Vision

To transform FCCL into a role model cement

manufacturing Company fully aware of
generally accepted principles of corporate social
responsibilities engaged in nation building
through most efficient utilization of resources
and optimally benefiting all stake holders while
enjoying public respect and goodwill.

Mission Statement

FCCL while maintaining its leading position in

quality of cement and through greater market
outreach will build up and improve its value
addition with a view to ensuring optimum
returns to the shareholders.
COMPANY HISTORY

Fauji Cement Company Limited was sponsored by Fauji Foundation and incorporated
as a public limited company on 23 November 1992. It obtained the Certificate of
Commencement of Business on 22 May 1993. The company has been setup with
primary objective of producing and selling Ordinary Portland Cement. For the
purpose of selection of sound process technology, state of the art equipment, civil
design and project monitoring, Local and Foreign Consultants were engaged.

The company entered into a contract with

World renowned cement plant
manufacturers M/s F.L. Smidth to carry out
design , engineering, procurement,
manufacturing, delivery, erection,
installation, testing and commissioning at
site of a new, state of the art, cement plant
including all auxiliary and ancillary
equipment, complete in all respects for the
purpose of manufacturing a minimum of
3,000 tdp clinker and corresponding quantity of Ordinary Portland Cement as per
Pakistan/ British Standard Specifications.

The contract came into force on 1 January 1994. Physical work on the project started
in August 1994.

Commissioning activities started in May 1997 generally remained smooth and trouble
free, which enabled first batch of clinker production on 26 September 1997 followed
by cement production in November 1997.

Subsequently in 2005, the Plant Capacity has been raised to 3,700 tons of clinker per
day i.e. 3,885 tons of cement per day.

BUSINESS

The company has been set up with the primary objective of producing and selling
Ordinary Portland Cement. The finest quality of Cement is available for all type of
customers whether for Dams, Canals, industrial structures, highways, commercial or
residential needs using latest state of the art dry process Cement manufacturing
process.

STRATEGIES

Fauji Cement is a longtime leader in the cement manufacturing industry, its,

headquartered in Islamabad, operates a cement plant at Jhang Bahtar, Tehsil Fateh
Jang, District Attock in the province of Punjab. The company has a strong and
longstanding tradition of service, reliability, and quality that reaches back more than
11 years. Sponsored by Fauji Foundation the Company was incorporated in
Rawalpindi in 1992.
The cement plant operating in the Fauji Cement is one of the most efficient and best
maintained in the country and has an annual production capacity of 1.165 million tons
of cement. The quality portland cement produced at this plant is the best in the
Country and is preferred the construction of highways, bridges, commercial and
industrial complexes, residential homes, and a myriad of other structures needing
speedy strengthening bond, fundamental to Pakistan's economic vitality and quality of
life.

CEMENT MANUFACTURING PROCESS

Cement is manufactured from 75-80%

limestone and 20-25% Clay, or from
raw materials containing the same
chemical constituents. The raw
materials are quarried and crushed,
after which they are mixed in the
correct proportions. The raw mix is
then ground in a raw mill and
subsequently burned in a rotary kiln at
a temperature around 1450 °C. The
raw materials undergo a number of
complex chemical reactions in the
burning phase and leave the kiln as
cement clinker, consisting of
agglomerate of clinker minerals. Finally the clinker ground to a fine powder cement in
a Cement Mill, together with 4-6% gypsum. The gypsum serves to retard the setting
time of the cement, which would otherwise harden, immediately with the addition of
water.

FCCL is using dry process to manufacture cement in the dry process the raw mix is
ground totally in dry condition, and it leaves the mill and enters the kiln as a powder
called raw meal. In order to dry all moisture from the raw materials the raw mill is air
swept with hot kiln gases or with hot air from an auxiliary furnace.
FAUJI CEMENT RATIO ANALYSIS FROM 2001-2006

Operating Financial &

Investment Ratios: 2001 2002 2003 2004 2005 2006
Gearing ratio 114.7 85.3 92.1 73.1 60.0 40.5
Current ratio 10.0 112.2 188.8 317.4 124.8 110.3
Acid test or Quick ratio 10.0 112.2 178.6 300.9 120.2 100.5
1,276.
Debt equity ratio - 655.8 7 296. 210. 121.1
Return on assets -10.0 -1.7 -9.4 -4.1 12.2 28.7
Return on Equity - -12.8 -129.9 -16.3 37.8 63.4
200
Key Performance Indicators: 1 2002 2003 2004 2005 2006
Net profit margin -21.9 -3.6 -21. -7.5 19.4 31.3
Earning per share before tax -3.3 -0.3 -1.4 -07 2.0 4.8
Earning per share after tax -3.3 -0.3 -1.4 -07 2.0 4.7
Sales as % of total assets 45.6 47.1 44.8 54.9 63.0 91.7
Earning per share before tax -
growth 106.3 -90.9 366.7 -50.0 385.7 140.0
Sales growth (current year's 'sales -
last year's sales / last year's sales) -0.3 0.3 -3.3 30.5 20.8 44.9

GEARING RATIO
Looking at the above ratios we can draw a big picture about the company as all the
major ratios are calculated. By looking at the gearing ratio it can be said that the
company is acting wisely in the market. In start it was highly geared and by the time
passes it reduces its financial leverage and when we look down we can see that the
industry average regarding the gearing is around 40s whereas Fauji Cement average is
77 which is too high and company becomes riskier. But as we see that the have paid
most of the portion of their loan and now they come back to the industry average this
defines the company as a suitable company.

CURRENT RATIO
Current ratio of Fauji Cement shows its position that in year 2003 & 2004 the
company faced tough time and it has enough liquid assets but could not able to utilize
and exceeds the industry practice which indeed caused loss for them in the
profitability.

ACID TEST RATIO

Same as the situation in the acid test ratio the industry average was not followed by
the company and this cost the company high as the liquid assets remained unused.

DEBT TO EQUITY RATIO

The company falls under a diverse group so this project started with nil equity and
later as the shares were issued the company developed the equity. As we look at the
industry averages the industry has a high debt to equity ratio but in the end terms we
can say that the company is less risky and has healthy equity in the ending years.

RETURN ON ASSETS
 As the earlier para defines that the company is having solid baseline the ROA is quite
good in the latter years. With respect to the industry the company is performing well
and proving a high ROA to strengthen its structure.
CEMENT INDUSTRY RATIO ANALYSIS FROM 2001-2006

Operating Financial & Investment Ratios: 2001 2002 2003 2004 2005 2006
Gearing ratio 49.3 48.1 49.7 40.1 39.5 43.9
Current ratio 60.5 82.1 83.6 80.5 86.5 100.7
Acid test or Quick ratio 60.5 82.1 75.3 72.4 79.7 92.8
Debt equity ratio 180.3 147.7 165.5 139.6 130.1 137.8
Return on assets -2.4 .5 -1.2 5.6 9.2 9.6
Return on Equity -6.8 1.2 3.1 13.3 21.3
Key Performance Indicators: 2001 2002 2003 2004 2005 2006
Net profit margin -5.1 1. -2.4 10.3 17.8 21.1
Earning per share before tax -.8 .2 -.4 1.7 3.5 4.9
Earning per share after tax -.9 .1 -.5 1.5 3.2 4.5
Sales as % of total assets 47.4 48.6 47.3 53.8 51.8 45.5
Sales growth 5. 10.8 4. 18.8 28.7 37.8

HORIZONTAL ANALYSIS:
Income Statement 2001 2002 2003 2004 2005 2006
(1)Local sales 2,566.30 2,573.20 100% 2,489.00 97% 3,247.30 127% 3,627.80 141% 5,194.60 202%
(2)Export sales 0 0 0 0 293.5 488.8
Gross sales 2,566.30 2,573.20 100% 2,489.00 97% 3,247.30 127% 3,921.30 153% 5,683.40 221%
Less: Cost of Sales 2,259.10 2,174.50 96% 2,313.40 102% 2,506.40 111% 2,839.80 126% 3,492.30 155%
GROSS PROFIT 307.2 398.7 130% 175.6 57% 740.9 241% 1,081.50 352% 2,191.10 713%
Less: Overhead and
Other Expenses 2,328.60 2,258.30 97% 2,557.90 110% 3,329.00 143% 2,943.90 126% 3,684.80 158%
OPERATING
PROFIT 245.4 323.8 132% -60.4 25% -39 16% 988.6 403% 2,041.90 832%
Less: Financial
expenses 807.9 416.7 52% 463.4 57% 204.2 25% 229.6 28% 264.3 33%
NET PROFIT/LOSS
BEFORE TAX -562.5 -92.9 17% -523.8 93% -243.2 43% 759 -135% 1,777.60 316%
Tax provision 8 8.2 103% 7.7 96% 12.6 158% 15.7 196% 21.4 268%

VERTICAL ANALYSIS
Income Statement 2001 2002 2003 2004 2005 2006
(1)Local sales 2,566.30 2,573.20 2,489.00 3,247.30 3,627.80 5,194.60
(2)Export sales 0 0 0 0 293.5 488.8
2,566.30 2,573.20 2,489.00 3,247.30 3,921.30 5,683.40
Gross sales
100% 100% 100% 100% 100% 100%
2,259.10 2,174.50 2,313.40 2,506.40 2,839.80 3,492.30
Less: Cost of Sales
88% 85% 93% 77% 72% 61%
GROSS PROFIT 307.2 398.7 175.6 740.9 1,081.50 2,191.10
2,328.60 2,258.30 2,557.90 3,329.00 2,943.90 3,684.80
Less: Overhead and Other Expenses
91% 88% 103% 103% 75% 65%
OPERATING PROFIT 245.4 323.8 -60.4 -39 988.6 2,041.90
807.9 416.7 463.4 204.2 229.6 264.3
Less: Financial expenses
31% 16% 19% 6% 6% 5%
NET PROFIT/LOSS BEFORE TAX -562.5 -92.9 -523.8 -243.2 759 1,777.60
Tax provision 8 8.2 7.7 12.6 15.7 21.4
SALES
We have taken year 2001 as our base year in the horizontal analysis and sales
as the base for Vertical analysis to get a gentle look at the position of
operations of the Company. The trend shows that the local sales of Fauji
Cement are increasing every year which is positive sign for any company and it
directly refer to the profit earning which is the ultimate goal of every company.
In year 2005 & 2006 the company also starts its export sales which opens new
horizon for the company and the exports sales had shown increase too which
ensures the strength of the company.

COST OF SALES
The point to be noted is that the Cost of sales is also increased over the years
but we can see from the trend that cost of sales is increased lower than the
Sales itself which mentions the company cost control ability. Lowering the cost
will lead to higher earning for the company. In our vertical analysis we can see
that the cost of sales is decreasing with respect to the sales. The operations of
the company are becoming efficient and cost effective.

OVERHEADS AND OTHER EXPENSES

Overheads for the company have increased over the years and are almost equal
to the cost of sales. The company's overheads are under control by the
management by the end of year 2006 whereas the overheads were highest in
the year 2004 which caused the operation profit negative. Later the overheads
were well managed and also escort the operating profit toward growth. With
the introduction of export sales the overheads reduced in the last two years.

FINANCIAL EXPENSES
As we look at the financial expenses we can notice that company took a high
cost loan to strengthen its position which levied it to net loss in the initial years
but the company not only paid the financial expenses but also kept the flag of
the company high when it comes to market reputation this caused a progressive
result which we can be seen in the year 2006. The company has paid most of
the financial expenses in the start so that in the latter years the company can
strengthen its base and financial structure.

CONCLUSION

The company has designed its capital structure so well that by achieving its
goals it is strengthening its capital. This shows that the company is not uni-
focused toward profit earning, but also toward developing its market and it has
a basic accounting principle of Going Concern. The company is ploughing
back its earnings to develop its equity and build a high structured Corporate
Firm. The company working is strictly ok and it is on to improve as the day
passing.