INSTITUTE OF BUSINESS MANAGEMENT

MUHAMMAD
ABID
20191-26531

DEWAN CEMENT
ANALYSIS REPORT

SUBMITTION TO :
SIR NAEEM UL HASSAN ANSARI

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INSTITUTE OF BUSINESS MANAGEMENT

Table of Contents
TITLE PAGE…………………………………………………………………………………………………………………………………………………………1
TABLE OF CONTENT……………………………………………………………………………………………………………………………………………2
INTRODUCTION………………………………………………………………………………………………………………………………………………….3
PLANT AND SUMMARY ……………………………………………………………………………………………………………………………………..3
EXECUTIVE SUMMARY………………………………………………………………………………………………………………………………………..4
OVERVIEW OF CEMENT INDUSTRY…………………………………………………………………………………………………………………….5
GLOBAL PRODUCTION OF CEMENT……………………………………………………………………………………………………………………5
PAKISTAN CEMENT INDUSTRY……………………………………………………………………………………………………………………………6
CONTRIBUTION TO ECONOMIC DEVELOPMENT …………………………………………………………………………………………………7
FINANCIAL RATIO ANALYSIS………………….……………………………………………………………………………………………………………8
DUO-POND ANALYSSIS………………………………………………………………………………………………………………………………………12
HORIZONTAL ANALYSIS……………………………………………………………………………………………………………………………………..13
FINANCIAL ANALYSIS BWTWEEN 2019-2020………………………………………………………………………………………………………15
CONCLUSION……………………………………………………………………………………………………………………………………………………..15
STATEMENT OF FINANCIAL POSITION……………………………………………………………………………………………………………….16
STATEMENT OF PROFIT AND LOSS…………………………………………………………………………………………………………………….17
STATEMENT OF CASH FLOW………………………………………………………………………………………………………………………………18
STATEMENT OF CHANGES IN EQUIT………………………………………………………………………………………………………………….19

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20191-26531
INSTITUTE OF BUSINESS MANAGEMENT

Introduction:
Dewan Cement Ltd. (DCL) is an ISO 9001:2008 certified company, and a name of trust in the production of
high-quality cement. DCL has a capacity of more than 2,880,000 tons per annum from two separate
manufacturing units, comprising of Pakland Cement Ltd., and Saadi Cement Ltd.

Pakland Cement Ltd. was established in 1981 at Deh Dhando in District Malir, Karachi, 44 kilometers off the
National Highway, encompassing an area of 150 acres. Within one year, an integrated plant with an initial
capacity of 300,000 TPA was up and running and it was fully operational by 1985, producing superior
Ordinary Portland Cement. In 1987, Sulphate Resisting Pakland, a pioneer product in the private sector, was
introduced. Supported by the latest technology and intensive machinery, the market size of the product rose in
a short span of time, resulting in a clinker production capacity of up to 750,000 TPA. Subsequently, Pakland
Blast Furnace Slag Cement was included in the company’s fold. The company is listed on the Karachi and
Lahore Stock Exchange

Plant and Production:

The two units are Located at:

o Deh Dhando, district Malir, Karachi, 44th km of National Highway (formerly Pakland Cement Ltd. with
5,700 TPD production capacity).

o Kamilpur, near Hattar in Khyber Pakhtunkhwa (formerly Saadi Cement Ltd. with 3,800 TPD production
capacity).

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20191-26531
INSTITUTE OF BUSINESS MANAGEMENT

EXECUTIVE SUMMARY:
The main purpose of this report is to analyze the financial performance and applicability of
a company since last three years including 2017, 2018 and 2019.
Through financial statements, we calculated activity ratios, profitability ratios, solvency
ratios and liquidity ratios to know whether entity is stable, solvent, liquid, or profitable
enough to secure a monetary investment. Interpretation of the financial statements and
data is essential for all internal and external stakeholders of the firm. With the help of ratio
analysis, we interpret the numbers from the balance sheet and income statements. 
The trend of these analysis over time is studied to check whether the firm`s Performance is
improving or deteriorating. Our group chose company of lucky Cement and has calculated
all the ratios necessary and analyzed it.

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20191-26531
INSTITUTE OF BUSINESS MANAGEMENT
Overview of cement industry
Cement is one of the basic ingredients of concrete which is the most widely used building material in
the world.

GLOBAL PRODUCTION OF CEMENT

The most comprehensive statistics of country-wise cement production are compiled and
published by US Geological Survey. The following chart has been prepared based on their
data which shows breakup of cement production by region. (It must be noted that these
figures were last updated in 2014 and slight changes might have occurred since then.
However, share of any region is unlikely to have significantly changed during last three
years). The earliest year for which global cement production statistics are available is 1998.
Asia was the biggest producer of cement even then but its share was slightly smaller.
Looking at country-wise production statistics for the year 1998, we find that 80 percent of
the world cement was being produced by 20 countries. China alone produced 35% of the
total global cement. Pakistan was the 31st largest cement producer back then, contributing
0.58% to global cement production.

Estimated production of cement by country (1998)

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20191-26531
INSTITUTE OF BUSINESS MANAGEMENT
PAKISTAN CEMENT INDUSTRY:

Cement industry is one of the major industries in Pakistan. The government predicts that the construction
and cement industry will prosper in the future. Therefore, they introduced an incentive package for them.

Economic survey reviews Pakistan cement industry for FY19-20

The Pakistan government has released its economic survey for FY19-20 on the eve of the Federal Budget
FY20-21. The survey reviews government incentives for the cement industry, accounts of dispatches,
export and mining lease issues.
After almost five years the Punjab Mines & Minerals department lifted a ban on the mining concession to
the cement sector. In order to promote investment and boost the trust of investors. Currently, 26
applications are under process.
Balochistan is the best for the installation of cement factories it has large deposits of limestone, gypsum
and coal. Seven applications for exploration and mining leases are currently under process. After
completion of the license, they are expected to be granted.

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20191-26531
INSTITUTE OF BUSINESS MANAGEMENT

CONTRIBUTION TO ECONOMIC DEVELOPMENT:

Cement sector posted a domestic growth of 3.86 percent in the first seven months of fiscal year. As per All
Pakistan Cement Manufacturer’s Association (APCMA) domestic demand for cement increased by 5.59% in
January 2020. And export increase by 39.49%.
North contributes towards the growth domestically in Pakistan. This time it dispatched 11.32% higher than
the previous fiscal year. While in exports it declined by 13.55%. In South, the domestic demand falls by
18.23%; however, exports increased by 70.84%.

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20191-26531
INSTITUTE OF BUSINESS MANAGEMENT

FINANCIAL RATIOS

RATIOS FORMULA 2020 2019

Gp margin Gross profit/Revenues -8.85% 10.18
Operating profit EBIT/Revenues -25.18% 2.45%
margin
Net profit margin Net income (EAT)/Revenues -25.18% 4.77%
Roa Net income / Average total -1.4% 9.3%
assets
Roe Net income / Average total 2.62% 12.55%
equity
Return on total capital EBIT / Short and Long-term -5.58% 2.37%
debt and equity
Current ratio Current assets / Current 0.4 1.01
liabilities
Quick ratio Quick assets / Current liabilities 0.17 0.62
Defencive interval Quick Assets / Avg. Daily Cash 1.48 2.45
Expenditure
Cash conversion cycle DOH + DSO - PDP 80.33 46.4
WCTO Revenues / Avg. Working -0.13 190
Capital
FATO Revenues / Avg. Net Fixed 0.5 1.95
Assets
TATO Revenues / Avg. Total Assets 0.354 0.5
Debt to asset ratio Total debt / Total assets 0.21 0.195
Debt to capital ratio Total debts / Total debt + Total -0.27 0.327
shareholder equity
Debt to equity ratio Total debt / total equity -0.31 0.34
Financial leverage Total assets / Total equity 1.702 1.59
Interest coverage ratio EBIT / Interest expenses 0.36 80.80

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20191-26531
INSTITUTE OF BUSINESS MANAGEMENT

RATIO ANALYSIS:

This report will talk about the profitability, liquidity, activities and solvency ratios to measure the perform
of Pioneer Cement Limited for the year ended 2019 and 2020.

PROFITABLILTY RATIOS:
It measures the company’s ability to generate profits from its resources.
Gross profit margin:
Gross profit shows the gross profit as a percentage of sales. Also, it shows the profit available for a firm to
pay off its operating expenses. Pioneer limited had a gross profit in the year 2019; however, a loss in the
year 2020. The gross profit margin fell to -1.64 percent. The likely reason for this is due the rise in cost of
production and fall in sales.
Operating profit margin:
Operating profit margin shows the profit before interest and tax in term of sales. Pioneer Cement ltd had a
loss in 2020. Therefore, the ratios declined from 16.38 percent to -5.77 percent. Although there was a fall
in operating expenses.
Net profit Margin:
Net profit margin shows the profit after interest and tax in terms of dividend. It indicates how much profit
is left for the dividends. Due to the gross loss, there is also a net loss in 2020. The loss result in a fall in net
profit by -3.33 percent. The finance cost increased to Rs.392754 thousand.

Return on Asset:
It measures the profit earned with respect to total assets. A higher ratio indicates that higher income is
earned on assets. In other words, assets are utilized in making profit. In 2020, again there is a fall in the
ratio to -0.4 percent. The main reason behind this fall is that there is an increase in the value of property,
plant and equipment. Which means that we can expect a return in 2021 from those assets.

Return on Equity:
It shows the net income as a percentage of common equity. The higher the better because it indicates a
higher return on common equity. Return on equity this year has fallen by -9.23 percent. Previously, it was
34.8 percent in 2019. This fall is due to the decline in net income.

Return on capital employed:

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20191-26531
INSTITUTE OF BUSINESS MANAGEMENT
Return on capital employed shows the earning before interest and tax in terms of the total capital
employed. The higher the return the better it is for the firm. Again a fall in ROCE can be seen up to -1.2
percent.

Liquidity Ratios:
It measures the company’s ability to meet its short term debts.
Current Ratio:
Current ratio shows that how much $1 current assets do we have to pay off our $1 liability. The ideal ratio
is usually 1.5 to 2 but it varies from industry to industry. The company has a ratio of 0.51:1 which means
that they have Rs 0.51 to payoff Rs 1 current liability which is a bad situation. But it depends on the
industry average. Although the current assets have increased but the loan from related parties of Rs
500000 thousand have caused it.

Quick Ratio:
It measures the amount of least liquid assets available to payoff firm’s current liability. The quick ratio have
fallen from 0.39 to 0.3 percent.

Defensive Interval:
Defensive interval shows how many times can the daily expenditure be paid from the company’s quick
assets. In the year 2020, it increased to 6034 because the daily expenditure of Pioneer Cement Ltd has
decreased by a lot.

Activity Ratios:
Activity ratio measures how efficiently a company performs day to day tasks, such as the collection of
receivables and management of inventory.
Cash Conversion Cycle:
Cash conversion cycle measures the length of time required for a company to go from cash paid to cash
received. The cash conversion cycle has improved in 2020. Their customers will pay back early than the
suppliers and the inventory is converted into cash before payment to the suppliers.
Working Capital Turnover:
It measures how efficiently a company is using its working capital to support sales and growth. It has
declined the year 2020. It declined to -1.18 (times) because the current liabilities has increased by a lot.
Fixed Asset Turnover:
It tells how well the business is using its fixed assets. It has declined which means that the assets are not
working at their full capacity. It is now 15.1 percent from 26.9 percent in 2019. The is because of the
purchase of fixed assets.
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Total Assets Turnover:
It tells how efficiently the firm is using its total assets. The assets ratio has fallen to 12.82 percent again this
is due to the purchase of fixed assets.

Solvency Ratios:
It measures a company’s ability to meet its short-term obligations.
Debt to Asset Ratio:
It shows the percentage of assets financed by the creditors.
Debt to Capital Ratio:
The total debt divided by the total capital. A higher ratio means higher risk.
Debt to Equity Ratio:
The ratio indicates the relative proportion of shareholders’ equity and debt used to finance a company’s
assets.
Financial Leverage Ratio:
It measures how many assets are bought from debts.
Interest Coverage Ratio:
It tells how many times can the profit pay the interest.

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DUO-POND ANALYSIS

RATIOS 2020 2019

PROFIT MARGIN -25.18% 4.77%
ASSET TO 0.2 0.6
EQUITY MULTIPLAYER 1.702 1.59
RETUTN ON EQUITY

Comments on duo-pond analysis

• Profit margin decreases which indicates a increase in CoGS, the reasons might be inefficient use of Labor and
Capital.

• Assets T.O. decreases which means that there is a decrease in Total Assets. Lower ratios mean that the
company isn't using its assets efficiently and most likely have management or production problems.

• A higher equity multiplier number indicates that the debt portion of total assets is increasing which
translates to more financial leverage for the company

• ROE falls which indicates the company ability to generate Profits also decreases. This Factor can also be
indicated through decrease in Assets Turnover.

purchase the assets into net profit for itself. A positive ROA indicates a positive direction in the profits level. In 2019,
the company posted a figure of 9.03% for ROA as compared to 1.4% in 2020, which shows that the company has
experienced a setback in generating profits through its assets.

E: The Return on Equity for a business tells us about its abilities to generate profits as well as efficiency. A ROE
figure describes the relationship between the company’s profits and the amount of capital it needs to generate
those profits. Higher ROA indicates that the business is efficient is generation of profits without needing much
capital. In 2019, Kohat Cement generated an ROE of 12.55% as compared to 2.37% in 2020, which shows a clear
decrease in its ability to generate profits from its capital.

F: The Return on Total Capital is another profitability ratio that looks at the profits earned by company
through its capital of debt and equity. It measures the efficiency through which the invested funds are used in the
operations of a business. It describes the profitability of a company in relation to the amount of funds it has
invested. In 2019, Kohat Cement generated a ROTC of 11.88% which was reasonably healthy figure and higher than
compared to what was experienced in 2020, when it posted a figure of 0.46%, which showed that the efficiency to
use the funds which were invested had decreased in major way.

The firm has a loss so the profit margin very in negative. Pioneer cement limited has to improve its
profitability. The efficiency of the firm is quite low so it needs to improve the efficiency of its assets. And
the leverage is quite high which means it is at high risk. All three things profitability, efficiency and leverage
needs improvement.

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20191-26531
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Horizontal Analysis:
It is the comparison of one year to another.

Assets:
There is over all an increase in total assets of the firm. There is a rise in property, plant and equipment
ofn15.3 percent. And a rise of 21.49 percent. This rise in current assets is due to account receivables.

Equity and liabilities:

There is a rise in share capital and reserve to 0.84 in 2020. And surplus on revaluation of fixed assets have
improved a lot from -9.5 percent to 3.73 percent. Long term liabilities have increased at a lower rate than
in 2019. The increase in long term liabilities have increased by 11.81 percent. Also, the current liabilities
have increased by 48.24 percent. This rise is because of increase in trade receivables. Over all there is a
15.98 percent increase in total equity and liabilities.

INCOME STATEMENT
There is a fall in the sales by -3.83 percent. Last year in 2019, the cost of sales increased while this the cost
of sales decreased by -15.91 percent but even then the fall in percentage change is way too much that the
cost of production of less cement is way higher. Therefore over all there is a negative gross profit.

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20191-26531
INSTITUTE OF BUSINESS MANAGEMENT
Financial Analysis (Comparison between 2020 & 2019):
The COVID Pandemic induced a recession at a global Level. Businesses across all the sectors of economy suffered a
major setback in their day-to-day business operations, with lockdowns impacting the workers productivity, which in
turn led to a decrease in sales, which ultimately resulted in decreases in the levels of profitability.

To offset the huge economic impact suffered by the businesses, governments worldwide announced a series of
measures aimed at providing monetary and fiscal support to the businesses that have been impacted. The
Government of Pakistan announced COVID Relief Package with approximate worth of Rs 1.2 Trillion. It announced
measures such as package for Rs100 Billion for export-oriented industries, and Rs100 Billion for Small and Medium
industries. The fiscal stimulus package also aimed to protect people from unemployment, and in this regard Rs200
Billion were earmarked for labor support, so that businesses could be convinced not to dismiss employees during
this time period. The Government also announced tax exemptions for businesses that were essential for generating
economic growth and as such an economic package for cement industries was also announced.

On the monetary side, The State Bank of Pakistan announced the decrease in interest rate from 13% to 7%, so that
businesses can have the ease of borrowing loans to fulfill their expenditures. It also relaxed the criteria of
rescheduling and restructuring of loans. Furthermore, it introduced a measure wherein the principal payment of
loan was to be deferred by one year.

CONCLUSION:
Over all due to the COVID-19 there was a downward trend in cement industries. The shut down stopped
the production process resulting in a loss for all firms. Pioneer Cement limited also faced this problem but
there were other reasons also for the fall in profitability, activity, solvency and liquidity ratios. The cost of
production rises by a lot because of inflation. Inflation made the local raw material expensive. Another
contributor is devaluation of currency. Due to devaluation the imports became expensive. This resulted in
an increase in cost of production. However, there are chances that Pioneer cement limited will do well in
2021 because government has also introduced a budget for cement industries

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STATEMENT OF FINANCIAL POSITION

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STATEMENT OF PROFIT AND LOSS

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STATEMENT OF CASH FLOWS

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STATEMENT OF CHANGES IN EQUITY

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