to
there labor which result in saving of there income which later on can be
utilized in the expansion of cement plant. Which will increase the cement
production?
18. Good Domestic and Foreign Market
The export may reach to $ 500 million increase during 2008. Data for the
first quarter of FY08 shows that Afghanistan is Pakistans largest cement
export market. The prospects for cement exports seem bright in the
medium term due to rising domestic as well as regional cement demand.
19. Good Government Policies
Government policies are in the favor of cement sector. Due to the

government favorable policies the cement sector gets the highest growth
rate of 21.11% among all the industries of Pakistan in year 2006-07. The
total industry installed capacity is expected to reach 49.1 million tons per
annum by FY10
20. High Quality of Cement
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Pakistan produces good quality of cement. This is the main reason due
to which recently Russia is offering high price for Pakistani cement.
Globally Pakistan is recognized for producing good quality of cement due
to which countries like Afghanistan, India, Middle East and some African
countries prefer to import cement from Pakistan.
Weaknesses
1. The stage of industrial development, in most of the segments, is still at a very low
level of technology and the existing industrial base is very narrow and consists of
very basic industries such as cement, sugar, textile, cigarette, edible oil, fertilizer,
soda ash, caustic soda, PVC etc.
2. Since cement is a specialized product, requiring sophisticated infrastructure and
production location. So, most of the cement industries in Pakistan are located
near/within mountainous regions that are rich in clay, iron and mineral capacity.
Structure of Cement industry in Pakistan is as such that there is not much
substitutability to buyers. Which shows that the Cross elasticity of demand is
negligible.
3. The customer has no choice at all to switch between two brands of cement due to
cartel of all of the cement manufacturers in Pakistan.
4. The freight charges are a massive 20% of the retail prices. The plants located very
close to each other and tapping the same market will have to expand their markets
which will increase their freight expenses. Dandot, Pioneer, Maple Leaf and
Garibwal are all located within a radius of 100 kilometers and are selling bulk of their
production in the same areas and will thus face serious competition from each other.
5. Consumers face a tough decision with regards to prefer which brand over which
because of the similar pricing of cement industry. The formation of cartel by the
cement manufacturers have exploited local consumers a lot and this has led to the
concentrated degree of oligopoly, where the firms are acting as a single unit to
perform their monopoly. Their combined market power is simply a diluted version of
the dominance that a single firm with a monopoly market share can exert.
6. Increase freight charges
Exporters of the cement often complain that railways freight charges for
carrying cement from Lahore city to the border of India are Rs500 per ton
($8 per ton) while it covers only 35 km. Against this, they say on the Indian
side, the freight is only $3 per ton for bringing goods from Chundrigar to the
border area. Cement exports have been badly hit by high fee that is being
charged by trucks and also by foreign shipping companies for the haulage of
cement from Pakistan to India. This increase in freight charges effect our
exports due to which our exports is declining
7. Logistic Problem
Page
Some of the cement companies of Pakistan have received orders from

Russia with a price tag of Rs 860 per bag. But our logistics is the biggest
hurdle in the way as our transportation system is not good enough to
transport cement to Russia due to which our cement companies might lose
the chance to capture the Russian market which is a highly profitable
market.
8. Usage of Paper bag
Pakistani cement companies export there cement in paper bags because

paper bags are cheap as compared to plastic bags. But the Cement
exported in paper bags is against the International standards and companies
have to pack the cement in plastic bag. The cement export to India could be
affected by the shortage of plastic bags used for transporting the commodity.
Although there are two companies that are manufacturing plastic bags for
cement but they are not able meet the demand. So thats why Pakistan
cement companies export cement in paper bags.
9. Idle capacity of various players:
The biggest problem of cement industry is the idle capacity of various

players. As many cement players are not operating at there full capacity.
Threats
1. Unanticipated increase in interest rates or less than expected demand growth might
create severe crises for the sector couple of years forward
2. Lack of demand or depressed demand in future will prove to be lethal for the sector
that has just started to recover from the miseries of 90s. Lack of demand forced
cement units to operate at very low capacity utilization in nineties. There was a
fierce competition among cement manufacturers.
3. A price war was witnessed which ended up with no conqueror. Similar
apprehensions exist for the future when there will be plenty of excess capacity. Any
hurdle in the growth of cement demand may force the sector into the price war. Yet,
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we expect cement manufacturers to act prudent and learn lesson from the history.
Any mistake, similar to the one made in the last decade, will again coerce the sector
into the era where all are losers with no winner.
4. Main component of the cost is fuel. Pakistan's cement industry has converted their
plants to coal considering it to be the cheapest fuel, but its price in international
markets has gone up by more than 300 per cent in the last one year, which directly
relate increasing the cost of production.
5. The demand of cement falls heavily during rainy weather in the country, which
directly affects the running cost of a unit. It is only the rising levels of cement
exports, which are sustaining the industry.
6. Instead of appreciating the marketing skills of cement entrepreneurs to explore new
markets for cement, the industry is being pressurized constantly without realizing
that any reduction in cement exports from Pakistan will not only deprive the country
of foreign exchange ($2 billion this year), but will also result in losses to the industry.
7. The burden of increased input costs has to be borne by the consumers. It is only the
government, which can provide relief to the consumers by cutting down or
abolishing the central excise duty.
8. Problems of oversupply situation:
Following problems might arise with the oversupply situation in cement industry:
Lower capacity utilization will reduce benefits of economies of scale.

High leverage will also adversely affect profitability of new plants.
New plants will gain market share at the cost of older players, which are
not undergoing expansion. Large idle capacity is will create panic in
players and this may result in price wars in the coming years.
9. IMF Package in Future can cause to decrease GDP and economical development in
Pakistan. Which will also be cause to stop development of infrastructure? So it will
have huge effect on cement industry also.
10. Indian and Iran industry is also expanding its cement capacity
Presently, India faces an acute cement shortage in its Southern states of

Tamilnado and Madras and in north Punjab. However, reports indicated that
the Indian industry is also working on a fast track to expand their
capacity in these regions to off-set the shortfall Major capacities
of countries like India and Iran are expected to come online by FY10 and
onwards which are likely to convert these countries from dependent
importers to potential exporters.
11. High energy prices
Recently cement industry of Pakistan is facing high energy prices due to

increase in the international prices of coal and oil. As our coal contain high
percentage of sulphur. Due to which Pakistan cement industry is not able to
use local coal as a source of energy. Due to which Pakistan cement industry
has to import coal from different countries at high prices. High finance and
depreciation cost as Pakistan cement industry is expanding its capacity to
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get the proper advantage of strong demand of cement in different countries.
The total industry installed capacity is expected to reach 49.1 million tons per
annum by FY10 and because of higher expansion finance and depreciation
cost is also going to rise by the FY10.
12. Decrease profitability due to competition in cement industry
The sharp decline in cement prices has been witnessed due to domestic
competition among producers has dampened the profitability of the industry.
This increase in competition among the players has further decreased the
prices of cement in the local market. The cement manufacturers decrease
the prices of there products in order to get high market as compared to its
competitor.
13. High level of taxation
Presently, the cement industry of Pakistan is heavily burdened due to levy of

Federal Excise Duty @ Rs. 750 per ton and General Sales Tax @ 15% on
duty paid value. In addition to Federal Excise Duty and General Sales Tax,
cement industry is also paying the provincial levies (Royalty and Excise
Duty) on acquiring of raw material for production of cement i.e. lime stone
and shall clay.
Opportunities
1. The local cement industry faces high upfront fuel costs. In order to facilitate their
conversion to coal, which is widely available in the country, the government has
given incentives for imported plant and equipment for coal firing units.
2. The demand of Pakistani cement is expected to continue to grow at the rate of 20
per cent for about four years to come. It may then follow traditional growth rate of
seven per cent per year. Announcement of major dams will dramatically increase
this demand.
3. Deregulation after accession of Pakistan to WTO is expected to open the window of
competition from cheaper markets. There may be no tariff after this deregulation on
import of cement allowing its entry into Pakistan from cheaper market at lower rate.
Cement from cheaper markets may also block Pakistans export of cement to its
neighboring countries. Global market has vigorously taken up the advantage of
economy of scales and multinational giants now control more than 40 per cent of
world production (China not included). The recent acquisition of Chakwal Cement by
an Egyptian giant, Orascom may be a beginning of such an entry in Pakistan by
multinationals. New avenues for export of cement are opening up for the indigenous
industry as Sri Lanka has recently shown interest to import 30,000 tons cement from
Pakistan every month. If the industry is able for avail the opportunity offered, it may
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secure a significant share of Sri Lanka market by supplying 360,000 tons of cement
annually.
4. Government Development Expenditure
Government development expenditures count for one third of total cement

consumption. Increase in development expenditures has helped cement
demand to grow at very high rates. Increase in PSDP- as announced in
Medium Term Development Framework 2005-10 made the cement
demand to grow in the country. Infrastructure development in a region
triggers private development projects having even positive impact on cement
demand.
5. Construction of large dams
Construction of four large dams will generate demand of 3.7mn tons as

construction activities start. Our estimate does not include demand
generation from Skardu-Katzarah dam as its feasibility study in not yet
completed. Extent of demand generation will depend on size of dam, type of
dam, and extent of relocation/resettlement activities required. Bhasha dam
will generate maximum demand as it is RCC concrete dam whereas other
dams being Earth fill/Rock fill dams will require less cement for their
construction. Resettlement activities for Kalabagh dam will generate
maximum demand as it is located in a highly populated area.
6. Improved access to regional market
Afghanistan is Pakistans largest cement export market. The prospects for

cement exports seem bright in the medium term due to rising domestic as
well as regional cement demand. Pakistan also achieved improved access to
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India after the complete removal of the 12.5 percent custom duty on Portland
cement imports in this country from January 2007, showing improved export
opportunities for Pakistan. India is planning to import more cement from
Pakistan to stabilize prices in the market and the government wants a
balance in demand and supply of cement in the current fiscal year. The
import of cement from Pakistan has increased manifold during last four
months. India has registered a number of Pakistani cement manufacturers, a
requirement to facilitate import of cement. Pakistan has already increased
the frequency of trains from one to three in a week to carry cement from
Pakistan to Wagah border. Due to boom in the construction industry, India
needs cement in bulk to meet its growing needs.
7. Demand of Pakistani cement by Russia
Fresh enquiries have been received from Russia and buyers are quoting
very attractive prices as Pakistani cement quality is of very high standard
and holds good strength.
8. Earthquake in China
In the month of May china is hit by severe earthquake having the magnitude
of 7.8 this earthquake has cause the serious destruction in china. This
disaster is also an opportunity for Pakistan cement industry to export cement
to china.
9. High prices of cement in the international market
Cement exports are expected to soar by a massive 107 per cent due to the
primary source of overall cement growth in FY08, the high exports owing to
the cement supply shortage in India and Middle East which lead to rocketing
cement prices in the region.
10. Increase in demand of cement due to the up coming sports event
South Africa is schedule to host the football world cup of 2010 due to which
they need to make the football stadiums for the World Cup and Sri Lanka are
also expected to approach Pakistani companies for cement imports because
Sri Lanka to co-host the cricket world cup of 2011.
Page
Recommendations
We would like to conclude this report by ranking overall sector as Neutral. We remain
neutral on the sector because on hand expansion is the need of hour. Due to expected
growth in demand, current capacity appears inadequate. On the other hand, expansion
plans set up by the various players of cement sector to grab demand expansion might
cause sector to overflow. Along with risk of being oversupplied, unanticipated increase in
interest rates or less than expected demand growth might create severe crises for the
sector couple of years forward. Weighing risks and rewards, we remain NEUTRAL on the
sector.
To break-up cement manufacturers cartel the Competition Commission of Pakistan raided
offices of Association of Cement Manufacturers of Pakistan and confiscated official record.
The association condemned this action and said it is against business norms. They
accused Commission for blaming cement manufacturers for making a cartel for the last 10
years but could not able to prove it. The capital structure of cement companies may
change, as most of the expansions during last two to three years have been debt financed
and companies are expected to retire these debts rapidly during next three to five years.
Moreover, the slow down in economy may occur due to political uncertainty, which might
result in reducing cement demand in future.
However, in case of construction of hydro-powered dams, there will be a sudden jump in
the local sales of those companies located near these dams.
Consolidation is needed for industry stability because of following observations.
1. Cartels are unstable by their nature.
2. Industry needs one or two dominant players for long-term sustainability in
prices and profits
3. Top four players command 35% of market share in the industry that will be
increased to 46% in FY08.
4. World norm is that top four players have more than 60% market share
5. Consolidation process will be needed to increase market share of larger players
rather than going for capacity expansions
6. We may see acquisitions in the industry as the industry goes through
overcapacity cycle.
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International Trend
Although international energy prices have declined recently, any beneficial impact on
margins has largely been negated by substantial depreciation of Pak Rupee. PACRA,
therefore, believes that the performance of cement companies could weaken further
impacting their financial profile. Pakistan's cement industry is poised to face a tough
challenge as the regional markets, mainly China and India, are likely to emerge as
competitors in the export market, following a slowdown in their domestic economies
and enhanced production capacity.
Page
FUTURE OUTLOOK
In the budget FY09 the central excise duty on cement was increased to Rs 900 per ton from
current Rs 750 per ton. On each bag the CED increased by Rs 7.50 per bag (from Rs 37.5
per bag to Rs 45 per bag). This increase was not expected to impact the profits of the
cement sector because this increment in CED was expected to be passed on to the
consumers. However, the rise in the GST by 1% was anticipated to cause an increase in
the local cement prices and dampen the demand for cement.
Local cement dispatches are expected to remain depressed due to slow down in economy
led construction activity in the country and also due to inflation. The government had
allocated Rs 550 billion for PSDP in the budget FY09, however owing to budgetary deficit;
the government later cut the PSDP expenditure.
Cement consumption is correlated to the GDP growth and as the economic condition now
stands, we can predict a slowdown in the GDP growth of the country. Thus the per capita
cement consumption will also fall during FY09. Exports have so far shown a strong growth
and supported the total cement dispatches. Cement manufacturers have been focusing on
the international markets to achieve growth in sales
Pakistan has been exporting to Afghanistan. Regional shortage of cement had presented a
favorable opportunity for our cement manufacturers. Cement demand in Afghanistan is
expected to be 1.5m-2.0m tons per annum for the next few years. Cement manufacturers
have growing opportunities in Middle East and African countries. New export markets like
Russia and European countries have been identified.
Growth in export sales may boost the margins of the industry and reduce the negative
impact of rising costs on its profitability. However, the effects of global recession have
started to impact international demand for cement. Indian market, which was a window of
opportunity for Pakistani cement manufacturers, has been closed as India banned import of
cement from Pakistan due to escalating tensions between the two countries.
Expenses are expected to increase for cement manufacturers. This will negatively impact
the gross margins of the cement sector. During the past, our cement manufacturers shifted
production from oil to coal or gas. Pakistan has huge reserves of coal but manufacturers
need to import coal because the local coal has high sulphur content.
The coal prices in the international market have fallen during the 3rd quarter of FY09 and
will result in lower cost of production in the future. However, the full positive effect of lower
coal prices may not be achieved because of the depreciation of Pakistani rupee which will
neutralize the impact of decreasing international coal prices. Also the government has
raised the power tariff by nearly 50% with variable rates for peak and off peak hours.
The gas prices have also risen. This will increase the cement manufacturers' cost of
production and impact their profitability in FY09. The recent cut of 100 basis points in the
discount rate by the SBP is expected to lead to further expansionary monetary policy.
Interest rates may go down and result in lower financial costs of debt for the company.
DGKC seems to be all set to tap new markets for cement exports. The company's largest
Vertical Cement Grinding Mill at D.G. Khan Site has started operations. After the start of
grinding mill additional quantities of cement will be available. Increased production will help
Page

DGKC to aggressively export to new markets and generate higher sales. Also, it will help
DGKC in energy saving and reducing maintenance cost.
DGKC is trying to cut down on costs that have significantly and adversely impacted its
profits in FY08. To reduce electricity cost, DGKC has started a project of power generation
from waste heat at DGK site. The project is expected to generate substantially cheap
electricity of about 10.4MW without using any fuel. This would help to cut down the cost of
production.
DGKC has also decided to use municipal solid waste as fuel for heating purposes. Thus,
negotiations with equipment suppliers are underway and expected to be finalized soon.
Also, DGKC is in contact with different city governments to enter into agreements for
acquiring solid waste.
This project will be beneficial, as it would bring down the company's costs of production,
help resolve the environmental issues related with disposal of solid waste and most
important, it would save huge foreign exchange spent on importing fossil fuels.
Page
Annexure
Summarized Income Statement
Summarized Income
Statement
Sales Net
Local Sales
Export Sales
Less.
Excise Duty
Special Excised Duty
Sales tax
Commission to stockiest
Sales Net
-.Cost of Sales
Raw and Packing material
used
Salaries and Wages
Electricity and Gas
Furnace oil
Stores and Spares used
Repair and maintenance
Insurance
Deprecation on property
plant and Equipment
Deprecation on assets
subjects to finance lease
Royalty
Excise Duty
Vehicle Running
Postage Telephone ,Telegram
Printing and Stationery
Legal and Professional
Charges
Estate Development
Rent, Rates and taxes
Freight Charges
Other Expenses
Opening W.I.P
Transfer from Trail run
Closing W.I.P
Cost of Goods Manufactured
Opening stock of finished
goods
Transfer from Trail run
Closing Stock of finished
goods
-)Own consumption
2008
Rs.
In000
2007
Rs.
In000
2006
Rs.
in000
2005
Rs.
In000
2004
Rs.
In 000
14732445
2741111
8887306
511826
10348119
607817
6730756
641351
5392393
305191
2729046
99556
1929858
250749
12464347
1679829
1509449
1141756
990124
1159214
140464
6419625
1349755
141067
7955665
877924
72867
5279560
766497
58207
3882756
1368488
480352
1644759
4597486
764204
98530
43904
1354192
580717
293929
605335
1902567
383159
22913
21840
469367
464080
230854
470625
2114667
388113
18233
20542
341940
374287
185914
322979
1493514
357762
9997
23642
330100
330535
161919
217911
1123716
338970
9637
42235
317155
3331
13108
13203
11311
6923
83731
25962
15541
5389
3480
1499
9639
6982
5753
2079
10534013
142686
(118292)
10558407
107804
45349
15373
7159
1784
945
499
6227
4113
3396
9449
4387229
161989
50462
(142686)
4456994
5058
43678
16884
6980
1774
1492
884
4678
3879
5680
7651
4155837
50205
(161989)
4044053
19468
31652
10450
5724
1831
1581
548
3930
3091
4139
4896
3177348
210983
(50205)
3338126
38616
30284
5909
5881
1374
1276
507
3179
6150
4573
6742
2614113
88603
(210983)
2491733
44145
(118863)
(11059)
19302
10528046
1936301
39300
(69728)
(25370)
43984
4387640
2031985
(5058)
14410
65641
3992822
3962843
(19468)
19148
26505
3330769
1948791
(38616)
5529
2497262
1385494
Page

Capitalized
Cost of Goods Sold
Gross Profit
-) Administrative Expenses
Salaries Wages
Electricity
Repair and Maintainance
Insurance
plant and Equipment
Deprecation on assets
subjects to finance lease
Vehicle Running
Legal and Professional
Charges
Traveling and conveyance
Entertainment
School expenses
Fees and subscription
Other Expenses
Auditors Remuneration
Total Administrative
Expenses
Selling and Distribution
Expense
Salaries Wages
Electricity
Repair and Maintenance
Insurance
plant and Equipment
Deprecation on leased
property
Vehicle Running
Traveling and conveyance
Entertainment
Advertisement and Sales
Promotion
Freight Charges-local
Freight and Handling
Charges-Export
Other Expenses
Total Selling and Distribution
Expenses
Other Operating Expenses
Workers profit participation
fund
Book Value of Asset written
off
Donation
57150
2985
1620
1685
11956
48958
2678
1324
1277
9027
40950
2684
1210
3147
7261
31056
2566
1243
3099
9742
27342
3125
1461
1992
12425
126
1571
1213
4945
1382
3545
3441
2210
3522
6783
176
1136
9004
1982
3424
110745
5353
2738
1897
3369
6104
2699
2780
8491
2966
2937
104169
4066
6093
4983
6394
10377
2561
3277
6975
3458
17304
121953
2678
3103
1913
1365
2410
872
795
6177
1855
1926
735
76480
1752
3841
1256
2471
2448
439
766
5944
937
360
704
68645
35431
875
299
497
1342
29727
670
884
235
1132
23997
443
225
172
324
17474
345
121
1397
895
14616
383
40
306
900
1940
1235
1553
3438
3720
296
3395
1603
1361
1094
2312
1406
189
2643
1225
855
891
1272
1561
294
1569
814
855
913
981
1045
398
1919
88
765
944
643
495
1432
358
2213
14135
492219
50
19637
23
-
31239
-
13572
-
2595
562970
2179
65122
1501
34352
2419
60905
1805
38560
93145
182006
83058
60829
11050
35112
414
-
9844
-
4530
-
206
9734
5000
580953
595687
139721
191850
6198
93786
61735
Page

Worker welfare fund
Exchange loss
Loss on Disposal of Property
Plant and Equipment
Loss on Sale and Lease back
transactions
Total Other Operating
Expenses
Other Operating Income
Income from Financial Assets
Income on Bank Deposits
Interest on Loan to
Employees
Gain on derecognizing of
investment
Dividend Income From
-Related Parties
-Others
Total Income from financial
Assets
Income from non financial
assets
Rental Income
Profit on sales of property
plant and assets
Scrap Sales
Mark up on loans
Provisions and unclaimed
balances returned back
Exchange gain
Others
Total other operating income
Profit from operations
Finance Cost
Long term finances
- Long term loans
- Preferred dividend
- Non participatory
redeemable capital
- Finance under markup
- Provident fund
-Short term borrowings
-Finance lease
workers profit participation
fund
Loss on derivative financial
instruments
Loss on Foreign currency
forward
Guarantee commission
Bank charges
Total finance Cost
Excess of Acquire Interest in
the net assets of acquire
Share of loss of Associated
company
727
128
-
1659
182
-
363
181
-
582
276
543173
535
290
-
820303
143
821301
465656
118
467615
265763
120
266427
152284
26
696341
34460
85730
121015
1592
4488
1634
4490
2847
3567
2002
3207
1980
-
10394
6973
1858
4170
1208
303
7609
4562
2116
2911
2002
729
3827
1351
289
846606
1513505
479420
2202393
6986
294114
3908802
500
707692
2425312
128462
1345016
1040737
-
323183
28281
-
305027
35351
-
186267
329
42655
35351
141701
20049
35351
12341
499413
584
522
103324
6564
98
73772
12543
101
42655
12439
83
37
9860
90
205308
-
17229
7804
871
4235
224601
-
4165
15569
(1766298)
86194
1813
4496
468173
-
1679
4994
450696
1405
6860
304041
(8674)
(14163)
(9573)
(175273)
1720471
3448533
2121271
1120415
108214
(309167)
33000
312435
40500
1027000
40000
464000
28700
297000
(5)
-
(247435)
(32422)
(5000)
193
(65000)
10222
(10000)
Page
Profit before Taxation

-)Taxation
For the year
- current
- Deferred
Prior Year
-Current
-Deferred
Total taxation
Net Income
(200958)
25685
98000
1030078
439193
325922
1622471
2418455
1682078
794493
Page
Summarized Balance Sheet

Summarized Balance Sheet
Equity and Liabilities
Capital and Reserves
Authorized Capital
-950000000@ ordinary share10
-50000000@ preference
share10
Issued subscribed and paid up
capital
Share deposit money
Reserves
Un-appropriated profit
Total capital and Reserve
Non Current Liabilities
Long term finance
Liabilities against subject to
finance lease
Long term deposits
Retirement and other benefits
Deferred Taxation
Total Non-Current liabilities
Current Liabilities
Trade and other payables
Accrued markup
Short term borrowing
Current portion of non-current
liabilities
Derivative foreign currency
forward options
Provision for taxation
Total Current liabilities
Total Liabilities
Assets
Non-Current Assets
Property plant and equipment
Assets subject to finance lease
Capital work in progress
Investments
Long term loans, advances and
deposits
Total Non-Current Assets
Current Assets
Stores spares and loose tools
Stock in trade
Trade debts
Investments
Advances, deposits,
prepayments and other
Receivables
Cash and bank balance
Total Current Assets
Total
2008
2007
2006
2005
9500000
500000
10000000
2535412
9500000
500000
10000000
2535412
2500000
500000
3000000
1843937
2500000
500000
3000000
1843937
27634722
32399
30528440
29630084
1757689
33923185
8351
15085354
2330558
19268200
7196568
277493
9317998
4389088
251661
6317055
8871051
393
8686447
1141
7372468
28886
4899225
131985
2730573
83487
73890
54018
1251000
10250352
79467
39862
1624000
10430917
33814
26572
1559000
9020740
28674
45765
537000
5642649
30365
38150
138000
3020575
1450074
391610
8194330
2828202
1027274
342612
3942972
2042281
1406869
340757
2613695
1619025
1154426
960620
599674
493968
1360677
487254
306048
2004
2500000
50000
300000
1676306
-
35090
12899306
53678098
35090
7390229
51744331
35090
6015436
34304376
35090
3055858
18016505
35090
2376989
11714619
24224273
6839
2488307
6592332
524176
22117551
133376
1907063
8174474
196913
7521723
295058
11759677
4482213
335810
6637237
317262
3983175
2610634
271428
6128083
166583
1126108
1387681
25021
33835927
32529377
24394481
13819736
8833476
2323883
1300325
463446
15082605
427832
1496291
295140
144245
16933790
229315
836049
226286
74165
8543763
152465
1035081
100994
76238
2769134
121486
938847
298538
52622
1386816
120329
244080
19842171
53678098
116173
19214954
51744331
77167
9909895
34304376
93836
4196769
18016505
83991
2881143
11714619
Page
Horizontal Analysis of Income Statements

Net sales
Cost of sale
Gross profit
administrative
expense
selling &dist.
expenses
other operating
expense
other Operating
income
profit from operation
finance cost
share of loss of
associated company
income before taxes
Net profit
2008
321.01 %
(421.58)
139.75
2007
165.34 %
(175.7)
146.66
2006
204.89 %
(159.89)
286.02
2005
135.97
(133.38)
140.66
2004
100 %
100
100
(61.33)
(151.75)
(177.66)
(111.41)
100
(145.98)
(168.88)
(89.09)
(157.95)
100
(964.90)
(226.32)
(310.76)
(151.29)
-100
659.03
373.20
228.95
550.89
100
112.53
(786.41)
163.74
(208.26)
290.61
(200.66)
180.32
(1345.25)
100
100
15.64
(61.66)
3.23
153.56
(30.06)
204.21
307.79
(316.05)
304.40
189.33
(134.75)
211.72
100
100
100
100
Horizontal analysis of income statement shows that net sales of the Co has increasing
trend. But on the other hand Cost of goods sold jump quickly. This is not a good trend. Cost
of goods sold of the Co increases due to expensive raw materials. Gross profit of the co
decreases from last years due to high cost of goods sold. Administrative and selling
expense of the Co has decreasing trend. Other operating expenses of the Company are
increasing quickly. Company is also increasing trend in other operating income. Profit from
operations also decreases. Co also has high finance cost from last years. Income before
taxes has decreasing trend due to high cost of goods sold and finance cost. Net profit of the
Company is Very small as compare to last years.
Vertical Analysis of Income

Statements
Net sales
Cost of sale
Gross profit
administrative expense
selling &dist. expenses
other operating expense
2008
100%
(84.46%)
15.35
(0.88)
(4.52)
(4.78)
2007
100%
(68.35%)
31.64
(1.62)
(1.01)
(2.17)
2006
100%
(50.18%)
49.81
(1.53)
(0.43)
(2.41)
2005
100%
(63.09%)
36.91
(1.45)
(1.15)
(1.78)
2004
100 %
(64.32%)
35.68
(1.77)
(0.99)
(1.59)
Page

other Operating
income
profit from operation
finance cost
Excess of acquires
interest in the net assets
of acquire
share of loss of
associated company
income before taxes
Net profit
6.79
7.47
3.70
13.40
3.37
12.14
(14.17)
0.69
34.31
(7.28)
49.13
(5.66)
45.94
(5.76)
34.64
(5.78)
(0.66)
(0.22)
(0.12)
1.41
(1.61)
20.20
26.80
(1.53)
25.27
43.34
(12.95)
30.40
40.18
(8.32)
31.86
28.86
(8.39)
20.46
In vertical analysis of income statement shows that has high cost of goods sold from last
years. Gross Profit of the Co has decreasing trend. This is decrease due to high cost of
goods sold. Operative expense of the co has minimum portion in the income statement.
Profit from operations also has decreasing trend. Share of loss of associated co also
increases Income before taxes also decreases from last years. Provision for income taxes
also has decreasing trend.
Horizontal Analysis of Balance

Sheet
Assets
issued subscribed &
paid up capital
reserves
accumulated profit
total
Total
non-current Liabilities
long term finance
liabilities against
assets subject to
lease finance
long-term deposits
retirement and other
benefit
deffered taxation
current liabilities
trade and other
payables
accrued mark up
current portion of
long term liabilities
provision for taxes
2008
2007
2006
2005
2004
151.25
151.25
110.00
110.00
100
629.62
675.08
343.70
163.96
100
12.87
698.43
926.07
110.26
100
537.01
305.02
147.51
100
324.88
318.12
269.99
179.42
100
0.47
1.36
34.50
158.09
100
243.34
261.71
141.59
104.40
69.65
119.96
100
906.52
1176.81
1129.71
389.13
100
293.56
207.96
284.81
233.70
100
28.78
25.18
25.03
70.60
100
580.43
419.14
332.27
123.07
100
100
100
100
100
100
Page

total
assets
non-current assets
property plant &
equipment
assets subject to
finance lease
capital work in
progress
investment
long-term loans
&deposits
current assets
stores spares and loose
tools
stock in trade
trade debts
investment
advanced deposits
cash and bank balance
542.67
310.91
25.47
128.56
100
395.29
360.92
122.74
108.31
100
4.10
80.06
177.12
190.45
100
220.96
169.35
1044.28
353.71
100
475.06
589.07
323
188.13
100
2094.94
99
1342.11
1084.80
100
100
115.7
116.10
121.51
123
247.53
159.37
89.05
110.25
100
435.56
880.71
1087.57
355.55
290.60
98.86
274.11
11221.05
190.57
138.32
75.79
140.94
616.07
126.71
91.88
33.83
144.88
199.67
100.96
111.72
100
100
100
100
100
Liabilities and owner equity of the balance sheet shows that issued and paid up capital of
the company is increasing. And reserves of the co also jump 343% to 675% in the year of
2006 to 2007. Accumulated profits of the co have decreasing trend. And it is dangerous for
the co.
Non current liabilities of the co increases from 2004 to 2007 but there is a decline in 2008.
Current liabilities of the co also have increasing trend.
This horizontal analysis of balance sheet shows that Fixed Assets of the Co increase from
last years. It means Co have much productive assets. It shows a good trend of fixed assets.
On other side trend of assets subjects to finance lease going to decrease. Co also have
asset that are work in progress but trend of these assets also going to decrease. Co also
invests in long term investment and this asset also has increasing trend from 2004 to 2008.
Co also has long term deposits and these also have increasing trend.
Current Assets of the Co also have increasing trend. Trade debts of the Co also have
increasing trend and its debts are not in a good position. Short term investments of the co
also increase and Co use its idle cash in good manners.
.
Vertical
sheet
Assets
issued subscribed &
paid up capital
reserves
accumulated profit
total
analysis
of
balance
2008
2007
2006
2005
2004
4.72%
4.89%
5.37%
10.23%
14.31%
51.48
57.26
43.97
39.94
37.47
0.06
3.39
6.79
1.54
2.15
Page

Total
Non-current
Liabilities
long term finance
liabilities against
assets subject to
lease finance
Long term deposits
retirement and other
benefit
deffered taxation
Total
Current liabilities
Trade & other
payables
accrued mark up
56.26
65.55
56.16
51.72
53.92
16.52
16.79
2.49
27.19
23.31
0.000732
0.0022
0.084
0.73
0.71
0.13
0.15
0.098
0.16
0.26
0.10
0.077
0.077
0.25
0.32
2.33
19.09
3.14
20.16
4.54
26.29
2.98
31.32
1.18
25.78
2.70
1.98
4.10
6.41
4.22
0.73
0.66
0.99
5.33
11.61
Short term borrowing

secured
current portion of
long term liabilities
provision for taxes
total
assets
non-current assets
property plant &
equipment
assets subject to
finance lease
capital work in
progress
investment
long-term loans
&deposits
Total
Current liabilities
stores spares and
loose tools
stock in trade
trade debts
investment
advanced deposits
cash and bank
balance
Total
15.26
7.62
7.62
5.27
3.95
4.72
3.33
4.16
0.06
24.03
0.068
14.28
0.10
17.54
0.19
16.96
0.29
20.29
45.13
42.74
21.92
36.83
52.31
0.012
0.26
0.86
1.76
1.42
4.63
3.68
34.28
22.11
9.61
12.28
0.97
15.79
0.38
13.06
0.97
14.49
1.51
11.85
0.21
63.03
62.86
71.11
76.71
75.41
4.32
2.89
2.44
5.75
8.01
2.42
0.86
28.09
0.79
0.45
0.57
0.27
32.72
0.44
0.22
0.66
0.22
24.90
0.44
0.22
0.56
0.42
15.37
0.67
0.52
2.55
0.45
11.84
1.03
0.72
36.26
37.13
28.88
23.29
24.59
Vertical Analysis of the balance sheets shows that in 2008 that Equity portion of Co have
large portion of equity .And there is minimum portion of non current liabilities. And it shows
a good trend. Co finances his assets through equity and pay minimum amount of interest.
Page

Current liabilities of the co increase from last years. On current assets co do not pay
interest. Co pays his obligation timely and there is no chance of insolvency.
On the other side of balance sheet are assets of the Co. Co have more productive assets.
Analysis show that Company Finance minimum assets at lease. Current assets of the Co
slightly decrease from last year.
Page
Liquidity Ratios
1. Days, Sales in Receivables = Gross Receivables/Net Sales/365
Year
2008
2007
2006
2005
2004
463446/12464347/365
144245/6419625/365
74165/7955665/365
76238/5279560/365
52622/3882756/365
Days, Sales in
Receivables
13.57days
8.20
3.40
5.27
4.95
2. Account Receivables Turnover =Net Sales /Average Gross Receivables

Year
2008
2007
2006
2005
2004
12464347/30384550
6419625/109205
7955665/75201.50
5279560/64430
3882756/52622
Account Receivables
Turnover
41.02times
58.78
105.79
81.44
73.78
3. Account Receivables turnover in days =Average Gross Receivables/Net

Sales/365
Year
Calculation in (Rupees000)
2008
2007
2006
2005
2004
30384.50/12464347/365
109205/6419625/365
75201.50/7955665/365
64430/5279560/365
52622/3882756/365
Account Receivables
turnover in days
8.89days
6.20
3.45
4.45
4.95
4. Days Sales in Inventory =Ending Inventory/Cost of Goods sold /365

Year
2008
2007
2006
2005
2004
Calculation (Rupees000)
1300325/10528046/365
295140/4387640/365
226286/3992822/365
100994/3330769/365
298538/2497262/365
Days Sales in Inventory

45.08 days
24.55 days
20.68 days
11.07 days
43.63 days
4. Inventory turnover = Cost of Goods sold/Average Inventory

Year
2008
10528046/797732.5
Inventory turnover
13.19times
Page

2007
2006
2005
2004
4387640/260713
3992822/163640
3330769/199766
2497262/298538
16.83
24.40
16.67
8.36
5. Inventory Turnover in Days =Average inventory /cost of goods sold /365

Year
2008
2007
2006
2005
2004
797732.5/10528046/365
260713/4387640/365
163640/3992822/365
199766/3330769/365
298538/2497262/365
Inventory turnover in days

27.66 days
21.69
14.96
21.89
43.63
07. Operating cycle = Account Receivables turnover in days + inventory turnover in

days
2008
=8.89+27.66 =36.55 days
2007
=6.20+21.69 =27.89
2006
=3.45+14.96 =18.41
2005
=4.45+21.89 =26.34
2004
= 4.95+43.63=48.58
08. Working Capital = Current Assets Current Liabilities (Amount in Rupees000)
2008
19842171-12899306 =6942865
2007
19214954-7390229 =11824725
2006
9909895-6015436 =3894459
2005
4196769-3055858 =1140911
2004
2881143-2376989 =504154
09. Current Ratio= Current Assets/Current Liabilities
Year
2008
19842171/12899306
2007
19214954/7390229
2006
9909895/6015436
2005
4196769/3055858
2004
2881143/2376989
Current Ratio
1.54:1
2.60:1
1.65:1
1.37:1
1.21:1
10. Quick Ratio= (Cash Equivalent + Marketable Securities+ Net Receivables)/Current

Liabilities
Year
Quick Ratio
2008
(244080+15082605+463446)/12899306
1.22:1
2007
(116173+16933790+144245)/7390229
2.33:1
2006
(7235749+502387+969891)/8429327
1.44:1
2005
(6931615+67244)/6344831
0.96:1
2004
(5078613+5503)/4524698
0.64:1
11. Cash Ratio =Cash Equivalent +Marketable Securities /Current liabilities
Year
Cash Ratio
2008
(244080+185082605)/12899306
1.18
Page

2007
2006
2005
2004
(116173+16933790)/7390229
(77167+8543763)/6015436
5279560/822532.50
3882756/504154
2.31
1.43
6.42
7.70
12. Sales to Working Capital = Sales/Average Working Capital

Year
Sales to Working Capital
2008
12464347/9383795
1.33times
2007
6419625/7859592
0.82
2006
7955665/2517685
3.17
2005
5279560/82253.20
6.42
2004
3882756/504154
7.70
Long Term Debt Paying Ability

1. Times Interest Earned =Recurring Earning, Excluding Interest Expenses, Tax expense,
Equity Earnings and Minority Earnings / Interest Expense,
Including Capitalized Interest
Year
Times Interest Earned
2008
1513505/1766298
8.56times
2007
2202393/467759
4.71
2006
3908802/(450696+620534)
3.65
2005
2425312/(304041+75437)
6.39
2004
1345016/(224601+2945)
52.94
2. Fixed Charge Coverage= Recurring Earnings, excluding Interest Expense, Tax expense
Equity earnings and minority earnings + interest portion of
Rentals/Interest expense including Capitalized interest +
Interest portion of rentals
Year
Calculation in (Rupees000 )
Fixed Charge coverage
2008
153505+8194330/1766298+8194330
0.84times
2007
2202393+3942972/467759+3942972
1.39times
2006
3908802+2613695/4500616+620534+2613695
0.84times
2005
2425312+960620/304041+75437+960620
2.53times
2004
13450+1360677/22460+2945+1360677
1.95times
3. Debt Ratio =Total Liabilities/Total Assets
Year
Calculation in (Rupees000 )
2008
23149658/53678098
2007
17821146/51744331
2006
15036176/34304376
2005
8698507/9317998
2004
5397564/6317055
4. Debt Equity Ratio=Total Liabilities/Shareholders Equity
Year
2008
23149658/30528440
2007
17821146/33923185
Fixed Charge coverage

43%
34%
44%
93%
85%
Debt Equity Ratio

76%
53
Page

2006
2005
2004
15036176/19268200
8698507/9317998
5397564/6317055
78
93
85
1. Net Profit Margin= Net Income before minority share of Earnings and Non
Recurring Items /Net Sales
Year
Net Profit Margin
2008
97753/12464347
7.84%
2007
1636634/6419625
25
2006
2428028/7955665
31
2005
1682078/5279560
31
2004
794493/3882756
20
2. Total Asset Turnover = Net Sales/Average total Assets
Year
Total Assets Turnover
2008
12464347/52711214.50
24 Times
2007
6419625/43024353.50
15
2006
7955665/10723490.50
74
2005
5279560/14865562
35
2004
3882756/11714619
33
3. Return on Assets =Net Income before minority shares of earning and nonrecurring
items /Average total Assets
Year
Return on Assets
2008
97753/52711214.50
18.5%
2007
1636634/43024353.50
3.8
2006
2428028/10723490.50
23
2005
1682078/14865562
11
2004
794493/11714619
6.8
4. Operating income Margin = Operating Income/Net Sales
Operating Income
Year
Margin
2008
1513505/12464347
12%
2007
2202393/6419625
34
2006
3908802/7955665
49
2005
2425312/5279560
46
2004
1345016/3882756
35
Assets Utilization
1. Operating Asset Turnover =Net Sales /Average Operating Assets
Page
Year
2008
2007
2006
2005
2004
12464347/5367098-(6592332+524176+15082605+427832)
6419625/51744331-(8174474+196913+16933790+229315)
7955665/34304376-(4482213+335810+152465+8543763)
5279560/18016505-(2610634+271428+2769134+121486)
3882756/11714619-(1387681+25021+1386816+120329)
Operating Asset
turnover
0.20times
0.096times
0.20times
0.28times
0.33times
2. Return on Operating Assets = operating income/Net sales

Return on Operating
Year
Assets
2008
1513505/63120379
24%
2007
22023 9 3/ 66879875
3.3
2006
3908802/38854201
10
2005
2425312/18567919
13
2004
13455016/11859104
11
3. Sales to Fixed Assets =Net Sales /Average Net fixed Assets(Exclude
construction in progress)
Year
2008
2007
2006
2005
2004
Sales to Fixed Assets
12464347/(24231112+22250927)/2
6419625/(7816781++22250927)/2
7955665/(7816781+6954499)/2
5279560/(6954499+6294666)/2
3882756/6294666
54%
43
108
80
62
4. 8.Return on Investment =Net Income before minority share of earning and non
recurring items + (Interest expense)*(1-tax rate)
Year
2008
2007
2006
2005
2004

97753+1766298*0.65/42566447
1636634+468173*0.65/3632152
2428028+450696*0.65/21624793.50
1682078+304041*0.65/12149138.50
794493+224601*0.65/9337630
Return on Investment
2.92%
5.34
12.58
15.47
10.07
5. 9.Return on total equity =Net Income before nonrecurring items-Dividend on

redeemable preferred stock/Average total equity
Year
2008
2007
2006
2005
2004

97753/(30528440+33923185)/2
1636634/(33923185+19268200)/2
2428028/(19268200+9317998)/2
1682078/(9317998+6317055)/2
794493/6317055
Return on total equity

0.30%
0.37
0.17
0.22
0.13
Page
6. 10.Return on Common equity=Net income before Nonrecurring ItemsPreferred dividend/Average common equity
Year
2008
2007
2006
2005
2004
Return on common equity
7. 11.Gross profit margin=Gross profit/Net sales

Year
2008
2007
2006
2005
2004

1936301/12464347
2031985/6419625
3962843/7955665
1948791/5279560
1385494/3882756
Gross profit margin

15.53%
31.65
49.81
36.91
35.68
Investment Ratios
1. Degree of financial Leverage=EBIT/Earnings before tax
Year
2008
2007
2006
2005
2004
1513505/175273+8674-86194
2202807/1720471+14163
3908802/3448533+9573
2425312/2121271
1345016/1120415
Degree of financial
leverage
15.48%
1.27
1.13
1.14
1.20
2. 2.Earnings per common share=Net income-preferred dividend/Weighted

Average no. of common share outstanding
Year
2008
2007
2006
2005
2004
25685/252485315
1622471-103324/252485315
2418455-73772/2332578650
1682078-329/219744584
794493-20049/219744584
Earnings per common

share
0.017%
0.60
0.10
0.76
0.35
Page
3. Price/Earning ratio=Market price per share/Diluted earning per share

Year
Price/Earning ratio
2008
30.97/0.12
258.08
2007
30.97/6.43
4.81
2006
30.97/9.14
3.38
2005
30.97/7.82
3.96
2004
30.97/3.78
8.19
4. Percentage of Retained earning=Net income-All dividend/Net income
Percentage of retained
Year
Earning
2008
25685-379093/25685
-13.76
2007
1622471-344743/1622471
0.79
2006
2418455-275478/2418455
0.88
2005
1682078-250705/1682078
0.85
2004
794493-138374/794493
0.83
5. Dividend payout=Dividend per common share/Diluted earning per share
Year
Dividend payout
2008
(379093000/158934068)/0.12
19.83
2007
(344743-103324/158934068)/6.43
23.62
2006
(275478-73772/112835676)/9.14
48.31
2005
(250705-329/112835676)/7.82
28.37
2004
(13874-20049/112835676)/3.78
27.74
6. Dividend yield= Dividend per common share/Market price per common share
Year
2008
2007
2006
2005
2004

(379093000/158934068)/30.97
(344743-103324/158934068)/30.97
(275478-73772/112835676)/30.97
(250705-329/112835676)/30.97
(13874-20049/112835676)/30.97
7. Book value per share=Total stockholders

equity/Number of common share outstanding
Year
2008
2007
2006
2005
2004

30528440-746071/158934068
33923185-746071/158934068
19268200-515580/112835676
9317998-515580/112835676
6317055-347949/112835676
Dividend yield
7.68%
4.90
14.23
7.17
3.38
equity-preferred
stock

18.74%
20.87
16.62
7.80
5.29
Page

Financial Analysis of DG Khan Cement Factory Ratio Analysis

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Financial Analysis of DG Khan Cement Company Ltd.

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