Advanced Financial Management Attock Cement: Submitted By: Ahsan Shahid Saad Bin Zahid Sehrish Shuja
Advanced Financial Management Attock Cement: Submitted By: Ahsan Shahid Saad Bin Zahid Sehrish Shuja
Advanced Financial Management Attock Cement: Submitted By: Ahsan Shahid Saad Bin Zahid Sehrish Shuja
Attock Cement
Submitted By:
Ahsan Shahid
Saad Bin Zahid
Sehrish Shuja
Overview of the presentation
Short term liquidity
operating cycle
long term solvency
Cost of Capital
ROA, ROE, Return on investment,
Break even, current operational level,
effective use of leverage
market price of the share.
Industry Analysis
We have taken DGCK results and ratios as a
representation of industry analysis
Attock Cement
Company incorporated in 1981
Listed on the KSE on june 2002
ACPL, is part of the Pharaon Group, which in addition
to investment in Cement industry has diversified
stakes in Pakistan mainly in the Oil and Gas Sector.
Attock Cement claims pioneer status in bringing the
Pre-calcination / Pre-heating dry process technology
to Pakistan.
Brand Name Falcon
Attock Cement
PRODUCTS
OPC
SRC
Portland Blast Furnace Slag Cement (PBFSC)
Financial Ratios
Operating Cycle
50
40
30
20
10
0
1 2 3
Activity Ratios
Receivable Turnover (times) 229.2 100.232 183.07 33.93
Average Collection Period (days) 1.5707 3.5917 1.97 10.59
Inventory Turnover (times) 10.8734 9.4925 6.77 25.72
Average age of inventory 33.1082 37.9248 53.14 14.00 Operating Cycle in
Operating cycle 34.6789 41.5165 55.11 24.59 60 days
Total Asset Turnover (times) 0.788 0.8502 1.22 0.24
50
40
30
20
10
0
1 2 3
Equit
y
30% Debt
70%
•Debt Ratio
•In the last three years Attock Cement has made a significant effort in order to
improve its debt to equity ratio.
•In 2007 70% of the Assets were financed by the long term and short term
debt.
•Reduced Debt because of increased financial costs
LONG TERM SOLVENCY
TIE ratio
Times interest Earned
Increase in EBIT by 154% 20
Ratio
18
16
Decrease in Finance cost in FY09 14
12
10
8
6
4
2
0
1 2 3
DOL DFL DCL
•means that a 1% increase in 4 egree of Combined Leverage
D
sales would increase net 2008 2009
income
by 3.47% in FY 09. 3
•Low risks from operating
2
expenses and Finance
Charges 2
•If a future sales forecast is
slightly higher than what
actually occurs, this could
lead to a small difference 0
between actual and budgeted
cash flow, which will not 0
1 2
greatly affect a firm's future - DOL DFL DCL
operating ability.
Analysis of Solvency Risk
A decline in debt ratio indicates that Attock Cement is
able to control its leverage impressively despite high
financing costs.
Its DCL ratios also show that the company financial
and operational risks are at very low levels as
compared with the industry which has an average DOL
of 13%. In the long run Attock would not have any
major risks associated with solvency and it is expected
to outperform the industry in the next year as well.
Breakeven Analysis
Components
Fixed Cost
Administrative Expense
Finance Cost
Depreciation (vehicles)
Variable Cost
COGS
Other Operating Expenses
Sales
Performance
2008 2009
Rs 1.86 Billion Rs 1.006 Billion
46.08% Decrease in
Breakeven level
70.15% Increase in Sales
5.1% Increase in Fixed Cost
Operational Level (Sales – B.E.)
2008 2009
Rs 3.134 Billion Rs 7.503 Billion
139% Increase in Operational
Level
Market Ratios
decrease in 2008
majorly because of
decrease in income 20.89
in 2008. With net
sales almost 11.04 6.03
doubling in the year
2009 the EPS has
shown an 1 2 3
improvement
A higher P/E ratio in FY08
P/E Ratio
suggests that investors are
14
expecting higher earnings
12 growth in the future
compared to the overall
10
market as they are paying
more for today’s earnings in
8
anticipation of future
6 earnings growth
0
1 2 3
Conclusion
To study the financial performance of Attock Cement,
based on measures such as liquidity, efficiency,
profitability, leverage and coverage
Huge impact of the economic condition of a nation on
its industrial environment in general and on every
player of each industry
2008 proved as a very crucial economic year
Attock Cement impressively controlled its venture in
this risky area of financing through reduced long term
financing, lesser trade payables and accrued markup
Attock Cement displayed greater prudence in
financing its assets within a challenging economic
situation in order to keep its head floating above water.
Attock Cement has displayed better receivable and
credit management as against D. G. Cement,
indicating an upgraded quality of receivables and the
firm’s success in its collection policies in year 2008 as
well
During FY08 as a result of the SBP’s tight monetary
stance, leading to higher lending rates
Inflationary trend prevailing in the economy cast its
effect on the prices of raw materials such as coal and
furnace oil, leading to greater cost of production and
subsequent greater distribution expenses
Attock Cement in year 2008 as well was enjoying
better profits in comparison to whole industry and as
far as 2009 is concerned it has over smarted every one
by 70% increase in sales
Recommendations
The cement industry is one of the strengths of Pakistan’s
economy, and has potential to produce more to meet
international demands. It should explore as many regions it
can cover, so not only it can expand its own market but also
raise its standards to global level.
The new budget announces a relaxed monetary policy,
interests rates will be cut down and concessional benefits
from the government for local development in FY10. The
industry must take advantage of the upcoming expected
lower interest rates but always be on alert to keep debt on
lower side and finance more through equity.
Adding more production capacity to boost sales,
as there is expected potential for new projects and
requirement to complete existing projects and
upkeep..
Passing on the cut from Fed to consumers to
promote demand and encourage investment
ACPL requires to improve its liquidity ratios to
meet its short term payables and maintain good
cash flow for investments and reinvestments.
Collection policy needs to be improved, the
collection criteria should be made stricter.