1

Financial Analysis on




By

Faizan Ahmed (13378)




Analysis of Financial Statement (BBA-H)

To

Sir Faisal Sarwar




July 22, 2013

2



Table of Contents
1 OVERVIEW
2 SWOT ANALYSIS.
3 HORIZONTAL ANALYSIS.
4 VERTICAL ANALYSIS
5 RATIO ANALYSIS.
6 INTRA COMPANY ANALYSIS
7 INTERPRETATION
8 CONCLUSION.






3



REASON FOR CHOOSEN PAKISTAN TOBACCO COMPANY:
I selected Pakistan Tobacco Company for analysis because it is market leader of Tobacco
industry in Pakistan and all the famous brands of cigarettes available in Pakistan are produced by
PTC.
TOBACCO INDUSTRY IN PAKISTAN:
The tobacco industry in Pakistan operates in an oligopolistic market, with only two major
players, Pakistan Tobacco Company (PTC) having 50% market share and Philip Morris Pakistan
(formerly Lakson Tobacco Company) having a market share of 32%. The remaining 18% of the
market consists of small fragmented players (usually out of tax bracket sold in interiors) and
hence their prices are very much lower than the regulated segment. Both the big companies have
expanded their capacities in Pakistan and hence have their own manufacturing facilities in the
country enough to cater to the countrys current demand for cigarettes. Pakistan Tobacco
Company operates with two manufacturing plants, one in Khyber Pakhtunkhwa and the other in
Punjab having a combined annual capacity of ~45bn sticks. and in the market.

ECONOMIC IMPORTANCE OF TOBACCO
Tobacco is a crop with myriad aspects. Not only does it involves scientific treatment, but special
attention by the producers during the growth, curing and marketing stages. This crop possesses
considerable economic significance and its impact on the fiscal and monetary policies of major
producing, exporting/importing countries is quite pronounced. In Pakistan, although tobacco
cultivation occupies a relatively small area of 0.27% of the total irrigated land in the country, it is
of great economic value as a source of revenue, employment and foreign exchange earnings to
the country. During 2011-2012, above Rs.65.6985 billions were contributed to the Federal
Exchequer as Central Excise Duty and Sales Tax. Being a highly labor -intensive crop, about

4

eighty thousand persons are involved in its cultivation, fifty thousands are engaged
in 21 factories of the Tobacco Industry and another one million find indirect
employment. It is also an important source of foreign exchange earnings for the
country (US$ 30.58 million during 2011-2012). Had the production of tobacco
crop not been developed by the Pakistan Tobacco Board on scientific lines, the country would
have been importing raw material worth Rs.8-10 billion per annum (2011-2012).
PAKISTAN TOBACCO COMPANY:
Pakistan Tobacco Company is an associate of leading global tobacco group, British American
Tobacco Company, which has a legacy spreading over more than 100 years. The BATC has its
presence in more than 180 countries and is known for its high quality tobacco brands. From
crops to commercialization, the company is involved in every aspect of the cigarette
manufacturing. The product portfolio of PTC is well diversified it has different varieties to offer
a wide range of smokers from low price to premium quality high priced cigarettes.
British American Tobacco Company started its operations back in 1947 and is the first
multinational to lay its foot on Pakistan. In 65 years, it has grown from a company operating
with a warehouse near Karachi port to having two state of the art facilities employing more than
1,700 employees today. PTC has products that cater to all markets and all consumer choices
from low income to prestige brands. It has six different brands to offer its consumers, Dunhill
and Benson and Hedges are the premium quality brands. They were re-launched in Pakistan in
2007 and 2003. Both the brands have been performing well since then. John Player Gold Leaf,
the largest urban brand in Pakistan, is the most familiar brand. In the low range segment PTC
offers Capstan by Pall Mall (CbPMO), Embassy and Gold flake. Embassy is the leading volume
brand, and the most popular brand in Punjab. It's locally tailor-made taste has enabled it to
achieve high brand loyalty.






5


ANNUAL HIGHLIGHTS
Even though the government then undertook some significant crackdown drives during 2012, the
year did not see any drastic change in the enforcement environment as the consumers continued
to be attracted towards the cheaper, duty evaded brands. Also, 2012 was a year of sustainability
for PTC after 2011 - a year when workforce was rationalized and the technology was upgraded.
The tobacco firms market share during 2012 stood at 50.4 percent compared to 48.6 percent in
2011 primarily on account of the re launching of Capstan by Paul Mall original a amongst its
other initiatives of marketing its brands.











6


SWOT ANALYSIS OF PAKISTAN TOBACCO COMPANY
STRENGTHS:
Large portfolio of brands
Market leader in with 50% share captured
Manufacturing plants in Attock and Jehlum
PTC employees are loyal with their organization
They have strong supplier chain system and their products are available in every place
and with every retailer
PTC have their own farms in KPK region (Mardan , Swabi , Bonaire)

WEAKNESS:
Their production system is not cost effective

OPPORTUNITIES:
Because of their good will potential customers are switching to other brands of PTC
Lakson Tobacco Company is diversifying some of its Brands .This is great opportunity
for Pakistan Tobacco Company that customers of Lakson Tobacco are switching to PTC
Brands

THREAT:
In KPK region PTC has facing security problem from Talibans Millions and extra money
is spent to give security to employee of PTC
Price of Tobacco are increasing due to Government duty
PTC is not allowed to advertise its products
Counter fit has a 20% market share
Rising taxes
Increasing regulation
Stiff competition from the growing illicit/illegal trade in the wake of weak enforcement.


7


About Analysis:
I did the analysis of Pakistan tobaccos financial statement and subsequently found out
the financial performance and the position of the company, along with the comparative
analysis on the basis of intercompany and industry average. The analysis involves
horizontal, vertical, trend and ratio analysis. For the investor considering the purchase of
shares in the company, the return they will earn is the key financial factor but an overall
evaluation of the companys performance and position is also important to get a better
picture of how well the company is actually doing. This report will assist them making
decision.
PTC is using IFRS and GAAP; IFRs for report and GAAP for Accounting standard
Inventory Valuation Method:
Stock-in-trade is stated at the lower of cost and net realizable value. Cost is determined using
the weighted average method. The cost of finished goods and work in process comprises design
costs, raw materials, direct labour , other direct costs and related production overheads.






8


HORIZONTAL ANALYSIS OF PROFIT AND LOSS :
PROFIT & LOSS ACCOUNT 2007 2008 2009 2010 2011 2012

Gross turnover base year 19.97 40.73 47.22 65.06 84.72
Excise duties base year 20.92 43.20 57.81 79.78 101.20
Sales tax base year 23.40 48.59 58.40 77.47 95.07
Net turnover base year 17.64 35.05 30.60 43.05 61.32
Cost of sales base year 21.71 41.09 54.79 75.38 83.00
Gross Profit base year 11.68 26.23 -4.77 -4.22 29.62
Selling and distribution expenses base year 7.66 25.07 82.62 74.29 95.82
Administration expenses base year 26.11 49.54 67.52 79.54 87.72
Other operating income base year -15.62 215.65 -35.04 -24.79 25.98
Other operating expenses base year 83.30 53.28 -37.99 252.14 170.69
Operating profit base year 3.78 23.39 -58.85 -82.24 -26.65
Finance income base year 93.02 233.01 19.61 26.82 110.69
Finance cost base year 0.33 68.94 477.29 442.04 434.30
Profit before taxation base year 4.54 24.81 -61.93 -84.98 -28.72
Taxation base year 4.37 24.66 -62.21 -85.01 -28.96
Profit for the year base year 4.63 24.88 -61.78 -84.97 -28.58




-300
-250
-200
-150
-100
-50
0
50
100
150
2007 2008 2009 2010 2011 2012
Profit for the year
Profit before taxation
Operating profit
Gross Profit

9


Interpretation of Horizontal Analysis of P &L:
Keeping 2007 as a base year, one can easily notice that PTC managed to show growth in
sales in 2012 in spite of the adverse economic situation prevalent in the country during
the time. A similarity can be noticed in cost of goods sold. The main factor behind
increase in cost of sales is continuous increasing prices of tobacco and other input costs.
Gross profit shows highest increase in 2012 which is also a positive sign.
An increasing trend can be seen in overall expenses,
Operating profit has a decreasing trend overall, but in 2012 the situation is far better as
compared to 2010 and 2011.
Finance cost and Finance income also increased rapidly which was a result of high
interest rates prevailing in the economy.
The overall net profit in 2012 is 28.58% lower than base year but even company is in
better position as compared to 2010 and 2011. One of the factors contributing to decrease
in profit is the increased government levies for all tobacco product and producers in the
form of custom duties, government sales tax and especially Federal Excise Duty (FED)







10


HORIZONTAL ANALYSIS OF BALANCE SHEET :
Balance Sheet
2007 2008 2009 2010 2011 2012
NON CURRENT ASSET

Property, Plant and Equipment base year 9% 15% 13% 18% 10%
Investment in Subsidiary Company at
Cost base year 0% 0% 0% 0% 0%
Long Term Loans base year -26% -42% -73% -90% -96%
Long Term Deposits and Prepayments base year 216% 53% 18% 74% 56%
Total Non Current Assets base year 9% 15% 13% 18% 10%
Current Assets base year
Stocks in trade base year 2% 44% 50% 62% 81%
Stores and spares base year 35% 55% 42% 35% 143%
Trade debts base year 12% -29% -33% -50% -55%
Loans and advances base year 71% 26% 25% 67% 78%
Short term prepayments base year 63% 12% 82% 45% 53%
Other receivables base year 7% -62% -59% -15% 25%
Cash and bank balances base year -58% -71% -69% -34% -17%
Total Current Asset base year 2% 34% 40% 53% 76%
Total Assets base year 6% 24% 26% 35% 41%
Share Capital & Reserves base year
Share Capital base year 0% 0% 0% 0% 0%
Revenue Reserves base year -8% 48% -9% -32% 35%
Total Capital base year -3% 15% -3% -10% 11%
Non Current Liabilities base year
Retirement Benefits base year 51% -100% -100% -100% -100%
Deferred Taxation base year 3% 37% 33% 34% 35%
Lease liability base year 0% 0% 0% 0% 0%
Total Non Current Liabilities base year 21% -15% 776% -17% -9%
Current Liabilities base year
Trade and other payables base year 22% 42% 50% 99% 97%
Accrued interest / mark-up accrued base year 23% 229% 457% 509% 387%
Short term finance base year -45% 25% 117% 72% 19%
Lease liability base year 0% 0% 0% 0% 0%
Income tax payable base year 33% 116% -107% -135% 18%
Total Current Liabilities base year 8% 42% 58% 83% 78%
Net Equity + Net Liabilities base year 6% 24% 26% 35% 41%

11




Interpretation of Horizontal Analysis of B/S:
Total assets have positive trend in the year 2008 and 2012. The increase in current assets
can be attributed mainly to increased stocks-in-trade and stores and spares which rose by
81% and 143% respectively as compared to 2007. The flattening of sales and higher raw
material costs due to inflation and rupee devaluation led to this sharp increase.
The growth driver of current liabilities was trade and other payable and accrued interest
which grew at a rate of 97%. Something similar was witnessed in the sub-heading of
sales tax payable to the government. Thus, we find that a large part of the current
liabilities grew because of the presence of payables to the government in the form of tax.
The sharp increase in current liabilities is also attributed to a significant rise in short term
running finance, available to the company.
Shareholders equity increased in 2012 by 11% without any increase in share capital
which is a positive sign and shows that company is generated good revenue reserves.

0%
20%
40%
60%
80%
100%
2,008 2,009 2,010 2,011 2,012
Net Equity + Net Liabilities
Total Assets

12


VERTICAL ANALYSIS OF PROFIT AND LOSS:
PROFIT & LOSS ACCOUNT 2007 2008 2009 2010 2011 2012

Sales 254.87 259.92 265.59 287.29 294.08 291.85
Excise duties -120.38 -123.73 -127.64 -145.45 -151.28 -150.13
Sales tax -34.50 -36.19 -37.95 -41.84 -42.80 -41.72
Net Sales 100%
16,042,877 18,872,495 21,666,525 20,952,629 22,949,974 25,880,309
Cos Of Goods Sold -59.39 -61.44 -62.04 -70.39 -72.81 -67.37
Gross Profit 40.61 38.56 37.96 29.61 27.19 32.63
Selling and distribution expenses 11.19 10.24 10.37 15.65 13.64 13.59
Administration expenses -4.59 -4.92 -5.08 -5.89 -5.76 -5.34
Other operating income 0.45 0.32 1.05 0.22 0.24 0.35
Other operating expenses -2.09 -3.26 -2.38 -0.99 -5.15 -3.51
Operating profit 23.19 20.45 21.18 7.31 2.88 10.54
Finance income 0.19 0.32 0.47 0.18 0.17 0.25
Interest Expense -0.16 -0.14 -0.20 -0.71 -0.61 -0.54
Profit before taxation 23.22 20.63 21.45 6.77 2.44 10.26
Taxation -8.13 -7.21 -7.51 -2.35 -0.85 -3.58
Profit for the year 15.09 13.42 13.95 4.42 1.59 6.68


0
20
40
60
80
100
120
2007 2008 2009 2010 2011 2012
Profit for the year
Profit before taxation
Operating profit
Gross Profit

13



Interpretation of Vertical Analysis of P&L:
Gross profit rate is declining from 2007 but in 2012 it was 32.6% which is better as compared
to 27.1% in 2011.
Operating profit rate is also showing similar trend and in 2012 PTC showed better operating
profit as compared to 2010 and 2011.
Secondly if we observe the profit trend it is seen that gross profit is decreasing from 2007 till
2011 but in 2012 they are growing by 2 % slowly and gradually but not up to the mark as
they were in the 2007.
But after expenses and all deduction of taxes net profit is not earning up to the mark from 5%
in year 2007 it is declining to 1 and even in 2010 profit was not to the mark and in 2012 they
try to boost their profits but still not like 2007 or base year.








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VERTICAL ANALYSIS OF BALANCE SHEET:
BALANCE SHEET 2007 2008 2009 2010 2011 2012
----------------------- Percentage (%) ------------------------
NON CURRENT ASSET
Property, Plant and Equipment 52.5 53.9 48.7 47.1 46.0 41.0
Investment in Subsidiary Company at Cost 0.1 0.0 0.0 0.0 0.0 0.0
Long Term Loans 0.1 0.1 0.1 0.0 0.0 0.0
Long Term Deposits and
Prepayments 0.1 0.4 0.2 0.1 0.2 0.1
total non-current assets 52.8 54.4 48.9 47.3 46.2 41.2
Current Assets
Stocks in trade 40.7 39.0 47.2 48.6 48.8 52.0
Stores and spares 1.4 1.8 1.8 1.6 1.4 2.5
Trade debts 0.0 0.0 0.0 0.0 0.0 0.0
Loans and advances 0.4 0.6 0.4 0.4 0.5 0.5
Short term prepayments 0.7 1.0 0.6 1.0 0.7 0.7
Other receivables 2.3 2.4 0.7 0.8 1.5 2.1
Cash and bank balances 1.7 0.7 0.4 0.4 0.8 1.0
total current assets 47 46 51 53 54 59
Total Assets
9,826,232 10,395,041 12,226,861 12,363,196 13,239,068 13,883,800
Share Capital & Reserves 0.0 0.0 0.0 0.0 0.0 0.0
Share Capital 26.0 24.6 20.9 20.7 19.3 18.4
Revenue Reserves 11.7 10.1 13.9 8.5 5.9 11.2
total capital 38 35 35 29 25 30
Non Current Liabilities
Retirement Benefits 5.0 7.1 0.0 0.0 0.0 0.0
Deferred Taxation 8.2 8.1 9.1 8.2 7.9
Lease liability 0.0 0.0 0.0 0.0 0.0 0.7
total non-current liabilities 13 15 9 92 8 9
Current Liabilities
Trade and other payables 36.1 41.6 41.2 43.2 53.4 50.4
Accrued interest / mark-up
accrued 0.1 0.1 0.2 0.4 0.4 0.3
Short term finance 10.6 5.5 10.6 18.2 13.5 8.9
Lease liability 0.0 0.0 0.0 0.0 0.0 0.4
Income tax payable 2.3 2.9 4.0 -0.1 -0.6 1.9
total current liabilities 49 50 56 62 67 62
Net Equity + Liability
9,826,232 10,395,041 12,226,861 12,363,196 13,239,068 13,883,800


15




Interpretation of vertical analysis of B/S :
Cash balances is also increasing as we seen they are selling the fixed assets in the years
therefore ultimately current assets are boost up.
Paid-up capital is almost stable to fluctuating so much but total equity was good enough
in 2007 and 2009 but now company is declining with respect to share holders.
In a summarize way, company is not good enough from 2007 till 2011 but in 2012 there
are on increasing trend if we observe from 2007 till 2012.




0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
2007 2008 2009 2010 2011 2012
total non-current assets
total current assets
total non-current liabilities
total current liabilities

16


Ratio Analysis

Profitability Ratios
2007 2008 2009 2010 2011 2012
Gross Profit Margin (%) 41 39 38 30 27 33
Operating Profit Margin (%) 23 20 21 7 3 11
Pretax Profit Margin (%) 23 21 21 7 2 10
Net Profit Margin (%) 15.09 13.42 13.95 4.42 1.59 6.68
Return On Assets (%) 26.08 25.05 26.72 7.52 2.84 12.75
Return On Equity (%) 65.33 70.18 70.94 25.68 10.91 42.08
Return On Capital Employed (%) 48.37 48.84 56.28 19.52 8.24 32.65

Formulae..

Gross Profit Margin = Gross Profit / Net Sales
Operating Profit Margin = Operating profit / net sales
Pretax Profit Margin = Pr tax Profit / Net Sales
Net Profit Margin = Net Profit / Net Sales
Return On Assets = Net Income / Average total assets
Return On Equity = Net Income / Average share holders' equity
Return On Capital Employed = EBIT /Capital Employed









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Profitability Ratios:
It is observed that in 2007 gross profit margin was tremendous but form 2008 till 2009
gross profit and almost stable not so much fluctuation takes and decline from 2010 but in
2012 , it is slowly and gradually increasing their profitability.
In 2011 net profit was 3 percent which was the lowest among all but still they have tried
to cover their all expenses and overall position of the company by getting returns on
assets and equity.
In 2010 & 2011 there is declining trend on the side of returns but in 2012 they are getting
better returns.


0
10
20
30
40
50
60
70
80
Gross Profit
Margin (%)
Operating
Profit Margin
(%)
Pretax Profit
Margin (%)
Net Profit
Margin (%)
Return On
Assets (%)
Return On
Equity (%)
Return On
Capital
Employed
(%)
2007
2008
2009
2010
2011
2012

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Liquidity Measurement Ratios
2007 2008 2009 2010 2011 2012
Working Capital (Rupees)
[Not Ratio] -181572.00 -470771.00 -614252.00 -1107810.00 -1705211.0 -426388.00
Current Ratio 0.96 0.91 0.91 0.85 0.81 0.95
Quick Ratio 0.13 0.13 0.07 0.07 0.07 0.11
Cash Ratio 171776.00 74311.00 52874.00 56945.00 114631.00 144030.00

Formulas
Working Capital = Current Assets - Current Liabilities
Current Ratio = Current Assets / Current Liabilities
Quick Ratio = (Current Assets-Inventory)/Current Liabilities
Cash Ratio = cash + cash equivalents + investments






19



Liquidity Measurement Ratios:

The company has not been maintaining consistent working capital which is a serious
issue for its day to day operations. However detailed analysis of working capital revealed
that although the net working capital has increased by Rs. 1.2 million in 2012 but
company has blocked its funds by increasing its stock in trade of Rs 7.2 million and
which shows ineffective cash management on part of the concerned division.

Current ratio, quick ratio and cash ratio are also showing fluctuation trend since 2008-
2012 due to the same reason that company has been losing its operating cash flows
because of lack of profitability and this is the reason that why trades and other payables
(part of current liabilities) is on the increasing trend and the company takes more time to
discharge all its current liabilities because of reducing liquidity.










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Solvency Ratio
2007 2008 2009 2010 2011 2012
Debt Ratio 0.28 0.16 0.31 0.63 0.53 0.30
Debt-Equity Ratio 1.65 1.88 1.87 2.50 2.97 2.38
Interest Coverage Ratio 144.65 150.68 107.13 10.47 4.98 20.17







Formulas
Debt Ratio = Total Liabilities / Total Assets
Debt-Equity Ratio = Total Liabilities / Shareholder's Equity
Interest Coverage Ratio = EBIT (operating profit) / Interest Expenses

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Solvency Ratios Analysis:
The lower the Debt ratios, the less leverage a company is using and the stronger its equity
position. In general, the higher the ratio, the more risk that company is considered to have taken
on. So Pak Tobacco is not highly leveraged company. Share holders of the company face
very low financial risk because the long term debt is a minimal portion of its total assets.

Debt ratio and debt equity ratio has been increasing from 2007-2010 because of
increasing balance of trade and other payables each year which is due to delayed
payments owing to reducing cash surplus. However debt ratios are slowly and gradually
showing decreasing trend from 2010 onwards that show a healthy as well as risky
position as far as financing of the company is concerned.



0
20
40
60
80
100
120
140
160
2007 2008 2009 2010 2011 2012
Debt Ratio
Debt-Equity Ratio
Interest Coverage Ratio

22




Interest coverage ratio of Pak tobacco is very unhealthy due to the sharp increase in finance
cost which was a result of high interest rates prevailing in the economy.
Although the company is still maintaining good debt ratios but its liquidity issues are
deterrent to its growth and overall outlook of its financial performance and position.



Asset Management /Activity Ratio



2007 2008 2009 2010 2011 2012
Inventory Turnover (times) 2.38 2.86 2.33 2.46 2.59 2.41
Inventory Turnover (days) 129 127 157 148 141 151
Account Payable Turnover 7.98 7.83 8.03 8.42 4.65 6.97
Asset Turnover (times) 4.16 4.72 4.71 4.87 5.10 5.44
Fixed Asset Turnover Ratio (times) 7.93 8.76 9.67 10.34 11.08 13.26

Formulas
Inventory Turnover = Cost Of Goods Sold / Average Inventory
Inventory Turnover Days = 365 / Inventory turnover
Asset Turnover = Net Sales / Total Assets
Payable Turnover = Purchases / Average Payable
Fixed Asset Turnover Ratio = Revenue / Property, Plant and Equipment


23








Assets Management And Activity Ratios Analysis:
Assets management ratios reveal that how company manage their assets and liquidity.
The ratios of turnover either times or days are fluctuating so much therefore this clearly
shows that the company has extended flexible terms to its customer and because of that
company is losing its profitability as well as it is seen that there is an increasing trend
going on in almost each turnovers so company need to improve on policies and has to
applied strict policies and ultimately the turnover days goes down and cash goes up and
profit will be increase.
Stock should not move to be on increasing trend as company is going down so they need
to work in investments rather than stock. Company need to work on maintain cash flows
as well as debt they are almost on debt financing and there cash flows are on declining
trend therefore they need to work on it.



0
20
40
60
80
100
120
140
160
180
2007 2008 2009 2010 2011 2012
Inventory Turnover (times)
Inventory Turnover (days)
Account Payable Turnover
Asset Turnover (times)
Fixed Asset Turnover Ratio (times)

24



As far as the fixed assets are concerned, the company has been seen to
regularly invest in latest machinery to cater for increased demand and to facilitate up
gradation in the technology footprint.
With the phenomenal growth in sales over the past couple of years and efficient
utilization of property plant and assets, the overall total asset turnover ratio has also
shown a rising trend over the years.


Valuation Ratios
2007 2008 2009 2010 2011 2012
Earning Per Share 9.47 9.91 11.83 3.62 1.42 6.77
Price - Earning Ratio 16.42 10.37 8.88 30.44 38.98 9.99
Dividend Payout Ratio (%) 104.5 97.38 80.73 165.71 147.61 59.88
Formulas
Earning Per Share= (Net income -Preferred dividend) / Weighted Average No of Ordinary Share
P/E Ratio = Current Share Price / Earnings per Share
Dividend Payout = Common Share Dividend/ Net income Attribute to common share

25





Valuation ratio Analysis:
EPS of PTC has declining trend from 2010 but 2012 shows better result due to which
EPS increased up to Rs. 6.77 per share.
Dividend Payout Ratio has declined in 2012 upto Rs. 59.88. Previously the excellent
performance of the company over the past couple of years allowed it to disburse dividends to its
share holders.




0
20
40
60
80
100
120
140
160
180
2007 2008 2009 2010 2011 2012
Earning Per Share
Price -Earning Ratio
Dividen Payout Ratio (%)

26


Intra Company: Pak Tobacco vs. Philip Morris:

Profitability Ratios
PTC PMC Difference
2012 2012 2012
Gross Profit Margin (%) 33 27.83 5.17
Operating Profit Margin (%) 11 -1.01 12.01
Net Profit Margin (%) 6.68 -3.37 10.05
Return On Assets (%) 12.75 -4.08 16.8
Return On Equity (%) 42.08 -8.12 50.2



Liquidity Measurement Ratios
PTC PMC Difference

2012 2012 2012
Current Ratio 0.95 1.05 -0.1
Quick Ratio 0.11 0.1428 -0.0328





Debt Ratios
PTC PMC Difference
2012 2012 2012
Debt Ratio 0.3 0.729 -0.429



Activity Ratios
PTC PMC Difference
2012 2012 2012
Inventory Turnover (times) 2.41 1.32 1.09
Asset Turnover (times) 5.44 0.985 4.45
Fixed Asset Turnover Ratio (times) 13.26 2.53 10.73


27

Intra company Analysis:
If we see the competitors that is Philip Morris and Pakistan tobacco has better
position in all aspects which can be summarize as follows:
Gross Profit Margin (%):
Pak tobacco

Philip Morris

Operating Profit Margin (%) :
Pak tobacco
Philip Morris

Net Profit Margin (%):
Pak tobacco
Philip Morris

28



Return on Assets (%) :
Pak tobacco

Philip Morris
Return On Equity (%):
Pak tobacco
Philip Morris
Current Ratio:
Pak tobacco
Philip Morris

Quick Ratio:
Pak tobacco
Philip Morris

29



Debt Ratio:
Pak tobacco
Philip Morris

Inventory Turnover (times):
Pak tobacco
Philip Morris

Asset Turnover (times):
Pak tobacco
Philip Morris
Fixed Asset Turnover Ratio (times):
Pak tobacco
Philip Morris

30



Interpretation:
Since we have observed that Pakistan tobaccos profitability position is better than
industry. But Pakistan tobacco has to work on liquidity and need to match at least
minimum level of the industry as we see from calculations, company has not so much
liquidity as there cash flows are negative as well as they are not generating cash and we
all know Cash is the blood of every organization. Company need to work on
maintaining cash flows and generate cash rather than building inventory.
Company is on low debt ratios compare to industry it shows the financial risk for their
shareholders and Pakistan tobacco needs to work on cash flows and on their debts.
Their interest coverage ratio is very high because of taxes which is not a good sign for the
Pakistan tobacco.
Pakistan tobacco have more times and days in order for recovery of cash this clearly
shows that the company has extended flexible terms to its customer and because of that
company is losing its profitability and having negative cash flows which ultimately
destroying the company position and performance.






31




Trend Analysis
PROFIT & LOSS
ACCOUNT 2007 2008 2009 2010 2011 2012

2,420,207 2,532,295 3,022,406 925,100 363,785 1,728,458







0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
0 1 2 3 4 5 6 7
Series1
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
0 1 2 3 4 5 6 7
Series1
Net Sales 16,042,877 18,872,495 21,666,525 20,952,629 22,949,974 25,880,309

32



Net Equity + Net Liabilities 9,826,232 10,395,041 12,226,861 12,363,196 13,239,068 13,883,800









0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
0 1 2 3 4 5 6 7
Series1

33


Conclusion:
PTCs remained market leader and its brands performed well against the competition and
challenging illicit cigarettes market. Despite bad performance in 2010 and 2011, 2012 is
a good year for PTC and company is on its way to earn profits as in previous years.
Since the company is on negative cash flows they need to impose strict rules and
regulations for their turnover days so that not so much negotiation takes place in order to
recover cash.
Pak tobacco need to maintain their liquidity because no one knows what happens in
future.
Pak tobacco need to maintain proper assets management in order to foresee the future as
we all know Pak tobacco doesnt have so much cash as well as liquidity and Cash is the
blood of every organizations so they need to improve their cash management in order to
stand as the market leader.
Overall the performance during 2012 improved. However, where the growth in top line
was 12 percent year-on-year and the bottom line also leaped by more than profits, the
margins still remained a small proportion of the gross revenues. Sales to net turnover
stood at almost seven percent, but in terms of gross revenues, margins were a trivial 2.3
percent in 2012.



34


References
www.businessrecorder.com
http://www.ptc.com.pk/group/sites/pak_7shbxn.nsf/vwPagesWebLive/DO7T5LP7/$FILE/medMD96DEL
P.pdf?openelement