LUCKY CEMENT LTD

ANALYSIS OF FINANCIAL STATEMENTS

Muhammad Faysal Khan 4/29/2014

Submitted to Sir Aun Ali

The purpose is to present the financial analysis of LUCKY cement ltd. To analyze the financial position data for the year ended July 2013 and July 2012 has been used. For this purpose the horizontal, vertical and ratio analysis, financial measure tools have been used.

FINANCIAL ANALYSIS OF LUCKY CEMENT LTD

ABSTRACT The purpose is to present the financial analysis of LUCKY cement ltd. To analyze the financial position data for the year ended July 2013 and July 2012 has been used. For this purpose the horizontal, vertical and ratio analysis, financial measure tools have been used. COMPANY OVERVIEW Lucky Cement Limited (LCL) is Pakistans largest producer and leading exporter of quality cement with the production capacity of 7.75 million tons per annum. The company is listed on Karachi, Lahore, Islamabad and London Stock Exchanges. Lucky Cement Limited was founded in 1996 by Tabba Memons. The company initially started with factories in the Pezu district of the (N.W.F.P). It now also, owns factory in Karachi. Lucky Cement Limited has been sponsored by one of the largest business groups in Pakistan, the Yunus Brothers Group, based in Karachi. Lucky Cement has a network of over 200 dealers which enables it to dominate the local market and is Pakistans first company to export sizeable quantities of loose cement and is the only cement manufacturer to have its own loading and storage terminal at Karachi Port.

HORIZOTAL AND VERTICAL ANALYSIS OF INCOME STATEMENT

INCOME STATEMENT
2013 net sales cost of sales gross profit 37,810,456 (21,089,359) 16,721,097 2012 Horizontal 33,322,535 (20,601,261) 12,721,274 13.47% 2.37% 31.44% Vertical 100.00% -55.78% 44.22% 100.00% -61.82% 38.18%

distribution cost admin expenses operating profit finance cost other operating income other charges earnings before tax Taxation earnings after tax

(3,665,578) (897,305) 12,158,214 (89,258) 247,928 (616,350) 11,700,534 (1,986,586) 9,713,948

(3,236,721) (474,135) 9,010,418 (253,234) 5,204 (438,411) 8,323,977 (1,541,561) 6,782,416

13.25% 89.25% 34.94% -64.75% 4664.18% 40.59% 40.56% 28.87% 43.22%

-9.69% -2.37% 32.16% -0.24% 0.66% -1.63% 30.95% -5.25% 25.69%

-9.71% -1.42% 27.04% -0.76% 0.02% -1.32% 24.98% -4.63% 20.35%

BASIC AND DILUTED E.P.S (rupees)

30.04

20.97

COMMENTS Horizontal analysis of income statement Net income increased by 43.22% in year 2013 compare with year 2012, several reasons for having a significant impact on earnings after tax, which are discussed for better understanding of horizontal analysis below. Lucky cement has achieved an overall net sales revenue growth of 13.47% in the year 2013 as compared to the previous year 2012. Increase in revenue was attributed due to both increase in volume and retention. Local gross sales revenue growth 12.32% and exports revenue growth is 14.59%. The major cost of production for cement is energy cost which has not significantly changed. As a matter of fact, the international price of coal and oil has not increased compared to the last year. Thats why the cost of sales just increases by a miner of 2.36%. Lucky cement

achieved a gross profit of 31.44% because the net sales increase percentage is higher than the percentage changed in gross profit, including the volumetric growth as well. Distribution costs incurred by the company 13.25% because of increase in exports by 14.75%.The financial cost reduced substantially by 64.75% compare with the previous year, mainly because of interest rates hedging. Admin expenses increased substantially by 89.25% in year 2013, because of two main reasons. Salaries and benefits increase by the company and spending on professional and advisory services heavily. Other income increase in 2013 by a huge of 4664.18% which is not a usual event. They got a gain on disposal of property, plant and equipment. Other charges increased by 40.59% compare with previous year because of profit participation fund. Taxation increased in 2013 by 28.87%. Vertical analysis of income statement Here we are doing the vertical analysis of lucky cement which will help us to understand the overall performance of the company in year 2013 compare with 2013.Net income was 20.35% of the net sales in 2012, increased in 2013 to 25.69% which is a healthy sign for the company. Cost of sales was 61.82% in 2012, reduced in 2013 to 55.78% thats why the company achieved gross profit of 44.22% which was 38.18% in 2012.Distribution cost has a miner impact which is 9.71% to 9.69% of sales. Admin expenses reached at 2.37% in year 2013 from 1.42% in year of 2012. Operating profit was 27.04% in year 2012 now in 2013 reached at 32.16%.Financial cost was 0.76% of the sales in 2013, reduced in year 2013 0.24% of the net sales. Other operating income was 0.02% in 2012, increased in 2013 to 0.66% of the sales. Other charges increased by 0.31% in the year 2013.Earning before tax was 24.98% in 2012 reached at 30.95% in 2013, with a net change of 5.97%.Taxation was 4.63% in 2012 of net sales, in 2013 record as 5.25% of net sales.

BALANCE SHEET
ASSETS NON-CURRENT ASSETS Property, plant and equipment intangible assets 2013 2012 HORIZONTAL VERTICLE 31,008,392 4,711 31,013,103 Long-term investment long-term loans and advances Long-term deposits and prepayments 5,619,000 547,573 3,175 37,182,851 CURRENT ASSETS stores, spares and consumables Stock-in-trade trade debts Loans and advances trade deposits and short term prepayments Other receivables investments Tax refunds due from the Government taxation net Cash and bank balances 5,179,055 1,431,157 1,668,299 259,998 41,814 692,191 110,062 538,812 286,096 2,805,840 13,013,324 Total asset EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVES share capital 50,196,175 5,396,220 1,276,433 1,050,639 148,189 67,894 105,677 538,812 126,361 844,422 9,554,647 40,631,241 0.00% 126.41% 232.28% 36.20% 23.54% 1.07% 0.57% 5.59% 25.92% 100.00% 1.33% 0.31% 2.08% 23.52% 100.00% -4.02% 12.12% 58.79% 75.45% -38.41% 555.01% 10.32% 2.85% 3.32% 0.52% 0.08% 1.38% 13.28% 3.14% 2.59% 0.36% 0.17% 0.26% 31,016,532 1,514 31,018,046 55,373 3,175 31,076,594 888.88% 0.00% 19.65% 1.09% 0.01% 74.08% 0.14% 0.01% 76.48% -0.03% 211.16% -0.02% 61.77% 0.01% 61.78% 76.34% 0.00% 76.34%

0.00%

6.44%

7.96%

3,233,750 Reserves 37,801,693 41,035,443 total equity Noncurrent liabilities long term finance long term deposits deferred liabilities 41,035,443

3,233,750 30,027,995 33,261,745 33,261,745 25.89% 23.37% 23.37% 75.31% 81.75% 81.75% 73.90% 81.86% 81.86%

127,498 57,125 5,130,265 5,314,888

392,898 52,752 3,299,522 3,745,172

-67.55% 8.29% 55.49% 41.91%

0.25% 0.11% 10.22% 10.59%

0.97% 0.13% 8.12% 9.22%

Current liabilities Trade and other payables Accrued mark-up current portion of long term finance 3,572,282 8,162 265,400 3,845,844 Total liabilities and equity 50,196,175 3,345,605 13,319 265,400 3,624,324 40,631,241 6.78% -38.72% 0.00% 6.11% 23.54% 7.12% 0.02% 0.53% 7.66% 100.00% 8.23% 0.03% 0.65% 8.92% 100.00%

Horizontal analysis of balance sheet Noncurrent assets are increasing by 19.65% mainly due to company made a long term investment. Current assets are increasing by 36.20% in 2013, due to cash and bank has increased by a significant of 232.28% and trade debts increased by 58.79%.Share capital and reserves has increased by 23.37% compare with the last year because of change in reserves is greater. Noncurrent liabilities increased by 41.91% while current liabilities increased by 6.11%. Over all equity and liabilities increased by 23.58%.

Vertical analysis of balance sheet in the year of 2012 noncurrent assets were 76.34% of total assets but in 2013 they were 74.08% of total assets, current assets were23.52% in 2012 and in 2013 were 25.92%, shows that total assets overall increases. Share capital and reserves are comparatively same percent of total equity and liabilities in both years 2012 and 2013. Noncurrent liabilities increased by 1.37% with preceding year. Current liabilities were 8.92% in 2012 reduced in 2013 to 7.22%.

RATIOS ANALYSIS
LIQUIDITY RATIOS 2013 2012

Current ratio Quick ratio Cash ratio

3.3837 3.0116 0.7296

2.6363 2.2841 0.2330

times times times

SOLVENCY RATIOS

Debt ratio Equity ratio Debt to equity ratio Capitalization ratio Equity multiplier EFFICIENCY RATIOS Account receivable turnover ratio Inventory turnover ratio Assets turnover Times interest earned ratio

0.1825 0.8175 0.2232 0.6217 1.2232

0.1814 0.8186 0.2216 0.5366 1.2216

% % times times times

54.6243 14.7359 0.7533 136.214

315.3244 16.1397 0.8201 35.5814

times times times times

PROFITABILITY RATIOS Gross profit margin ratio Net profit margin ratio Return on assets Return on equity MARKET VALUE RATIOS 0.4422 0.2504 0.1886 0.2307 0.3818 0.2034 0.1668 0.2038 % % % %

Price earnings ratio Earning yield Book value per share Market to book ratio

6.9462 14.44 126.90 1.6443

5.7014 17.63 102.86 1.1626

times % times times

LIQUIDITY RATIOS The company has the current ratio of 2.63 in 2012 which increased in 2013 to 3.38, means lucky cement have more current assets to meet the payment of current debts as compared with previous year. Quick ratio is much more accurate measure of current assets liquidity meets with the current obligations, which is also increasing 2.28 to 3.01 in 2013.The Companys cash ratio increasing 0.23 to 0.72 in the year 2013, Means Company have more cash compared with the previous year. SOLVENCY RATIOS Debt ratio shows a companys proportion of debt in its assets, lucky cement had the debt ratio of 0.1814 in year 2012 which is slightly change in 2013 at 0.1825, means the company just increase a little debt compared with the previous year. The equity ratio is a good indicator, shows the

proportion of the assets financed by the stockholders. Lucky cement decreased the equity ratio 0.8186 to 0.8175 in 2013 because of miner increase in debt. Lucky cement debt to equity ratio of 0.2232 in year 2013 show the major proportion of assets financed by equity, but it is little less than the year 2012. EFFICIENCY RATIOS Account receivable turnover tells about the companys credit policy, the greater the ratio means the quicker company collection of credit sales. Lucky cement account receivable turnover ratio significantly decreasing in 2013 to 54.62 which was 315.32 in 2012. Assets turnover ratio shows how much revenue generates from each rupee invested in the total assets, the company assets turnover ratio decreased by 0.0668 in 2013. Inventory turnover also decreased by 1.4038 in 2013. PROFITABILITY RATIOS Gross profit margin ratio increasing by 6.04% in 2013, while net profit margin ratio increasing by 5% in 2013 compare with 2012.ROA increased to 0.1886 in 2013 from 0.1668 in 2012, shows the increase in efficiency in current year. While ROE also increased by 3% in 2013. MARKET VALUE RATIOS Price earnings ratio shows how much a investor is willing to pay for one unit of earnings. The p/e ratio of the company is 6.94 and 5.7, 2013 and 2012 respectively which is a increase of 1.24 in current year. Earning yield is the measure of each rupee invested in the stock earned by the company which is 14.44% in 2013 and 17.63% in 2012, a decrease of 3.19%. Book value per share increased in 2013 by 24.04 compared with the last year.

CONCLUCION With the help of different tools I used in this report such as horizontal, vertical and ratio analysis can analyze the performance of LUCKY cement ltd. It is clearly visible here LUCKY cement profitability is in increasing trend, a significant increase in earnings per share, liquidity ratios increasing, profitability ratios increasing, market value ratios increasing, where a little decrease in assets turnover and earnings yield. Investors are more willing to invest in LUCKY cement because of strong financial position of the company. Ultimately we can say, LUCKY cement has enjoyed a healthy and vital financial position in the year 2013. REFFERENCES https://www.google.com.pk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8& ved=0CCgQFjAA&url=http%3A%2F%2Fwww.lucky. http://www.scribd.com/doc/28311503/Lucky-Cement-Comparative-Financial-StatmentsAnalysis. https://www.google.com.pk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8& sqi=2&ved=0CDEQFjAB&url=http%3A%2F%2Fwww.moneyhub.net%2Fscripts%2Fcgiip.wsc %2Fglobalone%2Fhtm%2Fcountry_home.r%3Fvcountry.