Final Project Made by Khizer

8/3/2019 Final Project Made by Khizer

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OGDCL

COMPREHENSIVE CASES

ANALYSIS AND INTERPRETATIONS

Submitted by:

Khizer Asif

Mohammad Azeem


2/41

OGDCL

INCOME

STATEMENT

from year 2006 to

2010

CC-2 (Rupees '000)

2010 2009 2008 2007 2006

Sales - net

142,571,

863

130,829,

579 125,445,674

100,261,

191

96,755,

382

Royalty16,72

8,84315,15

5,667 17,262,49310,87

7,44310,87

2,443

Operating expenses

23,72

7,818

22,67

3,893 18,882,365

18,49

7,388

15,04

5,654

transportation charges

1,49

2,267

1,52

2,489 1,472,615

1,08

7,931

94

2,163

CGS

41,948

,928

39,352

,049 37,617,473

30,462,

762

26,860,

260

Gross Profit

100,622,

935

91,477

,530 87,828,201

69,798,

429

69,895,

122

Other Income3,30

0,2143,37

0,823 8,308,6843,61

5,2314,24

7,881

Exploration and Prospecting Expenditure

7,90

2,370

7,45

9,560 6,612,836

7,40

6,280

3,68

0,707

General and administration

1,59

8,161

1,33

2,982 1,244,030

1,28

5,476

1,07

1,979

Finance Cost

1,27

3,312

92

6,027 531,799

44

9,561 9,973

Worker's Profit Participation Fund

4,66

0,671

4,25

9,364 4,387,411

3,21

3,617

3,46

9,017

share of profit in associate - net of

taxation

6

4,188

5

7,503 - - -

Profit Before Taxation

88,552

,753

80,927

,923 83,360,809

61,058,

726

65,911,

327

Taxation

29,37

5,628

25,38

8,282 33,747,216

15,42

8,762

19,94

3,604

Profit for the Year

59,177

,125

55,539

,641 49,613,593

45,629,

964

45,967,

723

Earnings per share - basic (Rupees) 13.76 12.91 11.45

1

0.61

1

0.69

CC2


3/41

Analysis on Income statement:

Net sales of OGDCL have grown significantly over the last five years. This

growth in sales is due to increase in demand of oil and gas in Pakistan. Gross profit,

Operating profit, Net profit of the company are also high because of less general and

administration cost. Operating expenses have been increasing consistently because of

high inflation in Pakistan. Exploration and prospecting expenditure of the company as a

percentage of sales are also low. Ogdcl overhead costs are low and CGS is high. This is

because of high operating expenses and royalty payment to the government. Finance cost

has increased by a large amount in FY07.There ia a fluctuation in Profit before tax of the

company but there is an overall increasing trend. Earnings per share have been increasingconsistently with the exception of 2007.

OGDCL BALANCE

SHEET

From Year

2006 to 2010

CC 3

(Rupees

'000)

2010 2009 2008 2007 2006

SHARE CAPITAL AND

RESERVES

Authorized Share Capital

Share capital 43,0

09,284

43,0

09,284

43,009

,284

43,0

09,284

43,00

9,284

Capital reserve

3,8

59,682

3,6

58,318

2,667,

064

2,4

38,228

2,21

9,027

Unappropriated profit

110,5

23,520

79,5

03,794

63,695

,077

55,1

69,140

49,54

1,966

Total Shareholder's Equity

157,39

2,486

126,17

1,396

109,371,4

25

100,616

,652

94,770,

277


4/41

NON CURRENT

LIABILITIES

Long term loans unsecured __ __ __ __ __ Deferred liabilities __ __ __ __ __

Taxation

21,4

99,184

17,7

10,497

12,370

,448

11,0

23,916

10,01

0,991

Employee benefits2,6

99,7732,0

08,4991,528,

4441,4

23,1321,42

0,245

Provision for

decommissioning cost

12,4

35,365

10,8

14,506

6,066,

716

5,1

51,807

4,22

1,756

Total Non-Current

Liabilities

36,63

4,322

30,53

3,502

19,965,6

08

17,598

,855

15,652,

992

CURRENT LIABILITIES

Trade and other payables 28,6

24,204

18,7

47,328

17,088

,050

11,1

22,665

7,17

4,483

Provision for taxation

6,2

16,639

2,5

40,170

4,143,

304 __

3,71

6,958

Proposed Dividends __ __ __ __ __

Total Current liabilities

34,8

40,843

21,2

87,498

21,231

,354

11,1

22,665

10,89

1,441

TOTAL LIABILITITES +

EQUITY

228,86

7,651

177,99

2,396

150,568,3

87

129,338

,172

121,314,

710

NON-CURRENT ASSETS

FIXED ASSETS

Property, plant and equipment34,9

98,89828,4

82,19423,225

,76321,6

00,20119,57

5,807

Development and production

assets

58,6

30,857

49,0

57,766

36,808

,041

28,7

49,993

2,55

1,149

Exploration and evaluation

assets

9,5

51,394

8,7

79,699

7,672,

444

6,3

65,706

677

,441

Stores held for capital

expenditure __ __ __ __

21,65

3,562

Total Fixed Assets

103,18

1,149

86,31

9,659

67,706,2

48

56,715

,900

44,457,

959

Investments in subsidiary and

associated companies __ __ __ __ __

Investments held to maturity __ __ __ __ __

Long term investments

3,2

31,435

2,9

03,133

3,175,

054

2,9

45,938

2,72

9,807

Long term loans and

receivables

1,9

02,330

1,8

49,707

1,324,

059

1,1

17,755

1,39

1,552

Long term prepayments

1

18,937 85,357

108,

937

3

9,821

58

,021

Total Non-Current Assets 108,43 91,15 72,314,2 60,819 48,637,


5/41

3,851 7,856 98 ,414 339

CURRENT ASSETS

Stores, spares and loose tools

14,5

27,278

17,4

64,351

16,274

,079

13,1

78,295

12,82

9,747

Stock in trade

1

72,084

1

08,301

151,

782

9

3,788

65

,608

Trade debts

82,9

92,291

56,1

40,092

40,626

,931

27,8

73,515

24,49

8,986

Loans and advances2,2

16,8812,6

33,9652,339,

0371,5

38,6571,83

5,159

Deposits and prepayments

6

16,641

4

19,621

678,

789

29

2,928

300

,260

Interest accrued

17,031 27,156

158,

863

25

3,222

494

,087

Other receivables

9

26,951

9

79,319

10,207

,516

1,0

63,389

256

,722

Advance tax __ __

1,102,

044

13,5

53,959 __

Short term investments __ __ __

5,9

50,713

31,20

9,932

Other financial assets

11,1

20,823

5,0

87,917 __ __ __

Cash and bank balances

7,8

43,820

3,9

73,818

6,715,

048

4,7

20,292

1,18

6,870

Total Current Assets

120,43

3,800

86,83

4,540

78,254,0

89

68,518

,758

72,677,

371

TOTAL ASSETS

228,86

7,651

177,99

2,396

150,568,3

87

129,338

,172

121,314,

710

CC3

Analysis on Balance Sheet:

Current assets are more than current liabilities from the year 2006-2010 and there

has been no long term debt in the company since FY06 which shows that the company

has been maintaining Reserve borrowing capacity in order to take advantage of good

investment opportunities in future.

The company has not issued any new shares in the market hence, the number of shares

outstanding have not changed. Apart from this, we can see that current and non-current

liabilities and assets have an increasing trend over the periods.


6/41

Lastly we can see that the total assets of the company have been growing at a high rate

throughout the year. This is because of the expansion policy Ogdcl is pursuing in order to

meet the rising demand of consumers of oil and gas in Pakistan.

OGDCL

Statement

of Cash

FlowsFrom Year

2006 to

2010

CC4

(Rupees

'000)

2010 2009 2008 2007 2006

C

ash flows from operating activities

Profit before taxation

88,552,7

53

80,927,9

23

78,307,4

04

61,058,7

26

65,911,32

7

Adjustments for:

Depreciation

3,323,4

74

3,306,4

07

3,129,8

82

2,978,4

42

2,370,87

1

Amortization of development and

production assets

6,457,0

68

6,208,4

03

4,961,1

45

3,637,3

69

3,339,72

9

Royalty

16,728,8

43

15,155,6

67

17,320,1

87

10,877,4

43

10,872,44

3

Workers' Profit Participation Fund

4,660,6

71

4,259,3

64

4,387,4

11

3,213,6

17

3,469,01

7

Provision for employees' benefits

1,288,0

12

1,712,8

15

759,4

09

184,85

2

367,80

7Unwinding of discount on provision

for decommissioning cost

1,263,9

14

911,6

83

527,6

95

443,69

9 __

Interest income

(1,560,8

48)

(1,775,6

71)

(2,653,8

59)

(3,064,60

7)

(3,389,61

6)

Un-realized gain/loss on

investments at fair value through

profit or loss

(5,99

3)

115,7

78

42,2

25

(60,38

6)

(21,52

3)

Dividend income (14,75 (29,51 (28,15 (300,65 (398,97


7/41

6) 2) 0) 3) 0)

Fixed assets reconciliation

adjustment __ __

59,0

94 __ __

Profit on disposals of property, plantand equipment (75,086) (160,737) (114,615) (32,628) (26,282)

Interest income on long term

receivables

(25,62

0)

(36,86

1)

(54,78

9)

(61,57

3)

(82,75

2)

Share of profit in associated

company

(64,11

8)

(57,50

3)

(44,68

0) __ __

Stores inventory written off

8,20

6

298,9

30 __ __ __

Provision for doubtful advances

reversed __

(2,41

6)

(9,86

4) __ __

Trade debts written off __ __ 1,44

5 __ __

Provision for obsolete and slowmoving inventory 414,669 251,868 319,283 __ 47,452

provision for doubtful claims

1,05

0 __ __ __ __

Provision for doubtful trade debts

82,80

8

3,1

73 __

(5,43

0) __

Write back of provision for stores,

spares and loose tools __ __ __ __ __

Write Back of provision against

advances __ __ __ __ __

Adjustment on account of fixed

assets reconciliation __ __ __ __ __

Land reconcilitation adjustments __ __ __ __ __ 121,035,0

47

111,089,3

11

106,909,2

23

78,868,8

71

82,459,50

3

W

orking capital changes

(Increase)/ decrease in current assets

Stores, spares and loose tools

1,140,4

26

(1,400,0

54)

(3,010,0

44)

(2,145,54

1)

(5,332,25

0)

Stock in trade(63,78

3)43,4

81(57,99

4)(28,18

0) __

Trade debts

(26,935,0

07)

(15,437,9

66)

(12,688,5

99)

(3,374,52

9)

(5,971,41

2)

Deposits and prepayments(197,020)

259,544

(386,035)

7,332

(36,540)

Advances and other receivables

240,0

92

(120,1

65)

(435,00

9)

86,03

5

(60,19

1)

Increase/ (decrease) in current

liabilities __ __ __ __ __

Trade and other payables

(1,018,1

59)

3,683,6

03

2,188,4

73

1,207,3

65

1,162,43

9

Cash generated from operations 94,201,5 98,117,7 92,520,0 74,621,3 72,221,54


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96 54 15 53 9

Royalty paid

(5,019,8

32)

(17,510,0

87)

(13,112,3

99)

(9,768,79

3)

(10,297,74

4)

Employee benefits paid

(1,305,7

43)

(1,232,7

60)

(906,17

9)

(327,30

2)

(1,349,93

1)

Payments workers' profitparticipation fund

(4,459,364)

(4,902,992)

(3,910,117)

(3,469,017)

(3,380,011)

Taxes paid

(21,910,4

72)

(21,492,5

95)

(22,992,4

22)

(24,083,50

8)

(14,231,43

1)

(32,695,4

11)

(45,138,4

34)

(40,921,1

17)

(37,648,62

0)

(29,259,11

7)

Net cash from operating activities61,506,18

5

52,979,32

0

51,598,89

8 36,972,733 42,962,432

C

ash flows from investing activities

Fixed capital expenditure

(24,211,3

39)

(25,072,0

50)

(18,347,2

24)

(16,444,90

5)

(10,244,80

0)

Interest received

1,530,8

39

2,107,8

50

2,962,8

31

3,466,0

00

3,142,01

4

Dividend received

67,67

6

53,1

57

52,0

81

300,65

3

398,97

0

Purchase of investments

(276,97

0)

(188,1

83)

(450,00

0)

(450,00

0)

(463,00

0)

Proceeds from sale of property, plant and equipment __ __

50,061

73,341

12,140

Proceeds from disposals of property,

plant and equipment

84,10

7

165,9

46

214,5

35

35,13

0

31,18

4

Long term prepayments(33,58

0)23,5

81(69,11

6)18,20

0(16,18

2)

Net cash used in investing activities

(22,839,267

)

(22,909,70

1)

(15,586,83

2)

(13,001,581

) (7,139,674)

C

ash flows from financing activities

Dividend paid

(28,770,0

03)

(39,406,1

71)

(41,473,4

22)

(38,154,08

9)

(41,444,70

3)

Net cash used in financing activities

(28,770,0

03)

(39,406,1

71)

(41,473,4

22)

(38,154,08

9)

(41,444,70

3)

Decrease/Increase in cash and

cash equivalents

9,896,91

5

(9,336,55

2)

(1,309,46

2)

(14,182,937

) (5,621,945)Cash and cash equivalents at

beginning of the year

8,939,82

8

18,276,38

0

17,994,34

2 32,177,279 37,799,224

Cash and cash equivalents at end

of the year

18,836,74

3

8,939,82

8

16,684,88

0 17,994,342 32,177,279

CC4


9/41

Analysis on Cash Flow Statement:

Cash from operations show net cash inflows which represent that the company is

generating enough cash to finance its operating activities while the cash from investing

and financing activities show net cash outflow which is a sign of growth as more is being

invested in fixed assets.

Net cash used in payment of dividend was Rs.39.40 billion as against 41.47 billion in the

previous year. Increase in cash flow from operating activities and net cash utilized in

investing and financing activities resulted in a net cash decrease of Rs.9.89 billion to

ending cash and cash equivalents balance of Rs.18.83 billion compared with Rs.8.93

billion over the previous year.

CC-6 2010 2009 2008 2007 2006

Sales - net 100.00% 100.00% 100.00%

100.00

% 100.00%

Royalty 11.73% 11.58% 13.76% 10.85% 11.24%

Operating expenses 16.64% 17.33% 15.05% 18.45% 15.55%

transportation charges 1.05% 1.16% 1.17% 1.09% 0.97%

CGS 29.42% 30.08% 29.99% 30.38% 27.76%

Gross Profit 70.58% 69.92% 70.01% 69.62% 72.24%

Other Income 2.31% 2.58% 6.62% 3.61% 4.39%

Exploration and Prospecting

Expenditure 5.54% 5.70% 5.27% 7.39% 3.80%

General and administration 1.12% 1.02% 0.99% 1.28% 1.11%

Finance Cost 0.89% 0.71% 0.42% 0.45% 0.01%

Worker's Profit Participation Fund 3.27% 3.26% 3.50% 3.21% 3.59%share of profit in associate - net of

taxation 0.05% 0.04% __ __ __


10/41

Profit Before Taxation 62.11% 61.86% 66.45% 60.90% 68.12%

Taxation 20.60% 19.41% 26.90% 15.39% 20.61%

Profit for the Year 41.51% 42.45% 39.55% 45.51% 47.51%

CC6

Analysis on Common Size Income Statement:

As we can see in the common size income statement Gross profit margin has

been fluctuating over the years. In 2010 CGS was 29.42% of sales where as GP was

70.58% of sales. other incomes as percentage of sales was highest in 2007, however it has

been falling since then and in 2010 other income was 2.31% of sales. Another thing that

we can see in the common size income statement is the low general and administration

expense as percentage of sales. Finance cost significantly increased over the years. Profit

before taxation has been fluctuating over the years. Profit before taxation as a percentage

of sales was highest in 2006. in 2010 profit for the year was 41.51% of sales.

OGDCL Common Size Balance Sheet

From Year 2006 to 2010

CC 7 2010 2009 2008 2007 2006

SHARE CAPITAL AND

RESERVES



11/41

Share capital 18.79% 24.16% 28.56% 33.25% 35.45%

Capital reserve 1.69% 2.06% 1.77% 1.89% 1.83%

Unappropriated profit 48.29% 44.67% 42.30% 42.65% 40.84%

Total Shareholder's Equity 68.77% 70.89% 72.64% 77.79% 78.12%

NON CURRENT LIABILITIES

Long term loans unsecured

Deferred liabilities

Taxation 9.39% 9.95% 8.22% 8.52% 8.25%

Employee benefits 1.18% 1.13% 1.02% 1.10% 1.17%

Provision for decommissioning cost 5.43% 6.08% 4.03% 3.98% 3.48%

Total Non-Current Liabilities 16.01% 17.15% 13.26% 13.61% 12.90%

CURRENT LIABILITIESTrade and other payables 12.51% 10.53% 11.35% 8.60% 5.91%

Provision for taxation 2.72% 1.43% 2.75% __ 3.06%

Proposed Dividends

Total Current liabilities 15.22% 11.96% 14.10% 8.60% 8.98%

TOTAL LIABILITITES + EQUITY 100.00% 100.00% 100.00%100.00

% 100.00%

NON-CURRENT ASSETS

FIXED ASSETS

Property, plant and equipment 15.29% 16.00% 15.43% 16.70% 16.14%

Development and production assets 25.62% 27.56% 24.45% 22.23% 2.10%

Exploration and evaluation assets 4.17% 4.93% 5.10% 4.92% 0.56%

Stores held for capital expenditure __ __ __ __ 17.85%

Total Fixed Assets 45.08% 48.50% 44.97% 43.85% 36.65%

Investments in subsidiary and

associated companies

Investments held to maturity

Long term investments 1.41% 1.63% 2.11% 2.28% 2.25%

Long term loans and receivables 0.83% 1.04% 0.88% 0.86% 1.15%

Long term prepayments 0.05% 0.05% 0.07% 0.03% 0.05%

Total Non-Current Assets 47.38% 51.21% 48.03% 47.02% 40.09%

CURRENT ASSETS

Stores, spares and loose tools 6.35% 9.81% 10.81% 10.19% 10.58%

Stock in trade 0.08% 0.06% 0.10% 0.07% 0.05%

Trade debts 36.26% 31.54% 26.98% 21.55% 20.19%

Loans and advances 0.97% 1.48% 1.55% 1.19% 1.51%


12/41

Deposits and prepayments 0.27% 0.24% 0.45% 0.23% 0.25%

Interest accrued 0.01% 0.02% 0.11% 0.20% 0.41%

Other receivables 0.41% 0.55% 6.78% 0.82% 0.21%

Advance tax __ __ 0.73% 10.48% __

Short term investments __ __ __ 4.60% 25.73%

Other financial assets 4.86% 2.86% __ __ __

Cash and bank balances 3.43% 2.23% 4.46% 3.65% 0.98%

Total Current Assets 52.62% 48.79% 51.97% 52.98% 59.91%

TOTAL ASSETS 100.00% 100.00% 100.00%100.00

% 100.00%

CC7

Analysis on Common size Balance Sheets:

From the common size analysis of balance sheets we can conclude that in balance

sheet the items especially current assets of the company are very high in all fiscal years.

However, there has been increase in current assets as compared to current liabilities; thus,

we can say that companys working capital is very high. Owners equity has been

decreasing over the five year period and there has been no long term debt in the company

since 2006. Presently the highest percent of total assets is represented by trade debts.

Fixed assets as percentage of total assets has increased throughout the year with the

exception of 2010 in which it fell and are currently at 47.38 % of total assets.

OGDCL

Per Share Results


CC- 9 2010 2009 2008 2007 2006

Sales 33.15 30.42 29.17 23.31 22.50


13/41

Net Income 13.76 12.91 11.54 10.61 10.69

Dividends 6.69 9.16 9.64 8.87 9.64

Book Value 36.60 29.34 25.43 23.39 22.03

Average Shares

Outstanding4,300,928,4

00

4,300,928,4

00

4,300,928,40

0

4,300,928,40

0

4,300,928,40

0

CC9

Per Share results:

EPS for the current year is 13.76 while for the previous year it was 12.91, which

shows a rise in net income, having an increase of 6.58%. Again this year, the rise was

minimal, although the sales were high, but the royalty, operational and tax costs took up a

major chunk of the sales revenue, leaving the company with net profits not much higher

than last year. It is hoped that the EPS will improve in future as the exploration and

development activities will start bearing fruit in the form of enhanced production.

Rise in EPS means the rise in income as the total number of share of OGDCL are

same. While Sales and book value also show an increasing trend as a percentage of

average number of shares outstanding.

OGDCLShort Term

Liquidity

Analysis

From Year

2006 to 2010

CC-10

(Rupees

'000)


14/41

2010 2009 2008 2007 2006

Current Asset

120,433,80

0

86,834,5

40

78,254,0

89

68,518,7

58

72,677,3

71Current

Liabilities

34,840,84

3

21,287,4

98

21,231,3

54

11,122,6

65

10,891,4

41

Ratio Current Ratio 3.46

4.0

8

3.6

9

6.1

6 6.67

Current Asset120,433,80

086,834,540

78,254,089

68,518,758

72,677,371

Inventory

172,08

4

108,3

01

151,7

82

93,7

88

65,60

8

Prepaid Expense616,64

1419,6

21678,7

89292,9

28300,26

0

CurrentLiabilities

34,840,843

21,287,498

21,231,354

11,122,665

10,891,441

Ratio Acid-test Ratio 3.43 4.05 3.65 6.13 6.64

Sales142,571,86

3130,829,5

79125,445,6

74100,261,1

9196,755,382

Average

Receivables

69,566,191.

50

48,383,511.

50

34,250,223.

00

26,186,250.

50

21,513,280.

00

Times

Accounts

Receivable

Turnover 2.05 2.70 3.66 3.83 4.50

Cost of Goods

Sold

41,948,92

8

39,352,0

49

37,617,4

73

30,462,7

62

26,860,2

60

Average

Inventory 140192.5 130041.5 122785 79698 49006

Times

Inventory

Turnover 299.22 302.61 306.37 382.23 548.10

Days

Days' Sales in

Receivables 175.66 133.14 98.29 94.02 80.04

Days

Days' Sales in

Inventory 1.20 1.19 1.18 0.94 0.66

Days

Approximate

Conversion

Period 176.86 134.33 99.47 94.97 80.70

Cash

7,843,82

0

3,973,8

18

6,715,0

48

4,720,2

92

1,186,8

70

Current Assets 120,433,80 86,834,5 78,254,0 68,518,7 72,677,3


15/41

0 40 89 58 71

Percent

Cash to Current

Assets 6.51% 4.58% 8.58% 6.89% 1.63%

Cash

7,843,82

0

3,973,8

18

6,715,0

48

4,720,2

92

1,186,8

70

Current

Liabilities

34,840,84

3

21,287,4

98

21,231,3

54

11,122,6

65

10,891,4

41

Percent

Cash to Current

Liabilities 22.51% 18.67% 31.63% 42.44% 10.90%

Current Asset

120,433,80

0

86,834,5

40

78,254,0

89

68,518,7

58

72,677,3

71

CurrentLiabilities

34,840,843

21,287,498

21,231,354

11,122,665

10,891,441

MS's Working Capital 85,592,95765,547,04

257,022,73

557,396,09

3 61,785,930

Days

Days' Purchases

in Accounts

Payable

6.5

9

5.6

5

3.9

3

8.6

1

6.1

1

Days

Average net

trade cycle 1.20 1.19 1.18 0.94 0.66

Cash generated

from operations

61,506,18

5

52,979,3

20

51,598,8

98

36,972,7

33

42,962,4

32

Total Current

Liabillities

34,840,84

3

21,287,4

98

21,231,3

54

11,122,6

65

10,891,4

41

Percent

Cash Provided

by operations to

average current

liabillities 177% 249% 243% 332% 394%

CC10

Short term Liquidity Analysis:

A liquidity ratio measures the firm ability to meet its current obligation, or

liquidity of short-term assets; related debt-paying ability. Several comparisons can be

made to determine this ability.


16/41

Current ratio Of OGDCL shows decreasing trend. However, in 2010 it is 3.46

which is quite appropriate for the liquidity position of the company. Although

current ratio has decreased yet it shows an improvement since keeping a high

value of ratio represents cash keep as idle in the company.

Current liabilities in 2010 have shown a heavy increase due to a significant

increase in trade and other payables. Current assets also rose in the year, primarily

due to massive increase in trade debts from Rs. 56140092 billion from the last

year to Rs. 82992291 billion this year. Still as the increase in liabilities was much

higher compared to previous years, the ratio fell from 2009. Yet the major

liabilities, like royalties were part of the companys expansion plan, which will

yield greater returns in the future. However, the liquidity of the company may

decline in future if the management continues to opt for liquidating in short term

investments to finance future exploration and drilling activities.

Similarly, acid test ratio shows the same trend and currently it is 3.43 which show

that OGDCL has still enough current assets available excluding inventories to pay

off its liabilities. Thus, internally liquidity position of the company shows

deteriorating trend yet it is still very high and acceptable.

In terms of assets management, OGDC hasnt done well in past years. Inventory

turnover days have been decreasing. This measure indicates that OGDCL has

more funds invested in inventory. In 2010 it is 299.22 times which is quite an


17/41

acceptable figure, yet it shows a deteriorating trend and may cause difficulty for

the company.

Days purchases in payables has fluctuated over the periods and has increase from

last year which was 5.65 days in 2009 to 6.59 in 2010which represents that now

OGDCL is taking more time to pay off its accounts payables which is good for

liquidity.

Receivables turnover ratio has decreased due to comparatively less increase in

sales as compared to trade debts receivables showing managerial inefficiency.

While, Days Sales Outstanding has been on a slightly increasing trend since

FY06, due to rises in trade debts. Presently it is 175.66 days which shows that

now it is taking more days than last year to collect its receivables.

As a result, we see that the operating cycle of the company has been increasing

since the end of 2006, caused by the increases in DSO. This implies that OGDCL

requires larger working capital which can be lowered by increase in days

purchases on credit.

. The companys credit policy seems to be less strict. This has led the company to

a negative image in terms of stock and debt management and the company needs

to turn this around as soon as possible, as the effects are getting bigger every

passing year. Hence, this is suggestive of a more aggressive credit policy.


18/41

Apart from this working capital has also declined from 2006-2008 but increased

in 2009-2010. this is because current assets are more than current liabilities.

However, it still shows a surplus which provides safety cushion to prospective

creditors of OGDCL.

---Cash ratio is quite low which represents that current assets are less liquid. Cash to

current liabilities has decreased considerably from 2007-2009 which represent

availability of less cash.

OGDCL

Common-Size Analysis of Current Assets and Current Liabilities (in%)

From year 2006 to 2010

CC 11 2010 2009 2008 2007 2006

CURRENT ASSETS Stores, spares and loose tools 12.06% 20.11% 20.80% 19.23% 17.65%

Stock in trade 0.14% 0.12% 0.19% 0.14% 0.09%

Trade debts 68.91% 64.65% 51.92% 40.68% 33.71%

Loans and advances 1.84% 3.03% 2.99% 2.25% 2.53%

Deposits and prepayments 0.51% 0.48% 0.87% 0.43% 0.41%

Interest accrued 0.01% 0.03% 0.20% 0.37% 0.68%

Other receivables 0.77% 1.13% 13.04% 1.55% 0.35%

Advance tax __ __ 1.41% 19.78% __

Short term investments __ __ __ 8.68% 42.94%

Other financial assets 9.23% 5.86% __ __

Cash and bank balances 6.51% 4.58% 8.58% 6.89% 1.63%

Total Current Assets 100.00% 100.00 100.00% 100.00 100.00%


19/41

% %

CURRENT LIABILITIES Trade and other payables 82.16% 88.07% 80.48% 100.00% 65.87%


Proposed Dividends

Total Current liabilities 100.00%100.00

% 100.00%

100.00

% 100.00%

CC11

Comments on Common size analysis of current assets and current liabilities:

Above Common size analysis shows that trade debts represent the highest

percentage of total current assets while interest accrued represents the lowest percentage.

And from the current liabilities we can observe that trade and other payables show the

high percentage of current liabilities but it has decreased in 2010 from the previous year

of 88.07%..

OGDCL Common-Size Statements of Cash

Flows


CC 15 2010 2009 2008 2007 2006

C

ash flows from operating activities

Profit before taxation 143.97% 152.75% 151.76% 165.15% 153.42%Adjustments for:

Depreciation 5.40% 6.24% 6.07% 8.06% 5.52%Amortization of development andproduction assets 10.50% 11.72% 9.61% 9.84% 7.77%Royalty 27.20% 28.61% 33.57% 29.42% 25.31%

Workers' Profit Participation Fund 7.58% 8.04% 8.50% 8.69% 8.07%Provision for employees' benefits 2.09% 3.23% 1.47% 0.50% 0.86%Unwinding of discount on provision 2.05% 1.72% 1.02% 1.20% __


20/41

for decommissioning costInterest income -2.54% -3.35% -5.14% -8.29% -7.89%Un-realized gain/loss on investments

at fair value through profit or loss -0.01% 0.22% 0.08% -0.16% -0.05%Dividend income -0.02% -0.06% -0.05% -0.81% -0.93%Fixed assets reconciliation adjustment __ __ 0.11% __ __ Profit on disposals of property, plantand equipment -0.12% -0.30% -0.22% -0.09% -0.06%Interest income on long term

receivables -0.04% -0.07% -0.11% -0.17% -0.19%

Share of profit in associated company -0.10% -0.11% -0.09% __ __ Stores inventory written off 0.01% 0.56% __ __ __ Provision for doubtful advances

reversed __ 0.00% -0.02% __ __

Trade debts written off __ __ 0.00% __ __ Provision for obsolete and slow

moving inventory 0.67% 0.48% 0.62% __ 0.11%provision for doubtful claims 0.00% __ __ __ __ Provision for doubtful trade debts 0.13% 0.01% __ -0.01% __ Write back of provision for stores,

spares and loose tools __ __ __ __ __ Write Back of provision against

advances __ __ __ __ __ Adjustment on account of fixed assetsreconciliation __ __ __ __ __

Land reconcilitation adjustments __ __ __ __ __ 196.79% 209.68% 207.19% 213.32% 191.93%

W

orking capital changes

(Increase)/ decrease in current assets Stores, spares and loose tools 1.85% -2.64% -5.83% -5.80% -12.41%Stock in trade -0.10% 0.08% -0.11% -0.08% __ Trade debts -43.79% -29.14% -24.59% -9.13% -13.90%

Deposits and prepayments -0.32% 0.49% -0.75% 0.02% -0.09%Advances and other receivables 0.39% -0.23% -0.84% 0.23% -0.14%

Increase/ (decrease) in current

liabilities __ __ __ __ __ Trade and other payables -1.66% 6.95% 4.24% 3.27% 2.71%

Cash generated from operations 153.16% 185.20% 179.31% 201.83% 168.10%

Royalty paid -8.16% -33.05% -25.41% -26.42% -23.97%Employee benefits paid -2.12% -2.33% -1.76% -0.89% -3.14%Payments workers' profit participationfund -7.25% -9.25% -7.58% -9.38% -7.87%


21/41

Taxes paid -35.62% -40.57% -44.56% -65.14% -33.13%

-53.16% -85.20% -79.31%-

101.83% -68.10%

Net cash from operating activities 100.00% 100.00% 100.00% 100.00% 100.00%

C

ash flows from investing activities

Fixed capital expenditure -39.36% -47.32% -35.56% -44.48% -23.85%Interest received 2.49% 3.98% 5.74% 9.37% 7.31%Dividend received 0.11% 0.10% 0.10% 0.81% 0.93%Purchase of investments -0.45% -0.36% -0.87% -1.22% -1.08%Proceeds from sale of property, plant

and equipment __ __ 0.10% 0.20% 0.03%Proceeds from disposals of property,

plant and equipment 0.14% 0.31% 0.42% 0.10% 0.07%Long term prepayments -0.05% 0.04% -0.13% 0.05% -0.04%Net cash used in investing activities -37.13% -43.24% -30.21% -35.17% -16.62%

C

ash flows from financing activities

Dividend paid -46.78% -74.38% -80.38%-

103.20% -96.47%

Net cash used in financing activities -46.78% -74.38% -80.38%

-

103.20

% -96.47%

Decrease/Increase in cash and cash

equivalents 16.09% -17.62% -2.54% -38.36% -13.09%

CC15

Common Size Statement of Cash flow

We can see that net cash used in investing activities is 37.13% of net cash from operating

activities whereas net cash used in financing activities is 46.78% of net cash from

operating activities. Thus, there is an increase in cash and cash equivalents in the current

year which is 16.09% of net cash from operating activities.


22/41

OGDCL

Analysis of Cash Flow Ratios

From year 2006 to 2010

(Rupees

'000)

CC - 17 2010 2009 2008 2007 2006 Total

Net Cash Flows fromoperating activities

61,506,185

52,979,320

51,598,898

36,972,733

42,962,432

246,019,568

Capital Expenditure

24,211,3

39

25,072,0

50

18,347,2

24

16,444,90

5

10,244,80

0

94,320,31

8

Increase in Inventory

63,78

3

57,99

4

28,18

0

33,20

4 183,161

Dividends Paid

28,770,0

03

39,406,1

71

41,473,4

22

38,154,08

9

41,444,70

3

189,248,38

8

Adequacy Ratio 0.867

Net Cash Flows fromoperating activities 61,506,185 52,979,320 51,598,898 36,972,733 42,962,432

Dividends Paid

28,770,0

03

39,406,1

71

41,473,4

22

38,154,08

9

41,444,70

3

Cash Flow from

Operating activities -

Dividends Paid (A)

32,736,18

2 13,573,149 10,125,476 (1,181,356) 1,517,729

Gross PPE

78,951,8

97

68,637,6

32

56,980,7

95

52,673,79

7

47,531,02

2

Long term

investments3,231,4

35

2,903,13

3

3,175,05

4

2,945,93

8

2,729,80

7

Other financial assets

11,120,8

23

5,087,91

7 __ __ __

Working Capital

85,592,9

57

65,547,0

42

57,022,7

35

57,396,09

3

61,785,93

0

Gross PPE + W.C +

Investments + Other

Assets (B)

178,897,1

12

142,175,7

24

117,178,5

84

113,015,82

8

112,046,75

9

Cash Reinvestement

Ratio ( %) 18.3% 9.5% 8.6% -1.0% 1.4%


23/41

CC17

Analysis of Cash Flow Ratios:

Cash flow adequacy ratio for the five years period is 0.867, implying that funds

generated from operations are insufficient to cover the expenses for capital expenditures,

inventory additions and cash dividends and there is a need for external financing.

OGDCLs cash reinvestment ratio is 18.3% for year 2010 which is satisfactory. Cash

reinvestment ratio has been increasing over the years with the exception of year 2007. it

increased significantly in year 2008 and 2010.

OGDCL

Analysis of

Capital

Structure

(Rupees '000)

CC - 18 2010 2009 2008 2007 2006

NON CURRENT

LIABILITIES

Long term loans

unsecured __ __ __ __ __

Deferred liabilities __ __ __ __ __

Taxation21,499,

184

17,710,

497 12,370,448

11,023,

916

10,010,

991

Employee benefits

2,699,

773

2,008,

499 1,528,444

1,423,1

32

1,420,

245Provision for

decommissioning

cost12,435,

365

10,814,

506 6,066,716

5,151,8

07

4,221,

756

Total Non-

Current Liabilities36,634,3

22

30,533,5

02 19,965,608

17,598,85

5

15,652,9

92

CURRENT

LIABILITIES


24/41

Trade and otherpayables

28,624,

204

18,747,

328 17,088,050

11,122,

665

7,174,

483

Provision for

taxation

6,216,

639

2,540,

170 4,143,304 __

3,716,

958Proposed

Dividends __ __ __ __ __Total Current

liabilities34,840,8

43

21,287,4

98 21,231,354

11,122,66

5

10,891,4

41

Total Liabilities71,475,1

65

51,821,0

00 41,196,962

28,721,52

0

26,544,4

33

SHARE

CAPITAL AND

RESERVES

Authorized Share

Capital Share capital 43,009,284

43,009,284 43,009,284

43,009,284

43,009,284

Capital reserve3,859,

682

3,658,

318 2,667,064

2,438,2

28

2,219,

027

Unappropriated

profit110,523,

520

79,503,

794 63,695,077

55,169,

140

49,541,

966

Total

Shareholder's

Equity157,392,4

86

126,171,3

96 109,371,425

100,616,65

2

94,770,2

77

TOTAL

LIABILITITES +

EQUITY

228,867,6

51

177,992,3

96 150,568,387

129,338,17

2

121,314,7

10

CC18

Analysis of Capital Structure

As we have already seen in the balance sheet that the overall value of the company has

increased over the years. Total shareholders equity has increased over the years. Major

part of this increase is represented by the increase in un-appropriated profit which has

consistently increased throughout the years. Share capital has remained same throughout

the five year period as no new shares have been issued. Total liabilities have also

increased throughout the five year period showing that company is using more credit.


25/41

OGDCL

Common-Sized Analysis of Capital Structure(in

%)

From years 2006 to 2010

CC - 19 2010 2009 2008 2007 2006

SHARE CAPITAL AND RESERVES


Share capital 18.79% 24.16% 28.56% 33.25% 35.45%

Capital reserve 1.69% 2.06% 1.77% 1.89% 1.83%

Unappropriated profit 48.29% 44.67% 42.30% 42.65% 40.84%

Total Shareholder's Equity 68.77% 70.89% 72.64% 77.79% 78.12%

NON CURRENT LIABILITIES

Long term loans unsecured

Deferred liabilities

Taxation 9.39% 9.95% 8.22% 8.52% 8.25%

Employee benefits 1.18% 1.13% 1.02% 1.10% 1.17%

Provision for decommissioning cost 5.43% 6.08% 4.03% 3.98% 3.48%

Total Non-Current Liabilities 16.01% 17.15% 13.26% 13.61% 12.90%

CURRENT LIABILITIES

Trade and other payables 12.51% 10.53% 11.35% 8.60% 5.91%


Proposed Dividends

Total Current liabilities 15.22% 11.96% 14.10% 8.60% 8.98%

TOTAL LIABILITITES + EQUITY100.00

%

100.00

% 100.00%

100.00

% 100.00%

CC19

Comments on Common size analysis of Capital Structure:

From the common size capital structure, it can be seen that the share capital

has decreased as a percentage of total assets The increase in trade and payables in 2010

compared to previous years has caused the current liabilities or short term debts to

increase. The companys liability is increasing not showing a good sign as it is not paying

off the short term debts properly.


26/41

OGDCL

Capital Structure and SolvencyRatios

For years 2006 to 2010

(Rupees

'000)

CC20 2010 2009 2008 2007 2006

Total Debt71,475,16

5

51,821,0

00

41,196,9

62

28,721,5

20

26,544,43

3

Total Equity

157,392,48

6

126,171,3

96

109,371,4

25

100,616,6

52

94,770,27

7Total Debt to Equity 0.45 0.41 0.38 0.29 0.28

Total Debt71,475,16

5

51,821,0

00

41,196,9

62

28,721,5

20

26,544,43

3

Total Debt and Equity228,867,65

1

177,992,3

96

150,568,3

87

129,338,1

72

121,314,71

0

Total Debt Ratio 0.31 0.29 0.27 0.22 0.22

Long Term Debt36,634,32

2

30,533,5

02

19,965,6

08

17,598,8

55

15,652,99

2

Owner's Equity157,392,48

6126,171,3

96109,371,4

25100,616,6

5294,770,27

7

Long Term Debt to Equity 0.23 0.24 0.18 0.17 0.17

Total Equity157,392,48

6

126,171,3

96

109,371,4

25

100,616,6

52

94,770,27

7

Total Debt71,475,16

5

51,821,0

00

41,196,9

62

28,721,5

20

26,544,43

3

Equity to Total Debt 2.20 2.43 2.65 3.50 3.57

Fixed Assets

103,181,14

9

86,319,6

59

67,706,2

48

56,715,9

00

44,457,95

9

Owner's Equity157,392,48

6

126,171,3

96

109,371,4

25

100,616,6

52

94,770,27

7

Fixed Assets to Equity 0.66 0.68 0.62 0.56 0.47

Current Liabilities34,840,84

3

21,287,4

98

21,231,3

54

11,122,6

65

10,891,44

1

Total Liabilites 71,475,16 51,821,0 41,196,9 28,721,5 26,544,43


27/41

5 00 62 20 3

Current Liabilities to Total

Liabilities 0.49 0.41 0.52 0.39 0.41

Earnings to Fixed Charges

Cash Flow from operation61,506,18

5

52,979,3

20

51,598,8

98

36,972,7

33

42,962,43

2

Fixed Charges1,273,31

2

926,02

7

531,79

9

449,56

1 9,973

Cash flow to Fixed Charges 48.30 57.21 97.03 82.24 4307.87

CC20

Capital Structure and Solvency Ratios:

OGDCL is 100% equity financed company; hence, it does not have any long term

debt or borrowings. However, OGDCL has been facing increasing debts over the

past years, especially in the sector of current liabilities in the form of royalties and

as in the case of last year in the form of taxes provision incurred as well. The rises

have been high in the royalties section as a part of the companys strategy to

expand and acquire new fields. This may lead the debt to equity ratios to rise

since 2006.

From the perspective of long term debt paying ability, the lower this ratio, the

better the companys debt position. Either ratios debt ratio or debt to equity ratio

which are used in this analysis show the same situation that the lower these ratios

the better the position of the company. Actually the debt ratio indicates the

percentage of assets financed by creditors and it helps to determine how well

creditors are protected in case of insolvency.


28/41

In case of debt ratio we can say that the companys position to pay its debts is

strong because the ratio is less than one. Hence, from this we can conclude that

the company is in a position to issue additional long term debt since its creditors

are protected.

If we talk about the companys debt paying ability from its shareholders equity

then it is also same as that of debt ratio because it also shows that the company

can pay its debts bitterly and easily.

This implies that although overall debt is rising, yet long term debts are steady,

reflecting Companys policy to avoid the performing of investment and other

activities through long term debt. But still, the below average debt ratios of

OGDCL suggest a slightly lower level of leverage for the company, compared to

the average industry.

If we observe balance sheets we will see that the company does not have any long

term loans. Thus, there exists no interest element in financial charges. Hence, TIE

ratio could not be calculated.

Fixed assets to equity ratio is represents that 62% fixed assets are financed by

equity and not by any debt. This is also a positive sign for the solvency of the

company.


29/41

Current liabilities to total liabilities is less than 1 which implies that current

liabilities are less than long term liabilities as a percent of total liabilities and this

ratio is increasing due to rise in current liabilities in 2010. While cash flow to

fixed charges is about 48.30 presently this is also quite acceptable.

OGDCL

Return on Invested

Capital

(Rupees

'000)

CC - 21 2010 2009 2008 2007 2006

Net Income 59,177,12555,539,64

1

49,613,59

3

45,629,96

4

45,967,72

3

Total Asset 228,867,651177,992,39

6

150,568,38

7

129,338,17

2

121,314,71

0

ROA 25.86% 31.20% 32.95% 35.28% 37.89%

Net Income 59,177,12555,539,64

1

49,613,59

3

45,629,96

4

45,967,72

3

Equity 157,392,486126,171,39

6

109,371,42

5

100,616,65

2

94,770,27

7

ROCE 37.60% 44.02% 45.36% 45.35% 48.50%

Net Income 59,177,12555,539,64

1

49,613,59

3

45,629,96

4

45,967,72

3

Long-term Debt +

Owner's Equity 194,026,808156,704,89

8

129,337,03

3

118,215,50

7

110,423,26

9

NI/(LTL+OE) 30.50% 35.44% 38.36% 38.60% 41.63%

Finacial Leverage Index 1.45 1.41 1.38 1.29 1.28

Net Income 59,177,12555,539,64

1

49,613,59

3

45,629,96

4

45,967,72

3

Dividends (28,770,003)(39,406,17

1)(41,473,42

2)(38,154,08

9)(41,444,70

3)

Owner's Equity 157,392,486126,171,39

6

109,371,42

5

100,616,65

2

94,770,27

7


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(NI-Div)/OE 55.88% 75.25% 83.28% 83.27% 92.24%

Disintegration

of ROCENI/Sales 0.415 0.423 0.4 0.46 0.48

Sales/Total Asset 0.623 0.735 0.83 0.78 0.8

Total Asset/Owners Equity 1.45 1.41 1.38 1.29 1.28

ROE=NI/SxS/TAxTA/OE 37.49% 43.84% 45.82% 46.29% 49.15%

CC21

Return on invested Capital Ratios:

We can see that both ROCE and Return on long term debt to equity are the same

as there is no debt involved. There has been a decreasing trend in ROCE

throughout the years. In 2010 ROCE fell significantly compared to previous

years. This was because equity rose drastically in 2010 whereas increase in net

income was not enough to sustain the ROCE of previous years.

Similarly, ROA shows an decreasing trend due to a higher increase in total assets

compared to net income.

ROA is a measure of operating efficiency for OGDCL. ROA has been decreasing

since 2006. Currently the ROA of 25.86% shows OGDCLs return on all its assets

entrusted to it has decreased in 2010.

Disintegration of OGDCLs ROE shows that changes in the net income margin

are primarily responsible for fluctuations in ROE during recent years. The other

two components are reasonably stable. Companys leverage ratio increases

gradually since 2006 due to increasingly leveraged capital structure.


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OGDCLs financial leverage index is positive and reasonably stable which

represent that OGDCL utilizes its debt profitability well.

OGDCL

Asset Utilization Ratios

(Rupees

'000)

CC22 2010 2009 2008 2007 2006

Sales142,571,86

3130,829,57

9125,445,67

4100,261,1

9196,755,38

2

Cash and Bank balances 7,843,820 3,973,818 6,715,048 4,720,292 1,186,870

Sales to Cash 18.18 32.92 18.68 21.24 81.52

Sales142,571,86

3130,829,57

9125,445,67

4100,261,1

9196,755,38

2

Trade Debts82,992,29

1

56,140,09

2

40,626,93

1

27,873,51

5

24,498,98

6

Sales to recievables 1.72 2.33 3.09 3.60 3.95

Sales

142,571,86

3

130,829,57

9

125,445,67

4

100,261,1

91

96,755,38

2

Stores and spares14,527,27

8

17,464,35

1

16,274,07

9

13,178,29

5

12,829,74

7

Stock-in-Trade172,084

108,301 151,782

93,788 65,608

Total Inventory14,699,36

2

17,572,65

2

16,425,86

1

13,272,08

3

12,895,35

5

Sales to inventory 9.70 7.45 7.64 7.55 7.50


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Sales142,571,86

3

130,829,57

9

125,445,67

4

100,261,1

91

96,755,38

2

Working Capital85,592,95

765,547,04

257,022,73

557,396,09

361,785,93

0

Sales to working capital 1.67 2.00 2.20 1.75 1.57

Sales142,571,86

3

130,829,57

9

125,445,67

4

100,261,1

91

96,755,38

2

Total Fixed assets103,181,14

986,319,65

967,706,24

856,715,90

044,457,95

9

Sales to fixed assets 1.38 1.52 1.85 1.77 2.18

Sales142,571,86

3

130,829,57

9

125,445,67

4

100,261,1

91

96,755,38

2

Current Liabillites34,840,84

321,287,49

821,231,35

411,122,66

510,891,44

1

Sales to current libillites 4.09 6.15 5.91 9.01 8.88

Sales142,571,86

3

130,829,57

9

125,445,67

4

100,261,1

91

96,755,38

2

Total Assets228,867,65

1177,992,39

6150,568,38

7129,338,1

72121,314,71

0

Sales to total assets 0.62 0.74 0.83 0.78 0.80

CC22

Assets Utilization Ratios:

The above assets utilization ratios measure OGDCLs effectiveness in generating sales

from assets.

Cash and bank balances of ogdcl have consistently been increasing over the past

five year period with the exception of 2009. companys sales to cash ratio has

been fluctuating with the highest cash to sales ration in year 2009. currently sales

to cash ratio is 18.18. this means that net sales of 2010 were 18.18 times of that

years cash and bank balance.


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Cash and cash equivalents turnover evidence the most significant variability in the

2006 where it is very high i.e. 81.52 which represents cash shortage that might

signal a liquidity crisis if a company has no ready sources of cash. Currently it is

18.18 which is lower than that of 2009 which may represent idle or excess cash

with the company for probably contingencies purposes.

Sales to inventories turnover has now increased compared to 2006 which shows

decrease in inventory held by the company and show efficiency of inventories

held to generate increase in sales. If this ratio is low then it represents over

stocked or slow moving inventories or overestimation of sales. It might have

decreased due to slow downs with important customers. However, working

capital turnover represents an increasing trend till 2008 then from 2009-2010, it

fell.

The sale to fixed assets ratio has a decreasing trend over the five year period

which is likely due to a larger increase in fixed assets because of the companys

expansion policy. Although sales have also increased but percentage increase in

Fixed Assets is greater than percentage increase in sales.

Sales to short term liabilities turnover show fluctuating trend over the periods like

sales to receivables and other assets. Sales to short term liabilities turnover has

been decreased primarily due to rise in current liabilities in 2010.


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OGDCL

Analysis Of Profit Margin

(Rupees

'000)

CC23 2010 2009 2008 2007 2006

Sales142,571,8

63

130,829,57

9

125,445,67

4

100,261,19

1

96,755,38

2

Gross Profit100,622,9

35

91,477,53

0

87,828,20

1

69,798,42

9

69,895,12

2

Gross Profit Margin 70.58% 69.92% 70.01% 69.62% 72.24%

EBIT88,552,75

3

80,927,92

3

83,360,80

9

61,058,72

6

65,911,32

7

Sales142,571,8

63

130,829,57

9

125,445,67

4

100,261,19

1

96,755,38

2

Operating Profit Margin 62.11% 61.86% 66.45% 60.90% 68.12%

Net Income59,177,12

5

55,539,64

1

49,613,59

3

45,629,96

4

45,967,72

3

Sales142,571,8

63

130,829,57

9

125,445,67

4

100,261,19

1

96,755,38

2

Net Profit Margin 41.51% 42.45% 39.55% 45.51% 47.51%

Net Income59,177,12

555,539,64

149,613,59

345,629,96

445,967,72

3

Shares Outstanding4,300,92

8

4,300,92

8

4,300,92

8

4,300,92

8

4,300,92

8

EPS 13.76 12.91 11.54 10.61 10.69

CC23

Analysis of Profit Margin Ratios:

Profitability analysis is critically important for equity investors and creditors. Profitability

ratio shows the earning ability of the firm that how much the company earn. Here it is


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found in three ratios i.e. Net profit margin and Gross profit margin and operating profit

margin. All these ratios indicate that companys earning ability is too much strong.

Net Profit Margin ratio shows profitability in 2007 which is 45.51% but in 2008 it

has decreased to 39.55% mainly due to rise in tax expense and finance cost in that

year. In current year the ratio drops down to 41.51%.

There have been fluctuations in gross profit margin ratio over the five year period.

Although the fluctuation has not been sharp in any year, but it has lead to a steady

effect over the time. The primary reason for these minor fluctuations is that there

is a minor increase in cost of sales. Therefore we can say that the trend is also

stable and companys profitability is increasing stepwise. So company earning

ability is too much strong.

Operating profit margin has also improved in 2010 mainly due to control in

operating expenses. In other words, sales and gross profit are growing at a fasterrate than costs and expenses. Thus, the overall profitability position of OGDCL

seems to be satisfactory.

OGDCL

Analysis of

Depriciation

(Rupees

'000)

CC-24 2010 2009 2008 2007 2006


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Accumulated Depreciation

43,952,94

9

40,155,43

8 33,755,032

31,073,

596

27,955,21

5

Gross PPE78,951,89

768,637,63

2 56,980,79552,673,797

47,531,022

Depreciation as %age of

Gross PPE(%) 55.67% 58.50% 59.24% 58.99% 58.81%

Annual Depreciation

3,981,68

6

3,807,89

8 3,354,064

3,234,

509

2,615,44

5

Annual Depreciation as

%age of Gross Ppe ( %) 5.04% 5.55% 5.89% 6.14% 5.50%

Annual Depreciation

3,981,68

6

3,807,89

8 3,354,064

3,234,

509

2,615,44

5

Net Sales

142,571,86

3

130,829,57

9 125,445,674

100,261,

191

96,755,38

2Annual Depreciation as

%age of Sales ( %) 2.79% 2.91% 2.67% 3.23% 2.70%

CC24

Analysis of Depriaciation

Depreciation as %age of Gross PPE( property , plant and equipment) fell from 58.50% in

2009 to 55.67% in 2010 because of the high increase in PPE. Although accumulated

depreciation also increased, this increase was lower than the increase gross PPE. Hencethe ratio fell. Overall gross PPE has been increasing over the five year period. This shows

that the company is investing in expansion.

Annual depreciation as a %age of gross PPE fell from 5.55% in 2009 to 5.04% in 2010.

again indicating the increase in PPE.

Annual depreciation as a %age of sales has been varying over the years. It fell in 2010compared to 2009 because of high sales in 2010.


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OGDCL

Analysis of Discretionary Expenditures

(Rupees'000)

CC25 2010 2009 2008 2007 2006

net sales

142,571,86

3

130,829,57

9

125,445,67

4

100,261,19

1

96,755,38

2

Property, plant and equipment

34,998,89

8

28,482,19

4

23,225,76

3

21,600,20

1

19,575,80

7

maintenance and repairs

691,62

9

1,026,09

8

956,32

2

940,70

1

594,93

2

advertising

48,30

4

36,87

6

33,24

8

26,22

0 55,781

maintenance and repairs/ sales 0.49% 0.78% 0.76% 0.94% 0.61%

maintenance and repairs/ property, plant

and equipment 1.98% 3.60% 4.12% 4.36% 3.04%

advertising/sales 0.03% 0.03% 0.03% 0.03% 0.06%

CC25

Analysis of Discretionary Expenditures

Maintenance and repairs as a percentage of sales fluctuated throughout the years with

reaching the highest in the year 2007 at 0.94%. It fell considerably from 2009 to 2010

due to drastic increase in the amount of net sales. Another factor that contributed in this

decline was decrease in maintenance and repairs cost in 2010.

Advertising expense has been fluctuating over the five year period. Advertising expense

as a percentage of sales has been increasing since 2007. this shows that the company is

spending more on advertising.

Maintenance and repairs as a %age of PPE rose from 2006 to 2007 but fell drastically to

1.98% in 2010. this is because of increase in gross PPE in 2010.


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OGDCL


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Market

Measures

CC - 26 2010 2009 2008 2007 2006

Price high 142 125.49 140.8 156 168.8

Price low 80.71 40.56 104.9 113.2 98.55

Average price 111.355 83.025 122.85 134.6 133.675

Eps 13.76 12.91 11.45 10.61 10.69

Price to earning 8.09 6.43 10.73 12.69 12.50

Average Price 111.355 83.025 122.85 134.6 133.675

Eps 13.76 12.91 11.45 10.61 10.69Earning Yield 12.36% 15.55% 9.32% 7.88% 8.00%

Dividends per share 6.69 9.16 9.64 8.87 9.64

Average Price 111.355 83.025 122.85 134.6 133.675

Dividends Yield 6.01% 11.04% 7.85% 6.59% 7.21%

Dividends per share 6.69 9.16 9.64 8.87 9.64

Eps 13.76 12.91 11.45

10.6

1

10.6

9

Dividends Payout Ratio 48.61% 70.97% 84.22% 83.61% 90.14%

CC26

Market Measures:

The first four measures reflect the markets valuation of OGDCLs equity

securities, while the dividend payout reflects more management discretion.

P/E ratio increases whenever the level of current earnings decreases. It measures

the multiple at which the market is capitalizing the earnings per share of a

company. This ratio has increased in 2010 although there have been fluctuations

throughout the five year period.


40/41

The earnings per share of OGDC rose this year from 12.91 to 13.76, having an

increase of 6.58%. Again this year, the rise was minimal, although the sales were

high, but the royalty, operational and tax costs took up all the profits, leaving the

company with net profits not much higher than last year. It is hoped that the EPS

will improve in future as the exploration and development activities will start

bearing fruit in the form of enhanced production.

The earnings yield has decreased from last year. Overall, there are fluctuations in

this ratio over the five year period. This is mainly due to weak equity markets.

Increasing earning yield of OGDCL represents the income producing power of a

share of common stock at the current price.

Similarly while dividends per share decreased from 9.16 to 6.69 and the dividend

yield has increased from 11.04% to 6.01% over the same period. Decreasing

dividend yield represents the decreasing cash return accruing to an investor on a

share of stock based on the current dividend rate and current price. Decrease in

earnings yield and dividend yield are attributable mainly to steady increases in

price to earnings and price to book ratios. Both ratios reflect the markets

disapproval and confidence in OGDCLs prior and expected performance. This

also represents OGDCLs inability to raise a given amount of equity capital by

issuing shares and the inability to use common stock as a means of payment for

acquisitions.


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While there was an increase in EPS, OGDCs DPS decreased by Rs. 2.47 per

share, bringing it down to Rs.6.69 per share.

We know that dividend payout ratio measures the proportion of earnings currently paid

out as common stock dividends. Here dividend payout ratio has decreased from 70.97%

to 48.61% which shows that proportion of earnings paid out as common stock dividends

has decreased in 2010.

Documents

Final Project Made by Khizer