Final Internship Report

D.G. KHAN CEMENT COMPANY LTD. (A unit of Nishat Group)

D.G. Khan Cement Company Ltd

Introduction

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.

Mian Mohammad Mansha, the chairman of Nishat Group continues the spirit of

entrepreneurship and has led the Group successfully to make it the premier business

group of the region. The group has become a multidimensional corporation and has

played an important role in the industrial development of the country. In recognition

of his unparallel contribution, the Government of Pakistan has also conferred him

with “Sitara-e-Imtiaz”, one of the most prestigious civil awards of the country.

D.G. Khan Cement Company:

D.G. Khan Cement Company Limited (DGKCC), a unit of Nishat group, is the second

largest cement-manufacturing unit in Pakistan with a production capacity of 13,400

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.

1 | P a g eH. Waqar Akhtar (CIIT/FA06-BBA-26/LHR)


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 has also set 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 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 equipped with two vertical cement grinding mills. The cement grinding mills

are first vertical Mills in Pakistan. The new plant is not only increasing the capacity

but also providing proximity to the untapped market of Northern Punjab and NWFP

besides making it more convenient to export to Afghanistan from northern borders.

Power Generation

For continuous and smooth operations of the plant uninterrupted power supply is

very crucial. The company has its own power generation plant along with WAPDA

supply. The installed generation capacity is 23.84 MW.

Environmental Management

DG Khan Cement Co. Ltd., production processes are environment friendly and

comply with the World Bank’s environmental standards. It has been certified for

“Environment Management System” ISO 14001 by Quality Assurance Services,

Australia. The company was also certified for ISO-9002 (Quality Management

System) in 1998. By achieving this landmark, DG Khan Cement became the first and

only cement factory in Pakistan certified for both ISO 9002 & ISO 14001...



COMPANY PROFILE

Company Name:

D.G. KHAN CEMENT COMPANY LIMITED

Legal Status:

Public Limited Company

Registered Office:

Nishat House, 53-A, Lawrence Road,

Lahore, Pakistan.

Phone: 92-42-6367812-20

Fax: 92-42-6367414

E-mail: [email protected]

Web: www.dgcement.com

Chairperson

Mrs. Naz Mansha

Chief Executive:

Mr. Mian Raza Mansha

Board of Directors:

Mrs. Naz Mansha Chairperson/Director

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

Company’s Secretary:

Mr. Khalid Mahmood Chohan

Auditors:


mailto:[email protected]


KPMG Taseer Hadi & Co, Chartered Accountants

Legal Advisor:

Mr. Shahid Hameed, Bar-at-Law

Bankers:

Royal Bank of Scotland (Formerly ABN AMRO Bank (Pakistan)

Limited)

Allied Bank Limited

Askari Bank Limited

Bank Alfalah Limited

CitiBank N.A.

Habib Bank Limited

MCB Bank Limited

National Bank of Pakistan

Standard Chartered Bank (Pakistan) Limited

The Bank of Punjab

United Bank Limited

Sales Offices

Lahore Regional Sales Office

Multan Regional Sales Office

DG Khan Regional Sales Office

Karachi Regional Sales Office



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.

Corporate Strategy

Their Corporate Strategy and objectives for the future are to find new and improved

means of cost reduction, fuel economy and to acquire advanced manufacturing

capabilities to support their product development efforts and product line expansion

and stand ready to leverage their debts and be responsive to the changing economic

scenario. DG Khan Cement believe in harnessing the inherent strengths of available

human resource and materials to the utmost and a commitment for building a solid

foundation poised for sustainable growth for the long-term benefit of their

shareholders and their employees.



Cement Production Process

The following raw material is required in the production process:

1. Lime stone: This raw material is company owned and is extracted from the

nearby mountains of Dera Gazi khan Unit. Limestone has the highest composition in

the cement product. 76% of the cement constitutes of limestone.

2. Clay: Clay is another natural resource. This raw material is also company owned.

24% of cement composition comprises of clay

3. Iron Ore, Bauxites and silica sand: Iron Ore is the only resource that is bought

from contractors. Iron Ore, Bauxites and silica sand are added in small quantities

less then one percent and it helps to strengthen the cement.

4. Gypsum: Gypsum acts as a retarding agent. It slows down the hardening process

which in turn gives the constructor enough time to use it.

Step 1:

Raw Materials:

There are basically three main raw materials that are used for the production of

cement.

In addition to that, a small proportion of other additives such as silica and Bauxites

are also added.

1. Limestone 76%

2. Clay 24%

3. Iron ore (less than 1%)

4. Silica sand (less than 1%)

5. Bauxites (less than 1%)

Lime stone and clay are extracted from the same place. Iron ore is bought from a

contractor.

Step 2:

The raw materials are providing for separate “crushers” that break them into smaller

pieces. After that they are stored in separate piles.



Storage area: It is a stacker that provides immediate storage. In case there is a

problem with the crusher, the stock present can be utilized immediately to provide

enough amounts to be used for three days.

Step 3:

From the stacker the components are mixed and made into an ultra fine powder in

the grinder. A weighing scale is maintained to check that the appropriate composition

of the materials is maintained and the right quantity is added. Again the mixture is

stored in a Consistent flow Silo. It is to be noted that until now only a physical

change has taken place. The next step would involve a chemical change.

Step 4:

The mixture is then added into a KILN. This is a rotating machine that heats the

mixture up to 1300*C where it is converted into a compound as a chemical reaction

takes place.

This compound is the cement produced in molten form. As it moves onwards an air

cooler is present that cools the cement and converts it into small stones known as

CLINKER. This is the intermediate product that is formed. After that the clinker is

stacked in piles, 1.5 ton clinker produced 1 ton cement.

Step 5:

The clinker is then added into a grinder. At this stage another element known as

Gypsum is added. The composition of the cement is 95% and that of gypsum is 5 %.

The gypsum acts as a retarding agent. Cement on its own when kept in contact with

water hardens very fast. It ensures rapid setting but gives cement the time to harden

in the grinder the cement is crushed into a powder form.

This stage is very critical in the cement production process because of the fact that if

something goes wrong with the composition, the quality of the cement gets affected

and the whole costs that are incurred to produce the cement is wasted. Because of

that the quality check at this stage is the maximum and continuous.



Cement Production Process:


Crushing and grinding of lime stone and clay

PreheatingRaw material from

Quarry blasting

CoolingRotary Kiln

Clinker storage

Cement Grinding+

Gypsum

Cement Mill

Cement Packing Plant


MARKETING & SALES Department

INTRODUCTION

The basic aim of company’s marketing strategy is to get the unique competitive

position for the company. Their marketing strategy is very evident from the mission

of the company. It stresses on to provide quality products to customers and explore

new markets to promote the sales of the company and to achieve optimum prices of

products of the company for sustainable and equitable growth and prosperity of the

company.

Sales and Marketing Department

Sales are the lifeblood of any business. This department deals in booking and sales

of the cement. This department also takes part in the marketing decisions of the

company. All the staff in this section is qualified and trained for their professional

duties. These are the people who are responsible to create image of the company

and its products. Leading personality of this department having a smiling look on his

face is always ready to solve the customer’s problem. All the members in this section

are very frank as to their behavior. They are very hard working and conscious as to

the customer care and their marketing targets.

Marketing division is soul of company’s goodwill. This is the marketing effort of this

department who win the confidence of consumers and distributors. Sales and

Marketing sections are combined. The marketing and sales division of the company

faces all the competition. First objective of marketing staff is to attract the customer

and next is to gain his confidence through the solution of his problem, if any.

The structure and working of this department is as following:

a. Director marketing

Mr. Farid Fazal

A man of success takes special care of company staff and employees. Being

responsible personnel of the company he engages best of his efforts to bring

success for the company. This man of unique ideas knows how to keep the company

flag up and up, to improve the market share of the company. Company’s own

products rely upon this brain. He played a key role in this successful organization,

and still enthusiastic about further achievements.



b. Deputy General Manager (Marketing)

Mr. Chaudhary Muhammad Aslam

He is the key person in marketing department because he is the oldest one and has

a lot of experience of cement industry. He has been working in the organization

since it was run under the name of State Cement.

c. Deputy Manager Sales

Mr. Aabid Nasir

As I told earlier that sale are the lifeblood of any business and in this department Mr.

Aabid Naseer is the lifeblood of sales department. He is a sales deputy manager but

he is also controlling the advertisement. He is although a young man but he is

experienced and professional at his job. He is a man of remarkable success,

responsible for sales and advertisement. He has always good and innovative ideas

to improve the sales and to promote the company’s image. He is very hard working

and has a good command over his work.

d. Assistant Manager Sales

Mr. Nadeem Badshah

He is key person in sales as he controlling all the booking and sales in the

department. He is really a competent and hard working person and master of his

work, performing his duties well. He is really a catalyst as he says that managers are

catalysts. He is very jolly and frank with all the team at marketing department. He is

playing a leading role in the department.

Marketing and Competitive Strategy

Product:

Two different products are produced at DGKCC namely Ordinary Portland Cement

and Sulphate Resistant Cement. These products are marketed through two different

brands:

DG brand & Elephant brand Ordinary Portland Cement

DG brand Sulphate Resistant Cement

Products:

Ordinary Portland Cement

Sulphate Resistant Cement



Ordinary Portland cement:

Exceptional Strength: At DGKCC the chemical composition and grinding fineness

are closely monitored to ensure that both Pakistani and British standards are

surpassed and our customers get cement of exceptional strength.

Ideal Setting Time: In order to allow sufficient time for application, cement must

have a quick initial settings time, however once in place; the final settings should not

take too long. At DGKCC ideal initial and final setting times are maintained.

Sulphate Resistant Cement:

Low C3A Content: Sulphate salts present in this soil combine with moisture and tri-

calcium alumnate (C3A), one of the constituents of cement to form a compound

known as Sulpho, Alumnate off Hydrated Calcium. This compound is highly

expansive and gradually results in the destruction of concrete. However, if “C3A”

content is very low, it is rendered inert and there is thus no reaction at all. British and

Pakistani standards specify that in a Sulphate Resistant Cement, the C3A content

must not exceed 3.5%. D.G Sulphate Resistant Cement has a much lower C3A

content, making the cement highly effective against Sulphate attacks.

Low Heat of Hydration: Heat of hydration is the heat generated on reaction of

cement and water. This is undesirable because it produces a corresponding thermal

expansion which deforms the concrete. Upon cooling down, there is a thermal

contraction which causes the concrete to crack. D.G Sulphate Resistant Cement has

a low heat of hydration making it EXTREMELY SUITABLE for BULK POURING and

MASS CONCRETING.

High Strength: As with any type of cement, strength is the fundamental property of

Sulphate Resistant Cement D.G. Sulphate Resistant Cement achieves high strength

through finer grinding and better particle distribution. In term of strength,, it not only

exceeds by far the standards specified for Sulphate Resistant Cement, but also

exceeds those of Ordinary Portland cement

Low Alkali Content: Certain aggregates contain alkali sensitive ingredients, which

under unfavorable conditions; can result in expansion leading to cracking of

concrete. The presence of alkali also causes staining and other undesirable effects



on concrete. American Standards specify that cement can be termed low-alkali if its

alkali content does not excced 0.6% D.G. Sulphate Resistant Cement has alkali

content below 0.6 and a unique distinction of being a Sulphate Resistance Cement

that can also be classified as low - alkali cement.

PRICE:

One of the four major elements of the marketing mix is price. Pricing is an important

issue because it is related to product positioning. Furthermore pricing affects other

marketing mix elements such as product features, channel decisions, and

promotions.

At DG cement prices are relatively high than competitors, which reflect their quality

of product. They have settled different prices for different segments. It is very high in

DG khan where factory is located. The reason for this is that there is no competitor in

that region. So they are monopolist in that region. They have settled different prices

for both brands, as their cost is different.

PLACE:

The company uses distributors for the distribution of its products. Company uses the

term stockist and non-stockist. Agency is issued if party deposits amount of 25000-

50000 on the basis of agency sales. Company gives incentives to the agency holder

for each bag. So they use push strategy to promote the product.

PROMOTION:

Company used a long ago their advertisement for the promotion of their product but

now a day’s company is not using any advertisement program. They are just relying

on giveaways, which are distributed among the distributors only. So they much rely

on the push strategy.

POSITIONING:

Company positions its product through its slogan, which is about durability. So they

use product features to position its product.



COMPETITIVE STRATEGY

Company’s main competitors are Lucky Cement, Maple Leaf cement, Askari cement,

and Bestway cement. So they set all their strategies keeping in view the strategies of

these companies. They set their prices according to the pricing strategy of their

competitors. More over they have competitive edge of their plant, which is of modern

technology. So they produce cement of much better quality than their competitors.

They also have competitive edge of their factory site, which is in vicinity of all raw

materials and in that area they have no competitors

HR And MIS Department

HR department is playing key role in recruitment. For recruitment jobs/posts are

advertised in newspapers and then formal procedure for interviewing and testing is

used. The main function of MIS department is to develop the software for the

company. It is also responsible for the maintenance of the software.

Inbox provides Oracle License Renewal to D.G. Khan Cement

Inbox Business Technologies provides Oracle License Renewal to D.G. Khan

Cement.

The services provided are mainly for:

Oracle E-Business Suite,

Oracle Enterprise Asset Management,

Oracle Enterprise Planning & Budgeting,

Oracle HR Intelligence,

Oracle Payroll,

Oracle Time & Labor,

Oracle Advanced Benefits, and Discoverer Desktop Edition.



This would enable the cement manufacturing company to continue running their

current systems and processes smoothly. Being an Oracle Certified Partner, Inbox is

authorized to provide Oracle products and services to customers in Pakistan.

DG Khan Factory Site

At site there are Finance, HR and Admin, Power Generation, MIS, Operations,

Quality control, Sales and Dispatch, security, and Operations departments. A brief

description of all these departments is as following:

Finance department is working on the same standards as that of head office. HR

department is also working on the same patterns as that of the head office. HR

department at site is headed over by Naseem-ul-Ghani who is General Manager HR

& ADMIN at site.

At site power is generated by the Power Plant, which is of WATSILLA Co. (Finland).

The plant is operated on gas and it produces 8.5 MW (Mega Watts) per plant. There

are three such plants. They are running on gas. Before gas the plant was operated

on coal. The plant is providing electricity facility to the colony and the cement plant

as well.

Operations department controls the working of cement plant. There are three

cement plants are working. At DG Khan Site, one is old plant of Japanese

technology. Its capacity was 2200 tpd (tons per day). Its capacity was expanded in

2005 and after expansion its capacity has increased from 2200 tpd to 2700 tpd. But

according to the site engineers it is producing more than guaranteed 2700 tpd with

substantial savings in fuel and energy.

The plant 2 is of F.L.Smidths (Denmark) and its capacity is 4000 tpd. The total

production capacity of the two plants is about 7000 tpd. Third plant was installed at

Khairpur it is Major Expantion with the capacity of 6700 tpd.unit.

Quality Control department ensures the Quality. Department is headed over by Dr.

Hafeez Ulah Shah who is Sr. Manager Quality Control. According to Mr. Shah

Quality is not that which cement sells better but quality is to control all the necessary

elements of cement and how effectively your cement plant controls these elements

so that better cement can be produced for the consumers. To ensure the quality, the

samples are checked after every hour so that quality cement should be produced.

Samples are checked physically as well as chemically. CCR department controls

plant digitally.



Sales and Dispatch Department is responsible for all the cement dispatches.

Cement is packed from cement silos electronically. The workers only have to fix the

sacks on the Machine. After packing the cement is loaded on the trucks for delivery.

Mr. Shahab controls this department.

Facilities for Workers at Site (Factory DG Khan)

Company has tried its best to provide all the basic facilities to the workers at site.

Company has provided them houses there at company’s colony. There are about

4000 to 4500 workers living in the colony. There are about 350-400 houses built for

the workers. They have been provided with a hospital, two schools, and ambulance

services. They are also provided with playgrounds and clubs. There is also a water

purification plant for the purification of canal water to make it useable for drink.

FINANCE DEPARTMENT

Introduction:

Director Finance heads finance department and working is controlled by Mr. Inayat-

Ullah Niazi who is General Manager Finance. All the accounts are maintained

according to international accounting standards. Software is used to maintain the

accounting records, which is developed by the MIS department. Software is

developing in Oracle e-business suit. The whole system of the organization is

computerized and sales department is also using this software for booking purposes

and software is linked to the Dera Gazi Khan Units and Kairpur unit.

Finance department has very important role in for any business firm now a days. So

DGKCCL has established its own Finance Department on professional basis.

DGKCCL has different financial managers who are responsible for the financial

aspects of the DGKCCL. This department plays a key role in organization’s

performance. Finance department is responsible to maintains accounts of all

departments within the organization. For solving the complex and difficult problems,

Finance Department is segregated into four divisions. These divisions are as follows:

1. Account Division

2. Internal Audit Division

3. Cost & Tax Division



Major Functions of Finance Department

Finance department performs different functions in the organization to run the

finance of the organization more effectively. Finance Manager is responsible for the

company’s financial management. The major functions which by this department are

as follows:

Calculate different expenses of the organization.

Calculation of all incomes, receiving from sales & other resources.

Financial planning of the organization.

Distribution of profit to the share holders.

Getting loans from banks and other financial institutions.

Costing the production.

To make the efficient use of money of the company.

Maintains all the accounts about inventory & imports of material.

Maintains all the records about purchases made by organization.

ACCOUNT DIVISION:

Finance department maintains all types of accounts in the organization. Finance

department records the transaction, design & implement the accounting system and

prepares the financial statements for the company. This department is under the

Finance Manager.

a) Inventory Section

b) Sales Accounts Section

c) Purchase Section

d) Cash & Bank Section

e) Pay Roll Section

f) Excise & Tax Section

g) Import & Export Section

a) Inventory Section

Inventory Section plays a very important role in any organization & is an important

part of the Accounting Section. This section maintains all the record and accounts

about inventory and imports of material. It is concerned mainly with the:

Control of inventory16 | P a g e

H. Waqar Akhtar (CIIT/FA06-BBA-26/LHR)


Imports

Investments

Loans

Accounting aspects of fixed assets

All store items lying in the stores of DGKCCL includes in inventory. Each item of

inventory is recorded on BIN CARDS or TAGS. These provide an independent check

on the store ledger. It is the duty of inventory section to know how much inventory is

there in stores and for how long it is going to be kept.

This section also checks the value of all assets. Inventory section also reconciles the

quantity of various assets with the help of store keeper to prepare the STOCK

EVALUATION REPORT. Inventory valuation is based on the average principle

because they believe that it is the best system. Inventory section also deals with the

loans of the company. DGKCCL has the policy to finance all long term projects

through loaning.

Documentation Used in Inventory Section

The Inventory Section deals with different types of documents such as:

Issuance Requisition (IR)

Store Transfer Note

Goods Received Notes

Store Evaluation Report

Store Return Report

Principles followed by Inventory Section

Accounting principles followed by inventory section:

Assets are depreciated at Straight Line Method.

Issue requisition of goods received note is the source of information of

inventory.

Fixed assets are stated at cost less accumulated depreciation.

Inventory evaluation is based on Average Method of Costing.

Assets, raw material and other stocks are recorded.



Depreciation in respect of such assets is charged in annual installments so as to

write off their yearend book value over their remaining re-estimated useful lives.

b) Sales Accounts Section:

The sales account section maintains customer’s record and the sales records. Sales

department is actually deals with the Marketing Department and assist the sales

force about the financial aspects. Sales department deals with three basic

documents. These documents are very important in the activities of Sales Section.

These are:

Order Confirmation

Internal Sale Order (ISO)

Dispatch Note (DN)

The actual procedure starts when the sales officer of Marketing Department gets an

order from his clients. When a customer confirms an order, the Marketing

Department issues an “Order Confirmation Slip”. The customer must sign the order

confirmation. After the confirmation, another document is prepared which is called

the “Internal Sales Order” which is used within the company. It is includes details

such as the following:

Purchase Order Number

Product Code

Quantity Ordered

Rate Agreed

Total Value of the Order

Sales Officer’s Code

Code of the Unit where cement are to be manufactured

The other document Dispatch Notes are prepared by the Dispatch Section, which

exists in the Marketing Department. Dispatch Notes contains:

Name of the customer

Customer number

Dispatch date

Dispatched to



Mode of transfer

Destination code

Sales section convert this ISO into coding and then check coding with ISO’s and

send this coding in computer section which enter this coding into computer. MIS

department then send Edit Report to the Sales Section to check it. After checking

this edit report it sends back to computer section and gets Invoice & Freight Debit

Note.

Another job of the Sales Section is to pay customer’s claims. If there are any

difference in the agreed quantity, quality or specifications the customer send a claim

and is verified by the Area Marketing Manager. Then the Marketing Department

sends a “Sales Return Note”, to the Planning Department and Accounts Department.

A “Credit Note” is issued in favor of the customer. Sales are debited and the

customer is credited, as the accounting entry. If transportation company is

responsible then sales department issue Debit Note to the concerned company. All

accounting process in the sales section are computerized.

A “Debit Note” is issued to the customer for the extra goods (more than the ordered)

delivered. The customer is debited and sales are credited.

As a policy matter, DGKCCL prefers to deal with customers who pay in advance or

against an LC for which the guarantee is provided by a bank. Insurance for the

delivered goods is borne by the customer, but he can request for a notification to his

insurance about the delivery of the goods. As for as exports are concerned, all

export documents are also prepared by this section and so are the local LCs.

A record book containing all the current accounts of the company’s sales is also

maintained and is called the “Account Current Ledger”.

c) Purchase Section:

DGKCCL has its own Purchase Accounting section. This section normally deals with

the records of all purchase made by DGKCCL. In DGKCCL purchases are actually

made by the Commercial Department but its accounts deal by the Purchase Section.

Purchase department also deal with different documents such as:



Issue Requisition (IR)

Purchase journal (PJ)

Cash Voucher (CV)

Purchase Journal Through Staff (PJS)

Goods Received Note (GRN)

Purchase Requisition (PR)

Store Return Note (SRN)

Store Transfer Note (STN)

The purchases section records all the daily purchases of company made by

commercial division or any other department. The purchases made by DGKCCL may

be on cash or Credit basis.

There are two types of purchases made by the company:

1. Credit Purchases:

Some purchases of goods made on credit. Such types of purchases are done by

authorized purchases of the company on the credit basis. Credit purchases are of

two types:

Against goods

Against services rendered

Normally goods need for manufacturing purpose such as packaging machinery,

chemicals etc. purchase on credit.

2. Local Purchase through Staff:

Commercial Department Staff members purchase this type of purchases. In this type

of purchases cash is paid immediately. Such purchases are recorded in purchase

journal through commercial staff and send it to the Purchase Section.

d) Cash and Bank Section

The staff of this section is assigned the job of making payments on behalf of the

company. It receives checks and records them in the cash and bank book on daily



basis. All the travelling allowance bills, petty cash expenses and monthly payments

of salaries are made through this section.

Operations of Cash & Bank Section:

To maintain Cash Book

The Management of Short Term Loans

Payments in the Shape of Cheques

Payments to the suppliers

To check the Bank Reconciliation Statement

Payments for Local Travelling

1. Cash Book:

The cash & bank section maintains a cash book in which details of all cash receipts

and payments are noted. A daily balance is prepared after examining daily cash

receipts and payments which is carried towards the next day as beginning balance of

the next day. All receipts of the organization are recorded on the credit side and all

the payments are recorded on the debit side.

2. Payments for Local Travelling:

Travelling within a radius of 50 km from DGKCCL is considered as local travelling f

or which traveling allowance is given to the employees. It is only given when an

employee uses a mode of transport for official purpose.

3. Short Term Loans Management:

In DGKCCL loans are also given for the purchase of cars and motorcycles. The

recommendations this regard is given by the departmental head and is finally

approved by the Finance Manager. The payments are made by loaner on

installments basis i.e., a part of his/her salary is deducted as installment. It is the

Cash & Bank Section responsibility to maintains it. This section is also responsible

for the management of all short term loans of the DGKCCL. DGKCCL is getting the

banking facilities from about eleven banks. In this regard this section normally seeks

the Bank Guarantees and Working Capital Loans in form of over draft facility. All the

machinery in the DGKCCL is on leasing, so it is Cash & Bank Section duty to see the



accounts of all things. The basic objective of this section is to finance the company’s

operations in a better way.

4. Issuance of Cheque:

When payment is not made on cash, then the organization issues cheques to its

creditors. The cheque issued has four copies. The original copy is sent to the

creditor or supplier. One copy is kept for posting purposes. One other copy is sent to

the sales department and the last copy is kept as a record. It is the job of Cash &

Bank Section to reimburse all those expenses paid by the employees on behalf of

the organization. Normally this payment is made twice in a month. All employees

send the details of the expenses incurred by them on the prescribed form. Cash &

Bank Section pays the amount either on the 1st day of the month or on the 15th day

5. Payment to the Suppliers:

One of the most important jobs of Cash & Bank section is to made payments to the

suppliers for the goods or services which they provided to the company. The

purchase section sends the bill indicating that the goods have been received and the

payment should be made.

e) Pay Roll Section

This section deals with the salaries and wages of the employees working in the

organization. There are two categories of employees:

Working on hourly basis

Working on monthly basis

The hourly paid employees are paid every fortnight whereas the other category

receives the salary at the end of month.

f) Payable & TAX Section

DGKCCL is engaged in production of Cement, payable section deals with the

payment of suppliers, sales tax, income tax, withholding tax and excise duty.



Mr. Khalid Mahmood Khalid (Manager A. Payable) responsible for confirmation of

payments document, these documents included, purchase order, Material Receiving

Report, sales tax invoice and the copy of journal voucher. He make sure that the

payment is according to purchase order and the requirements of purchase order is

fulfill, this section is also responsible for the computation of tax and maintaining the

whole tax data.

Computation of sales tax payable:

Sales Tax payable can be calculated by undertaking the following four steps:

Step 1: Calculation of Output tax payable

Step 2: Calculation of Input tax payable

Step 3: Payable Tax = Difference between Output tax payable and

Step 4: Submission of sales tax returns

There are hundreds of suppliers every new case is different from previous one.

NO Deduction Certificate: some suppliers have Deduction Certificate in this

case DGKCCL not deduct With Holding Tax (WHT) from supplier’s payment.

Suppliers are responsible to make direct payment to Government.

Advance Payments: Some suppliers have Advance Payments in this case

DGKCCL payable section check supplier’s ledger before payment.

Sales tax Invoice: some suppliers have dispute in income tax payable to

Govt. in this case payable section require sale tax invoice from supplier for

sales tax returns.



SWOT ANALYSIS

SWOT analysis is a tool for auditing an organization and its environment. It is the

first stage of planning and helps marketers to focus on key issues. SWOT stands for

Strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are

internal factors. Opportunities and threats are external factors.

The SWOT analysis of DG Khan Cement Co. is as following:

Strengths:

1. Availability of Raw Material.

2. DG Cement is a well-known brand in Pakistan and it has good image in

the market. People rely on this cement. The customer demands for the DG

Cement. They have good positioning through their slogan, which

represents durability.

3. Imported Machinery and plants in most of companies, which provide better

quality to over all process.

4. Pakistan has been ranked 5th in the world’s cement exports after a jump

of 47 percent in exports during last fiscal year, the Global Cement Report

shows. ( Daily Times Saturday, August 01, 2009)

5. The compressive strength is a very important factor of cement. The

Portland cement achieves its maximum strength in 28 days. The Pakistan

standard PSS 232-1883 (R) & British Standard BS 12: 1978 provides for

28 days strength of 5000Psi and 5950Psi respectively for mortar cubes.

6. Cement industries in Pakistan are currently operating at their maximum

capacity due to the boom in commercial and industrial construction within

Pakistan.

7. Housing demand to grow:

Following indications have showed a considerable demand of cement in

Pakistan:



Housing projects consume roughly 40% of cement demand

Currently 0.3mn houses are built annually against demand of 0.5mn

Low interest rates, post 9/11 remittances’ inflow, and real estate boom

have helped housing sector growth

Easy mortgage availability and announcement of low cost housing

schemes will determine housing sector growth in the long-run.

8. Government’s development spending shall continue to rise due to:

Government development expenditures count for one third of total

cement consumption

Increase in development expenditures has helped cement demand

to grow at very high rates

Increase in PSDP- as announced in Medium Term Development

Framework 2005-10 will help cement demand to grow in the country

Infrastructure development in a region triggers private development

projects having even positive impact on cement demand.

9. Pakistan cement industry is one the largest exporter in Asia, major

markets are of Afghanistan and Iraq will be after peace. It’s increased

GDP by exports, providing cements in Large Dams Project and

earthquake rehabilitations projects.



10.Laboratory testing facilities meeting all American and European standards

and Vertical cement grinding mills.

11.Today, we find a relatively better scenario as compare to past. Most of the

cement plants, that used to operate on furnace oil, have now been

converted into coal and gas system, which has substantially reduced cost

of production.

12.The most modern selection of production equipment possible in every

major department of the plant.

13.Cement export to India through railway

Most of the cement export to India is through railway. In order to

facilitate cement export to India, the railways has doubled its cement

capacity and increase its frequency of trains to India from Pakistan.

This step has been taken by Pakistan Railways in order to increase

cement export to India. This is regarded as a highly profitable market.

14.Use of Coal

Coal is found in all the four provinces of Pakistan. The country has

huge coal resources, about 185 billion tones, out of which 3.3 billion

tones are in proven/measured category and about 11 billion are

indicated reserves, the bulk of it is found in Sindh.

At present most of the cement companies have switch to coal or

gas as their basic fuel; the process has been completed in the last 6

to 7 years. According to the data of the All Pakistan Cement

Manufacturing Association of mid-2007, the cost of cement

production per ton by furnace oil was around Rs2, 083 whereas the

cost of production per ton by coal was Rs8, 68, saving Rs1, 215 per

ton. Similarly, the saving per bag was Rs60.75, which is a huge

difference. Reserves of coal can become strength for Pakistani

cement industry if Pakistan import sulphur washing plant from

European country than Pakistan cement industry is able to utilize

local coal to meet its energy requirement

15.Cheaper labor

The labor of Pakistan is very cheap. This is the important strength

of the cement industry as the cement companies of Pakistan has to



pay less to their labor which result in saving of their income which

later on can be utilized in the expansion of cement plant. Which will

increase the cement production?

16.Good Domestic and Foreign Market

The export reached to $ 500 million during 2008. Data for the first

quarter of FY08 shows that Afghanistan is Pakistan’s largest

cement export market. The prospects for cement exports seem

bright in the medium term due to rising domestic as well as regional

cement demand.

17.Good Government Policies

Government policies are in the favor of cement sector. Due to the

government favorable policies the cement sector gets the highest

growth rate of 21.11% among all the industries of Pakistan in year

2006-07. The total industry installed capacity is expected to reach

49.1 million tons per annum by FY10

18.High Quality of Cement

Pakistan produces good quality of cement. This is the main reason

due to which recently Russia is offering high price for Pakistani

cement. Globally Pakistan is recognized for producing good quality

of cement due to which countries like Afghanistan, India, Middle

East and some African countries prefer to import cement from

Pakistan.

Weaknesses:

1. The stage of industrial development, in most of the segments, is still at a very

low level of technology and the existing industrial base is very narrow and

consists of very basic industries such as cement, sugar, textile, cigarette,

edible oil, fertilizer, soda ash, caustic soda, PVC etc.

2. Since cement is a specialized product, requiring sophisticated infrastructure

and production location. So, most of the cement industries in Pakistan are

located near/within mountainous regions that are rich in clay, iron and mineral

capacity. Structure of Cement industry in Pakistan is as such that there is not



much substitutability to buyers. Which shows that the Cross elasticity of

demand is negligible.

3. The customer has no choice at all to switch between two brands of cement

due to cartel of all of the cement manufacturers in Pakistan.

4. The freight charges are a massive 20% of the retail prices. The plants located

very close to each other and tapping the same market will have to expand

their markets which will increase their freight expenses. Dandot, Pioneer,

Maple Leaf and Garibwal are all located within a radius of 100 kilometers and

are selling bulk of their production in the same areas and will thus face

serious competition from each other.

5. Consumers face a tough decision with regards to prefer which brand over

which because of the similar pricing of cement industry. The formation of

cartel by the cement manufacturers have exploited local consumers a lot and

this has led to the concentrated degree of oligopoly, where the firms are

acting as a single unit to perform their monopoly. Their combined market

power is simply a diluted version of the dominance that a single firm with a

monopoly market share can exert.

6. Increase freight charges

Exporters of the cement often complain that railways freight charges for

carrying cement from Lahore city to the border of India are Rs500 per

ton ($8 per ton) while it covers only 35 km. Against this, they say on

the Indian side, the freight is only $3 per ton for bringing goods from

Chundrigar to the border area. Cement exports have been badly hit by

high fee that is being charged by trucks and also by foreign shipping

companies for the haulage of cement from Pakistan to India. This

increase in freight charges effect our exports due to which our exports

is declining

7. Logistic Problem

Some of the cement companies of Pakistan have received orders from

Russia with a price tag of Rs 860 per bag. But our logistics is the

biggest hurdle in the way as our transportation system is not good



enough to transport cement to Russia due to which our cement

companies might lose the chance to capture the Russian market which

is a highly profitable market.

8. Usage of Paper bag

Pakistani cement companies export there cement in paper bags

because paper bags are cheap as compared to plastic bags. But the

Cement exported in paper bags is against the International standards

and companies have to pack the cement in plastic bag. The cement

export to India could be affected by the shortage of plastic bags used

for transporting the commodity. Although there are two companies that

are manufacturing plastic bags for cement but they are not able meet

the demand. So that’s why Pakistan cement companies export cement

in paper bags.

9. Idle capacity of various players:

The biggest problem of cement industry is the idle capacity of various

players. As many cement players are not operating at their full

capacity.

10.They are still using obsolete marketing practices. Top management should

use up-to-date marketing practices rather to use orthodox ideas. This is the

age of advertisement and they should advertise their product rather use push

strategy. They should emphasize on pull strategy as well. They have good,

energetic, experienced marketing and sales team they should use it

constructively.

11.They have not divided their zones for marketing and sales teams.



12.They are not paying much attention to promotional tools. They are not

advertising their product. They are only using trade promotions, which are not

enough to have a good positioning in the market.

13.They do not have much interaction with the distributors. They do not go to the

distributors for inquiring about the sales.

Threats:

1. Unanticipated increase in interest rates or less than expected demand growth

might create severe crises for the sector couple of years forward.

2. Lack of demand or depressed demand in future will prove to be lethal for the

sector that has just started to recover from the miseries of 90s. Lack of

demand forced cement units to operate at very low capacity utilization in

nineties. There was a fierce competition among cement manufacturers.

3. A price war was witnessed which ended up with no conqueror. Similar

apprehensions exist for the future when there will be plenty of excess

capacity. Any hurdle in the growth of cement demand may force the sector

into the price war. Yet, we expect cement manufacturers to act prudent and

learn lesson from the history. Any mistake, similar to the one made in the last

decade, will again coerce the sector into the era where all are losers with no

winner.

4. Main component of the cost is fuel. Pakistan's cement industry has converted

their plants to coal considering it to be the cheapest fuel, but its price in

international markets has gone up by more than 300 per cent in the last one

year, which directly relate increasing the cost of production.

5. The demand of cement falls heavily during rainy weather in the country, which

directly affects the running cost of a unit. It is only the rising levels of cement

exports, which are sustaining the industry.

6. Instead of appreciating the marketing skills of cement entrepreneurs to

explore new markets for cement, the industry is being pressurized constantly

without realizing that any reduction in cement exports from Pakistan will not

only deprive the country of foreign exchange ($2 billion last year), but will also

result in losses to the industry.



7. The burden of increased input costs has to be borne by the consumers. It is

only the government, which can provide relief to the consumers by cutting

down or abolishing the central excise duty.

8. Problems of oversupply situation:

Following problems might arise with the oversupply situation in cement

industry:

Lower capacity utilization will reduce benefits of economies of

scale. High leverage will also adversely affect profitability of new

plants.

New plants will gain market share at the cost of older players, which

are not undergoing expansion. Large idle capacity is will create

panic in players and this may result in price wars in the coming

years.

9. IMF Package in Future can cause to decrease GDP and economical

development in Pakistan. Which will also be cause to stop development of

infrastructure? So it will have huge effect on cement industry also.

10. Indian and Iran industry is also expanding its cement capacity

Presently, India faces an acute cement shortage in its Southern states

of Tamilnado and Madras and in north Punjab. However, reports

indicated that the Indian industry is also working on a fast track to

expand their capacity in these regions to off-set the shortfall

Major capacities of countries like India and Iran are expected to

come online by FY10 and onwards which are likely to convert these

countries from dependent importers to potential exporters.

11.High energy prices

Recently cement industry of Pakistan is facing high energy prices due

to increase in the international prices of coal and oil. As our coal

contain high percentage of sulphur. Due to which Pakistan cement

industry is not able to use local coal as a source of energy. Due to

which Pakistan cement industry has to import coal from different

countries at high prices. High finance and depreciation cost as



Pakistan cement industry is expanding its capacity to get the proper

advantage of strong demand of cement in different countries. The total

industry installed capacity is expected to reach 49.1 million tons per

annum by FY10 and because of higher expansion finance and

depreciation cost is also going to rise by the FY10.

12.Decrease profitability due to competition in cement industry

The sharp decline in cement prices has been witnessed due to

domestic competition among producers has dampened the profitability

of the industry. This increase in competition among the players has

further decreased the prices of cement in the local market. The cement

manufacturers decrease the prices of their products in order to get high

market as compared to its competitor.

13.High level of taxation

Presently, the cement industry of Pakistan is heavily burdened due to

levy of Federal Excise Duty @ Rs. 750 per ton and General Sales Tax

@ 16% on duty paid value. In addition to Federal Excise Duty and

General Sales Tax, cement industry is also paying the provincial levies

(Royalty and Excise Duty) on acquiring of raw material for production of

cement i.e. lime stone and shall clay.

Opportunities:

1. The local cement industry faces high upfront fuel costs. In order to facilitate

their conversion to coal, which is widely available in the country, the

government has given incentives for imported plant and equipment for coal

firing units.

2. The demand of Pakistani cement is expected to continue to grow at the rate of

20 per cent for about four years to come. It may then follow traditional growth

rate of seven per cent per year. Announcement of major dams will

dramatically increase this demand.

3. Deregulation after accession of Pakistan to WTO is expected to open the

window of competition from cheaper markets. There may be no tariff after this

deregulation on import of cement allowing its entry into Pakistan from cheaper

market at lower rate. Cement from cheaper markets may also block

Pakistan’s export of cement to its neighboring countries. Global market has



vigorously taken up the advantage of economy of scales and multinational

giants now control more than 40 per cent of world production (China not

included). The recent acquisition of Chakwal Cement by an Egyptian giant,

Orascom may be a beginning of such an entry in Pakistan by multinationals.

New avenues for export of cement are opening up for the indigenous industry

as Sri Lanka has recently shown interest to import 30,000 tons cement from

Pakistan every month. If the industry is able for avail the opportunity offered, it

may secure a significant share of Sri Lanka market by supplying 360,000 tons

of cement annually.

4. Government Development Expenditure

Government development expenditures count for one third of total

cement consumption. Increase in development expenditures has

helped cement demand to grow at very high rates. Increase in PSDP-

as announced in Medium Term Development Framework 2005-10 –

made the cement demand to grow in the country. Infrastructure

development in a region triggers private development projects having

even positive impact on cement demand.

5. Construction of large dams

Construction of four large dams will generate demand of 3.7mn tons as

construction activities start. Our estimate does not include demand

generation from Skardu-Katzarah dam as its feasibility study in not yet

completed. Extent of demand generation will depend on size of dam,

type of dam, and extent of relocation/resettlement activities required.



Bhasha dam will generate maximum demand as it is RCC concrete

dam whereas other dams being Earth fill/Rock fill dams will require less

cement for their construction. Resettlement activities for Kalabagh dam

will generate maximum demand as it is located in a highly populated

area.

6. Improved access to regional market

Afghanistan is Pakistan’s largest cement export market. The prospects

for cement exports seem bright in the medium term due to rising

domestic as well as regional cement demand. Pakistan also achieved

improved access to India after the complete removal of the 12.5

percent custom duty on Portland cement imports in this country from

January 2007, showing improved export opportunities for Pakistan.

India is planning to import more cement from Pakistan to stabilize

prices in the market and the government wants a balance in demand

and supply of cement in the current fiscal year. The import of cement

from Pakistan has increased manifold during last four months. India

has registered a number of Pakistani cement manufacturers, a

requirement to facilitate import of cement. Pakistan has already

increased the frequency of trains from one to three in a week to carry

cement from Pakistan to Wagah border. Due to boom in the

construction industry, India needs cement in bulk to meet its growing

needs.

7. Demand of Pakistani cement by Russia

Fresh enquiries have been received from Russia and buyers are

quoting very attractive prices as Pakistani cement quality is of very high

standard and holds good strength.

8. High prices of cement in the international market

Cement exports are expected to soar by a massive 107 per cent due to

the primary source of overall cement growth in FY08, the high exports

owing to the cement supply shortage in India and Middle East which

lead to rocketing cement prices in the region.

9. Increase in demand of cement due to the upcoming sports event



South Africa is schedule to host the football world cup of 2010 due to

which they need to make the football stadiums for the World Cup and

Sri Lanka are also expected to approach Pakistani companies for

cement imports because Sri Lanka to co-host the cricket world cup of

2011.

PRODUCT LIFE CYCLE

Product Life Cycle Stages

The product life cycle model can help analyzing product and industry maturity

stages.

In the above diagram arrow shows the product life cycle stage of cement and

cement industry as well. According to this diagram cement is at this time the

sales of cement are increasing because of enormous demand for the cement in

both local and foreign markets. More over competitors in this industry are

increasing day by. They are rushing to this industry because of ever increasing

demand of cement. So the product of the company is at growth stage and whole

cement industry is also at the growth stage.


Introduction

Growth

Maturity

Decline

CEMENT


BUSINESS ANALYSIS

Cement sector background

At the time of independence in 1947, only one or two units were producing grey

cement in the country. During the decade of 1948-58, the number of cement units

increased to six. During the Ayub era the economy started to grow and the

construction activities underwent a boom. To meet the growing demand of cement

new units were set up. During the decade of 1958-68, the number of cement units

increased from 6 to 9. During the following period of Zulfiqar Ali Bhutto all the

industrial units, including cement industry, were nationalized, therefore, no new unit

was set up during 1971-77. During the period of General Zia-ul-Haq, 1977-88,

denationalization of industrial units boosted the investments. Housing and

construction industries picked up and the demand for cement increased. Thus, the

number of cement units increased from 9 to 23 and finally 24.

The cement industry in Pakistan has become a long way since independence when

country had less than half a million tons per annum production capacity. By now it

has exceeded 10 million tons per annum as a result of establishment of new

manufacturing facilities and expansion by existing units. Privatization and effective

price decontrol in 1991-92 heralded a new era in which the industry has reached a

level where surplus production after meeting local demand is expected in 1997.

The cement industry is needed a highly important segment of industrial sector that

plays a pivotal role in the socio-economic development. Through the cement industry

in Pakistan has witnessed its lows and high in recent past, it has recovered during

the last couple of years and is buoyant once again.

There are total number of units are 23, from which 4 units are in the public sector

while the remaining 19 units are owned by the private sector. Two of the four units in

the public sector had to close down their operations due to stiff competition and

heavy cost of production. The cement plants are located in every province of

Pakistan.

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

Three additional cement plants with installed capacity of over 2.1 million tons are in

the final stage of completion despite the available excess capacity in this sector. The

following table shows installation of new cement factories and expansion of the

existing facilities during the current decade.

The industry is divided into two broad regions, the northern region and the southern

region. The northern region has over 87 percent share in total cement dispatches

while the units based in the southern region contributes 13 percent to the annual

cement sales.

Name of

company

New/ Expansion Year of

Commission

New Capacity

Created(Tons)

Northern Region



Askari Cement Expansion 1964 945,000

Askari cement New 1996 630,000

Bestway cement New 1988 1,039,500

D.G Khan cement Expansion 1988 1,039,500

Fauji cement New 1997 945,000

Lucky cement New 1996 1,260,000

Maple Leaf

cement

Expansion 1998 1,039,500

Pioneer cement New 1994 630,000

Sub-Total 7,528,500

Southern Region

Essa cement Expansion 1988 315,000

Total 7,843,500

Financial Analysis Of DG khan Cement Company Ltd

Overview of Income Statement

Overview of Income statement 2008 2007 2006 2005 2004

Sales 12,445,996 6,419,625 7,955,665 5,279,560 3,882,756

Cost of sales -10,530,723 -4,387,640 -3,992,822 -3,330,769 -2,497,262

Gross profit 1,915,273 2,031,985 3,962,843 1,948,791 1,385,494

Administrative expenses -111,658 -104,169 -121,953 -76,480 -68,645

Selling and distribution expenses -561,465 -65,122 -34,352 -60,905 -38,560

Other operating expenses -581,913 (139,721 -191,850 -93,786 -61,735

Other operating income 847,344 479,420 294,114 707,692 128,462

Profit from operations 1,507,581 2,202,393 3,908,802 2,425,312 1,345,016



Finance cost -1,749,837 -467,759 -450,696 -304,041 -224,601

Share of loss of associated

companies

-8,674 -14,163 -9,573

Profit\ Loss before tax -250,930 1,720,471 3,448,533 2,121,271 1,120,415

Taxation 197,700 -98,000 -1,030,078 -439,193 -325,922

Profit\ Loss for the year -53,230 1,622,471 2,418,455 1,682,078 794,493

Basic earnings per share

Rupees

-0.21 6.43 10.37 9.12 4.31

Diluted earnings per share 6.43 9.14 7.82 3.78

Overview of Balance sheet

Overview of Balance sheet 2008 2007 2006 2005 2004

Capital and Reserve 30528440 33923185 19268200 9317998 6317055

Non-current Liabilities 10250352 10430917 9020740 5642649 3020575

Current Liabilities 12899306 7390229 6015436 3055858 2376989

Assets

Non-current Assets 33835927 32529377 24394481 13819736 8833476

Current Assets 19842171 19214954 9909895 4196769 2881143

Liquidity Position with Graphical Presentation

Liquidity Position

Liquidity Position 2008 2007 2006 2005 2004

Current Ratio 1.54 2.60 1.65 1.37 1.21

Acid Test Ratio 1.22 2.33 1.44 0.96 0.64

Cash Ratio 1.18 2.31 1.43 0.94 0.62



The liquidity position of DGKC deteriorated during the first nine months of FY'09.

This was due to a 40% decrease in current assets and a 14% increase in current

liabilities if the company. The current liabilities of the company increased due to 14%

rise in trade payables, 61% increase in accrued markup and around 7% increase in

short term borrowing by the company.

On the other hand, current assets of the company declined due to decrease in

investments from Rs 15 billion at the end of FY08 to Rs 7 billion at the end of March

FY09. Also the cash and bank balance of the company decreased by 22%. Thus,

decrease in current assets and a corresponding increase in current liabilities resulted

in a less favorable liquidity position as compared to that in FY08.

DGKC's liquidity stance had been strengthening since FY04 and in FY07 its liquidity

position was the most favorable. The increase in current assets had brought about

this change. There was a 98% increase in short term investments. Furthermore, the

cash and bank balances had also risen considerably.

In FY08 the current assets of the company declined slightly but a 63% rise in current

liabilities caused a decrease in the liquidity of the company. Investments constitute

nearly 79% of the company's total current assets and they declined by 11% in FY08.

The investments decreased further from Rs 15 billion at year-end FY08 to Rs 10.9

billion by end of 1Q09.

Activity Ratios

Activity Ratios

Days Sales in

Receivables

Account

Receivables

Turnover

Account

Receivables

Turnover in Days

Activity

Ratio

Inventory

Turnover



in days

Inventory

Turnover

13.19 times 16.83 times 24.40 times 16.67 times 8.36 times

Days Sales

in

Inventory

45.08 days 24.55 days 20.68 days 11.07 days 43.63 days

Operating Cycle

Activity

Ratio

2008 2007 2006 2005 2004

Operating

Cycle

36.55days 27.89 days 18.41 days 26.34 days 48.58 days

Debt Ratios

Debt Ratios 2008 2007 2006 2005 2004

Debt to Tangible net

worth

77 52 78 93 85

Debt To Equity Ratio 76 53 78 93 85

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. However, during FY08 the debt ratios of the company rose because the

total debt increased in FY08 mainly due to a 63% increase in the current liabilities

which form 55% of the total debt.

Long term debt however decreased. The long term debt to equity increased because

of a decline in the equity base due to fall in reserves. The TIE ratio continued to fall

in FY08 against a positive trend that prevailed before FY07. The reason is

substantial rise in finance charges due to high interest rates in the economy.

Also the operating income in FY08 decreased, thus reducing the extent to which

operating income can decline before the firm is rendered unable to meet its interest

costs. Due to the losses that DGKC experienced in FY08 and the decrease in

profitability during July-March FY09, its Earning per Share (EPS) and Price to

Earning (P/E) Ratio have been negative. During July-May 2009 the share price

averaged around Rs 31.1.

This shows that the dismal profits of the company have started reflecting in the low

investor confidence and falling share price. The average share price of DGKC had

hovered around Rs 100/share except during the fourth quarter of FY08 when share

price fell well below the average. The management did not recommend any dividend

for FY08 due to the dismal profitability situation in the period.

Profitability Ratios

Profitability Ratios 2008 2007 2006 2005 200442 | P a g e

H. Waqar Akhtar (CIIT/FA06-BBA-26/LHR)


Gross Profit Margin 15 32 49 37 36

Operating Profit

Margin

12 34 49 46 35

Net Profit Margin 7.84 25 31 31 20

After experiencing declining profitability during FY08, the cement sector came back

strongly to post a growth of 167% in earnings during first quarter (July-September) of

fiscal year 2009. The cement sector posted profit after taxation of Rs 1.3 billion in

first quarter of FY09 as compared to Rs 500 million in the corresponding period of a

year earlier.

This growth was mainly due to higher local retention prices and depreciation of the

rupee against the dollar that resulted in an increase of rupee-based export sales.

The net sales of the cement sector in the period July-March FY09 was 58% higher

than the net sales generated during the corresponding period of FY08. It is believed

that the profits of cement companies increased due to an arrangement among them

to keep prices high in the local market.

However, higher sales revenue could not be translated into an increase in profits

during the period. Increased costs of sales, operating expenses and finance

expenses caused the profitability of DGKC to remain low during July-March FY09.

The cost of sales of the company increased by 30% during the period and resulted in

a gross profit of Rs 3,733 million.

The furnace oil/coal costs for the period July-March FY09 was Rs 5,258.6 million as

compared to Rs 3,095.7 million during the corresponding period of FY08. The

electricity and gas costs were lower, however, the cost of raw material and packing

material consumed increased by 12%. The administration expenses increased by



31% while the selling & distribution expenses increased drastically by 456% (from Rs

246 million in July-March FY08 to Rs 1,370 million in July-March FY09).

Selling expenses may have increased due to higher transportation costs involved

with exports and higher fuel costs. Also, the finance costs increased substantially by

77% as interest rates rose owing to tight monetary policy and liquidity crunch in the

market.

These rising costs greatly hampered the profitability of the company and resulted in

a profit after taxation of Rs 321 million in the period July-March FY09, which is 34%

lower than the profit (Rs 487 million) during July-March FY08. Therefore, the earning

per share (EPS) of the company declined from Rs 1.92 in July-March FY08 to Rs

1.27.

Profitability - Financial Year 2002 to Financial Year 2008

The profitability ratios of the company have shown a declining trend since after

FY05. The gross profit margin increased in FY06 only to fall in FY07 and FY08. The

profit margin of the company has decreased continuously along with return on assets

(ROA) and return on equity (ROE).

The profit after taxation had declined by 33% in FY07 due to lower net retention

prices caused by a supply overhang in the overall industry. Also the problem of rising

input costs had begun in FY07. This rise in cost of production and raw material have

continued into FY08 and further aggravated, causing the declining trend of the

profitability of DGKC.

Despite a strong growth in cement dispatches, the cement sector experienced

declining profitability during FY08. The profitability of the sector fell by 73.6% to Rs

562 million till March 2008 from Rs 2,133 million in the corresponding period of

FY07. Although the sales volume of the cement companies increased, the net sales

revenue did not increase to an equal extent due to decrease in net retention prices in

the sector.

Over the years all cement manufacturers undertook huge capacity expansion plans.

This created a situation of excess supply in the market. Companies resorted to price

wars leading to a fall in prices and reduced the profit margins for the companies. The

average cement price during the period July-March FY08 was Rs 128.3 per bag as

compared to Rs 133.6 per bag in the same period in FY07.



Similar was the case with DGKCC. Increased production facilitated higher sales

volume which in turn translated into almost doubling of sales revenue in FY08. The

company had earned the highest sales revenue of Rs 12.445 billion in FY08.

However, despite this, the gross profit of DGKC in FY08 (amounting to Rs 1.9 billion)

was around 6% lower than the gross profit posted in FY07 (Rs 2.0 billion).

The reason for lower gross profit was a 140% increase in the cost of sales during the

fiscal year. Major input costs increased and dampened the profitability of DGKC and

resulted in a loss after taxation of Rs 53.230 million in FY08 against a profit after

taxation of Rs 1.622 billion in FY07. The cement manufacturers in the industry were

faced with rising fuel and power costs during FY08.

The cost of production for the cement companies went up due to rise in the prices of

imported coal. The cement companies in Pakistan have shifted from oil to coal or

gas during the past few years. Coal is now used as a basic fuel by all cement

manufacturers. Pakistan has huge reserves of coal, but cement companies are

compelled to import it, as local coal has high sulphur content.

Crude oil prices shot up during FY08 and had its impact on prices of coal and natural

gas. The rise in the costs of international coal prices has been one of the biggest

reasons behind the dampening of gross margins of cement companies during FY08.

There was a nearly 50% rise in the coal prices in FY08

Along with the hike in the international coal prices, the depreciation of the rupee

against the dollar also added to the cost of importing coal. Finance charges rose due

to higher interest rates, long term finances, short term borrowing and inclusion of

workers' profit participation fund in FY08.

Assets Utilization

Asset Utilization 2008 2007 2006 2005 2004

Sales to Fixed Assets 54 43 108 80 62

Return on Operating

Assets

24 33 10 13 11

Operating Asset

turnover

20 9.6 20 28 33

Return on Assets 18.5 3.8 23 11 6.60



The performance of DGKC in terms of asset management was weak during FY07.

During the year, the inventory turnover (days) of the company more than doubled

compared to FY06 when the management of inventory seemed most efficient

(evident from the lowest inventory turnover in days). This could be traced back to

lower sales revenue for the period, coupled with a higher stock of inventory.

At the same time, the average time taken by the company to recover cash from sales

also increased. The increase in inventory turnover in days and Days sales

outstanding (DSO) prolonged the operating cycle of the company in FY07.

However, in FY08 the asset management of DGKC improved as the inventory

turnover rate increased because the company earned sales revenue more in

proportion to the increase in inventory. Thus the days to convert inventory into sales

became less (from approx. 100 days in FY07 to 79 days in FY08).

Although the days to convert sales into cash (DSO) increased slightly, the

substantial decrease in ITO (days) led to the shortening of the operating cycle in

FY08. The days sales outstanding was higher because the trade debt increased

substantially (by 153%) during FY08 as against sales.

Besides this the sales to equity and total asset turnover of the company which had a

declining trend till FY07 increased in FY08. The sales to equity ratio had been

decreasing because of an increase in the paid up capital. But the trend was reversed



in FY08 because the paid up capital remained same while the reserves fell, causing

a decrease in the equity base of the company.

Also higher growth in sales increased the sales/equity ratio. Total asset turnover also

improved because the management of the company's assets was effective in

generating higher sales revenue. The company's performance in the area has

improved as full-scale production from the newly inaugurated Khairpur plant has

augmented the sales.

Return on Investment

Return on total equity

Return

Ratios

2008 2007 2006 2005 2004

Return on

Investment

2.92 5.34 12.58 15.47 10.07

Return on

Total

Equity

0.30 0.37 17 22 13

One of the most important profitability metrics is return on equity [or ROE for short].

Return on equity reveals how much profit a company earned in comparison to the

total amount of shareholder equity found on the balance sheet. If you think back to

lesson three, you will remember that shareholder equity is equal to total assets



minus total liabilities. It's what the shareholders "own". Shareholder equity is a

creation of accounting that represents the assets created by the retained earnings of

the business and the paid-in capital of the owners. The return on Equity has

decreased drastically and there is quite a hell of decrement in ROE, which is not very

much encouraging for the investors in shares.

Investment Ratios

Degree of financial leverage

Earnings per common shares

Price earnings ratio

Investment ratios 2008 2007 2006 2005 2004

Degree of financial

leverage

15.48 1.27 1.13 1.14 1.20

Earning per common

shares

0.017 0.60 0.10 0.76 0.35

Price earning ratio 258.08 4.81 3.38 3.96 8.19

A leverage ratio summarizing the affect a particular amount of financial leverage

has on a company's earnings per share (EPS). Financial leverage involves using



fixed costs to finance the firm, and will include higher expenses before interest and

taxes (EBIT). The higher the degree of financial leverage, the more volatile EPS will

be, all other things remaining the same. Most likely, the firm under evaluation will be

trying to optimize EPS, and this ratio can be used to help determine the most

appropriate level of financial leverage to use to achieve that goal.

The company’s ratio ha increased dramatically in the year 2008 by 15 times. So

there is quite a margin for company to get leveraged.

The portion of a company's profit allocated to each outstanding share of common

stock. Earnings per share serve as an indicator of a company's profitability.

Earnings per share are generally considered to be the single most important variable

in determining a share's price. It is also a major component used to calculate the

price-to-earnings valuation ratio. The EPS of company is fluctuating but in current

year it has decreed drastically which is not a good sign for share holders. An

important aspect of EPS that's often ignored is the capital that is required to generate

the earnings (net income) in the calculation. Two companies could generate the

same EPS number, but one could do so with less equity (investment) - that company

would be more efficient at using its capital to generate income and, all other things

being equal would be a "better" company. Investors also need to be aware of

earnings manipulation that will affect the quality of the earnings number. It is

important not to rely on any one financial measure, but to use it in conjunction with

statement analysis and other measures.

A valuation ratio of a company's current share price compared to its per-share

earnings is Price Earning ratio. In general, a high P/E suggests that investors are

expecting higher earnings growth in the future compared to companies with a lower

P/E. However, the P/E ratio doesn't tell us the whole story by itself. It's usually more

useful to compare the P/E ratios of one company to other companies in the same

industry, to the market in general or against the company's own historical P/E. It

would not be useful for investors using the P/E ratio as a basis for their investment to

compare the P/E of a technology company (high P/E) to a utility company (low P/E)

as each industry has much different growth prospects.

The P/E is sometimes referred to as the "multiple", because it shows how much

investors are willing to pay per dollar of earnings. It is important that investors

note an important problem that arises with the P/E measure, and to avoid basing a

decision on this measure alone. The denominator (earnings) is based on an



accounting measure of earnings that is susceptible to forms of manipulation, making

the quality of the P/E only as good as the quality of the underlying earnings number.

Investment Ratios

Dividend payout ratio

Dividend yield ratio

Book value per share

Investment ratios 2008 2007 2006 2005 2004

Dividend payout ratio 19.83 23.62 48.31 28.37 27.74

Dividend yield ratio 7.68 4.90 14.23 7.17 3.38

Book value per share 18.74 20.87 16.62 7.80 5.29

Indicates the proportion of earnings that are used to pay dividends to shareholders.

A reduction in dividends paid is looked poorly upon by investors, and the stock price

usually depreciates as investors seek other dividend paying stocks

.

A stable dividend payout ratio indicates a solid dividend policy by the company's

board of directors. The situation of DG Khan Cement Co. Ltd. Shows increment in

2006 but from there is consistent decrement in this ratio by more than two times so

company is trying to build there retained earnings instead of giving dividend.



During bull markets the stock price is more likely to trade significantly higher than

book value, and in a bear market the two values may be close to equal. The

dividend yield or the dividend-price ratio on a company stock is the company's

annual dividend payments divided by its market cap, or the dividend per share

divided by the price per share. It is often expressed as a percentage. There is quite

fluctuations in this ratio which shows there is lack of stability in the company policy

towards this section.

Now if we look at the book value per share, as we know that somewhat similar to the

earnings per share, but it relates the stockholder's equity to the number of shares

outstanding, giving the shares a raw value. Comparing the market value to the book

value can indicate whether or not the stock in overvalued or undervalued. During bull

markets the stock price is more likely to trade significantly higher than book value,

and in a bear market the two values may be close to equal.

Univariate Model

1. Cash flow/Total debt

2. Net

Income/Total Assets (Return on Assets)


Calculation in (Rupees’ 000) Values

2008 (641970)/23149658 -2.773%

2007 475661/17821146 2.67

2006 4190452/15036176 27.869

2005 2484759/8698507 28.57

2004 945521/8698507 10.8

Year Calculation in (Rupees’

000)

Values

2008 25685/53678098 0.047%

2007 1622471/51744331 3.13

2006 2418455/34304376 7.05

2005 1682078/18016505 9.34

2004 794493/11714619 6.78


3. Total debt/Total Assets (debt ratio)

Multivariate Model

X1= Working Capital/Total Assets

Year Calculation in (Rupees’ 000) X1

2008 6942865/53678098 12.934%

2007 11824725/51744331 22.85

2006 3894459/34304376 11.35

2005 1140911/18016505 6.33

2004 504154/11714619 4.30

X2=Retained Earning/Total Assets


2008 30202533/53678098 56.27%

2007 33923185/51744331 65.56

2006 19259849/34304376 56.144

2005 9317998/18016505 51.72

2004 6317055/11714619 53.9


Year Calculation in (Rupees’ 000) Values

2008 23149658/53678098 43.13%

2007 17821146/51744331 34.44

2006 15036176/34304376 43.83

2005 8698507/18016505 48.28

2004 5397564/11714619 46.07s


X3=EBIT/Total assets


2008 1513505/53678098 2.82%

2007 2202393/5174 4.26

2006 3908802/34304376 21.69

2005 2425312/18016505 13.46

2004 1345016/11714619 11.48

X4= Market value of equity/Book value of total debt


2008 253541157*30.97/23149658 339.19%

2007 253541157*30.97/17821146 440.60

2006 184393569*30.97/1503176 379.79

2005 184393569*30.97/8698507 656.51

2004 167630518*30.97/5397564 961.82s

X5=Sales/Total Assets

DuPont Analysis

1. DuPont Return on Assets= (Net profit margin).(Total assets turnover)



2008 12464347/53678098 23.22%

2007 6419625/51744331 124.79

2006 7955665/34304376 23.19

2005 5279560/18016505 29.30

2004 3882756/11714619 33.14

Year Calculation in

(Rupees,000)

Dupont Return

on Assets

2008 7.84*0.24 1.88

2007 0.25*0.15 3.75

2006 0.31*0.74 22.94

2005 0.31*0.35 10.85

2004 0.20*0.33 6.60s


DuPont return on Assets has a decreasing trend. In 2008 net profit of co decrease

due to high cost of goods sold. Co does not utilize its assets properly in 2008. In

2007 trend of this ratio is good. But in last 3 years it also has increasing trend.

Horizontal Analysis of Income Statements

2008 2007 2006 2005 2004

Net sales 321.01 % 165.34 % 204.89 % 135.97 100 %

Cost of sale (421.58) (175.7) (159.89) (133.38) 100

Gross profit 139.75 146.66 286.02 140.66 100

administrative

expense

(61.33) (151.75) (177.66) (111.41) 100

selling &dist.

expenses

(145.98) (168.88) (89.09) (157.95) 100

other operating

expense

(964.90) (226.32) (310.76) (151.29) -100

other Operating

income

659.03 373.20 228.95 550.89 100

profit from operation 112.53 163.74 290.61 180.32 100

finance cost (786.41) (208.26) (200.66) (1345.25) 100

share of loss of

associated company

- - - - 100

income before 15.64 153.56 307.79 189.33 100



taxes

Provision for

taxation

(61.66) (30.06) (316.05) (134.75) 100

Net profit 3.23 204.21 304.40 211.72 100

Horizontal analysis of income statement shows that net sales of the Co has

increasing trend. But on the other hand Cost of goods sold jump quickly. This is not a

good trend. Cost of goods sold of the Co increases due to expensive raw materials.

Gross profit of the co decreases from last year’s due to high cost of goods sold.

Administrative and selling expense of the Co has decreasing trend. Other operating

expenses of the Company are increasing quickly. Company is also increasing trend

in other operating income. Profit from operations also decreases. Co also has high

finance cost from last years. Income before taxes has decreasing trend due to high

cost of goods sold and finance cost. Net profit of the Company is Very small as

compare to last years.

Vertical Analysis of Income Statements

2008 2007 2006 2005 2004

Net sales 100% 100% 100% 100% 100 %

Cost of sale (84.46%) (68.35%) (50.18%) (63.09%) (64.32%)

Gross profit 15.35 31.64 49.81 36.91 35.68

administrative expense (0.88) (1.62) (1.53) (1.45) (1.77)

selling &dist. expenses (4.52) (1.01) (0.43) (1.15) (0.99)

other operating

expense

(4.78) (2.17) (2.41) (1.78) (1.59)

other Operating

income

6.79 7.47 3.70 13.40 3.37

profit from operation 12.14 34.31 49.13 45.94 34.64

finance cost (14.17) (7.28) (5.66) (5.76) (5.78)

Excess of acquires

interest in the net

assets of acquire

0.69

- - - -

share of loss of

associated company

(0.66) (0.22) (0.12)

income before taxes 1.41 26.80 43.34 40.18 28.86



Provision for taxation (1.61) (1.53) (12.95) (8.32) (8.39)

Net profit 20.20 25.27 30.40 31.86 20.46

In vertical analysis of income statement shows that has high cost of goods sold from

last years. Gross Profit of the Co has decreasing trend. This is decrease due to high

cost of goods sold. Operative expense of the co has minimum portion in the income

statement. Profit from operations also has decreasing trend. Share of loss of

associated co also increases Income before taxes also decreases from last years.

Provision for income taxes also has decreasing trend.

Horizontal Analysis of Balance Sheet

Assets 2008 2007 2006 2005 2004

issued subscribed

& paid up capital

151.25 151.25 110.00 110.00 100

reserves 629.62 675.08 343.70 163.96 100

accumulated profit

total

12.87 698.43 926.07 110.26 100

Total - 537.01 305.02 147.51 100

non-current

Liabilities

long term finance 324.88 318.12 269.99 179.42 100

liabilities against

assets subject to

lease finance

0.47 1.36 34.50 158.09 100

long-term deposits 243.34 261.71

retirement and other

benefit

141.59 104.40 69.65 119.96 100

deferred taxation 906.52 1176.81 1129.71 389.13 100



current liabilities

trade and other

payables

293.56 207.96 284.81 233.70 100

accrued mark up 28.78 25.18 25.03 70.60 100

current portion of

long term liabilities

580.43 419.14 332.27 123.07 100

provision for taxes 100 100 100 100 100

total 542.67 310.91 25.47 128.56 100

assets

non-current assets

property plant &

equipment

395.29 360.92 122.74 108.31 100

assets subject to

finance lease

4.10 80.06 177.12 190.45 100

capital work in

progress

220.96 169.35 1044.28 353.71 100

investment 475.06 589.07 323 188.13 100

long-term loans

&deposits

2094.94 99 1342.11 1084.80 100

current assets 100 115.7 116.10 121.51 123

stores spares and

loose tools

247.53 159.37 89.05 110.25 100

stock in trade 435.56 98.86 75.79 33.83 100

trade debts 880.71 274.11 140.94 144.88 100

investment 1087.57 11221.05 616.07 199.67 100

advanced deposits 355.55 190.57 126.71 100.96 100

cash and bank

balance

290.60 138.32 91.88 111.72 100

Liabilities and owner equity of the balance sheet shows that issued and paid up

capital of the company is increasing. And reserves of the co also jump 343% to

675% in the year of 2006 to 2007. Accumulated profits of the co have decreasing

trend. And it is dangerous for the co.



Noncurrent liabilities of the co increases from 2004 to 2007 but there is a decline in

2008. Current liabilities of the co also have increasing trend.

This horizontal analysis of balance sheet shows that Fixed Assets of the Co increase

from last years. It means Co have much productive assets. It shows a good trend of

fixed assets. On other side trend of assets subjects to finance lease going to

decrease. Co also have asset that are work in progress but trend of these assets

also going to decrease. Co also invests in long term investment and this asset also

has increasing trend from 2004 to 2008. Co also has long term deposits and these

also have increasing trend.

Current Assets of the Co also have increasing trend. Trade debts of the Co also

have increasing trend and its debts are not in a good position. Short term

investments of the co also increase and Co use its idle cash in good manners.

.

Vertical analysis of balance sheet

Assets 2008 2007 2006 2005 2004

issued subscribed

& paid up capital

4.72% 4.89% 5.37% 10.23% 14.31%

reserves 51.48 57.26 43.97 39.94 37.47

accumulated profit

total

0.06 3.39 6.79 1.54 2.15

Total 56.26 65.55 56.16 51.72 53.92

Non-current

Liabilities

long term finance 16.52 16.79 2.49 27.19 23.31

liabilities against

assets subject to

lease finance

0.000732 0.0022 0.084 0.73 0.71

Long term

deposits

0.13 0.15 0.098 0.16 0.26

retirement and

other benefit

0.10 0.077 0.077 0.25 0.32



deffered taxation 2.33 3.14 4.54 2.98 1.18

Total 19.09 20.16 26.29 31.32 25.78

Current liabilities

Trade & other

payables

2.70 1.98 4.10 6.41 4.22

accrued mark up 0.73 0.66 0.99 5.33 11.61

Short term

borrowing secured

15.26 7.62 7.62

current portion of

long term liabilities

5.27 3.95 4.72 3.33 4.16

provision for taxes 0.06 0.068 0.10 0.19 0.29

total 24.03 14.28 17.54 16.96 20.29

assets

non-current assets

property plant &

equipment

45.13 42.74 21.92 36.83 52.31

assets subject to

finance lease

0.012 0.26 0.86 1.76 1.42

capital work in

progress

4.63 3.68 34.28 22.11 9.61

investment 12.28 15.79 13.06 14.49 11.85

long-term loans

&deposits

0.97 0.38 0.97 1.51 0.21

Total 63.03 62.86 71.11 76.71 75.41

Current liabilities

stores spares and

loose tools

4.32 2.89 2.44 5.75 8.01

stock in trade 2.42 0.57 0.66 0.56 2.55

trade debts 0.86 0.27 0.22 0.42 0.45

investment 28.09 32.72 24.90 15.37 11.84

advanced deposits 0.79 0.44 0.44 0.67 1.03

cash and bank

balance

0.45 0.22 0.22 0.52 0.72

Total 36.26 37.13 28.88 23.29 24.59



Vertical Analysis of the balance sheets shows that in 2008 that Equity portion of Co

have large portion of equity .And there is minimum portion of noncurrent liabilities.

And it shows a good trend. Co finances his assets through equity and pay minimum

amount of interest. Current liabilities of the co increase from last years. On current

assets co do not pay interest. Co pays his obligation timely and there is no chance of

insolvency.

On the other side of balance sheet are assets of the Co. Co have more productive

assets. Analysis show that Company Finance minimum assets at lease. Current

assets of the Co slightly decrease from last year.

LEARNING AS AN INTERNEE

The actual purpose of internship is the basic learning of practical and

professional approach of the studies. As an internee in DG Khan Cement

Company I have been assigned different duties.

My internship of Six weeks includes 36 working days. The whole ‘work done

by me’ can be well illustrated by distributing among six weeks depending

upon the nature of work, thereto. It can be well explained under following

heads;

WEEK-1

Department:

I. Finance/ Accounts

Worked with:

I. Mr. Khalid Mahmood Khalid (Manager A. Payable)

Duties and Accomplishments:

I. Work on Rectification of error

II. Work on Closing Entries

WEEK-2



Department:


Worked with:

I. Mr. Khalid Mahmood Khalid (Manager A. Payable)

II. Mr. Sultan (Dy Manager)


I. “COMPUTATION OF SALES TAX PAYABLE”

II. Sales Tax Status for Reconciliation

WEEK-3

Department:


Worked with:

I. Mr. Elahi Bakhsh

II. Mr. Sultan (Dy Manager)


I. Cement Manufacturing Process

II. Book keeping, Filing and Maintaining the records

III. Intra Company Reconciliation

IV. Bank reconciliation statement

WEEK-4

Department:

I. Finance (Export Section)

II. Marketing and Sales

Worked with:

I. Mr. Elahi Bakhsh

II. Mr. Abid Nasir



III. Mr. Haneef


I. Sales procedure and dealing with the Customers

II. Preparation of Sales Documents.

III. Letter Of Credit (L/C)

IV. Maintaining payments document

V. Export Process

WEEK-5

Department:

I. Sales and Marketing

II. MIS/ ERP

Worked with:

I. Mr. Abid Nasir

II. Mr. Amir

III. Mr. Waqas ( C.A)

IV. Mr. Hanif


I. Cash disbursements

II. Accounting module of Oracle E-Business

III. Maintaining Customer order form

IV. Report Generation

WEEK-6

Department:

I. ERP (enterprise Resource planning)

Worked with:

I. Mr. Kashif: Manager Audit in Ferguson & Co.

II. Mr. Waqas




I. Maintaining information reports

II. Reporting of General Ledger

III. Maintain suppliers Ledger

RECOMMENDATIONS

Top management should use up-to-date marketing practices rather to use

orthodox ideas. This is the age of advertisement and they should advertise their

product rather use push strategy. They should emphasize on pull strategy as

well. They have good, energetic, experienced marketing and sales team they

should use it constructively.

They should divide their zones for marketing and sales teams and should send

their teams to the distributors so that company should live in contact with the

distributors.

They should pay much attention to promotional tools. They should advertise their

product. They are only using trade promotions, which are not enough to have a

good positioning in the market. They should use other promotional tools as well

They should pay much attention to their employee’s promotion. They should use

better performance appraisal system.

The middle level management should be involved in decision-making. In this way

they will feel sense of responsibility and their productivity will increase. Their

loyalty with the organization will also increase.

They should also introduce some employee recognition program. In this way the

employees will be more satisfied with their jobs and ultimately will be beneficial

for the organization in terms of high productivity.



Skills and performance based performance appraisal program should be applied

and should not rely on one person’s formulated ACR.

Employees should be promoted on the basis of their achievement.

Employees should be rotated in different jobs and tasks, as monotony decreases

productivity

Consolidation is needed for industry stability because of following

observations.

1. Cartels are unstable by their nature.

2. Industry needs one or two dominant players for long-term sustainability

in prices and profits

3. Top four players command 46% of market share in the industry that will be

increased to 50% in FY10.

4. World norm is that top four players have more than 60% market share

5. Consolidation process will be needed to increase market share of larger

players rather than going for capacity expansions

6. We may see acquisitions in the industry as the industry goes

through overcapacity cycle.

CONCLUSION

It was really a good experience as I have learnt a lot about the practical environment

of the offices, particularly about the cement industry I have learnt for the first time. In

my opinion working environment of large business groups is not much different from

that of theoretical study of management.



International Trend

Although international energy prices have declined recently, any beneficial impact on

margins has largely been negated by substantial depreciation of Pak Rupee.

PACRA, therefore, believes that the performance of cement companies

could weaken further impacting their financial profile. Pakistan's cement industry

is poised to face a tough challenge as the regional markets, mainly China and India,

are likely to emerge as competitors in the export market, following a slowdown

in their domestic economies and enhanced production capacity.

Glossary

MIS Management Information System

HR Human Resource

DGKCCL Dera Gazi Khan Cement Company Limited

ERP Enterprise Resource planning

IR Issuance Requisition

STN Store Transfer Note

GRN Goods Received Notes

SER Store Evaluation Report

SRR Store Return Report

OC Order Confirmation

DN Dispatch Note (DN)

PO Purchase Order

PC Product Code

QO Quantity Ordered

SOC Sales Officer’s Code

ISO Internal Sale Order (ISO)

RC Reconciliation Statement

CV Cash voucher

BV Bank voucher



JV Journal voucher

References

Mr. Elahi Bakhsh Manager Finance

Mr. Khalid Mahmood Khalid Manager (A. Payable)

Mr. Ch. Abid nasir Sr. Deputy Manager Marketing

Mr. Shehzad Gul Assistant Manager (fin)

Mr. Sultan Mahmood Deputy Manager Finance

Electronic References

www.kmlg.com

www.dgcement.com/

www.pioneercement.com/

www.bestwaycement.com/

www.luckycement.com/

www.iptu.co.uk/content/pakistan_employment_law.asp

www.unescap.org

www.defence.pk/forums/economy-development

www.cia.gov

www.iht.com/articles/ap/2008/07/29/business/AS-Pakistan-Interest-Rates.php

www.thenews.com.pk/daily_detail.asp?id=123450



www.pakistan.gov.pk

www.probertencyclopaedia.com

www.thepost.com.pk

www.pwc.com/pk

Annexure

1. Summarized Income Statement

2. Summarized Balance Sheet

3. Liquidity Ratios

4. Long Term Debt Paying Ability

5. Profitability Ratios

6. Assets Utilization

7. Investment Ratios

8. DGCCL’s ORGANOGRAM ( Head office)

9. Organizational Chart


http://www.pwc.com/pk


10.Purchase accounting system

11. Production process

12. Sale accounting system
