Pakistan Cement Industry Analysis

LUCKY cementum This report studies LUCKY CEMENT as a target against some separate companies studied as a basis for athe likes of(p) analysis in the pains. halcyon cementum is the largest cementumum manufacturer in Pakistan and its up orgasm expansion in Karachi pull up stakes take its capacitance from 6. 5mntpa to 9mntpa, yet cementing its spot as the market leader. Lucky cementum peculiar(a) was corporal in Pakistan on September 18, 1993 on a lower floor the Companies Ordinance, 1984 (the Ordinance). The sh bes of the corpo ration atomic number 18 quoted on in all the three stock exchanges in Pakistan.The friendship has as well issued GDRs which are listed and traded on the Professional Securities Market of the London Stock Exchange. teleph angiotensin converting enzyme circuit write SECTOR cement industriousness PRODUCTS AND function Lucky cement aims at producing cement to suit e actually user. The following types of cement are easy ORDINARY PORTLAND CEMENT (OPC) run-of-the-mine Portland cement is available in darker timber as well as in swingy shades in Lucky Star with different grease names to suit the fate of users. SULPHATE RESISTANT CEMENT (SRC) sulphate resistant cementums lift out persona is to provide effective and long lasting strength against sulfate attacks and is actually suitable for constructions near sea shores as well as for notifyals linings. It provides very effective protection against alkali attacks. The friendship currentlyproduces atomic number 23 scratchs * Lucky cementum * Lucky Star * Lucky Gold * chairperson * Luckysulphate resistant cement(SRC) CUSTOMERS AND check MARKETS Lucky cementum aims at producing cement to suit every user.At present, it is producing Grey Portland Cement and too sulphate resistant cement. The customers are able to get Portland cement both in dark shade as well as in light shade with different brand names to suit the requirement of user. The Portland cement specificall y make for prefabrication perseverance with a lower setting while is also available. In addition, the correct also produce Slag cement for specific users. DISTRIBUTION carry Dealers, retailers and block representrs are the integral persona of Lucky Cements gross revenue strategy.This strong ne cardinalrk of to a greater extent(prenominal) than 200 dealers, dictated at strategic locations throughout the country, has enabled the troupe to create an impressive dispersion system and access to markets at even the remote parts of the country. pecuniary compose 30-Jun 30-Jun 30-Jun 30-Jun 2008 2009 2010 2011 Restated PKR Reclassified PKR egregious service delimitation 25. 69% 37. 26% 32. 55% 33. 48% EBITDA shore 23. 91% 31. 77% 23. 07% 25. 87% EBIT Margin 18. 14% 27. 41% 17. 31% 19. 83% advantages Income Margin 15. 79% 17. 45% 12. 08% 15. 26% Return on Invested Capital 9. 06% 19. 2% 11. 17% 12. 63% Return On integrity 14. 35% 19. 77% 12. 50% 14. 29% Return On Asset s 7. 82% 11. 97% 8. 18% 9. 63% leverage symmetry 3. 84% 1. 82% 2. 33% 1. 99% Debt to hail smashingization 45. 51% 39. 43% 34. 49% 32. 60% PROFITABILITY The favourableness of the company is quite decent, and shows an upward trend, which can be seen by the financial ratios of the firm. thither was a slight dip in the grade 2010, solely and so profitd considerably in socio-economic class 2011. This was mainly cod to the diminution in the personify of festeringion for Lucky Cement ( shine in the cost of raw materials).The prospects of the company are bright, which are demonstrated by broad(prenominal) net income coast and provide on invested capital ratios. GROWTH profile Lucky Cement is growing at a brisk pace, as the overall cement industry is facing a desirable scenario, which is also demonstrated by naughty hang on rightfulness and return on assets ratio. The company is also paying its creditors covert shown by the drop in leverage and debt to essence capitali sation ratios, which is a positive brand for the firm, and shows that it is growing at a considerable rate. harvest-time ON investitureThe return on investment of Lucky Cement from classs 2008-2011 is above 10% on average, which is quite a decent number, and shows the profit world power of the firms investments. It is 12. 63% in year 2011, and displays a favorable scenario for Lucky Cement. accredit indite The credit profile of the company shows a positive contract as the firms debt to total capitalization ratio declined from 45. 51% in year 2008, to 32. 60% in year 2011. Moreover, the leverage ratio of Lucky Cement has also seen a decline, which shows that the company is paying backward its debts and is maintaining a decent credit profile among its lenders and suppliers.ATTOCK CEMENT Attock Cement Pakistan particular(a) (ACPL) is a public limited company, listed on KSE since 2002. Main business of the company is manufacturing and sales of cement. ACPL, is part of the Phara on Group, which in addition to investment to cement industry has diversified stakes in Pakistan mainly in the oil and drift sector, power and real estate sector. The Attock Cement check was conceived and the company was integrate in 1981, the plant finally commenced commercial outturn on June 1, 1988. The project is a Pak Saudi joint venture and involved initial capital outlay of well-nigh Rs 1. billion with foreign exchange component of around US $ 45 million. This made it one of the largest enterprises in the private sector. Pharaon technical Investment Company Limited holds 84. 06% of total paid up division capital whereas the general public holds a total of 15. 94% shares. BUSINESS pen SECTOR Cement patience PRODUCTS AND SERVICES The main product of the Company is ORDINARY PORTLAND CEMENT (OPC) tho in addition to this ACPL also produces SULPHATE RESISTANT CEMENT (SRC) and PORTLAND BLAST FURNACE CEMENT (PBFC), which sells under the registered brand name of FALCON CEMENT in the market.DISTRIBUTION CHANNELS At ACPL sales and Marketing team focuses on delighting customers through making available quality products at the market place. ACPL has a network of dealers all around Pakistan. ACPL deliver on recognizing the efforts of its dealers through periodic incentive plans based on their sales performance. gross revenue and marketing forces lead in taking initiatives ahead of the competitors. fewer example of ACPL faster first include the exportation of clear out to the UAE and Qatar, along with cement exports to Iraq. FINANCIAL profile 30-Jun 30-Jun 30-Jun 30-Jun 2008 2009 2010 2011 Restated PKR Reclassified PKR Gross Profit Margin 22. 27% 31. 80% 25. 53% 20. 23% EBITDA Margin 24. 22% 28. 56% 20. 12% 14. 69% EBIT Margin 16. 20% 22. 99% 16. 59% 11. 52% terminate Income Margin 8. 69% 17. 54% 13. 25% 8% Return on Invested Capital 14. 06% 32. 07% 19. 23% 13% Return On Equity 12. 31% 31. 24% 18. 84% 11. 80% Return On Assets 7. 41% 21. 41% 14. 40% 8. 83% supplement Ratio 1. 93% 0. 90% 1. 08% 1. 54% Debt to total capitalization 39. 84% 31. 47% 23. 56% 25. 11% PROFITABILITYThe profitability of Attock Cement is quite satisfactory too but not as good as Lucky Cement. The companys gross profit boundary line was very low as canvassd to that of Lucky Cement, however, the firms net profit margin is at par. It can be seen that Attock Cement has more operating expenses as compared to Lucky Cement, which it necessitate to cut and succeed efficiency, to check over with the profitability performance of Lucky Cement. GROWTH compose Attock Cement has a very fluctuating, or rather, a very inconsistent result rate, as can be seen by the return on candour and return on assets ratios.Both the ratios were fairly decent in the year 2008, but thusly both saw a decline in uncoiled years 2009 and 2010, after which they came back to an acceptable level in year 2011. fork up ON INVESTMENT The return on investment of Attock Cement was again very unpredictable, fluctuating drastically between years 2008-2011. It touched(p) a very high 32. 07% in year 2009, but then declined to a level which was similar to that in year 2008. Overall, the return on invested capital was at a satisfactory level as compared to Lucky Cement, which shows the positive nature of the companys investments. CREDIT PROFILEThe credit profile of Attock Cement is a fairly acceptable one, as can be seen by the decreasing leverage and debt to total capitalization ratios. This means that Attock Cement, like Lucky Cement, is also paying back its creditors and suppliers, which will mean that the lenders will be happy to lend money and raw materials to the company, as theyre able to meet their financial obligations effectively. D. G. KHAN CEMENT D. G. caravan inn Cement Company Limited (DGKCC), a unit of Nishat group, is the largest cement-manufacturing unit in Pakistan with a production capableness of 5,500 tons clinker per twenty-four hour period.It h as a countrywide distribution network and its products are preferred on projects of national repute both locally and internationally due to the unparallel and consistent quality. It is list on all the Stock Exchanges of Pakistan. BUSINESS PROFILE SECTOR Cement Industry PRODUCTS AND SERVICES in that location are two types of cement products of D. G. khan * Ordinary Portland Cement * Sulphate Resistant Cement DISTRIBUTION CHANNELS deuce different products are produced at DGKCC namely Ordinary Portland Cement and Sulphate Resistant Cement.These products are marketed through two different brands * DG brand Elephant brand Ordinary Portland Cement * DG brand Sulphate Resistant Cement DG KhanCement Companysupplies cement throughout Pakistan especially in the state of matters of Punjab, Sind and Baluchistan. This extensive distribution is achieved through following regional sales offices * Lahore Regional Sales piazza * Multan Regional Sales Office * Rawalpindi Regional Sales Office * DG Khan Regional Sales Office * Karachi Regional Sales OfficeThese regional sales offices operate in assigned areas and have netweork of dealers in each area to achieve maximum sales in their territories. Moreover, direct sales are also make to institutional Clients for projects. FINANCIAL PROFILE 30-Jun 30-Jun 30-Jun 30-Jun 2008 2009 2010 2011 Restated PKR Reclassified PKR Gross Profit Margin 15. 51% 31. 61% 17. 93% 24. 00% EBITDA Margin 21. 25% 28. 05% 19. 24% 17. 91% EBIT Margin 10. 25% 20. 33% 10. 74% 10. 32% profit Income Margin 0. 24% 2. 46% 1. 61% 0. 95% Return on Invested Capital 2. 9% 8. 55% 3. 77% 3. 93% Return On Equity 0. 01% 2. 12% 1. 01% 0. 60% Return On Assets 0. 06% 1. 03% 0. 56% 0. 36% Leverage Ratio 8. 73% 4. 17% 6. 61% 5. 91% Debt to total capitalization 43. 12% 51. 54% 44. 45% 40. 16% PROFITABILITY The profitability of DG Khan Cement is very low and unsatisfactory as compared to the other two companies in the cement industry, Lucky and Attock Cement Ltd. DG Khan Cement is paying a hefty amount as interest expense, which can be seen by the lower net income margin ratio of the firm, ranging from 0. 4-2. 46%. However, the EBIT and EBITDA margins of DG Khan Cement were quite satisfactory, and at par with the other two companies in the industry. GROWTH PROFILE DG Khan Cement has a very poor harvest rate, evident by the very low return on equity and return on assets ratios. The growth of the company is disadvantageously hampered by the interest expense and the debt the firm has taken. Furthermore, the debt to total capitalization ratio of the company is also very high (higher than the other two companies in the industry), which was more than 50% in year 2009.These are negative implications for the company, and the investors must be unhappy with the performance of the firm. RETURN ON INVESTMENT The return on invested capital for DG Khan Cement was also quite inadequate when comparing with that of Lucky and Attock Cement. It was 2. 39% in year 2008, improverd to 8. 55% in year 2009, after which it colonized on a level between 3-4% in years 2010-2011. This trouble was again due to the high debt ratio and hefty interest payments made by the company, because of which the return on investments were very low as compared to its competitors.CREDIT PROFILE As opposed to its competitors, DG Khan Cement has a real horrific credit profile, as it is maintaining its debt to total capitalization and leverage ratios at a very high level and took up more lend in the year 2009, due to which its profitability is also getting impact adversely, and also its creditors and suppliers will be unwilling to lend DG Khan Cement more in the future, doubting the firms ability to pay them back, as it already has outstanding amounts to be received from the company. FECTO CEMENTEstablished at Sangjani, near Islamabad, the ISO 90012000 certified Fecto Cement Limited is Pakistans first anti-pollution cement manufacturing plant and also the firs t of its kind in South Asia. As one of the most integrated manufacturing units in the country, it has a rated capacity to produce 600,000 tonnes of clinker per annum BUSINESS PROFILE SECTOR Cement Industry DISTRIBUTION CHANNELS It supplies cement throughout Pakistan through a large properly kept up(p) distribution channel consisting of wholesalers, retailers and finally to the customers. FINANCIAL PROFILE 2008 2009 2010 2011 Gross Profit Margin 8. 3% 23. 21% 5. 26% 18. 33% EBITDA Margin -2. 64% 13. 88% -7. 77% 5. 42% EBIT Margin -51. 03% 11. 96% -10. 04% 2. 78% Net Income Margin -3. 53% 9. 49% -7. 17% 1. 98% Return on Invested Capital -4. 67% 13. 74% -8. 02% 2. 47% Return On Equity -13. 80% 33. 80% -30. 20% 8. 93% Return On Assets -51. 50% 15. 21% -9. 33% 2. 95% Leverage Ratio -22. 30% 3. 11% -9. 56% 11. 59% Debt to total capitalization 61. 52% 55% 69. 10% 67% PROFITABILITY The company has annexd its gross profit margin from last year as sales have amend more than th e rise in cost of sales.The net profit margin has improved as compare to the last year as the company was incur loss in 2010. However, it under performed in comparison to the industry. GROWTH PROFILE The growth rate has considerably improved from last year but the overall industry growth is much more than Fecto. The company needfully to annex its growth by retaining more than half of its wages and re-investing it to increase its income in the coming years otherwise it will fall mood crumb the industry and would take a long time to recover. RETURN ON INVESTMENT The return on investment has improved from the precedent year.This implies that company is capitalizing its assets in a more efficient manner with an increase in the accumulated profits. However, it is not at all satisfactory in comparison to its competitors. CREDIT PROFILE The debt to capitalization and leverage ratio is very high which means Fecto has more debt as compare to its equity. It has declined from the preced ing year but it is fairly high with regards to its competitors. This shows a weak financial survey as compared to the industry and poses more default risk for the company. MAPLE CEMENT At the time of privatization in 1992, the capacity of Maple Leaf to produceOrdinary Portland Cement (OPC) was 1000 tones per day (tpd). A second plant of 4000 tpd was commissioned in 1998 and a thirdly plant of 6700 tpd came into production in 2006. It increased the total capacity to 11,700 tpd. The capacity of White Cement has also increased from 100 tpd to 500tpd with the addition of a new plant. This plant also has provisions for doubling the capacity to 1000tpd. now Maple Leaf cement has 9% of the market share of OPC and is a ahead(p) brand in Pakistan with a diverse customer base. It is also the largest manufacturer of White Cement in the country with 80% of market share.BUSINESS PROFILE SECTOR Cement Industry PRODUCTS AND SERVICES The two main products are * Ordinary Portland Cement (OPC) w ith a capacity of 11700 tones per day. * White Cement, its present capacity is 500 tones per day which shall be doubled to 1000 tones per day in near future. FINANCIAL PROFILE 2008 2009 2010 2011 Gross Profit Margin 16. 94% 32. 49% 21. 56% 16. 64% EBITDA Margin 16. 88% 23. 19% 3. 45% 14. 14% EBIT Margin 5. 73% 16. 27% -3. 74% 4. 47% Net Income Margin -8. 65% -6. 45% -18. 96% -13. 53% Return on Invested Capital 1. 72% 9. 1% 1. 69% 1. 75% Return On Equity -8. 08% -14. 63% -50. 32% -20. 37% Return On Assets -2. 58% -3. 83% -9. 90% -5. 25% Leverage Ratio 13. 47% 5. 35% 38. 80% 13. 52% Debt to total capitalization 68. 02% 73. 80% 80. 32% 74. 23% PROFITABILITY The net profit margin increased by 5. 43% and settled at 13. 53% as compare to the prior year which was in negative. This is a good sign as the company is mournful towards profitability as compare to the last two years. However, the company needs to improve its asset management in order to compete with the industryGROWT H PROFILE The growth rate is improving as compare to the previous year which is surely a green sign for the company. From last year the earnings have fairly increased but Maple Leaf is still under performing as compared to the industry earning. A lot of efforts need to be put in for the company to be competing with the industry. RETURN ON INVESTMENT The return on investment is almost the same as compare to the last year. This means that the company needs to increase its sales in order to get a favorable outcome in the coming years. CREDIT PROFILEThe leverage ratio as well as the debt to equity ratio is fairly high as compare to the industry which refers to declining working(a) efficiency and ineffective asset management. Maple needs to decrease its reliance on debt to get a better ratio in the coming years. FAUJI CEMENT A longtime leader in the cement manufacturing industry, Fauji Cement Company, headquartered in Rawalpindi, operates a cement plant at Jhang Bahtar, Tehsil Fateh Jan g, District Attock in the province of Punjab. The Company has a strong and longstanding tradition of service, reliability, and quality that reaches back more than 13 years.Sponsored by Fauji Foundation the Company was incorporated in Rawalpindi in 1992. BUSINESS PROFILE SECTOR Cement Industry PRODUCTS AND SERVICES Ordinary Portland cement is the major product. CUSTOMERS The Company has been set up with the uncomplicated objective of producing and selling ordinary portland cement. The finest quality of cement is available for all types of customers whether for dams, canals, industrial structures, highways, commercial or residential needs using in vogue(p) state of the art dry touch on cement manufacturing process.FINANCIAL PROFILE 2008 2009 2010 2011 Gross Profit Margin 18. 56% 31. 75% 13. 54% 17. 35% EBITDA Margin 18. 56% 17. 12% 32. 61% 21. 35% EBIT Margin 16. 96% 30. 98% 9. 61% 12. 48% Net Income Margin 11. 66% 18. 96% 6. 57% 8. 98% Return on Invested Capital 3. 69% 9. 90% 1. 95% 1. 71% Return On Equity 4. 45% 10. 39% 2. 60% 3. 86% Return On Assets 3. 32% 4. 70% 0. 93% 1. 32% Leverage Ratio 4. 18% 8. 29% 25. 70% 20. 40% Debt to total capitalization 25. 0% 67. 06% 62. 60% 55. 90% PROFITABILITY The profit margin has increased as compare to the previous year but if we match it with past performance of the company it is still at a declining rate. This decrease is also due to the overall decline in the cement industry GROWTH PROFILE The growth rate has improved but it is not much satisfactory when compared with the industry. In order to compete with the dominant companies, Fauji needs to utilize its assets in a more efficient manner RETURN ON INVESTMENTAs compared with 2011 to 2010 it has been in the same position, Fauji needs to increase its growth by retaining more than half of its earnings and re-investing it to increase its income in the coming years otherwise it will fall way behind the industry and would take a long time to recover. CREDIT PR OFILE The credit profile of the company is fairly below the industry. However, the leverage ratio of Thatta Cement has seen a remarkable increase, which shows that the company is paying back its debts and is maintaining a decent credit profile among its lenders and suppliers.THATTA CEMENT Thatta Cement Company Limited was incorporated in 1980 as a public limited company. It was a wholly owned subsidiary of the State Cement Corporation of Pakistan (Pvt. ) Limited. The manufacturing forwardness was commissioned in 1982. The plant based on dry process technology, had a total installed capacity of 1,000 tons per day of clinker. The plant was supplied by M/s. Mitsubishi Corporation, Japan. In the year 2004 the consortium of Mr. Arif Habib and Al-Abbas Group acquired 100% shares of the Company from the Privatization Commission and took over its management control.BUSINESS PROFILE SECTOR Cement Industry PRODUCTS AND SERVICES * Ordinary Portland Cement * Sulphate Resistant Cement * Portlan d onrush Furnace Slag Cement * Ground Granulated Blast Furnace Slag CUSTOMERS AND END MARKETS Some of the valued customers * Lucky Paragon ( name-Mix) * DGDP, FWO (Frontier Works Organization), Siam Group, CGGC, AJK,SAMBU Pakistan, Bahria Icon, Envicrete, Hubcrete and Atlas Ready Mix. FINANCIAL PROFILE 2008 2009 2010 2011 Gross Profit Margin 14. 69% 27. 69% 17. 96% 12. 88% EBITDA Margin 8. 95% 21. 50% 5. 96% 0. 79%EBIT Margin 5. 65% 18. 96% 2. 63% -2. 04% Net Income Margin 2. 79% 11. 36% 0. 06% -4. 02% Return on Invested Capital 39. 15% 84. 50% 36. 40% 36. 28% Return On Equity 6. 92% 26. 45% 0. 12% -10. 64% Return On Assets 2. 94% 0. 07% 14. 37% 3. 75% Leverage Ratio 6. 11% 16. 77% 7. 25% 68. 25% Debt to total capitalization 0. 57% 4. 56% 0. 46% 0. 51% PROFITABILITY The profitability has declined as compare to the previous year due to the performance of the plant was badly affected by frequent interruptions in power supply by HESCO.The substantial loss is also due to th e increase in the production cost such as the purchase price of raw materials and huge increase in fuel and power cost. GROWTH PROFILE The growth rate is declining as compare to the last year mainly due to the increase in COGS and also the company has also invested in the long-term. There is also an increase in the distribution cost which is due to the increase of appreciation in exports related freight and other charges which increased by 11. 61% despite of decrease in sales volume of export by 18. 3%. RETURN ON INVESTMENT The return on invested capital is same as the previous year which is fairly high as compare to the other companies. This means that return from investments is considerably more than the industry average. CREDIT PROFILE The credit profile of the company is not much satisfactory. Moreover, the leverage ratio of Thatta Cement has also seen a decline, which shows that the company is paying back its debts and is maintaining a decent credit profile among its lenders an d suppliers