REPORT ON LAFARGE CEMENT

PAKISTAN

INTRODUCTION TO BUSINESS FINANCE

PROJECT REPORT
LAFARGE CEMENT PAKISTAN

SUBMITTED BY
SAAD KHAN KAKAERZAI
ID
SP09-BB-0083

SUBMITTED TO
MR. UMAIR BAIG

MOHAMMAD ALI JINNAH UNIVERSITY

KARACHI.

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 Table of Content
S.No Description Page
No.
01
02
03
04
05
06
07
08
09
10
11
12

13

14

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 DEDICATION:
Our beloved teachers & parents, whose blessings and concentration Brings
us to this stage and who trample their inclination and longing for Up holding
our studies.

LETTER OF ACKNOWLEDE

3
APRIL 24th, 2010

This report is a financial ratio analysis of Lafarge cement

pakistan which has been prepared as a part of the course
requirement for Introduction to Business Finance. The
material compiled and presented in this report is a result of
hard work.

This report has proved to be a great experience. For this, I

would like to thank our Almighty ALLAH who made
everything easier to me and then Our Instructor Mr. Umair
Baig who provided us the path of knowledge and guidance.

Sincerely,
Saad Khan Kakerzai

Introduction
“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 came into existence in 1996 with a daily production

capacity of 4,200 tons per day, currently is an omnipotent cement
plant of Pakistan, and rated amongst the few best plants in Asia.

4
With production facilities in Pezu (Production capacity: 13,000 Tons per
day) as well as in Karachi (Production capacity: 12,000 tons per day), it
has the tendency to become the hub of cement production in Asia.

The Vision
To be the market leader in domestic and exports from the Country by
supplying high quality cement at the most competitive rates with
customers’ satisfaction and discharge our social responsibilities for the
benefit of under privileged.

The Mission
To be the largest and fastest growing cement producer using state of
the art technology at the most competitive cost by utilizing our
experience for maximizing profits for our shareholders.

The Strategy
To be the leading exporter of cement from Pakistan for the regional
countries as well as to explore the other potential export markets.
As a part of future strategy, to explore investment possibilities outside
Pakistan in the cement industry to become global producer.

Company Information
BOARD OF DIRECTORS

Mr. Muhammad Yunus Tabba (Chairman/Director)

Mr. Muhammad Ali Tabba (Chief Executive)
Mr. Muhammad Sohail Tabba
Mr. Imran Yunus Tabba
Mr. Javed Yunus Tabba
Mrs. Rahila Aleem
Miss Mariam Razzak
Mr. Manzoor Ahmed (NIT)

EXECUTIVE DIRECTOR

Mr. Abdur Razzaq Thaplawala

5
DIRECTOR FINANCE &
COMPANY SECRETARY

Mr. Muhammad Abid Ganatra

FCA, FCMA, FCIS

STATUTORY AUDITORS

M/s. Ford Rhodes Sidat Hyder & Co.,

Chartered Accountants
A member firm of Ernst & Young Global Limited

INTERNAL AUDITORS

M/s. A.F. Ferguson & Co.,

Chartered Accountants
A member firm of PricewaterhouseCoopers

COST AUDITORS

M/s. KPMG Taseer Hadi & Co.,

Chartered Accountants

AUDIT COMMITTEE

Mr. Muhammad Yunus Tabba

Mr. Muhammad Ali Tabba
Mr. Imran Yunus Tabba
Mr. Javed Yunus Tabba
Miss Mariam Razzak

BANKERS

Allied Bank Limited

The Royal Bank of Scotland Limited
Bank AL-Habib Limited
Citibank N.A.,
Faysal Bank Limited
Habib Bank Limited

6
Habib Metropolitan Bank Ltd.
KASB Bank Limited
MCB Bank Limited
National Bank of Pakistan
Soneri Bank Limited
Standard Chartered Bank (Pakistan) Limited
United Bank Limited

REGISTERED OFFICE

Pezu, District Lakki Marwat, N.W.F.P.

PRODUCTION FACILITIES

1. Pezu, District Lakki Marwat, N.W.F.P.

2. 58 Kilometers on Main Super Highway, Gadap
Town, Karachi.

HEAD OFFICE

6-A, Muhammad Ali

Housing Society,
A. Aziz Hashim Tabba Street,
Karachi-75350
UAN # (021) 111-786-555

SHARES DEPARTMENT

6-A, Muhammad Ali

Housing Society,
A. Aziz Hashim Tabba Street, Karachi.
UAN # (021) 111-786-555

WEB SITE ADDRESS

www.lucky-cement.com

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E-MAIL ADDRESS

info@lucky-cement.com

A BRIEF PROFILE OF MR. ABDUL RAZZAK TABBA

LATE CHAIRMAN OF YUNUS BROTHERS GROUP

Mr. Abdul Razzak Tabba was the Chairman of YB Group. Mr. Tabba was
awarded SITARA-I-IMTIAZ on 23rd March, 2005 for Public Service and
the highest exports. Under the leadership of Mr. Abdul Razzak Tabba,
the Group has received more than 20 Exports Trophies from the
Government of Pakistan for the highest overall exports from the
Country as well as the highest exports in Textile Sector. It may be
pertinent to point out that during the financial year 2004-2005, the
textile mills owned by the Group i.e. Yunus Textile Mills, Lucky Textile
Mills, Gadoon Textile Mills and Fazal Textile Mills have in total exported
textile goods worth more than Rs. 18 Billion.
Unfortunately, the group lost its dynamic and great leader on 19th
May, 2005. Mr. A. Razzak Tabba suffered a heart stroke on 19th May,
2005 and died the same day.
Mr. A. Razzak Tabba was a Director of National Bank of Pakistan and
had been involved in policy making of the bank. In addition to this, he
was an active member of the board of governors of the Institute of
Business Management (IBM). He was also a member of academic
syndicate of Dow Medical University, as well as a member of advisory
committee of Citizen Police Liaison Committee, a trustee of Saark
Health Foundation, ice chairman Kidney Foundation and trustee of
World Memon Foundation Community Centre where technical
education is being given to more than 2300 girls every year.

8
History

9
BRANDS AVAILABLE AT LUCKY CEMENT

Lucky CEMENT (REGULAR) Lucky STAR

Lucky GOLD Lucky SULPHATE RESISTANT CEMENT (SRC)

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 Ratio Analysis
S.NO Ratio Formula 2007 2008
1- Current Ratio Current Assets 2852907874 3856415682
Current Liabilities 3122289185 5268864833
0.88 0.73

2- Quick Ratio Quick Assets 983703841 238042993

Current Liabilities 3122289185 5268864833
0.31 0.045

A/P payment Net Credit

3- period Purchases 364514357 383562061
Avg A/P 1537746095 1342179485
0.23 0.285

Avg Payment
Period 365 365 365
times 0.23 0.285
1587 1281

Current Assets-
4- Working Capital Current Liabilities 2852907874 - 3856415682 -
3122289185 5268864833
(269381311) (1412449151)

5- Debt Ratio Total Liabilities 10998872710 10949799450

Total Assets 21499828234 21984203052
51% 50%

Avg Days of
6- Operating Cycle A/R turnover day + 6 + 135 3+122
Invt turnover days
141 days 125 days

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S.NO Ratio Formula 2007 2008
7- A/R turnover Net Credit Sale 4191594084 7439375345
Avg. A/R 74358911 54142748
56.5 138

Avg. collection
8- period 365 365 365
A/R Turnover 56.5 138
6 days 3 days

9- Inventory turnover Cost of Good Sold 4684077998 6864524968

Avg. Inventory 1748102922 2349983010
S.NO Ratio Formula 2007
2.7 2008
3
14- Net profit margin Net Profit (1242403558) (521096900)
Total assets
10- turnover Net Sales 7439375345
4191594084 4191594084
7439375345
Net Sales
Total Assets 21499828234
(16.70%) 21984203052
(12.43%)
19.5% 34%

15- Return on assets Net Profit (521096900) (1242503558)

11- Price Earning Ratio Market Price 3 3.42
TotalPer
Earning Assets
share 21499828234
(0.59) 25723761
(1.01)
(2.42%)
(5.08) (5.65%)
(3.385)

12- Gross profit margin Gross Profit (492483914) 574850377

16- Equity Ratio Share Holder 10500955528 11034403602
Net Sales
Equity 4191594084 7439375345
Total assets 21499828234
(11.74%) 21984203052
7.727%
49% 50%
13- Dividend Yield Dividen per share 0 0
Market Price 3 3.42
17- Earning per share Net Profit after Tax (521096900) (1242503558)
0 0
No. of Shares 877480582 1224799777
issued

(0.59) (1.01)

18- Dividend per share Dividend Paid 0 0

No. of Shares 122479977712
issued 877480582

0 0
 Share Holder
19- Book value per share Equity 10500955528 11034403602
Number of shares 877480582 1224799777
S.NO Ratio Formula 2007 2008

12 9

Return on SHE Net income (521096900) (1242503558)

20-
Share holder 10500955528 11034403602
equity

(4.96%) (11.26%)

Rate of cost of good

sold COGS 4684077998 6864524968
21-
Net sales 4191594084 7439375345

111.7% 92.27%

Rate of operating
expense Operating expense 324501826 507941850
22-
Net sales 4191594084 7439375345

7.74% 6.82%

Cash Flow Margin Cash from

operation 690048153 2277828392
23-
Net sales 4191594084 7439375345

16.46% 30.61%

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 TIME SERIES ANALYSIS

1-CURRENT RATIO:

2007 2008
0.88 0.73

1
0.8
0.6
0.4
0.2
0
2007 2008

INTERPRETATION:
Current ratio measure the firm’s ability to meet its short term obligations or
commitments. It shows the relationship between current assets and current liabilities. In
the year 2007 current ratio was 0.88 it means current assets were 0.88 times less than that
of its current liabilities.
In the year 2008 it decreased to 0.73 if we evaluate the performance over the period of
time companies result are showing bad position in 2008.

14
2-QUICK RATIO:

2007 2008
0.31 0.045

0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
2007 2008

INTERPRETATION:
Quick ratio measure the firm’s ability to meet its short term obligations or commitments.
It shows the relationship between quick assets and current liabilities. In the year 2007
quick ratio was 0.31 it means quick assets were 0.31 times less than that of its current
liabilities.
In the year 2008 it decreased to 0.045 if we evaluate the performance over the period
of time companies result are showing worst position in 2008.

4-WORKING CAPITAL:

2007 2008
(269381311) (1412449151)

15
 0
2007 2008

-5E+08

-1E+09

-1.5E+09

INTERPRETATION:
Working capital measure the firm’s ability to meet its short term obligations or
commitments. It shows the relationship between current assets less current liabilities. In
the year 2007 working capital (269381311) it means company has problem with its cash.
In the year 2008 it decreased to (1412449151) and in 2008. if we evaluate the
performance over the period of time companies result are showing worse position though
in 2007 it was decreasing than increased in 2008.

4.NVENTORY TURNOVER:(TIMES)

2007 2008
2.7 3

3
2.95
2.9
2.85
2.8
2.75
2.7
2.65
2.6
2.55
2007 2008

INTERPRETATION:

Inventory turnover shows how efficiently management utilizes its assets in generating
revenue by relating or comparing sales to assets. It shows the relationship between costs

16
of goods sold with average inventory. In the year 2007 inventory was 1748102922 it
means firm use 2.7 times to convert its inventory into cash in 3 times. In the year 2008 it
increases in 2008.

5.INVENTORY TURNOV:(DAYS)

2007 2008
135 122

136
134
132
130
128
126
124
122
120
118
116
114
2007 2008

6.ACCOUNTS RECEIVABLE TURNOVER:

2007 2008
56 138

17
 140
120
100
80
60
40
20
0
2007 2008

INTERPRETATION:
Accounts receivable turnover shows how efficiently management utilizes its assets in
generating revenue by relating or comparing sales to assets. It shows the relationship
between credit sales and accounts receivables. In the year 2007 debt to equity ratio were
56 it means firm use to collects its cash 56 times in a year.
In the year 2008 it increased to 138.

7.ACCOUNTS RECEIVABLE TURNOVER IN DAYS:

2007 2008
6 3

0
2007 2008

8.ACCOUNTS PAYABLE PAYMENT PERIOD TIME:

2007 2008
0.23 0.285 18
 0.3

0.25

0.2

0.15

0.1

0.05

0
2007 2008

9. IN DAYS:

2007 2008
1587 1281

1600
1400
1200
1000
800
600
400
200
0
2007 2008

10. TOTAL DAYS OF OPERATING CYCLE:

2007 2008
141 125

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 145

140

135

130

125

120

115
2007 2008

11. DEBT RATIO:

2007 2008
51% 50%

51
50.8
50.6
50.4
50.2
50
49.8
49.6
49.4
2007 2008

INTERPRETATION:

Debt ratio measure the firm ability to meet its long term obligations or commitments. It
shows the relationship between total debts and total assets. In the year 2007 debt ratio
was 51% it means total liability were 51% less than that of its total assets.
In the year 2008 it decreased to 50%.

12. EQUITY RATIO:

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 2007 2008
49% 50%

50
49.8
49.6
49.4
49.2
49
48.8
48.6
48.4
2007 2008

13. ASSETS TURNOVER:

2007 2008
19.5% 34%

35
30
25
20
15
10
5
0
2007 2008

INTERPRETATION:

Total assets turnover shows how efficiently management utilizes its assets in generating
revenue by relating or comparing sales to assets. It shows the relationship between to
total assets to net sales. In the year 2007 total assets turnover was 110.54 it means that
firm has generated 110.54 times sales from its total assets.
In the year 2008 it increased to 126.123 if we evaluate the performance over the period of
time companies result are showing a good position in 2008.

14. EARNING PER SHARE:

2007 2008
(0.59) (1.01) 21
 0
2007 2008
-0.2

-0.4

-0.6

-0.8

-1

-1.2

15. PRICE EARNING RATIO:

2007 2008
(5.08) (3.386)

0
2007 2008
-1

-2

-3

-4

-5

-6

16. DIVIDEND PER SHARE:

2007 2008
0 0

22
 1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2007 2008

17. DIVIDEND YEILD:

2007 2008
0 0

1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2007 2008

18. BOOK VALUE PER SHARE:

2007 2008
12 9

23
 12

10

0
2007 2008

19. RATE OF RETURN ON TOTAL ASSETS:

2007 2008
(2.42%) (5.65%)

0.00%
2007 2008
-1.00%

-2.00%

-3.00%

-4.00%

-5.00%

-6.00%

INTERPRETATION:

Return on assets measures the overall record of the management in producing profits. It
shows the relationship between assets and net loss. In the year 2007 return on assets was
(2.42%) it means that firm has generated 2.42% of net loss from its total assets.
In the year 2008 it increased to (5.42) if we evaluate the performance over the period of
time companies result are showing a Worst position in 2008.

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20. RATE OF RETURN IN STOCKHOLDER EQUITY:

2007 2008
(4.96%) (11.26%)

0.00%
2007 2008
-2.00%

-4.00%

-6.00%

-8.00%

-10.00%

-12.00%

21. RATE OF COST OF GOOD SOLD:

2007 2008
112% 92.5%

120%

100%

80%

60%

40%

20%

0%
2007 2008

22. RATE OF GROSS PROFIT:

2007 2008
(12%) 8%

25
 10

0
2007 2008
-5

-10

-15

INTERPRETATION

Gross profit margin measures the overall record of the management in producing profits.
It shows the relationship between gross profit and sales. In the year 2007 gross loss
margin was 12 it means that firm has generated 12% of gross loss from its sales.
In the year 2008 it increased to 8% in gross profit if we evaluate the performance over
the period of time companies result are showing a better position as in 2008.
23. RATE OF OPERATING EXPENSE:

2007 2008
8 7

8
7.8
7.6
7.4
7.2
7
6.8
6.6
6.4
2007 2008

24. RATE OF NET PROFIT:

2007 2008
(12.5%) (17%)

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 0.00%
-2.00% 2007 2008
-4.00%
-6.00%
-8.00%
-10.00%
-12.00%
-14.00%
-16.00%
-18.00%

INTERPRETATION:

Net profit margin measures the overall record of the management in producing profits. It
shows the relationship between net profit and sales. In the year 2007 net loss margin was
12.5% it means that firm has generated 12.5% of net loss from its sales.
In the year 2008 it increased to 17% if we evaluate the performance over the period of
time companies result are showing a worst position in 2008.
25. CASH FLOW MARGIN:

2007 2008
16.5% 31%

35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2007 2008

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 Internal Growth Rate

IGR = Return on Assets * Retention Ratio *100

1- (Return on Assets * Retention Ratio)

FOR RETURN ON ASSETS:

ROA = Net profit

Total Assets

ROA = (1242503558)
21984203052

ROA = (0.056)

FOR RETENTION RATIO:

Retention Ratio = 1 – dividend payout rate

FOR DIVIDEND PAYOUT RATE:

Dividend payout rate = Dividend paid

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 NPAT
= 0
(1242503558
Dividend payout rate = 0

NOW,

Retention ratio = 1–0

= 1

THEREFORE
IGR = Return on Assets * Retention Ratio
1-(return on Assets * Retention Ratio)

= (0.056*1
1 – (-0.056)

IGR= 5.5%

Sustainable Growth Rate

SGR = Return on equity * Retention Ratio

1-(Return on equity * Retention Ration)

FOR RETURN ON EQUITY:

ROE = Net profit

Total Share holder equity

ROE = (1242503558
11034403602

ROE = (0.112)

Now,

= Return on equity*Retention Ratio

1- (Return on equity*Retention Ration)

= (0.112) * 1

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 1- (-0.112)

SGR = 10%

LAFARGE CEMENT PAKISTAN

COMMON SIZE INCOME STATEMENT
Net sales 100%

Cost of good sold (92.27%)

Gross Profit 7.72

Selling general administration expense (6.99%)

Other operating expense (0.47%)

Other operating income 0.63%

Total operating expense (6.82%)

Operating loss 0.89%

Finance cost (19.91%)

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Loss before tax (19.01%)
Tax 2.31%
Net loss for the year (16.70%)

LAFARGE CEMENT PAKISTAN

COMMON SIZE BALANCE SHEET
ASSETS:
NON CURRENT ASSETS:
Property plant and equipment 78.46%
Intengibles 0.01%
Long term advances 0.38%
Long term deposits 0.2%
Deferred taxation 3.4%
Total 82.45%

CURRENT ASSETS:
Stores and spares 11.16%
Stock in trade 4.30%
Trade debts 0.15%
Advances 0.68%
Prepayments 0.30%

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 Interest accrued 0.02%
Other receivables 0.68%
Cash and bank balances 0.25%
Total 17.54%
Total Assets 100%

EQUITIES AND LIABILITIES

SHARE CAIPITAL AND RESERVE
Share capital Authorized 225,000,000 ordinary
share
Issued subscribe and paid up 59.70%
Reserves:
Capital reserves 0.87%
Accumulated loss (10.38%)
(9.52%)
Total equities 50.19%
NON-CURRENT LIABILITIES
Long term financing 19.96%
Obligation under finance leases 0.09%
Other long term liabilities 5.7%
Current liabilities

32
Trade and other payables 5.21%
Accrued markup 1.72%
Short term running finance 11%
Current maturities:
Long term financing 5.97%
Obligation under finance leases 0.05%
Total 23.96%
Total liabilities and equities 100%

(Items of Income statement and Balance sheet are increased by Sustainable growth
rate which is -10%)

LAFARGE CEMENT PAKISTAN

PROFORMA INCOME STATEMENT
Net sales (6695437811)

Cost of good sold (6178072471)

Gross Profit (517365339)

Selling general administration expense (468283200)

Other operating expense (31532054)

Other operating income 42667589

Total operating expense (45714665)

Operating loss 60217675

Finance cost 1333506389

33
Loss before tax (1273288714)
Tax 155035513
Net loss for the year (1118253202)

LAFARGE CEMENT PAKISTAN

PROFORMA BALANCE SHEET
ASSETS:

NON CURRENT ASSETS:

Property plant and equipment

15523122980
3692434
Intengibles
74372400
Long term advances
394083100
Long term deposits
Deferred taxation
674412506
CURRENT ASSETS:

2208451699
Stores and spares
Stock in trade
852240938
30533926
Trade debts

34
 134305099
Advances
59985496
Prepayments
1552186
Interest accrued
133779450
Other receivables
49925316
Cash and bank balances
Total
3470774114

Total Asset 19785782750

EQUITIES AND LIABILITIES

SHARE CAIPITAL AND RESERVE
Share capital Authorized 225,000,000 ordinary
share 225000000000
11813800390
Issued subscribe and paid up
Reserves:
171429030
Capital reserves
Accumulated loss (2054266180)
(1882837150)

9930963242
Total equities
NON-CURRENT LIABILITIES
3949920347
Long term financing
Obligation under finance leases 19182706
1143738102
Other long term liabilities
CURENT LIABILITIES
35
 1031951587
Trade and other payables
340772504
Accrued markup
2176266020
Short term running finance
1182211499
Long term financing
10776739
Obligation under finance leases
Total 4741978350
19785782750
Total liabilities and equities

36