FAUJI CEMENT COMPANY LIMITED

Company Introduction
A longtime leader in the cement manufacturing industry, Fauji Cement Company, headquartered in Islamabad, operates a cement plant at Jhang Bahtar, Tehsil Fateh Jang, 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 10 years. Sponsored by Fauji Foundation the Company was incorporated in Rawalpindi in 1992. The cement plant operating in the Fauji Cement is one of the most efficient and best maintained in the country and has an annual production capacity of 1.165 million tons of cement. The quality portland cement produced at this plant is the best in the Country and is preferred the construction of highways, bridges, commercial and industrial complexes, residential homes, and a myriad of other structures needing speedy strengthening bond, fundamental to Pakistan's economic vitality and quality of life.

Company History
Fauji Cement Company Limited was sponsored by Fauji Foundation and incorporated as a public limited company on 23 November 1992. It obtained the Certificate of Commencement of Business on 22 May 1993. The company has been setup with primary objective of producing and selling Ordinary Portland Cement. For the purpose of selection of sound process technology, state of the art equipment, civil design and project monitoring, Local and Foreign Consultants were engaged. The company entered into a contract with World renowned cement plant manufacturers M/s F.L. Smith to carry out design , engineering, procurement, manufacturing, delivery, erection, installation, testing and commissioning at site of a new, state of the art, cement plant including all auxiliary and ancillary equipment, complete in all respects for the purpose of manufacturing a minimum of 3,000 tdp clinker and corresponding quantity of Ordinary Portland Cement as per Pakistan/British Standard Specifications. The contract came into force on January, 1, 1994. Physical work on the project started in August 1994. Commissioning activities started in May 1997 generally remained smooth and trouble free, which enabled first batch of clinker production on 26 September 1997 followed by cement production in November 1997. Subsequently in 2005, the Plant Capacity has been raised to 3,700 tons of clinker per day i.e. 3,885 tons of cement per day.

Corporate Profile
Board of Directors
Lt Gen Syed Arif Hasan, HI (M) (Retd) Lt Gen Javed Alam Khan, HI (M) (Retd) Mr. Qaiser Javed Mr. Riyaz H. Bokhari, IFU Brig Arif Rasul SI (M) (Retd) Qureshi, Brig Rahat Khan, SI (M) (Retd) Dr. Nadeem Inayat Brig Liaqat Ali (Retd) Brig Munawar Ahmed Rana (Retd) Brig Shabbir Ahmed (Retd) Chairman Chief Executive Director Director Director Director Director Director Director Secretary

Human Resources Committee

Dr. Nadeem Inayat Mr. Qaiser Javed Brig Liaqat Ali (Retd) Brig Shabbir Ahmed (Retd) President Member Member Secretary

Audit Committee
Mr. Qaiser Javed Mr. Riyaz H. Bokhari Brig Rahat Khan (Retd) Dr. Nadeem Inayat Brig Shabbir Ahmed (Retd) President Member Member Member Secretary

Technical Committee
Brig Rahat Khan (Retd) Brig Arif Rasul Qureshi (Retd) Brig Liaqat Ali (Retd) President Member Member 2

Mir Khawar Saleem, Director (Project)

Secretary

Mission Statement
FCCL while maintaining its leading position in quality of cement and through greater market outreach will build up and improve its value addition with a view to ensuring optimum returns to the shareholders.

Our Vision
To transform FCCL into a role model cement manufacturing Company fully aware of generally accepted principles of corporate social responsibilities engaged in nation building through most efficient utilization of resources and optimally benefiting all stake holders while enjoying public respect and goodwill.

Our Objective
The company has been set up with the primary objective of producing and selling ordinary Portland cement. The finest quality of Cement is available for all type of customers whether for Dams, Canals, industrial structures, highways, commercial or residential needs using latest state of the art dry process Cement manufacturing process.

Our Values
Customers: We listen to our customers and improve our product to meet their present and future needs.

People: Our success depends upon high performing people working together in a safe and healthy work place where diversity, development and team work are valued and recognized.

Accountability: We expect superior performance and results. Our leaders set clear goals and expectations, are supportive and provide and seek frequent feed back.

Citizen Ship: We support the communities where we do business, hold ourselves to the highest standards of ethical conduct and environment responsibility, and communicate openly with FCCL people and the public.

Financial Responsibility: We are prudent and effective in the use of the resources entrusted to us.

Product
Ordinary Portland Cement

Clinker 94-95%

Gypsum 5-6%

28 days strength up to 8000 P.S.I Fineness up to 3100 cm2/gm

Quality Policy

EMPHASIS ON 100% CUSTOMER SATISFACTION. 100 % EFFECTIVE UTILIZATION OF PLANT CAPACITIES. EMPHASIS ON 100% TOP QUALITY HUMAN RESOURCES. EMPHASIS ON 100% QUALITY CULTURE.

Auditors Report to the Members

We have audited the annexed balance sheet of Fauji Cement Company Limited ( the Company) as at 30 June 2007 and the related profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the responsibility of the Companys management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit. We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that: (a) in our opinion, proper books of account have been kept by the Company as required by the Companies Ordinance, 1984; (b) in our opinion (i) the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of account and are further in accordance with accounting polices consistently applied except for the change as indicated in note 2.8 with which we concur; (ii) the expenditure incurred during the year was for the purpose of the Companys business; and (iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the Company; (c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet, profit and loss account, cash flow statement and statement of Fauji Cement Company Limited

Income Statement Analysis

Fauji Cement Co Ltd Summarized Income Statement For the Year Ended 30 June, 2003 To 2007
SALES Less : Sales tax and excise duty NET SALES 2003 Rupees 2,488,992 978,254 1,510,738 75,725 65,299 882 472,772 246,489 245,737 192,730 1,158,610 1,299,634 37,601 1,337,235 -2,104 1,335,131 175,607 2004 Rupees 3,247,262 951,031 2,296,231 115,164 91,289 952 564,591 310,041 243,056 238,876 1,357,516 1,563,969 -21,944 1,542,025 13,381 1,555,406 740,825 2005 Rupees 3,921,363 1,076,219 2,845,144 136,819 87,091 1,378 699,818 332,383 251,981 245,183 1,530,743 1,754,653 16,137 1,770,790 -7,223 1,763,567 1,081,577 2006 Rupees 5,683,456 1,397,317 4,286,139 205,751 142,070 2,562 843,909 393,785 261,566 325,001 1,826,823 2,174,644 -82,047 2,092,597 2,430 2,095,027 2,191,112 2007 Rupees 4,780,036 1,316,753 3,463,283 235,379 133,780 2,213 979,044 431,609 276,244 355,819 2,044,929 2,414,088 -21,550 2,392,538 -20,750 2,371,788 1,091,495

Less: Cost of sales

Raw Material Direct Labor

Factory Overhead
Rent Rate & Taxes Fuel Consumed Power Consumed Depreciation Other F.OH Total F.OH Total Manufacturing Cost Work in Process Cost of goods manufactured Finished goods Cost of Sales

Gross Profit Less Operating Expenses General & Admin Expenses

Salary, wages and benefits Traveling and entertainment Legal and Professional charges Other General and Admin Expenses Total

15,408 2,933 12,117 7,917 38,375 7,992 1,209 1,149 1,737 2,930 15,017 0 122,215

21,817 2,053 1,655 14,542 40,067 12,011 1,144 1,850 2,296 3,116 20,417 0 680,341

21,835 3,320 3,148 13,991 42,294 11,085 1,172 2,590 2,101 4,386 21,334 40,493 977,456

35,663 4,769 3,490 22,706 66,628 21,388 1,112 2,376 2,866 3,953 31,695 94,127 1,998,662

42,439 3,487 2,281 23,095 71,302 20,651 1,353 2,871 2,029 13,741 40,645 58,098 921,450

Selling and Distribution Expenses

Salary, wages and benefits Rent Rate & Taxes Communication Expenses Advertisement and sales Promotion Other selling expenses Total Other Operating Expenses

Operating Profit(EBIT)

Add Other income

Interest on Bank Accounts Interest on Long Term Advances Gain on Disposal of Fixed Assets Others Total 6,795 79 1,259 394 8,527 3,347 307,050 0 4,246 148,763 463,406 191,061 -523,725 7,650 -516,075 -1.43 -1.27 9,517 119 378 32,730 42,744 11,615 57,324 873 0 134,410 204,222 762,152 -243,289 557,439 314,150 0.85 0.75 3,821 34 4,750 2,611 11,216 10,564 175,784 3,185 4,353 35,748 229,634 0 759,038 248,548 510,490 1.38 1.22 34,600 135 1,301 7,288 43,324 500 254,030 456 1,095 8,215 264,296 0 1,777,690 573,951 1,203,739 3.25 2.87 68,079 135 100 5,521 73,835 500 200,642 0 779 5,184 207,105 0 788,180 141,857 646,323 1.74 1.54

Less Financial charges

Fee and charges on Loans Interest on Long term loans Mark up on Short term loans from Associations Interest on short term loans Others Total Less Amortization of Differed Cost Profit/ Loss Before Taxation Less Taxation Profit/loss after Taxation Earning/ (Loss) per share - Basic Earning/ (Loss) per share - Diluted

Horizontal Analysis

Fauji Cement Co Ltd Income Statement (Horizontal Analysis) For the Year Ended 30 June, 2003 To 2007 2003 2004
SALES Less: Sales tax and excise duty NET SALES

2005
157.55 110.01 188.33 180.68 133.37 156.24 148.02 134.85 102.54 127.22 132.12 135.01 42.92 132.42 343.30 132.09 615.91

2006
228.34 142.84 283.71 271.71 217.57 290.48 178.50 159.76 106.44 168.63 157.67 167.33 -218.20 156.49 -115.49 156.92 1247.74

2007
192.05 134.60 229.24 310.83 204.87 250.91 207.09 175.10 112.41 184.62 176.50 185.75 -57.31 178.92 986.22 177.64 621.56

100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

130.46 97.22 151.99 152.08 139.80 107.94 119.42 125.78 98.91 123.94 117.17 120.34 -58.36 115.31 -635.98 116.50 421.87

Less: Cost of sales

Raw Material Direct Labor

Factory Overhead
Rent Rate & Taxes Fuel Consumed Power Consumed Depreciation Other F.OH Total F.OH Total Manufacturing Cost Work in Process Cost of goods manufactured Finished goods Cost of Sales

Gross Profit Less Operating Expenses General & Admin Expenses

Salary, wages and benefits Traveling and entertainment Legal and Professional charges Other General and Admin Expenses Total

100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

141.60 70.00 13.66 183.68 104.41 150.29 94.62 161.01 132.18

141.71 113.19 25.98 176.72 110.21 138.70 96.94 225.41 120.96

231.46 162.60 28.80 286.80 173.62 267.62 91.98 206.79 165.00

275.43 118.89 18.82 291.71 185.80 258.40 111.91 249.87 116.81

Selling and Distribution Expenses

Salary, wages and benefits Rent Rate & Taxes Communication Expenses Advertisement and sales Promotion

Other selling expenses Total

Operating Profit Add Other income

Interest on Bank Accounts Interest on Long Term Advances Gain on Disposal of Fixed Assets Others Total

100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

106.35 135.96 556.68 140.06 150.63 30.02 8307.11 501.28 347.03 18.67 0.00 90.35 44.07 398.91 46.45 7286.78 -60.87

149.69 142.07 799.78 56.23 43.04 377.28 662.69 131.54 315.63 57.25 102.52 24.03 49.55 0.00 -144.93 3248.99 -98.92

134.91 211.06 1635.37 509.20 170.89 103.34 1849.75 508.08 14.94 82.73 25.79 5.52 57.03 0.00 -339.43 7502.63 -233.25

468.98 270.66 753.96 1001.90 170.89 7.94 1401.27 865.90 14.94 65.35 18.35 3.48 44.69 0.00 -150.50 1854.34 -125.24

Less Financial charges

Fee and charges on Loans Interest on Long term loans Interest on short term loans Others Total Less Amortization of Differed Cost Profit/ Loss Before Taxation Less Taxation Profit/loss after Taxation

Vertical Analysis
Fauji Cement Co Ltd Income Statement ( Vertical Analysis) For the Year Ended 30 June, 200
SALES Less : Sales tax and excise duty NET SALES Raw Material Direct Labor

2003 100.00%
39.30 60.70 3.04 2.62

2004 100.00%
29.29 70.71 3.55 2.81

2005 100.00%
27.45 72.55 3.49 2.22

2006 100.00%
24.59 75.41 3.62 2.50

2007 100.00%
27.55 72.45 4.92 2.80

Factory Overhead Rent Rate & Taxes Fuel Consumed Power Consumed Depreciation Other F.OH Total F.OH Cost of Sales Gross Profit General & Admin Expenses Salary, wages and benefits Traveling and entertainment Legal and Professional charges Other General and Admin Expenses Total Selling and Distribution Expenses Salary, wages and benefits Rent Rate & Taxes Communication Expenses Advertisement and sales Promotion Other selling expenses Total Operating Profit Less Financial charges Fee and charges on Loans Interest on Long term loans Mark up on Short term loans from Associations Interest on short term loans

0.04 18.99 9.90 9.87 7.74 46.55

53.64

0.03 17.39 9.55 7.48 7.36 41.80

47.90

0.04 17.85 8.48 6.43 6.25 39.04

44.97

0.05 14.85 6.93 4.60 5.72 32.14

36.86

0.05 20.48 9.03 5.78 7.44 42.78

49.62

7.06 0.62 0.12 0.49 0.32 1.54 0.32 0.05 0.05 0.07 0.12 0.60 4.91 0.13 12.34 0.00 0.17

22.81 0.67 0.06 0.05 0.45 1.23 0.37 0.04 0.06 0.07 0.10 0.63 20.95 0.36 1.77 0.03 0.00

27.58 0.56 0.08 0.08 0.36 1.08 0.28 0.03 0.07 0.05 0.11 0.54 24.93 0.27 4.48 0.08 0.11

38.55 0.63 0.08 0.06 0.40 1.17 0.38 0.02 0.04 0.05 0.07 0.56 35.17 0.01 4.47 0.01 0.02

22.83 0.89 0.07 0.05 0.48 1.49 0.43 0.03 0.06 0.04 0.29 0.85 19.28 0.01 4.20 0.00 0.02 10

Others Total

5.98 18.62

4.14 6.29

0.91 5.86

0.14 4.65

0.11 4.33

FAUJI CEMENT COMPANY BALANCE SHEET

FAUJI CEMENT COMPANY LIMITED BALANCE SHEET As On 2003 To 2007 2003 2004 CURRENT ASSETS: 721,338,365 574,461,034 Cash and Bank Balance 193,992,231 19,708,814 Receivables 60,721,925 73,584,212 Stock in Trade: 47,962,326 61,599,838 Raw Material 10,149,401 15,223,951 Work in process 5,816,672 27,760,995 Finished goods: 31,996,253 18,614,892 NON CURRENT ASSETS: 5,591,918,365 5,335,892,506 Fixed assets 4,581,054,157 4,386,945,532 Long term Deposits, Prepayments and Deferred cost 21,600,000 36,600,000 Long Term Loans and Advances 40,000,000 CURRENT LIABILITIES 472,332,789 372,116,351 Current portion of long term loan 137,390,439 86,508,407 Short term loans 15,914,497 Other liabilities 319,027,853 285,607,944 Non Current LIABILITIES 421,593,774 3,599,103,166 Long term loans 4,188,487,125 3,558,839,081 Provisions for staff 27,450,649 40,264,085 Share Holders Equity 1,624,986,187 1,939,134,023 Paid up capital 1,624,986,187 1,939,134,023 Total Assets 6313256750 5910353540 Total Liabilities 4688270563 3971219517 Total Liabilities & Owner's Equity 6313256750 5910353540

2005 1,113,721,603 603,109,660 8,235,163 55,931,122 18,468,968 11,624,101 2,588,053 5,110,066,731 4,717,315,487

2006 1,579,381,610 847,590,378 2,836,409 145,090,210 28,011,800 93,670,852 23,407,558 4,576,776,382 4,563,115,282

2007 1,953,527 423,133 858,758 183,309 23,931 115,221 44,157 4,447,161 4,392,450

46,611,000 9,000,000 1,137,589,149 552,995,000 308,876,433 275,717,716 2,567,217,891 2,522,005,000 45,212,891 2,449,624,461 2,449,624,461 6223788334 3774163873 6223788334

46,611,000 9,000,000 1,207,427,336 550,000,000 236,353,099 421,074,237 1,648,292,490 1,425,000,000 7,911,808 3,282,616,746 3,282,616,746 6198107892 2915491146 6198107892

46,611 8,100 1,393,957 550,000 375,510 468,447 1,223,195 875,000 8,277 3,735,206 3,735,206 6400688 2665482 6400688 11

FAUJI CEMENT COMPANY BALANCE SHEET HORIZONTAL ANALYSIS As On 2003 To 2007

FAUJI CEMENT COMPANY LIMITED Balance Sheet Trend Analysis 2003 2004 CURRENT 100.00% 80.00% ASSETS: Cash and Bank Balance 100.00% 102.00% Receivables 100.00% 121.00% 100.00% 128.00% Stock in Trade: Raw Material 100.00% 150.00% Work in process 100.00% 477.00% Finished goods: 100.00% 58.00% NON CURRENT 100.00% 95.00% ASSETS: Fixed assets 100.00% 95.00% Long Term deposits 100.00% 169.00% Long Term Loans and Advances 100.00% 0.00% CURRENT 100.00% 78.00% LIABILITIES Current portion of long term loan 100.00% 63.00% Short term loans 100.00% 0.00% Other liabilities 100.00% 89.50% Non Current 100.00% 85.40% LIABILITIES Long term loans 100.00% 85.00% Provisions for staff 100.00% 147.00% Share Holders 100.00% 119.30% Equity Paid up capital 100.00% 119.30% 100.00% 93.60% Total Assets 100.00% 84.70% Total Liabilities 100.00% 93.60% Total Liabilities &

2005 154.00% 310.00% 14.00% 116.00% 182.00% 200.00% 81.00% 91.00% 103.00% 215.80% 22.50% 255.00% 402.00% 1941.00% 86.40% 61.00% 60.00% 164.70% 150.74% 150.74% 98.58% 80.50% 98.58%

2006 219.00% 437.00% 5.00% 302.00% 276.00% 1610.00% 73.00% 82.00% 99.60% 215.80% 22.50% 268.00% 400.00% 148.00% 132.00% 39.00% 34.00% 28.00% 202.00% 202.00% 98.17% 62.00% 98.17%

2007 0.27% 0.22% 1.4% 0.38% 0.24% 2% 14% 0.08% 0.09% 0.02% 0.02% 0.31% 0.40% 2.4% 0.15% 0.03% 0.02% 0.03% 0.23% 0.23% 0.1013% 0.05% 0.1013%
12

Owner's Equity

Ratio Analysis
Liquidity ratios
Current Ratio
The current ratio determines short term debt paying ability and is computed as follows Current Ratio = Current Assets / Current Liabilities
Current Ratio Years Current Assets Current Liabilities Current Ratio in Times

2003 721,338 472332 1.53

2004 574,461 372116 1.54

2005 1,113,721 1206946 0.92

2006 1,579,382 1267199 1.25

2007 1,953,527 1442287 1.35

1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 2003 1.53

Current Ratio in Times

1.54 1.25 1.35

0.92 Series1

2004

2005 Years

2006

2007

Interpretation
In the above table the ratio is increasing in the first years that mean the company has more funds to pay its current liabilities. But in the coming year there is a decrease in the ratio. That affects the companys debt paying ability. In the last two years the ratio increased due to increase in the current assets. So that is the positive sign for the company. It increases the short term, liquidity of the company and it attracts the short term loan providers on the cost of profitability.

13

 Quick Ratio
Quick Ratio = (Current Assets Inventory) / Current Liabilities
Quick Ratio Years Current Assets Inventory Current Liabilities Acid Test Ratio

2003 721,338 236,602 472332 1.03

2004 574,461 259,000 372116 0.85

2005 1,113,721 353,806 1206946 0.63

2006 1,579,382 635,978 1267199 0.74

2007 1,953,527 652,078 1442287 0.90

1.20 1.00 0.80 0.60 0.40 0.20 0.00

Acid Test Ratio (Times)

1.03 0.85 0.74 0.63 Series1 0.90

2003

2004

2005 Years

2006

2007

Interpretation
In the above table we can see that there is a decrease in the ratio. This ratio is taken on the basis of quick assets The main reason of the decline is the increase in the current liabilities. The other reason is increase in the inventory that decreases the required ratio.

14

Activity ratios

Inventory turnover

This ratio indicates the liquidity of the inventory. The formula is as follow, Inventory Turnover = Cost of Goods Sold / Average Inventory
Inventory Turnover Years Cost of Goods Sold Ending Inventory Inventory Turnover (Times)

(Times/Year)

2003 1,335,131 236,602 5.64

2004 1,555,406 259,000 6.01

2005 1,763,567 353,806 4.98

2006 2,095,027 635,978 3.29

2007 2,371,788 652,078 3.64

Inventory Turnover (Times)

8.00 6.00 4.00 2.00 0.00 5.64

6.01 4.98 3.29 3.64 Series1

2003 2004 2005 2006 2007 Years

Interpretation As shown in the table there is an increase in 2004 as compared to the base year. Whereas there is a decline in the inventory turnover in the following two years. On the other hand there is a slight rise in the ratio in last year. It is better for the company to have a high inventory turnover ratio .

Average Age of Inventory

365/inventory turnover
AVERAGE AGE OF INVENTORY Years 2003 days 365 Inventory turnover 5.64 Average age of inventory 64.71 (Times)

2004 365 6.01 60.73

2005 365 4.98 73.29

2006 365 3.29 110.9

2007 365 3.64 100.2

Interpretation
As shown in the table in 2005 the average age of inventory is high as compared to base year. Whereas the average age of turnover in 2004 is lowes 15

 Average collection period

= account Receivables / (Net Sales/365) Days

Average collection period Years Account Receivable Net Sales Days Sale in Account Receivable(Days)

2003 79,492 1,510,738 19.21

2004 23,833 2,296,231 3.79

2005 25,021 2,845,144 3.21

2006 27,042 4,286,139 2.30

2007 27,906 3,463,283 2.94

25.00 19.21 20.00 15.00 10.00 3.79 3.21 2.30 2.94 5.00 0.00 2003 2004 2005 2006 2007 Years

Series1

Interpretation
This ratio gives an indication of the length of time that the receivables have been outstanding at the end of the year. Shortening the credit terms indicates that there will be less risk in the collection of future receivables and a lengthening of the credit terms indicates a greater risk. In the above data we see that in year 2003 the days sales in account receivable is very high and it was not good for the company but after 2003 there is a great decrease in the days sales in inventory which show the good performance of the companys management and it shows a less risk in the collection of future receivables.

16

 Total Asset Turnover

Total Assets Turnover= Net Sales/ Total Assets
Total Assets Turnover Net Sales Total Assets Total Assets Turnover (Times) 2003 1,510,738 6,313,256 0.24 2004 2,296,231 5,910,353 0.39 2005 2,845,144 6,223,788 0.46 2006 4,286,139 6,198,107 0.69 2007 3,463,283 6,400,688 0.54

Total Assets Turnover (Times)

0.80 0.60 0.39 0.40 0.20 0.00 0.24 0.46

0.69 0.54 Series1

2003 2004 2005 2006 2007 Years

Interpretation It measures the activity of the assets and the ability of the firm to generate sales through the use of assets. The ratio is increasing and we can conclude that the cement company is efficiently using its assets to generate more sales and more profits.

Financial Leverage Ratios

Debt Ratio
The debt ratio indicates the firms long term debt paying ability. It is computed as follows Debt Ratio = Total Liabilities/Total Assets

Debt Ratio Total Liabilities Total Assets Debt Ratio 2003 4,688,270 6313256 74.26% 2004 3,971,219 5910353 67.19% 2005 3,774,164 6223788 60.64% 2006 2,915,491 6198107 47.04% 2007 2,665,482 6400688 41.64%

17

80.00% 70.00%

74.26% 67.19% 60.64% 47.04% 41.64% Series1

Debt Ratio (%age)

60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 2003 2004 2005 Years 2006 2007

Interpretation
This table shows the current and past debt paying ratio of the company. The ratio in 2003 was 74.26% which was very high but after that till 2007 it is decreasing continuously and in 2007 it is 41.64% this decreasing trend shows the company is in better position as compare to 2003.

Leverage Ratios
Times interest earned ratio
Times interest earned ratio = EBIT/Interest
Interest Earned Ratio EBIT Interest Earned Interest Earned Ratio (Times) 2003 122,215 6,874 18 2004 680,341 9,636 71 2005 977,456 3,855 254 2006 1,998,662 34,735 58 2007 921,450 68,214 14

Interset Earned Ratio (Times)

300 200 100 0 2003 2004 71 18

254

Series1 58 14 2005 Years 2006 2007

18

Interpretation
The above table indicates the Time interest earned ratio which shows the firm will able to meet his obligation or not in 2003 interest earned was 18 times of operating profit but in 2004 it was 71 times and it increase further to 254 times in 2005 at that time company was strong in meeting its obligation but after 2005 it was decreased to 58 times in 2006 and 14 times in 2007 this shows company losing its position to meet the obligation.

Fixed Charge Coverage Ratio

The Fixed charge coverage ratio indicates a firms long term debt paying ability from the income statement view. The fixed charge ratio indicates a firms ability to cover fixed charges. It is computed as follows: Fixed Charge Coverage Ratio = EBIT + Lease payment/Interest + Lease payment + (Principle + preferred dividend) * 1/(1-T)

Profitability Ratios
Gross profit Margin
Gross profit equals the difference between net sales revenue and the cost of goods sold. Gross profit Margin = Gross profit / Net sales Gross profit margin analysis helps a number of users. Managers budget gross profit levels into their predictions of profitability. Gross profit margin is also use in cost control. Gross profit margin can also be used to estimate inventory involved in insured loses.
Gross Profit Margin Gross Profit Net Sales Gross Profit Margin 2003 175,607 1,510,738 11.62% 2004 740,825 2,296,231 32.26% 2005 1,081,577 2,845,144 38.01% 2006 2,191,112 4,286,139 51.12% 2007 1,091,495 3,463,283 31.52%

Interpretation

In this table the gross profit margin has inclined substantially over the 1st four years from 2003 to 2006 after that in 2007 the Gross profit Margin decreased by 31.52%.The increase in Gross profit margin is due to increase in Net sales and Gross profit.

Operating Income Margin

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Operating Income Margin=Operating Income/Net Sales

Operating Income Margin (Amounts in Rs. 000) 2003 2004 Operating Income EBIT 122,215 680,341 Net Sales 1,510,738 2,296,231 Operating Income Margin 8.09% 29.63%

2005 977,456 2,845,144 34.36%

2006 1,998,662 4,286,139 46.63%

2007 921,450 3,463,283 26.61%

Interpretation
It include only operating income in the numerator. After checking table we can say that there is an increasing trend in operating profit margin the coming three years. But it declined in the last year due to increase in the cost of sales. Management must focus on the cost to control in order earn more profits.

Net Profit Margin

Net Profit Margin= Net Income before Minority shares of Earnings /Net Sale Net Profit Margin Net Income Net Sales Net Profit Margin (%age) 2003 -516,075 1,510,738 -34.16% 2004 314,150 2,296,231 13.68% 2005 510,490 2,845,144 17.94% 2006 1,203,739 4,286,139 28.08% 2007 646,323 3,463,283 18.66%

Interpretation
This ratio gives a measure of net income dollars generated by each dollar of sales. While it is desirable for this ratio to be high, competitive forces within an industry, economic conditions, use of debt financing, and operating characteristics such as high fixed cost will cause the net profit margin to vary between and within industries.

Return on total Assets

Return on Assets= Net Income before Minority Share of Earning / Total Assets
Return on Assets Net Income Total Assets Return on Assets (%age) 2003 -516,075 6,313,256 -8.17% 2004 314,150 5,910,353 5.32% 2005 510,490 6,223,788 8.20% 2006 1,203,739 6,198,107 19.42% 2007 646,323 6,400,688 10.10%

Interpretation
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It measures the firms ability to utilize its assets to create profits by comparing profits With the assets which generate the profits. In the base year the ratio is negative that is the bad sign for the company. But later wards it is increasing till the third year and it slope downwards in the last year. The reason behind that increase is the effective use of assets. The cement company is utilizing its assets in a better way to get more earnings.

Return on Total Equity

Return on Total Equity =Net income / Total Equity
Return on Total Equity Net Income Total Equity Return on Total Equity 2003 -516,075 1,624,986 -31.76% 2004 314,150 1,939,134 16.20% 2005 510,490 2,449,624 20.84% 2006 1,203,739 3,282,616 36.67% 2007 646,323 3,735,206 17.30%

Interpretation
In the above the Return on Total equity in 2003 is -31.76% but in 2004 to 2006 there is an increasing trend but after that in 2007 it again decreases to 17.30% from 36.67%. the reason behind this that companys long term debt decreases over five years. Also there is an increasing trend in Total equity in five years. Net income also increases from 2003-06.

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