Final project Report on cement industry

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Subject
Project
Topic
Financial Analysis Of Cement Industry
Submitted To,
Sir Umer Iqbal Siddiqi
Submitted By,
Muhammad Imran (3009)
Mudassar Nazar (3015)
Muhammad Asif (3021)
Group Leader, Mudassar Nazar (3015)
Class
B.B.A 8th
(Evening)

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Dedication
Dedicated to
Our dear and near, those who always help us when we need them and give us the
lesson of encouragement to say that,
“A winner is one who accepts his failures and mistakes, picks up the pieces, and
continues striving to reach his goals”.
We are very thankful to our respected teacher and also dedicate our this project
to our teacher,

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Sir Umer Siddiqi
2. Acknowledgement
Firstly we would like to pay our deep thanks to Allah Almighty who gave us the
strength and ability to make this project report.
Next we owe our bottomless thanks to our respected teacher SIR UMER IQBAL
SIDDIQI who directed us well and was always available to clear our doubts and
misunderstanding.
We wish to thanks to our friends for suggestions and critical review of the
manuscript.
Thank You

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3. ABSTRACT
The purpose of this research report is to evaluate, analyze and compare the financial
statements of Pioneer Cement Comparison with Kohat & Cherat Cement comparative analysis.
We have chosen these three companies on the basis of their financial performance, they are also
listed on all major stock exchanges of the country.
After researching, surveying, observing, collection of data, we have arrived at the written
analysis follows hereafter. As the requirement of the report, We have conducted a detailed study
of the analysis the financial statements and ratios.
On the basis of above information, We have arrived on specific recommendations from
strategic management‟s viewpoint. We have supported suggestions through strategic theories,
matrices and exhibits, present in the report.
The report includes the whole financial status of both the companies through which a
reader can get the financial strengths & weakness of both the organizations.
The fundamentals of the research is to build the reader‟s capability to evaluate the
financial data & information into projective manner as to compare the financial stability &
growth with each other in consequence either for enhancement & for decrement.
Pakistan currently has a per capita consumption of 120kg of cement, which is comparable
to that for India at 135kg per capita but substantially below the World Average 270kg and the
regional average of over 400kg for peers in Asia and over 600kg in the Middle East. Over the
years a number of tax policy and administrative measures have been introduced to attract
investment and facilitate growth of the cement industry. The Government has reduced central
excise duty (CED) on cement in the budget for 2011-12 in order to boost construction activity.

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In Pakistan APCMA plays a significant role in protecting the cement industry to the
Government and coordinating various activities in respect of formulation of Government policies
for the cement industry. Cement demand is significantly affected by the Public Sector
Development Program (PSDP), construction of dams, elevated and concrete roadways,
residential construction as well as exports.
Table of Content
Sr. Topic Page No.
Dedication 2
Acknowledgement 3
Abstract 4
1. Introduction cement industry 7
1.1 At the time of independence 7
1.1.1 Ayub Khan Era 7
1.1.2 Nationalization In Bhutto‟s Era 8
1.1.3 De-Nationalizationin Zia Ul Haq Era 8
1.1.4 Privatization In Nawaz Shariff‟s Era 9
1.1.5 General Musharaf Era 10
1.1.6 Historical development of cement industry 11
1.1.7 Economic development 11
1.2 World perspective of cement industry 12
1.2.1 Wto‟s regulation and its economic impact 13
1.2.2 Dumping 14
1.2.3 Subsidy 14
1.2.4 Countervailing duties ordinance, 2000 14
1.2.5 Agreement of subsidy and countervailing measures 15
1.2.6 Safeguard actions 15
1.2.7 Economic impact of wto on cement industry Pakistan 16
1.2.8 Types of cement production worldwide 18
1.2.9 Types of cement available in international market 18
1.2.10 Types of cement in Pakistan 19
1.3 Total employment in Cement industry 23
1.4 Challenges and issues and their solutions 24
2. Market shares of firms in cement industry 30
Profile of selected firms 31
2.1 Poineer cement limited 31

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2.2 Cherat cement limited 33
2.3 Kohat cement limited 35
2.4 Trade of union of cement industry 39
3. Financial analysis 41
3.1 Data collection 45
3.2 Ratio analysis 47
3.3 Data collection procedures 48
3.4 Analysis procedures 48
3.5 Tool of analysis 50
4. Data analysis, Result/Findind and discussion 51
4.1 Kohat cement company 51
4.1.1 Balance sheet (horizontal analysis) 51
4.1.2 Balance sheet (vertical analysis) 55
4.1.3 Income statement (horizontal analysis) 59
4.1.4 Income statement (vertical analysis) 62
4.2 Pioneer cement limited 65
4.2.1 Balance sheet (horizontal analysis) 68
4.2.2 Balance sheet (vertical analysis) 74
4.2.3 Income statement (vertical analysis) 76
4.2.4 Income statement (horizontal analysis) 82
4.3 Ratio analysis 86
4.3.1 Liquidity ratio 86
4.3.2 Current ratio 86
4.3.3 Quick ratio 89
4.3.4 Turnover ratio 92
4.3.5 Debtors turnover ratio 94
4.3.6 Total assets turnover ratio 96
4.3.7 Fixed turnover ratio 97
4.4.1 Profitability ratio 99
4.4.2 Gross profit ratio 99
4.4.3 Operating Profit Ratio 101
4.4.4 Return On assets 103
4.4.5 Return on equity ratio 105
4.4.6 Debt ratio 107
4.4.7 Debt service ratio 109
4.5 General ratio analysis 111
4.5.1 Probitability analysis 111
4.5.2 Liquidity analysis 112
4.5.3 Debt analysis 112
4.5.4 Assets 113
5 SWOT Analysis of Cement industry 114
5.1 Strengths 114
5.2 Weakness 116
5.3 Opportunities 117

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5.4 Threats 119
6 Conclusion 120
7 Recommodations 122
8 Referances 127
1. HISTORY OF THE CEMENT INDUSTRY
1.1 AT THE TIME OF INDEPENDENCE
The development of cement sector has made rapid strides, both in public and private sectors
during last two decades. The history of cement industry in Pakistan dates back to 1921 when the
first plant was established at Wah. Pakistan has come a long way since independence in 1947
when the country https://www.youtube.com/watch?v=Eh4yK1yQXcUy had inherited four
cement plants having total installed capacity of 0.5 million tons, all of which were controlled
from India. These units were located at Karachi, Rohri, Dandot and Wah. During the decade of
1948-58, the number of cement units increased to six.
1.1.1 AYUB KHAN’S ERA
During the Ayub era the economy started to grow and the construction activities underwent a
boom. In 1956 Pakistan Industrial Development Corporation (PIDC) established two plants at
Daudkel and Hyderabad and subsequently more plants were established in the private sector.
However these expansions that took place in 1956–66 could not keep pace with the economic
development and the country had to resort to imports of cement in 1976-77 and continued to do
so till 1994-95.

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Pakistan is fortunately rich in the deposits of limestone, clay and gypsum, which constitute basic
raw materials for manufacturing of cement. In spite of having abundant raw materials and rising
growth in demand of cement, only five cement factories were established during the initial thirty
years of independence, with aggregate capacity of 3.2 million tones.
Among these units one was established in Hyderabad (Sind) in the public sector. It was called
Zeal Pak and was set up in 1956. Another unit in the public sector was known as Maple Leaf
which was established in the province of Punjab in the same year. Three units were set up during
1965-66 in the private sector. These were Javedan in Sind, Gharibwal and Mustehkam in the
province of Punjab.
1.1.2 NATIONALIZATION IN BHUTTO’S ERA
After nationalization of industries in early seventies, cement industry remained under the control
of government till late seventies. During this period, growth in demand of cement was around 7
per cent per annum, whereas new capacities were not coming up to match with the demand.
Consequently, Pakistan had to import cement for a long period, which reached to a level of 1.3
million tones in the year 1981-82. Import of cement continued from 1971 to 1985. Its scarcity
also hampered the development process in the country.
During the period of Zulfiqar Ali Bhutto all the industrial units, including cement industry, were
nationalized, therefore, no new unit was set up during 1971-77. The industry was nationalized in
1972 and the State Cement Corporation of Pakistan (SCCP) was established following the
Economic Reforms Order, 1972, and was given the responsibility to manage the production of
cement in the country.
As a result of nationalization, a total of 10 cement units with an installed capacity of 2.8 million
tones per annum were transferred to the SCCP. Effective price control was also vested with the
SCCP and for a long time the industry operated under a regime of strict regulation and price
control. While the cement industry was working under state control, the SCCP established five
new units with an installed capacity of 1.8 million tones per annum.

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1.1.3 DE-NATIONALIZATION IN ZIA-UL-HAQ’S ERA
During the period of General Zia-ul-Haq, 1977-88, denationalization of industrial units boosted
the investments. Housing and construction industries picked up and the demand for cement
increased. Thus, the number of cement units increased from 9 to 23 and finally 24. After the
change in government in 1977, private sector was allowed to establish cement plants. As a result,
seven projects having a capacity of 2.54 million tons were installed in private sector and
simultaneously, State Cement Corporation of Pakistan also put four projects having a capacity of
1.6 million tons, enhancing the total capacity of the country to over 8.5 million tons by the end of
1990.
1.1.4 PRIVATIZATION IN NAWAZ SHARIFF’S ERA
During the regime of Nawaz Sharif the industry went through major transformation. The industry
was privatized in 1990 which led to setting up of new plants. The government embarked upon an
ambitious privatization programme and eight units were privatized. The units working under the
SCCP control are old and inefficient using 'wet process' whereas the units established in the
private sector are new, efficient and use 'dry process'. With the privatization of cement units after
1990, The SCCP lost its control over the supply of cement and controlled less than 25% of the
total installed capacity in the country which was shrinking with the establishment of more plants
in the private sector and expansion in the privatized units.
At that time there was an acute shortage of cement in the Northern areas of the country. In the
first half of nineties, Pakistan had to import cement which led to the increase in cement prices
exorbitantly making cement companies to earn very high profits. This tempted some of the
existing units like Cherat, Pakland, Dadabhoy, Ac Wah, D.G. Khan, Maple Leaf and Kohat to go
for expansion in their plants.
Simultaneously, 5 more new projects with aggregated capacity of 5 million tons came on the
stream. As such, production capacity went up to 16 million tons by the end of 2000. The five
new units in the private sector were Pioneer (Punjab) 1994, Lucky (NWFP) 1996, Askari
(NWFP) 1997, Kohat (Punjab) 1997 and Best Way (NWFP) 1998. Privatization and effective

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price decontrol in 1991-92 heralded a new era in which the industry has reached a level where
surplus production after meeting local demand is expected in 1997.
1.1.5 GENERAL MUSHARRAF’S ERA
In the year 1999-2000 the cement industry survived from its earlier crisis of excess production
and low demand and resultant under cutting and unhealthy competition. It came out of red
because of joint strategy to tailor production to the market requirements. This helped the industry
to achieve a price level which not only covered the cost of production but also left some margin
of profit to the manufacturers. This agreed sale price was also accepted by the consumers.
The industry is again on the war-path against its own members. The dispute arose in Sept. 2000
when the government levied sales tax on the cement industry. Immediately after, however, the
government allowed 4 cement units established in the NWFP and Baluchistan extension from
payment of sales tax till June 2001.
The remaining 19 cement plants operating in Punjab and Sind who were bound to pay sale tax
amounting to about Rs. 20 per bag, could not compete with the four privileged one. These four
units Best Way, AWT Cement, Lucky Cement were allowed sales tax exemption under an SR0
issued between 1992 and 96 allowing tax exemption to all industrial units set up in NWFP &
Baluchistan. The present government allowed this exemption to only cement industries located
in these areas till June 2001.

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1.1.6 HISTORICAL DEVELOPMENT OF CEMENT INDUSTRY
 1947(Bad era): Only four units were producing grey cement in the country.
 1948-58: The number of cement units increased to six
 1958-68(Boom era/Ayub era): The cement units increased from 6-9
 1971-77(Nationalization/Bhutto era): No new units were setup
 1977-78(Denationalization): Cement units increased from 9 to 23
 90‟s(Dark era /Cement sector had to bear massive losses): 24 units
 Current scenario: 29 players are
operating
Table: 1 Historical development of cement industry
1.1.7 ECONOMIC DEVELOPMENT
The contribution of cement industry in the economic development can be measured by the value
addition of the cement industry to Gross Domestic Product of the country, creation of
employment opportunities, receipts from exports, tax payments, and the entire revenue generated
by the cement industry. The cement industry of Pakistan is one of the major industries of
Pakistan which have an enormous impact on the economic development of the country. The
contribution of cement industry is very effective not for only the manufacturing sector but also
for the entire economic development of Pakistan. The cement industry of Pakistan was once a
very small industry but it rapidly grew with the passage of time and finally it entered in the
export market. The cement industry contributes in the Gross Domestic Product (GDP), it creates
employment opportunities for thousands of people and it creates huge revenue for the
government in the form of taxes. It directly and indirectly contributes in the economic
development of Pakistan. It also makes contribution in the development of its allies industries

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especially the transportation sector is largely benefitted by it. The cement industry of Pakistan
attracted not only domestic investors but also foreign investors.
Figure 1
1.2 WORLD PERSPECTIVE OF CEMENT INDUSTRY
The international cement market is one of the least regulated markets on an international scale
whereas international cement trade has been growing intensively in recent decades. While the
amount of cement traded has increased, the percentage of internationally traded cement to total
cement production remains in single percent digits (5% to 7%). This means that most of cement
production exists to satisfy local consumption.
The problem this research will explore is identifying the most critical factors required to regulate
the growing market for international cement. Initial fact finding suggests that cement production
has recently been concentrating in the developing world (Miller, 2009). Such increasing
production of a capital-intensive (labor-saving) industry means that the impact the cement
market is having on the local labor markets is low compared to the impact it is having on the
capital market. Even though economic rents are considerable, cement is one of the most polluting
industries: 5% of the world‟s total emission of greenhouse gases is caused by cement production
(Loreti, 2015). This means that the developing world is increasingly baring the environmental
burden.

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Any solution suggested to the problems caused by the cement industry has to be composed of
three crucial elements. First, it must be implemented on an international scale. Local solutions
cannot solve the problem. The environmental impact of burning fuel necessary to produce
cement in China, if uncontrolled, will lead to global warming because of the emission of
greenhouse gases caused by the burning. The impact of global warming however is not limited to
China alone but may have an extended impact on countries even as far away as South Africa.
Second, the developed world has to create an incentives system that does not shift all production
to areas that are less regulated. While it is desirable for European and North American countries
to achieve green economies by closing down cement factories or enacting strict environmental
regulations, it is a major problem when such cement production is only shifted to countries with
looser environmental regulations (Miller, 2009). Third, corruption and hidden transaction costs
within developing nations exacerbate the problem. Whether it is the lack of strong environmental
regulations or weakly implemented competition laws, developing countries can be a haven for
poor environmental control and strong cartels especially in a very high fixed cost industry such
as cement (Mishkin, 2014 and Selim, 2009). Any solution that does not contain these three
elements should be considered lacking.
The growing production of cement calls on all countries and NGOs to begin seriously
considering a global policy to solve the problems posed by this industry. An effective global
policy can only be found if different actors cooperate. Being a capital-intensive industry that
utilizes scarce resources to operate (such as fuel) means that governments need to keep some sort
of an eye on production. Even though cement is locally produced the impact of the production is
global and the presence of lucrative opportunities to shift production sites makes the industry an
attractive one for governmental regulation. It is this interaction between the economic
(efficiency) and the political (institutional) that calls for finding a framework for evaluating
solutions that takes into account both ends.
1.2.1 WTO’S REGULATIONS AND ITS ECONOMIC IMPACT
Pakistan was one of the WTO‟s members when it was established in 1995. There is a
considerable impact of WTO on all sectors of Pakistan's economy. Pakistan‟s domestic industry
faces problems of increased imports and unfair practices under the global trade regime. Pakistan
through national legislation has come up with anti-dumping laws against dumping,

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countervailing duties laws against subsidies and safeguard action laws against surge of imports
in order to protect its domestic industry.
1.2.2 DUMPING
A product is considered dumped if the export price is less than the price charged for the like
product in the exporting country. Thus, one identifies dumping simply by comparing prices in
two markets.
Anti-Dumping Duties Ordinance 2000
Pakistan through Anti-dumping Ordinance, 2000 has repealed the Import of Goods Ordinance,
1983 and has given effect to WTO provisions relating to imposition of anti-dumping duties in
order to offset dumping. This Ordinance has also provided a framework for investigation and
determination of dumping and injury in respect of goods imported into Pakistan. The rules made
by Pakistan in this regard are Anti-Dumping Duties Rules, 2001.
Agreement on Anti-Dumping
The Agreement on Anti-dumping elaborates the provisions of Article VI of GATT 1994. The
GATT provides the right to the contracting parties to apply anti-dumping measures i.e. measures
against imports of a product at an export price below its “normal value”, if such dumped imports
caused injury to a domestic industry in the territory of the import contracting party.
1.2.3 SUBSIDY
Subsidy contains three basic elements:
 A financial contribution
 By a government or any public body within territory of a WTO Member
 Which confers a benefit?
All three of these elements must be satisfied in order for a subsidy to exist
1.2.4 COUNTERVAILING DUTIES ORDINANCES, 2000

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The basic aim of these provisions is either to prohibit or to restrain the use of subsidies by a
WTO Member that affects the interests of other Members. However, the rules permit the
importing country to take remedial measures, which could take the form of countervailing duties
on subsidized imports. Pakistan through Countervailing Duties Ordinance, 2000 has given effect
to WTO provisions relating to imposition of countervailing duties to offset such subsidies. This
has been done by providing a framework for investigation and determination of such subsidies
and injury in respect of goods imported into Pakistan. The rules made by Pakistan in this regard
are Countervailing Duties Rules, 2002.
1.2.5 AGREEMENT ON SUBSIDIES AND COUNTERVAILING MEASURES
The Uruguay Round Agreement on Subsidies and Countervailing Measures (SCM) lays down
rules on the subsidies for industrial products and on countervailing duties to counteract the
effects of subsidies. Subsidies are divided into three categories; prohibited subsidies, actionable
subsidies and non-actionable subsidies. Export subsidies and those contingents on the use of
domestic as opposed to imported products are categorized as prohibited subsidies. However,
least developed countries (LDC‟s) and developing countries with per capita income of less than $
1,000 are exempt from this restriction and may use prohibited subsidies. Non-actionable
subsidies include those for research and development, for backward regions and for
environmental regions. All the remaining subsidies are actionable subsidies.
1.2.6 SAFEGUARD ACTIONS
Safeguard measures are defined as "emergency" actions with respect to increased imports of
particular products, where such imports have caused or threaten to cause serious injury to the
importing Member's domestic industry.
Safeguard Measures Ordinance of 2002
 Pakistan through Safeguard Measures Ordinance, 2002 has given effect to the provisions
of Article XIX of the General Agreement on Tariffs and Trade, 1994, and to the WTO
Agreement on Safeguards for the imposition of safeguard measures. This has been done
by providing a framework for investigation and determination of serious injury or threat

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of serious injury caused by products imported into Pakistan. The rules made by Pakistan
in this regard are Safeguard Measures Rules, 2003.
Agreement on Safeguards
 Whereas the agreements on anti-dumping and SCM provide remedies for domestic
producers if they are hurt by unfair imports, the Agreement on Safeguards provides
remedies for domestic producers injured by fairly traded imports. It allows the use of
temporary protective measures but sets rules to guard against the abuse of such measures.
Regulations of the other international treaties
 There was increasing pressure from international governing bodies, such as the ILO and
WTO and other organizations like the International Confederation of Free Trade Unions
(ICFTU), with regard to the issues of labour rights, the role of unions and labour
standards involving the Therefore, it is crucial for both the international community and
the Pakistanis people to seek a more informed perspective on the current situation and the
future engagement of the Pakistanis economy into the global economic system, as well as
Pakistan‟s future economic and political reforms.
1.2.7 ECONOMIC IMPACT OF WTO ON CEMENT INDUSTRY PAKISTAN
Pakistan follow must follow the role of WTO. Before WTO agreement there was a serious
disconnect between the needs of the industry and the availability of special skills suited to the
needs of the industry. There was no data available so that the industry could match the needs and
the skills available in the domestic manpower market. It was also pointed out that the existing
number of technical and vocational centers had been languishing for the past several years.
These were usually run and managed by the Provincial the Governments while the provincial the
Governments do not.

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Industries that have recently developed and have become capable of competing with foreign
firms are more likely to meet the challenge of increased Changing patterns of HRM in Pakistan
trade and undergo restructuring to consolidate their businesses and become more competitive.
The demand of Pakistani cement is expected to continue to grow at the rate of 20 per cent for
about Four years to come. It may then follow traditional growth rate of seven per cent per year.
Announcement of major dams will dramatically increase this demand. Deregulation after
accession of Pakistan to WTO is expected to open the window of competition from cheaper
markets. There may be no tariff after this deregulation on import of cement allowing its entry
into Pakistan from cheaper market at lower rate. Cement from cheaper markets may also block
Pakistan‟s export of cement to its neighboring countries.
WTO regime will have no negative impact on the operation of the cement sector. On the other
hand it is felt that WTO might offer opportunities for exporting cement/clinker to the
neighboring countries.
Pakistan is a signatory to the WTO and cannot keep its eyes shut to the realities. What Pakistan
needs to do is to make the best of a given situation and try and develop a strategy to get
maximum benefit from globalization and WTO.
• The local industry now cannot be protected with the use of quotas or very high tariffs.
The government needs to build a very strong network of Anti-dumping and countervailing duties
to protect the local industry against the onslaught of unfair foreign competition.
• The developing countries including Pakistan face problems in hiring law firms to advice
on WTO related issues, which is a constraining factor in seeking relief from Dispute Settlement
Body (DSU). This underscores the need to train local lawyers with WTO expertise.
• Our survival lies in enhancing credibility through adoption of international quality
standards, but Pakistan has a long way to go in obtaining certification of ISO‟s and other

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standards. A proper policy is required in this direction which should involve both public and
private quarters to address this issue.
• Special policies are needed for sectors which are working under deletion program such as
automobiles and engineering goods so that they could become efficient in shortest possible time.
1.2.8 TYPES OF CEMENT PRODUCED WORLDWIDE
Cements that are used for construction are divided into two main categories based on cement
properties, hydraulic or non-hydraulic. Although only certain types of cement are commonly
utilized today, there are several different types of cement that can be created. Various types of
cement are possible by blending different proportions of gypsum, clinker, and other additives
together.
Non-Hydraulic Cement
Non-hydraulic cement is cement which cannot harden while in contact with water, as compared
to hydraulic cement which can. When non-hydraulic cement is utilized in construction, it must be
kept dry so that it will hold the structure. Due to the difficulties related with waiting long periods
for drying, non-hydraulic cement is rarely used in current market.
Hydraulic Cement
Hydraulic cements are cements that have the ability to set and harden after being combined with
water. Hydraulic cement is made mainly from limestone, certain clay minerals, and gypsum,
which are burned together in a high temperature. Hydraulic cement is the main cement utilized in
modern day construction.
1.3 TYPES OF CEMENT AVAILABLE IN INTERNATIONAL MARKET
1. Portland cement
2. Portland cement blend
3. Portland Blast furnace Cement
4. Portland Fly ash Cement
5. Portland Pozzolan Cement
6. Portland Silica Fume cement

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7. Masonry Cement
8. Expansive Cement
9. White blended cement
10. Colored cement
11. Very finely ground cement
12. Pozzolan-lime cement
13. Slag-lime cement
14. Super sulfated cements
15. Calcium aluminate cements
16. Calcium sulfoaluminate cements
17. Natural Cements
18. Geopolymer cements
19. Sulphate resistance cement
1.2.8.1 TYPES OF CEMENT PRODUCED IN PAKISTAN
Cement industry is indeed a highly important segment of industrial sector that plays a vital role in the
socio-economic development. Since cement is a specialized product, requiring sophisticated
infrastructure and production location. Mostly of the cement companies in Pakistan are located
near mountainous regions that are rich in clay, iron and mineral capacity. Cement industries in
Pakistan are currently operating at their maximum capacity due to the boom in commercial and
industrial construction within Pakistan. Although a large number of cement varieties are
produced in different countries of the world, Pakistan has been producing following types of
cement.
1. Ordinary Portland cement
2. Portland Blast Furnace Slag Cement
3. Sulphate Resisting Cement
4. White Cement

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1. Portland cement
It is the most popular type of cement, formerly known as Ordinary Portland
Cement (OPC), CEM I. It is the cement that has been most commonly used
throughout the world in building works.
Figure 2: OPC
2. Portland blast furnace slag cement
The Slag Cement of the Portland Blast Furnace is a type of cement that is
hydraulic and is manufactured in a blast furnace. The manufacture of
Portland Blast Furnace Slag Cement requires 75% less energy than that for
the production of the Portland cement. The low cost of production of
Portland Blast Furnace Slag Cement makes it cheaper than Portland cement.
It is for this reason that in recent years, the sales of Portland Blast Furnace
Slag Cement have increased. Figure 3: Slag Cement
3. Sulphate Resistance
SRPC is a special type of CEM I cement. However, it is not the only
sulphate-resisting cement available; various factory-made composite cements
are also sulphate-resisting. SRC is specially used in sea and coastal areas as
it offers greater resistance to chemical attack from sulphate and dissolved
salts and alkalies present in sea and saline waters.
Figure 4: SRPC
4. White Cement

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White Portland cement is a unique kind of Portland cement. It is different from ordinary Portland
cement. It is of white color, instead of a dull grey one. White cement is frequently chosen by
architects for use in white, off-white or coloured concretes that will be exposed, inside or outside
buildings, to the public's gaze.
Figure 5: White Cement
CEMENT INDUSTRY CONTRIBUTION IN GDP
 Cement contribution in GDP is 3.5%
 Exported last year 700 million USD (47% increaed)
 Pakistan has ranked 5th position in world exporter of cement
 Total companies 23, 4 forigen and 3 controlled by armed forces 19 are listed in stock
exchange
Comparison of the industrial sector with other countries
Demands Growth VS GDP Growth:
 GDP growth is used as yardstick for measuring demand growth of cement. In its
simplest form, the theory suggests, a strong positive correlation between GDP
0%
10%
20%
30%
contribution
of industries
GDP growth
Pakistan
India
Bandladesh
srilanka

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growth rate and Cement demand growth. High GDP growth leads to high cement
consumption. The reverse is true when GDP growth declines. It is believed that
cement consumption increases along with the rise in per capita income. Cement
consumption is also reflective of the economic development achieved by a
country.
Developments in the sector:
Expansion of existing capacities is in the shape of plant up gradation or setting up new
production lines, is talk of the town these days. With its roots fixed on the ground of prospective
demand growth in the years to come, expansion is what almost all cement manufacturers are
pursuing. Annual production capacity has reached 25 million tons by June 2013 against
capacity of 18.6m tons per annum in June 2012. If all the expansion plans are materializes,
capacity is likely to touch 28m tons by the June 2014 & subsequently it would reach 35.7m tons
in 2015. Most of the new projects or expansions are concentrated in northern region, which
already captures around 77% capacity in total industry. Against 14.3m tons per annum current
capacity out of total capacity, northern region‟s capacity may jump sharply to 20.7m tons per
annum by 2013. While, capacity of south region is expected to reach 7.0 tons per annum against
current capacity which is 4.25m tons per annum.

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The bothersome fact lies on the other side of coin, that is, demand. A Big question that kills all
the joy of expansion is “Will there be enough demand in the country to absorb the excess
supply?” or putting it in other words “Will the recent spurt in cement demand will be sustained
over the period of time?”
Current stance of the cement sector:
After completion of major expansion plans in Pakistan in 2014, there would be a surplus
to export in regional markets particularly to China, India and Afghanistan, however in the
same period Iran would also be able to approach vigorously these markets as its most of
the cement plant will start to come online.
Iran would get benefit in terms of price as cement prices in Iran is among the cheapest in
the world as the price of cement in Iran remained in range of $20-$25 per ton. On the
other hand it is expected that being the US ally, Pakistan would get most of the favor in
order to keep its market share in these markets given the fact that all the construction
activities in Iraq and Afghanistan would be taken by US.
1.3 TOTAL EMPLOYMENT

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The company in cement sector takes their people as one of the most valuable assets, they view their
human resource as the competitive advantage therefore they ensure that they employ only those people
who are self-motivated and professionally qualified. They also take into consideration that their business
goal are realized through such diverse work force providing equal opportunities without any
discrimination on the basis of cast, creed, gender and religion.
Cement industry is also serving the nation by providing job opportunities and presently more
than 150,000 persons are employed directly or indirectly by the industry.
1.4 CHALLENGES AND ISSUES AND THEIR SOLUTIONS
Key issues in the economy that impact cement industry
 The Pakistani currency has been depreciating. This has caused a greater problem to the
industries who have taken loans in the foreign exchange currencies.

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 According to the federal bureau of statistics, Pakistan hit record inflation during 2015.
The SBP, in order to control the inflation, tightened the monetary policies by increasing
the interest rates. The increase in the interest rates made the industries pay more interest
against the long term loans that they had borrowed at lower interest rates.
 The investors in the cement sector are well aware of the importance of technology in the
present day and they realize the returns they can get using advance technologies. The
cement factories such as D.G. cement, lucky cement and may other factories is using
latest technologies. However, the old cement industries such as maple leaf are now
shifting towards the new technology as well.
 Main component of the cost is fuel. Pakistan's cement industry has converted their plants
to coal considering it to be the cheapest fuel, but its price in international markets has
gone up by more than 300 percent in the last one year, which directly relate increasing
the cost of Production.
Certain factors that affect the growth of cement industry are as follows:
 Slow construction activities in the country badly upsets domestic sale of cement.
 Higher GDP growth has positive impact on cement demand.
 Reconstruction work in result of earthquake boosts construction material demand
 Four large Dams (Bhasha Daimer Dam, Munda Dam, Akhori Dam and Neelum Jhelum)
are announced by government. Construction of these dams will generate demand of 3.7
million tons.
Proposed solution
 Federal Excise Duty and GST over Cement industry should be reduced. It‟s being treated
as a luxury item for the purpose of taxes and duties.
 The local cement industry faces high fuel costs. The government has given incentives in
order to facilitate their conversion to coal, which is widely available in the country.
 High Freight charges should be reduced as it‟s affecting negatively the domestic demand
of cement.
 Government of Pakistan should stress on factors that increase the GDP
 Government of Pakistan should do its upmost to control the instability in the country.

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 Government of Pakistan should provide infrastructure to the cement industry to setup
new factories
 Government of Pakistan should provide incentives to the cement industry so that they can
import new plants.
Impact of political parties on the cement industry
 Low domestic cement demand in the country is due to the political uncertainty.
 The political stability in pakistan is at unrest. Due to this, the cement factories are facing
problems regarding the investments they have made.
 The stock market has shown sheer down fall since the political unrest. Although the
market share index showed improvement after the resignation of pervez musharraf on
18th of august. But still the failure to restore the judges on time and many other issues
has made the share index to slope downward once again.
Key hurdles in marketing
 Since cement is a specialized product, requiring sophisticated infrastructure and
production location. So, most of the cement industries in Pakistan are located near/within
mountainous regions that are rich in clay, iron and mineral capacity. Structure of Cement
industry in Pakistan is as such that there is not much substitutability to buyers. Which
shows that the Cross elasticity of demand is negligible.
 Consumers face a tough decision with regards to prefer which brand over which because
of the similar pricing of cement industry.
 A price war was witnessed which ended up with no conqueror. Similar apprehensions
exist for the future. Any hurdle in the growth of cement demand may force the sector into
the price war. Yet, we expect cement manufacturers to act wise and learn lesson from the
history. Any mistake, similar to the one made in the last decade, will again drive the
sector into the era where all are losers with no winner.

27
 Containers are used for transportation purposes and even trains when cement is required
urgently from north to south or vice versa. As for exports, ships are launched from ports
but the cost of transportation faced by firms is so high that at maximum they can reach
till South Africa for exports and the price gets out of budget when the ship reaches USA
 Not much of innovation is possible in this industry. Intense rivalry can make it difficult
for smaller firms to survive.
 Firms cannot compromise much on the prices. It is hardly possible for any firm to get an
edge due to price.
Proposed solution
 Measures should be taken to insure that the customers are not exploited by the cement
industry.
 Cement industry should enter into long term contracts with cement transporters to gain
discounts and seek reduced transport prices.
 Cement industry can enter in to contracts with international logistics transportation
companies such as Mersk to export cement to USA in huge volumes at low cost
 When the big companies are forming an association, small manufactures should be also
considered as otherwise they would go out of business.
Availability of finance
Cement plant is a highly capital intensive business which requires a lot of investment which only
a Giant company or Group can afford. In old times, when cement plants were established,
comparatively less investment was required. There were also banks, banker‟s equity etc that
provided loans easily. Now only self financing exists which a bank provides and they sees the
feasibility of the project.
A new plant should be established after wide market research in an industry where the capacity is
already in surplus. This could be possible only if production cost is targeted. The old cement
plants were not established keeping in mind the production cost. Nowadays about 70% cost
constitutes the energy cost. If a company focuses on lowering the energy cost, making efficient

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use of technologically advanced machinery then the production cost would apparently be low.
There is always a potential for such plants.
Types of loans provided to the industry
Short term loans:
Short term loans are obtained against the current assets of the company. When the company
requires a short term loan it sends a request for the loan to the bank. The banks or other
financiers put down their facilities in a term sheet against which they can provide the loan to the
company.
Long term Loans:
The long term loans are obtained against the fixed assets of the company. These assets must be
insured by the insurance company. This is the basic requirement for the bank. When the
company requires a huge amount of loan it contacts to the bank for the loan. The bank than
forms a group with other banks in order to arrange the amount. A finance agreement is signed by
both the parties and the loan is given under the agreed terms and conditions.
Trade issues
 Import policy regarding construction equipment is not reorganized.
 Trade policy does not facilitate contractors.
 Regulatory framework discourages international contractors/consultants.
 Shortage of Electricity or power break down is a major constraint as the frequent
restoring to load shedding is causing an adverse effect on the trade and industry.
 Duties on import of Fuel
 Strict procedures for registration of contractors by Pakistan Engineering Council (PEC).

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 Audit should play a positive role.
Proposed solutions
 Custom duty over the import of pet coke should be withdrawn as its‟ negatively affects
the cement industry.
Key human resource issues in cement industry
 Shortage of qualified and skilled manpower at all levels is an important issue.
 Another issue is lack of training facilities for the development of required human
resources.
 Human resource policies of clients, contractors and consultants need improvement.
 Fully skilled and semi skilled workers in search of opportunities have gone to the Middle
East and other foreign countries.
 Some contractors and consultants lack professional management.
 Inadequate research and development.
 Limit use of IT in industry.
Proposed solutions
 Availability of qualified and skilled manpower should be given priority by government
 The training facilities should be developed at fast track.
 Foreign and local experts should be hired to do the research and development.
 Proper workshops that are held under the supervision of experts so that the practical
knowledge is properly imparted to the labor.
 The cement industry can use reward and bonuses to increase the motivational and
performance level of the labor force.
 Better machinery and management should be used to become cost efficient and become
competitive.

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2. MARKET SHARE OF THE FIRMS IN CEMENT
INDUSTRY
The market share of the cement company‟s in Pakistan is as follows:
Figure 6: market share of cement in Pakistan
Cement Company Market Share (%)
Kohat cement 6
Maple leaf 7
Askari cement 11
DG cement 13
Bestway cement 12
Lucky cement 16

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Chart 1: market shares of firms in cement industry
PROFILES OF SELECTED CEMENT COMPANIES
There are three major players in the Cement industry of Pakistan Lucky Cement, D.G. Khan Cement and
best way cement. According to the market share of 2015 lucky Cement occupy 18%, D.G. Khan 13% and
Best way Cement 12%
2.1 PIONEER CEMENT LIMITED
PHILOSOPHY:
The Management of Pioneer Cement Limited is committed to maintaining this quality policy at
all levels of the company. For this, as well as to achieve our corporate objectives, we all shall
work as a team and pursue continuous improvement.
INCORPORATION:
Others 35

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Pioneer Cement Limited (PCL) was incorporated in Pakistan as a public company limited by
shares on February 09, 1986. Its shares are quoted on all stock exchanges in Pakistan. The
principal activity of the Company is manufacturing and sale of cement.
PAID-UP CAPITAL/EQUITY
Paid up Capital 199.5 million shares of Rs.
10/= each
1,995
Shareholders’ Equity 2,401
VISION AND MISSION
Pioneer Cement Limited is committed to make sustained efforts towards optimum utilization of
its resources through good corporate governance for serving the interests of all its stakeholders.
CORPORATE INFORMATION
Company Name PIONEER CEMENT COMPANY
LIMITED.
Legal Status Public Limited Company

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COMPANY’S PROFILE
BOARD OF DIRECTORS
Chairman
Mr. Manzoor Hayat Noon
Managing Director & CEO
Mr. Javed Ali Khan
Directors
Mr. Aly Khan
Mr. Nadir Rahman
Mr. William Gordon Rodgers
Mr. Wajahat A. Baqai (NBP)
Mr. Rafique Dawood (FDIB)
Mr. Cevdet DAL
Mr. Etrat Hussain Rizvi
Mr. Saleem Shahzada
AUDIT COMMITTEE
Chairman
Mr. Rafique Dawood (FDIB)
Members
Mr. Aly Khan
Mr. William Gordon Rodgers
Mr. Etrat Hussain Rizvi
Mr. Wajahat A. Baqai (NBP)
CHIEF FINANCIAL OFFICER
Mr. Muhammad Saleem
COMPANY SECRETARY
Syed Anwar Ali
CHIEF INTERNAL AUDITOR
Mr. Muhammad Zafar Qidwai
STATUTORY AUDITORS
Ford Rhodes Sidat Hyder & Co.
COST AUDITORS
Siddiqui & Co.
LEGAL ADVISORS
Hassan & Hassan
Sayeed & Sayeed
BANKS
The Bank of Punjab
National Bank of Pakistan
Bank Islami Pakistan Limited
Meezan Bank Limited
The Royal Bank of Scotland
Askari Commercial Bank Limited
Bank Al-Habib Limited
Habib Bank Limited
United Bank Limited

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2.2 CHERAT CEMENT
History:
Before 1981 there was an association who created MONOPOLY in the cement sector because of
no close competitor in such industry. So to break that association and to offer cement to The public
Cherat Cement factory was founded.
Cherat cement is not only one of the best qualities cements in Pakistan, but in the entire region
because of its natural favor "the limestone" which is one of the best quality reserve in the world.
Cherat Cement Company limited is one of the largest companies of Ghulam Faruque group. Cherat
Cement Company was incorporated at Karachi on May 25, 1981 as a public limited company and
the certificate of commencement of business was obtained from the register of joint stock
companies Karachi on July 8, 1998.
Land of about 2219 canals and 4 Marias were obtained on lease from the government of NWFP.
Mining concession over an area of 10378.54 acres was obtained from the government of NWFP.
The foundation stone of Cherat Cement Company was laid on 1st
January 1982 by the then
president of Pakistan General Zia Ul Haq. It is situated at the foothills of Cherat cement near
Lakarai village at distance of about 40 kilometer from Peshawar city. It started its production on
10n
January 1985 after its inauguration by the governor of NWFP Lt. Gen. Fazl-e-Haq. The plant
was built by a French firm named Creuot Loire to enterprises abbreviated as CLE. It was the first
cement factory in private sector. Due to its importance the government of NWFP built road and
power lines for the factory.
The factory had the capacity to produce 1460 tons of cement per day but after plant expansion in
1993-94 its production capacity has increased to 2400 tons per day.
The plant expansion was completed in October 1994. But the recent production of the factory is
3300 tons per day.

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Quality Policy:
We want Cherat Cement Company to be regarded by our customer and our employees as the best
and the most profitable organization in the market we serve.
We seek innovation and improvement in every part of our business, through a system of ideas,
suggestions, feedback and application.
Every member of Cherat Cement Company Limited continuously perceives quality improvement
through procedures, designed to provide the knowledge and skills needed to achieve the goal of
our quality policy in line with customer requirements and by adhering to applicable statutory and
regulatory requirements related to product.
The Company Slogan:
"BIND YOUR BRICKS"
ISO 9002 Certification:
SO 9002 is a quality assurance model made up of quality system requirements. This model applies
to the organizations that produce, install, and service products. ISO expects organizations to apply
this model, ad to meet these requirements by developing a quality system. Cherat Cement
Company is an ISO 9002 certified company and follows sections on management and contract
review requirements etc.
Expansion of the Plant:
The factory had the capacity to produce 1460 tons of cement per day but after plant expansion in
1993-94 its production capacity has increased to 2500 tons per day. The plant expansion was
completed in October 1994. Now the plant produces 3400 tons per day. And lucky cement is the
market leader because it produces 6000 tons per day.

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Board of Directors:
Muhammad Faruque Chairman
Mr. Azam Faruque Chief Executive
Mr. Akbarali Peshni Director
Mr. Muhammad Nawaz Tishni (NIT) Nominee Director
Mr. Iftikhar Ahmad Bashir (NIT) Nominee Director
Mr. Javid Anwar (NIT) Nominee Director
2.3 KOHAT CEMENT COMPANT LIMITED
HISTORY OF KCCL
KCCL was incorporated as a State Cement unit with an installed capacity of 800-
900 tons/day and the cost of installation was about 718,900 million. At start there
were 250 officers and 1000 workers for the operation of business. It is situated in
the southwest of the Kohat city near Babri Banda on the Rawalpindi road. Its
distance from the Kohat city is about 12 kms (Kilometers) and its distance from
the other cities of Pakistan is i.e. 64 kms from Peshawar, 142 kms from Bannu,
165 kms from Rawalpindi and Islamabad etc. Its total height above the sea level is
about 450 meters. The total area bound by the KCCL is about 164 acres i.e. 656
kanals and this enclosed area consists of the factory plant, hill, colony, hospital,
school, mosque, playground, hostel for single workers, club and community hall
for the refreshment of employees, railway siding and also the leading road to the
main road.

37
For the operation of business the first machinery was imported from Romania in
the month of April 1978 and in Pakistan only KCCL has the Romanian
machinery. KCCL was incorporated on 30th
April 1980 under the companies‟ act
1913 and now the act has changed to Companies Ordinance 1984. Lt. Gen. Saeed
Qadir, minister of production, on 30th
June 1983, performed the opening
ceremony. The first commercial production of the KCCL was started on 1st
October 1984.
As the total outlay of the company was 718,900 million and its registered
authorized capital was 200 million. In the early stages, the shares of worth 188
million were floated in the capital market. The first Board of Directors of the
KCCL were; MR. Zaheer Sajjad (Chairman), MR.M. Saleem (Director/ GM),
MR. Mushtaq Hussain (Director), MR. Ghulam Murtaza (Director) and MR. Fida
Hussain (Director). The first Secretary of the company was MR. Fazal Karim
(GM Finance). During the first year of inauguration KCCL earned a net profit of
3 million.
In early days, company faced the problems like: delay in the supply of equipment,
defective supply of equipment as well as problems with the technical services but
the Pakistani engineers and the management of those days overcome the problems
efficiently.
a- Privatization of KCCL
Being working under the State Cement Corporation of Pakistan, KCCL was
privatizing by the Privatization Commission of Pakistan after nine years i.e. it was
privatized on October 31st
1992 in the Government of Main Muhammad Nawaz
Sharif. Privatization was followed through an open auction.
Atta Muhammad Sheikh, who has a prominent name in the business society, made
the highest bid and purchased the 90 percent shares of the company,. The partial
amount of the bid was 520 million and 300 million were paid to the State Cement
Corporation of Pakistan and hence, the total amount of the bid was 820 million.

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The company started its operation under the new management team and showed a
great efficiency. However, company suffered the loss in 1993 because of large
amount deducted as taxes but the new management made the tremendous efforts
to overcome the loss.
b- KCCL Achievements after Privatization
After Privatization, the new management team performed a vital role in the
growth of the company. In present the authorized capital of the company has been
extended up to 1000 million and plans to increase the authorized capital to 1500
million by changing the Memorandum and Articles of Association of the
company to reflect the increase in the authorized share capital of the company.
c- Mission Statement
 Our customer with quality cement at competitive pricing
 Our share holders with good returns and sustainable growth
 Our employee with care and career development opportunities.
d- Vision Statement
 Be the best in the eyes of all stake holders
e- Company Background
Kohat Cement Company Limited (incorporated in 1980) is an ISO 9001-2015
certified company, listed on Stock Exchanges of Pakistan and engaged in
manufacturing of Grey and White Cements. Quality of our products is better than
approved British and Pakistan Standards.
Company Registration Number & National Tax Number
1: Company Registration Number CUIN: 0007693

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2: National Tax Number 1758919-3
Board of Directors
Mr. Aizaz Mansoor Sheikh Chief Executive
Mr. Nadeem Atta Sheikh Director
Mrs. Ghazala Amjad Director
Mr. Omer Aizaz Sheikh Director
Mr. Muhammad Atta Tanseer Sheikh Director
Membership of industry associations and trade bodies
1. APCMA (All Pakistan Cement Manufacturer Association)
2. LCCI (Lahore Chamber of Commerce and Industry)
3. KPCCI (Khyber Pakhtunkhwa Chamber of Commerce and Industry)
6. Employers Federation of Pakistan
2.3 TRADE UNION OF CEMENT INDUSTRY
All PAKISTAN CEMENT MANUFACTURERS ASSOCIATION (APCMA)
YEAR OF FORMATION
APCMA is the collective voice of all the cement manufacturers
of Pakistan. It is registered under Trade Organization
Ordinance 2014. It was established on 14th of September 1992
under the Companies Ordinance 1984.
Figure 7
LOCATION OF HEAD OFFICE AND PRINCIPAL OFFICES OF APCMA
location of head office and other office of APCMA
Offices  Lahore (Head office)
 Karachi
Figure 8

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KEY RESPONSIBILITIES OF APCMA
1. To create an understanding amongst the private sector cement manufacturers of Pakistan
for the following purpose :
a. To increase the production of cement
b. To improve the quality of cement produced and to increase exports
c. To avoid undercutting in the sales price
d. To create healthy circumstances for production and sales of cement.
2. To protect, safeguard and promote the interest of its members
3. To help coordination and ensuring co-operation amongst its members to attain primary
objectives.
4. To identify and strengthen industry‟s role in the economic development of the country
5. To help and solve all the problems either faced by the cement manufacturers as a whole
or by individual cement manufacturers
6. Provides up-to-date statistical data/information to the industry and other agencies
7. To make representations to the government or other authorities for and on the behalf of
cement manufacturers in general and the trade in particular
8. To convene when necessary conferences and seminars at such times and such places as
may be determined for the promotion of cement industry in Pakistan.
9. Focuses infrastructural problems (Rail, Coal, Power, etc) and suggests suitable measures
for their solution.
10. Interacts for Industry's problems with the Government and co-ordinates various activities
with other bodies.
REGULAR EVENTS OF APCMA
 Annual elections
The elections for the management and President are held every year in which 80%
participation of the members is mandatory.
 Annual General Meeting

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The General Meeting of the association is held annually at the head office of APCMA in
Karachi. The meeting is presided by the Chairman APCMA and upcoming issues , yearly
progress, The Announcement of final result of election of members of executive
committee and office bearers and Approval of annual audited accounts of APCMA.
FAILURE OF APCMA
Price war was started in 2013 which was resulted due to market saturation by major cement plant
expansion. DGKK was the first player to destabilize the established industry, set prices in order
to transfer its excess production capacity
On 21st
Feb, 2014 the govt. has given one week deadline to APCMA to bring down the
unjustified cement prices or face action including ban on export. The government of Pakistan
held a detailed inquiry and ordered All-Pakistan Cement Manufacturers Association (APCMA)
to increase production and reduce the price of cement to its original level.
APCMA Expected the yearly sale to grow by five per cent however total dispatches had
increased by an insufficient two per cent in 2015-09.
Competition authorities in Pakistan fined about $77 million on 20 cement companies found
guilty of operating as a cartel and raising prices under mutual agreement.
ACHIEVEMENTS OF APCMA
 Took measures to bring prices to normal levels on in 2013
 Suspend export of cement from the 6th
April 2013 to 30th
April 2013, which resulted in
the availability of additional 200,000 tons of cement in the domestic market
 Increased the capacity utilization from 86% to 92 % of total installed capacity, which
brought an additional 91,000 tons of cement every month.
Reduction in excise duty by Rs 10 per bag which enabled stability in cement prices this year
(2009)
3 FINANCIAL ANALYSIS
Financial Analysis is the summary of all transactions that have occurred over a particular period.

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Financial Analysis refers to the assessment of a business to deal with the planning, budgeting,
monitoring, forecasting, and improving of all financial details within an organization.
These indicate a firm's financial health and stability.
Two key financial statements are:
BALANCE SHEET
 A balance sheet or statement of financial position is a summary of the financial balances
of a sole proprietorship, a business partnership or a company. Assets, liabilities and
ownership equity are listed as of a specific date, such as the end of its financial year. A
balance sheet is often described as a "snapshot of a company's financial condition”. Of
the four basic financial statements, the balance sheet is the only statement which applies
to a single point in time of a business' calendar year.
 A standard company balance sheet has three parts: assets, liabilities and ownership
equity. The main categories of assets are usually listed first and typically in order of
liquidity. Assets are followed by the liabilities. The difference between the assets and the
liabilities is known as equity or the net assets or the net worth or capital of the company
and according to the accounting equation, net worth must equal assets minus liabilities.
INCOME STATEMENT
Income statement (also referred as profit and loss statement (P&L), statement of financial
performance, earnings statement, operating statement or statement of operations)
 Is a company's financial statement that indicates how the revenue (money received from
the sale of products and services before expenses are taken out, also known as the "top
line") is transformed into the net income (the result after all revenues and expenses have
been accounted for, also known as the "bottom line"). It displays the revenues recognized
for a specific period, and the cost and expenses charged against these revenues, including
write-offs (e.g., depreciation and amortization of various assets) and taxes.

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 The purpose of the income statement is to show managers and investors whether the
company made or lost money during the period being reported.
 The important thing to remember about an income statement is that it represents a period
of time. This contrasts with the balance sheet, which represents a single moment in time
Horizontal Analysis
The analysis is based on a year-to-year comparison of a firm's ratios,
Vertical Analysis
The comparison of Balance Sheet accounts either using ratios or not, to get useful information
and draw useful conclusions
RATIO ANALYSIS:
A comparison of relationship among account balances.
FINANCIAL RATIOS
Financial Ratios are helpful in analyzing the actual performance of the company compared to its
financial objectives. They also provide insights into the firm‟s performance compared to other
firms in the industry. Ratio simply means one number expressed in term of another. A ratio is a
statistical yardstick by means of which relationship between two or various figures can be
compared or measured. The term accounting ratio is used to describe significant relationship
between figures shown on a balance sheet, profit and loss account or in any other part of
accounting organization. Accounting ratio thus shows the relationship between the accounting
data.
ACCOUNTING RATIOS
The term "accounting ratios" is used to describe significant relationship between figures shown
on a balance sheet, in a profit and loss account, in a budgetary control system or in any other part
of accounting organization. Accounting ratios thus shows the relationship between accounting

44
data. Ratios can be found out by dividing one number by another number. Ratios show how one
number is related to another. It may be expressed in the form of co-efficient, percentage,
proportion, or rate.
ADVANTAGES OF RATIOS ANALYSIS
Ratio analysis is an important and age-old technique of financial analysis. The following are
some of the advantages of ratio analysis:
SIMPLIFIES FINANCIAL STATEMENTS
It simplifies the comprehension of financial statements. Ratios tell the whole story of changes in
the financial condition of the business.
INTER PERIOD COMPARISON
It provide data for inter period comparison.
FACILITATES INTER-FIRM COMPARISON
It provides data for inter-firm comparison. Ratios highlight the factors associated with successful
and unsuccessful firm. They also reveal strong firms and weak firms, overvalued and
undervalued firms.
HELPS IN PLANNING
It helps in planning and forecasting. Ratios can assist management, in its basic functions of
forecasting. Planning, co-ordination, control and communications.

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MAKES INTER-FIRM COMPARISON POSSIBLE
Ratios analysis also makes possible comparison of the performance of different divisions of the
firm. The ratios are helpful in deciding about their efficiency or otherwise in the past and likely
performance in the future.
HELP IN INVESTMENT DECISIONS
It helps in investment decisions in the case of investors and lending decisions in the case of bankers etc
3.1 DATA.
Three cement industries for their comparative financial analysis (Inter firm &
inter period Analysis). We have collected the annual reports of our respective companies for
five years (2011-2015) .The companies are as follows:
 Pioneer Cement Ltd.
 Kohat Cement Ltd.
 Cherat Cement Ltd.
PROBLEM STATEMENT
Analysis will be made for Balance Sheet and Profit & loss A/c .the following financial statement
analysis and ratio analysis will also be analyzed.
Trend analysis (Horizontal Analysis).
Common size statement (Vertical Analysis)
RATIO ANALYSIS
 Liquidity ratios.
 Long term Liquidity / Long term Debt paying ability.
 Activity ratios / Asset turnover ratios / Efficiency ratios.

46
 Profitability ratios.
 Financial leverage ratios.
 Dividend policy ratios
 Comparison will be made on the entire above ratio to find how good the business of the
company is going.
PURPOSE OF STUDY
The purpose of the this research report is to extract the most out of the financial performance of
the Cement Industry by comparing the performance of the surveying units (Pioneer Cement Co.
Ltd.Comparison with Kohat & Cherat).
Pioneer Cement comparative analysis will be made by both inter period and inter firm analysis is
comparison with kohat Cement & Cherat Cement.
The main objective of this research is to find out the financially analysis of cement Industry of
Pakistan and also the current position of the cement industry in comparison of highly developed
and automated cement industry of the world and suggest the improvements needed to reach at
the same level, in term of trading process, trading volume and automation as well in term of
recognition as other the cement Industry have. Financial literacy for the business students is the
secondary purpose of this report especially for those students who don‟t select course related to
the finance.
RESEARCH OBJECTIVES
The objective of this study is to analyze the financial performance of the companies based on the
financial ratio during the period of 2011 to 2015.
Other objectives of this research report is to give the better investment opportunities to the
investors as well as to give the opportunity to the students to learn and have some knowledge
about the financial & comparative analysis of the industries.

47
LIMITATIONS OF REPORT
There are many performance measurements using financial ratio analysis. There might be
difficult to use all the measure. This study will select a certain financial ratio only. So, different
performance measurement will give different result.
This study based on the data collected through annual report, there could be some error in the
data sources, which could make the result not accurate.
This study limited to Five years research period from 2011 to 2015 for the ratio analysis in order
to determine the analysis and conclusion.
This research report is only the comparison of financial performance of two units of the Cement
Industry (i.e. Pioneer Cement compare with Kohat & Cherat.) and not the analysis of Cement
Industry as a whole.
METHODOLOGY:
This study used a comparative analysis (horizontal analysis) as a methodology because it is most
suitable and easy to interpret and compare the performance of this companion‟s. I will begin by
looking at the comparative ratios of the company for a Five -Years period by using trend
analysis.
Trend Analysis (Horizental) & ( Common size statement or Vertical)
Ratio Analysis.
3.2 RATIO ANALYSIS
A comparison of relationship among account balances. The term accounting ratio is used to
describe significant relationship between figures shown on a balance sheet, profit and loss
account or in any other part of accounting organization.
1. Profitability

48
It is ability to earn income and sustain growth in both short-term and long-term. A company's
degree of profitability is usually based on the income statement, which reports on the company's
results of operations;
2. Solvency
Its ability to pay its obligation to creditors and other third parties in the long-term;
3. Liquidity
Its ability to maintain positive cash flow, while satisfying immediate obligations;
4. Stability
The firm's ability to remain in business in the long run, without having to sustain significant
losses in the conduct of its business. Assessing a company's stability requires the use of both the
income statement and the balance sheet, as well as other financial and non-financial indicators
3.3. DATA COLLECTION PROCEDURES
The data has been collected from the annual report of selected company from the web site of the
respective company. Financial statement in the annual report will be used as a main source for
financial ratio analysis. For this study, the financial statement for three years (2011 to 2015) will
be used to get the result.
I choose Pioneer Cement comparative analysis with kohat & Cherat Cement.
Data has been collected from annual report (Balance Sheet & Income Statement) of five years
2011 to 2015 will be used to get the result.
3.4. ANALYSIS PROCEDURES
The financial ratio will be used in the analysis of the performance for the companies. The
selected company will be tested on the Trend Analysis / Vertical Analysis , profitability, liquidity
and solvency; certain financial ratio will be used such as;

49
Test of profitability
Return on Assets (ROA)
Return on Equity (ROE)
Profit margin
Earnings per share (EPS)
The test profitability ratios as its self described which include that how a company or an
organization can get its profitability factor enhance which influenced by its return on assets;
equity; margin & earning per share. The whole mechanism directly proportional to the
capability of firm or organization.
Test of liquidity
Current ratio
Quick/ acid test ratio
The test liquidity ratio defines that how quickly a firm or an organization transform its assets i.e.
cash securities; inventory & others into the form of cash its also enable the decision maker to
make corrective & proactive decisions which impact as increment in profitability of the
organization or firm.
Assets Turnover Ratio / Efficiency Ratio
Receivable Turn Over
Inventory Turn Over

50
The asset turnover ratio also known as efficiency ratio, the main emphasize in both the ratio on
the capability of how the company receivable convert quickly from the suppliers & the inventory
in similar way.
Financial Leverage Ratio
Debt-equity ratio
Debt-assets ratio
Times Interest Earned
The financial leverage ratios including debt-equity to asset & to time interest earned as a part
from those it‟s essential to conclude the financial stability of the organization which might be
essential for the company‟s whole structure including production, overhauling; forecasting &
utilizing the parameters into growth & corrective measures.
Dividend Policy Ratio
Dividend Yield
Payout Ratio
3.5 TOOLS OF ANALYSIS
PERCENTAGE ANALYSIS
Tools Of Analysis
Percentage Analysis Ratio Analysis

51
RATIO ANALYSIS
4 DATA ANALYSIS , RESULTS / FINDINGS AND DISCUSSIONS.
4.1 KOHAT CEMENT COMPANY LTD
A longtime leader in the cement manufacturing industry, Kohat Cement Company,
headquartered in Islamabad, operates a cement plant at Jhang Bahtar, Tehsil Fateh Jang, District
Attock in the province of Punjab. The Company has a strong and longstanding tradition of
service, reliability, and quality that reaches back more than 11 years. Sponsored by Kohat
Foundation, the Company was incorporated in Rawalpindi in 1992.
Horizontal Analysis Trend Analysis Vertical Analysis
Profitablility
Ratios
• Gross Profit
Ratio
• Operating Profit
Ratio
• Return On
Equity
• Return On
Assets
Liquidity Ratios
• Current Ratio
• Quick(Acid-
Test) Ratio
Efficiency Ratios
• Recievable
Turnover
Ratio
• Turnover
Days
• Total Asset
Turnover
Ratio
Debt Ratios
• Debt-To-Equity
Ratio
• Interest Coverage
Ratio

52
4.1.1 BALANCE SHEET (HORIZONTAL ANALYSIS)
Formula
Trend Analysis (Horizontally)= 100X
BaseYear
rCurrentYea
Trend Analysis (Horizontally= %15.204100
574460
1172765
X
Kohat Cement Company Limited
Balance Sheet (Trend Analysis)
As on December….. RS(000)
2011 2012 2013 2014 2015
CURRENT ASSETS 100.00% 204.15% 274.93% 340.06% 921.58%
Cash and bank balances 100.00% 306.01% 430.06% 214.69% 1919.91%
Deposit accounts 100.00% 407.60% 580.74% 293.17% 2733.41%
Current accounts 100.00% 121.17% 230.95% 94.01% 126.79%
Collection accounts 100.00% 43.97% 0.00% 0.00% 0.00%
Cash in hand 100.00% 485.19% 398.15% 329.63% 479.63%
Advances, Deposits, prepayments and
other receivables: 100.00% 62.57% 95.59% 1167.06% 469.63%
To suppliers 100.00% 53.31% 92.59% 2395.69% 45.59%
To employees 100.00% 174.39% 365.03% 138.31% 550.78%
Due from associated undertaking –
unsecured 100.00% 99.82% 283.05% 0.00% 0.00%
Deposits 100.00% 113.18% 142.04% 136.71% 436.94%
Prepayments 100.00% 40.68% 93.69% 29.46% 37.39%

53
Excise duty 100.00% 30.84% 0.00% 0.00% 0.00%
Advance tax –net 100.00% 175.82% 166.06% 295.30%
Sales tax refundable –net 100.00% 0.00% 0.00% 0.00% 2191.81%
Derivative foreign currency options used as
hedging instrument 100.00%
Interest accrued 100.00% 46.07% 251.77% 233.43% 681.75%
Prepaid arrangement fee for loans 100.00% 678.82%
Margin on letters of credit 100.00%
Other receivables- Considered goods 100.00% 1276.74% 439.69% 323.10% 1113.02%
Others 100.00% 0.00% 0.00% 66.72% 15.09%
TRADE DEBTS 100.00% 239.41% 56.88% 43.67% 60.12%
Unsecured 100.00% 104.98% 113.46% 67.62% 20.34%
Considered goods 100.00% 105.34% 114.41% 34.89% 0.00%
Considered doubtful 100.00% 100.00% 100.00% 532.74% 309.38%
Secure-considered goods 100.00% 371.96% 0.00% 52.34% 119.55%
Less: Provision for doubtful debts 100.00% 100.00% 100.00% 532.74% 309.38%
STOCK IN TRADE 100.00% 90.80% 235.54% 297.58% 373.52%
Raw and packing material 100.00% 121.32% 184.00% 157.19% 205.41%
Work in process 100.00% 41.87% 337.42% 415.05% 549.44%
Finished goods 100.00% 138.80% 125.74% 237.21% 248.67%
STORES, SPARES AND LOOSE
TOOLS 100.00% 182.60% 248.68% 237.47% 459.77%
Stores 100.00% 149.83% 276.30% 86.30% 578.20%
Spares 100.00% 206.65% 236.79% 333.02% 404.46%
Loose tools 100.00% 114.73% 168.79% 175.80% 188.62%
DEFERRED TAX ASSETS – NET 100.00% 59.14% 0.00% 0.00% 0.00%

54
LONG TERM DEPOSITS 100.00% 127.35% 127.35% 127.35% 127.35%
Islamabad Electric Supply Company
Limited 100.00% 100.00% 100.00% 100.00% 100.00%
Sui Northern Gas Pipelines Limited 100.00% 166.74% 166.74% 166.74% 166.74%
LONG TERM ADVANCES – Considered
goods 100.00% 100.00% 90.00% 80.00%
Sui Northern Gas Pipelines Limited 100.00% 90.00%
Less: Amount receivables within 12 months
shown under current assets 100.00% 100.00%
FIXED ASSETS – Tangible: 100.00% 98.50% 96.49% 92.88% 150.27%
Property, Plant and equipment 100.00% 98.50% 96.49% 92.88% 150.27%
Total Assets 100.00% 105.30% 104.87% 108.30% 210.72%
CURRENT LIABILITIES 100.00% 324.35% 340.54% 387.59% 659.68%
Current portion of long term financing: 100.00% 639.24% 635.78% 635.78% 635.78%
Short term borrowings – secured: 100.00% 76.52% 121.57% 446.25%
Markup accrued: 100.00% 528.15% 455.16% 368.03% 252.71%
Trade and other payables: 100.00% 101.19% 154.54% 171.92% 181.01%
Creditors 100.00% 100.70% 130.91% 179.11% 144.57%
Accrued liabilities 100.00% 105.82% 100.07% 187.35% 275.43%
Retention money 100.00% 97.36% 118.71% 110.79% 143.42%
Security deposits 100.00% 113.82% 149.19% 153.37% 144.98%
Advances from customers 100.00% 183.57% 254.07% 293.11% 178.82%
Workers‟ (Profit) Participation Fund 100.00% 234.20% 103.84% 61.11%
Workers‟ Welfare fund 100.00% 157.67%
Sales tax payable- net 100.00% 140.33% 175.91% 146.16% 0.00%

55
Excise duty payable 100.00% 6098.28% 17696.55% 14796.55% 99360.34%
Other liabilities 100.00% 7.21% 11.09% 49.87% 55.52%
Compensated absences 100.00% 10.67% 10.84%
Unclaimed dividend 100.00% 275.43% 107.67%
NON – CURRENT LIABILITIES 100.00% 71.33% 45.80% 33.99% 19.89%
Retention money payables: 100.00%
Deferred tax liability – net: 100.00% 157.82% 168.61%
Deferred liability 100.00% 112.29% 19.65% 20.56% 23.51%
Long term financing: 100.00% 70.87% 40.04% 24.59% 9.13%
Loans from banking companies –
Secured:
Habib Bank Limited 100.00% 65.29% 47.11% 28.93%
MCB Bank Limited 100.00% 65.29% 47.11% 28.93%
United Bank Limited 100.00% 65.29% 47.11% 28.93%
Bank Al Falah Limited 100.00% 65.29% 47.11% 28.93%
NIB Bank Limited 100.00% 61.40%
PICIC Commercial Bank Limited 100.00% 65.29% 0.00% 0.00%
Loan from related party:
Kohat Foundation- Unsecured 100.00% 0.00% 0.00% 0.00%
Less: amount payable within 12 months
shown under current liabilities 100.00% 99.46% 99.46% 99.46%
SHARE CAPITAL AND RESERVES 100.00% 126.33% 169.28% 192.62% 478.77%
Reserves: 100.00% -405.93%
Accumulated loss 100.00% 77.36% 40.43% 0.00% 0.00%
Share capital: 100.00% 100.00% 100.00% 100.00% 176.90%

56
Total Liabilities + Owner’s Equity 100.00% 105.30% 104.87% 108.30% 210.72%
4.1.2 BALANCE SHEET (VERTICAL ANALYSIS)
Formula
Common Size Statement (Vertically)= 100
.
X
TotalAsset
Item
Example:- Vertical Analysis = %72.9100
5910353
574460
X
Balance Sheet (Vertical Analysis)
As on December….. RS(000)
2011 2012 2013 2014 2015
CURRENT ASSETS 9.72% 18.84% 25.48% 30.52% 42.51%
Cash and bank balances 3.33% 9.69% 13.67% 6.61% 30.38%
Deposit accounts 2.33% 9.00% 12.88% 6.29% 30.16%
Current accounts 0.36% 0.42% 0.79% 0.31% 0.22%
Collection accounts 0.65% 0.27% 0.00% 0.00% 0.00%
Cash in hand 0.00% 0.00% 0.00% 0.00% 0.00%
Advances, Deposits, prepayments and
other receivables: 1.24% 0.74% 1.13% 13.42% 2.77%
To suppliers 0.58% 0.29% 0.51% 12.74% 0.12%
To employees 0.01% 0.01% 0.03% 0.01% 0.02%
Due from associated undertaking –
unsecured 0.02% 0.02% 0.05% 0.00% 0.00%

57
Deposits 0.02% 0.02% 0.03% 0.03% 0.05%
Prepayments 0.18% 0.07% 0.16% 0.05% 0.03%
Excise duty 0.17% 0.05% 0.00% 0.00% 0.00%
Advance tax –net 0.00% 0.13% 0.22% 0.20% 0.19%
Sales tax refundable -net 0.06% 0.00% 0.00% 0.00% 0.66%
Derivative foreign currency options used
as hedging instrument 0.00% 0.00% 0.00% 0.00% 0.68%
Interest accrued 0.04% 0.02% 0.09% 0.08% 0.12%
Prepaid arrangement fee for loans 0.00% 0.00% 0.00% 0.17% 0.60%
Margin on letters of credit 0.00% 0.00% 0.00% 0.00% 0.24%
Other receivables- Considered goods 0.01% 0.13% 0.05% 0.03% 0.06%
Others 0.16% 0.00% 0.00% 0.10% 0.01%
TRADE DEBTS 0.76% 1.72% 0.41% 0.31% 0.22%
Unsecured 0.40% 0.40% 0.44% 0.25% 0.04%
Considered doubtful 0.03% 0.03% 0.03% 0.13% 0.04%
Secure-considered goods 0.38% 1.35% 0.00% 0.18% 0.22%
Less: Provision for doubtful debts -0.03% -0.03% -0.03% -0.13% -0.04%
STOCK IN TRADE 1.04% 0.90% 2.34% 2.86% 1.85%
Raw and packing material 0.26% 0.30% 0.45% 0.37% 0.25%
Work in process 0.47% 0.19% 1.51% 1.80% 1.22%
Finished goods 0.31% 0.42% 0.38% 0.69% 0.37%
STORES, SPARES AND LOOSE
TOOLS 3.34% 5.79% 7.92% 7.32% 7.29%
Stores 1.22% 1.73% 3.20% 0.97% 3.34%
Spares 2.00% 3.93% 4.52% 6.16% 3.84%

58
Loose tools 0.12% 0.13% 0.20% 0.20% 0.11%
DEFERRED TAX ASSETS - NET 9.64% 5.42% 0.00% 0.00% 0.00%
LONG TERM DEPOSITS 0.62% 0.75% 0.75% 0.73% 0.37%
Islamabad Electric Supply Company
Limited 0.37% 0.35% 0.35% 0.34% 0.17%
LONG TERM ADVANCES -
Less: Amount receivables within 12
months shown under current assets 0.00% 0.00% 0.00% -0.01% -0.01%
FIXED ASSETS - Tangible: 80.02% 74.85% 73.62% 68.62% 57.06%
Property, Plant and equipment 80.02% 74.85% 73.62% 68.62% 57.06%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00%
CURRENT LIABILITIES 6.30% 19.39% 20.44% 22.53% 19.71%
Current portion of long term financing: 1.46% 8.89% 8.87% 8.59% 4.42%
Short term borrowings - secured: 0.00% 4.96% 3.81% 5.87% 11.07%
Markup accrued: 0.22% 1.11% 0.96% 0.76% 0.27%
Trade and other payables: 4.61% 4.43% 6.79% 7.32% 3.96%
Creditors 0.77% 0.74% 0.96% 1.28% 0.53%
Accrued liabilities 1.07% 1.08% 1.02% 1.86% 1.40%
Retention money 0.18% 0.17% 0.21% 0.19% 0.12%
Security deposits 0.43% 0.47% 0.61% 0.61% 0.30%
Advances from customers 0.39% 0.68% 0.95% 1.06% 0.33%
Workers' (Profit) Participation Fund 0.00% 0.64% 1.51% 0.65% 0.20%

59
Workers' Welfare fund 0.00% 0.00% 0.00% 0.25% 0.20%
Sales tax payable- net 0.38% 0.50% 0.63% 0.51% 0.00%
Excise duty payable 0.00% 0.06% 0.17% 0.13% 0.46%
Other liabilities 1.38% 0.09% 0.15% 0.64% 0.36%
Compensated absences 0.00% 0.00% 0.55% 0.06% 0.03%
Unclaimed dividend 0.00% 0.00% 0.03% 0.09% 0.02%
NON - CURRENT LIABILITIES 60.89% 41.25% 26.59% 19.11% 5.75%
Retention money payables: 0.00% 0.00% 0.00% 0.00% 0.15%
Deferred tax liability - net: 0.00% 0.00% 3.47% 5.31% 2.92%
Deferred liability 0.68% 0.73% 0.13% 0.13% 0.08%
Long term financing: 60.21% 40.52% 22.99% 13.67% 2.61%
Loans from banking companies -
Secured:
Habib Bank Limited 0.00% 14.73% 9.66% 6.75% 2.13%
MCB Bank Limited 0.00% 14.73% 9.66% 6.75% 2.13%
United Bank Limited 0.00% 7.36% 4.83% 3.37% 1.06%
Bank Al Falah Limited 0.00% 7.36% 4.83% 3.37% 1.06%
NIB Bank Limited 0.00% 0.00% 0.00% 2.02% 0.64%
PICIC Commercial Bank Limited 0.00% 4.42% 2.90% 0.00% 0.00%
Loan from related party:
Kohat Foundation- Unsecured 0.00% 0.80% 0.00% 0.00% 0.00%
Less: amount payable within 12 months
shown under current liabilities 0.00% -8.89% -8.87% -8.59% -4.42%
SHARE CAPITAL AND RESERVES 32.81% 39.36% 52.96% 58.36% 74.54%
Reserves: 0.00% 0.00% 0.00% -7.17% 14.97%
Accumulated loss -38.16% -28.03% -14.71% 0.00% 0.00%

60
Share capital: 70.97% 67.39% 67.67% 65.53% 59.58%
Total Liabilities + Owner's Equity 100.00% 100.00% 100.00% 100.00% 100.00%
4.1.3 INCOME STATEMENT (TREND ANALYSIS)
Income Statement (Trend Analysis)
For the Year Ended June…… RS(000)
2011 2012 2013 2014 2015
Sales 100.00% 120.76% 175.02% 147.20% 146.25%
Less: Government Levies 100.00% 113.16% 146.93% 138.46% 126.53%
Net Sales 100.00% 123.90% 186.66% 150.82% 154.42%
Cost of sales 100.00% 113.38% 134.69% 152.49% 185.66%
Raw material Consumed 100.00% 118.80% 178.66% 204.39% 197.47%
Packing material consumed 100.00% 95.18% 117.61% 142.21% 181.31%
Stores and spares consumed 100.00% 124.37% 114.51% 211.37% 206.51%
Spares written off 100.00% 5.02% 0.00%
Salaries, wages and benefits 100.00% 95.40% 155.63% 146.55% 146.19%
Rent, rates and taxes 100.00% 144.75% 269.12% 232.46% 555.04%
Insurance 100.00% 121.17% 85.05% 82.86% 81.91%
Fuel consumed 100.00% 123.95% 149.47% 173.41% 255.39%

61
Power consumed 100.00% 107.21% 127.01% 139.21% 145.60%
Depreciation 100.00% 103.67% 107.62% 113.65% 119.51%
Others 100.00% 114.80% 165.96% 174.47% 135.68%
100.00% 112.19% 139.05% 154.36% 188.03%
Add: Opening work-in-process 100.00% 477.24% 199.83% 1610.30% 1980.76%
Less: Closing work-in-process 100.00% 41.87% 337.42% 415.05% 549.44%
Cost of goods manufactured 100.00% 114.84% 135.70% 155.16% 188.29%
Add: Opening finished goods 100.00% 58.18% 80.75% 73.16% 138.01%
Less: Closing finished goods 100.00% 138.80% 125.75% 237.21% 248.67%
100.00% 113.38% 134.69% 152.49% 186.53%
Less: Own consumption capitalized 100.00%
100.00% 113.38% 134.69% 152.49% 185.66%
Gross profit 100.00% 146.00% 295.77% 147.34% 88.84%
Other income 100.00% 26.24% 101.35% 172.74% 251.67%
Distribution cost: 100.00% 104.49% 155.24% 199.08% 261.48%
Export freight and other charges 100.00%
Traveling and entertainment 100.00% 179.59% 143.91% 68.18% 108.99%
Vehicle running and maintenance
expenses 100.00% 59.78%
Repairs and maintenance 100.00% 212.17% 152.07% 42.09% 70.07%
Printing and stationery 100.00% 125.74% 79.17% 81.73% 107.07%
Depreciation 100.00% 93.98% 138.67% 223.56% 346.22%
Others 100.00% 109.88% 123.62% 284.05% 51.63%

62
Administrative expenses: 100.00% 106.97% 168.53% 180.35% 193.49%
expenses 100.00% 89.94%
Insurance 100.00% 114.10% 170.51% 190.38% 192.95%
Depreciation 100.00% 181.21% 197.21% 277.50% 481.21%
Others 100.00% 92.87% 127.51% 75.31% 67.55%
Other Operating expenses: 100.00% 7597.19% 17659.85% 10900.19% 6433.40%
Audits' remuneration 100.00% 102.06% 106.00% 99.44% 112.57%
Workers' (Profit) Participation Fund 100.00% 234.20% 103.84% 61.11%
Workers' Welfare Fund 100.00% 57.67%
Finance Cost: 100.00% 112.44% 129.42% 101.41% 71.96%
Fee and charges on loans 100.00% 90.95% 4.30% 4.30% 4.30%
Interest/mark-up on long term finance 100.00% 306.65% 443.15% 350.01% 226.66%
Interest/mark-up on long term loan
from related party 100.00% 364.83% 52.23% 0.00% 0.00%
Interest on short term borrowings and
other charges 100.00% 25.16% 17.90% 266.75%
Interest on Workers' Profit
Participation Fund 100.00% 3.13% 0.00%
Guarantee commission 100.00% 28.76% 0.43% 0.87% 0.59%
Bank charges and commission 100.00% 77.84% 104.45% 90.39% 93.31%
Foreign exchange risk
100.00% 0.00% 0.00% 0.00% 0.00%

63
insurance(FERI) contract
Amortization of deferred cost 100.00% 0.00% 0.00% 0.00% 0.00%
Net profit before taxation 100.00% -311.99% -730.69% -323.97% -186.84%
Less: Taxation 100.00% -44.59% -102.96% -25.45% -7.35%
Net profit after taxation 100.00% 162.50% 383.17% 205.74% 131.66%
4.1.4 INCOME STATEMENT (VERTICAL ANALYSIS)
Income Statement (Vertical Analysis)
For the Year Ended June…… RS(000)
2011 2012 2013 2014 2015
Sales 100.00% 100.00% 100.00% 100.00% 100.00%
Less: Government Levies -29.29% -27.45% -24.59% -27.55% -25.34%
Net Sales 70.71% 72.55% 75.41% 72.45% 74.66%
Less: Cost of sales 47.90% 44.97% 36.86% 49.62% 60.81%
Raw material Consumed 3.55% 3.49% 3.62% 4.92% 4.79%
Packing material consumed 4.79% 3.77% 3.22% 4.63% 5.94%
Stores and spares consumed 0.16% 0.17% 0.11% 0.23% 0.23%
Spares written off 0.00% 0.00% 0.33% 0.02% 0.00%

64
Insurance 0.46% 0.46% 0.22% 0.26% 0.26%
Fuel consumed 17.39% 17.85% 14.85% 20.48% 30.36%
Power consumed 9.55% 8.48% 6.93% 9.03% 9.51%
Depreciation 7.48% 6.43% 4.60% 5.78% 6.12%
Others 1.95% 1.85% 1.84% 2.31% 1.81%
48.16% 44.75% 38.26% 50.50% 61.92%
Add: Opening work-in-process 0.18% 0.71% 0.20% 1.96% 2.43%
Less: Closing work-in-process -0.85% -0.30% -1.65% -2.41% -3.21%
Cost of goods manufactured 47.49% 45.16% 36.82% 50.05% 61.14%
Add: Opening finished goods 0.99% 0.47% 0.45% 0.49% 0.93%
Less: Closing finished goods -0.57% -0.66% -0.41% -0.92% -0.97%
47.90% 44.97% 36.86% 49.62% 61.09%
Less: Own consumption capitalized 0.00% 0.00% 0.00% 0.00% -0.28%
47.90% 44.97% 36.86% 49.62% 60.81%
Gross profit 22.81% 27.58% 38.55% 22.83% 13.86%
Other income 1.32% 0.29% 0.76% 1.54% 2.27%
Distribution cost: 0.63% 0.54% 0.56% 0.85% 1.12%
Export freight and other charges 0.00% 0.00% 0.00% 0.00% 0.52%
expenses 0.00% 0.00% 0.00% 0.06% 0.03%

65
Depreciation 0.02% 0.02% 0.02% 0.04% 0.06%
Others 0.14% 0.13% 0.10% 0.27% 0.05%
Administrative expenses: 1.22% 1.08% 1.17% 1.49% 1.61%
expenses 0.00% 0.00% 0.00% 0.05% 0.05%
Insurance 0.01% 0.01% 0.01% 0.01% 0.01%
Depreciation 0.06% 0.09% 0.07% 0.11% 0.20%
Others 0.33% 0.25% 0.24% 0.17% 0.15%
Other Operating expenses: 0.02% 1.03% 1.66% 1.22% 0.72%
Audits' remuneration 0.02% 0.01% 0.01% 0.01% 0.01%
Workers' (Profit) Participation Fund 0.00% 1.02% 1.65% 0.87% 0.51%
Workers' Welfare Fund 0.00% 0.00% 0.00% 0.34% 0.20%
Finance Cost: 6.29% 5.86% 4.65% 4.33% 3.09%
Fee and charges on loans 0.36% 0.27% 0.01% 0.01% 0.01%
Interest/mark-up on long term finance 1.77% 4.48% 4.47% 4.20% 2.74%
Interest/mark-up on long term loan from
related party 0.03% 0.08% 0.01% 0.00% 0.00%
Interest on short term borrowings and
other charges 0.00% 0.11% 0.02% 0.02% 0.24%
Interest on Workers' Profit Participation
Fund 0.00% 0.00% 0.05% 0.00% 0.00%
Guarantee commission 3.45% 0.82% 0.01% 0.02% 0.01%

66
Bank charges and commission 0.14% 0.09% 0.08% 0.09% 0.09%
Foreign exchange risk insurance(FERI)
contract 0.55% 0.00% 0.00% 0.00% 0.00%
Amortization of deferred cost 23.47% 0.00% 0.00% 0.00% 0.00%
Net profit before taxation -7.49% 19.36% 31.28% 16.49% 9.57%
Less: Taxation 17.17% -6.34% -10.10% -2.97% -0.86%
Net profit after taxation 9.67% 13.02% 21.18% 13.52% 8.71%
4.2 PIONEER CEMENT LIMITED
FIVE YEARS HORIZONTAL ANALYSIS OF INCOME STATEMENT
PIONEER CEMENT COMPANY LIMITED
FIVE YEAR POSITION OF INCOME SATEMENT
For the year ended June 30 2011 2012 2013 2014 2015
Net Sales 55% 2% 50% 55% 40%
Cost of goods sold 54% 52% 34% 47% 31%
Gross Profit 61% -74% 83% 74% 73%
Administrative And Selling expenses 293% 25% -15% 55% 19%
Operating Operating/Loss -124% -84% 107% 80% 91%
Other operating expenses 1997% -88% 13% 123% -5%
Other operating income 162% -84% 162% -65% 19%

67
ANALYSIS:
Sales of the Company has shown increasing trend and has increased up to 40% in 2011,55% in
2012 and 50% in 2013 and 2% in 2014 and 55% in 2015 and respective from previous years
Cost of sales has also shown an increasing trend. In 2011 it is 31%, 2012 it increased 47%, in
2013 in increased 34%, 52% increase in 2014 and 54% in 2015 from respective years cost of sale
increase more than increase in sales which result there is loss in 2014. The major reason of this
increase in cost was the plant shutdown due to irregular power supply of WAPDA and increase
in prices of diesel and empty bags.
Profit/loss from operations -189% -84% 120% 45% 84%
Financial & Other Voluntary separation
scheme charges
13% -286% 63% 3% 28%
Profit/loss before taxation 211% -120% 137% 65% 56%
Taxation 333% -135% 316% -133% -44%
Profit/loss after taxation 92% -114% 104% -22% 87%

68
Gross profit of the company has also shown a increasing trend in from 2011 to 2012 up to 2013
respectively and then decrease and got loss in 2014 and then gross profit increase 61% in 2015
company cost of sale increases but sale decrease, in 2014 gross profit decreases -74% and it was
61% in 2015.Selling and distribution expenses also increases in 2015 as 293% and 25% in 2014
respectively. This decrease in gross profit was due to the increase in cost of goods sold and also
administrative and selling expenses which cause company got loss.
Operating profit showing increasing trend from 2011 to 2013 as 91%, 80% and 107%
respectively and then it decrease in 2014 and 2015 as -84% and -124% which show big loss in
the year of 2015.
Finance cost Decrease in 2014 as 286% and increased in 2015 as 13% which is not at higher side
but it is at higher side in 2011 to 2013 as 63% for expansion of new grey and white cement
plants. There is a great increase in 2015 which cause the loss of the company. Profit before tax
shows decrease in 2014 as 120% and increase in 2015 as 211% and company got loss in 2015.
Profit after tax decreased in 2014 by 114% and it was increase 92% in 2015. Company
management tries to expand its operations so it needs more finds that were got from short and
long term financing. Due to economic crises and dispute with unionized permanent workers,
company faces losses. Company is good for long term benefits, because it had declared bonus
shares for last five years. It had a great capacity to produce cement and they are improving
technology. They had implemented Enterprise Resource Planning software to increase the
efficiency and for better management planning.

69
4.2.2 HORIZONTAL ANALYSIS OF BALANCE SHEET
BALANCE SHEET
As at June 30 2015 2014 2013 2012 2011
EQUITY AND LIABILITIES
SHARE CAPITAL AND RESERVE
Authorized Share Capital 0% 0% 0% 0% 0%
Issue Subscribed & Paid Up Capital 18% 5% 5% 62% 26%
Reserves -22% -43% 847% -118% -28%
10% -10% 43% 197% -2%
Surplus on Revaluation of fixed assets-net of tax 290% -5% -4% - -
NON-CURRENT LIABILITIES
Redeemable capital - - -100% -8% 9.61%
Long term financing-secured 6% -83% - - 10.44%
Long term loans-secured -26% 27% -8% 3% -
Long term Musharaka finance -100% - - - -
Liabilities against assets subject to finance lease -51% 7% 65% 2780% 4.41%
Long term deposits -65% -7% -15% 187% 0.145%
Long term creditor-unsecured -30% -26% - - -
Deferred liabilities -10% 17% -12% -21% 8.28%
Deferred tax liabilities - -100% 122% - -
-25% -3% 12% 9% 32.8%
BALANCE SHEET

70
CURRENT LIABILITIES
Creditors against expansion project -90% -5% -39% -
Trade and other payables 120% 7% 27% 251% 10.98%
Interest/ Mark up accrued 54% 70% -44% -25% 0.11%
Short term Murabah-secured -73% - - -
Short term Musharaka secured - - - -
Short term finances - - - - 4.90%
Short term borrowings - - -100% - -
Current maturity of redeemable capital - - -100% 93% -
Current maturity of long term loan - -100% -36% -64% 3.24%
Current portion of long term loan - -100% - -
Current portion of liabilities against assets
subject to finance lease
39% 761% 919% 112% 2.11%
Current portion of deferred liability -100% -99% - - - -
Sales tax payable - -100% 62% 340% -
49% 43% 41% 158% 21.34
%
22% 2% 22% 61% 11.46
%
ASSETS
NON CURRENT ASSETS
FIXED CAPITAL EXPENDITURE
Property, plant and equipment 27% -2% 20% 74% 52.31%

71
Long term loans -11% 43% -25% 13% 0.10%
Long term deposits -15% 28% 169% 55% 0.105%
Deferred tax assets - - - -100% -
27% -2% 21% 66% 52.52
%
CURRENT ASSETS
Stock in trade -54% 55% 70% 12% 2.55%
Store, spare and loose tools 3% 11% 31% 13% 8.01%
Assets held for disposal -100% - - - -
Trade Debts 35% 138% -34% -23%
Loan & advances 156% 80% -78% 939% 0.21%
Deposits & prepayments -59% -33% -16% -32% 1.03%
Other receivables 8471% -87% -73% 22% -
Current portion of long term deposits 838% - - - -
Sales tax net -100% - - - -
Taxation-net - -100% -11% -8% -
Cash & bank balance -54% 325% 310% -53% 0.72%
-19% 56% 34% 17% 12.52
%
22% 2% 22% 61% 23.83
%
ANALYSIS:
1) NON-CURRENT ASSETS:
As we can see from the horizontal balance sheet analysis of five years, the total non-current
assets have shown increasing trend. In 2011 it is 52.52%, 2012 it is 66% than it increase 21% in

72
2013, 21% in 2013 and then it decrease in 2014 by 2% and then again increase in 2015 by 27%
as compare to 2014. This shows heavy investment in fixed assets by the management.
Operating fixed assets showed increasing trend in from 2011 to 2013 by 74%, 20% respectively
it decreases 2% in 2014 and then again increase in 2015 from 2014 by 27%. Long term loans
showing mix trend it increased by 13% in 2012 and then it decreased 25% in 2013 and increased
by 43% in year 2014 and decrease 11% respectively. Lon-term deposit has shown an increasing
trend from 2012 to 2014 by 55%, 169% and 28% from respective years, and it decrease in 2015
by 15% from 2014. Deferred tax assets just in 2012 than no more 2013, 2014, 2015 so it
decrease almost 100%
2) CURRENT ASSETS:
Store, spare and tools has shown increasing trend from 2011 to 2015 by 13%, 31%, 11%,and 3%
from their respective years, which shows that company is in good position as liquidity point of
view. Stock in trade shows increasing trend from 2012 to 2014 by 12% in 2012, 70% in 2013,
55% in 2014 and decrease 54% in 2015.This higher inventory is indication of weak inventory
management. Trade debts has shown decreasing trend in 2012 from 2011 by 23% and then
decrease by 34% from 2012 an it increased by 138% in 2014 which is at higher side and then it
increase by 35% in 2015 from 2014.Receivable management is inefficient in 2014 and 2015 by
showing increasing trend as compare it with 2012 and 2013.Loan and advances shown increasing
trend in 2012 in huge amount it increase 939% from 2011 which means company made advances
and loans to the employees in huge amounts than it decrease in 2013 by 78% and in 2014 again
increase by 80% and also increase in 2015 by 156%.deposits and prepayment showing
decreasing trend from 2012 to 2015 by 32%, 16%, 33% and 59% by respective years. Other
receivables also showing decreasing trend from 2013 to 2015 just increased in 2012 from 2011
by 22%. Cash and bank balance first decreased in 2012 by 53% from 2011 than it showing
increasing trend from 2013 to 2014 by 310% and 325% from respective years and then again it
decreased in 2015 54% from 2014.

73
Over all current assets showing increasing from 2011 to 2014 by 17%, 34% and 56% from
respective years and it decrease in 2015 by 19% from 2014 which means current assets are
decreased in 2015.
3) EQUITY AND LIABILITIES:
Share capital show an increasing trend it increases in 2011 by 42% ,2012 in 62% and 5% in 2013
and 2014 respectively and 18% in 2015 which means that issued subscribed and paid up
capital increased throughout all the years. Reserves have decreased in year 2012 by 118% and
increased in 2013 by 847%, after that it decreased in next two years in 2014 and 2015 by 43%
and 22% respectively which shows that company has utilized all its reserves for expansion of
project. Due to expansion of project company has not sufficient reserves and company has
not paid any dividend after 2011.
4) NON-CURRENT LIABILITIES:
Non-current liabilities have also shown an increasing trend from 2011 to 2013 by 32.8%, 9% and
12% and decreased in 2014 and 2015 by 3% and 25% from respective years. Capital showing
decreasing trend in 2012 and 2013 by 8% and 100%. Long term loans secured increase by 3% in
2012 and then it decreased 8% in 2013 it again increased in 2014 by 27% and decreased in 2015
by 26%. Liabilities against assets subject to finance lease increased from 2012 to 2014 by
2870%, 65% and 7% respectively and it decreased by 51% in 2015 from 2014. Long term
deposits increased 187% in 2012 and then it decreased in 2013 to 2015 by 15%, 7% and 65%
from respective years. Deferred liabilities decreased in 2012 and 2013 by 21% and 12% and
increased 17% in 2014 and decreased 10% in 2015 from respective years.
5) CURRENT LIABILITIES:
Total current liabilities have also shown an increasing trend. This is also in line with increase in
current assets of the company. Short term financing is taken to meet the working capital
requirements. Company is meeting its obligation on regular basis which is evident from an

74
increase in the current portion of long term debts under current liabilities head of the balance
sheet.
Trade payables decreased in 2012 by 251% which is at higher side and increased 27%, 7%, and
120% in 2013, 2014 and 2015 where as 10.98% in 2011 which is unfavorable for the company.
Interest and mark up accrued decrease in 2012 by 25% and 44% in 2013 and increase in 2014
and 2015 by 40% and 54% respectively. Sales tax payable increase 340% in 2012 from 2011
which is huge change in 2013 it also increases 62% from 2012 and decrease 100% in 2014.
Finally, size of the company has increased during the last five years. More investment is made in
capital assets. Company is in expansion phase since the base year. Investment in new expansion
project and technology is being made in order to keep pace with changing business environment.

75
4.2.3 VERTICAL ANALYSIS OF INCOME STATEMENT
2.11.1
Five Year Position Of Income Statement
For the year ended June 30 2015 2014 2013 2012 2011
Sales- Net -2697% -3349% 455% 616% 312%
Cost of goods sold -2412% -3009% 273% 413% 221%
Gross Profit -285% -340% 182% 203% 91%
Administrative And Selling expenses -309% -151% 17% 40% 20%
Operating Operating/Loss 24% -189% 165% 162% 71%
Other operating expenses 83% 8% -9% -16% -5%
Other operating income -17% -13% 11% 8% 19%
Profit/loss from operations 89% -194% 167% 155% 84%
Financial & Other
Voluntary separation scheme charges
230% 391% 29% 36% 28%
Profit/loss before taxation 319% 197% 138% 119% 56%
Taxation 219% 97% 38% 19% -44%
Profit/loss after taxation 100% 100% 100% 100% 100%
Vertical Analysis of Pioneer Cement Company Limited

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