Research Analysis Project

OXFORD BROOKES UNIVERSITY

B.Sc Hons in Applied Accounting

Research and Analysis Project

Name: Zeeshan Ali

ACCA Registration #2377739

BUSINESS AND FINANCIAL OF DG Khan CEMENT COMPANY OVER THREE YEAR PERIOD

Table of Content

ContentsTable of Content..........................................................................................................................................0

Section 1: Project objective and overall project approach..........................................................................2

Reasons for Choosing the Project Topic Area..........................................................................................2

Reasons for Choosing DG Khan Cement Limited.....................................................................................2

Research Questions.................................................................................................................................3

Research Questions.................................................................................................................................4

Overall Research Approach.....................................................................................................................4

Section 2: Information Gathering & Accounting / Business Techniques......................................................5

Sources of Information............................................................................................................................5

Limitations of information gathering.......................................................................................................6

Ethical Issues...........................................................................................................................................7

Accounting and Business Techniques used and their Limitations............................................................7

DG Khan Cement...................................................................................................................................11

Competitor............................................................................................................................................12

Section 3: Results, Analysis, Conclusion and Recommendations...............................................................14

Financial Analysis...................................................................................................................................14

Net Sales Turnover Ratio...................................................................................................................14

Gross Turnover..................................................................................................................................16

Net Turnover.....................................................................................................................................17

Gross Turnover..................................................................................................................................19

Net Turnover.....................................................................................................................................21

Gross Profit Margin............................................................................................................................22

Net Profit Margin...............................................................................................................................24

Current Ratio.....................................................................................................................................26

Efficiency Ratios.................................................................................................................................28

Earnings per Share.............................................................................................................................31

Return on Capital Employed..............................................................................................................33

Business Analysis...................................................................................................................................35

SWOT ANALYSIS.................................................................................................................................35

PORTER’S FIVE FORCES......................................................................................................................37

CONCLUSION.........................................................................................................................................39

RECOMMENDATIONS............................................................................................................................40

Section 1: Project objective and overall project approach

Reasons for Choosing the Project Topic AreaI selected the topic, analysis and evaluation of business and financial performance over a period of three

years, to carry out my research and analysis project.

I wanted to plan my career in strategic and business analysis. In the past, I had engaged with a

small organization and gained some experience of business analysis department. This project

proved very beneficial for me in improving my understandings and professional abilities.

There is a plenty of knowledge of Financial Accounting and reporting in the ACCA qualifications, it

also includes interpretation of financial statements, performance measurement of business and

theoretical knowledge. So I was very comfortable to carry out my research project because I was

already good in these areas.

It was very easy to obtain information to complete my research on the above mentioned topics.

There were many sources for the collection of data of any organization. I choose secondary

sources of information rather than the primary sources. Secondary sources are more reliable than

the primary sources.

Reasons for Choosing DG Khan Cement LimitedThe task of selecting the organization was a challenge for me. I had to carry out my research work with the

help of little bit knowledge about the industry. I choose DG Khan Cement Company Limited after a deep

research (DGKCC).

DG Khan Cement Limited Company is a leading company in the field of Cement industries in Pakistan.

Its production capacity is 14000 tons per day and it also has a good share in the international market.

This company is listed in the three stock exchanges in Pakistan. DG Khan Cement Limited also followed

the rules and regulations of professional and regulatory bodies like security and exchange commission of

Pakistan, Institute of Chartered Accountants of Pakistan and Institute of Chartered Management

Accountants etc. Cement Industry is playing is playing an effective role in the economic activities of the

countries and the DG Khan Cement Limited Company is on top in all these industries. A lot of information is

available publicly and we can collect information from the official website of the company. Information can

be gathered from the Business journals, magazines, newspapers, regulatory and professional bodies,

press releases and through websites. These all sources make the process of collecting information much

easier.

There is an intensive competition among 24 companies in the cement industries. Due to the high

competition and the better implementation of analysis and evaluation process made the research process

more meaningful. This is very important to draw conclusions for the assessment of organizations.

There are many seniors and classmates, who is working in the cement industry in the country.

Research ObjectiveThere are some objectives of my Research and Analysis Project, which are following.

I wanted to polish my professional knowledge and understandings in the accountancy field.

I wanted to better my analytical, evaluative and skills.

I wished to produce reports on the following matters:

The strategic position of DGKCC along with the information of its competitors and its products

which are moving in the market.

For the analysis of corporate strategies which were implemented and what are the other strategies

available.

Assessment of business processes and structures

Collecting information about its customers and its stakeholders.

To produce a report on the financial performance and position of the DG Khan Cement Company

in the context of its competitors, industry averages, economic environment, company’s objectives

and strategies.

Research Questions Whether the DGKCC is performing well in term of its goals and strategies?

Whether the graph of the DGKCC is going upward or downward?

What are those factors, which are affecting the financial performance of the organization?

Whether the organization is affected positively or negatively on its environment and its

competitors?

Whether the corporate strategies and business processes are effective and adequate?

Overall Research Approach I followed planned and methodical approach to carry out my research and analysis project. At the initial

stage, I select the topic for my project and after that I choose an appropriate organization to complete my

project. I planned for the research questions and I set my objectives. When I met with my mentor and I

revised my ACCA syllabus, it's appreciated me in deciding my research objectives.

After setting my objectives, I divided my plan into short term goals and targets and then I made a plan to

chase these targets. Day by day review of work was the main part of this plan.

To gather the data and sort out relevant and reliable information for the project was a very interesting task

for me. I gathered large amounts of data and I classified this data according to my set objectives.

When I gathered sufficient material, I started my project work. There were a lot of professional knowledge

and skills required for my research and analysis project. It was the main part of the Research and Analysis

Project. I used different professional techniques and models, for example ratio analysis, SWOT model and

Porter’s Five Forces model for the assessment of the business as well as financial performance of DGKCC.

I took help by drawing different graphs, tables and diagrams for the assessment of financial statements.

Then I prepared a draft report. I discussed and reviewed this report with my mentor and gave it a final

shape after correcting some mistakes.

Section 2: Information Gathering & Accounting / Business Techniques

Sources of Information Data can be collected from primary sources or secondary sources.

Primary Sources

Primary sources are those sources by which data are not taken previously. This data is collected to solve

the current problem, for example interviews of employees, questionnaires, management of the organization

and industry surveys. (University of Victoria, n.d.)

Secondary Sources

In case of secondary sources, data have been collected already. Data from the secondary sources is

available at any time like financial reports, director reports and departmental reports. (University of victoria,

n.d.)

I used secondary sources of data for my research and analysis project. The reason was that large amount

of data can be gathered easily from the secondary sources to fulfill the requirements of the project.

To collect data from secondary sources is not much better and it is just a waste of time.

I used different sources and methods for the collection of data, these sources and methods are followed.

Annual Reports

I obtained initial information from the annual reports of the DG Khan Cement Company. Annual Reports

provided me very important information to assess and evaluate the business and financial performance of

the company. Annual reports consisted of statutory reports like financial statements, director’s reports, and

auditor's report, voluntary reports like cost audit reports.

Organizational Official Website

I took a lot of guidance from the official website of the DG Khan Cement Limited Company. I obtained a lot

of information like a marketing strategy and information about the products.

ACCA Official Website

I got massive information from the Student accountant Magazine and from the articles which were available

on the official website of ACCA. These websites, polished my concepts, which were relevant to my project.

Electronic Media

Electronic media is a very useful source of gathering the information. I collected the data from the internet,

television channels and social media.

Print Media

Newspapers, business journals, magazines, stock exchange and security and exchange commission of

Pakistan’s press releases, informative booklets and different organizations in the industry are the examples

of print media. Information which was collected by the print media helped me to enhance my exposure to

my project research.

Limitations of information gathering There are some limitations of the collection of data. These are following.

There is no proper application of quality control procedures on the internet, on the published contents. In

this kind of situation, there is a need of taking maximum care while gathering reliable and authentic data.

Due to this reason, I collected the data from authentic websites, like official websites of the organizations,

Government websites, educational websites and other reliable institutes.

During the search of data, I also focused on the authors of publications and then I verified data with the

comparison of different sources. There was one more problem that I had to face while using the internet, a

plenty of knowledge and information was available on the net, due to this reason it was a little bit difficult for

me to collect data according to my research objectives.

Ethical IssuesI did not encounter any serious ethical issue during my project, but still there were some ethical issues arise

which I had to face.

Large amount of data and research relating to the project was available on the internet. This was a chance

of cheating, duplication and plagiarism. I was totally committed to my project with honesty and I took

extensive care for completing my research work.

I prepared my report by using my own knowledge and understanding, that I learnt from the ACCA

qualifications. I gathered information by using valuable and authentic references.

Accounting and Business Techniques used and their Limitations I applied different models and techniques for the analysis and evaluation of the financial performance and

position of the DGKCC over a period of three years.

Ratio Analysis

Ratio analysis is a technique which is used to interpret and assess the financial performance of the

organization. Ratio analysis was a very important and technical tool to analyse the financial statements of

the DGKCC. After the calculation of ratios, it is compared with the industry averages to know the

competitor’s position in the market.

Limitations of Ratio Analysis

There are some limitations of ratio analysis, which are described below.

Calculation of ratio analysis produces meaningful results only when comparative data of the previous year,

industry averages and non-financial information is available. Ratio analysis can be affected due to the

limitation of this kind of information.

Ratio analysis only explains the financial performance of an organization, but it analyses the short term

performance of the organization.

This analysis does not consider the non-financial factors, which are very important to assess the long term

performance of an organization.

It ignores some factors like inflation, specific boosts, downfalls, different basis for the valuation of assets.

Results and conclusions drawn from ratio analysis depend on the quality of financial statements. If financial

statements are not authentic or reliable then ratio analysis will also be inappropriate.

(Accounting Tools, n.d.)

SWOT

SWOT analysis is a model and a strategic tool for the identification and evaluation of internal and external

factors of an organization. These factors can be in favour or not to meet the organization project objectives.

SWOT stands for strengths, weaknesses, opportunities and threats. Strengths and weaknesses are the

internal factors of an organization. Opportunities and threats are the external factors of an organization.

Strengths and weaknesses show the capabilities and resources of the organization and threats and

opportunities explained the external environment of the organization.

Strengths and weaknesses may consist of personnel, managerial skills, finance and manufacturing

capabilities etc. social cultural environment, macroeconomic factors, legislation changes, technological

environment, changes in the market place and competitive forces are the examples of threats and

opportunities.

(Quick MBA, n.d.)

Limitations

SWOT is subjective method. Mostly calculations are based on judgments because it is a qualitative

measure which relates to the interpretations. There are a lot of personal abilities and skills are required for

the process of interpretations and calculations that is why its results depend on the biasness of participants.

This analysis does not simplify problems as well as challenges. We can get different ideas and information

from this analysis. But it does not suggest any way to prioritize issues. One more problem of this analysis is

that every point is important equally under this analysis. It does not consider those vital points that may be

highly important and influencing.

(Nordmeyer, n.d.)

Porter’s Five Forces

Porter’s Five Forces are a framework to assess the industry and to develop organizational strategy. An

economist Michael E. Porter developed this model in 1979.

This model helps to analyse the strengths of an organization in the current competitive environment. It

pointed out those areas which show the business power, so that the organization can succeed.

(Free Management Books, n.d.)

These five forces are following.

New Entry

Rivalry

Customer bargaining power

Supplier bargaining power

Substitute

Threat of new entry

There is always a threat for an organization that a new organization can enter into the market and can

reduce the power of the company. An organization may have to face some barriers before entering into the

market, like capital required to enter into the market, time for the effective competition, customer loyalty and

Government regulations etc.

Rivalry

An organization can assess whether the rivalry among the competitors is intensive or not. This is a very

important element to determine the competition and profitability of the industry.

Power of Buyers

Organizations analyses whether the bargaining power of the customers is high or low. In this context, an

organization access some factors like, number of buyers, the importance of each customer for the

organization and the cost of switching from organization product or service to other products in the market.

Power of Supplier

This factor analysis the bargaining power of the supplier in the industry. These factors may include number

of suppliers in the market, uniqueness of products, availability of substitute raw material and cost of

switching from one supplier to another supplier.

Substitute Product

Substitute product is that product which fulfilled same need. This will be a serious threat to the organization

if alternative product will be available in the market with low price.

Limitations of Porter’s Five Forces

Porter’s Five Forces cannot focus on the internal structure of the organization, Government legislation,

corporate and social responsibility during the development of corporate strategy.

Different kinds of products and interrelations of the modern markets can raise issues in determining market.

Porter’s Five Forces framework provides information about the threats and challenges but does not suggest

an appropriate solution to handle these issues. (Boundless, n.d.)

DG Khan Cement DG Khan Cement Company is producing quality cement in Pakistan. Its working capacity is 14000 tons per

day. This company was established according to the procedure of the State Cement Corporation of

Pakistan Limited as a private limited company. The company begins its working in 1986. Nishat Group was

a very famous group in 1992, and it is listed on the all stock exchanges in Pakistan.

There are three plants of DG Khan Cement Limited Company. Two plants are located at Dera Ghazi and

another one is in Khairpur. The company uses the latest technology in its plants for the production of

cement. There are a lot of customers of DG Khan all over the world. DG Khan exports its cement to the

India, Middle East and South Africa.

Quality Control

This company served quality products to all its customers. DG Khan Cement Limited uses a lot of

equipment’s for the checking of the quality of the products at each stage of the processes.

There is no chance of delay in the operating activities of the company because the company keeps all its

plants in good condition.

Environment safety

The company’s main aim is to produce quality products which cannot create any problem for the

environment. The company keeps in mind all national and international rules and regulations of

environment protection.

Products

There are two main products of the company.

Ordinary Portland Cement

Sulphate Resistant Cement

(DG Cement, n.d.)

Competitor Lucky Cement Company is the competitor of DG Khan Cement Limited Company.

Lucky Cement Limited Company established in 1996. It’s working capacity is 25000 tons per day of dry

cement. The first plant of the company was located at Pezu District of Khyber Pakhunkhwa. This is a public

limited company and it is listed on the all stock exchanges of Pakistan, and also listed in London Stock

Exchange.

LCL is a very large manufacturer of quality cement in the country, it also exports sizeable quantities of

loose cement. It owns its loading and storage terminal at the Karachi Port. The business of the company is

increasing from Northern Region in the Southern area in Karachi for the progress of the country.

Products

Following are the products of the company.

Ordinary Portland Cement

Sulphate Resistant Cement

Clinker

Block Cement

(Lucky Cement., n.d.)

Section 3: Results, Analysis, Conclusion and Recommendations

Financial Analysis

Net Sales Turnover Ratio

DG Khan Cement Limited

Table 1:


Local Sales Rs. (000) Exports Rs. (000) Gross Turnover Rs.(000)

Net Turnover Rs.(000)

FY14 26,296,488 6,048,508 32,344,996 26,542,509

FY13 22,733,691 6,866,192 29,599,883 24,915,924

FY12 20,258,088 7,146,523 27,404,611 22,949,853

Local sales

Local sales of DG khan cement limited continuously increased year by year. From FY-2012 to FY-2014 it

was increased by 54.8%. In 2011 it was Rs. 16.986 billion and in 2014 it reaches to Rs. 26.296 billion.

In FY-2012 DG khan cement limited increase their local sales by 19.3% over the last year. Domestic sales

are going up as the construction activity picks up pace, chiefly due to demand of cement for public sector

projects including a few small dams, roads and bridges and also due to construction and renovation of

housing units by individual households and construction companies. (Dawn, 2013)

In FY-2013 the local sales also increased by 12.2% over the previous year. As for the rest of the industry,

FY-2013 proved to be a good year for D.G. Khan Cement which recorded it's the highest-ever after tax

profit of Rs 5.5 billion. Local cement dispatches grew by more than four percent, a consistent three year

growth after the dismal performance of FY10. The Company sold nearly 2.89 million tons of cement, up

from 2.76 million tons last year. (Business Recorder, 2013)

In FY-2014 local sales increased by 15.7% over the last year. Increase in capacity utilization will increase

the demand for cement in summer season. And also, the wheat harvest season will improve agricultural

income, leading to an additional increase in local cement demand.

Exports

Financial statement shows that increase in exports stable in only two year i.e. Rs. 6.486 billion in 2011 and

Rs. 7.146 billion in 2012. And then the downward trend starts in DG khan cement limited. It is due to

construction of Dasu dam that reinforced optimism in local cement demand and also international cement

demand. (Global Cement, 2014)

In FY-2013 exports decreased by -3.9% over the previous year. It is due to total company cement

dispatches growing to 3%. This was creating 2% decline in cement export which is due to low demand of

bag cement. (Business Recorder, 2013)

In FY-2014 exports decreasing trend stable and exports reaches to -11.9%. Exports of DG khan cement

limited reaches to Rs. 6.048 billion in 2014 from Rs. 6.866 billion in 2013. It is due to DG Khan limited

having a mega project, which is construction of Dasu Dam. Its create the huge demand for cement within

the country therefor DG Khan does not meet the international demand and the exports of the company

decreased. (Global Cement, 2014)

Gross Turnover

Gross sales of the DG khan limited increased year by year. It reaches to Rs. 32.344 billion over the last 3

years.

In FY-2012 gross turnover of the company increase by 16.7% over the last year. It is due to work going on

different projects like reconstruction activities in flood affected areas, work on the Diamer Bhasha Dam,

higher retention prices and lower interest rates have remained the key factors driving stronger earnings for

cement producers. (Tribune, 2012)

InFY-2013 DG khan cement limited has increased their gross 8.0% over the previous year. It is due to the

company declined its cost of sales over the last year. Declining in cost of goods sold was a result of

alternate fuel use, electricity generation through waste heat recovery and reduced coal prices that decrease

the cost of goods sold by the company therefor the gross sales of the company increased in 2013.

(Business Recorder, 2013)

In 2014 gross sales of the company also increased by 9.3% over the last year. It is due to three reasons

which is company improved sales mix through higher marginal local market, higher cement prices and cost

efficiencies going forward that increase the gross sales of the company in 2014. (Pakistan Press

International, 2014)

Net Turnover

Net turnover of the company increased year by year. From 2012 to 2014 it reaches to Rs. 26.542 billion

and proportionally increased by 42.9% in three years.

In FY-2012 net turnover of the DG khan cement limited increased by 23.5% over the last year. Reason

behind this the company sign some mega projects that boost net turnover of the company in 2012. Bhasha

Dam was the main project of the company that increased their net turnover.

In FY-2013 net turnover also increased by 8.6% over the last year. It is due to minor decreased in excise

duty of the company. (Business Recorder, 2013)

And in FY-2014 net turnover also increased by 6.5% over the last year. It reaches to Rs. 26.54 billion in

spite of a decline in off take to 3.96 million tons during FY-2014 as local cement prices increased by 12%

year on year to Rs 506 for a 50-kg Bag. (News Hub, 2014)

20142013

2012

26,296,48822,733,691

20,258,088

6,048,5086,866,192

7,146,523

26,542,50924,915,924

22,949,853

SalesLocal Exports Net sales

Attock Cement Limited


Local Sales Rs. (000) Exports Rs.(000) Gross Turnover Rs.(000)

Net Turnover Rs. (000)

FY14 11,330,511 3,777,874 15,108,385 12,547,251

FY13 11,261,612 2,566,000 13,827,612 11,507,706

FY12 10,038,613 2,647,024 12,685,637 10,638,021

Local sales

A competitor of DG khan cement limited the Attock cement limited has also increased their local sales

during 2012 to 2014. The company increased its local sales by 36.3% over the three years.

In FY-2012 local sales was Rs. 10,038 million. Increased in local sales due to local cement retention prices

going up, lending some price based support to manufacturers. (Business Recorder, 2012)

In FY-2013 company’s local sales also increased by 12.2% over the last year. After the inclination of local

sales net profit of the company also increased to Rs. 2.136 billion in FY13 against Rs. 1.436 billion in FY14.

So the company announced that to invest $25 million in a new grinding cement unit in Basra, Iraq to

increase its sales. (World Cement, 2013)

In FY-2014 company slightly increased its local sales by 0.6% over the last year. It is due to poor law and

order situation in Karachi and also It is due to Attock cement limited investing $25 million in new projects

therefor the local sales of the company decreased. (Business Recorder, 2014)

Exports

Attock cement limited which is Competitor of DG khan cement limited has no grip on its exports.

Collectively exports increased in 2012 to 2014 to 54.5%.

In FY-2012 exports of the company increased by 8.2% over the last year. After the reconstruction of the

areas which is affected by flood in 2010 the company meets the local demand successfully and then

exports their cement to other countries which rise their exports over the last year. (Business Recorder,

2012)

In FY-2013 the export volume of the company decreased by -3.1% over the last year. It is due to lower

cement prices in international market therefor the exports of the company decreased over the last year.


In FY-2014 the exports of the Attock cement limited boost up by 47.2% over the last year. It is due to local

dispatches declined by 5.3% in the south, while exports from the region grew by a significant 20% during

FY-2014. (Business Recorder, 2014)

Gross TurnoverGross turnover of the company increased year by year. It reaches to Rs. 15.108 billion in 2014. And in

2012 to 2014 it was increased by 40.5% over the three years.

In FY-2012 gross turnover of the company increased by 17.9% over the last year. It is due to stable coal

prices, better PSDP allocation and continuous enhancements in infrastructure projects that boost the gross

sales of the company. (Business Recorder, 2012)

Gross sales also increased by 9.0% in FY-2013 over the last year. It reaches to Rs. 13.827 billion in 2013.

It is due to sales mix managed in such a way to achieve maximum sales revenue while capacity

maintaining utilization of 100%. (Business Recorder, 2013)

Attock cement limited which competitor of DG khan cement limited reaches its gross sales in 2014 to Rs.

15.108 billion. It is increased by 9.3% over the last year. It is due to increase prices of cement by 6% and

higher volume sales, which contribute to Rs 328 million of additional company revenue. (Business

Recorder, 2014)

Net TurnoverAttock cement limited competitor of DG khan cement limited increase their net turnover up to Rs. 12.547

billion in 2014 which is too less than its competitor.

In FY-2012 Attock cement limited increase their net turnover by 24.4% over the previous year. It is due to

when the country hit by the great flood in 2010 than in 2012 cement prices too high due to maximum

demand of cement in flood affected areas which therefore increase their net turnover over the last year.


In FY-2013 Company increase their net turnover by 8.2% over the previous year. It is due to local cement

prices much higher that boost their net turnover to Rs. 11.507 billion over the last year. (Tribune, 2013)

The company also raised its net turnover in FY-2014 by 9% over the previous year. Reason behind to

increase their net turnover the company too increased their local and export sales, which increased their

net turnover to Rs. 12.547 billion. (Tribune, 2014)

20142013

2011

11,330,51111,261,612

10,038,613

3,777,8742,566,000

2,647,024

12,547,251

11,507,706

10,638,021

SalesLocal Exports Net sales

Gross Profit Margin

Table 2

Gross Profit Margin (%)

FY14 FY13 FY12


34.88% 37.43% 32.71%


29.52% 30.72% 27.70%

DG Khan Cement

Gross profit margin of DG khan cement limited increased year by year from 2011 to 2013 but there is

slightly decreased in gross profit margin in FY-2014.

In FY-2012 gross profit margin of the company rise by 71.2% over the last year. Higher growth in gross

profit margin was driven by the cement bag prices higher by 25% over the Rs.339 to Rs. 425 in the same

period that was boosted up the gross profit margin of the company. (The Nation, 2012)

In FY-2013 Company’s gross profit also increased by 24.2% over the last year. It is due to the expected

cost of sales and lower average retention prices dragged the gross profit margin down to 24.2% in 2013

against 71.2% in the same period of last year. (Dawn, 2014)

In FY-2014 DG khan cement decreased its gross profit margin by -0.7% over the last year. DG khan

cement limited has a gross profit margin in 2014 Rs. 9.257 billion against the Rs. 9.326 billion in 2013.

Decrease in gross profit margin of DG Khan is due to rise higher in power tariff that reduced their gross

profit margin in 2014. (Dawn, 2014)

Attock cement limited

Attock cement limited which is a competitor of DG khan cement limited has raised their gross profit margin

year by year. It reaches to Rs. 3.703 billion over the previous year.

In FY-2012 Company increase their gross profit margin of 70.3% over the last year. It is due to the

company cost of sales gone down decreased by 82% to 74% against the last year. (Business Recorder,

2012)

In FY-2013 company increased their gross profit margin by 20% over the last year. It reaches to Rs. 3.534

billion against Rs. 2.946 billion over the last year. It is due to decline in coal prices from USD 106 per ton to

99 per ton also contribute toward low production cost that leads its gross profit margin high. (Business

Recorder, 2013)

In FY-2014 company also increased their gross profit margin to Rs. 3.703 billion against the Rs. 3.534

billion over the last year. It is due to increase the sale price of the cement in the country that boosts their

sales in 2014 and also increases their gross profit margin in 2014. (The News, 2014)

2014 2013 20120

5

10

15

20

25

30

35

40

DG Khan

Attock Cement

DG KhanAttock Cement

Net Profit Margin

Net Profit Margin (%)

FY14 FY13 FY12


22.48% 22.08% 17.90%


16.05% 18.56% 13.50%

DG Khan Cement

DG khan cement limited boosts their net profit up to 3389.4% in 2012 to 2014. It reaches to Rs. 5.965

billion against Rs. 170 million from 2012 to 2014.

In FY-2012 company increased their net profit margin by 2302.9% over the last year. It is due to company’s

cement price high due to extraordinary demand created of cement after the great flood affected in the

country. So that swelled the net profit margin of the company to Rs. 4.108 billion against Rs. 170 million

from the previous year. (Tribune, 2012)

In FY-2013 increasing trend also stable of net profit margin of DG khan cement limited. The company

increased their net profit margin by 33.9% over the last year. It is reported that net income of Rs. 5.502

billion for FY-2013, compared Rs. 4.108 billion in 2012. It is due to increase in cement prices and increase

in other income of the company in 2013. (News Today, 2014)

In FY-2014 company also increased their net profit by 8.4% over the previous year. It reaches to Rs. 8.460

billion in 2014 as compared to 2013 it was Rs. 8.090 billion. It is due to cement prices high and also Timely

repayment of debt resulted reduced finance cost and improved other income resulted growth in net profit

margin of the company. (Business Recorder, 2014)

Attock cement

The net profit of the company which is a competitor of the DG khan cement limited have also increased

trend in their net profit since 2011 but in 2014 net profit of the company slightly decreased by -5.7% over

the previous year.

In FY-2012 company’s net profit increased by 109.9% over the last year. This shows the strong position of

the company. The main reason behind this scenario was that the finance cost decreased by -52.3% over

the last year that why the net profit of the company increased.

In the FY-2013 net profit of the company also increased by 48.7% over the past year. It is due to increase

in local demand. It reaches to 25 million tons and also company meets the 8 million tons of foreign demand

so the company’s net profit increased in 2013. (Business Recorder, 2013)

In FY-2014 net profit of the company slightly decreased by -5.7% over the last year. It is due to increase in

finance cost and also increase the tax therefor that creates the slight decrease in net profit margin of the

company.

Category 1 Category 2 Category 30

5

10

15

20

25

DGK

ATTock

DGKATTock

Current Ratio

Current Ratio (times)

FY14 FY13 FY12


5 3 2


3 3 3

DG Khan Cement Limited:

The current ratio of the company shows the stronger liquidity position of the company. DG Khan increased

their current ratio year by year.

In FY-2012 current ratio of the company increased by 13.8% over the previous year. It is due to current

assets of the company increased by 0.8% over the previous year and the liabilities of the company

decreased by -11.5% over the last year that increased the current ratio of the company.

In FY-2013 current ratio of the company also increased by 69.6% over the last year. It is due to the

company making long term investment in projects that make highly return to the company that step

increased the assets of the company, on the other hand company also decreased their liabilities by -16.9%

over the last year that result the current ratio of the company increased.

The company boosts their current ratio of 93.4% in FY-2014 over the previous year. This shows the strong

liquidity position of the company. It is due to DG khan cement limited increased their assets to Rs. 32.068

billion as compared to previous year it was Rs. 25.983 billion. In assets DG khan makes huge investments

in highly returns projects and also make a trade of the stock that increase their assets and also DG Khan

decreased their liabilities also which shows the company decreased their liabilities to Rs. 5.940 billion as

compared to Rs. 9.307 billion in previous year. That increased the liquidity position of the company.

Attock Cement Limited:

On the other hand Attock cement limited which is a competitor of DG khan cement limited has no much

strong liquidity position.

In FY-2012 company increased their current ratio by 48.7% over the previous year. It is due to the company

increase their current assets. In current assets company increase loan and advances over the previous

year. And also slightly reduced their current liabilities that increase the current ratio of the company.

In FY-2013 current ratio of the company remain the same over the last year. But the company makes 37%

increased their current assets and also increased their current liabilities 25.5% over the last year. This

effect makes the current position of the company remain the same over the previous year.

A current ratio of Attock cement limited in 2014 remains the same since 2012. It is due to the company

makes no additional investment that increased their assets so the company remain same position since

2012 to 2014.

Attock cement limited which is a competitor of DG khan cement limited have less liquidity position in the

market as compared to the same period with DG khan cement limited.

2014 2013 20120

0.5

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3.5

4

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DGK

ATTOCK

DGK ATTOCK

Efficiency Ratios



FY14 FY13 FY12

Debtors Collection Period (days)

3 4 6

Creditors Payment period (days)

50 51 44

Stock Turnover (days) 114 127 112

The number of receivable days shown better position of the company because reports say that the

company collection days decreased year by year.

In the FY-2012 collection period was 6 days of the company. It is because the company makes Rs. 23.473

billion sales in the year. In FY-2013 company’s collection periods decreased by -29.9% over the last year

and reaches to 4 days from 6 days. As in FY-2014 the collection period also decreased by -29.8% over the

last year. And reaches to 3 days 1 day less than the previous day. It shows the company has managed

efficiently their debtors that show the better position of the company.

The payment period of the company reaches 50 days in 2014 from 44 days in 2012. Hence the company

makes high sales and increased their sales year by year, but the company not efficient to pay their liabilities

timely so that’s why payment period increased from 44 days to 50 days in 2012 to 2014.

On the other hand stock turnover increased by 15 days fr0m 112 days in 2012 to 127 days in 2013. To

increase the stock turnover days it is due to increase in local sales, but in that period the export decreased

therefor the stock turnover days go too increased. But in 2014 stock turnover days decreased by -10.3%

over the last year this indicates that the company has efficiently managed their stock turnover.

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140

Debtors day

payables day

Inventory Days

Debtors daypayables dayInventory Days


Attock Cement Limited FY14 FY13 FY12

Debtors Collection Period (days)

8 11 7

Creditors Payment period (days)

83 74 57

Stock Turnover (days) 22 26 26

Attock cement limited has debtor’s collection periods increased by 5 days from 2 to 7 days in 2012. And

also increased by 4 days to 11 days in 2013. It is due to the company does not manage its debtors

efficiently therefor the collection period increased. In FY-2014 collection periods reduced by 3 days and

reaches to 8 days.

As of the payment period of the company increased year by year. It reaches to 83 days in 2014 as

compared to previous year it was 74 days. This shows that the company not efficiently pays off their

current liabilities in time.

As for the stock turnover days it is reduced by 22 days from previous days that show the better position

of the company.

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90

Debtors days

Payables days

inventory days

Debtors daysPayables daysinventory days

Earnings per Share

EPS (Rs) FY14 FY13 FY12


14 13 9


18 21 17

DG Khan Cement

Superb growth has been shown in EPS of the company over the three year period from FY12 to FY14. In

FY12 it increased by 1987% over the previous year it is due to company’s net profit reaches to Rs. 4.108

billion in 2014 against Rs. 170 million in 2013.

In FY13 company also increased their EPS by 33.9% over the previous year. It was due to company’s net

sales increased by 8.6% over the last year. This shows the excellent performance of the company.

In FY14 DG khan cement limited also increased their EPS by 8.4% over the previous year. In that period

company raised their net profit, therefore EPS of the company also increased. (Dawn, 2014)

Attock Cement

The company’s report shows that company increased their EPS since FY12 to FY14. In FY12 it increased

by 109.9% over the previous year, it’s due to company raised their net profit by 109% over the previous

year. In FY13 company’s EPS also boost up by 29.3% against the previous year. In FY14 company’s EPS

declined by -18% over the previous year because company’s net profit also decreased by 5.7% over the

last year.

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DGK

Attock

DGK

Attock

Return on Capital Employed

ROCE Ratio (%) FY14 FY13 FY12


13 15 14


27.5 30 27

DG Khan Cement

In FY12 Company’s ROCE increased by 102% over the last year. It is due to company increased their

capital employed by 6.7% from the previous year and also the cause behind this inclination was company’s

sales were increasing and cost of sale to sale ratio has declining trend as the company has installed their

own WHRS. In FY13 company also increased their ROCE ration by 2.9% from the previous year. The

company continuously has increased trend in ROCE but in FY14 company decreased their ROCE by -

15.8% over the last year it is due to company decreased their capital employed.

Attock cement

A competitor of DG Khan has also increased their ROCE by 62.6% over the last year. It is due to company

capital employed increased to Rs. 7.566 billion against Rs. 6.364 billion. Also in that period company’s

cement price high and sales tax decline that increased their ROCE. In FY13 company also increased their

ROCE by 10.2% over the previous year, but in FY14 company decreased their ROCE by -7.8% over the

previous year. It decreases due to company their net profit to Rs. 2.014 billion from Rs. 2.136 billion.

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DGK

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DGKATTOCK

Business AnalysisSWOT ANALYSIS

Strengths Weaknesses

Dg khan cement buys 100% shares of Lafarge that boost their local as well international sales. (The Good News, 2014)

Dg khan cement is the second largest cement company in Pakistan their production capacity of 14,000 tons per day.(Business Recorder, 2013)

Dg khan cement install 30MW pulverized coal fired captive power plant in DG Khan to increase their other income. (Dawn, 2014)

DG Khan has lowered its dependence on

gas for its power generation; the company

already installed a 10.4 MW waste Heat

Recovery at DG Khan.

DG khan cement received an outstanding achievement award for production of over 2.281 million tons with capacity utilization of 104% in the year. (Mark The Truth, 2011)

Dg khan cement limited has set a world record by producing highest 2.281 million tons of clinker. (The News, 2011)

Dg khan cement increased their exports by 5% for every year since its birth. (Business Recorder, 2013)

Local cement demand of the company high,

but export sales diminished since FY12 due

to high price of cement in international

market because of devaluation of the home

currency.

Units of production are located in those

areas where the transportation cost of the

Dg khan cement limited higher.

The company has much cash in hand and

cast at the bank, but company not invests

this cash in highly generated projects. (Daily

Times, 2014)

Opportunities Threats

After the great flood affected by the areas it

is a great opportunity for DG khan cement

to meet the demand of the cement in those

areas.

Recently motorway project approved by the

Government that creates a huge demand of

cement in the cement industry.

Construction of Dasu Dam also creates huge demand of cement it is a great opportunity for the cement industry to meet the demand for the project. (Global Cement, 2014)

The company has threat from lucky cement

limited that have 25,000 tons per day

production capacity against the 14,000 tons

per day.

Dg khan cement limited and also the entire

cement industry has the security threat.

(Dawn, 2014)

Federal excise duty is expected to be

doubled on cement industry that

automatically increased the cement prices

in the country and also outside the country.

(The Nation, 2013)

Devaluation of Pakistan rupee that increase

the price of coal in international markets

that also increased cement price in the

country. (The Nation, 2013)

PORTER’S FIVE FORCES

Threat of New Entrants

Threat of new entrant for dg khan cement in high due to higher profitability and an increasing demand

forecast for the next two decades have enticed many new players enter the cement industry. The industry

is set to see an increase in capacity, both from the existing players as well as the new players. This

increase in capacity will meet the rising demand and will not result in the utilization rates falling down.

Therefor Dg khan cement has highest threat of the new entrance.

Bargaining Power of Suppliers

The bargaining power of suppliers for DG khan cement limited are very less because of the reason that

material rates are issued by Govt. and every supplier has to maintain that same rate. Pakistan also has a

huge amount of raw material available which is used in cement industry and also supplier did not want to

lose their major buyers so that’s why the bargaining power of suppliers is very less for Dg khan cement

limited.

Bargaining Power of Buyers

The bargaining power of buyers also low in cement industry because buyers are not in a position to

negotiate with their suppliers due to high demand of cement in Pakistan and also in international market.

Due to the high demand of cement, construction companies also did not afford any loss due to the

interruption of cement supply, so the buyer did not negotiate with the supplier and accept the prices and

terms and conditions by the cement industry.

Threat of substitutes

For DG khan cement limited, threat of substitutes is not high because Pakistan is an emerging economy

that does not afford substitutes other than the cement. There is many substitutes are available such as

wood, steel, aluminium, glass and fiber glass. These substitutes price are much higher and does not

provide the strength against the cement therefor threat of substitutes is less for the DG khan cement

limited.

Rivalry among Existing Players

DG khan cement limited have many competitors such as Lucky cement limited, Attock cement limited,

Pioneer cement limited and Askari cement limited. To boost their revenue the cement producing companies

developed competition among each other to meet the high demand of the market. And the companies not

in a position to increase their cement price in the market to increase their revenue because the prices of the

cement under the Govt. control. Therefor companies due to high competition compete their competitors by

establishing more markets.

CONCLUSIONDG Khan Cement Company Limited is amongst largest cement manufacturers of Pakistan with a

production capacity of 14,000 tons per day (4.200 million tons/annum). The Company has a countrywide

distribution network, with the second largest market share in the industry. In an effort to embrace

environmentally acceptable technology, the Company has also undertaken projects such as Waste Heat

Recovery Plant Project and alternative fuel projects. DGKCC production processes are environment

friendly and comply with the World Bank's environmental standards. It has been certified for "Environment

Management System" ISO 14001 by Quality Assurance Services, Australia. The company was also

certified for ISO-9002 Quality Management System) in 1998. By achieving this landmark, DG Khan Cement

became the first and only cement factory in Pakistan certified for both ISO 9002 & ISO 14001.

In the income statement of the company shows that company has an excellent performance done since its

birth. Sales, gross profit, net profit show an increasing trend from its previous year. Also ratios of the

company increased year by year.

RECOMMENDATIONS DG khan cement limited should enhance their production capacity so as to meet the local as well

as international demand.

The company should install its production plants in those areas where the transport cost less bear

by the company.

Because the company has much excess of cash so it must invest in the company in those projects

where the returns are so high.

Research Analysis Project

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