Description
The report explains on internship report of Lakson Tobacco Company Limited.
LAKSON TOBACCO COMPANY, LIMITED
LAKSON TOBACCO
COMPANY, LIMITED
FINANCIAL PROJECT
DEPARTMENT BUSINESS MANAGEMENT SCIENCES
UNIVERSITY OF EDUCATION
OKARA CAMPUS
SUPERVISOR
MR. MUHAMMAD SALEEM
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LAKSON TOBACCO COMPANY, LIMITED
RESEARCH AND DEVELOPED BY
Noman Ashraf
BBA (HONS) FINANCE SESSION 2006-2010 ROLL NO 98 (M) SEMESTER 8Th
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LAKSON TOBACCO COMPANY, LIMITED
Dedication
I dedicate this project to Almighty Allah, The Creator of worlds And Hazrat Muhammad (P.B.U.P), the cause of The creation of the Universe And To my parents, To the persons who loved me, persons whom I loved and for all those who prayed for me.
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Acknowledgment
First of all thanks to Almighty Allah, who have given me the strength and knowledge to complete this project. I would like to specially thank for the help of my finance teacher Sir Muhammad Saleem who helped me a lot regarding this project. Then I would like to thanks for the cooperation of Mr. Bilal Iqbal Khan and Mr. Muhammed Tabassum Shad they give me a lot of information. I have learned a lot with the kind guidance of Sir Muhammad Zahid and I think I have achieved my goal of learning practical things.
Noman Ashraf BBA (Hons) Finance
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Executive Summary................................................................................................... Mission Statement..................................................................................................... About Company......................................................................................................... History of Tobacco.................................................................................................... Tobacco Industry in Pakistan..................................................................................... PEST ANALYSIS OF TOBACCO........................................................................... RATIO ANALYSIS GRAPH & INTERPRETATION............................................. SWOT ANALYSIS OF LAKSON TOBACCO COMPANY................................... COMPETITORS ANALYSIS................................................................................... BASES FOR SEGMENTATION:............................................................................. Demographic..............................................................................................................
Population growth............................................................................................................................ Population growth in Pakistan is about 2.5% annually. This population explosion creates an opportunity for the cigarette manufacturers..................................................................................... Population age mix........................................................................................................................... Ethnic Markets............................................................................................................................. Educational group........................................................................................................................ Household patterns....................................................................................................................... Geographic and Social class:....................................................................................................... Task Environment:............................................................................................................................... ii) Producer Distributor Retailer Final Consumer............................................................ SWOT ANALYSIS.............................................................................................................................. THE BOSTON CONSULTING GROUP (BCG) MATRIX............................................................... The BCG Matrix and one size fits all strategies...................................................................... Other uses and benefits of the BCG Matrix............................................................................ CONCLUSION.................................................................................................................................... FUTURE RECOMMENDATIONS.................................................................................................... REFRENCES.......................................................................................................................................
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EXECUTIVE SUMMARY
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Executive Summary
The report is prepared about the major activities conducted by the finance Department at Lakson Tobacco. The covered activities are Planning and Selection, Financial Resources, Development and Investment. The report helps in understanding how the Financial Position motivates and market activities of the firm in meeting the goals and challenges faced by the company. The Lakson Group was founded in 1954. It Product Portfolio - centering around consumer goods and services - consists of detergents & soaps, toothpaste, food products, fast food restaurants, insurance, internet services, software, paper & board, printing, powdered beverages and tea, packaging, publications, surgical instruments, and textiles. The Lakson Group of Companies generates sales revenues in excess of Rupees 37 billion (US$ 625 million) annually. Group assets exceed Rupees 17 billion (US$ 280 million). Lakson Tobacco Company, LTC is a multinational organization having its parent company, the British American Tobacco, located in England. LTC is a cigarette manufacturer and is one of the highly respected multinationals in Pakistan. The tobacco industry is one of the most important sectors of the economy and LTC has become a major player in this industry by keeping thousands of people employed; and by contributing to the annual GDP of Pakistan through the large amount of taxes paid on cigarette manufacturing and sales. By having the mission of being the “first choice for everyone,” LTC is obviously portraying itself as a very focused, determined and goal-oriented company. Its objectives are not only related to sales and profits, but are also reflective of the excellent corporate culture and the high level of ethical responsibility that the company takes on. LTC is an organization well suited from all facets – that is - operations, marketing, organizational structure, leadership, and motivational aspects – every element perfectly blends in its success story. On one hand, LTC has firm values and believes that have played a significant part in building and maintaining its
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corporate culture, while on the other hand, it has high marketing standards which take more into account than just the sales of cigarettes. It listens and reacts to the concerns of its stakeholders especially since it is operating in a highly controversial industry. From a business point of view, it takes great strategic steps to market and enhance the image of its brands while complying with all the government regulations. Its major competitor is Pakistan Tobacco Company, which adopts a number of immoral marketing practices that LTC has to counter ethically since it is a multinational. In addition, LTC understands the highly significant role of information technology in today’s global economy, and thus pays special attention to the implementation of IT in all of its departments. Every department has its own network system and database that provide increased communication and reliable data. Especially, in the factories, LTC has a number of latest machinery for manufacturing and their performance is commendable. The Group's principal activity is to manufacture and sale of cigarettes and tobacco in Pakistan. The Group operates in five factories located in Karachi in the districts of Dadu, Sahiwal, Rawalpindi and Swabi. The Group markets the products under the brand name Morven Gold and Marlboro. LTC has a great consideration for quality of its product. Quality monitoring starts from the point where tobacco is purchased to the point of sale and even after the sale. All the customer complaints are taken care of and efforts for constant improvement in quality are made. In fact, the company is so quality conscious that it invests million of rupees in procurement of machinery that improves the quality of cigarettes. Ultimately, it is evident that LTC has adopted world-class standards in its internal as well as its external activities and thus has been extremely successful in its core business.
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MISSION STATEMENT
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Mission Statement
Build a successful business model that encompasses the needs of our customers, our shareholders, and employees Provide a dynamic, responsive organization that ensures a rapid response to opportunity and competition Invest in a balanced portfolio of short, medium, and long-term business opportunities of measured risk
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COMPANY ACHIEVEMENT
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Awards
A record-breaking four companies
With a record-breaking four companies being selected for the Karachi Stock Exchange’s Best Performance Award for 2005, the Lakson Group is once again the KSE’s top performing business group.
We thank the KSE for recognizing the achievements of Lakson Tobacco Company Limited, Colgate-Palmolive Pakistan Limited, Century Paper and Board Mills Limited and Clover Pakistan Limited.
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Top 25 Companies Award from Karachi Stock Exchange: Lakson Tobacco (1997, 1998, 1999, 2003, 2004 & 2005 ) Century Insurance (1997 & 1998) Century Paper & Board Mills (2002, 2003 & 2004) Colgate Palmolive (2004) Corporate Excellence Certificate from Management Association of Pakistan: Colgate-Palmolive (2001, 2002 & 2004)
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COMPANY INFORMATION
LAKSON TOBACCO COMPANY, LIMITED
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ABOUT COMPANY
Sultan Ali Lakhani
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Advisor to the Group CEO of Century Publications (Pvt. Ltd.), Editor-in-Chief of the Daily Express & Express News Channel (Pvt. Ltd.) Honorary Counsel General of Mexico in Pakistan Member, Senate (Upper House) of Pakistan from 1987 to 1994 Education:
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B.A (Honors) Economics Karachi University
37 years of top management experience of Group companies
Iqbal Ali Lakhani
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Chairman of the Group CEO of Century Paper & Board Mills Ltd., CEO of Tritex Cotton Mills Ltd., CEO of Merit Packaging, CEO of Cyber.Net (Pvt. Ltd.) Education:
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BBA, Finance & Marketing University of California at Berkeley
34 years of top management experience of Group companies
Zulfiqar Ali Lakhani
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CEO of Colgate Palmolive (Pakistan) Ltd., Tetley Clover & Clover Pakistan Ltd. Education:
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MBA, Wharton School of Business, University of Pennsylvania with a concentration in Finance & Marketing M.S. in Industrial Engineering B.S Chemical Engineering, Stanford University
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30 years of top management experience of Group companies
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LAKSON TOBACCO COMPANY, LIMITED
Amin Mohammed Lakhani
• • •
CEO McDonalds Pakistan & CEO Accuray Surgicals Honorary Counsel General of Singapore in Pakistan Education
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MBA, Wharton School of Business, University of Pennsylvania with a concentration in Finance & International Business. B.S. in Industrial Engineering, Stanford University
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25 years of top management experience of Group companies
Major Group Companies
Accuray Surgicals Ltd. Surgical, Dental, Manicure & Veterinary Instruments Century Insurance Co. Ltd. General Insurance Century Paper & Board Mills Ltd. Paper & Board Century Publications (Pvt.) Ltd. Newspapers & Magazines Clover Pakistan Ltd. Food Products Colgate-Palmolive (Pakistan) Ltd. Detergents, Soaps & Toothpaste Cyber Net Internet Services (Pvt.) Ltd. Internet Service Provider Lakson Business Solutions Limited. Software & Web Solutions
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Hasanali Karabhai Foundation Philanthropic Work Merit Packaging Ltd. Printing & Packaging Princeton Travels (Pvt.) Ltd. Travel Services Satellite Broadcasting Media Pakistan 24/7 broadcast news TV channel SIZA Foods (Pvt.) Ltd. (McDonald’s) Quick Service Restaurants Tritex Cotton Mills Ltd. Cotton Yarn Tetley Clover (Pvt.) Ltd. Tea
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LAKSON TOBACCO COMPANY, LIMITED Foreign Affiliations
The Lakson Group of Companies is one of the largest and most welldiversified companies in Pakistan with a range of foreign affiliated partners that include Tetley Tea, Colgate-Palmolive, McDonalds, Kraft Foods and Phillip Morris International. Colgate-Palmolive Inc.: McDonald’s Corporation: Kraft Foods: Tetley Overseas Holdings Ltd. 30% equity ownership in Colgate- Palmolive (Pakistan) Limited Siza foods (Pvt.) Limited holds an exclusive Country Development License for Pakistan. Holds an exclusive licensing exclusive Country Development License for Pakistan. 50% equity ownership in Tetley Clover
People
People are their most valuable asset. Successful individuals are the driving force behind a successful enterprise. Attracting, retaining, and motivating the most talented people will position Lakson at the forefront of each industry in which it competes.
Customer Success
Leads to their success. We will achieve maximum customer satisfaction through value-added products and industry-leading services and support.
Excellence
The pursuit of excellence is not a destination, it's a journey. They will always strive to the be the best in each of our respective industries and in sectors where they are already regarded as the best, they will strive to maintain and entrench our position as industry leaders.
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LAKSON TOBACCO COMPANY, LIMITED Innovation
They are advocates and instruments of positive change. Being innovative builds competitive advantage and creates new opportunities. They will strive to create a culture where entrepreneurial initiatives and thinking outside the box are encouraged and rewarded.
Teamwork
Teams are the catalysts for our ideas and actions. Every team member has the power to influence the group. They treat this power as a privilege and a responsibility. Teamwork is the foundation of an effective, successful, fun environment in which the whole is greater than the sum of the parts.
Openness
Openness facilitates informed decisions, understanding, and trust. Sharing information across the organization facilitates our common goals, spreads the collective knowledge base of our organization, and helps individuals access information in a more timely and efficient manner.. Furthermore, such openness stimulates greater transparency in our transactions which builds trust amongst coworkers, customers, and regulators.
Social Responsibility
Encouraging a culture of social responsibility allows our people to achieve a healthy balance between their professional endeavors, family commitments and any community initiatives in which they are interested. In addition, such a culture lays the foundation for successful relationships with the communities that are most affected by our operations and fosters goodwill towards us.
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Sustainable Profitability
Our business is based on a balanced perspective between short and longterm vision. We aim to grow the company, to increase our earnings, and to enhance our corporate environment through profitable investments.
Headquarters are located at:
LAKSON SQUARE, BLDG. # 2, SARWAR SHAHEED ROAD, KARACHI – 74200, PAKISTAN Tel: + 9221 569-8000 Fax: + 9221 568-3410
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HISTORY OF TOBACCO
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History of Tobacco
Tobacco has a long history in the Americas. The Mayan Indians of Mexico carved drawings in stone showing tobacco use. These drawings date back to somewhere between 600 to 900 A.D. Tobacco was grown by American Indians before the Europeans came from England, Spain, France, and Italy to North America. Native Americans smoked tobacco through a pipe for special religious and medical purposes. They did not smoke every day. Tobacco was the first crop grown for money in North America. In 1612 the settlers of the first American colony in Jamestown, Virginia grew tobacco as a cash crop. It was their main source of money. Other cash crops were corn, cotton, wheat, sugar, and soya beans. Tobacco helped pay for the American Revolution against England. Also, the first President of the U.S. grew tobacco. By the 1800's, many people had begun using small amounts of tobacco. Some chewed it. Others smoked it occasionally in a pipe, or they hand-rolled a cigarette or cigar. On the average, people smoked about 40 cigarettes a year. The first commercial cigarettes were made in 1865 by Washington Duke on his 300-acre farm in Raleigh, North Carolina. His hand-rolled cigarettes were sold to soldiers at the end of the Civil War. It was not until James Bonsack invented the cigarette-making machine in 1881 that cigarette smoking became widespread. Bonsack's cigarette machine could make 120,000 cigarettes a day. He went into business with Washington Duke's son, James "Buck" Duke. They built a factory and made 10 million cigarettes their first year and about one billion cigarettes five years later. The first brand of cigarettes were packaged in a box with baseball cards and were called Duke of Durham. Buck Duke and his father started the first tobacco company in the U.S. They named it the American Tobacco Company.
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Credit: An 1892 Duke of Durham box of machine-rolled cigarettes Tobacco Biology & Politics The American Tobacco Company was the largest and most powerful tobacco company until the early 1900's. Several companies were making cigarettes by the early 1900's. In 1902 Philip Morris Company came out with its Marlboro brand. They were selling their cigarettes mainly to men. Everything changed during World War I (1914-18) and World War II (1939-45). Soldiers overseas were given free cigarettes every day. At home production increased and cigarettes were being marketed to women too. More than any other war, World War II brought more independence for women. Many of them went to work and started smoking for the first time while their husbands were away. By 1944 cigarette production was up to 300 billion a year. Service men received about 75% of all cigarettes produced. The wars were good for the tobacco industry. Since WW II, there have been six giant cigarette companies in the U.S. They are Philip Morris, R.J. Reynolds, American Brands, Lorillard, Brown & Williamson, and Liggett & Myers (now called the Brooke Group). They make millions of dollars selling cigarettes in the U.S. and all over the world.
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In 1964 the Surgeon General of the U.S. (the chief doctor for the country) wrote a report about the dangers of cigarette smoking. He said that the nicotine and tar in cigarettes cause lung cancer. In 1965 the Congress of the U.S. passed the Cigarette Labelling and Advertising Act. It said that every cigarette pack must have a warning label on its side stating "Cigarettes may be hazardous to your health." By the 1980's, the tobacco companies had come out with new brands of cigarettes with lower amounts of tar and nicotine and improved filters to keep their customers buying and to help reduce their fears. The early 1980's were called the "tar wars" because tobacco companies competed aggressively to make over 100 low tar and "ultra" low tar cigarettes. Each company made and sold many different brands of cigarettes. In 1984 Congress passed another law called the Comprehensive Smoking Education Act. It said that the cigarette companies every three months had to change the warning labels on cigarette packs. It created four different labels for the companies to rotate.
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Public Law 98-474, "Comprehensive Smoking Education Act, 1984"
Credit: Smoking Tobacco & Health, Centers for Disease Control Since the 1980's, federal, state, local governments, and private companies have begun taking actions to restrict cigarette smoking in public places. The warning labels were the first step. Tobacco companies cannot advertise cigarettes on television or radio. It is against a law that was passed by Congress in 1971. Many cities across the U.S. do not allow smoking in public buildings and restaurants. Since 1990, airlines have not allowed smoking on airplane flights in the U.S. that are six hours or less. State taxes on cigarettes have increased. As it becomes more difficult for tobacco companies to sell their products in the U.S., they are looking outside. U.S. tobacco companies are now growing tobacco in Africa, South America (Brazil and Paraguay), India, Pakistan, the Philippines, Greece, Thailand, and the Dominican Republic. Fifty percent (50%) of the sales of U.S. tobacco companies go to Asian countries, such as Thailand, South Korea, Malaysia, the Philippines, and Taiwan.
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TOBACCO INDUSTRY IN PAKISTAN
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Tobacco Industry in Pakistan
Pakistan's tobacco industry has been a traditionally dependable source of government income, contributing some 27.5 billion rupees per year - the equivalent of 4.4% of Pakistan's GDP. It has the largest yield of any crop in that country and employs some 1 million Pakistanis. But in the last few years, there has been a growing concern about the ill effects of cigarette smoking and the impact it has on the health and well being of Pakistanis. For instance, approximately 90% of lung cancers in Pakistan are attributable to cigarette smoking. In the last decade or so, there has been a large anti-smoking backlash in the United States. The recent out-of-court settlement of $360 billion between "Big Tobacco" and participants in a class action suit has spurred the development of anti-smoking coalitions in other parts of the world. The decline in smoking in North America, especially the United States, has been offset by a strong push from the large tobacco companies to find converts in the developing world. As tobacco control is tightening in the West, transnational tobacco companies are becoming more active in developing countries. The result is that tobacco use is declining at the rate of 1.5% in the West but at the same time it is increasing at the rate of 1.7% in the developing countries. While the anti-tobacco movement in the USA helped lower cigarette sales, Big Tobacco, the largest US companies: Philip Morris, R.J. Reynolds and Brown and Williamson, as well as the British American Tobacco Co., have continue to expand overseas. They have flooded the markets in Asia and Eastern Europe with advertisements, promotional products and cut-price brands designed to encourage new smokers. According to the Pakistan Pediatric Association, every day more than 1,000 children between the ages of six and 16, start smoking. It is estimated that more than a third of men and some four percent of women in the country are smokers.
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Every year, the government spends some US$20,000 on anti-smoking messages but cigarette companies spend millions of dollars annually on advertising. According to the prestigious advertising magazine 'Age', the Lakson Tobacco Company spent an astounding $6.4 million on publicity in 1998, making it the third largest business advertiser in Pakistan that year. Anti-tobacco campaigners accuse the government of being swayed by the tobacco industry. According to independent estimates, the Pakistani government collected over $300 million in tobacco tax in 1990, slightly more than a tenth of the government's total revenue earnings that year. Anti-tobacco activists say that whatever benefits the government is reaping in the short term from tobacco-related industries will be significantly offset by the long term health care problems of average Pakistanis devastated by smoking addictions
LAKSON TOBACCO COMPANY LIMITED
Introduction of the Organization:
Lakson Tobacco Company Limited is a part of Lakson Group which was founded in 1954. Portfolio of Lakson Group consists of detergents & soaps, toothpaste, food products, fast food restaurants, insurance, internet services, software, paper & board, printing, powdered beverages and tea, packaging, textiles, surgical instruments, and publications. ABOUT LAKSON TOBACCO COMPANY LIMITED •The Company was establish in 1971 • Mr. Hassan Ali Karabai was the founder. • First Brand of the Company was Lakson Kings • Merger with Premier Tobacco Industries in 1997
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PRODUCTION UNITS – FACTORIES & LEAF DIVISION The Group operates in five factories located in Karachi, in the districts of Dadu, Sahiwal, Rawalpindi and Swabi. History: A multinational company - was incorporated on February 10, 1969. The project went into production on August 18, 1971 with manufacturing capacity of 1200 million cigarettes per year on single shift basis. The present capacity increased to 14,850 million cigarettes. The company has acquired the shares of Tobacco Processing Industries Ltd. and has set up a large modern Tobacco Threshing and Redrying plant at Mardan. This plant has commenced production in June 1981. This company has been merged with Lakson with effect from January 1, 1982. The capacity was increased to the present level The capacity was increased to the present level with the start up of new factory at Mardan in early 1979. Punjab Cigarette Industrial Limited has been merged in the company in 1982. The Authorised capital of the company is Rs. 200.00 million divided into ordinary shares of Rs. 10/- each, against which the Paid-up capital stood at Rs. 73.15 million as at June 30, 1993. Ruthmans equity in the Company has been made up to 29.87 per cent. The Reserves of the company increased from Rs. 55.20 million to Rs. 70.89 million during the year 1993. The Break-up Value per Rs. 10/- worked out to Rs. 19.69. Meanwhile, the Paid-up capital increased to Rs. 80.46 million and Reserves to Rs. 78.50 million during the year 1994. Sales during the year ending June 30, 1993 stood at Rs. 2434.61 million as compared to Rs. 2473.76 million showing a fall of 1.58 per cent. Pretax profit during the same period stood at Rs. 48.21 million as compared to Rs. 25.51 million showing a substantial increase of 88.98 per cent. Earning per share worked out to 4.14 as compared to Rs. 2.94 in the preceding year. Price Earning Ratio at the market price of Rs. 31.50 worked out to 8:1. The lower sales was due to a reduction in the export of tobacco and sluggish conditions in the domestic
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market during the year under review along with persistent devaluation of Pak Rupee against major currencies. The company paid Central Excise Duty and Sales Tax on tobacco and cigarettes amounted to Rs. 1,557 million which is 68 per cent of domestic sales revenue during the year 1993. The company gave a dividend of 20 per cent plus bonus at the rate of 1:10 in 1993.
About Lakson
To maintain high quality standards in our products, all of our major companies are ISO 9001-2000 certified. In 2004, Lakson Group contributed PKR 14.2 billion (US $220 million) to the Ex-Chequer, constituting approximately 2.7% of Total Government Revenue. The Group employees 6,560 persons directly, 5,340 persons by contract MARKET SHARE BUSINESS AREA Fabric Care Scourers Oral Care Dish Bar, Liquid & Paste Internet Service Provision Packaging Board MARKET SHARE 49% 50% 29% 83% 26% 23%
Corporate Responsibility
HASANALI KARABHAI FOUNDATION The Foundation was established to undertake various financial aid programs and charitable contributions. The Foundation owns and operates a multi-storied office building in the center of Karachi and the entire rental income from this property is being utilized for philanthropic purposes.
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EYE CAMPS It is estimated that there are about 2 ½ million blind people in Pakistan. The Lakson Group initiated the idea of “Free Eye Camps” in 1994. Its objective was to set up free camps to provide treatment to patients with eye related diseases and to eradicate curable blindness from the country. NO. OF FREE EYE CAMPS OPD CONDUCTED OPERATIONS PERFORMED GLASSES DISTRIBUTED 11 74,000 4,500 30,000
Hospitals – Statistics to date
OPD’S CONDUCTED Male Female Total OPERATIONS PERFORMED 39,274 34,784 74,058 4,663
The hospital has been completed at a cost of PKR32 million and is the first specialized hospital for eye diseases in Swabi (NWFP.) Operational since May 2001, fully equipped to handle all types of eye related diseases. Fully electronic system for maintaining online patient records. ISO 9001-2000 certified. QMS on Q-Pulse software. The Sahiwal hospital was completed at a cost of PKR 30 million and is the first specialized hospital for eye diseases in Qadarabad. Operational since March 2004.
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Fully equipped to handle all types of eye related diseases. Fully electronic system for maintaining online patient records. ISO 9001-2000 certification under process. QMS on Q-Pulse under process. Social Initiatives A diabetic center was established at the Mardan (NWFP) hospital in 2005. A K-12 school was established in Kotri (Sind) in June 2005. A third eye hospital is being established in Kotri (Sind) which will commence operations by 2007.
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PEST ANALYSIS
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PEST ANALYSIS OF TOBACCO
Political
Ministry of Health has made all possible efforts in informing the masses that smoking is injurious to health and LTC maintains that “smoking is an adult choice”. Cigarettes are being manufactured and each packet must contain a warning “Tobacco seriously damages health” or “smoking is injurious to health”. But as such it has no effect on company's marketing strategies and tactics, although cigarette manufacturers can not promote it as “good for health” product. The law “no smoking in public places” might effect sales volume because the people who use to smoke for style or fashion may give it up.
Economic
The tobacco industry has commissioned numerous reports evaluating its gross economic contribution in terms of employment (in both manufacturing and agriculture, but not in the health sector), earnings, exports and taxes paid. Universally, these studies conclude that the industry makes a major economic contribution. In almost all cases, the studies are based on two important implicit assumptions: That it would be possible totally to eliminate all tobacco consumption; and That where tobacco consumption is reduced, money that used to be spent on tobacco consumption would not be spent on other forms of consumption (yet nor would it be saved). In other words, these studies do not ask: “What would be the net economic effects of a reduction in tobacco consumption?” In the real world, if tobacco consumption is reduced, two outcomes are possible: the level of national savings increases; and/or other forms of consumption expenditure are substituted for tobacco expenditures. If smokers reduce their consumption and simply spend their money
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elsewhere, the relative economic effects of the two different consumption patterns must be identified. There is some evidence that a reduction in expenditure on smoking could well lead to higher levels of domestic employment and earnings (because cigarette production is relatively capital-intensive and, in many countries, foreign-owned). If the money is saved rather than spent, the increased savings are likely to have stimulatory macroeconomic effects which should be compared with the direct economic effects of reduced tobacco expenditures. On balance, it seems reasonable to expect that the economic effects of reduced tobacco expenditures on earnings and employment are likely to be close to neutral. Reduced smoking will change the structure of national consumption, but is unlikely to have a major impact on its total level.
Social, Welfare
In India (reported by Dr. Bhandari), 16 million people are estimated to be involved in the tobacco industry, with 2.1 million in the cultivation sector. In his study, he found that the average monthly household income for tobacco farmers is 4,700 rupees, compared with 4,000 rupees for non-tobacco farmers in the same area and this is reflected in a greater affluence and a better quality of life ( e.g. television sets, own transport). There are fewer under-age marriages, dowry is less frequently stipulated and a larger proportion is educated to at least secondary school level. Tobacco farmers also have greater contact with other branches of agriculture and this is reflected in a higher standard of overall crop production. It is interesting to note that, although the non-tobacco growing communities receive more government aid for health facilities, transport and other aspects of infrastructure, the tobacco-growing sector has as a matter of fact the better overall infrastructure as it tends to attract greater private investment. The social relevance of leaf tobacco production was also demonstrated by Ayres for Brazil. A viable agricultural community is particularly important there to avoid rural migrations to the cities and consequent extreme poverty. Tobaccogrowing provides such viable communities. Furthermore, because most farm units which are relatively small – are farmer-owned, they provide centres for family
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activity and this helps increase the stability of the social environment. Growers and their families feel secure in their occupations as they are growing a crop with the highest return in that region, marketing is assured, transportation is provided by the buyers, etc. The strength and affluence of the industry enables an integrated system of leaf production, involving crop planning, extension, financing, guaranteed purchase of the crop and environmental and social programmes. His message is that farmers should be kept on the land. With a crop like tobacco they can be part of organised agriculture that considerably strengthen their representative power on social and other issues and on the services they receive. This is largely absent in other commodities.
Technological
LTC is the pioneer of using latest technology in Pakistan. The machine they use to manufacture cigarettes “Loga Max” can produce 8000 sticks per minute. Although now Pakistan Tobacco Company is also using the same technology but it was LTC which introduced it in the country. Everyone knows that technology has a significant effect on company’s production capabilities. Use of this technology (Loga Max) enables LTC to fulfill the market demand well in time and more efficiently.
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RATIO ANALYSIS GRAPH & INTERPRETATION
LAKSON TOBACCO COMPANY, LIMITED
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RATIO ANALYSIS GRAPH & INTERPRETATION
Debt paying ability
Net working capital
Formula
Net Working Capital =
Current assets – Current liabilities
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
2004 Current assets Current liabilities Net working capital (Rs) 910815 582613 328202 2005 1384495 449823 934672 2006 1267950 516444 751506 2007 1240430 542025 698405 2008 1719948 1597703 122245
Net working capital
1000000 900000 800000 700000 600000 500000 400000 300000 200000 100000 0 934672 751506 698405
Rupees
Net w orking capital 328202 122245
2004
2005
2006 Ye ars
2007
2008
The amount of Total current assets was Rs. 910815 in the year 2004; it becomes Rs. 1384495 in the year 2005 after an increment of Rs.1293680. In the year 2006 the amount becomes Rs. 1267950 after a decrement of Rs. 116545. In the next
55
LAKSON TOBACCO COMPANY, LIMITED
year 2007 it becomes Rs. 1240430 after a decrement of Rs.1143520. In the last year 2008 the amount becomes Rs. 17119948 after an increment of Rs.471518. It is maximum in the year 2007 and minimum in the year 2003. The amount of Current liabilities was Rs. 582613 in the year 2004; it becomes Rs. 449823 in the year 2005 after an decrement of Rs.132790. In the year 2006 the amount becomes Rs. 516444 after an increment of Rs.66621. In the next year 2007 it becomes Rs. 542025 after an increment of Rs.25581. In the last year 2008 the amount becomes Rs. 1597703 after an increment of Rs.1055678. It is maximum in the year 2008 and minimum in the year 2003. The amount of net working capital was Rs. 328202 in the year 2004; it becomes Rs. 934672 in the year 2005 after an increment of Rs.606470. In the year 2006 the amount becomes Rs. 751506 after a decrement of Rs.183166. In the next year 2007 it becomes Rs. 698405 after a decrement of Rs.53101. In the last year 2008 the amount becomes Rs. 122245 after a decrement of Rs.576160. The net working capital is higher in 2008 due to very large amount of current assets and much difference in current assets and current liabilities. Current assets are maximum due to large amount of stock in trade.
56
LAKSON TOBACCO COMPANY, LIMITED
Current Ratio
Formula
CurrentAssets Current ratio = CurrentLiabilities
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Current assets Current liabilities Current ratio (Times) 2004 910815 582613 1.56 2005 1384495 449823 3.08 2006 1267950 516444 2.46 2007 1240430 542025 2.29 2008 1719948 1597703 1.08
Current Ratio
3.50 3.00 2.50 Times 2.00 1.50 1.00 0.50 0.00 2004 2005 2006 Years 2007 2008 1.56 1.08 3.08 2.46 2.29 Current Ratio
The amount of Total current assets was Rs. 910815 in the year 2004; it becomes Rs. 1384495 in the year 2005 after an increment of Rs.1293680. In the year 2006 the amount becomes Rs. 1267950 after a decrement of Rs. 116545. In the next year 2007 it becomes Rs. 1240430 after a decrement of Rs.1143520. In the last year 2008 the amount becomes Rs. 17119948 after an increment of Rs.471518. It is maximum in the year 2007 and minimum in the year 2003.
57
LAKSON TOBACCO COMPANY, LIMITED
The amount of Current liabilities was Rs. 582613 in the year 2004; it becomes Rs. 449823 in the year 2005 after an decrement of Rs.132790. In the year 2006 the amount becomes Rs. 516444 after an increment of Rs.66621. In the next year 2007 it becomes Rs. 542025 after an increment of Rs.25581. In the last year 2008 the amount becomes Rs. 1597703 after an increment of Rs.1055678. It is maximum in the year 2008 and minimum in the year 2003. The current ratio is 1.56 in the year 2004; it becomes 3.08 after an increment of 1.52 in the year 2005. In the year 2006 the current ratio becomes 2.46 after a decrement of 0.62. The current ratio becomes 2.29 after a decrement of 0.17 in the year 2007.In the last year 2008 the percentage becomes 1.08 after a decrement of 1.21. The current ratio is higher in 2008 due to very large amount of current assets and much difference in current assets and current liabilities. Current assets are maximum due to large amount of stock in trade. The value of current ratio has risen slightly from the previous year. This is a good signal for the short term creditors that the company has potential to pay back the obligations in the near future. The figure shows the current ratio of the company has been better than the over all industry for the most of the time. It became low in 2007 due to the increase in the current portion of the long term loans and finances which the company has taken.
58
LAKSON TOBACCO COMPANY, LIMITED
Acid ratio
Formula
(CurrentAsset ? Inventory) CurrentLiabilities Acid ratio =
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Current assets Inventory Current liabilities Acid ratio (times) 2004 910815 79931 582613 1.43 2005 1384495 88498 449823 2.88 2006 1267950 145227 516444 2.17 2007 1240430 117288 542025 2.07 2008 1719948 207491 1597703 0.95
Acid Ratio
3.50 3.00 2.50 Times 2.00 1.50 1.00 0.50 0.00 2004 2005 2006 Years 2007 2008 1.43 0.95 2.88 2.17 2.07 Acid Ratio
The amount of Total current assets was Rs. 910815 in the year 2004; it becomes Rs. 1384495 in the year 2005 after an increment of Rs.1293680. In the year 2006 the amount becomes Rs. 1267950 after a decrement of Rs. 116545. In the next year 2007 it becomes Rs. 1240430 after a decrement of Rs.1143520. In the last year 2008 the amount becomes Rs. 17119948 after an increment of Rs.471518. It is maximum in the year 2007 and minimum in the year 2003.
59
LAKSON TOBACCO COMPANY, LIMITED
The amount of Current liabilities was Rs. 582613 in the year 2004; it becomes Rs. 449823 in the year 2005 after an decrement of Rs.132790. In the year 2006 the amount becomes Rs. 516444 after an increment of Rs.66621. In the next year 2007 it becomes Rs. 542025 after an increment of Rs.25581. In the last year 2008 the amount becomes Rs. 1597703 after an increment of Rs.1055678. It is maximum in the year 2008 and minimum in the year 2003. The amount of inventory was Rs. 79931 in year 2004 becomes Rs. 88498 in the year 2005 after an increment of Rs.8567. In the year 2006 the amount becomes Rs. 145227 after an increment of Rs.56729. In the next year 2007 it becomes Rs. 117288 after a decrement of Rs.27939. In the last year 2008 the amount becomes Rs. 207491 after an increment of Rs.90203. It is maximum in the year 2008 and minimum in the year 2003. The acid ratio is 1.43 in the year 2004; it becomes 2.88 after an increment of 1.45 in the year 2005. In the year 2006 the acid ratio becomes 2.17 after a decrement of 0.71. The acid ratio becomes 2.07 after a decrement of 0.1 in the year 2007. In the last year 2008 the acid ratio becomes 0.95 after a decrement of 1.12.The acid ratio is maximum in 2005. The calculations above show that the quick ratios have showed improvement with respect to the previous year and are maximum in 2005. But, comparing the calculations with the industrial median and we realize that the company’s potential to pay the obligations has decreased.
60
LAKSON TOBACCO COMPANY, LIMITED
Debt/equity ratio
Formula
totalliabilities Debt/equity ratio = shareholder ' sequity
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Total liabilities Shareholder’s equity Debt/equity ratio (%)
Debt/Equity Ratio
120.00% 100.00% Percentage 80.00% 60.00% 40.00% 20.00% 0.00% 2004 2005 2006 Years 2007 2008 78.91% 83.81% 70.94% 57.98% Debt/Equity Ratio 103.06%
2004 962423 1219649 78.91%
2005 1460329 1742471 83.81%
2006 1498963 2112926 70.94%
2007 1296758 2236592 57.98%
2008 2224167 2158106 103.06%
The amount of total liabilities was Rs. 962423 in the year 2004; it becomes Rs. 1460329 in the year 2005 after an increment of Rs.497906. In the year 2006 the amount becomes Rs. 1498963 after an increment of Rs.38634. In the next year 2007 it becomes Rs. 1296758 after a decrement of Rs.202205. In the last year 2008 the amount becomes Rs. 2224167 after an increment of Rs.927409. It is maximum in the year 2008 and minimum in the year 2003.
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LAKSON TOBACCO COMPANY, LIMITED
The amount owner’s equity accounts were Rs. 1219649 in the year 2004; it becomes Rs. 1742471 in the year 2005 after an increment of Rs.522822. In the year 2006 the amount becomes Rs. 2112926 after an increment of Rs.370455. In the next year 2007 it becomes Rs. 2236592 after an increment of Rs.123666. In the last year 2008 the amount becomes Rs. 2158106 after a decrement of Rs.78486. It is maximum in the year 2008 and minimum in the year 2003. The debt/equity ratio is 78.91% in the year 2004; it becomes 83.81% after an increment of 4.9% in the year 2005. In the year 2006 the debt/equity ratio becomes 70.94% after a decrement of 12.87%. The debt/equity ratio becomes 57.98% after a decrement of 12.96% in the year 2007. In the last year 2008 the percentage becomes 103.06% after an increment of 45.08%. The debt equity ratio is maximum in 2003 due to large amount of shareholders equity and less amount of liabilities. This ratio has increased as well, as compared to the year 2006. In the ratio form, the results for the year 2007 can be stated as 79.14% and that of the year 2005 is 61.46%. The creditors always prefer this ratio to be low. the lower the ratio, the higher the level of the firm’s financing that is being provided by the share holders, and larger the creditor cushion in the event of shrinking assets values. If we see the figure, we see that the company’s ratio in the past years have been in the favor of the creditors, but the requirement of loans for the expansion projects started by the company.
62
LAKSON TOBACCO COMPANY, LIMITED
Debt to tangible net worth
Formula
totalliabi lities Debt to tangible net worth = ( shareholde r ' sequity ? int angibleass ets )
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Total liabilities Shareholders equity Intangible assets Debt to tangible net worth (%) 2004 962423 1219649 0 78.91% 2005 1460329 1742471 0 83.81% 2006 1498963 2112926 0 70.94% 2007 1296758 2236592 0 57.98% 2008 2224167 2158106 0 103.06%
Debt to Tangible Net worth
120.00% 100.00% Percentage 80.00% 60.00% 40.00% 20.00% 0.00% 2004 2005 2006 Ye ars 2007 2008 78.91% 83.81% 70.94% 57.98% Debt to Tangible Net w orth 103.06%
The amount of total liabilities was Rs. 962423 in the year 2004; it becomes Rs. 1460329 in the year 2005 after an increment of Rs.497906. In the year 2006 the amount becomes Rs. 1498963 after an increment of Rs.38634. In the next year
63
LAKSON TOBACCO COMPANY, LIMITED
2007 it becomes Rs. 1296758 after a decrement of Rs.202205. In the last year 2008 the amount becomes Rs. 2224167 after an increment of Rs.927409. It is maximum in the year 2008 and minimum in the year 2003. The amount owner’s equity accounts were Rs. 1219649 in the year 2004; it becomes Rs. 1742471 in the year 2005 after an increment of Rs.522822. In the year 2006 the amount becomes Rs. 2112926 after an increment of Rs.370455. In the next year 2007 it becomes Rs. 2236592 after an increment of Rs.123666. In the last year 2008 the amount becomes Rs. 2158106 after a decrement of Rs.78486. It is maximum in the year 2008 and minimum in the year 2003. The debt to tangible net worth is 78.91% in the year 2004; it becomes 83.81% after an increment of 4.9% in the year 2005. In the year 2006 the debt/equity ratio becomes 70.94% after a decrement of 12.87%. The debt/equity ratio becomes 57.98% after a decrement of 12.96% in the year 2007. In the last year 2008 the percentage becomes 103.06% after an increment of 45.08%. The debt equity ratio is maximum in 2003 due to large amount of shareholders equity and less amount of liabilities.
64
LAKSON TOBACCO COMPANY, LIMITED
Cash ratio
Formula
(cash & cashequilent + marketable sec urities ) currentliabilities Cash ratio =
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Cash Marketable securities Current liabilities Cash ratio (times) 2004 386410 3061 582613 0.67 2005 750842 30646 449823 1.74 2006 383509 43138 516444 0.83 2007 75471 26450 542025 0.19 2008 65529 30058 1597703 0.06
Cash Ratio
2.00 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 1.74
Cash ratio
0.67
0.83
Cash Ratio
0.19
0.06 2008
2004
2005
2006 Years
2007
The amount of cash and bank balance was Rs. 386410 in the year 2004; it becomes Rs. 750842 in the year 2005 after a increment of Rs.364432. In the year 2006 the amount becomes Rs. 383509 after a decrement of Rs.367333. In the next year 2007 it becomes Rs. 75475 after a decrement of Rs.308038. In the last year 2008 the amount becomes Rs. 65529 after a decrement of Rs 9942. It is maximum in the year 2008 and minimum in the year 2003. The amount of Current liabilities was Rs. 582613 in the year 2004; it becomes Rs.
65
LAKSON TOBACCO COMPANY, LIMITED
449823 in the year 2005 after an decrement of Rs.132790. In the year 2006 the amount becomes Rs. 516444 after an increment of Rs.66621. In the next year 2007 it becomes Rs. 542025 after an increment of Rs.25581. In the last year 2008 the amount becomes Rs. 1597703 after an increment of Rs.1055678. It is maximum in the year 2008 and minimum in the year 2003. The cash ratio is 0.67 in the year 2004; it becomes 1.74 after an increment of 1.07 in the year 2005. In the year 2006 the cash ratio becomes 0.83 after a decrement of 0.91. The cash ratio becomes 0.19 after a decrement of 0.64 in the year 2007. In the last year 2008 the cash ratio becomes 0.06 after a decrement of 0.13. The cash ratio is maximum in 2005.The cash ratio is minimum in 2003 due to less amount of cash.
66
LAKSON TOBACCO COMPANY, LIMITED
Short term liabilities
Day’s sales in account receivable
Formula
averagegrossaccountreceivable (netsales / 365) Day’s Sales in account receivable=
LAKSON TOBACCO COMPANY LTD
Ratio analysis
Average account receivable Net sales Day's sales in account receivable (Days) 2004 22638 2084955 4.00 2005 21986 2400530 3.00 2006 164233 2434513 25.00 2007 17415 2619960 2.00 2008 130108 3013752 16.00
Day's sales in account Receivable
30.00 25.00 25.00 20.00 Days 15.00 10.00 5.00 0.00 2004 2005 2006 Years 2007 2008 4.00 3.00 2.00 16.00
Day's sales in account Receivable
The amount of account receivable saving accounts was Rs. 22638 in the year 2004; it becomes Rs. 21986 in the year 2005 after a decrement of Rs.652. In the year 2005 the amount becomes Rs. 164233 after an increment of Rs.142247. In the next year 2007 it becomes Rs. 17415 after a decrement of Rs. 146818. In the
67
LAKSON TOBACCO COMPANY, LIMITED
last year 2008 the amount becomes Rs. 130108 after an increment of Rs.112693. It is maximum in the year 2008 and minimum in the year 2005 The amount of sales was Rs. 2084955 in the year 2004; it becomes Rs. 2400530 in the year 2005 after an increment of Rs.315575. In the year 2006 the amount becomes Rs. 2434513 after an increment of Rs.33983. In the next year 2007 it becomes Rs. 2619960 after an increment of Rs.185447. In the last year 2008 the amount becomes Rs. 3013752 after an increment of Rs.393792. It is maximum in the year 2008 and minimum in the year 2003. The days sales in account receivable is 4 in the year 2004; it becomes 3 after a decrement of 1 in the year 2005. In the year 2006 the day’s sales in account receivable becomes 25 after an increment of 22. The day’s sales in account receivable become 2 after a decrement of 23 in the year 2007. In the last year 2008 the day’s becomes 16 after an increment of 14.
68
LAKSON TOBACCO COMPANY, LIMITED Account receivable turnover Formula
netsales Account receivable turn over = averageaccountreceivables
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Net sales Average account receivable Account receivable turnover (Times) 2004 2084955 22638 1997.08 2005 2400530 21986 550.33 2006 2434513 164233 1223.99 2007 2619960 17415 1225.43 2008 3013752 130108 42.09
Account Receivable turnover
2500.00 2000.00 1500.00 1000.00 550.33 500.00 42.09 0.00 2004 2005 2006 Years 2007 2008 1997.08
Times
1223.99 1225.43
Account Receivable turnover
The amount of account receivable saving accounts was Rs. 22638 in the year 2004; it becomes Rs. 21986 in the year 2005 after a decrement of Rs.652. In the year 2005 the amount becomes Rs. 164233 after an increment of Rs.142247. In the next year 2007 it becomes Rs. 17415 after a decrement of Rs. 146818. In the last year 2008 the amount becomes Rs. 130108 after an increment of Rs.112693. It is maximum in the year 2008 and minimum in the year 2005
69
LAKSON TOBACCO COMPANY, LIMITED
The amount of sales was Rs. 2084955 in the year 2004; it becomes Rs. 2400530 in the year 2005 after an increment of Rs.315575. In the year 2006 the amount becomes Rs. 2434513 after an increment of Rs.33983. In the next year 2007 it becomes Rs. 2619960 after an increment of Rs.185447. In the last year 2008 the amount becomes Rs. 3013752 after an increment of Rs.393792. It is maximum in the year 2008 and minimum in the year 2003. The account receivable turnover is 1997.08 in the year 2004; it becomes 550.33 after a decrement of 1446.75 in the year 2005. In the year 2006 the account receivable turnover becomes 1223.99 after an increment of 673.66. The account receivable turnover becomes 1225.43 after an increment of 1.44 in the year 2007. In the last year 2008 the percentage becomes 42.09 after a decrement of 1183.34. The account receivable turnover is maximum in 2007 due to large amount of sales and very less amount of account receivable. The account receivable turnover is minimum in 2008.
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LAKSON TOBACCO COMPANY, LIMITED
Day’s sales in inventory
Formula
endinginventiry (CGS / 365) Day’s sales in inventory =
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
2004 Ending inventory Cost of goods sold Days sales in inventory 16573 1369785 4.42 2005 27371 1544122 6.47 2006 44459 1488882 10.90 2007 48858 2242296 7.95 2008 69638 2834336 8.97
Day's sales in inventury
12.00 10.00 8.00 Days 6.00 4.00 2.00 0.00 2004 2005 2006 Years 2007 2008 4.42 6.47 Day's sales in inventury 10.90 7.95 8.97
The amount of cost of goods sold was Rs.1369785 in the year 2004; it becomes Rs. 1544122 in the year 2005 after an increment of Rs.174337. In the year 2006 the amount becomes Rs. 1488882 after an decrement of Rs.55240. In the next year 2007 it becomes Rs. 2242296 after an increment of Rs.753414. In the last year 2008 the amount becomes Rs. 2834336 after an increment of Rs.592040. It is
71
LAKSON TOBACCO COMPANY, LIMITED
maximum in the year 2008 and minimum in the year 2003. The day’s sales in inventory are 4. In the year 2004; it becomes 6 after an increment of 2 in the year 2005. In the year 2006 the day’s sales in inventory becomes 11 after an increment of 5. The day’s sales in inventory become 8 after a decrement of 3 in the year 2007. In the last year 2008 the percentage becomes 9 after an increment of 1.The day’s sales in inventory is maximum in 2004 and minimum in 2005.
72
LAKSON TOBACCO COMPANY, LIMITED
Inventory turnover
Formula
CGS Inventory turn over = averageinventory
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Inventory Cost of goods sold Inventory turnover 2004 79931 1369785 82.65 2005 88498 1544122 56.41 2006 145227 1488882 33.49 2007 117288 2242296 45.89 2008 207491 2834336 40.70
Inventury turnover
90.00 80.00 70.00 Times 60.00 50.00 40.00 30.00 20.00 10.00 0.00 2004 2005 2006 Years 2007 2008 82.65
56.41 45.89 33.49 40.70 Inventury turnover
The amount of cost of goods sold was Rs.1369785 in the year 2004; it becomes Rs. 1544122 in the year 2005 after an increment of Rs.174337. In the year 2006 the amount becomes Rs. 1488882 after an decrement of Rs.55240. In the next year 2007 it becomes Rs. 2242296 after an increment of Rs.753414. In the last year 2008 the amount becomes Rs. 2834336 after an increment of Rs.592040. It is
73
LAKSON TOBACCO COMPANY, LIMITED
maximum in the year 2008 and minimum in the year 2003. The amount of inventory was Rs. 79931 in year 2004 becomes Rs. 88498 in the year 2005 after an increment of Rs.8567. In the year 2006 the amount becomes Rs. 145227 after an increment of Rs.56729. In the next year 2007 it becomes Rs. 117288 after a decrement of Rs.27939. In the last year 2008 the amount becomes Rs. 207491 after abn increment of Rs.90203. It is maximum in the year 2008 and minimum in the year 2003. The inventory turnover is 82.65 in the year 2004; it becomes 56.41 after a decrement of 26.24 in the year 2005. In the year 2006 the inventory turnover becomes 33.49 after a decrement of 22.92. The inventory turnover becomes 45.89 after an increment of 12.4 in the year 2007. In the last year 2008 the percentage becomes 40.70 after an increment of 5.19. However, when we compare the five year inventory turnover rate of shezan as shown in the figure12, we see that the company has always been managing its inventory well. The reason for its bad management for the cost of work in process increased and so as the cost of finished goods, hence causing the cost of goods to rise in spite of fewer sales.
Profitability Analysis
74
LAKSON TOBACCO COMPANY, LIMITED
Net profit margin
Formula
netincome Net profit margin = netsales
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Net income Net sales Net profit margin 2004 425696 2084955 20.42% 2005 512300 2400530 21.34% 2006 537785 2434513 22.09% 2007 184158 2619960 7.03% 2008 10354 3013752 0.34%
Net profit margin
25.00% 20.42% 20.00% Percentage 15.00% Net prof it margin 10.00% 5.00% 0.34% 0.00% 2004 2005 2006 years 2007 2008 7.03% 21.34% 22.09%
The amount of sales was Rs. 2084955 in the year 2004; it becomes Rs. 2400530 in the year 2005 after an increment of Rs.315575. In the year 2006 the amount becomes Rs. 2434513 after an increment of Rs.33983. In the next year 2007 it becomes Rs. 2619960 after an increment of Rs.185447. In the last year 2008 the
75
LAKSON TOBACCO COMPANY, LIMITED
amount becomes Rs. 3013752 after an increment of Rs.393792. It is maximum in the year 2008 and minimum in the year 2003. The amount of net income was Rs. 425696 in the year 2004; it becomes Rs. 512300 in the year 2005 after an increment of Rs.86604. In the year 2006 the amount becomes Rs. 537785 after an increment of Rs.25485. In the next year 2007 it becomes Rs. 184158 after an decrement of Rs.353627. In the last year 2008 the amount becomes Rs. 10354 after an decrement of Rs.137804. It is maximum in the year 2008 and minimum in the year 2003. The net profit margin is 20.42% in the year 2004; it becomes 21.34% after an increment of 0.92% in the year 2005. In the year 2006 the net profit margin becomes 22.09% after an increment of 0.75%. The net profit margin becomes 7.03% after a decrement of 15.06% in the year 2007. In the last year 2008 the percentage becomes 0.34% after a decrement of 6.69%.The net profit margin is maximum in 2005 and minimum in 2003. However, in 2006 the situation was quite good since the company earned 93 % more than in 2007. The industrial median was also higher than that of the companies. The reason behind the reduction was the reduction in sales along with the relative increase in the cost of goods sold. The sales of the company reduced due to the production from wet process kiln due to stoppage of dry process kiln for routine maintenance. The figure shows the comparison of the net margin generated by cherat.
Total assets turnover
76
LAKSON TOBACCO COMPANY, LIMITED
Formula
netsales Total asset turn over = averagetotalassets
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Net sales Average total assets Total asset turnover 2004 2084955 2005 2400530 2006 2434513 2007 2619960 2008 3013752
2182072
0.96
3202800
0.75
3611889
0.67
3533350
0.74
4382273
0.69
Total assets turnover
1.20 1.00 0.80 Times 0.60 0.40 0.20 0.00 2004 2005 2006 Years 2007 2008 0.96 0.75 0.67 0.74 0.69 Total assets turnover
The amount of sales was Rs. 2084955 in the year 2004; it becomes Rs. 2400530 in the year 2005 after an increment of Rs.315575. In the year 2006 the amount becomes Rs. 2434513 after an increment of Rs.33983. In the next year 2007 it becomes Rs. 2619960 after an increment of Rs.185447. In the last year 2008 the amount becomes Rs. 3013752 after an increment of Rs.393792. It is maximum in
77
LAKSON TOBACCO COMPANY, LIMITED
the year 2008 and minimum in the year 2003. The amount of total assets accounts was Rs. 2182072 in the year 2004; it becomes Rs. 3202800 in the year 2005 after an increment of Rs.1020728. In the year 2006 the amount becomes Rs. 3611889 after an increment of Rs.409089. In the next year 2007 it becomes Rs. 3533350 after an decrement of Rs.78539. In the last year 2008 the amount becomes Rs. 4382273 after an increment of Rs.848923. It is maximum in the year 2008 and minimum in the year 2003. The total turn over of the company is lower than the industrial median as well. The industrial median also shows that the over all industry earned. The five year industrial analysis shows that cherat has been always performing well as compared to the beverage industries. The reason behind this decrease was that in spite of the fact that the total assets of the company increased.
78
LAKSON TOBACCO COMPANY, LIMITED
Return on assets
Formula
netincome Return on asset = averagetotalassets
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Net income Total assets return on assets 2004 425696 2005 512300 2006 537785 2007 184158 2008 10354
2182072
19.51%
3202800
16.00%
3611889
14.89%
3533350
5.21%
4382273
0.24%
Return on assets
25.00% 20.00% Percentage 15.00% Return on assets 10.00% 5.21% 5.00% 0.24% 0.00% 2004 2005 2006 Years 2007 2008 19.51% 16.00% 14.89%
The amount of net income was Rs. 425696 in the year 2004; it becomes Rs. 512300 in the year 2005 after an increment of Rs.86604. In the year 2006 the amount becomes Rs. 537785 after an increment of Rs.25485. In the next year 2007 it becomes Rs. 184158 after an decrement of Rs.353627. In the last year 2008 the amount becomes Rs. 10354 after an decrement of Rs.137804. It is maximum in the year 2008 and minimum in the year 2003.
79
LAKSON TOBACCO COMPANY, LIMITED
The amount of total assets accounts was Rs. 2182072 in the year 2004; it becomes Rs. 3202800 in the year 2005 after an increment of Rs.1020728. In the year 2006 the amount becomes Rs. 3611889 after an increment of Rs.409089. In the next year 2007 it becomes Rs. 3533350 after an decrement of Rs.78539. In the last year 2008 the amount becomes Rs. 4382273 after an increment of Rs.848923. It is maximum in the year 2008 and minimum in the year 2003. The return on assets is 19.51% in the year 2004; it becomes 16.00% after a decrement of 3.51% in the year 2005. In the year 2006 the return on assets becomes 14.89% after a decrement of 1.11%. The return on assets becomes 5.21% after a decrement of 9.68% in the year 2007. In the last year 2008 the percentage becomes 0.24% after a decrement of 4.97%. The ratio is also below than the industry median. The industrial median for the year 2007 is 2.9 %. If we compare the five years industrial median with the company, we see that the company has not been performing well for the last three years in a row.
80
LAKSON TOBACCO COMPANY, LIMITED
Operating income margin
Formula
operatingincome netsales Operating income margin =
Cherat Cement company limited
Ratio Analysis
Operating income Net sales operating income margin 2004 633537 2084955 30.39% 2005 718037 2400530 29.91% 2006 799111 2434513 32.82% 2007 322558 2619960 12.31% 2008 25078 3013752 0.83%
Operating income margin
35.00% 30.00% 25.00% Percentage 20.00% 15.00% 10.00% 5.00% 0.00% 2004 2005 2006 Years 2007 2008 0.83% 12.31% Operating income margin 30.39% 29.91% 32.82%
The amount of sales was Rs. 2084955 in the year 2004; it becomes Rs. 2400530 in the year 2005 after an increment of Rs.315575. In the year 2006 the amount becomes Rs. 2434513 after an increment of Rs.33983. In the next year 2007 it becomes Rs. 2619960 after an increment of Rs.185447. In the last year 2008 the amount becomes Rs. 3013752 after an increment of Rs.393792. It is maximum in
81
LAKSON TOBACCO COMPANY, LIMITED
the year 2008 and minimum in the year 2003.
The amount of operating profit was Rs. 633537 in the year 2004; it becomes Rs. 718037 in the year 2005 after an increment of Rs.84500. In the year 2006 the amount becomes Rs. 799111 after an increment of Rs.81074. In the next year 2007 it becomes Rs. 322558 after an decrement of Rs.476553. In the last year 2008 the amount becomes Rs. 25078 after an decrement of Rs.297480. It is maximum in the year 2008 and minimum in the year 2003. The operating income margin is 30.39% in the year 2004; it becomes 29.99% after an increment of 0.48% in the year 2005. In the year 2006 the operating income margin becomes 32.82% after an increment of 2.91%. The operating income margin becomes 12.31% after a decrement of 20.51% in the year 2007. In the last year 2008 the percentage becomes 0.83% after a decrement of 11.48%.
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LAKSON TOBACCO COMPANY, LIMITED
Operating assets turnover
Formula
netsales Operating asset turn over = averageoperatingassets
Cherat Cement company limited
Ratio Analysis
Net sales Operating assets operating asset turnover 2004 2084955 0 0.00 2005 2400530 1227052 1.96 2006 2434513 2198977 1.11 2007 2619960 2042162 1.28 2008 3013752 2155930 1.40
Operating assets turnover
2.50 2.00 1.50 1.11 1.00 0.50 0.00 0.00 2004 2005 2006 Years 2007 2008 1.96 1.40 Operating assets turnover
The amount of sales was Rs. 2084955 in the year 2004; it becomes Rs. 2400530 in the year 2005 after an increment of Rs.315575. In the year 2006 the amount becomes Rs. 2434513 after an increment of Rs.33983. In the next year 2007 it becomes Rs. 2619960 after an increment of Rs.185447. In the last year 2008 the
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Times
1.28
LAKSON TOBACCO COMPANY, LIMITED
amount becomes Rs. 3013752 after an increment of Rs.393792. It is maximum in the year 2008 and minimum in the year 2003. The amount of operating assets was Rs. 0 in the year 2004; it becomes Rs. 1227052 in the year 2005 after an increment of Rs.1227052. In the year 2006 the amount becomes Rs. 2198977 after an increment of Rs.971925. In the next year 2007 it becomes Rs. 2042162 after an decrement of Rs.156815. In the last year 2008 the amount becomes Rs. 2155930 after an increment of Rs.113768. It is maximum in the year 2008 and minimum in the year 2003. The operating assets turnover is 0.00 in the year 2004; it becomes 1.96 after an incrementt of 1.96 in the year 2005. In the year 2006 the operating asset turnover becomes 1.11 after a decrement of 0.85. The operating asset turnover becomes 1.28 after an increment of 0.17 in the year 2007. In the last year 2008 the operating assets turnover becomes 1.40 after an increment of 0.12 .
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Return on operating assets
Formula
netincome Return on operating assets = averageoperatingassets
Cherat Cement company limited
Ratio Analysis
Net income Operating assets Return on operating assets 2004 425696 0 0.00% 2005 512300 1227052 41.75% 2006 537785 2198977 24.46% 2007 184158 2042162 9.02% 2008 10354 2155930 0.48%
Return on operating assets
45.00% 40.00% 35.00% Percentage 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2004 2005 2006 Years 2007 2008 0.00% 9.02% 0.48% 24.46% Return on operating assets 41.75%
The amount of net income was Rs. 425696 in the year 2004; it becomes Rs. 512300 in the year 2005 after an increment of Rs.86604. In the year 2006 the amount becomes Rs. 537785 after an increment of Rs.25485. In the next year 2007 it becomes Rs. 184158 after an decrement of Rs.353627. In the last year 2008 the amount becomes Rs. 10354 after an decrement of Rs.137804. It is
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LAKSON TOBACCO COMPANY, LIMITED
maximum in the year 2008 and minimum in the year 2003. The amount of operating assets was Rs. 0 in the year 2004; it becomes Rs. 1227052 in the year 2005 after an increment of Rs.1227052. In the year 2006 the amount becomes Rs. 2198977 after an increment of Rs.971925. In the next year 2007 it becomes Rs. 2042162 after an decrement of Rs.156815. In the last year 2008 the amount becomes Rs. 2155930 after an increment of Rs.113768. It is maximum in the year 2008 and minimum in the year 2003. The return on operating assets is 0.00% in the year 2004; it becomes 41.75% after a increment of 41.75% in the year 2005. In the year 2006 the return on operating assets becomes 24.46% after a decrement of 17.29%. The return on operating assets becomes 9.02% after a decrement of 15.44% in the year 2007. In the last year 2008 the percentage becomes 0.48% after a decrement of 8.54%.
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Sales to fixed assets
Formula
netsales Sales to fixed assets = averagetotalfixedassets
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Net sales Total fixed assets Sales to fixed assets 2004 2084955 1119332 1.86 2005 2400530 1773455 1.35 2006 2434513 2269848 1.07 2007 2619960 2196964 1.19 2008 3013752 2522040 1.19
Sales to fixed assets
2.00 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 1.86 1.35 1.07 1.19 1.19 Sales to fixed assets
Times
2004
2005
2006 Years
2007
2008
The amount of sales was Rs. 2084955 in the year 2004; it becomes Rs. 2400530 in the year 2005 after an increment of Rs.315575. In the year 2006 the amount becomes Rs. 2434513 after an increment of Rs.33983. In the next year 2007 it becomes Rs. 2619960 after an increment of Rs.185447. In the last year 2008 the amount becomes Rs. 3013752 after an increment of Rs.393792. It is maximum in the year 2008 and minimum in the year 2003.
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LAKSON TOBACCO COMPANY, LIMITED
The amount of tangible fixed assets was Rs. 1119332 in the year 2004; it becomes Rs. 1773455 in the year 2005 after an increment of Rs.654123. In the year 2006 the amount becomes Rs. 2269848 after an increment of Rs.496393. In the next year 2007 it becomes Rs. 2196964 after an decrement of Rs.72884. In the last year 2008 the amount becomes Rs. 2522040 after an increment of Rs.325076. It is maximum in the year 2008 and minimum in the year 2003.
The sales to fixed assets are 1.86 in the year 2004; it becomes 1.35 after a decrement of 0.51 in the year 2005. In the year 2006 the sales to fixed assets becomes 1.07 after a decrement of 0.28. The sales to fixed assets become 1.19 after an increment of 0.12 in the year 2007. In the last year 2008 the sales to fixed assets becomes 1.19 after an increment of 0.00.
Return on total equity
Formula netincome ? redeemablepreferredstockdividend averagetotalequity Return on total equity =
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Net income Preferred stock dividend Total equity Return on total equity (%) 2004 425696 0 1219649 34.90% 2005 512300 0 174247 1 29.40% 2006 537785 0 2112926 25.45% 2007 184158 0 2236592 8.23% 2008 10354 0 2158106 0.48%
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Reurn on total equity
40.00% 35.00% 30.00% Percentage 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2004 2005 2006 Years 2007 2008 8.23% 0.48% Reurn on total equity 34.90% 29.40% 25.45%
The amount of net income was Rs. 425696 in the year 2004; it becomes Rs. 512300 in the year 2005 after an increment of Rs.86604. In the year 2006 the amount becomes Rs. 537785 after an increment of Rs.25485. In the next year 2007 it becomes Rs. 184158 after an decrement of Rs.353627. In the last year 2008 the amount becomes Rs. 10354 after an decrement of Rs.137804. It is maximum in the year 2008 and minimum in the year 2003.
The return on total equity is 34.90% in the year 2004; it becomes 29.40% after a decrement of 5.5% in the year 2005. In the year 2006 the return on total equity becomes 25.45% after a decrement of 3.95%. The return on total equity becomes 8.23% after a decrement of 17.22% in the year 2007. In the last year 2008 the percentage becomes 0.48% after a decrement of 7.75%. The return on equity for the year 2007 shows that the investors earned 22.49% on their investments where as for the year 2008 the investors earned 21.88%. The reason behind the low returns was the unfortunate break down, which caused the
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LAKSON TOBACCO COMPANY, LIMITED
decrease in sales and the increase in the cost. The cost of goods sold also increased due to trial run operation, the management is not able to generate enough revenues against the investments made by the share holders.
Gross profit margin Formula grossprofit Gross profit margin = netsales X 100
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Gross profit Net sales Gross profit margin 2004 715170 2084955 34.30% 2005 856408 2400530 35.68% 2006 945631 2434513 38.84% 2007 377664 2619960 14.41% 2008 179416 3013752 5.95%
Gross profit margin
45.00% 40.00% 35.00% Percentage 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2004 2005 2006 Years 2007 2008 14.41% 5.95% Gross profit margin 34.30% 35.68% 38.84%
The amount of gross profit was Rs. 715170 in the year 2004; it becomes Rs. 856408 in the year 2005 after an increment of Rs.141238. In the year 2006 the
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LAKSON TOBACCO COMPANY, LIMITED
amount becomes Rs. 945631 after an increment of Rs.89223. In the next year 2007 it becomes Rs. 377664 after decrement of Rs.567967. In the last year 2008 the amount becomes Rs. 179416 after decrement of Rs.198248. It is maximum in the year 2003 and minimum in the year 2005. The amount of sales was Rs. 2084955 in the year 2004; it becomes Rs. 2400530 in the year 2005 after an increment of Rs.315575. In the year 2006 the amount becomes Rs. 2434513 after an increment of Rs.33983. In the next year 2007 it becomes Rs. 2619960 after an increment of Rs.185447. In the last year 2008 the amount becomes Rs. 3013752 after an increment of Rs.393792. It is maximum in the year 2008 and minimum in the year 2003. The gross profit margin is 34.30% in the year 2004; it becomes 35.68% after an increment of 1.38% in the year 2005. In the year 2006 the gross profit margin becomes 38.84% after an increment of 3.16%. The gross profit margin becomes 14.41% after a decrement of 24.43% in the year 2007. In the last year 2008 the percentage becomes 5.95% after a decrement of 8.46%. Analysis for the investor Earning per share Formula Earning Per Common Share= netincome ? preferreddividend weightaveragenoofcommonshareouts tan ding
Cherat Cement company limited
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LAKSON TOBACCO COMPANY, LIMITED Ratio Analysis
Net income
Number of common share outstanding Earning per common share 2004 425696000 53192352 8.00 2005 512300000 33490440 15.30 2006 537785000 53113050 10.12 2007 184158000 95580008 1.93 2008 10354000 95580008 0.11
Earning per comman share
18.00 16.00 14.00 12.00 Rupees 10.00 8.00 6.00 4.00 2.00 0.00 2004 2005 2006 Years 2007 2008 1.93 0.11 8.00 10.12 Earning per comman share 15.30
The amount of net income was Rs. 425696 in the year 2004; it becomes Rs. 512300 in the year 2005 after an increment of Rs.86604. In the year 2006 the amount becomes Rs. 537785 after an increment of Rs.25485. In the next year 2007 it becomes Rs. 184158 after an decrement of Rs.353627. In the last year 2008 the amount becomes Rs. 10354 after an decrement of Rs.137804. It is maximum in the year 2008 and minimum in the year 2003. The earning per share in the year 2008 was 26.86. This showed that on each share of common stock outstanding. The reason behind the low earning is the lowering of net income and increase in the financing costs and slight increase in the number
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of shares by 1 % as well. The five years comparison of cherat with the industry shows that the company’s earning per share has always been lower than the industry’s average earning per share.
Price earning ratio Formula Market Pr icePerCommonShare DilutedEPS Price/ earning ratio =
Cherat Cement company limited
Ratio Analysis
Market price per common share Earning per share Price/earning ratio 2004 10 8.00 1.25 2005 10 15.30 0.65 2006 10 10.12 0.99 2007 10 1.93 5.19 2008 10 0.11 92.31
Price/earning ratio
100.00 90.00 80.00 70.00 60.00 Times 50.00 40.00 30.00 20.00 10.00 0.00 2004 2005 2006 Ye ar s 2007 2008 1.25 0.65 0.99 Pric e/earning ratio 92.31
5.19
The amount of earning per share was Rs. 8.00 in the year 2004; it becomes Rs. 15.30 in the year 2005 after an increment of Rs.7.3. In the year 2006 the amount
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becomes Rs. 10.12 after an decrement of Rs.5.18. In the next year 2007 it becomes Rs. 1.93 after an decrement of Rs.8.19. In the last year 2008 the amount becomes Rs. 0.11 after an decrement of Rs.1.82. It is maximum in the year 2008 and minimum in the year 2003. The price earning ratio is 1.25 in the year 2004; it becomes 0.65 after an increment of 0.6 in the year 2005. In the year 2006 the price earning ratio becomes 0.99 after a increment of 0.34. The price earning ratio becomes 5.19 after a decrement of 4.2 in the year 2007. In the last year 2008 the price earning ratio becomes 92.31 after an incremnet of 87.12.
Percentage of retained earning Formula NetIncome ? AllDividend NetIncome Percentage of retained earning =
Cherat Cement company limited
Ratio Analysis
Net income Dividend percentage of retained earning 2004 425696 221486 47.97% 2005 512300 10856 97.88% 2006 537785 71270 86.75% 2007 184158 106392 42.23% 2008 10354 509115 -4817.09%
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Percentage of retained earning
1000.00% 0.00% -1000.00% Percentage -2000.00% Percentage of retained earning -3000.00% -4000.00% -5000.00% -6000.00% Years -4817.09% 2004 2005 2006 2007 2008 47.97% 97.88% 86.75% 42.23%
The amount of net income was Rs. 425696 in the year 2004; it becomes Rs. 512300 in the year 2005 after an increment of Rs.86604. In the year 2006 the amount becomes Rs. 537785 after an increment of Rs.25485. In the next year 2007 it becomes Rs. 184158 after a decrement of Rs.353627. In the last year 2008 the amount becomes Rs. 10354 after a decrement of Rs.137804. It is maximum in the year 2008 and minimum in the year 2003.
The amount of dividend was Rs. 221486 in the year 2004; it becomes Rs. 10856 in the year 2005 after a decrement of Rs.210630. In the year 2006 the amount becomes Rs. 71270 after a increment of Rs.60414. In the next year 2007 it becomes Rs. 106392 after an increment of Rs.35122. In the last year 2008 the amount becomes Rs. 509115 after a increment of Rs.402723. It is maximum in the year 2004 and minimum in the year 2005. The percentage of retained earning is 47.97% in the year 2004; it becomes 97.88% after an increment of 49.91% in the year 2005. In the year 2006 the
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LAKSON TOBACCO COMPANY, LIMITED
percentage of retained earning becomes 86.75% after a decrement of 11.13%. The percentage of retained earning becomes 42.23% after a decrement of 44.52% in the year 2007. In the last year 2008 the percentage becomes 4817.09% after an increment of 4774.86%.
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TREND ANALYSIS
01000900000378000 00002001c00000000 00040000000301080 0050000000b020000 0000050000000c02b c048308040000002e 0118001c000000fb0 21000070000000000
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INTERPRETATION OF TREND ANALYSIS OF BALANCE SHEET
BABA FARID SUGAR MILLS LTD Balance Sheet Trend Analysis 2004 Cash and bank balance Deposit accounts Current accounts Cheques Cash 100.00% 100.00 100.00 00.00 100.00 2005 506.60% 100.00 509.13 00.00 134.25 2006 791.28% 97.35 795.02 00.00 265.68 2007 715.35% 99.53 718.89 00.00 207.77 2008 294.58% 102.22 291.52 00.00 924.34
Trend Analysis
1000.00% 800.00% 600.00% 400.00% 200.00% 0.00% Year 2008 Year 2007 Year 2006 years Year 2005 Year 2004
Cash in hand Balance in Curent account Balance in deposit account Total cash & bank balance
NOTE: All amounts mentioned in Balance Sheet are Rs. (000).
%age
There is an increment in cash and bank balance from 2004 to 2008. Cash and bank balance in 2004 is Rs.9, 984,600.Cash and bank balance in 2004 is Rs.9, 984,600which by the increment of amount Rs.772749 becomes Rs.50, 582,134 in 2005. The amount in 2004 becomes Rs.1687656 by the decrement of Rs.129121 in 2005. The increment of amount Rs.103495 in 2005 it becomes Rs.79, 005,666 in 2006 The amount of Rs. 71,425,078 in 2007 by the increment of Rs.1823905 becomes Rs.29, 412,826 in 2008. There is an increment in cash and bank balance from 2004 to 2008.Cash and
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LAKSON TOBACCO COMPANY, LIMITED
bank balance in 2004 is 100%.Cash and bank balance in 2004 is 100% which by the increment of 74.02% becomes 174.02% in 2004. The amount in 2005 becomes 506.60% by the decrement of 10.37% in 2006. The increment of 791.28% in 2006 it becomes 715.35% in 2007.The amount of 715.35% in 2007 by the increment of 174.7% becomes 294.58% in 2008 Major effect on this increment is due to deposits accounts which has only decrement in 2005 and has continuous increment in this account from year 2004 to 2008 and much in 2007 and 2008. Current account has minor effect on cash and bank balance is go through ups and down from 2004 to 2008.
BABA FARID SUGAR MILLS LTD Balance Sheet Trend Analysis 2004 2005 2006 100.00% 319.77% 130.32% 100.00 125.56 155.24 00.00 00.00 00.00 100.00 -3226.59 -2805.26 2007 58.06% 181.10 00.00 -813.88 2008 -1376.18% 167.36 00.00 447.32
Deferred Taxation Unabsorbed tax depreciation Fixed Assets On Assets Under Finance Lease
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LAKSON TOBACCO COMPANY, LIMITED
Accelerated Tax Depreciation 100.00 661.01 665.42 715.06 29.11
Trend Analysis
1000.00% 0.00% %age -1000.00% -2000.00% -3000.00% -4000.00% years Year 2008 Year 2007 Year 2006 Year 2005 Year 2004
Unabsorbed tax depreciation Fixed assets On assets under finance lease Accelerated tax depreciation Total Deferred Taxation
There is an increment in Deferred Taxation from 2004to 2008. Deferred Taxation in 2005 is Rs.-50,726,956. Deferred Taxation in 2004 are Rs.-15,863,472 which by decrement of amount Rs.1745 becomes 1 Rs.64448 in 2004.The amount in 2005 becomes Rs. .-50,726,956 by the increment of Rs.-20,673,234 in 2006.The increment of amount Rs.95816 in 2006 it becomes Rs.-9,210,305 in 2007.The amount of Rs.287159 in 2007 by the increment of Rs.56411 becomes -218,309,200 in 2008.
Deferred Taxation in 2004 are 100%. Deferred Taxation in 2004 is 100% which by decrement of 1.05% becomes 319.77% in 2005.The amount in 2005 becomes 319.77% by the increment of 16.18% in 2005.The increment of amount 319.77% in 2005 it becomes 172.79% in 2006. The amount of 58.06% in 2007 by the increment of 33.94% becomes -1376.18% in 2008. Major effect on this increment is due to Deferred Taxation which have continuous increment in this account from year 2004 to 2008 and much in 2006 and 2007. Deferred Taxation and balance with statutory authorities has reverse effect on
102
LAKSON TOBACCO COMPANY, LIMITED
cash and bank balance is go through ups and down from 2004to 2008.
BABA FARID SUGAR MILLS LTD Balance Sheet Trend Analysis 2004 2005 2006 100.00% 134.32% 129.10% 100.00 131.40 174.43 100.00 134.31 128.84 100.00 236.36 112.67 2007 220.13% 260.25 219.70 909.99 2008 3.53% 212.53 2.15 568.76
Stock In Trade Work in Process Sugar Finished Goods Sugar Molasses:
Trend Analysis
1000.00% %age 500.00% 0.00% Year 2008 Year 2007 Year 2006 Years Year 2005 Year 2004 Work in Process sugar Finished Goods sugar Molasses Total stork in trade
There is an increment in Trade debts from 2004 to 2008 except in 2006. Stock In Trade in 2004 are Rs.643473. Stock In Trade in 2004 are Rs.643473 which by the increment of amount Rs.171926 becomes Rs.815399 in 2005.The amount in 2005 becomes Rs.647009 by the decrement of Rs.168390 in 2006.The increment of amount Rs.83667 in 2006 it becomes Rs.730676 in 2007.The amount of Rs.730676 in 2007 by the increment of Rs.318788 becomes Rs.1049464 in 2008. Stock In Trade in 2004 is 100%. Stock In Trade in 2004 are 100% which by the increment of amount 26.72% becomes 134.32% in 2005.The amount in 2005 becomes 100.55% by the decrement of 129.10% in 2006.The increment of amount 13% in 2006 it
becomes 220.13% in 2007.The amount of 220.13% in 2007 by the increment of
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LAKSON TOBACCO COMPANY, LIMITED
49.54% becomes 3.53% in 2008. Major effect on this increment is due to Work in Process which has only decrement in 2005 and has continuous increment in this account from year 2004 to 2008 and much in 2008.Work in Process has positive effect on Stock In Trade which goes down from 2004 to 2008.
BABA FARID SUGAR MILLS LTD Balance Sheet Trend Analysis 2004 Stores Spare Parts &Tools Stores Spare Parts Loose Tools 100.00% 100.00 100.00 100.00 2005 98.83% 90.32 105.79 80.50 2006 111.99% 118.12 107.21 103.85 2007 112.80% 110.55 114.72 104.68 2008 133.62% 152.62 118.60 119.94
Trend Analysis
%age 200.00% 150.00% 100.00% 50.00% 0.00% Year Year Year Year Year 2008 2007 2006 2005 2004 Years
Stores Spare Parts LooseTools Total Stores Spare Parts AND Tools
There is an increment in Stores Spare Parts &Tools from 2004 to 2008 except decrement in 2006. Stores Spare Parts &Tools in 2004 are Rs.316575.Other receivables in 2004 are Rs.316575 which by the increment of amount Rs.76730 becomes Rs.393305 in 2005. The amount in 2005 becomes Rs.286793 by the decrement of Rs.106512 in 2006. The increment of amount Rs.263140 in 2006 it becomes Rs.549933 in 2007. The amount of Rs.549933 in 2007 by the increment of Rs.108556 becomes Rs.658489 in 2008. Stores Spare Parts &Tools in 2004 are 100%.
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LAKSON TOBACCO COMPANY, LIMITED
Stores Spare Parts &Tools in 2004 are 100% which by the increment of amount 24.24% becomes 98.83% in 2005.The amount in 2005 becomes 90.59% by the Decrement of 111.99% in 2006.The increment of amount 83.12% in 2006 it becomes 112.80% in 2007.The amount of 112.80% in 2007 by the increment of 34.29% becomes 133.62% in 2008. Major effect on this increment is due to Stores which has only decrement in 2006 and has continuous increment in this account from year 2004 to 2008. Spare Parts has negative effect on other receivables as it goes up from 2004 to 2006 and then positive effect as it goes down from 2006 to 2008.
INTERPRETATION OF TREND ANALYSIS OF INCOME STATMENT
BABA FARID SUGAR MILLS LTD
Income Statement Trend Analysis 2004 Net Sales 100.00% 2005 157.60% 2006 212.96% 2007 151.81% 2008 295.88%
Trend Analysis
400.00% 300.00% 200.00% 100.00% 0.00% Year 2008 Year 2007 Year 2006 Years Year 2005 Year 2004 %age
Net Sales
NOTE: All amounts mentioned in Income Statement are Rs. (000) except Earning per Share that are only in rupees.
There is continuous boom in net sales from year 2004 to 2008 The net sales in 2004 is Rs.387,820,985 which declines to Rs611,195,873 in 2005
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LAKSON TOBACCO COMPANY, LIMITED
due to decrement of amount Rs.487815.The amount goes up to Rs.18476457 with increment of amount Rs. 825,903,521 in 2006.In 2007 there is again boom in amount and it becomes Rs.588,743,157 with increment of amount the increment of amount Rs.3455617 it becomes Rs.1097661.With
Rs.1,147,880,942 in 2008. The net sales in 2004 are 100.00 which decline to 157.60 in 2005 due to decrement of amount 2.69. The amount goes up to 212.96 with increment of amount 4.62 in 2006.
In2007 there is again boom in amount and it becomes 151.81 with increment of amount 6.06.With the increment of amount 295.88 it becomes 127.04 in 2008. So the company has made make progress from 2004 to 2008.
BABA FARID SUGAR MILLS LTD
Income Statement Trend Analysis 2004 Cost of sold 100.00% 2005 135.38 2006 198.96 2007 160.85 2008 299.46
Trend Analysis
400.00% 300.00% 200.00% 100.00% 0.00% Year 2008 Year 2007 Year 2006 Years Year 2005 Year 2004 %age
Cost of Sales
There is continuous increment in Cost of sold from year 2004 to 2008 The Cost of goods sold in 2004 is Rs.364,299,923 which declines to Rs.493,176,914 in 2005 due to decrement of amount Rs.579157.The amount goes up to Rs.15236959 with increment of amount Rs.724,800,229 in 2006.In 2007
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LAKSON TOBACCO COMPANY, LIMITED
there is again boom in amount and it becomes Rs.585,960,109 with increment of amount Rs.255689.With the Rs.1,090,939,576 in 2008. The Cost of goods sold in 2004 is 100.00 which declines to 135.38 in 2005 due to decrement of amount 3.75. The amount goes up to 98.54 with increment of amount 198.96 in 2006.In 2007 there is again boom in amount and it becomes 100.19 with increment of amount 160.85.With the increment of amount 137.61 it becomes 299.46 in 2008. The cost of goods sold increase due to increase in operation of company. increment of amount Rs.2730967 it becomes
BABA FARID SUGAR MILLS LTD
Gross Profit Income Statement Trend Analysis 2004 2005 2006 100.00% 501.76 429.84 2007 11.83 2008 242.09
Trend Analysis
600.00% %age 400.00% 200.00% 0.00% Year 2008 Year 2007 Year 2006 Year 2005 Year 2004 Years Gross Profit
There is continuous boom in Gross Profit from year 2004 to 2008. The Gross Profit in 2004 is Rs.23,521,063 which increases to Rs.118,018,959 in 2005 due to increment of amount Rs.91342.The amount goes up to Rs.3239498 with increment of amount Rs.101,103,292 in 2006.In 2007 there is again boom in amount and it becomes Rs.4081470 with increment of amount Rs.2,783,048 With the increment
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LAKSON TOBACCO COMPANY, LIMITED
of amount Rs.724650 it becomes Rs.56,941,366 in 2008. The Gross Profit in 2004 is 100.00 which increases to 501.76 in 2005 due to increment of amount 3.43.The amount goes up to 121.59 with increment of amount 429.84 in 2006.In 2007 there is again boom in amount and it becomes 153.19 with increment of amount 11.83.With the increment of amount 27.20 it becomes 242.09 in 2008. So the company has made make progress from 2004 to 2008.
BABA FARID SUGAR MILLS LTD
Income Statement Trend Analysis 2004 Operating Profit 100.00% 2005 -737.81% 2006 -531.69% 2007 394.29% 2008 -100.75
Trend Analysis
500.00% %age 0.00% -500.00% -1000.00% Years Year 2008 Year 2007 Year 2006 Year 2005 Year 2004 Operating Profit /Loss
There is continuous boom in Operating Profit from year 2004 to 2008. The Operating Profit in 2004 is Rs.-10,892,775 which increases to Rs.80, 367,809 in 2005 due to increment of amount Rs.259107.The amount goes up to Rs.1730342 with increment of amount Rs, 915,946 in 2006.In 2007 there is again boom in amount and it becomes Rs.2479018 with increment of amount Rs. -42,949,590With the increment of amount Rs.492352 it becomes Rs10, 974,503
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LAKSON TOBACCO COMPANY, LIMITED
in 2008. The Operating Profit in 2004 is 100.00 which increases to -737.81in 2005 due to increment of amount 23.82.The amount goes up to 159.09 with increment of amount -531.69 in 2006.In 2007 there is again boom in amount and it becomes 227.92 with increment of amount 394.29.With the increment of amount -100.75 it becomes 273.18 in 2008. So from 2004 to 2008 the company has made make progress.
BABA FARID SUGAR MILLS LTD
Income Statement Trend Analysis 2004 2005 2006 Loss: Per Share Basic & Basic 100.00% -25.05% 50.32% Diluted 2007 351.40% 2008 9.07%
Trend Analysis
400.00% %age 200.00% 0.00% -200.00% Year 2008 Year 2007 Year Year 2006 2005 Years Year 2004 Loss
er Share Basic & Diluted
There are prominent ups and downs in Per Share Basic & Basic Diluted from year 2004 to 2008. The Per Share Basic & Basic Diluted in 2004 is Rs.-4.63 which booms up to Rs.1.16 in 2005 due to increment of amount. The amount goes down with decrement of amount Rs.-2.33 in 2006.In 2007 there is decline in amount and it becomes Rs.-16.27.With the increment of amount it becomes Rs.-0.42 in 2008. Per Share Basic & Basic Diluted in 2004 is 100 which booms up to -25.05 in
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LAKSON TOBACCO COMPANY, LIMITED
2005 due to increment of amount 903.32.The amount goes down to 88.10 with decrement of amount 50.32 in 2006.In 2007 there is decline in amount and it becomes 69.00 with Decrement of amount 351.40.With the increment of amount 9.07 it becomes 88.61 in 2008.
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LAKSON TOBACCO COMPANY, LIMITED
VERTICAL ANALYSIS
01000900000378000 00002001c00000000 00040000000301080 0050000000b020000 0000050000000c02b c048308040000002e 0118001c000000fb0 21000070000000000
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INTERPRETATION OF VERTICAL ANALYSIS OF BALANCE SHEET
BABA FARID SUGAR MILLS LTD Balance Sheet Vertical Analysis 2004 Cash and bank balance Deposit accounts Current accounts Cheques Cash 2.57% 0.00 2.56 0.00 0.01 2005 8.28% 00.00 8.26 0.00 0.01 2006 9.57% 00.00 9.55 0.00 0.02 2007 12.13% 00.00 12.11 0.00 0.02 2008 44.96% 8.71 0.00 0.00 0.00
Vertical Analysis
1000.00% 800.00% 600.00% 400.00% 200.00% 0.00% Year 2008 Year 2007 Year 2006 years Year 2005 Year 2004
Cash in hand Balance in Curent account Balance in deposit account Total cash & bank balance
%age
There is an increment in cash and bank balance from 2004 to 2008. Cash and bank balance in 2004 is Rs.1044028.Cash and bank balance in 2004 is Rs.1044028 which by the increment of amount Rs.772749 becomes Rs.1816777 in 2005. The amount in 2005 becomes Rs.1687656 by the decrement of Rs.129121 in 2006. The increment of amount Rs.103495 in 2006 it becomes Rs.1791151 in 2007.
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The amount of Rs.791151 in 2007 by the increment of Rs.1823905 becomes Rs.3615056 in 2008. Cash and bank balance in 2004 is2.57which by the increment of 5.66 becomes 8.28 in 2005.The amount in 2005 becomes 9.57 by the decrement of 12.13 in 2006.The decrement of 0.87 in 2006 it becomes 10.58 in 2007.The amount of 10.58 in 2006 by the increment of 8.64 becomes 44.96 in 2007. Significant effect on this increment is due to current accounts which has decrement in 2005 and 2007 has increment in this account from year 2004, 2006 and 2008. Deposit accounts has minor effect on cash and bank balance is go through ups and down from 2004 to 2008.
BABA FARID SUGAR MILLS LTD Balance Sheet Vertical Analysis 2004 2005 2006 2007 2008
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Deferred Taxation Unabsorbed tax depreciation Fixed Assets On Assets Under Finance Lease Accelerated Tax Depreciation -4.09 -5.57 0.00 0.19 1.29 8.30 4.44 0.00 3.86 5.43 2.50 4.06 0.00 2.48 4.04 1.56 6.65 0.00 1.01 6.09 0.03 0.00 0.00 2.09 2.03
Vertical Analysis
1000.00% 0.00% %age -1000.00% -2000.00% -3000.00% -4000.00% years Year Year Year Year Year 2008 2007 2006 2005 2004 Unabsorbed tax depreciation Fixed assets On assets under finance lease Accelerated tax depreciation Total Deferred Taxation
There is an increment in Deferred Taxation from 2004 to 2008. Deferred Taxation in 2004 are Rs.166193. Deferred Taxation in 2004 are Rs.166193 which by decrement of amount Rs.1745 becomes Rs.64448 in 2005.The amount in 2005 becomes Rs.191343 by the increment of Rs.26895 in 2006.The increment of amount Rs.95816 in 2006 it becomes Rs.287159 in 2007.The amount of Rs.287159 in 2007 by the increment of Rs.56411 becomes 343570 in 2008. Deferred Taxation in 2004 are-4.09. Deferred Taxation in 2004 is -4.09which by no change remain -4.09in 2004.The amount in 2005 becomes 8.30 by the increment of 0.12 in 2006.The increment of amount 2.50 in 2006 it becomes 1.56 in 2007. The amount of 1.70 in 2007 by the increment of 0.13 becomes 0.03 in 2008. Most effect on this increment is due to short term prepayments which have continuous increment in this account from year 2003 to 2007 and much in 2006 and 2007. Trade deposits and balance with statutory authorities has reverse effect on
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cash and bank balance is go through ups and down from 2003 to 2007.
BABA FARID SUGAR MILLS LTD Balance Sheet Vertical Analysis 2004 2005 2006 47.62 40.59 28.87 0.28 0.23 0.23 47.33 40.33 28.63 0.01 0.02 0.1 2007 69.05 0.48 68.49 0.08 2008 0.19 0.10 0.06 0.19
Stock In Trade Work in Process Sugar Finished Goods Sugar Molasses:
Vertical Analysis
1000.00% %age 500.00% 0.00% Year 2008 Year 2007 Year 2006 Years Year 2005 Year 2004 Work in Process sugar Finished Goods sugar Molasses Total stork in trade
There is an increment in Stock In Trade from 2004 to 2008 except in 2006.
Stock In Trade in 2004 are Rs.643473.Trade debts in 2004 are Rs.643473 which by the increment of amount Rs.171926 becomes Rs.815399 in 2005.The amount in 2005 becomes Rs.647009 by the decrement of Rs.168390 in 2006.The increment of amount Rs.83667 in 2006 it becomes Rs.730676 in 2007.The amount of Rs.730676 in 2007 by the increment of Rs.318788 becomes Rs.1049464 in 2008
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Stock In Trade in 2004 are 47.62 which by the increment of amount 1.30
becomes 40.59 in 2005.The amount in 2005 becomes 40.59 by the decrement of 28.87 in 2006.The decrement of amount 0.07 in 2006 it becomes 69.05 in 2007.The amount of 4.32 in 2007 by the increment of 1.26 becomes 0.19 in 2008. Major effect on this increment is due to Work in Process Sugar which has only decrement in 2005 and 2006 has increment in this account from year 2004 to
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2005 and 2007.Finished Goods Sugar, has positive effect on Stock In Trade which goes down from 2004 to 2008.
BABA FARID SUGAR MILLS LTD Balance Sheet Vertical Analysis 2004 Stores Spare Parts &Tools Stores Spare Parts Loose Tools 9.20 4.05 5.07 0.08 2005 5.57 2.32 3.40 0.04 2006 4.84 2.25 2.55 0.04 2007 6.83 2.95 3.83 0.05 2008 0.03 0.00 0.20 0.34
Vertical Analysis
200.00% 150.00% 100.00% 50.00% 0.00% Year 2008 Year 2007 Year 2006 Years Year 2005 Year 2004
Stores Spare Parts LooseTools Total Stores Spare Parts AND Tools
There is an increment in Stores Spare Parts &Tools from 2004 to 2008 except decrement in 2006. Stores Spare Parts &Tools in 2004 are Rs.316575.Other receivables in 2004 are Rs.316575 which by the increment of amount Rs.76730 becomes Rs.393305 in 2005. The amount in 2005 becomes Rs.286793 by the decrement of Rs.106512 in 2006. The increment of amount Rs.263140 in 2006 it becomes Rs.549933 in 2007. The amount of Rs.549933 in 2007 by the increment of Rs.108556 becomes Rs.658489 in 2008. Stores Spare Parts &Tools in 2004 are 9.20 which by the increment of amount 5.57 becomes 2.82 in 2005.The amount in 2005 becomes 1.95 by the decrement of 4.84 in 2006.The increment of amount 1.30 in 2006 it becomes 6.83 in 2007.The amount of 3.25 in 2007 by the increment of 0.25 becomes 0.03 in 2008.
%age
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Most effect on this increment is due to Stores which has only decrement in 2005 and has continuous increment in this account from year 2004 to 2008. Spare Parts has negative effect on other receivables as it goes up from 2004 to 2006 and then positive effect as it goes down from 2006 to 2008.
BABA FARID SUGAR MILLS LTD Balance Sheet Vertical Analysis 2004 DepositsPrepaymentReceivable Short Term Deposit Prepaid Expanse Other Receivable 0.26 0.00 0.26 0.00 2005 0.12 0.00 0.11 0.02
Short term Deposits
2006 1.07 0.95 0.11 0.01
2007 1.87 1.69 0.16 0.02
2008 11.36 2.52 0.00 2.56
Vertical Analysis 2000.00% 1500.00% 1000.00% 500.00% 0.00%
00 8 ar 20 07 Ye ar 20 06 Ye ar 20 05 Ye ar 20 04 ar 2
%age
Prepaid Expences
Other receiveables
Ye
Ye
Years
Total Deposits Prepayments and other receviable
There are ups and down in Deposits Prepayment Receivable from 2004 to 2008. Deposits Prepayment Receivable in 2004 is Rs.2046297 which by the increment of amount Rs.866580 becomes Rs.2912877 in 2005.The amount in 2005 becomes Rs.2511481 by the decrement of Rs.401396 in 2006.The decrement of amount Rs.163691 in 2006 it becomes Rs.2347790 in 2007.The amount of Rs.2347790 in 2007 by the decrement of Rs.36454 becomes Rs.2311336 in 2008. Deposits Prepayment Receivable in 2004 is 0.26 which by the increment of amount 0.12 becomes 20.91 in 2005.The amount in 2005 becomes 17.04 by the decrement of 1.07 in 2006.The decrement of amount 3.17 in 2006 it becomes 1.87 in 2007.The amount of 13.87 in 2007 by the decrement of 1.58 becomes
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11.36 in 2008. Work-in-process has increasing effect on Deposits Prepayment Receivable 2004 to 2008.
BABA FARID SUGAR MILLS LTD Balance Sheet Vertical Analysis 2004 Subordinated Loan Associated Undertaking Landform Director 34.8 4 15.4 7 19.3 6 2005 22.10 9.82 12.29 2006 16.36 0.00 16.36 2007 22.95 0.00 22.95 2008 0.28 0.00 21.76
Vertical Analysis
200.00% 150.00% 100.00% 50.00% 0.00% Year 2008 Year 2007 Year 2006 Years Year 2005 Year 2004 %age Associated Undertaking Loan From Director Total Sub Ordinated Loan
There is an increment in Subordinated Loan from 2004 to 2007 except decrement in 2008. Subordinated Loan in 2004 is Rs.652196 which by the increment of amount Rs.11056 becomes Rs.663252 in 2005.The amount in 2005 becomes Rs.689319 by the increment of Rs.26067 in 2006.The increment of amount Rs.16320 in 2006 it becomes Rs.705639 in 2007.The amount of Rs.705639 in 2007 by the decrement of Rs.100159 becomes Rs.605480 in 2008. Subordinated Loan in 2004 is 34.84 which by the increment of amount 0.15 becomes 22.10 in 2005.The amount in 2005 becomes 4.68 by the decrement of 16.36 in 2006.The decrement of amount 0.51 in 2005 it becomes 22.95 in 2007.The amount of 4.17 in 2006 by the decrement of 0.95 becomes 0.28 in 2008.
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INTERPRETATION OF VERTICAL ANALYSIS OF INCOME STATMENT
BABA FARID SUGAR MILLS LTD
Income Statement Vertical Analysis 2004 Net Sales 100.00% 2005 100.00% 2006 100.00% 2007 100.00% 2008 100.00%
Vertical Analysis
400.00% 300.00% 200.00% 100.00% 0.00% Year 2008 Year 2007 Year 2006 Years Year 2005 Year 2004 %age
Net Sales
There is continuous boom in net sales from year 2004 to 2008 The net sales in 2004 is Rs.387,820,985 which declines to Rs611,195,873 in 2005 due to decrement of amount Rs.487815.The amount goes up to Rs.18476457 with increment of amount Rs. 825,903,521 in 2006.In 2007 there is again boom in amount and it becomes Rs.588,743,157 with increment of amount the increment of amount Rs.3455617 it becomes Rs.1097661.With
Rs.1,147,880,942 in 2008.
BABA FARID SUGAR MILLS LTD
Cost of sold Income Statement Vertical Analysis 2004 2005 2006 93.94 80.69 87.76 2007 99.53 2008 0.00
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Vertical Analysis
400.00% 300.00% 200.00% 100.00% 0.00% Year 2008 Year 2007 Year 2006 Years Year 2005 Year 2004 %age
Cost of Sales
There is continuous increment in Cost of sold from year 2004 to 2008 The Cost of goods sold in 2004 is Rs.364,299,923 which declines to Rs.493,176,914 in 2005 due to decrement of amount Rs.579157.The amount goes up to Rs.15236959 with increment of amount Rs.724,800,229 in 2006.In 2007 there is again boom in amount and it becomes Rs.585,960,109 with increment of amount Rs.255689.With the Rs.1,090,939,576 in 2008. The cost of goods sold increase due to increase in operation of company By vertical analysis there is continuous decline in cot of goods sold. The Cost of goods sold in 2004 is 93.94 which decline to 84.38 in 2005 due to decrement of amount 80.69. The amount goes down to 82.47 with decrement of amount 87.76 in 2006.In 2007 there is again decline in amount and it becomes 79.15 with decrement of amount 99.53.With the decrement of amount 0.00 it becomes In 2008. increment of amount Rs.2730967 it becomes
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BABA FARID SUGAR MILLS LTD
Income Statement Vertical Analysis 2004 Gross Profit 6.06 2005 19.31 2006 12.24 2007 0.47 2008 0.01
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Vertical Analysis
600.00% %age 400.00% 200.00% 0.00% Year 2008 Year 2007 Year 2006 Year 2005 Year 2004 Years Gross Profit
There is continuous boom in Gross Profit from year 2004 to 2008. The Gross Profit in 2004 is Rs.23,521,063 which increases to Rs.118,018,959 in 2005 due to increment of amount Rs.91342.The amount goes up to Rs.3239498 with increment of amount Rs.101,103,292 in 2006.In 2007 there is again boom in amount and it becomes Rs.4081470 with increment of amount Rs.2,783,048 With the increment of amount Rs.724650 it becomes Rs.56,941,366 in 2008. The Gross Profit in 2004 is 6.06 which increases to 19.31 in 2005 due to increment of amount 0.92.The amount goes up to 17.53 with increment of amount 12.24in 2006.In 2007 there is again boom in amount and it becomes 20.85 with increment of amount 0.47.With the increment of amount 0.01 it becomes in 2008. So the company has made make progress from 2004 to 2008.
BABA FARID SUGAR MILLS LTD
Operating Profit Income Statement Vertical Analysis 2004 2005 2006 -2.81 13.15 7.01 2007 7.30 2008 3.00
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Vertical Analysis
500.00% %age 0.00% -500.00% -1000.00% Years Year 2008 Year 2007 Year 2006 Year 2005 Year 2004 Operating Profit /Loss
There is continuous boom in Operating Profit from year 2004 to 2008. The Operating Profit in 2004 is Rs.-10,892,775 which increases to Rs.80,367,809 in 2005 due to increment of amount Rs.259107.The amount goes up to Rs.1730342 with increment of amount Rs.57,915,946 in 2006.In 2007 there is again boom in amount and it becomes Rs.2479018 with increment of amount Rs. -42,949,590With the increment of amount Rs.492352 it becomes Rs10,974,503 in 2008. The Operating Profit in 2004 is -2.81 which increases to 13.15 in 2005 due to increment of amount 1.63.The amount goes up to 9.37 with increment of amount 7.01 in 2006.In 2007 there is again boom in amount and it becomes 12.66 with increment of amount 7.30.With the increment of amount 3.00it becomes 12.90 in 2008. So from 2004 to 2008 the company has made progress.
BABA FARID SUGAR MILLS LTD
Income Statement Vertical Analysis 2004 2005 2006 Loss: Per Share Basic & Basic 0.00 0.00 0.00 Diluted 2007 0.00 2008 0.00
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Vertical Analysis
400.00% %age 200.00% 0.00% -200.00% Year 2008 Year 2007 Year Year 2006 2005 Years Year 2004 Losser Share Basic & Diluted
There are prominent ups and downs in Per Share Basic & Basic Diluted from year 2004 to 2008 The Per Share Basic & Basic Diluted in 2004 to 2008 is Rs.0.00. Significant effect on other income is due to account which is Scrap sales which has major increment from 2004 to 2008. Profit on short-term and call deposits, return on loans due from associate and gain on disposals of fixed assets less effective on other income they all have ups and downs.
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SWOT ANALYSIS
01000900000378000 00002001c00000000 00040000000301080 0050000000b020000 0000050000000c02b c048308040000002e 0118001c000000fb0 21000070000000000
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SWOT ANALYSIS OF LAKSON TOBACCO COMPANY
Strengths:
In the analysis of the Strengths of the company we focused on the competencies of the PTC its entirety.
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LTC’s own reputation as a dynamic enterprise. Technological sophistication in terms of highly advanced production techniques and manufacturing plants. Offering superior quality brands has helped the company in carving out an image for itself both in the market and in the hearts of the consumers thus winning the trust of both. Highly competent and diverse work force throughout the ranks of the company. Compliance with the regulations of the government and regular payment of taxes has earned the company the respect of all and sundry. Major contributor to the national revenue of the state. Major contributor to numerous causes such as forestation campaign, free mobile dispensaries, training schools and the company’s concern for the eco system. A highly advanced and systematic distribution network and supply chain. Utilization of highly creative and state of the art marketing tools. Excellent corporate culture, which is more growth, oriented. A strong interactive communication system.
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Weaknesses:
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Failure of LTC to file a strong case against lower quality brands whose producers do not pay any tax to the government and yet have maintained a prominent presence in the market. Cigarette being a controversial product convincing the consumer to prefer
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LTC’s brands to competitors because of the quality of their constituents has become an uphill task.
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For gaining an edge over the competitors and in a bid to live up to its image in the market much of LTC’s operations are highly costly. So financial resources are being extravagantly used. Cutting back on such cost may be difficult, because of which in recent years the company has done extensive across the board retrenchment.
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Opportunities:
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Since LTC has already captured a major share of the local market in it’s pocket which has been ensured by the availability of their brands in virtually every shop all over the country, so it appears less likely that any big attractive opportunity would be missed by it. LTC will assess the prospects and will avail it as and when as it presents itself. However, LTC has a golden opportunity to expand its distribution network to the neighbouring Afghanistan and realize the prospects of a full fledged manufacturing unit in that country. This would help them capture another big profitable market. This big opportunity is backed and justified by the existing strong operations of the Area Sales Office.
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Threats:
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The biggest threat that LTC is faced with at this point in time is posed by the widespread rampant smuggling of foreign brands that are much cheaper and eat away a big chunk of profit of the company. Another threat is that of the “counterfeit” cigarettes which too are easily available in the market. These brands on the one hand because of their low quality tarnish the image of the genuine brands and on the other deprive the company of a good share. Tobacco being a controversial product, governments enforce strict regulatory measures from time to time to discourage its mass production which is also a
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LAKSON TOBACCO COMPANY, LIMITED
genuine threat for the company.
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Imposition of high taxation on tobacco related products especially, cigarettes. The growing health hazards such as cancer and ailment of the heart and their attribution to smoking may also create a potential threatening situation for the company. LTC’s selective approach towards its retail merchandising as opposed to the competitor’s readiness and promptness in their aggressive merchandising may create problems for the company. In a future scenario there is a great likelihood of a possible confrontation between anti-smoking campaigners and tobacco produce
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LAKSON TOBACCO COMPANY, LIMITED
Introduction of product:
LAKSON TOBACCO'S MAIN BRANDS, INCLUDE: * Park Lane * Premier Classic * Red & White * Morven Gold * Princeton * K2 * Diplomat The company has shown robust growth rates over the years. In 2005, the company performed exceedingly well and was able to achieve growth in all areas. Its operating profits were 32% higher than the same period last year (SPLY). This improved performance can be attributed to higher sales volume, improved margins, better brand mix and control over cost through focus on operational efficiencies. However the Company could not maintain its superb performance of 2005 in 2006, as the sales were the same as last year and operating profit declined by 7.4% over the SPLY. In 2007, the company improved its performance over the 2006 performance and increased Sales by 9%, Gross Profit 8% and operating profit 12% in spite of an 8% increase in the cost of sales due to a 15 % increase in the prices of tobacco. In 2008, the company's performance reasonably keeping in mind the huge losses it suffered to its assets and posted a 16% increase in its net
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turnover. This is a decent performance keeping in view the overall industry growth is estimated at 3% but it is lower than its major competitor Pakistan Tobacco Company. LTC’S MARKETING PRINCIPLES: LTC is proud of its strong reputation for supreme quality brands. It does not believe in compromise on quality and standard and gives high importance and value to aggressive but legitimate marketing in order to ensure sustained image and performance. In major markets across the country, LTC’s trade marketers are frequently rated highly in customer surveys on professionalism and service. It aims to satisfy adult consumers' demands better and more profitably than the competitors. LTC believes strongly that tobacco should never be marketed to youth. It should only be marketed to adult smokers, in an appropriate way that takes account of the risks posed to health. It also believes adults who have chosen to smoke should be able to receive information about what they buy, and we should be able to communicate responsibly with them about their brands. And in this direction much of LTC’s marketing department’s efforts are aimed at ASU30* category smokers and is trying its utmost to win them over. LTC’s marketing is not designed to 'sell smoking'. That would be wrong – and a waste of marketing effort. Rather PTC is working in a long-established, mature product category, where people already know what the basic product is. There would be no commercial sense to trying to market to informed customers who don't want the product. LTC’s marketing is about brands; retaining the brand loyalty of its customers, and winning them over from competing brands. Its brands are amongst its most important assets. As well as complying with all laws and many voluntary codes on marketing, it has for many years been guided by a clear set of British American Tobacco Advertising Principles.
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LAKSON TOBACCO COMPANY, LIMITED These have set out, for example,
• • • LTC’s advertising and promotional activities will be directed at adult smokers. No health claims will be made about tobacco products. People appearing in advertising will not be, or appear to be, younger than 25. Moreover LTC strongly adheres to and respects all the laws and promulgated regulations such as the “50 meter Clause”* which implies that no merchandising material shall be displayed on any outlet within close proximity of schools or other educational institutions, religious seminaries, mosques, hospitals etc violation of which may incur government penalties. The government of Pakistan has recently revised the Health Warning Legislation. As per the guidelines, the new health warning “Smoking causes cancer and heart diseases – Ministry of Health” will be printed on the flap (top) on front side of the cigarette packs in Urdu and on the back in English. It will cover 30% of the pack on each side in rectangular box.
MARKETING ANALYSIS:
Marketing at LTC is divided into three further categories: marketing research, brand marketing and trade marketing the marketing research department carries out its surveys and other such activities to find out the demand for each brand, and to discover the potential cigarette market. the brand marketing department comprise of brand managers who have the responsibility the success and health of their individual brands. Each brand manager designs and executes promotions to increase the sale of his brand. Advertising through different medias and sponsorships of event is also the job of brand marketing. The trade marketing staff works direct in the field and interacts with the distributers, wholesalers, retailers, and the customers. LTC is renowned for conceiving brands attaining the status of a classic. It has been consistently meeting consumer expectations for the past ten years
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LAKSON TOBACCO COMPANY, LIMITED
with the popular international brand names LTC is one of a very few companies in Pakistan which is paying a great deal of attention to the retail marketing. It started a retail excellence program, which is a set of structured presentations covering subjects such as business ethics, trends, customer focus and how to satisfy customer needs profitably. It enables LTC to develop and roll out best-practiced retailer methods, which will enhance retailer profitability and their relationship with the company in order to regain market leadership in the future. The focus is how to provide a “world-class” service to consumers, sharing company information and plans, and gaining feedback. LTC holds numerous trade meetings with its distributors and retailers, which no doubt helps to strengthen the relationship and be responsive to their requirements better than any other FMCG company in the market place.
MARKETING STRATEGY AUDIT
The mission is market oriented as its word project the company’s present image, which is successfully been carried by their Sales and marketing department. LTC has always tried to bring new and grand-marketing events (Voyage of discovery – JPGL) to project is the company different from its competitors. The company’s marketing budgets had always been the highest in the industry but for the past two years Lakson Tobacco Company has increased its budgets to compete on equal grounds with them. Marketing Objectives & Goals: • • • Sales translated into turnover Budget for cost Profitability The marketing objectives as mentioned earlier are inline with the corporate strategy and are very much clear and appropriate for the marketing department. This is proved by their two consecutive re-launches (Capstan & Gold
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Flake), which are done to make up for the lost sales volume and profits. The goals are set by the department keeping in mind the objectives. The brand managers sets their own sales targets which are then matched with the performance of the brands every month.
Marketing Strategy:
As LTC exists in a ‘Fragmented industry’, the company takes advantage of its multinational connections and uses ‘Image Differentiation Strategy’. The company has established an image of a quality product provider at an affordable price, along with its attractive and eye-catching marketing campaigns. The company makes use of Societal Marketing Concept to project itself.
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COMPETITORS ANALYSIS
01000900000378000 00002001c00000000 00040000000301080 0050000000b020000 0000050000000c02b c048308040000002e 0118001c000000fb0 21000070000000000
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COMPETITORS ANALYSIS
In year 2000, PTC underwent a major transformation by taking bold initiatives towards regaining leadership in the market. Price repositioning on brands in the medium and low segment provided PTC with an opportunity to gain competitive advantage, which resulted in increased volumes and market share. Its daring steps forced competition to revert to similar but desperate reactions. Bringing down the prices of their brands in medium and low segment resulted in major cannibalization and lower gains in overall volume than PTC. PTC’s main competitor is the Lakson Tobacco Company. However, there are also mushrooming brands called the “Mardanwalls.” The third element that is of a major concern to PTC is the counterfeit and the tax evaded brands. Table 3 shows the market share of PTC and its competitors.
“Market Share of LTC and its Competitors”
Lakson Tobacco Pakistan Tobacco Mardanwallas Counterfeit/other Tax evaded brands
45.20% 47.70% 2.20%
5.90%
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LAKSON TOBACCO COMPANY, LIMITED
“Brand-wise yearly Volume of cigarettes sold by LTC and PTC”
Lakson Tobacco No. of cigarettes Brands sold/year Red & White 177 K-2 141 Diplomat 231 Morven Gold 1560 Pakistan Tobacco No. of cigarettes Brands sold/year Benson & Hedges 0.4 Gold Leaf 361 Capstan 245 Wills 40 Gold Flake 884 Embassy 652 PTC Total Sale 2182.4
LTC Total Sale
2109
Mardanwallas
These brands are manufactured in Mardan and thus are called the “Mardanwallas.” These are normally low category cigarettes (under Rs. 10) for example Gold Street. The goal of the Mardanwalls is solely money-making, and are not concerned about acquiring a strong position in the market. These are also 100% tax evaded. The government has made legislation regarding this issue; however, nothing has been done so far. Secondly, their factories are located in the northern areas so tax evasion becomes very easy. No proper marketing structure or strategies exist for these brands. Their ATL activities, which include electronic and print media, are extremely low. These brands usually survive on BTL activities, which mainly consist of posters.
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BASES FOR SEGMENTATION:
Macro-environment
Demographic
Population growth Population growth in Pakistan is about 2.5% annually. This population explosion creates an opportunity for the cigarette manufacturers. Population age mix Pakistan, with a rapid population growth, is the country where young adults age 25 to 40 and some teens (above 18) are the major consumers of cigarettes. So these groups are the main targets of LTC. Ethnic Markets In Pakistan almost every one is a Pakistani. But each social class or group (segmentation) has certain specific wants and buying habits. LTC has directed their product and promotions to all these groups. Educational group Mostly the people in Pakistan are illiterate and they want to smoke strong tobacco with out knowing its more harmful effects. So LTC’s brands are mostly strong tobacco. Household patterns The traditional household pattern in Pakistan is joint family where grand parents, parents and their children and the children of their children live together. So living in this kind of system is discouraging for young smokers.
Geographic and Social class:
Opportunities
In Punjab a large number of people in lower class use to smoke “Embassy” which is one of the main driving brands of LTC. LTC advertises it (embassy) in different ways (media), a lucky draw scheme (sheran da mela) and
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LAKSON TOBACCO COMPANY, LIMITED
the name of a famous singer Ibrar –ul-haq is also a associated with embassy to attract the existing customers.
Threats
In this class people are more prices conscious so reduction in the prices of Lakson’s brands may decrease the sales volume of LTC if customers switch to Lakson’s brands.
Environmental:
LTC is promoting itself as an environmental friendly organization by adopting “tree plantation” campaign. PTC planned 3 million trees* annually in different areas of the country.
Cultural
In Pakistan the basic traditions, customs and values are not much different but because of the “dish culture” mostly young generation like European and American culture which leads to liberalism so these youngsters go for smoking as an essential of stylish life. On the other hand in villages the elderly people smoke “Hukka” and the youngsters smoke cigarettes. The sole reason behind it is that the young generation does not really see why should they be dependant upon someone to fill up the paraphernalia of Hukka, and even if they have to do it themselves it is time consuming and so they prefer ready to smoke stylish cigarettes instead of Hukka.
Task Environment:
As mentioned earlier, the population of Pakistan is growing by 2.7% annually and number of smokers are increasing as well. Market size therefore is getting larger and it is and opportunity for cigarette manufactures. But unfortunately PTC has emerged as a strong competitor of LTC and has attracted all the 10% growth of potential consumers where PTC was not able to do so. This
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tough competition is brining a decline in the profits of the company due to which LTC has decreased the prices of almost all it’s brands (except Benson & Hedges) to remain in the competition. LOTUS NOTES: Lotus notes are communication software with fool proof reliable and efficient information sharing and exchange facilities. It has dynamic E-mail features and is used to send and receive messages and other required data to and from the regional as well as the head office. PTC has integrated its entire networking system through this software.
Stock Specification*
? ? ? ? ? ? ? ? 1 CARTON=10M 1 M=5 OUTERS(20HL),10 OUTERS(10HL) 1 OUTER=10 PACKS 1 PACK=10 STICKS(10HL),20 STICKS(20HL) 1 CARTON=50 OUTERS(20HL),100 OUTERS(10HL) 1 CARTON=10,000 STICKS 1 M= 1000 STICKS 1 OUTER= 100 STICKS(10HL),200 STICKS(20HL) The cartons are placed on a four wheel trolley and pushed with great ease to be loaded onto the trucks. The Warehouse assistant must be present at the time of loading. He would mark the outflow of stock of each brand in the DSR checklist. The procedure for placing the order is fairly simple. The distributor who has non-check account at HBL Peshawar usually makes a phone call and gives the order for the required brands specifying its quantity. He would either issue a bank draft in the name of his own account at HBL send a TT or would deposit cash in
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the account for this transaction. Each brand has its own distinctive code known both to the warehouse people and the distributors. Orders are received almost daily from the distributors both “Local” as well as those located along the “Rout” and immediate shipment is made. Each rout distributor has his own respective code as well as area code. As soon as the order is received, the Warehouse Executive feeds the data into the CS3 system using the specific code of the distributor and takes a rough print out of a checklist of brands and quantity of stock to be lifted.
DISTRIBUTION STRATEGY
CHANNELS OF DISTRIBUTION Channel of distribution is a system whereby customers are provided access to an organization’s products or services. The distribution network of the Area Sales Office Peshawar is engaged in two types of sale which are as follows: PRIMARY SALE Primary sale involves the transfer of stock from the Warehouse to the Distributor’s go down. SECONDARY SALE Whereas, in Secondary sale the distributor carries the stock to the market. And for this Pakistan Tobacco Company employees two main channels of distribution for making it’s product available to the consumer. These are as follows:
i) Producer
Distributor
Wholesaler Retailer
Final Consumer
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Though a third alternative channel i.e from Producer to the Distributor and then the final Consumer also exists but it is almost outdated and is no longer used. The Peshawar Area Sales Office which falls in the North region supplies stock to almost the entire province including Landi Kotal and Chitral. The Area Sales Office has a total of 19 distributions all over the jurisdiction of the Area Sales office having a systematic supply chain. These areas have been classified according to their size and location having their own respective sections as follows:
LTC’S PROMOTION STATEGY:
PROMOTION “It is one of the four controllable variables (with product, price and place) of the marketing mix”.* Promotion Mix It is “the range of means available to an organisation for communication with its target market - advertising, sales promotion, personal selling, publicity and public relations.” The entire scheme of operations pertaining to promotion at PTC is mapped out by people at the head office at Islamabad. They instruct the sales offices all over the country to execute these operations. ADVERTISING “Any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor”.* LTC’S advertisements that formerly featured in almost all the media have
* *
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declined substantially owing to the strict media regulations formulated by the government with the aim of discouraging tobacco related products particularly cigarettes. Nevertheless, LTC’s brands have over the decades through ensuring sustained superior quality and a bond with both it’s distributors, retailers and above all it’s consumers, have successfully captured a significant market share. SALES PROMOTION* Sales Promotion is “a marketing discipline that utilizes a variety of incentive techniques to structure sales related programs targeted to consumers, trade and or sales levels that generate a specific, measurable action or response for a product or service”. LTC has always been engaged in vigorous sales promotion activities to lure the consumer towards its brands. It employs a number of strategies in this regard such as “Push Strategy” aimed mainly at the resellers such as the retailers by offering them various incentives to secure their brands against those of the competitors by attracting more consumers towards LTC’s high quality brands. On the other hand “Pull Strategy” aims to attract the consumer directly which is done mainly through consumer promotional tools. During the internship period the internee happened to experience one such promotional Program using both the “Pull” and “Push” strategies. (a) CONSUMER PROMOTION Consumer Promotions are directed at the ultimate user of the good or service. From time to time LTC utilizes a number of such promotional tools most of which have been quite successful: Samples Sampling allows the consumer to experience the product or service first hand.
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It is the job of the Sales Promoter at LTC’s Sales Office to give out free samples of its brands to smokers who might be loyal to the brand of a rival producer. For instance free samples of GF 10HL were given out to smokers by SP’s during consumer contact. Coupons Legal certificate offered by manufacturers and retailers that grant specified savings on selected products are called Coupons. They must be presented for redemption at the Point Of Purchase. Coupons are used mainly to encourage trial and induce brand switching. Price Pack Such deals provide the consumer with something extra through the pack itself. However, it is less common in the case of PTC’s promotional strategies. Premium A premium is a tangible reward for performing a particular act. It is also called incentive marketing and it works because the premium ads value to the product. Recently, there was a scheme introduced whereby all the retailers were directed to offer the customer an extra pack of Gold Flake on the production of three empty packs of 10HL or 20 HL packs of the same brand. Sweepstakes Sweepstakes require the participants to submit their names to be included in a drawing or other chance selection. Quite often either during sampling or consumer contact sales promoters take down the names and addresses of the consumers thus contacted and use the data among other purposes also for drawing in which the lucky ones can win loads of exciting prizes. Games The data provided by the Sales Promoters through the consumer contact is also used for carrying out draws and then the names of consumers thus obtained from the draws are then invited to take part in all kids of fun games. Recently, during the Shandoor Polo Tournament the Area Office had organized a variety of games such as “Musical chair” and “Tug of War”
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(b) TRADE PROMOTION Trade Promotion is aimed at the intermediaries such as retailers and wholesalers. LTC uses several trade promotion tools such as Contests LTC also allows its retailers to participate in different kinds of contests as part of the promotional strategy of a certain brand. There was a contest recently in which the retailers had to decorate their shops and winner was to be judged on the basis of how well the shop had been adorned. Pop-Displays/Merchandising LTC offers a variety of merchandising items such as Banners, counter units, Kiosks, Mirrors, Clocks, Modulars, Tube Shades, Hoardings etc to those valued retailers who have had an impressive track record of sales. Advertising specialties Specialty advertising includes souvenirs such as hats, T-shirts, key chains, watches with the logo of either the brand or the producer. LTC gives away such items to the consumers through the retailers. PERSONAL SELLING: “Personal Selling, a form of promotion utilizing the services of a sales team; one of the major controllable variables (with advertising, sales promotion and publicity) of the promotion mix.” At LTC Personal selling activities are performed by the SP’s. PUBLIC RELATIONS: “Building good relations with the company are various publics by obtaining favorable publicity, building up a good corporate image, and handling or heading off unfavorable rumours, stories and events.”
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Most of the PR issues are handled by the head office and though the sales office does not have a PR officer having exclusive PR related functions yet all the TMO’s and SP’s have over the course of their dealings with the market acquired the skills to negotiate with all kinds of
PTC’S TRADE MARKETING PRACTICES
PTC’S marketing department has been divided into two sections: BRAND MARKETING TRADE MARKETING
? ?
BRAND MARKETING It is concerned with the marketing activities relating to the various brands manufactured by LTC. At LTC Brand marketing consists how best to determine the needs and wants of potential customers, developing a sound brand marketing strategy to meet those needs and wants, and executing a plan that incorporates the brand marketing strategy focused around the specific brand being marketed. TRADE MARKETING AT THE AREA SALES OFFICE Almost the entire set of activities at the Peshawar Area Sales Office is based on the concept of “Trade Marketing”. It is primarily concerned with channels of distribution and the subsequent promotional strategies of brands. It is the duty of all the regional managers to ensure that all the go down inventories are maintained according to the actual and estimated requirements. “Trade marketing” as a notion entails various marketing related activities such as: Sales Handling demand orders Supply to the distributors and retailers All the subsequent Promotional activities etc.
? ? ? ?
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SWOT ANALYSIS WITH COMPETITORS
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SWOT ANALYSIS
A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis. The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection. It ought to be noted that the following SWOT Analysis is by no means an exhaustive in depth analysis or the exact picture of the of the state of affairs in the company, as there are many subtle aspects which are to be dealt with in a much broader perspective. Rather it only seeks to express the views of the internee to the best of his understanding.
SWOT analysis of competitor (PTC) Strengths to PTC :
PTC is LTC’s largest competitor and the second legal cigarette manufacturer in the Pakistan besides LTC. PTC used to be affiliated with Phillip Morris, the giant in the global cigarette market. PTC has 25% more resources and three times more salesman than LTC, and this almost unlimited budget are due to tax evasion.
Weaknesses of PTC:
The biggest weakness of PTC is money making and it believes in short-term gains rather than long-term benefits. PTC uses quite unethical marketing strategies. Its price is not properly positioned in relation to the theme, thus this promotion lacks harmony. PTC’s cigarettes are not completely tax evaded; a very small amount of tax is paid.
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LAKSON TOBACCO COMPANY, LIMITED Opportunities to LTC:
There are many opportunities in market to grow up and avail the chances in future competitions.
Threats to LTC:
According to PTC the biggest threat is the growing market share and increasing profit rate of LTC. The management of the PTC takes a strong notice of their competitor’s new business investments and innovations in this field.
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BCG MATRIX
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THE BOSTON CONSULTING GROUP (BCG) MATRIX
The BCG Matrix method is the most well-known portfolio management tool. It is based on product life cycle theory. It was developed in the early 70s by the Boston Consulting Group. The BCG Matrix can be used to determine what priorities should be given in the product portfolio of a business unit. To ensure long-term value creation, a company should have a portfolio of products that contains both high-growth products in need of cash inputs and low-growth products that generate a lot of cash. The Boston Consulting Group Matrix has 2 dimensions: ? Market share ? Market growth The basic idea behind it is: if a product has a bigger market share, or if the product's market grows faster, it is better for the company.
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The four segments of the BCG Matrix
Placing products in the BCG matrix provides 4 categories in a portfolio of a company:
•
Stars (high growth, high market share)
o
Stars are using large amounts of cash. Stars are leaders in the business. Therefore they should also generate large amounts of cash. Stars are frequently roughly in balance on net cash flow. However if needed any attempt should be made to hold your market share in Stars, because the rewards will be Cash Cows if market share is kept.
o
•
Cash Cows (low growth, high market share)
o
Profits and cash generation should be high. Because of the low growth, investments which are needed should be low. Cash Cows are often the stars of yesterday and they are the foundation of a company.
o
•
Dogs (low growth, low market share)
o o o
Avoid and minimize the number of Dogs in a company. Watch out for expensive ‘rescue plans’. Dogs must deliver cash, otherwise they must be liquidated.
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•
Question Marks (high growth, low market share) o Question Marks have the worst cash characteristics of all, because they have high cash demands and generate low returns, because of their low market share. o If the market share remains unchanged, Question Marks will simply absorb great amounts of cash. o Either invests heavily, or sell off, or invest nothing and generate any cash that you can. Increase market share or deliver cash.
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The BCG Matrix method can help to understand a frequently made strategy mistake: having a one size fits all strategy approach, such as a generic growth target (9 percent per year) or a generic return on capital of say 9,5% for an entire corporation. In such a scenario: • Cash Cows Business Units will reach their profit target easily. Their management have an easy job. The executives are often praised anyhow. Even worse, they are often allowed to reinvest substantial cash amounts in their mature businesses. • Dogs Business Units are fighting an impossible battle and, even worse, now and then investments are made. These are hopeless attempts to "turn the business around". • As a result all Question Marks and Stars receive only mediocre investment funds. In this way they can never become Cash Cows. These inadequate invested sums of money are a waste of money. Either these SBUs should receive enough investment funds to enable them to achieve a real market dominance and become Cash Cows (or Stars), or otherwise companies are advised to disinvest. They can then try to get any possible cash from the Question Marks that were not selected.
Other uses and benefits of the BCG Matrix
• If a company is able to use the experience curve to its advantage, it should be able to manufacture and sell new products at a price that is low enough to get early market share leadership. Once it becomes a star, it is destined to be profitable. • • BCG model is helpful for managers to evaluate balance in the firm’s current portfolio of Stars, Cash Cows, Question Marks and Dogs. BCG method is applicable to large companies that seek volume and experience effects.
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•
•
The model is simple and easy to understand. It provides a base for management to decide and prepare for future actions.
Limitations of the BCG Matrix
Some limitations of the Boston Consulting Group Matrix include: • • • • • • • • It neglects the effects of synergy between business units. High market share is not the only success factor. Market growth is not the only indicator for attractiveness of a market. Sometimes Dogs can earn even more cash as Cash Cows. The problems of getting data on the market share and market growth. There is no clear definition of what constitutes a "market". A high market share does not necessarily lead to profitability all the time. The model uses only two dimensions – market share and growth rate. This may tempt management to emphasize a particular product, or to divest prematurely. • • A business with a low market share can be profitable too. The model neglects small competitors that have fast growing market shares
BCG Matrix of Lakson Tobacco Company Limited
Lakson Tobacco products has strong market position in Pakistan because of their evergreen selling nature throughout the year that’s why it has large market share and its products has till very strong potential to grow and penetrate not only in local markets but also in foreign markets. Therefore according to BCG matrix product lines of Lakson Tobacco lies in Cash Cows due to large market share and high potential to grow.
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CONCLUSION
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CONCLUSION
We have gone through the Five years annual reports of Lakson Tobacco Company Limited and made the Five years financial analysis of the company, which shows that the Company is moving toward the profitability and expansion and the chance of bankruptcy is limited. Lakson Tobacco is improving itself in competition industries and leading towards bright side. Sustained financial results enable profitability growth and provide superior shareholders value. Financial measures reflect decisions, performance and achievements, which for last Five years (2004 – 2008), resulted from outstanding productivity, impressive marketing performance, organized investment plans and the success of Company’s highly flexible business enterprise as disclosed in Company Financial Statements. The efforts of their financial force were complemented by robust demand and favorable pricing environment.
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FUTURE RECOMMENDATIONS
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FUTURE RECOMMENDATIONS
I will put some of our recommendation in front of the company so that company can improve. ? LTC’s Area Sales Office should either be immediately renovated or shifted somewhere else as its present location with the state of its office building and the premises in no way give an onlooker the impression of a proper LTC’s marketing and sales office in NWFP. ? Both the Area Manager and the TMO’s have to realize that in order to boost the efficiency and moral of the sales force they must be motivated. ? It implies that proper appreciation must be accorded to them according to their performance mostly in the form of monetary reward upon the accomplishment of the sales target of each respective SP. ? The Sales Office must cut back on their daily expenses particularly the extra expenses of the fuel of the vehicles and those of telephone at the office. ? As stated in the “Analysis” section the SP’s do not have any real job security as they can be hired and fired at the behest of the Area Manager. Therefore, has to be a system in place whereby sales force hiring and termination could be done so that no arbitrary decision is taken. ? A canteen must be set up at the Sales Office for the staff who at present do not have a proper facility for tea and meals which are bought mostly from a hotel nearby. ? Besides, a cook must be hired on permanent basis to ease up the burden of the Warehouse loader who a present has dual or may be more jobs of loader, peon, cook as well as a watchman at times. ? Instead of Suzuki pick ups, Jeeps should be provided to the SP’s who are given four wheelers. This is for the reason that Suzuki pick ups have not been found to be up to the task particularly when it comes to rugged terrain of the rural areas for which these vehicles are mostly used.
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? All the Financial strategies and planning should then be aimed at the consumers in such a way that the slogans and images carry the message to the consumer in a very convincing fashion for winning their favour. The modalities of such a strategy should be worked out by marketing team familiar with the tastes, conventions and preferences of the local people. ? ? And such a course of action applies to other brands too. The company must have periodic meetings in which to allow the staff members at the sales offices all over the country to share their experiences of the market conditions, tradition, and tastes peculiar to a market with the marketing teams at the helm of decision making. ? This would in turn facilitate the task of marketing department at the head office to chalk out effective and efficient strategies for different markets according to their demands. ? For this the company should collaborate with the retailers and custom officials to pin point such elements who are engaged in this trade and through Concerted efforts uproot them. ? LTC is also confronted by the mushrooming of industries engaged in the production of counterfeit cigarettes in the names of LTC’s brands. And again this trade too is rife and flourishing in NWFP. LTC must press the government for stringent measures against counterfeit brands as they tarnish the company’s image in the market. ? Likewise, a large number of non-tax paying cigarette manufacturers are into the business in the province that must be taken to task and their operations be halted and confiscated forthwith. ? LTC being a major contributor to the national revenue must safeguard its interests in the face of the threats posed by the aforementioned factors. In this regard the company must advocate a strong case against all those entities engaged in the same trade but operating through illicit means. ? The transporter supplying the stock to distributors located along the
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“Route” must be accompanied by a guard. ? Usually LTC places more emphasis on its retailers whereas, the small time sellers of tobacco products such as the vendors who have no settled outlets but who constitute a reasonable market in NWFP are mostly ignored. ? If the company instructs its sales force to cover these sellers with mobile shops on the foot path and elsewhere on the streets too in terms of communicating company’s schemes and offers on certain brands then they too can make up a good market.
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REFERENCES
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REFRENCES
1. Rao Faisal U Rehman Senior Manager Finance, Rave Traders 2. Chaudhry Muhammad Umair BBA (Hons) Finance
INTERNET
? www.bat.com ? www.goliath.ecnext.com ? www.business.com ? www.connect2web.com ? Interviews of different officers of different departments.
Books
1. Principles of Managerial Finance (Eleventh Edition) By Lawrence J. Gitman 2. Manageril Finaice (Twelth Editiion) By Van Horne
Reports
1. Annual Report Lakson Tobacco Company Limited Pakistan 2004 2. Annual Report Lakson Tobacco Company Limited Pakistan 2005 3. Annual Report Lakson Tobacco Company Limited Pakistan 2006 4. Annual Report Lakson Tobacco Company Limited Pakistan 2007 5. Annual Report Lakson Tobacco Company Limited Pakistan 2008
Newspapers
1. Dawn 2. The News 3. Business Recorder
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ANNEXURE
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TREND ANALYSIS 2004
GROSS TURNOVER LESS: SALES TAX LESS: EXCISE DUTY TURNOVER-NET OF SALES TAX AND EXCISE DUTY COST OF SALES RAW MATERIAL CONSUMED OPENING STOCK PURCHASES, REDRYING AND RELATED EXPENSES ENDING STOCK CLOSING STOCK EXCISE DUTY, SALES TAX AND OTHER LEVIES COST OF RAW MATERIAL DAMAGED DURING THE DECEMBER INCIDENT EXPORT REBATE GOVERNMENT LEVIES MANUFACTURING EXPENSIS WORK IN PROCESS OPENING STOCK CLOSING STOCK SALES OF WASTE COST OF WORK IN PROCESS DAMAGES DURING THE DECEMBR FINISHED GOODS OPENING STOCK LESS: ADJUSTMENT CLAIM CLOSING STOCK BALANCE CARRIED FORWARD TOTAL GROSS PROFIT DISTRIBUTION AND MARKETING EXPENSES SALERIES ALLOWANCE AND OTHER BENEFITS 100.00% 100.00% 100.00% 100.00% 114.26% 129.55% 120.67% 120.81% 87.99% 102.36% 129.47% 124.87% 111.42% 107.52% 102.44% 115.18% 40.89% 96.12% 135.38% 173.11% 100.00% 100.00% 100.00% 75.48% 110.97% 189.70% 110.97% 141.95% 148.10% 141.95% 99.86% 135.12% 56.72% 60.40% 82.86% 100.00% 145.86% 99.72% 100.00% 100.00% 87.28% 114.72% 146.97% 0.00% 144.73% 223.74% 100.00% 100.00% 99.13% 113.38% 87.28% 125.71% 146.97% 99.39% 218.57% 135.82% 100.00% 116.57% 84.20% 107.65% 107.69% 58.07% 46.65% 100.00%
2005
118.93%
2006
100.17%
2007
108.76% 116.63%
2008
111.20% 116.97%
63.91% 106.07% 118.97%
0.00% 1.06% 112.27%
100.00% 100.00% 100.00%
58.31% 0.00% 11.89%
11.89% 1519.48%
1519.48% 43.21%
0.00% 0.00%
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SELLING EXPENSES FREIGHT ON SALES RENT RATES AND TAXES POSTAGE TELEPHONE AND STATIONERY DEPRICIATION AMORTIZATION TRAVELLING AND VEHICLE EXPENSES VEHICLE RUNNING EXPENSES RENT OF LEASED ASSET MARKETING EXPENSE INSURANCE ROYALITY REPAIR AND MAINTENANCE OTHER EXPENSES TOTAL ADMINISTRATIVE EXPANSES SALERIES ALLOWANCE AND OTHER BENEFITS RENT RATES AND TAXES RENT OF LEASED ASSET POSTAGE TELEPHONE AND STATIONERY TRAVELLING AND VEHICLE EXPENSES VEHICLE RUNNING EXPENSES REPAIR AND MAINTENANCE LEGAL AND PROFESSIONAL CHARGES PRINTING AND STATIONERY UTILITIES FEE AND SUBSCRIETION ENTERTAINMENT INSURANCE AUDITORS REMUNERATION DONATION DEPRICIATION AMORTIZATION SECURITY SERVICE CHARGES OTHER EXPENSES TOTAL OTHET OPERATING EXPENSES 100.00% 100.00% 100.00% 100.00% 119.66% 117.46% 144.49% 134.14% 100.00% 294.82% 0.00% 0.00% 0.00% 0.00% 0.00% 82.05% 106.86% 83.61% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 179.44% 120.67% 144.49% 107.56% 103.76% 0.00% 117.24% 220.81% 91.55% 160.39% 126.76% 129.52% 101.75% 94.42% 163.78% 87.70% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 129.93% 129.47% 108.37% 0.00% 0.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 132.47% 121.53% 0.00% 114.69% 112.93% 257.98% 0.00% 167.93% 144.00% 279.61% 100.61% 336.17% 136.34% 102.44% 103.45% 95.38% 107.78% 22.28% 119.37% 135.38% 171.95% 100.00% 100.00% 100.00% 100.00% 121.24% 136.07% 139.94% 123.27% 129.50% 121.12% 172.88% 190.67% 84.12% 57.58% 0.00% 102.78% 97.17% 140.73% 93.22% 60.03% 38.71% 96.83% 128.75% 108.13% 84.49% 113.59% 141.49% 0.00% 399.63%
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WORKERS PROFIT PARTICIPATION FUND WORKERS WELFARE FUND CURRENT PERIOD LESS PRIOR PERIOD IMPAIRMENT CHARGES/LOSS ON ITEM OF PROPERTY, PLANT AND EQUIPMENT FIXED ASSET WRITTEN OFF LOSS DUE TO THE DECEMBER INCIDENT- NET LOSS ON DISPOSAL OF INVESTMENT UNREALIZED GAIN ON HELD FOR TRAIDING INVESTMENTS RAW AND PACKING MATERIAL AUDIT REMUNERATION DONATION WORK IN PROCESS FINSHIED GOODS FINSHIED GOODS IN TRANSIT CASH IN HAND PLANT AND MACHINERY OFFICE EQUIPMENT VEHICLES POWER AND OTHER INSTALATION COMPUTIOR EQUIPMENT TOTAL OTHET OPERATING INCOME PROFIT ON DISPOSAL OF FIXED ASSETS PROFIT ON DISPOSAL OF FIXED ASSETS INVESTMENT INCOME FROM FINANCIAL ASSETS PROFIT ON SHORT TERM DEPOSITS GAIN ON SALE OF INVESTMENT UNREALIZED GAIN ON HELD FOR TRAIDING INVESTMENTS ROYALITY INCOME OTHERS INCOME FROM ASSETS THER THAN FINANCIAL ASSETS TOTAL OPERATING PROFIT FINANCE COST 100.00% 100.00% 100.00% 173.96% 132.48% 47.37% 122.65% 92.63% 117.35% 102.61% 110.84% 179.73% 109.02% 6.45% 238.35% 100.00% 100.00% 65.30% 94.56% 0.00% 368.91% 197.52% 100.00% 100.00% 100.00% 100.00% 134.14% 173.96% 210.33% 0.00% 82.05% 122.65% 127.90% 106.86% 102.61% 125.97% 83.61% 109.02% 39.56% 100.00% 100.00% 98.92% 115.63% 0.00% 0.00% 100.00% 0.00%
100.00% 100.00%
133.48% 139.50%
92.54% 94.06%
110.34% 97.42%
66.39% 76.11%
100.00% 100.00%
183.58% 0.00%
0.00%
0.00%
100.00%
170.32%
85.00%
80.84% 96.11% 0.00%
240.80% 0.00%
0.00% 13.55%
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MARK UP ON RUNNING FINANCE UNDER MARK UP ARRANGEMENTS WORKER PORFIT PARTICIPATION FUND SECURITY DEPOSITS LIABILITIES AGAINST ASSET SUBJECT TO FINANCE LEASE BANK COMMISSION AND OTHER CHARGES TOTAL PROFIT BEFORE TAXATION TAXATION CURRENT - FOR THE YEAR CURRENT - FOR PRIOR PERIOD DEFERRED TOTAL PROFIT AFTER TAXATION EARNING PER SHARE PROFIT FOR THE YEAR AFTER TAXATION NO OF ORDINARY SHARES TOTAL 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 0.00% 292.53% 94.44% 0.00% 57.53% 47.37% 133.32% 136.16% 140.53% -20.88% 30.43% 136.16% 131.88% 131.89% 131.88% 100.00% 131.89% 133.32% 117.35% 92.54% 93.05% 95.36% -208.08% 74.70% 93.05% 92.28% 76.89% 92.28% 120.00% 76.89% 75.75% 179.73% 110.55% 108.29% 94.89% -136.78% 674.86% 108.29% 111.75% 111.76% 111.75% 100.00% 111.76% 208.83% 238.35% 66.33% 71.61% 68.85% 141.92% 82.39% 71.61% 63.62% 63.61% 63.62% 100.00% 63.61% 46.72% 55.88% 21.48% 84.21% 257.45% 267.88% 0.00%
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doc_773728776.pdf
The report explains on internship report of Lakson Tobacco Company Limited.
LAKSON TOBACCO COMPANY, LIMITED
LAKSON TOBACCO
COMPANY, LIMITED
FINANCIAL PROJECT
DEPARTMENT BUSINESS MANAGEMENT SCIENCES
UNIVERSITY OF EDUCATION
OKARA CAMPUS
SUPERVISOR
MR. MUHAMMAD SALEEM
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LAKSON TOBACCO COMPANY, LIMITED
RESEARCH AND DEVELOPED BY
Noman Ashraf
BBA (HONS) FINANCE SESSION 2006-2010 ROLL NO 98 (M) SEMESTER 8Th
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Dedication
I dedicate this project to Almighty Allah, The Creator of worlds And Hazrat Muhammad (P.B.U.P), the cause of The creation of the Universe And To my parents, To the persons who loved me, persons whom I loved and for all those who prayed for me.
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Acknowledgment
First of all thanks to Almighty Allah, who have given me the strength and knowledge to complete this project. I would like to specially thank for the help of my finance teacher Sir Muhammad Saleem who helped me a lot regarding this project. Then I would like to thanks for the cooperation of Mr. Bilal Iqbal Khan and Mr. Muhammed Tabassum Shad they give me a lot of information. I have learned a lot with the kind guidance of Sir Muhammad Zahid and I think I have achieved my goal of learning practical things.
Noman Ashraf BBA (Hons) Finance
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Executive Summary................................................................................................... Mission Statement..................................................................................................... About Company......................................................................................................... History of Tobacco.................................................................................................... Tobacco Industry in Pakistan..................................................................................... PEST ANALYSIS OF TOBACCO........................................................................... RATIO ANALYSIS GRAPH & INTERPRETATION............................................. SWOT ANALYSIS OF LAKSON TOBACCO COMPANY................................... COMPETITORS ANALYSIS................................................................................... BASES FOR SEGMENTATION:............................................................................. Demographic..............................................................................................................
Population growth............................................................................................................................ Population growth in Pakistan is about 2.5% annually. This population explosion creates an opportunity for the cigarette manufacturers..................................................................................... Population age mix........................................................................................................................... Ethnic Markets............................................................................................................................. Educational group........................................................................................................................ Household patterns....................................................................................................................... Geographic and Social class:....................................................................................................... Task Environment:............................................................................................................................... ii) Producer Distributor Retailer Final Consumer............................................................ SWOT ANALYSIS.............................................................................................................................. THE BOSTON CONSULTING GROUP (BCG) MATRIX............................................................... The BCG Matrix and one size fits all strategies...................................................................... Other uses and benefits of the BCG Matrix............................................................................ CONCLUSION.................................................................................................................................... FUTURE RECOMMENDATIONS.................................................................................................... REFRENCES.......................................................................................................................................
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EXECUTIVE SUMMARY
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Executive Summary
The report is prepared about the major activities conducted by the finance Department at Lakson Tobacco. The covered activities are Planning and Selection, Financial Resources, Development and Investment. The report helps in understanding how the Financial Position motivates and market activities of the firm in meeting the goals and challenges faced by the company. The Lakson Group was founded in 1954. It Product Portfolio - centering around consumer goods and services - consists of detergents & soaps, toothpaste, food products, fast food restaurants, insurance, internet services, software, paper & board, printing, powdered beverages and tea, packaging, publications, surgical instruments, and textiles. The Lakson Group of Companies generates sales revenues in excess of Rupees 37 billion (US$ 625 million) annually. Group assets exceed Rupees 17 billion (US$ 280 million). Lakson Tobacco Company, LTC is a multinational organization having its parent company, the British American Tobacco, located in England. LTC is a cigarette manufacturer and is one of the highly respected multinationals in Pakistan. The tobacco industry is one of the most important sectors of the economy and LTC has become a major player in this industry by keeping thousands of people employed; and by contributing to the annual GDP of Pakistan through the large amount of taxes paid on cigarette manufacturing and sales. By having the mission of being the “first choice for everyone,” LTC is obviously portraying itself as a very focused, determined and goal-oriented company. Its objectives are not only related to sales and profits, but are also reflective of the excellent corporate culture and the high level of ethical responsibility that the company takes on. LTC is an organization well suited from all facets – that is - operations, marketing, organizational structure, leadership, and motivational aspects – every element perfectly blends in its success story. On one hand, LTC has firm values and believes that have played a significant part in building and maintaining its
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corporate culture, while on the other hand, it has high marketing standards which take more into account than just the sales of cigarettes. It listens and reacts to the concerns of its stakeholders especially since it is operating in a highly controversial industry. From a business point of view, it takes great strategic steps to market and enhance the image of its brands while complying with all the government regulations. Its major competitor is Pakistan Tobacco Company, which adopts a number of immoral marketing practices that LTC has to counter ethically since it is a multinational. In addition, LTC understands the highly significant role of information technology in today’s global economy, and thus pays special attention to the implementation of IT in all of its departments. Every department has its own network system and database that provide increased communication and reliable data. Especially, in the factories, LTC has a number of latest machinery for manufacturing and their performance is commendable. The Group's principal activity is to manufacture and sale of cigarettes and tobacco in Pakistan. The Group operates in five factories located in Karachi in the districts of Dadu, Sahiwal, Rawalpindi and Swabi. The Group markets the products under the brand name Morven Gold and Marlboro. LTC has a great consideration for quality of its product. Quality monitoring starts from the point where tobacco is purchased to the point of sale and even after the sale. All the customer complaints are taken care of and efforts for constant improvement in quality are made. In fact, the company is so quality conscious that it invests million of rupees in procurement of machinery that improves the quality of cigarettes. Ultimately, it is evident that LTC has adopted world-class standards in its internal as well as its external activities and thus has been extremely successful in its core business.
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MISSION STATEMENT
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Mission Statement
Build a successful business model that encompasses the needs of our customers, our shareholders, and employees Provide a dynamic, responsive organization that ensures a rapid response to opportunity and competition Invest in a balanced portfolio of short, medium, and long-term business opportunities of measured risk
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COMPANY ACHIEVEMENT
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Awards
A record-breaking four companies
With a record-breaking four companies being selected for the Karachi Stock Exchange’s Best Performance Award for 2005, the Lakson Group is once again the KSE’s top performing business group.
We thank the KSE for recognizing the achievements of Lakson Tobacco Company Limited, Colgate-Palmolive Pakistan Limited, Century Paper and Board Mills Limited and Clover Pakistan Limited.
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Top 25 Companies Award from Karachi Stock Exchange: Lakson Tobacco (1997, 1998, 1999, 2003, 2004 & 2005 ) Century Insurance (1997 & 1998) Century Paper & Board Mills (2002, 2003 & 2004) Colgate Palmolive (2004) Corporate Excellence Certificate from Management Association of Pakistan: Colgate-Palmolive (2001, 2002 & 2004)
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COMPANY INFORMATION
LAKSON TOBACCO COMPANY, LIMITED
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ABOUT COMPANY
Sultan Ali Lakhani
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Advisor to the Group CEO of Century Publications (Pvt. Ltd.), Editor-in-Chief of the Daily Express & Express News Channel (Pvt. Ltd.) Honorary Counsel General of Mexico in Pakistan Member, Senate (Upper House) of Pakistan from 1987 to 1994 Education:
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B.A (Honors) Economics Karachi University
37 years of top management experience of Group companies
Iqbal Ali Lakhani
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Chairman of the Group CEO of Century Paper & Board Mills Ltd., CEO of Tritex Cotton Mills Ltd., CEO of Merit Packaging, CEO of Cyber.Net (Pvt. Ltd.) Education:
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BBA, Finance & Marketing University of California at Berkeley
34 years of top management experience of Group companies
Zulfiqar Ali Lakhani
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CEO of Colgate Palmolive (Pakistan) Ltd., Tetley Clover & Clover Pakistan Ltd. Education:
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MBA, Wharton School of Business, University of Pennsylvania with a concentration in Finance & Marketing M.S. in Industrial Engineering B.S Chemical Engineering, Stanford University
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30 years of top management experience of Group companies
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Amin Mohammed Lakhani
• • •
CEO McDonalds Pakistan & CEO Accuray Surgicals Honorary Counsel General of Singapore in Pakistan Education
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MBA, Wharton School of Business, University of Pennsylvania with a concentration in Finance & International Business. B.S. in Industrial Engineering, Stanford University
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25 years of top management experience of Group companies
Major Group Companies
Accuray Surgicals Ltd. Surgical, Dental, Manicure & Veterinary Instruments Century Insurance Co. Ltd. General Insurance Century Paper & Board Mills Ltd. Paper & Board Century Publications (Pvt.) Ltd. Newspapers & Magazines Clover Pakistan Ltd. Food Products Colgate-Palmolive (Pakistan) Ltd. Detergents, Soaps & Toothpaste Cyber Net Internet Services (Pvt.) Ltd. Internet Service Provider Lakson Business Solutions Limited. Software & Web Solutions
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Hasanali Karabhai Foundation Philanthropic Work Merit Packaging Ltd. Printing & Packaging Princeton Travels (Pvt.) Ltd. Travel Services Satellite Broadcasting Media Pakistan 24/7 broadcast news TV channel SIZA Foods (Pvt.) Ltd. (McDonald’s) Quick Service Restaurants Tritex Cotton Mills Ltd. Cotton Yarn Tetley Clover (Pvt.) Ltd. Tea
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LAKSON TOBACCO COMPANY, LIMITED Foreign Affiliations
The Lakson Group of Companies is one of the largest and most welldiversified companies in Pakistan with a range of foreign affiliated partners that include Tetley Tea, Colgate-Palmolive, McDonalds, Kraft Foods and Phillip Morris International. Colgate-Palmolive Inc.: McDonald’s Corporation: Kraft Foods: Tetley Overseas Holdings Ltd. 30% equity ownership in Colgate- Palmolive (Pakistan) Limited Siza foods (Pvt.) Limited holds an exclusive Country Development License for Pakistan. Holds an exclusive licensing exclusive Country Development License for Pakistan. 50% equity ownership in Tetley Clover
People
People are their most valuable asset. Successful individuals are the driving force behind a successful enterprise. Attracting, retaining, and motivating the most talented people will position Lakson at the forefront of each industry in which it competes.
Customer Success
Leads to their success. We will achieve maximum customer satisfaction through value-added products and industry-leading services and support.
Excellence
The pursuit of excellence is not a destination, it's a journey. They will always strive to the be the best in each of our respective industries and in sectors where they are already regarded as the best, they will strive to maintain and entrench our position as industry leaders.
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LAKSON TOBACCO COMPANY, LIMITED Innovation
They are advocates and instruments of positive change. Being innovative builds competitive advantage and creates new opportunities. They will strive to create a culture where entrepreneurial initiatives and thinking outside the box are encouraged and rewarded.
Teamwork
Teams are the catalysts for our ideas and actions. Every team member has the power to influence the group. They treat this power as a privilege and a responsibility. Teamwork is the foundation of an effective, successful, fun environment in which the whole is greater than the sum of the parts.
Openness
Openness facilitates informed decisions, understanding, and trust. Sharing information across the organization facilitates our common goals, spreads the collective knowledge base of our organization, and helps individuals access information in a more timely and efficient manner.. Furthermore, such openness stimulates greater transparency in our transactions which builds trust amongst coworkers, customers, and regulators.
Social Responsibility
Encouraging a culture of social responsibility allows our people to achieve a healthy balance between their professional endeavors, family commitments and any community initiatives in which they are interested. In addition, such a culture lays the foundation for successful relationships with the communities that are most affected by our operations and fosters goodwill towards us.
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Sustainable Profitability
Our business is based on a balanced perspective between short and longterm vision. We aim to grow the company, to increase our earnings, and to enhance our corporate environment through profitable investments.
Headquarters are located at:
LAKSON SQUARE, BLDG. # 2, SARWAR SHAHEED ROAD, KARACHI – 74200, PAKISTAN Tel: + 9221 569-8000 Fax: + 9221 568-3410
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HISTORY OF TOBACCO
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History of Tobacco
Tobacco has a long history in the Americas. The Mayan Indians of Mexico carved drawings in stone showing tobacco use. These drawings date back to somewhere between 600 to 900 A.D. Tobacco was grown by American Indians before the Europeans came from England, Spain, France, and Italy to North America. Native Americans smoked tobacco through a pipe for special religious and medical purposes. They did not smoke every day. Tobacco was the first crop grown for money in North America. In 1612 the settlers of the first American colony in Jamestown, Virginia grew tobacco as a cash crop. It was their main source of money. Other cash crops were corn, cotton, wheat, sugar, and soya beans. Tobacco helped pay for the American Revolution against England. Also, the first President of the U.S. grew tobacco. By the 1800's, many people had begun using small amounts of tobacco. Some chewed it. Others smoked it occasionally in a pipe, or they hand-rolled a cigarette or cigar. On the average, people smoked about 40 cigarettes a year. The first commercial cigarettes were made in 1865 by Washington Duke on his 300-acre farm in Raleigh, North Carolina. His hand-rolled cigarettes were sold to soldiers at the end of the Civil War. It was not until James Bonsack invented the cigarette-making machine in 1881 that cigarette smoking became widespread. Bonsack's cigarette machine could make 120,000 cigarettes a day. He went into business with Washington Duke's son, James "Buck" Duke. They built a factory and made 10 million cigarettes their first year and about one billion cigarettes five years later. The first brand of cigarettes were packaged in a box with baseball cards and were called Duke of Durham. Buck Duke and his father started the first tobacco company in the U.S. They named it the American Tobacco Company.
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Credit: An 1892 Duke of Durham box of machine-rolled cigarettes Tobacco Biology & Politics The American Tobacco Company was the largest and most powerful tobacco company until the early 1900's. Several companies were making cigarettes by the early 1900's. In 1902 Philip Morris Company came out with its Marlboro brand. They were selling their cigarettes mainly to men. Everything changed during World War I (1914-18) and World War II (1939-45). Soldiers overseas were given free cigarettes every day. At home production increased and cigarettes were being marketed to women too. More than any other war, World War II brought more independence for women. Many of them went to work and started smoking for the first time while their husbands were away. By 1944 cigarette production was up to 300 billion a year. Service men received about 75% of all cigarettes produced. The wars were good for the tobacco industry. Since WW II, there have been six giant cigarette companies in the U.S. They are Philip Morris, R.J. Reynolds, American Brands, Lorillard, Brown & Williamson, and Liggett & Myers (now called the Brooke Group). They make millions of dollars selling cigarettes in the U.S. and all over the world.
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In 1964 the Surgeon General of the U.S. (the chief doctor for the country) wrote a report about the dangers of cigarette smoking. He said that the nicotine and tar in cigarettes cause lung cancer. In 1965 the Congress of the U.S. passed the Cigarette Labelling and Advertising Act. It said that every cigarette pack must have a warning label on its side stating "Cigarettes may be hazardous to your health." By the 1980's, the tobacco companies had come out with new brands of cigarettes with lower amounts of tar and nicotine and improved filters to keep their customers buying and to help reduce their fears. The early 1980's were called the "tar wars" because tobacco companies competed aggressively to make over 100 low tar and "ultra" low tar cigarettes. Each company made and sold many different brands of cigarettes. In 1984 Congress passed another law called the Comprehensive Smoking Education Act. It said that the cigarette companies every three months had to change the warning labels on cigarette packs. It created four different labels for the companies to rotate.
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Public Law 98-474, "Comprehensive Smoking Education Act, 1984"
Credit: Smoking Tobacco & Health, Centers for Disease Control Since the 1980's, federal, state, local governments, and private companies have begun taking actions to restrict cigarette smoking in public places. The warning labels were the first step. Tobacco companies cannot advertise cigarettes on television or radio. It is against a law that was passed by Congress in 1971. Many cities across the U.S. do not allow smoking in public buildings and restaurants. Since 1990, airlines have not allowed smoking on airplane flights in the U.S. that are six hours or less. State taxes on cigarettes have increased. As it becomes more difficult for tobacco companies to sell their products in the U.S., they are looking outside. U.S. tobacco companies are now growing tobacco in Africa, South America (Brazil and Paraguay), India, Pakistan, the Philippines, Greece, Thailand, and the Dominican Republic. Fifty percent (50%) of the sales of U.S. tobacco companies go to Asian countries, such as Thailand, South Korea, Malaysia, the Philippines, and Taiwan.
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TOBACCO INDUSTRY IN PAKISTAN
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Tobacco Industry in Pakistan
Pakistan's tobacco industry has been a traditionally dependable source of government income, contributing some 27.5 billion rupees per year - the equivalent of 4.4% of Pakistan's GDP. It has the largest yield of any crop in that country and employs some 1 million Pakistanis. But in the last few years, there has been a growing concern about the ill effects of cigarette smoking and the impact it has on the health and well being of Pakistanis. For instance, approximately 90% of lung cancers in Pakistan are attributable to cigarette smoking. In the last decade or so, there has been a large anti-smoking backlash in the United States. The recent out-of-court settlement of $360 billion between "Big Tobacco" and participants in a class action suit has spurred the development of anti-smoking coalitions in other parts of the world. The decline in smoking in North America, especially the United States, has been offset by a strong push from the large tobacco companies to find converts in the developing world. As tobacco control is tightening in the West, transnational tobacco companies are becoming more active in developing countries. The result is that tobacco use is declining at the rate of 1.5% in the West but at the same time it is increasing at the rate of 1.7% in the developing countries. While the anti-tobacco movement in the USA helped lower cigarette sales, Big Tobacco, the largest US companies: Philip Morris, R.J. Reynolds and Brown and Williamson, as well as the British American Tobacco Co., have continue to expand overseas. They have flooded the markets in Asia and Eastern Europe with advertisements, promotional products and cut-price brands designed to encourage new smokers. According to the Pakistan Pediatric Association, every day more than 1,000 children between the ages of six and 16, start smoking. It is estimated that more than a third of men and some four percent of women in the country are smokers.
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Every year, the government spends some US$20,000 on anti-smoking messages but cigarette companies spend millions of dollars annually on advertising. According to the prestigious advertising magazine 'Age', the Lakson Tobacco Company spent an astounding $6.4 million on publicity in 1998, making it the third largest business advertiser in Pakistan that year. Anti-tobacco campaigners accuse the government of being swayed by the tobacco industry. According to independent estimates, the Pakistani government collected over $300 million in tobacco tax in 1990, slightly more than a tenth of the government's total revenue earnings that year. Anti-tobacco activists say that whatever benefits the government is reaping in the short term from tobacco-related industries will be significantly offset by the long term health care problems of average Pakistanis devastated by smoking addictions
LAKSON TOBACCO COMPANY LIMITED
Introduction of the Organization:
Lakson Tobacco Company Limited is a part of Lakson Group which was founded in 1954. Portfolio of Lakson Group consists of detergents & soaps, toothpaste, food products, fast food restaurants, insurance, internet services, software, paper & board, printing, powdered beverages and tea, packaging, textiles, surgical instruments, and publications. ABOUT LAKSON TOBACCO COMPANY LIMITED •The Company was establish in 1971 • Mr. Hassan Ali Karabai was the founder. • First Brand of the Company was Lakson Kings • Merger with Premier Tobacco Industries in 1997
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PRODUCTION UNITS – FACTORIES & LEAF DIVISION The Group operates in five factories located in Karachi, in the districts of Dadu, Sahiwal, Rawalpindi and Swabi. History: A multinational company - was incorporated on February 10, 1969. The project went into production on August 18, 1971 with manufacturing capacity of 1200 million cigarettes per year on single shift basis. The present capacity increased to 14,850 million cigarettes. The company has acquired the shares of Tobacco Processing Industries Ltd. and has set up a large modern Tobacco Threshing and Redrying plant at Mardan. This plant has commenced production in June 1981. This company has been merged with Lakson with effect from January 1, 1982. The capacity was increased to the present level The capacity was increased to the present level with the start up of new factory at Mardan in early 1979. Punjab Cigarette Industrial Limited has been merged in the company in 1982. The Authorised capital of the company is Rs. 200.00 million divided into ordinary shares of Rs. 10/- each, against which the Paid-up capital stood at Rs. 73.15 million as at June 30, 1993. Ruthmans equity in the Company has been made up to 29.87 per cent. The Reserves of the company increased from Rs. 55.20 million to Rs. 70.89 million during the year 1993. The Break-up Value per Rs. 10/- worked out to Rs. 19.69. Meanwhile, the Paid-up capital increased to Rs. 80.46 million and Reserves to Rs. 78.50 million during the year 1994. Sales during the year ending June 30, 1993 stood at Rs. 2434.61 million as compared to Rs. 2473.76 million showing a fall of 1.58 per cent. Pretax profit during the same period stood at Rs. 48.21 million as compared to Rs. 25.51 million showing a substantial increase of 88.98 per cent. Earning per share worked out to 4.14 as compared to Rs. 2.94 in the preceding year. Price Earning Ratio at the market price of Rs. 31.50 worked out to 8:1. The lower sales was due to a reduction in the export of tobacco and sluggish conditions in the domestic
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market during the year under review along with persistent devaluation of Pak Rupee against major currencies. The company paid Central Excise Duty and Sales Tax on tobacco and cigarettes amounted to Rs. 1,557 million which is 68 per cent of domestic sales revenue during the year 1993. The company gave a dividend of 20 per cent plus bonus at the rate of 1:10 in 1993.
About Lakson
To maintain high quality standards in our products, all of our major companies are ISO 9001-2000 certified. In 2004, Lakson Group contributed PKR 14.2 billion (US $220 million) to the Ex-Chequer, constituting approximately 2.7% of Total Government Revenue. The Group employees 6,560 persons directly, 5,340 persons by contract MARKET SHARE BUSINESS AREA Fabric Care Scourers Oral Care Dish Bar, Liquid & Paste Internet Service Provision Packaging Board MARKET SHARE 49% 50% 29% 83% 26% 23%
Corporate Responsibility
HASANALI KARABHAI FOUNDATION The Foundation was established to undertake various financial aid programs and charitable contributions. The Foundation owns and operates a multi-storied office building in the center of Karachi and the entire rental income from this property is being utilized for philanthropic purposes.
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EYE CAMPS It is estimated that there are about 2 ½ million blind people in Pakistan. The Lakson Group initiated the idea of “Free Eye Camps” in 1994. Its objective was to set up free camps to provide treatment to patients with eye related diseases and to eradicate curable blindness from the country. NO. OF FREE EYE CAMPS OPD CONDUCTED OPERATIONS PERFORMED GLASSES DISTRIBUTED 11 74,000 4,500 30,000
Hospitals – Statistics to date
OPD’S CONDUCTED Male Female Total OPERATIONS PERFORMED 39,274 34,784 74,058 4,663
The hospital has been completed at a cost of PKR32 million and is the first specialized hospital for eye diseases in Swabi (NWFP.) Operational since May 2001, fully equipped to handle all types of eye related diseases. Fully electronic system for maintaining online patient records. ISO 9001-2000 certified. QMS on Q-Pulse software. The Sahiwal hospital was completed at a cost of PKR 30 million and is the first specialized hospital for eye diseases in Qadarabad. Operational since March 2004.
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Fully equipped to handle all types of eye related diseases. Fully electronic system for maintaining online patient records. ISO 9001-2000 certification under process. QMS on Q-Pulse under process. Social Initiatives A diabetic center was established at the Mardan (NWFP) hospital in 2005. A K-12 school was established in Kotri (Sind) in June 2005. A third eye hospital is being established in Kotri (Sind) which will commence operations by 2007.
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PEST ANALYSIS
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PEST ANALYSIS OF TOBACCO
Political
Ministry of Health has made all possible efforts in informing the masses that smoking is injurious to health and LTC maintains that “smoking is an adult choice”. Cigarettes are being manufactured and each packet must contain a warning “Tobacco seriously damages health” or “smoking is injurious to health”. But as such it has no effect on company's marketing strategies and tactics, although cigarette manufacturers can not promote it as “good for health” product. The law “no smoking in public places” might effect sales volume because the people who use to smoke for style or fashion may give it up.
Economic
The tobacco industry has commissioned numerous reports evaluating its gross economic contribution in terms of employment (in both manufacturing and agriculture, but not in the health sector), earnings, exports and taxes paid. Universally, these studies conclude that the industry makes a major economic contribution. In almost all cases, the studies are based on two important implicit assumptions: That it would be possible totally to eliminate all tobacco consumption; and That where tobacco consumption is reduced, money that used to be spent on tobacco consumption would not be spent on other forms of consumption (yet nor would it be saved). In other words, these studies do not ask: “What would be the net economic effects of a reduction in tobacco consumption?” In the real world, if tobacco consumption is reduced, two outcomes are possible: the level of national savings increases; and/or other forms of consumption expenditure are substituted for tobacco expenditures. If smokers reduce their consumption and simply spend their money
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elsewhere, the relative economic effects of the two different consumption patterns must be identified. There is some evidence that a reduction in expenditure on smoking could well lead to higher levels of domestic employment and earnings (because cigarette production is relatively capital-intensive and, in many countries, foreign-owned). If the money is saved rather than spent, the increased savings are likely to have stimulatory macroeconomic effects which should be compared with the direct economic effects of reduced tobacco expenditures. On balance, it seems reasonable to expect that the economic effects of reduced tobacco expenditures on earnings and employment are likely to be close to neutral. Reduced smoking will change the structure of national consumption, but is unlikely to have a major impact on its total level.
Social, Welfare
In India (reported by Dr. Bhandari), 16 million people are estimated to be involved in the tobacco industry, with 2.1 million in the cultivation sector. In his study, he found that the average monthly household income for tobacco farmers is 4,700 rupees, compared with 4,000 rupees for non-tobacco farmers in the same area and this is reflected in a greater affluence and a better quality of life ( e.g. television sets, own transport). There are fewer under-age marriages, dowry is less frequently stipulated and a larger proportion is educated to at least secondary school level. Tobacco farmers also have greater contact with other branches of agriculture and this is reflected in a higher standard of overall crop production. It is interesting to note that, although the non-tobacco growing communities receive more government aid for health facilities, transport and other aspects of infrastructure, the tobacco-growing sector has as a matter of fact the better overall infrastructure as it tends to attract greater private investment. The social relevance of leaf tobacco production was also demonstrated by Ayres for Brazil. A viable agricultural community is particularly important there to avoid rural migrations to the cities and consequent extreme poverty. Tobaccogrowing provides such viable communities. Furthermore, because most farm units which are relatively small – are farmer-owned, they provide centres for family
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activity and this helps increase the stability of the social environment. Growers and their families feel secure in their occupations as they are growing a crop with the highest return in that region, marketing is assured, transportation is provided by the buyers, etc. The strength and affluence of the industry enables an integrated system of leaf production, involving crop planning, extension, financing, guaranteed purchase of the crop and environmental and social programmes. His message is that farmers should be kept on the land. With a crop like tobacco they can be part of organised agriculture that considerably strengthen their representative power on social and other issues and on the services they receive. This is largely absent in other commodities.
Technological
LTC is the pioneer of using latest technology in Pakistan. The machine they use to manufacture cigarettes “Loga Max” can produce 8000 sticks per minute. Although now Pakistan Tobacco Company is also using the same technology but it was LTC which introduced it in the country. Everyone knows that technology has a significant effect on company’s production capabilities. Use of this technology (Loga Max) enables LTC to fulfill the market demand well in time and more efficiently.
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RATIO ANALYSIS GRAPH & INTERPRETATION
LAKSON TOBACCO COMPANY, LIMITED
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RATIO ANALYSIS GRAPH & INTERPRETATION
Debt paying ability
Net working capital
Formula
Net Working Capital =
Current assets – Current liabilities
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
2004 Current assets Current liabilities Net working capital (Rs) 910815 582613 328202 2005 1384495 449823 934672 2006 1267950 516444 751506 2007 1240430 542025 698405 2008 1719948 1597703 122245
Net working capital
1000000 900000 800000 700000 600000 500000 400000 300000 200000 100000 0 934672 751506 698405
Rupees
Net w orking capital 328202 122245
2004
2005
2006 Ye ars
2007
2008
The amount of Total current assets was Rs. 910815 in the year 2004; it becomes Rs. 1384495 in the year 2005 after an increment of Rs.1293680. In the year 2006 the amount becomes Rs. 1267950 after a decrement of Rs. 116545. In the next
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LAKSON TOBACCO COMPANY, LIMITED
year 2007 it becomes Rs. 1240430 after a decrement of Rs.1143520. In the last year 2008 the amount becomes Rs. 17119948 after an increment of Rs.471518. It is maximum in the year 2007 and minimum in the year 2003. The amount of Current liabilities was Rs. 582613 in the year 2004; it becomes Rs. 449823 in the year 2005 after an decrement of Rs.132790. In the year 2006 the amount becomes Rs. 516444 after an increment of Rs.66621. In the next year 2007 it becomes Rs. 542025 after an increment of Rs.25581. In the last year 2008 the amount becomes Rs. 1597703 after an increment of Rs.1055678. It is maximum in the year 2008 and minimum in the year 2003. The amount of net working capital was Rs. 328202 in the year 2004; it becomes Rs. 934672 in the year 2005 after an increment of Rs.606470. In the year 2006 the amount becomes Rs. 751506 after a decrement of Rs.183166. In the next year 2007 it becomes Rs. 698405 after a decrement of Rs.53101. In the last year 2008 the amount becomes Rs. 122245 after a decrement of Rs.576160. The net working capital is higher in 2008 due to very large amount of current assets and much difference in current assets and current liabilities. Current assets are maximum due to large amount of stock in trade.
56
LAKSON TOBACCO COMPANY, LIMITED
Current Ratio
Formula
CurrentAssets Current ratio = CurrentLiabilities
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Current assets Current liabilities Current ratio (Times) 2004 910815 582613 1.56 2005 1384495 449823 3.08 2006 1267950 516444 2.46 2007 1240430 542025 2.29 2008 1719948 1597703 1.08
Current Ratio
3.50 3.00 2.50 Times 2.00 1.50 1.00 0.50 0.00 2004 2005 2006 Years 2007 2008 1.56 1.08 3.08 2.46 2.29 Current Ratio
The amount of Total current assets was Rs. 910815 in the year 2004; it becomes Rs. 1384495 in the year 2005 after an increment of Rs.1293680. In the year 2006 the amount becomes Rs. 1267950 after a decrement of Rs. 116545. In the next year 2007 it becomes Rs. 1240430 after a decrement of Rs.1143520. In the last year 2008 the amount becomes Rs. 17119948 after an increment of Rs.471518. It is maximum in the year 2007 and minimum in the year 2003.
57
LAKSON TOBACCO COMPANY, LIMITED
The amount of Current liabilities was Rs. 582613 in the year 2004; it becomes Rs. 449823 in the year 2005 after an decrement of Rs.132790. In the year 2006 the amount becomes Rs. 516444 after an increment of Rs.66621. In the next year 2007 it becomes Rs. 542025 after an increment of Rs.25581. In the last year 2008 the amount becomes Rs. 1597703 after an increment of Rs.1055678. It is maximum in the year 2008 and minimum in the year 2003. The current ratio is 1.56 in the year 2004; it becomes 3.08 after an increment of 1.52 in the year 2005. In the year 2006 the current ratio becomes 2.46 after a decrement of 0.62. The current ratio becomes 2.29 after a decrement of 0.17 in the year 2007.In the last year 2008 the percentage becomes 1.08 after a decrement of 1.21. The current ratio is higher in 2008 due to very large amount of current assets and much difference in current assets and current liabilities. Current assets are maximum due to large amount of stock in trade. The value of current ratio has risen slightly from the previous year. This is a good signal for the short term creditors that the company has potential to pay back the obligations in the near future. The figure shows the current ratio of the company has been better than the over all industry for the most of the time. It became low in 2007 due to the increase in the current portion of the long term loans and finances which the company has taken.
58
LAKSON TOBACCO COMPANY, LIMITED
Acid ratio
Formula
(CurrentAsset ? Inventory) CurrentLiabilities Acid ratio =
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Current assets Inventory Current liabilities Acid ratio (times) 2004 910815 79931 582613 1.43 2005 1384495 88498 449823 2.88 2006 1267950 145227 516444 2.17 2007 1240430 117288 542025 2.07 2008 1719948 207491 1597703 0.95
Acid Ratio
3.50 3.00 2.50 Times 2.00 1.50 1.00 0.50 0.00 2004 2005 2006 Years 2007 2008 1.43 0.95 2.88 2.17 2.07 Acid Ratio
The amount of Total current assets was Rs. 910815 in the year 2004; it becomes Rs. 1384495 in the year 2005 after an increment of Rs.1293680. In the year 2006 the amount becomes Rs. 1267950 after a decrement of Rs. 116545. In the next year 2007 it becomes Rs. 1240430 after a decrement of Rs.1143520. In the last year 2008 the amount becomes Rs. 17119948 after an increment of Rs.471518. It is maximum in the year 2007 and minimum in the year 2003.
59
LAKSON TOBACCO COMPANY, LIMITED
The amount of Current liabilities was Rs. 582613 in the year 2004; it becomes Rs. 449823 in the year 2005 after an decrement of Rs.132790. In the year 2006 the amount becomes Rs. 516444 after an increment of Rs.66621. In the next year 2007 it becomes Rs. 542025 after an increment of Rs.25581. In the last year 2008 the amount becomes Rs. 1597703 after an increment of Rs.1055678. It is maximum in the year 2008 and minimum in the year 2003. The amount of inventory was Rs. 79931 in year 2004 becomes Rs. 88498 in the year 2005 after an increment of Rs.8567. In the year 2006 the amount becomes Rs. 145227 after an increment of Rs.56729. In the next year 2007 it becomes Rs. 117288 after a decrement of Rs.27939. In the last year 2008 the amount becomes Rs. 207491 after an increment of Rs.90203. It is maximum in the year 2008 and minimum in the year 2003. The acid ratio is 1.43 in the year 2004; it becomes 2.88 after an increment of 1.45 in the year 2005. In the year 2006 the acid ratio becomes 2.17 after a decrement of 0.71. The acid ratio becomes 2.07 after a decrement of 0.1 in the year 2007. In the last year 2008 the acid ratio becomes 0.95 after a decrement of 1.12.The acid ratio is maximum in 2005. The calculations above show that the quick ratios have showed improvement with respect to the previous year and are maximum in 2005. But, comparing the calculations with the industrial median and we realize that the company’s potential to pay the obligations has decreased.
60
LAKSON TOBACCO COMPANY, LIMITED
Debt/equity ratio
Formula
totalliabilities Debt/equity ratio = shareholder ' sequity
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Total liabilities Shareholder’s equity Debt/equity ratio (%)
Debt/Equity Ratio
120.00% 100.00% Percentage 80.00% 60.00% 40.00% 20.00% 0.00% 2004 2005 2006 Years 2007 2008 78.91% 83.81% 70.94% 57.98% Debt/Equity Ratio 103.06%
2004 962423 1219649 78.91%
2005 1460329 1742471 83.81%
2006 1498963 2112926 70.94%
2007 1296758 2236592 57.98%
2008 2224167 2158106 103.06%
The amount of total liabilities was Rs. 962423 in the year 2004; it becomes Rs. 1460329 in the year 2005 after an increment of Rs.497906. In the year 2006 the amount becomes Rs. 1498963 after an increment of Rs.38634. In the next year 2007 it becomes Rs. 1296758 after a decrement of Rs.202205. In the last year 2008 the amount becomes Rs. 2224167 after an increment of Rs.927409. It is maximum in the year 2008 and minimum in the year 2003.
61
LAKSON TOBACCO COMPANY, LIMITED
The amount owner’s equity accounts were Rs. 1219649 in the year 2004; it becomes Rs. 1742471 in the year 2005 after an increment of Rs.522822. In the year 2006 the amount becomes Rs. 2112926 after an increment of Rs.370455. In the next year 2007 it becomes Rs. 2236592 after an increment of Rs.123666. In the last year 2008 the amount becomes Rs. 2158106 after a decrement of Rs.78486. It is maximum in the year 2008 and minimum in the year 2003. The debt/equity ratio is 78.91% in the year 2004; it becomes 83.81% after an increment of 4.9% in the year 2005. In the year 2006 the debt/equity ratio becomes 70.94% after a decrement of 12.87%. The debt/equity ratio becomes 57.98% after a decrement of 12.96% in the year 2007. In the last year 2008 the percentage becomes 103.06% after an increment of 45.08%. The debt equity ratio is maximum in 2003 due to large amount of shareholders equity and less amount of liabilities. This ratio has increased as well, as compared to the year 2006. In the ratio form, the results for the year 2007 can be stated as 79.14% and that of the year 2005 is 61.46%. The creditors always prefer this ratio to be low. the lower the ratio, the higher the level of the firm’s financing that is being provided by the share holders, and larger the creditor cushion in the event of shrinking assets values. If we see the figure, we see that the company’s ratio in the past years have been in the favor of the creditors, but the requirement of loans for the expansion projects started by the company.
62
LAKSON TOBACCO COMPANY, LIMITED
Debt to tangible net worth
Formula
totalliabi lities Debt to tangible net worth = ( shareholde r ' sequity ? int angibleass ets )
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Total liabilities Shareholders equity Intangible assets Debt to tangible net worth (%) 2004 962423 1219649 0 78.91% 2005 1460329 1742471 0 83.81% 2006 1498963 2112926 0 70.94% 2007 1296758 2236592 0 57.98% 2008 2224167 2158106 0 103.06%
Debt to Tangible Net worth
120.00% 100.00% Percentage 80.00% 60.00% 40.00% 20.00% 0.00% 2004 2005 2006 Ye ars 2007 2008 78.91% 83.81% 70.94% 57.98% Debt to Tangible Net w orth 103.06%
The amount of total liabilities was Rs. 962423 in the year 2004; it becomes Rs. 1460329 in the year 2005 after an increment of Rs.497906. In the year 2006 the amount becomes Rs. 1498963 after an increment of Rs.38634. In the next year
63
LAKSON TOBACCO COMPANY, LIMITED
2007 it becomes Rs. 1296758 after a decrement of Rs.202205. In the last year 2008 the amount becomes Rs. 2224167 after an increment of Rs.927409. It is maximum in the year 2008 and minimum in the year 2003. The amount owner’s equity accounts were Rs. 1219649 in the year 2004; it becomes Rs. 1742471 in the year 2005 after an increment of Rs.522822. In the year 2006 the amount becomes Rs. 2112926 after an increment of Rs.370455. In the next year 2007 it becomes Rs. 2236592 after an increment of Rs.123666. In the last year 2008 the amount becomes Rs. 2158106 after a decrement of Rs.78486. It is maximum in the year 2008 and minimum in the year 2003. The debt to tangible net worth is 78.91% in the year 2004; it becomes 83.81% after an increment of 4.9% in the year 2005. In the year 2006 the debt/equity ratio becomes 70.94% after a decrement of 12.87%. The debt/equity ratio becomes 57.98% after a decrement of 12.96% in the year 2007. In the last year 2008 the percentage becomes 103.06% after an increment of 45.08%. The debt equity ratio is maximum in 2003 due to large amount of shareholders equity and less amount of liabilities.
64
LAKSON TOBACCO COMPANY, LIMITED
Cash ratio
Formula
(cash & cashequilent + marketable sec urities ) currentliabilities Cash ratio =
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Cash Marketable securities Current liabilities Cash ratio (times) 2004 386410 3061 582613 0.67 2005 750842 30646 449823 1.74 2006 383509 43138 516444 0.83 2007 75471 26450 542025 0.19 2008 65529 30058 1597703 0.06
Cash Ratio
2.00 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 1.74
Cash ratio
0.67
0.83
Cash Ratio
0.19
0.06 2008
2004
2005
2006 Years
2007
The amount of cash and bank balance was Rs. 386410 in the year 2004; it becomes Rs. 750842 in the year 2005 after a increment of Rs.364432. In the year 2006 the amount becomes Rs. 383509 after a decrement of Rs.367333. In the next year 2007 it becomes Rs. 75475 after a decrement of Rs.308038. In the last year 2008 the amount becomes Rs. 65529 after a decrement of Rs 9942. It is maximum in the year 2008 and minimum in the year 2003. The amount of Current liabilities was Rs. 582613 in the year 2004; it becomes Rs.
65
LAKSON TOBACCO COMPANY, LIMITED
449823 in the year 2005 after an decrement of Rs.132790. In the year 2006 the amount becomes Rs. 516444 after an increment of Rs.66621. In the next year 2007 it becomes Rs. 542025 after an increment of Rs.25581. In the last year 2008 the amount becomes Rs. 1597703 after an increment of Rs.1055678. It is maximum in the year 2008 and minimum in the year 2003. The cash ratio is 0.67 in the year 2004; it becomes 1.74 after an increment of 1.07 in the year 2005. In the year 2006 the cash ratio becomes 0.83 after a decrement of 0.91. The cash ratio becomes 0.19 after a decrement of 0.64 in the year 2007. In the last year 2008 the cash ratio becomes 0.06 after a decrement of 0.13. The cash ratio is maximum in 2005.The cash ratio is minimum in 2003 due to less amount of cash.
66
LAKSON TOBACCO COMPANY, LIMITED
Short term liabilities
Day’s sales in account receivable
Formula
averagegrossaccountreceivable (netsales / 365) Day’s Sales in account receivable=
LAKSON TOBACCO COMPANY LTD
Ratio analysis
Average account receivable Net sales Day's sales in account receivable (Days) 2004 22638 2084955 4.00 2005 21986 2400530 3.00 2006 164233 2434513 25.00 2007 17415 2619960 2.00 2008 130108 3013752 16.00
Day's sales in account Receivable
30.00 25.00 25.00 20.00 Days 15.00 10.00 5.00 0.00 2004 2005 2006 Years 2007 2008 4.00 3.00 2.00 16.00
Day's sales in account Receivable
The amount of account receivable saving accounts was Rs. 22638 in the year 2004; it becomes Rs. 21986 in the year 2005 after a decrement of Rs.652. In the year 2005 the amount becomes Rs. 164233 after an increment of Rs.142247. In the next year 2007 it becomes Rs. 17415 after a decrement of Rs. 146818. In the
67
LAKSON TOBACCO COMPANY, LIMITED
last year 2008 the amount becomes Rs. 130108 after an increment of Rs.112693. It is maximum in the year 2008 and minimum in the year 2005 The amount of sales was Rs. 2084955 in the year 2004; it becomes Rs. 2400530 in the year 2005 after an increment of Rs.315575. In the year 2006 the amount becomes Rs. 2434513 after an increment of Rs.33983. In the next year 2007 it becomes Rs. 2619960 after an increment of Rs.185447. In the last year 2008 the amount becomes Rs. 3013752 after an increment of Rs.393792. It is maximum in the year 2008 and minimum in the year 2003. The days sales in account receivable is 4 in the year 2004; it becomes 3 after a decrement of 1 in the year 2005. In the year 2006 the day’s sales in account receivable becomes 25 after an increment of 22. The day’s sales in account receivable become 2 after a decrement of 23 in the year 2007. In the last year 2008 the day’s becomes 16 after an increment of 14.
68
LAKSON TOBACCO COMPANY, LIMITED Account receivable turnover Formula
netsales Account receivable turn over = averageaccountreceivables
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Net sales Average account receivable Account receivable turnover (Times) 2004 2084955 22638 1997.08 2005 2400530 21986 550.33 2006 2434513 164233 1223.99 2007 2619960 17415 1225.43 2008 3013752 130108 42.09
Account Receivable turnover
2500.00 2000.00 1500.00 1000.00 550.33 500.00 42.09 0.00 2004 2005 2006 Years 2007 2008 1997.08
Times
1223.99 1225.43
Account Receivable turnover
The amount of account receivable saving accounts was Rs. 22638 in the year 2004; it becomes Rs. 21986 in the year 2005 after a decrement of Rs.652. In the year 2005 the amount becomes Rs. 164233 after an increment of Rs.142247. In the next year 2007 it becomes Rs. 17415 after a decrement of Rs. 146818. In the last year 2008 the amount becomes Rs. 130108 after an increment of Rs.112693. It is maximum in the year 2008 and minimum in the year 2005
69
LAKSON TOBACCO COMPANY, LIMITED
The amount of sales was Rs. 2084955 in the year 2004; it becomes Rs. 2400530 in the year 2005 after an increment of Rs.315575. In the year 2006 the amount becomes Rs. 2434513 after an increment of Rs.33983. In the next year 2007 it becomes Rs. 2619960 after an increment of Rs.185447. In the last year 2008 the amount becomes Rs. 3013752 after an increment of Rs.393792. It is maximum in the year 2008 and minimum in the year 2003. The account receivable turnover is 1997.08 in the year 2004; it becomes 550.33 after a decrement of 1446.75 in the year 2005. In the year 2006 the account receivable turnover becomes 1223.99 after an increment of 673.66. The account receivable turnover becomes 1225.43 after an increment of 1.44 in the year 2007. In the last year 2008 the percentage becomes 42.09 after a decrement of 1183.34. The account receivable turnover is maximum in 2007 due to large amount of sales and very less amount of account receivable. The account receivable turnover is minimum in 2008.
70
LAKSON TOBACCO COMPANY, LIMITED
Day’s sales in inventory
Formula
endinginventiry (CGS / 365) Day’s sales in inventory =
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
2004 Ending inventory Cost of goods sold Days sales in inventory 16573 1369785 4.42 2005 27371 1544122 6.47 2006 44459 1488882 10.90 2007 48858 2242296 7.95 2008 69638 2834336 8.97
Day's sales in inventury
12.00 10.00 8.00 Days 6.00 4.00 2.00 0.00 2004 2005 2006 Years 2007 2008 4.42 6.47 Day's sales in inventury 10.90 7.95 8.97
The amount of cost of goods sold was Rs.1369785 in the year 2004; it becomes Rs. 1544122 in the year 2005 after an increment of Rs.174337. In the year 2006 the amount becomes Rs. 1488882 after an decrement of Rs.55240. In the next year 2007 it becomes Rs. 2242296 after an increment of Rs.753414. In the last year 2008 the amount becomes Rs. 2834336 after an increment of Rs.592040. It is
71
LAKSON TOBACCO COMPANY, LIMITED
maximum in the year 2008 and minimum in the year 2003. The day’s sales in inventory are 4. In the year 2004; it becomes 6 after an increment of 2 in the year 2005. In the year 2006 the day’s sales in inventory becomes 11 after an increment of 5. The day’s sales in inventory become 8 after a decrement of 3 in the year 2007. In the last year 2008 the percentage becomes 9 after an increment of 1.The day’s sales in inventory is maximum in 2004 and minimum in 2005.
72
LAKSON TOBACCO COMPANY, LIMITED
Inventory turnover
Formula
CGS Inventory turn over = averageinventory
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Inventory Cost of goods sold Inventory turnover 2004 79931 1369785 82.65 2005 88498 1544122 56.41 2006 145227 1488882 33.49 2007 117288 2242296 45.89 2008 207491 2834336 40.70
Inventury turnover
90.00 80.00 70.00 Times 60.00 50.00 40.00 30.00 20.00 10.00 0.00 2004 2005 2006 Years 2007 2008 82.65
56.41 45.89 33.49 40.70 Inventury turnover
The amount of cost of goods sold was Rs.1369785 in the year 2004; it becomes Rs. 1544122 in the year 2005 after an increment of Rs.174337. In the year 2006 the amount becomes Rs. 1488882 after an decrement of Rs.55240. In the next year 2007 it becomes Rs. 2242296 after an increment of Rs.753414. In the last year 2008 the amount becomes Rs. 2834336 after an increment of Rs.592040. It is
73
LAKSON TOBACCO COMPANY, LIMITED
maximum in the year 2008 and minimum in the year 2003. The amount of inventory was Rs. 79931 in year 2004 becomes Rs. 88498 in the year 2005 after an increment of Rs.8567. In the year 2006 the amount becomes Rs. 145227 after an increment of Rs.56729. In the next year 2007 it becomes Rs. 117288 after a decrement of Rs.27939. In the last year 2008 the amount becomes Rs. 207491 after abn increment of Rs.90203. It is maximum in the year 2008 and minimum in the year 2003. The inventory turnover is 82.65 in the year 2004; it becomes 56.41 after a decrement of 26.24 in the year 2005. In the year 2006 the inventory turnover becomes 33.49 after a decrement of 22.92. The inventory turnover becomes 45.89 after an increment of 12.4 in the year 2007. In the last year 2008 the percentage becomes 40.70 after an increment of 5.19. However, when we compare the five year inventory turnover rate of shezan as shown in the figure12, we see that the company has always been managing its inventory well. The reason for its bad management for the cost of work in process increased and so as the cost of finished goods, hence causing the cost of goods to rise in spite of fewer sales.
Profitability Analysis
74
LAKSON TOBACCO COMPANY, LIMITED
Net profit margin
Formula
netincome Net profit margin = netsales
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Net income Net sales Net profit margin 2004 425696 2084955 20.42% 2005 512300 2400530 21.34% 2006 537785 2434513 22.09% 2007 184158 2619960 7.03% 2008 10354 3013752 0.34%
Net profit margin
25.00% 20.42% 20.00% Percentage 15.00% Net prof it margin 10.00% 5.00% 0.34% 0.00% 2004 2005 2006 years 2007 2008 7.03% 21.34% 22.09%
The amount of sales was Rs. 2084955 in the year 2004; it becomes Rs. 2400530 in the year 2005 after an increment of Rs.315575. In the year 2006 the amount becomes Rs. 2434513 after an increment of Rs.33983. In the next year 2007 it becomes Rs. 2619960 after an increment of Rs.185447. In the last year 2008 the
75
LAKSON TOBACCO COMPANY, LIMITED
amount becomes Rs. 3013752 after an increment of Rs.393792. It is maximum in the year 2008 and minimum in the year 2003. The amount of net income was Rs. 425696 in the year 2004; it becomes Rs. 512300 in the year 2005 after an increment of Rs.86604. In the year 2006 the amount becomes Rs. 537785 after an increment of Rs.25485. In the next year 2007 it becomes Rs. 184158 after an decrement of Rs.353627. In the last year 2008 the amount becomes Rs. 10354 after an decrement of Rs.137804. It is maximum in the year 2008 and minimum in the year 2003. The net profit margin is 20.42% in the year 2004; it becomes 21.34% after an increment of 0.92% in the year 2005. In the year 2006 the net profit margin becomes 22.09% after an increment of 0.75%. The net profit margin becomes 7.03% after a decrement of 15.06% in the year 2007. In the last year 2008 the percentage becomes 0.34% after a decrement of 6.69%.The net profit margin is maximum in 2005 and minimum in 2003. However, in 2006 the situation was quite good since the company earned 93 % more than in 2007. The industrial median was also higher than that of the companies. The reason behind the reduction was the reduction in sales along with the relative increase in the cost of goods sold. The sales of the company reduced due to the production from wet process kiln due to stoppage of dry process kiln for routine maintenance. The figure shows the comparison of the net margin generated by cherat.
Total assets turnover
76
LAKSON TOBACCO COMPANY, LIMITED
Formula
netsales Total asset turn over = averagetotalassets
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Net sales Average total assets Total asset turnover 2004 2084955 2005 2400530 2006 2434513 2007 2619960 2008 3013752
2182072
0.96
3202800
0.75
3611889
0.67
3533350
0.74
4382273
0.69
Total assets turnover
1.20 1.00 0.80 Times 0.60 0.40 0.20 0.00 2004 2005 2006 Years 2007 2008 0.96 0.75 0.67 0.74 0.69 Total assets turnover
The amount of sales was Rs. 2084955 in the year 2004; it becomes Rs. 2400530 in the year 2005 after an increment of Rs.315575. In the year 2006 the amount becomes Rs. 2434513 after an increment of Rs.33983. In the next year 2007 it becomes Rs. 2619960 after an increment of Rs.185447. In the last year 2008 the amount becomes Rs. 3013752 after an increment of Rs.393792. It is maximum in
77
LAKSON TOBACCO COMPANY, LIMITED
the year 2008 and minimum in the year 2003. The amount of total assets accounts was Rs. 2182072 in the year 2004; it becomes Rs. 3202800 in the year 2005 after an increment of Rs.1020728. In the year 2006 the amount becomes Rs. 3611889 after an increment of Rs.409089. In the next year 2007 it becomes Rs. 3533350 after an decrement of Rs.78539. In the last year 2008 the amount becomes Rs. 4382273 after an increment of Rs.848923. It is maximum in the year 2008 and minimum in the year 2003. The total turn over of the company is lower than the industrial median as well. The industrial median also shows that the over all industry earned. The five year industrial analysis shows that cherat has been always performing well as compared to the beverage industries. The reason behind this decrease was that in spite of the fact that the total assets of the company increased.
78
LAKSON TOBACCO COMPANY, LIMITED
Return on assets
Formula
netincome Return on asset = averagetotalassets
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Net income Total assets return on assets 2004 425696 2005 512300 2006 537785 2007 184158 2008 10354
2182072
19.51%
3202800
16.00%
3611889
14.89%
3533350
5.21%
4382273
0.24%
Return on assets
25.00% 20.00% Percentage 15.00% Return on assets 10.00% 5.21% 5.00% 0.24% 0.00% 2004 2005 2006 Years 2007 2008 19.51% 16.00% 14.89%
The amount of net income was Rs. 425696 in the year 2004; it becomes Rs. 512300 in the year 2005 after an increment of Rs.86604. In the year 2006 the amount becomes Rs. 537785 after an increment of Rs.25485. In the next year 2007 it becomes Rs. 184158 after an decrement of Rs.353627. In the last year 2008 the amount becomes Rs. 10354 after an decrement of Rs.137804. It is maximum in the year 2008 and minimum in the year 2003.
79
LAKSON TOBACCO COMPANY, LIMITED
The amount of total assets accounts was Rs. 2182072 in the year 2004; it becomes Rs. 3202800 in the year 2005 after an increment of Rs.1020728. In the year 2006 the amount becomes Rs. 3611889 after an increment of Rs.409089. In the next year 2007 it becomes Rs. 3533350 after an decrement of Rs.78539. In the last year 2008 the amount becomes Rs. 4382273 after an increment of Rs.848923. It is maximum in the year 2008 and minimum in the year 2003. The return on assets is 19.51% in the year 2004; it becomes 16.00% after a decrement of 3.51% in the year 2005. In the year 2006 the return on assets becomes 14.89% after a decrement of 1.11%. The return on assets becomes 5.21% after a decrement of 9.68% in the year 2007. In the last year 2008 the percentage becomes 0.24% after a decrement of 4.97%. The ratio is also below than the industry median. The industrial median for the year 2007 is 2.9 %. If we compare the five years industrial median with the company, we see that the company has not been performing well for the last three years in a row.
80
LAKSON TOBACCO COMPANY, LIMITED
Operating income margin
Formula
operatingincome netsales Operating income margin =
Cherat Cement company limited
Ratio Analysis
Operating income Net sales operating income margin 2004 633537 2084955 30.39% 2005 718037 2400530 29.91% 2006 799111 2434513 32.82% 2007 322558 2619960 12.31% 2008 25078 3013752 0.83%
Operating income margin
35.00% 30.00% 25.00% Percentage 20.00% 15.00% 10.00% 5.00% 0.00% 2004 2005 2006 Years 2007 2008 0.83% 12.31% Operating income margin 30.39% 29.91% 32.82%
The amount of sales was Rs. 2084955 in the year 2004; it becomes Rs. 2400530 in the year 2005 after an increment of Rs.315575. In the year 2006 the amount becomes Rs. 2434513 after an increment of Rs.33983. In the next year 2007 it becomes Rs. 2619960 after an increment of Rs.185447. In the last year 2008 the amount becomes Rs. 3013752 after an increment of Rs.393792. It is maximum in
81
LAKSON TOBACCO COMPANY, LIMITED
the year 2008 and minimum in the year 2003.
The amount of operating profit was Rs. 633537 in the year 2004; it becomes Rs. 718037 in the year 2005 after an increment of Rs.84500. In the year 2006 the amount becomes Rs. 799111 after an increment of Rs.81074. In the next year 2007 it becomes Rs. 322558 after an decrement of Rs.476553. In the last year 2008 the amount becomes Rs. 25078 after an decrement of Rs.297480. It is maximum in the year 2008 and minimum in the year 2003. The operating income margin is 30.39% in the year 2004; it becomes 29.99% after an increment of 0.48% in the year 2005. In the year 2006 the operating income margin becomes 32.82% after an increment of 2.91%. The operating income margin becomes 12.31% after a decrement of 20.51% in the year 2007. In the last year 2008 the percentage becomes 0.83% after a decrement of 11.48%.
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LAKSON TOBACCO COMPANY, LIMITED
Operating assets turnover
Formula
netsales Operating asset turn over = averageoperatingassets
Cherat Cement company limited
Ratio Analysis
Net sales Operating assets operating asset turnover 2004 2084955 0 0.00 2005 2400530 1227052 1.96 2006 2434513 2198977 1.11 2007 2619960 2042162 1.28 2008 3013752 2155930 1.40
Operating assets turnover
2.50 2.00 1.50 1.11 1.00 0.50 0.00 0.00 2004 2005 2006 Years 2007 2008 1.96 1.40 Operating assets turnover
The amount of sales was Rs. 2084955 in the year 2004; it becomes Rs. 2400530 in the year 2005 after an increment of Rs.315575. In the year 2006 the amount becomes Rs. 2434513 after an increment of Rs.33983. In the next year 2007 it becomes Rs. 2619960 after an increment of Rs.185447. In the last year 2008 the
83
Times
1.28
LAKSON TOBACCO COMPANY, LIMITED
amount becomes Rs. 3013752 after an increment of Rs.393792. It is maximum in the year 2008 and minimum in the year 2003. The amount of operating assets was Rs. 0 in the year 2004; it becomes Rs. 1227052 in the year 2005 after an increment of Rs.1227052. In the year 2006 the amount becomes Rs. 2198977 after an increment of Rs.971925. In the next year 2007 it becomes Rs. 2042162 after an decrement of Rs.156815. In the last year 2008 the amount becomes Rs. 2155930 after an increment of Rs.113768. It is maximum in the year 2008 and minimum in the year 2003. The operating assets turnover is 0.00 in the year 2004; it becomes 1.96 after an incrementt of 1.96 in the year 2005. In the year 2006 the operating asset turnover becomes 1.11 after a decrement of 0.85. The operating asset turnover becomes 1.28 after an increment of 0.17 in the year 2007. In the last year 2008 the operating assets turnover becomes 1.40 after an increment of 0.12 .
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Return on operating assets
Formula
netincome Return on operating assets = averageoperatingassets
Cherat Cement company limited
Ratio Analysis
Net income Operating assets Return on operating assets 2004 425696 0 0.00% 2005 512300 1227052 41.75% 2006 537785 2198977 24.46% 2007 184158 2042162 9.02% 2008 10354 2155930 0.48%
Return on operating assets
45.00% 40.00% 35.00% Percentage 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2004 2005 2006 Years 2007 2008 0.00% 9.02% 0.48% 24.46% Return on operating assets 41.75%
The amount of net income was Rs. 425696 in the year 2004; it becomes Rs. 512300 in the year 2005 after an increment of Rs.86604. In the year 2006 the amount becomes Rs. 537785 after an increment of Rs.25485. In the next year 2007 it becomes Rs. 184158 after an decrement of Rs.353627. In the last year 2008 the amount becomes Rs. 10354 after an decrement of Rs.137804. It is
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LAKSON TOBACCO COMPANY, LIMITED
maximum in the year 2008 and minimum in the year 2003. The amount of operating assets was Rs. 0 in the year 2004; it becomes Rs. 1227052 in the year 2005 after an increment of Rs.1227052. In the year 2006 the amount becomes Rs. 2198977 after an increment of Rs.971925. In the next year 2007 it becomes Rs. 2042162 after an decrement of Rs.156815. In the last year 2008 the amount becomes Rs. 2155930 after an increment of Rs.113768. It is maximum in the year 2008 and minimum in the year 2003. The return on operating assets is 0.00% in the year 2004; it becomes 41.75% after a increment of 41.75% in the year 2005. In the year 2006 the return on operating assets becomes 24.46% after a decrement of 17.29%. The return on operating assets becomes 9.02% after a decrement of 15.44% in the year 2007. In the last year 2008 the percentage becomes 0.48% after a decrement of 8.54%.
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Sales to fixed assets
Formula
netsales Sales to fixed assets = averagetotalfixedassets
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Net sales Total fixed assets Sales to fixed assets 2004 2084955 1119332 1.86 2005 2400530 1773455 1.35 2006 2434513 2269848 1.07 2007 2619960 2196964 1.19 2008 3013752 2522040 1.19
Sales to fixed assets
2.00 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 1.86 1.35 1.07 1.19 1.19 Sales to fixed assets
Times
2004
2005
2006 Years
2007
2008
The amount of sales was Rs. 2084955 in the year 2004; it becomes Rs. 2400530 in the year 2005 after an increment of Rs.315575. In the year 2006 the amount becomes Rs. 2434513 after an increment of Rs.33983. In the next year 2007 it becomes Rs. 2619960 after an increment of Rs.185447. In the last year 2008 the amount becomes Rs. 3013752 after an increment of Rs.393792. It is maximum in the year 2008 and minimum in the year 2003.
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LAKSON TOBACCO COMPANY, LIMITED
The amount of tangible fixed assets was Rs. 1119332 in the year 2004; it becomes Rs. 1773455 in the year 2005 after an increment of Rs.654123. In the year 2006 the amount becomes Rs. 2269848 after an increment of Rs.496393. In the next year 2007 it becomes Rs. 2196964 after an decrement of Rs.72884. In the last year 2008 the amount becomes Rs. 2522040 after an increment of Rs.325076. It is maximum in the year 2008 and minimum in the year 2003.
The sales to fixed assets are 1.86 in the year 2004; it becomes 1.35 after a decrement of 0.51 in the year 2005. In the year 2006 the sales to fixed assets becomes 1.07 after a decrement of 0.28. The sales to fixed assets become 1.19 after an increment of 0.12 in the year 2007. In the last year 2008 the sales to fixed assets becomes 1.19 after an increment of 0.00.
Return on total equity
Formula netincome ? redeemablepreferredstockdividend averagetotalequity Return on total equity =
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Net income Preferred stock dividend Total equity Return on total equity (%) 2004 425696 0 1219649 34.90% 2005 512300 0 174247 1 29.40% 2006 537785 0 2112926 25.45% 2007 184158 0 2236592 8.23% 2008 10354 0 2158106 0.48%
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Reurn on total equity
40.00% 35.00% 30.00% Percentage 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2004 2005 2006 Years 2007 2008 8.23% 0.48% Reurn on total equity 34.90% 29.40% 25.45%
The amount of net income was Rs. 425696 in the year 2004; it becomes Rs. 512300 in the year 2005 after an increment of Rs.86604. In the year 2006 the amount becomes Rs. 537785 after an increment of Rs.25485. In the next year 2007 it becomes Rs. 184158 after an decrement of Rs.353627. In the last year 2008 the amount becomes Rs. 10354 after an decrement of Rs.137804. It is maximum in the year 2008 and minimum in the year 2003.
The return on total equity is 34.90% in the year 2004; it becomes 29.40% after a decrement of 5.5% in the year 2005. In the year 2006 the return on total equity becomes 25.45% after a decrement of 3.95%. The return on total equity becomes 8.23% after a decrement of 17.22% in the year 2007. In the last year 2008 the percentage becomes 0.48% after a decrement of 7.75%. The return on equity for the year 2007 shows that the investors earned 22.49% on their investments where as for the year 2008 the investors earned 21.88%. The reason behind the low returns was the unfortunate break down, which caused the
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LAKSON TOBACCO COMPANY, LIMITED
decrease in sales and the increase in the cost. The cost of goods sold also increased due to trial run operation, the management is not able to generate enough revenues against the investments made by the share holders.
Gross profit margin Formula grossprofit Gross profit margin = netsales X 100
LAKSON TOBACCO COMPANY LTD
Ratio Analysis
Gross profit Net sales Gross profit margin 2004 715170 2084955 34.30% 2005 856408 2400530 35.68% 2006 945631 2434513 38.84% 2007 377664 2619960 14.41% 2008 179416 3013752 5.95%
Gross profit margin
45.00% 40.00% 35.00% Percentage 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2004 2005 2006 Years 2007 2008 14.41% 5.95% Gross profit margin 34.30% 35.68% 38.84%
The amount of gross profit was Rs. 715170 in the year 2004; it becomes Rs. 856408 in the year 2005 after an increment of Rs.141238. In the year 2006 the
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amount becomes Rs. 945631 after an increment of Rs.89223. In the next year 2007 it becomes Rs. 377664 after decrement of Rs.567967. In the last year 2008 the amount becomes Rs. 179416 after decrement of Rs.198248. It is maximum in the year 2003 and minimum in the year 2005. The amount of sales was Rs. 2084955 in the year 2004; it becomes Rs. 2400530 in the year 2005 after an increment of Rs.315575. In the year 2006 the amount becomes Rs. 2434513 after an increment of Rs.33983. In the next year 2007 it becomes Rs. 2619960 after an increment of Rs.185447. In the last year 2008 the amount becomes Rs. 3013752 after an increment of Rs.393792. It is maximum in the year 2008 and minimum in the year 2003. The gross profit margin is 34.30% in the year 2004; it becomes 35.68% after an increment of 1.38% in the year 2005. In the year 2006 the gross profit margin becomes 38.84% after an increment of 3.16%. The gross profit margin becomes 14.41% after a decrement of 24.43% in the year 2007. In the last year 2008 the percentage becomes 5.95% after a decrement of 8.46%. Analysis for the investor Earning per share Formula Earning Per Common Share= netincome ? preferreddividend weightaveragenoofcommonshareouts tan ding
Cherat Cement company limited
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LAKSON TOBACCO COMPANY, LIMITED Ratio Analysis
Net income
Number of common share outstanding Earning per common share 2004 425696000 53192352 8.00 2005 512300000 33490440 15.30 2006 537785000 53113050 10.12 2007 184158000 95580008 1.93 2008 10354000 95580008 0.11
Earning per comman share
18.00 16.00 14.00 12.00 Rupees 10.00 8.00 6.00 4.00 2.00 0.00 2004 2005 2006 Years 2007 2008 1.93 0.11 8.00 10.12 Earning per comman share 15.30
The amount of net income was Rs. 425696 in the year 2004; it becomes Rs. 512300 in the year 2005 after an increment of Rs.86604. In the year 2006 the amount becomes Rs. 537785 after an increment of Rs.25485. In the next year 2007 it becomes Rs. 184158 after an decrement of Rs.353627. In the last year 2008 the amount becomes Rs. 10354 after an decrement of Rs.137804. It is maximum in the year 2008 and minimum in the year 2003. The earning per share in the year 2008 was 26.86. This showed that on each share of common stock outstanding. The reason behind the low earning is the lowering of net income and increase in the financing costs and slight increase in the number
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of shares by 1 % as well. The five years comparison of cherat with the industry shows that the company’s earning per share has always been lower than the industry’s average earning per share.
Price earning ratio Formula Market Pr icePerCommonShare DilutedEPS Price/ earning ratio =
Cherat Cement company limited
Ratio Analysis
Market price per common share Earning per share Price/earning ratio 2004 10 8.00 1.25 2005 10 15.30 0.65 2006 10 10.12 0.99 2007 10 1.93 5.19 2008 10 0.11 92.31
Price/earning ratio
100.00 90.00 80.00 70.00 60.00 Times 50.00 40.00 30.00 20.00 10.00 0.00 2004 2005 2006 Ye ar s 2007 2008 1.25 0.65 0.99 Pric e/earning ratio 92.31
5.19
The amount of earning per share was Rs. 8.00 in the year 2004; it becomes Rs. 15.30 in the year 2005 after an increment of Rs.7.3. In the year 2006 the amount
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becomes Rs. 10.12 after an decrement of Rs.5.18. In the next year 2007 it becomes Rs. 1.93 after an decrement of Rs.8.19. In the last year 2008 the amount becomes Rs. 0.11 after an decrement of Rs.1.82. It is maximum in the year 2008 and minimum in the year 2003. The price earning ratio is 1.25 in the year 2004; it becomes 0.65 after an increment of 0.6 in the year 2005. In the year 2006 the price earning ratio becomes 0.99 after a increment of 0.34. The price earning ratio becomes 5.19 after a decrement of 4.2 in the year 2007. In the last year 2008 the price earning ratio becomes 92.31 after an incremnet of 87.12.
Percentage of retained earning Formula NetIncome ? AllDividend NetIncome Percentage of retained earning =
Cherat Cement company limited
Ratio Analysis
Net income Dividend percentage of retained earning 2004 425696 221486 47.97% 2005 512300 10856 97.88% 2006 537785 71270 86.75% 2007 184158 106392 42.23% 2008 10354 509115 -4817.09%
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Percentage of retained earning
1000.00% 0.00% -1000.00% Percentage -2000.00% Percentage of retained earning -3000.00% -4000.00% -5000.00% -6000.00% Years -4817.09% 2004 2005 2006 2007 2008 47.97% 97.88% 86.75% 42.23%
The amount of net income was Rs. 425696 in the year 2004; it becomes Rs. 512300 in the year 2005 after an increment of Rs.86604. In the year 2006 the amount becomes Rs. 537785 after an increment of Rs.25485. In the next year 2007 it becomes Rs. 184158 after a decrement of Rs.353627. In the last year 2008 the amount becomes Rs. 10354 after a decrement of Rs.137804. It is maximum in the year 2008 and minimum in the year 2003.
The amount of dividend was Rs. 221486 in the year 2004; it becomes Rs. 10856 in the year 2005 after a decrement of Rs.210630. In the year 2006 the amount becomes Rs. 71270 after a increment of Rs.60414. In the next year 2007 it becomes Rs. 106392 after an increment of Rs.35122. In the last year 2008 the amount becomes Rs. 509115 after a increment of Rs.402723. It is maximum in the year 2004 and minimum in the year 2005. The percentage of retained earning is 47.97% in the year 2004; it becomes 97.88% after an increment of 49.91% in the year 2005. In the year 2006 the
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LAKSON TOBACCO COMPANY, LIMITED
percentage of retained earning becomes 86.75% after a decrement of 11.13%. The percentage of retained earning becomes 42.23% after a decrement of 44.52% in the year 2007. In the last year 2008 the percentage becomes 4817.09% after an increment of 4774.86%.
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TREND ANALYSIS
01000900000378000 00002001c00000000 00040000000301080 0050000000b020000 0000050000000c02b c048308040000002e 0118001c000000fb0 21000070000000000
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INTERPRETATION OF TREND ANALYSIS OF BALANCE SHEET
BABA FARID SUGAR MILLS LTD Balance Sheet Trend Analysis 2004 Cash and bank balance Deposit accounts Current accounts Cheques Cash 100.00% 100.00 100.00 00.00 100.00 2005 506.60% 100.00 509.13 00.00 134.25 2006 791.28% 97.35 795.02 00.00 265.68 2007 715.35% 99.53 718.89 00.00 207.77 2008 294.58% 102.22 291.52 00.00 924.34
Trend Analysis
1000.00% 800.00% 600.00% 400.00% 200.00% 0.00% Year 2008 Year 2007 Year 2006 years Year 2005 Year 2004
Cash in hand Balance in Curent account Balance in deposit account Total cash & bank balance
NOTE: All amounts mentioned in Balance Sheet are Rs. (000).
%age
There is an increment in cash and bank balance from 2004 to 2008. Cash and bank balance in 2004 is Rs.9, 984,600.Cash and bank balance in 2004 is Rs.9, 984,600which by the increment of amount Rs.772749 becomes Rs.50, 582,134 in 2005. The amount in 2004 becomes Rs.1687656 by the decrement of Rs.129121 in 2005. The increment of amount Rs.103495 in 2005 it becomes Rs.79, 005,666 in 2006 The amount of Rs. 71,425,078 in 2007 by the increment of Rs.1823905 becomes Rs.29, 412,826 in 2008. There is an increment in cash and bank balance from 2004 to 2008.Cash and
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LAKSON TOBACCO COMPANY, LIMITED
bank balance in 2004 is 100%.Cash and bank balance in 2004 is 100% which by the increment of 74.02% becomes 174.02% in 2004. The amount in 2005 becomes 506.60% by the decrement of 10.37% in 2006. The increment of 791.28% in 2006 it becomes 715.35% in 2007.The amount of 715.35% in 2007 by the increment of 174.7% becomes 294.58% in 2008 Major effect on this increment is due to deposits accounts which has only decrement in 2005 and has continuous increment in this account from year 2004 to 2008 and much in 2007 and 2008. Current account has minor effect on cash and bank balance is go through ups and down from 2004 to 2008.
BABA FARID SUGAR MILLS LTD Balance Sheet Trend Analysis 2004 2005 2006 100.00% 319.77% 130.32% 100.00 125.56 155.24 00.00 00.00 00.00 100.00 -3226.59 -2805.26 2007 58.06% 181.10 00.00 -813.88 2008 -1376.18% 167.36 00.00 447.32
Deferred Taxation Unabsorbed tax depreciation Fixed Assets On Assets Under Finance Lease
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LAKSON TOBACCO COMPANY, LIMITED
Accelerated Tax Depreciation 100.00 661.01 665.42 715.06 29.11
Trend Analysis
1000.00% 0.00% %age -1000.00% -2000.00% -3000.00% -4000.00% years Year 2008 Year 2007 Year 2006 Year 2005 Year 2004
Unabsorbed tax depreciation Fixed assets On assets under finance lease Accelerated tax depreciation Total Deferred Taxation
There is an increment in Deferred Taxation from 2004to 2008. Deferred Taxation in 2005 is Rs.-50,726,956. Deferred Taxation in 2004 are Rs.-15,863,472 which by decrement of amount Rs.1745 becomes 1 Rs.64448 in 2004.The amount in 2005 becomes Rs. .-50,726,956 by the increment of Rs.-20,673,234 in 2006.The increment of amount Rs.95816 in 2006 it becomes Rs.-9,210,305 in 2007.The amount of Rs.287159 in 2007 by the increment of Rs.56411 becomes -218,309,200 in 2008.
Deferred Taxation in 2004 are 100%. Deferred Taxation in 2004 is 100% which by decrement of 1.05% becomes 319.77% in 2005.The amount in 2005 becomes 319.77% by the increment of 16.18% in 2005.The increment of amount 319.77% in 2005 it becomes 172.79% in 2006. The amount of 58.06% in 2007 by the increment of 33.94% becomes -1376.18% in 2008. Major effect on this increment is due to Deferred Taxation which have continuous increment in this account from year 2004 to 2008 and much in 2006 and 2007. Deferred Taxation and balance with statutory authorities has reverse effect on
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cash and bank balance is go through ups and down from 2004to 2008.
BABA FARID SUGAR MILLS LTD Balance Sheet Trend Analysis 2004 2005 2006 100.00% 134.32% 129.10% 100.00 131.40 174.43 100.00 134.31 128.84 100.00 236.36 112.67 2007 220.13% 260.25 219.70 909.99 2008 3.53% 212.53 2.15 568.76
Stock In Trade Work in Process Sugar Finished Goods Sugar Molasses:
Trend Analysis
1000.00% %age 500.00% 0.00% Year 2008 Year 2007 Year 2006 Years Year 2005 Year 2004 Work in Process sugar Finished Goods sugar Molasses Total stork in trade
There is an increment in Trade debts from 2004 to 2008 except in 2006. Stock In Trade in 2004 are Rs.643473. Stock In Trade in 2004 are Rs.643473 which by the increment of amount Rs.171926 becomes Rs.815399 in 2005.The amount in 2005 becomes Rs.647009 by the decrement of Rs.168390 in 2006.The increment of amount Rs.83667 in 2006 it becomes Rs.730676 in 2007.The amount of Rs.730676 in 2007 by the increment of Rs.318788 becomes Rs.1049464 in 2008. Stock In Trade in 2004 is 100%. Stock In Trade in 2004 are 100% which by the increment of amount 26.72% becomes 134.32% in 2005.The amount in 2005 becomes 100.55% by the decrement of 129.10% in 2006.The increment of amount 13% in 2006 it
becomes 220.13% in 2007.The amount of 220.13% in 2007 by the increment of
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LAKSON TOBACCO COMPANY, LIMITED
49.54% becomes 3.53% in 2008. Major effect on this increment is due to Work in Process which has only decrement in 2005 and has continuous increment in this account from year 2004 to 2008 and much in 2008.Work in Process has positive effect on Stock In Trade which goes down from 2004 to 2008.
BABA FARID SUGAR MILLS LTD Balance Sheet Trend Analysis 2004 Stores Spare Parts &Tools Stores Spare Parts Loose Tools 100.00% 100.00 100.00 100.00 2005 98.83% 90.32 105.79 80.50 2006 111.99% 118.12 107.21 103.85 2007 112.80% 110.55 114.72 104.68 2008 133.62% 152.62 118.60 119.94
Trend Analysis
%age 200.00% 150.00% 100.00% 50.00% 0.00% Year Year Year Year Year 2008 2007 2006 2005 2004 Years
Stores Spare Parts LooseTools Total Stores Spare Parts AND Tools
There is an increment in Stores Spare Parts &Tools from 2004 to 2008 except decrement in 2006. Stores Spare Parts &Tools in 2004 are Rs.316575.Other receivables in 2004 are Rs.316575 which by the increment of amount Rs.76730 becomes Rs.393305 in 2005. The amount in 2005 becomes Rs.286793 by the decrement of Rs.106512 in 2006. The increment of amount Rs.263140 in 2006 it becomes Rs.549933 in 2007. The amount of Rs.549933 in 2007 by the increment of Rs.108556 becomes Rs.658489 in 2008. Stores Spare Parts &Tools in 2004 are 100%.
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LAKSON TOBACCO COMPANY, LIMITED
Stores Spare Parts &Tools in 2004 are 100% which by the increment of amount 24.24% becomes 98.83% in 2005.The amount in 2005 becomes 90.59% by the Decrement of 111.99% in 2006.The increment of amount 83.12% in 2006 it becomes 112.80% in 2007.The amount of 112.80% in 2007 by the increment of 34.29% becomes 133.62% in 2008. Major effect on this increment is due to Stores which has only decrement in 2006 and has continuous increment in this account from year 2004 to 2008. Spare Parts has negative effect on other receivables as it goes up from 2004 to 2006 and then positive effect as it goes down from 2006 to 2008.
INTERPRETATION OF TREND ANALYSIS OF INCOME STATMENT
BABA FARID SUGAR MILLS LTD
Income Statement Trend Analysis 2004 Net Sales 100.00% 2005 157.60% 2006 212.96% 2007 151.81% 2008 295.88%
Trend Analysis
400.00% 300.00% 200.00% 100.00% 0.00% Year 2008 Year 2007 Year 2006 Years Year 2005 Year 2004 %age
Net Sales
NOTE: All amounts mentioned in Income Statement are Rs. (000) except Earning per Share that are only in rupees.
There is continuous boom in net sales from year 2004 to 2008 The net sales in 2004 is Rs.387,820,985 which declines to Rs611,195,873 in 2005
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LAKSON TOBACCO COMPANY, LIMITED
due to decrement of amount Rs.487815.The amount goes up to Rs.18476457 with increment of amount Rs. 825,903,521 in 2006.In 2007 there is again boom in amount and it becomes Rs.588,743,157 with increment of amount the increment of amount Rs.3455617 it becomes Rs.1097661.With
Rs.1,147,880,942 in 2008. The net sales in 2004 are 100.00 which decline to 157.60 in 2005 due to decrement of amount 2.69. The amount goes up to 212.96 with increment of amount 4.62 in 2006.
In2007 there is again boom in amount and it becomes 151.81 with increment of amount 6.06.With the increment of amount 295.88 it becomes 127.04 in 2008. So the company has made make progress from 2004 to 2008.
BABA FARID SUGAR MILLS LTD
Income Statement Trend Analysis 2004 Cost of sold 100.00% 2005 135.38 2006 198.96 2007 160.85 2008 299.46
Trend Analysis
400.00% 300.00% 200.00% 100.00% 0.00% Year 2008 Year 2007 Year 2006 Years Year 2005 Year 2004 %age
Cost of Sales
There is continuous increment in Cost of sold from year 2004 to 2008 The Cost of goods sold in 2004 is Rs.364,299,923 which declines to Rs.493,176,914 in 2005 due to decrement of amount Rs.579157.The amount goes up to Rs.15236959 with increment of amount Rs.724,800,229 in 2006.In 2007
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LAKSON TOBACCO COMPANY, LIMITED
there is again boom in amount and it becomes Rs.585,960,109 with increment of amount Rs.255689.With the Rs.1,090,939,576 in 2008. The Cost of goods sold in 2004 is 100.00 which declines to 135.38 in 2005 due to decrement of amount 3.75. The amount goes up to 98.54 with increment of amount 198.96 in 2006.In 2007 there is again boom in amount and it becomes 100.19 with increment of amount 160.85.With the increment of amount 137.61 it becomes 299.46 in 2008. The cost of goods sold increase due to increase in operation of company. increment of amount Rs.2730967 it becomes
BABA FARID SUGAR MILLS LTD
Gross Profit Income Statement Trend Analysis 2004 2005 2006 100.00% 501.76 429.84 2007 11.83 2008 242.09
Trend Analysis
600.00% %age 400.00% 200.00% 0.00% Year 2008 Year 2007 Year 2006 Year 2005 Year 2004 Years Gross Profit
There is continuous boom in Gross Profit from year 2004 to 2008. The Gross Profit in 2004 is Rs.23,521,063 which increases to Rs.118,018,959 in 2005 due to increment of amount Rs.91342.The amount goes up to Rs.3239498 with increment of amount Rs.101,103,292 in 2006.In 2007 there is again boom in amount and it becomes Rs.4081470 with increment of amount Rs.2,783,048 With the increment
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LAKSON TOBACCO COMPANY, LIMITED
of amount Rs.724650 it becomes Rs.56,941,366 in 2008. The Gross Profit in 2004 is 100.00 which increases to 501.76 in 2005 due to increment of amount 3.43.The amount goes up to 121.59 with increment of amount 429.84 in 2006.In 2007 there is again boom in amount and it becomes 153.19 with increment of amount 11.83.With the increment of amount 27.20 it becomes 242.09 in 2008. So the company has made make progress from 2004 to 2008.
BABA FARID SUGAR MILLS LTD
Income Statement Trend Analysis 2004 Operating Profit 100.00% 2005 -737.81% 2006 -531.69% 2007 394.29% 2008 -100.75
Trend Analysis
500.00% %age 0.00% -500.00% -1000.00% Years Year 2008 Year 2007 Year 2006 Year 2005 Year 2004 Operating Profit /Loss
There is continuous boom in Operating Profit from year 2004 to 2008. The Operating Profit in 2004 is Rs.-10,892,775 which increases to Rs.80, 367,809 in 2005 due to increment of amount Rs.259107.The amount goes up to Rs.1730342 with increment of amount Rs, 915,946 in 2006.In 2007 there is again boom in amount and it becomes Rs.2479018 with increment of amount Rs. -42,949,590With the increment of amount Rs.492352 it becomes Rs10, 974,503
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LAKSON TOBACCO COMPANY, LIMITED
in 2008. The Operating Profit in 2004 is 100.00 which increases to -737.81in 2005 due to increment of amount 23.82.The amount goes up to 159.09 with increment of amount -531.69 in 2006.In 2007 there is again boom in amount and it becomes 227.92 with increment of amount 394.29.With the increment of amount -100.75 it becomes 273.18 in 2008. So from 2004 to 2008 the company has made make progress.
BABA FARID SUGAR MILLS LTD
Income Statement Trend Analysis 2004 2005 2006 Loss: Per Share Basic & Basic 100.00% -25.05% 50.32% Diluted 2007 351.40% 2008 9.07%
Trend Analysis
400.00% %age 200.00% 0.00% -200.00% Year 2008 Year 2007 Year Year 2006 2005 Years Year 2004 Loss
er Share Basic & DilutedThere are prominent ups and downs in Per Share Basic & Basic Diluted from year 2004 to 2008. The Per Share Basic & Basic Diluted in 2004 is Rs.-4.63 which booms up to Rs.1.16 in 2005 due to increment of amount. The amount goes down with decrement of amount Rs.-2.33 in 2006.In 2007 there is decline in amount and it becomes Rs.-16.27.With the increment of amount it becomes Rs.-0.42 in 2008. Per Share Basic & Basic Diluted in 2004 is 100 which booms up to -25.05 in
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LAKSON TOBACCO COMPANY, LIMITED
2005 due to increment of amount 903.32.The amount goes down to 88.10 with decrement of amount 50.32 in 2006.In 2007 there is decline in amount and it becomes 69.00 with Decrement of amount 351.40.With the increment of amount 9.07 it becomes 88.61 in 2008.
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LAKSON TOBACCO COMPANY, LIMITED
VERTICAL ANALYSIS
01000900000378000 00002001c00000000 00040000000301080 0050000000b020000 0000050000000c02b c048308040000002e 0118001c000000fb0 21000070000000000
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INTERPRETATION OF VERTICAL ANALYSIS OF BALANCE SHEET
BABA FARID SUGAR MILLS LTD Balance Sheet Vertical Analysis 2004 Cash and bank balance Deposit accounts Current accounts Cheques Cash 2.57% 0.00 2.56 0.00 0.01 2005 8.28% 00.00 8.26 0.00 0.01 2006 9.57% 00.00 9.55 0.00 0.02 2007 12.13% 00.00 12.11 0.00 0.02 2008 44.96% 8.71 0.00 0.00 0.00
Vertical Analysis
1000.00% 800.00% 600.00% 400.00% 200.00% 0.00% Year 2008 Year 2007 Year 2006 years Year 2005 Year 2004
Cash in hand Balance in Curent account Balance in deposit account Total cash & bank balance
%age
There is an increment in cash and bank balance from 2004 to 2008. Cash and bank balance in 2004 is Rs.1044028.Cash and bank balance in 2004 is Rs.1044028 which by the increment of amount Rs.772749 becomes Rs.1816777 in 2005. The amount in 2005 becomes Rs.1687656 by the decrement of Rs.129121 in 2006. The increment of amount Rs.103495 in 2006 it becomes Rs.1791151 in 2007.
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The amount of Rs.791151 in 2007 by the increment of Rs.1823905 becomes Rs.3615056 in 2008. Cash and bank balance in 2004 is2.57which by the increment of 5.66 becomes 8.28 in 2005.The amount in 2005 becomes 9.57 by the decrement of 12.13 in 2006.The decrement of 0.87 in 2006 it becomes 10.58 in 2007.The amount of 10.58 in 2006 by the increment of 8.64 becomes 44.96 in 2007. Significant effect on this increment is due to current accounts which has decrement in 2005 and 2007 has increment in this account from year 2004, 2006 and 2008. Deposit accounts has minor effect on cash and bank balance is go through ups and down from 2004 to 2008.
BABA FARID SUGAR MILLS LTD Balance Sheet Vertical Analysis 2004 2005 2006 2007 2008
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Deferred Taxation Unabsorbed tax depreciation Fixed Assets On Assets Under Finance Lease Accelerated Tax Depreciation -4.09 -5.57 0.00 0.19 1.29 8.30 4.44 0.00 3.86 5.43 2.50 4.06 0.00 2.48 4.04 1.56 6.65 0.00 1.01 6.09 0.03 0.00 0.00 2.09 2.03
Vertical Analysis
1000.00% 0.00% %age -1000.00% -2000.00% -3000.00% -4000.00% years Year Year Year Year Year 2008 2007 2006 2005 2004 Unabsorbed tax depreciation Fixed assets On assets under finance lease Accelerated tax depreciation Total Deferred Taxation
There is an increment in Deferred Taxation from 2004 to 2008. Deferred Taxation in 2004 are Rs.166193. Deferred Taxation in 2004 are Rs.166193 which by decrement of amount Rs.1745 becomes Rs.64448 in 2005.The amount in 2005 becomes Rs.191343 by the increment of Rs.26895 in 2006.The increment of amount Rs.95816 in 2006 it becomes Rs.287159 in 2007.The amount of Rs.287159 in 2007 by the increment of Rs.56411 becomes 343570 in 2008. Deferred Taxation in 2004 are-4.09. Deferred Taxation in 2004 is -4.09which by no change remain -4.09in 2004.The amount in 2005 becomes 8.30 by the increment of 0.12 in 2006.The increment of amount 2.50 in 2006 it becomes 1.56 in 2007. The amount of 1.70 in 2007 by the increment of 0.13 becomes 0.03 in 2008. Most effect on this increment is due to short term prepayments which have continuous increment in this account from year 2003 to 2007 and much in 2006 and 2007. Trade deposits and balance with statutory authorities has reverse effect on
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cash and bank balance is go through ups and down from 2003 to 2007.
BABA FARID SUGAR MILLS LTD Balance Sheet Vertical Analysis 2004 2005 2006 47.62 40.59 28.87 0.28 0.23 0.23 47.33 40.33 28.63 0.01 0.02 0.1 2007 69.05 0.48 68.49 0.08 2008 0.19 0.10 0.06 0.19
Stock In Trade Work in Process Sugar Finished Goods Sugar Molasses:
Vertical Analysis
1000.00% %age 500.00% 0.00% Year 2008 Year 2007 Year 2006 Years Year 2005 Year 2004 Work in Process sugar Finished Goods sugar Molasses Total stork in trade
There is an increment in Stock In Trade from 2004 to 2008 except in 2006.
Stock In Trade in 2004 are Rs.643473.Trade debts in 2004 are Rs.643473 which by the increment of amount Rs.171926 becomes Rs.815399 in 2005.The amount in 2005 becomes Rs.647009 by the decrement of Rs.168390 in 2006.The increment of amount Rs.83667 in 2006 it becomes Rs.730676 in 2007.The amount of Rs.730676 in 2007 by the increment of Rs.318788 becomes Rs.1049464 in 2008
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Stock In Trade in 2004 are 47.62 which by the increment of amount 1.30
becomes 40.59 in 2005.The amount in 2005 becomes 40.59 by the decrement of 28.87 in 2006.The decrement of amount 0.07 in 2006 it becomes 69.05 in 2007.The amount of 4.32 in 2007 by the increment of 1.26 becomes 0.19 in 2008. Major effect on this increment is due to Work in Process Sugar which has only decrement in 2005 and 2006 has increment in this account from year 2004 to
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2005 and 2007.Finished Goods Sugar, has positive effect on Stock In Trade which goes down from 2004 to 2008.
BABA FARID SUGAR MILLS LTD Balance Sheet Vertical Analysis 2004 Stores Spare Parts &Tools Stores Spare Parts Loose Tools 9.20 4.05 5.07 0.08 2005 5.57 2.32 3.40 0.04 2006 4.84 2.25 2.55 0.04 2007 6.83 2.95 3.83 0.05 2008 0.03 0.00 0.20 0.34
Vertical Analysis
200.00% 150.00% 100.00% 50.00% 0.00% Year 2008 Year 2007 Year 2006 Years Year 2005 Year 2004
Stores Spare Parts LooseTools Total Stores Spare Parts AND Tools
There is an increment in Stores Spare Parts &Tools from 2004 to 2008 except decrement in 2006. Stores Spare Parts &Tools in 2004 are Rs.316575.Other receivables in 2004 are Rs.316575 which by the increment of amount Rs.76730 becomes Rs.393305 in 2005. The amount in 2005 becomes Rs.286793 by the decrement of Rs.106512 in 2006. The increment of amount Rs.263140 in 2006 it becomes Rs.549933 in 2007. The amount of Rs.549933 in 2007 by the increment of Rs.108556 becomes Rs.658489 in 2008. Stores Spare Parts &Tools in 2004 are 9.20 which by the increment of amount 5.57 becomes 2.82 in 2005.The amount in 2005 becomes 1.95 by the decrement of 4.84 in 2006.The increment of amount 1.30 in 2006 it becomes 6.83 in 2007.The amount of 3.25 in 2007 by the increment of 0.25 becomes 0.03 in 2008.
%age
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Most effect on this increment is due to Stores which has only decrement in 2005 and has continuous increment in this account from year 2004 to 2008. Spare Parts has negative effect on other receivables as it goes up from 2004 to 2006 and then positive effect as it goes down from 2006 to 2008.
BABA FARID SUGAR MILLS LTD Balance Sheet Vertical Analysis 2004 DepositsPrepaymentReceivable Short Term Deposit Prepaid Expanse Other Receivable 0.26 0.00 0.26 0.00 2005 0.12 0.00 0.11 0.02
Short term Deposits
2006 1.07 0.95 0.11 0.01
2007 1.87 1.69 0.16 0.02
2008 11.36 2.52 0.00 2.56
Vertical Analysis 2000.00% 1500.00% 1000.00% 500.00% 0.00%
00 8 ar 20 07 Ye ar 20 06 Ye ar 20 05 Ye ar 20 04 ar 2
%age
Prepaid Expences
Other receiveables
Ye
Ye
Years
Total Deposits Prepayments and other receviable
There are ups and down in Deposits Prepayment Receivable from 2004 to 2008. Deposits Prepayment Receivable in 2004 is Rs.2046297 which by the increment of amount Rs.866580 becomes Rs.2912877 in 2005.The amount in 2005 becomes Rs.2511481 by the decrement of Rs.401396 in 2006.The decrement of amount Rs.163691 in 2006 it becomes Rs.2347790 in 2007.The amount of Rs.2347790 in 2007 by the decrement of Rs.36454 becomes Rs.2311336 in 2008. Deposits Prepayment Receivable in 2004 is 0.26 which by the increment of amount 0.12 becomes 20.91 in 2005.The amount in 2005 becomes 17.04 by the decrement of 1.07 in 2006.The decrement of amount 3.17 in 2006 it becomes 1.87 in 2007.The amount of 13.87 in 2007 by the decrement of 1.58 becomes
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11.36 in 2008. Work-in-process has increasing effect on Deposits Prepayment Receivable 2004 to 2008.
BABA FARID SUGAR MILLS LTD Balance Sheet Vertical Analysis 2004 Subordinated Loan Associated Undertaking Landform Director 34.8 4 15.4 7 19.3 6 2005 22.10 9.82 12.29 2006 16.36 0.00 16.36 2007 22.95 0.00 22.95 2008 0.28 0.00 21.76
Vertical Analysis
200.00% 150.00% 100.00% 50.00% 0.00% Year 2008 Year 2007 Year 2006 Years Year 2005 Year 2004 %age Associated Undertaking Loan From Director Total Sub Ordinated Loan
There is an increment in Subordinated Loan from 2004 to 2007 except decrement in 2008. Subordinated Loan in 2004 is Rs.652196 which by the increment of amount Rs.11056 becomes Rs.663252 in 2005.The amount in 2005 becomes Rs.689319 by the increment of Rs.26067 in 2006.The increment of amount Rs.16320 in 2006 it becomes Rs.705639 in 2007.The amount of Rs.705639 in 2007 by the decrement of Rs.100159 becomes Rs.605480 in 2008. Subordinated Loan in 2004 is 34.84 which by the increment of amount 0.15 becomes 22.10 in 2005.The amount in 2005 becomes 4.68 by the decrement of 16.36 in 2006.The decrement of amount 0.51 in 2005 it becomes 22.95 in 2007.The amount of 4.17 in 2006 by the decrement of 0.95 becomes 0.28 in 2008.
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INTERPRETATION OF VERTICAL ANALYSIS OF INCOME STATMENT
BABA FARID SUGAR MILLS LTD
Income Statement Vertical Analysis 2004 Net Sales 100.00% 2005 100.00% 2006 100.00% 2007 100.00% 2008 100.00%
Vertical Analysis
400.00% 300.00% 200.00% 100.00% 0.00% Year 2008 Year 2007 Year 2006 Years Year 2005 Year 2004 %age
Net Sales
There is continuous boom in net sales from year 2004 to 2008 The net sales in 2004 is Rs.387,820,985 which declines to Rs611,195,873 in 2005 due to decrement of amount Rs.487815.The amount goes up to Rs.18476457 with increment of amount Rs. 825,903,521 in 2006.In 2007 there is again boom in amount and it becomes Rs.588,743,157 with increment of amount the increment of amount Rs.3455617 it becomes Rs.1097661.With
Rs.1,147,880,942 in 2008.
BABA FARID SUGAR MILLS LTD
Cost of sold Income Statement Vertical Analysis 2004 2005 2006 93.94 80.69 87.76 2007 99.53 2008 0.00
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Vertical Analysis
400.00% 300.00% 200.00% 100.00% 0.00% Year 2008 Year 2007 Year 2006 Years Year 2005 Year 2004 %age
Cost of Sales
There is continuous increment in Cost of sold from year 2004 to 2008 The Cost of goods sold in 2004 is Rs.364,299,923 which declines to Rs.493,176,914 in 2005 due to decrement of amount Rs.579157.The amount goes up to Rs.15236959 with increment of amount Rs.724,800,229 in 2006.In 2007 there is again boom in amount and it becomes Rs.585,960,109 with increment of amount Rs.255689.With the Rs.1,090,939,576 in 2008. The cost of goods sold increase due to increase in operation of company By vertical analysis there is continuous decline in cot of goods sold. The Cost of goods sold in 2004 is 93.94 which decline to 84.38 in 2005 due to decrement of amount 80.69. The amount goes down to 82.47 with decrement of amount 87.76 in 2006.In 2007 there is again decline in amount and it becomes 79.15 with decrement of amount 99.53.With the decrement of amount 0.00 it becomes In 2008. increment of amount Rs.2730967 it becomes
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BABA FARID SUGAR MILLS LTD
Income Statement Vertical Analysis 2004 Gross Profit 6.06 2005 19.31 2006 12.24 2007 0.47 2008 0.01
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Vertical Analysis
600.00% %age 400.00% 200.00% 0.00% Year 2008 Year 2007 Year 2006 Year 2005 Year 2004 Years Gross Profit
There is continuous boom in Gross Profit from year 2004 to 2008. The Gross Profit in 2004 is Rs.23,521,063 which increases to Rs.118,018,959 in 2005 due to increment of amount Rs.91342.The amount goes up to Rs.3239498 with increment of amount Rs.101,103,292 in 2006.In 2007 there is again boom in amount and it becomes Rs.4081470 with increment of amount Rs.2,783,048 With the increment of amount Rs.724650 it becomes Rs.56,941,366 in 2008. The Gross Profit in 2004 is 6.06 which increases to 19.31 in 2005 due to increment of amount 0.92.The amount goes up to 17.53 with increment of amount 12.24in 2006.In 2007 there is again boom in amount and it becomes 20.85 with increment of amount 0.47.With the increment of amount 0.01 it becomes in 2008. So the company has made make progress from 2004 to 2008.
BABA FARID SUGAR MILLS LTD
Operating Profit Income Statement Vertical Analysis 2004 2005 2006 -2.81 13.15 7.01 2007 7.30 2008 3.00
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Vertical Analysis
500.00% %age 0.00% -500.00% -1000.00% Years Year 2008 Year 2007 Year 2006 Year 2005 Year 2004 Operating Profit /Loss
There is continuous boom in Operating Profit from year 2004 to 2008. The Operating Profit in 2004 is Rs.-10,892,775 which increases to Rs.80,367,809 in 2005 due to increment of amount Rs.259107.The amount goes up to Rs.1730342 with increment of amount Rs.57,915,946 in 2006.In 2007 there is again boom in amount and it becomes Rs.2479018 with increment of amount Rs. -42,949,590With the increment of amount Rs.492352 it becomes Rs10,974,503 in 2008. The Operating Profit in 2004 is -2.81 which increases to 13.15 in 2005 due to increment of amount 1.63.The amount goes up to 9.37 with increment of amount 7.01 in 2006.In 2007 there is again boom in amount and it becomes 12.66 with increment of amount 7.30.With the increment of amount 3.00it becomes 12.90 in 2008. So from 2004 to 2008 the company has made progress.
BABA FARID SUGAR MILLS LTD
Income Statement Vertical Analysis 2004 2005 2006 Loss: Per Share Basic & Basic 0.00 0.00 0.00 Diluted 2007 0.00 2008 0.00
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Vertical Analysis
400.00% %age 200.00% 0.00% -200.00% Year 2008 Year 2007 Year Year 2006 2005 Years Year 2004 Loss
er Share Basic & DilutedThere are prominent ups and downs in Per Share Basic & Basic Diluted from year 2004 to 2008 The Per Share Basic & Basic Diluted in 2004 to 2008 is Rs.0.00. Significant effect on other income is due to account which is Scrap sales which has major increment from 2004 to 2008. Profit on short-term and call deposits, return on loans due from associate and gain on disposals of fixed assets less effective on other income they all have ups and downs.
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SWOT ANALYSIS
01000900000378000 00002001c00000000 00040000000301080 0050000000b020000 0000050000000c02b c048308040000002e 0118001c000000fb0 21000070000000000
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SWOT ANALYSIS OF LAKSON TOBACCO COMPANY
Strengths:
In the analysis of the Strengths of the company we focused on the competencies of the PTC its entirety.
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LTC’s own reputation as a dynamic enterprise. Technological sophistication in terms of highly advanced production techniques and manufacturing plants. Offering superior quality brands has helped the company in carving out an image for itself both in the market and in the hearts of the consumers thus winning the trust of both. Highly competent and diverse work force throughout the ranks of the company. Compliance with the regulations of the government and regular payment of taxes has earned the company the respect of all and sundry. Major contributor to the national revenue of the state. Major contributor to numerous causes such as forestation campaign, free mobile dispensaries, training schools and the company’s concern for the eco system. A highly advanced and systematic distribution network and supply chain. Utilization of highly creative and state of the art marketing tools. Excellent corporate culture, which is more growth, oriented. A strong interactive communication system.
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Weaknesses:
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Failure of LTC to file a strong case against lower quality brands whose producers do not pay any tax to the government and yet have maintained a prominent presence in the market. Cigarette being a controversial product convincing the consumer to prefer
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LTC’s brands to competitors because of the quality of their constituents has become an uphill task.
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For gaining an edge over the competitors and in a bid to live up to its image in the market much of LTC’s operations are highly costly. So financial resources are being extravagantly used. Cutting back on such cost may be difficult, because of which in recent years the company has done extensive across the board retrenchment.
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Opportunities:
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Since LTC has already captured a major share of the local market in it’s pocket which has been ensured by the availability of their brands in virtually every shop all over the country, so it appears less likely that any big attractive opportunity would be missed by it. LTC will assess the prospects and will avail it as and when as it presents itself. However, LTC has a golden opportunity to expand its distribution network to the neighbouring Afghanistan and realize the prospects of a full fledged manufacturing unit in that country. This would help them capture another big profitable market. This big opportunity is backed and justified by the existing strong operations of the Area Sales Office.
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Threats:
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The biggest threat that LTC is faced with at this point in time is posed by the widespread rampant smuggling of foreign brands that are much cheaper and eat away a big chunk of profit of the company. Another threat is that of the “counterfeit” cigarettes which too are easily available in the market. These brands on the one hand because of their low quality tarnish the image of the genuine brands and on the other deprive the company of a good share. Tobacco being a controversial product, governments enforce strict regulatory measures from time to time to discourage its mass production which is also a
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genuine threat for the company.
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Imposition of high taxation on tobacco related products especially, cigarettes. The growing health hazards such as cancer and ailment of the heart and their attribution to smoking may also create a potential threatening situation for the company. LTC’s selective approach towards its retail merchandising as opposed to the competitor’s readiness and promptness in their aggressive merchandising may create problems for the company. In a future scenario there is a great likelihood of a possible confrontation between anti-smoking campaigners and tobacco produce
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LAKSON TOBACCO COMPANY, LIMITED
Introduction of product:
LAKSON TOBACCO'S MAIN BRANDS, INCLUDE: * Park Lane * Premier Classic * Red & White * Morven Gold * Princeton * K2 * Diplomat The company has shown robust growth rates over the years. In 2005, the company performed exceedingly well and was able to achieve growth in all areas. Its operating profits were 32% higher than the same period last year (SPLY). This improved performance can be attributed to higher sales volume, improved margins, better brand mix and control over cost through focus on operational efficiencies. However the Company could not maintain its superb performance of 2005 in 2006, as the sales were the same as last year and operating profit declined by 7.4% over the SPLY. In 2007, the company improved its performance over the 2006 performance and increased Sales by 9%, Gross Profit 8% and operating profit 12% in spite of an 8% increase in the cost of sales due to a 15 % increase in the prices of tobacco. In 2008, the company's performance reasonably keeping in mind the huge losses it suffered to its assets and posted a 16% increase in its net
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turnover. This is a decent performance keeping in view the overall industry growth is estimated at 3% but it is lower than its major competitor Pakistan Tobacco Company. LTC’S MARKETING PRINCIPLES: LTC is proud of its strong reputation for supreme quality brands. It does not believe in compromise on quality and standard and gives high importance and value to aggressive but legitimate marketing in order to ensure sustained image and performance. In major markets across the country, LTC’s trade marketers are frequently rated highly in customer surveys on professionalism and service. It aims to satisfy adult consumers' demands better and more profitably than the competitors. LTC believes strongly that tobacco should never be marketed to youth. It should only be marketed to adult smokers, in an appropriate way that takes account of the risks posed to health. It also believes adults who have chosen to smoke should be able to receive information about what they buy, and we should be able to communicate responsibly with them about their brands. And in this direction much of LTC’s marketing department’s efforts are aimed at ASU30* category smokers and is trying its utmost to win them over. LTC’s marketing is not designed to 'sell smoking'. That would be wrong – and a waste of marketing effort. Rather PTC is working in a long-established, mature product category, where people already know what the basic product is. There would be no commercial sense to trying to market to informed customers who don't want the product. LTC’s marketing is about brands; retaining the brand loyalty of its customers, and winning them over from competing brands. Its brands are amongst its most important assets. As well as complying with all laws and many voluntary codes on marketing, it has for many years been guided by a clear set of British American Tobacco Advertising Principles.
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LAKSON TOBACCO COMPANY, LIMITED These have set out, for example,
• • • LTC’s advertising and promotional activities will be directed at adult smokers. No health claims will be made about tobacco products. People appearing in advertising will not be, or appear to be, younger than 25. Moreover LTC strongly adheres to and respects all the laws and promulgated regulations such as the “50 meter Clause”* which implies that no merchandising material shall be displayed on any outlet within close proximity of schools or other educational institutions, religious seminaries, mosques, hospitals etc violation of which may incur government penalties. The government of Pakistan has recently revised the Health Warning Legislation. As per the guidelines, the new health warning “Smoking causes cancer and heart diseases – Ministry of Health” will be printed on the flap (top) on front side of the cigarette packs in Urdu and on the back in English. It will cover 30% of the pack on each side in rectangular box.
MARKETING ANALYSIS:
Marketing at LTC is divided into three further categories: marketing research, brand marketing and trade marketing the marketing research department carries out its surveys and other such activities to find out the demand for each brand, and to discover the potential cigarette market. the brand marketing department comprise of brand managers who have the responsibility the success and health of their individual brands. Each brand manager designs and executes promotions to increase the sale of his brand. Advertising through different medias and sponsorships of event is also the job of brand marketing. The trade marketing staff works direct in the field and interacts with the distributers, wholesalers, retailers, and the customers. LTC is renowned for conceiving brands attaining the status of a classic. It has been consistently meeting consumer expectations for the past ten years
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LAKSON TOBACCO COMPANY, LIMITED
with the popular international brand names LTC is one of a very few companies in Pakistan which is paying a great deal of attention to the retail marketing. It started a retail excellence program, which is a set of structured presentations covering subjects such as business ethics, trends, customer focus and how to satisfy customer needs profitably. It enables LTC to develop and roll out best-practiced retailer methods, which will enhance retailer profitability and their relationship with the company in order to regain market leadership in the future. The focus is how to provide a “world-class” service to consumers, sharing company information and plans, and gaining feedback. LTC holds numerous trade meetings with its distributors and retailers, which no doubt helps to strengthen the relationship and be responsive to their requirements better than any other FMCG company in the market place.
MARKETING STRATEGY AUDIT
The mission is market oriented as its word project the company’s present image, which is successfully been carried by their Sales and marketing department. LTC has always tried to bring new and grand-marketing events (Voyage of discovery – JPGL) to project is the company different from its competitors. The company’s marketing budgets had always been the highest in the industry but for the past two years Lakson Tobacco Company has increased its budgets to compete on equal grounds with them. Marketing Objectives & Goals: • • • Sales translated into turnover Budget for cost Profitability The marketing objectives as mentioned earlier are inline with the corporate strategy and are very much clear and appropriate for the marketing department. This is proved by their two consecutive re-launches (Capstan & Gold
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Flake), which are done to make up for the lost sales volume and profits. The goals are set by the department keeping in mind the objectives. The brand managers sets their own sales targets which are then matched with the performance of the brands every month.
Marketing Strategy:
As LTC exists in a ‘Fragmented industry’, the company takes advantage of its multinational connections and uses ‘Image Differentiation Strategy’. The company has established an image of a quality product provider at an affordable price, along with its attractive and eye-catching marketing campaigns. The company makes use of Societal Marketing Concept to project itself.
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COMPETITORS ANALYSIS
01000900000378000 00002001c00000000 00040000000301080 0050000000b020000 0000050000000c02b c048308040000002e 0118001c000000fb0 21000070000000000
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COMPETITORS ANALYSIS
In year 2000, PTC underwent a major transformation by taking bold initiatives towards regaining leadership in the market. Price repositioning on brands in the medium and low segment provided PTC with an opportunity to gain competitive advantage, which resulted in increased volumes and market share. Its daring steps forced competition to revert to similar but desperate reactions. Bringing down the prices of their brands in medium and low segment resulted in major cannibalization and lower gains in overall volume than PTC. PTC’s main competitor is the Lakson Tobacco Company. However, there are also mushrooming brands called the “Mardanwalls.” The third element that is of a major concern to PTC is the counterfeit and the tax evaded brands. Table 3 shows the market share of PTC and its competitors.
“Market Share of LTC and its Competitors”
Lakson Tobacco Pakistan Tobacco Mardanwallas Counterfeit/other Tax evaded brands
45.20% 47.70% 2.20%
5.90%
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LAKSON TOBACCO COMPANY, LIMITED
“Brand-wise yearly Volume of cigarettes sold by LTC and PTC”
Lakson Tobacco No. of cigarettes Brands sold/year Red & White 177 K-2 141 Diplomat 231 Morven Gold 1560 Pakistan Tobacco No. of cigarettes Brands sold/year Benson & Hedges 0.4 Gold Leaf 361 Capstan 245 Wills 40 Gold Flake 884 Embassy 652 PTC Total Sale 2182.4
LTC Total Sale
2109
Mardanwallas
These brands are manufactured in Mardan and thus are called the “Mardanwallas.” These are normally low category cigarettes (under Rs. 10) for example Gold Street. The goal of the Mardanwalls is solely money-making, and are not concerned about acquiring a strong position in the market. These are also 100% tax evaded. The government has made legislation regarding this issue; however, nothing has been done so far. Secondly, their factories are located in the northern areas so tax evasion becomes very easy. No proper marketing structure or strategies exist for these brands. Their ATL activities, which include electronic and print media, are extremely low. These brands usually survive on BTL activities, which mainly consist of posters.
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BASES FOR SEGMENTATION:
Macro-environment
Demographic
Population growth Population growth in Pakistan is about 2.5% annually. This population explosion creates an opportunity for the cigarette manufacturers. Population age mix Pakistan, with a rapid population growth, is the country where young adults age 25 to 40 and some teens (above 18) are the major consumers of cigarettes. So these groups are the main targets of LTC. Ethnic Markets In Pakistan almost every one is a Pakistani. But each social class or group (segmentation) has certain specific wants and buying habits. LTC has directed their product and promotions to all these groups. Educational group Mostly the people in Pakistan are illiterate and they want to smoke strong tobacco with out knowing its more harmful effects. So LTC’s brands are mostly strong tobacco. Household patterns The traditional household pattern in Pakistan is joint family where grand parents, parents and their children and the children of their children live together. So living in this kind of system is discouraging for young smokers.
Geographic and Social class:
Opportunities
In Punjab a large number of people in lower class use to smoke “Embassy” which is one of the main driving brands of LTC. LTC advertises it (embassy) in different ways (media), a lucky draw scheme (sheran da mela) and
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LAKSON TOBACCO COMPANY, LIMITED
the name of a famous singer Ibrar –ul-haq is also a associated with embassy to attract the existing customers.
Threats
In this class people are more prices conscious so reduction in the prices of Lakson’s brands may decrease the sales volume of LTC if customers switch to Lakson’s brands.
Environmental:
LTC is promoting itself as an environmental friendly organization by adopting “tree plantation” campaign. PTC planned 3 million trees* annually in different areas of the country.
Cultural
In Pakistan the basic traditions, customs and values are not much different but because of the “dish culture” mostly young generation like European and American culture which leads to liberalism so these youngsters go for smoking as an essential of stylish life. On the other hand in villages the elderly people smoke “Hukka” and the youngsters smoke cigarettes. The sole reason behind it is that the young generation does not really see why should they be dependant upon someone to fill up the paraphernalia of Hukka, and even if they have to do it themselves it is time consuming and so they prefer ready to smoke stylish cigarettes instead of Hukka.
Task Environment:
As mentioned earlier, the population of Pakistan is growing by 2.7% annually and number of smokers are increasing as well. Market size therefore is getting larger and it is and opportunity for cigarette manufactures. But unfortunately PTC has emerged as a strong competitor of LTC and has attracted all the 10% growth of potential consumers where PTC was not able to do so. This
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tough competition is brining a decline in the profits of the company due to which LTC has decreased the prices of almost all it’s brands (except Benson & Hedges) to remain in the competition. LOTUS NOTES: Lotus notes are communication software with fool proof reliable and efficient information sharing and exchange facilities. It has dynamic E-mail features and is used to send and receive messages and other required data to and from the regional as well as the head office. PTC has integrated its entire networking system through this software.
Stock Specification*
? ? ? ? ? ? ? ? 1 CARTON=10M 1 M=5 OUTERS(20HL),10 OUTERS(10HL) 1 OUTER=10 PACKS 1 PACK=10 STICKS(10HL),20 STICKS(20HL) 1 CARTON=50 OUTERS(20HL),100 OUTERS(10HL) 1 CARTON=10,000 STICKS 1 M= 1000 STICKS 1 OUTER= 100 STICKS(10HL),200 STICKS(20HL) The cartons are placed on a four wheel trolley and pushed with great ease to be loaded onto the trucks. The Warehouse assistant must be present at the time of loading. He would mark the outflow of stock of each brand in the DSR checklist. The procedure for placing the order is fairly simple. The distributor who has non-check account at HBL Peshawar usually makes a phone call and gives the order for the required brands specifying its quantity. He would either issue a bank draft in the name of his own account at HBL send a TT or would deposit cash in
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the account for this transaction. Each brand has its own distinctive code known both to the warehouse people and the distributors. Orders are received almost daily from the distributors both “Local” as well as those located along the “Rout” and immediate shipment is made. Each rout distributor has his own respective code as well as area code. As soon as the order is received, the Warehouse Executive feeds the data into the CS3 system using the specific code of the distributor and takes a rough print out of a checklist of brands and quantity of stock to be lifted.
DISTRIBUTION STRATEGY
CHANNELS OF DISTRIBUTION Channel of distribution is a system whereby customers are provided access to an organization’s products or services. The distribution network of the Area Sales Office Peshawar is engaged in two types of sale which are as follows: PRIMARY SALE Primary sale involves the transfer of stock from the Warehouse to the Distributor’s go down. SECONDARY SALE Whereas, in Secondary sale the distributor carries the stock to the market. And for this Pakistan Tobacco Company employees two main channels of distribution for making it’s product available to the consumer. These are as follows:
i) Producer
Distributor
Wholesaler Retailer
Final Consumer
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Though a third alternative channel i.e from Producer to the Distributor and then the final Consumer also exists but it is almost outdated and is no longer used. The Peshawar Area Sales Office which falls in the North region supplies stock to almost the entire province including Landi Kotal and Chitral. The Area Sales Office has a total of 19 distributions all over the jurisdiction of the Area Sales office having a systematic supply chain. These areas have been classified according to their size and location having their own respective sections as follows:
LTC’S PROMOTION STATEGY:
PROMOTION “It is one of the four controllable variables (with product, price and place) of the marketing mix”.* Promotion Mix It is “the range of means available to an organisation for communication with its target market - advertising, sales promotion, personal selling, publicity and public relations.” The entire scheme of operations pertaining to promotion at PTC is mapped out by people at the head office at Islamabad. They instruct the sales offices all over the country to execute these operations. ADVERTISING “Any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor”.* LTC’S advertisements that formerly featured in almost all the media have
* *
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declined substantially owing to the strict media regulations formulated by the government with the aim of discouraging tobacco related products particularly cigarettes. Nevertheless, LTC’s brands have over the decades through ensuring sustained superior quality and a bond with both it’s distributors, retailers and above all it’s consumers, have successfully captured a significant market share. SALES PROMOTION* Sales Promotion is “a marketing discipline that utilizes a variety of incentive techniques to structure sales related programs targeted to consumers, trade and or sales levels that generate a specific, measurable action or response for a product or service”. LTC has always been engaged in vigorous sales promotion activities to lure the consumer towards its brands. It employs a number of strategies in this regard such as “Push Strategy” aimed mainly at the resellers such as the retailers by offering them various incentives to secure their brands against those of the competitors by attracting more consumers towards LTC’s high quality brands. On the other hand “Pull Strategy” aims to attract the consumer directly which is done mainly through consumer promotional tools. During the internship period the internee happened to experience one such promotional Program using both the “Pull” and “Push” strategies. (a) CONSUMER PROMOTION Consumer Promotions are directed at the ultimate user of the good or service. From time to time LTC utilizes a number of such promotional tools most of which have been quite successful: Samples Sampling allows the consumer to experience the product or service first hand.
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It is the job of the Sales Promoter at LTC’s Sales Office to give out free samples of its brands to smokers who might be loyal to the brand of a rival producer. For instance free samples of GF 10HL were given out to smokers by SP’s during consumer contact. Coupons Legal certificate offered by manufacturers and retailers that grant specified savings on selected products are called Coupons. They must be presented for redemption at the Point Of Purchase. Coupons are used mainly to encourage trial and induce brand switching. Price Pack Such deals provide the consumer with something extra through the pack itself. However, it is less common in the case of PTC’s promotional strategies. Premium A premium is a tangible reward for performing a particular act. It is also called incentive marketing and it works because the premium ads value to the product. Recently, there was a scheme introduced whereby all the retailers were directed to offer the customer an extra pack of Gold Flake on the production of three empty packs of 10HL or 20 HL packs of the same brand. Sweepstakes Sweepstakes require the participants to submit their names to be included in a drawing or other chance selection. Quite often either during sampling or consumer contact sales promoters take down the names and addresses of the consumers thus contacted and use the data among other purposes also for drawing in which the lucky ones can win loads of exciting prizes. Games The data provided by the Sales Promoters through the consumer contact is also used for carrying out draws and then the names of consumers thus obtained from the draws are then invited to take part in all kids of fun games. Recently, during the Shandoor Polo Tournament the Area Office had organized a variety of games such as “Musical chair” and “Tug of War”
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(b) TRADE PROMOTION Trade Promotion is aimed at the intermediaries such as retailers and wholesalers. LTC uses several trade promotion tools such as Contests LTC also allows its retailers to participate in different kinds of contests as part of the promotional strategy of a certain brand. There was a contest recently in which the retailers had to decorate their shops and winner was to be judged on the basis of how well the shop had been adorned. Pop-Displays/Merchandising LTC offers a variety of merchandising items such as Banners, counter units, Kiosks, Mirrors, Clocks, Modulars, Tube Shades, Hoardings etc to those valued retailers who have had an impressive track record of sales. Advertising specialties Specialty advertising includes souvenirs such as hats, T-shirts, key chains, watches with the logo of either the brand or the producer. LTC gives away such items to the consumers through the retailers. PERSONAL SELLING: “Personal Selling, a form of promotion utilizing the services of a sales team; one of the major controllable variables (with advertising, sales promotion and publicity) of the promotion mix.” At LTC Personal selling activities are performed by the SP’s. PUBLIC RELATIONS: “Building good relations with the company are various publics by obtaining favorable publicity, building up a good corporate image, and handling or heading off unfavorable rumours, stories and events.”
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Most of the PR issues are handled by the head office and though the sales office does not have a PR officer having exclusive PR related functions yet all the TMO’s and SP’s have over the course of their dealings with the market acquired the skills to negotiate with all kinds of
PTC’S TRADE MARKETING PRACTICES
PTC’S marketing department has been divided into two sections: BRAND MARKETING TRADE MARKETING
? ?
BRAND MARKETING It is concerned with the marketing activities relating to the various brands manufactured by LTC. At LTC Brand marketing consists how best to determine the needs and wants of potential customers, developing a sound brand marketing strategy to meet those needs and wants, and executing a plan that incorporates the brand marketing strategy focused around the specific brand being marketed. TRADE MARKETING AT THE AREA SALES OFFICE Almost the entire set of activities at the Peshawar Area Sales Office is based on the concept of “Trade Marketing”. It is primarily concerned with channels of distribution and the subsequent promotional strategies of brands. It is the duty of all the regional managers to ensure that all the go down inventories are maintained according to the actual and estimated requirements. “Trade marketing” as a notion entails various marketing related activities such as: Sales Handling demand orders Supply to the distributors and retailers All the subsequent Promotional activities etc.
? ? ? ?
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SWOT ANALYSIS WITH COMPETITORS
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SWOT ANALYSIS
A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis. The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection. It ought to be noted that the following SWOT Analysis is by no means an exhaustive in depth analysis or the exact picture of the of the state of affairs in the company, as there are many subtle aspects which are to be dealt with in a much broader perspective. Rather it only seeks to express the views of the internee to the best of his understanding.
SWOT analysis of competitor (PTC) Strengths to PTC :
PTC is LTC’s largest competitor and the second legal cigarette manufacturer in the Pakistan besides LTC. PTC used to be affiliated with Phillip Morris, the giant in the global cigarette market. PTC has 25% more resources and three times more salesman than LTC, and this almost unlimited budget are due to tax evasion.
Weaknesses of PTC:
The biggest weakness of PTC is money making and it believes in short-term gains rather than long-term benefits. PTC uses quite unethical marketing strategies. Its price is not properly positioned in relation to the theme, thus this promotion lacks harmony. PTC’s cigarettes are not completely tax evaded; a very small amount of tax is paid.
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LAKSON TOBACCO COMPANY, LIMITED Opportunities to LTC:
There are many opportunities in market to grow up and avail the chances in future competitions.
Threats to LTC:
According to PTC the biggest threat is the growing market share and increasing profit rate of LTC. The management of the PTC takes a strong notice of their competitor’s new business investments and innovations in this field.
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BCG MATRIX
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THE BOSTON CONSULTING GROUP (BCG) MATRIX
The BCG Matrix method is the most well-known portfolio management tool. It is based on product life cycle theory. It was developed in the early 70s by the Boston Consulting Group. The BCG Matrix can be used to determine what priorities should be given in the product portfolio of a business unit. To ensure long-term value creation, a company should have a portfolio of products that contains both high-growth products in need of cash inputs and low-growth products that generate a lot of cash. The Boston Consulting Group Matrix has 2 dimensions: ? Market share ? Market growth The basic idea behind it is: if a product has a bigger market share, or if the product's market grows faster, it is better for the company.
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The four segments of the BCG Matrix
Placing products in the BCG matrix provides 4 categories in a portfolio of a company:
•
Stars (high growth, high market share)
o
Stars are using large amounts of cash. Stars are leaders in the business. Therefore they should also generate large amounts of cash. Stars are frequently roughly in balance on net cash flow. However if needed any attempt should be made to hold your market share in Stars, because the rewards will be Cash Cows if market share is kept.
o
•
Cash Cows (low growth, high market share)
o
Profits and cash generation should be high. Because of the low growth, investments which are needed should be low. Cash Cows are often the stars of yesterday and they are the foundation of a company.
o
•
Dogs (low growth, low market share)
o o o
Avoid and minimize the number of Dogs in a company. Watch out for expensive ‘rescue plans’. Dogs must deliver cash, otherwise they must be liquidated.
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•
Question Marks (high growth, low market share) o Question Marks have the worst cash characteristics of all, because they have high cash demands and generate low returns, because of their low market share. o If the market share remains unchanged, Question Marks will simply absorb great amounts of cash. o Either invests heavily, or sell off, or invest nothing and generate any cash that you can. Increase market share or deliver cash.
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The BCG Matrix method can help to understand a frequently made strategy mistake: having a one size fits all strategy approach, such as a generic growth target (9 percent per year) or a generic return on capital of say 9,5% for an entire corporation. In such a scenario: • Cash Cows Business Units will reach their profit target easily. Their management have an easy job. The executives are often praised anyhow. Even worse, they are often allowed to reinvest substantial cash amounts in their mature businesses. • Dogs Business Units are fighting an impossible battle and, even worse, now and then investments are made. These are hopeless attempts to "turn the business around". • As a result all Question Marks and Stars receive only mediocre investment funds. In this way they can never become Cash Cows. These inadequate invested sums of money are a waste of money. Either these SBUs should receive enough investment funds to enable them to achieve a real market dominance and become Cash Cows (or Stars), or otherwise companies are advised to disinvest. They can then try to get any possible cash from the Question Marks that were not selected.
Other uses and benefits of the BCG Matrix
• If a company is able to use the experience curve to its advantage, it should be able to manufacture and sell new products at a price that is low enough to get early market share leadership. Once it becomes a star, it is destined to be profitable. • • BCG model is helpful for managers to evaluate balance in the firm’s current portfolio of Stars, Cash Cows, Question Marks and Dogs. BCG method is applicable to large companies that seek volume and experience effects.
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•
•
The model is simple and easy to understand. It provides a base for management to decide and prepare for future actions.
Limitations of the BCG Matrix
Some limitations of the Boston Consulting Group Matrix include: • • • • • • • • It neglects the effects of synergy between business units. High market share is not the only success factor. Market growth is not the only indicator for attractiveness of a market. Sometimes Dogs can earn even more cash as Cash Cows. The problems of getting data on the market share and market growth. There is no clear definition of what constitutes a "market". A high market share does not necessarily lead to profitability all the time. The model uses only two dimensions – market share and growth rate. This may tempt management to emphasize a particular product, or to divest prematurely. • • A business with a low market share can be profitable too. The model neglects small competitors that have fast growing market shares
BCG Matrix of Lakson Tobacco Company Limited
Lakson Tobacco products has strong market position in Pakistan because of their evergreen selling nature throughout the year that’s why it has large market share and its products has till very strong potential to grow and penetrate not only in local markets but also in foreign markets. Therefore according to BCG matrix product lines of Lakson Tobacco lies in Cash Cows due to large market share and high potential to grow.
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CONCLUSION
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CONCLUSION
We have gone through the Five years annual reports of Lakson Tobacco Company Limited and made the Five years financial analysis of the company, which shows that the Company is moving toward the profitability and expansion and the chance of bankruptcy is limited. Lakson Tobacco is improving itself in competition industries and leading towards bright side. Sustained financial results enable profitability growth and provide superior shareholders value. Financial measures reflect decisions, performance and achievements, which for last Five years (2004 – 2008), resulted from outstanding productivity, impressive marketing performance, organized investment plans and the success of Company’s highly flexible business enterprise as disclosed in Company Financial Statements. The efforts of their financial force were complemented by robust demand and favorable pricing environment.
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FUTURE RECOMMENDATIONS
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FUTURE RECOMMENDATIONS
I will put some of our recommendation in front of the company so that company can improve. ? LTC’s Area Sales Office should either be immediately renovated or shifted somewhere else as its present location with the state of its office building and the premises in no way give an onlooker the impression of a proper LTC’s marketing and sales office in NWFP. ? Both the Area Manager and the TMO’s have to realize that in order to boost the efficiency and moral of the sales force they must be motivated. ? It implies that proper appreciation must be accorded to them according to their performance mostly in the form of monetary reward upon the accomplishment of the sales target of each respective SP. ? The Sales Office must cut back on their daily expenses particularly the extra expenses of the fuel of the vehicles and those of telephone at the office. ? As stated in the “Analysis” section the SP’s do not have any real job security as they can be hired and fired at the behest of the Area Manager. Therefore, has to be a system in place whereby sales force hiring and termination could be done so that no arbitrary decision is taken. ? A canteen must be set up at the Sales Office for the staff who at present do not have a proper facility for tea and meals which are bought mostly from a hotel nearby. ? Besides, a cook must be hired on permanent basis to ease up the burden of the Warehouse loader who a present has dual or may be more jobs of loader, peon, cook as well as a watchman at times. ? Instead of Suzuki pick ups, Jeeps should be provided to the SP’s who are given four wheelers. This is for the reason that Suzuki pick ups have not been found to be up to the task particularly when it comes to rugged terrain of the rural areas for which these vehicles are mostly used.
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? All the Financial strategies and planning should then be aimed at the consumers in such a way that the slogans and images carry the message to the consumer in a very convincing fashion for winning their favour. The modalities of such a strategy should be worked out by marketing team familiar with the tastes, conventions and preferences of the local people. ? ? And such a course of action applies to other brands too. The company must have periodic meetings in which to allow the staff members at the sales offices all over the country to share their experiences of the market conditions, tradition, and tastes peculiar to a market with the marketing teams at the helm of decision making. ? This would in turn facilitate the task of marketing department at the head office to chalk out effective and efficient strategies for different markets according to their demands. ? For this the company should collaborate with the retailers and custom officials to pin point such elements who are engaged in this trade and through Concerted efforts uproot them. ? LTC is also confronted by the mushrooming of industries engaged in the production of counterfeit cigarettes in the names of LTC’s brands. And again this trade too is rife and flourishing in NWFP. LTC must press the government for stringent measures against counterfeit brands as they tarnish the company’s image in the market. ? Likewise, a large number of non-tax paying cigarette manufacturers are into the business in the province that must be taken to task and their operations be halted and confiscated forthwith. ? LTC being a major contributor to the national revenue must safeguard its interests in the face of the threats posed by the aforementioned factors. In this regard the company must advocate a strong case against all those entities engaged in the same trade but operating through illicit means. ? The transporter supplying the stock to distributors located along the
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“Route” must be accompanied by a guard. ? Usually LTC places more emphasis on its retailers whereas, the small time sellers of tobacco products such as the vendors who have no settled outlets but who constitute a reasonable market in NWFP are mostly ignored. ? If the company instructs its sales force to cover these sellers with mobile shops on the foot path and elsewhere on the streets too in terms of communicating company’s schemes and offers on certain brands then they too can make up a good market.
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REFERENCES
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REFRENCES
1. Rao Faisal U Rehman Senior Manager Finance, Rave Traders 2. Chaudhry Muhammad Umair BBA (Hons) Finance
INTERNET
? www.bat.com ? www.goliath.ecnext.com ? www.business.com ? www.connect2web.com ? Interviews of different officers of different departments.
Books
1. Principles of Managerial Finance (Eleventh Edition) By Lawrence J. Gitman 2. Manageril Finaice (Twelth Editiion) By Van Horne
Reports
1. Annual Report Lakson Tobacco Company Limited Pakistan 2004 2. Annual Report Lakson Tobacco Company Limited Pakistan 2005 3. Annual Report Lakson Tobacco Company Limited Pakistan 2006 4. Annual Report Lakson Tobacco Company Limited Pakistan 2007 5. Annual Report Lakson Tobacco Company Limited Pakistan 2008
Newspapers
1. Dawn 2. The News 3. Business Recorder
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ANNEXURE
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TREND ANALYSIS 2004
GROSS TURNOVER LESS: SALES TAX LESS: EXCISE DUTY TURNOVER-NET OF SALES TAX AND EXCISE DUTY COST OF SALES RAW MATERIAL CONSUMED OPENING STOCK PURCHASES, REDRYING AND RELATED EXPENSES ENDING STOCK CLOSING STOCK EXCISE DUTY, SALES TAX AND OTHER LEVIES COST OF RAW MATERIAL DAMAGED DURING THE DECEMBER INCIDENT EXPORT REBATE GOVERNMENT LEVIES MANUFACTURING EXPENSIS WORK IN PROCESS OPENING STOCK CLOSING STOCK SALES OF WASTE COST OF WORK IN PROCESS DAMAGES DURING THE DECEMBR FINISHED GOODS OPENING STOCK LESS: ADJUSTMENT CLAIM CLOSING STOCK BALANCE CARRIED FORWARD TOTAL GROSS PROFIT DISTRIBUTION AND MARKETING EXPENSES SALERIES ALLOWANCE AND OTHER BENEFITS 100.00% 100.00% 100.00% 100.00% 114.26% 129.55% 120.67% 120.81% 87.99% 102.36% 129.47% 124.87% 111.42% 107.52% 102.44% 115.18% 40.89% 96.12% 135.38% 173.11% 100.00% 100.00% 100.00% 75.48% 110.97% 189.70% 110.97% 141.95% 148.10% 141.95% 99.86% 135.12% 56.72% 60.40% 82.86% 100.00% 145.86% 99.72% 100.00% 100.00% 87.28% 114.72% 146.97% 0.00% 144.73% 223.74% 100.00% 100.00% 99.13% 113.38% 87.28% 125.71% 146.97% 99.39% 218.57% 135.82% 100.00% 116.57% 84.20% 107.65% 107.69% 58.07% 46.65% 100.00%
2005
118.93%
2006
100.17%
2007
108.76% 116.63%
2008
111.20% 116.97%
63.91% 106.07% 118.97%
0.00% 1.06% 112.27%
100.00% 100.00% 100.00%
58.31% 0.00% 11.89%
11.89% 1519.48%
1519.48% 43.21%
0.00% 0.00%
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SELLING EXPENSES FREIGHT ON SALES RENT RATES AND TAXES POSTAGE TELEPHONE AND STATIONERY DEPRICIATION AMORTIZATION TRAVELLING AND VEHICLE EXPENSES VEHICLE RUNNING EXPENSES RENT OF LEASED ASSET MARKETING EXPENSE INSURANCE ROYALITY REPAIR AND MAINTENANCE OTHER EXPENSES TOTAL ADMINISTRATIVE EXPANSES SALERIES ALLOWANCE AND OTHER BENEFITS RENT RATES AND TAXES RENT OF LEASED ASSET POSTAGE TELEPHONE AND STATIONERY TRAVELLING AND VEHICLE EXPENSES VEHICLE RUNNING EXPENSES REPAIR AND MAINTENANCE LEGAL AND PROFESSIONAL CHARGES PRINTING AND STATIONERY UTILITIES FEE AND SUBSCRIETION ENTERTAINMENT INSURANCE AUDITORS REMUNERATION DONATION DEPRICIATION AMORTIZATION SECURITY SERVICE CHARGES OTHER EXPENSES TOTAL OTHET OPERATING EXPENSES 100.00% 100.00% 100.00% 100.00% 119.66% 117.46% 144.49% 134.14% 100.00% 294.82% 0.00% 0.00% 0.00% 0.00% 0.00% 82.05% 106.86% 83.61% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 179.44% 120.67% 144.49% 107.56% 103.76% 0.00% 117.24% 220.81% 91.55% 160.39% 126.76% 129.52% 101.75% 94.42% 163.78% 87.70% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 129.93% 129.47% 108.37% 0.00% 0.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 132.47% 121.53% 0.00% 114.69% 112.93% 257.98% 0.00% 167.93% 144.00% 279.61% 100.61% 336.17% 136.34% 102.44% 103.45% 95.38% 107.78% 22.28% 119.37% 135.38% 171.95% 100.00% 100.00% 100.00% 100.00% 121.24% 136.07% 139.94% 123.27% 129.50% 121.12% 172.88% 190.67% 84.12% 57.58% 0.00% 102.78% 97.17% 140.73% 93.22% 60.03% 38.71% 96.83% 128.75% 108.13% 84.49% 113.59% 141.49% 0.00% 399.63%
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WORKERS PROFIT PARTICIPATION FUND WORKERS WELFARE FUND CURRENT PERIOD LESS PRIOR PERIOD IMPAIRMENT CHARGES/LOSS ON ITEM OF PROPERTY, PLANT AND EQUIPMENT FIXED ASSET WRITTEN OFF LOSS DUE TO THE DECEMBER INCIDENT- NET LOSS ON DISPOSAL OF INVESTMENT UNREALIZED GAIN ON HELD FOR TRAIDING INVESTMENTS RAW AND PACKING MATERIAL AUDIT REMUNERATION DONATION WORK IN PROCESS FINSHIED GOODS FINSHIED GOODS IN TRANSIT CASH IN HAND PLANT AND MACHINERY OFFICE EQUIPMENT VEHICLES POWER AND OTHER INSTALATION COMPUTIOR EQUIPMENT TOTAL OTHET OPERATING INCOME PROFIT ON DISPOSAL OF FIXED ASSETS PROFIT ON DISPOSAL OF FIXED ASSETS INVESTMENT INCOME FROM FINANCIAL ASSETS PROFIT ON SHORT TERM DEPOSITS GAIN ON SALE OF INVESTMENT UNREALIZED GAIN ON HELD FOR TRAIDING INVESTMENTS ROYALITY INCOME OTHERS INCOME FROM ASSETS THER THAN FINANCIAL ASSETS TOTAL OPERATING PROFIT FINANCE COST 100.00% 100.00% 100.00% 173.96% 132.48% 47.37% 122.65% 92.63% 117.35% 102.61% 110.84% 179.73% 109.02% 6.45% 238.35% 100.00% 100.00% 65.30% 94.56% 0.00% 368.91% 197.52% 100.00% 100.00% 100.00% 100.00% 134.14% 173.96% 210.33% 0.00% 82.05% 122.65% 127.90% 106.86% 102.61% 125.97% 83.61% 109.02% 39.56% 100.00% 100.00% 98.92% 115.63% 0.00% 0.00% 100.00% 0.00%
100.00% 100.00%
133.48% 139.50%
92.54% 94.06%
110.34% 97.42%
66.39% 76.11%
100.00% 100.00%
183.58% 0.00%
0.00%
0.00%
100.00%
170.32%
85.00%
80.84% 96.11% 0.00%
240.80% 0.00%
0.00% 13.55%
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MARK UP ON RUNNING FINANCE UNDER MARK UP ARRANGEMENTS WORKER PORFIT PARTICIPATION FUND SECURITY DEPOSITS LIABILITIES AGAINST ASSET SUBJECT TO FINANCE LEASE BANK COMMISSION AND OTHER CHARGES TOTAL PROFIT BEFORE TAXATION TAXATION CURRENT - FOR THE YEAR CURRENT - FOR PRIOR PERIOD DEFERRED TOTAL PROFIT AFTER TAXATION EARNING PER SHARE PROFIT FOR THE YEAR AFTER TAXATION NO OF ORDINARY SHARES TOTAL 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 0.00% 292.53% 94.44% 0.00% 57.53% 47.37% 133.32% 136.16% 140.53% -20.88% 30.43% 136.16% 131.88% 131.89% 131.88% 100.00% 131.89% 133.32% 117.35% 92.54% 93.05% 95.36% -208.08% 74.70% 93.05% 92.28% 76.89% 92.28% 120.00% 76.89% 75.75% 179.73% 110.55% 108.29% 94.89% -136.78% 674.86% 108.29% 111.75% 111.76% 111.75% 100.00% 111.76% 208.83% 238.35% 66.33% 71.61% 68.85% 141.92% 82.39% 71.61% 63.62% 63.61% 63.62% 100.00% 63.61% 46.72% 55.88% 21.48% 84.21% 257.45% 267.88% 0.00%
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