PrefaceLearning in practical side is somewhat that cannot be compared with books knowledge. BBA (Hons)program is designed in such a way that students are required to do the projects and researches thengive their recommendation and conclusion. It also provides student an opportunity to apply thisknowledge in practical field.Now to fulfil the practical requirement of this course, I successfully completed an internship reporton DGKCC (Pvt.) Limited, a unit of Nishat Group. It was great opportunity for me to apply thetoretical knowledge and get practical exposure. I have visited almost all the departments andstudied function of each department at factory.The purpose of the report is to elaborate on my experience about DGKCC (Pvt.) Limited. I have triedto present the overview of the company and its operations and the task that are carried out duringmy stay at DGKCC (Pvt.) Limited. Although 6 weeks is a small time to completely understand theprocesses and philosophy of a company, but at least one gets a good overview about it, and I havetried to write all that grasped during this short time, in this report. This report includes DGKCCworking way outs, information about their departments function and working.I have analyzed their working and have given certain recommendations on the basis of myobservation. I have tried my level best to give real look about DGKCC while writing this report. MayALLAH succeed me while evaluation of this report.Gohar Ayyoub
AcknowledgementsThanking Almighty Allah, who bestowed me the knowledge and the courage to write this report. Ialso thank honourable Sir Nazik Hussain for his in class contribution which prepared and showed methe way to complete the internship and the writing of this report. Thank you, Sir; indeed we owe youa great deal. This internship provided me a golden opportunity to learn. In this report I have tried torelate everything that I thought was necessary. Though, it’s a bit difficult to say anything about theperfection of the effort that I have made but I hope that it finds its place somewhere to meet therequired and expected criterion. I would like to add a few deepest words for the people who werepart of this report in numerous ways… people who gave unending support right from the stage thereport was assigned. Particularly I also wish to thank the managerial staff at Nishat House whohelped me to gain a lot of information regarding the company and cement industry and also thankfulto Mr. Inayat Ullah Niazi (CFO, DG Khan Cement Company) who provide me an opportunity to learnand understand the working of organization as an internee. I am also thankful to Mr. Hamid Shah(Senior D. Manager Finance) who played a role of polar star for me in the organization and whoseexperience taught me a lot about the industry and the organization.I am especially thankful to Mr. Mukhtar Ahmad (Senior Manager Production) who helped me a lot ingetting the knowledge of cement industry.And finally deepest and warmest appreciation to the whole team of DG Khan Cement Company whohelped me a lot in getting knowledge about the office working and about the cement plant ofKhairpur.
Executive SummaryDera Ghazi Khan Cement Company Limited is a strategic business unit of Nishat Group, which is thelargest industrial group in Pakistan. D.G. Khan Cement Co. is market leader with respect to marketshare with about 11.4% market share. Apart from its competitors; its product is high priced yet it hashighest market share because of good quality. Its plant is situated in Dera Ghazi Khan and Khairpurand head office is situated at Lahore. Factory site Unit 1and 2 that is situated in very remote area ofPunjab, yet it proved a blessing for the company. Because it has all three basic raw materials i.e.Lime stone, Shale, and Gypsum at one place. It has three plants working two in D.G. khan and one inKhairpur. First plant is old one and it is Japanese plant. The other two plants are of F.L.Smiths,Denmark. Presently it has a total Installed capacity of 14000 tpd (tons per day).Presently the company is also exporting the cement to Afghanistan, Iraq, UAE and Russia. The teamof the D.G. Cement is story of success of D.G. Cement. The whole team is self-motivated and hadplayed a vital role in the success of the company
Dedication“To my beloved parents, teachers and friends whose endeavour supplications made me able to get this success”
Corporate InformationCompany Name: D.G. KHAN CEMENT COMPANY LIMITEDLegal Status: Public Limited CompanyRegistered Office: Nishat House, 53-A, Lawrence Road, Lahore, PakistanPhone: 92-42-6367812-20Fax: 92-42-6367414E-mail: email@example.comWeb: www.dgcement.comChairperson Mrs. Naz ManshaChief Executive Mr. Mian Raza ManshaBoard of Directors Mr. Khalid Qadeer Qureshi Mr. Farid Fazal Mr.Zaka ud din Mr.Inayat Ullah Niazi(CFO) Ms.Nabiha Shahnwaz CheemaCompany’s Secretary: Mr. Khalid Mahmood ChohanExternal Auditors: KPMG Taseer Hadi & Co, Chartered AccountantsLegal Advisor: Mr. Shahid Hameed, Bar-at-LawBankers: Allied Bank Limited Habib Metropolitan Bank Limited Askari Bank Limited MCB Bank Limited Bank Alfalah Limited NIB Bank Bank Islami Pakistan Limited Meezan Bank Limited Barclays Bank Plc
National Bank of Pakistan Citibank N.A. Samba Bank Limted Deutsche Bank AG Standard Chartered Bank (Pakistan) Dubai Islamic Bank Limited Faysal Bank Limited Silk Bank Limited First Women Bank Limited The Bank of Punjab Habib Bank Limited United Bank Limited HSBCSales Offices: Lahore Regional Sales Office Multan Regional Sales Office DG Khan Regional Sales Office Karachi Regional Sales OfficeFactory: 1. Khofli Sattai, Distt. Dera Ghazi Khan-Pakistan Phone: 92-641-460025-7 Fax: 92-641-462392 Email: firstname.lastname@example.org 2. 12, K.M. Choa Saidan Shah Road, Khairpur, Tehsil Kallar Kahar, Dist. Chakwal-Pakistan Phone: 92-543-650215-8 Fax: 92-543-650231
IntroductionDG Khan Cement Company Limited (DGKC) is a producer and seller of ordinary Portland andSulphate-resistant cement. The company is a unit of Nishat group which is a leading and diversifiedbusiness group with a strong presence in the three most important sectors of Pakistan: textiles,cement and financial services. The group also has considerable stake in insurance, power generation,paper products and aviation sectors. DGKCC is listed on the stock exchanges of Karachi, Lahore andIslamabad.AboutD.G. Khan Cement Company Limited (DGKCC), a unit of Nishat group, is the largest cement-manufacturing unit in Pakistan with a production capacity more than 5,500 tons clinker per day. Ithas a countrywide distribution network and its products are preferred on projects of national reputeboth locally and internationally due to the unparallel and consistent quality. It is listed on all theStock Exchanges of Pakistan. D.G.Khan Cement Company has the largest cement manufacturingcapacity in the country.Listed in 1992, D.G.Khan Cement was established by the State Cement Corporation of Pakistan(SSCP) at Dera Ghazi Khan in 1986. It was privatized to the Nishat group in 1994-95 at Rs35.90 pershare.Nishat GroupNishat Group is one of the leading and most diversified business groups in South East Asia. Withassets over PRs.300 billion 0r $3.5 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 namelyTextiles, Cement and Financial Services. In addition, the Group has also interest in Insurance, PowerGeneration, Paper products and Aviation. It also has the distinction of being one of the largestplayers in each sector. The Group is considered at par with multinationals operating locally interms of its quality of products & services and management skills.Mian Mohammad Mansha: The chairman of Nishat Group continues the spirit of Entrepreneurshipand has led the Group successfully to make it the premier business group of the region. The grouphas become a multidimensional corporation and has played an important role in the industrialdevelopment of the country. In recognition of his unparallel contribution, the Government ofPakistan has also conferred him with “Sitara-e-Imtiaz”, one of the most prestigious civil awards ofthe country.Acquisition of DGKCC by Nishat GroupNishat Group acquired DGKCC in 1992 under the privatization initiative of the government. Startingfrom the privatization, the focus of the management has been on increasing capacity as well asutilization level of the plant. The company undertook the optimization by raising the capacity
immediately after the privatization by 200tpd to 2200tpd in 1993. Now a day the export demand ofD.G cement is 2000 TPD. Presently D.G.K.C.C export cement to Afghanistan, Iraq AND UAE. (Pakistan Cement Industry)Vision StatementTo transform the Company into modern and dynamic cement manufacturing company with qualifiedprofessional and fully equipped to play a meaningful role on sustainable basis in the economy ofPakistan. (Annual Report 2010-11)Mission StatementTo provide quality products to customers and explore new markets to promote/expand sales of theCompany through good governance and foster a sound and dynamic team, so as to achieve optimumprices of products of the company for sustainable and equitable growth and prosperity of theCompany. (Annual Report 2010-11)
Company Awards and AchievementsDG Khan Cement Company Limited (DGKCC) has broken a world record in operational excellence.This outstanding achievement was marked by the Danish world leading company FLSMIDT awardingDG Khan Cement Company Limited (DGKCC) with its global outstanding achievement award 2011.The award was presented to the CEO of DGKC, Mr. Raza Mansha by the Danish Ambassador,H.E. Mr. Uffe Wolffhechel at a prestigious ceremony under the presence of Pakistan’s leadingbusiness community members and diplomats.During financial year 2009-10, DG Khan Cement Company Limited (DGKCC), Khairpur Plant has madenew global records by achievement ever highest clinker production of over 2.281 million tons with akiln capacity utilization of 104% and plant operational days of 346.5. (DGKCC achievements by MTT News)In recognition of this success, the Board of Management of FLSmidth A/s, Denmark has given anOutstanding Achievement Award to DG Khan Cement Company Limited (DGKCC), on a global basisfor outperforming the World standard run factor criterion for rotary cement kilns of 330 days peryear at its Khairpur Plant during the financial year 2009-10 by running it for 346.5 days at 104% ofthe rated capacity.The award was presented, to Mr. Raza Mansha Chief Executive of DG Khan Cement CompanyLimited (DGKCC), by the Ambassador of Denmark, H.E. Mr.Uffe Wolffhechel and FLSmidth VicePresident Mr. Kristian A. Gregersen in a ceremony held at a prestigous local hotel in Lahore.The award function was attended by large number of representatives from Industry, Banking andofficials both from public and private sectors. Speaking at the occasion, Danish Ambassadorcongratulated DG Khan Cement Company Limited (DGKCC) for benchmarking global standards ofexcellence and mapping Pakistan’s business community among world business leaders.”Today’s award only reinforces what we all believe in and that is that Pakistan is a country, wherelots of success stories do take place. I feel very proud to be part of such a story today. Although thiscountry is facing a lot of challenges, it proves to the international community that operationalexcellence, innovation, high ethics, social and environmental care are successful driving forces alsoin Pakistan”. The Ambassador extended his full support for creating more Danish-Pakistani businessopportunities within energy and the cement sector, stating that FLSmidt and DG Khan CementCompany Limited (DGKCC) were successful players in promoting Pakistan and Denmark as partnersfor global excellence.Mr. Raza Mansha shared that his team had invested a lot of efforts in Research and Development forincreasing productivity, achieve customer satisfaction in the wide market zones of north and southof Pakistan. Mr. Raza Mansha congratulated General Manager Works Dr. Arif Bashir and his teammembers for their outstanding performance. Concluding his speech, Mr. Raza Mansha emphasizedthe need to work jointly for reducing the cost of production through new technologies and by usingalternate fuels.Mr. Raza Mansha highlighted in particular the contributions of DG Khan Cement Company Limited(DGKCC) to control pollution by incorporating latest environment friendly technologies and their roleto uplift the socio economic status of populations living both in DG Khan and Chakwal Districts.
All this has enabled DG Khan Cement Company Limited (DGKCC) to produce the outstanding resultsand enabled DG Khan Cement Company Limited (DGKCC) to efficiently outperform the best of thebest in the world and made them eligible to receive the F.L.Smiths Outstanding Achievement Award. (DGKCC achievements by MTT News)Brands (Product)Two different products are produced at DGKCC namely Ordinary Portland Cement and SulphateResistant Cement. These products are marketed through two different brands:• DG brand & Elephant brand Ordinary Portland Cement (It is also called the OPC and its demand isabout 92% because of commonly used).•DG brand Sulphate Resistant Cement (It is also called the SRC and its demand is about only 8%because it is only used in standing the foundations its main work is to finish the pours producedwhile standing the foundations and made the foundations much strong). In addition to following twobrands they are also offering four different packaging which are as following: o OPC o SRC o ELEPHANT BRAND o DG PLASTIC BAG
Friendly EnvironmentMeasures Taken in Protecting the Environment and Its Impact On Company’sPerformanceDGKCC is part of the solution and it has the track record to prove it. A leader in the fight againstpollution, DGKCC has been a pioneer in developing innovative methods for recycling. Its patentedcement-making process -- CemStar -- significantly reduces carbon dioxide (CO2) and nitrogen oxide(NOx) emissions in the cement- making kiln process. Today, cement producers throughout thePAKISTAN use that process, resulting in a cleaner environment nationally. The Company constantlyseeks new ways to utilize innovative technologies in its environmental protection programs. Thecommitment made by D.G.K.C.C to the environment is paramount, the Company’s kilns use the mostadvanced air pollution control systems ever utilized by a cement plant in PAKISTAN.Capacity AdditionTo meet the increasing demand and to capitalize on its geographic location, the managementfurther expanded the capacity by adding another production line with a capacity of 3,300 tons perday in year 1998. Design of the new plant is based on latest dry process technology, energy efficientand environmental protection from particulate pollution according to the international standards.The plant and machinery was supplied by M/s F.L. Smiths of Denmark. As a result, DGKCC emergedas the largest cement production plant in Pakistan with annual production capacity of 1,650,000 Mtons of clinker (1,732,000 M.Tons Cement) constituting about 10% share of the total cementproduction capacity of the country. The optimization plan is still underway to increase the totalcapacity of the two units to 6700 TPD by mid of 2005 from 5500 TPD at present.Expansion -Khairpur ProjectFurthermore, the Group 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 industryof Pakistan, the new plant have two strings of pre-heater towers, the advantage of twin strings liesin the operational flexibility whereby production may be adjusted according to market conditions.The project is equipped with two vertical cement grinding mills. The cement grinding mills are firstvertical Mills in Pakistan. The new plant would not only increase the capacity but would also provideproximity to the untapped market of Northern Punjab and KHBER PAKTUNKHAN besides making itmore convenient to export to Afghanistan from northern borders. (DG Cement article.php)
Power GenerationFor continuous and smooth operations of the plant uninterrupted power supply is very crucial. Thecompany has its own power generation plant along with WAPDA supply. The installed generationcapacity is 23.84 MW.Sales and Production (FY’09)In FY09 DG Khan Cement hit a major land mark regarding growing sales, despite the severe powercrises and security situation of the state. Moreover, due to global recession and the liquidity & creditcrunch, the buying power of the major customers both at home and abroad was looking bleak. Localsales decreased by 14%, while the exports passed the 10 million ton mark. Also the company had torecover from a negative profit after tax due to a huge amount of debt leverage in the balance sheet.Despite all these factors the company due to sharp and effective steps recorded a huge boost insales of 45%, a figure which even overshadowed the 17.86% rise in the operating cost thusregistering a profit after taxes of Rs 525m. The exports also doubled playing a major part in theincreasing sales. The companys production of both cement and clinker was less than the previousyear. The cement production was 8.3% less than the year 2008-09 due to lack of resources likepower and also due to the weakening buying powers of the customers because of inflation. Theproduction of clinker followed similar trend being 4% less than FY08 in FY09. (Financial Report 2009)Plant Operation and Production (FY’2010-11)Clinker production during the period underreport is good and all the plants operated well. Cementproduction during the first six months of the current financial year declined by 14% on account ofless cement demand both in the country and in export markets, whereas, the cement productionduring the 2nd quarter declined by 6%. (Financial Report 2010-11)
]Sales (FY’2010-11)Cement sales in the country plunged by nearly28% during the first half of FY 2011 compared withthe corresponding period. Whereas during the 2nd quarter the local sales declined by 29%.Thedecline is attributed to poor construction activities both in housing sector as well as in public sector.Bleak stimulus in cement off take in the country forced your company to eye again on internationalmarkets. During the period, despite international recession in regional markets, export of cementaugmented by nearly 64% during the first half of the year, whereas during the 2nd quarter i.e. OctDec 2010 the export grew by nearly 192%. The company is making all out effort to fully capitalize itsoperating capacities. (Financial Report 2010-11)Power plant on the cardsDG Khan Cement has decided to set up its second 8.6-megawatt waste heat recovery power plant,this time at its Khairpur site at a cost of Rs2.5 billion. The first plant started trial operation in Maylast year. The right shares issued by the company are expected to help raise capital for the newplant, say analysts. Electricity produced from the plant will help replace the expensive electricitypurchased from the Water and Power Development Authority, the company said in a statement onThursday. The project, expected to be completed in fiscal 2013, will result in an annual savings ofRs300 to Rs350 million. The company is also considering procuring foreign loan worth Rs1.5 billion($16.5 million) while equity portion will be bought through issuance of right shares. (The Express Tribune, February 18th, 2011)Alternative fuel projectThe company has also decided to use agriculture and other wastes as fuel instead of expensive coaland petroleum products. A first phase has been completed at Khairpur cement plant in which thecompany is using different industrial wastes like rice husk, cotton sticks, wheat straw and molasses.This has cut down daily use of imported coal by 50 to 70 tons. The second phase is expected to becompleted by fiscal 2012 at a cost of Rs1.25 billion. These projects are expected to bring substantialsavings in fuel costs, the company said. (The Express Tribune, February 18th, 2011)Environmental ManagementDG Khan Cement Co. Ltd., production processes are environment friendly and comply with theWorld 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 thefirst and only cement factory in Pakistancertified for both ISO 9002 & ISO 14001...
On Going Projects:The work on first phase of Refused Derived Fuel (RDF), alternative fuels, at Khairpur cement planthas been successfully completed and your company has started replacing imported coal withdifferent alternative fuels, e.g. industrial and agricultural wastes, cotton sticks, corn cops, rice huskand rice powder, municipal waste etc. After reviewing the encouraging results of RDF project atKhairpur cement plant your company has decided to implement the first phase of RDF at DG khansite and also started extension phase at Khairpur cement plant. The projects are expected to becompleted in the current calendar year. This will result in savings on account of fuel costs.Ongoing power shortage and rising tariff forced your company to start power generation from wasteheat recovery at Khairpur cement plant. The project is expected to generate 8.5MW. Plant &machinery will be supplied by M/s. FL Smidth Denmark. The letter of credit has already beenestablished. The project is expected to be completed in the first quarter of FY 2013. This project willreduce reliance on power purchase from WAPDA and bring down the cost of production. (Annual Report 2010-11)Future Outlook:Cement demand is highly correlated with the growth in GDP. Current prevailing economic conditionsin the country are badly affected by poor governance and terrorist attacks. The industrial activitiesare suffering due to severe gas outage and power load shedding which is a bad omen for businessand investment climate in the country. In addition the rising prices of goods and services have set analarming situation in the country which is likely to further aggravate due to dangling politicalposture. Going forward, the rising cost of fuels like, furnace oil, diesel and coal in internationalmarkets is another serious threat to the economy of the country. Pakistan is passing through theworst phase and need of the hour is to take a few stiff and long term decisions for the revival andstability of the economy on strong footings. Political stability, consistency of policies, and tight andstringent monetary controls could change the destiny of our country. Going forward immediatesteps should be taken to overcome the energy crisis in the country. Country badly needs a few bigwater reservoirs to overcome water scarcity for agriculture and cheap power generation for smoothand efficient running of industrial activities. In addition large scale housing projects should belaunched which will have many fold effects on the business activities in the country. All these stepswill bring the economy back on track and our country could be a preferred place for investors bothforeigners and local. (Annual Report 2010-11)
Business Process 1. Cement acts as a binding agent, holding particles of aggregate together form concrete. 2. Cement production is highly energy-intensive process and involves the chemical combination of calcium carbonate (limestone), silica, alumina and small amounts of other materials. 3. Burning limestone to make clinker produces cement, and the clinker is blended with additives and then finely ground to produce different cement types.Key Steps:There are following five steps given as under:The raw materials needed to produce cement are:1) Shale 2) Limestone3) Bauxite 4) Gypsum5) Iron ore
Step 1:Extraction of raw materialsThe raw materials are extracted from the quarry by digging the holes through machines inmountains containing limestone and other resources needed to be used in process then theydo blasting.Step 2:Storage and blending of raw materialsThen all these raw materials are to be stored for the further process. Those raw materials arethen crushed and then blend with each other. Then these are transported to the plant wherethey are stored forming piles through machines and homogenized.Step 3:Raw grinding and burningAfter that there will be grinding in a careful mixture which produces a very fine powder in a2000 horse power roller mill, this fine powder is known as ‘Raw Meal’. Next, the fine powderis heated as it passes through the Pre-Heater Tower into a large kiln, which is over half thelength of a football field and 4.2 meters in diameter. In the kiln, the powder is heated to 1500degrees Celsius and cooled by bursts of air. Now this creates a new product, called Clinker.And is just like small black soft stones. It is the basic requirement for the production of allcements.Step 4:Cement grinding and storageA small amount of gypsum (3-5%) is added to the clinker to regulate how the cement will set.The mixture is then very finely ground in a finishing mill. The mill is a large revolving cylindercontaining 250 tons of steel balls that is driven by 4000 horse power motor. Then "pure cement" isobtained and is so fine that it can pass through a sieve that will hold water. During this phase,different mineral materials, called "cement additives", may be added alongside the gypsum. Used invarying proportions, these additives, gives the cement specific properties such as reducedpermeability, greater resistance to sulfates and aggressive environments, improved workability, orhigher- quality finishes. Finally, the cement is stored insilos before being packing and delivers to the sites.Step 5:Packing and delivering.After being stored in silos, there is a last phase of packingthat cement and loading and delivering that very finecement to the sites where it requires.
The cement manufacturing process consists of many simultaneous and continuous operations usingsome of the largest moving machinery in manufacturing. Over 5000 sensors and 50 computers allowthe entire operation to be controlled by a couple of Operators from a central control room. Eachtone of cement requires about 1.7 tone of limestone, gypsum and silica, etc. By volume limestoneaccounts for about 80% and clay 19% of the intermediate product — clinker. Gypsum is later onadded to clinker in the ratio of 4:96 to obtain cement.Flow Process of ProductionCost of productionSince the industry faces a situation where sales price will be fixed by mutual consensus, the costof production will be the most critical factor of profitability. Energy cost is a major component oftotal cost of production. It contributes at an average 40 to 45 percent towards total cost of cement
production. Energy cost is even higher in case of those plants which use wet process. Acement plant based on wet process consumes 165 kg of furnace oil to produce one tone of clinkeras compared to 85 kg of furnace oil used in dry process to produce the same quantity of clinker.Since cement plants use both furnace oil and electricity, any increase in the prices of these twoproducts is detrimental to profitability of the industry. Ever since October 1995, however, there hasbeen more than 60% increase in the price of furnace oil.Another significant cost component is packaging material. Cement is rarely sold in bulk inPakistan — almost all cement sales are in four-ply paper sacks. Cost of paper sacks has gone upby almost 90% since December 1994.D.G. Khan Cement was the most prized unit out of the cement units privatized by the NawazSharif government. Of all it was the most modern plant with bulk of depreciation amortized andinterest charges paid for. The company enjoys a virtual monopoly in its sales territory. There isno other cement plant within a radius of 400 kilometers in Suleiman Range.The expansion will come on line at a time when there will be supply overhang in the industry.With margins coming under pressure it will have to bear the added brunt of higher financialcharges and increased depreciation cost in the years to come.Analysis of the latest half-yearly results of the company shows that although sales of thecompany have gone up by 3.5%, the increase in cost of sales has reduced gross margin from 61%to 48%. With rising inputs cost not being matched by similar increase in price of cement,margins are expected to shrink further. The company, after the expansion is expected to facefiercer competition from Zeal Pak, Pioneer, Dandot and Wah. To wrest market share from thecompetitors, it is likely that D.G. Khan will have to reduce its cement prices.
DECISION MAKINGThe decision making style of D.G.K.C.C is DECENTRALIZATION. And the organizational structure isFLAT. Although all the employees have opportunity to give the decisions regarding the plantperformance and for that also meetings are held every day between DIRECTOR and MANAGERS ofthe company in which they also discuss and made future plans of the daily routine work and theyalso check out their previous day work efficiency and performance, every manager is responsible togive the performance report of every employee working under him.Also an annual meeting which is always announced by the chairperson is held between the chairperson and directors of the Company in this meeting plan and goals to be achieve in the coming yearare set and also they see and compare the Company’s performance between the previous and nextyear and here the head give the certain target to be achieve in the coming year although thesuggests are taken by the directors but these suggests are not give so much importance regardingproduction. And also there is a process of delegation within the company.Top Management of DGKCC
DepartmentalizationPurchase Purchase requisition Approval Hierarchy Director G.M(Work) G.M(Admin) Head of Depatment Requester
Purchase approval Hierarchy on Comparative Statement Director(Tech&Operaton) Above 20000&all Capitals G.M(works) up to 20000 G.M(Admin)up to 20000 C.F.A( Controller of Finance Accounts) D.G.M (Works) HOD( Relevant Department) HOD( Manager Purchase) Purchase OfficerPurchase departmentPurchasing processRequisitionIt is basically demand created by user department. If the worker of DGKCC needs any item relatinghis task than he raise demand by giving this letter.RFQ (Request for Quotation)When purchase department see any requisition contact to suppliers is done. So that they can givethem proper idea about theirs items. That how much easily they can provide these items to factory.QuotationThis is basically response of suppliers against RFQ.Comparative StatementThis is a comparison of all the quotations which are received from suppliers. In this statementdepartment see that which suppliers is providing items in least amount and in reasonable time.Requisition in favour of an approved suppliersPurchase order will follow a predefined approval hierarchy to get approval.
Purchase orderAfter taking comparison a suppliers is suggested. And order is placed to supplier.ReceiptUser will enter receipt in the system on physical receipt of item on gate.Inspection and deliverUser will enter results of inspection in the system for every receipt entered in the system.Store departmentReceipt sectionIn receipt section the inward and out ward gate pass is analyzed. Once purchase department placedorder than the supplier delivers the item to factory. When these items reached to site than aninward gate pass is made to enter these items in factory. And these items are reached to storedepartment. When these items reached to store department a report is maintained by storedepartment. That is SAIR (Store Arrival and Inspection Report).RR sectionAfter the completion of SAIR a reprehensive of relevant department came to store and see whetheritems are according the quotation or not. If these are not according to need than rejection remarksis passed and items are sent back to supplier with the reason of rejection. If supplier has itemsaccording the reason than he sent those items this time.Another report is made on approving the items by a relevant person. That is MRR (MaterialReceiving Report). And after this items are stored in store department.If the department which had raised PR needs items than they will get those items by MOI (Moveorder issue) statement. And material will be shifted to that department from store department. Ifthere some items remain unused than these items will be shifted back to store department forfuture use.The specimens of all these reports which are used in purchase and store departments are as under.
Finance DepartmentHierarchy (Chief Financial Officer) CFA (Controller of Finance Accounts) S.Managers Managers S.D. Manager D. Manager A. Manager Jounior Officers Workers (Staff)Finance departmentBasically finance department is working on Oracle software. Before Oracle, Microsoft Excel was inuse. The purpose of using oracle is to increase the efficiency and speed of work. At DG site, theprocess of work in Oracle is called ERP (Enterprise Resource Planning).There are many modules in finance of Oracle. But DGKCC is using only three module of finance. A/R A/P General Ledger ERP
Account payableFor account payable different types of invoices are used to work in oracle.Standard InvoiceStandard Invoice consists of two sections; one is Header level section and second is Line levelsection. Header level controls credit entry and line level controls debit entry. Different taxes are alsocharged to expanses according the law of Government.2% tax on transport3.5% tax on goods6% tax on service contract agreementsPre PaymentIt is a basically advance which is provided to suppliers. The record of pre payment is maintained inthis invoice.Debit MemoIt is an invoice which is used to recover the expanse. For example if supplier is using any asset ofcompany, and he says that the charges of using that asset are deducted from the supplier payment,than this invoice is used. Company make a debit memo against that supplier in oracle and oraclewarns the user about this on the time of supplier payment.Credit Memo It is also used to recover the company amount. For example a company purchased an asset andsubmits retention money against that asset. If asset has fulfils the period successfully than supplierwill liable to pay retention money to company. In credit memo DFF (descriptive flex field) is used. Itbasically tells the reference and name of supplier.Expanse report or Cash paymentThis report is maintained to record the petty expanse. A lumsum amount is issued for the casher.And casher pay the all the petty expanse bills from that amount.Account receivableThis account is maintained by these two 1. Transaction 2. Receipt 1. TransactionTransaction is passed for the sale of scrape. OR it is passed for the sale of cement. The revenuewhich is credited for that this will be passed.
2. ReceiptIt is used to record the direct expanse. Two types of receipt are used in finance department. o Standard o MiscellaneousGeneral ledgerIn general ledger all the entries are passed indirectly. Basically this is used to remove the mistake ofthe previous passed entries.Marketing (S &D) DepartmentHierarchy Director (Marketing) G.M( Marketing) Sales Officers
Marketing (S & D) Excise EDP DespatchMarketing department consist of further three department.ExciseThis department deals with excise duties and sales tax of parties orders.EDPEDP means electronic data processing. This department gives a tracking number to order afterreceiving from sales offices of company. This tracking number is identity of that order, which has afull record in oracle software. After doing the proper procedure the order document is processed todespatch office. Different reports which are the parts of EDP daily work, APCMA (All Pakistan Cement Manufacturing Association) Daily Brand Wise Despatch Daily loading Report District Wise Balance Loading Report Statement of Daily Despatch Office Wise Back Log Position (DG) Cement Balance Transfer Programme Daily Plant Wise Dispatch Report Cement Transfer report (indirect) Sales Tax Invoice DespatchIn despatch department the main work is to despatch the cement according the orders of salesoffices. After taking the authorities the despatch department makes truck loading advice according
to which cement bags are loaded on truck. It basically shows the quantity, location of unit, truckdriver name, truck number and destination of loaded cements bags.Despatch department also make many report daily some are Truck Loading Advice Truck Loading Advice (Inventory Transfer) Truck Loading Check Report Unit Wise Despatch Detail Gate Pass Gate Pass (Inventory Transfer) Office Wise Despatches District Wise Status ReportHuman Resource DepartmentThere are five practices of human resource. Recruitment and Selection Employees Training and Relation Development Rewards and Performance Benefits AppraisalRecruitment and SelectionThere is a long process of recruitment and selection in GDKCC. First a vacancy add is published innewspapers. Then interviews are conducted in Head office Lahore. A written test is also a part ofselection process. Then after a proper analysis a candidate is selected for the job. Now, the HRdepartment of DGKCC starts to maintain the record of employee in a file.
Following documents are the parts of this record book. Employee Academic Certificate Curriculum Violet Hand written application for recruitment Company test Employee’s Code of Conduct Employee personal record form Appointment Latter Medical fitness certificate Registered AID (Security Clearance) Orientation Program Orientation Arrival Probation Review Form Review Form Conformation Office Orders Emails form Head OfficeAnd in the case of retirement or death some other document also becomes the part of record file.Such like Death Certificate, Clearance form etc.The specimens of some documents are attached with report.Training and DevelopmentWith the advancement in technology, DGKCC also arrange different workshops and trainingprograms for employees. First the training of one year is necessary for new recruitment of technicalstaff. With the advancement in Oracle Software, Company provides employees opportunity to learnabout oracle as they need. For this company provides one week training to employees in head office.Performance AppraisalFor this purpose an Annual Confidential Report (ACR) is prepared according the performance ofemployee throughout year. On the basis of which different steps is taken for employee’s future. Aform is a part of this report which is called worker performance appraisal form. The sketch of datawhich is obtained with the help of this form is Personal Data Performance Evaluation o Professional Knowledge o Hard work and Dedication o Work Standard o Team Work o Attitude and Behavior o Attendance o Honest and Loyal o Obedient
o Personal Hygiene o Courteousy Overall performance Training (TNA) Comments of G.MThis form is filled by the head of department of relevant employee.Rewards and BenefitsAn increment of 15% in salary is offered to employees every year. DGKCC has been offered residentfacility to mostly its employees. Travailing facility to employees is free from D.G Khan to Site.Promotions are offered to deserving employees. A well constructed colony is also the benefit ofemployees.Housing BenefitsBlock E, F Permanent WorkersBlock D AJO, GoBlock C Jam, SDMBlock B DGMBlock A G.MVehicle BenefitMotor cycle Technical StaffCultus Car ManagersToddy Car Senior D. ManagersPerjure General ManagersMedical BenefitMedical of all officers rank employees is free.Education BenefitFor workers, half Fee of school is provided by company.For Officers, full fee of school is provided by company.Insurance BenefitCompany also insures all its employees.
Retirement BenefitsOn the time of retirement following adjustments are maintained. From the date of joining after probation period the amount is deducted from the salary and provided every employee after his retirement in the form of Provident Fund. After retirement an Earned Leave fund is also provided to employee. A lumsum amount in form of Gratuity is also provided to employee. It is basically obtained by multiplying number of year service with last basic salary. Deductions are also done. May be employee took any loan from company than the adjustment is passed for that amount. It can be house building loan or any other loan. Old age fund in the form of pension is also provided by government to employee. DGKCC provide the government the entire documents which are required for this purpose.Employees RelationCompany focused to maintained good relation with employees. For this purpose different workerparties are working in DGKCC. These maintain a good relation between employees and company .After the completion of a year, employees brings their represented forward who try to solve theproblems of workers. There is a system of election for choosing the best representation ofemployees.
Financial analysisName of Company D. G Khan Cement Company LimitedTicker DGKCAssets (June2010) Rs 47,046,043,000Share Capital Rs 3,650,993,000Sales Revenue (June 2010) Rs 16,275,354,000PAT (June 2010) Rs 233,022,000Market Share Price (30 June 2010) Rs 23. 62(365,099,266 ordinary shares of Rs 10 each)DGKC has two plants at Dera Ghazi Khan and a new Greenfeild cement plant at Khairpur village,which was started in FY 04 and began commercial production in June 2007. The plant has a capacityof 2. 1mtpa. Commencement of production at the new plant and effective and efficient operationsmanagement led to 70% and 66%increase in the volume of clinker and cement productionrespectively. The company has its own power generation plant along with WAPDA supply. A dualfuel power generation plant at Khairpur cement plant also started its commercial operationssuccessfully in FY 08.Cement sales have seen a negative sign both in the local as well as export markets during the periodJuly-September 2010. Local sales dropped by 16% to be 4. 6 million tons due to lower governmentalspending along with lower spending by people ravaged by the floods. Export sales of the industrydropped by 21% due to increased supply in the regional markets, forcing some of the players to lookfor better markets.Rising cost of coal, fuels and packing materials also badly hit the production costs. Coal ininternational market is hovering around US$ 120/ton against US$75/ton last year same period. Inaddition, constant rise of gas and electricity tariff also posed negatively to the profitability of thecement sector.For DG Khan Cement, during the first quarter ie July-September 2010 the local sales witnessed adecline of about 27% by reason of flood in most parts of the country. Whereas, exports of cementplunged by 8% from the corresponding period. Sales revenue and gross profit declined by 23% and48% respectively during the period under report compared with the same period last year ensuedfrom low sales volume and increase in production costs. Administrative, distribution and sellingexpenses decreased in accordance to lower sales volume. However, financial charges were slightlyhigher than last years at Rs 488 million as compared to Rs 468 million in the same quarter last year.DG Khan earned a net profit of Rs 22. 146 million (2009: Net profit Rs 584. 619 million). EPS was Rs 0.06 (2009: Rs 1. 6) (Courtesy: Business Recorder)
DG Khan Cement in comparison with the cement industryThe cement sales in the company witnessed a growth of 15% in FY10 whereas DGKC witnessed agrowth of 27% of sales volume. It also comprised of a 17% market share in local sales. DGKC has agross margin and profit margin which is almost similar compared to the industry average of 15.15%and 1.4% respectively. However, its current ratio is 1.19:1 whereas the industry average is of 0. 71:1.This means that DGKC is in a good position to meet its short-term debt. The current liabilitiesdecreased mainly as the provision of taxation reduced as profits fell and also export sales fell.Current assets increased mainly due to increase in short-term investments.The company is reasonably leveraged with a Debt to Asset ratio of 44% compared to the industryaverage of 50%. This can be owed to its repayment of long-term loans The Return on Assets of 0. 5%is marginally lower than the industry average of 1% mainly due to a reduced in sales revenue. Owingto such factors, its Earning per Share is also Rs 0. 72 as compared to an average of Rs 2 which resultsin lower investor confidence.Production During FY 09, the demand for DG Khan Cement and clinker had fallen from FY 08 by 8%and 7% respectively due to the economic recession plus low developmental expenditure by thegovernment. However due to increased spending in the private sector and higher agriculturalsupport prices provided by the government to the rural sector the overall capacity utilization of thecement plants increased to 76% in FY 10 from 74% in FY 09. This led to an increase of 27% in DGKhan Cement s production from FY 09 to FY 10 as 4,908,593 m. tons. (Courtesy: Business Recorder)SalesThe cement sector posted a reasonable growth of 9.4% as the total sales volume increased by 2.94million tons to reach 34.22 million tons by June 2010 from 31.28 million tons. Although DGKC svolumetric sales grew by 28%, the sales revenue fell by 10% from FY 09 to FY 10 as Rs 16,275 millionin FY 10 from Rs 18,038 million. This was mainly due to lower selling prices internationally plus thetough competition within the cement manufacturers leading to price wars.However, despite the decrease in sales revenue, the sales volume of the company increased locallyby 45% from FY 09 to FY 10 due to increased private sector spending and higher support prices foragricultural products by the government whereas the export sales decreased by 20% mainly due to afall in exports to India. Hence an overall increase of 28% in FY 10. The total cement and clinker salesof DGKC had increased in FY 10 as higher production enabled it to largely tap the local market.Cement sales rose by 28% but clinker sales fell by 60%ProfitabilityRecent Results DGKC posted PAT of Rs 233.022 million in FY 10 as compared to Rs 525.581 million inFY 09. This decline was mainly due to lower prices and reduced exports. The net sales revenue of thecement sector in FY 10 was 10% lower than the net sales revenue generated in FY 09. Although thesales volume increased by 28%- 45% increase in local sales and 20% decrease in export sales, the
revenue fell down mainly due to lower selling prices. Costs of sales increased by 9.8% from FY 09 toFY10.The increase was due to increasing coal prices to US$115/ton increased the fuel costs. Also arise in gas and electricity tariffs increased costs of production too. Also the costs of packing materialincreased in FY 10. This resulted in a decline of 9.8% in the gross profit from the last year; reportingto Rs 2,705.36 million from Rs 5,679.73 million.The operating expense decreased by 56% on the whole in FY 10 mainly because of large decline inselling and distribution expenses as when export reduced, freight charges reduced. Also there was a27% decline in the financing costs as the company paid off its long-term loans. Yet the PAT declinedby 56% in FY10. Therefore the earnings per share (EPS) also fell from Rs 1. 63 to Rs 0.72 in FY10. (Courtesy: Business Recorder)Profitability - FY 02 to FY 09The profitability ratios of the company have shown a declining trend since after FY 05. The grossprofit margin increased in FY 06 only to fall in FY 07 and FY 08. The profit margin of the company hasdecreased continuously along with return on assets (ROA) and return on equity (ROE). The profitafter taxation had declined by 33% in FY 07 due to lower net retention prices caused by a supplyoverhang in the overall industry. Also the problem of rising input costs had begun in FY 07. This risein cost of production and raw material had continued into FY 08. However in FY 09, the boost inexport sales lead to an increase in the PAT and the profit margin was 2. 91%. The operating expenseshad also increased due to higher selling and distribution expenses but the increased sales revenuecontributed to an increase in PAT.Increased production facilitated higher sales volume which in turn translated into almost doubling ofsales revenue in FY 08. The company had earned the highest sales revenue of Rs 12.445 billion in FY08. However, despite this, the gross profit of DGKC in FY 08 (amounting to Rs 1. 9 billion) was around6% lower than the gross profit posted in FY 07 (Rs 2. 0 billion). The reason for lower gross profit wasa 140% increase in the cost of sales during the fiscal year.However in FY 09, major distribution costs increased when exports increased. Also finance chargesrose due to higher interest rates and increased long-term borrowing. But the sales revenue hadincreased by 45% improving the profitability of DGKC and resulted in a profit after taxation of Rs525.581 million in FY 09 against a loss after taxation of Rs 53.23 million in FY 08. (Courtesy: Business Recorder)
Future OutlookThe infrastructure redevelopment of flood affected areas is also a potential area for demand ofcement to grow. The government announced to finance every house that was either fully or partiallyaffected by the flood; again a potential demand for the growth of cement industry. Also withincreased private sector spending, building infrastructure across the country will also aid inincreasing demand of cement. The road networks and dams construction projects are also apotential source to increase demand of cement. Hence demand of local sales is expected to increaseExports have recently reduced due to gulf region capacity and loss of export sales to India due topolitical tension in FY09. Yet there is export potential in new export markets like Russia and someEuropean countries.DGKC is trying to cut down on costs that have significantly and adversely impacted its profits. Toreduce electricity cost, DGKC has started a project of power generation from waste heat at DGK Site.The project is expected to generate substantially cheap electricity of about 10.4MW without usingany fuel. This would help to cut down the cost of production. DGKC has also decided to usemunicipal solid waste as fuel for heating purposes. This project will be beneficial as it would bringdown the company s costs of production, help resolve the environmental issues related withdisposal of solid waste and most important, it would save huge foreign exchange spent on importingfossil fuels. Also if currently, coal is used as a fuel and is imported, in future local coal can also beused over the cement industry as Lucky Cement has already being supplied by Oracle Coal Fields.================================================================================================================Liquidity FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10=================================================================================================================Current Ratio: 1. 07 1.34 1.21 1.37 1.65 2.60 1.59 0.84 1.19-----------------------------------------------------------------------------------------------------------------------------------Profitability FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10-----------------------------------------------------------------------------------------------------------------------------------Gross Profit Margin 28.35% 22.65% 35.68% 36.91% 49.81% 31.65% 15.39% 31.49% 16.62%Profit Margin on Sales: 10. 29% 16.16% 20.46% 31.86% 30.40% 25.27% -0.43% 2.91% 1.43%Return on Assets 3. 23% 5. 08% 6. 78% 9. 34% 7. 05% 3. 14% -0. 10% 1. 23% 0. 50%Return on Equity 8. 01% 9. 51% 12. 58% 18. 05% 12. 55% 4. 78% -0. 18% 2. 51% 0. 88%
SWOT AnalysisSWOT stands for strengths, weaknesses, opportunities and threats. A SWOT analysis is atechnique that many companies use during strategic planning; basically an organized way toevaluate where to focus time, money and energy to improve productivity and growth. A SWOTanalysis can be a valuable tool for setting milestones or approaching a venture investor, becauseit demonstrates a solid understanding of your company performance and the factors influencingproductivity.Explanation of SWOT Analysis STRENGTHSAvailability of raw materialThe easy availability of the key raw material Gypsum, Shale and limestone all over Pakistangives a smoother start as which I think is a very good for any cement industry. And the plants areinstalled quite near to raw material which is a competitive edge.Cheaper labourAs we all know the labour of Pakistan is very cheap. So this is a healthy sign for the company as thecompany has to pay less to their labour which result in saving of their income and later on can beutilized in the expansion of cement plant. Resultant increases the cement production.Latest machineryThe plant of the company is equipped with the latest machinery having a latest technology inPakistan as compared with others. Although it is expensive but it saves the cost by producing qualitycement and creating value in mind of customers.Quality ProductAs the plant equipped with the modern technology so it has a capability to produce better qualityusing less energy than others. The company has been certified for “Environment ManagementSystem” ISO 14001 by Quality Assurance Services, Australia. The company was also certifiedfor ISO-9002 (Quality Management System) in 1998. By achieving this landmark, DG KhanCement became the first and only cement factory in Pakistan certified for both ISO 9002 & ISO14001.Self Power GenerationThe company has its own power generation plants in the factory area so to meet the plantrequirements and we all know that Pakistan these days suffer with serious energy crisis so thecompany do not totally depends upon WAPDA even from its own generation the companyproduces energy with much less cost so I think it is another main strength that DGKCC have ifcompared with other cement industry because not other cement plants in Pakistan have suchenergy generation system so they have to depend upon WAPDA.
DurabilityYes, DGKCC has a very good image in mind of its customer’s reason being they produce the finestquality since day first of its production and take steps to make it better and even charge lesscompared with its competitors. The company has its positioning through its slogan, which representsdurability.Competitive EdgeCompany launches its new plant near Chakwal, which double its production capacity. So this newPlant helps in gaining the competitive edge over others in north region.Profitable OrganizationAt present and from few years organization is earning profit which is its strength because inprofitable organizations more and people invest more and more. So profitability is a good sign forthe organization. Here are some figures to prove further:Use of Coal and Waste ProductsCoal is found in all the four provinces of Pakistan. The country has huge coal resources, about185 billion tonnes, out of which 3.3 billion tonnes are in proven/measured category and about 11billion are indicated reserves, the bulk of it is found in Sindh.
At present, DGKCC switch to coal and gas as basic fuel. According to data the cost of cementproduction per tonne by furnace oil was around Rs2, 083 whereas the cost of production pertonne by coal was Rs8,68,saving Rs1,215 per tonne. Similarly, the saving per bag was Rs60.75,which is a huge difference. Now ‘husk’ is also introduce as basic fuel in order to minimizeproduction cost as much as possible.Own Paper Bag PlantDGKCC has now installed its own paper bag plant and became pioneer in that to even minimize itsbag cost even that plant also sells bags to other cement plants as per demand. WEAKNESESSLow Promotional CampaignIf we analyze this they are not paying much attention to promotional campaign. They are notadvertising their product as per requirement because through promotional campaign they can alsogain more market. They are only using trade promotions, which are not enough to have a goodpositioning in the market.No Performance AppraisalThere is no proper performance appraisal program. If one works hard and show creativity hisperformance is not appraised by any instrument. The managerial staff is not promoted on the basisof performance, as they have no any tool to measure performance of managers. The only one way tomeasure the performance is annual confidential report, which is prepared by only one person who isimmediate boss of any employee.Seniority IssuesIn management there is a seniority virus means there is no proper mechanism for the promotion ofthe seniors. Experienced persons have a lot of experience and they know the organization best andhow to effectively run that organization. They know that what to promote and what not to promoteabout the organization. This irregularity in promotion of managerial staff creates job dissatisfactionand lowers down their productivity. It may happen that staff is not dissatisfied with the job but atthe same time they may not be satisfied with their job.Centralized Decision MakingAlthough the decision making style of DGKCC is decentralized that what the company says but theground reality is that in decision making process the middle level management is not much considerby the upper management which creates sense of irresponsibility among the members of company.
So ultimately it creates job dissatisfaction. Their decisions are not praised and honoured much asthey expect. OPPORTUNITIESLocation of ProjectLocation always matters, if we see in southern Punjab there is not enough cement factories otherthan DG Cement. So we can say that there is somewhat monopolist in that part and controls wholemarket. If the company upgrades its production capacity they have a good chance to cover theforeign market of Afghanistan from that plant. Increase in demand of cement due to the upcomingsports event .South Africa is schedule to host the football world cup of 2010 due to which they needto make the football stadiums for the World Cup and Sri Lanka are also expected to approachPakistani companies for cement imports because Sri Lanka to co-host the cricket world cup of 2011.So this is a good chance for a company to maximize profit.Export DemandAs there is a war like situation in Afghanistan and Iraq so there is a huge demand of cement inrehabilitation process, most of Indian cement plants are in north region so from there it costs a lot toreach in southern region so this also again is a huge market to be capture, also there is a hugedemand in UAE and Russia. Result there is a huge cake of international market which a companyhave a chance to cater.Introduction to New Product LineThe company still produces OPC and SRC but there is also a room for producing the ‘White Cement’so I think by introducing the new product line they can also increase their sales and profit alsoRehabilitation and New Construction Projects in CountryAs we all know there’s started a rehabilitation phase in north areas of Pakistan after war againstmilitants and in South Waziristan there is a rehabilitation phase to be coming and a lots of projectshave started in the country. So this increase in demand creates a new opportunity for the companyto earn more profit. THREATSIncrease in Fuel PricesIncrease in the international prices of coal and oil is a major threat. As Pakistan coal contains highpercentage of sulphur due to which the company is not able to use the local coal as a source of
energy. So the company has to import the coal from different countries like South Africa, china andIndonesia at high prices. This will restrict the profit margin.Economic RecessionThere is a global recession going these days so this is also a threat to cement industry as it affects alot to export market.Political InstabilityThat instability always remains threat to Pakistan and its cement industry also because due to thisthere’s not as much growth and now the war like situation in a country is really a big issue.IMF LoanIMF Package in Future can cause to decrease GDP and economical development in Pakistan. This willalso be cause to stop development of infrastructure. So it will have huge effect on company also infact on whole industry.Increase in Interest RatesUnanticipated increase in interest rates or less than expected demand growth might create severecrises for the sector couple of years forward.Decrease profitability due to competitionThe sharp decline in cement prices has been witnessed due to domestic competition amongcompanies has dampened the profitability of the company. This increase in competition amongthe players has further decreased the prices of cement in the local market. So the companydecrease the prices of products in order to get high market as compared to its competitor.High level of taxationPresently, the company is heavily burdened due to levy of Federal Excise Duty @ Rs. 750 per ton andGeneral Sales Tax @ 15% on duty paid value. In addition to Federal Excise Duty and General SalesTax, company is also paying the provincial levies (Royalty and Excise Duty) on acquiring of rawmaterial for production of cement i.e. lime stone, shale and clay.Per ton cost impact of these taxes in four provinces of Pakistan is as follows: Punjab Khyber Paktunkhan Sindh BaluchistanLime Stone 24 21 17 65Shall/ Clay 03 04 03 11A comparison of taxation and retail prices with other regional countries revealed that taxation inPakistan is highest while cement retail prices are lowest.
Problem IdentificationAs there are not many lope holes in the company because they strictly follow the standards. But stillthere are some tribulations that need to be viewed. They should have to pay their serious attention to their marketing in order to boost their sales and income of the company as the company also suffers very serious problems regarding sale of cement these days. Reason being due to: o Economic recession all over the globe the company is in crisis these days. o Instability of politics in Pakistan o Terrorism in Pakistan o Energy crisis in Pakistan. There is a lot of problem regarding sitting arrangement of guests in the head office as even I internee had issue throughout my internship and this is just because they have a very congested place so they need to work on that. Though they have a very good record system but the file keeping is not so much good all the record files are placed randomly at the corner of finance department n whenever a file is needed then there would be a lot of problem in order to search that particular file. As NISHAT head office is not just only the head office of DG Cement but also the head office of Nishat Power, so now they are really running out of space from everywhere they had a major space issue regarding car parking, file keeping record, office space. There are many few people who are computer literate most of the employees don’t operate the computer well though they use the computer but they don’t have a good command on computer. So they need to be trained more regarding the use of ORACLE software. Working after hours without any incentive Multitasking continuously effects workRecommendation o They should pay much attention to their employee’s promotion. They should use performance appraisal system. o Top management should use up-to-date marketing practices rather to use orthodox ideas. o 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. o They should pay much attention to promotional tools. They should advertise their product. o 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. o 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. o 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.
o Skills and performance based performance appraisal program should be applied. Employees should be promoted on the basis of their achievement. Employees should be rotated in different jobs and tasks, as monotony decreases productivity.
Conclusion State Cement Corporation of Pakistan (S. C. C. P) was established in 1984 managed by the Federal Government. In the beginning, existing plant was purchased from U.B. E. industries of Japan. It had installed capacity of 2300-ton clinker daily and started its production in April 1986. The main purpose for the establishment of plant was to fulfil the demand of Northern Marketing zone. In 1977 the annual demand for cement in Pakistan was about at 3.7 million tons while the production was about 3.1 m. To fulfil 0.6 million gap, a new plant was required. After a detailed investigation, they selected a place D. G. Khan City where large high quality material reserves were available at least or 100 years. The location is ideal because it is near to market as well as prior to raw material. The govt. privatized the SCCOP, first purchased by Segol Group of Industries and Nishat Group of Industries combinely. In 1992, the company purchased by Nishat Group of Industries solely. After privatization it name changed from SCCOP to D. G. Khan Cement Factory, before the establishment of expansion plant (new plant) in 1997. The cement was brought to this and either from Maple Leaf Cement Factory Mianwali and Zeal Pak Hyderabad and ACC Rohi. The new plant is the relief for Bahawalpur, Lodhran, Khanewal Muzafargurh, Bahawalnagar, and Vehari. It was purchased from F. X. Smith of Denmark. Its design capacity was 3300 ton clinker per day. The company has following types of cement: o Ordinary Portland Cement o Sulphate Resistance Cement o Black Cement o Heat Resistance Cement o White Cement o Slag Cement o Quick Setting Cement o Under Water Setting Cement o Acid Resistant Cement The company recently did two things: o Establishment of Expansion Plant o Getting ISO 9002 Certificate Both the measures are to reveal the future planning of the company. The future planning of the company is to export their high quality cement. The existing plant is unable to cope with the demand of country. With the establishment of expansion plant, their supply is more than demand. So, they can easily export their high quality cement. The main purpose of ISO 9002 certificate it to get the approval from ISO, they can export their high quality cement according to international standards and can export after 2000 A. D. when only ISO certified companies can export their products.Production Process
D. G. Khan Cement factory adopt true dry production process for the manufacturing of cement. Thisprocess consists of following steps.DrillingDrilling is done in the quarry with the help of drilling machine. They create a space for the powderexplosive.BlastingThe powder explosive is blasted under a controlled process to get different small segments oflimestone. The large segments are also converted into small segments which is called crushingprocess.TransportationThe small fragments are loaded on the 7-Km long 3 belts conveyor system running over roughterrain. This conveyor takes the new material from quarry to the factory site. The limestone andshale to stored in the open space.GrindingAfter storage, the stored limestone and shale are fed to the raw mill with the help of two hoppersaccording to predetermined mixed proportion. The roughly crushed material passed through 3rollers. The mixture is dehydrated, sized, and fine particulars are separated.PackingIn the packing unit, there are 4 rotary packers and each packer has 8 nozzles. The whole packingprocess is automatic. Cement bags are loaded on the trucks and heavy trollers automatically. Eachcement bag has 50 Kg weight. Sometimes heavy users ask for bulk quantity of cement withoutpacking. It is loaded into the truck.LoadingThe final sample is taken when the packed cement is loaded on the truck. The some four tests areperformed as it is performed in cement mill. If the cement is not up to the mark dispatch is stoppedotherwise no problem.DistributionFor the efficient distribution, the company open its four sales offices in four different cities. Multan D. G. Khan Lahore Karachi
Dispatch DepartmentAnd dispatch department at the factory site. Mostly sales offices are located near the target market.Dealers are registered called stockists. They have to deposit at least Rs. 50000 as security. Before theestablishment of expansion plant a quota system is introduced. Each dealer has maximum andminimum limit of his quota.Store DepartmentThe store department performs two basic functions: o Management of Inventory o Controlling of Inventory Management of InventoryThe store department perform following functions for management of inventory. The inward card is issued when the truck passes through factory gate. Inspection of quantity of material is done on the gate. Inspection note is sent to the concerning department. The manager or incharge who raise the order called indentor write the remarks upon it after checking the quality. It is the duty of indentor to write the acceptance and rejection note upon it. All accepted material is stored by store department and write material receiving report.One of copy of material receiving report is sent to following departments. o Finance department o Store department o Purchase department o MIS department o SupplierAll the received items are written in the records books. Control of InventoryThe store department controls the inventory both manually and by computer. Two systems areintroduced for physical control of inventory. Cardex Card or Bin SystemIn the Cardex card system, all the materials for which store department issued the material receivingreport entered in the Cardex cards. Different pieces of information are written on these Cardexcards. o Category o Code no o Part No o Description
o Maximum Level o Re-ordering Level o LocationAll the work done manually and balance the card when the inventory coming or going out ofdepartment. Computer RecordsThe second system for controlling of inventory is computer records. All the transactions are updatedin the computer.PurchasingThe purchasing of different items is done by the purchase department of the D. G. Khan CementFactory. The purchase department not only purchase for the factory as well as for the sales offices.Usually the department purchases machinery furnace oil, office equipment, supplies, paper sacks,explosive etc:The purchase department acquire the things through the acquisition process. The Acquisition ProcessThe acquisition process consists of following steps.Need RecognitionNeed for the acquisition of raw material arises when the production department asks to the storedepartment of some particular item. The store department is unable to fulfil the need. So herecommends to the purchase department.For example, Production Department needs a calculator. And Calculator is not available. There is aneed to Purchase calculatorSupplier SelectionIn the supplier selection stage, Different suppliers are identified. Suppliers are of two types. o Permanent Suppliers o Random SupplierThe company has permanent contractor to the different items. Contracts are of long term in nature.So they don’t need any frequently selection of random supplier. The company selected the supplierdo to following characteristics. o Past experience o Past performance o Financial strength o Quality of material supplied o Price charges
o Nature of relationship with the supplierOne of these factors can change the decision.Placing the orderThe purchase department has authority to buy the items. The purchase is done once the particularsgiven by the store department. The following particulars are given in the indent form: o Name of the department o Description of the item needed o Last purchase date o Quality of item o Quantity of itemThe order placement is dependent upon the requirement of item. Different purchases procedure areadopted depending upon o Urgency o Availability o ImportanceThere are three types of purchase processes: Regular Purchase Spot Purchase Importance Regular PurchaseRegular purchase is the purchase of those items which they are required after the certain periodwith regularity. It exhibits the following characteristics. o Such items are very expensive o Such items are not needed urgentlyThese are consumable goods.The order is placed in the newspaper in the form of tender notice. The terms and condition arementioned in the tender notice. The supplier gets the tender form from the nearest sales office(mentioned in the newspaper) on submission of fee. In this tender notice all the description of itemis mentioned. The supplier fills the form and submits to department with a security fee. The supplieris selected on the basis of low bid of the supplier. In case, the company accepts the tender notice ofsupplier who gives maximum discount. Sometimes the indentor is also considered for the selectionof supplier which negotiate with the supplier in term of quality of item.After the supplier has been identified and selected the company will issue purchase order to thesupplier.
Spot PurchaseSometimes, different items are purchased on the spot. These items are urgently needed, havingmore alternative and payment made in cash e.g. towels, tube lights, stationary, bullets, bed sheetsand spoons, dishes etc. Spot purchase is done through spot purchase committee which is consists of o Indentor or end user o Purchase department representative o CommercialThe spot committee visits different suppliers evaluate the items in terms of price, quality anddelivery date. The committee make the payment to the supplier on the spot. One month is neededfor the spot purchase to be completed.ImportThe company imports those items which are not available here or having low quality. Import is along and complex process, it takes six months for an import purchase to be completed mostly earthmoving machinery, fire bricks and spare parts are imported.Track the orderTrack the order means routine follow ups of orders to anticipate late deliveries or probabledeviations from requested order quantities. Different modes are used or tracking the orders e.g.telephone, letter, fax. The company usually tracks the order when some delay will stop theproduction.Receiving the orderWhen the order is received from the supplier, the indentor checks the quality of the incomingmaterials. The indentor writes the remarks about items either it is accepted or rejected. Acceptanceor rejection note is issued by the store department. If the materials are accepted the storedepartment issues material receiving report. One copy of the material receiving report is issued toeach of the following department. o Supplier o Finance Department o MIS Department o Store DepartmentPurchase DepartmentThe rejection of items is informed to the purchase department and they return to the supplier. Thepurchase department also maintain and updates their records of different supplier on punctuality,quality, quantity deviations and price. All these information will help for future evaluation ofsupplier. When the finance department has received the material receiving report from the storedepartment supplier as paid and entries are passed in their records.
Supplier ContractsThe purchase department of D. G. Khan Cement company has identified and registered differentsuppliers for the materials, which have vital importance such as furnace oil, paper sacks andexplosive.Furnace Oil 90% of furnace oil is purchased from Pakistan State Oil 10% of the required furnace oil is purchased from Shell Paper SacksThe company usually makes a contract of six months duration for the supply of paper sacks.Generally, the company awards contract to any of the following companies.1. Pakistan Paper Sack Corporation Karachi2. Khyber Papers Private Ltd. Gadoon.3. Cherat Paper Sack GadoonSupplier of StationaryFollowing printing agencies are the suppliers of stationary to the D. G. Khan Cement Company:1. Dera Press2. Freedom Art Press3. Top SignsAll located in Dera Ghazi Khan City.ExplosiveThere is only one supplier of explosive in the whole country. So the company also makes purchase ofexplosive from that very company i.e. Pakistan Ordinance Factories Wah Cantt.
In 1995, D.G Khan Cement (DGK) was at the top of the 19 listed cement units in terms of profitsearned and total assets and ranked second in respect of sales. The company then enjoyed excellentliquidity with no short-term borrowings; minimal long-term liabilities and a mountain of cash as highas Rs2.1 billion at end-December, 1995.By the middle of last decade, the days of sunshine and glory were all but over for the cement sector.Excess capacity; the teething competition; economic recession and the spiralling cost of productionall pushed cement producing units in the quagmire of losses. The company is still market leader withrespect to market share of 11.2% to 11.4%. During the fiscal year ended June 30, 2009 (fiscal 2009),the Company produced 3,946,101metric tons of clinker and 3,877,296 metric tons of cement. TheCompanys subsidiary, Nishat Paper Products Company Limited is principally engaged in themanufacture and sale of paper products and packaging material.During the first half of FY 2011, the sale of cement in the country registered a decline of over 8%compared with the corresponding period. The sales of cement in the local market were 10.108million tons against 11.022 million tons during the same period last year. Export of cement duringthe period also declined significantly. Total export of cement during the period under review is 4.629million tons against 5.579 million tons during the corresponding period. The decline of 17% duringthe period attributed to declining rates of cement in the international markets along with sluggishdemand. In addition, the rising cost of production in the country also made it less competitive forthe industry to compete in the international markets.Net profit of DG Khan Cement, the second largest cement-maker, fell 60 per cent to Rs192 million inthe first half of fiscal 2010-11 compared with Rs470 million posted in the same period last year.The decline is primarily due to lower gross margins amid higher input cost and lower selling prices inthe local market. Sales volume is also expected to have dropped 16 per cent to two million tons dueto subdued demand amid severe floods.Net sales rose marginally by 2.7 per cent to Rs8.2 billion compared with Rs8 billion as sales volumedeclined. Gross margins remained flat on account of higher coal prices, which rose 37 per cent on ayearly basis.Domestic cement sales are likely to see an increase in March onwards with rural income increasingfollowing the harvest season, according to analysts. The company’s portfolio – composed primarilyof group companies including MCB Bank and Nishat Mills Limited – is likely to keep profitabilityafloat. Dividend income is expected to clock in at Rs293 million.Other income, which includes income from portfolio companies, rose 16 per cent to Rs546 millioncompared with Rs471 million in the preceding year.Working at DG Cement has provided me with an invaluable experience of how the financial mattersare run and solved. I had chosen to go into this field because of the interest I have in Finance. Fromthe whole analysis, company has good profit earning capacity. Although in FY 2011 Company hasfaced problems regarding net sales. But company is working with full it’s potential. And i hopecompany will achieve it leading position again. As Pakistani market is going to be liberalized, newplayers are entering all sectors including cement sector, competition is going to be very intensive
and severe. To remain market leader DGKCC should reorganize its policies regarding pricing,placement, workforce management and development. To gain and sustain competitive advantageDGKCC should change itself continuously according to local as well as international market. DG KhanCement factory is the leading company in the cement sector.The company is performing well for the financial point of view. However net profit of DGKCC falls inFY 2011. But company is trying its level best to retain its profit. It pays a huge amount annually in theform of taxes to the government of Pakistan. Company’s distribution channels are very effective.The prices of D G Cement products are higher than the competitors due to the fine quality, itprovides. It can also be concluded that D G Cement should reduce the prices of its products.
BibliographyWeb 1. http://www.dgcement.com 2. http://www.cement.org/basics/images/flashtour.html 3. http://www.inlandcanada.com/NR/exeres/3E7E96B8-1DF4-4F8D-A5CA-0FC35A4BDBD5.htm 4. http://www.cement.org/basics/howmade.asp 5. http://www.cement.org/basics/images/flashtour.html 6. http://www.brecorder.com/index.php?id=959953&currPageNo=1&query=&search=&term= &supD= 7. http://www.forexpk.com/highlights/corporate-news/dg-khan-cement-company-limited- analysis-of-financial-statements-financial-year-2002-financial-year-2010.html 8. http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ric=DGKH.KA 9. http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/Business/27-Oct- 2009/Cement-industry-crosses-Rs120-billion-debt-mark 10. http://www.pakistaneconomist.com/database2/cover/c96-97.asp 11. http://www.cement.com.pk/cement/pakistan-cement-industry.html 12. http://www.cementchina.net/news/shownews.asp?id=4144 13. http://www.dgcement.com/financial-reports/AnnualReport2009-10.pdf41 14. http://www.dgcement.com/financial-reports/DG1stQurater20010-11.pdf 15. http://economicpakistan.wordpress.com/2009/02/01/cement-industry/ Analysis of Financial Statement by GibsonTEXT 1. Economic Survey Of Pakistan 2006-07 2. Economic Survey Of Pakistan 2007-08 3. Annual Report Of Lucky Cement 2007-08 4. Annual Report Of Fauji Cement 2007-08 5. Annual Report Of D.G Khan Cement 2007-08 6. Annual Report Of D.G Khan Cement 2008-09 7. Annual Report Of D.G Khan Cement 2009-10 8. Annual Report Of D.G Khan Cement 2010-11 9. Annual Report Of Pioneer Cement 2007-08 10. Budget Review 2008-09PEOPLE I. I.U.NIAZI II. MUKHTAR AHMAD III. Hamid Shah IV. Zahid Iqbal V. ELAHI BUKHSH
APPENDIX✔INTERNSHIP OFFER LETTER✔INTERNSHIP COMPLETION LETTER✔EMPLOYER EVALUATION FORM