Attock Cement Pakistan Limited (ACPL), a part of the Pharaon Group, is a public limited company, listed on the Karachi Stock Exchange since June 2002. Main activities of the company include Manufacturing and Sales of Cement.
Presently, Pharaon Commercial Investment Company Limited holds the major shares of the company (84.06% of the total paid up capital), whereas the general public holds a total of 15.94% shares.
The company was incorporated in 1981, while the commercial production initiated on June 1, 1988. The project is a Pak Saudi joint venture and involved initial capital outlay of around Rs 1.5 billion with foreign exchange component of around US $45 million. This made it one of the largest enterprises in the private sector.
Attock Cement Pakistan Limited has witnessed a volumetric growth in sales over the past years in lieu of vigorous growth in GDP, high government spending on infrastructure projects, ongoing constructions projects and development activities in neighboring countries.
Owing to favorably high market prices and more than 100% capacity utilization in FY'06, the company posted a record breaking sales volume of 843,137 tons. However, the positive effect of increased sales volume was mitigated by lower sales price per bag in 2H'06 shrinking sales by 38.39%.
Presently the company with the extension of Line 2 is working at a daily and annual production capacity of 3000mtpd and 945000mtpa respectively. As a result of its tremendous performance in FY'04, ACPL enjoys a market share of 4.59% with leadership in branded cement by the name of 'FALCON CEMENT'.
Until recently, liquidity position of ACPL had been deteriorating since four years. This can be ascribed to high base effect in lieu of greater current liabilities of the company. Yet, the company still fared well than its competitors.
FY'06 was followed by a drastic fall in current ratio owing to its capacity expansion plan in the form of Line 2 project kiln. Thus, long term financing was carried out consequently affecting the current liabilities and liquidity position of the company.
Gradual payment of long-term debt in future will further hit the liquidity position of the company.
Ever increasing efficiency in capacity utilization and capacity enhancement had an inflated effect on ACPL asset management. With increasingly better utilization of assets and brand equity (of its FALCON BRAND) the company has surpassed other players of the industry. In lieu of record breaking sales volume in FY'06, inventory turnover ratio and thus the operating cycle has shortened as well. Subjected to changes in equity figure, sales-to-equity ratio showed an erratic trend and mainly hovered around 1.4.
A jerk in the asset management ratios, however, was observed in 2H'06 owing to oversupply in the market, tumbling down the cement sales price consequently eating away the striking sales revenue that company acquired in the preceding year.
ACPL reaped enormous sales growth in lieu of strong demand for cement backed by robust GDP growth. The positive trend is also reflected in the company's gross profit and net profit margins.
The after effect of such enormous sales growth is evident from a sharp downturn in profitability ratios in FY'06 owing to high base effect.
As discussed earlier, 2H'06 was marked by a recession in cement sales prices thus hitting the profitability ratios as well. The fiscal year FY07 shall however be better as the prices have increases. However, any hike in fuel prices and KIBOR rates might have severe repercussions on the company's future profitability condition. At present the increasing coal prices as well as the unprecedented increase in royalty by the Balochistan government has resulted in increasing costs for the company.
Until FY'06, the interest coverage ratio of the company has been commendable. However, the capacity expansion projects in FY'06 indebted ACPL to significant cost of borrowing (mark-ups) consequently deteriorating its TIE ratio. ACPL major operations are debt-financed with more than 60% of its financing carried out through long-term debt, thus raising the finance cost ie interest expense.
Consequently, long-term debts to equity and total debt-to-asset ratios have also increased over the years.
Mounting KIBOR rates in future, will further add to the cost of borrowing hitting the debt management ratios of the company. With phenomenal sales growth and profit after taxation, ACPL witnessed a marked increase in EPS in FY'05 and FY'06 growing by 112% and 207.5% respectively. It, however, depicted a downturn in 2H'06 due to a depression in cement prices affecting the whole industry.
In terms of its net worth, ACPL fares well than the industry owing to its increasingly high profits. DPS is also in line with the industry average and is on the rise as well. Price-to-Earnings ratio, however; is lower than that of other players of the industry.
FUTURE OUTLOOK:
In future cement demand in both local and export markets will remain consistently high. In lieu of growing exports, upcoming new cement production capacities will soon get absorbed in regional markets given that the GoP does not take any negative decision on export of cement. Rise in international coal prices along with high cost of electricity, however, will remain a threat in future. Besides, all these factors will hamper the profitability of ACPL.
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ATTOCK CEMENT - KEY FINANCIAL DATA
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Income Statement (Rs '000) FY'02 FY'03 FY'04 FY'05 FY'06 Mar'07
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Total Revenue 1369773 1442678 1881918 2587407 3472581 2139489
Cost of Goods Sold 1107565 1187504 1268714 1559824 1807534 1221642
General & Administrative Expenses 12922 16902 76901 100643 32748 52007
Selling and Distribution Expenses 72697 79939 146523 180351 151569 160415
Operating Profit (EBIT) 226334 219083 499248 1232099 1522024 775410
Financial Charges 23257 8439 8983 11267 25387 38545
Net Income Before Taxes 189297 195921 456737 1160858 1393345 736865
Net Income After Taxes 95906 132137 280226 861727 908609 498665
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Balance Sheet (Rs '000) FY'02 FY'03 FY'04 FY'05 FY'06 Mar'07
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Stores & Spares 191,976 203,678 223,942 369,924 258,471 404,804
Stock in Trade 196,383 171,032 197,321 162,285 167,171 214,695
Cash & Bank Balances 35,174 57,212 107,741 168,622 94,855 109,005
Total Current Assets 532,985 585,715 718,624 837,427 574,858 1,027,070
Total Non Current Assets 881,138 887,820 1,109,434 2,547,026 4,236,094 4,566,413
Total Assets 1,428,506 1,488,949 1,850,176 3,407,187 4,871,506 5,651,963
Total Current Liabilities 268,257 240,876 371,413 487,500 811,973 1,220,299
Long Term Debt 24,164 23,298 14,319 6,764 819 356
Total Non Current Liabilities 129,905 157,755 198,423 731,099 1,145,390 1,327,927
Total Liabilities 398,162 398,631 569,836 1,285,186 1,918,276 2,548,226
Paid Up Capital 721,629 721,629 721,629 721,629 721,629 721,629
Total Equity 1,030,344 1,090,318 1,280,340 2,122,001 2,953,230 3,103,737
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LIQUIDITY RATIO FY'02 FY'03 FY'04 FY'05 FY'06 Mar'07
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Current Ratio 1.99 2.43 1.93 1.72 0.71 0.84
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ASSET MANAGEMENT FY'02 FY'03 FY'04 FY'05 FY'06 Mar'07
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Inventory Turnover(Days) 102.07 93.5 80.59 74.05 44.13 52.12
Day Sales Outstanding (Days) 4.13 4.04 1.16 0.55 2.4 9.66
Operating Cycle (Days) 106.2 97.55 81.75 74.6 46.52 61.78
Total Asset turnover 0.96 0.97 1.02 0.76 0.71 0.38
Sales/Equity 1.33 1.32 1.47 1.22 1.18 0.69
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DEBT MANAGEMENT FY'02 FY'03 FY'04 FY'05 FY'06 Mar'07
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Debt to Asset(%) 27.87 26.77 30.8 37.72 39.38 45.09
Debt/Equity (Times) 0.39 0.37 0.45 0.61 0.65 0.82
Times Interest Earned (Times) 9.73 25.96 55.58 109.35 59.95 20.12
Long Term Debt to Equity(%) 12.61 14.47 15.5 34.45 38.78 42.78
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PROFITABILITY (%) FY'02 FY'03 FY'04 FY'05 FY'06 Mar'07
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Gross Profit Margin 19.14 17.69 32.58 39.71 47.95 42.9
Net Profit Margin 7 9.16 14.89 33.3 26.17 23.31
Return on Asset 6.71 8.87 15.15 25.29 18.65 8.82
Return on Common Equity 9.31 12.12 21.89 40.61 30.77 16.07
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PER SHARE FY'02 FY'03 FY'04 FY'05 FY'06 Mar'07
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Earning per share 1.33 1.83 3.88 11.94 12.59 6.91
Price earning ratio 8.65 9.13 9.36 5.04 6.96 12.26
Dividend per share 0.5 1 1.25 1.25 1.25 5
Book value 14 15 18 29 41 43
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