LUCKY CEMENT

LIMITED

007 Annual Report

2010
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REPORT ON:
ANALYSIS OF FINANCIAL
STATEMENT
(LUCKY CEMENT LTD)

PREPARED BY:
IMRAN ALI FA10-MB-0188

SUBMITTED TO:
ZARTASHIA KIRAN IMRAN

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 ACKNOWLEGEMENT

Perfection was the watchword we had in our mind when we started working
on this project. However people generally agree that man can only strive to
approach excellence but never actually achieve it. Exquisite perfection is
rather a trait of God, and by his grace, we have tried very hard to make this
report an excellent one.

I would like to thank Ms. Zartashia Kiran Imran for her assistance,
guidance & instructions; she gave to me in the friendliest manner through
out this report, which could not have been successful without her dedicated
attention & guidance.

I tried out my best to collect appropriate information for the completion of

this report. I am grateful to my teacher for providing me such a practical
oriented chance to explore new dimensions and enable me to understand the
latest world business situations.

Once again, I am thankful to all the people who have been involved in the
completion of this report directly or indirectly

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LUCKY CEMENT LIMITED

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The Vision
We envision being the leader of the cement industry by
identifying and capitalizing on new market opportunities,
meeting expectations of the stakeholders, contributing
towards industrial progress and sustainable future, while
being responsible corporate citizens.

The Mission
Our mission is to expand our business network by
forming strategic alliances in the global market. We
endeavor to equip our business with the latest technology to
produce quality cement while conserving energy and
reducing CO2 emission to reinforce eco-friendly business
practices; thus meeting international standards.

The Strategies
At Lucky Cement, we work together to achieve the following
strategies:

Market Penetration
We believe in depth and width expansion, and have
therefore broadened our horizons to do business globally.

Supporting Diversification
Diversity is our "strength". From producing a variety of
cement brands, providing a range of logistics and transportation
solutions and catering to a variety of markets globally, we have
achieved it all.

Technological Advances

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 At Lucky Cement, we keep ourselves in line with
technological advances to further improve cement quality and
production methods to achieve optimum efficiency.

Human Resource Significance

We value our Human Resources for providing a framework
that serves as a guiding force for the organization as a whole.

Production Edges
We employ the latest production techniques and the finest
quality of raw materials to ensure optimum efficiency at all
stages of production. The efficiency and the effectiveness of our
production method(s) help us compete in the market and meet
the growing demands of our customers.

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LUCKY CEMENT LIMITED
Core Values

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 LUCKY CEMENT LIMITED

CEMENT INDUSTRY
Introduction:
Cement is a key infrastructure industry. It has been
decontrolled from price and distribution on 1st March, 1989 and
delicensed on 25th July, 1991. However, the performance of
the industry and prices of cement are monitored regularly. The
constraints faced by the industry are reviewed in the
Infrastructure Coordination Committee meetings held in the
Cabinet Secretariat under the Chairmanship of Secretary
(Coordination). Its performance is also reviewed by the Cabinet
Committee on Infrastructure.

Capacity and Production:

The Pakistan Cement Industry was under pressure due to
over capacity. The demand in domestic market has shown
positive growth of 16.6%. The industry sold the highest ever
cement in the history of the country with 23.53 million tons of
cement dispatches.
The growth in domestic demand is due to private sector
spending and also on back of the recovery of rural economy due
to higher agriculture support prices offered by the government
of Pakistan. Having said that, the prices still remained very
depressed during this financial year.

Exports:
However the export of cement by sea will be under
pressure due to increase in cement capacity in the region. On
positive note, the demand in Afghanistan has increased and
hopefully in the coming financial year, it may touch 5.0 million

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tons. The industry is still facing challenges due to over capacity
which will keep the domestic prices under pressure.

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LUCKY CEMENT LIMITED

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LUCKY CEMENT LIMITED

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 LUCKY CEMENT LIMITED

Comparison of both EPS

We can see the situation of EPS of both years in 2009 and 2010. Now we can make
out the difference of both types of EPS. When we observe the EPS in 2009 it was 14.21 as
compared in 2010 it was 9.70 it is due to decrease in sales of about 6.92% as compare to
2009 sales on the other hand the increase in expenses also decrease the net profit and
ultimately decrease the EPS of 2010.
This EPS represent the true figure and shape of the company where the company
stands right now.

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 LUCKY CEMENT LIMITED
(Amount in ‘000’)

LIDUIDITY RATIO
Current Ratio:
= Current Assets
Current Liabilities

Year 2010 = 6,871,464 = 0.71

9,641,691

Year 2009 = 7,857,942 = 0.86

9,098,678

INTERPRETATION:-
Current ratio shows the relationship between current assets
and current liabilities. In other words it shows how many current
assets a firm has in order to cover its current liabilities. Current
Ratio of 2009 is well due to falling in current liabilities and
decrease in current assets and it shows 0.86 : 1 as compare to
the current ratio in 2010 which is showing a decreasing trend
and shows 0.71 : 1 which is not as good sign for the company.

Quick Ratio (Asid Test Ratio):

= Current Assets - Stock
Current Liabilities

Year 2010 = 6,871,464 - 60 8,813 = 0.65

9,641,691

Year 2009 = 7,857,942 - 1,196,608 = 0.73

9,098,678

INTERPRETATION:-
Quick ratio is same like current ration but its shows the
relationship between current assets after excluding stocks and
current liabilities. In other words it shows how many more

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liquidate assets a firm has in order to cover its current liabilities.
Quick Ratio of 2009 is well due to falling in current liabilities and
decrease in current assets and it shows 0.73 : 1 as compare to
the current ratio in 2010 which is showing a decreasing trend
and shows 0.65 : 1 which is not as good sign for the company.

PROFITABILITY RATIO
Gross Profit Margin:
= Gross Profit x 100
Sales
Year 2010 = 7,978,861 x 100 = 32.56%
24,508,793

Year 2009 = 9,811,266 x 100 = 37.26%

26,330,404

INTERPRETATION:-
Gross profit Margin ratio shows the relationship between
gross profit Margin and sales. In other words how much amount
firms receive excess to cost of goods sold. Gross profit Margin of
2009 is very well due to falling of cost of good sold of “LUCKY
CEMENT LIMITED” was receiving 37.26% gross profit Margin
which was very sufficient, because in 2010 “LUCKY CEMENT
LIMITED” is receiving only 32.56% so due to lower or lowest of
gross profit Margin we can say this is worst for entire company.

Operating Profit Margin:

= Operating Profit x 100
Sales
Year 2010 = 4,242,570 x 100 = 17.31%
24,508,793

Year 2009 = 7,217,493 x 100 = 27.41%

26,330,404

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INTERPRETATION:-
Rate of Operating profit explain that how much you obtain
after deducting distribution and administration activities of firm.
Operating profit of “LUCKY CEMENT LIMITED” in 2009 is quiet
better as compare to 2010, so rate of operating profit in 2010 is
17.31%, but in 2009 situation was very full resonance as
compare to 2010.

Net Profit Margin:

= Net Profit x 100
Sales
Year 2010 = 3,137,457 x 100 = 12.80%
24,508,793

Year 2009 = 4,596,549 x 100 = 17.46%

26,330,404
INTERPRETATION:-
Rate of net profit explain that how much you obtain after
competition of all activities of firm. Net profit shows the real
growth and performance of “LUCKY CEMENT LIMITED”, because
stake holders are interested in company’s profit. So “LUCKY
CEMENT LIMITED” situation in 2009 is better as compare to
2010, so rate of net profit in 2010 is 12.80%, but in 2009
situation was very much better as compare to 2010.

Return on Total Assets:

= Net Profit x 100
Total Assets
Year 2010 = 3,137,457 x 100 = 8.19%
38,310,244

Year 2009 = 4,596,549 x 100 = 11.97%

38,392,362
INTERPRETATION:-
Rate of return and total asset shows that how much income
“LUCKY CEMENT LIMITED” firms earns with reference to total

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assets. Return on total assets can be calculated by the help of
net income so net income of 2009 was good as compare to 2010
so return on total assets was seem to be better as compare to
2010. So return on total assets is tending to be worst as
compare to 2009.

Return on Common Equity:

= Net Profit x 100
Total Shareholder’s Equity

Year 2010 = 3,137,457 x 100 = 12.50%

25,095,929

Year 2009 = 4,596,549 x 100 = 19.77%

23,251,972
INTERPRETATION:-
Rate of return on Common equity shows that how much net
income receives with reference to share holder’s equity. In 2009
situation of return on share holder’s equity was very well,
because it was positive and then it has DIFFERENCE as compare
to 2009. But now in 2010 it is slightly different condition in
current year due to significant changes in company’s policies
due to various reasons. Company profit ratio is fall in this year.

ACTIVITY RATIO
Inventory Turnover:
= Cost of Goods Sold
Inventory
Year 2010 = 11,147,366 = 18.31 times
608,813

Year 2009 = 20,737,216 = 17.33 times

1,196,608

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INTERPRETATION:-
Inventory turnover ratio shows that how many times the
stock is used through the cost of goods sold and higher the
consumption shows higher profitability. Inventory Turnover of
2010 is very well and was 18.31 times as compare to 17.33
times in 2009.

Total Assets Turnover:

= Sales
Total Assets
Year 2010 = 24,508,793 = 63.97%
38,310,244

Year 2009 = 26,330,404 = 68.58%

38,392,362

INTERPRETATION:-
Rate of return and total asset shows that how much income
“LUCKY CEMENT LIMITED” firms earns with reference to total
assets. Return on total assets can be calculated by the help of
net income so net income of 2009 was good as compare to 2010
so return on total assets was seem to be better as compare to
2010. So return on total assets is tending to be worst as
compare to 2009.

Payable Days:
= Accounts Payable
Annual Purchase / 365
Year 2010 = 63.16%

Year 2009 = 68.79%

INTERPRETATION:-

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 Payable days ratio shows the number of day in which the
creditors were paid by the company. As the number of days
increases shows the improvement in cash cycle of the company.

DEBT RATIO
Debt ratio:
= Total Liabilities
Total Assets
Year 2010 = 0.34

Year 2009 = 0.39

Time Interest Earned Ratio:

= Earning before interest & Tax
Interest
Year 2010 = 7.45 times

Year 2009 = 5.83 times

Debt to Equity Ratio:

= Total Debts.
Total Equity

2010 = 0.53 times

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2009 = 0.65 times

MARKET RATIO
P/E Ratio:
= Market Price per Share
EPS
Year 2010 = 6.40

Year 2009 = 4.12

Cash Dividend Per Share Ratio:

= Dividend
Total Shareholder’s Equity
Year 2010 = 4.00

Year 2009 = 4.00

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 LUCKY CEMENT LIMITED

POTENTIAL EXPENSES IN 2010 AS COMPARED TO

2009:
DISTRIBUTION COST 2010 2009 Difference
(Rupees in ‘000’)
Salaries and benefits 42,490 35,765 6,725
Communication 3,499 3,250 249
Logistic and related charges 3,233,415 2,267,954 965,461
Loading and others 28,472 29,285 -813
Travelling and conveyance 2,518 1,340 1,178
Printing and stationery 812 771 41
Insurance 10,897 10,322 575
Rent, rates and taxes 6,537 6,361 176
Utilities 1,298 822 476
Vehicles running and maintenance 7,002 5,951 1,051
Repairs and maintenance 8,597 549 8,048
Fees, subscription and periodicals 606 107 499
Advertisement and sales promotion 9,713 4,465 5,248
Entertainment 580 465 115
Depreciation 73,570 58,952 14,618
Others 3,041 1,478 1,563
TOTAL DISTRIBUTION COST 3,433,047 2,427,837 1,005,210

ADMINISTRATIVE EXPENSES 2010 2009 Difference

(Rupees in ‘000’)
Salaries and benefits 110,914 81,089 29,825
Communication 6,503 6,239 264
Travelling and conveyance 9,353 6,415 2,938
Insurance 1,268 1,311 -43
Rent, rates and taxes 2,298 1,577 721
Vehicles running and maintenance 10,034 8,438 1,596
Printing and stationery 6,731 4,142 2,589
Fees and subscription 7,102 8,214 -1,112
Security services 1,708 1,430 278
Legal and professional 8,638 9,215 -577
Transportation and freight 329 242 87
Utilities 5,542 3,833 1,709
Repairs and maintenance 6,870 8,444 -1,574
Advertisement 1,238 173 1,065
Donations 104,046 6,872 97,174
Auditors' remuneration 1,481 1,112 369
Other auditors' remuneration 5,279 3,852 1,427

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 Depreciation 10,197 11,264 -1,067
Amortization 1,466 - 1,466
Others 2,247 2,074 173
TOTAL ADMINISTRATIVE
EXPENSES 303,244 165,936 137,308

RECOMMENDATION
Our recommendation is company should reduce the spending policy
because particularly in 2010 company spent a lot in these unpaid areas

• Export logistic and other charges

• Travelling and conveyance
• Legal and professional
• Vehicles running and maintenance
• Advertisement and sales promotion
• Printing and stationery
• Repair and maintenance

These are expenses where company has been expenditure a lot which is not
good for company.

• Export logistic expenses are very high as compare to preceding year.

That is not so much encouraging at the right moment.

• Travelling and conveyance are increasing as compare to last year

and company should look after the expenses occurred in this head
should be justifiable and in favor of the company.

• Legal and professional expenses are being paid by company. First

company are not in position to give us profit and company management
involve in certain situation that paying this type of expenses which is only
reduce the profit level in company.

• Vehicles running and maintenance will be increase as the travelling

and conveyance increases but the company should take corrective
actions to control on these costs.

• Advertisement and sales promotion is the essential part of

promoting product like cement. But it is also very shocking for
stockholder of this company that company placed so many amounts on

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 advertising as compare to last year but volume of sales is lower then
2009. Its mean company didn’t use their amount at right time and right
place that’s way this advertising is not performing well for company
future.

• Printing and stationery is also showing increasing trend as compare

to last year it shows that there can be a misuse or wastage while doing
the printing of the office documents and stationary.

Repair and maintenance in distribution costs is getting very high as

compare to preceding year and showing alarming signal to the company.

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LUCKY CEMENT LIMITED

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 RECOMMENDATION FOR LUCKY CEMENT
LTD
Throughout previous years the performance of the organization is good. Its
dynamic year is 2009 as its earning per share and dividend per shares is also
increasing. But in 2010 company assets is increasing as compare to 2009 as
company’s performance was going good in 2009 but in 2010 performance was
quiet worst. I want to recommend some new ideas to be a leading Company in
Pakistan.

Policies of company:-

The company should revise its policy regarding their weak area because some
ratios indicating that company is suffering from the worst condition.

Raw material:-
Company should buy raw material as low as possible to increase its gross
profit.

Current Assets & current liabilities:-

Company should maintain its current assets to paying its current liabilities.

Reduce cost and improve Revenue:-

Company should minimize its product cost to increase its sales for regulating
the product in market.

proper utilization of resources:-

Company should properly utilize its assets to generate more sales.

Finance cost:-
Company should borrow in less interest rate, by this company pay less interest
expense and maintain its cash transaction.

Improve export level:-

Lastly I would like to recommend that the company needs to expand its
operation by new launches and exploring new countries for export.

Control the expenses:-

Company must control the expenses which are biggest and challenging task for
company to reduce it. Because this is significant reason of falling profit
situation of LUCKY CEMENT LTD.

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