Assignment on Analysis Of Financial Statement Of Lucky Cement

(2006 & 2007)

Student Name : Amin Muhammad Rumi Submited To Sir: Auon Ali Date May 2011.

VISION STATEMENT AND MISSION STATEMENT OF LUCKY CEMENT LTD.

VISION
Our vision is to supply cement globally at ease, simultaneously publicizing our brand worldwide and identifying our social responsibility by engaging in a number of social welfare activities, for the benefit of poor and needy people

MISSION We are an industrial organization with a big capital base, using state of the art technology in manufacturing and marketing of cement globally. Our strength lies in the continuous value addition of the Company through sound investments in sustainable areas for customers, employees and shareholders. With no compromise on quality and a vital role to play in social responsibilities we seek innovative answers to complex problems.

COMPANY PROFILE
Sponsored by well known Yunus Brothers Group one of the largest export houses of Pakistan, Lucky Cement Limited is presently a 21,000 Tons Per Day, dry process Cement Plant Lucky Cement came into existence in 1996 with a daily production capacity of 4200 Tons par day, currently is an omnipotent cement plant of Pakistan, and rated amongst the few best Plants in Asia with production facilities in Pezu (Production capacity: 13,000 Tons per day) as well as in Karachi (Production capacity: 8000 Tons per day) it has the tendency to become the hub of cement production in Asia.

Vertical and Horizontal Analysis Of Lucky Cement

Vertical Analysis Of Lucky

Cement

For the Year Ended June 30, 2007

Lucky Cements Vertical Analysis For the year ended June 30, 2007
(Rupees '000') 2007 %

Net Sales Cost of sales Gross Profit Distribution cost Administrative expense Operating profit Finance cost Other operating income Other charges Profit before taxation Taxation: Current Deferred tax Profit after taxation

12,521,861

100

8,846,708 70.6501054 3,675,153 497,729 111,311 609,040 3,066,133 862,847 -629,289 142,204 375,762 2,690,351 29.3498946 3.97488041 0.88893336 4.86381377 24.4862405 6.89072495 -5.025523 1.13564589 3.00084788 21.4852329

63,146 0.50428606 79,913 0.63818789 143,059 1.14247395 2,547,292 20.342759

Comments In year 2007 the gross profit after taxes is decreasing from 24% to 20%. its increasing in cost of sale from 62% to 70% . But it also increasing in the sale up to 55%. But operating profit is decreasing from 37% to 24%. Due to increasing in the cost of sale.

Lucky cement Vertical Analysis For the period ended June 30, 2007
2007 %

TOTAL ASSET Equity and Liabilities Share Capital And Reserves

25,730,226

100

ASSETS NON-CURRENT ASSETS Property, plant and equipment Long term deposits Current Assets Stores and spares Stock -in- trade Trade debts-considered goods Loan and advances Trade deposits-Short term prepayment Other receivables Tax refunds due to the government Taxation- net Cash and bank balances 1,993,573 676,256 476,667 241,821 9,661 183,138 538,812 50,057 1,239,158 5,409,143 7.74798092 2.62825519 1.8525566 0.9398324 0.03754728 0.71176211 2.09408188 0.19454551 4.81596236 21.02252425 20,318,908 2,175 20,321,083 78.9690227 0.00845309 78.9774758

Share Capital Reserves

2,633,750 10.2360158 6,719,800 26.116366 9,353,550 36.3523818

Non Current Liabilities Long term finance long term deposits Deferred liabilities Deferred Taxation Current Liabilities Trade and other payables Accrued mark-up Short term Borrowings Current portion of long term finance 8,335,604 25,863 147,245 1,515,535 10,024,247 1,546,699 326,181 2,864,397 1,615,152 32.3961554 0.10051602 0.5722647 5.89009595 38.9590321 6.0112142 1.26769582 11.1324207 6.2772554

6,352,429 24.6885861 CONTINGENCIES AND COMMITMENTS TOTAL EQUITY AND

25,730,226

100

Lucky cement Vertical Analysis For the period ended June 30, 2007

Comment In year 2007 the current assets are 21% but in year 2006 the current assets are 18.86% and the noncurrent assets are 78.97% in 2007 but in 2006 they are 81.13%, so its increasing but also the current liabilities are also increased in 2007 24.68% which is 20.11% in 2006. The noncurrent liabilities and equity are also increased in 2007 49.95% and 11.149%. Which are 38% and 10% in 2006.

Lucky Cements Vertical Analysis For the year ended June 30, 2006
(Rupees '000') 2006 %

Net Sales Cost of sales Gross Profit Distribution cost Administrative expense Operating profit Finance cost Other operating income Other charges Profit before taxation Taxation: Current Deferred tax Profit after taxation

8,054,101

100

5,073,797 62.9964412 2,980,304 103,489 106,740 210,229 2,770,075 82,809 203 134,493 217,099 2,552,976 37.0035588 1.28492305 1.32528758 2.61021062 34.3933482 1.02815944 0.00252046 1.6698698 2.69550878 31.6978394

39,923 0.49568537 577,103 7.16533105 617,026 7.66101642 1,935,950 24.036823

Comments In year 2006 the profit after taxes is 24.03%. Because the cost of sales is 62.99% end of this year. Operating profit of this year is 34.393% and EBT is 31.69%.

Lucky cement Vertical Analysis For the period ended June 30, 2006
2006 ASSETS NON-CURRENT ASSETS Property, plant and equipment Long term deposits Current Assets Stores and spares Stock -in- trade Trade debts-considered goods Loan and advances Trade deposits-Short term prepayment Other receivables Taxation- net Cash and bank balances 1,267,000 5.36346764 431,418 1.82627978 98,389 0.41650057 202,238 0.85611442 285,121 1.20697495 83,912 23,661 2,063,755 4,455,494 23,622,777 0.35521649 0.10016181 8.73629294 18.8610086 100 19,165,108 81.1297842
Non Current Liabilities

Equity and Liabilities Share Capital And Reserves Share Capital Reserves 2,633,750 11.1491972 4,435,883 18.7779913 7,069,633 29.9271885

2,175 0.00920722 19,167,283 81.1389914

Long term finance long term deposits Deferred liabilities Deferred Taxation

10,156,595 27,269 181,623 1,435,622 11,801,109

42.9949239 0.1154352 0.76884695 6.07727872 49.9564848

Current Liabilities Trade and other payables Accrued mark-up Short term Borrowings Current portion of long term finance Sales tax payable

1,451,086 6.14274097 190,130 0.8048588 645,872 2.734107 2,382,576 10.0859268 82,371 0.34869313 4,752,035 20.1163267

TOTAL ASSET

CONTINGENCIES AND COMMITMENTS TOTAL EQUITY AND LIABILITIES

23,622,777

100

Lucky cement Vertical Analysis For the period ended June 30, 2006

Comments In year 2006 the current assets are 18.86% and the non current Assets are 81.13%. In this year the current liabilities are 20.11%. which is more then the current assets .The non current liabilities are 49.95% and the equity is 11.149%.

Horizontal Analysis Of Lucky Cement

2007 vs 2006

Lucky Cements Horizontal Analysis Year vs. Year (2007 vs. 2006)
2006 2007 2007 (% increase or decrease) 55.47186458 74.36070067 23.31470212 380.9486999 4.282368372 189.7031332 10.68772506 941.9724909 309894.5813 5.733383894 73.08324773 5.380974988 58.16947624 -86.15273183 -76.81475335 31.5783982

Net Sales Cost of sales Gross Profit Distribution cost Administrative expense Operating profit Finance cost Other operating income Other charges Profit before taxation Taxation: Current Deferred tax Profit after taxation

8,054,101 12,521,861 5,073,797 8,846,708 2,980,304 3,675,153 103,489 497,729 106,740 111,311 210,229 609,040 2,770,075 3,066,133 82,809 862,847 -203 -629,289 134,493 142,204 217,099 375,762 2,552,976 2,690,351 39,923 63,146 577,103 79,913 617,026 143,059 1,935,950 2,547,292

Comment When we comparison the income statement of both year 2006 and 2007. In 2007 the EAT is increasing by 31.57% because of increasing in net sale which is 55.47%. In 2007 the cost of sale is increasing because of increasing in net sale.

Lucky Cements Horizontal Analysis Year vs. Year (2007 vs. 2006)
Lucky cement 2006 2007 2007 (% increase or decrease) Equity and Liabilities Share Capital And Reserves Share Capital Reserves 2,633,750 2,633,750 4,435,883 6,719,800 7,069,633 9,353,550 0 51.4873138 32.30601928

ASSETS NON-CURRENT ASSETS Property, plant and equipment Long term deposits 19,165,108 20,318,908 2,175 2,175 19,167,283 20,321,083 6.020315669 0 6.019632517

Non Current Liabilities Long term finance long term deposits Deferred liabilities 10,156,595 8,335,604 27,269 25,863 181,623 147,245 -17.9291485 5.156037992 18.92821944 5.566437405

Current Assets Stores and spares 1,267,000 Stock -in- trade 431,418 Trade debts-considered 98,389 goods Loan and advances 202,238 Trade deposits-Short 285,121 term prepayment Other receivables 83,912 Tax refunds due to the government Taxation- net 23,661 Cash and bank balances 2,063,755 4,455,494 TOTAL ASSET 1,993,573 676,256 476,667 241,821 9,661 183,138 538,812 50,057 1,239,158 5,409,143 57.34593528 56.75192041 384.4718414 19.57248391 96.61161402 118.2500715

Deferred Taxation Current Liabilities

1,435,622 1,515,535

111.5591057 -39.9561479 21.40388922 8.921258496

Trade and other payables 1,451,086 1,546,699 Accrued mark-up 190,130 326,181 Short term Borrowings 645,872 2,864,397 Current portion of long 2,382,576 1,615,152 term finance Sales tax payable 82,371 4,752,035 6,352,429

6.589065018 71.55682954 343.4929831 32.20984346 -100 33.67807687

23,622,777 25,730,226

TOTAL EQUITY AND LIABILITIES

23,622,777 25,730,226

8.921258496

Lucky Cements Horizontal Analysis Year vs. Year (2007 vs. 2006)

Comment When we comparison the balance sheet of both year in, current assets its increasing 21.4% but its increasing 33.6% in current liabilities. In year 207 the non current liabilities increasing by 33.6780% and non current assets are increasing by 6%.

Liquidity Ratios : A class of financial metrics that is used to determine a company's ability to pay off its short-terms debts obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the company possesses to cover short-term debts
Comments
Current ratio Current Ratio = Current Assets / Current Liabilities

2007 Current Assets Current Liabilities Current Ratio

Lucky Cement 5,409,143 6,352,429 0.8515:1

2006 Current assets Current liabilities Current Ratio

Lucky Cement 4,455,494 4,752,035 0.937:1

Current ratios measures whether or not a company has enough resources to pay its short term debt over the next business cycle with its short term assets by comparing firms current assets to its current liabilities. In year 2006 the current ratio was 0.937 : 1 and in 2007 .0.8515 : 1.The ratio is decline because increasing in current liabilities. There is also increasing in current assets but its more increasing in current liabilities. Thats why it decline in current ratio. Although in both years the position of the company to pay off its short term debt is not very good. It is necessary for the company that its current ratio remains above 1 time to meet its short term obligations and in the case of lucky cement the current of year 2007 is declining because the short obligations (liabilities) are increasing at a faster pace than its current assets.

Quick/Acid test ratio: Quick Ratio: Quick Assets (cash + marketable securities + receivables) / Current Liabilities
2007 Quick assets Current liabilities Acid test ratio Lucky Cement 4,732,887 6,352,429 0.745:1
Comments Current ratios measures whether or not a company has enough resources to pay its short term debt over the next business cycle with its short term assets by comparing firms current assets to its current liabilities. In year 2006 the current ratio was 0.937 : 1 and in 2007 . 0.8515:1 .The ratio is decline because increasing in current liabilities. There is also increasing in current assets but its more increasing in current liabilities. Thats why it decline in current ratio. Although in both years the position of the company to pay off its short term debt is not very good. It is necessary for the company that its current ratio remains above 1 time to meet its short term obligations and in the case of lucky cement the current of year 2007 is declining because the short obligations (liabilities) are increasing at a faster pace than its current assets.

2006 Quick Assets Current liabilities Acid test ratio

Lucky Cement 4024076 4,752,035 0.846:1

Operating/Activity Ratios: Accounting ratios that measure a firm's ability to convert different accounts within their balance sheets into cash or sales. Inventory turnover Inventory Turnover = Cost of Good sold / Average Inventory
2007 COGS Average inventory Inventory turnover Lucky Cement 8,846,708 (431,418+676,256)/2 15.97times

Comments Inventory turn over ratio is one of the efficiency ratios and measure the no of turns on average inventory is sold and Connected into cash during the fiscal year. In year 2006 the inventory turns over was 18.54 times and in 2007 its 15.97 times. In here the inventory turn over are decreasing because it purchased excess inventory or absolute inventory. Absolute inventory should be write off. Another possible reason of low inventory turnover for decreasing is that a low turn over is indicates the poor liquidity. But it also indicates the planned inventory build up in the case of material shortages or in anticipation of rapidly rising prices.

2006 Cost of goods sold Average inventory Inventory turnover

Lucky Cement 5,673,797 (431,418+115,771)/2 18.54times

No. Of Days in inventory No. of days in inventory = 365 / inventory turnover

2007 No. of days in an year Inventory turnover No. of days in inventory Lucky Cement 365 15.97 22.85days
Comments

2006 No. of days in an year Inventory turnover No. of days in inventory

Lucky Cement 365 18.54 19.68days

A financial measure of a companys performance that gives investors an idea of how long it takes a company to turn its inventory into sale. It is also present the process of thing raw materials into cash. In year 2006 the no of days in inventory are sale in 19.68 days but in 2007 it sale in 22.85 days. This is not good sing for company. Because when the no of days are increasing its decreasing in inventory turn over in times

Receivable turnover: Receivable turnover = Net credit sales / average net receivables
2007 Net credit sales Avg. net receivables receivable turnover Lucky Cement 12,521,861 (476,667+98,389)/2 43.55times

Comments Receivable ratios used to quantity a firms effectiveness in extending credit as well as collecting debts. This ratio indicates measures no of times on average receivables are collected during paid. Its shows how successful the firm is in its collection. In year 2006 the receivables turn over was 132.9 time and in 2007 its 43.55 time. The receivable turn over is decline due the increasing more increasing in credit net sale and decreasing in net average receivable.

2006 Net credit sales Avg. net receivables receivable turnover

Lucky Cement 8,054,101 (98,389+22,808)/2 132.90times

No. of days in receivables: No of days in receivable: 365 / Debtor turnover

Comments

2007 No. of days in an year receivable turnover No. of days in receivables

Lucky Cement 365 43.55 8.381days

Credit policy is defined as the maximum time period allowed to the customer to pay back.
The average collection period in the year 2006 was 2.746 days which means that the firm is able to collect its receivables within approximately 5 days. However, in 2007, the average collection period increased to 8.381 days, thus now the company is collecting its receivable within approximately 10 days. There could be many reasons for this increase in average collection period such as, problem in management, lack of incentive given to its customers or undependable customer. . This is not good for company future because in this case the payment of company is blocked for more days may be in future company facing the problem of cash shortage.

2006 No. of days in an year receivable turnover No. of days in receivables

Lucky Cement 365 132.90 2.746days

Total Assets turnover:

Total Assets Turnover = Net sales / Average Assets
Comments

2007 Net sales Avg. assets Total assets turnover

Lucky Cement 12,521,861 25,730,226 0.4866 : 1

It is an efficiency ratio that measures the ability of a company to use its assets to generate sales. The final asset management ratio the total asset turn over ratio measures the turnover of all the firm assets and help us to identify when problem occur that is a problem in fixed assets or in current assets.. In 2006, it was 0.341 times and in year 2007 is 0.487. Total assets turn over ratio of lucky cement is continued to improve. It had been increasing due to high growth in sales revenue as compared to growth in assets.

2006 Net sales Avg. assets Total assets turnover

Lucky Cement 8054,101 23,622,779 0.3409 : 1

Fixed assets turnover: Fixed Asset turnover = Net Sales / Fixed Assets
2007 Net sales Fixed assets Fixed assets turnover Lucky Cement 12,521,861 20,321,083 0.616 : 1

Comments The fixed turnover ratio measures how effective the firm uses plant and equipment.

2006 Net sales Fixed assets Fixed assets turnover

Lucky Cement 8,054,101 19,167,283 0.4202 : 1

The role of fixed asset is to support the sales. The fixed Asset turnover ratio of year 2007 is 0.616 times and in year 2006 was 0.42 this shows that as the fixed asset increases there is also an increase in the sales.

Profitability Ratios: A class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well. Gross profit to sales: Gross profit Margin = Gross profit / net sales
2007 Gross profit Net sales Profit margin ratio Lucky Cement 3,675,153 12,521,861 29.34%

Comments Gross profit margin measures the percent of each sales dollar remaining after the firm has paid for its goods. The higher the GPM the lower the relative cost of merchandise sold. Gross profit margin of year 2007 declined because of the high cost which occurs because of inefficient operations and heavy use of debt.

2006 Gross profit Net sales Profit margin ratio

Lucky Cement 2,980,304 8,054,101 37.00%

Operating Profit Margin Operating Profit Margin = Operating Profit / Sales

2007 Operating Profit Sales Operating Profit Margin Lucky Cement 3,066,113 12,521,861 24.48%
Comments Operating profit margin gives an idea of how much a company makes (before interest and taxes) on each dollar of sale. A healthy operating profit margin is required for a company to be able to pay for its fixed cost. Such as interest on debt. Operating profit margin of year 2007 declined because of the high cost which occurs because of inefficient operations and heavy use of debt. And also sale is decreasing in 2007

2006 Operating Profit Sales Operating Profit Margin

Lucky Cement 2,770,075 8,054,101 34.39%

Net profit after tax to sales: Net Profit Margin = Net profit after tax / net sales
2007 Net profit after tax Net sales Net profit after tax to sales Lucky Cement 2,547,292 12,521,861 20.34%
Comments Net profit margin measures how much of each dollar earned by the company is translated into profit (after reduction all the expenses and income tax) . In 2006 profit margin for lucky cement is 24.03% and in 2007 it is 20.34%. Net profit after tax is decline in year 2007 because the net sale is decreasing in 2007 compared to 2006.

2006 Net profit after tax Net sales Net profit after tax to sales

Lucky Cement 1,935,950 8,054,101 24.03%

Return on Equity after tax: ROE = Net income after tax / avg. common stockholders equity
2007 Net income after tax Avg. comm. stockholders equity Return on equity after tax Lucky Cement 2,547,292 9,353,550 27.23%

2006 Net income after tax Avg. comm. stockholders equity Return on equity after tax

Lucky Cement 1,935,950 7,069,633 27.38%

Comments Return on equity measures a corporations profitability by revealing how much profit a company generates with money share holders have interested. In return of equity after tax is almost same because the net income after tax is increased in 2007 but also the average common stockholder equity is also increasing in year 2007.

Return on assets: ROA = Net Income / Total Assets

2007 Net income Avg. assets Return on assets Lucky Cement 2,547,292 3825,730,226 4.89%
Comments Return on assets gives an idea as to how efficient management is at using its assets to generate earnings. In 2006 the return of assets is 8.195% and it decreased in 2007 is 4.89%. Because in 2007 the total assets are rapidly increasing then the net income. Thats why the return of assets is decline in 2007

2006 Net income Avg. assets Return on assets

Lucky Cement 1,935,950 23,622,777 8.195%

Debt Ratios: One of many ratios used to measure a company's ability to meet long-term obligations. The solvency ratio measures the size of a company's after-tax income, excluding non-cash depreciation expenses, as compared to the firm's total debt obligations. It provides a measurement of how likely a company will be to continue meeting its debt obligations.

Debt : Equity ratio: Debt to Equity = Total Debt / Total Equity

2007 Total debt Total equity Debt to equity ratio Lucky Cement (6,352,429+10,024,247) 9,353,550 175%

2006 Total debt Total equity Debt to equity ratio

Lucky Cement (4,752,035+11,801,109) 7,069,633 234.1%

Comments Debt to equity ratios measures companys financial leverage. It indicates what proposition of equity and debt the company is using to finance its assets. In 2006 most of the assets of lucky cement has finance from debt .this ratio is very high 234.1% as compare to year 2007 the percentage of debt to equity ratio is decline on 175% due to rapidly more increasing in equity

Debt : Assets Ratio: Debt to Assets ratio = Total Debts / Total Assets
2007 Total debt Total Assets Debt to equity ratio Lucky Cement (6,352,429+10,024,247) 25,730,266 63.64%
Comments This ratio indicates what proportions of the companys assets are being financed through debt high percentage indicates that company is highly debt leverage firm. The debt to equity ratio in 2006 was 70.1% which shows that 70.1% of financing through debt. However in 2007 the debt to equity ratio decreased to 63.6% which shows that the company curtails its financing through debts although there is a decline in the risk the company facing but still the firm debt financing on the higher side as compared to ideal situation which is 60% equity & 40% debt.

2006 Total debt Total Assets Debt to equity ratio

Lucky Cement (4,752,035+11,801,109) 23,622,777 70.07%

Interest Coverage ratio: Interest Coverage ratio = Operating Income / finance cost (interest expense)

2007 Operating Income Finance cost (Interest Expense) Time interest coverage

Lucky Cement 3,066,113 862,849 3.55 times

2006 Operating Income Finance cost (Interest Expense) Time interest coverage

Lucky Cement 2,770,075 82,809 33.45 times

Comments Indicates a firms ability to cover the interest charges. The coverage aspect of the ratio indicates how many times the interest could be paid from available earning. If interest coverage ratio below 1 indicates that the company is not generating sufficient revenues to satisfy interest expenses. The interest coverage ratio was 33.45 in 2006 which have decreased to 3.55 in 2007 therefore the company are not able to cover the interest expense at a higher margin of safety.

Investment Valuation Ratios: Investment valuation ratios attempt to simplify this evaluation process by comparing relevant data that help users gain an estimate of valuation.
Earnings per share (after tax): EPS = Net income / No. of shares outstanding
2007 Net income Avg. comm. Shares outstanding EPS (Rupees) Lucky Cement 2,547,292 263,375 9.67

2006 Net income Avg. comm. Shares outstanding EPS (Rupees)

Lucky Cement 1,935,950 263,375 7.35

Comments The portion of a companys profit allocated to each outstanding share of common stock. Earning per share serves as indicator of a companys profitability. EPS of lucky cement is positive upward trend during 2006 and 2007.Because of continuous increasing in net income.

Price / Earning ratio (after tax): P.E Ratio = Market price per share / EPS
2007 Market price per share EPS Price to earnings ratio(Rupees) Lucky Cement 123.04 9.67 12.72

2006 Market price per share EPS Price to earnings ratio(Rupees)

Lucky Cement 100.42 7.35 13.66

Comments The price earning ratio has declined as a result of the drop in price. This declined indicates lower shareholder expectations but might also indicate a good time to buy. In year 2006 the price earning ratio is 13.66% and its declined in year 2007 on 12.72%.

Dividend Yield: Dividend Yield = Cash dividend per share / Market price per share
2007 Cash dividend per share Market price per share Dividend yield Lucky Cement 1.25 123.04 1.01%

Comments
Dividend yield is up, caused by the rise in dividend and more so by the drop in price. In year 2006 the dividend yield was .99% and it increasing in year 2007 at 1.01%.

2006 Cash dividend per share Market price per share Dividend yield

Lucky Cement 1 100.42 0.99%

Dividend Payout ratio: Dividend Payout Ratio = Cash dividend per share / Earnings per share
2007 Cash dividend Net income Dividend payout ratio Lucky Cement 1.25

Comments

2006 Cash dividend Net income Dividend payout ratio

In year 2006 the dividend 12.9% payout ratio of company is 13.6% which declined in year 2007 at 12.9%. Due to Lucky Cement decreasing in cash dividend . 1
7.35 13.6%

9.67

Market Value Per Share as on 30th June:

2007 Market Value per share(Rupees) Lucky Cement 123.04
Comments
The market price value is increasing during 2006 and 2007. In 2006 the market price value per share was 100.42 and in 2007 123.04. It is positive point for company.

2006 Market Value per share(Rupees)

Lucky Cement 100.42