Report On D.G. Khan Cement

D.G.
Khan Cement Company Limited
CORPORATE PROFILE
Board of Directors
Mrs. Naz Mansha Chairperson

Mian Raza Mansha Chief Executive
Mr. Manzar Mushtaq
Mr. Khalid Qadeer Qureshi
Mr. Zaka-ud-Din
Mr. Muhammad Azam
Mr. Inayat Ullah Niazi Chief Financial Officer
Audit Committee
Mr. Manzar Mushtaq Member/Chairman
Mr. Khalid Qadeer Qureshi Member
Mr. Muhammad Azam Member
Company Secretary
Mr. Khalid Mahmood Chohan
Bankers
Royal Bank of Sot land (ABN AMRO Bank (Pakistan) Limited)

Allied Bank Limited
Askari Bank Limited
Bank Alfalah Limited
Citibank N.A.
Habib Bank Limited
MCB Bank Limited
National Bank of Pakistan
Standard Chartered Bank (Pakistan) Limited
The Bank of Punjab
United Bank Limited
Auditors
KPMG Taseer Hadi & Co, Chartered Accountants

Legal Advisors
Mr. Shahid Hamid, Bar-at-Law
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D.G. Khan Cement Company Limited
Registered Office
Nishat House, 53-A, Lawrence Road,

Lahore-Pakistan
Phone: 92-42-6367812-20 UAN: 111 11 33 33
Fax: 92-42-6367414
Email: info@dgcement.com
web site: www.dgcement.com
Factory
1. Khofli Sattai, Distt. Dera Ghazi Khan-Pakistan

Phone: 92-641-460025-7
Fax: 92-641-462392
Email: dgsite@dgcement.com
2. 12, K.M. Choa Saidan Shah Road,

Khairpur, Tehsil Kallar Kahar,
Distt. Chakwal-Pakistan
Phone: 92-543-650215-8
Fax: 92-543-650231
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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.
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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.
DIRECTORS’ REPORT
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I, on behalf of the Board of Directors’ of D.G. Khan Cement Company Limited, feel
pleasure to put before you the 30thAnnual Report of D.G. Khan Cement Company
Limited, along with financial statements and auditors report thereon for the year ended
June 30, 2008.
INDUSTRY REVIEW
The cement industry of Pakistan again set a new record and sold30.112M 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 neighbouring 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
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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.
PLANT PERFORMANCE
Plant performance during the year under review was excellent. Kiln-2 at DG Khan Site
operated for record 343 days which is a record in the cement industry. Kiln-1 at DGK and
kiln-1 at KHP operated 325 and 287 days respectively. It was only possible by adopting
sound and prudent production management and preventive maintenance techniques. Your
management believes in the policy of using the best available equipments to achieve both
efficiency and effectiveness. This is evident for the fact that overall capacity utilization of
the plants was above 103% during FY 2008 which is unprecedented in the cement
industry of Pakistan.
Expansion plant in Khairpur (KHP) Dist. Chakwal, beingin its first year of operation,
operated remarkably well during the period under review. Detailed operational
parameters are well within the range of guarantees given by the plant supplier.
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State of the art duel fuel power generation plant placed at Khairpur cement plant also
started its commercial operations successfully.
Cement production during the period under report was good and posted an increase of
76% compared with last year. Vertical Cement Grinding mill placed at Khairpur plant
proved to be energy efficient and entails low maintenance compared with traditional
cement mills.
SALES
The following table portrays the sales summary:
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Your company, after the start of production from new cement plant at Khairpur, fully
paced to tap the local and export markets. Local Cement sales during FY 2008 ballooned
by 52% compared with last year.
Whereas, export of cement posted a decent hike and augmented by 331%.Your Company
is now exporting not only to traditional market of Afghanistan, rather has entered into
most of the countries of Middle East. In addition, your company is also trying to tap new
export avenues and started exporting to Russia, India and some African countries.
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Your company is making all out efforts to utilize the optimum level of its available
capacity, and have also started selling clinker both locally and in the markets.
2008 2007
(Rupees in thousand)
OPERATING RESULTS
Net Sales 12,445,996 6,419,625
Cost of Sales 10,530,723 4,387,640
Gross Profit 1,915,273 2,031,985
After tax (loss) / profit (53,230) 1,622,471
(Loss)/earning per share (Rs. /Share) (0.21) 6.43
Volumetric growth in cement sales during the period contributed in getting the sale
revenue doubled from last year. Despite the growth of 94% in sale revenue, gross profit
during the period witnessed a decline of about 6% compared with previous period.
Major contributors to the decline in gross profit are the price war among the cement
manufacturers which squeezed the profit margins sharply. The position further
aggravated due to sky rocketing fuel prices in international markets and severe inflation
in the country. Prices of coal, used in cement industry, increased by nearly 50% during
the period under report compared to last year. Likewise, since July 2007, OGRA
increased Gas Tariff by over 40% for cement sector and over 38% for power generation.
Similar trends were also witnessed in other input costs which badly affected the
profitability of the company.
Insufficient cash flows which rest to rely more on running finances and increasing
lending benchmark rates, on the back of stringent monetary policy of the State Bank of
Pakistan to curb mounting inflation in the country, put unmatched pressure on the finance
cost. Going forward, worsening economic conditions and huge trade imbalances led to
weak the Pakistani Rupees in relation to major international currencies.
Higher production cost and devaluation of the rupee cast serious burden on the
profitability of the company during the year, which was somehow bailed out by dividend
income from investments. Total dividend stream during FY 2008 stood at Rs. 820.446
million against Rs. 465.774 million last year.
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After accounting for all charges including deprecation/ amortization of Rs. 1,363.037
million, financial charges of Rs. 1,749.837 million and Rs. (197.70) million for provision
for taxation (including deferred tax of Rs. (305.0) million) etc. your Company suffered a
net loss of Rs. 53.230 million.
DIVIDEND
Your management keeping in view profitability and liquidity position of the company
decided not to recommend any dividend for the period under review.
ONGOING PROJECTS
The new world’s largest Vertical Cement Grinding Mill at D.G. Khan Site is under
commissioning. The mill is expected to start commercial production in second quarter of
FY 2009. After the start of grinding mill additional quantities of cement will be available,
this will help boost revenue.
Project of power generation from waste heat at DGK Site is in full swing. Civil work has
already been started. Shipments from plant supplier would start by the end of this
calendar year. The project is expected to generate substantially cheap electricity of about
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10.4MW without using any fuel. This would help to cut down the cost of production. The
project is expected to start in first quarter of next financial year.
Going forward, your company has also decided to use municipal solid waste as fuel for
heating purposes. In this regard, negotiations with equipment suppliers are in process,
which is expected to be finalized soon. In addition, your company is also in contact with
different city governments to enter into agreements for acquiring the solid waste. This
project entail multi dimensional benefits, like it would bring down the 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.
FUTURE OUTLOOK
Despite severe fiscal pressure on the Govt. of Pakistan due to economic turn down and
mounting trade and budget deficit, the Federal budget came up with incremental Public
sector development plan (PSDP). The outlay budgeted for FY 2009 is Rs 550bn. against
Rs. 520bn. last year which is 5.7% higher and 20% higher than the revised budget of Rs.
458bn for FY 2008; this bodes well for the cement industry of the country.
The Govt. has already announced after the meeting of NEC in June 2008 allocation of Rs.
166bn for infrastructural projects out of which Rs. 54bn. would be spent on 314 small
new dams countrywide. In the budget 2009, an allocation of Rs. 75bn. has also been
made for construction and improvement of dams and water reservoirs in the country. In
addition, an amount of Rs. 37bn. has also been allocated for roads and highways. Pakistan
is short of housing compared with regional countries. To address the issue the Govt. has
announced to add 1000K units of low cost houses. All these steps announced if followed
will increase the cement demand in the country during FY 2009.
Cement industry of the country since the last few years had been demanding gradual slash
in central excise duty (CED) which is the highest among the regional countries, but as a
surprise the Govt. has rather increased the CED in the Federal budget from Rs.750/ton to
Rs.900/ton. In addition, Govt. also increased general sales tax by 1%. Both these indirect
tax measures would bode negatively on cement demand in the country.
Exports have touched almost 7.0 million tons mark during FY 2008. The cement players
in the country are trying to find new markets in the world. Demand of cement
manufacturers to allow export of cement to India via land route is not yet resolved. If
allowed a sizeable quantity of cement could be exported through land route which is the
cheapest and most convenient.
Growth in exports is continuing and cement has emerged as a valuable commodity for the
country as it is earning precious foreign exchange. Impediments to the exports like lack
of bulk handling facilities at ports and insufficient export rebate is hindering the exports
potentials of the country. Cement industry is demanding from Govt. of Pakistan to set up
bulk handling facilities for cement, clinker and coal at Karachi ports but nothing has
turned out yet.
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RELATED PARTIES
The transactions between the related parties were made at arm’s length prices determined
in accordance with the comparable uncontrolled prices method. The Company has fully
complied with the best practices on Transfer Pricing as contained in the Listing
Regulations of Stock Exchanges in Pakistan.
CORPORATE & FINANCIAL REPORTING FRAME WORK
In compliance with the Code of Corporate Governance, we give below statements on

Corporate and Financial Reporting Frame Work:
The financial statements, prepared by the management of the Company, present fairly its
state of affairs, the results of its operations, cash flows and changes in equity.
Proper books of account of the Company have been maintained.
Appropriate accounting policies have been consistently applied in preparation of financial

statements and accounting estimates are based on reasonable and prudent judgment.
International Accounting Standards, as applicable in Pakistan, have been followed in

preparation of financial statements and any departure there from has been adequately
disclosed.
The system of internal control is sound in design and has been effectively implemented
and monitored. There are no significant doubts upon the Company’s ability to continue as
a going concern.
There has been no material departure from the best practices of corporate governance, as
detailed in the listing regulations.
Value of investments of Provident Fund as on June 30, 2008 is Rs. 235.022 million.
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Board Meetings:
During the year under review, five meetings were held. Attendance by each director is as
follow:
S. No. Name of Director Attendance
1. Mrs. Naz Mansha Chairperson 4

2. Mian Raza Mansha Chief Executive 5
3. Mr. Manzar Mushtaq 4
4. Khalid Qadeer Qureshi 5
5. Zaka ud din 5
6. Muhammad Azam 5
7. Inayat Ullah Niazi 5
AUDIT COMMITEE
The Board of Directors in compliance with the Code of Corporate Governance has
established an audit committee. The names of its members are given in the company
profile.
AUDITORS
M/s. KPMG Taseer Hadi and Khalid, Chartered Accountants, Lahore, retire and being
eligible, offer themselves for the reappointment.
M/s. Avais Hyder Liaquat Nauman Rizwan, Chartered Accountants, Lahore have been
appointed as Cost Auditors.
ACKNOWLEDGEMENT
The management applauds the efforts of dedicated engineers, technicians and staff of
D.G. Khan Site for their hard work and commitment which turned to set a record run
factor of Kiln-2. In addition, management also acknowledges the role of all the financial
institutions, dealers, customers, suppliers and other stakeholders for their continued
support.
For and on behalf of the Board
Lahore MIAN RAZA MANSH

September 19, 2008 Chief Executive
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AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed balance sheet of D. G. Khan Cement Company Limited
(“the Company”) as at 30 June 2008 and the related profit and loss account, cash flow
statement and statement of changes in equity together with the notes forming part thereof,
for the year then ended and we state that we have obtained all the information and
explanations which, to the best of our knowledge and belief, were necessary for the
purposes of our audit.
It is the responsibility of the Company’s management to establish and maintain a system

of internal control, and prepare and present the above said statements in conformity with
the approved accounting standards and the requirements of the Companies Ordinance,
1984. Our responsibility is to express an opinion on these statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in

Pakistan. These standards require that we plan and perform the audit to obtain reasonable
assurance about whether the above said statements are free of any material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the above said statements. An audit also includes assessing the accounting
policies and significant estimates made by management, as well as, evaluating the overall
presentation of the above said statements. We believe that our audit provides a reasonable
basis for our opinion and, after due verification, we report that:
a) In our opinion, proper books of account have been kept by the Company as required by
the Companies Ordinance, 1984;
b) In our opinion:
i) the balance sheet and profit and loss account together with the notes thereon
have been drawn up in conformity with the Companies Ordinance, 1984, and are
in agreement with the books of account and are further in accordance with
accounting policies consistently applied;
ii) the expenditure incurred during the year was for the purpose of the Company’s
business; and
iii) the business conducted, investments made and the expenditure incurred during
the year were in accordance with the objects of the Company;
c) In our opinion and to the best of our information and according to the explanations
given to us, the balance sheet, profit and loss account, cash flow statement and statement
of changes in equity together with the notes forming part thereof conform with approved
accounting standards as applicable in Pakistan, and, give the information required by the
Companies Ordinance, 1984, in the manner so required and respectively give a true and
fair view of the state of the Company’s affairs as at 30 June 2008 and of the profit, its
cash nflows and changes in equity for the year then ended; and
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d) In our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980
(XVIII of 1980), was deducted by the Company and deposited in the Central Zakat Fund
established under section 7 of that Ordinance.
Lahore KPMG Taseer Hadi & Co.

September 19,2008 Chartered Accountants
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BALANCE SHEET
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D.G. Khan Cement Company Ltd.
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Balance Sheet
As On June 30, 2008
2008 2007
Rupees in thousand
ASSETS
CURRENT ASSETS
Stores, spares and tools 2,299,250 1,496,291
Stoke-in-trade 455,856 295,140
Trade debts 366,173 144,245
Investment 15,082,582 16,933,790
Advances, deposits, payments and other receivables 782,358 229,315
Cash and bank balance 226,372 116,173
Total Current Assets 19,202,591 19,214,954
NON-CURRENT ASSETS
Property, plant and equipment 22,977,894 22,117,551
Assets subject to finance lease 5,135 133,376
Investments 2,488,307 1,907,063
Long term loans, advances and deposits 523,046 196,913
Total Non-Current Assets 32,790343 32,529,377
TOTAL ASSETS 51,992,934 51,744,331
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Trade and other payables 1,370,336 1,027,274
Accrued markup 364,664 342,612
Short term borrowing-secured 7,597,020 3,942,972
Current portion of non-current liabilities 2,687,608 2,042,281
Provision for taxation 35,090 35,090
Total Current Liabilities 12,054,718 7,390,229
NON-CURRENT LIABILITIES
Long term finances 8,411,051 8,686,447
Liabilities against assets subject to finance lease - 1,141
Long term deposits 73,890 79,467
Retirement and other benefits 54,018 39,862
Deferred 1,319,000 1,624,000
Total Non-Current Liabilities 9,857,959 10,430,917
EQUITY
CAPITAL AND RESERVES
Authorized Capital
1,000,000,000 shares @ Rs 10 10,000,000 10,000,000
Issued subscribed and paid up capital 2,535,412 2,535,412
Reserves 27,595,698 27,630084
Accumulated (loss)/profit (50,853) 1,757,689
Total Equity 30,080,257 33,923,185
TOTAL LIABILITIES AND EQUITY 51,992,934 51,744,331
INCOME STATEMENT
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Income Statement
For the Year Ended on June 30, 2008
2008 2007
Rupees in thousand
Sales - net 12,445,996 6,419,625
Cost of sales (10,530,723) (4,387,640)
Gross profit 1,915,273 2,031,985
Administrative expenses (111,658) (104,169)

Selling and distribution expenses (561,465) (65,122)
Other operating expenses (581,913) (139,721)
Other operating income 847,344 479,420
Profit from operations 1,507,581 2,202,393
Finance cost (1,749,837) (467,759)

Share of loss of associated companies (8,674) (14,163)
(Loss) / profit before tax (250,930) 1,720,471
Taxation 197,700 (98,000)

(Loss) / profit for the year (53,230) 1,622,471
(Loss) / earnings per share - basic and diluted (0.21) 6.43
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CASH FLOW STATEMENT
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Cash Flow Statement
For the Year Ended on June 30, 2008
2008 2007
Rupees in thousand
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 1,263,660 996,605
Finance cost paid (1,727,177) (465,771)
Retirement and other benefits paid (5,054) (43,067)
Taxes paid (135,780) (57,759)
Net (decrease) / increase in long term deposits (5,577) 45,653
Net cash (used in)/generated from operating activities (609,928) 475,661
CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment (2,698,370) (5,095,269)
Purchase of investments (188,339) (320,955)
Sale proceeds of investments - 90
Net (increase)/decrease in long term loans, advances and (325,502) 138,897
deposits
Sales proceeds of property, plant and equipment 26,655 18,608
Dividend received 820,435 465,779
Interest received 8,333 3,681
Net cash used in investing activities (2,356,788) (4,789,169)
CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of share capital - 1,602,666
Proceeds from long term finances 3,000,000 3,332,548
Repayment of long term finances (3,178,083) (1,481,302)
Repayment of liabilities against assets subject to finance (19,957) (85,932)
lease
Dividend paid (379,093) (344,743)
Net cash (used in)/generated from financing activities (577,133) 3,023,237
Net decrease in cash and cash equivalents (3,543,849) (1,290,271)
Cash and cash equivalents at the beginning of year (3,826,799) (2,536,528)
Cash and cash equivalents at the end of year (7,370,648) (3,826,799)
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FINANCIAL RATIOS ANALYSIS
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The information contained in the four basic financial statements is of major significance
to the various interested parties who regularly need to have relatives measure of the
company operating activities efficiency. Relative is a key word here, because the analysis
of financial statements is based on the use of ratio or relative values.
What is ratio analysis? What type of ratio analysis?
Ratio analysis involves method of calculating and interpreting financial ratio to analyze
and monitor the firm’s performance.
Type of ratio analysis

Ratio analysis is not merely the calculation of a given ratio. More important is the
interpretation of the ratio value.
There are two types of ratio analysis
 Cross-sectional analysis
 Time series analysis
Cross-sectional analysis
Cross-sectional analysis involves the comparison of different firms’ financial ratios at the
same point in time.
The major types of comparison that are made in cross-sectional analysis are:
 Benchmarking
 Industry average
Benchmarking
Benchmarking is frequently use by different firms. In this a firm compares its ratio values
to those of a key competitor or a group of competitors that it wishes to emulate.
Industry average
Industry averages are not particularly useful for analyze with firms with multiproduct
lines. In the case of multiproduct firms, it is difficult to select the appropriate benchmark
industry.
Time series analysis
Time series analysis evaluates performance over time. Comparison of current to past
performance, using ratios, enables analysts to asses the firm’s progress.
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Categories of ratio analysis:

Financial ratios can be divided for convenience into five basic categories:
 Liquidity ratios
 Activity ratios
 Debt ratios
 Profitability ratios
 Market ratios
A) Liquidity Ratios:
A firm’s ability to satisfy its short-term obligations as they come due is called liquidity.
Liquidity refers to the solvency of the firm’s overall financial position the ease with
which it can pay its bill. These ratios are viewed as a good indicator of cash flow
problems. The two basic measures of liquidity are:
a) Current ratio
b) Quick (acid test) ratio
a) Current Ratio
A measure of liquidity calculated by dividing the firm’s current assets by its current
liabilities. It measures the firm’s ability to meet its short-term obligations. It is expressed
as follow:
Current assets
Current ratio =
Current liabilities
` 19,202,591,000
=
12,054,934,000
= 1.59 Times
CURRENT RATIO ANALYSIS

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YEAR 2008 2007 2006 2005 2004

CURREN
T RATIO 2.60 1.65 1.37 1.21
1.59
b) Quick (acid test) ratio
The quick ratio measures the liquidity and is calculated by dividing the firm’s current
assets minus inventory by its current liabilities. It is calculated as follows:
Current assets – Inventory

Quick ratio =
Current liabilities
19,202,591,000 – 445,856,000
=
12,054,934,000
= 1.56 Times
QUICK RATIO ANALYSIS

YEAR 2008 2007 2006 2005 2004
QUICK
1.56 2.56 1.61 1.32 1.17
RATIO
TIME-SERIES ANALYSIS OF LIQUIDITY RATIOS

YEAR 2008 2007 2006 2005 2004
CURREN
T RATIO 2.60 1.65 1.37 1.21
1.59
QUICK
1.56 2.56 1.61 1.32 1.17
RATIO
B) Activity ratios:
It measures the speed with which various accounts are converted into sales or cash
inflows or outflows.
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A number of ratios are available for measuring the activity of the most important current
accounts, which includes inventory, account receivable, and account payable.
It includes following ratios:
a) Inventory turnover
b) Average collection period
c) Average payment period
d) Total assets turnover
a) Inventory turnover:
It commonly measures the activity, or liquidity, of a firm’s inventory. It is calculated as
follows.
Cost of goods sold
Inventory turnover =
Inventory
10,530.723,000
=
445,856,000
= 23.62 Times
INVENTORY TURNOVER
YEAR 2008 2007 2006 2005 2004
I.T.O 23.62 14.86 17.64 27.86 19.93
b) Average collection period:

The average collection period, or average age of account receivable, useful in evaluating
credit and collection policies. It is calculated by dividing the average daily sales into the
account receivable balance:
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Account receivable
Average collection period =
Average sales per day
Account receivable
=
Annual sales/360
366,173,000
=
12,455,996,000/ 360
= 10.58 Days
AVERAGE COLLECTION PERIOD

YEAR 2008 2007 2006 2005 2004
A.C.P 10.58 8.09 3.36 4.88 5.20
c) Average payment period:

Average payment period or average age of account payable, is calculated by dividing the
account payable to average purchases per day.
Account payable
Average payment period =
Average purchase per day
Account payable
=
Annual purchases / 360
1,370,336,000
=
29,698,442 / 360
= 46.142 Days
AVERAGE PAYMENT PERIOD

YEAR 2008 2007 2006 2005 2004
A.P.P 46.142 82.984 64.365 56.966 78.598
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d) Total assets turnover:

It indicates the efficiency with which the firm uses its assets to generate sales. It is
calculated as follows:
Sales
Total assets turnover =
Total assets
12,455,996,000
=
51,992,934,000
= 0.239 Times
TOTAL ASSET TURNOVER

YEAR 2008 2007 2006 2005 2004
T.A.T 0.239 0.124 0.232 0.214 0.195
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TIME-SERIES ANALYSIS OF ACTIVITY RATIOS

YEAR 2008 2007 2006 2005 2004
Inventory
Turnover 23.62 14.86 17.64 27.86 19.93
(Times)
Average
Collection 10.58 8.09 3.36 4.88 5.20
Period(Days)
Average
Payment 46.142 82.984 64.365 56.966 78.598
Period(Days)
Total Asset
Turnover 0.239 0.124 0.232 0.214 0.195
(Times)
C) Debt ratio:
It measures the proportion of total assets financed by the firm’s creditors. The higher this
ratio, the greater the amount of other people’s money being used to generate profits. It is
calculated as follows:
Total liabilities
Debt ratio =
Total assets
21,912,677,000
=
51,992,934,000
= 0.4215* 100
= 42.15 %
DEBT RATIO ANALYSIS

YEAR 2008 2007 2006 2005 2004
DEBIT
42.15% 34.44% 43.83% 48.28% 46.08%
RATIO
Time interest earned ratio
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It is also called interest coverage ratio, measures the firm’s ability to make contractual
interest payments it is calculated as follows.
Earning before interest and taxes

Time interest earned ratio =
Interest
1,507,581,000
=
1,749,837,000
= 0.86 Times
TIME INTREST EARNED RATIO ANALYSIS

YEAR 2008 2007 2006 2005 2004
T.I.E.R 0.86 4.71 8.67 7.98 5.99
TIME-SERIES ANALYSIS DEBT OF RATIOS

YEAR 2006 2005 2004 2003 2002
DEBIT
42.15% 34.44% 43.83% 48.28% 46.08%
RATIO
T.I.E.R 0.86 4.71 8.67 7.98 5.99
D) Profitability ratio:
There are many measures of profitability. As a group, these measures enable the analyst
to evaluate the firm’s profit s with respect to a given level of sales, a certain level of
assets, or the owners’ investment.
It includes the following ratios:

a) Gross profit margin
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b) Net profit margin

c) Earning per share
d) Return on total assets (ROA)
e) Return on equity (ROE)
a) Gross profit margin:
It measures the percentage of sales dollar remaining after the firm has paid for its goods.
It is calculating as follow:
Sale – CGS
Gross profit margin =
Sale
Gross profit
=
Sales
1,915,273,000
=
12,445,996,000
=
= 15.39 %
GROSS PROFIT MARGIN ANALYSIS

YEAR 2008 2007 2006 2005 2004
G.P.M 15.39% 31.65% 49.81% 36.91% 35.68%
b) Operating profit margin:
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It measures the percentage of each sales dollar remaining after all costs and expenses
other than interest, taxes, and preferred stock dividend are deducted.
It is also called “pure profit” earned on each sales dollar. It is calculating as follow:
Operating profits
Operating profit margin =
Sales
1,507,581,000
=
12,445,996,000
= 12.11%
OPERATING PROFIT MARGIN ANALYSIS

YEAR 2008 2007 2006 2005 2004
O.P.M 12.11% 34.31% 49.13% 33.16% 32.09%
c) Net profit margin:

It measures the percentage of each sales dollar remaining after all costs, expenses,
including interest and taxes have been deducted.
It is calculating as follow:
Earnings available for common stockholders

Net profit margin =
Sales
(53,230,000)
=
12,445,996,000
= (0.43) %
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NET PROFIT MARGIN ANALYSIS

YEAR 2008 2007 2006 2005 2004
N.P.M -0.43% 25.27% 30.40% 31.86% 20.46%
d) Earnings Per Share:
EPS represents the number of dollars earned during the period on behalf of each
outstanding share of common stock. It is calculating as follow:
Earning available for common stockholders
E.P.S =
No. Of shares of common stock outstanding
(53,230,000)
=
253,541,157
= Rs. -0.21
EARNING PER SHARE ANALYSIS

YEAR 2008 2007 2006 2005 2004
E.P.S Rs. -0.21 Rs. 6.40 Rs. 13.12 Rs. 9.12 Rs. 4.74
e) Return on Total Assets (ROA):

It is also called the return on investment measures the overall effectiveness of
management in generating profit with its available assets. The higher the firms return on
total assets the better the firm is.

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ROA =
Total assets
(53,230,000)
=
51,992,934,000
= -0.10 %
RETURN ON TOTAL ASSETS ANALYSIS

YEAR 2008 2007 2006 2005 2004
ROA -0.10 % 3.14% 7.05% 9.34% 6.78%
f) Return on equity (ROE):
The return on common equity measures the return earned on common stockholders
investment in the firm. It is calculating as follow

ROE =
Common stock equity
(53,230,000)
=
30,080,257,000
= -0.18%
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RETURN ON EQUITY ANALYSIS

YEAR 2008 2007 2006 2005 2004
ROE -0.18% 4.78% 12.55% 18.05% 12.58%
TIME-SERIES ANALYSIS OF PROFITABILITY RATIOS

YEAR 2008 2007 2006 2005 2004
Gross
Profit 15.39% 31.65% 49.81% 36.91% 35.68%
Margin
Operating
Profit 12.11% 34.31% 49.13% 33.16% 32.09%
Margin
Net Profit
-0.43% 25.27% 30.40% 31.86% 20.46%
Margin
Earnings
Rs. -0.21 Rs. 6.40 Rs. 13.12 Rs. 9.12 Rs. 4.74
Per Share
Return on
Total -0.10 % 3.14% 7.05% 9.34% 6.78%
Assets
Return on
Common -0.18% 4.78% 12.55% 18.05% 12.58%
Equity
E) Market ratios:
Market ratio relate to the firm’s market value, as measured by its current share price, to
certain accounting values. It is measured in two ways
a) Price/Earning ratio
b) Market/Book ratio
a) Price/Earning ratio:
It measures the amount that investors are willing to pay for each dollar of the firm’s
earning. The higher the price earning ratio the greater is investors’ confidence.
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Market price per share of common stock

P/E ratio =
EPS
37.73
=
-0.21
= -179.81Times
PRICE/EARNING RATIO ANALYSIS

YEAR 2008 2007 2006 2005 2004
P/E
-179.81 16.72 6.61 7.42 9.80
RATIO
b) Market/Book ratio:
It provides an assessment of how investor views the firm’s performance. Firm expected to
earn high return relative to their risk typically sells at higher market/book multiples.
Common stock equity

Book value per share of common stock =
Number of shares of common
stock outstanding
30,080,257,000
=
253,541,157
= Rs. 118.64/share
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BOOK VALUE PER SHARE

YEAR 2008 2007 2006 2005 2004
BOOK
118.64 133.80 104.49 50.53 37.68
VALUE
Market price per share of common stock

Market/Book (M/B) ratio =
Book value per share of common stock
37.73
=
118.64
= 0.32 Times
MARKET/BOOK RATIO ANALYSIS

YEAR 2008 2007 2006 2005 2004
M/B
0.32 0.29 0.35 0.31 0.27
RATIO
CROSS-SECTIONAL ANALYSIS:
For the Year 2008
D.G.Khan
Liquidity ratios Cement Lucky Cement Remarks
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Current ratio= 1.59 Times 1.09 Times Poor

Quick Ratio= 1.56 Times 1.00 Times Poor
Activity Ratios
Inventory Turnover= 23.62 Times 17.76 Times Greater
Average Collection Period= 10.58 Days 15.50 Days Better
Average Payment Period= 46.14 Days 102.6 Days Better
Total Asset Turnover= 0.24 Times 0.50 Times Poor

Debt Ratios
Debt Ratio= 42.85% 45.5% Ok
Time Interest Earned Ratio= 0.86 Times 24.27 Times Poor
Profitability Ratios
Gross profit margin= 15.39% 25.73% Poor
Operating profit margin= 12.11% 18.14% Poor

Net profit margin= (0.43)% 15.79% Poor
Poor
Earning per share(EPS)= Rs. (0.21) Rs. 7.84
Return on total assets(ROA)= (0.10)% 7.82% Poor
Return on common equity(ROE)= (0.17)% 14.35% Poor
Market Ratio
Price/Earnings(P/E)Ratio= -179.81 11.18 Poor
Market/Book Ratio 0.318 1.60 Poor
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STRENGTH WEAKNESS
 Assets  Weak Culture
 Plant Capacity of Production  Power distance
 Employees
 Collectivism
OPPORTUNITY THREATS
 Export in Abroad Country  Competitor
 Expanding Business  Dynamic Environment
 Recession in Economy
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Report On D.G. Khan Cement

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D.G.

Khan Cement Company Limited

Mrs. Naz Mansha Chairperson

Mr. Khalid Mahmood Chohan

Royal Bank of Sot land (ABN AMRO Bank (Pakistan) Limited)

KPMG Taseer Hadi & Co, Chartered Accountants

Mr. Shahid Hamid, Bar-at-Law

Nishat House, 53-A, Lawrence Road,

1. Khofli Sattai, Distt. Dera Ghazi Khan-Pakistan

2. 12, K.M. Choa Saidan Shah Road,

To provide quality products to customers and explore new

To transform the Company into modern and dynamic

The following table portrays the sales summary:

CORPORATE & FINANCIAL REPORTING FRAME WORK

In compliance with the Code of Corporate Governance, we give below statements on

Proper books of account of the Company have been maintained.

Appropriate accounting policies have been consistently applied in preparation of financial

International Accounting Standards, as applicable in Pakistan, have been followed in

S. No. Name of Director Attendance

1. Mrs. Naz Mansha Chairperson 4

For and on behalf of the Board

Lahore MIAN RAZA MANSH

AUDITORS' REPORT TO THE MEMBERS

It is the responsibility of the Company’s management to establish and maintain a system

We conducted our audit in accordance with the auditing standards as applicable in

Lahore KPMG Taseer Hadi & Co.

D.G. Khan Cement Company Ltd.

TOTAL LIABILITIES AND EQUITY 51,992,934 51,744,331

D.G. Khan Cement Company Ltd.

Administrative expenses (111,658) (104,169)

Finance cost (1,749,837) (467,759)

Taxation 197,700 (98,000)

(Loss) / earnings per share - basic and diluted (0.21) 6.43

CASH FLOW STATEMENT

D.G. Khan Cement Company Ltd.

CASH FLOWS FROM INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

Net decrease in cash and cash equivalents (3,543,849) (1,290,271)

Cash and cash equivalents at the beginning of year (3,826,799) (2,536,528)

Cash and cash equivalents at the end of year (7,370,648) (3,826,799)

FINANCIAL RATIOS ANALYSIS

What is ratio analysis? What type of ratio analysis?

Type of ratio analysis

Categories of ratio analysis:

CURRENT RATIO ANALYSIS

YEAR 2008 2007 2006 2005 2004

b) Quick (acid test) ratio

Current assets – Inventory

QUICK RATIO ANALYSIS

TIME-SERIES ANALYSIS OF LIQUIDITY RATIOS

b) Average collection period:

AVERAGE COLLECTION PERIOD

c) Average payment period:

AVERAGE PAYMENT PERIOD

d) Total assets turnover:

TOTAL ASSET TURNOVER

TIME-SERIES ANALYSIS OF ACTIVITY RATIOS

DEBT RATIO ANALYSIS

Earning before interest and taxes

TIME INTREST EARNED RATIO ANALYSIS

TIME-SERIES ANALYSIS DEBT OF RATIOS

It includes the following ratios: