Lucky Cement Limited (LUCK) is Pakistan's cement giant. The Company operates under the
umbrella of Yunus Brothers (YB) Group. Its annual report of 2013 reports high profits, here is the complete analysis of Income statement of 2013 taking 2008 as a base year.
HORIZONTAL ANALYSIS OF INCOME STATEMENT
Snapshot of horizontal analysis of 2013 income statement of Lucky Cemnet.
SALES/REVENUE
Sales have grown
from 2008 to 122.9% in 2013.An increase of 55.27% was reported in 2009, 2010
has shown a decline of 10.74% than a gradual increase were reported in 2011, from
preceding year i.e. 8.89%. Growth of 43.08% in 2012 and 26.47% in 2013 from preceding
year were reported, this was mainly due to increase in dispatches and high
selling prices.
COGS was increased 31.10% from 2008 to2009 and remain almost same in
2010 i.e. 31.18% than report increase of 6.16% in 2011 from 2010, 2012 and 2013
reported positive change of 26.15% and 26.47% from preceding year. This
increase is attributable to increase in sales volume and decrease in fuel costs.
OPERATING PROFIT
Operating profit was increased 134.61% in 2009 than record a decline
of 96.7% in 2010 from 2009 due to high distribution and administrative costs
then its gradually increase to 29.86% in 2011 from preceding year, a big change
of 125% and 102.32% were shown in 2012 and 2013 due to lower distribution costs
and increase in revenues.
Finance costs has reported a huge increase of 875.97% in 2009 then
shows significant decline of 526.88% in 2010 this was due to repayment of
long-term debt. Changes of 40.56%, 208.73%, and 70.22% were reported in 2011, 2012
and 2013 respectively. It’s due to payment of long-term debts and now capital
structure is mainly based on equity.
Other income and expenses has slight increase of 24% in 2009 than
other expenses increased that LCL has maintained to the level of 42.71%.
PAT increased 71.66% in 2009 then decline to 17.17% in 2010 this is
because of decrease in sales and operating profit. Changes of 31.11%, 105.02%,
and 109.48% from preceding year were reported in 201, 2012 and 2013
respectively this increase is attributable to increase in operating profit and
decrease in finance costs.
VERTICAL ANALYSIS OF INCOME STATEMENT
Vertical analysis of Lucky's 2013 income statement
COGS
Cost of goods sold to sales are quite high in 2008 i.e. 74% then
gradually declined to 62.74%, 67.44%, 66.52%, 61.82% and 55.78% in 2009, 2010,
2011, 2012 and 2013. This is due to cost controlling initiatives and lowering
coal prices in international market taken by LCL.
DISTRIBUTION AND FINANCE COSTS
Distribution cost is very high in 2010 i.e. 14% of sales, it declines
gradually because LCL has acquired its own multipurpose transportation system
that has lowered the distribution cost.
Finance cost to net sales has lowered due to decrease in debts and other
income and expenditures were 3.79% in 2008 then have a declining trend.
RATIO ANALYSIS OF INCOME STATEMENT
Profitability ratios show the return on sales and return on investment
of the owners. These ratios reveal the actual performance of the company.
GROSS PROFIT MARGIN
Gross Profit margin ratio of Lucky Cement shows its ability to cover it
fixed and other expenses and return.
These ratios are showing mix trend of up and down in LCL’s gross profit
margin in last six years.In 2008 this was 25.69%, it increased to 37.26% by a significant
increase of 11.57% in 2009. Gross profit margin ratio declined by 4.7% to
32.26% in 2010 while in 2011 the ratio shows a little increase by 1% from
preceding year to 33.48%. In 2012 gross profit margin was increased by 4.7% to
38.18% then the gross profit of the cement giant reported increase of 6.04%
that leads to 44.22%.
This increase or decrease in gross profit margin is the result of
increase or decrease in two main components of this ratio i.e.
1. Cost of goods Sold
2. Net Sales
In 2008 the gross profit margin of LCL were reported 25.69% during this
year Net sales were Rs.17 billion while Rs. 12.6 billion were cost of goods
sold which increased to Rs.16.5 billion associated in the increase of net sales
to Rs.26.3 billion in 2009 which gives the increased ratio of 37.26% then it
declines to 32.56% which is because of a decline of 6.92% in net sales i.e.
Rs.24.5 billion but surprisingly increase of .07% increase in cost of goods sold
i.e. Rs. 16.52 billion is observed. This is because of a significant decline in
selling prices and increase in fuel prices in late 2009 and 2010.
A slow increase in ratio is observed in subsequent years i.e. 33.48%,
38.18% and 44.22% in 2011, 2012 and 2013 respectively. This is due to the
increase in dispatches, rise in selling prices, and decrease in coal prices
which is an important raw material.
Sales grew by 6.16% , cost of goods sold grew by 4.70% in 2011 as
compared to last year, In 2012 sales were grew by 28.08% so as increase of
19.04% in cost of goods sold due to increase in dispatches and this huge
increase in sales is attributable to 19% rise in local selling prices.
The cement giant declared the highest ever revenue in its history in
year in review i.e. Rs.37.8 billion which is the growth of 13.47% from
preceding year, this growth in sales is due to increase of 1.4% in dispatches
i.e. 6 million tons and this change is also attributable to 12% increase in net
selling price in the year 2013.
Cost of goods sold record an increase of 2.37% from preceding year which
is much lower as compared to increase in sales revenue, this is due to decrease
in coal prices and cost controlling initiatives taken by the company i.e. the
use of fuel efficient grinding mills and tyre-derived fuel (TDF) plant to
reduce costs. This increased sales and controlled cost of sales has shown a
31.34% increase in Gross profit i.e. Rs.16.7 billion.
OPERATING PROFIT RATIO
Operating
profit ratio in 2008 is 21.93% then its increase sharply to 30.46% in 2009 due
to increase in sales and gross profit then decline of 12.11% showed in operating
profit ratio of 2010 due to decrease in selling prices that leads to decline in
the ratio. It increased in 2011 to 21.08% and it continues to increase in 2012
and 2013 to 28.34% and 33.3% respectively.
Operating profit ratio consists of two main components that influence
it.
1. Operating expenses
2. Other income and expenses
In 2008 operating profit were
Rs.3 billion which is 18.14% of its sales and other expenses exceeded other
incomes by Rs.0.6 billion that is 3.79% of its sales. In 2009 ratio showed a
significant increase which is 30.46% it is due to 125% increase in gross profit
i.e. Rs.9.8 billion which covers the increase in distribution, administrative
costs and other expenses but administrative costs and other expenses decline as
the ratio to sales.
LCL’s operating profit ratio decline
drastically in 2010 due to decline in gross profit to 18% and huge increase in
distribution and administrative costs while other expenses decline 68% from
preceding year.
A small increase in the ratio
showed in 2011 which is 18.35% it is due to increase in gross profit and
decrease in distribution costs to 5.73% from preceding year, other expenses
also increased from Rs.255 million to Rs. 322 million. Ratio increases to
28.34% in 2012 this is attributable to high gross profit margin and lower
distribution and administrative costs i.e. Rs.3.2 billion and Rs.474 million
respectively, they are a bit higher in amounts but lower as percentage to sales
that leads to high operating profit, but other expenses increased by 34% from
2011 which is comprises of other income of Rs.5 million and other expenses of
Rs.438 million.
In 2013 operating profit ratio
increase to 33.13% this rise in ratio is attributable to high gross profit i.e.
Rs. 16.7 billion, there is also increase in distribution costs from Rs.3.2
billion to Rs.3.6 billion but its decline in percentage of sales i.e. from 9.7%
to 9.6% that shows controlled costs and increase in amounts is due to increase
in dispatches while administrative costs almost doubled from Rs.474 million to
Rs.897 million its 89% increase from previous year costs.
Other expenses decreased by
14.95% from Rs.433 million to Rs.368 million this is due to increase in other
income from Rs.5 million to Rs.247 million, this rise is due to high gain of
Rs.14 million on disposal of property, plant and equipment, profit of Rs.222
million from sale of electricity, income of Rs. 10.7 million from financial
assets and unrealized gain of Rs.62 thousand on revaluation of investments. The
sale of electricity and revaluation are irregular items that has given boost to
other income which has covered the high rise in other expenses from Rs.438
million to Rs.616 million that increased the operating profit.
PRE-TAX RATIO
Pre-Tax ratio of LCL’s was
13.60% in 2008 it increased to 19.66% this is due to large increase in operating
profit whereas finance costs increased largely from Rs.126 million to Rs.1.23
billion i.e. 875.97% increase from 2008, then it declines to 13.94% in 2010
because of decrease in operating profit and finance costs then it rose slightly
to 16.61% in 2011 due to increase in operating profit and decrease in finance
costs from Rs.569 million to Rs.517 million which is 9% decline due to
repayment of long-term debts then it further increase to 24.98% and 30.95% in
2012 and 2013 respectively, this is because of increase in gross profit so as
increase in operating profit and significant decrease in short-term and long-term
debts because of their repayment i.e. decrease of 51% in 2012 from 2011 and
64.75% decrease in 2013 from 2012 finance costs.
NET PROFIT RATIO
Net profit ratio in 2008 was
15.79% whereas its pre-tax ratio is lower than this i.e. 13.60%, the reason for
this increase in net profit ratio is LCL has got tax benefit of Rs.371 million in
2008 that has increased its net profit then this ratio has increased as
increase in profit before tax i.e. 17.26% in 2009, 12.80% in 2010, 15.26% in
2011, 20.35% in 2012 and 25.69% in 2013 there is not any significant change in
taxation.
RETURN ON ASSETS
Return on asset comprises of
three inputs: Net Income, Net Interest amount and Average total assets which
combine makes changes in ROA. Assets have increased over the period, net
interest amount is decreased while net income have fluctuations which has
affected the return on Assets as discussed in the above paragraph.
RETURN ON EQUITY
These 6 years ratios of return
on equity represent the LCL’s management efficiency of generating profit from
every unit of shareholders equity. Ratio of return on equity is comprises of
two components:
·
Net
income
·
Average
shareholder’s equity
As presented in the above
graph Return on equity ratio is showing a mixed trend of increase and decrease
in return on shareholders’ investment which is 26.15% in 2013 from 19.12% in
2008.
Shareholder’s Equity has
increased over the period and net income is fluctuated over the period which is
increased in 2008 and 2009 as a result ROE increased that is 19.12% and 21.94%
respectively but in 2010 it declines and equity increases as a result ROE
decreased to 12.98% then it gradually increases to 15.02%, 22.22%, 26.15% which
is the result of increase in both net income and shareholder’s equity.
Hope that you have found this article helpful if so then your biggest compliment for me is a share. You can ask any question or query related to this analysis and please add your information to it in comment box.
No comments:
Post a Comment