SEMESTER PROJECT

Financial statement Analysis

Name: IQBAL KHAN

Batch: 42

Semester: 7th

Program: BBA 4 yrs

 Executive summary
We looked at the company's money reports really closely. We used different tools to
understand how well the company is doing. First, we checked ratios, which are like key
numbers. These numbers help us see if the company is good at making money and paying its
debts. Then, we looked at trends over time to find any patterns. This helps us know if the
company is getting better or facing problems. After that, we checked how things changed from
one year to the next. This helps us find areas that are doing really well or not so well. Lastly, we
broke down the money reports into percentages. This shows us how much each part
contributes to the whole. By doing all these things, we get a full picture of how the company is
doing and can make smart decisions for its future.
 Introduction
In this project, we're diving deep into the financial world, trying to make sense of it all in a simple way.
Our main gig is breaking down trends and understanding what the numbers are telling us. We're not just
stopping there – we're also getting our hands dirty with some ratio calculations. It's like financial
detective work, piecing together clues to get a clear picture. The data we're using? Well, we've got it
from two key sources – the income statement and the balance sheet. These documents spill the beans
on where the money is coming from and where it's going. By doing this, we're making sure our analysis
covers all the bases. The goal? To share insights that are as clear as day, helping everyone make sense of
the financial puzzle. So, buckle up – we're on a mission to demystify the numbers and make finance
easy to understand.

Company Introduction

Company Ownership Structure

Board of Directors:
● Ahmad Waqar Chairman,
● Ahsan M. Saleem Chief Executive Officer
● Farah Ayub Tarin
● Farrukh V. Junaidy
● Muhammad Kamran Saleem
● Nadeem Maqbool
● Nasir Shafi
● S.M. Ehtishamullah

Audit Committee:
● Farrukh V. Junaidy Chairman
● Nadeem Maqbool Member
● Nasir Shafi Member
● S.M. Ehtishamullah Member
Human Resource Committee:
● Nadeem Maqbool Chairman
● Ahmad Waqar Member
● Farah Ayub Tarin Member
● Nasir Shafi Member

CFO & Company Secretary:

● Muhammad Saad Thaniana

Company Brief History

1983 • Incorporation of Crescent Steel and Allied Products Limited*

1987 • Started commercial production • Listed on Pakistan Stock Exchange • API Certification
accreditation

1989-90 • Modification of pipe plant to produce line pipes up to 90 inches in outside diameter

1991 • Exported line pipes • Investment made in 3-layered polyolefin coating facility

1992 • Executed first ever 3LPE coating project in Pakistan

1995-96 • Change of reporting period from December to June • Introduced new logo of the
Company

1997 • First company in its sector to obtain ISO 9001 accreditation • Started reporting on
Environment and Social Responsibility

2000 • Diversified into the textile sector by acquiring Crescent Cotton Products consisting of
19,680 spindles*

2001-02 • BMR at Crescent Cotton Products

2003 • Adaptation of the Code of Corporate Governance • Formation of the Board Audit
Committee • Formation of the Board Human Resource Committee

2004 • Implementation of ERP and other IT related initiatives • Acquired testing facilities for our
service line pipes
2005 • Installed fine count unit at Crescent Cotton Products consisting 25,344 spindles*

2006 • Pipe manufacturing and coating plant significantly upgraded to produce pipes for cross
country pipelines • Completion and commencement of production on the new spinning mill •
Acknowledged among KSE - Top 25 Companies 2005 • First Pakistani Company to acquire oil
and gas industry specifics ISO/TS 29001, QMS Certification from API • 1st Position – Best
Corporate Report Awards 2005 (ICAP and ICMAP)

2007 • Initiated the of Oracle e-business suite initiated • The Investment and Infrastructure
Development Division (IID) was carved out as a separate business unit

2008 • Executed port piles work • 1st Position – Best Corporate Report Award 2007 (ICAP and
ICMAP)

2009 • Oracle E-Business Suite go - live • Merit certificate - Best Presented Accounts and
Corporate Governance Disclosure Award 2009 (SAFA) • Acknowledged among KSE - Top 25
Companies 2008 • 2nd Position – Best Corporate Report Award 2008 (ICAP and ICMAP)

2010 • Acquired a 100% stake in Shakarganj Energy (Private) Limited, a bagasse fired thermal
generation power plant* • Adapted horizontal and vertical integration in the steel business •
Complied with ISO 14001 and OHSAS 18001 requirements for the first time • 2nd Position –
Best Corporate Report Award 2009 (ICAP and ICMAP)

2011 • Upgraded coating plant capacity to 60” making it the only coating plant of this capacity in
Pakistan • Migrated entire ERP system to Cloud Infrastructure • Acknowledged among KSE -
Top 25 Companies 2010 • Machinery enhancement at Crescent Cotton Products • 2nd Position –
Best Corporate Report Award 2010 (ICAP and ICMAP)

2012 • Acquired a 100% stake in CS Capital (Private) Limited* • Steel Division upgraded with
state of the art digital control systems and HMI (Human Machine Interface) capabilities •
Acknowledged among KSE - Top 25 Companies 2011 BMR at Crescent Cotton Products • 1st
Position – Best Management and Decent Work Practices Award (EFP) • 2nd Position - Best
Practices Award on OSH&E (Occupational Safety, Health and Environment) (EFP) • 2nd
Position – Best Corporate Report Award 2011 (ICAP and ICMAP)

2013 • Incorporated a wholly owned subsidiary Crescent Hadeed (Private) Limited to

manufacture steel billets* • High energy efficient motors installed for reducing consumption of
energy during production • Defined Crescent Core Values • Launched Crescent Communications
– an internal communication platform • Developed a sustainability reporting framework • 1st
Position – Best Corporate Report Award 2012 (ICAP and ICMAP) • 2nd Position – Corporate
Excellence Award (MAP)

2014 • 1st Position – Employer of the Year Award 2012 (EFP) • 1st Position – Best Practice
Award on OHSAS 2013 (EFP) • 2nd Position – Best Corporate Report Award 2013 (ICAP and
ICMAP) • 3rd Position – Best CEO Award 2013 (Mass HRS) • 4th Position – Best Sustainability
Report Award 2013 (ICAP and ICMAP) • 5th Position – Corporate Philanthropy Award 2012
(PCP)

2015 • Land allocated by Punjab Power Development Board to Solution de Energy (Private)
Limited to establish solar power generation plant • Installation of 7,680 compact attachments to
enhance efficiency* • Received KSE - Top 25 Companies Award for the years 2010, 2011 and
2013 • 2nd Position - Best Presented Annual Report Award 2013 (SAFA) • 3rd Position - Best
Practice Award on OSH&E (Occupational Safety, Health and Environment) 2014 (EFP)

2016 • Rights issued to finance expansion in the line pipe manufacturing unit by adding another
SP Line • Installation and commencement of operation on the second SP Line, enhancing the
installed capacity and product offering • Record production of 58,202 tons of Mixed-Dia Bare
Pipe and coating of 590,738 square meter • 1st Position in the Diversified Holdings Sector - Best
Presented Annual Report Award 2014 (SAFA) • 3rd Position in the Engineering Sector - Best
Corporate Report Award 2014 (ICAP and ICMAP) • 2nd Position - Best Sustainability Report
Award 2014 (ICAP and ICMAP) • 2nd Position in the Human Resource Development Category -
Employer of the Year Award 2014 (EFP)

2017 • Record production of 88,110 tons of Mixed-Dia Bare Pipe • Assigned initial entity ratings
of ‘A+/A-2’ (Single A Plus/A-Two) by JCR-VIS • 1st Position in the Diversified Holdings
Sector - Best Presented Annual Report Award 2015 (SAFA) • 3rd Position in the Engineering
Sector - Best Corporate Report Award 2015 (ICAP and ICMAP) • 3rd Position - Best
Sustainability Report Award 2015 (ICAP and ICMAP) • 1st Position in the Engineering and
Autos Sector - Best Corporate Report Award 2016 (ICAP and ICMAP) • 3rd Position - Best
Sustainability Report Award 2016 (ICAP and ICMAP)

2018 • Maintained the entity rating of ‘A+/A-2’ (Single A Plus/A-Two) by JCR-VIS • Listed
among PSX - Top 25 Companies 2016 • 1st Position in the Diversified Holdings Sector - Best
Presented Annual Report Award 2016 (SAFA) • 3rd Position in the Integrated Reporting
Category - Best Presented Annual Report Award 2016 (SAFA) • 5th Position - Best
Sustainability Report Award 2017 (ICAP and ICMAP)

2019 • Certificate of Merit in the Engineering and Autos Sector - Best Corporate Report Award
2018 (ICAP and ICMAP) • Amalgamation of Crescent Hadeed (Private) Limited and CS Energy
(Private) Limited – wholly owned subsidiaries • 1st Position in the Diversified Holdings Sector -
Best Presented Annual Report Award 2017 (SAFA) • Enhanced hydro-tester machine capacity to
meet new industry requirements

2020 • Issuance of electricity generation license of Solution de Energy • 3rd Position – Corporate
Philanthropy Award 2018 (PCP) • Tested and implemented IT infrastructure for work from
home. • Implementation of Covid-19 protocols and work instructions
2021 • 1st in the Diversified Holdings Sector - Best Presented Annual Report Award 2019
(SAFA) • Certificate of Merit in the Engineering and Autos Sector - Best Corporate Report
Award 2019 (ICAP and ICMAP) • Certificate of Merit in the Engineering and Autos Sector -
Best Corporate Report Award 2020 (ICAP and ICMAP)

2022 • 1st in the Diversified Holdings Sector - Best Presented Annual Report Award 2020
(SAFA) • Certificate of Merit in the Engineering and Autos Sector - Best Corporate Report
Award 2021 (ICAP and ICMAP)

Berger Principle Lines

● Steel Division
● Crescent Cotton Products
● Cotton Division
● Investment and Infrastructure Development Division
● Crescent Hadeed – Steel Billets Division
● CS Energy – Energy Division

● CS Capital (Private) Limited

● Solution De Energy (Private) Limited

Berger Major Competitors

There are no competitors identified for Crescent Steel and Allied Products; Acquisitions. There
have been no acquisitions found related to Crescent

Berger Market Price of Shares

Crescent Steel & Allied Products share price on Dec 15, 2022 is Rs 35.54

Total Capitalization
The total capitalization of Crescent Steel & Allied Products is 2,759,058.73
Fiscal Year
A fiscal year is a period of 12 months. Crescent Steel & Allied products fiscal year start on 1st
July and end on 30th June. For example fiscal year 2022, covers a period from 1st July 2021 to
30th June 2022.

Method of Depreciation
The method of depreciation used by Crescent Steel & Allied Products to depreciate its
operational asset is Straight Line Method.

Inventory Method
Stores, spares and loose tools are valued at lower of weighted average cost and net realizable
value, less provision for impairment, if any. Items in transit are valued at cost comprising invoice
value plus other charges incurred thereon less impairment if any.

Incorporation Date
Crescent Steel and Allied Products Limited was incorporated on 1 August 1983 as a public
limited company in Pakistan under the Companies Act, 1913 (now Companies Act, 2017). The
Company operates five segments Steel, Cotton, Investment and Infrastructure Development
(IID), Energy and Hadeed (Billet) segment.

Average Income Tax for Fiscal Year

In accordance with the Finance Act, 2022 super tax at the rate of 4% for tax year 2022 and
onwards has been imposed on the Company in addition to the corporate tax rate of 29% up to 30
June 2021. Accordingly the Company has recorded deferred tax at 33%.

CSAP Products & Services

Steel Products:
● Steel Line Pipe Manufacturing And Anti Corrosion And Flow Coatings
● Steel Line Pipes
● Steel Tubular Piles
● Steel Coil Slitting Line
● Offline Ultrasonic Testing Of Steel Pipes
● Testing
● Fabrication
 ● Protective Coating & Lining

Cotton Products:
● Carded Cotton/Synthetic Yarn Ne16s~36s
● Carded Compact Cotton Yarn Ne21s~40s
● Siro Spun Cotton Yarn Ne8s~12s
● Slub Cotton Yarn Ne8s~20s

Energy:
CS Energy was incorporated on 2 April 2008. The unit has developed and commissioned a
15MW a co-generation, bagasse fired thermal generation power plant at Bhone, Punjab with
commercial operations commencing in December 2014.
The unit’s primary business is to generate, accumulate, distribute, sell and supply electricity to
FESCO and to other distribution companies as permitted. The unit also employs a 16.5 MW
condensing and extraction turbine to process steam during off-season periods to ensure
uninterrupted supply to Crescent Hadeed throughout the year.
This innovative project sets a precedent for power production at sugar mills by using bagasse as
a source of alternative energy. The co-generation plant uses bagasse in the combustion process to
produce power and process steam. The plant is well positioned to cater to excess demand of
process steam from the surrounding sugar mills and to provide reliable emission free power to
the national grid.
The power plant will operate under environmental management controls and in strict compliance
with the requirements of the National Environmental Quality Standards (NEQS) Pakistan to
ensure there are no adverse effects on the surrounding environment and community.

Investment & Infrastructure Development:

The division manages an investment portfolio in securities (shares, bonds and other securities),
across diversified sectors and investment properties (held for rental as well as long term
appreciation) in order to meet specified investment goals at a given risk appetite, to maximize
returns. Our strategy has been to focus on financially sound investments in sectors and projects
which have potential for growth.
To bring greater focus to investment management, in 2011, the company acquired a fully owned
subsidiary operating as CS Capital (Private) Limited, at the Head Office in Karachi. The
principal activity of the subsidiary is to manage and organically grow investment portfolios in
stocks, commodities and other securities, both strategic and short term.

SWOT Analysis:
Strengths:
● Strong balance sheet footing with low gearing.
● Strong systems provide for discipline and effective management.
 ● Business lines provide multiple/diverse avenues of revenue generation and buffer market
shocks.
● Strong culture underpinned by our core values, promotes a healthy, and inclusive
workplace environment; ensures quality consciousness across all deliverables.
● Brand equity.
● Social and relationship capital.
● Organization information capital positions us well to deliver value addition to partners
(suppliers and customers – example: design support for pipelines etc.)

Weaknesses:
● Economies of scale.
● Limited value addition in product suite of cotton and billet segments.
● Low-capacity utilization for steel billets.

● Choked access to debt capital on account of heavily skewed non funded exposures on
past sales.

Opportunities:
● Future projects: Infrastructure development, Energy/LNG projects, Water supply
projects, Port Construction projects etc.
● Expected rise in energy/steel demand due to increase in per capita consumption,
population etc.
● Export of pipe opportunities to other countries like GCC and EU.
● Develop alternative energy sources through renewable i.e. solar, to reduce overall energy
costs.

Threats:
● Higher sensitivity (w.r.t. pipe demand) to sociopolitical landscape/environment.
● Supply chain constraints, raw material availability and volatile commodity prices.
● Currency devaluations, policy rate hikes and restrictive import regulations especially
margin requirements.
● Rising input costs on account of energy costs and inflation.
● Cotton crop shortage/higher rates and poor quality.
 ● Limited availability of local scrap; reliance on imported scrap increases sensitivity to
commodity markets.

Corporate Social Responsibility:

CSAP Foundation has been established with the aim of bringing greater focus to our
philanthropic CSR. The Foundation was granted tax exemption from FBR in 2018 and is
operative as a non-profit organization. The main objectives of the Foundation are:

● To consolidate our philanthropic agenda and social contributions under one umbrella
● To bring more focus to philanthropic CSR and community development objectives
● To bring greater focus, accountability, and transparency to our societal investments
● To enable access to funds and strategic partnerships
Over the years CSAP Foundation has made contributions to various community partners in the
education, health, environment and societal sectors. We are currently working towards
positioning all our social contributions through the Foundation and are hopeful that it will enable
us to bring greater focus to our philanthropic CSR and towards the United Nations Sustainable
Development Goals (SDGs) in their ambition to achieve a better world for all. Some of our
community partners include:

● Burns Centre
● Citizens Police Liaison Committee
● Civil Hospital
● Karachi Relief Trust
● National University of Sciences and Technology
● The Citizens Foundation
● The Health Foundation
● World Wide Fund
The multidimensional focus of CSAP Foundation ensures that we are able to serve the
community by focusing on the immediate needs of our society while aligning them with long-
term developmental objectives.

Careers:
Our people are fundamental to our success. We seek to attract, develop and retain a talented,
diverse workforce with a passion for learning and the creativity to discover and develop — all
working together in an environment that encourages innovation and collaboration, where our
employees excel and contribute to high performance results for our company, shareholders,
customers, and communities.
If you are interested in joining our team, please view current vacancies and submit your CV with
covering letter to careers@crescent.com.pk specifically mentioning your reporting line with the
position name as subject.

Meaning & Concept Financial Analysis:

According to Hermanson et al (1992:824), “financial statement analysis consists of applying
analysis tools and techniques to financial statements and other relevant data to show important
relationships and obtain useful information.” Therefore, financial statement analysis can be
defined as the breaking down, interpretation, and translation of data contained in financial
statements to provide information and show important relationships among the items of financial
statements and drawing conclusions about the past performance, current financial position, and
future potentials of a business.

Types of Financial Analysis:

Vertical Analysis
This type of financial analysis involves looking at various components of the income
statement and dividing them by revenue to express them as a percentage. For this exercise to be
most effective, the results should be benchmarked against other companies in the same industry
to see how well the company is performing.

Horizontal Analysis
Horizontal analysis involves taking several years of financial data and comparing them to each
other to determine a growth rate. This will help an analyst determine if a company is growing or
declining, and identify important trends.

Ratio Analysis
Ratio analysis is a quantitative method of gaining insight into a company's liquidity, operational
efficiency, and profitability by studying its financial statements such as the balance sheet and
income statement. Ratio analysis is a cornerstone of fundamental equity analysis.

Trend Analysis
Trend analysis is a technique used to examine and predict movements of an item based on
current and historical data. You can use trend analysis to improve your business using trend data
to inform your decision-making.

Procedure of Ratio Analysis

1. An analyst should decide the objectives of ratio analysis.
2. Select th0 appropriate ratios on the basis of objectives of ratio analysis.
 3. Calculation of the selected such ratios.
4. Comparison of the calculated ratios with the ratios of the same business concern in the
past.
5. Comparison of the calculated ratios with the same type of ratios of other similar business
concerns.
6. Comparison of the calculated ratios with the same type of ratios of the industry to which
the business concern belongs.
7. Interpretation of the ratios.

Devices of Financial Analysis

1. Balance Sheet
2. Income Statement
3. Statement of Cash Flow

Limitation of Financial Analysis

Some of the most important limitations of ratio analysis include:

Historical Information: Information used in the analysis is based on real past results that are
released by the company. Therefore, ratio analysis metrics do not necessarily represent future
company performance.

Inflationary effects: Financial statements are released periodically and, therefore, there are time
differences between each release. If inflation has occurred in between periods, then real prices
are not reflected in the financial statements. Thus, the numbers across different periods are not
comparable until they are adjusted for inflation.

Changes in accounting policies: If the company has changed its accounting policies and
procedures, this may significantly affect financial reporting. In this case, the key financial
metrics utilized in ratio analysis are altered, and the financial results recorded after the changes
are not comparable to the results recorded before the change. It is up to the analyst to be up to
date with changes to accounting policies. Changes made are generally found in the notes to the
financial statements section.

Operational changes: A company may significantly change its operational structure, anything
from their supply chain strategy to the product that they are selling. When significant operational
changes occur, the comparison of financial metrics before and after the operational change may
lead to misleading conclusions about the company’s performance and future prospects.

Seasonal effects: An analyst should be aware of seasonal factors that could potentially result in
limitations of ratio analysis. The inability to adjust the ratio analysis to the seasonality effects
may lead to false interpretations of the results from the analysis.
Manipulation of financial statements: Ratio analysis is based on information that is reported
by the company in its financial statements. This information may be manipulated by the
company’s management to report a better result than its actual performance. Hence, ratio
analysis may not accurately reflect the true nature of the business, as the misrepresentation of
information is not detected by simple analysis. It is important that an analyst is aware of these
possible manipulations and always complete extensive due diligence before reaching any
conclusions.

Overview of Ratio Analysis

Ratio analysis refers to the analysis of various pieces of financial information in the financial
statements of a business. They are mainly used by external analysts to determine various aspects
of a business, such as its profitability, liquidity, and solvency. Analysts rely on current and past
financial statements to obtain data to evaluate the financial performance of a company. They use
the data to determine if a company’s financial health is on an upward or downward trend and to
draw comparisons to other competing firms.

Data Analysis & Interpretation:

Profitability Ratios
Years Net Profit Margin ROA Operating Margin ROE Gross Profit Margin
2022 5.17% 4.34% 7.92% 6.01% -0.92%
2021 4.85% 3.80% 8.78% 5.89% 6.84%
2020 -0.45% -0.18% 5.00% -0.31% 1.33%
2019 3.53% 1.73% 6.62% 2.66% 5.42%
2018 -0.62% 6.80% 3.29% -0.81% 5.44%

INTERPRETATION: Profitability ratios indicate how efficiently a company generates profit

and value for shareholders. Higher ratio results are often more favorable. Net profit Margin is
lowest in 2020 and 2018 the company has to take necessary steps to increase sales and to reduce
the cost of sale. So that in future the loss can be prevented. ROA is low in 2020 due to decrease
in low sales which result in decrease in net profit. Operating profit remains stable. ROE was also
low in 2020 and 2018 because the company failed to convert its equity financing into profit
effectively and efficiently. GP Margin is low in 2022 because CGS was greater than then the net
sales.

Liquidity Ratios
Years Current Ratio Acid Test Ratio Working Capital Sales to W.C.
2022 1.38 0.75 816768 8.68
2021 1.45 0.89 1134278 6.40
 2020 1.11 0.53 448162 8.53
2019 1.19 0.79 475726 8.55
2018 0.02 0.82 1753828 5.66

INTERPRETATION: The current ratio is well-maintained except in the year 2022. This
happens due to the increase of current liabilities. The Company Acid Test ratio is low and the
company is not in a position to meet its obligation without struggle. Higher working capital of a
company demonstrates healthier Financial position. The sales to W.C ratio is stable meaning the
company is efficiently utilizing its C.A and C.L to support its growth in sales.

Activity Ratios
Year R.T.I.
s Receivables Turnover D Inventory Turnover I.T.I.D Total Asset Turnover
2022 45.41 8.04 5.18 71.07 0.83
2021 40.02 9.12 3.66 99.85 0.79
160.0
2020 23.73 15.38 2.28 4 0.43
165.4
2019 45.50 8.02 2.21 5 0.40
117.6
2018 20.41 17.88 3.28 9 0.74

INTERPRETATION: Receivable Turnover means on average basis how many times cash is
collected in a year and receivable turnover in days mean on average basis after how many days
cash is collected in a year. Inventory turnover means On average basis how many times
inventory is converted into cash in a year and inventory turnover in days means after how many
days inventory converted into cash in a year. Total Asset turnover Ratio is low its need to be
higher to increase effectiveness and efficiency.

Capital Structure Ratio

Year Interest Coverage
s Ratio Debt/Equity Ratio Debt/Total Asset Debt/Tangible Ratio
2022 2.28 38.48% 27.79% 0.39
2021 3.02 45.80% 31.41% 0.46
2020 0.62 77.32% 43.60% 0.77
2019 1.10 53.63% 34.91% 0.54
2018 1.24 58.39% 36.86% 0.59

INTERPRETATION: It represents how many times the company can pay its obligations using
its earnings. The company will be able to pay its obligation due to low coverage ratio in 2020 the
company will struggle to pay its obligations. Debt to Equity Ratio shows how much debt
business has as compared to investor equity. Debt to Total Asset how much of a business is
owned by the creditor compared to how much of the company’s assets are owned by
shareholders. The company is low which means the company is leveraged.

Solvency Ratio
Years NPAT+Dep / Total Liability
2022 24.32%
2021 20.79%
2020 4.91%
2019 8.89%
2018 0.93%

INTERPRETATION: A solvency ratio measures the size of a company's profitability and

compares it to its obligations. The Company’s Solvency has been increased since 2018 it went
down in 2020 then again increase in 2021 and 2022 which shows that the company is financially
strong.

DuPont Return On Asset

Years Net Profit Margin*Total Asset Turnover
2022 4.28%
2021 3.83%
2020 -0.19%
2019 1.41%
2018 -0.46%

INTERPRETATION: It measures the combined effects of profit margins and asset turnover.
DuPont ROA is low in 2020 and 2018 due to decrease in Asset Turnover this negatively impacts
the ROE of the company.