Introduction

Sponsored by Fauji Foundation, Fauji Cement Company (FCCL) was incorporated in

Rawalpindi in 1992. With its headquarters in Islamabad, the company operates cement
plants at Jhang Bahtar, Tehsil Fateh Jang, District Attock in Punjab. The cement plant
has an annual production capacity of 1.165 million tons cement.

The quality portland cement produced at this plant is the one of the best in the country
and is preferred in the construction of highways, bridges, commercial and industrial
complexes, residential homes, and a myriad of other structures, fundamental to
Pakistan's economic vitality and quality of life.

In line with the cement industry, Fauji Cement has signed a contract with Polysius, a
German cement plant manufacturing firm for installation of state of the art, the largest
single line (7200 tons per day of clinker) ever commissioned in Pakistan. Meaningful
expansion will help the company expand its market share. The project is expected to be
commissioned in the 3rd/4th quarter of 2010.

Mission Statement

FCCL while maintaining its leading position in quality of cement and through greater
market outreach will build up and improve its value addition with a view to ensuring
optimum returns to the shareholders.

Our Vision

To transform FCCL into a role model cement manufacturing Company fully aware of
generally accepted principles of corporate social responsibilities engaged in nation
building through most efficient utilization of resources and optimally benefiting all stake
holders while enjoying public respect and goodwill.

Our Objective

The company has been set up with the primary objective of producing and selling
ordinary Portland cement. The finest quality of Cement is available for all type of
customers whether for Dams, Canals, industrial structures, highways, commercial or
residential needs using latest state of the art dry process Cement manufacturing
process.
Our Values

Customers: We listen to our customers and improve our product to meet their present
and future needs.

People: Our success depends upon high performing people working together in a safe
and healthy work place where diversity, development and team work are valued and
recognized.

Accountability: We expect superior performance and results. Our leaders set clear
goals and expectations, are supportive and provide and seek frequent feed back.

Citizen Ship: We support the communities where we do business, hold ourselves to the
highest standards of ethical conduct and environment responsibility, and communicate
openly with FCCL people and the public.

Financial Responsibility: We are prudent and effective in the use of the resources
entrusted to us.

Industry Overview

FY10 has been one of the worst in the history for the local cement industry in terms of prices
and profitability. The ongoing recession along with capacity expansions in the cement sector
have created a situation of excess supply and a drop in prices due to a severe price war. The
total cement production capacity of the industry stands at 45 million tons as of the end of
FY10, with capacity utilization of the industry estimated at 68%. The fierce price war has
drastically eroded retention prices on one hand, while on the other hand input prices have also
increased due to heavy inflationary pressures. On per-ton-basis, retention prices were lower by
21% YoY, while gross profit was lower by 53% YoY due to cost pressures.

On the backdrop of declining prices, overall cement volumetric growth registered an increase
of 9.3% YoY to stand at 34.2 million tons. The increase in the domestic dispatches of the
industry is 14.63% and the decrease in exports is 0.89%. While exports increasing
considerably during FY09; expanding capacity of neighboring countries deterred the local
cement industry from capturing the market and only a marginal rise was seen during FY10.

There are the some financial statement & ratio analysis to understand more accurately the
current position of the company.
 Profit & Loss Statement
For the Year Ended June 30, 2008 to 2010

Actual Statement
Rupees in '000'

2008 2009 2010

Sales 4,749,217 6,953,323 4,902,396

Less : Sales tax and excise duty 1,203,315 1,638,785 1,093,941
Net Sales 3,545,902 5,314,538 3,808,455
Less: Cost of sales
Raw Material 227,413 254,441 233,889
Direct Labor 133,451 196,081 224,949
Factory Overhead
Rent Rate & Taxes 5,284 6,513 4,441
Fuel Consumed 1,441,919 1,773,556 1,337,948
Power Consumed 451,419 604,701 692,496
Depreciation 290,477 297,109 310,389
Other F.OH 390,781 479,347 478,908
Total F.OH 2,579,880 3,161,226 2,824,182
Total Manufacturing Cost 2,940,744 3,611,748 3,283,020
Work in Process (37,308) (111,124) 30,210
Cost of Goods Manufactured 2,903,436 3,722,872 3,313,230
Finished goods (2,132) (4,043) 16,921
Own Consumption capitalized (13,514) (91,719) (37,280)
Cost of Sales 2,887,790 3,627,110 3,292,871
Gross Profit 658,112 1,687,428 515,584
Less: Operating Expenses
General & Admin Expenses
Salary, wages and benefits 41,153 61,591 58,358
Traveling and entertainment 7,483 3,236 4,962
Legal and Professional charges 1,935 3,171 4,003
Other General and Admin Expenses 25,924 35,188 36,167
Total General & Admin Expenses 76,495 103,186 103,490
Selling and Distribution Expenses
Salary, wages and benefits 18,791 25,184 26,868
Export Fright and other charges 24,482 8,758 1,101
Rent Rate & Taxes 1,468 1,630 3,013
Communication Expenses 3,242 3,200 2,841
Advertisement and sales Promotion 2,207 2,430 3,048
Other selling expenses 3,193 9,058 10,866
Total Selling & Distribution Expenses 53,383 50,260 47,737
Other Operating Expenses 34,290 78,173 25,460
Operating Profit (EBIT) 493,944 1,455,809 338,897
Add: Other income      
Interest on Bank Accounts 93,133 184,667 12,439
Interest on Long Term Advances 122 83 105
Gain on Disposal of Fixed Assets 2,550 2479 982
Others 11,769 3,195 13,694
Total other income 107,574 190,424 27,220
Less: Financial charges
Fee and charges on Loans 500 500 500
Interest on Long term loans 129,928 82,672 13,389
Interest on short term loans 11,609 135,653 20,182
Others 4,917 5,891 7,135
Total Financial Charges 146,954 224,716 41,206
Profit/ Loss Before Taxation 454,564 1,421,517 324,911
Less Taxation 40,966 413,894 74,732
Profit/loss after Taxation 413,598 1,007,623 250,179
Earning/ (Loss) per share – Basic 0.85 1.45 0.31
Earning/ (Loss) per share - Diluted 0.77 1.36 0.3

Horizontal Analysis
Rupees in '000'

2008 2009 2010

Sales 100.00% 146% 103%

Less : Sales tax and excise duty 100.00% 136% 91%
Net Sales 100.00% 150% 107%
Less: Cost of sales
Raw Material 100.00% 112% 103%
Direct Labor 100.00% 147% 169%
Factory Overhead
Rent Rate & Taxes 100.00% 123% 84%
Fuel Consumed 100.00% 123% 93%
Power Consumed 100.00% 134% 153%
Depreciation 100.00% 102% 107%
Other F.OH 100.00% 123% 123%
Total F.OH 100.00% 123% 109%
Total Manufacturing Cost 100.00% 123% 112%
Work in Process 100.00% 298% -81%
Cost of Goods Manufactured 100.00% 128% 114%
Finished goods 100.00% 190% -794%
Own Consumption capitalized 100.00% 679% 276%
Cost of Sales 100.00% 126% 114%
Gross Profit 100.00% 256% 78%
Less: Operating Expenses
General & Admin Expenses
Salary, wages and benefits 100.00% 150% 142%
Traveling and entertainment 100.00% 43% 66%
Legal and Professional charges 100.00% 164% 207%
Other General and Admin Expenses 100.00% 136% 140%
Total General & Admin Expenses 100.00% 135% 135%
Selling and Distribution Expenses
Salary, wages and benefits 100.00% 134% 143%
Export Fright and other charges 100.00% 36% 4%
Rent Rate & Taxes 100.00% 111% 205%
Communication Expenses 100.00% 99% 88%
Advertisement and sales Promotion 100.00% 110% 138%
Other selling expenses 100.00% 284% 340%
Total Selling & Distribution Expenses 100.00% 94% 89%
Other Operating Expenses 100.00% 228% 74%
Operating Profit (EBIT)
Add: Other income
Interest on Bank Accounts 100.00% 198% 13%
Interest on Long Term Advances 100.00% 68% 86%
Gain on Disposal of Fixed Assets 100.00% 97% 39%
Others 100.00% 27% 116%
Total other income 100.00% 177% 25%
Less: Financial charges
Fee and charges on Loans 100.00% 100% 100%
Interest on Long term loans 100.00% 64% 10%
Interest on short term loans 100.00% 1169% 174%
Others 100.00% 120% 145%
Total Financial Charges 100.00% 153% 28%
Profit/ Loss Before Taxation 100.00% 313% 71%
Less Taxation 100.00% 1010% 182%
Profit/loss after Taxation 100.00% 244% 60%

Vertical Analysis
Rupees in '000'
 2008 2009 2010

Sales 100% 100% 100%

Less : Sales tax and excise duty 25.34% 23.57% 22.31%
Net Sales 74.66% 76.43% 77.69%
Cost of sales
Raw Material 4.79% 3.66% 4.77%
Direct Labor 2.81% 2.82% 4.59%
Factory Overhead    
Rent Rate & Taxes 0.11% 0.09% 0.09%
Fuel Consumed 30.36% 25.51% 27.29%
Power Consumed 9.51% 8.70% 14.13%
Depreciation 6.12% 4.27% 6.33%
Other F.OH 8.23% 6.89% 9.77%
Total F.OH 54.32% 45.46% 57.61%
Cost of Sales 60.81% 52.16% 67.17%
Gross Profit 13.86% 24.27% 10.52%

General & Admin Expenses

Salary, wages and benefits 0.87% 0.89% 1.19%
Traveling and entertainment 0.16% 0.05% 0.10%
Legal and Professional charges 0.04% 0.05% 0.08%
Other General and Admin Expenses 0.55% 0.51% 0.74%
Total General & Admin Expenses 1.61% 1.48% 2.11%
Selling and Distribution Expenses
Salary, wages and benefits 0.40% 0.36% 0.55%
Export Fright and other charges 0.52% 0.13% 0.02%
Rent Rate & Taxes 0.03% 0.02% 0.06%
Communication Expenses 0.07% 0.05% 0.06%
Advertisement and sales Promotion 0.05% 0.03% 0.06%
Other selling expenses 0.07% 0.13% 0.22%
Total Selling & Distribution Expenses 1.12% 0.72% 0.97%
Other Operating Expenses 0.72% 1.12% 0.52%
Operating Profit (EBIT) 10.40% 20.94% 6.91%
Other income
Interest on Bank Accounts 1.96% 2.66% 0.25%
Interest on Long Term Advances 0.00% 0.00% 0.00%
Gain on Disposal of Fixed Assets 0.05% 0.04% 0.02%
Others 0.17% 0.05% 0.28%
Total other income 2.27% 2.74% 0.56%
Financial charges
Fee and charges on Loans 0.01% 0.01% 0.01%
Interest on Long term loans 2.74% 1.19% 0.27%
Interest on short term loans 0.24% 1.95% 0.41%
Others 0.10% 0.08% 0.15%
Total Financial Charges 3.09% 3.23% 0.84%
Profit/ Loss Before Taxation 9.57% 20.44% 6.63%
Less Taxation 0.86% 5.95% 1.52%
Profit/loss after Taxation 8.71% 14.49% 5.10%

Balance Sheet
For the Year Ended June 30, 2010
Horizontal Analysis
Increase / Decrease

ASSETS 2010 2009 Amount Percentage

Property, plant and Equipment 23,819,040 18,777,204 5,041,836 21.17%

    -
23,819,04
FIXED ASSETS - Tangible 0 18,777,204 5,041,836 21.17%

-
5,40
LONG TERM ADVANCE 0 6,300 . (900) -16.67%

884,84
LONG TERM DEPOSITS 1 1,008,983 (124,142) -14.03%

CURRENT ASSETS
1,060,53
Stores, spares and tools 3 1,038,078 22,455 2.12%
96,68 137,45
Stock in trade 4 1 (40,767) -42.17%
24,51
Trade Debts 4 54,641 (30,127) -122.90%
696,77 247,89
Advances, deposits, prepayments, 0 7 448,873 64.42%
 and other receivables -
192,21 175,94
Cash and bank balances 7 7 16,270 8.46%
2,070,71
CURRENT ASSETS 8 1,654,014 416,704 20.12%

-
26,779,99
9 21,446,501 5,333,498 19.92%

EQUITY AND LIABILITIES 2010 2009

Share Capital 7,419,887 7,419,887 - 0.00%

Reserves 2,190,798 2,270,802 (80,004) -3.65%

    -

SHARE CAPITAL AND RESERVES 9,610,685 9,690,689 (80,004) -0.83%

Subordinated loan - unsecured 400,000 - 400,000 100.00%

Long term financing 11,909,030 6,224,227 5,684,803 47.74%

Fair value of derivative 72,026 - 72,026 100.00%

Deferred libiliaty - compensated
absences 14,707 10,766 3,941 26.80%

Deferred tax liability - net 788,636 728,154 60,482 7.67%

Retention money payable - 143,739 (143,739)

Liability against shipment in transit - 2,020,916 (2,020,916)

    -

NON - CURRENT LIBILITIES 12,784,399 9,127,802 3,656,597 28.60%

Trade and other payable 1,698,674 1,441,825 256,849 15.12%

Markup 349,130 95,407 253,723 72.67%

Short term borrowings - secured 99,949 11.55%
 865,727 765,778

Current portion of long term financing 1,071,384 325,000 746,384 69.67%

    -

CURRENT LIBILITIES 3,984,915 2,628,010 1,356,905 34.05%

26,779,999 21,446,501 5,333,498 19.92%

Balance Sheet
For The Year Ended June 30, 2008 to 2010
Common Sizing

Common Size Percentage

ASSETS 2010 2009 2008 2010 2009 2008

88.94 87.55 57.06

Property, plant and Equipment 23,819,040 18,777,204 7,106,599 % % %
         
, 88.94 87.55 57.06
FIXED ASSETS - Tangible 23,819,040 18,777,204 7,106,599 % % %

5,40
LONG TERM ADVANCE 0 6,300 7,200 0.02% 0.03% 0.06%

884,84
LONG TERM DEPOSITS 1 1,008,983 46,611 3.30% 4.70% 0.37%

CURRENT ASSETS
1,060,53 907,59
Stores, spares and tools 3 1,038,078 1 3.96% 4.84% 7.29%
96,68 137,45 230,08
Stock in trade 4 1 9 0.36% 0.64% 1.85%
24,51
Trade Debts 4 54,641 26,927 0.09% 0.25% 0.22%
696,77 247,89 345,56
Advances, deposits, prepayments, 0 7 7 2.60% 1.16% 2.77%
and other receivables
192,21 175,94 30.38
Cash and bank balances 7 7 3,783,909 0.72% 0.82% %
2,070,71
CURRENT ASSETS 8 1,654,014 5,294,083 7.73% 7.71% 42.51%

26,779,99 21,446,501 12,454,493 100% 100% 100%

 9

EQUITY AND LIABILITIES            

27.71 34.60 59.58
Share Capital 7,419,887 7,419,887 7,419,887 % % %
10.59 14.97
Reserves 2,190,798 2,270,802 1,864,094 8.18% % %
           
35.89 45.19 74.54
SHARE CAPITAL AND RESERVES 9,610,685 9,690,689 9,283,981 % % %

Subordinated loan - unsecured 400,000 - - 1.49% 0.00% 0.00%

44.47 29.02
Long term financing 11,909,030 6,224,227 325,000 % % 2.61%

Fair value of derivative 72,026 - - 0.27% 0.00%

Deferred libiliaty - compensated
….absences 14,707 10,766 9,468 0.05% 0.05% 0.08%

Deferred tax liability - net 788,636 728,154 363,154 2.94% 3.40% 2.92%

Retention money payable - 143,739 18,129 0.00% 0.67% 0.15%

Liability against shipment in transit - 2,020,916 - 0.00% 9.42%
 
47.74 42.56
NON - CURRENT LIBILITIES 12,784,399 9,127,802 715,751 % % 5.75%

Trade and other payable 1,698,674 1,441,825 493,210 6.34% 6.72% 3.96%

Markup 349,130 95,407 33,186 1.30% 0.44% 0.27%

11.07
Short term borrowings - secured 865,727 765,778 1,378,365 3.23% 3.57% %

Current portion of long term financing 1,071,384 325,000 550,000 4.00% 1.52% 4.42%

14.88 12.25 19.71

CURRENT LIBILITIES 3,984,915 2,628,010 2,454,761 % % %

26,779,999 21,446,501 12,454,493 100% 100% 100%

 Ratio Analysis

1. Earning Per Share (EPS) Rupees in '000'

Basic 2010 2009 2008

413,5
Profit After Tax 250,179 1,007,623 98
489,4
Number of Share Equity 807,029 694,912 56
       
Earning Per Share (EPS) 0.31 1.45 0.85

Diluted 2010 2009 2008

Profit After Tax 250,179 1,007,623 413598

Number of Share Equity 833,930 740,899 538468

       
Earning Per Share (EPS) 0.30 1.36 0.77

2. Return on Equity
2010 2009 2008
324,9 1,421,51 454,5
Earning Before Tax 11 7 64
9,610,68 9,690,68 9,283,98
Total Equity 5 9 1

Return on Equity 3% 15% 5%

3. Return on Assets
2010 2009 2008
413,5
Net Profit 250,179 1,007,623 98
12,454,49
Total Assets 26,779,999 21,446,501 3

Return on Assets 0.01 0.05 0.03

4. Gross Profit Margin

2010 2009 2008
Gross Profit 658,1
 515,584 1,687,428 12
4,749,21
Sales 4,902,396 6,953,323 7

Gross Profit Margin 11% 24% 14%

5. Net Profit Margin

2010 2009 2008

Net Profit 250,179 1007623 413598

Sales 4,902,396 6,953,323 4749217

Net Profit Margin 5% 14% 9%

6. Price Earning Ratio

2010 2009 2008
Market Price Per Share 4.55 6.59 16.06
Earning Per Share 0.31 1.45 0.85
       
Price Earning Ratio 14.68 4.54 18.89

7. Current Ratio
2010 2009 2008
5,294,08
Current Assets 2,070,718 1,654,014 3
2,454,76
Current Liabilities 3,984,915 2,628,010 1
       
Current Ratio 0.52 0.63 2.16

8. Quick Ratio / Acid Test

Ratio
2010 2009 2008
Current Assets 5,294,08
 2,070,718 1,654,014 3
2,454,76
Current Liabilities 3,984,915 2,628,010 1
1,164,60
Inventories 1,181,731 1,230,170 7
       
Quick Ratio / Acid Test
Ratio 0.22 0.16 1.68

9. Asset turnover
2010 2009 2008
4,749,21
Sales 4,902,396 6,953,323 7
12,454,49
Total Assets 26,779,999 21,446,501 3

Asset turnover 0.18 0.32 0.38

10. Debt to Equity

2010 2009 2008
3,170,51
Total Libilities 17,169,314 11,755,812 2
9,283,98
Total Equity 9,610,685 9,690,689 1

Debt to Equity 1.79 1.21 0.34

11. Debt to Asset Ratio

2010 2009 2008
3,170,51
Total Debts 17,169,314 11,755,812 2
12,454,49
Total Assets 26,779,999 21,446,501 3

Debt to Asset 0.64 0.55 0.25

12. Long term Debt to Equity

2010 2009 2008
 715,7
Long term Debts 12,784,399 9,127,802 51
9,283,98
Total Equity 9,610,685 9,690,689 1

Long term Debt to Equity 1.33 0.94 0.08

SALES AND PRODUCTION

Cement production of FCCL for FY10 stood at 1,119,577 tons, a decline of 4% over production
during FY09. Local sales fell by nearly 12%, standing at 786,646 tons (FY09: 891,283 tons)
while exports rose by 21% standing at 332,931 tons. In terms of revenue, sales fell by almost
30%, dropping down to Rs 4.9 billion at the end of FY10 (FY09: Rs 6.95 billion). The decline in
sales revenue is attributed to both, a decline in turnover, as well as a decline in cement prices.
Over the year, there has been a decline of 27.53% in the local prices and a 12.90% drop in
international prices. As a result, revenue from local dispatches dropped by almost 36%, against
a 12% drop in volume. Similarly, export revenue rose by only 1.2% against a 21% increase in
volume.

Comparing the performance of Fauji Cement to the industry, it is seen that while all companies
experienced a decline in sales revenue due to the ongoing slash in prices, most also
experienced a growth in sales volume. This trend however was not followed by FCCL. Capacity
utilization of the company stood at 96% during FY'10 (FY'09:100%). This proportion is expected
to decrease further if demand of cement does not pick up, as the company is currently in the
process of capacity expansion.

PROFITABILITY

For FY10, Fauji Cement posted a profit after tax of Rs 250 million, a decline of 75% YoY (FY09:
Rs 1 billion). This decline was due to both, declining prices and lower sales. Production costs for
the year fell by 9.2% YoY, which is more than proportionate to the decline in sales volume. This
shows that the company was able to employ efficiencies and cut costs such that production
costs fell despite inflationary pressures. Fuel consumption, which comprises of 40% of costs, fell
by almost 25% over the year. Raw materials and packaging materials consumed fell in
proportion to the decline in sales. Gross Profit thus stood at Rs 515 million, as compared to Rs
1.69 billion at the end of FY09.

Operating expenses remained relatively stable over the year, while operating income fell
sharply, dropping from Rs 190 million during FY10, to Rs 27 million during FY10. This decline is
primarily due to the lack of profit on bank balances over the year. Finance costs saw a decline,
falling to Rs 41 million (FY09: Rs 224 million), resulting in a Profit before Tax of Rs 325 million.

With the decline in sales revenue and the ongoing price war, profitability of the company was
seen to decline over FY10. The Gross profit margin for FY10 stood at 10.5% (FY09: 24.3%),
while the net profit margin stood at 6.6% (FY09: 20.4%). While the company's gross profit
margin is similar to that of the industry, the net profit margin stands well above the industry
average which is only 1.4%.

ROA for FY10 stood at 0.01%, due to the combined effect of a decline in sales and an increase
in assets (FY09: 0.05%). Similarly, ROE stood at 3%, the decline caused only by the drop in
sales (FY09: 15%). Both figures are in line with the industry.

LIQUIDITY

The liquidity position of FCCL has been seen to be on a decline since FY09, when the current
ratio fell sharply from 2.16 at the end of FY08 to 0.63 at the end of FY09. During FY10, a much
smaller drop was seen, with the current ratio now standing at 0.52. The liquidity position of the
company is similar to that of the industry, which has an average current ratio of 0.67.

Current liabilities rose by 52% YoY, standing at Rs 3.98 billion; while current assets rose by
20% YoY to stand at Rs 2.1 billion. A large portion of the increase in current liabilities is
attributed to an increase in the current portion of long term financing. Current assets on the
other hand increased due to increases in sales tax refundable.

ASSET MANAGEMENT

Asset management, similar to the other ratios analyzed, has been on a decline during FY10.
Total Asset Turnover saw moderate decline, largely a result of the decline in sales. Total Asset
Turnover stood at 0.18 (FY09: 0.32). Total Asset Turnover of FCCL lies well below the industry
average which stands at 0.44.

DEBT MANAGEMENT

Debt management of FCCL has been on a decline, with short and long term debt on the rise.
The debt to assets ratio has seen a moderate rise, from 0.55 at the end of FY09 to 0.64 by the
end of FY10. Debt to equity however rose by 48%, standing at 1.79 (FY09: 1.21). While debt to
assets rose only moderately due to the balance of increasing assets and liabilities, the debt to
equity ratio felt the full impact of the increasing debt. A large proportion of the increase in
liabilities is a result of long term debt, which is why the long term debt to equity ratio of the
company rose from 0.94 at the end of FY09 to 1.33 at the end of FY10. Long-term debt of the
company stands at Rs 12.8 billion, while current liabilities stand at Rs 3.9 billion. The company's
debt management is considerably worse than the industry average, which has a debt to equity
ratio of 1.3 and a long term debt to equity ratio of 0.65.

MARKET VALUE

The market price of FCCL has been on a decline, with the price dropping from Rs 6.59 per
share at the end of FY09 to Rs 4.55 by the end of FY10. The beta for the stock is 0.79, which
means that it provides less return than the average stock, but is also less risky.

Earnings per share for the year stood at Rs 0.31, a 79% decline YoY (FY09: Rs 1.45). The
company's EPS stands well below the industry average of Rs 2 per share, and is a reflection of
the poor sales during the year. The price earnings ratio stands at 14.68, which shows that
investors are still confident about the company's prospects, despite the company's performance.
Like other cement manufacturers, FCCL has not announced a dividend for its shareholders, and
has chosen to reinvest profits so as to boost performance during the coming year.

FUTURE OUTLOOK

The prospects of the local cement industry are dependent upon improvements in the economy,
especially macro-economic indicators and the law and order situation. While a budget of over
Rs 600 billion had been allocated to public sector development program (PSDP) this year, this
amount may be slashed in half in the aftermath of the floods. Resources are limited and public
and private spending will both be reduced in the future, a threat to local cement manufacturers.
However, there is a large amount of reconstruction that is required in the flood affected areas
which will ultimately enhance demand for cement in the country. Additionally, a number of dams
as well as roads and buildings need to be built, which will help provide the cement sector with
the required boost.

Pakistan has the ability to export large quantities of cement, but is unable to capitalize upon this
opportunity due to heavy taxation and excise duty, political tension, and poor law and order
situation. Export sales are likely to reduce further in the near future due to enhanced capacity of
neighboring countries.

FCCL is currently in the process of expansion, which once complete will make it the largest
cement manufacturer of Pakistan. The company is expected to revive in terms of sales and
profitability, as well as debt management, once this project is complete. With the expected boost
in cement demand, prices are likely to rise, which will help the company to further improve
profitability.