continued from ANALYSIS OF 2013 BALANCE SHEET OF LUCKY CEMENT LIMITED
LIQUIDITY RATIOS
Current Ratio
LCL had Rs.1.09 of assets for every Rs.1
of current liability in 2008, it decline to 0.86 in 2009 due to 5.96% decline
in current assets and increase of 18.37% in current liabilities, current ratio
further decline in 2010 to 0.71 this is because of a huge decline of 12.55% in
current assets and 5.97% increase in current liabilities in 2010. In 2011 it
increased a bit to 0.88 due to increase of 37.44% in current assets and a
little increase of 10.94% in current liabilities. Current ratio shows a
significant increase in 2012 of 2.64 it is mainly because of a huge decline of
66.12% in current liabilities then the ratio further increased to 3.38 in 2013
due a huge increase of36.20% in current assets and a little increase of 6.11%
in 2013.
Quick Ratio
LCL’s Quick ratio is revealing a slight
downward trend from 0.46 in 2008 till 0.18 in 2011 this is mainly due to decline
in quick assets and increase in current liabilities. In 2012 it increased to
0.8 which is mainly due to increase in cash and other receivables further it
goes up to 1.66 in 2013 which is due to a huge increase in cash i.e.
Rs.1,961,418,000 and LCL’s investment of Rs.110,062,000 in marketable
securities.
Cash ratio is showing a mixed trend it
declines in 2008 to 0.9 due to the shortage of cash then a small increase of
0.1 in 2009 it again shows decline in 2010and 2011 to 0.03 then cash increased
significantly in 2012 to Rs.844,422,000 which increased the cash ratio to 0.23
in 2013 it further increased to 0.73 due to huge increase of Rs.1,961,418,000
in cash amount.
Cash Conversion Cycle
Cash conversion cycle is showing the LCL’s
operating cycle that how many time it takes to convert its investment into
cash. It is comprises of Inventory turnover days, receivable turnover days and
payables turnover days.
LCL has converted
its investment into cash in 48.43 days in 2008 then this conversion period
expands till 68 days in 2013 this due to increase in inventory turnover days
then early repayment of current liabilities.
SOLVENCY ANALYSIS
The following
ratios show the solvency of LCL whether it is stable and have the ability to meet
its long-term obligations.
DEBT RATIOS
Debt to Asset Ratio
LCL Debt to Asset ratio is 0.46 in 2008
then it declines to 0.39 in 2009 it continuously declining to 0.18 in 2013 this
declining trend is due to payment of long-term debt and continuous growth in
assets.
Debt to Equity Ratio
Debt to equity ratio is also showing
continuous downward trend due to increase in equity and decrease in
liabilities. It was 84% in 2008 then it declines to 65%, 53%, 48%, 22% in 2009,
2010, 2011, 2012 , now LCL has 22% debt as compared to 84% debt in 2008. LCL
has managed to reduce its financial risk and moved toward equity based
financing.
COVERAGE RATIOS
Interest
Coverage Ratio
Interest coverage ratio has a mixed trend
it was 19.20 in 2008 then it declines to 5.19 in 2009 due to huge increase of
875.97% in finance costs as the result of 18.37% increase in current
liabilities and increased interest rates. In 2012 it climbed to 33.87 due to
increase in earnings and decline in finance costs as a result of 52.5% and
52.8% decline in long-term liabilities and current liabilities respectively.
In 2013 it reaches the all time high
132.09 times LCL can cover its interest obligations due to 34% increase in EBIT
and 64.75% decrease in finance costs due to low interests on liabilities.
VALUATION RATIOS
EPS
LCL earned 9.84 times per share in 2008 it
increased to 14.21 in 2009 due to 71.66% increase in net income which is Rs.1,918,878,000
then it falls to 9.7 in 2010 because of 31.74% decline in net income that is
Rs.1,459,091,000 then recover and increased to 12.28 times in 2011, 20.97 times
in 2012 and the highest ever EPS of 30.04 times in 2013 this is due to
continuous increase in net income which increased upto 43.22% i.e. Rs.
2,931,532,000 in 2013 while outstanding shares remain same.
PRICE EARNING RATIO
LCL Price Earning
ratio was 9.96 times in 2008 then it declines to 4.12, 6.4, 5.77, 5.5 and 6.98
times in 2009, 2010, 2011, 2012 and 2013 this is due to fluctuations in market
price of shares.
DIVIDEND PAYOUT RATIO
LCL has a tight dividend policy it has not
paid dividend in 2008 then its dividend payout ratio increased to 28.15% in
2009 it grows further to 41.23% due to dividend payment per share increased to
Rs.4 in2010 it declines to 32.58% in 2011 28.61% and 26.63% (Rs.8 dividend on
each share) in 2013 due to increase in shares outstanding.
Here the analysis of the Lucky Cement limited has been completed it's performance have been measured through comparing it's performance from its past year performance now you can see the more market based comparison and its better position in the market.
INTERCOMPANY ANALYSIS
+Lucky Cement is an industry giant that is why i am comparing it with the companies which have strong presence in the Cement market of Pakistan so its major competitors are +DG Khan Cement company, +Attock Cement Comapny and +Fauji Cement Company. Here is the intercompany analysis.
1. +DG KHAN CEMENT COMPANY
+D.G. Khan
Cement Company Limited, (DGKCC) is amongst largest cement manufacturers of
Pakistan with a production capacity of 14,000 tons per day (4.200 million
tons/annum). DGKCC has three cement plants, two plants located at Dera Ghazi
Khan and one at Khairpur Distt. Chakwal. All the plants are based on latest Dry
Process Technology. The Company operates through a countrywide distribution
network managed by different Regional Sales offices. The Company's products are
preferred on projects of national repute both locally and internationally due
to the un-parallel and consistent quality. The Company is listed on all the
Stock Exchanges of Pakistan.
2. +ATTOCK CEMENT COMPANY
ACPL is
a member of Pharaon Group of Companies operating in Pakistan. ACPL's
projects was conceived in 1981. The projects is a Pak-Saudi venture and
has involved an initial capital outlay of around Rs. 1.5 billion with a foreign
exchange component of around US$ 45 million. ACPL's
manufacturing plant is located in Tehsil Hub, District Lasbela,
Baluchistan, at a distance of about 45 kilometers north west of
Karachi. ACPL has attained ISO 9001:2000 and ISO 14000 certifications from
Lloyds Register Quality Assurance (LRQA) in 2002 and 2006.ACPL is making
substantial contribution to the country's economy and deposited over Rs.2,600
Million (US$ 30 Million) to the national and provincial exchequer in the form
of Excise Duty, Sales Tax, Special Excise Duty, Royalty and Income Tax during
the year 2010 - 2011.
3. +FAUJI CEMENT COMPANY
A longtime leader in the
cement manufacturing industry, +Fauji Cement Company, headquartered in
Rawalpindi, operates a cement plant at Jhang Bahtar, Tehsil Fateh Jang,
District Attock in the province of Punjab. The Company has a strong and
longstanding tradition of service, reliability, and quality that reaches back
more than 15 years. Sponsored by Fauji Foundation, the Company was incorporated
in Rawalpindi in 1992.
Lucky cement has the highest gross profit
margin of 44.22% as compared to its competitors this is because of its cost
controlling initiatives use of alternative fuel while DG khan has highest
operating profit ratio of 32.47%, Lucky is the second one in this which is
31.18%. Here again Lucky has the highest net profit ratio of 25.69% due to decreased
finance costs. Attock cement has more return on assets as compared to others
i.e. 33.86% then Lucky has 21.26%, 26.88% is the highest Return on equity
provided by Attock cement, Lucky is in the next one with 26.15%.
Lucky cement
inventory turnover is 47.9 days which is quite low as compared to other
competitors while Attock cement has the good inventory turnover which is 25.87
days. Fauji cement has the best receivable recovery period which is 2.9 days,
DG khan follows FCL by 4.33 days then Attock cement comes with 11.08 days and
Lucky cement has very late recovery of receivables, fixed assets turnover is
fine with 1.22 times. This is revealing that Lucky cement does not manage its
cash efficiently.
+
+Lucky cement has the lowest financial risk
as compared to industry competitors its Debt to asset ratio is lowest which is
0.18 while DG Khan has 0.24 debt to Asset Ratio, Attock cement has 0.26 and
Fauji cement has 0.29 so as debt to equity ratio 0.22 of Lucky cement, 0.32 of
DG Khan, 0.35 of Attock cement and 0.50 of FCL which is showing FCL has more
financial risk as compared to others while Attock cement has the highest
interest coverage ratio of 180.68 then LCL has 132.09. LCL has strong solvency
due to low debt.
CONCLUSION
+Lucky cement has outperformed in the year under review
with high profit margins of 25.69% due to increased prices coupled with lower
fuel costs providing high returns on assets and equity but it has low inventory
and receivable turnovers showing its less efficiency in cash management while
it is stable having good liquidity and solvency position.
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