pioneer financial analysis

FINANCIAL ANALYSIS OF PIONEER CEMENT COMPANY.

Chapter # 01

Brief History Corporate information Vision and Mission Statement

THE UNIVERSITY OF LAHORE 1


1.1 BRIEF HISTORY

OUR PHILOSOPHY:

The Management of Pioneer Cement Limited are committed to maintaining this quality policy at all levels of the company. For this, as well as to achieve our corporate objectives, we all shall work as a team and pursue continuous improvement.

INCORPORATION:

Pioneer Cement Limited (PCL) was incorporated in Pakistan as a public company limited by shares on February 09, 1986. Its shares are quoted on all stock exchanges in Pakistan. The principal activity of the Company is manufacturing and sale of cement.

1.2 Corporate Information.

Company NamePIONEER CEMENT COMPANY LIMITED.

Legal Status Public Limited Company

Head Office 7th Floor, Lakson Square Building No.3, Sarwar Shaved Road, Karachi, Pakistan. Telephone (021) 5685052-55 Fax (021) 5685051 Email: [email protected]

1.3 Vision & Mission

Pioneer Cement Limited is committed to make sustained efforts towards optimum utilization of its resources through good corporate governance for serving the interests of all its stakeholders.



Chapter # 02

FINANCIAL ANALYSIS OF THE COMPANY

Ratio Analysis Definition of Accounting Ratios Advantages of Ratios Analysis. Limitations of Ratios Analysis. Classification of Ratios.

Liquidity Ratios.(a) Current Ratio(b) Quick Ratio

Turnover / Activity Ratios(a) Inventory Days(b) Debtors turnover Ratio(c) Creditors Turnover Ratio(d) Total Assets Turnover(e) Fixed Assets turnover

Profitability Ratio(a) Gross profit Ratio(b) Operating profit Ratio(c) Profit/ (Loss) Before Interest and Tax(d) Net Profit/ (Loss) after Interest & Tax(e) Return on Assets(f) Return on Capital employed(g) Return on equity Ratio (ROE)

Leverage Ratios(a) Debt to Equity Ratio(b) Interest coverage Ratio

Investment / Share holder Ratios(a) Earning Per Share(b) Earning Yield(c) Market Value of Share(d) Price Earning Ratio

Horizontal Analysis Profit and loss Account Balance Sheet

Vertical Analysis Profit and loss Account Balance Sheet



2.1 RATIO ANALYSIS:

Ratio simply means one number expressed in term of another. A ratio is a statistical yardstick by means of which relationship between two or various figures can be compared or measured. The term accounting ratio is used to describe significant relationship between figures shown on a balance sheet, profit and loss account or in any other part of accounting organization. Accounting ratio thus shows the relationship between the accounting data.

2.2 Definition of Accounting Ratios:

The term "accounting ratios" is used to describe significant relationship between figures shown on a balance sheet, in a profit and loss account, in a budgetary control system or in any other part of accounting organization. Accounting ratios thus shows the relationship between accounting data.

Ratios can be found out by dividing one number by another number. Ratios show how one number is related to another. It may be expressed in the form of co-efficient, percentage, proportion, or rate. For example the current assets and current liabilities of a business on a particular date are 200,000 and 100,000 respectively. The ratio of current assets and current liabilities could be expressed as 2 (i.e. 200,000 / 100,000) or 200 percent or it can be expressed as 2:1 i.e., the current assets are two times the current liabilities. Ratio sometimes is expressed in the form of rate. For instance, the ratio between two numerical facts, usually over a period of time, e.g. stock turnover is three times a year.

2.3 Advantages of Ratios Analysis

Ratio analysis is an important and age-old technique of financial analysis. The following are some of the advantages of ratio analysis:

1. Simplifies financial statements: It simplifies the comprehension of financial statements. Ratios tell the whole story of changes in the financial condition of the business

2. Facilitates inter-firm comparison: It provides data for inter-firm comparison. Ratios highlight the factors associated with with successful and unsuccessful firm. They also reveal strong firms and weak firms, overvalued and undervalued firms.

3. Helps in planning: It helps in planning and forecasting. Ratios can assist

4. management, in its basic functions of forecasting. Planning, co-ordination, control and communications.



5. Makes inter-firm comparison possible: Ratios analysis also makes possible comparison of the performance of different divisions of the firm. The ratios are helpful in deciding about their efficiency or otherwise in the past and likely performance in the future.

Help in investment decisions: It helps in investment decisions in the case of investors and lending decisions in the case of bankers etc

2.4 Limitations of Ratios Analysis:

The ratios analysis is one of the most powerful tools of financial management. Though ratios are simple to calculate and easy to understand, they suffer from serious limitations.

1) Limitations of financial statements: Ratios are based only on the information which has been recorded in the financial statements. Financial statements themselves are subject to several limitations. Thus ratios derived, there from, are also subject to those limitations. For example, non-financial changes though important for the business are not relevant by the financial statements. Financial statements are affected to a very great extent by accounting conventions and concepts. Personal judgment plays a great part in determining the figures for financial statements.

2) Comparative study required: Ratios are useful in judging the efficiency of the business only when they are compared with past results of the business. However, such a comparison only provide glimpse of the past performance and forecasts for future may not prove correct since several other factors like market conditions, management policies, etc. may affect the future operations.

3) Ratios alone are not adequate: Ratios are only indicators, they cannot be taken as final regarding good or bad financial position of the business. Other things have also to be seen.

4) Problems of price level changes: A change in price level can affect the validity of ratios calculated for different time periods. In such a

5) case the ratio analysis may not clearly indicate the trend in solvency and profitability of the company. The financial statements, therefore, be adjusted keeping in view the price level changes if a meaningful comparison is to be made through accounting ratios.



6) Lack of adequate standard: No fixed standard can be laid down for ideal ratios. There are no well accepted standards or rule of thumb for all ratios which can be accepted as norm. It renders interpretation of the ratios difficult.

7) Limited use of single ratios: A single ratio, usually, does not convey much of a sense. To make a better interpretation, a number of ratios have to be calculated which is likely to confuse the analyst than help him in making any good decision.

8) Personal bias: Ratios are only means of financial analysis and not an end in itself. Ratios have to interpreted and different people may interpret the same ratio in different way.

Incomparable: Not only industries differ in their nature, but also the firms of the similar business widely differ in their size and accounting procedures etc. It makes comparison of ratios difficult and misleading.

2.5 (A) LIQUIDITY RATIOS:

Liquidity ratios are the ratios for testing short term solvency or financial position of a business. These are designed to test the ability of the business to meet its short term obligation promptly. A class of financial metrics that is used to determine a company's ability to pay off its short-terms debts obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the company possesses to cover short-term debts

2.5.1 CURRENT RATIO:

Current ratio may be defined as the relationship between current assets and current liabilities. This ratio is also known as "working capital ratio". It is a measure of general liquidity and is most widely used to make the analysis for short term financial position or liquidity of a firm. It is calculated by dividing the total of the current assets by total of the current liabilities.

Components:

The two basic components of this ratio are current assets and current liabilities. Current assets include cash and those assets which can be easily converted into cash within a short period of time, generally, one year, such as marketable securities or readily realizable investments, bills receivables, sundry debtors,



(excluding bad debts or provisions), inventories, work in progress, etc. Prepaid paid expenses should also be included in current assets because they represent payments made in advance which will not have to be paid in near future. Current liabilities are those obligations which are payable within a short period of tie generally one year and include outstanding expenses, bills payable, sundry creditors, bank overdraft, accrued expenses, short term advances, income tax payable, dividend payable, etc. However, some times a controversy arises that whether overdraft should be regarded as current liability or not. Often an arrangement with a bank may be regarded as permanent and therefore, it may be treated as long term liability. At the same time the fact remains that the overdraft facility may be cancelled at any time. Accordingly, because of this reason and the need for conversion in interpreting a situation, it seems advisable to include overdrafts in current liabilities.

Limitations of Current Ratio:

This ratio is measure of liquidity and should be used very carefully because it suffers from many limitations. It is, therefore, suggested that it should not be used as the sole index of short term solvency

1. It is crude ratio because it measure only the quantity and not the quality of the current assets.

2. Even if the ratio is favorable, the firm may be in financial trouble, because of more stock and work in process which is not easily convertible into cash, and, therefore firm may have less cash to pay off current liabilities.

3. Valuation of current assets and window dressing is another problem. This ratio can be very easily manipulated by overvaluing the current assets. An equal increase in both current assets and current liabilities would decrease the ratio and similarly equal decrease in current assets and current liabilities would increase current ratio.

Significance

This ratio is a general and quick measure of liquidity of a firm. It represents the margin of safety or cushion available to the creditors. It is an index of the firm’s

financial stability. It is also an index of technical solvency and an index of the strength of working capital.

A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its current obligations in time and when they become due. On the other hand, a relatively low current ratio represents that the liquidity position of the firm is not good and the firm shall not be able to pay its current liabilities in



time without facing difficulties. An increase in the current ratio represents improvement in the liquidity position of the firm while a decrease in the current ratio represents that there has been a deterioration in the liquidity position of the firm. A ratio equal to or near 2 : 1 is considered as a standard or normal or satisfactory. The idea of having double the current assets as compared to current liabilities is to provide for the delays and losses in the realization of current assets. However, the rule of 2 :1 should not be blindly used while making interpretation of the ratio. Firms having less than 2 : 1 ratio may be having a better liquidity than even firms having more than 2 : 1 ratio. This is because of the reason that current ratio measures the quantity of the current assets and not the quality of the current assets. If a firm's current assets include debtors which are not recoverable or stocks which are slow-moving or obsolete, the current ratio may be high but it does not represent a good liquidity position.

Current Ratio.Formula Current Assets/Current Liabilities

Years 2008 2007 2006 2005 2004

Pioneer Cement 0.26 0.48 0.56 0.92 1.03

Maple leaf 0.81 1.08 1.01 1.22 1.26

Kohat Cement 0.66 1.00 2.56 1.47 1.24



Current Ratio

0.00

0.50

1.00

1.50

2.00

2.50

3.00

2008 2007 2006 2005 2004

Years

Valu

es (

tim

es)

Pioneer Cement

Maple leaf

Kohat Cement

Comments:

Current Ratio clears the extent to which the claim of short term creditors can be met by assets that are to become cash within a year. The best standard ratio is 2:1 so, the Pioneer Cement has current ratio below standard. There is a decrease in 2004 to 2008. Current Ratio of Kohat Cement is more than Pioneer and Maple Leaf. Current ratio shows that how many times current assets are available to meet its current liabilities. Pioneer cement current ratio shows decreasing trend and it has less than 1:1 but only in 2004 it is more than 1:1. Maple leaf also shows decreasing trend in current ratio. Kohat cement current ratio shows increasing trend in 2004, 2005 and in 2006 but decreases in 2007 and 2008 which shows that it has less current assets or current liabilities increases.

2.5.2 Liquidity or Acid Test or Quick Ratio:

Liquid ratio is also termed as "Liquidity Ratio”,” Acid Test Ratio" or "Quick Ratio". It is the ratio of liquid assets to current liabilities. The true liquidity refers to the ability of a firm to pay its short term obligations as and when they become due

Components:

The two components of liquid ratio (acid test ratio or quick ratio) are liquid assets and liquid liabilities. Liquid assets normally include cash, bank, sundry debtors,



bills receivable and marketable securities or temporary investments. In other words they are current assets minus inventories (stock) and prepaid expenses. Inventories cannot be termed as liquid assets because it cannot be converted into cash immediately without a loss of value. In the same manner, prepaid expenses are also excluded from the list of liquid assets because they are not expected to be converted into cash. Similarly, Liquid liabilities means current liabilities i.e., sundry creditors, bills payable, outstanding expenses, short term advances, income tax payable, dividends payable, and bank overdraft (only if payable on demand). Some time bank overdraft is not included in current liabilities, on the argument that bank overdraft is generally permanent way of financing and is not subject to be called on demand. In such cases overdraft will be excluded from current liabilities

Significance:

The quick ratio/acid test ratio is very useful in measuring the liquidity position of a firm. It measures the firm's capacity to pay off current obligations immediately and is more rigorous test of liquidity than the current ratio. It is used as a complementary ratio to the current ratio. Liquid ratio is more rigorous test of liquidity than the current ratio because it eliminates inventories and prepaid expenses as a part of current assets. Usually a high liquid ratios an indication that the firm is liquid and has the ability to meet its current or liquid liabilities in time and on the other hand a low liquidity ratio represents that the firm's liquidity position is not good. As a convention, generally, a quick ratio of "one to one" (1:1) is considered to be satisfactory.

Although liquidity ratio is more rigorous test of liquidity than the current ratio , yet it should be used cautiously and 1:1 standard should not be used blindly. A liquid ratio of 1:1 does not necessarily mean satisfactory liquidity position of the firm if all the debtors cannot be realized and cash is needed immediately to meet the current obligations. In the same manner, a low liquid ratio does not necessarily mean a bad liquidity position as inventories are not absolutely non-liquid. Hence, a firm having a high liquidity ratio may not have a satisfactory liquidity position if it has slow-paying debtors. On the other hand, A firm having a low liquid ratio may have a good liquidity position if it has a fast moving inventories. Though this ratio is definitely an improvement over current ratio, the interpretation of this ratio also suffers from the same limitations as of current ratio



Quick Ratio.Formula Current Asset-stock/current liabilities

Years 2008 2007 2006 2005 2004

Pioneer Cement 0.24 0.41 0.47 0.81 0.9

Maple Leaf 0.75 0.98 0.93 1.1 1.18

Kohat Cement 0.57 0.78 2.34 1.41 1.18

Qucik Ratio

0

0.5

1

1.5

2

2.5

2008 2007 2006 2005 2004

Years

Valu

es (

tim

es0

Pioneer Cement

Maple Leaf

Kohat Cement

Comments:

The acid test ratio is also below standard due to heavy short term borrowings. Pioneer acid test ratio decreased in year 2005, 2006, 2007 and in 2008. The quick ratio of Kohat cement shows that sufficient liquid asset are available to discharge and settle its current obligation. The rise in current liabilities is due to the expansion of project and short and long term financing. Pioneer Cement liquidity is less than standard. Kohat and Maple Leaf liquidity is on considerable point. Kohat cement liquid ratio is more than pioneer and Maple leaf which shows that it has more liquidity. Maple leaf liquidity position is considerable because it is near to 1 which shows that it has liquid assets to meet its current liabilities. Pioneer position is not at considerable point. It shows decreasing trend and less than 1:1.



2.6 (B) Turnover/ Activity ratios:

Activity ratios are measures of how well assets are used. Activity ratios -- which are, for the most part, turnover ratios -- can be used to evaluate the benefits produced by specific assets, such as inventory or accounts receivable. Or they can be use to evaluate the benefits produced by all a company's assets collectively. These measures help us gauge how effectively the company is at putting its investment to work. A company will invest in assets – e.g., inventory or plant and equipment – and then use these assets to generate revenues. The greater the turnover, the more effectively the company is at producing a benefit from its investment in assets

2.6.1 Inventory days.

The number of days inventory is also known as average inventory period and inventory holding period. A high number of days inventory indicates that their is a lack of demand for the product being sold. A low days inventory ratio (inventory holding period) may indicate that the company is not keeping enough stock on hand to meet demands. The number of days inventory and inventory turnover ratios are included in the the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.

Inventory DaysFormula Inventory Days = Inventory / Cost of Sales*365Years 2008 2007 2006 2005 2004Pioneer Cement 6 20 19 15 20Maple Leaf 24 40 21 23 16Kohat Cement 49 38 28 8 6



Inventory Turnover Days

0

10

20

30

40

50

60

2008 2007 2006 2005 2004

Years

Va

lue

s (

Da

ys

)Pioneer Cement

Maple Leaf

Kohat Cement

Comments:

Pioneer inventory days decreased in 2005 as compare to 2004 and increased in 2006 and in 2007 and show decreasing in 2008 which shows that management is efficient for managing inventory period.

The above diagram shows that in 2004 and 2005 Kohat cement has less inventory days required to convert stock in sale which shows that Kohat management is efficient but it decreases with the passage of times and Pioneer trend is opposite to Kohat. It was low in beginning and it increases in 2008, but Maple leaf shows mixed trend.

2.6.2 Debtors Turnover Ratio or Receivables Turnover Ratio:

Debtors turnover ratio indicates the velocity of debt collection of a firm. In simple words it indicates the number of times average debtors (receivable) are turned over during a year.

Significance of the Ratio:

This ratio indicates the number of times the debtors are turned over a year. The higher the value of debtors turnover the more efficient is the management of debtors or more liquid the debtors are. Similarly, low debtors turnover ratio implies inefficient management of debtors or less liquid debtors. It is the reliable measure of the time of cash flow from credit sales. There is no rule of thumb



which may be used as a norm to interpret the ratio as it may be different from firm to firm.

Debtor days.Formula Trade debtors/Credit sales*365

Years 2008 2007 2006 2005 2004

Pioneer Cement 3 3 1 3 7

Maple Leaf 35 19 10 8 9

Kohat Cement 4 5 3 5 7

Comments:

Graph shows that Pioneer cement has good debtor management to receive the debt or collect the receivables and shows positive trend and debtors collection period is less than creditors period. Kohat position is also considerable but Maple leaf management has more time to collect their receivables whish shows inefficient debtor management and in 2008 it is at highest point which indicates unfavorable situation regarding to debtor collection period.

2.6.3 Creditors / Accounts Payable Turnover Ratio:


Debtor Days

0

5

10

15

20

25

30

35

40

2008 2007 2006 2005 2004

Years

Val

ues

(d

ays)

Pioneer Cement

Maple Leaf

Kohat Cement


This ratio is similar to the debtors turnover ratio. It compares creditors with the total credit purchases. It signifies the credit period enjoyed by the firm in paying creditors. Accounts payable include both sundry creditors and bills payable. Same as debtors turnover ratio, creditors turnover ratio can be calculated in two forms, creditors turnover ratio and average payment period.

Significance of the Ratio:

The average payment period ratio represents the number of days by the firm to pay its creditors. A high creditors turnover ratio or a lower credit period ratio signifies that the creditors are being paid promptly. This situation enhances the credit worthiness of the company. However a very favorable ratio to this effect also shows that the business is not taking the full advantage of credit facilities allowed by the creditors.

Creditors days:Formula Trade Creditors/Credit Sales*365

Years 2008 2007 2006 2005 2004

Pioneer Cement 65 46 44 52 23

Maple Leaf 117 71 48 37 33

Kohat Cement 65 42 34 31 37

Creditors Days

0

20

40

60

80

100

120

140

2008 2007 2006 2005 2004

Years

Val

ues

(d

ays) Pioneer Cement

Maple Leaf

Kohat Cement

Comments:



Pioneer creditors days increase in 2004 to 2005 and decrease in 2005 to 2006 and increase in 2007 and 2008 Maple leaf credit management is more better than Kohat and Pioneer it has 120 days for payment which shows it efficiency in 2008. If we compare creditors days to debtors day than we can see that pioneer cement and kohat cement is going better to manage its resources

2.6.4 Total Assets Turnover Ratio.

The total assets turnover ratio measures the use of all assets in terms of sales, by comparing sales with net total assets. This interactive tutorial walks you through the calculations as well as where on the financial statements to find the numbers.

Total Asset TurnoverFormula Sales/ Total Assets

Years 2008 2007 2006 2005 2004

Pioneer Cement 0.46 0.36 0.37 0.30 0.31

Maple Leaf 0.30 0.16 0.30 0.41 0.48

Kohat Cement 0.18 0.26 0.76 1.04 1.10

Total Asset Turnover

0.00

0.20

0.40

0.60

0.80

1.00

1.20

2008 2007 2006 2005 2004

Years

Va

lue

s (

Tim

es

)

Pioneer Cement

Maple Leaf

Kohat Cement



Comments:

In the above graph we can see that total asset turnover ratio of pioneer cement company showing mix trend in the year 2008 total asset total asset turnover ratio is at highest level and as it compare it with maple leaf and kohat cement it is better in the last two year 2007,2008 so we can say it is using its assets for generating the revenue in a better way than kohat and maple leaf cement in 2004,2005 and 2006 kohat cement total asset turnover ratio at top so they use much of it for generating revenue.But pioneer overall situation regarding to total asset turnover ratio is better than other two competitor.

2.6.5 Fixed Assets Turnover Ratio:

Fixed assets turnover ratio is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the concern. Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under-utilization of fixed assets

Fixed Asset Turnover RatioFormula Cost of sales / Fixed Assets

Years 2008 2007 2006 2005 2004

Pioneer Cement 0.51 0.42 0.41 0.32 0.36

Maple Leaf 0.39 0.2 0.35 0.51 0.61

Kohat Cement 1.46 1.52 2.12 2.95 2.32



Fixed Asset Turnover

0

0.5

1

1.5

2

2.5

3

3.5

2008 2007 2006 2005 2004

Years

Val

ues

(ti

mes

)Pioneer Cement

Maple Leaf

Kohat Cement

Comments:

It shows the utilization of fixed assets, Pioneer increasing the utilization of its fixed assets but it has lower times than Kohat cement which has more utilization of fixed assets and at highest level in 2005. Maple leaf shows the mixed trend and has less utilization than Kohat and Pioneer cement.

2.7 (C) Profitability Ratios:

Profitability ratios (also referred to as profit margin ratios) compare components of income with sales. They give us an idea of what makes up a company's income and are usually expressed as a portion of each dollar of sales. The profit margin ratios we discuss here differ only by the numerator. It's in the numerator that we reflect and thus evaluate performance for different aspects of the business: The gross profit margin is the ratio of gross income or profit to sales. This ratio indicates how much of every dollar of sales is left after costs of goods sold.

2.7.1 Gross Profit (GP) Ratio:

Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a percentage. It expresses the relationship between gross profit and sales.

Components:

The basic components of the calculation of gross profit ratio are gross profit and net sales. Net sales means that sales minus sales returns. Gross profit would be the



difference between net sales and cost of goods sold. Cost of goods sold in the case of a trading concern would be equal to opening stock plus purchases, minus closing stock plus all direct expenses relating to purchases. In the case of manufacturing concern, it would be equal to the sum of the cost of raw materials, wages, direct expenses and all manufacturing expenses. In other words, generally the expenses charged to profit and loss account or operating expenses are excluded from the calculation of cost of goods sold.

Significance:

Gross profit ratio may be indicated to what extent the selling prices of goods per unit may be reduced without incurring losses on operations. It reflects efficiency with which a firm produces its products. As the gross profit is found by deducting cost of goods sold from net sales, higher the gross profit better it is. There is no standard GP ratio for evaluation. It may vary from business to business. However, the gross profit earned should be sufficient to recover all operating expenses and to build up reserves after paying all fixed interest charges and dividends.

Gross profit to Sales:Formula Gross profit/Sales*100

Years 2008 2007 2006 2005 2004Pioneer Cement

10.58% 10.16% 40.00% 32.91% 29.23%

Maple Leaf 16.94% 8.35% 37.63% 30.95% 34.01%

Kohat Cement 6.35% 22.09% 51.55% 38.72% 35.45%

Gross Profit Ratio

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

2008 2007 2006 2005 2004

Years

Val

ues

(%

) Pioneer Cement

Maple Leaf

Kohat Cement



Comments:

Gross profit of pioneer cement company increasing in 2004 to 2006 but decrease in 2007 to 2008, Due to inflation and economic instability in Pakistan and irregular power supply of wapda in 2007 and 2008. Gross Profit ratio of three competitors show increasing trend in 2004 to 2006 due to good economic and financial situation of world and good market situation in Pakistan. Kohat position is more considerable up to 2006 but shows decreasing trend in 2007 and 2008, and Maple leaf also has same situation.

2.7.2 Operating Profit Ratio:

Operating ratio is the ratio of cost of goods sold plus operating expenses to net sales. It is generally expressed in percentage. It measures the cost of operations per dollar of sales. This is closely related to the ratio of operating profit to net sales.

Components:

The two basic components for the calculation of operating ratio are operating cost (cost of goods sold plus operating expenses) and net sales. Operating expenses normally include (a) administrative and office expenses and (b) selling and distribution expenses. Financial charges such as interest, provision for taxation etc. are generally excluded from operating expenses.

Significance:

Operating ratio shows the operational efficiency of the business. Lower operating ratio shows higher operating profit and vice versa. An operating ratio ranging between 75% and 80% is generally considered as standard for manufacturing concerns. This ratio is considered to be a yardstick of operating efficiency but it should be used cautiously because it may be affected by a number of uncontrollable factors beyond the control of the firm. Moreover, in some firms, non-operating expenses from a substantial part of the total expenses and in such cases operating ratio may give misleading results



Operating Profit Margin`

Formula Operating Profit Margin = Operating profit /Sale*100

Years 2008 2007 2006 2005 2004

Pioneer Cement

-3.13% 5.79% 36.74% 25.16% 26.89%

Maple Leaf 4.38% 4.18% 34.14% 29.57% 32.31%

Kohat Cement 1.57% 17.91% 49.24% 35.86% 32.25%

Operating Profit Margin

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

2008 2007 2006 2005 2004

Years

Val

ues

(%

)

Pioneer Cement

Maple Leaf

Kohat Cement

Comments:

Pioneer cement company operating profit increasing in 2004 to 2006 and decreasing in 2007 and 2008 and in 2008 they suffer loss by 3.13% due to increase in prices of coal, diesel and empty bag in 2007-2008 Operating profit of all three organization show increasing trend in 2004,2005, and 2006 but decreases in 2007 and 2008due to increase in operating expenses.



2.7.3 Net Profit/ (Loss) Before TaxFormula Net profit before tax/Sales*100


-11.83% -5.89% 30.33% 19.26% 18.00%

Maple Leaf -17.45% -3.77% 28.63% 23.94% 22.26%

Kohat Cement

-20.32% 4.22% 44.66% 32.70% 28.28%

Net Profit / Loss Before Tax

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

2008 2007 2006 2005 2004

Years

Valu

es (

%)

Pioneer Cement

Maple Leaf

Kohat Cement

Comments:

Net profit before interest and tax ratio is increasing in 2004 to 2006 of Pioneer, Maple leaf and Kohat cement and decrease in 2007-2008 and become negative in 2008 of all three companies It expressed in percentage.

2.7.4 Net Profit/ (Loss) after Tax:

Net profit ratio is the ratio of net profit (after taxes) to net sales. It is expressed as percentage



Significance:

NP ratio is used to measure the overall profitability and hence it is very useful to proprietors. The ratio is very useful as if the net profit is not sufficient, the firm shall not be able to achieve a satisfactory return on its investment.

This ratio also indicates the firm's capacity to face adverse economic conditions such as price competition, low demand, etc. Obviously, higher the ratio the better is the profitability. But while interpreting the ratio it should be kept in mind that the performance of profits also be seen in relation to investments or capital of the firm and not only in relation to sales.

Components of net profit ratio:

The two basic components of the net profit ratio are the net profit and sales. The net profits are obtained after deducting income-tax and, generally, non-operating expenses and incomes are excluded from the net profits for calculating this ratio. Thus, incomes such as interest on investments outside the business, profit on sales of fixed assets and losses on sales of fixed assets, etc are excluded.

Net Profit/ (Loss) after interest and Tax.Formula Net profit after tax/Sales*365


-3.71% -2.98% 21.98% 16.24% 32.07%

Maple Leaf -8.65% 1.13% 18.55% 16.95% 14.44%

Kohat Cement

-16.17% 3.14% 33.94% 22.53% 20.94%



Net Profit / Loss after Tax

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

2008 2007 2006 2005 2004

Years

Valu

es (

%)

Pioneer Cement

Maple Leaf

Kohat Cement

Comments:

The Net Profit margin tells us the ability of a company to generate the earning after meeting all costs of business. There is an increase in net profit in 2006 as compare to 2004 and 2005. In year 2008 company suffered a net loss. The ratio has decreased as compare to previous year due to decrease in sale and expansion of project and finance cost. All three organizations have same trend.

2.7.5 Return on Assets:

Where asset turnover tells an investor the total sales for each $1 of assets, return on assets [or ROA for short] tells an investor how much profit a company generated for each $1 in assets. The return on assets figure is also a sure-fire way to gauge the asset intensity of a business. Companies such as telecommunication providers, car manufacturers, and railroads are very asset-intensive, meaning they require big, expensive machinery or equipment to generate a profit. Advertising agencies and software companies, on the other hand, are generally very asset-light (in the case of a software companies, once a program has been developed, employees simply copy it to a five-cent disk, throw an instruction manual in the box, and mail it out to stores).



Return on Assets:Formula Net Income / Total Assets*100


-1.72% -1.10% 8.00% 4.80% 9.90%

Maple Leaf -2.58% 0.18% 5.64% 6.98% 6.87%

Kohat Cement -2.92% 0.83% 25.68% 23.40% 22.97%

Return on Assets

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

2008 2007 2006 2005 2004

Years

Valu

es (

%)

Pioneer Cement

Maple Leaf

Kohat Cement

Comments:

This ratio measure the return of total investment of the business. Pioneer cement company show mix trend in 2004 it is at maximum point than decrease in 2005 and again increase in 2006 and than become negative in 2007 and 2008. Kohat cement company return on asset is much better than maple leaf and pioneer it decreases in 2004 to 2006 and than decrease in 2007 and becomes negative in 2008, it is at highest point in 2006, maple leaf also increase in 2004 to 2005 and than it little decrease in 2006 and at goes down in 2007 and becomes negative in 2008.

2.7.6 Return on Capital Employed (ROCE) Ratio:



Capital employed and operating profits are the main items. Capital employed may be defined in a number of ways. However, two widely accepted definitions are "gross capital employed" and "net capital employed". Gross capital employed usually means the total assets, fixed as well as current, used in business, while net capital employed refers to total assets minus liabilities. On the other hand, it refers to total of capital, capital reserves, revenue reserves (including profit and loss account balance), debentures and long term loans.

Return on Capital employed

FormulaProfit before interest and taxation / Capital Employed *100

Years 2008 2007 2006 2005 2004

Pioneer Cement -9.00% -5.50% 41.60% 21.50% 44.50%

Maple Leaf 2.39% 1.00% 12.24% 13.97% 18.00%

Kohat Cement -4.11% 6.52% 40.64% 44.76% 42.30%

Return on Capital Employed

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

2008 2007 2006 2005 2004

Years

Val

ues

(%

)

Pioneer

Maple Leaf

Kohat

Comments:

Pioneer Cement return on capital employed is very high 2004 but it has decreased in 2005from 40% to 20% and it had increased in 2006 as 20% to 40% and it had decreased in 2007 and 2008 and become negative. Kohat return on capital employed increase in 2004 to 2006 and decreases in 2007 and in 2008. Maple Leaf has less return on capital employed is less than its competitors. In 2007 and



2008 due to economic crises Kohat and Pioneer return on equity becomes negative.

2.7.7 Return on Equity Capital (ROE) Ratio:

In real sense, ordinarily shareholders are the real owners of the company. They assume the highest risk in the company. (Preference share holders have a preference over ordinary shareholders in the payment of dividend as well as capital. Preference share holders get a fixed rate of dividend irrespective of the quantum of profits of the company). The rate of dividends varies with the availability of profits in case of ordinary shares only. Thus ordinary shareholders are more interested in the profitability of a company and the performance of a company should be judged on the basis of return on equity capital of the company. Return on equity capital which is the relationship between profits of a company and its equity, can be calculated as follows.

Components:

Equity share capital should be the total called-up value of equity shares. As the profit used for the calculations are the final profits available to equity shareholders as dividend, therefore the preference dividend and taxes are deducted in order to arrive at such profits.

Significance:

This ratio is more meaningful to the equity shareholders who are interested to know profits earned by the company and those profits which can be made available to pay dividends to them. Interpretation of the ratio is similar to the interpretation of return on shareholder's investments and higher the ratio better is.

Return on equity Ratio (ROE)Formula [(Net profit after tax − Preference dividend) / Equity



share capital] × 100


-7.80% -4.46% 29.11% 20.48% 77.81%

Maple Leaf -8.09% 0.47% 14.51% 11.58% 13.18%

Kohat Cement

-9.55% 2.09% 34.58% 35.73% 42.09%

Return on Equity Ratio

-20.00%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

2008 2007 2006 2005 2004

Years

Val

ues

(%

)

Pioneer Cement

Maple Leaf

Kohat Cement

Comments:

In 2004 Pioneer cement company return on equity ratio is at highest point and better, in 2005 it decreases and in 2006 it is better than 2005 but in 2007 and 2008 it goes down and become negative. Kohat cement company also shows decreasing trend it is highest point in 2004 and than decrease in 2005 to 2007 and it becomes negative in 2008. Maple leaf cement company return on equity ratio has mix trend in 2004 it is at lower side and than it increase in 2005 and it decrease in 2006 and it goes down and become negative in 2007 and 2008.

2.8 (C) LEVERAGE RATIOS:



A company can finance its assets either with equity or debt. Financing through debt involves risk because debt legally obligates the company to pay interest and to repay the principal as promised. Equity financing does not obligate the company to pay anything -- dividends are paid at the discretion of the board of directors. There is always some risk, which we refer to as business risk, inherent in any operating segment of a business. But how a company chooses to finance its operations -- the particular mix of debt and equity -- may add financial risk on top of business risk Financial risk is the extent that debt financing is used relative to equity. Financial leverage ratios are used to assess how much financial risk the company has taken on. Thereare two types of financial leverage ratios: component percentages and coverage ratios. Component percentages compare a company's debt with either its total capital (debt plus equity) or its equity capital. Coverage ratios reflect a company's ability to satisfy fixed obligations, such as interest,principal repayment, or lease payments.

2.8.1 Debt to Equity Ratio:

Debt-to-Equity ratio indicates the relationship between the external equities or outsiders funds and the internal equities or shareholders funds. It is also known as external internal equity ratio. It is determined to ascertain soundness of the long term financial policies of the company.

Debt to Equity Ratio:Formula Total Long Term Debts / Shareholders Funds

Years 2008 2007 2006 2005 2004

Pioneer Cement 31:69 52:48 48:52 52:48 86:14

Maple Leaf 55:45 55:45 51:49 26:74 37:63

Kohat Cement 67:33 55:45 10:90 10:90 22:78



Debt To Equity Ratio

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

2008 2007 2006 2005 2004

Years

Valu

es Pioneer Cement

Maple Leaf

Kohat Cement

Comments:

Pioneer cement debt to equity ratio is higher point in 2004 and after that it has improved its situation in next coming years and decreases, but Kohat and Maple leaf shows increasing trend from 2004 to 2008 which shows that they increasing there debts for expansion of project and their short and long term debts increased.

2.8.2 Debt Service Ratio or Interest Coverage Ratio:

Interest coverage ratio is also known as debt service ratio or debt service coverage ratio. This ratio relates the fixed interest charges to the income earned by the business. It indicates whether the business has earned sufficient profits to pay periodically the interest charges.

Significance of debt service ratio:

The interest coverage ratio is very important from the lender's point of view. It indicates the number of times interest is covered by the profits available to pay interest charges



Interest Coverage Ratio.Formula Net Profit Before Interest and Tax / Fixed Interest Charges]

Years 2008 2007 2006 2005 2004

Pioneer cement 0.39 0.31 5.73 4.26 3.03

Maple Leaf 0.23 0.58 5.79 5.99 3.42

Kohat Cement -4.71 1.23 20.21 25.17 17.22

Interest Coverage Ratio

-10

-5

0

5

10

15

20

25

30

2008 2007 2006 2005 2004

Years

Valu

es Pioneer cement

Maple Leaf

Kohat Cement

Comments:

Interest Cover Ratio shows that how many times interest is earned by the company. Pioneer cement company shows increasing trend from 2004 to 2006 which indicates positive sign and beneficial for the company and it has availability the funds to pay interest expense. In 2007 and 2008 it goes down which means it is not good sign for the company to pay the interest expense. kohat cement company is in better position to maple leaf and pioneer cement, In year 2005 company earned 17.22 times interest which is higher among all year and easy to pay the interest expense. In 2007 and 2008 Interest cover ration of all the company is not very healthy and it shows that the financial costs are very high and earnings are very low. Management must look into the matter and should improve this ratio.



2.9 (D) Investment / Share Holder Ratios:

Relationship of gains from investments (including realized capital gains) resulting from insurance operations to earned premiums.

2.9.1 Earnings Per Share (EPS) Ratio:

Earnings per share ratio (EPS Ratio) is a small variation of return on equity capital ratio and is calculated by dividing the net profit after taxes and preference dividend by the total number of equity shares.

Significance:

The earnings per share is a good measure of profitability and when compared with EPS of similar companies, it gives a view of the comparative earnings or earnings power of the firm. EPS ratio calculated for a number of years indicates whether or not the earning power of the company has increased.

Earning Per Share:Formula Profit after tax/No. of shares

Years 2008 2007 2006 2005 2004

Pioneer Cement -0.93 -0.5 4.16 2.46 3.72

Maple Leaf -1.82 0.13 3.56 3.31 2.4

Kohat Cement -1.9 0.48 9.06 7.83 5.93



Earning Per Share

-4

-2

0

2

4

6

8

10

2008 2007 2006 2005 2004

Years

Valu

es Pioneer Cement

Maple Leaf

Kohat Cement

Comments:

The earning per share of three companies shown mixed trend in above diagram, earning per share of pioneer cement company decrease in 2005 as compare it to 2004 and than it increase in 2006 and it is at highest point in this year, and it goes negative in 2007 and 2008 which mean there is no earning and it goes in to loss. Kohat cement and Maple leaf has also same trends but kohat cement has better earning per share ratio as compare it to maple leaf and pioneer cement its also negative in 2008. The earning per share has reduced as compared to the previous year, badly. The company should better mange its financial position and improve its performance to get out this fall in earning per share.

2.9.2 Earnings Yield.

The earnings per share for the most recent 12-month period divided by the current market price per share. The earnings yield (which is the inverse of the P/E ratio) shows the percentage of each dollar invested in the stock that was earned by the company.



Earning YieldFormula Earning Per Share / Market Price Per Share * 100

Year 2008 2007 2006 2005 2004

Pioneer Cement -3.30% -1.34% 9.11% 12.09% 18.51%

Maple Leaf -9.28% 0.62% 16.58% 16.87% 11.71%

Kohat Cement -9.55% 2.09% 36.71% 35.72% 28.06%

Earning Yield

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

2008 2007 2006 2005 2004

Years

Val

ues

(%

)

Pioneer Cement

Maple Leaf

Kohat Cement

Comments:

Earning Yield of Kohat, Maple Leaf and Pioneer was negative in 2008 due to economic crises. But it has very good condition in 2004 to 2006. Cement industry has good return in last some years but due to economics and financial crises return on investment decreases. Return on investment was very high in 2004 to 2006.of all these competitors but Maple Leaf shows a good trend but Pioneer is less than Kohat and Maple Leaf.



2.9.3 Market Value of Share:Formula

Years 2008 2007 2006 2005 2004

Pioneer Cement 28.17 37.4 45.65 20.35 20.1

Maple Leaf 19.61 21.09 21.47 19.62 20.49

Kohat Cement 19.9 22.99 24.68 21.92 21.13

Market Value of Share

0

10

20

30

40

50

2008 2007 2006 2005 2004

Years

Valu

es (

Rs)

Pioneer Cement

Maple Leaf

Kohat Cement

Comments:

Graph shows that market value of share of pioneer cement company is high in 2006 to 2008 as compare to kohat cement and maple leaf in 2006 it is at highest point, market value of kohat cement and maple leaf show mixed trend and kohat cement market value of share at high point in 2006 and maple leaf high market value in 2006

2.9.4 Price Earning Ratio (P/E Ratio):

Price earning ratio (P/E ratio) is the ratio between market price per equity share and earning per share. The ratio is calculated to make an estimate of appreciation in the value of a share of a company and is widely used by investors to decide whether or not to buy shares in a particular company.



Significance of Price Earning Ratio:

Price earnings ratio helps the investor in deciding whether to buy or not to buy the shares of a particular company at a particular market priceGenerally, higher the price earning ratio the better it is. If the P/E ratio falls, the management should look into the causes that have resulted into the fall of this ratio.

Price Earning Ratio:Formula Market price per equity share / Earnings per share

Years 2008 2007 2006 2005 2004

Pioneer Cement -30.29 -74.8 10.97 8.27 5.4

Maple Leaf -10.77 16.23 6.03 5.93 8.54

Kohat Cement -10.47 47.89 2.72 2.8 3.56

Price Earning Ratio

-100

-80

-60

-40

-20

0

20

40

60

2008 2007 2006 2005 2004

Years

Val

ues

Pioneer Cement

Maple Leaf

Kohat Cement

Comments:

Price earning ratio of pioneer cement increasing from 2004 to 2006 which is beneficial for the company also favorable for the investor and encourage the investors to invest but decrease in 2007 and 2008 and at very worst position in



2007 and then become negative in 2008, Maple leaf and Kohat shows mixed trend, kohat company maximum price earning ratio in 2007 and negative in 2008 and maple leaf price earning ratio never goes negative and it is at high point in 2008 which encourage the investor, it shows that there is increase in market value of share and decrease in value of earning per share.

It helps the investor to decide to buy or not to buy the shares. According to this situation we can see that company get loses and reduce price earning in last five year.



2.10 Horizontal Analysis:

"In the base statement of previous year every item is given 100% and is subsequent years these are changed to the related percentages as per base years.”

Importance

Comparative statement can be prepared for several years in a columnar form. The changes from period to period can be reflected by establishing a base year and making it 100%. Thereafter all such changes are reflected in percentages. This analysis is invaluable to management and other analysts because the absolute large data are condensed into percentages. The purpose of horizontal analysis is to highlight the changes.

Profit And Loss AccountProfit and loss account is also named income statement or income statement or income and expenditure account or statement of operations and encompasses all sources of revenue, gain and losses and expenses for a particular period, grouped into various headings as per charts of accounts of a company. In other words, it summarizes the results of operations for an accounting period. The net income is closed by transfer to balance sheet after paying the dividends and appropriations. Sometimes an appropriation is made to general reserve and still some portion is left as retained earning.

Balance Sheet

The purpose o balance sheet is to reflect financial position of an entity on a particular date. The balance sheet consists of assets, which are the property of the entity , the liabilities, which are the debts payable to outside investors or suppliers of goods and services, and the shareholder’s equity, which represents owners’ interest in the entity. At any given date, assets must be equal to the contributions of the creditors and owners.



2.10.1 Four years Horizontal Analysis of Profit and loss Account.

PIONEER CEMENT COMPANY LIMITED

FOUR YEAR POSITION OF PROFIT & LOSS ACCOUNT

For the year ended June 30 2008 2007 2006 2005

Sales- Net 55% 2% 50% 55%

Cost of goods sold 54% 52% 34% 47%

Gross Profit 61% -74% 83% 74%

Administrative And Selling expenses

293% 25% -15% 55%

Operating Operating/Loss -124% -84% 107% 80%

Other operating expenses 1997% -88% 13% 123%

Other operating income 162% -84% 162% -65%

Profit/loss from operations -189% -84% 120% 45%

Financial & Other Voluntary separation scheme charges

13% -286% 63% 3%

Profit/loss before taxation 211% -120% 137% 65%

Taxation 333% -135% 316% -133%

Profit/loss after taxation 92% -114% 104% -22%

Comments:

Sales of the Company has shown a increasing trend and has increased up to 55% in 2005 and 50% in 2006 and 2% in 2007 and 55% in 2008 and respective from previous yearsCost of sales has also shown an increasing trend. In 2005 it increased 47%, in 2006 in increased 34%, 52% increase in 2007 and 54% in 2008 from respective years cost of sale increase more than increase in sales which result there is loss in 2007 the major reason of this increase in cost was the plant shutdown due to irregular power supply of wapda and increase in prices of diesel and empty bags.

Gross profit of the company has also shown a increasing trend in 2005 up to ,2006 and 2006 respectively and then decrease and got loss in 2007 and then gross profit increase 61% in 2008 company cost of sale increases but sale decrease, in 2007 gross profit decreases -74% and it was 61% in 2008.Selling and distribution



expenses also increases in 2008 as 293% and 25% in 2007 respectively. This decrease in gross profit was due to the increase in cost of goods sold and also administrative and selling expense which cause company got loss.Operating profit showing increasing trend from 2005 to 2006 as 80% and 107% respectively and than it decrease in 2007 and 2008 as -84% and -124% which show big loss in the year of 2008.

Finance cot Decrease in 2007 as 286% and increased in 2008 as 13% which is not at higher side but it is at higher side in 2005 to 2006 as 63% for expansion of new grey and white cement plants. There is a great increase in 2008 which cause the loss of the company. Profit before tax show decrease in 2007 as 120% and increase in 2008 as 211% and company got loss in 2008. Profit after tax decreased in 2007 by 114% and it was increase 92% in 2008. Company management tries to expand its operations so it needs more finds that were got from short and long term financing. Due to economic crises and dispute with unionized permanent workers, company faces losses. Company is good for long term benefits, because it had declared bonus shares for last five years. It had a great capacity to produce cement and they are improving technology. They had implemented Enterprise Resource Planning software to increase the efficiency and for better management planning.

2.10.2 Horizontal Analysis of Balance Sheet of Last Four years



PIONEER CEMENT COMPANY LIMITED

BALANCE SHEET

As at June 30 2008 2007 2006 2005

EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVE

Authorized Share Capital 0% 0% 0% 0%

Issue Subscribed & Paid Up Capital 18% 5% 5% 62%

Reserves -22% -43% 847% -118%

10% -10% 43% 197%

Surplus on Revaluation of fixed assets-net of tax

290% -5% -4% -

NON-CURRENT LIABILITIES

Redeemable capital - - -100% -8%

Long term financing-secured 6% -83% - -

Long term loans-secured -26% 27% -8% 3%

Long term Musharaka finance -100% - - -

Liabilities against assets subject to finance lease

-51% 7% 65% 2780%

Long term deposits -65% -7% -15% 187%

Long term creditor-unsecured -30% -26% - -

Deferred liabilities -10% 17% -12% -21%

Deferred tax liabilities - -100% 122% -

-25% -3% 12% 9%



CURRENT LIABILITIES

Creditors against expansion project -90% -5% -39% -

Trade and other payables 120% 7% 27% 251%

Interest/ Mark up accrued 54% 70% -44% -25%

Short term Murabah-secured -73% - - - Short term Musharaka secured - - - - Short term finances - - - -

Short term borrowings - - -100% -

Current maturity of redeemable capital - - -100% 93%

Current maturity of long term loan - -100% -36% -64%

Current portion of long term loan - -100% - -

Current portion of liabilities against assets subject to finance lease

39% 761% 919% 112%

Current portion of deferred liability -100% -99% - -

Sales tax payable - -100% 62% 340%

49% 43% 41% 158%

22% 2% 22% 61%

ASSETS

NON CURRENT ASSETS

FIXED CAPITAL EXPENDITURE

Property, plant and equipment 27% -2% 20% 74%

Long term loans -11% 43% -25% 13%

Long term deposits -15% 28% 169% 55%



Deferred tax assets - - - -100%

27% -2% 21% 66%CURRENT ASSETS

Stock in trade -54% 55% 70% 12%

Store, spare and loose tools 3% 11% 31% 13%

Assets held for disposal -100% - - -

Trade Debts 35% 138% -34% -23%

Loan & advances 156% 80% -78% 939%

Deposits & prepayments -59% -33% -16% -32%

Other receivables 8471% -87% -73% 22%

Current portion of long term deposits 838% - - -

Sales tax net -100% - - -

Taxation-net - -100% -11% -8%

Cash & bank balance -54% 325% 310% -53%

-19% 56% 34% 17%

22% 2% 22% 61%

Comments:

Non-Current Assets

As we can see from the horizontal balance sheet analysis of Four years, the total non-current assets have shown increasing trend. In 2005 it is 66% than it increase 21% in 2006, 21% in 2006 and than it decrease in 2007 by 2% and than again increase in 2008 by 27% as compare to 2007. This shows heavy investment in fixed assets by the management.Operating fixed assets showed increasing trend in from 2005 to 2006 by 74%, 20% respectively it decreases 2% in 2007 and than again increase in 2008 from 2007 by 27%. Long term loans showing mix trend it increased by 13% in 2005 and than it decreased 25% in 2006 and increased by 43% in year 2007 and decrease 11% respectively. Lon-term deposit has shown an increasing trend from 2005 to 2007 by 55%, 169% and 28% from respective years, and it decrease in 2008 by 15% from 2007. Deferred tax assets just in 2005 than no more 2006,2007,2008 so it decrease almost 100%

Current Assets



Store, spare and tools has shown increasing trend from 2005 to 2008 by 13%, 31%, 11%,and 3% from their respective years, which shows that company is in good position as liquidity point of view. Stock in trade shows increasing trend from 2005 to 2007 by 12% in 2005,70% in 2006, 55% in 2007 and decrease 54% in 2008 This higher inventory is indication of week inventory management. Trade debts has shown decreasing trend in 2005 from 2004 by 23% and then decrease by 34% from 2005 an it increased by 138% in 2007 which is at higher side and than it increase by 35% in 2008 from 2007.Receivable management is inefficient in 2007 and 2008 by showing increasing trend as compare it with 2005 and 2006.Loan and advances shown increasing trend in 2005 in huge amount it increase 939% from 2004 which means company made advances and loans to the employees in huge amounts than it decrease in 2006 by 78% and in 2007 again increase by 80% and also increase in 2008 by 156%.deposits and prepayment showing decreasing trend from 2005 to 2008 by 32%, 16%, 33% and 59% by respective years. Other receivables also showing decreasing trend from 2006 to 2008 just increased in 2005 from 2004 by 22%. Cash and bank balance first decreased in 2005 by 53% from 2004 than it showing increasing trend from 2006 to 2007 by 310% and 325% from respective years and than again it decreased in 2008 54% from 2007.Over all current assets showing increasing from 2005 to 2007 by 17%, 34% and 56% from respective years and it decrease in 2008 by 19% from 2007 which means current assets are decreased in 2008.

Equity and Liabilities

Share capital show an increasing trend it increases in 2005 by 62% and 5% in 2006 and 2007 respectively and 18% in 2008 which means that issued subscribed and paid up capital increased through out all the years. Reserves have decreased in year 2005 by 118% and increased in 2006 by 847%, after that it decreased in next tow years in 2007 and 2008 by 43% and 22% respectively. which shows that company has utilized all its reserves for expansion of project. Due to expansion of project company has not sufficient reserves and company has not paid any dividend after 2004.

Non-Current Liabilities

Non-current liabilities have also shown an increasing trend from 2005 to 2006 by 9% and 12% and decreased in 2007 and 2008 by 3% and 25% from respective years. Redeemable capital showing decreasing trend in 2005 and 2006 by 8% and 100%. Long term loans secured in crease by 3% in 2005 and than it decreased 8% in 2006 it again increased in 2007 by 27% and decreased in 2008 by 26%. Liabilities against assets subject to finance lease increased from 2005 to 2007 by 2870%, 65% and 7% respectively and it decreased by 51% in 2008 from 2007. Long term deposits increased 187% in 2005 and than it decreased in 2006 to 2008



by 15%, 7% and 65% from respective years. Deferred liabilities decreased in 2005 and 2006 by 21% and 12% and increased 17% in 2007 and decreased 10% in 2008 from respective years.

Current Liabilities

Total current liabilities have also shown an increasing trend. This is also inline with increase in current assets of the company. Short term financing is taken to meet the working capital requirements. Company is meeting its obligation on regular basis which is evident from an increase in the current portion of long term debts under current liabilities head of the balance sheet.

Trade payables decreased in 2005 by 251% which is at higher side and increased 27%, 7%, and 120% in 2006, 2007 and 2008 which is unfavorable for the company. Interest and mark up accrued decrease in 2005 by 25% and 44% in 2006 and increase in 2007 and 2008 by 40% and 54% respectively. Sales tax payable increase 340% in 2005 from 2004 which is huge change in 2006 it also increase 62% from 2005 and decrease 100% in 2007.Finally, size of the company has increased during the last five years. More investment is made in capital assets. Company is in expansion phase since the base year. Investment in new expansion project and technology is being made in order to keep pace with changing business environment.

2.11 Vertical Analysis:

“An analysis of percentage financial statements where all balance sheet items are divided by total assets and all income statement items are divided by net sales or revenue”The expression of individual financial statement item as percentages of total helps the analyst spot trends with respect to the relative importance of these items over time.

Profit And Loss Account

Similar method as as applied for balance sheet is also applicable to profit and loss account. The various items of profit and loss account are related as percentage to sales. For example, items like, cost of goods sold. Operating expenses, gross profit, taxation etc. are reduced to percentages by treating the sales as 100 %. These ratios are also called vertical ratios and mix percentages.

Balance Sheet



Vertical analysis is also called common size analysis. The common size balance sheet is also called 100% balance sheet. The total of assets is the base figures representing 100%. Every item of the balance sheet is related vertically to reflect the vertical mix against the total. The analysis represents internal composition of assets and liabilities. The common size balance sheet analysis reveals the sources of capital and all other sources and the application of sources to assets of the company.

2.11.1 Vertical Analysis Of Pioneer Cement Company Limited



Five Year Position Of Profit & Loss Account

For the year ended June 30 2008 2007 2006 2005 2004

Sales- Net -2697% -3349% 455% 616% 312%

Cost of goods sold -2412% -3009% 273% 413% 221%

Gross Profit -285% -340% 182% 203% 91%

Administrative And Selling expenses -309% -151% 17% 40% 20%

Operating Operating/Loss 24% -189% 165% 162% 71%

Other operating expenses 83% 8% -9% -16% -5%

Other operating income -17% -13% 11% 8% 19%

Profit/loss from operations 89% -194% 167% 155% 84%

Financial & Other Voluntary separation scheme charges

230% 391% 29% 36% 28%

Profit/loss before taxation 319% 197% 138% 119% 56%

Taxation 219% 97% 38% 19% -44%

Profit/loss after taxation 100% 100% 100% 100% 100%

Comments:

As we can see from the vertical profit and loss account the sales revenue increased from 2004 to 2006 by 312%, 6165 and 455% respectively and decreased by 3349% and 2697% in 2007 and 2008 respectively. Cost of sales also increased in 2004 by 221% in 2005 by 413% and in 2006 by 273% and in next two years it decrease in 2007 by 3009% and in 2008 by 2412%. Gross profit increase in 2004 by 91% 203% increase in 2005, 182% increase in 2006 and in 2007 and 2008 it decreased 340% and 285% respectively.Administrative and Selling expense also increase in 2004 to 2006 by 20%, 40% and 17% respectively and it decreases in 2007 by 151% and in 2008 by 309% from respective years. Other operating expense decreases from 2004 to 2006 by 5% in 2004, 16% in 2005 and 9% in 2006, it increased in 2007 by 8% from 2006 and increase in 2008 by 83% from 2007. Other operating income increase from 2004 to 2006 by 19%, 8% and 11% and decreased in 2007 by 13% and 17% in 2008. Financial and other voluntary separation charges showing increasing trend all five years it increased by 28% in 2004 36% in 2005, 29% in 2006, 391% in



2007 and 230% in 2008 from their respective years. .Profit before taxation has increased by 56% in 2004 119% in 2005, 138% in 2006, 197% in 2007 and 219% in 2008. Profit after taxation the company get loss in 2007 and in 2008 from their respective years.Finally the company is improving with the passage of time. Although the profits are not very adequate but the management is very confident that they are working hard and the company will prosper in coming years as most of the capital work has been completed.

2.11.2 VERTICAL ANALYSIS OF BALANCE SHEET:



VERTICAL ANALYSISFOR LAST FIVE YEARSPIONEER CEMENT COMPANY LIMITEDBALANCE SHEET

As at June 30 2008 2007 2006 2005 2004



Authorized Share Capital 0% 0% 0% 0% 0%

Issue Subscribed & Paid Up Capital

19% 20% 19% 22% 22%

Reserves 3% 5% 8% 1% -10%

22% 24% 28% 24% 13%


26% 7% 9% 15% 0%


Redeemable capital 0% 0% 0% 2% 4%

Long term financing-secured 1% 1% 5% 0% 0%

Long term loans-secured 16% 27% 22% 29% 45%

Long term Musharaka finance 0% 1% 1% 1% 0%


2% 6% 5% 4% 0%

Long term deposits 0% 0% 0% 0% 0%

Long term creditor-unsecured 0% 0% 0% 0% 0%

Deferred liabilities 9% 12% 10% 14% 29%

Deferred tax liabilities 0% 0% 5% 3% 0%

28% 46% 49% 53% 78%

CURRENT LIABILITIES



Creditors against expansion project

0% 3% 4% 7% 0%

Trade and other payables 8% 5% 4% 4% 2%

Interest/ Mark up accrued 1% 1% 1% 1% 2%

Short term Murabah-secured 0% 1% 0% 0% 0%Short term Musharaka secured 0% 0% 0% 0% 0%Short term finances 3% 0% 0% 0% 0%

Short term borrowings 0% 0% 0% 0% 0%

Current maturity of redeemable capital

0% 0% 0% 0% 0%

Current maturity of long term loan

0% 0% 0% 1% 4%

Current portion of long term loan 0% 0% 4% 0% 0%


15% 13% 2% 0% 0%

Current portion of deferred liability

0% 0% 2% 0% 0%

Sales tax payable 0% 0% 0% 0% 0%

29% 23% 17% 14% 9%

105% 100% 102% 106% 100%

ASSETS



NON CURRENT ASSETS

FIXED CAPITAL EXPENDITURE

Property, plant and equipment 91% 87% 91% 93% 86%

Long term loans 0% 0% 0% 0% 0%

Long term deposits 1% 1% 1% 1% 1%

Deferred tax assets 0% 0% 0% 0% 5%

92% 89% 93% 93% 91%

CURRENT ASSETS

Stock in trade 1% 2% 1% 1% 1%

Store, spare and loose tools 4% 5% 4% 4% 6%

Assets held for disposal 0% 0% 0% 0% 0%

Trade Debts 0% 0% 0% 0% 1%

Loan & advances 1% 0% 0% 1% 0%

Deposits & prepayments 0% 0% 0% 0% 0%

Other receivables 0% 0% 0% 0% 0%

Current portion of long term deposits

0% 0% 0% 0% 0%

Sales tax net 0% 0% 0% 0% 0%

Taxation-net 0% 0% 0% 0% 0%

Cash & bank balance 1% 4% 1% 0% 1%

8% 11% 7% 7% 9%

100% 100% 100% 100% 100%

Comments:



ASSETS

Non-Current Assets

As we can see from the vertical balance sheet of the company total fixed assets are constant in relation to total assets with little variations. The management is more focusing on working capital management than on fixed asset in last two years as shown by the vertical balance sheet.

Property, plant and equipment have shown a increasing trend it increased in 2004 by 86% in 2005 by 93% in 2006 by 91% 87% in 2007 and 91% in 2008.

Current Assets

Total current assets have shown an increasing trend over the last five year period. Stores and spares decreased in year 2008, 2005 and 2006 by 4% and increased in 2004 by 6% and 2007 by 5%.Stock in trade has shown an increasing with a same sequence at the rate of 1% all the years except 2007 which is 2%. Stock in trade is about 1% of the total current assets in 2004, 2005, 2006 and 2008 and it was 2% of total assets in 2007. Stores and spares have the largest portion than stock of the total current assets.

Trade debts 1% of total assets in 2004 and than no other year has significant effect on total current Asset effected by trade debts. Cash and bank balance were 1% in 2005, 1% in 2006 and 2008 and 4% in 2007. This trend shows that more funds are tied in receivable, inventories and in stores & spares.


Issued Subscribed and paid up capital showing mix trend in increase 22% in 2004 and 2005 contribute in total liabilities and than it decrease in 2006 by 19% contribution and in 2007 by 20% and in 2008 19% in total liabilities. . Currently company is not paying dividends to shareholders. Reserves also decreased in 2004 by 10% and no major contribution in total liabilities in coming years.

Non-Current Liabilities

Total long-term liabilities of the company have shown decreasing trend in relation to total liabilities. It contribute in total liabilities by 78% in 2004, 53% in 2005, 49% in 2006, 46% in 2007 and 28% in 2008.

Current Liabilities



Current liabilities have shown an increasing trend during the last five years from 2004 to 2008 as shown in the vertical balance sheet of the company they contribute in total liabilities by 9% in 2004, 14% in 2005, 17% in 2006, 23% in 2007 and 29% in 2008 which is maximum and company got loss in 2007 and 2008. Trade and other payables have shown an increasing trend with a marginal increase in last five years. Trade and other payables increase in 2008 by 8% and 2007 by 5% than their respective years, in 2006 and 2005 they were 4% and 2%in 2004.



CHAPTER # 03

Company Analysis Company Life Cycle



3.1 COMPANY ANALYSIS:

Pioneer cement limited fulfills all its targets of supplies in the market and also

expands its production with the needs of market. In these days company is in its

growth stage. Now the company has three production lines including one line for

white cement produce and also for grey cement. The growth in demand of cement

in Asia, India and Middle East, particularly supply deficit in India and China has

geared up export opportunities for Cement Industry of Pakistan. Supply deficit in

India has resulted in significant demand for Pakistani Cement due to India's

geographic proximity with Pakistan. Bureau of Indian standards have approved

Pioneer Cement for import to India. This demand will also be supported by

closing down of some cement units in Europe due to their strict laws governing

pollution control and other environment hazards. Being one of the big cement

units of Pakistan and due to its high quality Pioneer Cement is the prime of choice

of the International buyers all over the world. Pioneer Cement is committed to

provide high quality cement to its international customers and is being exported to

Afghanistan, India, Middle East, Europe and Africa. Pioneer Cement

conveniently meets all the International standards including American, British,

Indian and European standards. Pioneer cement is an ISO 9001-2000 and ISO

14001-2004 certified company and follows all rules and regulations of the

government. Company’s social performance is also good. It has good cooperation

with community and the environment. Company has a good relation with their

workers and also trying for their welfare.



3.2 COMPANY LIFE CYCLE:

Last Five Years Sales of the Company

NET SALES

-

1,000,000,000

2,000,000,000

3,000,000,000

4,000,000,000

5,000,000,000

6,000,000,000

2008 2007 2006 2005 2004

Years

Val

ues

SALES

Comments:

In the above graph you can see in the year 2008 sale of the company at highest point and it is showing increasing trend from 2004 so company sale is at increasing side in the year of 2006 and 2007 there is no much difference between the sale this increasing trend due to expansion of plant and due to the consumption and the demand in the market so we can say that Pioneer Cement’s demand is increasing in the market.

Management Analysis

Company has a centralized management system. All decisions are taken by the top management. The top management is control all the operations from head office. In order to control all operations of company different departments have been made. Following are some important parts of the organization, through which we can see the management pattern of the kohat cement company.



HR Management

The top management of company is in head office. It controls all of its operations while sitting here in Lahore. Its style of managing the major HR activities is following:

Recruitment and selection

For any middle level or top level post, the advertisements have been made through news paper and website. After screening the applications of candidates, the suitable candidates

are called for initial interview with HR Manager. In case of success that candidate will transfer to relevant department for interviewing with Manager of department and G.M of the company. After following this whole criterion, an individual has been selected.

There is no fix criterion to select for lower level employees whereas some basic information is prerequisite for their job.



CHAPTER # 04

Five Years Review Recommendation Conclusion Bibliography



4.1 FIVE YEARS REVIEW

Five Years Profit and Loss

-800,000,000-600,000,000-400,000,000-200,000,000

-200,000,000400,000,000600,000,000800,000,000

1,000,000,0001,200,000,0001,400,000,000

2008 2007 2006 2005 2004

Years

Val

ues

(Rs)

Gross Profit

Operating Operating/Loss

Profit/loss from operations

Profit/loss before taxation

Profit/loss after taxation

Explanation:

In the above chat we can see the profit position of the company during the year 2004 to 2008 in these five years company profitability position is better in 2006 as compare it with other years, so we can say that company was in much better position in 2006.

Review

In 2004-05 Production and sales volume have registered significant rise during the year 2004-05.Cement Production increased by 49% to 720,214 tons, whereas Cement Sales also went up by 49% to 719,947 tons, over the last year. Breakup of Sales in the domestic market and in the export market is given as under

Years Domestic Sales M.Tons

Export M.Tons

2004-05 553461 166486



2003-04 478805 3100

Despite 38% rise in the cost of fuel due to rise in the prices of coal and increase inmarkup rates, cost of production and sale has reduced by Rs.85/- per ton or Rs.61million due to operational efficiencies and increase in volume of production. Had prices of coal not increased, the Company’s profitability would have increased by another Rs.108 million. the Company has earned a profit (before tax) ofRs.393 million during the year under review. This profit figure has been arrived at after accounting for the diminution in the value of shares which were issued to National Bank of Pakistan @ Rs.23/- per share. As per the requirements of International Accounting Standard 39, the diminution in the market value of shares as of balance sheet date i.e.30.06.2005 was to be provided in the accounts. As such Rs.31 million have been included in the “other charges” to account for the difference in the value of shares as on 30th June, 2005 and the transaction value of shares at Rs.23/- per share. However, the share value subsequently increased well above Rs.23/- per share. This provision will, as such be reversed in the subsequent period. Had this extra charge not been made in the accounts, profit before taxation would have amounted to Rs.424 million for the year under review. Company had enhanced its existing capacity from 2000 tons to 2350 tons clinker per day by way of optimization. With the expansion of 4300 tons per day, the revised capacity of your plant would be 6650 tons clinker per day or 7000 tons cement per day. The capacity of the plant will, INSHA ALLAH become over two million tons cement per annum.

In 2006-07 Company was able to achieve a turnaround last year, when it had posted a profit of Rs.675 million. The positive result of the last year had generated optimism with regard to the operations for the current year thereafter, unfortunately, Company sustained a loss of Rs.93 million despite substantial growth in sales volume. A massive decline of 35% was recorded in average prices of cement in the domestic market during the year 2006-07, over the preceding year which has adversely affected the operating results of Company for the year under review. Cost of production on the other hand went up on account of increase in the price of input items and an upward revision of power tariff. Average net retention price during last year worked out to Rs.3,685 per ton which declined to Rs. 2,459 per ton during the year under review. Company has exported 132,284 tons of cement as compared to 118,028 tons of cement exported last year and registered a rise of 12%. Due to depressed domestic market, and a falling trend in the price of cement during the year under review. The management is therefore trying to enhance export of cement besides exploring the possibility of exporting clinker in overseas market. Cement production during the period under review increased by 55% to 448,394 tons. The Clinker production has continuously been increasing, registering a rise 19% in the first quarter, 51%



in the second quarter and 93% in the third quarter. Due to the management’s continued efforts to optimize the production and as result, production of clinker during the year was 1,238,168 tons as against capacity of 1,995,000 tons, whereas production of cement during the year was 1,263,626 tons as against the capacity of 2,094,750 tons. Capacity utilization of the plant remained at 74% during the year under review as against 69% for the preceding year.In 2007-2008 clinker production has risen from 1,238,168 tons in 2006-07 to 1,640,092 tons in 2007-08 registering an impressive growth of 32% as compared to last year, mainly on account of smooth running of the plant. Cement production, for the same period increased significantly by 18% from 1,263,626 tons to 1,492,353 tons. Capacity utilization of the plant on account of clinker and cement was 82% and 71% which is higher than last year»s capacity utilization by 22% and 11% respectively, of Clinker and Cement.Company stepped up its efforts to boost distribution network and was able to sell 1,334,354 tons during the year ended 30 June, 2008 in contrast to 1,141,267 tons sold during the preceding year registering an increase of 17% Export of cement/clinker showed a phenomenal increase of 125% to reach 450,659 tons as against 132,284 tons exported during last year. It comprised 157,228 tons cement and 293,431 tons clinker as compared with last year»s export of 130,284 tons cement and 2000 tons clinker. Company has contributed Rs.1,074.667 million to the National Exchequer during the year under review in the shape of Excise Duty and Sales Tax.

4.2 RECOMMENDATIONS

The Company should design effective internal control system, which not only increase the efficiency but also reduce the pressure exists on accounts and finance department.

The Company should arrange training and orientation programs for its employees on regular basis so that they can equip themselves with the latest developments in the field of finance and accounts.

Monthly accounts should be prepared on regular basis so that it will help the management to make better and timely decisions.

Calculations of mark-up should be made by the Company to reconcile and check the mark-up charged by the banks to keep a good control on the financial charges charged by the banks.

Trade debtors and creditors balances reconciliations should be made on monthly basis along with keeping the balances updated by sending balance confirmations letters to the parties’ The selection criteria should also be improved. The company



should select the educated and experienced employees and along with there should be a proper training system for them

4.3 CONCLUSION:

The company underwent many expansion plans due to which its capacity was increased to 2350 tons per day in 2005 and in 2006 a new production line of 4300 tons per day clinker capacity started production. Its shares are quoted on all the three stock exchanges of the country. It is a part of the Noon group, which holds the majority stake of 60% in the company, followed by a leading brokerage house, First National Equity Limited (FNE) 9% shareholding. Financial institutions, insurance companies and the general public, hold the rest of the shareholding.

PIOC is involved in the manufacturing and marketing of cement. Its products include ordinary Portland cement, suitable for concrete construction and sulphate resistant cement, ideal for construction in or near sea. The company's sulphate resistant cement has less than 2.0 C3A content whereas the maximum limit of C3A content set by British and Pakistan standards, is 3.5.

Thus, the company's sulphate resistant cement is highly preferred in important projects such as the Thai Greater Canal project. PIOC's products are sold under the brand name of 'Pioneer Cement' and it was the winner of "Brand of the Year Awards 2006" in cement sector in the national category.

The company's state-of-the-art European (FLS) plant is equipped such that it allows stringent quality control measures. PIOC is ISO 9001:2000 QMS and ISO: 14001:2004 certified. It meets local as well as international quality standards. PIOC produces and sells clinker and cement domestically and internationally.

During 1QFY09 the clinker production increased by 5% (to 400,076 tons from 382,642 tons in 1QFY08). Cement production also declined by 21% (to 313,454 tons from 398,590 tons in 1QFY08). The company produced less due to the decrease in local demand for cement.

The cement sector had shown an impressive growth of 24.3% in the cement dispatches during FY08, owing to a strong demand in the local market and supply deficits in the regional markets. The major boost had come from the export sales (a growth of 142%) while local cement dispatches grew nominally by 6.5%.

However, the sector could not maintain this strong performance and total cement dispatches during 1Q09 showed a nominal growth of 0.7% to 7.33m tons as against 7.28m tons in the corresponding quarter in FY08. Local cement dispatches



declined by 15.4% due to slow economic activity and the cut down on PSDP expenditure by the government. Capacity utilizations also declined to 78.9% in 1Q09 from 82.2% last year mainly due to poor local dispatches.

Exports showed a growth of 59.5% and export market share rose from 21.5% in 1QFY08 to 34.1% in 1QFY09 and it was this increase that boosted the overall sales of the sector. The real estate boom in the Middle East and the reconstruction process in Afghanistan boosted the demand for cement.

Also better retention prices for exports also compelled the cement manufacturers to focus on tapping new potential markets of Iraq and Africa. As per the industry trend, PIOC's export performance was better as the company had 141,373 tons of total exports and showed an increase of 93% over the same quarter in FY08.

Local sales constitute a major portion of the total cement sales of PIOC, however, due to increasing demand for cement in regional markets, the share of exports in the total cement sales of the company has increased. Exports contributed 17% towards overall dispatches and 14% towards capacity utilizations during 1QFY09.

The share of exports in the total cement dispatches had increased and was vital in achieving the growth in cement dispatches during FY08 as well. PIOC exported 293,431 tons of clinker in FY08, mostly to Middle East due to depleted limestone reserves and idle installed grinding capacities. PIOC is also exporting to Europe and Africa.

PROFITABILITY

During FY08, the cement sector experienced strong growth in cement dispatches but at the same time it was faced with declining profitability. Although the sales volume in the sector increased, the net sales revenue did not increase as much due to decrease in net retention. Over the years all cement manufacturers undertook huge capacity expansion plans which have now created a situation of excess supply in the local market.

Companies resorted to price wars and this led to a fall in prices. As per the industry trend of declining profitability, PIOC also posted an overall loss of 179 million in FY08. The Profitability ratios of PIOC indicate that PIOC, like many other companies in the cement sector, has been plagued by lower earnings.

The gross profit margin fell drastically in FY07 and fell slightly in FY08 as well. PIOC's rising operating expenses and finance costs have led negative net profit margin. Similarly return on assets and return on equity have also fallen. The prices of imported coal had shot up during the last fiscal year and caused a major rise in the cost of production.



Crude oil prices had also seen an unprecedented rise last fiscal year. As fuel costs are the largest portion of production costs of the PIOC, the price increase had deeply hit the profitability of the company in FY08. For PIOC the prices of packaging material went up and formed 14% to total production costs. Fuel and electricity costs form 60% of the cost of sales and higher electricity tariffs and fuel costs affected the earnings of the company in FY08.

RECENT RESULTS

The profitability improved during the 1QFY09. The company earned a gross profit of Rs 454.017 million during the 1QFY09 as against Rs 47.573 million reported for the same quarter in FY08. The gross profit was thus 843% higher. This was because there was a 75% increase in the net sales of the company in 1QFY09 over the sales registered during 1QFY08 while the cost of sales increased by 35%.

However, the impact of this phenomenal increase in gross profit during the quarter was limited because of higher transportation costs. As the share of exports increased, the costs associated with distribution and transportation have also risen for the company. The distribution expenses of the company increased by 195% during 1QFY09 as compared to the same quarter in FY08.

Depreciation in rupee value has greatly affected the company and limited its profits for the 1QFY09. PIOC faced an exchange loss of Rs 144.146 million during the three months due to the depreciation of rupee against US dollar and Japanese yen. Also tight monetary policy and higher KIBOR rates during the period resulted in higher finance cost for the company.

All these factors caused the expenses for the company to rise. But higher sales allowed the company to post a profit after tax of Rs 16.748 million during 1QFY09 as against a loss after taxation of Rs 121.840 million reported during the corresponding quarter of last fiscal year.

LIQUIDITY

The liquidity position of the company has been deteriorating over the years due to substantial rise in the current liabilities. Liquidity improved slightly during FY07. PIOC felt a liquidity crunch, like many other companies in the cement sector due to the price war and losses incurred in FY08. The current liabilities have also increased to Rs 2.987 billion during FY08, backed mainly by increased short-term borrowings by the company.



To solve the liquidity problem, PIOC initiated a process of restructuring its debt by issuing Sukuk bonds of Rs 2.5 billion in FY08. This will help the company to liquidate its excessive current liabilities. It will also help the company to control its financial costs. In FY07, cash and bank balances were 32% while trade debts and inventory were 3% and 16% respectively of the current assets.

During FY08, the composition of current assets changed such that the most liquid assets: cash and bank balances constituted 18%, trade debts 5% and inventory 9% of the total current assets. Stores, spares and tools are highly illiquid assets and they form a major portion of the company's current assets.

ASSET QUALITY

The asset management of the company seems to be quite effective during FY08 as the operating cycle of PIOC decreased to 9 days from 23 days in FY07. The operating cycle, however, has reduced due to faster sales turnover while days to collect trade debt remained the same in FY08. The days to sell the average inventory were 19 days in FY07 whereas in FY08 it took the company only 6 days to sell its inventory.

DEBT MANAGEMENT

The debt to assets ratio depicts how PIOC is financed. Each year, the company is being increasingly financed by equity rather than debt. In FY04, debt financed 87% of assets while in FY08 debt only contributed to 56% of the total assets. The company's debt to asset ratio has not fluctuated much because over the years because assets and liabilities have grown more or less in the same proportions.

The debt to equity ratio fell during FY05 and FY06 indicating that the company was financing its growth by equity. In FY05, the equity of the company rose by 197% while liabilities increased only by 11%. In FY07 the equity fell as the reserves fell owing to the loss made during that fiscal year. This caused a slight increase in D/E ratio in FY07. In FY08 the debt to equity ratio has declined owing largely to a fall in the debt. The company is trying to restructure its financing composition in favor of equity by issuing Sukuk financing and convertible loan into equity. This will reduce the current liabilities in the future. In the wake of rising interest rates in the economy, this strategy will prove to be beneficial for PIOC in the future.

The average price/share fell during FY07 to Rs 31.78 and in FY08, it remained around Rs 31.84. The share prices declined due to the losses incurred during both the fiscal years. The price movement during 1QFY09 is depicted in the graph and shows that PIOC's share price remained below Rs 30/share during the three months (August-September 2008).



FUTURE OUTLOOK In the budget FY09, the central excise duty on cement was increased to Rs 900 per ton from current Rs 750 per ton. On each bag the CED increased by Rs 7.50 per bag (from Rs 37.5 per bag to Rs 45 per bag). But this increase is not expected to impact the profits of the cement sector because this increment in CED will be passed on to the consumers. However, the rise in the GST by 1% will increase the local cement prices and may dampen the demand for cement.

Local cement dispatches are expected to remain depressed due to slowdown in economy-led construction activities in the country and also due to inflation. In the budget FY09, the government had allocated Rs 550 billion to PSDP in the country, however owing to budgetary deficit, the government later decided to cut PSDP expenditure.

Cement consumption is correlated to GDP growth and as the economic condition now stands, we can predict a grave slowdown in the GDP growth of the country. Thus the per capita cement consumption will also fall during FY09.

However, exports are expected to maintain their strong growth and support the total cement dispatches. Cement manufacturers will have to focus on the international markets to achieve growth in sales.

Pakistan has been exporting to Afghanistan. Regional shortage of cement had provided a favorable opportunity for our cement manufacturers. Cement demand in Afghanistan is expected to be 1.5m-2.0m tons per annum for the next five years. Cement manufacturers have growing opportunities in Middle East and African countries. New export markets like Russia and European countries have been identified.

Growth in export sales may boost the margins of the industry and reduce the negative impact of rising costs on its profitability.

Pioneer Cement Limited is expected to have increased exports as it has received orders from new buyers such as Russia, Central Asia, Madagascar and Nigeria. During the 1QFY08, Pioneer Cement Limited was approved by the Bureau of Indian Standards (BIS) to export cement to India. PIOC clearly benefited from the growth in demand for cement in India and Middle East. As PIOC's plants are in close proximity to Indian border, the shortage of cement in India made it a lucrative and accessible market for the company and exports were made through roads. This was a window of opportunity for PIOC and the whole of the cement sector. But as a result of growing hostilities between the two countries, India halted its import of cement from Pakistan. This will cause the export sales of PIOC to be lesser than expected during FY09.



Expenses are expected to increase for cement manufacturers. This will negatively impact the gross margins of the cement sector. During the past, our cement manufacturers shifted production from oil to coal or gas. Pakistan has huge reserves of coal but manufacturers need to import coal due to high sulphur content. The coal prices in the international market have fallen from their peak level of US $210 per ton. But the depreciation of Pakistani rupee will neutralize the impact of decreasing international coal prices. Also the government has raised the power tariff by nearly 50% with variable rates for peak and off peak hours. The gas prices have also risen. This will increase the cement manufacturers' cost of production and impact their profitability in FY09.

4.4 Bibliography

REFERENCE & SOURCES USED

Pioneer Cement company limited website (www.pioneercement.com)



Pioneer Cement company Annual Reports Kohat Cement company Annual Reports. Maple Leaf Cement Company website (www.kmlg.com) Kohat Cement Company website (www.kohatcement.com) Kohat Cement Company Financial Reports. All Pakistan cement manufacturing Association. www.apcma.com Financial Management by (BPB) Financial Reporting by (BPB) Karachi stock exchange site www.investopedia.com www.brecorder.com Business Recorder www.accountingformanagment.com

References.

Special Thanks to

Mr. Zaheer Abbas

CHAPTER # 05

Annexure:

Five Years Balance Sheet of Pioneer Cement Company


http://www.brecorder.com/

http://www.investopedia.com/

http://www.apcma.com/

http://www.kohatcement.com/

http://www.kmlg.com/


Five Years Profit and Loss account of Pioneer Cement Company Five Years Balance Sheet of Kohat Cement Company Five Years Profit and Loss account of Kohat Cement Company Five Years Balance Sheet of Maple Leaf Cement Company Five Years Profit and Loss account of Maple Leaf Cement Company Ratio Working of Pioneer, Maple leaf and Kohat Cement Company

5.1 Five Years Balance Sheet of Pioneer Cement Company

PIONEER CEMENT COMPANY LIMITEDBALANCE SHEET



FOR LAST FIVE YEARSAs at June 30 2008 2007 2006 2005 2004EQUITY AND LIABILITIES


Authorized Share Capital 2,500,000,000

2,500,000,000 2,500,000,000 2,500,000,000 2,500,000,000

Issue Subscribed & Paid Up Capital

1,995,324,000

1,698,148,000 1,624,839,000 1,547,466,000 954,371,000

Reserves 310,136,000

398,076,000 697,224,000 73,643,000 (409,128,000)

2,305,460,000 2,096,224,000 2,322,063,000 1,621,109,000 545,243,000


2,239,856,000 574,203,000 604,342,000 629,314,000 -


Redeemable capital -

- - 171,403,000 185,923,000

Long term financing-secured 76,851,000

72,603,000 430,663,000 - -

Long term loans-secured 1,701,777,000

2,293,709,000 1,812,063,000 1,973,151,000 1,911,662,000

Long term Musharaka finance -

50,000,000 50,000,000 50,000,000 -


237,795,000

486,577,000 454,070,000 274,644,000 9,536,000

Long term deposits 1,841,000

5,247,000 5,627,000 6,647,000 2,320,000

Long term creditor-unsecured 15,114,000

21,497,000 29,008,000 - -

Deferred liabilities 906,186,000

1,010,587,000 862,867,000 975,490,000 1,236,845,000

Deferred tax liabilities -

- 435,989,000 196,618,000 -

2,939,564,000 3,940,220,000 4,080,287,000 3,647,953,000 3,346,286,000

CURRENT LIABILITIES

Creditors against expansion project

29,594,000

283,428,000 298,260,000 488,772,000 -

Trade and other payables 863,265,000

392,894,000 368,446,000 289,668,000 82,515,000

Interest/ Mark up accrued 110,932,000

72,176,000 42,463,000 75,960,000 101,104,000

Short term Murabah-secured 27,151,000

99,720,000 - - -

Short term Musharaka secured 40,000,000

- - - -

Short term finances 311,685,000

- - - -

Short term borrowings -

- - 20,000,000 -



Current maturity of redeemable capital

-

-

0

19,600,000 10,160,000

Current maturity of long term loan -

- 40,740,000 63,695,000 178,898,000

Current portion of long term loan -

- 354,170,000 - -


1,597,817,000

1,150,772,000 133,585,000 13,114,000 6,189,000

Current portion of deferred liability

-

860,000 130,390,000 - -

Sales tax payable 7,265,000

- 30,250,000 18,730,000 4,255,000

2,987,709,000 1,999,850,000 1,398,304,000 989,539,000 383,121,000

10,472,589,000 8,610,497,000 8,404,996,000 6,887,915,000 4,274,650,000

As at June 30 2008 2007 2006 2005 2004

ASSETS

NON CURRENT ASSETSFIXED CAPITAL EXPENDITURE

Property, plant and equipment 9,570,865,000

7,510,640,000 7,683,391,000 6,381,731,000 3,657,284,000

Long term loans 6,415,000

7,248,000 5,064,000 6,718,000 5,956,000

Long term deposits 108,001,000

126,317,000 98,809,000 36,783,000 23,655,000

Deferred tax assets - - -

- 192,742,000

9,685,281,000 7,644,205,000 7,787,264,000 6,425,232,000 3,879,637,000

CURRENT ASSETS

Stock in trade 68,691,000

150,294,000 96,757,000 56,825,000 50,809,000

Store, spare and loose tools 427,193,000

416,586,000 375858000

287,119,000 254,880,000

Assets held for disposal -

32,847,000 32847000

- -

Trade Debts 40,124,000

29,717,000 12,490,000 18,944,000 24,712,000

Loan & advances 63,048,000

24,629,000 13,670,000 61,652,000 5,936,000

Deposits & prepayments 427,000

1,041,000 1,550,000 1,835,000 2,680,000

Other receivables 19,628,000

229,000 1,756,000 6,533,000 5,360,000

Current portion of long term deposits

18,290,000

1,950,000 - - -

Sales tax net -

3,507,000 - - -

Taxation-net 10,724,000

- 10,899,000 12,246,000 13,265,000

Cash & bank balance 139,183,000

305,492,000 71,905,000 17,529,000 37,371,000



787,308,000 966,292,000 617,732,000 462,683,000 395,013,000

10,472,589,000 8,610,497,000 8,404,996,000 6,887,915,000 4,274,650,000

5.2 Five Years Profit and loss Account of Pioneer Cement Company.

PIONEER CEMENT



FIVE YEAR POSITION OF PROFIT & LOSS ACCOUNT For the year ended June 30th

2008 2007 2006 2005 2004

Sales- Net 4,853,764,000 3,131,487,000 3,075,922,000 2,045,127,000 1,322,728,000

Cost of goods sold 4,340,151,000 2,813,309,000 1,845,284,000 1,372,012,000 936,066,000

Gross Profit 513,613,000 318,178,000 1,230,638,000 673,115,000 386,662,000

Administrative And Selling expenses

556,025,000 141,350,000 113,219,000 133,692,000 86,231,000

Operating Operating/Loss

(42,412,000) 176,828,000 1,117,419,000 539,423,000 300,431,000

Other operating expenses (149,029,000) (7,108,000) (58,562,000) (51,952,000) (23,311,000)

Other operating income 30,630,000 11,687,000 71,163,000 27,193,000 78,519,000

Profit/loss from operations

- 160,811,000 181,407,000 1,130,020,000 514,664,000 355,639,000

Finance costs - 413,203,000 - 365,848,000 196,949,000 120,745,000 117,421,000


(574,014,000) (184,441,000) 933,071,000 393,919,000 238,218,000

Taxation (394,043,000) (90,947,000) 257,089,000 61,830,000 (186,047,000)

Profit/loss after taxation (179,971,000) (93,494,000) 675,982,000 332,089,000 424,265,000

5.3 Five years Balance Sheet of Kohat Cement Company

Kohat Cement CompanyBalance sheet of Last five years

As at June 30 2008 2007 2006 2005 2004




SHARE CAPITAL AND RESERVEAuthorized Share Capital 1,500,000,000 1,500,000,000 1,500,000,000 1,000,000,000 500,000,000

Issue Subscribed & Paid Up Capital 1,170,520,370 1,017,843,800 925,312,540 493,500,020 329,000,010

Reserves 235,805,586 396,306,773 389,397,905 162,120,028 162,120,028

Unappropriated profit 922,803,191 925,505,570 969,229,248 426,112,297 204,110,962

2,329,129,147 2,339,656,143 2,283,939,693 1,081,732,345 695,231,000

Non Current Liabilities

Long Term Security Deposits 135,837,621 106,808,320 5,451,100 2,132,500 1,846,056

Long Term Loans 2,981,785,715 2,703,308,354 237,500,000 81,648,330 133,048,330

Liabilities against Assets subject To finance lease 3,686,712 - 2,358,098 35,461,448 56,282,172

Deferred Liabilities 155,732,831 158,739,583 161,267,836 104,240,120 105,589,559

3,277,042,879 2,968,856,257 406,577,034 223,482,398 296,766,117

CURRENT LIABILITIESTrade and other payables 244,465,133 178,982,959 215,249,060 147,709,665 139,925,047

Mark up payable on secured loans 50,719,344 12,260,606 1,973,686 1,655,264 1,414,512

Short term running finance - secured 1,096,066,075 146,434,421 57,397,506 52,582,288 58,477,626

Current portion of long term liabilities:

Long term finances - secured 625,022,321 218,120,218 44,148,330 53,800,000 41,300,000

Liabilities against assets subject to finance lease - secured 1,475,601 - 34,064,784 30,297,282 26,949,946

Provision for taxation

- - 32,760,357 58,943,432 12,144,144

Unclaimed dividend - - 1,684,753 1,801,602



-

2,017,748,474 555,798,204 385,593,723 346,672,684 282,012,877

7,623,920,500 5,864,310,604 3,076,110,450 1,651,887,427 1,274,009,994

As at June 30 2008 2007 2006 2005 2004

ASSETS

NON CURRENT ASSETS

Property plant & Equipment

Operating fixed assets- tangible 941,431,201 1,023,528,041 1,095,105,981 581,007,037 603,032,810

Capital work-in-progress 5,307,288,753 4,234,731,837 984,287,376 488,802,983 178,169,534

Store and spares held for capital expenditures

- -

- 50,070,412 124,267,150

Long term loans and advances 38,142,100 45,731,201 2,565,634 4,639,073 2,943,180

Long term deposits 4,429,440 3,879,440 4,969,240 16,756,490 14,952,130

Staff retirement benefit

- - - 1,097,189

6,291,291,494 5,307,870,519 2,086,928,231 1,141,275,995 924,461,993

CURRENT ASSETS

Stock in trade 174,317,806 125,147,740 87,869,995 22,336,658 15,100,336

Store, spare and loose tools 699,954,682 157,436,002 117,594,905 86,217,074 87,617,242

Trade Debts 15,341,081 21,381,453 21,642,079 23,799,056 25,986,269

Advances, deposits, prepayments & other receivables 406,020,470 120,072,947 98,589,010 89,192,508 52,744,640

-

- 6,600,000 -

-

Cash and bank balances 36,994,967 132,401,943 656,886,230 289,066,136 168,099,514

1,332,629,006 556,440,085 989,182,219 510,611,432 349,548,001

7,623,920,500 5,864,310,604 3,076,110,450 1,651,887,427 1,274,009,994



5.4 Five years profit and loss account of Kohat Cement

Kohat Cement Company.

Profit and loss account for last five years

For the year ended June 30 2008 2007 2006 2005 2004

Sales- Net 1,375,972,754 1,553,733,256 2,327,237,579 1,715,426,515 1,397,871,078



Cost of goods sold 1,288,570,903 1,210,466,340 1,127,575,661 1,051,203,519 902,333,594

Gross Profit 87,401,851 343,266,916 1,199,661,918 664,222,996 495,537,484

Administrative And Selling expenses 65,772,406 65,040,344 53,812,821 49,020,390 44,610,821

Operating profit 21,629,445 278,226,572 1,145,849,097 615,202,606 450,926,663

Other operating expenses -20,958,970 -7,640,715 -71,433,971 -40,170,445 -35,722,154

Other operating income 35,978,496 75,624,748 19,106,540 9,129,239 4,444,478

Profit from operations 36,648,971 346,210,605 1,093,521,666 584,161,400 419,648,987

Finance cost 48,935,320 280,622,053 54,097,507 23,212,275 24,374,892

Voluntary separation scheme charges 267,286,401

-

- -

-

Profit before taxation -279,572,750 65,588,552 1,039,424,159 560,949,125 395,274,095

Taxation -57,133,384 16,780,970 249,557,198 174,447,785 102,616,840

Profit after taxation -222,439,366 48,807,582 789,866,961 386,501,340 292,657,255

5.5 Five years Balance Sheet of Maple Leaf Cement Company.

MAPLE LEAF COMPANY

Five years Balance SheetAs at June 30 2008 2007 2006 2005 2004EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVE

(Rupees (Rupees (Rupees (Rupees (Rupees



in'000') in'000') in'000') in'000') in'000')

Authorized Share Capital 5,000,000 5,000,000 5,000,000 5,000,000 2,377,647

Issued, Subscribed & Paid- Up Capital

4,264,108 4,264,108 3,519,581 3,248,844 1,804,913

Reserves 4,644,355 4,457,328 2,807,562 2,704,922 1,560,423

(Accumulated loss) Unappropriated profit

(547,574)

271,601 972,594 56,393 332,208

Reserve for issue of bonus shares - - - 270,737

8,360,889 8,993,037 7,299,737 6,280,896 3,697,544

NON-CURRENT LIABILITIESLoan from related parties 35,224 250,000 - - -

Long term Loan and finances 241,539 8,576,657 7,868,948 2,157,706 2,061,737

Redeemable capital 8,000,000 - - 41,650 124,950

Syndicated term finances 1,000,000 - - - -


957,434 268,040 12,226 - -

Lease finance advances and accrued interest thereon

- 679,676 74,146 - -

Long term deposits 2,582 2,702 2,977 6,572 7,182

Deferred taxation 154,741 897,183 875,609 328,571 -

Employees' compensated absences 16,688 13,192 10,250 8,513 7,760

10,408,208 10,687,450 8,844,156 2,543,012 2,201,629

CURRENT LIABILITIESCurrent portion of: - redeemable capital - - 41,650 83,300 83,300

- long term loans and finances - 1,792,519 538,530 434,030 434,030

- syndicated term finances 1,080,000 - - - -

- liabilities against assets subject to finance lease

188,011 13,858 4,481 - -

Short term finances 3,369,738 797,585 947,160 589,843 274,611

Trade and other payables 2,495,559 719,311 752,172 432,048 307,511

Accrued profit and interest / mark- 194,568 378,675 279,112 38,646 23,154



upDividends 54,588 54,539 54,586 13,627 -

Taxations - - 31,828 4,005 65,829

7,382,464 3,756,487 2,649,519 1,595,499 1,188,435

26,151,561 23,436,974 18,793,412 10,419,407 7,087,608

As at June 30 2008 2007 2006 2005 2004

(Rupees in'000')

(Rupees in'000')

(Rupees in'000')

(Rupees in'000')

(Rupees in'000')

ASSETSNON CURRENT ASSETS Property, plant and equipment 20,081,448 19,330,866 16,088,505 8,462,382 5,562,682

Intangible assets 15,082 4,578 - - -

Loans to employees 6,121 6,373 7,127 5,824 6,349

Deposits & prepayments 54,014 43,200 15,923 6,142 4,074

Investments - - 17,395 5,000 5,000

Deferred taxation - - - - 10,237

20,156,665 19,385,017 16,128,950 8,479,348 5,588,342

CURRENT ASSETS Store, spare and loose tools 3,325,744 2,014,580 1,847,926 1,100,967 941,544

Stock in trade 433,952 369,709 200,946 183,217 100,145

Trade Debts 743,366 194,587 163,459 92,597 87,104

Fair value derivation financial instruments

365,748 242,226 - - -

Loans & advances 82,814 85,544 299,257 - -

Investments 734,859 944,669 - - -

Deposits and short term prepayments

54,532 15,373 7,314 - -

Accrued profit 763 402 559 - -

Sales tax customs and excise duty 57,769 37,742 34,611 - -

Due from gratuity fund trust 9,768 8,539 - - -

Other receivables 21,780 1,198 9,452 - -

Taxation- net 44,907 14,029 -

-Prepayment and other receivables

193,476 147,202

Cash and bank balances 118,894 123,359 100,938 369,802 223,271

5,994,896 4,051,957 2,664,462 1,940,059 1,499,266

26,151,561 23,436,974 18,793,412 10,419,407 7,087,608



5.6 Five Years Profit And loss account of Maple Leaf Cement Company.

MAPLE LEAF FIVE YEAR POSITION OF PROFIT & LOSS ACCOUNTFor the year ended June 30th 2008 2007 2006 2005 2004

(Rupees in'000')

(Rupees in'000')

(Rupees in'000')

(Rupees in'000')

(Rupees in'000')

Sales- Net 7,815,829 3,711,081 5,709,792 4,290,734 3,375,799



Cost of goods sold 6,491,999 3,401,188 3,561,212 2,962,802 2,227,571

Gross Profit 1,323,830 309,893 2,148,580 1,327,932 1,148,228

Administrative and selling expenses

121,236 67,291 60,474 58,902 57,462

Distribution expense 834,849 69,021 20,961 - -

Other operating expenses 24,838 18,371 118,024 - -

Other operating income 980,923 154,683 199,459 58,902 57,462

Operating profit 342,907 155,210 1,949,121 1,269,030 1,090,766

Other operating income 105,656 43,224 26,671 18,097 11,133

448,563 198,434 1,975,792 1,287,127 1,101,899

Finance cost 1,812,807 338,453 340,978 259,749 350,392


(1,364,244) (140,019) 1,634,814 1,027,378 751,507

Taxation Current 44,815 (9,477) 28,536 (38,880) 17,325

Deferred (732,924) (172,589) 547,038 338,808 246,710

(688,109) (182,066) 575,574 299,928 264,035

Profit/loss after taxation (676,135) 42,047 1,059,240 727,450 487,472

5.7 Ratio working of Pioneer, Maple Leaf and Kohat Cement Company

Current Ratio

Current Asset /Current Liabilities

Years 2008 2007 2006 2005 2004

PioneerCement

787308/2987709

=0.26

966292/1999850

=0.48

617732/1100044

=0.56

462683/500767=0.92

395013/383121=1.03



Maple Leaf Cement

5994896/7382464

=0.81

4051957/3756487

=1.08

2664462/2649519

=1.01

1940059/1595499

=1.22

1499266/1188435

=1.26

Kohat Cement

1332629006/2017748474

=0.66

556440085/555798204

=1.0

989182219/385593723

=2.56

510611432/346672684

=1.47

349548001/282012877

=1.24

Quick Ratio

Current Asset-Stock /Current Liabilities

Years 2008 2007 2006 2005 2004

PioneerCement

(787308-68691)/2987709

=0.24

(966292-150294)/1999850

=0.41

(617732-96757)/1100044

=0.47

(462683-56825)/500767=0.81

(395013-50809)/383121=0.90

Maple Leaf Cement

(5994896-433952)/7382464

=0.75

(4051957-369709)/3756487

=0.98

(2664462-200946)/2649519

=0.93

(1940059-183217)/1595499

=1.10

(1499266-100145)/1188435

=1.18

Kohat Cement

(1332629006-174317806)/2017748474

=0.57

(556440085-125147740)/555798204

=0.78

(989182219-87869995)/385593723

=2.34

(510611432-22336658)/346672684

=1.41

(349548001-15100336)/282012877

=1.18

Inventory Days

Inventory/Cost of Sales *365

Years 2008 2007 2006 2005 2004

PioneerCement

(68691/4340151)*365

=5.77

(150294/2813309)*365

=19.49

(96757/1845284)*365

=19.14

(56825/1372012)*365

=15.12

(50809/936066)*365

=19.82



Maple Leaf Cement

(433952/6491999)*365

=24.40

(369709/3401188)*365

=40.38

(200946/3561212)*365

=20.60

(183217/2962802)*365

=22.57

(100145/2227571)*365

=16.41

Kohat Cement

(174317806/1288570903)*36

5=49.38

(125147740/1210466340)*36

5=37.74

(87869995/1127575661)*36

5=28.44

(22336658/10512035190)*36

5=7.75

(15100336/902333594)*36

5=6.11

Debtor Days Trade debtors/ Sales *365

Years 2008 2007 2006 2005 2004

PioneerCement

40124/4853764*365

=3.01

29717/3131487*365

=3.46

12490/3075922*365

=1.48

18944/2045127*365

=3.38

24712/1322728*365

=6.82

Maple Leaf Cement

743366/7815829*365

=34.72

194587/3711081*365

=19.14

163459/5709792*365

=10.49

92597/4290734*365

=7.87

87104/3375799*365

=9.42

Kohat Cement

15341081/1375972754*36

5=4.10

21381453/1553733256*36

5=5.02

21642079/2327237579*36

5=3.39

23799056/1715426515*36

5=5.06

25986269/1397871078*36

5=6.78

Creditor Days Trade Creditors / Sales *365

Years 2008 2007 2006 2005 2004

PioneerCement

863265/4853764*365

=64.92

392894/3131487*365

=45.79

368446/3075922*365

=43.72

289668/2045127*365

=51.70

82515/1322728*365

=22.77

Maple Leaf Cement

2495559/7815829*365

=116.54

719311/3711081*365

=70.75

752172/5709792*365

=48.08

432048/4290734*365

=36.75

307511/3375799*365

=33.25



Kohat Cement

244465133/1375972754*36

5=64.85

178982959/1553733256*36

5=42.05

215249060/2327237579*36

5=33.76

147709665/1715426515*36

5=31.42

139925047/1397871078*3

65=36.54

Total Asset Turnover

Sales / Total Assets

Years 2008 2007 2006 2005 2004

PioneerCement

4853764/10472589

=0.46

3131487/8610497

=0.36

3075922/8404996

=0.37

2045127/6887915

=0.30

1322728/4274650

=0.31

Maple Leaf Cement

7815829/26151561

=0.30

3711081/23436974

=0.16

5709792/18793412

=0.30

4290734/10419407

=0.41

3375799/7087608

=0.48

Kohat Cement

1375972754/7623920500

=0.18

1553733256/5864310604

=0.26

2327237579/3076110450

=0.76

1715426515/1651887427

=1.04

1397871078/1274009994

=1.10

Fixed Asset

TurnoverSales / Fixed Assets

Years 2008 2007 2006 2005 2004

PioneerCement

4853764/9570865

0.51

3131487/7510640

=0.42

3075922/7683391

0.41

2045127/6381731

=0.32

1322728/3657284

=0.36

Maple Leaf Cement

7815829/20081448

=0.39

3711081/19330866

=0.20

5709792/16088505

=0.35

4290734/8462382

=0.51

3375799/5562682

=0.61



Kohat Cement

1375972754/941431201

=1.46

1553733256/1023528041

=1.52

2327237579/1095105981

=2.12

1715426515/581007037

=2.95

1397871078/603032810

=2.32

Gross profit

Margin Gross profit / Sales *100

Years 2008 2007 2006 2005 2004

PioneerCement

513613/4853764*100

=10.58%

318178/3131487*100

=10.16%

1230638/3075922*100

=40%

673115/2045127*100

=32.91%

386662/1322728*100

=29.23%

Maple Leaf Cement

1323830/7815829*100

=16.94%

309893/3711081*100

=8.35%

2148580/5709792*100

=37.63%

1327932/4290734*100

=30.95%

1148228/3375799*100

=34.01%

Kohat Cement

87401851/1375972754*100

=6.35%

343266916/1553733256*100

=22.09%

1199661918/2327237579*100

=51.55%

664222996/1715426515*100

=38.72%

495537484/1397871078*100

=35.45%

Operating profit

Margin Operating profit / Sales *100

Years 2008 2007 2006 2005 2004

PioneerCement

(-160811)/4853764*100

-3.13%

181407/3131487*100

=5.79%

1130020/3075922*100

=36.74%

514664/2045127*100

=25.16%

355639/1322728*100

=26.89%

Maple Leaf Cement

342907/7815829*100

=4.38%

155210/3711081*100

=4.18%

1949121/5709792*100

=34.14%

1269030/4290734*100

=29.57%

1090766/3375799*100

=32.31%



Kohat Cement

21629445/1375972754*100

=1.57%

278226572/1553733256*10

0=17.91%

1145849097/2327237579*10

0=49.24%

615202606/1715426515*10

0=35.86%

450926663/1397871078*10

0=32.25%

Profit/loss before interest and tax

Profit (loss) before interest and tax / Sales *100

Years 2008 2007 2006 2005 2004

PioneerCement

(-574014)/4853764*100

=(11.83%)

(-184441)/3131487*100

=(-5.89)

933071/3075922*100

=30.33%

393919/2045127*100

=19.26%

238218/1322728*100

=18%

Maple Leaf Cement

(-1364244)/7815829*100=(-17.45%)

(-140019)/3711081*100

=(-3.77%)

1634814/5709792*100

=28.63%

1027378/4290734*100

=23.94%

751507/3375799*100

=22.26%

Kohat Cement

(-279572750)/1375972754*10

0=(-20.72%)

65588552/1553733256*10

0=4.22%

1039424159/2327237579*10

0=44.66%

560949125/1715426515*10

0=32.70

395274095/1397871078*100

=28.28%

Net profit/loss after interest

and taxNet profit (loss) after interest and tax / Sales *100

Years 2008 2007 2006 2005 2004

PioneerCement

(-179971)/4853764*100

=(-3.71%)

(-93494)/3131487*100

=(-2.98%)

675982/3075922*100

=21.98%

332089/2045127*100

=16.24%

424265/1322728*100

=32.07%

Maple Leaf Cement

(-676135)/7815829*100

=(-8.65)

42047/3711081*100

=1.13%

1059240/5709792*100

=18.55%

727450/4290734*100

=16.95%

487472/3375799*100

=14.44%

Kohat Cement

(-222439366)/1375972754*10

0=(-16.17%)

48807582/1553733256*10

0=3.14%

789866961/2327237579*10

0=33.94%

386501340/1715426515*10

0=22.53%

292657255/1397871078*10

0=20.94%



Return on Assets

Net income / total assets*100

Years 2008 2007 2006 2005 2004

PioneerCement

(-179971)/10472589*100

=(-1.72%)

(-93494)/8610497*100

=(-1.10%)

675982/8404996*100

=8.00%

332089/6887915*100

=4.80%

424265/4274650*100

=9.90%

Maple Leaf Cement

(-676135)/26151561*100

=(-2.58%)

42047/23436974*100

=0.18%

1059240/18793412*100

=5.64%

727450/10419407*100

=6.98%

487472/7087608*100

=6.87

Kohat Cement

(-222439366/7623920500)*10

0=(-2.92%)

48807582/5864310604*10

0=0.83%

789866961/3076110450*10

0=25.68%

386501340/1651887427*10

0=23.40%

292657255/1274009994*10

0=22.97

Return on Equity

(Net profit after tax-preference dividend) / Equity share capital *100

Years 2008 2007 2006 2005 2004

PioneerCement

(-179971-0)/2305460*100

=(-7.80%)

(-93494-0)/2096224*100

=(-4.46%)

(675982-0)/2322063*100

=29.11%

(332089-0)/1621109*100

=20.48%

(424265-0)/545243*100

=77.81%

Maple Leaf Cement

(-676135-0)/8360889*100

=(-8.09%)

(42047-0)/8993037*100

=0.47%

(1059240-0)/7299737*100

=14.51%

(727450-0)/6280896*100

=11.58%

(487472-0)/3697544*100

=13.18%

Kohat Cement

(-222439366-0)/2329129147*100

=(-9.55%)

(48807582-0)/2339656143*10

0=2.09%

(789866961-0)/2283939693*10

0=34.58%

(386501340-0)/1081732345*10

0=35.73%

(292657255-0)/695231000*10

0=42.09%



Earning per share

Profit after tax / No of shares

Years 2008 2007 2006 2005 2004

PioneerCement

(-179971)/194152=(-0.93)

(-93494)/187794=(-0.5)

675982/162484=4.16

332089/135001=2.46

424265/114059=3.72

Maple Leaf Cement

(-676135000)/372263356

=(-1.82)

42047000/324920106

=0.13

1059240000/297810685

=3.56

727450000/219742006

=3.31

487472000/203052740

=2.40

Kohat Cement

(222439366)/117052037

=(-1.90)

48807582/101784380

=0.48

789866961/87164948

=9.06

386501340/49350002

=7.83

292657255/49350002

=5.93

Extra Information

No of shares of pioneer

194152 187794 162484 135001 114059

No of shares of maple leaf

372263356 324920106 297810685 219742006 203052740

No of shares of kohat cement

117052037 101784380 87164948 49350002 49350002

Earning yieldEarning per share / Market price per share*100

Years 2008 2007 2006 2005 2004

PioneerCement

(-0.93)/28.17*100=(-3.30%)

(-0.5)/37.4*100=(-1.34%)

4.16/45.65*100

=9.11%

2.46/20.35*100=12.09%

3.72/20.1*100=18.51%

Maple Leaf Cement

(-1.82)/19.61*100=(-9.28%)

0.13/21.09*100

=0.62%

3.56/21.47*100=16.58%

3.31/19.62*100=16.87%

2.4/20.49*100=11.71%

Kohat Cement

(-1.9)/19.9*100=(-9.55%)

0.48/22.99*100

=2.09%

9.06/24.68*100=36.71%

7.83/21.92*100=35.72%

5.93/21.13*100=28.06%

Extra Information



Market price of pioneer

28.17 37.4 45.65 20.35 20.1

Market price of Maple leaf

19.61 21.09 21.47 19.62 20.49

Market price of kohat cement

19.9 22.99 24.68 21.92 21.13

Price Earning Ratio

Market price per equity share / Earning per share

Years 2008 2007 2006 2005 2004

PioneerCement

28.17/(-0.93)

=(-30.29)

37.4/(-0.5)

=(-74.8)

45.65/4.16

=10.97

20.35/2.46

=8.27

20.1/3.72

=5.40

Maple Leaf Cement

19.61/(-1.82)

=(-10.77)

21.09/0.13

=162.23

21.47/3.56

=6.03

19.62/3.31

=5.93

20.49/2.4

=8.54

Kohat Cement

19.9/(-1.9)

=(-10.47)

22.99/0.48

=47.89

24.68/9.06

=2.72

21.92/7.83

=2.80

21.13/5.93

=3.56


pioneer financial analysis

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