OXFORD BROOKS

UNIVERSITY
RESEARCH AND ANALYSIS PROJECT
OVER
Bestway Cement Limited
For the Year Ended ! "#ne$ %!&&$ %!&!$ %!!'
Name( Faisa) "a*ed +CC+ Re,istration No- &.%!&!
No- o/ words 0$11 2eriod( %
Contents
Contents..................................................................................................................................... 2
1 PROJECT OBJECTIVES AND OVERALL RESEARCH APPROACH....................................3
2 INFORMATION GATHERING AND ACCOUNTING/BUSINESS TOOLS USED.....................
3 FINANCIAL AND BUSINESS ANAL!SIS..............................................................................12
" CONCLUSION AND RECOMMENDATIONS.........................................................................2
APPENDCIES
Appendix A Reference and Bibliography
Appendix B Profit and Loss Account
Appendix C Balance Sheet
Appendix D Ratios
Appendix E Ratios or!ulae
Appendix "raphs
1 PROJECT OBJECTIVES AND OVERALL RESEARCH
APPROACH
1.1 Introduction to Topic and Copan!"
#he research and analysis pro$ect has been done on the topic no % &inancial and Business
analysis of co!pany of your choice o'er three year period( a'ailable in the BSc info pac) on
ACCA *ebsite+
or the purpose of research and analysis pro$ect the first step *as selection of topic+ It is
i!perati'e to ha'e in depth )no*ledge about the topic you are *or)ing to prepare report li)e
research and analysis pro$ect+ I chose this topic on bac) of follo*ing reasons+
Being core area of ACCA syllabus, I ha'e detailed )no*ledge about this topic+
A'ailability of appropriate infor!ation plays a 'ital role in success of pro$ect+ #he
infor!ation re-uired to carry out pro$ect of this topic *as easily a'ailable in !ar)et+
I a! personally interested in practically analy.ing financial perfor!ance of business+
#his topic pro'ided !e opportunity to apply the )no*ledge gained during ACCA studies+
/nce the topic has been selected, the next step *as to select a co!pany to carry out research
approach+ or this purpose I chose Best*ay Ce!ent Li!ited 0BCL1+ #he analysis has been
carried out for the year ended 2344, 2343, and 2335+ #he reasons forcing !y decision *ere
follo*ing+
BCL is the 2
nd
largest ce!ent !anufacturer of Pa)istan+
It is one of the !a$or exporters of ce!ent+
inancial infor!ation about BCL *as a'ailable in stoc) exchange as *ell as at official
*ebsite of BCL+
It is part of reno*ned group of 6+7+ &Best*ay "roup(+
1.# Pro$ect O%$ecti&es"
#he funda!ental ob$ecti'es of the research and analysis pro$ect are to
Analy.e sales trend of BCL+
Analy.e profitability, efficiency, li-uidity, Assess sol'ency and !ar)et ratios of BCL+
P#o$%t&'%(%t)
8#he profitability ratios are the basic ban) financial ratios+ Profitability ratios are the financial
state!ent ratios *hich focus on ho* *ell a business is perfor!ing in ter!s of profit9+
0Anon+, n+d+1
L%*+%,%t)
8In'estors loo) at li-uidity ratios to deter!ine the ability of a business to pay off short ter!
obligations fro! cash or near cash assets to e'aluate the ris) associated if *ere to in'est in this
co!pany+ ailure to pay off short ter! obligation !ay resulted in financial difficulty or
ban)ruptcy in near future9+
0Anon+, n+d+1
E$$%-%en-) R&t%o
8Efficiency ratios are the financial state!ent ratios that !easure ho* effecti'ely a business uses
and controls its assets9+
0Bi.*i. Consulting, n+d+1
So(.en-) #&t%o
A general ter! describing a financial ratio that co!pares so!e for! of o*ner9s e-uity 0or
capital1 to borro*ed funds+ "earing is a !easure of financial le'erage, de!onstrating the
degree to *hich a fir!9s acti'ities are funded by o*ner9s funds 'ersus creditor9s funds+
0In'estopedia, n+d+1
M&#/et #&t%os
8Any ratio that co!pares security9s current !ar)et price 0or a'erage !ar)et price o'er a period
of ti!e1 to any ite! on financial state!ent+ /ne of the !ost co!!on !ar)et 'alue ratio is the
price:earning ratio,*hich !easure the !ar)et price against the co!pany9s earnings for a gi'en
period of ti!e+ unda!ental analyst use !ar)et 'alue ratios to help deter!ine *hether a
security is o'er'alued or under'alued9+
0inancial dictionary, n+d+1
Assessing the strengths, *ea)nesses, opportunities and threats by using S;/#
analysis+
S0OT &n&()s%s
8S;/# analysis is a tool for auditing an organi.ation and its en'iron!ent+ It is the first stage of
planning and helps !ar)eters to focus on )ey issues+ S;/# stands for strengths, *ea)ness,
opportunity, and threats+ Strengths and *ea)ness are internal factors+ /pportunities and threats
are external factors9+
0<ar)eting teacher, n+d+1
Analy.ing potential for profits of industry and co!petiti'eness of co!pany by $udging
Porter i'e orces analysis+
Po#te# F%.e Fo#-es An&()s%s
8#he Porter=s > orces tool is a si!ple but po*erful tool for understanding *here po*er lies in a
business situation+ #his is useful, because it helps you understand both the strength of your
current co!petiti'e position, and the strength of a position you=re considering !o'ing into9
0<ind tools, n+d+1
1.' Researc( )uestions"
/nce topic and co!pany has been selected, I for!ulated so!e research -uestions to re!ain
focus to the research and analysis pro$ect+ #he research -uestions I for!ulated *ere follo*ing+
;hat are ai!s and ob$ecti'es of !y research *or)?
Is research and analysis pro$ect rele'ant to !y interest and area?
@o* to gather infor!ation and fro! *hich sources?
@o* to analy.e the perfor!ance of co!pany?
;hich !odels to be use for analysis?
@o* to co!pare perfor!ance of co!pany?
;hat are other s)ills re-uired to carry out research *or)?
;hat is the ti!efra!e to follo* to co!plete research and analysis pro$ect on ti!e?
1.* Researc( Approac("
I de'ised si!ple but co!prehensi'e research approach to co!plete the research *or) on ti!e+
After I ha'e selected the research topic, I tried to find out one of the best co!panies to carry
research *or)+ After a reasonable consideration I chose BCL for analysis+ <o'ing for*ard, I
for!ulated research -uestions and tried to find out appropriate ans*ers of those -uestions+
I collected infor!ation fro! different sources, including pri!ary and secondary sources+ #hese
sources *ere scrutini.ed for authenticityA the authentic infor!ation *as used in accounting
!odels to analy.e perfor!ance of co!pany+ I highlighted !ain points, $otted the! do*n to
paper and finally prepared a report+ #he !odels used included ratio analysis, S;/# analysis
and porter fi'e forces analysis+
#he analysis done *as re'ie*ed by !entor and *ea)nesses in pro$ect *or) *ere pointed out+
#he pro$ect *as updated again according to suggestions of !entor to i!pro'e the -uality of
*or)+ Presentation to !entor *as also a part of research approach+ I used presentation slides to
gi'e presentation+
inally I dre* a conclusion based on !y analysis and !ade so!e reco!!endations for
i!pro'e!ent of the business of BCL+
# IN+OR,ATION -ATHERIN- AND
ACCO.NTIN-/B.SINESS TOOLS .SED
#.1 Sources o0 In0oration 1at(erin1"
#here are t*o sources of infor!ation+ #hese sources are categori.ed as pri!ary sources and
secondary sources+
P#%1&#) so+#-es o$ %n$o#1&t%on 2&t3e#%n24
Pri!ary source of infor!ation is uni-ue and original *or)+ Pri!ary sources are original *or)
*hich has not been e'aluated or filtered by suggestions and explanations+ #hese original
sources beca!e the base for other research and de'elop!ent *or)+ Pri!ary sources are result
of research in physical or electronic for!+ Pri!ary sources share original report or ne* and
inno'ati'e infor!ation+
0<aryland, n+d+1
Met3o,s +se, to 2&t3e# 5#%1&#) %n$o#1&t%on4
As pri!ary sources of infor!ation are not easy to get and they are expensi'e as *ell, the
pri!ary sources of infor!ation a'ailable to !e *ere the inter'ie*s *hich I conducted fro!
!anage!ent e!ployees of co!pany+ I inter'ie*ed,
I+ inance !anager of BCL+
II+ <ar)eting !anager of BCL+
I raised different -ueries *ith the! and as)ed se'eral -uestion regarding the financial targets
and !ar)eting strategies of co!pany+ #he econo!ic conditions of Pa)istan and their i!pact on
BCL also re!ained the topic of inter'ie*+ #he finance !anager particularly *as concerned
about financial perfor!ance of co!pany and the !ar)eting !anager )ept focus on en'iron!ent
in *hich BCL is operating+
Se-on,&#) so+#-es4
Secondary sources are explanations and suggestions on pri!ary sources+ @o*e'er, pri!ary
sources do not include e'idences of pri!ary sources, rather they are explanations of e'idences
of pri!ary source+ So!e people also define secondary source as tertiary source+
0<aryland, n+d+1
Met3o,s +se, to 2&t3e# %n$o#1&t%on $#o1 se-on,&#) so+#-es4
#here *ere lots of secondary sources of infor!ation a'ailable to !e+ #hese sources included
follo*ing,
Ann+&( #e5o#ts4 Annual reports re!ained the !a$or secondary source of infor!ation+ #he
infor!ation gathered fro! annual reports included both financial and non financial infor!ation+
In fact, the annual reports *ere the !ost authentic source of secondary infor!ation co!pared
to other secondary sources+
Inte#net4 Internet and *ebsites *ere fastest sources of secondary infor!ation+ I used different
*ebsites and search engines to gather infor!ation fro! internet+ <ost of the definitions used in
research and analysis pro$ect *ere accessed fro! internet+
Me,%&4 <edia *as another source of secondary infor!ation+ #he #+B channels li)e Bloo!berg
*ere rich source of infor!ation+ Although the infor!ation gathered fro! these channels *as not
particularly used for research and analysis pro$ect, but it de'eloped business understanding and
econo!ic conditions *orld *ide+
Ne6s5&5e#4 Paper !edia *as also !a$or source of infor!ation+ I read out different articles
relating to ce!ent industry, go'ern!ent policies and their i!pact on businesses+ #he
ne*spaper I used *as &Business Recorder(+
Boo/s4 I consulted different boo)s including boo)s of !y ACCA syllabus+ #hese boo)s
refreshed !y )no*ledge+ I re'ised different accounting and business tools including their
li!itations fro! these boo)s+
Stoc) exchangeC I also 'isited stoc) exchange to assess in'estor9s point of 'ie* regarding BCL+
#.# Liitations o0 in0oration 1at(ered"
;hile infor!ation gathering I faced different proble!s+ #hese are listed belo*+
Li!itations of pri!ary sourcesC #he only pri!ary source a'ailable to !e *as the inter'ie*s *ith
!anage!ent of BCL+ #here *as no other source of pri!ary infor!ation+ <oreo'er, it *as
difficult tas) to get appoint!ent fro! !anagers of BCL because of their professional
co!!it!ents+ #he infor!ation gathered fro! these inter'ie*s *as also a little bit biased, as
!anagers are e!ployee of BCL and they tend to represent their co!pany in best possible *ay+
Li!itations of secondary infor!ationC #he infor!ation gathered fro! secondary sources *as not
as !uch authentic as pri!ary sourcesA especially the infor!ation gathered fro! internet *as
sub$ected to greater ris)+ @o*e'er, the infor!ation gathered fro! annual reports is considered
authentic as annual reports are audited by good audit fir!s+ Annual accounts contained past
infor!ation and relying on only past infor!ation for analysis does not produce good results+
urther to this the old ne*spapers *ere not easy to access+ I 'isited public libraries for this
purpose and the physical condition of old ne*spapers *as also abys!al+
#.' Et(ica2 issues durin1 in0oration 1at(erin1"
;hile infor!ation gathering and research and analysis pro$ect preparation, I faced so!e ethical
issues as *ell+ @o*e'er, I handled these issues and resol'ed professionally to a'oid any ethical
proble!+
/ne of !y friends *ho *as also *or)ing on research and analysis pro$ect for sa!e topic as
!ine, offered !e to put in co!bined effort in research *or)+ @o*e'er, I hu!bly denied although
he chose different co!pany for analysis+
During the inter'ie*s *ith !anagers of BCL, !anagers *ere reluctant to share so!e of the
financial goals and !ar)eting strategies+ I assured the! that the infor!ation they are pro'iding
to !e *ill re!ain confidential and *ill be used for research and analysis purposes only+
I used analytical s)ills and *or) ob$ecti'ely *ithout being biased+ I used authentic infor!ation in
research and analysis pro$ect )ic)ing off biased infor!ation+
#.* Accountin1/Business tec(ni3ues used and t(eir 2iitations"
I used ratio analysis as analytical tool for financial perfor!ance+ #o access business
en'iron!ent S;/# and Porter i'e orces *ere used+
R&t%o An&()s%s4
8Ratio analysis is a for! of financial state!ent analysis that is used to obtain a -uic) indication
of a fir!9s financial perfor!ance in se'eral )ey areas+ #he ratios are categori.ed as short ter!
sol'ency ratios, Debt <anage!ent Ratios, Asset <anage!ent Ratios, Profitability Ratio, and
<ar)et Balue Ratios9
0Business finance online, n+d+1
L%1%t&t%on o$ $%n&n-%&( #&t%o &n&()s%s4
;indo* dressing and creati'e accounting !anipulates ratios calculated+
Different organi.ations ha'e different accounting polices+ Ratios can be !ay be distorted
by different use of accounting policies+
Ratios ignore future prospects and action by !anage!ent as they are based on past
infor!ation+
Co!parison *ith ratio analysis !ay be !isleading *hen unifor! base for calculating
ratios is not used+
Ratios are nothing in their o*nA they need to co!pare *ith last year ratios, industry
a'erages or other co!petitors+
Inflation !a)es ratios useless, as inflated increase in re'enue is not gro*th in re'enue
truly+
#here are !ore than one for!ulae used to calculate sa!e ratio+ #his factor reduces the
usefulness of ratios+
So!e additional infor!ation li)e budgeted figures, co!petitor ratios, industry a'erage
etc is also needed to co!pare ratios+
0#C, 23441
S0OT An&()s%s
8S;/# analysis is an extre!ely useful tool for understanding and decision:!a)ing for all sorts
of situations in business and organi.ations+ S;/# is an acrony! for Strength, ;ea)ness,
/pportunities, #hreats+ Infor!ation about the origins and in'entors of S;/# analysis is belo*+
#he S;/# analysis headings pro'ide a good fra!e*or) for re'ie*ing strategy, position and
direction of a co!pany or business proposition, or any other idea9
0Business balls, n+d+1
L%1%t&t%on o$ S0OT &n&()s%s
S;/# analysis is useful for business planning, on the other hand it also ha'e so!e li!itations+
#hese li!itations are listed belo*+
S;/# analysis !ay o'er si!plify so!e business situations+ /'er si!plifying !ay ignore so!e
of the !a$or factors *hich affect businesses hugely+ Categori.ing in four heads of strengths,
*ea)nesses, opportunities and threats ha'e no basis+ actors are categori.ed arbitrarily *hich
!ay o'er loo) so!e factors+ ;hile so!e factors are difficult to categori.e in one head *hen
they are falling in !ore than one head, li)e ne* and inno'ati'e technology !ay be considered
as opportunity for so!e co!panies on the other hand it !ay be ta)en as threat for so!e of the
co!panies+ Si!ilarly strengths and *ea)nesses are not clear so!eti!es li)e running business
fro! a pro!inent place is strength but it !ay also be categori.ed as *ea)ness o*ing to higher
rents or leases for that place+ In fact this !odel is useful for s!all setups+
0Anon+, n+d+1
Po#te# F%.e Fo#-es An&()s%s4
8<ichael Porter=s fa!ous i'e orces of Co!petiti'e Position !odel pro'ides a si!ple
perspecti'e for assessing and analy.ing the co!petiti'e strength and position of a corporation
or business organi.ation9
0Business balls, n+d+1
L%1%t&t%ons o$ Po#te# F%.e Fo#-es4
Li!itations of Porter i'e orces !odel include follo*ings+
Porter i'e orces !odel $udge potential of profits by accounting fi'e forces+ #his !odel
includes threat of substitute products+ Porter challenges that co!panies ha'e threat of profit
sharing e'en by those substitutes *hich are in different sectors+ #his is not true in fact+ Si!ilar is
case *ith buyers e'en if they are fro! different industries+ <oreo'er, threat of ne* entry is not a
threat for so!e co!panies in fact, as long as their custo!ers are loyal *ith the! due to their
-uality products and brand i!age+ Porter i'e orces considers !ar)et as static, *hich is a
!a$or li!itation of this !odel as no !ar)et is static in today9s life due to *hich this !odel is not
capable of considering ne* !ar)ets+
0Course *or) Du, n+d+1

' +INANCIAL AND B.SINESS ANAL4SIS
'.1 Ceent Sector o0 Pa5istan"
Rich reser'es of li!estone and gypsu! along *ith a!ple gas resources !a)e ce!ent industry
to be one of the i!portant industries of Pa)istan+ /*ing to these potential !anufacturers is not
only !eeting the local de!and but also exporting to 6+A+E, Afghanistan, Ira-, Africa, and
Russia+
Currently there are 4E pri'ate and > public !anufacturers of ce!ent in Pa)istan *ith co!bined
!anufacturing capacity of 5+3DF!illion tons+ Ne* !anufacturing plants *hich are under
planning stage include 44 !anufacturers *hich *ill ha'e capacity of 42+5%%!illion tons+
0Nargis Sarfra., 23441
'.# Copan! Histor! o0 Best6a! Ceent Liited"
Best*ay Ce!ent Li!ited is a !e!ber co!pany of Best*ay "roup 6+7+ Approxi!atelyA thirty
years ago Sir <uha!!ad An*ar founded this group+
Best*ay group in'ested profoundly in Pa)istan in response to efforts of "o'ern!ent of Pa)istan
to !agneti.e foreign in'est!ent in Pa)istan+ Best*ay Ce!ent *as incorporated *ith capacity of
o'er G!illion per year !a)ing it 2
nd
largest ce!ent !anufacturer of Pa)istan+
Econo!y of Pa)istan *as not attracti'e in 4552 *hen Best*ay group set up ce!ent
!anufacturing plant in Pa)istan+ @o*e'er, due to technical co!petencies and !anagerial
excellence Best*ay !anaged production facility efficiently and *ith in no ti!e it attained !ar)et
do!inance+
0Best*ay Ce!ent Li!ited, 23441
'.' +inancia2 Ana2!sis
3.3.1 S&(es An&()s%s4
L+-/)
Ce1ent Best6&) Ce1ent L%1%te,
F! 2711 F! 2711 F! 2717 F! 2778
#urno'er 0Rs 83331
2G,34E,>45 4F,FF2,FGE 4F,FFF,3GF
4D,%4D,E5
E
"ro*th in sales 0H1 G+4GH :3+34H :43+33H 5E+%EH
Sales 'olu!e:ce!ent 0tons1 >,E%2,>E3 F,23E,G4G D,2D5,%4F F,22D,FED
Production 'olu!e:ce!ent
0tons1 >,EE5,E43 F,3E%,G>% D,224,%>G F,2F3,23%
#urno'er of BCL reduced fro! Rs+ 4D,%4>!illion to Rs+ 4F,FF2!illion o'er three years+ Sales
re'enue reduced in I43 by 43H o*ing to lo*er prices of ce!ent in local !ar)et due to fierce
co!petition+ Sale prices *ere also not attracti'e in international !ar)et due to o'ersupply+
Because of these reasons BCL9s turno'er reduced to Rs+ 4F,FFF!illion against Rs+
4D,%4>!illion in spite of higher sales 'olu!e+ BCL sold F2H higher 'olu!e posting D+2D5!illion
tons in I43 against F+22D!illion tons of ce!ent in I35+ #his sale included 3+5%!illion tons
exports against 4+3E!illion tons in I3%+ #he production 'olu!es stood at D,224!illion tons
against F,2F3!illion tons in I35+ 0BCL Annual Report, 23431
I44 *as another tough year for ce!ent industry *here floods during the year ha!pered
econo!ic gro*th and de!and for ce!ent reduced significantly+ #his *as also !ar)ed due to
lo*er spending by go'ern!ent on infrastructure de'elop!ent+ Exports to international !ar)et
also sho*ed sin)ing trend due to slac)ness in construction acti'ities+ Because of these reasons
BCL could sale only F+23%!illion tons ce!ent against D,2D5!illion tons in I43 0decreased by
2>H1+ #his sales 'olu!e included 3+>F!illion export to Afghanistan and India co!pared to last
year9s export of 3+5%!illion tons+ @o*e'er, better prices of ce!ent during the year reduced the
i!pact of lo*er sales 'olu!e and turno'er stood at Rs+ 4F,FF2!illion in I44 *ith a !inor
decrease of 3+34H bench!ar)ed *ith last year+ 0Annual Report, 23441
Co15et%to# An&()s%s4
BCL9s sales 'olu!e and turno'er *ere lo*er than LCL+ LCL !anufactured >,EE5!illion tons
against F,3E%!illion tons of BCL+ Re'enue stood at Rs+ 2,G34%!illion co!pared to Rs+
4F,FFF!illion of BCL+ #he reason for higher sales 'olu!e *as the access to higher international
!ar)et+
3.3.2 P#o$%t&'%(%t) An&()s%s4
L+-/)
Ce1ent Best6&) Ce1ent L%1%te,
PROFITABILIT! F! 2711 F! 2711 F! 2717 F! 2778
#urno'er 2G,34E,>45 4F,FF2,FGE 4F,FFF,3GF 4D,%4D,E5E
"ross profit0Rs+333=1 %,E44,445 2,54F,%F3 4,EG%,%3E D,EE3,FDE
Net Profit0Rs+333=1 F,5E3,D33 4E5,2F3 4,235,DFE 5ED,32D
"P Ratio 0H1 FF+> 24+5 4F+F F2+2
NP Ratio 0H1 4>+F 4+F 5+4 G+G
G#oss 5#o$%t 9GP: #&t%o4
"P !arginJprofit fell fro! F2+2H to 24+5H o'er three years *ith lo*est "P ratio of 4F+FH in
I43+ BCL !ar)ed "P of Rs+ 4,EG5!illion in I43 against Rs+ D,EE3!illion 0reduced by
G2+5H1+ #his decli'ity *as o*ing to lo*er turno'er 0o*ing to lo*er prices of ce!ent1 co!pared
to preceding year+ #urno'er lo*ered by 43H, ho*e'er, production increased by F3+EH 0I35C
F,2F3!illion, I43C D,222!illion1+ @igher production caused cost of sales to boost up by 4>+4FH
0I35C Rs+ 43,3D>!illionA I43C Rs+ 44,>GD!illion1+ In fact BCL sold higher 'olu!e for lo*er
prices+ #he hi)ed cost of sales fueled *ith lo*er turno'er suppressed "P !argin to 4F+FH in
I43 fro! F2+2H in I35+
BCL registered "P of Rs+ 2,54D!illion in I44 co!pared to "P of Rs+ 4,EG5!illion in I43+ In
spite of lo*er sales 'olu!e, "P i!pro'ed dra!atically+ #his *as to lo*er cost of sales+ #he
production 'olu!e reduced as *ell along *ith reduction in sales 'olu!e+ Lo*er production
incurred lo*er costs of sales and cost of sales stood at Rs+ 43,D45!illion plu!!eted do*n*ard
by 5+5H fro! I43 0Rs+ 44,>GD!illion1+ @o*e'er, turno'er didn9t fall due to higher prices of
ce!ent especially in last -uarter of the year+ #his rendered turno'er to reduce significantly li)e
cost of sales resulting in higher "P+ #he higher "P resulted in good "P !argin of 24+5H
co!pared to 4F+FH in I43+
Net P#o$%t 9NP: 1&#2%n4
NP ratio did so!ersault o'er three year period standing at G+GH, :5+4H and 4+FH in I35, I43
and I44 respecti'ely+ BCL earned losses in I43 co!pared to profits preceding year+
Although all operating costs reduced o*ing to lo*er production yet "P *as not sufficient
enough to bear the burden of operating costs, finance costs and taxes resulting in net loss+ "P
lo*ered do*n by G2+5H 0I43C Rs+ 4,EG5!illion, I35C Rs+ D,EE3!illion1+ /perating costs
scaled do*n by 2>+2H 0I43C Rs+ 5>%!illion, I35C Rs+ 4,2%3!illion1, finance cost stood at Rs+
2,22F!illion 0I35C Rs+ 2,2%G!illion1 a decrease of 2+%H+ All these factors contributed to net
loss of Rs+ 4,235!illion against net profit of Rs+ 5ED!illion in I35+ #his loss con'erted NP
!argin of G+GH in I35 to NP !argin of :5+4H in I43+
I!pro'ed !argins and significantly reduced cost enabled BCL to return on profitability in I44+
BCL recorded better "P of Rs+ 2,54D!illion against Rs+ 4,EG5!illion in I43+ BCL )ept strict
cost controls resulting in lo*ering do*n distribution costs by GE+FH 0I44C Rs+ F>4!illion,
I43C 4,3E>!illion1+ #hese reduced costs coupled *ith 444H increased other operating inco!e
0I44C Rs+ >3%!illion, I43C Rs+ 2D4!illion1 resulted in operating profit of Rs+ 2,54F!illion
against Rs+ %44!illion in I43+ inancial charges increased to Rs+ 2,D%5!illion fro! Rs+
2,22F!illion last year due to rising rates of !ar)up+ As a result of these changes BCL posted
NP of Rs+ 4E5!illion against net loss of Rs+ 4,235!illion in I43+ #his reco'ered NP !argin to
4+FH co!pared to :5+4H in I43+
Co15et%to# An&()s%s4
"P !argin of LCL *as FF+>H and NP !argin *as 4>+FH bench!ar)ed *ith "P !argin of
24+5H and NP !argin of 4+5H of BCL+ #he higher !argins of LCL *ere due to higher sales
'olu!e and turno'er along *ith econo!ies of scales achie'ed *hich lo*ered costs for LCL+
3.3.3 L%*+%,%t) An&()s%s
L+-/)
Ce1ent Best6&) Ce1ent L%1%te,
LI;UIDIT! F! 2711 F! 2711 F! 2717 F! 2778
Current Ratio 3+%% 3+>F 3+>2 3+G>
Kuic) Ratio 3+4% 3+4G 3+45 3+2E
C+##ent #&t%o4
Current ratio of BCL not only re!ained belo* the threshold le'el but also reduced o'er three
years indicating credit crunch for BCL+ Current ratio decreased fro! 3+G>ti!es to 3+>Fti!es o'er
three year period under re'ie*+ Current assets didn9t change significantly, decreasing by $ust
2+FH 0I43C Rs+ D,G5>!illion, I35C D,%3%!illion1 as co!pared to change in current liabilities
*hich hi)ed by 24+>H 0I43C Rs+ 5,33>!illion, I35C E,D42!illion1 in I43+ In respect of
current liabilities, the !a$or contributors to change *ere, short ter! borro*ings *hich shot up
dra!atically by >3+FH 0I43C Rs+ F,>%>!illion, I35C 2,F%G!illion1 to finance *or)ing capital+
#hese decreased current assets coupled *ith increased current liabilities plunged current ratio
to 3+>2ti!es in I43 against 3+G>ti!es in I35+
Current ratio i!pro'ed slightly in I44 to 3+>Fti!es co!pared to 3+>2ti!es in I43+ Current
assets increased *ith higher pace co!pared to increase in current liabilities at %+EH 0I44C Rs+
>,43D!illion, I43C Rs+ D,G5>!illion1, *here as current liabilities hi)ed by G+5H 0I44C Rs+
5,G25!illion, I43C Rs+ 5,33>!illion1+ #he increase in current assets *as !a$orly due to
increase in stoc) in trade because of lo*er sales 'olu!e+ Increase in current liabilities *as
!a$orly due to increased short ter! borro*ings by 4D+>H 0I44C Rs+ D,43>!illion, I43C Rs+
F,>%>!illion1+ @igher stoc) in trade raised need of short ter! borro*ings to finance *or)ing
capital+
;+%-/ #&t%o4
Kuic) ratio sho*ed de'astating picture o'er three years falling to 3+4Gti!es in I44 fro!
3+2Eti!es in I35+ In I43, BCL tried to sale higher 'olu!e to co!pensate lo*er prices of
ce!ent to re!ain profitable during the year+ In'entory le'els $u!ped up radically in current year
*here store and spares stood at 0I43C Rs+ 2,4GE!illion, I35C Rs+ 4,E%3!illion1+ #his coupled
*ith effect of increased liabilities of 24+>H ha!pered -uic) ratio to 3+45ti!es fro! 3+2Eti!es+
I44 further depressed -uic) ratio to 3+4Gti!es fro! 3+45ti!es in I43+ Although current
assets increased *ith greater pace 0%+EH1 co!pared to current liabilities 0G+5H1, ho*e'er this
increase *as due to stoc) in trade and stores and spares *hich reduced current assets balance
used to calculate -uic) ratio+ Stores and spares increased by 5+EH 0I44C Rs+ 2,FE%!illion,
I43C Rs+ 2,4GE!illion1 and stoc) in trade rose up by >4+>H 0I44C Rs+ 4,453!illion, I43C Rs+
E%>!illion1+ #hese factors not only rendered -uic) ratio to i!pro'e but caused it to de!ean to
3+4Gti!es+
Both of these li-uidity ratios are consistently lo* *hich !ay i!pact credit rating of BCL+
Co15et%to# An&()s%s4
Li-uidity position of LCL *as also abys!al but *as better fro! BCL+ Current and -uic) ratios of
LCL *ere 3+%%ti!es and 3+4%ti!es respecti'ely against 3+>Fti!es of current and 3+4Gti!es of
-uic) ratio for BCL+
3.3." E$$%-%en-) An&()s%s4
EFFICIENC! L+-/)
Ce1ent
Best6&) Ce1ent L%1%te,
F! 2711 F! 2711 F! 2717 F! 2778
Debtor Days 5 %
%
4D
Creditor Days %
F
G2 >G >2
In'entory #urno'er 2G D2 2> F
%
De'to# ,&)s4
BCL operated efficiently and debtor days reduced fro! 4Ddays to % days o'er three year+ In
I43, trade debtors de!eaned considerably by D5H 0I35C Rs+ >%>!illion, I43C Rs+ 25E
!illion1 because of lo*er turno'er+ @o*e'er, turno'er decreased by $ust 43H 0I35C Rs+
4,D%4>!illion, I43C Rs+ 4,FFF!illion1+ #his reduced debtors days to %days co!pared to
4Ddays in I35+ #his reduction in debtor days !ar)ed reduction in cash operating cycle by
Gdays+
Debtor days in I44 re!ained sa!e as for preceding year of 4Ddays+ #rade debtors reduced
by G+%H 0I43C Rs+ 25E!illion, I44C Rs+ 2EE !illion1 *hich *as a !inor decrease *hile
turno'er re!ained al!ost sa!e as for preceding year *ithout lea'ing any effect on debtors
days+
C#e,%to# ,&)s4
BCL used creditors effecti'ely being free source of *or)ing capital finance increasing creditor
days fro! >2days in I35 to G2days in I44+ In I43, trade payables bourgeoned by 4D+5H
0I35C Rs+ 4,F>>!illion, I43C Rs+ 4,>>%!illion1 *hich out paced increase in purchases+
Purchases hi)ed *ith G+%H 0I35C Rs+ 5,DD5!illion, I43C Rs+ 43,352!illion1+ Both of these
factors resulted in creditor days to increase fro! >2days to >Gdays+
I44 sho*ed sa!e trend for creditor days as I43+ Creditor days increased further to G2days+
Although purchases decreased by >H 0I43C Rs+ 43,352!illion, I44C Rs+ 5,>%E!illion1 due to
lo*er le'el of production, yet trade payables increased by D+G2H 0I43C Rs+ 4,>>%!illion, I44C
Rs+ 4,GF3!illion1 because of higher pay!ent periods+
In.ento#) t+#no.e# ,&)s4
In'entory le'els of BCL sho*ed ballooning effect o'er three years+ #urno'er days fall in I43 to
2>days fro! F%days in I35 and again rising to D2days in I44+ In'entory turno'er reduced
during I43 o*ing to higher 'olu!etric sale *hich caused stoc) in trade to lo*er by 2>+GH
0I35C Rs+ 4,3>G!illion, I43C Rs+ E%>!illion1 *here cost of sales boosted up by 4>H 0I35C
Rs+ 43,3DD!illion, I43C Rs+ 44,>GD!illion1+ Cu!ulati'e effect of both of these caused in'entory
days to get lo*er+
In'entory turno'er days rose up to D2days in I44+ Because of lo*er de!and BCL could not
achie'e handso!e 'olu!etric sale resulting in higher turno'er days+ Cost of sales lo*er by
5+5H 0I43C Rs+ 44,>GD!illion, I44C Rs+ 43,D45!illion1 *hile stoc) in trade soared by >4+>H
gi'ing higher in'entory turno'er days of D2+ @igher days also raised the need to finance *or)ing
capital *hich *as fulfilled by delaying creditors and raising short ter! loans+
#he acti'ity days result in increase or decrease of cash operating cycle collecti'ely+ Due to
rising creditor day9s cash operating cycle of BCL is lo*ering+ #his is a positi'e sign for BCL+ #his
*ill enable BCL to lo*er do*n short ter! loans to finance *or)ing capital+
Co15et%to# An&()s%s4
Although operating cycle of BCL *as not bad but LCL operated efficiently *ith higher creditor
pay!ent period of %Fdays against G2days of BCL and in'entory turno'er period of $ust 2>days
bench!ar)ed *ith D2days of BCL+ #his could be due to better !ar)eting strategies *hich
lo*ered in'entory turno'er days for LCL, *hile reliability of LCL in !ar)et enabled LCL to
achie'e prolonged creditor pay!ent periods+ Debtor collection period *as slightly different for
both co!panies *ith 5days for LCL and %days for BCL+
3.3.< So(.en-) An&()s%s4
SOLVENC!
L+-/)
Ce1ent Best6&) Ce1ent L%1%te,
F! 2711 F! 2711 F! 2717 F! 2778
"earing 23H FGH >%H >%H
Interest Co'erage 5+FD 4+4E 3+FG 4+>F
Ge&#%n2 #&t%o4
"earing is calculated long ter! finance di'ided by long ter! finance and e-uity+ "earing of BCL
lo*ered fro! >%H to FGH o'er three years+ In I43 BCL repaid so!e loan and long ter!
finance reduced by 4>+>H 0I35C Rs+ 44,D>G!illion, I43C Rs+ 5,G%G!illion1+ BCL generated
losses in I43 *hich *ea)ened e-uity base by ad$usting against accu!ulated profits due to
*hich e-uity reduced by 4D+EH 0I35C Rs+ %,24G!illion, I43C Rs+ E,33G!illion1+ #he decrease
in loans and e-uity nullified effect of each other and o'erall gearing re!ained at sa!e le'el of
>%H+
"earing reduced in I44 to FGH fro! >%H+ #his *as due to repay!ents of loans as co!pany
repaid hea'y a!ounts of loans bearing higher interest rates to lo*er do*n its finance cost+ Long
ter! finance de!eaned by FG+DH 0I43C Rs+ 5,G%G!illion, I44C Rs+ G,4>G!illion1+ /n the
other hand profit in sa!e year strengthened e-uity by >G+GH 0I43C Rs+ E,33G!illion, I44C Rs+
43,5E2!illion1+ #his ga'e gearing of FGH co!pared to >%H preceding year+
Inte#est -o.e#&2e4
Interest co'er sho*ed ballooning trend o'er three years standing at 4+>Fti!es, 3+FGti!es and
4+4Eti!es in I35, I43 and I44 respecti'ely+ inance costs lo*ered in I43 by 2+EH
0I35C Rs+ 2,2%G!illion, I43C Rs+ 2,22F!illion1, ho*e'er, operating profit before interest and
tax fall sharply by EG+EH 0I35C Rs+ F,D54!illion, I43C Rs+ %44!illion1 due to lo*er "P+ #hese
factors ha!pered interest co'er to 3+FGti!es against 4+>Fti!es in I35+
I44 !ar)ed 44+5H higher interest costs standing at Rs+ 2,D%5!illion co!pared to I43 of Rs+
2,22F!illion+ Although long ter! loans reduced further this year, the shot up in finance cost *as
!erely due to higher short ter! borro*ings *hich *ere raised to finance *or)ing capital as
in'entory le'els build up during year+ @o*e'er, o*ing to higher operating profits *hich increase
by 2>5H 0I43C Rs+ %44!illion, I44C Rs+ 2,54F!illion1, interest co'er reco'ered to 4+4Eti!es
against 3+FGti!es in I43+
Co15et%to# An&()s%s4
LCL operated at gearing le'el of 23H due to lo*er loans and strengthened e-uity base
bench!ar)ed *ith FGH gearing of BCL+ /*ing to lo*er loans finance costs *ere also !uch
lo*er at Rs+ >4%!illion against Rs+ 2,54F!illion of BCL+ Because of these reasons LCL had
sound interest co'er of 5+FDti!es co!pared to 4+4Eti!es of BCL in I44+
3.3.= M&#/et An&()s%s4
INVESTOR
L+-/)
Ce1ent Best6&) Ce1ent L%1%te,
F! 2711 F! 2711 F! 2717 F! 2778
Earning per share 42+2% 3+>E :F+5> F+4E
E&#n%n2s 5e# s3&#e 9EPS:4
EPS of BCL sho*ed de'astating picture in I43 falling fro! Rs+ F+4E in preceding year to loss
per share of Rs+ F+5>+ #his fall *as attributed to lo*er sales *hich could not post reasonable
profits to absorb costs con'erting profit per share of Rs+ F+4E in I35 to loss per share of Rs+
F+5> in I43+ Net loss a!ounted to Rs+ 4,235!illion *here nu!ber of shares stood at
F2G!illion gi'ing loss per share of Rs+ :F+E4+
#he situation i!pro'ed significantly in I44 posting earnings per share of Rs+ 3+>E fro! loss
per share of Rs+ F+5> in I43+ #his *as achie'ed by cost controls ho*e'er sales turno'er stood
at sa!e le'el as for last year+ BCL earned net profit of Rs+ 4E5!illion+ BCL issued right share
during year *hich increased nu!ber of shares fro! F2G!illion to >E%!illion, yet earnings per
share i!pro'ed retuning to profits fro! loss+
/ther ratios li)e di'idend per share and di'idend payout ratios could not be calculated for BCL
as co!pany has not paid any di'idend for all of the three years+
Co15et%to# An&()s%s4
EPS of LCL *ere !uch better than that of BCL standing at Rs+ 42+2% co!pared to Rs+ 3+>E of
BCL+ @igher earnings of LCL *ere due to higher sale 'olu!e and re'enue *ith controlled costs
*hich resulted in higher earnings per share+
'.* S7OT Ana2!sis"
St#en2t3s4
P#o,+-t%on -&5&-%t)4
BCL is one of the largest !anufacturers in industry+ BCL has t*o production plants located at
@attar ha'ing production capacity of 4,4E3,333 !etric tons per annu! and Cha)*al ha'ing
production capacity of F,D23,333 !etric tons per annu!+ #his capacity !a)es BCL 2
nd
largest
ce!ent !anufacturer of Pa)istan+ 0BCL Annual Report, 23441
Te-3no(o2)4
Laboratories of BCL are e-uipped *ith state of the art technology including L:ray fluorescent
analyser and Diffracto!eter+ BCL is the first ce!ent !anufacturer in Pa)istan *hich used this
technology+ 0BCL Annual Report, 23441
E>5o#te# o$ -e1ent4
BCL has captured export !ar)et in Afghanistan and India+ BCL is fir!ly established as leading
brand in Afghanistan and India+ BCL exported 3+>F!illion tons of ce!ent in I44 and
3+5%!illion tons in I43 and 4+3E!illion tons in I35 to these !ar)ets+ 0BCL Annual Report,
23441
A6&#, 6%nn%n24
BCL is a*ard *inning co!pany+ BCL *on a*ards for being leading exporter+ Different trophies
fro! Ra*alpindi and Sarhad cha!bers of co!!erce and industry *ere achie'ed+ 0BCL Annual
Report, 23441
Co#5o#&te so-%&( #es5ons%'%(%t)C
Best*ay ce!ent ta)es it corporate social responsibility and contributes to*ards charities and
donations for society+ It is one of the !a$or contributors to Best*ay oundation, *hich is a
charitable trust of Best*ay group+ 0BCL Annual Report, 23441
M&#/et s3&#e4
BCL ha'e co!petiti'e !ar)et share+ BCL captured local !ar)et by 4D+>FH and share in export
!ar)et *as 5+DDH in I44+ 0BCL Annual Report, 23441
0e&/nesses4
Losses4
BCL has losses in I43+ #heses losses *ere o*ing to lo*er sale prices of ce!ent during year+
H%23 ene#2) #e(&te, -osts4
BCL has production plant based on gas and coal+ Prices of these !aterials are being increased
by the go'ern!ent and supply of gas is also short+ Due to these reasons BCL has higher
energy related costs+ So!e of the co!petitors li)e LCL are shifting their plants to use *aste
tyres and carbon as ra* !aterial instead of coal and gas and had reduced energy related costs
considerably 0LCL Annual Report, 23441+ ;hile BCL is still using gas and coal reser'es+
H%23e# %n.ento#) t+#no.e# ,&)s4
@igher in'entory turno'er days in spite to hea'y !ar)eting and ad'ertise!ent 0ad'ertise!ent
expense I44C Rs+ 3+5>F!illion, I43C 3+>4G!illion1 is pinching point for BCL+ 0BCL Annual
Report, 23441
O55o#t+n%t%es4
P#o,+-t #&n2e4
BCL has opportunity to increase product range+ So!e of the co!petitors are selling loose
ce!ent as *ell BCL should also !o'e to*ards !anufacturing of loose ce!ent+
E>5&ns%on4
BCL has opportunity to di'ersify+ It has brand i!age in export !ar)et as *ell+ Construction
acti'ities in Afghanistan and India are increasing the de!and for BCL products+ BCL can set up
plants in Afghanistan and India as *ell+
0Scribd, 23351
Re,+-t%on o$ -osts4
BCL got opportunity to con'ert production plant to *aste of tyres and rubber to reduce energy
related cost *hich *ould increase profitability+
T3#e&ts4
G&s -+#t&%(1ent4
So!e of the production plants use gas and coal as ra* !aterials+ "as curtail!ent by the
go'ern!ent along *ith rising prices of coal !ay incur production loss for BCL+
0Eho*, n+d+1
E-ono1%- -on,%t%ons4
Econo!ic conditions of Pa)istan, ha'ing higher inflation rates, interest rates and tax rates,
security issues, la* and order situations are big threat for industries+ 0BCL Annual Report, 23441
Po(%t%-&( #est(essness4
Political restlessness has created proble!s for industries+ De!ands are falling due to slac)ness
in construction acti'ities by go'ern!ent on public pro$ects+ 0BCL Annual Report, 23441
3.< Po#te# F%.e Fo#-es An&()s%s4
3.<.1 T3#e&t o$ ne6 ent#)4
#hreat of ne* entry is lo*er o*ing to follo*ing reasons+
Capital re-uire!ents are huge+ It also ta)es ti!e to de'elop distribution channels+
#he plant and e-uip!ent is also specified *hich !a)es s*itching cost of !anufacturers
higher
#he econo!ies of scales *hich are achie'ed by existing players are difficult to be
a'ailable for ne* entrants+
Brand i!age created by players id difficult to challenge+
0Scribd, 23351
3.<.2 T3#e&t o$ s+'st%t+te 5#o,+-ts4
Currently there are no substitute products of ce!ent so the threat of substitute products is
lo*er+
3.<.3 B&#2&%n%n2 5o6e# o$ s+55(%e#s4
Suppliers include go'ern!ent pro'iding gas and coal and other suppliers of ra* !aterials+
Bargaining po*er of suppliers is considered !oderate for BCL o*ing to follo*ing reasons+
"o'ern!ent controls the supply of coal and gas *hich !ay i!pact BCL, ho*e'er, heat
reco'ery syste! has enabled BCL to produce o*n electricity *hich has reduced
bargaining po*er of go'ern!ent+ 0BCL Annual Report, 23441
/ther suppliers supply li!e stone *hich is used as ra* !aterial for production of
ce!ent+ Pa)istan has rich resources of li!e stone so the bargaining po*er of suppliers
of this ra* !aterial is lo*er+
3.<." B&#2&%n%n2 5o6e# o$ '+)e#s4
Custo!ers of BCL include indi'idual buyers, institutional buyers as *ell as go'ern!ent+ Export
!ar)et is another buyer of BCL+ #he bargaining po*er of buyers is high because of follo*ing
reasons+
#he industry is not operating at full capacity+ /n a'erage industry operated at capacity
utili.ation of G%+E5H and at EG+25H in I44 and I43 respecti'ely+ 0BCL Annual
Report, 23441
#here is fierce co!petition in !ar)et+
Cartel doesn9t exist in ce!ent industry *hich has increased co!petition+
S*itching costs of buyers are lo*er because of a'ailability of different brands+
3.<.< Co15et%t%.e #%.&(#)4
Co!petiti'e ri'alry is higher in ce!ent industry because of follo*ing reasons+
Large nu!ber of !anufacturersA co!peting at lo*er de!and+
Aggressi'e !ar)eting and selling techni-ues are being used by co!petitors to attract
custo!ers+
0Scribd, 23351
@o*e'er, good brand na!e of BCL has enabled it to co!pete the !ar)et+
* CONCL.SION AND RECO,,ENDATIONS
*.1 Conc2usion"
De!and for ce!ent reduced during current year *here floods and lo*er spending by
go'ern!ent on infrastructure de'elop!ent+ Exports to international !ar)et also sho*ed sin)ing
trend+ #urno'er de!eaned o'er three year period o*ing to these reasons+
Profitability of BCL re!ained at ris) o'er three year periodA e'en BCL had loss in I43 due to
lo*er prices of ce!ent+ @o*e'er, current year i!pro'ed profitability due to strict cost controls
and better prices of ce!ent+
Li-uidity position of BCL continued to deteriorate o'er three year+ Rising need to finance
*or)ing capital along *ith in'entory le'els pushed li-uidity ratios to danger+ #he situation
indicates li-uidity crunch for BCL+
BCL operated efficiently by rising creditor days to finance *or)ing capital to reduce need of
short ter! finance+ @o*e'er, in'entory holding period increased due to lo*er 'olu!etric sale
during current year+
Sol'ency ratios i!pro'ed o'er three year period+ Co!pany !o'ed to*ards e-uity sources of
finance lo*ering gearing+ @o*e'er, due to losses in I43, interest co'erage ratio lo*ered do*n
significantly+
In'estor ratios *ere not satisfactory+ BCL could not achie'e that le'el to fall in fa'ourite list for
in'estor to in'est in+ Earnings per share *ere lo*er in all three years+
BCL is 2
nd
largest !anufacturer of ce!ent in Pa)istan ha'ing higher !anufacturing capacity+ It
has de'eloped brand na!e in export !ar)et as *ell+ BCL *on different re*ards along *ith
contribution to corporate social responsibility+
@igher energy related costs and losses incurred fall in so!e of the *ea)nesses of BCL+ @igher
in'entory turno'er days in spite to hea'y !ar)eting and ad'ertise!ent is another pinching point
for BCL+
BCL got opportunity to increase product range li)e !anufacturing of loose ce!ent, expansion
into other !ar)ets including export !ar)et and con'ert production plant to *aste of tyres and
rubber+
"as curtail!ent by go'ern!ent, abys!al econo!ic conditions *ith higher inflation rates,
interest rates and tax rates, political restlessness are threats BCL is facing+
#hreat of ne* entry is lo*er on account of huge capital re-uire!ents, higher s*itching cost for
!anufacturers and brand i!age created by players is difficult to challenge+
Currently there are no substitute products of ce!ent so the threat of substitute products is
lo*er+
Bargaining po*er of suppliers is considered !oderate for BCL as BCL to produce o*n
electricity *hich has reduced bargaining po*er of go'ern!ent+ Suppliers of li!e stone ha'e
lo*er po*er due rich resources of li!e stone in Pa)istan+
Bargaining po*er of buyers is high because industry is not operating at full capacity, fierce
co!petition, and lo*er s*itching costs of buyers+ Co!petiti'e ri'alry is higher in ce!ent
industry because of large nu!ber of !anufacturers and lo*er de!and+ @o*e'er, good brand
na!e of BCL has enabled it to co!pete the !ar)et+
*.# Recoendation"
/n the basis of analysis carried out, follo*ing are so!e reco!!endations for BCL+
#o con'ert plants on *aste of tyres and rubber in order to reduce energy related costs+
Re'ise !ar)eting strategies to !a)e the! effecti'e+
"rab the opportunities+ As strengths see! to be lo*er to grab all opportunities, BCL
should prioritise opportunities to a'ail+
I!pro'e li-uidity position and in'estor 'alue ratios to attract in'estors and e-uity funds+