Financial Statement Analysis Of Kohat Cement Company Limited

Financial Statement Analysis of Kohat Cement Company Limited.

Presented By: Mansoor Abdul Qadeer Ali Nawaz M. Abdullah

Roll # E11 Roll # E44 Roll # E43 Roll # E37

1

INTRODUCTION TO KOHAT CEMENT COMPANY

Kohat Cement Company Limited is a public limited company incorporated in Pakistan under the Companies Act, 1913 (incorporated in 1980) and is an ISO 9001-2008 certified company, listed on Karachi, Lahore and Islamabad Stock exchanges. The Company is engaged in the Manufacturing and sale of cement. The registered office is situated at Rawalpindi Road, Kohat, Pakistan. The plant is located in Kohat about 60 kilometers from Peshawar 2

VISION Be the best in the eyes of all stakeholders OUR MISSION IS TO PROVIDE Our Customers with quality cement at competitive pricing Our Shareholders with good returns and sustainable growth Our Employees with care and career development opportunities CORPORATE STRATEGY Stay ahead of competition by adopting latest technology with efficient and progressive teamwork in an environment of good governance and professionalism

3

OTHER INFORMATION • Symbol of Company assigned by Stock Exchanges KOHC • Free Float of the Shares of Company is 22,828,967 number of shares as on 30/06/2011. • Based on Annual Audited Accounts of 30.06.2011 & share price on 30.06.2011 – i. EPS = 0.49 – ii. P/E ratio = 12.46 – iii. Breakup value =16.33

4

PRODUCT KOHAT Cement Company Limited engaged in manufacturing of Grey and White Cements. • GREY CEMENT Kohat Ordinary Portland Cement is manufactured under strict quality Control on state of the art plant with latest technology • Available in 50 Kg paper or polypropylene bags (20 bags to a metric ton). • Bulk cement can be delivered in Khyber Pakhtoonkhwa areas.

5

PRODUCT WHITE CEMENT A state of the art plant with technology from BabcockGrenzebach Germany is installed at Kohat. Kohat Super White Cement is the product of unique decolorizing process, which prevents oxidation of iron in the clinker and maximizes whiteness. High refractive index and opacity of Kohat Super White Cement impart a brilliant luster and smooth finish, even when mixed with pigments. It also mixes easily with inorganic pigments which do not fade in sunshine and alkaline attack. The comprehensive strength of Kohat Super White Cement is at par or more than the strength of Ordinary Portland Cement. Therefore it can conveniently be used in place of grey cement in all kinds of concrete and mortar mix. 6

CAPACITY

Line I Line II

Line III Total Capacity

Grey Cement Tons/Anum 594,000 -

White Cement Tons/Anum 148,500

2,211,000 2,805,000

148,500

7

Overview In the year 2011 The economic slowdown coupled with high inflation severely affected the cement industry in the country. There was a negative growth of 8% in the cement sector where by domestic consumption of cement declined by 6.6% to 22 million tons and Exports declined by 11.7% to 9.4 million tons. And in the same year the Kohat Cement Company managed the highest ever sales volume of 1,494,955 tons of grey cement during the current financial year compared to 1,191,833 tons in the previous year showing an increase of 25.4% in sales volume. 8

Production and Sale Volumes

9

Financial results

10

Kohat Cement Company Limited Balance Sheet As on December 31st ,2006,2007,2008,2009,2010,2011 2006

2007

Assets:

2008

2009

2010

2011

(Amounts in Rupees)

Current Assets Stores, Spares And Loose Tools

117,594,905

157,436,002

699,954,682

841,844,312

638,000,427

850,571,198

Stock In Trade

87,869,995

125,147,740

174,317,806

139,293,693

290,433,057

507,527,333

Trade Debts

21,642,079

21,381,453

15,341,081

17,792,165

20,010,133

12,567,298

Investments Advances, Deposits, Repayments & Other Receivables

6,600,000

-

-

-

-

36,156,000

98,589,010

120,072,947

406,020,470

612,373,810

430,703,292

506,114,913

Cash And Bank Balances

656,886,230

132,401,943

36,994,967

34,371,413

28,021,733

40,681,734

Total Current Assets

989,182,219

556,440,085

1,332,629,006 1,645,675,393 1,407,168,642 1,953,618,476

Non Current Assets Property, Plant And Equipment Operating Fixed Assets Capital Work-In-Progress Total Property, Plant And Equipment Intangible Assets

1,095,105,981 1,023,528,041 984,287,376

941,431,201

4,234,731,837 5,307,288,753

6,352,852,944 6,368,030,446 7,140,840,908 584,965,206

861,363,339

-

2,079,393,357 5,258,259,878 6,248,719,954 6,937,818,150 7,229,393,785 7,140,840,908 -

-

-

2,689,912

2,587,653

2,355,963

Long Term Loans And Advances

2,565,634

45,731,201

38,142,100

33,313,347

28,832,286

23,706,054

Long Term Deposits

4,969,240

3,879,440

4,429,440

5,397,440

5,397,440

3,879,440

Total Non Current Assets

2,086,928,231 5,307,870,519 6,291,291,494 6,979,218,849 7,266,211,164 7,170,782,365

Total Assets

11 3,076,110,450 5,864,310,604 7,623,920,500 8,624,894,242 8,673,379,806 9,124,400,841

Equity And Liabilities: Current Liabilities Trade And Other Payables Interest And Markup Accrued

215,249,060 1,973,686

178,982,959 12,260,606

Short Term Running Finances Secured

57,397,506

146,434,421

44,148,330 -

218,120,218

625,022,321

680,933,125 -

596,370,138 -

40,050,000 -

34,064,784 32,760,357

-

1,475,601 -

-

-

-

385,593,723

555,798,204

Current Portion Of Non-Current Liabilities Long Term Finances Long term finances secured Liabilities Against Assets Subject To Finance Lease Provision For Taxation Total Current Liabilities

244,465,133 50,719,344

554,458,612 312,801,576

734,312,487 504,895,065

973,628,527 433,182,170

1,096,066,075 1,398,198,921 1,406,895,249 1,363,678,773

2,017,748,474 2,946,392,234 3,242,472,939 2,810,539,470

Non Current Liabilities Long Term Finances-Secured Liabilities Against Assets Subject To Finance Lease Long Term Security Deposits Deferred Liabilities Derivative Financial Liabilities

237,500,000

Total Non Current Liabilities

406,577,034

2,358,098 5,451,100 161,267,836 -

2,703,308,354 2,981,785,715 2,989,387,373 3,049,320,000 3,536,870,000 106,808,320 158,739,583 -

3,686,712 135,837,621 155,732,831 -

2,040,128 154,209,127 101,197,782 160,120,433

155,923,337 62,669,613 202,024,046

163,656,829 323,097,976 187,420,429

2,968,856,257 3,277,042,879 3,406,954,843 3,469,936,996 4,211,045,234

Share Capital And Reserves Authorized Capital 150,000,000 Ordinary Shares Of Rs. 10 Each Issued, Subscribed & Paid-Up Capital General Reserve Accumulated Profit

925,312,540 389,397,905 969,229,248

1,017,843,800 1,170,520,370 1,287,572,410 1,287,572,410 1,287,572,410 396,306,773 235,805,586 34,078,866 51,278,714 129,409,009 925,505,570 922,803,191 949,895,889 622,118,747 685,834,718

Total Equities

2,283,939,693 2,339,656,143 2,329,129,147 2,271,547,165 1,960,969,871 2,102,816,137

Total Liabilities & Equities

3,076,110,450 5,864,310,604 7,623,920,500 8,624,894,242 8,673,379,806 9,124,400,841

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Kohat Cement Company Limited Income Statement For the year ended Dec 31st, 2006, 07, 08,09,10,11 2006

2007

2008 2009 (Amount in Rupees)

2010

2011

Sales Net

2,327,237,579 1,553,733,256 1,375,972,754 3,395,580,759 3,692,038,418 6,085,434,517

Cost of Goods Sold

1,127,575,661 1,210,466,340 1,288,570,903 2,591,021,469 3,341,872,196 5,158,302,614

Gross Profit

1,199,661,918

343,266,916

87,401,851

804,559,290

350,166,222

927,131,903

Selling & Distribution Expanses

15,533,247

18,701,815

24,878,363

111,490,601

56,245,683

41,199,134

Administrative And General Expanses

38,279,574

46,338,529

40,894,043

30,094,507

35,943,591

48,845,016

Total Operating Expanses

53,812,821

65,040,344

65,772,406

141,585,108

92,189,274

90,044,150

1,145,849,097

278,226,572

21,629,445

662,974,182

257,976,948

837,087,753

71,433,971

7,640,715

20,958,970

3,291,944

4,835,758

16,484,515

1,074,415,126

270,585,857

670,475

659,682,238

253,141,190

820,603,238

Other Operating Income

19,106,540

75,624,748

35,978,496

34,218,809

23,210,906

20,424,475

Income From Operations

1,093,521,666

346,210,605

36,648,971

693,901,047

276,352,096

841,027,713

54,097,507

18,370,018

48,935,320

549,902,638

658,589,707

715,246,906

Loss On Derivative Financial Instrument

-

-

-

122,813,948

-

-

Voluntary Separation Scheme

-

-

267,286,401

-

-

-

54,097,507

18,370,018

316,221,721

672,716,586

658,589,707

715,246,906

1,039,424,159

327,840,587

(279,572,750)

21,184,461

(382,237,611)

125,780,807

Taxation

249,557,198

79,472,319

(57,133,384)

(5,908,237)

(54,460,469)

62,064,836

Profit / (Loss) After Taxation Earning / (Loss) Per Share - Basic & Diluted

789,866,961

248,368,268

(222,439,366)

27,092,698

(327,777,142)

63,715,971

Operating Income Other Operating Expanses Sub total

Finance Cost

Total Other Expanses Profit /(Loss) Before Taxation

13 9.06

2.12

(1.73)

0.21

(2.55)

0.49

Kohat Cement Company Limited Analysis of Balance Sheet As on December 31st , 2006,07,08,09,10,11

2006 Assets: Current Assets Stores, Spares & Loose Tools Stock In Trade Trade Debts Investments Advances, Deposits, Repayments & Other Receivables Cash And Bank Balances Total Current Assets Non Current Assets Property, Plant And Equipment Operating Fixed Assets

3.82 2.86 0.70 0.21

2007

Vertical Analysis 2008 2009

2010

2011

% % % %

2.68 % 2.13 % 0.36 % - %

9.18 % 2.29 % 0.20 % - %

9.76 % 1.62 % 0.21 % - %

7.36 % 3.35 % 0.23 % - %

9.32 5.56 0.14 0.40

3.20 % 21.35 % 32.16 %

2.05 % 2.26 % 9.49 %

5.33 % 0.49 % 17.48 %

7.10 % 0.40 % 19.08 %

4.97 % 0.32 % 16.22 %

5.55 % 0.45 % 21.41 %

35.60 %

17.45 %

12.35 %

73.66 %

73.42 %

78.26 %

Capital Work-In-Progress Total Property Plant & Equipment Intangible Assets Long Term Loans And Advances Long Term Deposits Total Non Current Assets

32.00 % 67.60 % - % 0.08 % 0.16 % 67.84 %

72.21 % 89.67 % - % 0.78 % 0.07 % 90.51 %

69.61 % 81.96 % - % 0.50 % 0.06 % 82.52 %

6.78 % 80.44 % 0.03 % 0.39 % 0.06 % 80.92 %

9.93 % 83.35 % 0.03 % 0.33 % 0.06 % 83.78 %

- % 78.26 % 0.03 % 0.26 % 0.04 % 78.59 %

Total Assets

100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 %

14

% % % %

Equity and Liabilities: Current Liabilities Trade And Other Payables Interest And Markup Accrued Short Term Running Finances Secured Current Portion Of Non-Current Liabilities Long Term Finances Long term finances secured Liabilities Against Assets Subject To Finance Lease Provision For Taxation Total Current Liabilities

7.00 % 0.06 % 1.87 %

3.05 % 0.21 % 2.50 %

3.21 % 0.67 % 14.38 %

6.43 % 3.63 % 16.21 %

8.47 % 5.82 % 16.22 %

10.67 % 4.75 % 14.95 %

1.44 % - %

- % 3.72 %

- % 8.20 %

7.89 % - %

6.88 % - %

0.44 % - %

1.11 % 1.06 % 12.54 %

- % - % 9.48 %

0.02 % - % 26.47 %

- % - % 34.16 %

- % - % 37.38 %

- % - % 30.80 %

7.72 %

46.10 %

39.11 %

34.66 %

35.16 %

38.76 %

0.08 % 0.18 % 5.24 % - % 13.22 %

- % 1.82 % 2.71 % - % 50.63 %

0.05 % 1.78 % 2.04 % - % 42.98 %

0.02 % 1.79 % 1.17 % 1.86 % 39.50 %

- % 1.80 % 0.72 % 2.33 % 40.01 %

- % 1.79 % 3.54 % 2.05 % 46.15 %

Authorized Capital 150,000,000 Ordinary Shares Of Rs. 10 Each Issued, Subscribed & Paid-Up Capital 30.08 % 17.36 % General Reserve 12.66 % 6.76 % Accumulated Profit 31.51 % 15.78 % Total Equity 74.25 % 39.90 %

15.35 % 3.09 % 12.10 % 30.55 %

14.93 % 0.40 % 11.01 % 26.34 %

14.85 % 0.59 % 7.17 % 22.61 %

14.11 % 1.42 % 7.52 % 23.05 %

Non Current Liabilities Long Term Finances-Secured Liabilities Against Assets Subject To Finance Lease Long Term Security Deposits Differed Liabilities Derivative Financial Liabilities Total Non Current Liabilities Share Capital & Reserves

Total Liabilities & Equities

15

100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 %

Kohat Cement Company Limited Analysis of Income Statement For the year ended Dec 31st, 2006, 7,8,9,10,11 Vertical Analysis 2008 2009

2006

2007

Sales net Cost of goods sold Gross profit Selling & distribution expanses Administrative and general expanses Total Operating expanses Operating income Other operating expanses Sub total Other operating income

100.00% 48.45% 51.55% 0.67% 1.64% 2.31% 49.24% 3.07% 46.17% 0.82%

100.00% 77.91% 22.09% 1.20% 2.98% 4.19% 17.91% 0.49% 17.42% 4.87%

100.00% 93.65% 6.35% 1.81% 2.97% 4.78% 1.57% 1.52% 0.05% 2.61%

Profit from operations Finance cost

46.99% 2.32%

22.28% 1.18%

Loss on derivative financial instrument Voluntary separation scheme

0.00% 0.00%

Total Other expanses Profit /(Loss) before taxation Taxation Profit / (loss) after taxation Earning / (loss) per share - basic and diluted

2010

2011

100.00% 76.31% 23.69% 3.28% 0.89% 4.17% 19.52% 0.10% 19.43% 1.01%

100.00% 90.52% 9.48% 1.52% 0.97% 2.50% 6.99% 0.13% 6.86% 0.63%

100.00% 84.76% 15.24% 0.68% 0.80% 1.48% 13.76% 0.27% 13.48% 0.34%

2.66% 3.56%

20.44% 16.19%

7.49% 17.84%

13.82% 11.75%

0.00% 0.00%

0.00% 19.43%

3.62% 0.00%

0.00% 0.00%

0.00% 0.00%

2.32% 44.66% 10.72% 33.94%

1.18% 21.10% 5.11% 15.99%

22.98% (20.32%) (4.15%) (16.17%)

19.81% 0.62% (0.17%) 0.80%

17.84% (10.35%) (1.48%) (8.88%)

11.75% 2.07% 1.02% 1.05%

9.06

2.12

(1.90)

0.21

(2.55)

16 0.49

Kohat Cement Company Limited Analysis of Balance Sheet As on December 31st , 2006,07,08,09,10,11 Horizontal Analysis 2008 2009

2006

2007

2010

2011

Stores, Spares And Loose Tools

100.00 %

133.88 %

595.23 %

715.89 %

542.54 %

723.31 %

Stock In Trade

100.00 %

142.42 %

198.38 %

158.52 %

330.53 %

577.59 %

Trade Debts

100.00 %

98.80 %

70.89 %

82.21 %

92.46 %

58.07 %

Investments Advances, Deposits, Repayments & Other Receivables

100.00 %

- %

- %

- %

- %

547.82 %

100.00 %

121.79 %

411.83 %

621.14 %

436.87 %

513.36 %

Cash And Bank Balances

100.00 %

20.16 %

5.63 %

5.23 %

4.27 %

6.19 %

Total Current Assets

100.00 %

56.25 %

134.72 %

166.37 %

142.26 %

197.50 %

Operating Fixed Assets

100.00 %

93.46 %

85.97 %

580.11 %

581.50 %

652.07 %

Capital Work-In-Progress

100.00 %

430.23 %

539.20 %

59.43 %

87.51 %

- %

Total Property, Plant And Equipment Intangible Assets

100.00 % - %

252.87 % - %

300.51 % - %

333.65 % 2,689,912 %

347.67 % 2,587,653 %

343.41 % 2,355,963 %

Long Term Loans And Advances

100.00 % 1,782.45 %

1,486.65 %

1,298.45 %

1,123.79 %

923.98 %

Long Term Deposits

100.00 %

78.07 %

89.14 %

108.62 %

108.62 %

78.07 %

Total Non Current Assets

100.00 %

254.34 %

301.46 %

334.43 %

348.18 %

343.60 %

Total Assets

100.00 %

190.64 %

247.84 %

280.38 %

281.96 %

17 296.62 %

Assets: Current Assets

Non Current Assets Property, Plant And Equipment

Equity And Liabilities: Current Liabilities Trade And Other Payables

100.00 %

83.15 %

113.57 %

257.59 %

341.15 %

452.33 %

Interest And Markup Accrued

100.00 %

621.20 %

2,569.78 %

15,848.60 %

25,581.33 %

21,947.88 %

Short Term Running Finances Secured 100.00 % Current Portion Of Non-Current Liabilities Long Term Finances 100.00 %

255.12 %

1,909.61 %

2,435.99 %

2,451.14 %

2,375.85 %

- %

- %

1,542.38 %

1,350.83 %

90.72 %

- %

- %

- %

Long term finances secured Liabilities Against Assets Subject To Finance Lease

- %

218,120,218 625,022,321

100.00 %

- %

4.33 %

- %

- %

- %

Provision For Taxation

100.00 %

- %

- %

- %

- %

- %

Total Current Liabilities

100.00 %

144.14 %

523.28 %

764.12 %

840.90 %

728.89 %

1,255.49 %

1,258.69 %

1,283.92 %

1,489.21 %

156.34 %

86.52 %

- %

- %

2,491.93 %

2,828.95 %

2,860.40 %

3,002.27 %

62.75 %

38.86 %

200.35 %

Non Current Liabilities Long Term Finances-Secured Liabilities Against Assets Subject To Finance Lease

100.00 % 1,138.24 %

Long Term Security Deposits

100.00 % 1,959.39 %

Differed Liabilities

100.00 %

98.43 %

96.57 %

- %

- %

- %

100.00 %

730.21 %

806.01 %

837.96 %

853.45 %

1,035.73 %

Share Capital And Reserves Authorized Capital 150,000,000 OrdinaryShares Of Rs. 10 Each Issued, Subscribed And Paid-Up Capital 100.00 % 101.77 %

126.50 %

139.15 %

139.15 %

139.15 %

General Reserve

100.00 %

95.49 %

60.56 %

8.75 %

13.17 %

33.23 %

Accumulated Profit

100.00 %

102.44 %

95.21 %

98.01 %

64.19 %

70.76 %

Total Equities

100.00 %

110.00 %

101.98 %

99.46 %

85.86 %

92.07 %

Total Liabilities & Equities

100.00 %

190.64 %

247.84 %

280.38 %

281.96 %

18 296.62 %

Derivative Financial Liabilities Total Non Current Liabilities

100.00 %

- %

160,120,433% 202,024,046% 187,420,429%

Kohat Cement Company Limited Analysis of Income Statement For the year ended Dec 31st, 2006, 7,8,9,10,11 Horizontal Analysis 2006 2007 2008 2009

2010

2011

Sales net

100.00%

66.76%

59.12%

145.91%

158.64%

261.49%

Cost of goods sold

100.00%

107.35%

114.28%

229.79%

296.38%

457.47%

Gross profit

100.00%

28.61%

7.29%

67.07%

29.19%

77.28%

Selling & distribution expanses

100.00%

120.40%

160.16%

717.75%

362.10%

265.23%

Administrative and general expanses

100.00%

121.05%

106.83%

78.62%

93.90%

127.60%

Total Operating expanses

100.00%

120.86%

122.22%

263.11%

171.31%

167.33%

Operating income

100.00%

24.28%

1.89%

57.86%

22.51%

73.05%

Other operating expanses

100.00%

10.70%

29.34%

4.61%

6.77%

23.08%

Sub total

100.00%

25.18%

0.06%

61.40%

23.56%

76.38%

Other operating income

100.00%

395.81%

188.30%

179.09%

121.48%

106.90%

Profit from operations

100.00%

31.66%

3.35%

63.46%

25.27%

76.91%

Finance cost

100.00%

33.96%

90.46%

1,016.50%

1,217.41%

1,322.14%

Loss on derivative financial instrument

100.00%

100.00%

100.00%

1,228,139 %

100.00%

100.00%

Voluntary separation scheme

100.00%

100.00%

2,672,864 %

100.00%

100.00%

100.00%

Total Other expanses

100.00%

33.96%

584.54%

1,243.53%

1,217.41%

1,322.14%

Profit /(Loss) before taxation

100.00%

31.54%

(26.90%)

2.04%

(36.77%)

12.10%

Taxation

100.00%

31.85%

(22.89%)

(2.37%)

(21.82%)

24.87%

Profit / (loss) after taxation

100.00%

31.44%

(28.16%)

3.43%

(41.50%)

9.06

2.12

(1.90)

0.21

(2.55)

8.07% 19 0.49

Earning / (loss) per share - basic and diluted

RATIO ANALYSIS Financial ratios are usually expressed as a percentage or as times per period. There are five main types of ratios: • Liquidity ratios • Activity test ratios • Solvency Ratio • Profitability Ratio • Investor specific ratio The Time-series analysis is method of comparing company present performance with their past performances. Here we analyze “KOHAT Cement Company Limited” performance by comparing its present ratios with past 6 years. • 1. Liquidity Ratio: The liquidity of firm is measured by its ability to satisfy its short-term obligations. Liquidity refers to solvency of firms overall financial position-the ease with which it can pay its bills. They may include ratios that measure the efficiency of the use of current assets. We measure liquidity of “KOHAT Cement Company Limited” by calculating following ratios: 20

a) Current ratio: Current ratio is the measure of short term debt paying ability of the firm calculated as: Rule of thumb is 2:1 Current ratio = Current assets Current liabilities Year

2006

2007

2008

2009

2010

2011

Total Current Assets

942,182,219

556,440,085

1,332,629,006

1,645,675,393

1,407,168,642

1,953,618,476

Total Current Liabilities

385,593,723

555,798,204

2,017,748,474

2,946,392,234

3,242,472,939

2,810,539,470

Current ratio

2.44:1

1.00:1

0.66:1

0.56:1

0.43:1

0.70:1

Ratio

Current Ratio 3 2.5 2 1.5 1 0.5 0

2.44

1

2006

2007

0.66

0.56

2008

2009

0.43

2010

0.7

2011 21

b) Quick ratio / acid test ratio: At a time it is desirable to access a more immediate position than that indicated by the current ratio. The acid test or quick ratio relates to most liquid assets to current liabilities. Measures assets that are quickly converted into cash and they are compared with current liabilities. Calculated as: Quick ratio = current asset – inventory Current liabilities Rule of thumb is 1:1

Year

2006

2007

2008

2009

2010

2011

Total Current Assets

942,182,219

556,440,085

1,332,629,006

1,645,675,393

1,407,168,642

1,953,618,476

Total Current Liabilities

385,593,723

555,798,204

2,017,748,474

2,946,392,234

3,242,472,939

2,810,539,470

Stock in trade

87,869,995

125,147,740

174,317,806

139,293,693

290,433,057

507,527,333

Acid test ratio

2.22:1

0.78:1

0.57 :1

0.51 :1

0.34:1

0.51:1

Acid Test Ratio

2.5

2.22

Ratio

2 1.5 0.78

1

0.57

0.51

0.5

0.34

0.51

0

2006

2007

2008

2009

2010

2011

22

c) Cash ratio

:

Sometimes the analysts need to view the ability of a firm from an extremely conservative point of view. For example the company may have pledged and its inventory or the analyst suspects severe liquidity problem with inventory & receivables. The best indicator to the company’s short-run liquidity may be the cash ratio. Calculated as: Cash ratio = Cash + marketable securities Current liabilities

Year

2006

2007

Cash & Bank Balances 656,886,230 132,401,943 Investments

6,600,000

0

Total Current Liabilities 385,593,723 555,798,204 172.07 %

Ratios

Cash ratio

200 % 180 % 160 % 140 % 120 % 100 % 80 % 60 % 40 % 20 % -%

23.82 %

2008

2009

2010

2011

36,994,967

34,371,413

28,021,733

40,681,734

0

0

0

36,156,000

2,017,748,474

2,946,392,234

3,242,472,939

2,810,539,470

1.83 % 1.17 % Cash Ratio

0.86 %

2.73 %

172.07 %

23.82 % 2006

2007

1.83 %

1.17 %

0.86 %

2.73 %

2008

2009

2010

2011

Year

23

d) Networking capital : The working capital of a business is an indication of the short-run solvency of the business. Reveal the portion of current assets that have been financed by the long term liabilities calculated as:

Networking capital= Current assets – current liabilities

Year

2006

2007

2008

2009

2010

2011

Total Current Assets

942,182,219

556,440,085

1,332,629,006

1,645,675,393

1,407,168,642

1,953,618,476

Total Current Liabilities

385,593,723

555,798,204

2,017,748,474

2,946,392,234

3,242,472,939

2,810,539,470

Networking capital

556,588,496

641,881

(685,119,468)

(1,300,716,841)

1,835,304,297

(856,920,995)

24

e) Defensive interval: For how long cash resources are sufficient for operating expenditure without taking financial support calculated as: Defensive interval = Cash + Marketable Securities + Accounts Receivables Projected expenditures x 365 days Projected expenditures = Cost of Goods Sold + Other Operating Expanses except depreciation

Year

2006

2007

2008

2009

2010

2011

1,127,575,661

1,210,466,340

1,288,570,903

2,591,021,469

3,341,872,196

5,158,302,614

71,433,971

7,640,715

20,958,970

3,291,944

4,835,758

16,484,515

53,812,821

65,040,344

65,772,406

141,585,108

92,189,274

90,044,150

930,133

1,127,077

1,069,070

1,922,723

2,868,981

2,608,756

1,251,892,320

1,282,020,322

1,374,233,209

2,733,975,798

3,436,028,247

5,262,222,523

656,886,230

132,401,943

36,994,967

34,371,413

28,021,733

40,681,734

Investments

6,600,000

0

0

0

0

36,156,000

Trade Debts Defensive Interval days

21,642,079

21,381,453

15,341,081

17,792,165

20,010,133

12,567,298

197

43

14

Cost of Goods Sold Other Operating Expanses Total operating Expanses Depreciation Expanse Projected expenditures Cash & Bank Balances

7

5

6

Defensive Interval 250

197 Time In Days

200 150 100 43

50

14

7

5

6

2008

2009

2010

2011

0 2006

2007

25

f) Length of operation cycle: Operating cycle represents the period of time elapsing between the acquisition of goods and the final cash realization resulting from sales and subsequent collection calculated as: Length of operation cycle = average # of days account average # of days Receivables outstanding + inventory in stock

Year

2006

2007

2008

2009

2010

2011

Average # of days accounts Receivable outstanding

4

5

5

2

2

1

Average # of days inventory in stock

18

32

42

22

23

28

Length of Operating cycle days

22

37

47

24

25

29

Time in Days

Length of Operating Cycle 50 45 40 35 30 25 20 15 10 5 0

47 37 22

2006

2007

2008 Year

24

25

2009

2010

29

2011 26

g) Length of cash cycle: Cash cycle is the period of time for which firm have cash resources to run their operations. Calculated as: Length of cash cycle = operating cycle – average # of days account payables outstanding

Year

2006 2007 2008 2009 2010 2011

Average # of days accounts payable outstanding

28

46

55

42

63

50

Operating cycle

22

37

47

24

25

29

Length of Cash cycle days

(6)

(9)

(8)

(18)

(38)

(21)

Time in Days

Length of Cash Cycle

0 -5 -10 -15 -20 -25 -30 -35 -40

2006 -6

2007

2008

-9

-8

2009

2010

-18

-21

-38 Year

2011

27

2. Activity Ratio Activity ratio is the measure of the management’s efficiency in utilizing the assets of the organization. Activity ratios measure the sped with which various accounts are converted into sales or cash –inflows or outflows. a) Inventory turnover ratio: Inventory turnover indicates the liquidity of the inventory. Calculated as: Inventory turnover ratio = Cost of goods sold Average inventory

Year Stock In Trade

22,336,658

Average Stock in trade

2006

2007

2008

2009

2010

2011

87,869,995

125,147,740

174,317,806

139,293,693

290,433,057

507,527,333

55,103,327

106,508,868

149,732,773

156,805,750 214,863,375

398,980,195

Cost of Goods Sold

1,127,575,661

1,210,466,340

1,288,570,903

2,591,021,469

3,341,872,196

5,158,302,614

Inventory turnover

20.46

11.36

8.61

16.52

15.55

12.93

Inventory Turnover Ratio

Times a year

25

20

20

17

15

11

10

16

13

9

5 0 2006

2007

2008

2009

2010

2011 28

Year

b) Average # of day’s inventory in stock:

The inventory turnover figures are also can expressed in number of days instead of times per year. This is comparable to the computation that expressed accounts receivables turn over in days calculate as: Average # of days inventory in stock =

Year

360 days Inventory Turnover

2006 2007 2008 2009 2010 2011

Inventory turnover Average # of days inventory in stock

20.46

11.36

8.61

16.52

15.55

12.93

18

32

42

22

23

28

Time in Days

Average No of Days Inventory In Stock 45 40 35 30 25 20 15 10 5 -

42 32 18

2006

2007

2008

Year

22

23

2009

2010

28

2011 29

c) Accounts receivable turnover: Account receivable turnover indicates the liquidity of the receivables. Calculated as: Accounts receivable turnover = Net sales Average accounts receivable Year

2005

Sales Net Trade Debts

23,799,056

Average Trade debts Accounts Receivable turnover

2006

2007

2008

2009

2010

2011

2,327,237,579

1,553,733,256

1,375,972,754

3,395,580,759

3,692,038,418

6,085,434,517

21,642,079

21,381,453

15,341,081

17,792,165

20,010,133

12,567,298

22,720,568

21,511,766

18,361,267

16,566,623

18,901,149

16,288,716

102.43

72.23

74.94

204.97

195.33

373.60

Times a year

Accounts Receivable Turnover 400 350 300 250 200 150 100 50 0

374

102

2006

72

75

2007

2008

205

195

2009

2010

2011 30

Year

d) Average number of days accounts receivables outstanding: The accounts receivable turn over can be expressed in term of days instead of times per year. Turnover in number of days can also give a comparison with number of day’s sales in the ending receivables. Average # of days account receivables outstanding = 360 Accounts receivable turnover

Year

2006 2007 2008 2009 2010 2011

Accounts receivable turnover Average # of days accounts receivable outstanding

102.43

72.23

74.94

204.97

195.33

373.60

4

5

5

2

2

1

Time in Days

Average No of Days Account Receivable Outstanding

6 5 4 3 2 1 0

5

5

4 2

2 1

2006

2007

2008

2009

Year

2010

2011 31

e) Account payable turn over: Number of time accounts payables comes due within a year. Account payable turn over = Net sale Year

2005

Sales Net

Average accounts payables 2006 2007 2008 2009

2010

2011

2,327,237,579 1,553,733,256 1,375,972,754 3,395,580,759 3,692,038,418 6,085,434,517

Trade & Other Payables

149,394,418

215,249,060

178,982,959

244,465,133

554,458,612

734,312,487

973,628,527

Average account payables

182,321,739

197,116,010

211,724,046

399,461,873

644,385,550

853,970,507

Accounts payable turnover

12.76

7.88

6.50

8.50

5.73

7.13

Times a year

Accounts Payable Turnover 14 12 10 8 6 4 2 0

12.76 7.88

2006

2007

8.5 6.5

5.73

2008

2009

Year

2010

7.13

2011 32

f) Average # of days accounts payables outstanding: The number of day’s firm can retain accounts payables. Average # of days accounts payables outstanding = 360 Account payable turn over

Year

2006 2007 2008 2009 2010 2011

Accounts payable turnover

12.76

7.88

6.50

8.50

5.73

7.13

Average # of days accounts payable outstanding

28

46

55

42

63

50

Time in Days

Average No of Days Account Payable Outstanding 70 60 50 40 30 20 10 -

63

55

50

46

42

28

2006

2007

2008

2009

2010

2011

Year 33

g) Fix asset turnover ratio: The ratio measures the firm’s ability to make productive use of is property, plant, & equipment by generating sales dollars. Since construction in progresses does not contribute to current sales it should be excluded from net fixed assets calculated as:

Year Operating Fixed Assets

Fix asset turn over = Net sales Average fix assets 2006 2007 2008 2009 2005

581,007,037

2010

2011

1,095,105,981

1,023,528,041

941,431,201

6,352,852,944

6,368,030,446

7,140,840,908

2,327,237,579

1,553,733,256

1,375,972,754

3,395,580,759

3,692,038,418

6,085,434,517

Average fix assets

838,056,509

1,059,317,011

982,479,621

3,647,142,073

6,360,441,695

6,754,435,677

Fix asset turn over

2.78

1.47

1.40

0.93

0.58

0.90

Times

Sales Net

3 2.5 2 1.5 1 0.5 0

Fix Asset Turnover

2.78 1.47

1.4 0.93

2006

2007

2008

2009 Year

0.58 2010

0.9

2011 34

h) Total asset turn over ratio: Return on assets measures the firm’s ability to utilize its assets to create profits by comparing profits with the assets that generate the profits. Calculated as: Total asset turnover = Net sales Average total asset Year Total Assets

2006

2008

2009

2010

2011

7,623,920,500

8,624,894,242

8,673,379,806

9,124,400,841

2,327,237,579 1,553,733,256

1,375,972,754

3,395,580,759

3,692,038,418

6,085,434,517

2,363,998,939 4,470,210,527

6,888,648,730

8,124,407,371

8,649,137,024

8,898,890,324

0.19

0.42

0.43

0.68

2005

2007

1,651,887,427 3,076,110,450 5,864,310,604

Net sales Average total assets Total asset turnover

0.98

0.34

Times

Total Asset Turnover 1.2 1 0.8 0.6 0.4 0.2 0

0.98 0.68 0.34

0.42

0.43

2009

2010

0.19 2006

2007

2008

2011 35

Year

3. Solvency Ratio Is the ability to pay the debts mostly long term as indicated by the income statement and the others considered the firms ability to carry debts as indicated by the balance sheet. Creditors and mostly banks and lending institutions are interested because they have to ascertain about to recoup their finance …. a) Debt to equity ratio: Debt to equity is a computation that determines the entity’s long run debt paying ability This computation compares the total debts with the total share holder’s equity. The debt to equity ratio also helps to determine how well creditors are protected In case of insolvency.

Debt to equity ratio = Total debts x 100 Total stock holder’s equity

Year Total Current Liabilities Total Non Current Liabilities Total Equities

2006

2007

2008

2009

2010

2011

385,593,723

555,798,204

2,017,748,474

2,946,392,234

3,242,472,939

2,810,539,470

406,577,034

2,968,856,257

3,277,042,879

3,406,954,843

3,469,936,996

4,211,045,234

2,283,939,693

2,339,656,143

2,329,129,147

2,271,547,165

1,960,969,871

2,102,816,137

34.68 %

150.64 %

227.33 %

279.69 %

342.30 %

333.91 %

Debt to equity ratio

%age

Debt To Equity Ratio 400 % 350 % 300 % 250 % 200 % 150 % 100 % 50 % 0%

342 %

334 %

2010

2011

280 % 227 % 151 % 35 % 2006

2007

2008

2009

Year

36

b) Debt to capital ratio:

Companies can finance their operations through either debt or equity. The debt-to-capital ratio gives users an idea of a company's financial structure, or how it is financing its operations, along with some insight into its financial strength. The higher the debt-to-capital ratio, the more debt the company has compared to its equity. This tells investors whether a company is more prone to using debt financing or equity financing. A company with high debt-to-capital ratios, compared to a general or industry average, may show weak financial strength because the cost of these debts may weigh on the company and increase its default risk... . Debt to Capital Ratio = Total Debts X 100 Total Capital (long term debts + stock holder’s equity)

Year Total Current Liabilities Total Non Current Liabilities Total Equities Debt to capital ratio

2006

2007

2008

2009

2010

2011

385,593,723

555,798,204

2,017,748,474

2,946,392,234

3,242,472,939

2,810,539,470

406,577,034

2,968,856,257

3,277,042,879

3,406,954,843

3,469,936,996

4,211,045,234

2,283,939,693

2,339,656,143

2,329,129,147

2,271,547,165

1,960,969,871

2,102,816,137

29.44 %

66.40 %

94.45 %

111.88 %

123.60 %

111.21 %

%age

Debt To Equity Ratio 140 % 120 % 100 % 80 % 60 % 40 % 20 % 0%

112 %

124 %

111 %

94 % 66 % 29 %

2006

2007

2008

2009

2010

2011

37

Time Interest Earn Ratio: Indicate a firm’s long term debt paying ability from the income statement view. If the time interest earn is adequate little danger exist that the firm will not be able to meet its interest obligation. Time Interest Earn Ratio = EBIT X 100 Interest Expanse

Year

2006

Profit /(Loss) Before Taxation Finance Cost EBIT

2007

2008

2009

2010

2011

1,039,424,159 327,840,587 (279,572,750) 21,184,461 (382,237,611) 125,780,807 54,097,507

18,370,018

48,935,320

549,902,638 658,589,707 715,246,906

1,093,521,666 346,210,605 (230,637,430) 571,087,099 276,352,096 841,027,713

Time interest earn

20.21

18.85

(4.71)

1.04

0.42

1.18

Times a year

Time Interest Earn Ratio 25 20 15 10 5 5 10 -

20.21

2006

18.85

2007

2008 5.00 -

1.04

0.42

1.18

2009

2010

2011 38

4. Profitability Ratio Profitability ratio is a barometer of organization’s profit & loss. Using this ratio they quantify which would be the best mode of financing that would yield the higher profitability. Profitability is the ability of a business to earn profit over a period of time. There are various measure of profitability which indicates the efficiency of operations and generating of revenues and profits. They include following

a) Gross Margin: It determines the management’s expertise in managing the cost of goods sold. If cost of Goods sold is higher the gross margin would be lower or vice versa. Gross margin = Gross profit x 100 Net sales

Year

2006

2007

2008

2009

2010

2011

Gross Profit

1,199,661,918

343,266,916

87,401,851

804,559,290

357,020,526

927,131,903

Sales Net

2,327,237,579 1,553,733,256 1,375,972,754 3,395,580,759 3,692,038,418 6,085,434,517

Gross margin

52 %

22 %

6%

24 %

10 %

15 %

Gross Margine Ratio

60 %

52 %

50 % 40 %

30 %

24 %

22 %

20 %

10 %

6%

10 %

15 %

-%

2006

2007

2008 Year

2009

2010

2011

39

b) Operating Income to Sale: Measure of firm’s income they are generating from operations. Recognize the effect and the magnitude of operating expanses. Operating income margin = Operating income x 100 Net sales

Year

2006

Income From Operations

2007

1,093,521,666 346,210,605

2008

2009

2010

2011

36,648,971

693,901,047

276,352,096

841,027,713

Sales net 2,327,237,579 1,553,733,256 1,375,972,754 3,395,580,759 3,692,038,418 6,085,434,517 Operating income To sale 46.99 % 22.28 % 2.66 % 20.44 % 7.49 % 13.82 %

Operating Income Margine 50 % 45 % 40 % 35 % 30 % 25 % 20 % 15 % 10 % 5% -%

47 %

22 %

20 %

14 % 7%

3% 2006

2007

2008

2009 Year

2010

2011 40

c) Margin before Interest & Taxes: Margin before Interest & Taxes = EBIT x 100 Net sales

Year

2006

EBIT

1,093,521,666

Sales Net Margin before interest & taxes

2007 346,210,605

2008 (230,637,430)

2009

2010

2011

571,087,099

283,206,400

841,027,713

2,327,237,579

1,553,733,256

1,375,972,754

3,395,580,759

3,692,038,418

6,085,434,517

46.99 %

22.28 %

( 16.76 ) %

16.82 %

7.67 %

13.82 %

%ages

Margine before Interest and Taxes 60 % 50 % 40 % 30 % 20 % 10 % -% 10 %20 %-

47 % 22 %

17 % 8%

2006

2007

2008

2009

2010

14 %

2011

17 %Year

41

d) Margin before Taxes: Margin before Taxes = EBT x 100 Net sales

Year

2006

Profit /(Loss) Before Taxation 1,039,424,159 Sales Net

2007

2008

2009

2010

2011

327,840,587

(279,572,750)

21,184,461

(382,237,611)

125,780,807

2,327,237,579 1,553,733,256 1,375,972,754 3,395,580,759 3,692,038,418 6,085,434,517

Margin before taxes

44.66 %

21.10 %

(20.32 %)

0.62 %

(10.35 %)

2.07 %

%ages

Margine before Taxes 50 % 40 % 30 % 20 % 10 % -% 10 %20 %30 %-

45 % 21 % 2%

1% 2006

2007

2008

2009

20 %Year

2010 10 %-

2011 42

e) Net Profit Margin, Return on sale ratio: Commonly used profit measure is return on sales, often termed net profit margin. This ratio gives measure of net income dollars generated by each dollar of sales. Net Profit Margin, Return on sale ratio = Net income x 100 Net sales Year Net income Sales Net Net profit margin

2006

2007

2008

2009

2010

2011

789,866,961

248,368,268

(222,439,366)

27,092,698

(327,777,142)

63,715,971

2,327,237,579

1,553,733,256

1,375,972,754

3,395,580,759

3,692,038,418

6,085,434,517

33.94 %

15.99 %

(16.17 %)

0.80 %

(8.88 %)

1.05 %

Net Profit Margine 40 %

33.94 %

%ages

30 % 15.99 %

20 % 10 %

1.05 %

0.80 %

-% 10 %20 %-

2006

2007

2008

2009

16.17 %Year

2010 8.88 %-

2011 43

f) Return on Asset: The rate of return on total assets indicates the degree of efficiency with which management has used the assets of the enterprise during an accounting period. Calculated as: Return on assets = EBIT x 100 Average total assets

Year

2006

2005

EBIT Total assets Average total assets Return on assets

2007

1,093,521,666 1,651,887,427

346,210,605

2008 (230,637,430)

2009 571,087,099

2010 283,206,400

2011 841,027,713

3,076,110,450 5,864,310,604 7,623,920,500 8,624,894,242 8,673,379,806 9,124,400,841 2,363,998,939 4,470,210,527 6,744,115,552 8,124,407,371 8,649,137,024 8,898,890,324 46.26 %

7.74 %

(3.42 %)

7.03 %

3.27 %

9.45 %

Return on Assets 50 %

46.26 %

%ages

40 % 30 %

20 % 7.74 %

10 %

7.03 %

3.27 %

9.45 %

2010

2011

-%

10 %-

2006

2007

2008 2009 3.42 %Year

44

g) Return on total asset: Income is earned by using the assets of a business productively. The more efficient the production, the more profitable the business. This is an important ratio for all users of financial statements. Calculated as: Return on total asset = Net income Avg. total assets

Year

2006

2007

2008

2009

2010

2011

789,866,961

248,368,268

(222,439,366)

27,092,698

(327,777,142)

63,715,971

2005

Net income Total assets

1,651,887,427

Average total assets

3,076,110,450 5,864,310,604 7,623,920,500 8,624,894,242 8,673,379,806 9,124,400,841 2,363,998,939 4,470,210,527 6,744,115,552 8,124,407,371 8,649,137,024 8,898,890,324

Return On total assets

33.41 %

5.56 %

3.30 %-

0.33 %

3.79 %-

0.72 %

%ages

Return on total Assets 35 % 30 % 25 % 20 % 15 % 10 % 5% -% 5 %10 %-

33.00 %

6.00 % 0.72 %

0.33 % 2006

2007

2008 -3.3

2009

2010 -3.79

2011 45

h) Return on total capital: This ratio measures the ability of the firm to reward those who provide long term funds and to attract to providers of future funds. Calculated as below for reporting purpose: Return on total capital = EBIT x 100 Total capital

Year

2006

EBIT

1,093,521,666

Total Equities Total Non Current Liabilities Return on total capital

2007

2008

346,210,605

(230,637,430)

2009

2010

2011

571,087,099

283,206,400

841,027,713

2,283,939,693

2,339,656,143

2,329,129,147

2,271,547,165

1,960,969,871

2,102,816,137

406,577,034

2,968,856,257

3,277,042,879

3,406,954,843

3,469,936,996

4,211,045,234

40.64 %

6.52 %

(4.11 %)

10.06 %

5.21 %

13.32 %

%ages

Return on Capital 45 % 40 % 35 % 30 % 25 % 20 % 15 % 10 % 5% -% 5 %10 %-

40.64 %

6.52 % 2006

2007

2008 4.11 %-Year

10.06 %

5.21 %

13.32 %

2009

2010

2011 46

i) Return on equity: The return on total equity measures the return to both common and proffered shareholders. Compute as follows: Return on equity = EBT x 100 Average stock holder’s equity

Year

2005

Profit /(Loss) Before Taxation Stockholder’s equity 1,081,732,345 Average stockholder’s equity

%ages

Return on equity

70 % 60 % 50 % 40 % 30 % 20 % 10 % -% 10 %20 %30 %-

2006

2007

2008

2009

2010

2011

1,039,424,159

327,840,587

(279,572,750)

21,184,461

(382,237,611)

125,780,807

2,283,939,693

2,339,656,143

2,329,129,147

2,271,547,165

1,960,969,871

2,102,816,137

1,682,836,019

2,311,797,918

2,334,392,645

2,300,338,156

2,116,258,518

2,031,893,004

61.77 %

14.18 %

(11.98 %)

0.92 %

(18.06 %)

6.19 %

Return on Equity

61.77 %

14.18 % 6.19 %

0.92 %

2006

2007

2008

2009

11.98 %-

2010

2011

19.06 %-

47

Year

j) Return on equity: Drill down return and fetch decisive return on equity it is for internal use for management Decision making. So that management can effectively scrutinize their decision of investment by visualizing more factual consequences. Return on equity = Net income x 100 Average stock holder’s equity

Year

2006

Net income Average stockholder’s equity Return on equity

789,866,961

2007

2008

248,368,268 (222,439,366)

2009

2010

2011

27,092,698

(327,777,142)

63,715,971

1,682,836,019 2,311,797,918 2,334,392,645 2,300,338,156 2,116,258,518 2,031,893,004 46.94 %

10.74 % (9.53 %) Return on Equity

1.18 %

(15.49 %)

3.14 %

60 % 50 %

46.94 %

%ages

40 % 30 % 20 % 10.74 % 10 %

3.14 %

1.18 % -% 2006

2007

2008

2009

2010

2011

10 %20 %-

9.53 %-

48 Year

15.49 %-

k) Return on common stock equity: This ratio measures the return to the common stock holder, the residual owners. The owner is retrieving by doing business. Return on common stock equity = Net income – preferred stock dividend x 100 Average common stockholder’s equity

Year

2005

Net income Issued, Subscribed & Paid-Up Capital 493,500,020 Average common stock holder’s equity Return on common Stock holder’s equity

2006

2007

2008

2009

2010

2011

789,866,961

248,368,268

(222,439,366)

27,092,698

(327,777,142)

63,715,971

925,312,540

1,017,843,800

1,170,520,370

1,287,572,410

1,287,572,410

1,287,572,410

709406280

971578170

1094182085

1229046390

1287572410

1287572410

111.34 %

25.56 %

(20.33 %)

2.20 %

(25.46 %)

4.95 %

Return on Common Stock Holder's Equity 120 %

111 %

100 %

%ages

80 % 60 % 40 %

26 %

20 %

5%

2%

-% 20 %-

40 %-

2,006 %

2,007 %

2,008 % 20 %-

2,009 %

Year

2,010 % 25 %-

2,011 %

49

5. Investor specific ratios Investor specific ratios measure the various accounts for which investors have specific concerns. These ratios are also called Market ratios because of their nature. We measure KOHAT’s marketability test by calculating following market ratios:

a) Earning per share: Whatever income remains in the business after all prior claims, other than owners claims (i.e. ordinary dividends) have been paid, will belong to the ordinary shareholders who can then make a decision as to how much of this income they wish to remove from the business in the form of a dividend, and how much they wish to retain in the business. The shareholders are particularly interested in knowing how much has been earned during the financial year on each of the shares held by them 50

a) Earning per share:

Profit / (Loss) After Taxation Issued, Subscribed & Paid-Up Capital Outstanding Common Shares Earning / (Loss) Per Share - Basic & Diluted

2006

2007

789,866,961

248,368,268

925,312,540

Out standing common stock 2008 2009 2010 (222,439,366)

27,092,698

(327,777,142)

2011 63,715,971

1,017,843,800 1,170,520,370 1,287,572,410 1,287,572,410 1,287,572,410

92,531,254

101,784,380

117,052,037

128,757,241

128,757,241

128,757,241

9.06

2.12

(1.73)

0.21

(2.55)

0.49

10

Amount in Rs

Year

EPS = Net income – preferred stock dividend x 100

Earning/share

9.06

8 6 4

2.12

2

0.49

0.21

0 -2

2006

2007

2008 -1.73

2009

2010

2011

-2.55

-4

51 Year

b) %age of earning retained: The portion of current earrings retained for internal growth or to maximize the shareholder’s wealth. Retained earning ratio = Net income – all dividends x 100 Net income %age of earning retained is 100 % in all 6 years because no dividend is declared or paid during the period.

c) Price earning ratio: P/E ratio is a useful indicator of what premium or discount investors are prepared to pay or receive for the investment. Price earning ratio = Market price per share x 100 EPS Market value is not available there fore it is not possible to calculate price earning ratio. 52

d) Dividend payout ratio: This ratio indicates the percentage of each dollar earned that is distributed to the owners inform of cash. It is calculated by dividing the firm’s cash dividend per share by its EPS. Dividend payout ratio = Dividend/common share x 100 EPS No dividend declared or paid during these periods there fore the ratio is zero.

e) Dividend Yield: This ratio is the percentage return provided by the dividends paid on common stock. Dividend yield ratio = Dividend/common share x 100 Market price/share No dividend declared or paid during these periods therefore dividend yield is zero %.

53

f) Book value per share: This ratio shows the book value per share, which is the amount invested by the owners of the business by holding stocks. It also shows potential investors into the business what they might hope to receive as a return on the basis of its book value comparable with its market value. Book Value =

Total stock holder’s equity –

Year

2006

2007

2008

2009

2010

2011

2,283,939,693

2,339,656,143

2,329,129,147

2,271,547,165

1,960,969,871

2,102,816,137

92,531,254

101,784,380

117,052,037

128,757,241

128,757,241

128,757,241

Total Equities # Outstanding Common Shares Book value per share

(preferred stock equity + preferred stock dividend in arrears) Out standing common stock

24.68

22.99

19.90

17.64

15.23

16.33

Amount in Rs

Book value per share 30 25 20 15 10 5 0

24.68

2006

22.99

2007

19.9

17.64

2008

2009 Year

15.23

16.33

2010

2011 54

DuPont analysis using return on total asset: The rate of return on assets can be broken down on two component ratios: the net profit Margin and the total assets turnover these ratios allow the improved analysis of changes in the return on assets %age. “E.I DuPont De Nemours & Company” developed this method of separating the rate of return ratios into its components parts. Computed as follows: Return on total asset Net income Avg. total assets

= =

Net profit margin x Net income x Net sales

Total asset turnover Net sales Avg. total assets

Year

2006

2007

2008

2009

2010

2011

Net profit margin

33.94 %

15.99 %

(16.17 %)

0.80 %

(8.88 %)

1.05 %

0.98

0.34

0.19

0.42

0.43

0.68

33.41 %

5.56 %

(3.30 %)

0.33 %

(3.79 %)

0.72 %

Total asset turnover

Return On total assets

55

DuPont analysis using return on operating assets: DuPont analysis could also be done using return on operating assets i.e. a combination of return on operating assets and operating asset turnover. Operating items provide refined picture of management’s performance. Return on Operating asset Operating income Avg. Operating assets

Year Operating Profit margin Operating asset turnover Return on Operating asset

= =

Operating profit margin Operating income Net sales

x Operating asset turnover x Net sales Avg. Operating assets

2006

2007

2008

2009

2010

2011

46.99 %

22.28 %

2.66 %

20.44 %

7.49 %

13.82 %

277.69

146.67

140.05

93.10

58.05

90.10

130.48 %

32.68 %

3.73 %

19.03 %

4.34 %

12.45 %

56

Degree of financial leverage: • The use of financing with a fix charge such as interest is termed financial leverage. Financial leverage is successful if the firm earns more on the borrowed funds than it pays to use them. Using financial leverage results in a fixed financing charge that can materially affect the earning available to the common shareholders. 57

Degree of financial leverage: Degree of financial leverage =

EBIT EBIT-I

Year Income before interest & taxes Finance Cost Degree of financial leverage

2006

2007

2008

2009

2010

2011

1,093,521,666

346,210,605

36,648,971

693,901,047

276,352,096

841,027,713

54,097,507

18,370,018

48,935,320

549,902,638

658,589,707

715,246,906

1.06 %

(2.98 %)

4.82 %

(0.72 %)

6.69 %

1.05 %

Degree of Financial leverage 8%

6.69 %

%age

6%

4.82 %

4% 2%

1.05 %

1.06 %

2006

2007

0%

2 %4 %-

2008

2009

2.98 %-

2010 0.72 %-

2011 58

Year

Degree of operating leverage: • A type of leverage ratio summarizing the effect a particular amount of operating leverage has on a company's earnings before interest and taxes (EBIT). Operating leverage involves using a large proportion of fixed costs to variable costs in the operations of the firm. The higher the degree of operating leverage, the more volatile the EBIT figure will be relative to a given change in sales, all other things remaining the same. This ratio is useful as it helps the user in determining the effects that a given level of operating leverage has on the earnings potential of the firm. This ratio can also be used to help the firm determine the most appropriate level of operating leverage in order to maximize the company's EBIT.

59

Degree of operating leverage: Degree of operating leverage =

DCL

DFL

Year

2006

DCL Degree of financial leverage Degree of operating leverage

2007

2009

2010

2011

1.91 % (6.58 %) (17.23 %)

15.53 %

13.48 %

15.77 %

1.05 %

(2.98 %)

4.82 %

(0.72 %)

6.69 %

(5.78 %)

3.22 %

(18.72 %)

2.35 %

1.06 %

1.81 % (6.20 %)

2008

Degree of Operating leverage 5%

3.22 %

1.81 %

2.35 %

%age

0% 5 %10 %-

2006

2007

2008

6.20 %-

5.78 %-

2009

2010

2011

18.72 %-

60

15 %20 %Year

Degree of combine leverage: • The Degree of Combined Leverage (DCL) is the leverage ratio that sums up the combined effect of the Degree of Operating Leverage (DOL) and the Degree of Financial Leverage (DFL) has on the Earning per share or EPS given a particular change in shares. This ratio helps in ascertaining the best possible financial and operational leverage that is to be used in any firm or business. • This ratio has been known to be very useful to a company or firm as it helps a firm understand the effects of combining financial and operating leverage on the total earnings of the company. A high level of combined leverage shows the risk involved in the company as there are more fixed costs in the company, while a low combined leverage would mean better for the company. 61

Degree of combine leverage: Degree of combine leverage =

%age change in EPS

%age change in sale volume Year

2005

2006

2007

2008

2009

2010

2011

4.50

9.06

2.12

(1.73)

0.21

(2.55)

0.49

EPS volume

1,715,426,515 2,327,237,579 1,553,733,256 1,375,972,754 3,395,580,759 3,692,038,418 6,085,434,517

%age Change in EPS %age change in Sales volume

50.33 %

(327.36 %)

(222.54 % )

923.81 %

(108.24 %)

620.41 %

26.29 %

(49.78 %)

(12.92 %)

59.48 %

8.03 %

39.33 %

DCL

1.91 %

(6.58 %)

(17.23 %)

15.53 %

(13.48 %)

15.77 %

%age

Degree of Combine leverage 20 % 15 % 10 % 5% 0% 5 %10 %15 %20 %-

15.53 %

13.48 %

15.77 %

1.91 % 2006

2007 6.58 %-

2008

17.23 %Year

2009

2010

2011

62

CONCLUSIONS • Liquidity The overall liquidity of Kohat Cement seems to exhibit reasonable trend, having being maintained the level which is prevailing in whole industry. The company’s liquidity seems to be satisfactory. • Financial Leverage/Debt In the initial debt ratio is low and continuously increasing with the passage of time as business is flourishing. In the year 2011Company debt ratio is higher we see same trend is prevailing in the industry. All firms have same high level of debts and most of company asset are financed by debts. So we can say regarding debt Ratio Company is with the passage of time increasing this ratio which is healthy sign, company is improving its business and creditors are willingly providing debts to Kohat Cement. • Activity Kohat Cement Inventory management system is not looking smart. The company may be experiencing some problems with account receivables. In 2006 its collection period is above industry average. In 2007 it is brought down but not competing industry average. The total utilization of company asset is less than that of industry which shows efficiency is not yet achieved. 63

CONCLUSIONS… • Profitability Though company has high cost good sold received, yet it faces loss .There may be various reasons for this. – – – –

High interest charges. The high dumping rate. Tariff and Quota effects. High tax rate.

• Investor specific/Market Kohat market ratio also good as compare to other companies in the industries because its market price per share increases (the market price per share is given of 2 year’s only) although it’s earning per share decreases and must have to focus on this.

64

RECOMMENDATIONS • Company should improve its inventory management system for efficient use of resources • There should be an improvement in receivables collection as company have large amount of receivables yet to collect. • Company should focus on increasing profit instead of innovation. They should outsource innovations from the research firms or advanced companies indigenously or from abroad. • Company has to focus those countries for import where there is less tariff and no quota implications. It should increase its business in free trade areas and common markets. • Company should efficiently utilize assets to generate sales. Qualified new talent should be hired for the managerial posts. • Company should capture markets. Because we know that company have a huge idle capacity creating fix costs it can be utilized in condition of increase in sales. 65

RECOMMENDATIONS… • There should be increase in promotion to increase in sales worldwide. • There should be efficient management which is fully aware with industry trends. • Kohat Cement should maintain the degree of combined leverage so as to minimize the risks involved in the business. Maintaining the risk and not increasing it from where it is. • The Company should try to lower or minimize the financial leverage in order to balance the operating leverage and by minimizing the operating leverage when the financial leverage is to be balances. • The balanced degree of combined leverage (DCL) is likely to provide with an increase in the earnings per share of the equity holders.

66

THANK YOU 67