Lucky Cement Report PDF

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Lucky Cement Analysis Report...

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Classification: Public

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Contents Profit & Loss Account - Cement Companies Comparative Analysis – 2019......................2 Balance Sheet Comparative Analysis.....................................................................................3 Summary of Cash Flow Statements........................................................................................4 Lucky Cement Six Years Financial Analysis..........................................................................8 D G Khan Cement Six Years Analysis..................................................................................13 Kohat Cement Six Year Analysis..........................................................................................17 Cherat Cement Six Years Analysis.......................................................................................21 Comparative Analysis of all four companies.......................................................................27 Graphical Representation 2018

2019.................................................................................28

Market Value..........................................................................................................................34 Subsidiaries, Associated and Joint Ventures Companies....................................................34 Related Party Transactions...................................................................................................40 Capacity Utilization...............................................................................................................41 Non Finance Factors..............................................................................................................42

1

Profit & Loss Account - Cement Companies Comparative Analysis – 2019

Rs in Million s

Lucky Cement

V

2018

2019

Sales

47,541

48,021

100%

Cost of Sales

(30,589)

(4,037)

Gross Profit

16,952

H

DG Khan Cement 2018

2019

1%

30,66 8

40,51 6

-8%

87%

(21,92 8)

(35,15 4)

13,983

29%

18%

8,740

5,362

(1,992)

(2,728)

-6%

37%

(898)

(1,089)

(1,227)

-3%

13%

Operatn g Profit

13,870

10,027

21%

Finance Cost

-

-

Other Income

(1,248)

2,194

Profit Before Taxaton

15,118

Taxaton Profit After Taxaton

Distribut on Cost Administr aton Cost

V

H

Cherat Cement

H

13,4 38

15,64 5

15%

(9,11 3)

(11,43 9)

18 %

-8%

4,32 5

4,206

27 %

-3%

(396)

-2%

18%

(96)

(118)

1%

23%

(245)

(293)

-2%

20%

(203)

(254)

2%

25%

33 %

2,503

2,190

14 %

13%

4,07 6

3,722

24 %

-9%

537 %

356

(1,142 )

-7%

421 %

(106)

(46)

0%

-57%

81

106

1%

31%

361

348

2%

-4%

2,147

1,047

7%

51%

3,97 0

3,676

23 %

-7%

(80)

(714)

-5%

793 %

(990)

(1,207 )

8%

22%

2,132

1,762

11 %

17%

2,97 9

2,468

16 %

-17%

14,38 8

15,86 3

60 %

(11,24 9)

(12,97 9)

13 %

39 %

3,139

2,883

(1,305 )

-3%

45 %

(337)

(624)

(628)

-2%

1%

28%

7,889

5,294

13 %

-

(519)

(3,304 )

-8%

5%

276 %

3,026

2,497

6%

12,221

25%

19%

7,370

1,990

5%

(2,921)

(1,730)

-4%

41%

(1,467 )

(381)

-1%

12,197

10,490

22%

14%

8,837

1,609

4%

17 % 73 % 74 % 82 %

100 % 82 %

there is high increase in sales of DG Khan i.e. 32% Lucky Cement Distribution cost is more than administration cost however Cherat and Kohat administration cost is more. Kohat cement has very high tax deduction Net income decreased from previous year but DG Khan has very low 82% profit in 2019 than 2018

2

V

10%

32 %

 

Kohat Cement 2019

2019

 

H

201 8

2018 100 % 87 %

V

10 0% 73 %

16% 26%

Balance Sheet Comparative Analysis Rs in Millions Asset Property, Equipment Intangible Asset Long Term Invest Long term Advance Long term deposit Current Asset

Lucky Cement

V

H

DG Khan Cement

H

Cherat Cement

V

H

Kohat Cement

V

H

2019

19

19 vs 18

2018

2018

2019

19

19 vs 18

23,80 5

26,89 0

76%

13%

9,113

21,873

70%

140%

15

18

0%

20%

15

13

0%

-13%

396

254

1%

36%

3,655

3,691

12%

1%

0.6

0.7

0%

17%

0

90

0%

2249%

19

21

0%

11%

125

38

0%

-70%

2018

2019

19

19 vs 18

2018

2019

19

19 vs 18

40,913

57,276

46 %

40%

76,493

79,98 0

64 %

5%

55

18

0%

-67%

-

-

24,981

34,314

27 %

37%

16,259

12,27 6

10 %

91

99

0%

9%

574

237

0% 48 % 27 % 10 0%

16%

6,281

8,093

23%

29%

10,407

5,606

18%

-46%

3%

30,51 9

35,27 9

100%

16%

23,316

31,314

100%

34%

19 vs 18

2018

2019

19

19 vs 18

2018

2019

19

19 vs 18

11,17 3 15,69 3

11,75 6 17,32 7

33%

5%

17,976

19,672

63%

9%

49%

10%

1,660

6,118

20%

269%

3

3

0%

0%

59,269

-22%

29,075

15%

121,88 9

60,73 3 33,62 3 125,9 41 2019

19

77,13 4 20,76 5 34,24 7 125,9 41

61 % 16 % 27 % 10 0%

42,956

33,379

Total Asset

108,99 9

125,08 9

27 % 10 0%

Finance

2018

2019

19

19 vs 18

2018

86,367

94,318

75 %

9%

70,928

7,395

7,193

6%

-3%

22,201

55%

22,553

15%

121,88 9

Shareholde r Equity Long term Deposit Current Liabilities Funds Invested

V

15,237

23,578

108,99 9

125,08 9

     

19 % 10 0%

24% 59% 2%

9% -6% 52%

3,652

6,196

18%

70%

3,679

5,523

18%

50%

3%

30,51 9

35,27 9

100%

16%

23,316

31,314

100%

34%

Lucky cement has 40% increased in asset however Kohat had 140% Lucky cement 46% are Property and equipment and highest is of Cherat Cement Current asset decreased of Lucky Cement however Cherat Cement it increased by 29% Most of lucky cement asset is LT invest and CAsset however for DG Khan its LT deposit and for Cherat and Kohat its only the Current asset. Lucky cement is more finance by Equity however Kohat has high long term deposits. Everything common in all is current liabilities has increased more than others but Kohat Long term deposit increased drastically

3

Summary of Cash Flow Statements Lucky Cement

   

Net cash flow from operating activities is increased in 2015 but then remained constant till 2019 Cash used in investing activities shows drastic increase in 2019 as compared to 2014 Outflow from financing activities is same for all years except in 2018 it was high of all till 2017 cash and bank balance was positive but due to investment it decreased in onward from 2018 to 2019

4

DG Khan Cement

 

More CASH was generated from operations and there is very high increase of finance cost means company paid their interest and loans payment. 100% increase in long term deposits

   

land and property is less done in 2019 then 2018, there is reduction of -60% Double investment is done equity investment Significant decrease of cash flow from long term finances i.e. -45% -43% reduction shown in paying out the dividends Investment in

5

Cherat Cement



   

increase in finance cost 100% incease in trade debts 471% increase in inventory it means wrong production planning that is huge increase stock and sales gone down significantly. It is also due to the over all market condition -64 decrease in investment in property and equipment. Less dividends paid then 2018

6

2 2 0. 7 %

Kohat Cement

      

Shareholder equity increased from 8,587 to 19,762 which significant increase of floating of shares in market. 227% increase in L.T liabilities from 2014 to 2019 Current Assets decreased by 14% 23% increase in sales from 2014 to 2019. However there was a slight dip in sales during 2016 to 2017 9% increase in cash flow from operations 366% increase in investing activities from 2014 to 2019 Significant reduction in financing activities

7

Lucky Cement Six Years Financial Analysis Financial Ratios

Since 2014 to 2017 the company has been experiencing almost the same GP margin around 45 percent however it reduced for the next two years to around 29% in 2019. This is mainly attributed to change in sales mix from cement to clinker that resulted in lower net retentions. Moreover, higher fuel and other costs also contributed in the decrease of gross profit. Also the operating cost has increased from around 60% to around79% in the last two financial years because the distribution costs has risen by 37% since the last year. Also as a result of this rising cost the profit has decreased to 25% in 2019 from around 40% in the last five years. Also the profit after tax has reduced by around 5% in the last five years that is mainly attributable to decreased net retentions and higher fuel and other costs. Moreover this has reduced the EBITDA to sales from 38% in 2014 to 28% in 2019. Also the operating leverage gas declined over the period of six years. Since the profit declined it impacted the operating leverage, Return on Equity after tax ( ROE) and Return on Capital Employed (ROCE).The ROE declined to almost 50% in the last six years and ROCE also reduced by almost 50% in the last six years.

Liquidity Rations

In 2014 the company’s current ratio was 4.32 that shows the company had more liquid assets which later reduced to 1.42 in six years as the current assets declined and the current liabilities increased. Also this impacted the Quick acid test ratio in the same manner. Since the past two years the company’s current assets have declined but stock in trade increased by 50% and prepayments also raised by almost 100%. Also company’s cash also reduced by 8

50% from 2018 to 2019 that caused the major reduction in all liquidity ratios along with the increase in payables that increased by 40% and short-term borrowings that also increased by almost 40%. Cash to current liabilities also declined from 1.89 to 0.66 as a result. Also cash flow from operating activities didn’t use much of the company’s cash as this ratio remains almost the same over the last six years.

Activity Ratios

Inventory turnover ratio is also around three over the last six years meaning the company has used or replaced its inventory almost three times in the last year. Also the days in inventory formula shows that the company has held its inventory for almost 110 days before using or replacing it. There is not much change throughout the last six years, meaning that there is no efficiency or efficiency in using the inventory over this time period. Also the Debtor turnover also hasn’t change much in the last six years except that it has reduced by two times meaning it is now less efficient in collection its receivables. Also the DSO has reduced by 1.5 days in the last six years showing the inefficiency in collecting the receivables. Credit turnover has reduced to 2 times in the last three years from six in 2014 as the Days in payables has increased from 57 days to 173 days in last three years meaning that the company is now taking more time in making payments to its creditors which can increase the cash cycle and benefit the company. Operating cycle is reducing over the six-year period from 66 days to -40 days which means the company is converting its production into cash in less much less days than before, showing the efficiency of the company. Also both total asset turnover and fixed assets turnover ratio has declined over the period because the fixed assets have increased as there in a increase in PPE.

Investment Ratios

9

Earning per Share for the company has remained around PKR 35. In 2019 it fell to PKR 32 from PKR 37 in the last year. Also the Price Earning Ratio has reduced in the last five years to 11 times from 13.5 times. Also of the total earnings the company has paid about 20% in dividend to shareholders. This percentage has also reduced from last year because in 2019 the profit also declined. Also as a result dividend per share also declined from PKR 13 to PKR 6.5 in 2019. Also the break up value has increased from PKR 153 to PKR 291 and market value has declined in the market from PKR 836 to PKR 380 and therefore the Price to Book ratio has declined from 3% to 1.3%.

Capital Structure Ratios

Company’s long-term finance is zero along with the any portion of long term that is falling in current liability except for 2014 therefore financial leverage and debt to equity is zero for all these years. The cost of debt is 13.15% for year 2014 for the current portion of long-term liability and the interest coverage ratio is 425 times.

Free Cash Flow (FCF)

The company’s FCF has been decreasing meaning that the company’s investments have increased, and the cash is used to finance those cost. The company must make must its acceptable liquidity level.

10

Du Pont Analysis

The main highlights of DuPont analysis are as follows: 1. The profit margins for the company declined during current year on account of higher costs mainly due to increase in prices of coal and other fuel prices. 2. The Asset base of the company has improved during the current year mainly on account of expansions and investment projects. 3. The Financial Leverage ratio for the Company has improved due to incremental Assets base and Equity strength of the balance sheet as the Company is mainly 11

financed by Equity. The Equity has further strengthened due to additional profitability which has in turn strengthened the retained earnings account. Conclusion Overall, the operational & assets efficiency and Equity Multiplier are monitored on a regular basis to remain aware of the financial health of the Company. The DuPont analysis for the last 6 years depicts a positive Return on Equity (ROE) for the Company. The ROE from 2014 has gradually declined due to investments in capital intensive projects which are expected to generate returns in the coming years.

D G Khan Cement Six Years Analysis Profitability Ratios

From 2014 to 2016 the company was able to increase its Profit before tax from 29.58% to 42.02% however in the next three years there was a declining trend and in 2019 profit fell to just 4.91% which shows that it has c=declined by 86%. Gross Profit, Profit after tax and EBITDA all are showing same trend that the profit was increasing from 2014 to 2016 but later started declining and in 2019 there was a huge decline. Also as a result the Return on Asset and Return on Equity declined in the last there years. Cost of sales (%age of net sales) for the year increased to 86.7% against 71.5% in 2018 showing the increase of 21.2%, continuing the increasing trend from 2017. This was the highest in the last ten years which had the average of 69.5%. Share of Raw material and packing material costs %age to manufacturing cost fell by 12.6% along with salaries and wages that fell by 10.4%. These expenses although showed increase in absolute value due to new operational Hub plant, exchange rate devaluation and inflation, registered decline due to massive increase in share of 21.7% in electricity and gas expense in manufacturing cost. Share of depreciation in manufacturing cost decreased by 9.7% due to revision in the estimated life of property plant and equipment that result in annual decrease of Rs 2 billion for FY19 in depreciation expense. Furnace oil and coal expense showed slight movement in share of manufacturing expense during the year. Cement production remained under-utilized resulting in the increase...