Lucky Cement Limited (New)

8/7/2019 Lucky Cement Limited (New)

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LUCKY CEMENT

LIMITED

007

Annual Report

2010

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REPORT ON:

ANALYSIS OF FINANCIAL

STATEMENT(LUCKY CEMENT LTD)

PREPARED BY:

IMRAN ALI FA10-MB-0188

SUBMITTED TO:ZARTASHIA KIRAN IMRAN

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ACKNOWLEGEMENT

Perfection was the watchword we had in our mind when we started working

on this project. However people generally agree that man can only strive to

approach excellence but never actually achieve it. Exquisite perfection is

rather a trait of God, and by his grace, we have tried very hard to make this

report an excellent one.

I would like to thank Ms. Zartashia Kiran Imran for her assistance,

guidance & instructions; she gave to me in the friendliest manner through

out this report, which could not have been successful without her dedicated

attention & guidance.

I tried out my best to collect appropriate information for the completion of

this report. I am grateful to my teacher for providing me such a practical

oriented chance to explore new dimensions and enable me to understand the

latest world business situations.

Once again, I am thankful to all the people who have been involved in the

completion of this report directly or indirectly

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LUCKY CEMENT LIMITED

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The VisionWe envision being the leader of the cement industry by

identifying and capitalizing on new market opportunities,

meeting expectations of the stakeholders, contributingtowards industrial progress and sustainable future, whilebeing responsible corporate citizens.

The MissionOur mission is to expand our business network by

forming strategic alliances in the global market. Weendeavor to equip our business with the latest technology toproduce quality cement while conserving energy andreducing CO2 emission to reinforce eco-friendly businesspractices; thus meeting international standards.

The Strategies

At Lucky Cement, we work together to achieve the followingstrategies:

Market PenetrationWe believe in depth and width expansion, and have

therefore broadened our horizons to do business globally.

Supporting DiversificationDiversity is our "strength". From producing a variety of

cement brands, providing a range of logistics and transportationsolutions and catering to a variety of markets globally, we haveachieved it all.

Technological Advances

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At Lucky Cement, we keep ourselves in line withtechnological advances to further improve cement quality andproduction methods to achieve optimum efficiency.

Human Resource SignificanceWe value our Human Resources for providing a frameworkthat serves as a guiding force for the organization as a whole.

Production EdgesWe employ the latest production techniques and the finest

quality of raw materials to ensure optimum efficiency at allstages of production. The efficiency and the effectiveness of ourproduction method(s) help us compete in the market and meetthe growing demands of our customers.

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Core Values

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CEMENT INDUSTRY

Introduction:

Cement is a key infrastructure industry. It has beendecontrolled from price and distribution on 1st March, 1989 anddelicensed on 25th July, 1991. However, the performance ofthe industry and prices of cement are monitored regularly. Theconstraints faced by the industry are reviewed in the

Infrastructure Coordination Committee meetings held in theCabinet Secretariat under the Chairmanship of Secretary(Coordination). Its performance is also reviewed by the CabinetCommittee on Infrastructure.

Capacity and Production:

The Pakistan Cement Industry was under pressure due toover capacity. The demand in domestic market has shownpositive growth of 16.6%. The industry sold the highest evercement in the history of the country with 23.53 million tons ofcement dispatches.

The growth in domestic demand is due to private sectorspending and also on back of the recovery of rural economy dueto higher agriculture support prices offered by the governmentof Pakistan. Having said that, the prices still remained verydepressed during this financial year.

Exports:

However the export of cement by sea will be underpressure due to increase in cement capacity in the region. Onpositive note, the demand in Afghanistan has increased andhopefully in the coming financial year, it may touch 5.0 million

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tons. The industry is still facing challenges due to over capacitywhich will keep the domestic prices under pressure.

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Comparison of both EPS

We can see the situation of EPS of both years in 2009 and 2010. Now we can makeout the difference of both types of EPS. When we observe the EPS in 2009 it was 14.21 ascompared in 2010 it was 9.70 it is due to decrease in sales of about 6.92% as compare to2009 sales on the other hand the increase in expenses also decrease the net profit andultimately decrease the EPS of 2010.

This EPS represent the true figure and shape of the company where the company

stands right now.

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LUCKY CEMENT LIMITED(Amount in 000)

LIDUIDITY RATIO

Current Ratio:

= Current AssetsCurrent Liabilities

Year 2010 = 6,871,464 = 0.71

9,641,691

Year 2009 = 7,857,942 = 0.869,098,678

INTERPRETATION:-Current ratio shows the relationship between current assets

and current liabilities. In other words it shows how many currentassets a firm has in order to cover its current liabilities. CurrentRatio of 2009 is well due to falling in current liabilities anddecrease in current assets and it shows 0.86 : 1 as compare to

the current ratio in 2010 which is showing a decreasing trendand shows 0.71 : 1 which is not as good sign for the company.

Quick Ratio (Asid Test Ratio):

= Current Assets - Stock

Current Liabilities

Year 2010 = 6,871,464 - 60 8,813 = 0.659,641,691

Year 2009 = 7,857,942 - 1,196,608 = 0.739,098,678

INTERPRETATION:-Quick ratio is same like current ration but its shows the

relationship between current assets after excluding stocks andcurrent liabilities. In other words it shows how many more

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liquidate assets a firm has in order to cover its current liabilities.Quick Ratio of 2009 is well due to falling in current liabilities anddecrease in current assets and it shows 0.73 : 1 as compare tothe current ratio in 2010 which is showing a decreasing trend

and shows 0.65 : 1 which is not as good sign for the company.

PROFITABILITY RATIO

Gross Profit Margin:

= Gross Profit x 100

Sales

Year 2010 = 7,978,861 x 100 = 32.56%

24,508,793

Year 2009 = 9,811,266 x 100 = 37.26%

26,330,404

INTERPRETATION:-Gross profit Margin ratio shows the relationship between

gross profit Margin and sales. In other words how much amount

firms receive excess to cost of goods sold. Gross profit Margin of2009 is very well due to falling of cost of good sold of LUCKYCEMENT LIMITED was receiving 37.26% gross profit Marginwhich was very sufficient, because in 2010 LUCKY CEMENTLIMITED is receiving only 32.56% so due to lower or lowest ofgross profit Margin we can say this is worst for entire company.

Operating Profit Margin:

= Operating Profit x 100Sales

Year 2010 = 4,242,570 x 100 = 17.31%

24,508,793

Year 2009 = 7,217,493 x 100 = 27.41%

26,330,404

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INTERPRETATION:-Rate of Operating profit explain that how much you obtain

after deducting distribution and administration activities of firm.Operating profit of LUCKY CEMENT LIMITED in 2009 is quiet

better as compare to 2010, so rate of operating profit in 2010 is17.31%, but in 2009 situation was very full resonance ascompare to 2010.

Net Profit Margin:

= Net Profit x 100

Sales

Year 2010 = 3,137,457 x 100 = 12.80%

24,508,793

Year 2009 = 4,596,549 x 100 = 17.46%

26,330,404

INTERPRETATION:-Rate of net profit explain that how much you obtain after

competition of all activities of firm. Net profit shows the realgrowth and performance of LUCKY CEMENT LIMITED, becausestake holders are interested in companys profit. So LUCKY

CEMENT LIMITED situation in 2009 is better as compare to2010, so rate of net profit in 2010 is 12.80%, but in 2009situation was very much better as compare to 2010.

Return on Total Assets:

= Net Profit x 100

Total Assets

Year 2010 = 3,137,457 x 100 = 8.19%

38,310,244

Year 2009 = 4,596,549 x 100 = 11.97%

38,392,362

INTERPRETATION:-Rate of return and total asset shows that how much income

LUCKY CEMENT LIMITED firms earns with reference to total

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assets. Return on total assets can be calculated by the help ofnet income so net income of 2009 was good as compare to 2010so return on total assets was seem to be better as compare to2010. So return on total assets is tending to be worst as

compare to 2009.

Return on Common Equity:

= Net Profit x 100

Total Shareholders Equity

Year 2010 = 3,137,457 x 100 = 12.50%

25,095,929

Year 2009 = 4,596,549 x 100 = 19.77%

23,251,972

INTERPRETATION:-Rate of return on Common equity shows that how much net

income receives with reference to share holders equity. In 2009situation of return on share holders equity was very well,because it was positive and then it has DIFFERENCE as compareto 2009. But now in 2010 it is slightly different condition in

current year due to significant changes in companys policiesdue to various reasons. Company profit ratio is fall in this year.

ACTIVITY RATIO

Inventory Turnover:

= Cost of Goods Sold

Inventory

Year 2010 = 11,147,366 = 18.31 times

608,813

Year 2009 = 20,737,216 = 17.33 times

1,196,608

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INTERPRETATION:-Inventory turnover ratio shows that how many times the

stock is used through the cost of goods sold and higher theconsumption shows higher profitability. Inventory Turnover of

2010 is very well and was 18.31 times as compare to 17.33times in 2009.

Total Assets Turnover:

= Sales

Total Assets

Year 2010 = 24,508,793 = 63.97%38,310,244

Year 2009 = 26,330,404 = 68.58%

38,392,362

INTERPRETATION:-Rate of return and total asset shows that how much income

LUCKY CEMENT LIMITED firms earns with reference to totalassets. Return on total assets can be calculated by the help ofnet income so net income of 2009 was good as compare to 2010

so return on total assets was seem to be better as compare to2010. So return on total assets is tending to be worst ascompare to 2009.

Payable Days:

= Accounts PayableAnnual Purchase / 365

Year 2010 = 63.16%

Year 2009 = 68.79%

INTERPRETATION:-

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Payable days ratio shows the number of day in which thecreditors were paid by the company. As the number of daysincreases shows the improvement in cash cycle of the company.

DEBT RATIODebt ratio:

= Total Liabilities

Total Assets

Year 2010 = 0.34

Year 2009 = 0.39

Time Interest Earned Ratio:

= Earning before interest & Tax

Interest

Year 2010 = 7.45 times

Year 2009 = 5.83 times

Debt to Equity Ratio:

= Total Debts.Total Equity

2010 = 0.53 times

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2009 = 0.65 times

MARKET RATIO

P/E Ratio:

= Market Price per ShareEPS

Year 2010 = 6.40

Year 2009 = 4.12

Cash Dividend Per Share Ratio:

= Dividend

Total Shareholders Equity

Year 2010 = 4.00

Year 2009 = 4.00

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POTENTIAL EXPENSES IN 2010 AS COMPARED TO2009:

DISTRIBUTION COST 2010 2009 Difference

(Rupees in 000)

Salaries and benefits 42,490 35,765 6,725

Communication 3,499 3,250 249

Logistic and related charges 3,233,415 2,267,954 965,461

Loading and others 28,472 29,285 -813

Travelling and conveyance 2,518 1,340 1,178

Printing and stationery 812 771 41Insurance 10,897 10,322 575

Rent, rates and taxes 6,537 6,361 176

Utilities 1,298 822 476

Vehicles running and maintenance 7,002 5,951 1,051

Repairs and maintenance 8,597 549 8,048

Fees, subscription and periodicals 606 107 499

Advertisement and sales promotion 9,713 4,465 5,248

Entertainment 580 465 115

Depreciation 73,570 58,952 14,618

Others 3,041 1,478 1,563

TOTAL DISTRIBUTION COST 3,433,047 2,427,837 1,005,210

ADMINISTRATIVE EXPENSES 2010 2009 Difference

(Rupees in 000)

Salaries and benefits 110,914 81,089 29,825

Communication 6,503 6,239 264

Travelling and conveyance 9,353 6,415 2,938

Insurance 1,268 1,311 -43

Rent, rates and taxes 2,298 1,577 721

Vehicles running and maintenance 10,034 8,438 1,596

Printing and stationery 6,731 4,142 2,589

Fees and subscription 7,102 8,214 -1,112

Security services 1,708 1,430 278

Legal and professional 8,638 9,215 -577

Transportation and freight 329 242 87

Utilities 5,542 3,833 1,709

Repairs and maintenance 6,870 8,444 -1,574

Advertisement 1,238 173 1,065

Donations 104,046 6,872 97,174

Auditors' remuneration 1,481 1,112 369

Other auditors' remuneration 5,279 3,852 1,427

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Depreciation 10,197 11,264 -1,067

Amortization 1,466 - 1,466

Others 2,247 2,074 173

TOTAL ADMINISTRATIVEEXPENSES 303,244 165,936 137,308

RECOMMENDATION

Our recommendation is company should reduce the spending policybecause particularly in 2010 company spent a lot in these unpaid areas

Export logistic and other charges

Travelling and conveyance

Legal and professional

Vehicles running and maintenance

Advertisement and sales promotion

Printing and stationery

Repair and maintenance

These are expenses where company has been expenditure a lot which is notgood for company.

Export logistic expenses are very high as compare to preceding year.

That is not so much encouraging at the right moment.

Travelling and conveyance are increasing as compare to last yearand company should look after the expenses occurred in this headshould be justifiable and in favor of the company.

Legal and professional expenses are being paid by company. Firstcompany are not in position to give us profit and company managementinvolve in certain situation that paying this type of expenses which is onlyreduce the profit level in company.

Vehicles running and maintenance will be increase as the travellingand conveyance increases but the company should take correctiveactions to control on these costs.

Advertisement and sales promotion is the essential part ofpromoting product like cement. But it is also very shocking forstockholder of this company that company placed so many amounts on

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advertising as compare to last year but volume of sales is lower then2009. Its mean company didnt use their amount at right time and rightplace thats way this advertising is not performing well for companyfuture.

Printing and stationery is also showing increasing trend as compareto last year it shows that there can be a misuse or wastage while doingthe printing of the office documents and stationary.

Repair and maintenance in distribution costs is getting very high ascompare to preceding year and showing alarming signal to the company.

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RECOMMENDATION FOR LUCKY CEMENT

LTD

Throughout previous years the performance of the organization is good. Itsdynamic year is 2009 as its earning per share and dividend per shares is alsoincreasing. But in 2010 company assets is increasing as compare to 2009 ascompanys performance was going good in 2009 but in 2010 performance wasquiet worst. I want to recommend some new ideas to be a leading Company inPakistan.

Policies of company:-

The company should revise its policy regarding their weak area because some

ratios indicating that company is suffering from the worst condition.

Raw material:-Company should buy raw material as low as possible to increase its grossprofit.

Current Assets & current liabilities:-Company should maintain its current assets to paying its current liabilities.

Reduce cost and improve Revenue:-Company should minimize its product cost to increase its sales for regulating

the product in market.

proper utilization of resources:-Company should properly utilize its assets to generate more sales.

Finance cost:-Company should borrow in less interest rate, by this company pay less interestexpense and maintain its cash transaction.

Improve export level:-Lastly I would like to recommend that the company needs to expand itsoperation by new launches and exploring new countries for export.

Control the expenses:-Company must control the expenses which are biggest and challenging task forcompany to reduce it. Because this is significant reason of falling profitsituation of LUCKY CEMENT LTD.

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