PROJECT REPORT OF

FINANCIAL REPORTING & ANALYSIS ON

“FAUJI CEMENT COMPANY”

Submitted to:

Mr. Waqas rauf

Submitted By:

TANZEEL ASIF (AH 523102)

MBA. (Banking & Finance)

1st Semester.

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FAUJI CEMENT COMPANY
LIMITED
Company Introduction
A longtime leader in the cement manufacturing industry, Fauji Cement Company,
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
10 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.

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. Smith 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 January, 1, 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.

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Corporate Profile
Board of Directors
Lt Gen Syed Arif Hasan, HI (M) (Retd) Chairman
Lt Gen Javed Alam Khan, HI (M) (Retd) Chief Executive
Mr. Qaiser Javed Director
Mr. Riyaz H. Bokhari, IFU Director
Brig Arif Rasul SI (M) (Retd) Qureshi, Director
Brig Rahat Khan, SI (M) (Retd) Director
Dr. Nadeem Inayat Director
Brig Liaqat Ali (Retd) Director
Brig Munawar Ahmed Rana (Retd) Director
Brig Shabbir Ahmed (Retd) Secretary

Human Resources Committee

Dr. Nadeem Inayat President
Mr. Qaiser Javed Member
Brig Liaqat Ali (Retd) Member
Brig Shabbir Ahmed (Retd) Secretary

Audit Committee

Mr. Qaiser Javed President

Mr. Riyaz H. Bokhari Member
Brig Rahat Khan (Retd) Member
Dr. Nadeem Inayat Member
Brig Shabbir Ahmed (Retd) Secretary

Technical Committee

Brig Rahat Khan (Retd) President

Brig Arif Rasul Qureshi (Retd) Member
Brig Liaqat Ali (Retd) Member
Mir Khawar Saleem, Director (Project) Secretary

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 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.

Our 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.

Our Objective
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.

Our Values
Customers: We listen to our customers and improve our product to meet their present
and future needs.

People: Our success depends upon high performing people working together in a safe
and healthy work place where diversity, development and team work are valued and
recognized.

Accountability: We expect superior performance and results. Our leaders set clear
goals and expectations, are supportive and provide and seek frequent feed back.

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Citizen Ship: We support the communities where we do business, hold ourselves to
the highest standards of ethical conduct and environment responsibility, and
communicate openly with FCCL people and the public.

Financial Responsibility: We are prudent and effective in the use of the resources
entrusted to us.

Product
Ordinary Portland Cement

Clinker 94-95%
Gypsum 5-6%

28 days strength up to 8000 P.S.I

Fineness up to 3100 cm2/gm

Quality Policy
• EMPHASIS ON 100% CUSTOMER SATISFACTION.
• 100 % EFFECTIVE UTILIZATION OF PLANT CAPACITIES.
• EMPHASIS ON 100% TOP QUALITY HUMAN RESOURCES.
• EMPHASIS ON 100% QUALITY CULTURE.

TO REMAIN A LEADING MANUFACTURER OF PORTL

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 Income Statement Analysis

Fauji Cement Co Ltd

Summarized Income Statement
For the Year Ended 30 June, 2003 To 2007 (in 000)
2003 2004 2005 2006 2007
Rupees Rupees Rupees Rupees Rupees
SALES 2,488,992 3,247,262 3,921,363 5,683,456 4,780,036
Less : Sales tax and excise duty 978,254 951,031 1,076,219 1,397,317 1,316,753
NET SALES 1,510,738 2,296,231 2,845,144 4,286,139 3,463,283
Less: Cost of sales
Raw Material 75,725 115,164 136,819 205,751 235,379
Direct Labor 65,299 91,289 87,091 142,070 133,780
Factory Overhead
Rent Rate & Taxes 882 952 1,378 2,562 2,213
Fuel Consumed 472,772 564,591 699,818 843,909 979,044
Power Consumed 246,489 310,041 332,383 393,785 431,609
Depreciation 245,737 243,056 251,981 261,566 276,244
Other F.OH 192,730 238,876 245,183 325,001 355,819
Total F.OH 1,158,610 1,357,516 1,530,743 1,826,823 2,044,929
Total Manufacturing Cost 1,299,634 1,563,969 1,754,653 2,174,644 2,414,088
Work in Process 37,601 -21,944 16,137 -82,047 -21,550
Cost of goods manufactured 1,337,235 1,542,025 1,770,790 2,092,597 2,392,538
Finished goods -2,104 13,381 -7,223 2,430 -20,750
Cost of Sales 1,335,131 1,555,406 1,763,567 2,095,027 2,371,788
Gross Profit 175,607 740,825 1,081,577 2,191,112 1,091,495
Less Operating Expenses
General & Admin Expenses
Salary, wages and benefits 15,408 21,817 21,835 35,663 42,439
Traveling and entertainment 2,933 2,053 3,320 4,769 3,487
Legal and Professional charges 12,117 1,655 3,148 3,490 2,281
Other General and Admin Expenses 7,917 14,542 13,991 22,706 23,095
Total 38,375 40,067 42,294 66,628 71,302
Selling and Distribution Expenses
Salary, wages and benefits 7,992 12,011 11,085 21,388 20,651
Rent Rate & Taxes 1,209 1,144 1,172 1,112 1,353
Communication Expenses 1,149 1,850 2,590 2,376 2,871
Advertisement and sales Promotion 1,737 2,296 2,101 2,866 2,029
Other selling expenses 2,930 3,116 4,386 3,953 13,741
Total 15,017 20,417 21,334 31,695 40,645
Other Operating Expenses 0 0 40,493 94,127 58,098
Operating Profit(EBIT) 122,215 680,341 977,456 1,998,662 921,450

Add Other income

Interest on Bank Accounts 6,795 9,517 3,821 34,600 68,079
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Interest on Long Term Advances 79 119 34 135 135
Gain on Disposal of Fixed Assets 1,259 378 4,750 1,301 100
Others 394 32,730 2,611 7,288 5,521
Total 8,527 42,744 11,216 43,324 73,835
Less Financial charges
Fee and charges on Loans 3,347 11,615 10,564 500 500
Interest on Long term loans 307,050 57,324 175,784 254,030 200,642
Mark up on Short term loans from
Associations 0 873 3,185 456 0
Interest on short term loans 4,246 0 4,353 1,095 779
Others 148,763 134,410 35,748 8,215 5,184
Total 463,406 204,222 229,634 264,296 207,105
Less Amortization of Differed Cost 191,061 762,152 0 0 0
Profit/ Loss Before Taxation -523,725 -243,289 759,038 1,777,690 788,180
Less Taxation 7,650 557,439 248,548 573,951 141,857
Profit/loss after Taxation -516,075 314,150 510,490 1,203,739 646,323
Earning/ (Loss) per share - Basic -1.43 0.85 1.38 3.25 1.74
Earning/ (Loss) per share - Diluted -1.27 0.75 1.22 2.87 1.54

FAUJI CEMENT COMPANY

BALANCE SHEET HORIZONTAL ANALYSIS
As On 2003 To 2007

FAUJI CEMENT COMPANY LIMITED

Balance Sheet Trend Analysis
2003 2004 2005 2006 2007
CURRENT
ASSETS: 100.00% 80.00% 154.00% 219.00% 0.27%
Cash and Bank
Balance 100.00% 102.00% 310.00% 437.00% 0.22%
Receivables 100.00% 121.00% 14.00% 5.00% 1.4%
Stock in Trade: 100.00% 128.00% 116.00% 302.00% 0.38%
Raw Material 100.00% 150.00% 182.00% 276.00% 0.24%
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Work in process 100.00% 477.00% 200.00% 1610.00% 2%
Finished goods: 100.00% 58.00% 81.00% 73.00% 14%
NON CURRENT
ASSETS: 100.00% 95.00% 91.00% 82.00% 0.08%
Fixed assets 100.00% 95.00% 103.00% 99.60% 0.09%
Long Term deposits 100.00% 169.00% 215.80% 215.80% 0.02%
Long Term Loans and
Advances 100.00% 0.00% 22.50% 22.50% 0.02%
CURRENT
LIABILITIES 100.00% 78.00% 255.00% 268.00% 0.31%
Current portion of
long term loan 100.00% 63.00% 402.00% 400.00% 0.40%
Short term loans 100.00% 0.00% 1941.00% 148.00% 2.4%
Other liabilities 100.00% 89.50% 86.40% 132.00% 0.15%
Non Current
LIABILITIES 100.00% 85.40% 61.00% 39.00% 0.03%
Long term loans 100.00% 85.00% 60.00% 34.00% 0.02%
Provisions for staff 100.00% 147.00% 164.70% 28.00% 0.03%
Share Holders
Equity 100.00% 119.30% 150.74% 202.00% 0.23%
Paid up capital 100.00% 119.30% 150.74% 202.00% 0.23%
Total Assets 100.00% 93.60% 98.58% 98.17% 0.1013%
Total Liabilities 100.00% 84.70% 80.50% 62.00% 0.05%
Total Liabilities &
Owner's Equity 100.00% 93.60% 98.58% 98.17% 0.1013%

• Day’s Sales in Receivable

The number of day’s sales in receivables relates the amount of the accounts receivable
to the average daily sales on account. It is computed as follows,

Day’s Sales in Acc/ Receivable = Average Gross Receivables / (Net Sales/365)

Days

Days Sale in Account Receivable ( Amounts in Rs. “000”)

Years 2003 2004 2005 2006 2007
Gross Account Receivable 79,492 23,833 25,021 27,042 27,906
Net Sales 1,510,738 2,296,231 2,845,144 4,286,139 3,463,283
Days Sale in Account 19.21 3.79 3.21 2.30 2.94
Receivable(Days)

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 25.00
19.21
20.00
15.00
Series1
10.00
3.79 3.21 2.30 2.94
5.00
0.00
20032004200520062007
Years

Interpretation

This ratio gives an indication of the length of time that the receivables have been
outstanding at the end of the year. Shortening the credit terms indicates that there will
be less risk in the collection of future receivables and a lengthening of the credit terms
indicates a greater risk. In the above data we see that in year 2003 the days sales in
account receivable is very high and it was not good for the company but after 2003
there is a great decrease in the days sales in inventory which show the good
performance of the company’s management and it shows a less risk in the collection
of future receivables.
• Account Receivable Turnover

This ratio indicates the liquidity of the receivables. It is computed by as follows

Accounts Receivable Turnover = Net Sales / Average Gross Receivable

(Times/Year)

Account Receivable Turn Over( Amounts in Rs. “000”)

Years 2003 2004 2005 2006 2007
Net Sales 1,510,738 2,296,231 2,845,144 4,286,139 3,463,283
Gross Account Receivable 79,492 23,833 25,021 27,042 27,906
Account Receivable Turn 19.00 96.35 113.71 158.50 124.11
Over (Times/Year)

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 Turn Over (Time/Year)
200.00

Account Receivable
158.50
150.00 113.71 124.11
96.35
100.00 Series1

50.00 19.00
0.00
2003 2004 2005 2006 2007
Years

Interpretation
From the above calculation it is shown that account receivable turnover is increasing
with every year. It shows the liquidity of accounts receivable in terms of time per
year. We see that in 2003 the account receivable turnover is too low and in 2004 there
is a high increase in accounts receivable turnover and we see a gradual increase in the
accounts receivable up to year 2006. In 2007 we see a great decline in accounts
receivable turnover.

• Days Sales in Inventory

The number of day’s sales in inventory ratio relates the amount of the ending
inventory to the average daily cost of goods sold. It is computed as follows,

Days Sales in Inventory = Ending Inventory / (Cost of Goods Sold/365)

(Days)

Days Sales in Inventory ( Amounts in Rs. “000”)

Years 2003 2004 2005 2006 2007
Ending Inventory 236,602 259,000 353,806 635,978 652,078
Cost of Goods Sold 1,335,131 1,555,406 1,763,567 2,095,027 2,371,788
Days Sales in 64.68 60.78 73.23 110.80 100.35
Inventory(Days)

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 Days Sales in Inventory
120.00 110.80
100.35
100.00
73.23
80.00 64.68 60.78
(Days) 60.00 Series1
40.00
20.00
0.00
2003 2004 2005 2006 2007
Years

Interpretation

The day’s sales in inventory estimate the number of days that it will take to sell the
current inventory. The lower the number of day’s sales in inventory, the better the
inventory control. From the above data we see that there is a slight decrease in 2004
in day’s sales in inventory and it shows a good trend but after 2004 there is a high
increase in the day’s sales in inventory to year 2006 which shows a weak inventory
control of the management. In 2007 we see a little decrease in number of days in
day’s sales inventory which indicates that management is trying to improve the
inventory control system

• Inventory Turnover
This ratio indicates the liquidity of the inventory. The formula is as follow,

Inventory Turnover = Cost of Goods Sold / Average Inventory (Times/Year)

Inventory Turnover ( Amounts in Rs. “000”)

Years 2003 2004 2005 2006 2007
Cost of Goods Sold 1,335,131 1,555,406 1,763,567 2,095,027 2,371,788
Ending Inventory 236,602 259,000 353,806 635,978 652,078
Inventory Turnover (Times) 5.64 6.01 4.98 3.29 3.64

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 8.00

Inventory Turnover
5.64 6.01
6.00 4.98

(Times)
3.29 3.64
4.00 Series1

2.00
0.00
2003 2004 2005 2006 2007
Years

Interpretation
As shown in the table there is an increase in 2004 as compared to the base year.
Whereas there is a decline in the inventory turnover in the following two years. On
the other hand there is a slight rise in the ratio in last year. It is better for the company
to have a high inventory turnover ratio .

• Working Capital

The working capital of a business is an indication of the short term solvency of the
business. It is computed as follows

Working Capital = Current Assets – Current Liabilities

Net Working Capital ( Amounts in Rs. “000”)

Years 2003 2004 2005 2006 2007
Current Assets 721,338 574,461 1,113,721 1,579,382 1,953,527
Current Liabilities 472332 372116 1206946 1267199 1442287
Net Working 249006 202345 -93225 312183 511240
Capital
Capi
king
Wor
Net

Rs)
(in
tal

600000 511240
500000
400000 312183
300000 249006
202345
200000 Series1
100000
0

-100000 2003 2004 2005 2006 2007

-200000
Years

Interpretation

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In the first year there is decrease in the working capital. And then in the second year
the working capital gone to the negative side. That decline is due to increase in the
current liabilities. That in turn affected the short term solvency of the company. But in
the coming years the working capital increase to a good extent. That on the other hand
increased the solvency of the company. Higher ratio is better for the organization to
get the short term loans from financial institutions.

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