Contents

PROJECT OBJECTIVES and Overall Research Approach

Introduction

Reasons for Choosing the Topic

Reasons for Choosing Industry

Reasons for Choosing Company

Reasons for Choosing the Competitor

Information Gathering and Accounting / Business Techniques Used

Sources of Information

Information Gathering:

Limitations of Information Gathering

Ethical Issues Involved in Information gathering Process

Accounting and Business Techniques Used:

Ratio Analysis:

2.5.2 Limitations of Ratio Analysis: 6

2.5.3 SWOT Analysis: 6

2.5.4. Limitations of SWOT Analysis: 6

2.5.5. Porter’s Five Forces 7

2.5.6. Limitations of Porter’s Five Forces: 7

3. Results, Analysis, Conclusions and Recommendations 8

Industry Profile: 8

NESTLE PAKISTAN 8

UNILEVER PAKISTAN 8

3.1. Ratio Analysis: 9

3.1.1. Sales Revenue: 9

3.1.2. Gross Profit Margin: 11

Net Profit Margin: 12

3.1.4. Return on Capital Employed: 13

3.1.5. Current Ratio: 14

3.1.6 Receivable Days: 15

3.1.7. Payable Days: 16

3.1.8. Inventory days: 17

3.1.9. Debt to Equity Ratio: 18

3.1.10. Interest Cover Ratio: 19

3.1.11. Earnings per Share: 20

3.2. Business Analysis: 20

3.2.1. Porter’s Five Forces: 20

3.2.2. SWOT Analysis: 22

3.3. Conclusion: 25

3.4. Recommendations: 26

Cement industry is one the important industries of Pakistan which has a significant
contribution in the economic development of Pakistan. When Pakistan came into existence
it had only four cement plants but presently over twenty cement firms are operating in the
cement industry of Pakistan. (Agha, 2014). The cement industry requires high
infrastructure and favorable conditions for production. Majority of the cement firms in the
country are located in the vicinity of mountainous areas. These areas are highly rich in
the inputs required for the cement production

Journal for Studies in Management and Planning Available at

http://internationaljournalofresearch.org/index.php/JSMaP e-ISSN: 2395-0463 Volume 01
Issue 02 March 2015 Available online: http://internationaljournalofresearch.org/ P a g e | 237
such as clay, iron, gypsum and other minerals. (Manarvi, & Gardezi, 2014). The cement
industry of Pakistan is divided into two broad regions on the basis of their geographical
location which include Northern zone and Southern Zone. The Northern zone covers
over 80% of the total cement share of the country while rest of the cement is produced
in the southern zone. (Manarvi, & Gardezi, 2014). The cement industry of Pakistan has an
oligopolistic market structure where top five companies have controls over 55% of the
market share of cement. While the remaining all companies cover only 45% of market
shares. The total production capacity of the cement industry of Pakistan stood 44.8 million
tons in FY13. The capacity utilization of cement production stood 75% in the same
year. (Nayyar, Zaigham, & Qadeer, 2014). Cement industry of Pakistan is fulfilling the local
demand of cement and also exporting cement to the neighborhood countries like Russia,
Iraq, Sri Lanka, India, Afghanistan and United Arab Emirates. At present, Pakistan is also
exporting cement to some African countries as well. Currently, Pakistan is ranked among
the world's top 10 cement exporting countries. (Na
 Cement industry is progressing at a very fast pace in Pakistan. At the time of inception, there were only
four cement plants in Pakistan with an annual capacity of 300,000 Metric tons. Presently the industry has
grown to 29 units with annual capacity of 45 Million tons.

China's Investment in Infrastructure development of Pakistan (CPEC)

China has agreed to invest 42 billion US $in infrastructure development of Pakistan. The major projects
include roads (Khunjrab - Gawadar Highway - 2,400 KM), (Karachi - Lahore motorway - 1,060 KM), rails,
ports (Gawadar port), Dams (Dassu & Bhasha dam), energy and special economic zones.

CPEC is key important factor which may have positive impact on all sector Pakistan. It can transform
Pakistan into an investment heaven in Asia having more than 200 million population market as well as
economic hub for neighboring countries. Through CPEC, Government may also generate enormous
employment opportunities for its youth. Moreover, Pakistani Government is working on mega projects
including Dassu & Bhasha Dams Khunjrab - Gawadar Highway - 2,400 KM), (Karachi - Lahore motorway
- 1,060 KM) and Gawadar port etc. Cement Industry in Pakistan progressed rapidly in last few decades. At
the time of Independence only 4 units were available whereas this figure is crossing now digit of 29. Cement
Sector provide the raw material for infrastructure of any country. Growth of cement sector is the symbol of
development in country. This is the reason why I selected Cement Sector. in order to evaluate contribution
of cement sector in the development of our country.

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Home »Brief Recordings » MapleLeaf Cement Factory Limited
 BRIE F RE CORDINGS

MapleLeaf Cement Factory Limited

 R EC O R D ER R E PO R T

 SE P 2 6 T H, 2 0 1 9

 O V E R V I EW

In 1956, the West Pakistan Industrial Development Corporation (WPIDC) established MapleLeaf Cement
(PSX: MLCF) with an initial production capacity of 300,000 tons per annum. Later it was merged by the
State Cement Corporation of Pakistan (SCCP) with White Cement Industries Limited (WCIL) which was
formed with a clinker capacity of 15,000 tons per annum. The SCCP also established Pak Cement
Company Limited (PCCL) with a capacity of 180,000 tons per annum and merged all three during the
privatization scheme of the 2000s. The company operates through two production lines for the production
of grey cement and white cement and has over 90 percent of the market share in the latter and about 7
percent in the former based on annual capacity of 3.36 million tons of clinker. During FY19, the company
added a brownfield line with grey clinker production of about 2.4 million tons annually. The plant is located
in Daud Khel, Punjab near the salt range and extraction sites of important minerals like limestone, clay
and sand used in the production process.

MapleLeaf primarily supplies to the northern zone markets of the country, MapleLeaf exports to India,
Afghanistan, Middle East and other African countries.

Shareholdings and investments MapleLeaf is a subsidiary of Kohinoor Textile Mills Limited

(KTML), part of the larger Kohinoor MapleLeaf Group (KMLG) which has businesses in textile, power and
investment sectors.

As part of the Kohinoor Group, MapleLeaf's largest shares (55 percent) were held by its holding company
KTML as at June 2018. The rest of the shares are spread nominally across banks, NBFIs, insurance
companies, mutual funds, joint stock companies and so on. The general public held 27 percent of the
company's shares.
The company extends loan facilities to the holding company for working capital needs of KTML and also
earn a mark-up equal to one percent above either 3-months KIBOR or the average borrowing cost of the
company, whichever is higher.

MapleLeaf also has its own wholly-owned subsidiary called MapleLeaf Power Limited, which generates
40MW of power on imported coal. This captive plant saves the company energy costs which are lower
compared to grid prices.

The company's new expansion was worth Rs 26 billion and took the total capacity of the company to 5.4
million tons per annum also undoubtedly raising market share. The project is financed with 59 percent
debt and the rest equity. The company offered 12.5 percent right issue at Rs 65 per share (including a
premium of Rs 55 per share).

Financial and operational performance If MapleLeaf had a moving target on its back, that
target would be moving up, like its revenues. They have grown even during times of weak demand. The
company's decision to expand was based on its very high utilisation levels that were at their lowest at 79
percent in FY12 and remained mostly above 80 percent through the years.
Demand has been a mix of domestic and exports where when domestic demand was rising, the company
cut down on its export sales and when domestic demand receded, exports were raised. But traditionally,
domestic sales fetch higher prices while in exports, cement companies have to keep prices low to
compete.

Competition has remained limited though specially during years when demand was a plenty. During the
PML-N government term, the economy was in expansion and infrastructure led demand was growing,
partly owing to CPEC projects kicking off. The government had raised spending on development while
overall economic growth led to higher private sector spending, specially in commercial ventures. The
industry embarked on ambitious capacity enhancements and retention prices also improved on the back
of high demand and high capacity utilization. Evidently, both kept growing until FY18 for MapleLeaf.

However, higher costs started to manifest as early as FY17 when coal prices globally jumped up. Coal
being a major raw material for cement manufacturers brought up costs. As a result, margins receded in
FY17 and kept falling up until FY19, only exacerbated in the outgoing year by an unfavorable exchange
rate. Since FY16, per unit cost rose 20 percent against a 3 percent drop in revenue per unit till FY18.

In its annual report for FY18, the company argued that because of the coal fired power plant, it was able
to reduce per ton cost of power and was able to meet input cost price hikes by better negotiations.
Effective inventory management also helped. The company also has a transportation agreement with
Pakistan Railways to bring down inland transport overheads which will last till FY21. It also played a
maximum portion of the expansion related LC. These cushioned the blow that hit the industry on account
of depreciating rupee.
Recent performance and outlook In 9MFY19, clinker production fell by 12 percent while cement
production fell by 16 percent. Domestic demand changed during FY19 completely as the new government
took over office and slowly administered austerity measures including cuts in development spending and
business confidence decreasing. Despite these trends, the company was able to grow revenues by 1
percent.

Also considered the two main markets in the exporting sector- India and Afghanistan- started to become
less receptive to Pakistani cement exports, India nearly shutting down imports due to political tensions. In
the south, cement companies were able to switch to exporting clinker overseas but north players faced
challenges in selling their excess cement to markets. During the first nine months, the company saw
exports to India grow which led to revenue growth, though in the last three months, those high duties
ensured no volumes could be sent cross border.

According to its nine months report, "the company was able to avoid the likely adverse impact on its
profitability due to increase in electricity tariff by NEPRA. [It] relied mainly on its internal power generation
sources to meet its electricity requirements which includes coal fired power plant".

Higher fuel costs, freight and higher average coal prices globally and rupee depreciation led to margin
decline that no contingent measures could help, though captive generation while use of pet coke which is
more cost effective also helped.

In the full year despite efficiency measures to cut down costs and mitigate risks, the company saw
profitability drop by 60 percent year on year. The company also announced it is thinking of floating 85
percent rights shares to improve its debt to equity ratio and inject equity to cover its expansion related
long term debt. The cost of borrowing due to monetary policy tightening is putting considerable pressure
on the company whose finance costs in FY19 grew to 5 percent from 2 percent last year.

The demand outlook is not changing too swiftly as the company enters FY20 since austerity is in full
swing. Though Mapleleaf may grab a great market share due to its expansion. If the Naya Pakistan
Housing construction picks up pace, it may lead to domestic demand recovering though nothing can be
done about the export segment. On the cost side, falling coal prices in the global market and the
company's effective inventory management may help with the margin granted demand does not fall too
much.
Over 50% of the demand for cement is by the builders for multifarious housing projects whereas the rest
comes for infrastructure development. Pakistan, the world’s 14th largest cement producer, has promising
business opportunities in the days to come since the investors from across the world are eyeing Pakistan
for the hitherto untapped opportunities.

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