Final Project Profitability Ratio Analysis Cherat Cement, DG Khan Cement & Fauji Cement For The FY2013, FY2014 & FY2015

1. ABDUL MAJID
BS120402838
BS (BUSINESS ADMINISTRATION)
FINANCE
1

2. Profitability Ratio Analysis
of
Cherat Cement, DG Khan Cement
&
Fauji Cement
2

3. Introduction of the Project
Financial ratios express the relationship between one data points to another data
point. Financial ratios are like financial temperature, which gives state of health of
business and provide useful information, financial ratio analysis conduct on the
base of company’s financial reports.
Management, investors, creditors, shareholders always wants to seek up-to-date
status of companies. So for this reason different type of ratios like profitability,
liquidity, activity & leverage help to evaluate the company’s performance.
Mostly investors takes interest how the performance of company in terms of
profit & net earnings, and how company can increase their wealth in forms of
profits, and dividend.
Profitability ratio is most popular ratio, which express the ability of company to
generate revenue and profits. Profitability ratio tells us how much a company earns
its profits as compare to its sales, assets and expenses etc.
3

4. 4
Profitability ratio tells us the strength/ weakness of a company itself and
comparison in same industry
Profitability ratios tell us which company’s income is exceeding to its expenses
and these results helps management, investors, shareholders & creditors to access
overall performance.
Pakistani Cement industry
Pakistani cement industry is playing vital role in economic development sector.
Pakistani cement industry is now recognizing as a major player in regional market.
Government is taking concrete steps to revive the national economy & it has
positive effects on the cement sector.
Project is about profitability ratio analysis of three important cement companies
of Pakistan
I.Cherat Cement Company Limited
II.DG Khan Cement Company Limited
III.Fauji Cement Company Limited
For The FY 2013, FY 2014 & FY 2015

5. Objectives
• Objectives of this project is to analyze how cement companies works,
what are their strength, weakness, threats & opportunities and which
company is more reliable and reasonable than others. Profitability
ratio analysis is the key evaluating measure of efficiency and financial
strength.
• How effectively, selected companies are maximizing their profits by
controlling their cost, selling and Interest expenses & to make ratio
comparisons of different periods.
• To study financial health of Major Players & analyze the capital
structure of the companies with the help of ratios.
• To offer appropriate suggestions for the better performance & educate
to its shareholders.
• Making a comparisons of company s financial performance against
past years’ performance and with other companies in same industry.
5

6. Significance of Project
• Accurate Results of financial ratio analysis has great significance
and provides more benefits to various stakeholders whom
directly or indirectly linked with the company, like investors,
creditors, shareholders, tax department, banks and Govt. etc.
• Helpful to administration of the business by providing sparkler
clear picture regarding important aspects like, financial health,
net profit margins, gross profit margins, expense ratio, ROA,
ROE, Total shareholder equity, EPS, DPS, and P/E ratio etc.
• Research study is also beneficial to employees and offers
motivation by showing how actively they are contributing for
company’s growth and profitability.
• Investors who are interested in investing in the company’s
shares, will also get benefited by going through the study and can
easily take a decision whether to invest or not to invest in the
company’s shares.
6

7. Data Collection
Sources
Secondary
• Accounting and finance Books
• website
• Newspapers
• Companies Annual Financial Reports.
For collection of data it is used different types of tools according to the project
and research method.
 Company assessment Reports
 Read out company profile
 Companies’ annual financial reports
 Stock exchange
 Internet past reports and articles 7

8. Data Processing
• For preparing of project or report we use different types of
tools, tools helps to evaluate a company’s performance. I use
most important and valuable tool that is “financial ratios“.
Different types of ratios help to analyze and also provide
useful information about financial health and current status of
company. Financial reports (Balance sheet, Income statement
& cash flow statement) are use to calculate Ratios. Financial
ratios provide complete & clear picture to management for
decision making and also useful for Government,
shareholders and general public.
• Microsoft Word, Microsoft Excel work sheets & Calculator
are used to calculate the different ratios analysis and for Bar
Charts
8

9. Data/ Ratio Analysis
All these profitability ratios are calculated in this project
and used to make financial ratio analysis:
• Gross Profit Margin
• Operating income Margin
• Net profit Margin
• Return on assets
• DuPont Return on assets
• Operating assets turnover
• Return on operating assets
• Return on total equity
• Sales to fixed asset
9

10. Gross Profit Margin
Gross profit Margin = Gross Profit / Net sale * 100
PKR In Millions
FY 2013 FY 2014 FY 2015
Cherat
Cement
2190/6294*100
=34.79 %
2102.650/6451.330
*100
=32.59%
1983.545/6565.41
6*100
=30.21%
DG Khan
Cement
9326.007/24915.924
*100
=37.42%
9257.568/26542.50
9*100
=34.87%
9455.2/26104.611
*100
=36.22%
Fauji
Cement
5080/15968*100
=31.82%
6084/17532*100
=34.70 %
7027/18642*100
=37.69%
10

11. Graphical Analysis of Ratio
11

12. Operating profit Margin
Operating profit Margin=Operating Profit / Net sale * 100
PKR In Millions
FY 2013 FY 2014 FY 2015
Cherat
Cement
1585/6294*100
= 25.18 %
1716/6451.33*100
=26.60 %
1709/6565.42*100
=26.03%
DG
Khan
Cement
8090.737/24915.924*
100
=32.47 %
8460.256/26542.509*
100
=31.87 %
9828.681/26104.611*
100
=37.65 %
Fauji
Cement
4598/15968*100
=28.79 %
5552/17532*100
=31.67 %
6386/18642*100
=34.25 %
12

13. Graphical Analysis of Ratio
13

14. Net Profit Margin
Net Profit Margin = Net Profit/ sales *100
PKR In Millions
FY 2013 FY 2014 FY 2015
Cherat
Cement
1228/6294*100
=19.51 %
1316/6451.33*100
=20 %
1288/6565.42*100
=19.61%
DG
Khan
Cement
5502.169/24915*1
00
=22.08 %
5965.498/26542*100
=22.48 %
7624.68/26104*100
=29.21 %
Fauji
Cement
2097/15968*100
=13.13 %
2626/17532*100
=14.97 %
4116/18642*100
=22.07 %
14

15. Graphical Analysis of Ratio
15

16. Return on Assets
Return on Asset = Net income / Average Total Assets *100
PKR In Millions
FY 2013 FY 2014 FY 2015
Cherat
Cement
1228/4888*100
=25.12%
1316/4978.5*100
=26.44%
1288/7947.5*100
=16.20%
DG Khan
Cement
5502.16/57105*100
=9.64%
5965.498/68404.394
*100=8.72%
7624.68/73836.756
*100=10.33%
Fauji
Cement
2097/30504.257*10
0=6.88%
2626/29843.1905*1
00=8.94%
4116/29954.5*100
=13.74%
16

17. Graphical Analysis of Ratio
17

18. DuPont Return on Assets
ROE = Profit margin * Total Asset turnover *Financial
Leverage
Profit margin =Net profit/sales)
(Total asset Turnover= Net Sales/Average Total Assets)
(Equity Multiplier= Total Assets/Total equity)
PKR In Millions
Companie
s
FY 2013 FY 2014 FY 2015
Cherat
Cement
19.51*128.76*1
.3/100=32.65
20*129.59*1.32/
100=34.21%
19.61*82.80*1.179/10
0=29.4%
DG Khan
Cement
22.08*43.63*1.
32/100=12.71%
22.48*38.801*1.
193/100=10.40%
29.21*35.35*1.19/100
=12.28%
Fauji
Cement
13.13*52.34*1.
90/100=13.06%
14.97*58.7*1.94
/100=17.04%
22.07*62.23*1.75/100
=24.03%
18

19. Graphical Analysis of Ratio
19

20. Operating Assets Turn over
Operating Assets Turn over = Operating Assets/ Total Non-Cash Assets.
PKR In Millions
FY 2013 FY 2014 FY 2015
Cherat Cement 3244178/94640
00-18354
= 34.34%
3320210/643100
0-17116
= 51.77%
3061855/5065000-
25548
=60.76%
DG Khan
Cement
29958970/7439
1443-257723
= 40.42%
29,832,625/7328
2069- 1309026
= 41.45%
28951966/74391443-
468881
= 39.17%
Fauji Cement 23880553/3052
8290-2296603
=84.85%
23881426/29381
332-842983
= 83.49%
24734325/30305049-
1702171
=86.47%
20

21. Graphical Analysis of Ratio
21

22. Operating ROA
Operating ROA = EBIT/ Average total Asset
(Average total asset = Opening +Ending Assets/2)
PKR In Millions
FY 2013 FY 2014 FY 2015
Cherat
Cement
1585/4888*100
=32.42%
1688/4978.51*100
=33.90%
1671/7947.5*100
=21.02%
DG
Khan
Cement
7095.86/57102*100
=12.42%
7851.39/68404.39*10
0
=11.47%
9545.18/73836.75*100
=12.92%
Fauji
Cement
3085.52/30504.25*10
0=10.11%
4509.50/29843.19*10
0=15.10%
5679.89/29954.50*100
=18.96%
22

23. Graphical Analysis of Ratio
23

24. Return on Equity
Return on Equity = Net income / shareholder Investment *100
PKR In Millions
FY 2013 FY 2014 FY 2015
Cherat
Cement
1228/3709*100
=33.10%
1316/4864*100
=27.05%
1288/8026*100
=16.04%
DG Khan
Cement
5508.16/47956.79
*100=11.48%
5965.49/61516.53
5*100=9.639%
7624.68/62296.07
*100=12.24%
Fauji
Cement
2097/15936.36*1
00=13.16%
2626/15788.187*1
00=16.64%
4116/17418.984*
100=23.63%
24

25. Graphical Analysis of Ratio
25

26. Sales to Fixed Assets
Sales to Fixed Assets = Sales Revenue/ Average Fixed Assets
(Net sales= Gross sales- returns)
(Fixed Assets= Property, Plant and Machinery etc.)
PKR In Millions
FY 2013 FY 2014 FY 2015
Cherat
Cement
6294/2473.4325
=2.54Times
6451.33/3220.21
0=2.0Times
6565.42/3244.178=
2.02Times
DG
Khan
Cement
24915.924/2893
4.979=0.8611
Times
26542.509/29832
.625=0.889Times
26104.611/29958.9
70=0.871Times
Fauji
Cement
15968/24734.32
5=0.64 Times
17532.277/23881
.426=0.74Times
18642.358/23880.5
53=0.77 Times
26

27. Graphical Analysis of Ratio
27

28. Conclusion/Findings
• Overall profitability analysis shows DG Khan Cements the best company with highest
level of operating net profit margins. It is showing their best performance in industry and
creditworthiness. DG khan cement over all finance cost decreased due to Effective
financial management.ROE increase with high profit margin. Operating assets turnover
ratio declined because of low exports. ROE has increasing trend. DG Khan exports are low
due to peace conditions is not good in Afghanistan. They have capacity to produce more
profits which is their strength.
• Fauji Cement large in the size and has increasing trend in net sales. Operating & net profit
margin increasing.ROE has increasing trend continuously. Showing best performance in
ROA with best utilizing of its Assets. Fauji cement is declining operating assets turnover
but maximum utilizing its assets, which is good sign of performance. Sales to fixed assets is
showing little increasing in FY 2015. Fauji cement is performing well.
• Cherat cement is smaller in size. Although it is facing low gross profit margin & net profit
margins due to primarily expansion of new line which are under process but their timely
decisions and change according to demand is well. Pak China economic corridor will
increase demand. Cherat Cement increases its sales as compare to previous years. The
negative variances are primarily due to ongoing expansion projects are in line and low
export to Afghanistan due to peace condition is not good. Overall results are productive and
expected to grow in future.
28

29. Recommendations
•Cherat Cement and Fauji should complete project in time for increasing their sales & profit
margins.
•DG Khan Cement and Fauji Cement should increase their domestic sales to cover the sales
losses due to low export in Afghanistan and other countries for peace problem.
•Cherat Cement face negative operating assets turnover ratio, it completes all lines
immediately, and DG khan also increase domestic sale for better utilization of its assets or
converted into cash for stronger health.
•DG khan Cement and Cherat Cement improve their ROA ratio with increase of net sales
and, use cost & expenses control strategies.
•DG Khan Cement and Fauji Cement increase more domestics sales to increase net income
for shareholder point of view, in this way they can increase dividend for investors
•DG khan Cement and Fauji Cement search new exports markets or increase domestic
supply and utilize their all plants for increasing sales to fixed assets ratio and Cherat Cement
complete all line for better sales to fixed assets ratio.
29

30. Thank You
30