STRATEGIC MANAGEMENT PROJECT

D.G. KHAN CEMENT COMPANY LIMITED

D.G. KHAN CEMENT COMPANY LIMITED

Table of Contents
1 KEY RESULT AREAS ................................................................................................................................ 4 1.1 1.2 NET PROFIT AFTER TAX ................................................................................................................. 4 EMPLOYESS QUALITY AND MOTIVATION ..................................................................................... 5

1.2.1 AVERAGE SALARY OF EXECUTIVE AND WORKERS ....................................................................... 5 1.2.2 EMPLOYEE TURNOVER (% p.a) ..................................................................................................... 5 1.2.3 PROFESSIONAL QUALIFICATION OF ............................................................................................ 5 1.3 2 SOCIAL CONTRIBUTION ( % EXPENDITURE OF NPAT) ................................................................... 7

KEY FACTORS ......................................................................................................................................... 7 2.1 EMPLOYEE QUALITY AND MOTIVATION ............................................................................................. 7 2.2 2.3 2.4 2.5 2.6 INVESTMENT IN RESEARCH AND DEVELOPMENT ( % of cost of sales p.a) ................................... 7 INVESTMENT IN BALANCING MODERNIZATION REPLACEMENT ( % OF PAID UP CAPITAL) ......... 8 EMPLOYEE PERMORMANCE AND MANAGEMENT SYSTEM ......................................................... 8 % OF EMPLOYEE COMPENSATION LINKED TO EMPLOYEE ........................................................... 9 PERFORMANCE OF D.G.KHAN COMPANY LIMITED .................................................................... 10

D.G. KHAN CEMENT COMPANY LIMITED

Acknowledgement
I am grateful to Almighty Allah who gave us the courage and strength to complete the assigned project in hand successfully for the STRATEGIC MANAGEMENT REPORT. I would like to thank my teacher, Mr. KHALID AMIN for all of his support and valuable assistance at every stage in the completion of this report.

Regards KANWAL BAWA

D.G. KHAN CEMENT COMPANY LIMITED

1
1.1

KEY RESULT AREAS

NET PROFIT AFTER TAX

FOR THE LAST THREE YEARS

2009 2008 2007 (Rupees in thousands)

Sales - net Cost of sales Gross profit Administrative expenses Selling and distribution expenses Other operating expenses Other operating income Impairment on investment Profit from operations Finance cost Excess of acquirer's interest in the net assets of acquiree Share of loss of associated company Profit / (loss) before tax Taxation Profit for the year Attributable to: Equity holders of the parent Minority interest

18,368,507 12,464,347 6,419,625 (12,563,681) (10,528,046) (4387,640) 5,804,826 (145,547) (1,881,101) (823,692) 735,021 (257,386) 3,432,121 (2,777,663) 1,513,505 (1,766,298) 86,194 (8,674) 654,458 (239,376) 415,082 (175,273) 200,958 25,685 1720,471 (98,000) 1622,471 2,202,393 (467,759) (14,163) 1,936,301 (110,745) (562,970) (595,687) 846,606 2031,98 (104,169) (65,122) (139,721) 479,420

451,555 (36,473) 415,082

30,022 (4,337) 25,685 0.12

1622,471

Earnings per share - basic and diluted

1.68

6.43

D.G. KHAN CEMENT COMPANY LIMITED

1.2 EMPLOYESS QUALITY AND MOTIVATION
1.2.1 AVERAGE SALARY OF EXECUTIVE AND WORKERS

Chief Executive 20092008 (Rupees in thousands) Managerial remuneration Contributions to provident and gratuity funds Housing Utilities Leave passage Medical expenses Others 5,668 270 385 4,238 10,561 4,723 3,149 469 1,940 10,281

Directors 20092008 (Rupees in thousands) 8,964 896 594 697 30 1,266 12,447 7,470 1,370 810 354 72 1,432 11,508

Executives 20092008 (Rupees in thousand)

101,538 8,297 21,755 6,508 2,185 1,236 37,157 178,676

73,737 10,822 33,978 1,965 1,068 12,835 134,405

Number of persons

92

69

The Company also provides the chief executive and some of the directors and executives with free transport and residential telephones

1.2.2 EMPLOYEE TURNOVER (% p.a)

Salaries, wages and other benefits include Rs 2.565 million (2008: Rs 2.099 million), Rs. 2.26 million (2008: Rs.1.620 million) and Rs 1.843 million (2008: Rs 2.041 million) respectively, in respect of provident fund contribution by the Company, provision for gratuity and staff compensated absences. With an employee turnover of 20.64% in 2008 and 14.19% in 2009. 1.2.3 PROFESSIONAL QUALIFICATION OF

CHIEF EXECTIVE MIAN RAZA MANSHA Mr. Mian Raza Mansha is the Chief Executive Officer of D.G. Khan Cement Company. He is also a director in the following companies. MCB Bank Limited Sui Northern Gas Pipe Lines Limited (MCB Nominee) Nishat Paper Products Company Limited Nishat Power Limited

D.G. KHAN CEMENT COMPANY LIMITED

Nishat Hotels & Properties Limited MNET Services (Pvt.) Limited D.G. Khan Cement Mr. Mansha has done his Bachelor of Arts Degree in International Relations from the University of Pennsylvania, where he was also the chairman of the Alumni Student Committee.

CHIEF FINANCIAL OFFICER INAYAT ULLAH NIAZI The chief financial officer Mr. Inayat has 17 years of experience in the banking / financial sector. Prior to joining Muslim Commercial Financial Services (Pvt) Limited, he has worked for some of the eminent financial institutions including, Bank Al Habib Ltd ( Capital Markets) since April, 2008. He has also associated with the Deutsche Bank AG Karachi since August, 1994 to December, 2005. He has extensive experience in the field of financial markets. In Deutsche Bank he has dealt with leading multinational financial institutions. He holds a MBA degree with a number of courses from reputed institutes. HEAD OF MARKETING FARID FAZAL HEAD OF OPERATION ZAKA UD DIN HEAD OF HUMAN RESOURCE NADEEM ANJUM Objective: Seeking a challenging opportunity in an organization of international repute as HR Head to utilize my experiences and skills for the promotion of organizations vision & mission. Summary: Since 1993 he is in the field of HR. He started his career as Secretary to Manager HR and presently working as Group HR Manager. He has very diversified HR experience, which covers Hotel, Banking, Cement and now in FMCG Sector. Mr. Nadeem Anjums specialities Oracle HRMS ,Strategic HRM/Planning Recruitment, Selection & Placement Performance Management Personnel Management Admininstration & Security Compensation & Benefits Training & Development

D.G. KHAN CEMENT COMPANY LIMITED

1.3 SOCIAL CONTRIBUTION ( % EXPENDITURE OF NPAT)
2009 Workers' profit participation fund Book value of asset written Donation Worker welfare fund 41,724 7,387 15,855 730,888

Social contribution expenditure (795,854) of Profit from operations 3,383,258 = 23.5%

2 KEY FACTORS

2.1 EMPLOYEE QUALITY AND MOTIVATION :

AVERAGE SALARY PER MONTH OF CHIEF EXECUTIVE MIAN RAZA MANSHA

CHIEF FINANCIAL OFFICER INAYAT ULLAH NIAZI

HEAD OF MARKETING ZAKA UD DIN

HEAD OF OPERATIONS- FARID FAZAL

HEAD OF HUMAN RESOURCE NADEEM ANJUM

2.2 INVESTMENT IN RESEARCH AND DEVELOPMENT ( % of cost of sales p.a)

2008 Investment 48,752 Cost of sales 10,528,046 Investment in research and development = 0.463 %

D.G. KHAN CEMENT COMPANY LIMITED

2009 Investment 38, 878 Cost of sales 12,563,681 Investment in research and development = 0.309 %

2.3 INVESTMENT IN BALANCING MODERNIZATION REPLACEMENT ( % OF PAID UP CAPITAL)

2008
Investments 6592,332 Paid up capital 2535,412 Investment in bmr = 260 %

2009
Investment 2968,879 Paid up capital 3042, 494 Investment in bmr = 97.5 %

2.4 EMPLOYEE PERMORMANCE AND MANAGEMENT SYSTEM

Assumptions used for valuation of the accumulating compensated absences are as under: 2009 Discount rate Expected rate of increase in salary Average expected remaining working life time of employee Expected withdrawal and early retirement rate 2008 12 % per annum 12 % per annum 11 % per annum 11 % per annum 12 years 12 years Based on experience 2009 OfficersWorkers (days)(days) 14.00 6.00 1.00 19.00 6.00 2.00 13.00 6.00 3.00 2008 OfficersWorkers (days)(days) 18.00 10.00 2.00

Average number of leaves - Utilized per annum - Encashed per annum - Utilized per annum in excess of accrued leave of 30 days - Encashed per annum in excess of accrued leave of 30 days

D.G. KHAN CEMENT COMPANY LIMITED

2.5 % OF EMPLOYEE COMPENSATION LINKED TO EMPLOYEE

Defined contribution plan The Company operates a recognized provident fund for all its regular employees. Equal monthly contributions are made to the fund both by the Company and the employees at the rate of 10% of the basic salary for officers and 10% of basic salary plus cost of living allowance for workers. Obligation for contributions to defined contribution plan is recognized as an expense in the profit and loss account as and when incurred.

Retirement and other benefits The main features of the schemes operated by the Company for its employees are as follows: Defined benefit plan The Company operates an approved funded defined benefit gratuity plan for all employees having a service period of more than five years for management staff and one year for workers. Provisions are made in the financial statements to cover obligations on the basis of actuarial valuations carried out annually. The most recent valuation was carried out as at 30 June 2009 using the "Projected unit credit method". The amount recognised in balance sheet represents the present value of the defined benefit obligation as on 30 June 2009 as adjusted for unrecognised actuarial gains and losses. Cumulative net unrecognised actuarial gains and losses at the end of the previous year which exceed 10% of the greater of the present value of the Company obligations and the fair value of plan assets are amortised over the expected average working lives of the participating employees.

Accumulating compensated absences The Company provides for accumulating compensated absences when the employees render service that increase their entitlement to future compensated absences. Under the service rules employees are entitled to 2.5 days leave per month. Unutilized leaves can be accumulated upto 90 days in case of officers. Any balance in excess of 90 days can be encashed upto 17 days a year only. Any further unutilised leaves lapse. In case of workers, unutilized leaves may be accumulated without any limit, however accumulated leave balance above 50 days is encashable upon demand of the worker. Unutilized leaves can be used at any time by all employees, subject to the approval of the Company's management. Provisions are made annually to cover the obligation for accumulating compensated absences based on actuarial valuation and are charged to profit and loss. The most recent valuation was carried out as at 30 June 2009 using the "Projected unit credit method". The amount recognised in the balance sheet represents the present value of the defined benefit obligations. Actuarial gains and losses are charged to profit and loss immediately in the period when these occur.

D.G. KHAN CEMENT COMPANY LIMITED

2.6 PERFORMANCE OF D.G.KHAN COMPANY LIMITED
FINANCIAL POSITION Current assets Current liablilities Property, plant & equipment Total assets Long term liabilites Shareholder's equity 2009 13,287,591 15,834,799 24,345,793 42,723,041 4,528,224 20,918,442 2008 19,202,591 12,054,718 22,977,894 51,992,934 8,538,959 30,080,257

RATIOS Current ratio (%) Gross profit to sales (%) Net profit to sales Earnings per share Basic (Rs.) Diluted (Rs.) 0.84:1 31.49 2.91 1.96 1.96 1.59:1 15.39 (0.43) (0.21) (0.21)

D.G.KHAN CEMENT sold equal to 93 % of its capacity which is significantly higher than industry average of 74%. This was only possible due to brand loyalty and customers satisfaction on the companys products. Liquidity crisis both in the country as well as in export markets created recession like situation. D.G.KHAN CEMENT is making all out effort to tap all potential export market. During the year sizable quantity of cement has been exported to Sri lanka and south African countries , in addition to traditional markets of Afghanistan and UAE. Going forward, your company also exported 177 thousand tons of clinker against 72 thousand tons last year. In spite of decline in cement sales , the net sales revenue ballooned by nearly 45% on account of stable cement prices in the country. Cost of sales during the period increased by nearly 18% due to hyper- inflation in the country and high fuel prices in the international markets, especially in the first half of the FY 2009. Analyzing the performance of the company we notice the following situations : 1. Current assets have decreased by 30 % in 2009 with current liabilities increasing by 31.3% which is evident by looking at the current ratio of 2009 from 1.59:1 to 0.84:1. 2. Total assets have also decreased by 17.82% whereas even long term liabilities have decreased by 46.9%. In addition , shareholders equity has decreased by 30.4 % in FY 2009. 3. Well even if such a situation has occurred the earnings per share basic and diluted have gone up from (0.21) to 1.96.

D.G. KHAN CEMENT COMPANY LIMITED