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LETTER OF TRANSMITTAL
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November 29, 2010

Course Instructor, Analysis of Financial Statement

Iqra University
Karachi.

Dear Sir:

We herewith present our ³Term Report´ authorized by you as a requirement for this course. In this
report, we have tried to provide the industry review & analysis of financial statements of Lucky
Cement Ltd, and Dera Ghazi Khan Cement for the year 2009-2008. An in depth comparison has also
been done with the Industry ratios that has been attained with the average of D. G. Khan, Lucky, &
Attock Cement ratios.

We hope we have covered all that was required in the report, & foresee your acceptance of the report.

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Sincerely,

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ACKNOWLEDGEMENT

In the name of ³Allah´, the most beneficent and merciful who gave us strength and knowledge to
complete this report. This report is a part of our course ³Analysis of Financial Statement´. This has
proved to be a great learning experience for all of us about analyzing financial statements and thereby
making decisions accordingly. We would like to express gratitude to our teacher Mr. Faisal Dhedhi
who gave us this opportunity to learn & project our capabilities through this report. We would also like
to thank family & friends who supported us in completion of this report by giving us helpful
information & the priceless comments and suggestions.


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TABLE OF CONTENTS
ACKNOWLEDGEMENTYYY
CEMENT INDUSTRY REVIEWY Y
INTRODUCTION:YY Y
STRUCTURE:Y
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PRODUCT TYPE:YY
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GEOGRAPHICAL AREA:YY
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MARKET SHARE:YYY
GROWTH PATTERN:YYY
GOVERNMENT ROLE:YYY
TAXATION YYY
EXCISE DUTY:YYY
FUTURE OUTLOOK:YYY
FINANCIAL RATIOS:YYY
RATIOS CALCULATED:YYY
LUCKY CEMENTYYY
INTRODUCTION TO LUCKY CEMENT:YY
KEY MANAGEMENT PERSONNELYYY
EXTERNAL FACTORS SHAPING LUCKY¶S FORTUNESYYY

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FINANCIALS OF LUCKY CEMENT:YYY
RATIO ANALYSIS:YY Y
CASH FLOW COMMENTARY:YYY
Analytical Viewpoint:YYY
DERA GHAZI KHAN CEMENTYYY
INTRODUCTION TO THE COMPANY:YYY
FINANCIAL OF D.G.KHAN CEMENT:YYY
RATIO ANALYSIS:YYY
CASH FLOW COMMENTARY:YYY
ANALYTICAL VIEWPOINT:YYY
CONCLUSION:YYY

CEMENT INDUSTRY REVIEW

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INTRODUCTION:
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The industry comprises of 29 firms (19 units in the north and 10 units in the south), with the installed
production capacity of 44.09 million tons. The north with installed production capacity of 35.18
million tons (80 percent) whiles the south with installed production capacity of 8.89 million tons (20
percent), compete for the domestic market of over 19 million tons. There are four foreign companies,
three armed forces companies and 16 private companies listed in the stock exchanges. The industry is
divided into two broad regions, the northern region and the southern region. The northern region has
around 80 percent share in total cement dispatches while the units based in the southern region

contributes 20 percent to the annual cement sales.

Cement industry is indeed a highly important segment of industrial sector that plays a pivotal role in the
socio-economic development. Since cement is a specialized product, requiring sophisticated
infrastructure and production location. Mostly of the cement industries in Pakistan are located
near/within mountainous regions that are rich in clay, iron and mineral capacity. Cement industries in
Pakistan are currently operating at their maximum capacity due to the boom in commercial and
industrial construction within Pakistan.

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The cement sector is contributing above Rs 30 billion to the national exchequer in the form of taxes.

Cement industry is also serving the nation by providing job opportunities and presently more than
150,000 persons are employed directly or indirectly by the industry.

The industry had exported 7.716 million tons cement during the year 2007-08 and had earned $450
million, while is expected to export 11.00 million tons of cement during 2008-09 and earn
approximately $700 million.

STRUCTURE:
A market is a group of buyers and sellers exchanging goods that are highly substitutable for one
another. Markets are defined by demand conditions; they embody the zone of consumer choice for the
goods.

Now, market for Cement in Pakistan exists in two main dimensions:

YProduct type

2. Geographic area.

˜RODUCT TY˜E:
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.

GEOGRA˜ ICAL AREA:

The other factor i.e. geographic location also doesn¶t affects a lot considering the flexibility of
demand. The customer has no choice at all to switch between two brands of cement. As the
cement market is moving from a virtual 'sellers' market' to an over-supply situation, it is
expected that when prices stagnate and profitability becomes a function of volume and
economies of scale, location advantage and proximity to markets will become extremely
important factors. At present 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

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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.

MARKET S ARE:
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musiness Recorder reported that Pakistan¶s cement exports witnessed a healthy growth of 65%, to over
6 million tons during 7 months of the current fiscal year mainly due to rise in international demand.
The exports may reach to 11 million tones and earn approx $ 700 million during 2008-09. On MoM
basis, local dispatches of cement during January 2009 showed a decline of 8%, to 1.51 million tons
from 1.65 million tons of January 2008. Overall dispatches, including export and local sales, reached
16.77 million tons during July to January of 2008-09 as against 16.20 million tons of last fiscal year,
depicting an increase of 3%.

my September 2009, after witnessing substantial growth in all three quarters of fiscal year (FY) 2008-
09, cement sector concluded the fourth quarter with a handsome growth of 1,492 percent on yearly
basis. Moreover, the performance is skewed towards large players with export potential as profitable
companies in both years posted increase of just 109 percent, said analyst at o



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Though total dispatches were down 2 percent, net sales grew by 55 percent to Rs 101.4 billion or $1.3
billion on the back of higher net retention prices (up 59 percent) and improved export based revenues.
Cost of sales/tone also rose by 33 percent on yearly basis amid higher realized coal prices and
inflationary pressures, the analyst maintained.

GROWT ˜ATTERN:
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From the recent past years, high investment in infrastructure development has increased the growth of
cement sector. Plus many multinational companies are building the huge projects which have also
increased the demand for cement locally.

Domestic demand is expected to grow at 13% Capacity growth rate (CAGR) during next five years.
Certain factors will also affect the growth of cement industry as well. These are as follows:

Strong GD˜ growth

Ø Cement demand growth rate was double the GDP growth rate in last three years.

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ousing sector growth

Ø Housing projects consume roughly 40% of cement demand.

Ø Low interest rates, post 9/11 remittances¶ inflow, and real estate boom have helped housing sector growth.

Government Development Expenditures

Ø Government development expenditures count for one third of total cement consumption.

Ø Infrastructure development in a region triggers private development projects having even positive impact on
cement demand.

Earthquake Rehabilitation

Ø Reconstruction work will boost construction material demand

Ø Reconstruction work is expected to generate cement demand of 4mn tons over next 3-4 years

Announcement of large Dams

Ø Construction of four large dams will generate demand of 3.7mn tons. mhasha Daimer Dam, Munda Dam,
Akhori Dam and Neelum Jhelum.

The main factors behind increase in demand of cement were:

÷Y 60 percent higher Public Sector Development Projects allocation

÷Y 7 percent GDP growth
÷Y Increasing number in real estate developments projects
÷Y Construction of mega dams

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GOVERNMENT ROLE:
TAXATION
Instead of providing any relief in the budget, the sector was penalized with an increase of 3%
increase in sales tax to 18%. Manufactures are currently passing this increase to consumers but
situation is unlikely to continue.

EXCISE DUTY:
In budget for 2008-2009 the federal excise duty on cement has been to Rs.900 per tones from
Rs.750 pet tones.

FUTURE OUTLOOK:
As cement capacity is increasing to cater the rising domestic and regional demand, it started facing a
tougher time because of price fall after the first quarter of FY06 due to increase in supply, energy prices
started surging and higher expansion led to mounting finance and depreciation costs.

Moreover, this rising trend is expected to be short-lived due to higher interest rates and inflationary
concerns are likely to make it disadvantageous for investors to enter the construction industry. In
addition to this, to control real estate prices the government is considering imposing a tax on it. The
targets for exports for 2009 and 2010 are set to be 9.99 million and 10 million tons respectively.
Currently, the export demand is expected to be from new inductee India along with other countries like
Gulf Cooperation Council (GCC) countries, due to rising oil prices-led economic growth. More
countries like South Africa to make the football stadiums for the World Cup and Sri Lanka are also
expected to approach Pakistani companies for cement imports. However, export depends on factors
such as: ability to produce cement at Rs 85 per bag. Export strategy should be made for at least three
years, 2008-10, after which new plant will start production in the region. In the meantime industry
should explore new markets for export or ready to lower prices of cement in local market.

The sharp decline in cement prices were due to domestic competition among producers has dampened
the profitability of the industry. 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 slowdown in economy may occur due
to political uncertainty which might result in reducing cement demand in future. However, in case of

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construction of hydro-powered dams, there will be a sudden jump in the local sales of those companies
located near these dams.

FINANCIAL RATIOS:
A statistic has little value in isolation. Hence, a profit figure of Rs.100 million is meaningless unless it
is related to either the firm¶s turnover (sales revenue) or the value of its assets. Accounting ratios
attempt to highlight the relationships between significant items in the accounts of a firm.
Financial ratios are the analyst¶s microscope; they allow them to get a better view of the firm¶s
financial health than just looking at the raw financial statements

Ratios are used by both internal and external analysts

Internal uses
÷Y Planning
÷Y Evaluation of management
External uses
÷Y Credit granting
÷Y Performance monitoring
÷Y Investment decisions
÷Y Making of policies

RATIOS CALCULATED:

r Current ratio = current assets / current liabilities

2 Quick ratio = (cash+ marketable securities + accounts receivables)
Liquidity
current liabilities
Ratios
3 Cash ratio = (cash + marketable securities)/current liabilities
4 Working Capital =Current Assets-Current Liabilities
5 Receivable turnover = net annual sales / average receivables
6 Average number of days receivables outstanding = 365 days_
receivables turnover
7 Inventory turnover = cost of goods sold / average inventory
Activity
8 Average number of days in stock = 365 / inventory turnover
Ratios
9 ˜ayable turnover = COGS / average payables
r Average number of days payables outstanding = 365_____
payable turnover
rr Cash conversion cycle = avg. collection period + avg. number of days in stock ± avg. payables
r2 Gross profit margin = gross profit / net sales
Profitability r3 Operating profit margin = operating income/net sales
Ratios r4 ˜re-tax margin = Earnings before tax/sales
r5 Net margin = net income/sales

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r6 Return on assets = earnings before interest and taxes
average total assets
r7 Return on common equity = (net income ± preferred dividends)
average common equity
r8 Return on total equity = net income/average total equity
r9 Fixed Asset Turnover= Sales/fixed assets
Turnover 2 Total asset turnover = net sales / average total assets
Ratios 2r Equity turnover = net sales / average total equity
22 Debt to capital = total debt / total capital
23 Debt to equity = total debt / total equity
Risk Ratios
24 Times interest earned = earnings before interest and tax
interest expense
25 Sustainable Growth rate = RR * ROE
26 Du˜ont Formula=Asset turnover*Net profit Margin*Leverage Ratio
Leverage 27 Asset to Equity ratio= Total assets/equity
28 ˜ayout Ratio= dividend declared/net income
29 Earnings per share=net income/share issued
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LUCKY CEMENT
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INTRODUCTION TO LUCKY CEMENT:

With two factories, one situated in the Northern Area while the other in Karachi, Lucky Cement is
one the largest export houses in Pakistan. Lucky Cement Limited has been sponsored by Yunus
mrothers Group (Ym Group) which is one of the largest business groups of the Country based in
Karachi. The group has diversified its portfolio into textile and power generation sectors. Lucky
Cement currently has a capacity of 25,000 tons per day of dry process cement. The Company offers
three types of cement: ordinary Portland cement, sulphate
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KEY MANAGEMENT ˜ERSONNEL
Mohammad Abid Ganatra - Director Finance

Mr. Ganatra is a fellow member of Institute of Chartered Accountants of Pakistan, Cost &
Management Accountants of Pakistan and the Institute of Corporate Secretaries of Pakistan. With
Manager Consultancy experience at Delloite Touché Tohmatsu International Pakistan prior to joining
Lucky, he looks after the areas of financial management, treasury, accounts, taxation and corporate
affairs of the company. He has been associated with the company since 1994.

EXTERNAL FACTORS S A˜ING LUCKY¶S FORTUNES

÷Y Reconstruction activities to keep local demand intact-
While the industry¶s local dispatches witnessed a substantial decline of 16%YoY during the
FY10 owing to massive destruction caused to agricultural land and infrastructure by the recent
floods, the company interestingly witnessed improvement in its local off take of 2%YoY. The
company should also reap benefits of the subsequent rise in demand arising from the post floods
reconstruction activities.Y This should result in an increase of its market share to 14% from 13%
last year in the local market.

÷Y Construction of Diamer Bhasha dam to provide further upside

The construction of the 4,500MW Diamer mhasha dam (worth Rs894bn) to meet the growing
energy crisis in the country should provide a further upside to our local demand estimates.
Construction of the mhasha Dam is likely to generate an average of 1-1.5mn tons per annum of
demand over a period of 6-7 years.

÷Y Exports to remain playing major-

The steady demand from Afghanistan, Iraq (post war development) and Eastern African
countries (supply shortage) should stem any possible major decline in the export volumes.
Moreover, the anticipated rise in global demand of 20-25mn tons owing to mega events like the
FIFA Football World Cup (2014) and Olympics (2016), both in mrazil, should bode well for the
company. Though this may not necessary directly improve sales for the company, it should keep
prices in the global market firm and open up space in other markets.

÷Y Lucky looking for Diversity-Excess power sold

Lucky in Jan 2010 entered in an electricity supply agreement with KESC to supply up to
49.5MW from its captive power plant for the next 10 years. As per the agreement, Lucky will
provide at least 30MW, with an additional 19.5MW dependent upon availability of excess
electricity.

÷Y Cost efficiences- Lucky being on top

To achieve cost efficiencies, Lucky Cement has been conducting operational upgrades to its
plants. Setting up Waste Heat Recovery projects in both its plants, is expected to reduce power

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costs by 22%, which constitutes ~20% of the total cost of production. The Southern plant¶s
project came online during 3QFY10, followed by the Northern plant¶s project in September
2010.Y Moreover, the company has acquired a fleet of 18 trailers for transportation of coal and
cement from the Karachi plant to the port and vice versa and is looking for cheaper alternate
fuel sources, other than local coal, for which details are likely to be released soon by the
management.YY

FINANCIALS OF LUCKY CEMENT:

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RATIO ANALYSIS:
RATIOS LUCKY CEMENT INDUSTRY
AVG. ANALYSIS
2 9 2 8 2 9
Current Ratio 0.86 1.09 1.38 In the year 2009 the current ratio of Lucky
Cement is less than the industry average,
which is 1.38. The main reason is the rapid
increase in the Current liabilities from the year
2008, significantly in short term borrowing.
While current assets also reduced, mainly
because of refundable sales tax and other
receivables coverage.
Quick Ratio 0.73 0.99 1.14 In comparison to the industry the quick ratio is
less by Rs.0.40. Yearly ratio also decreased as
inventory accumulation rose from the previous
year.
Cash Ratio 0.13 0.09 0.30 The industry norm is to maintain cash at 0.30
to pay off Rs.1 liability, but lucky is less by
Rs.0.17 which is too much. It should needed
increase its cash and bank balance to maintain
a good cash ratio as industry is doing fairly
well. Although an increase is seen from 2008,
yet it¶s not up to the mark.
Working Capital (1,240,736) 668,627 (720,386) The company has heavily indulged itself in
short term borrowing since last year so as to
meet the increasing coal prices and other crises
caused by the recent FY07-08 economic
downfall. All this affected the overall industry
as well but the aggregate affect on lucky is
more than industry.
Receivable turnover 17.93 10.53 52.38 The company is doing well on its collections in
comparison to the industry by 9 more days to
collect its receivable. mut has fairly improved
from last year by decreasing its collection
period by 15 days and extending more credit to
the customers. More receivables days from the
Receivable days 20 35 11 industry is showing that company is not
offering credit more as the industry is, so it can
offer more credit as sales may get affected later
on if credit periods decrease greatly.
Inventory Turnover 17.33 17.76 15.68 Lucky Cement doing fairly well by 3 days in
converting its inventory into sales in
comparison to the industry. This is due to its
operations efficiency and the increasing
Inventory days 21 21 24 demand trends of the cement product. Recent
post floods reconstruction activities, past
earthquake, & rise in construction of houses all
affected positively to Lucky. Thus, the demand
factor caused inventory turnover to get better
in comparison to the industry.

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˜ayable Turnover 5.31 3.55 7.09 The company uses a lot of credit from its
suppliers. The days clearly shows that the
company has good credit worthiness in
˜ayables Turnover 69 103 54 comparison to the industry, although this
days reduced from the last year but the overall affect
on company was good.
Cash Conversion -27 -48 -18 Lucky has improved its cash conversion cycle
Cycle from last year as its payables significantly
decreased i.e. they now can convert their
investments faster into cash, but the industry is
moving faster towards getting positive
indicator, so Lucky should try to increase its
inventory days more so as to strengthen the
conversion cycle.
G˜ Margin 37% 25.69% 34% Company has increased its Gross profit margin
from last year as Sales has improved more than
the rise in cost of sales due to fierce rise in coal
prices. This ratio is fairly well than the
industry too.
Operating Income 24% 14.35% 23% The same reason applies here too. The rise in
Margin GP was way more than in expenses which are
the reason the margin increased from last year
and is more than industry average too.
˜re-tax Margin 20% 13.60% 16% Although finance cost increased greatly but the
overall sales affect undermined it, and that is
the reason behind increase in margin from last
year.
Net profit Margin 17% 15.79% 13% After the taxes were paid off, the company
managed to increase its NP margin from last
year & performed well in comparison to the
industry too.

Return on assets 18% 7.11% 19% The company is doing great in terms of earning
returns on its total assets in comparison to last
year as well as industry. This drastic increase
from last year was possible because of
1.Operational efficiency
2. Increase in Fixed assets such as long term
deposits.
Due to this worthy increase in both net income
and assets, the ROA increased.
Return on common 20% 14.35% 18% The ROCE is much better than the industry
equity because Lucky has increased its Reserve
amount greatly due to rise in un-appropriated
profits. This is the reason behind increase from
last year as well. Investment in equity has not
changed but the reserves played major role in
strengthening this ratio calculation. This also
means that investing in the firm equity can be
fruitful for the investor.

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Fixed Asset 86% 66% 117% The increase in long term deposits and
turnover Property, plant, & equipment has caused boost
in operational efficiency that in return earned it
20% more than last year. This ratio is fairly
well but in terms of industry it¶s less by 30%
which needs to covered soon by investing
more fixed assets and turning it well into sales
to earn better returns in years to come.
Total assets 69% 49.53% 78% The same reason is applied here as well that
turnover since operational efficiency was attained in this
year, it caused 69% return on the total assets
invested in the business, and this also increased
from last year as well. If this trend persists it
can surely compete with the industry average
which is 9% more than present ratio.
Equity Turnover 113% 91% 121% The turnover of on equity fairly increased from
last year because of increase in sales and the
equity amount due to reserves mainly. In
comparison to the industry company has to
work harder as it¶s presently 7% more than
present ratio.
Debt to Capital 0.39 0.46 0.41 The company has currently increased its short-
ratio term borrowing, and availed the facility of
deferred taxation which in return boosted the
ratio of debt to total capital. More or less
industry has the same composition so company
is still playing it safe. mut it decreased from
last year because of investment more into
equity.
Debt to equity 0.65 0.84 0.72 This ratio is better than last year, but it can
clearly be seen that company is more inclined
towards debt rather than equity, for the reason
that company is moving towards equity
investments. Although industry is more on
borrowing side, but Lucky is better in
managing its capital structure currently.
Interest Coverage 5.19 19.20 8.03 The Coverage ratio decreased drastically from
ratio last year for the fact that cost of capital rose as
borrowings also increased a lot. This led
company interest coverage ability to decrease.
If Profits can be increased this ratio can get
better and be in fair position with the industry
which is presently 2.84x more than Lucky
ratio.
Du˜ont ROE* 19.77% 14.35% 17.84% This ratio is a combination of asset turnover,
net profit margin, and asset to equity ratio. The
increase from last year is seen primarily
because of rise in asset turnover, and net profit
margin. In comparison to the industry
company is doing well in earning returns on

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equity investments.

Asset to equity 1.65 1.84 1.72 This leverage ratio shows that for every Rs.1
Ratio of equity there are Rs.1.65 of assets, this ratio
decreased from last year because equity
increased far more than Assets. If effort is put
in can compete with the industry.
˜ayout Ratio 28.14% 0.00% 47.95% The payout ratio increased due to decrease in
debt ratio and increase in equity investments.
Company already had more reserves so it
could now afford to pay off dividends.
Although this ratio is very less than industry
but drastic increase from last year can
guarantee the trend progression in the
upcoming year.
Earnings per share 14.21 9.84 12.29 The net income/no. of shares is said to be
earning per shares issued. From last year the
earnings fairly increased and are performing
much better than the industry earning. Thus,
this shows that future investment if made in
firm¶s equity can get us good earnings.
Growth Rate 14.21% 14.35% 13.51% The overall industry growth is less than Lucky
as this company sales trends are fairly
increasing due to boost in local as well as
exports demand. Thus this ratio tell s us that
Lucky can have bright future aspects as its
Waste Heat Recovery Projects can save it up
on power cost of operations, & building of
dam is another outlook of the company. So,
investment can be made worthwhile, if put in
Lucky Cement.
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CAS FLOW COMMENTARY:

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Cash flow from operating activities

Net cash generated has a huge change in 2009 compared to 2008. my looking at the cash flow
we can easily notice that huge difference is in the cash generated from operations. Further going
to notice the change, the company had increased its sales with huge margin in 2009 which
results in a net profit and eventually to a positive cash flow from operations.

Cash flow from investing activities

Company has used less cash in its investing activities than the previous year as it has decreased
its investing in fixed expenditures. mut increase in sales proceeds shows that Company has been
involved in selling of their current property and fixed assets.

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Cash flow from financing

Company has lessen their financing activities by not issuing any global deposits receipts in the
year 2009 where as they did issue global deposit receipts in 2008. This change has caused this
decreasing effect in their cash used in financing activities.

Analytical Viewpoint:

From an Investment perspective, Lucky Cement.ltd has shown good trend in earning returns on equity.
The ROCE is much better than the industry because Lucky has increased its Reserve amount greatly
due to rise in un-appropriated profits. This is the reason behind increase from last year as well.
Investment in equity has not changed but the reserves played major role in strengthening this ratio
calculation. This also means that investing in the firm equity can be fruitful for the investor. The fact
that its payout ratio greatly increased from the last year is an evidence of the company inclination
change occurring more favorably towards Equity investment. This is the primarily reason for paying
more dividends and attracting investors, so that they are drawn towards investing in Lucky Cement.

Thus, in all we can say our µBuy¶ call on Lucky Cement (LUCK), since the company has bright future
prospects by earning cost efficiency through installation of Waste Heat Recovery Plant and increasing
demand trends. The only risk that investor has to face is in igher than expected coal prices and
Recognition of the Rsr.3bn fine by the Competition Commission of ˜akistan (CC˜) for forming
cartel to influence domestic pricing in the past years.

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DERA G AZI K AN CEMENT
INTRODUCTION TO T E COM˜ANY:
NIS AT GROU˜
Nishat Group is one of the leading and most diversified business groups in South East Asia. With assets
over Rs.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. 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
contribution, the Government of Pakistan has also conferred him with ³ 

´, one of the
most prestigious civil awards of the country.

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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 UmE
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. 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 ˜roject
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 pre-heater 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.
˜ower 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
mank¶s environmental standards. The company was also certified for ISO-9002 (Quality Management
System) in 1998. my achieving this landmark, DG Khan Cement became the first and only cement
factory in Pakistan certified for both ISO 9002 & ISO 14001.

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FINANCIAL OF D.G.K AN CEMENT:

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CAS FLOW COMMENTARY:

Cash flow from operating activities

Net cash generated has a huge change in 2009 compared to 2008 as we can see that in 2008
company net cash generated was in negative where as in 2009 it¶s positive with a difference on
huge figure. my looking at the cash flow we can easily notice that huge difference is in the cash
generated from operations. Further going to notice the change, the company had increased its
sales with huge margin in 2009 which results in a net profit and eventually to a positive cash
flow from operations.

Cash flow from investing activities

Company has used less cash in its investing activities than the previous year as it has decreased
its investing in purchases. As company has done less investment in purchases means that they
haven¶t bought much new properties neither sold much of their old ones therefore sales
proceeding are also less this year.

Cash flow from financing

Company has increased their financing side by issuing share capital which was zero in 2008.

ANALYTICAL VIEW˜OINT:
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From an Investment perspective, D. G. Khan Cement.ltd has shown good change in earning returns on
equity. As compared with 2008 to 2009 it has been better in position due to increase in paid up capital,
but considering the industry it is a failure, as the industry is earning greater return on equity, so from an
investment point of view this cannot return a good percentage back to its shareholders..This also means
that investing in the firm equity is not fruitful for the investor. Although the payout ratio is 100% but
it¶s all backed by the debts and other securities. Company is not focusing much on the Equity
Investments presently, but may do as trend is changing in the overall Cement industry.

Thus, in all we can partially say our µBuy¶ call on D.G. K AN Cement (DGCK), since the company
shares are available at a less expensive price in comparison to the Lucky Cement.ltd yet it pays more
dividend. mut the key risk remains in the slowdown faced from the exports and price wars between
local cement manufacturers.

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CONCLUSION:
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Overall, Lucky Cement is observed to be the market leader in the industry by capturing 19% of the
market share leaving D.G. Khan Cement to have 12% of the market. moth the companies are said to be
investors favourite for the fact that one gets you dividend in short-run (DGCK) and another gives you
consistent returns in long run (LUCK). my analysing these financial statements once reaches to the
conclusion that both the companies are an asset to the industry, having bright growth prospects in
future, offering quality cement to the consumers, yet a good source of earning foreign exchange as both
are involved in exports, while contributes major as it¶s the known to be the main export house. Thus,
investment can be made in both the companies likely based on investor¶s attitude & his/her
expectations from the company.

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REFERENCES:
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