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Contents
Acknowledgement Company Information Company Background List of stake holders Sales trend Liquidity position (Current ratio) Quick ratio Debt-to-equity ratio Profitability Ratio Return on assets Return on Equity ROE Earning per share Gross profit margin Comparison gross profit, net profit and sales Assets turnover ratio Inventory Turnover Ratio Conclusion
Analysis of Financial Statements
Page |2
Acknowledgment
This project “Analysis of Financial Statements of Fauji Cement” is assigned to us by our highly regarded teacher of BF Mr. Zulfiqar Ali Shah. We have made our best efforts and had not left even one stone unturned to complete this project as proper and neat as we can. This informative outcome is the result of hardworking of all members in a group formation. All members have utilized their skills up to their optimal level, which result in such a tremendous outcome. Nevertheless it was a bit challenging task demanding a lot of commitment, hardworking and expertise. We have faced so many obstacles while obtaining required information. We have completed it by best of our expertise. There may be some flaws in this project but we have utilized our expertise to their optimal level to generate something valuable for us and to share with others.
Analysis of Financial Statements
Page |3 In short all this is due to love, affection, care, and help of our parents and teachers who had make us from scrap, a something valuable and to whom we are going to dedicate our project.
Analysis of Financial Statements
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Analysis of Financial Statements
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Company Background
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 1 January 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.
Vision Statement
To transform FCCL into a model cement manufacturing Company engaged in nation building through most efficient utilization of resources and optimally benefiting all stake holders while enjoying public respect and goodwill.
Mission Statement
FCCL while maintaining its leading position in quality of cement will build up on its present state of profitability with a view to ensuring optimum returns to the shareholders.
Strategies
We shall achieve our vision by making total quality the FCCL way of doing business, Relentless pursuit of full customer satisfaction, Empowering FCCL people leading the industry of Cement world and manufacturing excellence producing superior returns to our shareholders.
Analysis of Financial Statements
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Financial Responsibility
We are prudent and effective in the use of the resources entrusted to us.
Marketing & Sales
Manufacture and market ORDINARY PORTLAND CEMENT. [PS-232-1983(R)]
Local Sales
Fauji Cement Company supplies cement throughout Pakistan especially in the provinces of Punjab, AJK and NWFP through extensive dealer’s network.
Direct Sales
Direct sales have been made to mega and large projects. Some of them are:• • • • • • • • • Mangla Dam Raising Development Project Malakand (Dargai) Hydrothermal Power Projects Motorway (M1-Project, Islamabad-Peshawar) & (M2-Project, Islamabad-Lahore) Army Housing Schemes Air Force Housing Schemes International Airport Lahore. Bahria Town Sites. Fauji Foundation Projects National Highway Authority Projects National Logistic Cell Projects
•
Exports
Have a large share in the Afghan market. Some exports are also made to the Middle based upon requirements.
Stake Holders of Fauji Cement
Analysis of Financial Statements
Page |7 1 2 3 4 Fauji Foundation IFU F.L. Smith & Co. General Public 52.09% 1.74% 1.74% 44.43%
LIQUIDITY POSITION
?Current Ratio
years 2001 2002 2003 2004 2005 2006 2007 current Asset current Liabilities Ratios 0.11 1.42 1.53 1.54 0.92 1.25 1.35
721338365 574461034 1113721603 1579381610 1953527
472332789 372116351 1206945982 1267198656 1442287
Analysis of Financial Statements
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Current Ratio
1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2001 2002 2003 2004 Years 2005 2006 2007
Ratios
Series1
Above information shows surprising results as current ratio increased massively in year 2001-2002. As we know that current ratio can increased by two ways: • Increase in current assets • Decrease in liabilities Figures of 2001-02 is outlier so it can affect negatively to our results, hence we are going to neglect this figure by considering it outlier.
? Interpretations of 2003-04
If we look at the figures of 2003-04 an increase of 0.65 % is there. Reasons behind this increase are: Companies current assets decreased on other side current liabilities are also decreased but decrease in liabilities is greater than decrease in current assets. As companies current assets decreased by 20%, while current liabilities decreased by 21.21% so due to these factors there is small increase of 0.65 % in current ratio. • Decrease in current assets
Decrease in current assets = 721338365 – 574461034 / 721338365 = 20 %
Analysis of Financial Statements
Page |9 Now we see that what components of current assets decrease as there is net decrease of 20 % in current assets. If we see the current assets of company during 2003-04 we come to know that there is increase in all factors like inventory, stock in trade and A/R except trade debtors and current portion of foreign exchange risk insurance contract. Their foreign exchange risk insurance contract has expired by the amount of Rs-184.776 million due to which current assets decrease while all other parts of current assets has increased. So due to the expiry of foreign exchange insurance contract there was a net decrease of 20 % in current assets. • Decrease in current liabilities Decrease in current liabilities = 472332789 – 372116351 / 472332789 = 21.21 % As from above calculations it is clear that company liabilities decreased by 21.21 %. Now we see that which factors of current liabilities decreased and why? Short term loan of business has decreased to zero. On other side accrued liabilities of creditors has decreased by 10.50 % 319027853 – 285607944/319027853 = 10.50 %, Current portion of long term debt also decreased by 37 %, which is big decrease and contribute up to a large extent in decrease of current liabilities. 137390439 – 86508407 / 137390439 = 37 %
? Interpretations of 2004-05
If we see the graph of current ratio we came to know that current ratio decrease from 1.54 to 0.92. This is a massive decrease. Now we have to see that why this ratio came down. Total decrease in current ratio is 40.25. Now if we see the statements of these years we see that there is increase in both current assets and current liabilities. Current assets are increasing by 94 % 113721603 – 574451034 / 574451034 = 94 % Analysis of Financial Statements
P a g e | 10 While on other side current liabilities are increased by 224.35 % which is calculated here down. 1206945982 – 372116351 / 372116351 = 224.35 %
? Interpretations of Year 2005-06
If we cast a sight on graph of current ratio we see that there was increase in the ratio. Ratio increased from 0.92 to 1.25, which shows the increase of 35.86 %. During this year current assets of company increased by 34.67 % while on other side company current liabilities also increased by just 4.99 %, which is very small increase compare to increase in current assets. So increase in current assets is too much than increase in current liabilities hence current ratio increased by 35.86 %. Now we are going to unveil those factors due to which this ratio has shown this much increase.
? Interpretations of 2006-07
Current ratio of company increased from 1.25 to 1.35 during fiscal year 2006-07, which is increase of 7.4 %. Now we are going to discuss and underline factors due to which ratio increased. During the year current assets increased but current liabilities also increased. Increase in current assets was greater than increase in current liabilities due to which current ratio has shown such a minimal increase.
Quick Ratio
Years 2001 Current Asset Current Liabilities Inventories Ratios 0.09
Analysis of Financial Statements
P a g e | 11 2002 2003 2004 2005 2006 2007 1.27 1.43 1.38 0.88 1.13 1.23
721338365 574461034 1113721603 1579381610 1953527
472332789 372116351 1206945982 1267198656 1442287
188640194 197400283 297875556 490887123 468769
Quick Ratio
2 Ratio 1.5 1 0.5 0 2001 2002 2003 2004 2005 2006 2007 Years
Above information shows surprising results as Quick ratio increased massively in year 2001-2002. As we know that Quick ratio can increased by two ways: • Increase in Liquid assets • Decrease in liabilities Again Figures of 2001-02 is outlier so it can affect negatively to our results, hence we are going to neglect this figure by considering it outlier.
?Interpretations of 2003-04
Analysis of Financial Statements
P a g e | 12 If we look at the figures of 2003-04 a decrease of 3.50 % is there. Reasons behind this are: Companies Liquid assets decreased on other side current liabilities are also decreased but decrease in Liquid assets is greater than decrease in current liabilities. As companies Liquid assets decreased by 23.84%, while current liabilities decreased by 21.21% so due to these factors there is small decrease of 3.5 % in Quick ratio.
?Interpretations of 2004-05
If we see the graph of Quick ratio we came to know that Quick ratio decrease from 1.38 to 0.88. There is a decrease of 36.23 % in the ratio. Now we have to see that why this ratio came down. • Increase in Liquid assets There is an increase in liquid assets of 57 % in the year 2005. • Increase in current liabilities While on other side current liabilities are increased by 224.35 % which is calculated here down. 1206945982 – 372116351 / 372116351 = 224.35 % The reason of high increase in current liabilities is the increase in the short term borrowings from nil to Rs.308, 876,433.
?Interpretations of 2005-06
During year 2005-06 quick ratio has shown a increase from 0.88 to 1.13. Ratio increased by 22.12%. Now we have to see that why this ratio has shown a upsurge of 22 %. So this affect is partially due to increase in current ratio. During the same year our current ratio also increases by 26.4%.
?Interpretations of 2006-07
Here in year 2006-07 current ratios has shown a increase of 8.13%. Again it is due to increase in current ratio as during the same year current ratio also increased by 7.40%. Here we see that change in quick ratio is greater than change in current ratio. From this factor we can predict that during the year company inventory has changed by minimal amount as compared to other current assets due to which current ratio has shown a small change. While on other side when we have deducted inventory for quick ratio than ratio increased more than current ratio.
Analysis of Financial Statements
P a g e | 13
? Debt-to-equity Ratio
years 2001 2002 2003 2004 2005 2006 2007 Debt Equity Ratios 20.06 2.05 2.66 1.88 1.26 0.6 0.38
4325877564 3645347488 2522005000 1969570000 1419378000
4194422350 1939134023 2449624461 3282616000 3735206000
Debt Equity Ratio
25 20
Ratios
15 Series1 10 5 0 2001 2002 2003 2004
Years
2005
2006
2007
?Interpretations of year 2004-05
During the year 2004-05 company debt reduced by 29.13%. While on other side equity remain same. So due to reduction of debt ratio came down.
Analysis of Financial Statements
P a g e | 14
?Interpretations of 2005-06
During 2005-06 company debt-to-equity ratio decreased from 1.26 to 0.6. Ratio decreased by about 52.38 %, which shows that company has reduced their debt during the year in massive amount. Now we make calculations that how much debt company has reduced during the year, where from they have arranged funds to pay back their debt
?Interpretations of 2006-07
During 2006-07 company debt-to-equity ratios decreased from 0.6 to 0.38 which is decrease of about 36.66%, which shows that company has reduced their debt during the year. Now we make calculations that how much debt company has reduced during the year and either equity has increased or decreased.
Profitability Ratios
? Return on Assets ? Years ROA % 2001 -10.14 2002 -1.6 2003 -8.42 2004 5.32 2005 8.2 2006 19.42 2007 10.1
Analysis of Financial Statements
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ROA 25 20 15 Ratio 10 5 0 -5 -10 -15 Years 2001 2002 2003 2004 2005 2006 2007
Series1
From the above graph it is clear company ROA was in negative zone during 2001 to 2003. But ROA entered in positive zone from 2004. As we know that ROA has two main components due to which it can either increase or decreased. • Total or Avg. Assets • Net Profit ROA = Net Profit Total Asset ROA can increase either net profit increase or total assets decreased. During the year 2001-03 company net profit was going in loss due to which ROA remain in negative zone. But from year 2004 and onward profit shifted in positive zone and start increasing slowly due to which ROA has shown an increase but again it decrease in year 2007. Decrease in ROA in year 2006-07 is solely due to decrease in net income of company. In year 2006-07 NI reduce by 46.30%. So due to this decrease ROA dropped by 47.99 %. ROA drop during 2005-06 partially due to decrease in fixed assets as company assets also reduced over the period by 2.04%. As we have discussed before, that ROA also reduced due to reduction in fixed assets or denominator. ROA drop during 2005-06 partially due to decrease in fixed assets as company assets also reduced over the period by 2.04%. As we have discussed before, that ROA also reduced due to reduction in fixed assets or denominator. Over the period ROA is also affected by the reduction in fixed assets. As we see from financial statements that fixed assets of company reduced during 2005 up to 2007. For further clarification here are some calculations.
Analysis of Financial Statements
P a g e | 16
?Reduction in Fixed Assets
Year % Reduction in Fixed Assets 2004-05 0.25 2005-06 2.04 2006-07 3.74 Reasons behind the reduction in fixed assets during 2004-05 are depreciation of plant and machinery and disposal of assets. During the year five vehicles and a building disposed off by net gain of 4.749 million. On other side assets are depreciated by amount of Rs.256.283 million. During the year 2005-06 company has charged depreciation of Rs.266.532 million and disposed off four vehicles and a computer by net gain of Rs.1.301 million. While during 2006-07 company has charged depreciation of Rs.283.454 million and disposed off their two vehicles by net gain of Rs.0.1 million
? Return on Equity (ROE)
Year 2003 2004 2005 2006 2007
NI -531380995 314147836 510490438 1203735333 646323000
Total Equity 4194422350 4194422350 2449624461 3282616746 3735206000
Ratio -0.127 0.075 0.208 0.367 0.173
Analysis of Financial Statements
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ROE
0.400 0.300 Ratio 0.200 0.100 0.000 -0.100 -0.200 Year 2003 2004 2005 2006 2007
From the above graph of EPS it is clear that the graph has same trend as that of net profit margin of company. EPS was in negative zone during year 2002-03 but it enters in positive zone afterward. Again in year 2006-07 EPS drop from 0.36 to 0.17. The only reason behind this decrease is reduction in sales during respective year. NI of company affected due to reduction in sales whose impact also transfers to ROE. ? Net Profit Margin Ratio Years 2002 2003 2004 2005 2006 2007 Ratio% -6.96 -21.35 9.67 13.02 25.18 13.52
Analysis of Financial Statements
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Net Profit Margin Years
2002 2003 2004 2005 2006 2007
30 20 Ratio% 10 0 -10 -20 -30
?Interpretations for 2002-03
During year 2002-03 company has shown negative profit mean loss. Net profit margin has shown a negative increase of 67.40 %, which is a massive loss. If we see sales of company during respective year we came to know that sales also reduced by 4.78%.
During the year company net profit increased. This is the year in which company came out of losses and shown a positive figure of profitability. During the year company has approved its profitability by about 25%. Increase in sales is the most important factor contributing towards this improvement. During the year 2003-04 company sales increase by about 52%. On other side interest expanse also reduce by 55.93%. According to my personal opinion profit is highly affected by reduction in interest expanse.
?Interpretations for 2003-04
During the year 2004-05 the Company earned a Profit after Tax of Rs.510.49 million as compared to last year’s profit of Rs.314.148 Million, the profit from operations increased from Rs.723 Million to Rs.989 Million depicting an increase in capacity utilization to 96% as compared to 88% last year, stable market environment and economy in costs resulting from Analysis of Financial Statements
?Interpretations for 2004-05
P a g e | 19 conversion to coal firing system. The diluted earnings per share rose up to Rs.1.22 as compared to Rs.0.75 for the previous year. ? Interpretations for Year 2005-06 Company net profit margin has shown a good increase during 2005-06. Net profit margin increased from 13.02 to 25.18, which is increase of about 48.29 % during 2005-06.
? Net Profit Margin Ratio Years 2002 2003 2004 2005 2006 2007
Net Profit Margin Years
2002 2003 2004 2005 2006 2007
Ratio% -6.96 -21.35 9.67 13.02 25.18 13.52
30 20 Ratio% 10 0 -10 -20 -30
?Interpretations for 2002-03
During year 2002-03 company has shown negative profit mean loss. Net profit margin has shown a negative increase of 67.40 %, which is a massive loss. If we see sales of company during respective year we came to know that sales also reduced by 4.78%. Now from both of these figures it is clear that increase in company loss is not merely due to reduction in sales Analysis of Financial Statements
P a g e | 20 because sales reduced by just 4.78% while net loss increased by 67.40%. This situation shows that there are some other reasons behind this decrement.
During the year company net profit increased. This is the year in which company came out of losses and shown a positive figure of profitability. During the year company has approved its profitability by about 25%. Increase in sales is the most important factor contributing towards this improvement. During the year 2003-04 company sales increase by about 52%. On other side interest expanse also reduce by 55.93%. According to my personal opinion profit is highly affected by reduction in interest expanse.
?Interpretations for 2003-04
During the year 2004-05 the Company earned a Profit after Tax of Rs.510.49 million as compared to last year’s profit of Rs.314.148 Million, the profit from operations increased from Rs.723 Million to Rs.989 Million depicting an increase in capacity utilization to 96% as compared to 88% last year, stable market environment and economy in costs resulting from conversion to coal firing system. The diluted earnings per share rose up to Rs.1.22 as compared to Rs.0.75 for the previous year.
?Interpretations for 2004-05
Company net profit margin has shown a good increase during 2005-06. Net profit margin increased from 13.02 to 25.18, which is increase of about 48.29 % during 2005-06. There are so many factors who had contributed towards this increase. Most of them are discussed below: • Increase in Sales During the year company sales boost up by 52.80 %, which is good indicator for net profit and had affect over net profit margin ratio. Due to which ratio increased. Reasons of increase in sales has been discussed before, that during the year 2005-06 we have had a earthquake in our country due to which demand of cement increased as rehabilitation activities increased. So this increase in demand has boost up company’s sales which result in high net profit margin ratio.
?Interpretations for Year 2005-06
?Interpretations for Year 2006-07
Analysis of Financial Statements
P a g e | 21 During the year 2006-07 company’s sales reduced by 19.19 % due to which net-profit margin also decreased from 25.18 to 13.52 which is decrease of 46.30. Now we see that why the sales of company reduced during the year
? Earning Per Share EPS
Year 2001 2002 2003 2004 2005 2006 2007
Earning Per Share
4 2 EPS 0 -2 -4 Years 2001 2002 2003 2004 2005 2006 2007
EPS -3.33 -0.64 -1.43 0.85 1.38 3.25 1.74
The graph of EPS remains in negative zone during year 2001 up to 2003. This happens due to loss in net profit during the respective years. EPS entered in positive zone from 2004 and keeps on increasing up to 2006 but has shown a decline of 46.46% in year 2006-07. So this decline is solely due to decrease in sales in year 2006-07.
Analysis of Financial Statements
P a g e | 22 ? Gross Profit Margin Ratio years Ratio % 2001 19.5 2002 25.13 2003 11.62 2004 32.26 2005 38.01 2006 51.12 2007 31.52
Gross Profit Margin
60 50 Ratio% 40 30 20 10 0 2001 2002 2003 2004 Years 2005 2006 2007
?Comparison of Sales, Gross Profit and Net Profit
Comparison of Sales, Net Profit and Gross Profit
150 %Change 100 50 0 -50
Gross Profit Net Profit Sales 2001 2002 2003 2004 2005 2006 2007 Years
Analysis of Financial Statements
P a g e | 23
Above graph shows us relation between three components sales, gross profit and net profit. The relation is based upon percentage change. We can interpret that how percentage change occur in sales during any specific year and how it impact over net profit and gross profit. Relation shows us that if sales increase by suppose ten percent but net profit change more than sales than we can say that company has reduced either their CGS, Financing cost, Tax or other operating expanses more than compare to previous year. If change in gross profit is more than change in sales it’s depict that CGS has reduced compare to previous year. If we see the graph it shows that change in net profit is moving about parallel with change in sales but gross profit is changing more than change in sales and change in net profit. This relation shows that over the time company has focused and reduced their two factors: o Government Levis o Cost of Goods Sold (CGS)
ACTIVITY RATIOS ?Assets Turnover Ratio
years 2001 2002 2003 2004 2005 2006 2007
A ssets Turnover Ratio 0.8 Ratio 0.6 0.4 0.2 0
0 1 0 2 0 0 3 0 4 5 0 6 2 0 0 2 0 2 0 2 0 2 0 2 0 2 0 7
Ratios 0.28 0.23 0.24 0.39 0.46 0.69 0.54
% Change -17.85 4.11 38.46 15.21 33.33 21.73
Y ears
Analysis of Financial Statements
P a g e | 24
Graph of assets turnover ration shows that the ratio was 0.23 during 2002 but it keeps on increasing up to year 2006-07. The main factor contributing towards this increase is increase in sales. On other side company has reduced their fixed assets through out these years. As we know that assets turnover ration can increase due to following reasons. • Increase in sales • Decrease in fixed assets In both cases assets turnover increased and both factors had affected this ratio throughout the years. As table below shows that how fixed assets reduced during these years. Year % Reduction in Fixed Assets 2004-05 0.25 2005-06 2.04 2006-07 3.74
?Inventory Turnover Ratio
Year 2003 2004 2005 2006 2007 Inventory Turnover I/TO Days 7.07 7.87 5.92 4.26 5.05 52 46 62 86 72 % Change 11.53 -25.8 -27.9 16.27
Analysis of Financial Statements
P a g e | 25
Inventory Turnover Days
100 80 60 40 20 0 2003 2004 2005 2006 2007 Years
Above graph of inventory turnover shows a astonishing situation. In starting years inventory turnover was good. Inventory was turning over in just 52 days. Than this ration improve more and come to 46 days in year 2004-05. As we know that this ratio can improve by two reasons. • Decrease in CGS • Decrease in inventory Now we see that during the years in which ratio increase, what was the reason behind this increase either inventory decrease or CGS decreased?
?Interpretations for Year 2004-07
2003-04 CGS % of Sales Inventory % Change 53.64 4.43 2004-05 44.97 33.73 2005-06 36.86 26.57 2006-07 49.61 -4.50
From above calculation we can say that during 2004-05 our CGS reduced from 53.64% to 44.97%. During the year CGS reduced by 8.67% or sales, while on other side our inventory also increase but affect of decrease in CGS is higher than increase in inventory due to which ratio increase. Analysis of Financial Statements
Ratio in Days
P a g e | 26 During year 2005-06 again ratio increase. This increase is very clear that in respective year both inventory and CGS reduced substantially. So due to this reduction company turnover increased significantly. While in year 2006-07 again turnover reduced. If we see the above calculations which depict that during year 2006-07 our CGS increased by 12.75%, which is a significant amount, but on other side inventory also reduced by just 4.50 which is insignificant figure. So turnover came down.
? Reasons of increase in CGS during 2006-07
• • • • • • Price of raw material increased Spare breakages increased Fuel prices increased Administrative increased by 28.93% Traveling and conveyance expanses increased Repair and maintenance expanse increased massively
HORIZONTAL ANALYSIS Note Rupees ('000)
2004 Sales Cost of Good Sold Gross Profit Operating Expenses Administrative Expenses Selling & Distribution Expenses Operation Profit Financial & Other Charges Net Profit
3,247,262 1,555,407 740,824 532,500 39,535 20,416 723,083 204,222 314,147
2005
3,921,362 1,763,566 1,081,576 4,049,311 42,293 21,332 988,672 229,634 510,490
2006
4,286,138 2,095,027 2,191,111 94,127 66,629 31,695 2,041,984 264,297 1,203,735
2007
3,463,28 3 2,371,78 8 1,091,49 5 58,098 71,302 40,645 995,285 207,105 646,323
HORIZONTAL ANALYSIS Horizontal Analysis =Income statements/sales Analysis of Financial Statements
P a g e | 27
Common Size %
Cost of Good Sold Gross Profit Operating Expenses Administrative Expenses Selling & Distribution Expenses Operation Profit Financial & Other Charges Net Profit 2004 0.479 0.476 0.719 0.074 0.516 35.417 0.282 1.538 2005 0.450 0.613 3.744 0.010 0.504 46.347 0.232 2.223 2006 0.489 1.046 0.043 0.708 0.476 64.426 0.129 4.554 2007 0.685 0.460 0.053 1.227 0.570 24.487 0.208 3.121
VERTICAL ANALYSIS Base Year 2004 2004 100 100 100 100 100 100 100 100 100 Indexed % 2005 2006 120.759 131.992 113.383 134.693 145.996 295.767 760.434 17.676 106.976 168.532 104.487 155.246 136.730 282.400 112.443 129.417 162.500 383.176 2007 106.652 152.487 147.335 10.910 180.352 199.084 137.645 101.412 205.739
Sales Cost of Good Sold Gross Profit Operating Expenses Administrative Expenses Selling & Distribution Expenses Operation Profit Financial & Other Charges Net Profit Sales during 2001-07 years
Business Analysis
Sales (000) % Change
Analysis of Financial Statements
P a g e | 28 2001 2002 2003 2004 2005 2006 2007 1575604 1586606 1510738 2296231 2845143 4286138 3463283
0.698 -4.782 51.994 23.905 50.648 -19.198
N s les et a
50 00 00 0 40 00 00 0 Sales Net 30 00 00 0 20 00 00 0 10 00 00 0 0 20 01 20 02 2 3 00 2 4 00 Y rs ea 2 5 00 20 06 20 07
Analysis of Financial Statements
P a g e | 29
DIRECTOR’S REPORT
MARKET OVERVIEW
GENERAL 1. THE DIRECTORS OF FAUJI CEMENT COMPANY LIMITED (FCCL) ARE PLEASED PRESENT THE 15 TH ANNUAL R EPORT TOGETHER WITH AUDITED FINANCIAL STATEMENTS THE C OMPANY FOR THE YEAR ENDED 30 JUNE 2007 ANDTHE AUDITORS ' R EPORT . 2. THE CEMENT INDUSTRY DURING FISCAL YEAR 2006-07. TOTAL CEMENT
HIGHEST FIGURE EVER TO OF
WITNESSED AN UNPRECEDENTED DEMAND FOR ITS PRODUCT DESPATCHES STOOD AT THE
24.22 MILLION TONS WHICH IS THE CEMENT INDUSTRY. IT REFLECTED A RECORD GROWTH OF 31.56 PERCENT OVER 18.4 MILLION TONS OF SALES DURING LAST F ISCAL YEAR. WHEREAS, LOCAL DEMAND GREW BY 24.4 PERCENT OVER LAST YEAR, THE EXPORTS WITNESSED A STRONG AND HEALTHY GROWTH OF 112 PERCENT TO AN ALL TIME HIGH LEVEL OF 3.188 MILLION TONES IN THE WAKE OF RISING INTERNATIONAL DEMAND , AS COMPARED TO 1.5 MILLION TONS DURING THE LAST YEAR.
ACHIEVEDBY
Analysis of Financial Statements
P a g e | 30
3. DURING
COMPARED TO
THE YEAR UNDER REVIEW , THE CAPACITY UTILIZATION STOOD AT
80%
AS
88%
OF LAST YEAR.
THE
REDUCTION WAS MAINLY ATTRIBUTED TO START
UP OF NEW LINES OF PRODUCTION WHICH HAD INCREASED THE CAPACITY FROM
24
MTPA TO
33.4 MTPA. AT THE END OF FISCAL YEAR 07, PER CAPITA CEMENT PAKISTAN INCREASED BY 11.961 % TO 131 KG AS COMPARED TO 117 KG IN FISCAL YEAR 06. 4. COMPARING %, WHICH WAS
PERFORMANCE OF WITH INDUSTRY , CAPACITY UTILIZATION OF
CONSUMPTION IN
FCCL STOOD AT 98.00 HIGHER BY 6.6% OVER LAST YEAR . THE HIGHLIGHTS OF THE THE C OMPANY VIS - À- VIS THE INDUSTRY ARE AS UNDER:-
COMPARISON OF DESPATCHES
A.
FCCL COMPARISON 2006-07 990,823 152,268 1,143,091 98.08% 1,098,019 1,153,711 1,143,091
2005-06 DIFFERENCE (%) (1) DOMESTIC DISPATCHES (TONS) 952,771 3.99% (2) EXPORTS (TONS) 113,410 34.26% (3) TOTAL DISPATCHES (TONS) 1,066,181 7.21% (4) CAPACITY UTILIZATION (%) 91.48% 7.21% (5) CLINKER PRODUCTION (TONS) 1,058,368 3.75% (6) CEMENT PRODUCTION (TONS) 1,064,649 8.37% (7) SALES (TONS) 1,066,181 7.21%
B.
INDUSTRY COMPARISON
2006-07 21,034,278
2005-06 DIFFERENCE (%) (1) DOMESTIC DISPATCHES (TONS) Analysis of Financial Statements
P a g e | 31 16,907,138 24.41% (2) EXPORTS (TONS) 1,505,159 1 11.83% (3) TOTAL DISPATCHES (TONS) 18,412,297 31.56% (4) CAPACITY UTILIZATION 87.93% -8.94%
3,188,424 24,222,702 80.07%
PRODUCTION REVIEW
5. PERFORMANCE
OF THE PLANT REMAINED ABOVE SATISFACTORY LEVEL WITH AN OVERALL EFFICIENCY EXCEEDING
98.9%. EFFICIENCY CAPTIVE POWER
IN TERMS OF FUEL , POWER AND RAW
MATERIAL CONSUMPTION AT OUR PLANT IS AMONG THE BEST .
6. PROJECT COMPLETED.
FOR
6MW
PLANT
HAS
BEEN
SUCCESSFULLY
FINANCIAL PERFORMANCE
7. PROFITABILITY. THE COMPANY EARNED A PROFIT AFTER TAX OF RS. 646 MILLION AS COMPARED TO LAST YEAR'S PROFIT OF RS. 1,204 MILLION . THE PROFIT FROM OPERATIONS DECREASED FROM R S. 2,042 M ILLION TO RS . 995 M ILLION DEPICTING A DECREASE OF 51.26 % OWING TO REDUCTION IN CEMENT PRICES AND HIGHER MANUFACTURING COST . 8. CONTRIBUTION TO NATIONAL EXCHEQUER. THE COMPANY HAS CONTRIBUTED A SUM OF R S. 1,383 M ILLION TO THE NATIONAL EXCHEQUER IN THE FORM OF TAXES AND DUTIES DURING THE YEAR. CONCURRENTLY , FAUJI CEMENT EARNED USD 7.428 MILLION THROUGH EXPORT OF CEMENT . 9. PRESENTATION OF FINANCIAL STATEMENTS. THE FINANCIAL STATEMENTS PREPARED BY THE MANAGEMENT PRESENT THE C OMPANY 'S STATE OF AFFAIRS , THE RESULTS OF ITS OPERATIONS , CASH FLOWS AND CHANGES IN EQUITY IN A FAIR AND ACCURATE MANNER. 10. BOOKS 11.
OF
ACCOUNT. PROPER
BOOKS OF ACCOUNT HAVE BEEN MAINTAINED .
ACCOUNTING POLICIES. APPROPRIATE
ACCOUNTING
POLICIES
HAVE
BEEN
CONSISTENTLY APPLIED IN PREPARATION OF FINANCIAL STATEMENTS EXCEPT FOR THE CHANGE IN ACCOUNTING POLICY AS STATED IN NOTE
2.8
TO THE FINANCIAL STATEMENTS AND ACCOUNTING ESTIMATES ARE BASED ON
REASONABLE AND PRUDENT JUDGEMENT.
Analysis of Financial Statements
P a g e | 32 12. COMPLIANCE
INTERNATIONAL
INTERNATIONAL ACCOUNTING STANDARDS (IAS) AND FINANCIAL REPORTING STANDARDS (IFRS).INTERNATIONAL
WITH
HAVE BEEN FOLLOWED IN
ACCOUNTING STANDARDS AND INTERNATIONAL FINANCIAL REPORTING STANDARDS, AS APPLICABLE IN PAKISTAN, PREPARATION OF FINANCIAL STATEMENTS. 13. INTERNAL CONTROL SYSTEM. THE
DESIGN AND HAS BEEN EFFECTIVELY IMPLEMENTED AND MONITORED .
SYSTEM OF INTERNAL CONTROL IS SOUND IN
14. GOING CONCERN. THERE 15. BEST PRACTICES
IS NO DOUBT THAT THE
COMPANY
HAS THE ABILITY AND
STRENGTH TO OPERATE AS A GOING CONCERN.
OF
CORPORATE GOVERNANCE.
THERE
HAS
BEEN
NO
MATERIAL DEPARTURE FROM THE BEST PRACTICES OF CORPORATE GOVERNANCE , AS GIVEN IN THE LISTING REGULATIONS .
16. FINANCIAL DATA DESCRIPTION 2004
OF
LAST SIX YEARS. KEY
2007 2002
OPERATING AND FINANCIAL DATA
OF LAST SIX YEARS IS GIVEN BELOW :-
2006
2005
2003
OPERATING RESULTS (RS. IN MILLION ) NET SALES 2,296.231 1,510.738 GROSS PROFIT 740.824 175.605 OPERATING PROFIT 723.084 122.213 FINANCIAL CHARGES 204.223 463.409 PROFIT/(LOSS)
AFTER TAXATION
3,463 .283 1,586.606 1,091.495 398.707 995.285 317.023 207.105 416.732 646.323 (110.480)
4,286.138 2,191.111 2,041.984 264.297 1,203.735
2,845.143 1,081.576 988.673 229.634 510.490
314.148
(531.381)
BALANCE SHEET
SHAREHOLDER'S EQUITY 3,735.206 1,939.134 1,624.986 2,156.367 FIXED ASSETS 4,392.450 3,282.617 4,563.115 2,449.624 4,658.272
Analysis of Financial Statements
P a g e | 33 4,729.254 4,659.449 LONG TERM LOANS INCLUDING CURRENT
PORTION
4,854.117 1,425.000 4,412.582 1.74 (0.64) 1.54 (0.63) 1,975.000 3,075.000
3,645.347
4,325.878
EPS (RS)
BASIC 0.85 DILUTED 0.75 3.25 2.87 1.38 1.22 (1.43) (1.27)
17. OUTSTANDING STATUTORY DUES. THE COMPANY OUTSTANDING STATUTORY DUES. 18. VALUE OF INVESTMENT GIVEN BELOW :NON-MANAGEMENT STAFF PROVIDENT FUND: RS. 28,383,705 19. SALIENT ASPECTS COMPANY COMPLIES
OF
DOES
NOT
HAVE
ANY
OF
EMPLOYEES. VALUE
AS ON
30 JUNE 2007
IS
MANAGEMENT STAFF RS. 43,370,276 COMPANY'S CONTROL REPORTING SYSTEMS. THE
AND
CODE OF CORPORATE GOVERNANCE AS CONTAINED IN THE LISTING REGULATIONS OF THE STOCK E XCHANGES . THE B OARD 'S PRIMARY ROLE IS THE PROTECTION AND ENHANCEMENT OF LONG TERM SHAREHOLDERS ' VALUE . TO FULFIL THIS ROLE , THE B OARD IS RESPONSIBLE TO IMPLEMENT OVERALL CORPORATE GOVERNANCE IN THE COMPANY INCLUDING APPROVAL OF THE STRATEGIC DIRECTION AS RECOMMENDED BY THE MANAGEMENT, APPROVING AND MONITORING CAPITAL EXPENDITURE, APPOINTING , REMOVING AND CREATING SUCCESSION POLICIES FOR THE SENIOR M ANAGEMENT, ESTABLISHING AND MONITORING THE ACHIEVEMENT OF M ANAGEMENT' S GOALS AND ENSURING THE INTEGRITY OF INTERNAL CONTROL AND M ANAGEMENT INFORMATION SYSTEMS . IT IS ALSO RESPONSIBLE FOR APPROVING AND MONITORING FINANCIAL AND OTHER REPORTING . THE B OARD HAS DELEGATED RESPONSIBILITY FOR OPERATION AND ADMINISTRATION OF THE C OMPANY TO THE CHIEF EXECUTIVE /MANAGING DIRECTOR. RESPONSIBILITIES ARE DELINEATED BY FORMAL AUTHORITY DELEGATIONS . THE BOARD HAS CONSTITUTED THE FOLLOWING COMMITTEES WHICH WORK UNDER THE GUIDANCE OF B OARD OF DIRECTORS:WITH ALL THE REQUIREMENTS OF THE A. B.
AUDIT COMMITTEE. TECHNICAL COMMITTEE. C . H UMAN RESOURCES COMMITTEE .
Analysis of Financial Statements
P a g e | 34
ATTENDANCE
OF
MEETINGS
AUDIT FOLLOWS :AND
20. DURING THE YEAR UNDER REVIEW, THE B OARD OF DIRECTORS COMMITTEE HELD FIVE MEETINGS EACH. ATTENDANCE BY EACH DIRECTOR IS AS
A.
BOARD
OF
DIRECTORS
NO
OF
MEETINGS (RETIRED) (RETIRED) JAVED IFU (RETIRED) (RETIRED) (RETIRED) INAYAT FLS
ATTENDED (1) LT GEN SYED ARIF HASAN, HI (M), -5 (2) MAJ GEN MALIK IFTIKHAR KHAN, HI (M) -5 (3) MR. QAISER -5 (4) MR. RIYAZ H. BOKHARI , -3 (5) BRIG MUNAWAR AHMED RANA, SI (M) -5 (6) BRIG ARIF RASUL QURESHI, SI (M) -5 (7) BRIG RAHAT KHAN, SI (M) -5 (8) DR . NADEEM -5 (9 )MS TINE BREMHOLM KOKFELT, - NIL
B.
AUDIT
OF
COMMITTEE
NO
MEETINGS
ATTENDED (1) -5 (2) -2 (3) -3 (4) MR. MR. BRIG RIYAZ RAHAT DR . KHAN, QAISER H. SI NADEEM BOKHARI , (M) JAVED IFU (RETIRED) INAYAT
Analysis of Financial Statements
P a g e | 35 -4 NOTE: CHIEF FINANCIAL OFFICER (CFO) AND INTERNAL AUDITOR WERE INVARIABLY INVITED TO ATTEND THE MEETINGS OF AUDIT COMMITTEE . E XTERNAL AUDITORS WERE ALSO INVITED TO ATTEND TWO MEETINGS OF AUDIT COMMITTEE , WHEREIN , ISSUES RELATED TO ANNUAL AND HALF YEAR 'S FINANCIAL STATEMENTS WERE DISCUSSED .
DISCLOSURES
21. TO THE BEST OF OUR KNOWLEDGE, THE DIRECTORS, CEO, CFO, COMPANY SECRETARY, COMPANY AUDITORS, THEIR SPOUSES AND THEIR MINOR CHILDREN HAVE NOT UNDERTAKEN ANY TRADING IN C OMPANY 'S S HARES DURING THE FY 2006-07.
RELATIONS WITH PERSONNEL
22. RELATIONS
BETWEEN THE
AND
LOCALS
AND THE
MANAGEMENT
WORKERS
CONTINUED
TO
BE AND
EXTREMELY CORDIAL BASED ON MUTUAL RESPECT AND CONFIDENCE CONTRIBUTING TO THE OPTIMAL EFFICIENCY .
THE COMPANY HAS ALLOCATED PROFIT PARTICIPATION FUND FOR ITS EMPLOYEES. 23. CONCURRENTLY,
THE
FUNDS FOR
PROVIDENT FUND
COMPANY
CONTINUES TO ENJOY A HIGH DEGREE OF GOODWILL
AND COOPERATION WITH LOCAL COMMUNITY AS IT RESPECTS THEIR ENVIRONMENT THROUGH RESPONSIBLE BUSINESS PRACTICES . AT REASONABLE FEE .
THE COMPANY
RUNS A FREE DISPENSARY FOR THE
LOCALS AND ALSO PROVIDES GOOD EDUCATION FACILITIES UP TO SECONDARY SCHOOL LEVEL
ELECTION
OF
DIRECTORS
DIRECTORS
OF THE
24. DURING
THREE YEARS .
THE YEAR UNDER REVIEW , ELECTION OF
COMPANY
WAS
HELD AND THE PRESENT
BOARD
OF
DIRECTORS
WAS UNANIMOUSLY ELECTED FOR A TERM OF
DIRECTORS
25. THERE AUDITORS
HAS BEEN NO CHANGE IN THE COMPOSITION OF
BOARD
DURING THE YEAR.
AUDITORS
26. THE PRESENT AUDITORS M/S KPMG TASEER HADI & CO; CHARTERED ACCOUNTANTS WILL STAND RETIRED AT THE CONCLUSION OF THE 15TH ANNUAL GENERAL Analysis of Financial Statements
P a g e | 36 MEETING. HOWEVER, THEY HAVE EXPRESSED THEIR WILLINGNESS FOR RE-APPOINTMENT. THEY HAVE ALSO BEEN RECOMMENDED BY THE AUDIT COMMITTEE, SUBJECT TO COMPLIANCE WITH CLAUSE (XLI ) OF C ODE OF C ORPORATE G OVERNANCE . PRODUCT QUALITY 27. FCCL HAS ALWAYS ENDEAVOURED TO PRODUCE THE BEST QUALITY CEMENT IN PAKISTAN, WHICH IS AMPLY REFLECTED IN ITS HIGH DEMAND, BOTH INSIDE AND OUTSIDE THE C OUNTRY . AS A COMPANY, FCCL IS FOCUSED ON CUSTOMERS' SATISFACTION , EMPLOYEES ' MORALE AND FAIR DEAL TO ITS PARTNERS IN THE BUSINESS . I T STRICTLY ADHERES TO THE FOLLOWING :A. B.
QUALITY POLICY. CUSTOMERS' OBJECTIVES
SATISFACTION THROUGH QUALITY ASSURANCE .
(1) TO BE A COST EFFECTIVE AND EFFICIENT ORGANISATION . (2) CONTINUOUS IMPROVEMENT THROUGH WELL PLANNED TRAINING . (3) COMMITMENT TO LEADERSHIP AND TEAM-WORK. (4) TO MAINTAIN QUALITY CULTURE WITHIN FCCL. (5) TO REMAIN A LEADING MANUFACTURER OF HIGH QUALITY PORTLAND CEMENT PAKISTAN.
IN
28. THE COMPANY, BY GRACE OF ALMIGHTY ALLAH, IS AN ISO 9001-2000 CERTIFIED COMPANY AND ALSO RECOMMENDED FOR ISO-14001-2004 FOR ENVIRONMENTAL MANAGEMENT SYSTEM. FUTURE OUTLOOK
FUTURE OUTLOOK
29. KEEPING
OF IN VIEW THE GROWING DEMAND OF CEMENT IN FUTURE,
FAUJI CEMENT
HAS
DECIDED TO ENHANCE ITS PRODUCTION CAPACITY .
FOR
THIS PURPOSE A COMPLETE NEW LINE
7200
TONS PER DAY CLINKER WILL BE INSTALLED PARALLEL TO THE EXISTING LINE . SIGNED WITH
THE SALIENT ASPECTS OF THE PROJECT ARE GIVEN BELOW :A . AGREEMENTS FOR SUPPLY OF ENGINEERING AND EQUIPMENT HAVE BEEN GERMAN FIRMS POLY SIUS, HAVER & BOECKER, LOESCHE AND SWISS FIRM ABB.
B.
THE
PLANT WILL BE THE BIGGEST EVER SINGLE LINE IN
PAKISTAN ,
AND THE EQUIPMENT
WILL COMPRISE OF THE LATEST STATE OF THE ART TECHNOLOGY DEVELOPED BY LEADING FOREIGNN COMPANIES . C.
FOR
THE PURPOSE OF CIVIL WORKS , ERECTION AND LOCAL FABRICATION A CONTRACT HAS
BEEN AWARDED TO SUCH TASKS .
M/S DESCON ENGINEERING LAHORE,
WHO HAVE A WIDE EXPERIENCE IN
Analysis of Financial Statements
P a g e | 37
D.
LOCAL
FABRICATION
AND
PROCUREMENT
HAVE
BEEN
ENCOURAGED
TO
THE
MAXIMUM
EXTENT TO UTILISE LOCAL SOURCES TO SAVE ON COST AND FOREIGN EXCHANGE . E.
THE
PLANT WILL START COMMERCIAL PRODUCTION IN EARLY
2010 INSHA ALLAH.
ACKNOWLEDGMENT
30. THE DIRECTORS
DEDICATION OF EXPRESS THEIR DEEP APPRECIATION OF OUR VALUED CUSTOMERS , THE TO THEIR PROFESSIONAL OBLIGATIONS BOTH IN AND THE COOPERATION FINANCIAL
COMPANY'S COMPANY FIELDS .
EMPLOYEES DISPLAY
EXTENDED BY FINANCIAL INSTITUTIONS TO EXCELLENT
/
GOVERNMENT AGENCIES , WHICH HAVE ENABLED THE OPERATIONAL AND
PERFORMANCE
CONCLUSION
31. WITH FOR
PROFOUND GRATITUDE TO THE BLESSINGS OF OF THE OPINION THAT THE
COMPANY BOARD
REMAINS ON ITS
ALLAH ALMIGHTY, WAY TO SUCCESS .
THE
BOARD
IS
AND ON BEHALF OF THE
RAWALPINDI LT GEN SYED ARIF HASAN, HI(M) (RETD) 21 AUGUST 2007
CHAIRMAN
Analysis of Financial Statements
doc_434265972.doc
Contents
Acknowledgement Company Information Company Background List of stake holders Sales trend Liquidity position (Current ratio) Quick ratio Debt-to-equity ratio Profitability Ratio Return on assets Return on Equity ROE Earning per share Gross profit margin Comparison gross profit, net profit and sales Assets turnover ratio Inventory Turnover Ratio Conclusion
Analysis of Financial Statements
Page |2
Acknowledgment
This project “Analysis of Financial Statements of Fauji Cement” is assigned to us by our highly regarded teacher of BF Mr. Zulfiqar Ali Shah. We have made our best efforts and had not left even one stone unturned to complete this project as proper and neat as we can. This informative outcome is the result of hardworking of all members in a group formation. All members have utilized their skills up to their optimal level, which result in such a tremendous outcome. Nevertheless it was a bit challenging task demanding a lot of commitment, hardworking and expertise. We have faced so many obstacles while obtaining required information. We have completed it by best of our expertise. There may be some flaws in this project but we have utilized our expertise to their optimal level to generate something valuable for us and to share with others.
Analysis of Financial Statements
Page |3 In short all this is due to love, affection, care, and help of our parents and teachers who had make us from scrap, a something valuable and to whom we are going to dedicate our project.
Analysis of Financial Statements
Page |4
Analysis of Financial Statements
Page |5
Company Background
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 1 January 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.
Vision Statement
To transform FCCL into a model cement manufacturing Company engaged in nation building through most efficient utilization of resources and optimally benefiting all stake holders while enjoying public respect and goodwill.
Mission Statement
FCCL while maintaining its leading position in quality of cement will build up on its present state of profitability with a view to ensuring optimum returns to the shareholders.
Strategies
We shall achieve our vision by making total quality the FCCL way of doing business, Relentless pursuit of full customer satisfaction, Empowering FCCL people leading the industry of Cement world and manufacturing excellence producing superior returns to our shareholders.
Analysis of Financial Statements
Page |6
Financial Responsibility
We are prudent and effective in the use of the resources entrusted to us.
Marketing & Sales
Manufacture and market ORDINARY PORTLAND CEMENT. [PS-232-1983(R)]
Local Sales
Fauji Cement Company supplies cement throughout Pakistan especially in the provinces of Punjab, AJK and NWFP through extensive dealer’s network.
Direct Sales
Direct sales have been made to mega and large projects. Some of them are:• • • • • • • • • Mangla Dam Raising Development Project Malakand (Dargai) Hydrothermal Power Projects Motorway (M1-Project, Islamabad-Peshawar) & (M2-Project, Islamabad-Lahore) Army Housing Schemes Air Force Housing Schemes International Airport Lahore. Bahria Town Sites. Fauji Foundation Projects National Highway Authority Projects National Logistic Cell Projects
•
Exports
Have a large share in the Afghan market. Some exports are also made to the Middle based upon requirements.
Stake Holders of Fauji Cement
Analysis of Financial Statements
Page |7 1 2 3 4 Fauji Foundation IFU F.L. Smith & Co. General Public 52.09% 1.74% 1.74% 44.43%
LIQUIDITY POSITION
?Current Ratio
years 2001 2002 2003 2004 2005 2006 2007 current Asset current Liabilities Ratios 0.11 1.42 1.53 1.54 0.92 1.25 1.35
721338365 574461034 1113721603 1579381610 1953527
472332789 372116351 1206945982 1267198656 1442287
Analysis of Financial Statements
Page |8
Current Ratio
1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2001 2002 2003 2004 Years 2005 2006 2007
Ratios
Series1
Above information shows surprising results as current ratio increased massively in year 2001-2002. As we know that current ratio can increased by two ways: • Increase in current assets • Decrease in liabilities Figures of 2001-02 is outlier so it can affect negatively to our results, hence we are going to neglect this figure by considering it outlier.
? Interpretations of 2003-04
If we look at the figures of 2003-04 an increase of 0.65 % is there. Reasons behind this increase are: Companies current assets decreased on other side current liabilities are also decreased but decrease in liabilities is greater than decrease in current assets. As companies current assets decreased by 20%, while current liabilities decreased by 21.21% so due to these factors there is small increase of 0.65 % in current ratio. • Decrease in current assets
Decrease in current assets = 721338365 – 574461034 / 721338365 = 20 %
Analysis of Financial Statements
Page |9 Now we see that what components of current assets decrease as there is net decrease of 20 % in current assets. If we see the current assets of company during 2003-04 we come to know that there is increase in all factors like inventory, stock in trade and A/R except trade debtors and current portion of foreign exchange risk insurance contract. Their foreign exchange risk insurance contract has expired by the amount of Rs-184.776 million due to which current assets decrease while all other parts of current assets has increased. So due to the expiry of foreign exchange insurance contract there was a net decrease of 20 % in current assets. • Decrease in current liabilities Decrease in current liabilities = 472332789 – 372116351 / 472332789 = 21.21 % As from above calculations it is clear that company liabilities decreased by 21.21 %. Now we see that which factors of current liabilities decreased and why? Short term loan of business has decreased to zero. On other side accrued liabilities of creditors has decreased by 10.50 % 319027853 – 285607944/319027853 = 10.50 %, Current portion of long term debt also decreased by 37 %, which is big decrease and contribute up to a large extent in decrease of current liabilities. 137390439 – 86508407 / 137390439 = 37 %
? Interpretations of 2004-05
If we see the graph of current ratio we came to know that current ratio decrease from 1.54 to 0.92. This is a massive decrease. Now we have to see that why this ratio came down. Total decrease in current ratio is 40.25. Now if we see the statements of these years we see that there is increase in both current assets and current liabilities. Current assets are increasing by 94 % 113721603 – 574451034 / 574451034 = 94 % Analysis of Financial Statements
P a g e | 10 While on other side current liabilities are increased by 224.35 % which is calculated here down. 1206945982 – 372116351 / 372116351 = 224.35 %
? Interpretations of Year 2005-06
If we cast a sight on graph of current ratio we see that there was increase in the ratio. Ratio increased from 0.92 to 1.25, which shows the increase of 35.86 %. During this year current assets of company increased by 34.67 % while on other side company current liabilities also increased by just 4.99 %, which is very small increase compare to increase in current assets. So increase in current assets is too much than increase in current liabilities hence current ratio increased by 35.86 %. Now we are going to unveil those factors due to which this ratio has shown this much increase.
? Interpretations of 2006-07
Current ratio of company increased from 1.25 to 1.35 during fiscal year 2006-07, which is increase of 7.4 %. Now we are going to discuss and underline factors due to which ratio increased. During the year current assets increased but current liabilities also increased. Increase in current assets was greater than increase in current liabilities due to which current ratio has shown such a minimal increase.
Quick Ratio
Years 2001 Current Asset Current Liabilities Inventories Ratios 0.09
Analysis of Financial Statements
P a g e | 11 2002 2003 2004 2005 2006 2007 1.27 1.43 1.38 0.88 1.13 1.23
721338365 574461034 1113721603 1579381610 1953527
472332789 372116351 1206945982 1267198656 1442287
188640194 197400283 297875556 490887123 468769
Quick Ratio
2 Ratio 1.5 1 0.5 0 2001 2002 2003 2004 2005 2006 2007 Years
Above information shows surprising results as Quick ratio increased massively in year 2001-2002. As we know that Quick ratio can increased by two ways: • Increase in Liquid assets • Decrease in liabilities Again Figures of 2001-02 is outlier so it can affect negatively to our results, hence we are going to neglect this figure by considering it outlier.
?Interpretations of 2003-04
Analysis of Financial Statements
P a g e | 12 If we look at the figures of 2003-04 a decrease of 3.50 % is there. Reasons behind this are: Companies Liquid assets decreased on other side current liabilities are also decreased but decrease in Liquid assets is greater than decrease in current liabilities. As companies Liquid assets decreased by 23.84%, while current liabilities decreased by 21.21% so due to these factors there is small decrease of 3.5 % in Quick ratio.
?Interpretations of 2004-05
If we see the graph of Quick ratio we came to know that Quick ratio decrease from 1.38 to 0.88. There is a decrease of 36.23 % in the ratio. Now we have to see that why this ratio came down. • Increase in Liquid assets There is an increase in liquid assets of 57 % in the year 2005. • Increase in current liabilities While on other side current liabilities are increased by 224.35 % which is calculated here down. 1206945982 – 372116351 / 372116351 = 224.35 % The reason of high increase in current liabilities is the increase in the short term borrowings from nil to Rs.308, 876,433.
?Interpretations of 2005-06
During year 2005-06 quick ratio has shown a increase from 0.88 to 1.13. Ratio increased by 22.12%. Now we have to see that why this ratio has shown a upsurge of 22 %. So this affect is partially due to increase in current ratio. During the same year our current ratio also increases by 26.4%.
?Interpretations of 2006-07
Here in year 2006-07 current ratios has shown a increase of 8.13%. Again it is due to increase in current ratio as during the same year current ratio also increased by 7.40%. Here we see that change in quick ratio is greater than change in current ratio. From this factor we can predict that during the year company inventory has changed by minimal amount as compared to other current assets due to which current ratio has shown a small change. While on other side when we have deducted inventory for quick ratio than ratio increased more than current ratio.
Analysis of Financial Statements
P a g e | 13
? Debt-to-equity Ratio
years 2001 2002 2003 2004 2005 2006 2007 Debt Equity Ratios 20.06 2.05 2.66 1.88 1.26 0.6 0.38
4325877564 3645347488 2522005000 1969570000 1419378000
4194422350 1939134023 2449624461 3282616000 3735206000
Debt Equity Ratio
25 20
Ratios
15 Series1 10 5 0 2001 2002 2003 2004
Years
2005
2006
2007
?Interpretations of year 2004-05
During the year 2004-05 company debt reduced by 29.13%. While on other side equity remain same. So due to reduction of debt ratio came down.
Analysis of Financial Statements
P a g e | 14
?Interpretations of 2005-06
During 2005-06 company debt-to-equity ratio decreased from 1.26 to 0.6. Ratio decreased by about 52.38 %, which shows that company has reduced their debt during the year in massive amount. Now we make calculations that how much debt company has reduced during the year, where from they have arranged funds to pay back their debt
?Interpretations of 2006-07
During 2006-07 company debt-to-equity ratios decreased from 0.6 to 0.38 which is decrease of about 36.66%, which shows that company has reduced their debt during the year. Now we make calculations that how much debt company has reduced during the year and either equity has increased or decreased.
Profitability Ratios
? Return on Assets ? Years ROA % 2001 -10.14 2002 -1.6 2003 -8.42 2004 5.32 2005 8.2 2006 19.42 2007 10.1
Analysis of Financial Statements
P a g e | 15
ROA 25 20 15 Ratio 10 5 0 -5 -10 -15 Years 2001 2002 2003 2004 2005 2006 2007
Series1
From the above graph it is clear company ROA was in negative zone during 2001 to 2003. But ROA entered in positive zone from 2004. As we know that ROA has two main components due to which it can either increase or decreased. • Total or Avg. Assets • Net Profit ROA = Net Profit Total Asset ROA can increase either net profit increase or total assets decreased. During the year 2001-03 company net profit was going in loss due to which ROA remain in negative zone. But from year 2004 and onward profit shifted in positive zone and start increasing slowly due to which ROA has shown an increase but again it decrease in year 2007. Decrease in ROA in year 2006-07 is solely due to decrease in net income of company. In year 2006-07 NI reduce by 46.30%. So due to this decrease ROA dropped by 47.99 %. ROA drop during 2005-06 partially due to decrease in fixed assets as company assets also reduced over the period by 2.04%. As we have discussed before, that ROA also reduced due to reduction in fixed assets or denominator. ROA drop during 2005-06 partially due to decrease in fixed assets as company assets also reduced over the period by 2.04%. As we have discussed before, that ROA also reduced due to reduction in fixed assets or denominator. Over the period ROA is also affected by the reduction in fixed assets. As we see from financial statements that fixed assets of company reduced during 2005 up to 2007. For further clarification here are some calculations.
Analysis of Financial Statements
P a g e | 16
?Reduction in Fixed Assets
Year % Reduction in Fixed Assets 2004-05 0.25 2005-06 2.04 2006-07 3.74 Reasons behind the reduction in fixed assets during 2004-05 are depreciation of plant and machinery and disposal of assets. During the year five vehicles and a building disposed off by net gain of 4.749 million. On other side assets are depreciated by amount of Rs.256.283 million. During the year 2005-06 company has charged depreciation of Rs.266.532 million and disposed off four vehicles and a computer by net gain of Rs.1.301 million. While during 2006-07 company has charged depreciation of Rs.283.454 million and disposed off their two vehicles by net gain of Rs.0.1 million
? Return on Equity (ROE)
Year 2003 2004 2005 2006 2007
NI -531380995 314147836 510490438 1203735333 646323000
Total Equity 4194422350 4194422350 2449624461 3282616746 3735206000
Ratio -0.127 0.075 0.208 0.367 0.173
Analysis of Financial Statements
P a g e | 17
ROE
0.400 0.300 Ratio 0.200 0.100 0.000 -0.100 -0.200 Year 2003 2004 2005 2006 2007
From the above graph of EPS it is clear that the graph has same trend as that of net profit margin of company. EPS was in negative zone during year 2002-03 but it enters in positive zone afterward. Again in year 2006-07 EPS drop from 0.36 to 0.17. The only reason behind this decrease is reduction in sales during respective year. NI of company affected due to reduction in sales whose impact also transfers to ROE. ? Net Profit Margin Ratio Years 2002 2003 2004 2005 2006 2007 Ratio% -6.96 -21.35 9.67 13.02 25.18 13.52
Analysis of Financial Statements
P a g e | 18
Net Profit Margin Years
2002 2003 2004 2005 2006 2007
30 20 Ratio% 10 0 -10 -20 -30
?Interpretations for 2002-03
During year 2002-03 company has shown negative profit mean loss. Net profit margin has shown a negative increase of 67.40 %, which is a massive loss. If we see sales of company during respective year we came to know that sales also reduced by 4.78%.
During the year company net profit increased. This is the year in which company came out of losses and shown a positive figure of profitability. During the year company has approved its profitability by about 25%. Increase in sales is the most important factor contributing towards this improvement. During the year 2003-04 company sales increase by about 52%. On other side interest expanse also reduce by 55.93%. According to my personal opinion profit is highly affected by reduction in interest expanse.
?Interpretations for 2003-04
During the year 2004-05 the Company earned a Profit after Tax of Rs.510.49 million as compared to last year’s profit of Rs.314.148 Million, the profit from operations increased from Rs.723 Million to Rs.989 Million depicting an increase in capacity utilization to 96% as compared to 88% last year, stable market environment and economy in costs resulting from Analysis of Financial Statements
?Interpretations for 2004-05
P a g e | 19 conversion to coal firing system. The diluted earnings per share rose up to Rs.1.22 as compared to Rs.0.75 for the previous year. ? Interpretations for Year 2005-06 Company net profit margin has shown a good increase during 2005-06. Net profit margin increased from 13.02 to 25.18, which is increase of about 48.29 % during 2005-06.
? Net Profit Margin Ratio Years 2002 2003 2004 2005 2006 2007
Net Profit Margin Years
2002 2003 2004 2005 2006 2007
Ratio% -6.96 -21.35 9.67 13.02 25.18 13.52
30 20 Ratio% 10 0 -10 -20 -30
?Interpretations for 2002-03
During year 2002-03 company has shown negative profit mean loss. Net profit margin has shown a negative increase of 67.40 %, which is a massive loss. If we see sales of company during respective year we came to know that sales also reduced by 4.78%. Now from both of these figures it is clear that increase in company loss is not merely due to reduction in sales Analysis of Financial Statements
P a g e | 20 because sales reduced by just 4.78% while net loss increased by 67.40%. This situation shows that there are some other reasons behind this decrement.
During the year company net profit increased. This is the year in which company came out of losses and shown a positive figure of profitability. During the year company has approved its profitability by about 25%. Increase in sales is the most important factor contributing towards this improvement. During the year 2003-04 company sales increase by about 52%. On other side interest expanse also reduce by 55.93%. According to my personal opinion profit is highly affected by reduction in interest expanse.
?Interpretations for 2003-04
During the year 2004-05 the Company earned a Profit after Tax of Rs.510.49 million as compared to last year’s profit of Rs.314.148 Million, the profit from operations increased from Rs.723 Million to Rs.989 Million depicting an increase in capacity utilization to 96% as compared to 88% last year, stable market environment and economy in costs resulting from conversion to coal firing system. The diluted earnings per share rose up to Rs.1.22 as compared to Rs.0.75 for the previous year.
?Interpretations for 2004-05
Company net profit margin has shown a good increase during 2005-06. Net profit margin increased from 13.02 to 25.18, which is increase of about 48.29 % during 2005-06. There are so many factors who had contributed towards this increase. Most of them are discussed below: • Increase in Sales During the year company sales boost up by 52.80 %, which is good indicator for net profit and had affect over net profit margin ratio. Due to which ratio increased. Reasons of increase in sales has been discussed before, that during the year 2005-06 we have had a earthquake in our country due to which demand of cement increased as rehabilitation activities increased. So this increase in demand has boost up company’s sales which result in high net profit margin ratio.
?Interpretations for Year 2005-06
?Interpretations for Year 2006-07
Analysis of Financial Statements
P a g e | 21 During the year 2006-07 company’s sales reduced by 19.19 % due to which net-profit margin also decreased from 25.18 to 13.52 which is decrease of 46.30. Now we see that why the sales of company reduced during the year
? Earning Per Share EPS
Year 2001 2002 2003 2004 2005 2006 2007
Earning Per Share
4 2 EPS 0 -2 -4 Years 2001 2002 2003 2004 2005 2006 2007
EPS -3.33 -0.64 -1.43 0.85 1.38 3.25 1.74
The graph of EPS remains in negative zone during year 2001 up to 2003. This happens due to loss in net profit during the respective years. EPS entered in positive zone from 2004 and keeps on increasing up to 2006 but has shown a decline of 46.46% in year 2006-07. So this decline is solely due to decrease in sales in year 2006-07.
Analysis of Financial Statements
P a g e | 22 ? Gross Profit Margin Ratio years Ratio % 2001 19.5 2002 25.13 2003 11.62 2004 32.26 2005 38.01 2006 51.12 2007 31.52
Gross Profit Margin
60 50 Ratio% 40 30 20 10 0 2001 2002 2003 2004 Years 2005 2006 2007
?Comparison of Sales, Gross Profit and Net Profit
Comparison of Sales, Net Profit and Gross Profit
150 %Change 100 50 0 -50
Gross Profit Net Profit Sales 2001 2002 2003 2004 2005 2006 2007 Years
Analysis of Financial Statements
P a g e | 23
Above graph shows us relation between three components sales, gross profit and net profit. The relation is based upon percentage change. We can interpret that how percentage change occur in sales during any specific year and how it impact over net profit and gross profit. Relation shows us that if sales increase by suppose ten percent but net profit change more than sales than we can say that company has reduced either their CGS, Financing cost, Tax or other operating expanses more than compare to previous year. If change in gross profit is more than change in sales it’s depict that CGS has reduced compare to previous year. If we see the graph it shows that change in net profit is moving about parallel with change in sales but gross profit is changing more than change in sales and change in net profit. This relation shows that over the time company has focused and reduced their two factors: o Government Levis o Cost of Goods Sold (CGS)
ACTIVITY RATIOS ?Assets Turnover Ratio
years 2001 2002 2003 2004 2005 2006 2007
A ssets Turnover Ratio 0.8 Ratio 0.6 0.4 0.2 0
0 1 0 2 0 0 3 0 4 5 0 6 2 0 0 2 0 2 0 2 0 2 0 2 0 2 0 7
Ratios 0.28 0.23 0.24 0.39 0.46 0.69 0.54
% Change -17.85 4.11 38.46 15.21 33.33 21.73
Y ears
Analysis of Financial Statements
P a g e | 24
Graph of assets turnover ration shows that the ratio was 0.23 during 2002 but it keeps on increasing up to year 2006-07. The main factor contributing towards this increase is increase in sales. On other side company has reduced their fixed assets through out these years. As we know that assets turnover ration can increase due to following reasons. • Increase in sales • Decrease in fixed assets In both cases assets turnover increased and both factors had affected this ratio throughout the years. As table below shows that how fixed assets reduced during these years. Year % Reduction in Fixed Assets 2004-05 0.25 2005-06 2.04 2006-07 3.74
?Inventory Turnover Ratio
Year 2003 2004 2005 2006 2007 Inventory Turnover I/TO Days 7.07 7.87 5.92 4.26 5.05 52 46 62 86 72 % Change 11.53 -25.8 -27.9 16.27
Analysis of Financial Statements
P a g e | 25
Inventory Turnover Days
100 80 60 40 20 0 2003 2004 2005 2006 2007 Years
Above graph of inventory turnover shows a astonishing situation. In starting years inventory turnover was good. Inventory was turning over in just 52 days. Than this ration improve more and come to 46 days in year 2004-05. As we know that this ratio can improve by two reasons. • Decrease in CGS • Decrease in inventory Now we see that during the years in which ratio increase, what was the reason behind this increase either inventory decrease or CGS decreased?
?Interpretations for Year 2004-07
2003-04 CGS % of Sales Inventory % Change 53.64 4.43 2004-05 44.97 33.73 2005-06 36.86 26.57 2006-07 49.61 -4.50
From above calculation we can say that during 2004-05 our CGS reduced from 53.64% to 44.97%. During the year CGS reduced by 8.67% or sales, while on other side our inventory also increase but affect of decrease in CGS is higher than increase in inventory due to which ratio increase. Analysis of Financial Statements
Ratio in Days
P a g e | 26 During year 2005-06 again ratio increase. This increase is very clear that in respective year both inventory and CGS reduced substantially. So due to this reduction company turnover increased significantly. While in year 2006-07 again turnover reduced. If we see the above calculations which depict that during year 2006-07 our CGS increased by 12.75%, which is a significant amount, but on other side inventory also reduced by just 4.50 which is insignificant figure. So turnover came down.
? Reasons of increase in CGS during 2006-07
• • • • • • Price of raw material increased Spare breakages increased Fuel prices increased Administrative increased by 28.93% Traveling and conveyance expanses increased Repair and maintenance expanse increased massively
HORIZONTAL ANALYSIS Note Rupees ('000)
2004 Sales Cost of Good Sold Gross Profit Operating Expenses Administrative Expenses Selling & Distribution Expenses Operation Profit Financial & Other Charges Net Profit
3,247,262 1,555,407 740,824 532,500 39,535 20,416 723,083 204,222 314,147
2005
3,921,362 1,763,566 1,081,576 4,049,311 42,293 21,332 988,672 229,634 510,490
2006
4,286,138 2,095,027 2,191,111 94,127 66,629 31,695 2,041,984 264,297 1,203,735
2007
3,463,28 3 2,371,78 8 1,091,49 5 58,098 71,302 40,645 995,285 207,105 646,323
HORIZONTAL ANALYSIS Horizontal Analysis =Income statements/sales Analysis of Financial Statements
P a g e | 27
Common Size %
Cost of Good Sold Gross Profit Operating Expenses Administrative Expenses Selling & Distribution Expenses Operation Profit Financial & Other Charges Net Profit 2004 0.479 0.476 0.719 0.074 0.516 35.417 0.282 1.538 2005 0.450 0.613 3.744 0.010 0.504 46.347 0.232 2.223 2006 0.489 1.046 0.043 0.708 0.476 64.426 0.129 4.554 2007 0.685 0.460 0.053 1.227 0.570 24.487 0.208 3.121
VERTICAL ANALYSIS Base Year 2004 2004 100 100 100 100 100 100 100 100 100 Indexed % 2005 2006 120.759 131.992 113.383 134.693 145.996 295.767 760.434 17.676 106.976 168.532 104.487 155.246 136.730 282.400 112.443 129.417 162.500 383.176 2007 106.652 152.487 147.335 10.910 180.352 199.084 137.645 101.412 205.739
Sales Cost of Good Sold Gross Profit Operating Expenses Administrative Expenses Selling & Distribution Expenses Operation Profit Financial & Other Charges Net Profit Sales during 2001-07 years
Business Analysis
Sales (000) % Change
Analysis of Financial Statements
P a g e | 28 2001 2002 2003 2004 2005 2006 2007 1575604 1586606 1510738 2296231 2845143 4286138 3463283
0.698 -4.782 51.994 23.905 50.648 -19.198
N s les et a
50 00 00 0 40 00 00 0 Sales Net 30 00 00 0 20 00 00 0 10 00 00 0 0 20 01 20 02 2 3 00 2 4 00 Y rs ea 2 5 00 20 06 20 07
Analysis of Financial Statements
P a g e | 29
DIRECTOR’S REPORT
MARKET OVERVIEW
GENERAL 1. THE DIRECTORS OF FAUJI CEMENT COMPANY LIMITED (FCCL) ARE PLEASED PRESENT THE 15 TH ANNUAL R EPORT TOGETHER WITH AUDITED FINANCIAL STATEMENTS THE C OMPANY FOR THE YEAR ENDED 30 JUNE 2007 ANDTHE AUDITORS ' R EPORT . 2. THE CEMENT INDUSTRY DURING FISCAL YEAR 2006-07. TOTAL CEMENT
HIGHEST FIGURE EVER TO OF
WITNESSED AN UNPRECEDENTED DEMAND FOR ITS PRODUCT DESPATCHES STOOD AT THE
24.22 MILLION TONS WHICH IS THE CEMENT INDUSTRY. IT REFLECTED A RECORD GROWTH OF 31.56 PERCENT OVER 18.4 MILLION TONS OF SALES DURING LAST F ISCAL YEAR. WHEREAS, LOCAL DEMAND GREW BY 24.4 PERCENT OVER LAST YEAR, THE EXPORTS WITNESSED A STRONG AND HEALTHY GROWTH OF 112 PERCENT TO AN ALL TIME HIGH LEVEL OF 3.188 MILLION TONES IN THE WAKE OF RISING INTERNATIONAL DEMAND , AS COMPARED TO 1.5 MILLION TONS DURING THE LAST YEAR.
ACHIEVEDBY
Analysis of Financial Statements
P a g e | 30
3. DURING
COMPARED TO
THE YEAR UNDER REVIEW , THE CAPACITY UTILIZATION STOOD AT
80%
AS
88%
OF LAST YEAR.
THE
REDUCTION WAS MAINLY ATTRIBUTED TO START
UP OF NEW LINES OF PRODUCTION WHICH HAD INCREASED THE CAPACITY FROM
24
MTPA TO
33.4 MTPA. AT THE END OF FISCAL YEAR 07, PER CAPITA CEMENT PAKISTAN INCREASED BY 11.961 % TO 131 KG AS COMPARED TO 117 KG IN FISCAL YEAR 06. 4. COMPARING %, WHICH WAS
PERFORMANCE OF WITH INDUSTRY , CAPACITY UTILIZATION OF
CONSUMPTION IN
FCCL STOOD AT 98.00 HIGHER BY 6.6% OVER LAST YEAR . THE HIGHLIGHTS OF THE THE C OMPANY VIS - À- VIS THE INDUSTRY ARE AS UNDER:-
COMPARISON OF DESPATCHES
A.
FCCL COMPARISON 2006-07 990,823 152,268 1,143,091 98.08% 1,098,019 1,153,711 1,143,091
2005-06 DIFFERENCE (%) (1) DOMESTIC DISPATCHES (TONS) 952,771 3.99% (2) EXPORTS (TONS) 113,410 34.26% (3) TOTAL DISPATCHES (TONS) 1,066,181 7.21% (4) CAPACITY UTILIZATION (%) 91.48% 7.21% (5) CLINKER PRODUCTION (TONS) 1,058,368 3.75% (6) CEMENT PRODUCTION (TONS) 1,064,649 8.37% (7) SALES (TONS) 1,066,181 7.21%
B.
INDUSTRY COMPARISON
2006-07 21,034,278
2005-06 DIFFERENCE (%) (1) DOMESTIC DISPATCHES (TONS) Analysis of Financial Statements
P a g e | 31 16,907,138 24.41% (2) EXPORTS (TONS) 1,505,159 1 11.83% (3) TOTAL DISPATCHES (TONS) 18,412,297 31.56% (4) CAPACITY UTILIZATION 87.93% -8.94%
3,188,424 24,222,702 80.07%
PRODUCTION REVIEW
5. PERFORMANCE
OF THE PLANT REMAINED ABOVE SATISFACTORY LEVEL WITH AN OVERALL EFFICIENCY EXCEEDING
98.9%. EFFICIENCY CAPTIVE POWER
IN TERMS OF FUEL , POWER AND RAW
MATERIAL CONSUMPTION AT OUR PLANT IS AMONG THE BEST .
6. PROJECT COMPLETED.
FOR
6MW
PLANT
HAS
BEEN
SUCCESSFULLY
FINANCIAL PERFORMANCE
7. PROFITABILITY. THE COMPANY EARNED A PROFIT AFTER TAX OF RS. 646 MILLION AS COMPARED TO LAST YEAR'S PROFIT OF RS. 1,204 MILLION . THE PROFIT FROM OPERATIONS DECREASED FROM R S. 2,042 M ILLION TO RS . 995 M ILLION DEPICTING A DECREASE OF 51.26 % OWING TO REDUCTION IN CEMENT PRICES AND HIGHER MANUFACTURING COST . 8. CONTRIBUTION TO NATIONAL EXCHEQUER. THE COMPANY HAS CONTRIBUTED A SUM OF R S. 1,383 M ILLION TO THE NATIONAL EXCHEQUER IN THE FORM OF TAXES AND DUTIES DURING THE YEAR. CONCURRENTLY , FAUJI CEMENT EARNED USD 7.428 MILLION THROUGH EXPORT OF CEMENT . 9. PRESENTATION OF FINANCIAL STATEMENTS. THE FINANCIAL STATEMENTS PREPARED BY THE MANAGEMENT PRESENT THE C OMPANY 'S STATE OF AFFAIRS , THE RESULTS OF ITS OPERATIONS , CASH FLOWS AND CHANGES IN EQUITY IN A FAIR AND ACCURATE MANNER. 10. BOOKS 11.
OF
ACCOUNT. PROPER
BOOKS OF ACCOUNT HAVE BEEN MAINTAINED .
ACCOUNTING POLICIES. APPROPRIATE
ACCOUNTING
POLICIES
HAVE
BEEN
CONSISTENTLY APPLIED IN PREPARATION OF FINANCIAL STATEMENTS EXCEPT FOR THE CHANGE IN ACCOUNTING POLICY AS STATED IN NOTE
2.8
TO THE FINANCIAL STATEMENTS AND ACCOUNTING ESTIMATES ARE BASED ON
REASONABLE AND PRUDENT JUDGEMENT.
Analysis of Financial Statements
P a g e | 32 12. COMPLIANCE
INTERNATIONAL
INTERNATIONAL ACCOUNTING STANDARDS (IAS) AND FINANCIAL REPORTING STANDARDS (IFRS).INTERNATIONAL
WITH
HAVE BEEN FOLLOWED IN
ACCOUNTING STANDARDS AND INTERNATIONAL FINANCIAL REPORTING STANDARDS, AS APPLICABLE IN PAKISTAN, PREPARATION OF FINANCIAL STATEMENTS. 13. INTERNAL CONTROL SYSTEM. THE
DESIGN AND HAS BEEN EFFECTIVELY IMPLEMENTED AND MONITORED .
SYSTEM OF INTERNAL CONTROL IS SOUND IN
14. GOING CONCERN. THERE 15. BEST PRACTICES
IS NO DOUBT THAT THE
COMPANY
HAS THE ABILITY AND
STRENGTH TO OPERATE AS A GOING CONCERN.
OF
CORPORATE GOVERNANCE.
THERE
HAS
BEEN
NO
MATERIAL DEPARTURE FROM THE BEST PRACTICES OF CORPORATE GOVERNANCE , AS GIVEN IN THE LISTING REGULATIONS .
16. FINANCIAL DATA DESCRIPTION 2004
OF
LAST SIX YEARS. KEY
2007 2002
OPERATING AND FINANCIAL DATA
OF LAST SIX YEARS IS GIVEN BELOW :-
2006
2005
2003
OPERATING RESULTS (RS. IN MILLION ) NET SALES 2,296.231 1,510.738 GROSS PROFIT 740.824 175.605 OPERATING PROFIT 723.084 122.213 FINANCIAL CHARGES 204.223 463.409 PROFIT/(LOSS)
AFTER TAXATION
3,463 .283 1,586.606 1,091.495 398.707 995.285 317.023 207.105 416.732 646.323 (110.480)
4,286.138 2,191.111 2,041.984 264.297 1,203.735
2,845.143 1,081.576 988.673 229.634 510.490
314.148
(531.381)
BALANCE SHEET
SHAREHOLDER'S EQUITY 3,735.206 1,939.134 1,624.986 2,156.367 FIXED ASSETS 4,392.450 3,282.617 4,563.115 2,449.624 4,658.272
Analysis of Financial Statements
P a g e | 33 4,729.254 4,659.449 LONG TERM LOANS INCLUDING CURRENT
PORTION
4,854.117 1,425.000 4,412.582 1.74 (0.64) 1.54 (0.63) 1,975.000 3,075.000
3,645.347
4,325.878
EPS (RS)
BASIC 0.85 DILUTED 0.75 3.25 2.87 1.38 1.22 (1.43) (1.27)
17. OUTSTANDING STATUTORY DUES. THE COMPANY OUTSTANDING STATUTORY DUES. 18. VALUE OF INVESTMENT GIVEN BELOW :NON-MANAGEMENT STAFF PROVIDENT FUND: RS. 28,383,705 19. SALIENT ASPECTS COMPANY COMPLIES
OF
DOES
NOT
HAVE
ANY
OF
EMPLOYEES. VALUE
AS ON
30 JUNE 2007
IS
MANAGEMENT STAFF RS. 43,370,276 COMPANY'S CONTROL REPORTING SYSTEMS. THE
AND
CODE OF CORPORATE GOVERNANCE AS CONTAINED IN THE LISTING REGULATIONS OF THE STOCK E XCHANGES . THE B OARD 'S PRIMARY ROLE IS THE PROTECTION AND ENHANCEMENT OF LONG TERM SHAREHOLDERS ' VALUE . TO FULFIL THIS ROLE , THE B OARD IS RESPONSIBLE TO IMPLEMENT OVERALL CORPORATE GOVERNANCE IN THE COMPANY INCLUDING APPROVAL OF THE STRATEGIC DIRECTION AS RECOMMENDED BY THE MANAGEMENT, APPROVING AND MONITORING CAPITAL EXPENDITURE, APPOINTING , REMOVING AND CREATING SUCCESSION POLICIES FOR THE SENIOR M ANAGEMENT, ESTABLISHING AND MONITORING THE ACHIEVEMENT OF M ANAGEMENT' S GOALS AND ENSURING THE INTEGRITY OF INTERNAL CONTROL AND M ANAGEMENT INFORMATION SYSTEMS . IT IS ALSO RESPONSIBLE FOR APPROVING AND MONITORING FINANCIAL AND OTHER REPORTING . THE B OARD HAS DELEGATED RESPONSIBILITY FOR OPERATION AND ADMINISTRATION OF THE C OMPANY TO THE CHIEF EXECUTIVE /MANAGING DIRECTOR. RESPONSIBILITIES ARE DELINEATED BY FORMAL AUTHORITY DELEGATIONS . THE BOARD HAS CONSTITUTED THE FOLLOWING COMMITTEES WHICH WORK UNDER THE GUIDANCE OF B OARD OF DIRECTORS:WITH ALL THE REQUIREMENTS OF THE A. B.
AUDIT COMMITTEE. TECHNICAL COMMITTEE. C . H UMAN RESOURCES COMMITTEE .
Analysis of Financial Statements
P a g e | 34
ATTENDANCE
OF
MEETINGS
AUDIT FOLLOWS :AND
20. DURING THE YEAR UNDER REVIEW, THE B OARD OF DIRECTORS COMMITTEE HELD FIVE MEETINGS EACH. ATTENDANCE BY EACH DIRECTOR IS AS
A.
BOARD
OF
DIRECTORS
NO
OF
MEETINGS (RETIRED) (RETIRED) JAVED IFU (RETIRED) (RETIRED) (RETIRED) INAYAT FLS
ATTENDED (1) LT GEN SYED ARIF HASAN, HI (M), -5 (2) MAJ GEN MALIK IFTIKHAR KHAN, HI (M) -5 (3) MR. QAISER -5 (4) MR. RIYAZ H. BOKHARI , -3 (5) BRIG MUNAWAR AHMED RANA, SI (M) -5 (6) BRIG ARIF RASUL QURESHI, SI (M) -5 (7) BRIG RAHAT KHAN, SI (M) -5 (8) DR . NADEEM -5 (9 )MS TINE BREMHOLM KOKFELT, - NIL
B.
AUDIT
OF
COMMITTEE
NO
MEETINGS
ATTENDED (1) -5 (2) -2 (3) -3 (4) MR. MR. BRIG RIYAZ RAHAT DR . KHAN, QAISER H. SI NADEEM BOKHARI , (M) JAVED IFU (RETIRED) INAYAT
Analysis of Financial Statements
P a g e | 35 -4 NOTE: CHIEF FINANCIAL OFFICER (CFO) AND INTERNAL AUDITOR WERE INVARIABLY INVITED TO ATTEND THE MEETINGS OF AUDIT COMMITTEE . E XTERNAL AUDITORS WERE ALSO INVITED TO ATTEND TWO MEETINGS OF AUDIT COMMITTEE , WHEREIN , ISSUES RELATED TO ANNUAL AND HALF YEAR 'S FINANCIAL STATEMENTS WERE DISCUSSED .
DISCLOSURES
21. TO THE BEST OF OUR KNOWLEDGE, THE DIRECTORS, CEO, CFO, COMPANY SECRETARY, COMPANY AUDITORS, THEIR SPOUSES AND THEIR MINOR CHILDREN HAVE NOT UNDERTAKEN ANY TRADING IN C OMPANY 'S S HARES DURING THE FY 2006-07.
RELATIONS WITH PERSONNEL
22. RELATIONS
BETWEEN THE
AND
LOCALS
AND THE
MANAGEMENT
WORKERS
CONTINUED
TO
BE AND
EXTREMELY CORDIAL BASED ON MUTUAL RESPECT AND CONFIDENCE CONTRIBUTING TO THE OPTIMAL EFFICIENCY .
THE COMPANY HAS ALLOCATED PROFIT PARTICIPATION FUND FOR ITS EMPLOYEES. 23. CONCURRENTLY,
THE
FUNDS FOR
PROVIDENT FUND
COMPANY
CONTINUES TO ENJOY A HIGH DEGREE OF GOODWILL
AND COOPERATION WITH LOCAL COMMUNITY AS IT RESPECTS THEIR ENVIRONMENT THROUGH RESPONSIBLE BUSINESS PRACTICES . AT REASONABLE FEE .
THE COMPANY
RUNS A FREE DISPENSARY FOR THE
LOCALS AND ALSO PROVIDES GOOD EDUCATION FACILITIES UP TO SECONDARY SCHOOL LEVEL
ELECTION
OF
DIRECTORS
DIRECTORS
OF THE
24. DURING
THREE YEARS .
THE YEAR UNDER REVIEW , ELECTION OF
COMPANY
WAS
HELD AND THE PRESENT
BOARD
OF
DIRECTORS
WAS UNANIMOUSLY ELECTED FOR A TERM OF
DIRECTORS
25. THERE AUDITORS
HAS BEEN NO CHANGE IN THE COMPOSITION OF
BOARD
DURING THE YEAR.
AUDITORS
26. THE PRESENT AUDITORS M/S KPMG TASEER HADI & CO; CHARTERED ACCOUNTANTS WILL STAND RETIRED AT THE CONCLUSION OF THE 15TH ANNUAL GENERAL Analysis of Financial Statements
P a g e | 36 MEETING. HOWEVER, THEY HAVE EXPRESSED THEIR WILLINGNESS FOR RE-APPOINTMENT. THEY HAVE ALSO BEEN RECOMMENDED BY THE AUDIT COMMITTEE, SUBJECT TO COMPLIANCE WITH CLAUSE (XLI ) OF C ODE OF C ORPORATE G OVERNANCE . PRODUCT QUALITY 27. FCCL HAS ALWAYS ENDEAVOURED TO PRODUCE THE BEST QUALITY CEMENT IN PAKISTAN, WHICH IS AMPLY REFLECTED IN ITS HIGH DEMAND, BOTH INSIDE AND OUTSIDE THE C OUNTRY . AS A COMPANY, FCCL IS FOCUSED ON CUSTOMERS' SATISFACTION , EMPLOYEES ' MORALE AND FAIR DEAL TO ITS PARTNERS IN THE BUSINESS . I T STRICTLY ADHERES TO THE FOLLOWING :A. B.
QUALITY POLICY. CUSTOMERS' OBJECTIVES
SATISFACTION THROUGH QUALITY ASSURANCE .
(1) TO BE A COST EFFECTIVE AND EFFICIENT ORGANISATION . (2) CONTINUOUS IMPROVEMENT THROUGH WELL PLANNED TRAINING . (3) COMMITMENT TO LEADERSHIP AND TEAM-WORK. (4) TO MAINTAIN QUALITY CULTURE WITHIN FCCL. (5) TO REMAIN A LEADING MANUFACTURER OF HIGH QUALITY PORTLAND CEMENT PAKISTAN.
IN
28. THE COMPANY, BY GRACE OF ALMIGHTY ALLAH, IS AN ISO 9001-2000 CERTIFIED COMPANY AND ALSO RECOMMENDED FOR ISO-14001-2004 FOR ENVIRONMENTAL MANAGEMENT SYSTEM. FUTURE OUTLOOK
FUTURE OUTLOOK
29. KEEPING
OF IN VIEW THE GROWING DEMAND OF CEMENT IN FUTURE,
FAUJI CEMENT
HAS
DECIDED TO ENHANCE ITS PRODUCTION CAPACITY .
FOR
THIS PURPOSE A COMPLETE NEW LINE
7200
TONS PER DAY CLINKER WILL BE INSTALLED PARALLEL TO THE EXISTING LINE . SIGNED WITH
THE SALIENT ASPECTS OF THE PROJECT ARE GIVEN BELOW :A . AGREEMENTS FOR SUPPLY OF ENGINEERING AND EQUIPMENT HAVE BEEN GERMAN FIRMS POLY SIUS, HAVER & BOECKER, LOESCHE AND SWISS FIRM ABB.
B.
THE
PLANT WILL BE THE BIGGEST EVER SINGLE LINE IN
PAKISTAN ,
AND THE EQUIPMENT
WILL COMPRISE OF THE LATEST STATE OF THE ART TECHNOLOGY DEVELOPED BY LEADING FOREIGNN COMPANIES . C.
FOR
THE PURPOSE OF CIVIL WORKS , ERECTION AND LOCAL FABRICATION A CONTRACT HAS
BEEN AWARDED TO SUCH TASKS .
M/S DESCON ENGINEERING LAHORE,
WHO HAVE A WIDE EXPERIENCE IN
Analysis of Financial Statements
P a g e | 37
D.
LOCAL
FABRICATION
AND
PROCUREMENT
HAVE
BEEN
ENCOURAGED
TO
THE
MAXIMUM
EXTENT TO UTILISE LOCAL SOURCES TO SAVE ON COST AND FOREIGN EXCHANGE . E.
THE
PLANT WILL START COMMERCIAL PRODUCTION IN EARLY
2010 INSHA ALLAH.
ACKNOWLEDGMENT
30. THE DIRECTORS
DEDICATION OF EXPRESS THEIR DEEP APPRECIATION OF OUR VALUED CUSTOMERS , THE TO THEIR PROFESSIONAL OBLIGATIONS BOTH IN AND THE COOPERATION FINANCIAL
COMPANY'S COMPANY FIELDS .
EMPLOYEES DISPLAY
EXTENDED BY FINANCIAL INSTITUTIONS TO EXCELLENT
/
GOVERNMENT AGENCIES , WHICH HAVE ENABLED THE OPERATIONAL AND
PERFORMANCE
CONCLUSION
31. WITH FOR
PROFOUND GRATITUDE TO THE BLESSINGS OF OF THE OPINION THAT THE
COMPANY BOARD
REMAINS ON ITS
ALLAH ALMIGHTY, WAY TO SUCCESS .
THE
BOARD
IS
AND ON BEHALF OF THE
RAWALPINDI LT GEN SYED ARIF HASAN, HI(M) (RETD) 21 AUGUST 2007
CHAIRMAN
Analysis of Financial Statements
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