Financial Ratio Analysis

Company Name: Lucky Cement

Submitted by: Mansab Ali, Asad Qadeer, Amir Sohail

Submitted to:
Sir Tariq Arman
 1. Introduction:

1.1 Economy Introduction:

The economy of Pakistan is the 24th largest in the world in terms of purchasing power parity (PPP), and 42nd
largest in terms of nominal gross domestic product. Pakistan has a population of over 212.2 million (the
world's 5th-largest), giving it a nominal GDP per capita of $1,357 in 2019,which ranks 154th in the world and
giving it a PPP GDP per capita of 5,839 in 2019, which ranks 132th in the world for 2019. However, Pakistan's
undocumented economy is estimated to be 36% of its overall economy, which is not taken into consideration
when calculating per capita income. Pakistan is a developing country and is one of the Next Eleven countries
identified by Jim O'Neill in a research paper as having a high potential of becoming, along with
the BRICS countries, among the world's largest economies in the 21st century.[The economy is semi-
industrialized, with centres of growth along the Indus River. Primary export commodities include textiles,
leather goods, sports goods, chemicals, carpets/rugs and medical instruments.
Growth poles of Pakistan's economy are situated along the Indus River; the diversified economies
of Karachi and major urban centers in the Punjab, coexisting with lesser developed areas in other parts of the
country. The economy has suffered in the past from internal political disputes, a fast-growing population, mixed
levels of foreign investment. Foreign exchange reserves are bolstered by steady worker remittances, but a
growing current account deficit – driven by a widening trade gap as import growth outstrips export expansion –
could draw down reserves and dampen GDP growth in the medium term. Pakistan is currently undergoing a
process of economic liberalization, including privatization of all government corporations, aimed to
attract foreign investment and decrease budget deficit.

1.2 Cement Industry History:

Cement industry is one of the few industries that existed in Pakistan before the partition of the sub-continent.
The major reason for the existence of this industry is the availability of the raw materials. Pakistan has
inexhaustible reserves of limestone and clay, which can support the industry for another 50-60 years. The annual
production of the cement at the time of the creation of Pakistan was only 300000 tones per year. By 1954 the
production increased to 660000 tonnes per annum against a demand of 1000000 tonnes per annum. At this time
PIDC took initiative and established two cement factories Zealpak (240,000 tonnes) and Maple Leaf (100,000
tonnes) having a capacity of 340000 tones, thereby increasing the production to 1000000 tonnes per annum.
Since then besides expansion of the existing plants, new plants have also established. Besides producing OPC,
the Pakistani cement industry also started producing SRC, Slag cement and white cement.

1921 the first cement plant was established at WAH. At the time of independence in 1947 there were four
cement factories with an installed capacity of 470,000 tonnes per annum. These units were located at Karachi,
Rohri, Dandot and WAH. In 1956 PIDC established two plants at Daudkel and Hyderabad and subsequently
more plants were established in the private sector.

The industry was nationalized in 1972 and the State Cement Corporation of Pakistan (SCCP) was established
following the Economic Reforms Order, 1972. As a result of nationalization, a total of 10 cement units with an
installed capacity of 2.8 million tonnes per annum were transferred to the SCCP. Effective price control was
also vested with the SCCP and for a long time the industry operated under a regime of strict regulation and price
control. While the cement industry was working under the state control, the SCCP established five new units
with an installed capacity of 1.8 million tonnes per annum. For the next fifteen years no new cement plant was
established under the private sector, which resulted in acute shortage of cement in late 70s and early 80s. This
gap was filled by the import of cement. Severe shortage of cement and price deregulation prompted the private
sector to establish more plants. Seven units were established in the private sector before commencement of the
process of privatization in 1991.

During the regime of Nawaz Sharif the industry went through major transformation. As a part of its privatization
policy, the Government of Pakistan, has privatized 8 cement plants since 1992. Due to privatization the SCCP
lost its control over the prices of the cement and as a result new cement plants were established under private
sector. The units working under the SCCP control are old and inefficient using “wet process” whereas the units
established in the private sector are new, efficient and use “dry process”. At present there are more than 28
cement plants in Pakistan with installed capacity of over 19.5 million tonnes per annum. The present demand for
cement in Pakistan is around 9.5 million tonnes per annum.

2. Lucky Cement:
2.1 History:

Lucky Cement Limited was founded in 1993 by Abdur Razzak Tabba. The company started with
factories in the Pezu located in Lakki Marwat District district of the North West Frontier
Province (N.W.F.P). It now, also, owns a factory in Karachi.
Lucky Cement Limited (LCL) is one of the largest producer and leading exporter of quality cement in
Pakistan with the production capacity of 7.75 million tons per annum. The company is listed on
Karachi, Lahore, Islamabad, and London Stock Exchanges.
Over the years, the Company has grown substantially and is expanding its business operations with
production facilities at strategic locations in Karachi to cater to the Southern regions, Pezu and Khyber
Pakhtunkhwa to furnish the Northern areas of the country. Lucky Cement has a network of over 200
dealers which enables it to dominate the local market and is Pakistan’s first company to export sizeable
quantities of loose cement being the only cement manufacturer to have its own loading and storage
terminal at Karachi Port.
Lucky Cement Limited has been sponsored by one of the largest business groups in Pakistan, the
Yunus Brothers Group based in Karachi.

2.2 Vision & Mission:

Vision: Ensure sustainable leadership position in Pakistan and increase global footprint in the
cement sector. Identify and capitalize on diversification opportunities to maximize shareholders’
value while remaining socially responsive in all spheres of operations.
MISSION: We strive to be a growth oriented company by identifying opportunities, making the
right investments, producing high quality cement and using innovative technology to achieve cost
competitiveness and customer satisfaction. We endeavor to harness the best human resources and
providing them a level playing field in achieving long-term goals. We aim to deliver sustained
growth and enduring value to our stakeholders. We recognize our obligations towards environment
and corporate social responsibility and seek to mitigate any adverse effects on our environment.

2.3 STRATEGIC OBJECTIVES

To support value creation for all of our stakeholders, Lucky Cement’s business is focused on the delivery of the
following six strategic priorities, which aim to increase upon sustainable growth and cost efficiency. Everyone
at Lucky Cement has a role to play in delivering these strategic priorities.

1. Growing local market share: Our focus remains on designing business strategies for the local market
that ensure holding and increasing our market share. We continue to reinforce our strength to expand
our share in the local market.
2. Increasing share in the international market: We channel our resources and energies towards
development of new markets and territories with the aim of being more accessible to the global
construction industry and also to earn more foreign exchange for the country.
 3. Efficiency: We strive to continuously improve efficiency and to bring down our energy consumption
and costs by optimally utilizing all available resources.
4. Diversification: We endeavor to enhance stakeholders’ value by diversification and making
investments in such projects which maximize the returns for all stakeholders.
5. Sustainable Development (In terms of environmental and social responsibility): We endeavor to give
back to the communities that we operate in and also to the society at large by efficiently using natural
resources. We aim to deliver high quality goods at competitive prices while progressively reducing
ecological impacts.
6. HR Excellence: Developing our people is important to us. Human capital is an asset and plays an
important role in our success. Our Core Values, Code of Conduct and HR policies provide an outline
which serves as a guiding force for the whole organization.

2.3 Product Line:

Ordinary Portland Cement (OPC)

We offer Ordinary Portland Cement (OPC) that is used in all general constructions, especially in major and
prestigious projects where cement is needed to meet stringent quality requirements. It can also be used in concrete
mortars and grouts, etc. Ordinary Portland Cement is compatible/consumable with admixture/ retarders, etc.

OPC has easy workability and lower heat of hydration. We maintain our technical standard of quality parameter
at high level and with high strength at all ages. Our OPC cement satisfies EN 196 / 197 – 1, SABS, BIS, SLSI &
PSS – 232 ~ 1983 (R).

1 Raj Cement

2 Block Cement

3 Ordinary Portland Punjab Cement

4 Portland Cement

5 Ordinary Portland-Cement Lucky Star

6 Ordinary Portland-Cement

Sulphate Resistant Cement (SRC)

By maintaining C3A level within the specified limit of 3.5%, our Sulphate Resistant Cement is more resistant to
Sulphate attacks and is suitable for use in foundations near seashore and canal linings.

SRC has lower heat of hydration and its strength satisfies B.S 4027 / 1980 & PS 612 / 1989.

1 Sulphate Resistant Cement

Clinker

We also offer clinker to the customers with their own grinding units. Clinker can be easily handled by ordinary
mineral handling equipment and can be stored for several months without compromising on the quality. Clinker
is the primary product in the cement manufacturing process where limestone, clay and sand are grinded and heated,
before the gypsum is added to produce the final product of cement.

2.4 Company Information:

Board of Directors

Muhammad Yunus Tabba - Chairman

Muhammad Ali Tabba

Muhammad Sohail Tabba
Jawed Yunus Tabba
Mariam Tabba Khan
Manzoor Ahmed
Mohammad Javed Iqbal

Management Team

Muhammad Ali Tabba - Chief Executive

Noman Hasan - Executive Director

Irfan Chawala - Director Finance & Chief Financial Officer

Amin Ganny - Chief Operating Officer

Adnan Ahmed - Chief Operating Officer, International Businesses

Murtaza Abbas - Chief Strategy Officer & Director Investment

Faisal Mahmood - SDGM Finance & Company Secretary

Board Committees

AUDIT COMMITTEE

Manzoor Ahmed - Chairman

Muhammad Sohail Tabba

Jawed Yunus Tabba
Mariam Tabba Khan
Mohammad Javed Iqbal

HUMAN RESOURCE AND REMUNERATION COMMITTEE

Mohammad Javed Iqbal - Chairman

Muhammad Ali Tabba

Muhammad Sohail Tabba
Jawed Yunus Tabba
Mariam Yabba Khan

BUDGET COMMITTEE

Muhammad Sohail Tabba - Chairman

Muhammad Ali Tabba

Jawed Yunus Tabba
Mariam Tabba Khan
Bankers

Allied Bank Limited

Allied Bank Limited – Islamic Banking
Askari Bank Limited
Askari Bank Limited – Islamic Banking
Bank Alfalah Limited – Islamic Banking
Bank AL-Habib Limited
Bank AL-Habib Limited – Islamic Banking
BankIslami Pakistan Limited
Citibank N.A.
Dubai Islamic Bank Pakistan Limited
Faysal Bank Limited – Islamic Banking
Habib Bank Limited
Habib Bank Limited – Islamic Banking
Habib Metropolitan Bank Limited
Habib Metropolitan Bank Limited – Islamic Banking
Industrial and Commercial Bank of China Limited
MCB Bank Limited
MCB Islamic Bank Limited
Meezan Bank Limited
National Bank of Pakistan
Standard Chartered Bank (Pakistan) Limited
United Bank Limited
UBL Ameen Islamic Banking

Auditors

External Auditors - M/s. A.F. Ferguson & Co., Chartered Accountants

Shariah Advisor : M/s. Alhamd Shariah Advisory Services (Pvt). Ltd

Registered Office

Main Indus Highway, Pezu, District Lakki Marwat, Khyber Pakhtunkhwa, Pakistan

Head Office

6-A, Muhammad Ali Housing Society,A. Aziz Hashim Tabba Street,Karachi – 75350
UAN: (+92-21) 111-786-555
Website: www.lucky-cement.com
Email: [email protected]

Production Facilities

1. Main Indus Highway, Pezu, District Lakki Marwat, Khyber Pakhtunkhwa, Pakistan
2. 58 Kilometers on Main M9 Highway, Gadap Town,Karachi, Pakistan

Share Registrar

M/s. CDC Share Registrar Services Limited (CDCSRSL) CDC House, 99-B, Block-B, S.M.C.H.S
Main Shahra-e-Faisal, Karachi, Pakistan
(Toll Free): 0800 23275
Financial Ratios:

1. Liquidity Ratio:
Liquidity Ratios are used to measure a firm’s ability to
meet short-term obligation.

1.1 Current Ratio:

The current ratio is a liquidity ratio that measures a
company's ability to pay short-term obligations or those due within one year. It tells investors
and analysts how a company can maximize the current assets on its balance sheet to satisfy its
current debt and other payables.

Formula :
Current Ratio= Current assets / Current liabilities

Liquidity Ratio
(Rupees '000')
Current Ratio
Lucky Attock Dewan Power
S.No Years Cements Cements Cements Cements Average
1 2019 1.415672585 0.909964088 0.563496824 0.67750116 0.89166
2 2018 2.119699534 0.874112907 0.625141496 1.432996125 1.26299
3 2017 2.682700949 0.708745263 0.582881707 2.560367509 1.63367
4 2016 4.091832329 2.625945614 0.669529991 0.909641422 2.07424

2. Profitability Ratio:
Profitability ratios are a class of financial metrics that are used to assess a
business's ability to generate earnings relative to its revenue, operating costs, balance sheet assets, and
shareholders' equity over time, using data from a specific point in time.

2.1 Net Profit Margin:

The net profit margin is equal to how much net income or profit is
generated as a percentage of revenue. Net profit margin is the ratio of net profits to revenues
for a company or business segment. Net profit margin is typically expressed as a percentage
but can also be represented in decimal form. The net profit margin illustrates how much of each
Rupees in revenue collected by a company translates into profit.

Formula:

Net Profit Margin = Net profit after tax / Net Sales

 Profitability Ratio
(Rupees '000')
Net Profit Margin
Lucky Attock Dewan Power
S.No Years Cements Cements Cements Cements Average
-
1 2019 0.21844905 0.099764573 0.022839176 0.150865048 0.111559874
2 2018 0.165811366 0.260582617 0.066964273 0.073656303 0.14175364
3 2017 0.199017298 0.205905774 0.101568346 0.104180378 0.152667949
4 2016 0.286235892 0.207641357 0.116428289 0.11735946 0.18191625

Gross Profit Margin

Lucky Attock Dewan Power
S.No Years Cements Cements Cements Cements Average

1 2019 48,021,398 20,780,933 12,054,024 3,858,454 21,178,702

2 2018 97,541,883 16,884,410 13,473,482 4,343,239 33,060,754
3 2017 87,382,524 14,735,171 12,856,278 4,480,622 29,863,649
4 2016 45,222,088 13,918,339 12,879,094 4,144,454 19,040,994

Return On Equity
Lucky Attock Dewan Power
S.No Years Cements Cements Cements Cements Average
- Net Profit After Tax/
1 2019 0.111221428 0.128774576 0.016178068 0.047629513 0 Share Holder Equity
2 2018 0.147602352 0.295830833 0.052255996 0.028312704 0
3 2017 0.180765392 0.241347086 0.079728881 0.05560872 0
4 2016 0.186723241 0.2766408 0.114262517 0.207141488 0

Return On Assets
Lucky Attock Dewan Power
S.No Years Cements Cements Cements Cements Average
- Net Profit After Tax/
1 2019 0.083861979 0.075895269 0.009208977 0.014549593 0 Total Assets
2 2018 0.097948479 0.166620276 0.029828972 0.013048212 0
3 2017 0.12334705 0.142173394 0.043141738 0.040993091 0
4 2016 0.150649704 0.200328772 0.058954379 0.077910094 0
 3. Debts Management Ratio:
A ratio of a company's debt to its total financing. The
debt management ratio measures how much of a company's operations comes from debt instead of other
forms of financing, such as stock or personal savings. The debt management ratio is one measure among
many of a company's risk and likelihood of default.

Debts Managements Ratio (Rupees '000')

Debts To Equity Ratio

Lucky Attock Dewan Power
S.No Years Cements Cements Cements Cements Average
Total Debts/
1 2019 0.326243781 0.696740493 0.756771419 2.273597517 1.0133383
2 2018 0.506938693 0.775479194 0.751853722 1.169853214 0.80103121
3 2017 0.465502354 0.697554509 0.848068359 0.356538846 0.59191602
4 2016 0.239063611 0.380933934 0.938151489 1.658724676 0.80421843

Gross Profit Margin

Lucky Attock Dewan Power
S.No Years Cements Cements Cements Cements Average
1 2019 0.245990809 0.410634682 0.430773982 0.694525673 0.44548129
2 2018 0.336402997 0.436771772 0.429176085 0.539139333 0.43537255
3 2017 0.317640127 0.410917296 0.458894475 0.262829809 0.36257043
4 2016 0.192878305 0.275852396 0.484044459 0.623879821 0.39416375
 4. Activity/Asset Management Ratio:
A set of ratios which
measure how effectively a firm is managing its assets.

Activity Ratio/Asset Management Ratio

(Rupees '000')
Receivable Trunover
Lucky Attock Dewan Power
S.No Years Cements Cements Cements Cements Average
1 2019 27.90249 95.06874332 95.69724516 1.7201037 55.0971455 sales/Avg Rec
2 2018 46.525793 109.9420871 92.88149813 5.9781012 63.8318699
3 2017 42.052579 133.5608903 97.77678992 13.570737 71.7402489
4 2016 39.206295 152.1288003 118.4061395 21.138815 82.7200125
Receivable Trunover In Days
Lucky Attock Dewan Power
S.No Years Cements Cements Cements Cements Average
1 2019 13.08127 3.839327073 3.814111884 212.1965 58.2328032
2 2018 7.8451107 3.319929697 3.929738509 61.056176 19.0377387
3 2017 8.6796104 2.732835932 3.73299226 26.896108 10.5103866
4 2016 9.3097295 2.399282709 3.082610424 17.266814 8.01460925

Fixed Assets Turnover sales/Fixed assets

Lucky Attock Dewan Power
S.No Years Cements Cements Cements Cements Average
1 2019 0.5236199 1.056496966 0.446352546 0.1155596 0.53550724
2 2018 1.4769352 0.858073983 0.500196686 0.2185038 0.76342744
3 2017 1.1117251 0.840184564 0.473669349 0.8469494 0.81813211
4 2016 0.9722109 1.925207821 0.579078891 0.9264232 1.1007302

Total Assets Turnover sales/total assets

Lucky Attock Dewan Power
S.No Years Cements Cements Cements Cements Average
1 2019 0.3838972 0.760743685 0.403209702 0.0964411 0.41107293
2 2018 0.5907223 0.639414393 0.44544607 0.17715 0.46318319
3 2017 0.6197805 0.690477935 0.424755738 0.3934819 0.53212403
4 2016 0.5263131 0.964782621 0.506357852 0.6638587 0.66532806

Payable Turnover:
 (Rupees '000')
Payable Trunover
Lucky Attock Dewan
S.No Years Cements Cements Cements Power Cements Average
1 2019 1 2 3 1 2 CGS/Avg Account Payable
2 2018 2 1 3 1 2
3 2017 2 1 4 2 2
4 2016 2 2 4 2 2
Payable Trunover In Days
Lucky Attock Dewan
S.No Years Cements Cements Cements Power Cements Average
1 2019 347 196 112 530 296 Days(365)/PTO
2 2018 164 275 112 262 203
3 2017 174 268 98 157 174
4 2016 233 195 92 152 168

References:

https://www.investopedia.com/terms/p/profitabilityratios.asp
https://www.investopedia.com/terms/c/currentratio.asp

https://www.investopedia.com/terms/n/net_margin.asp

https://financial-dictionary.thefreedictionary.com/debt+management+ratio

https://www.stock-analysis-on.net/Knowledge-Base/Asset-Management-Ratios