SWOT ANALYSIS

Strength

1. Lucky Cement is one of the largest cement producers in Pakistan as he enjoys premium brand image
in the eyes of the customers.
2. The strategic plant locations across the country, gives the company access to a nationwide market
and mitigates exposure to any localized risks.
3. The company has an extensive dealership network of more than 200 dealers and distributors. Also,
the company’s smart logistic setup and management enables it to effectively cater to both the
international as well as the domestic markets.

Weaknesses
1. Although Lucky Cement has a leadership position in Pakistan’s cement industry, it has limited
presence in some markets. It was, therefore, important for the company to expand into other
markets.

Opportunities
1. The positive demographic trends like growing population, increasing urbanization and rising income
levels are the key demand drivers.

Threats
1. On the other hand, growing local demand on the back of private housing demand, infrastructure
spending by the government as well as CPEC initiative has enabled the company to substitute
declining export volumes with domestic thereby helped mitigate the risk of negative growth.
 PORTER FIVE FORCES ANALYSIS

INTENSITY OF RIVALRY AMONG COMPETITORS:

Competitiveness in the cement industry in Pakistan can be described as moderate as no single cement
company can dominating the market. However, Lucky Cement has the largest share of 18% with

On the export side, Pakistani cement companies are competing with Iranian and Chinese cement
manufacturers and Afghanistan with loads of cheap Iranian cement along with anti-dumping duties
being imposed on Pakistani cement in South Africa the competition is being more intense in terms of
exports.

Threat of Substitutes:
Cement substitutes generally include the use of fly ash, slag and concrete, but in Pakistan the cement
companies use them as raw materials and people hesitate to use these substitutes due to lack of quality
and conditions for their effectiveness.

Wood and steel can be used as a substitute for cement, but in Pakistan wood is not in great demand for
house construction and whenever steel is used, it is actually used along with cement.

There is no perfect substitute for cement in Pakistan and its use is predominantly high, which means
that the threat of substitutes is very low in the Pakistani cement industry.

Threat of New Entrants:

The cement industry is growing in Pakistan as the industry saw sales growth of 44.39% in Mar-2021
which encourages opportunity for new companies to enter in this sector.

Pakistan has high availability of raw materials used in cement manufacturing like limestone and silica
and can attract new industries to enter the industry.

Overall, the barriers to entry are mixed and the threat of new entrants can be termed as high.

Bargaining power of suppliers:

Due to the abundance of raw materials available in Pakistan that are used in the manufacture of
cement, the number of suppliers is high, which means that the bargaining power of the suppliers is low.

The cost of switching from one supplier to another is low as most suppliers have the full range of
cement available and the buyer can easily switch from one supplier to another.

In general, the bargaining power of suppliers in the Pakistani cement industry can be rated as low.
Bargaining power of buyers:
Cement is used in both the commercial/government as well as housing sector. For large buyers who buy
high volumes of cement for instance after the initiative to build Gwadar port or building of Diamer
Bhasha dam the buyer being the government here can regulate prices and their bargaining power would
be high.

For the individual buyers in housing sector, the number of buyers are large and usually purchase cement
in lower quantities as compared to the consumption of cement in huge projects the bargaining power of
buyer would be low because a supplier would not mind if a buyer leaves as he has many to choose from.

Overall, the bargaining power of buyers is mixed and can be categorized as medium.
 ECONOMIC VALUE ADDED & RESIDUAL INCOME

ECONOMIC VALUE ADDED

PARTICULARS 2018-2019 2019-2020

EVA = NOPAT - COST OF EQUITY

NOPAT 10,515,162 3,520,311

Less: Cost of capital 19,025,720 13,846,217

EVA (8,510,558) (10,325,906)

`

Residual Income
PARTICULARS 2019 2020
RI = Net income – (Equity * Cost of Equity)
Net Income 10,538,595 10,538,595
Equity 94,318,417 99,183,861
Cost of equity 19.34% 11.20%

Residual Income (7,702,587) (569,997)