Muhammad Ali Jinnah University

Report On Attock Petroleum Limited Prepared by Faraz Saleem (Fa09-Mb-0033) Submitted to Sir Umair Baig

TABLE OF CONTENT

1. COMPANY PROFILE 2. BALANCE SHEET 3. INCOME STATEMENT 4. FINANCIAL RATIOS & GRAPH 5. INTERPRETATION 6. COMMON SIZE INCOME STATEMENT 7. COMMON SIZE BALANCE SHEET 8. IGR 9. SGR 10. PROFORMA INCOME STATEMENT 11. CONCLUSION

12. RECOMMNDATIONS

COMPANY PROFILE

Attock Petroleum Limited (APL) is the 4th Oil Marketing Company in Pakistan to be granted a marketing license in February 1998. Though a new entrant in the field of oil marketing, APL has managed to establish its presence and reputation as a progressive and dynamic organization focusing on providing quality and environment friendly petroleum products and services in Pakistan and abroad. Its steady and substantially growing market share and customer confidence, which it enjoys, are manifestations of APL's successful policies. APL is part of the first fully integrated Oil Company of the sub-continent, APLs sponsors include Pharaon Commercial Investment Group Limited (PCIGL) and Attock Group of Companies. Pharaon Group is engaged internationally in diversified entrepreneurial activities, including Hotels, Oil Exploration, Production and Refining, Manufacturing of Petroleum Products, Chemicals, Manufacturing and Trading of Cement, Real Estate etc. The Attock Group of companies consist of The Attock Oil Company Limited (AOC), Pakistan Oilfields Limited (POL), Attock Refinery Limited (ARL), Attock Petroleum Limited (APL), Attock Information Technology Services (Pvt) Limited (AITSL), Attock Cement Pakistan Limited (ACPL) etc. AOC was incorporated with limited liability in England on December 01, 1913. The company is principally engaged in exploration, drilling and production of petroleum and related activities in Pakistan. AOC is the pioneer in the oil sector in Pakistan. Its first oil discovery in Pakistan was made in Khaur district Attock in 1915. The refining operations were started in 1922 at Morgah near Rawalpindi. (For other group companies information please visit Group Profile)

Liquidity Ratios
Liquidity ratios measure the availability of cash to pay debt.It have two subtypes current ratio and quick ratio. The current ratio is an indication of a firm's market liquidity and ability to meet creditor's demands. Acceptable current ratios vary from industry to industry.Attock Petrolium showing potive trent in Current ration because it is rises from 1.41 Fy08 to 1.50 FY 09 due to rise in current asset from 13881634000 to 16406083000 which is very benificial for any organisation.However if current ratio rises to high it mean company is not utilizing their assest in best way. While Generally, the acid test ratio should be 1:1 or better, however this varies widely by industry. In general, the higher the ratio, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets). Therefore atoock petrolium Quick Ratio also increasing which is making the company repotation stronger and stronger.
Positive working capital means that the company is able to pay off its short-term liabilities. Negative working capital means that a company currently is unable to meet its shortterm liabilities with its current assets (cash, accounts receivable and inventory). Similarly APL Increasing from previous year it means company can work after paying their liabilities.

WORKING CAPITAL Total Asset Total liabilities

2008 15513336-9977487 5535849 2009 18270355-11188087 7082268

8000000 7000000 6000000 5000000 4000000 3000000 2000000 1000000 0 2008 2009

Workin capital

CURRENT RATIO Current Assets Current Liabilities 2008 2009

13881634 9842350 1.41

16406083 10936549 1.50

1.5 1.48 1.46 1.44 1.42 1.4 2009 2008 C.R

ACID-TEST/ QUICK/ LIQUID RATIO. Quick Assets Current Liabilities

2008 13484019 9842350 1.37

2009 162326287 10936549 1.48

1.5 1.45 1.4 1.35 1.3 2009 2008

Q.R

PROFITABILITY RATIO
Profitability ratios measure the firm's use of its assets and control of its expenses to generate an acceptable rate of return.Similarly ATP little bit increses in GP but due to its same COGS rate which is almost 94% of its sale, although sales increses by 16% from previous year but it cannot imposed its much effect on GP due to high rate of COGS. Operating profit ratio decrease from 0.061 to 0.058 due to high rate of operating expense in 2009, which is 0.81% higher than that of 0.69% in 2008.however due to high other income which include commission and interest net profit ratio rises from 0.0496 to 0.498

GROSS PROFIT MARGIN

Gross Profit Total Net Sales 2008 2748401 53242330 0.051 2009 3292350 61863152 0.053

0.053 0.0525 0.052 0.0515 0.051 0.0505 0.05 2009 2008 Gross Profit Margin

Operating Profit Margin Operating income Net sales 2008 3272090 53242330 0.061 2009 3630256 61863152 0.058

0.061 0.06 0.059 0.058 0.057 0.056 2009 2008 Operating Profit Margin

Net Profit Margin Net income Net Sales 2008 2641552 53242330 0.496
0.5 0.4

2009 3082419 61863152 0.0498

Return on

0.3 0.2 0.1 0 2009 2008 NET PROFIT MARGIN

Asset

Net Income Total Asset 2008 2641552 15513336 0.170

0.17 0.16 0.15 0.14 0.13 0.12 0.11 0.1 2008 20009 Return on asset

2009 3082419 18270355 0.168

Return on Equity Net income Total SHE 2008 2641552 5535849 0.0477 2009 3082419 7082268 0.435

0.48 0.47 0.46 0.45 0.44 0.43 0.42 0.41 2008 2009 Return on Equity

EARNING PER SHARE Net income No of share 2008 2641552 57600 45.86 2009 3082419 57604 53.51

54 52

ACTIVITY
An indicator converts various sales. In general, management can sales or cash, the is being run. is following:

50 48 46 44 42 2008 2009 EPS

RATIO
of how rapidly a firm accounts into cash or the sooner convert assets into more effectively the firm Analysis of each ration

A/P turnover times means how many times a firm paid their liabilities in a year this ratio may differ from industry to industry but generally stockholders attracts towards the organization who paid their liabilities quickly in the same way ATC A\P turn over slightly moved downward from 54 to 63. Asset turnover measures a firm's efficiency at using its assets in generating sales or revenue - the higher the number the better the performance of company.. But here you can see that asset turnover is decreasing from 3.43 to 3.38 which is somewhat bit lower than previous year. By maintaining accounts receivable, firms are indirectly extending interest-free loans to their clients. A high ratio implies either that a company operates on a cash basis or that its extension of credit and collection of accounts receivable is efficient. A low ratio implies the company should re-assess its credit policies in order to ensure the timely collection of imparted credit that is not earning interest for the firm .APL improving in account receivable because in 2008 its collected asset days are 49 which become 45 in 2010.

Inventory ratio showing how many times a company's inventory is sold and replaced over a period. This ratio should be compared against industry averages. A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying likewise APL showing very high ration of inventory almost

double of previous year if we kept eye on inventory turnover days then we know that in almost every 1 and half day the inventory is updating because of high ratio of sales.

A/P TURNOVER TIMES Net Purchases Average A-P

2008 50451319_____ (5296183+9813929/2) 6.67 2009 58413217____ (10728556+9813929/2) 5.68

7 6.5 6 5.5 5 2009 2008 A/P turnover tim es

ACCOUNT PAYABLE TURNOVER DAYS 360 A-P turnover times 2008 360 6.67 54
64 62 60 58 56 54 52 50 48 2008 2009

2009 360 5.68 63

TOTAL ASSET Net Sale Total. Asset

Accout Py days

TURNOVER

2008 53242330 15513336 3.43

2009 61863152 18270355 3.38

3.44 3.42 3.4 3.38 3.36 3.34 2009 2008 Total asset turnover

ACCOUNT RECEIVABLE TURNOVER TIMES Net Cr Sale Average A/R 2008 2009

53242330____ 61863152_____ (6721529+878498/2) (8592508+6721529/2) 7.43

8.2 8 7.8 7.6 7.4 7.2 7 2009 2008 A/R Turnover

8.07

ACCOUNT RECEIVABLE DAYS 360 A/R Times 2008 360 7.43 49 2009 360 8.07 45

49 48 47 46 45 44 43 2008 2009 A/R Days

INVENTORY TURNOVER TIMES

COGS ____ Average Inventory 2008 2009

50493929___ 58570802____ (341702+299092/2) (141507+299092/2) 157

300 250 200 150 100 50 0 2009 2008 Inventory turnover tim es

265

INV TURNOVER DAYS 360 INV Times 2008 360 157 2.32 2009 360 265 1.35

2.5 2 1.5 1 0.5 0 2008 2009 INV Turover Days

AVERAGE DAYS OF OPERATING CYCLE. A/R Days +Inv Days 2008 2.32+49 2009 1.35+45

51.32
350 300 250 200 150 100 50 0 2008 2009

46.35

Average Daysof operatin Cycle

LONG TERM DEBT PAYING ABILITY

Ratio that indicates what proportion of debt a company has relative to its assets. The measure gives an idea to the leverage of the company along with the potential risks the company faces in terms of its debt-load. A debt ratio of greater than 1 indicates that a company has more debt than assets, meanwhile, a debt ratio of less than 1 indicates that a company has more assets than debt. Used in conjunction with other measures of financial health, the debt ratio can help investors determine a company's level of risk. Debt ratio of APL showing that it has more assets than its liabilities, which is good sign for company. A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense. However APL debt to company ration showing that debt is almost 57% more than its liabilities but lower than previous year, which indicating that equity is gradually increased in contrast with their liabilities in current year

DEBT RATIO Total Liabilities Total Asset

2008 9977487 15513336 0.64

0.64 0.63 0.62 0.61 0.6 0.59 2009 2008

2009 11188087 7082268 0.61

Debt ratio

DEBT TO EQUITY Total Debt Total Equity 2008 9977487 5535849 1.80
1.8 1.7 1.6 1.5 1.4 2009 2008 Debt to equity

2009 11188087 7082268 1.57

DIVIDEND PER SHARE.

Dividends No. Of Shares 2008 960000 48000 20 2009 1440000 57600 25

25 20 15 10 5 0 2008 2009 Divident per share

SUMMARY OF RATIOS
Liquidity 2009 7082268 2008 5535849

Working capital

CURRENT RATIO QUICK RATIO

1.50 1.48 2009 0.053

1.41 1.37 2008 0.051

Profitability Gross Profit Margin Operating Profit Margin Net Profit Margin Return on Asset Return on Equity Earning Per Share

0.058

0.061

0.0498 0.168 0.435 53.51

0.0496 0.170 0.477 45.86

A/P turnover times A/P turnover days Total asset turnover

5.68

6.67

63 dys 3.38

54 3.43

A/R Turnover times

8.07

7.43

A/R Days

45

49

Inventory Turnover times

265

157

Inv turnover Days Avg Day of operating cycle. Debt ratio

1.35

2.27

46.35

51.27

0.61

0.64

Debt to equity Dividend per share

1.57

1.80

25

20

COMMON SIZE INCOME STATEMENT

2009 Sales Cost of sales Gross profit Other operating Income Operating Expense Operating Profit Income on bank Deposits and Investment Share of Profit of Associated Companies Workers Profit Participation Fund PROFIT BEFORE TAXATION Provision for taxation PROFIT FOR THE YEAR 61863152 (58570802) 3292353 843967 (506061) 3630256 848852 26510 (225199) 4280419 (1198000) 3082419 % 100 94.7 5.3 1.4 8.0 5.9 1.4 0.042 0.4 6.9 1.9 5.0 2008 53242330 % 100

(50493929) 94.8 2748104 896359 (372670) 3272090 381910 58918 (183366) 3529552 (888000) 2641552 5.2 1.7 0.7 6.1 0.7 0.1 0.3 6.6 1.7 5.0

COMMON SIZE BALANCE SHEET SHARE CAPITAL AND RESERVES Issue subscribed and paid up capital Reserves Special reserve Revenue reserve Inappropriate profit 0.18% 35% 0.34% 32.24%

2009
3.1%

2008
3.09%

38.76% 35.68%
NON-CURRENT LIABILITIES Long-term deposit Deferred income tax Liability 0.87% 0.50% 0.78% 0.09%

1.37% 0.87%
CURRENT-LIABILITIES Trade and Other Payables Provision for income tax 57.72% 1.13% 63.26% 0.18%

58.85% 63.44%
TOTAL LIABILITIES

100%

100%

& EQUITIES

2009 PROPERTY, PLANT AND EQUIPMENT 6.1% 5.94%

2008

LONG TERM INVESTMENT IN ASSOCIATED COMPANIES

4.01%

4.57%

10.11%
CURRENT ASSETS Stores and spares Stock in trade 0.015%

10.51%

0.033%

0.77%

1.92%

Trade debts

42.88%

37.55%

Advances, deposits prepayment And other receivable. Short term Investments

5.42%

8.40%

2.12%

Cash and bank balances

2008

40.6%

39.42%

89.68%

89.44%
2009 0% 20% 40% 60% 80% 100%

current Asset

Non Current Asset

2008 2009 0% 20% 40% 60% 80% 100%

share hoder equity no current liabilities

current liabiilities

INTERPRETATION:
Common size Income statement defines the percentage of each item with respect to Net Sales so that we can easily analysis that which item % is increasing or decreasing. If we kept eye on APL common size Income statement then we know that cost of good sold declined from 94.8 to 94.7 which helped to higher the rate of gross profit but due to high ratio of expense compare to previous year operating profit declined from 6.1 % to 5.9.However due to other income net profit margin moves little bit high. On other hand common size balance sheet shows the percentage of each item with respect to total assets, like APL Share equity has been rose from 35% to 38%, it means that firm has the total share holder equity of 38 % of its total asset. While APL had 63% current liabilities of total asset in 2008, which decreases to 58 % in, 2009, which is somewhat, better for any company to lower down its liabilities. Moreover APL Non current asset percentage slightly moved downward from 10.51% to 10.11% while little bit increases in current ratio from previous year.

CALCULATION OF GROWTH RATE Sustainable Growth Rate: (SGR)

SGR => Return on Equity. b 1- (ROE. b) b => retention ratio => 1 payout ratio Payout ratio => Dividend Net Income

PAYOUT RATIO b= SGR= SGR = 1-0.467 =

= 1440000 3082419 0.533 0.435 *0.533 1-(0.435*0.533) 0.231 = 0.231 = 30% 1-0.231 0.769

Internal Growth Rate: (IGR)

IGR => Return on Assets. b 1-(ROA. b)

0.168 *0.533 =9.83% 1-(0.168*0.533)

PROFORMA INCOME STATEMENT 2010 SGR 30% 80422098 Sales Cost of sales Gross profit Other operating Income Operating Expense Operating Profit Income on bank Deposits and Investment Share of Profit of Associated Companies Workers Profit Participation Fund PROFIT BEFORE TAXATION Provision for taxation PROFIT FOR THE YEAR (76142043) 4280055 1097157 (657879) 4719333 1103507 34463 (292759) 5564544 (1557400) 4007144

PROFORMA INCOME STATEMENT 2010 IGR 10% 68049467 Sales Cost of sales Gross profit Other operating Income Operating Expense Operating Profit Income on bank Deposits and Investment Share of Profit of Associated Companies Workers Profit Participation Fund PROFIT BEFORE TAXATION Provision for taxation PROFIT FOR THE YEAR (64427882) 3621585 928364 (556667) 3993282 933737 29161 (247719) 4708461 (1317800) 3390661

CONCLUSION After careful consideration of the financial position of Attock petroleum limited, I found that Sale has been increased by almost 16% of previous year but somewhat it could not change the net profit margin massively due to high percentage of expense. If we kept eye on the financial ratio of company then, we know that return on asset and equity is decreasing from previous year for the reason that assets and equities increase by almost 18%, while income increased by 16.5%, so it is obvious to understand that change in income is less than change in asset and equity, which cause decline in both the ratios. Moreover, there is a clear increased in earning per share from 45 to 53 this increase raise question that when the net profit margin is same as previous year then how EPS has been grown. As we know that net profit increases almost 17% from previous year while there is no change occurred in the number of shares, which boost up the EPS from 45 to 53. RECOMMENDATION Attock Petroleum must decrease their expense ratio because it is increasing since last year. More important thing for APL is to improve their recurring income because since many year APL is selling their asset in order to increase EPS which is not useful for any organization because regular selling of their asset could caused the insolvency of firm. Therefore, APL should increase their recurring nature income.