Subject;

International Business
Topic;
Cement Sector Analysis for Pakistan
Submitted To;
Mr. Shehzad Ashraf
Submitted By;
Muhammad Asif
Roll No (3021)
BBA 8th (Evening)

University of Education (Okara)

 Lucky Cement Company
Introduction
Lucky cement Sponsored by well known Yunus Brothers Group one of the largest export
houses of Pakistan, Lucky Cement Limited currently has the capacity of producing 25,000 tons
per day of dry process Cement. Lucky Cement Limited (LCL) is Pakistans largest producer and
leading exporter of quality cement with the production capacity of 7.75 million tons per annum.
The company is listed on Karachi, Lahore, Islamabad and London Stock Exchanges. Over the
years, the Company has grown substantially and is expanding its business operations with
production facilities at strategic locations in Karachi to cater to the Southern regions, Pezu and
Khyber Pakhtunkhwa to furnish the Northern areas of the country. Lucky Cement is Pakistans
first company to export sizeable quantities of loose cement being the only cement manufacturer
to have its own loading and storage terminal at Karachi Port.

Chairman
Under Mr. Yunus Tabbas leadership, the Group has achieved considerable breakthroughs and
has received many awards from local and international institutions. Mr. Muhammad Yunus
Tabba started his over forty-two years long career with Yunus Brothers Group (YBG) as one of
its founding members and has seen it progress through manufacturing, sales management,
marketing management and general management. With his expertise and diversified experience,
he has taken YBG to a level which is appreciated by local and international business
communities. Muhammad Yunus Tabba has also been awarded Businessman of the Year by
the Chambers of Commerce several times during his career.

Chief Executive
Mr. Muhammad Ali Tabba is the Chief Executive of Lucky Cement Limited, succeeding his late
father in 2005. He also serves as the Chief Executive of Yunus Textile Mills Ltd (YTM), a state-
of-the-art home textile mill with subsidiaries in the North America and Europe.

Company Profile
Lucky Cement Limited
Lucky Cement is the flagship company of YBG, which has a solid history of exceptional
growth performance since its inception in 1993. The shares of the Company are quoted on the
Pakistan Stock Exchange (PSX). The Company has also issued Global Depository Receipts
(GDRs) which are listed and traded on the Professional Securities
Market of the London Stock Exchange.

Vision
We envision being the leader of the cement industry in Pakistan, identifying and capitalizing on
new opportunities in the global market, contributing towards industrial progress and sustainable
future, while being responsible corporate citizens.
Mission
Our mission is to be a premium cement manufacturer by building a professional organization,
having state-of-theart technology, identifying new prospects to reach globally and maintain
service and quality standards to cater to the international construction needs with an
environment-friendly approach.

Demand
In Pakistan, infrastructure projects and the housing sector are the key drivers for consumption of
cement. Going forward, consumption of cement from these two sectors is projected to increase.
Housing Sector
Increasing urbanization with urban areas having lower number of people per household
vis-- vis rural areas creating additional demand for housing units.
Significant backlog of housing units estimated at 9 million units and announcement of
various plans by the government to address this shortfall.
New affordable mega housing projects (Bahria Town, DHA, and LDA City)
Infrastructure
Infrastructure projects worth $9.8b are planned to be undertaken under China Pakistan
Economic Corridor
Spending for infrastructure projects as per allocations made under Public Sector
Development Programs particularly for construction of dams, roads and bridges.
Large infrastructure projects include Gwadar Airport, Gwadar Deep Sea Port
Hydropower project of around 10,000MW capacity and Karachi-Lahore Motorway.

Marketing Arrangement
The industry operates under a marketing arrangement whereby there is understanding on pricing
between cement players and a quota is assigned to each player based on installed capacity. The
marketing arrangement has matured considerably and has been a key element of cement sector
profitability. Historically, profitability of cement players witnessed pressure, particularly those
with lower efficiencies and limited export dispatches, in periods when marketing arrangement
was absent.

Expansion
Pakistan is amongst the three Cement Hotspots in the world where demand is expected to grow
at its fastest. Given the favorable demand outlook and in order to enhance efficiencies, four
cement manufacturers have announced expansion with additional capacities coming online
representing roughly 16% of existing capacity. Moreover, other local cement manufacturers with
capacity expansion in the North representing only one-tenth of additional capacity, risk to
marketing arrangement is limited in the backdrop of increasing demand. However, expansion in
the South represents over 50% of existing capacity which may be a threat to marketing
arrangement.
Export
According to All Pakistan Cement Manufacturers, import of cement has surpassed local
consumption.
In the first three months of the fiscal year 2016-17, cement consumption rose 8.3 percent
than that of previous year.
At least 90 lac tonne cement was exported in July-September period.
In the past month, import of cement increased by 12 percent taking the total to 5.23 lac
tonne out of which 2.28 lac tonne went to Afghanistan and 1.20 tonne to India.

Export to Afghanistan
Pakistans export of cement to Afghanistan has decreased from 0.174 million tons to 0.166
million tons during of January 2017, compared to the corresponding period last year, Industry
stakeholders expressed their concerns over the drop in overall exports to Afghanistan that have
declined by 10.88 percent in the first seven months of the current fiscal year, The Nation, a
Pakistani newspaper, reported.

Export to India
The industries also said that cement exports to India have registered an increase of 79.34 percent
between July 2016 to January 2017. Export by sea declined by 19.23 percent during first seven
months of current fiscal year.

Pakistan imports
Import from Afghanistan

The top exports of Afghanistan are Grapes ($166M), Raw Cotton ($82.8M), Insect Resins
($70.2M), Other Nuts ($59.3M) and Coal Briquettes ($56M), using the 1992 revision of the HS
(Harmonized System) classification. Its top imports are Peat ($1.1B), Raw Sugar ($531M),
Wheat Flours ($408M), Petroleum Gas ($352M) and Inedible Fats and Oils ($326M).

Imports from India

Pakistan has imported items worth Rs 1.88 billion from March 16, 2015 to March 31st during
current fiscal year from India via Wahga Border, while total taxes worth Rs 226.6 million were
collected during the period. As per details available to Customs Today Pakistan imported
tomatoes, garlic, polyethylene, cotton, poly propylene, Carbon Di Oxide and rolling machinery
from India.

Pakistan imported 2,917,231 kg of tomatoes from India in 16 days and income tax collected
during this period was Rs 8.2 million. On the other hand, garlic was also a big import from India
and during 16 days of March 6,86,196 kg of garlic was imported from the neighboring country.
Income tax collected from the import of garlic was Rs 4.3 million.
SWOT Analysis

SWOT Analysis for Lucky Cement Company

Strengths
High growth rate
Existing distribution and sales networks
Monetary assistance provided

Weaknesses
Market

Opportunities
Growing demand
New markets
New products and services
Global markets
Income level is at a constant increase
Growing economy

Threats
Government regulations
Price changes

Vertical Analysis of Financial Performance

The vertical analysis shows very good performance of the organization, Cost of Services are 52% of sales
with a resulting Gross Profit of 33% this is good performance of the company and despite very good
sales revenue of over Rs. 391 Billion the profitability of the organization is very good for the company.
Company achievement is so high.

In distribution cost major expense is incurred on Advertisement and distribution which is Rs. 32 Billion
and it is extremely high as well.

Administrative expenses of the organization still increase with the previous year 1% of the total sales
revenue and amounts more than Rs. 4.74 Billion it is also very high.

Finance Cost of organization is decrease as compare to previous year that cost are Rs. 2.53 Billion and it
comprise almost 1% of the sales revenue.

Just because of the above mentioned main points organization performance is so good and increase the
net sales as compare to the previous.
Horizontal Analysis of SOFP (statement of financial position)

When we do a horizontal analysis of the organization we come to find that the sales of
organization have increased by 37% but surprisingly its cost of services increased by 24% which
clearly indicates that the management of the organization is in a very good shape and the
corresponding cost of sales to with better management. As a result even the increase in sales has
resulted that company grow well and performance is so good as compared to the previous year it
is still growing and improve the sale volume on the organization in the coming year.

Gross profit of the organization is decreased by 59% which indicates clearly that company going
to improve and cost of good is not effect on the profit of the company.

Exchange profit of the organization in the year 2012 has increased by 143% slightly change in
the cost of the current year.

Due to all above results and good business performance the overall profit of the organization has
increased by 116% which is make stronger of the organization and in the future it may increase
the plant and business.

Current Ratio:
The purpose of using liquidity ratio is to determine the ability of the company for paying off its short term
debts. The higher value of liquidity ratios reflects that the company is well secured in performing its
obligations of short term debts. The calculation of current ratio shows that lucky cement is well secured in
this region. Its current ratio is 2.64 more than previous year .88

Inventory Turnover:
If we compare the inventory turnover it is 3.84 in year 2011 and 5.84 this year. This shows that company
has lower its efforts to convert its inventory into sales due to several reasons like power shortage.

Operating Profit Margin:

Company has generated 14% Operating Profit in 2011 and as compare to previous year in 2012
Operating Profit is 21%. Company decrease their finance cost and slightly change in CGS that is and
sales revenue is so high as compared to the previous year and performance is so increase in that year.

Net Profit Ratio:

Company has generated 12.50% Net Profit in 2011 and as compare to previous year in 2012 Net Profit is
17.40%. This improvement is so high in the net profit that company improved his performance beyond
the previous years. Company decrease his finance cost also increases his income that is effective on the
increase the Net profit ratio.
Return on Assets:
Lucky Cement is increase in return on assets in this year that would be 20% in 2012 and in 2011
that was 10% Company financial position is strong as compare to the previous year.

Assets Turnover Ratio:

Assets Turnover show that how much company has generated by employing on unit of currency.
Lucky cement is generating about 0.96 revenues against Re.1.0 assets. This reveals that although
the return is very good in 2011 however performing so well in 2012.

Debt ratio:
Gearing ratio is the measure to check the equity to borrowed funds/long term financing. The best
measure is the gearing ratio (Debt to equity). The results of the company show that they are
highly geared as the portion of their borrowed money is very much higher than the owners
equity. The other best measure is to check, how much the profit covers its interest. The higher
the interest cover ratio value, the more safe the company position is. The debt ratio in 2011 was
33% and in 2012 debt ratio is 18% show the company decrease the payables and remove all
short term borrowing and also decrease the long term financing that impact on the debt ratio and
strong position of the company show as well.

Interest cover:
Interest cover ratio is the measure to check the equity to borrowed funds/long term financing.
The best measure is the gearing ratio (Debt to equity). The results of the company show that they
are highly geared as the portion of their borrowed money is very much higher than the owners
equity. The other best measure is to check, how much the profit covers its interest. The higher
the interest cover ratio value, the more safe the company position is. Interest Cover was 8.2 in
2011 and in 2012 it is so high 32.87 that is four time double in that year and company show so
the high equity in present and it would shows as well strong financial position.

Earning per share:

Most important is what the company is paying back toits investors/owners. The greater value of
EPS maintain the investors and owners confidence on the company.The Company is paying
almost double the value and building its better image before the investors. The previous year
EPS was 12.28 and in 2012 it is increase by 20.9 that is greater value of EPS in present.

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