AFS REPORT: A COMPARISON BETWEEN LUCKY

CEMENT AND ITS COMPETITORS

SUBMITTED TO: SIR TALHA SHAHID

By

Kiran Naz
(31642)
Wardah Umer Farooq
(31643)
Laraib Saleem
(28631)
Sana Gul
(34401)
Yasin Muhammad Hanif
(31571)
Zulfiqar Haider
(27295)

Iqra University
Main Campus

Karachi,
Pakistan
November, 2018
INTRODUCTION OF LUCKY CEMENT:
Founded in 1993, Lucky Cement Limited stands as the flagship company of Yunus Brothers
Group (YBG). Lucky Cement is one of the largest producers and leading exporters of quality
cement in Pakistan and is listed on the Pakistan Stock Exchange (PSX). The company has also
issued Global Depository Receipts (GDRs), listed and traded on the Professional Securities
Market of the London Stock Exchange.

Lucky Cement strives to remain an efficient and low cost producer and is one of the pioneers to
introduce and install Waste Heat Recovery and Refuse Derived Fuel (RDF) and Tyre Derived
Fuel (TDF) Plants in Pakistan.

HISTORY OF LUCKY CEMENT:

Lucky Cement Limited was founded in 1993 by Abdur Razzak Tabba. The company started with
factories in the Pezu located in Lakki Marwat District of the North West Frontier
Province (N.W.F.P). It now, also, owns a factory in Karachi.
Lucky Cement Limited (LCL) is one of the largest producer and leading exporter of quality
cement in Pakistan with the production capacity of 7.75 million tons per annum. The company is
listed on Karachi, Lahore, Islamabad and London Stock Exchanges.
Over the years, the Company has grown substantially and is expanding its business operations
with production facilities at strategic locations in Karachi to cater to the Southern regions, Pezu
and Khyber Pakhtunkhwa to furnish the Northern areas of the country. Lucky Cement has a
network of over 200 dealers which enables it to dominate the local market and is Pakistan’s first
company to export sizeable quantities of loose cement being the only cement manufacturer to
have its own loading and storage terminal at Karachi Port.
Lucky Cement Limited has been sponsored by one of the largest business groups in Pakistan, the
Yunus Brothers Group based in Karachi.

BORD OF DIRECTORS:
 Muhammad younas tabba (chairman)
 Muhammad ali tabba (CEO)
 Muhammad suhail tabba (Director)
 Jawed yunus tabba (director)
 Marium tabba khan (director)
 Manzoor ahmed (director)
 Muhammad javed Iqbal (director)
CORE BRANDS:
Lucky Cement produces cement to suit every need. Variations of Ordinary Portland Cement
(OPC) and Sulphate Resistant Cement (SRC) are manufactured to meet the needs of a wide
range of customers. The following cement brands are available domestically
QUALITY ASSURANCE OF PRODUCTS:
Lucky Cement’s product portfolio complies with a range of standards, depending upon the
geographical territory where it is sold. Advanced technology such as Distributed Control System
(DCS), Programmable Logic Controllers (PLCs) and on-line X-Ray Analyzers are used to ensure
that product quality is consistent. Having one of the best-equipped laboratories, with facilities for
analysis of fuel and raw material, Lucky Cement ensures that the market is supplied with high
quality products

The following international bureaus of standards have accredited Lucky Cement over the years:

 Bureau of Indian Standards

 Kenya Bureau of Standards
 Sri Lankan Standard Institute
 Standards Organization of Nigeria
 South African Bureau of Standards
 Tanzania Bureau of Standard
 CE Marking
Furthermore, Lucky Cement’s products are also under compliance with EN-197-2:2014
Conformity evaluation. A conformity mark “C E” has been embossed on the packaging of
Lucky Cement’s international products, which is a prerequisite to export cement in European
Union markets.
 Trend Analysis of Lucky Cement

LUCKY CEMENT
Financial performance indicators 2013-2018

Interpretation;

Looking at Lucky Cement Profitability as measured by Gross Profit Margin which stood at 35.6% FY18 as
compared to last year having 46.62%, it went down by 23.5%. Despite of improvement in revenues of
PKR 47.45bn FY18 against PKR 46.38bn FY17, it went up by 4% still Gross Profit Margin was affected
because of higher cost of sales which were up by 25% with PKR 30.58bn as compared to PKR
24.38bn.This was mainly due to increase in price of raw material i.e coal price in international market
(up by 13% qoq & YoY up by 7%), increase in gas price, pkr devaluation (up by on avg of 5% QoQ).

Company Net Profit Margin stands at 25.66% FY18 against 29.97% FY17, down by 14%. Company
reported an Earnings of PKR 12.19bn against PAT of PKR 13.69bn FY17. Earnings shrink by lower margins
due to higher coal price and PKR devaluation in previous qtr. However, lower tax rate supported little bit
earnings. This was mainly on the back of tax credit on the expansion of its brownfield pezu cement plant
in KPK.

FY18 was not a good year for the Lucky cement as return on equity falls by 18% having 13.99% FY18
against 17.17% FY17, thus decreases investor confidence. This is due to lower Gross Profit margins and
Profit Margins and higher reserve base. Return on Capital employed also affected which give a down of
20% having 14.54% FY18 against 18.37% FY17. This was attributed in increase of some short-term
liabilities.
 Lucky Cement Liquidity Ratios

Interpretation;

Current Assets showed a slight down by 7% amounting at PKR 42.95mn FY18 against PKR 46.38mn FY17.
This is due to rise in short-term loan and advances to employees. However, current ratio is still at 2:82:1
which means that company has more than 2 times more current assets than current liabilities. It shows
that company is still operating well and can pay their short-term liabilities with their current assets easily
but still need to improve a lot with having better margins.

Lucky Cement Activity Ratios

Interpretation;

Lucky cement activity ratios indicate that a company manages its inventories, cash, receivables and
payables and other assets well. As inventory is being sold 3.22 times a year FY18 as compared to 3.05,
Debtors are paying their credit in every 113.35 days but still need high as compared to previous year, as
payable turnover stands at 2.73times a year which means that company has enough cash and are paying
off on time, total asset turnover is not that good as it lesser than 1, currently standing at 0.44 which
means that they are not using their assets as efficiently as they were using in 2014 having 1.35times.
Slight decrease in Fixed Assets Turnover is seen which stands at 1.16 times FY18 as compared to 1.22
times FY17, we believe that business has over invested in plant & equipment and other long-term
investments such as offshore projects in Iraq and & DRC plant in African nation.

Investor Ratios of Lucky Cement

Interpretation;

Lucky Cement reported an EPS of 37.72 FY18 as compared to 42.34 FY17, which went down by 10% due
to lower profits on the back of lower margins. However, company declared a full year dividend of PKR
13.0/share giving a payout ratio 34.47% FY18, which says that investor are getting compensated on their
investment rather than capital gain. Market value as on 30th June 2018 was 507.93 as compared to
836.26 FY17, mainly on the back of lower company earnings, poor economic growth in terms of increase
in current account deficit, foreign selling in large cap Stocks which affected Market price of lucky
cement.

Solvency Ratios of Lucky Cement

Interpretation;

Currently, Lucky Cement Capital structure is based on equity financing, we believe. Hence, Shareholder
equity rose by 8% at PKR 86.3mn FY18 against PKR 79.78mn FY 17. However, share capital remained
same but the increase was mainly seen in Company reserves due to increase in undistributed profits for
financing new projects & Investments.

The company has no Long-term borrowings and all the projects and investment are primarily financed
by internally generated cash flows.
 Comparison of Lucky Cement & DG Khan Cement

Lucky Cement Profitability Ratios:

DG Khan Cement Profitability Ratios:

Gross Profit Ratio:

Gross profit ratio of DG Khan Cement is less than Lucky Cement in the last 6 years. It shows
that DG Khan Cement is way behind than Lucky Cement in terms of Gross Profit. Lucky
Cement sales revenue in 2018 was 47542000 as compare with its COGS of 30589000 which
results in 36%Gross Profit in 2018.
Net Profit Ratio:

Net Profit ratio of DG Khan Cement is more than Lucky Cement because of the taxation added
in their revenue due to previous losses in their business. Which results in increasing their Net
Profit from PBT 24% to PAT 28% in 2018.

Return on Equity:

In terms of return on equity, Lucky Cement gives a great return on equity of 14% as compare to
DG Khan Cement which is 11.63%. It is due to the higher profitability every year as compare to
DG Khan Cement. It shows that Lucky Cement is at much better place financially from DG
Khan Cement.

Return on Capital Employed:

Lucky Cement has more return on capital employed (14.54%) than DG Khan Cement (9.54%). It
is due to the higher return on investment of Lucky Cement because it generates more profit than
DG Khan Cement in 2018.
Lucky Cement Liquidity Ratios:

DG Khan Cement Liquidity Ratios:

Working Capital Ratio:

Lucky Cement has working capital of Rs. 27718415, whereas, DG Khan Cement has working
capital of Rs. 6522433. It shows that Lucky Cement is at a great position, due to its huge amount
of working capital to run its business in a better way than DG Khan Cement.

Current Ratio:
Lucky Cement is at a better position by having its current ratio of 2.82 times than DG Khan
cement which has 1.29 times. It means that Lucky Cement has 2.82 times of assets to pay off its
liabilities in coming future.

Quick Ratio:
Quick ratio of Lucky Cement is 2.12 times which shows a good position of its quick assets to
pay off its current liabilities in a short period of time as compare with DG Khan Cement who has
Quick ratio of 0.84 times. It is due to the rapid increase in credit sales of Lucky Cement.
Lucky Cement Activity Ratios:

DG Khan Cement Activity Ratios:

Receivable Turnover:
Lucky Cement has R/To of 23.73 times whereas, DG Khan Cement has R/To of 8.26 times in
2018. It shows that Lucky Cement recover its debts so quickly which results in high receivable
turnover as compare to DG Khan Cement.
Inventory Turnover:
Lucky Cement has inventory turnover of 3.22 times which shows that they sells their stock so
quickly and don’t hold their stock for long time.

Payable Turnover:
Lucky Cement has lower payable ratio than DG Khan Cement. It shows that Lucky Cement pay
its payables quicker than DG Khan Cement.
Solvency Ratios of Lucky Cement:

Solvency Ratios of DG Khan Cement:

Gearing Ratio / Debt to Equity Ratio:

Lucky cement has very low gearing ratio which shows very low risk in business. It shows that
they are not relying on debt financing. Lucky Cement’s investors have more stake in the business
than creditors.
Investor Ratios of Lucky Cement:

Investor Ratios of DG Khan Cement:

Earnings per Share:

Lucky Cement EPS is decreasing in 2018 as compare with DG Khan Cement EPS which is
increasing every year. It is because of decrease in profit after taxation due to which EPS is
decreased in 2018 as compare with last year.

Price Earnings Ratio:

In 2018 Lucky Cement PE Ratio is decreased as compare with last year where DG Khan Cement
PE Ratio is also decreasing in 2018. It is due to the over pricing of share price in 2018.

Market Value:
Lucky Cement market value is decreased in 2018 where as its market value was increasing in last
5 years. It is due to the decrease in market value of equity.
Dividend Yield Ratio:
Lucky Cement dividend yield ratio is increased in 2018 so rapidly, it means that Lucky Cement is
paying good amount to its shareholders from its profit in the form of dividend.

Comparison of Lucky Cement & Fauji Cement

Lucky Cement Profitability Ratios:

Fauji Cement Profitability Ratios:

Gross Profit Ratio:

The gross profit ratio of Fauji cement is lesser than Lucky cement of past five years. Even
though the gross profit of Lucky cement declined by 9% in 2018 yet its Gross Profit ratio is still
better than Fauji cement whose Gross Profit Ratio is mostly 43% or more whereas gross profit
ratio of Fauji Cement is 32% per year (if we take average).

Net Profit Ratio:

The net profit ratio of Fauji cement per year (taking the average of past five years) is 17% per
year however the Net Profit Ratio of Lucky cement (on the basis of average per year) is 26.6%
which is almost 10% more as compared to Fauji cement which is because of higher sales of
lucky cement.
.

Lucky Cement Liquidity Ratios:

Fauji Cement Liquidity Ratios:

Current Ratio:
The current ratio of Lucky cement is 2.82 times almost whereas the current ratio of Fauji Cement
is 1.49 times: which is a pure indicator that Fauji cement has more current liabilities in the ratio
of their current asset, as compared to lucky cement who has lesser current liabilities as compared
to their current assets
Quick Ratio:
The Quick Ratio of Lucky Cement is 2.12 times whereas the Fauji Cement has the quick ratio of
1.20 on the basis of average of past 6 years indicating that Fauji cement has more Current
liabilities in the ratio as compared to Lucky cement. Fauji cement is at the edge in the ratio as
Quick ratio of 1-1.5 is in safe zone where as more ratio indicates strong financial position of a
firm as seen in lucky cement’s quick ratio which is 2.12.
Lucky Cement Activity Ratios:

Fauji Cement Activity Ratios:

Asset Turnover:
The Asset Turnover ratio of Lucky cement is 0.44 times per year (on average basis)whereas
Fauji cement has Asset Turnover of 0.73 times indicating that Fauji cement has lesser assets but
generates larger sales as compared to Lucky cement who has larger assets and generating lesser
sales as compared to Fauji cement.
Fixed Asset Turnover:
Lucky cement has Fixed asset turnover of 1.16 times whereas Fauji Cement is 0.94 which means
fixed asset of Lucky cement is generating more sales as compared to Fauji Cement.
Solvency Ratios of Lucky Cement:

Solvency Ratios Fuji Khan Cement:

Gearing Ratio / Debt to Equity Ratio:

Gearing Ratio of Fauji Cement is 0.05 times whereas the Lucky cement is not given.
Investor Ratios of Lucky Cement:

Investor Ratios of Fauji Cement:

Earnings per Share:

EPS of lucky cement per year on average basis is 37Rs whereas EPS of Fauji cement per year on
average basis is 2.41Rs.
Market Value:
The Market Value of Lucky Cement per share is 507 Rs where as The Market Value of Lucky
Cement per share is 28.89 Rs.
Dividend Yield Ratio:
Lucky cement’s Dividend yield ratio is 19.5% whereas Fauji cement’s Dividend yield ratio is
3.46% which is lesser than Lucky Cement.
CONCLUSION:
• The analysis done in the previous slides makes it very clear, that Lucky Cement is the
most favorable company in the cement industry, with the highest number of shareholders
and returns.

• They have also earned the highest gross profit for the last 5 years in comparison to Fauji
and DG Khan.

• In 2012 Lucky Cement was the only company in Pakistan to receive an A+ rating by
Global Reporting Initiative (GRI) of Netherlands, for its Sustainability Report for 2012.

• The profit-after-tax of Lucky Cement Limited jumped up by 70.82 percent to Rs6.78

billion for the year ended June 30, 2012 from Rs3.97 billion. This was the highest
increase in profits in one Fiscal year in the history of Pakistan.