D.G. Khan Cement Company Limited: Nishat Group

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D.G.

Khan Cement Company Limited


NISHAT GROUP
Nishat Group is one of the leading and most
diversified business groups in South East Asia. With
assets over PRs.300 billion, it ranks amongst the top
five business houses of Pakistan. The group has
strong presence in three most important business
sectors of the region namely Textiles, Cement and
Financial Services. In addition, the Group has also
interest in Insurance, Power Generation, Paper
products and Aviation. It also has the distinction of
being one of the largest players in each sector. The
Group is considered at par with multinationals
operating locally in terms of its quality of products &
services and management skills.

Mission Statement
To provide quality products to customers and explore
new markets to promote/expand sales of the
Company through good governance and foster a
sound and dynamic team, so as to achieve optimum
prices of products of the Company for sustainable
and equitable growth and prosperity of the Company.

Vision Statement
To transform the Company into modern and dynamic
cement manufacturing company with qualified
professionals and fully equipped to play a meaningful
role on sustainable basis in the economy of Pakistan.
D.G. Khan Cement Company Limited
D.G. Khan Cement Company
D.G. Khan Cement Company Limited (DGKCC), a unit
of Nishat group, is the largest cement-manufacturing
unit in Pakistan with a production capacity of 5,500
tons clinker per day. It has a countrywide distribution
network and its products are preferred on projects of
national repute both locally and internationally due
to the unparallel and consistent quality. It is list on all
the Stock Exchanges of Pakistan.

DGKCC was established under the management


control of State Cement Corporation of Pakistan
Limited (SCCP) in 1978. DGKCC started its
commercial production in April 1986 with 2000 tons
per day (TPD) clinker based on dry process
technology. Plant & Machinery was supplied by UBE
Industries of Japan.

Acquisition of DGKCC by Nishat Group


Nishat Group acquired DGKCC in 1992 under the
privatization initiative of the government. Starting
from the privatization, the focus of the management
has been on increasing capacity as well as utilization
level of the plant. The company undertook the
optimization by raising the capacity immediately
after the privatization by 200tpd to 2200tpd in 1993.
Capacity Addition
To meet the increasing demand and to capitalize on
its geographic location, the management further
expanded the capacity by adding another production
line with a capacity of 3,300 tons per day in year
1998. Design of the new plant is based on latest dry
process technology, energy efficient and
environmental protection from particulate pollution
according to the international standards. The plant
and machinery was supplied by M/s F.L. Smidth of
Denmark. As a result, DGKCC emerged as the largest
cement production plant in Pakistan with annual
production capacity of 1,650,000 M tons of clinker
(1,732,000 M.Tons Cement) constituting about 10%
share of the total cement production capacity of the
country. The optimization plan is still underway to
increase the total capacity of the two units to 6700
TPD by mid of 2005 from 5500 TPD at present

Expansion -Khairpur Project


Furthermore, the Group is also setting up a new
cement production line of 6,700 TPD clinker near
Kalar Kahar, Distt. Chakwal, the single largest
production line in the country. First of its kind in
cement industry of Pakistan, the new plant will have
two strings of pre-heater towers, the advantage of
twin strings lies in the operational flexibility whereby
production may be adjusted according to market
conditions. The project will be equipped with two
vertical cement grinding mills. The cement grinding
mills are first vertical Mills in Pakistan. The new plant
would not only increase the capacity but would also
provide proximity to the untapped market of
Northern Punjab and NWFP besides making it more
convenient to export to Afghanistan from northern
borders.

BOARD OF DIRECTORS
• Mrs. Naz
Mansha Chairperson/Directo
r
• Mian Raza Mansha Chief
Executive/Director
• Saqib Elahi Director
• Khalid Qadeer Qureshi Director
• Mohammad Azam Director
• Zaka ud din Director
• Inayat Ullah Niazi Director &
Chief Financial Officer

The province-wise distribution of cement plant is as


under.

Providence Units Capacity (Million


Tons)
Punjab 8 7.488
Sindh 8 3.851
NWFP 6 4.945
Baluchistan 1 0.758
Total 23 17.040
Financial statement analysis (Ratio analysis)
Inter company analysis

Intra company analysis


Cash Ratio (CR);

Cash + Cash Equivalent


Cash Ratio (CR) = --------------------------------
Current Liabilities

Liquidity Position 2008 2007 2006 2005 2004


Cash Ratio 1.18 2.31 1.43 0.94 0.62

Current Ratio (CR);

Current Assets
CR = --------------------------
Current Liabilities

Liquidity Position 2008 2007 200 2005 200


6 4
Current Ratio 1.54 2.60 1.65 1.37 1.21
Industry leader 0.94 0.84 1.94
Current Ratio

Current ratio shows the ability to cover its current liabilities with
its current assets D.G khan Cement Company’s current ratio is
higher then the lucky cement company which indicates a good sign
to mange or cover its current liabilities.

Quick (Acid-Test) Ratio (QR);

Current Assets – Inventory


QR = ----------------------------------------
Current Liabilities

Liquidity Position 2008 2007 2006 2005 2004


Acid Test Ratio 1.22 2.33 1.44 0.96 0.64
Industry leader 1.15 0.24 0.45
Acid Test Ratio

It shows a firms ability to meet its current liabilities with most


liquid assets.
D.G khan Cement Company’s quick ratio is slightly above the
lucky cement company which indicate that it is in line with lucky
cement company
It indicate that acid test ratio is favorable for the company but it
dose not tell us
This ratio show that D.G khan Cement Company is able to meet its
liabilities easily with its currents assets
Inventory Turnover (IT);

Cost of Goods Sold


IT = --------------------------
Inventory

Activity Ratio 2008 2007 2006 2005 2004


Inventory 13.19 16.83 24.40 16.67 8.36
Turnover times times times times times
This ratio tells us how many times inventory is turnover into
receivable through sales during a year
D.G khan Cement Company’s inventory turnover ratio is
decreasing from last 2 years which is not favorable for company.
Low inventory turnover is often a sign of excessive, slow moving,
or absolute item inventory (which may require the treatment of
inventor as liquid as asset).

Inventory Turnover in Days (ITD);

360
IT = --------------------------
Inventory Turnover

Activity Ratio 2008 2007 2006 2005 2004

Inventory 27.66 21.69 14.96 21.89 43.63


Turnover in days days days days days days
Industry leader
27.41 27.90 31.04
Inventory
Turnover in days days days days

This figure tells us how many days, on average before inventory is


turned over into account receivable through sales
D.G khan Cement Company is on average 28 days is going then
lucky cement company
Account receivable turnover Ratio (ART);

Annual net created sale


ARTR= ------------------------------
Receivables
Activity Ratios 2008 2007 2006 2005 2004
Account
41.02 58.78 105.79 81.94 73.78
Receivables
Turnover times times times times times

The receivable turnover shows the quality of the firm’s receivable


that how successful the firm is in its collection. D.G khan Cement
Company’s receivable turnover ratio is increasing from previous
years and its improving their receivables turnover and the quality
of the collection is also good, that tell us the number of times the
account receivable turned into cash during the year.

Average Collection Period (ACP):

Accounts Receivable *360


ACP = ---------------------------------------
Annual Sales

OR

360
ACP = ----------------------------------
Receivable Turnover

Activity Ratio 2008 2007 2006 2005 2004


Average collection
period
8.78 6.12 3.40 4.39 4.87

This figure tells us the average numbers of days that receivable are
outstanding before being collected. Since the D.G khan Cement
Company’s is increasing which means that the company is good in
sales management.
Operating Cycle (0P)

Operating cycle = Account Receivables turnover in days +


inventory turnover in days

2008 =8.89+27.66 =36.55 days


2007 =6.20+21.69 =27.89
2006 =3.45+14.96 =18.41
2005 =4.45+21.89 =26.34
2004 = 4.95+43.63=48.58

Activity Ratio 2008 2007 2006 2005 2004


36.55da 27.89 18.41 26.34 48.58
Operating Cycle
ys days days days days
Industry leader
Operating Cycle 12.74 2.95 -20.11

The operating cycle is the length of time from the commitment of


cash for purchases until the collection of receivables resulting from
sale of goods or services.
D.G khan Cement Company with high operating cycle is not liquid
in a dynamic sense. It can produce a product sale it, collect it in a
relatively in a high period of time and on other and lucky cement
company is well in operating cycle in current year. High operating
cycle may suggest excessive receivable or inventory.

Debt Ratio (DR);

Total Liabilities
DR= ---------------------------
Total Assets
Debt Ratios 2008 2007 2006 2005 2004
Debt Ratio 43 34 44 48 46
The debt management ratios of DGKC showed a positive trend
during FY07. The debt to asset and equity ratios as well as the
long-term debt ratio all receded during the period and this reflected
a reduction in the company's dependence on debt financing.

Debt-Equity Ratio (DER);

Long-Term Debt
DER= -----------------------------
Stockholders’ Equity

Debt Ratios 2008 2007 2006 2005 2004


Debt To Equity Ratio 76% 53% 78% 93% 85%
Industry leader
175.02 234.14
Debt To Equity Ratio 57.17%
% %

The ratios show that the creditors are providing 76 pesas of


financing for each 1 rupee being provided by shareholders. On the
other hand the debt to equity ratio of lucky cement company have
57.17 pesas of financing for each 1 rupee , it means that investor’s
are more trust on D.G khan Cement Company then lucky cement
company.
Gross Profit Margin (GPM);

Gross Profits
GPM= ---------------------
Sales

Profitability Ratios 2008 2007 2006 2005 2004

Gross Profit Margin 15 32 49 37 36


Industry leader
29.35 37.00
Gross Profit Margin 35.53%
% %
This ratio tell us the profit with respect of the firm relative to sales
after we deduct the cost of producing the goods it is the measure of
the D.G khan Cement Company’s operations as well as indication
of how products are priced.
Gross profit margin ratio of D.G khan Cement Company is low as
compare to lucky cement company it means that D.G khan Cement
Company is not performing their operations in a good manner.

Net Profit Margin (NPM);

Net Profit after Taxes


NPM= --------------------------------
Sales

Profitability Ratios 2008 2007 2006 2005 2004


Net Profit Margin 7.84 25 31 31 20
Industry leader
20.34 24.04
Net Profit Margin 22.71%
% %

This ratio is the measure of the firm’s profitability of sales after


taking account of all expense and income taxes.
D.G khan Cement Company’s net profit margin show 7.84 pesas
out of every 1 rupee constitutes after profit tax
Return on Equity (ROE);

Net Profit after Taxes


ROE= ------------------------------
Stockholders’ Equity

Return
2008 2007 2006 2005 2004
Ratios
Return on
Total Equity
0.30% 0.37% 17% 22% 13%
Industry
leader
17.08
Return on 27.23% 27.38%
Total Equity %

This ratio tell us the earning power on shareholder’s book value


investment value low ratio reflect of firm’s investment
opportunities are not strong as compare to lucky cement company.
D.G khan Cement Company mostly depends on debt financing to
improve the ROE. It means that the D.G khan Cement Company is
involves excessive financial risk.

Return on investment; (ROI)

Net profit after taxes


(ROI) = -------------------------------
Total assets

Investment ratios 2008 2007 2006 2005 2004


Return on 15.4
2.92 5.34 12.58 10.07
Investment 7
Earnings per Share (EPS);

Earnings Available for Common stockholders


EPS = -----------------------------------------------------------------
Number of Shares of Common Stock
Outstanding

Investment ratios 2008 2007 2006 2005 2004


Earning per common
shares 0.017 0.60 0.10 0.76 0.35
Industry leader
Earning per common 14.11 9.67 7.37
shares

Price/Earnings (P/E) Ratio;

Market Price Per Share of Common Stock


P/E = ---------------------------------------------------------
Earnings Per Share

Investment ratios 2008 2007 2006 2005 2004


Price earning ratio
258.08 4.81 3.38 3.96 8.19
Industry leader
Earning per common 7.59 9.86 11.32
shares

The ratio of the price per share /earning per share ratio of D.G
khan Cement Company is higher in contrast to lucky cement
company it shows that the growths of D.G khan Cement Company
is strong as compare to lucky cement company and also have a
lower risk and the trust element of D.G khan Cement Company is
also high.

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