pakistan cement factory marketing management

Marketing Management Orascom Pakistan Cement Company

LETTER OF TRANSMITTAL

To,

Sir Sohail,

Gift University,

Gujranwala.

Respected Sir,

Enclosed is the report, which was required in the letter of authorization. This

report is prepared according by keeping all the requirements of project in mind.

The project is basically to represent the Marketing Plan of a Multi-National

company through the collection of data and information.

We choose ORASCUM Pak Cement Company, which is multinational company.

We did survey of it and gathered collection from them. Instead of it we gather

further information from secondary data. Secondary resource means

documented data. After making hypothesis we verify this hypothesis from the

secondary data and represent the Marketing Plan of ORASCUM.

Sincerely,

The students,

GIFT University.

GIFT Business School 1


Acknowledgement

We are extremely grateful to Almighty ALLAH, who blessed us and have mercy

and kindness in our way to complete this project because nothing can be done

without his blessings.

We are also grateful to Sir Sohail, who gave us a project through which we come

to know Marketing Management in real terms. He also contributed with his

precious time for us to complete this report.

At the end, we want to thank all of our group members who coordinated with us

in many ways. Without their support it seems to be quite a difficult task to get

results for the completion of this report.



PREFACE

The data and information we required was about 4Ps (Product, Price, Place and

Promotion), SWOT analysis, SBU’s, Market research, Internal Analysis, External

Analysis and Market Expansion Grid. The problems faced during the research

and data collection of the local market. In short the Marketing Plan of Pakistan

Cement Company. For this we did survey of the company collect data and used it

in the preparation of the report.

Although we cannot collect the whole information that was required to complete

this report. For this we searched from net and take help from our seniors. During

all this process we faced some problems. But those problems were solved by the

will of Allah and our Holy Prophet (PBUH) and we were able to complete this

report.



Executive Summary

Orascom Construction Industries (OCI) traces its roots back to 1950 when Eng.

Onsi Sawiris first founded a construction company with a few friends in Upper

Egypt. By the early 1990s, Eng. Sawiris had established Orascom as a leading

private sector contractor by working in partnership with international companies

pursing projects in Egypt.

In the mid 1990s, Eng. Sawiris transferred management control to his son, Mr.

Nassef Sawiris, who embarked upon an ambitious diversification strategy

through investments in complementary businesses such as cement and building

materials. Orascom Construction Industries (OCI) is a leading cement producer

and construction contractor active in emerging markets. As a cement producer,

they own and operate cement plants in Egypt, Algeria, Turkey, Pakistan, northern

Iraq and Spain, which have a combined annual production capacity of 21 million

tonnes.

As a contractor, OCI provides engineering procurement and construction

services on large, complex and demanding industrial, commercial, water sewage,

transportation, telecommunications, maritime, tourism and railway projects for

private and public customers principally in Europe, Middle East, Africa and

Central Asia. The Sawiris Family, which includes Onsi Sawiris, Nassef Sawiris

and Samih Sawiris, exercises control over the company. Sawiris Family has

60%.In Concessions & industrial Regional governments have tapped private

developers to undertake large-scale energy, power, water, transportation and

industrial development projects.

The OCI Cement Group intends to expand their cement production capacity

through Greenfield plant development and selective acquisitions in key emerging

markets with large populations and growing economies. OCI intends to comply

with international best practices for corporate governance, corporate citizenship

and sustainable development.



In Code of business ethics they have

• Conflicts of Interest

• Corporate Opportunities

• Confidential Information

• Fair Dealing

• Protection and Proper Use of Company Assets

• Accurate Record Keeping and Reporting

• Compliance with Laws, Rules and Regulations

• Government Contracting

• Reporting of Illegal or Unethical Behavior

• Amendments and Waivers

Its Social Responsibility is that Orascom Construction Industries is a publicly

listed corporation owned by thousands of shareholders. OCI has adopted

corporate governance guidelines, which comply with all applicable laws and

stock exchange regulations. Their media centre has the latest OCI news releases

as well as additional information and images relevant to journalists and media

professionals. Their pressroom staff aims to provide corporate information to all

their stakeholders in an open, accurate and timely manner.

Orascom Construction Industries produces cement and provides construction

services for customers in the developing world. The OCI Cement Group is the

largest cement producer in the Middle East and a leading regional cement

exporter. The OCI Cement Group is the largest cement producer in the Middle

East and a leading regional cement exporter. The OCI Cement Group is the


exporter. The OCI Construction Group provides engineering, procurement and

construction services on large, complex and demanding projects for public and

private customers primarily in the Middle East, North Africa and Central Asia.



Orascom Construction Industries is one of the largest employers in the region

with more than 40,000 employees located in 14 different countries. Their

greatest asset is their people and their business success is a direct result of their

passion, expertise and dedication. It’s Performance & Projections Is that they

initiated coverage of Orascom Construction Industries-OCI in 2005 as a regional

cement and construction conglomerate, with a large capacity for cement

production in emerging markets and a dominant position among competing

contractors in the Middle East. Progress in the process of acquiring cement

producers and construction of Greenfield plants.

They remain positive on OCI’s outlook and its ability to release unannounced

value at a sustainable pace. The addition of cement capacity in undersupplied,

high-margin, low-consumption (per capita) markets. Exogenous factors have also

played in OCI’s favor; cement and construction demand have benefited from

regional construction booms, due to high crude prices and heavy government

spending on development efforts, primarily infrastructure.

Its Competitive advantages is Cost advantages that exist in Egypt. Government

subsidies on energy products apply to almost all energy sources, and particularly

natural gas. Natural gas is a core component of ammonia production, allowing

domestic producers in Egypt to supply regional destinations at a discount to

global pricing levels.

They value OCI based on the results of two methods

• A Discounted Cash Flow valuation and

• A value generated by the multiples of peer companies.



They arrive at a target value of EGP 257/share, yielding an upside potential of

17% from the current market price of EGP 220/share. They update their

coverage with a Buy recommendation. In November 2004, the OCI Cement

Group finalized negotiations for the acquisition of a controlling stake in Pakistan

Cement Company (PCC), formerly named Chakwal Cement Company, in

Pakistan. In July 2005, OCI received regulatory approval to raise its stake in

Pakistan Cement Company to 60.6%. The first foreign investment in the Pakistan

cement industry is Orascom Construction Industries (OCI) acquisition of Chakwal

Cement Company in March 2005. Subsequently, the Company name was

changed to Pakistan Cement Company (PCC).

The renamed Pakistan Cement Company currently owns the property and

equipment for a cement plant capable of producing 2.5 million tons annually.

PCC is one of the largest cement producers in Pakistan. OCI is a leading cement

producer and construction contractor active in emerging markets. As a cement

producer, OCI owns and operates cement plants in Egypt, Algeria, Pakistan,

Northern Iraq and Turkey, which have a combined annual production capacity

approaching 21 million tons. PCC’s Board of Directors and Management are

committed to strong corporate governance and sound business practices. The

company has applied the principles contained in the Code. The Board has

formed an Audit Committee.

They believe that their cement business is well positioned to outperform its peers

and create exceptional value for shareholders. Their investor relations’ team

aims to provide corporate information to all their stakeholders in an open,

accurate and timely manner. Cement will not deteriorate significantly if it is

protected from exposure to moisture (humid air, rain condensation, etc.). If

cement is allowed to absorb moisture, its setting time is increased and loss of

strength will occur.



There are two kinds of cement manufactured in Pakistan Cement Company,

which are:

• Ordinary Portland Cement

• Sulphate Resistance Cement

Their Vision statement is, “Strive to exceed the expectations of our stakeholders

through sustainable growth and high quality performance” and Mission Statement

is, “We are committed to providing outstanding value to our customers, a safe

and stimulating work environment for our employees and superior returns for our

shareholders.”

Strengths and weaknesses are controllable factors that are related to the

company, whereas opportunities and threats are uncontrollable factors such as

economic, social etc. that give information about the industry.In SWOT we have

• Strength

• Weakness

• Opportunities

• Threats

The Orascom Pakistan Cement Company has the biggest strength that it belong

to the Orascom group of companies. In Pakistan the population is increasing

rapidly. In this regard we conduct situation analysis which is mainly revolves

around two points which are:

1. Internal analysis

2. External analysis

It forecasts for all headline macroeconomic indicators, including real GDP

growth, inflation, fiscal balance, trade balance, current account and external debt.



Orascom Pakistan Cement Company has two main types of products which are

same the difference was in its packing size and the market in which it sold. So

there are two SBUs one to deal and produce within Pakistan one deal and

produce for outside Pakistan.

BCG Matrix is consisting of four positions which are:

1. Question mark

2. Star

3. Cash Cows

4. Dog

In market expansion grid Pakistan Cement Company Lies in market penetration

and market development. In market they are offering existing product in existing

markets and also offering that existing product into new markets.

Pakistan Cement Company Limited is the country's fifth largest cement

manufacturer with a manufacturing capacity of 2.11m tons of cement per annum,

which is 5.9% of the total cement manufacturing capacity of the country. Its plant

commenced commercial operations in December 2006 with an annual cement

production capacity of 2.5m tons. PCC manufactures cement under the brand

name of PAKCEM.

The company's kiln started operation in July. Orascom Construction Industries is

the parent company of the Pakistan Cement Holding and Camden Cement

Holding. Recently, Lafarge S.A., a world leader in cement, aggregates, concrete

and gypsum, operating in over 70 countries, acquired entire cement operations of

the Orascom Construction Industries Cement Group. Moreover, through the

acquisition, Lafarge got access in Pakistan's emerging cement market via 69%

stake in Pakistan Cement.



Pakistan Cement has no history of sales as such. Furthermore, the debt paying

ability has improved slightly as the company started its cement production. The

future outlook of the company seems positive. A lot of opportunities exist for

Pakistan Cement. Higher PSDP bodes well for the cement demand, particularly

due to the infrastructure development component that requires higher quantities

of cement. Then in marketing mix we define Product, price, place and promotion.

Then we target the marketing strategies then push vs. pull strategy



History & Introduction

Of

ORASCOM



History Orascom Construction Industries (OCI) traces its roots back to 1950 when Eng.

Onsi Sawiris first founded a construction company with a few friends in Upper

Egypt. By digging waterways and paving roads, he built his businesses into one

of Egypt's largest general contractors. In 1961, the business was nationalized

and later became known as the El Nasr Civil Works Company. Not content to be

an employee in his own company, Eng. Sawiris left for Libya where he continued

his construction career.

In 1976, he returned to Egypt and founded Orascom as a general contracting

and trading company with five employees. By the early 1990s, Eng. Sawiris had

established Orascom as a leading private sector contractor by working in

partnership with international companies pursing projects in Egypt.

Eng. Sawiris commented "Orascom grew because we were able to provide our

clients with turnkey solutions on challenging projects." Having built a successful

track record on projects ranging from water treatment plants and railways to five

star hotels and office skyscrapers, Eng. Sawiris positioned OCI to undertake

even more complex and demanding projects in Egypt and the region.

In the mid 1990s, Eng. Sawiris transferred management control to his son, Mr.

Nassef Sawiris, who embarked upon an ambitious diversification strategy

through investments in complementary businesses such as cement and building

materials. Having grown the family business into a large corporation, Mr. Sawiris

oversaw an initial public offering of shares in the company on the Cairo stock

exchange in 1999.

In the years that followed, Mr. Sawiris invested heavily to expand capacity at

Egyptian Cement Company and then took the strategic decision to expand

operations abroad, which led to the establishment of Algerian Cement Company

and the partnership with the management of the Besix Group.



Introduction

Orascom Construction Industries (OCI) is a leading cement producer and

construction contractor active in emerging markets. Based in Cairo, they employ

more than 40,000 people in over 20 countries. Working together with their

employees, business partners and customers, they are helping to build the future

in developing countries around the world. As a cement producer, they own and

operate cement plants in Egypt, Algeria, Turkey, Pakistan, northern Iraq and

Spain, which have a combined annual production capacity of 21 million tonnes.

Their new investments in northern Iraq, Turkey, Nigeria, Algeria, the United Arab

Emirates, Saudi Arabia, Syria and DPRK will increase their annual production

capacity to 42 million tonnes. Their Cement Group exports primarily from Egypt

to customers in more than 30 countries including the USA, Europe, Africa and

the Middle East. They produce and distribute aggregates and ready-mix concrete

in Spain, Egypt and Algeria. They also manufacture cement bags in Egypt and

Algeria. As a contractor, OCI provides engineering procurement and construction

services on large, complex and demanding industrial, commercial, water sewage,

transportation, telecommunications, maritime, tourism and railway projects for

private and public customers principally in Europe, Middle East, Africa and

Central Asia. Their Construction Group is active in over 100 projects in more than

20 countries.

Through partnerships with industry leaders, they also manufacture fabricated

steel products as well as architectural curtain walling and window systems. As

part of their long-term strategy to create a sustainable flow of construction

opportunities, they also have investments in natural gas industries, including

fertilizers and in infrastructure concessions including a port operator and an

industrial park developer. Today, OCI is the largest cement producer in the

Middle East and one of the top 200 construction contractors in the world.



Ownership Structure

Concessions & industrial

Of

ORASCOM



Ownership Structure

The Sawiris Family, who collectively own or control 60% of the outstanding

ordinary shares of the company, founded Orascom Construction Industries. The

Sawiris Family, which includes Onsi Sawiris, Nassef Sawiris and Samih Sawiris,

exercises control over the company.

• Sawiris Family 60%

• Free Float 40%

Concessions & industrial

OCI participates as an equity investor in long-term infrastructure concessions.

Drawing on their experience in power, water, and industrial construction, they are

uniquely qualified to capitalize on the growth of private infrastructure projects in

Egypt and the Middle East region.

They are currently participating as an equity investor in a port operator, an

industrial park developer, and a natural gas distributor. Regional governments

have tapped private developers to undertake large-scale energy, power, water,

transportation and industrial development projects.

OCI intends to aggressively pursue selected opportunities in partnership with

international companies and financial institutions that have the technical know-

how and management experience to minimize their project risks and ensure the

reliable, cost-efficient delivery of services to the community.



Board & management

Of

ORASCOM



Board & management The business of the Company is conducted by its employees, managers and

executive officers, under the direction of the chief executive officer and the

oversight of the Board of Directors, to enhance the long-term value of the

Company for its shareholders. The Board of Directors is elected by shareholders

to oversee and counsel management. The Board of Directors is chaired by Eng.

Onsi Sawiris and consists of nine members, three of which are considered to be

independent. Their Board of Directors are:

• Mr. Onsi Sawiris

• Nassef Sawiris

• Osama Bishai

• Alaa Sabaa

• Mohammed Youssef

• Maged Abadir

• Karim Camel-Toueg

• Mohamed Farouk Abdel Moneim

• Tarek Hatem.

Management team

• Nassef Sawiris Chief Executive Officer

• Salman Butt Chief Financial Officer

• Nicolas Estay Executive Vice President

• Adel Bishai Corporate Governance Director

• Dalia Khorshid Corporate Treasurer

• Fady Kiama Corporate Controller

• Hussein Marei General Counsel

• Kevin Struve Strategic Planning Director

• Hassan Badrawi Investor Relations Director


http://www.orascomci.com/index.php?id=engonsisawiris

http://www.orascomci.com/index.php?id=nassefonsisawiris

http://www.orascomci.com/index.php?id=engosamabishai

http://www.orascomci.com/index.php?id=alaasabaa

http://www.orascomci.com/index.php?id=engmohammedyoussef

http://www.orascomci.com/index.php?id=engmagedadabir

http://www.orascomci.com/index.php?id=karimcameltoueg

http://www.orascomci.com/index.php?id=mohamedfaroukabdelmoneim

http://www.orascomci.com/index.php?id=drtarekhatem


Strategy

Of

ORASCOM



Strategy

The Orascom Construction Industries (OCI) management team aims to create

exceptional value for shareholders by producing cement and providing

construction services to customers in emerging markets. By establishing

strategic partnerships, recruiting and retaining high caliber employees, utilizing

the latest production technologies, and maintaining a commitment to quality and

safety, the management team intends to deliver sustainable growth and above

returns.

The OCI Cement Group intends to expand their cement production capacity

through Greenfield plant development and selective acquisitions in key emerging

markets with large populations and growing economies. The OCI Construction

Group intends to selectively target large, complex and demanding projects on

which we have a competitive advantage either through a specific technical

competency, a strong geographical presence or a successful track record with

clients.

OCI intends to comply with international best practices for corporate governance,

corporate citizenship and sustainable development. OCI, its subsidiaries and

affiliates demand that all their employees conduct themselves in accordance with

the highest standard of professional conduct and ethics.



Code

Of

Business Conduct

And Ethics



Code of Business Conduct and Ethics

This Code of Business Conduct and Ethics (the “Code”) contains the policies that

relate to the legal and ethical standards of conduct that the directors, executive

officers and employees of Orascom Construction Industries S.A.E. (the

“Company”) are expected to comply with while carrying out their duties and

responsibilities on behalf of the Company. This Code is intended to focus the

Board of Directors (the “Board”) and management on areas of ethical risk,

provide guidance to personnel to help them recognize and deal with ethical

issues, provide mechanisms to report unethical conduct, and help to foster a

culture of honesty and accountability. No code or policy can anticipate every

situation that may arise. The Company expects each director, executive officer

and employee to act with honesty and integrity, to exercise independent

professional judgment and to deter wrong doing in the conduct of all duties and

responsibilities on behalf of the Company.

Conflicts of Interest

Directors, executive officers and employees should avoid conflicts of interest

between themselves and the Company. A “conflict of interest” can occur when

the private interest of a director, executive officer or employee interferes in any

way or even appears to interfere with the interests of the Company as a whole. A

conflict situation can arise when a director, executive officer or employee takes

actions or has interests that may make it difficult to perform his or her company

work objectively and effectively. Conflicts of interest also arise when a director,

executive officer or employee, or a member of his or her immediate family,

receives improper personal benefits as a result of his or her position in the

Company.



Any situation that involves, or may reasonably be expected to involve, a conflict

of interest with the Company should be disclosed promptly to appropriate

personnel or to the Chairperson of the Audit Committee of the Board.

Corporate Opportunities Directors, executive officers and employees are prohibited from

(a) Taking for themselves personally opportunities that are discovered through

the use of corporate property, information or position,

(b) Using corporate property, information or position for personal gain, and

(c) Competing with the Company.

Confidential Information Directors, executive officers and employees should maintain the confidentiality of

information entrusted to them by the Company or its customers, except when

disclosure is authorized or legally mandated. “Confidential information” includes

all non-public information that might be of use to competitors, or harmful to the

Company or its customers, if disclosed.

Fair Dealing

Directors, executive officers and employees should endeavor to deal fairly with

the Company’s customers, suppliers, competitors and employees. None should

take advantage of anyone through manipulation, concealment, abuse of

privileged information, misrepresentation of material facts, or any other unfair-

dealing practice.



Protection and Proper Use of Company Assets Directors, executive officers and employees should protect the Company’s

assets and ensure their efficient use. Theft, carelessness and waste have a

direct impact on the Company’s profitability. All Company assets should be used

for legitimate business purposes.

Accurate Record Keeping and Reporting

Directors, executive officers and employees should accurately reflect the

transactions of the Company in its books, records, accounts and reports and

should maintain an adequate system of internal controls and disclosure controls

to promote compliance with the laws, rules and regulations applicable to the

Company. Falsification of any Company record is prohibited. All reports,

documents or communications authorized or legally mandated for disclosure to

the public should be full, fair, accurate, timely and understandable.

Compliance with Laws, Rules and Regulations

Directors, executive officers and employees should comply with the laws, rules

and regulations applicable to the Company.

Government Contracting The laws, rules and regulations applicable to contracting with government entities

are complex and may impose different and special requirements on the

Company. Failure to comply with these requirements may be a criminal offence.

Directors, executive officers and employees should comply with these

requirements and questions regarding compliance should be referred to

appropriate personnel or outside counsel as necessary.



Reporting of Illegal or Unethical Behavior Directors, executive officers and employees should promote ethical behavior and

should encourage employees to talk to supervisors, managers or other

appropriate personnel when in doubt about the best course of action in a

particular situation. Directors, executive officers and employees should report

violations of laws, rules, regulations or this Code to appropriate personnel or to

the Chairperson of the Audit Committee of the Board. Violations will be

investigated and action will be taken by the appropriate personnel or the Board

as necessary. The Company will not allow retaliation for reports made in good

faith.

Amendments and Waivers

Any amendments to or waiver of this Code shall be made only by the Board upon

the recommendation of the Nominating and Corporate Governance Committee.

If an amendment to or waiver of this Code is made or granted, appropriate

disclosure will be made as required by applicable laws and stock exchange

regulations.



Social responsibility

Of

ORASCOM



Social Responsibility

Orascom Construction Industries is a publicly listed corporation owned by

thousands of shareholders. They employ thousands of people and provide goods

and services to thousands of customers in many countries. What they do and

how they do it can have an impact on the lives of every one of their shareholders,

employees, customers, business partners and those in the communities where

they operate.

They recognize that they have a social responsibility to their stakeholders and

are committed to acting in accordance with international best practices for

corporate governance, corporate citizenship and sustainable development. OCI,

its subsidiaries and affiliates demand that all their employees conduct

themselves in accordance with the highest standard of professional conduct and

ethics.

OCI has adopted corporate governance guidelines, which comply with all

applicable laws and stock exchange regulations. They have adopted strict

employee health, safety and environmental policies, have formed a charitable

foundation to provide educational opportunities for young people and have joined

the UN Global Compact to promote human rights, labor standards, environmental

protection and anti-corruption efforts. Working together with their employees,

their international partners and their customers, they are helping to build a

brighter future in developing countries around the world.



Media centre

Of

ORASCOM



Media centre

Their media centre has the latest OCI news releases as well as additional

information and images relevant to journalists and media professionals. Their

pressroom staff aims to provide corporate information to all their stakeholders in

an open, accurate and timely manner.



Operations

Of

Orascom



Operations

Orascom Construction Industries produces cement and provides construction

services for customers in the developing world. The OCI Cement Group is the


exporter. Although cement is a simple product, it is absolutely essential and

affects the lives of nearly everyone. Their cement is used to build homes,

buildings and public infrastructure in more than 30 countries.

The OCI Construction Group has built an exceptional track record on large and

complex projects ranging from water treatment plants and power stations to five

star hotels and office skyscrapers in countries throughout the Middle East, North

Africa and Central Asia. With the successful completion of each new project, we

are helping to build a better quality of life and a better future for people in the

region.



Cement group

Of

ORASCOM



Cement group

The OCI Cement Group is the largest cement producer in the Middle East and a

leading regional cement exporter. Their principal operating cement subsidiaries

are Egyptian Cement Company, which has an installed annual production

capacity of 10 million tonnes, and Algerian Cement Company, which has an

installed annual production capacity of 5 million tonnes.

In July 2006, they successfully completed an upgrade in Egypt, a rehabilitation

project in northern Iraq and commissioned a new plant in Pakistan raising our

Group capacity to 21 million tonnes.

They are currently constructing cement plants in the UAE, Algeria, northern Iraq,

and Nigeria and have recently acquired cement operations in Turkey and Spain

which are being further expanded, all of which will increase their annual

production capacity to 39 million tonnes by 2009.

They export cement primarily from Egypt to customers in more than 30 countries

including the USA. They also produce and distribute ready mix concrete,

aggregates and cement bags in Egypt and Algeria.



Construction group

Of

ORASCOM



Construction group

The OCI Construction Group provides engineering, procurement and

construction services on large, complex and demanding projects for public and


OCI has undertaken numerous landmark industrial, commercial and

infrastructure projects including the world's largest swing bridge over the Suez

Canal and the three tallest buildings in Egypt.

Their principal operating construction businesses are the Besix Group, based in

Belgium with extensive experience on large building, infrastructure and marine

projects, and Contrack International, and based in the USA with extensive

experience on institutional and infrastructure projects.

Through partnerships with industry leaders, we also manufacture fabricated steel

products as well as architectural curtain walling and window systems. They also

have investments in infrastructure concessions including a port operator,

industrial park developer and regional natural gas distributor.



People & careers



People & careers

Orascom Construction Industries is one of the largest employers in the region

with more than 40,000 employees located in 14 different countries. Their

greatest asset is their people and their business success is a direct result of their

passion, expertise and dedication.



Performance

&

Projections



Performance & Projections

They initiated coverage of Orascom Construction Industries-OCI in 2005 as a

regional cement and construction conglomerate, with a large capacity for cement

production in emerging markets and a dominant position among competing

contractors in the Middle East. OCI’s growth at the time was accelerated by the

acquisition of Besix and the expansion of its order book into GCC-based projects,

while on the cement front, key acquisitions and the establishment of well-

positioned Greenfield operations prompted a positive long-term outlook on its

value-creating ability. They now update their target value for OCI on the basis of

strong developments during the year, including;

• The expansion of cement capacity to include facilities in the UAE, a

grinding station in Spain and a distribution terminal in Sudan

• Progress in the process of acquiring cement producers and construction of

Greenfield plants. Continued order book expansion, particularly in the

GCC, and Indications that it is interested in adding fertilizer manufacturing

as an independent business line. We remain positive on OCI’s outlook and

its ability to release unannounced value at a sustainable pace.

OCI’s performance drivers over the past three years have been

(i) The addition of cement capacity in undersupplied, high-margin, low-

consumption (per capita) markets.

(ii) Expanding export avenues, primarily from its Egyptian operations.



(iii) Establishing a foothold in the GCC construction industry through its

acquisition of Besix.

(iv) Substantial experience in the construction of industrial facilities thereby

gaining a leading position among competitors.

Exogenous factors have also played in OCI’s favor; cement and construction

demand have benefited from regional construction booms, due to high crude

prices and heavy government spending on development efforts, primarily

infrastructure. The closure of cement facilities in Europe and the advantage of lax

emissions regulations in OCI have chosen markets have allowed it to pursue the

challenging target of remaining a low cost manufacturer with global reach. OCI’s

current strategy has shown a shift towards

(i) The integration of elements in its value chain under its umbrella, namely

the trend towards acquiring grinding and distribution facilities for cement

products, alongside its existing bagging, ready mix, and gypsum

producing subsidiaries,

(ii) The expansion into somewhat related industries, such as fertilizers

manufacturing and ready mix concrete production, via its experience and

exposure as a contractor.

With many of its growth targets set in previous years still taking effect, they

project an acceleration of growth going forward, due to the introduction of new

value drivers, and hence an upward revision of our fair value target. Over the

past three years, OCI’s consolidated revenues, EBITDA, and net profits have

grown at CAGRs 77%, 60% and 81% respectively. They forecast a rise to 37%,

40% and 57% in growth going forward during our forecast period.



Competitive advantages

Of

ORASCOM



Competitive advantages

OCI’s latest venture will benefit from a number of key market conditions, namely:

• Cost advantages exist in Egypt. Besides labor cost competitiveness and

raw material abundance, energy costs are low relative to regional

alternatives. Government subsidies on energy products apply to almost all

energy sources, and particularly natural gas. Natural gas is a core

component of ammonia production, allowing domestic producers in Egypt

to supply regional destinations at a discount to global pricing levels.

• Reduced exposure to raw material price volatilities. EBIC will enjoy a 25-

year gas supply agreement with EGPC, limiting its sensitivity to

movements in global energy prices.

• Secure revenues. All of EBIC’s output will be bought up by US-based

fertilizer products merchandiser and distributor Transammonia Company,

through a long-term take-or-pay agreement.

• Tax exemptions, due to the plant’s location in Al Sokhna industrial park,

an industrial free zone.

They value OCI’s venture into ammonia production on the basis of the value

implied by peer multiples. However, they adopt a broad-based approach which

encompassed a range of gas derivatives industries, thereby widening their

definition of ‘peer’ companies, as well as provisions for further plant capacities in

the production of ammonia, urea, and other derivatives. They value the move in

terms of a new business line, rather than a single plant.



Valuation Methods

Of

ORASCOM



Valuation They value OCI based on the results of two methods

• A Discounted Cash Flow valuation and

• A value generated by the multiples of peer companies.

They arrive at a target value of EGP 257/share, yielding an upside potential of

17% from the current market price of EGP 220/share. They update their

coverage with a Buy recommendation.

Discounted Cash Flow: Their DCF valuation returns a fair value of 195/share, and was based on a 5-year

consolidated free cash flow forecast. The valuation does not include the value

contribution of OCI’s investments in fertilizer industries. The valuation assumes a

constant debt/equity level throughout the forecast period, permitting to discount

free cash flows to the firm at the weighted average cost of capital (WACC). It is

noteworthy that OCI’s (debt/ value) parameter has held constant over the past

three years, averaging 61%, thus lending support for our assumption. Their

WACC of 10.55% is composed of the following:

• A cost of equity of 13.08% based on a risk-free rate of 10.00%, derived

from the yield to maturity of a 10 year EGP-denominated Egyptian

Government bond maturing in 2014, an equity risk premium of 5% which

they apply across the board on all MENA equity markets, and a levered

beta of 0.62.

• A cost of debt of 8.95% based on the weighted average interest rate on all

of OCI’s overdrafts, loan facilities, and outstanding bonds as of FY 04, as

well as any announced borrowings/bond issues to date.



Adjusted Present Value

Their APV valuation of OCI returns a fair value of 211/share. Free cash flows to

equity are discounted at the cost of equity of 13.45%, and an un-levered asset

beta of 0.69. DCF and APV valuations should in theory return identical fair

values. However, we find that the treatment of taxes on a consolidated level

influences the effect of taxes on cash flows, particularly with regards to

withholding taxes in host countries. Their computed effective tax rate is 4.1%,

generating EGP 176.75m in future tax shields.

Multiple based values They chose to apply a multiple-based valuation of OCI by compiling the price-to-

earnings multiples of peer companies operating along OCI’s core business lines;

cement manufacturing and general construction activities. They adopt FY 05 as

well as forward multiples in the assessment of the future profitability of peer

comparables.

Cement operations are valued on the basis of deriving an average P/E multiple.

Peers are drawn from two pools; global peers who in their view reflect the scope

and reach of OCI’s operations, including the distribution of cement products to

international markets, along with regional peers within the MENA region, in order

to capture the value generated by manufacturers serving the region’s

construction boom and those which enjoy the advantages of domestic cost

efficiencies and regulatory advantages. Peers range from global entities such as

Lafarge Cement and Cemex, to domestic producers such as Torah and Asec

Cement. Cement operations deliver an implied value of EGP 31.1 bn to OCI’s

total multiple based value, or roughly 69% of the total.



The valuation of OCI’s construction activities requires some finesse. Few

regional peers exist, and even fewer are listed on regional capital markets.

Global peers, which predominantly operate in China and South East Asia, were

used in our selection. They adopt the multiples of global peers based on the

congruence seen in the size of their order books, target markets, and resources.

They however find that the regions construction boom warrants the inclusion of a

growth factor that accounts for the superior earnings growth expected for

MENA-based contractors, particularly those exposed to the GCC’s construction

spurt of late. They introduce a ‘growth differential’; the difference in future

earnings growth expected for OCI over and above the quoted medium-term

consensus growth of the global sector. They arrive at a sustainable differential of

12% going forward, and introduce an adjustment to OCI’s implied forward P/E

multiple. OCI’s construction group delivers a value contribution of EGP 13.73 bn

or 31% of the total, in-line with the trend in bottom-line contributions of OCI’s two

main business lines.



Introduction

Of

Pakistan Cement Company



Introduction

In November 2004, the OCI Cement Group finalized negotiations for the

acquisition of a controlling stake in Pakistan Cement Company (PCC), formerly

named Chakwal Cement Company, in Pakistan. Formal completion of the

acquisition was completed in March 2005. In July 2005, OCI received regulatory

approval to raise its stake in Pakistan Cement Company to 60.6%. Following a

recent rights issue, OCI ownership in the PCC increased to 69%.

The first foreign investment in the Pakistan cement industry is Orascom

Construction Industries (OCI) acquisition of Chakwal Cement Company in March

2005. Subsequently, the Company name was changed to Pakistan Cement

Company (PCC).

Chakwal Cement Company was originally formed in 1993 but was unable to raise

the additional financing necessary to complete the construction of its production

plant. The renamed Pakistan Cement Company currently owns the property and

equipment for a cement plant capable of producing 2.5 million tons annually.

The production equipment for a single dry process cement plant was supplied by

F.L.Smidth in 1995. The cement plant is located along the Lahore-Islamabad

highway in the Punjab Province of northern Pakistan, some 80 kilometers south

of Islamabad. Construction work was successfully completed in 15 months and

the plant was successfully commissioned in July 2006. PCC is one of the largest

cement producers in Pakistan. The state of the art plant commenced Commercial

Operations in December 2006 with an annual cement production capacity of

2.5m tons, thus becoming the largest production line in Pakistan.

The plant is located at Kalar Kahar, District Chakwal in the province of Punjab,

an area rich in lime stone reserves. The quality of limestone in this area is

considered to be the best in the region.



In addition to Ordinary Portland Cement (OPC) the plant can also produce

Sulphate Resistant Cement (SRC) with the packaging options of 50 kg bags, 1.5

tons, 2 tons jumbo bags and bulk carriers. The advanced plant laboratory is the

most sophisticated in the industry and ensures consistent high quality of cement.

PCC is proud of its product PAKCEM that is the leader on all quality scales.

PAKCEM is the first cement in Pakistan to comply with European Standards (EN

197) and also far exceeding requirements of Pakistani Standard (PS 232).

PCC’s aim of being at the forefront in creating foundations for a prosperous

tomorrow is backed by the Company’s philosophy of providing outstanding value

to its customers, a safe and stimulating work environment for its employees,

superior returns for its shareholders and special focus on social responsibility

and environmental protection.



CORPORATE

ORASCOM Construction

Industries



Corporate OCI Pakistan Cement Company (PCC) is a subsidiary of Orascom Construction

Industries (OCI), which is a commercial empire worth over $12 billion having its

corporate headquarters in Egypt. OCI is a leading cement producer and

construction contractor active in emerging markets. It is based in Cairo, Egypt,

and employs more than 40,000 people in 20 countries.

As a cement producer, OCI owns and operates cement plants in Egypt, Algeria,

Pakistan, Northern Iraq and Turkey, which have a combined annual production

capacity approaching 21 million tons. Further investments in the UAE, Algeria,

northern Iraq, Turkey, Nigeria, Spain, Saudi Arabia and Syria will increase group

annual production capacity to approx 39 million tons in 2009.

As a contractor, OCI provides engineering, procurement and construction

services on industrial, commercial and infrastructure projects for public and


OCI has provided services to construct numerous landmark projects including

cement, fertilizer, power and desalination plants and international airports,

seaports and LNG terminals. Currently, OCI is constructing the tallest building of

the world in Dubai.



Corporate Governance & Investors Relations

Of PCC



Corporate Governance

PCC’s Board of Directors and Management are committed to strong corporate

governance and sound business practices. The statement of compliance with the

Code of Corporate Governance as contained in the listing regulations of Stock

Exchange in Pakistan is reproduced below. The company has applied the

principles contained in the Code in the following manner

1. The company encourages the representation of independent non-

executive directors on its Board of Directors. At present the Board

includes three executive directors, seven non-executive directors and one

independent non-executive director representing institutional equity

interest.

2. The directors have confirmed that none of them is serving as a director in

ten or more listed companies in Pakistan, including this company.

3. All the resident directors of the company are registered as taxpayers and

none of them has defaulted in payment of any loan to a banking company,

a DFI or a NBFI or, being a member of stock exchange, has been

declared as a defaulter by that stock exchange.

4. The casual vacancies occurred in the Board as a result of resignation by

various directors was filled up by the directors within 30 days thereof.

5. The company has prepared a 'Statement of Ethics and Business

Practices’, which has been signed by all the directors and employees of

the company.

6. The Board has developed a vision statement, overall corporate strategy

and significant policies of the company. A complete record of particulars of

significant policies along with the dates on which these were approved or

amended has been maintained.



7. All the powers of the Board have been duly exercised and decisions on

material transactions have been taken by the Board. The board approved

the remuneration payable to working director and other directors.

8. The meetings of the Board were presided over by a director elected by the

board for the purpose and the board met for the approval of all quarterly,

half yearly and annual accounts. Written notices of the Board meetings,

along with agenda were circulated at least seven days before the

meetings. The minutes of the meetings were appropriately recorded and

circulated.

9. All the Directors on the Board are fully conversant with their duties and

responsibilities as a Director. The Directors for any orientation course in

this respect felt no need.

10. During the year, the Board approved appointment of Chief Financial

Officer and his remuneration and terms and conditions of employment. No

other new appointment was made during the year.

11. The directors' report for the year ended December 31, 2006 has been

prepared in compliance with the requirements of the Code and fully

describes the salient matters required to be disclosed.

12. The financial statements of the company were fully endorsed by CEO and

CFO before approval of the Board.

13. The directors, CEO and executives do not hold any interest in the shares

of the company other than that disclosed in the pattern of shareholding.

14. The company has complied with all the corporate and financial reporting

requirements of the Code.

15. The Board has formed an Audit Committee. It comprises three members;

of whom two, are non-executive directors.



16. The meetings of the Audit Committee were held prior to approval of

interim and final results of the Company. The terms of references of the

committee have been formed and advised to the committee for

compliance.

17. The Board is in the process of setting up an effective internal audit

function.

18. The statutory auditors of the company have confirmed that they have been

given satisfactory rating under the quality control review program of the

Institute of Chartered Accountants of Pakistan, that they or any of the

partners of the firm, their spouses and minor children do not hold shares

of the Company and that the firm and all its partners are in compliance

with International Federation of Accountants (IFAC) guidelines on code of

ethics as adopted by Institute of Chartered Accountants of Pakistan.

19. The Statutory auditors or the persons associated with them have not been

appointed to provide other services except in accordance with the listing

regulations and the auditors have confirmed that they have observed IFAC

guidelines in this regard.

20. We confirm that all other material principles contained in the Code have

been complied with.

Investor Relations

They believe that their cement business is well positioned to outperform its peers

and create exceptional value for shareholders. Their investor relations’ team

aims to provide corporate information to all their stakeholders in an open,

accurate and timely manner.



Board of Directors

Of

PCC



Board of Directors

• Mr. Nassef Onsi Naguib Sawiris (Chief Executive/Chairman)

• Mr. Ahmad Said Heshmat Hassan (Managing Director)

• Mr. Salman Khalid Butt

• Mr. Ahmed Shebl Tolba Daabes

• Mr. Sherif Youssef Mohamed Tantawy

• Mr. Hesham Moustafa Abdel Samie

• Mr. Amr Ali Reda

• Mr. Bilal Hamid Javaid

• Khawaja Mohammad Naveed

• Mr. Mohammad Aman Farooq

• Mr. Shahid Anwar (Nominee NIT)



Storage Environment



Storage Environment

Cement will not deteriorate significantly if it is protected from exposure to

moisture (humid air, rain condensation, etc.). If cement is allowed to absorb

moisture, its setting time is increased and loss of strength will occur.



Kinds of Cement


• Sulphate Resistant Cement



Kinds of Cement There are two kinds of cement manufactured in Pakistan Cement Company,

which are:


• Sulphate Resistance Cement

Ordinary Portland Cement

Ordinary Portland Cement is produced by pulverizing clinker consisting

essentially of hydraulic calcium silicate and containing one or more forms of

calcium sulphate as an inter ground addition.

Assured Compliance With

European Standard OPC EN 197-1 CEM I 42.5 R

Pakistani Standard PS 232/1983(R)



Typical Analysis and Physical Properties

The listed tests below are typical and for information only. Analytical details of the

product should be sought in writing from the Pakistan Cement Company.

Chemical Analysis

Typical Results Standard RequirementEN 197-1 BS 12-1996

Loss on Ignition % 2.0 5.0% Max

Insoluble residue % 0.5 1.5% Max

Sulphate as SO3 % 2.5 3.5% Max

Chloride % 0.05 0.1% Max

Alkali Equivalent % 0.57 0.60% Max

Physical Properties

Fineness

Sieve Residue Over 45µm% 9-11

Fineness by Blaine cm2/g 3200-3300



Setting Behavior


Standard Consistency % 27.5

Initial Setting Time (minutes)

150 60Min.

Final Setting Time (hours) 4:30 10h

Compressive Strength Performance Mortar EN 196-1 Testing Method


Early strength – 2days (N/mm2)

22.5 20.0Min. for 42.5 R

Standard Strength – 28days (N/mm2)

50.0 42.5Min. and 62.5 Max for

42.5 R

Application

The product has been designed to give enhance concrete properties in the fresh

“wet” state with adequate high early strength levels upon setting and hardening.



Sulphate Resistant Cement

Sulphate Resistant Cement is a dark colored Portland cement manufactured

from clinker of low C3A content and undergoes grinding with a reduced

proportion of Gypsum than Ordinary Portland Cement.

Assured Compliance With

European Standard OPC EN 197-1 CEM I 42.5 N

British Standard SRC 42.5 N BS 4027-1996

Pakistani Standard SRC PS 612(R)



Typical Analysis and Physical Properties

The tests results below are typical and for information only. Analytical details of

the product should be sought in writing from the Pakistan Cement Company.

Chemical Analysis

Typical ResultsStandard RequirementBS 4027-1996

Loss on Ignition % 1.2 3.0% Max

4.0% Max

Insoluble residue % 0.5 1.5% Max

Sulphate as SO3 % 1.80 2.5% Max

Chloride % 0.02 0.1% Max

Tricalcium Aluminate.C3A%

2.80 3.5% Max

Alkali Equivalent % 0.50 0.60

**Mg0% 1.3 4.0%

Physical Properties

Fineness PS 612 (R)

Sieve Residue Over 45µm% 9-11 -

Fineness by Blaine Cm2/g 3100-3200 2800



Setting Behavior

Typical Results Standard RequirementBS 4027 - 1996

Standard Consistency % 27.0

Initial Setting Time (minutes)

150 45Min

Final Setting Time (minutes)

275 600 Max

Compressive Strength Performance Mortar EN 196-1 Testing Method


Early Strength – 2 days (Mpa)

19.0 10.0 Min For 42.5 N

Late Strength – 28days (Mpa)

47.0 42.5Min and 62.5 Max

for 42.5 N



Mortar BS 4550 Testing Method

Typical Results PS 612 (R)

Early Strength – 3 days (Mpa)

31.5 15

Late Strength – 28 days (Mpa)

55.0 34

Application

Use in concrete exposed to severe Sulphate action where soil or ground water

have high Sulphate content.

Mortar expansion under sulphate attack



Vision Statement

And

Mission Statement



Vision Statement

“Strive to exceed the expectations of our stakeholders through sustainable

growth and high quality performance”

Mission Statement

“We are committed to providing outstanding value to our customers, a safe and

stimulating work environment for our employees and superior returns for our

shareholders.”



SITUATION ANALYSIS



SITUATION ANALYSIS

In order to identify and satisfy customer’s needs, every company has to take into

consideration its internal and external situation. In that way, by scanning the

company’s environment and by collecting all the necessary information, a SWOT

analysis can be developed. SWOT analysis is a critical for a company as on one

hand, it enables it to identify its weaknesses and threats and therefore to reduce

them, and on the other hand, to take advantage of its strengths and

opportunities. Strengths and weaknesses are controllable factors that are related

to the company, whereas opportunities and threats are uncontrollable factors

such as economic, social etc. that give information about the industry.



SWOT Analysis

Of

PCC



SWOT Analysis

The Orascom Pakistan Cement Company has the biggest strength that it belong

to the Orascom group of companies. The weakness for the company is that it

was unaware of the management style in Pakistan. The opportunity for the

company is OCI which is a construction company of Orascom group. The threat

for the company is the production capacity of its competitors LUCKY and D.G

cement companies.

Strengths Orascom Pakistan Cement Company is top rated in its market due to these

strengths.

• Orascom One of the biggest strength for the company is that it belongs to Orascom

which was already an established brand. In Pakistan Mobilink Pakistan’s

favorite cellular company also belongs to Orascom.

• Huge Capital As the company was new in this business and market it may face problem of

capital but Orascom Pakistan Cement Company doesn’t face such a problem

as they have huge capital and investors due to Orascom.

• Production Capacity Strength of the company is its production capacity which is very large. It has

the latest equipments and machineries used in the production of cement.

• Unique Formula Strength of the company in production department is its unique formula of

cement which was never introduced before in Pakistan. Due to this formula

their cement is more reliable and long lasting.



Weaknesses

The company when established it weaknesses but with the passage of time and

from its competitors it learned a lot.

• Unaware from the management style in Pakistan

As the company was owned by the foreign people they were unaware of the

management style in Pakistan. They faced many problems in the start with

management, employees etc.

Opportunities The company has many opportunities from its beginning.

• OCI As it belongs to Orascom and Orascom also have a huge construction

company OCI which is working on the contract of tallest building in Dubai and

also had many more contracts allover the world. So a big portion of Orascom

Pakistan Cement Company was consumed in OCI.

• Few Competitors In Pakistan’s cement market there wasn’t a huge number of competitors for

Orascom Pakistan Cement Company. This creates a huge opportunity to

enter and established in the market.

• Rapid Increase in Population In Pakistan the population is increasing rapidly so this provides a great

opportunity for the company. Because as the population increase rapidly the

need of construction of houses, markets, buildings etc also increase rapidly

and in all these construction cement is used.



• Foreigner Company As the company belongs to Orascom which is Egyptian Company it also gives

it a great opportunity in Pakistani market. Because Pakistani people think that

foreigner companies produce quality and standard goods and services so

they like to purchase their cement.

Threats

Orascom Pakistan Cement Company has a threat from its competitors.

• Lucky Cement The production capacity of Lucky cement is the threat for the company. As

Lucky Cement is the largest cement manufacturer in Pakistan’s cement

market.

• D.G Cement Another competitor of Orascom Pakistan Cement Company is D.G Cement

Company which is also holds a great market share in Pakistan. Its production

capacity also could be threat for Orascom Pakistan Cement Company in

future.



Porter FIVE Forces Model



Porter FIVE Forces Model

1. COMPETITIVE RIVALRY

The competitive rivalry among Cement providers has become intense. But

now the position of Pakistan Cement Company is at Star position and its

competitors Lucky Cement and D.G are behind them but to maintain its

position they have to struggle continuously.



2. BARGAINIG POWER OF CUSTOMERS

Buying power of consumers is high. This is the result of the increasing

number of independent firms and the pressure of consumer groups and

the regulator.

3. BARGAINIG POWER OF SUPPLIERS

Pakistan Cement Company competed for market share those with

significant presence, such as local and international markets.

4. THREAT OF SUBSTITUTE PRODUCTS

Pakistan Cement Company has threat all the Manufactures of Cements

but mostly from Lucky Cement and D.G because they are its strong

competitors.

5. THREAT OF NEW ENTRANTS

Pakistani Government has opened up the market to competition. Instead

of old competitors PCC has also threat of new competitors. WTO is

another threat for us because it will come free trading internationally.



Market Expansion Grid




127

4. Diversification2. Marketdevelopment

Newmarkets

3. Productdevelopment

Newproducts

1. Marketpenetration

Existingmarkets

Existingproducts


Pakistan Construction Company lies both in Market Penetration and Market

Development. Because it is offering Existing products in Existing markets and

also Existing products in the new markets



SBU’s

Of

Company



SBU’s of Company

Orascom Pakistan Cement Company has two main types of products which are

same the difference was in its packing size and the market in which it sold. So

there are two SBUs one to deal and produce within Pakistan one deal and

produce for outside Pakistan.

For Export

SBU for export produce cement bags of 200 kg to 500 kg which is used in foreign

countries. This SBU also had a huge sale and it also supply to OCI which was

the main reason for its huge profits and demand.

In Pakistan

SBU for Pakistan produce only cement bags of 50 kg as it was the standard size

in Pakistan and the competitors also produced the same. It also had a huge

demand and generating satisfactory profits for Orascom Pakistan Cement

Company.



BCG Matrix

Of

PCC



BCG Matrix BCG Matrix is consisting of four positions which are:

1. Question mark

2. Star

3. Cash Cows

4. Dog

These four positions help us to understand the place of our product in the

market.

Question mark

In this stage there is high growth rate but relatively low shares. It’s the first step

to build into stars or phase out. At this stage cash is required to hold market

share in the market. In start when Pakistan Cement Company was launched it lie

in the question mark when it was introduced in the Pakistan’s Cement market.



Star

In this stage company has high growth rate and high shares. Company has profit

potential and need heavy investment to grow further in the market. Due to

brilliant strategies, skilled management, expert employees and other facilities the

product of the company now lies in Star. When a product is in star then it is

generating satisfactory profits gaining good market share. Now PCC is lying in

star position and growing day by day.

Cash Cows

At this stage company has low growth rate and high shares. It establishes

successful SBU’s and produce cash. But the products of PCC are still in Star.

Dogs

In dogs there is low growth rate and low shares and have low profit potential. As

mentioned above products of PCC lies in Star.

Pakistan Cement Company

THRIVING!

Efficient Inefficient

SURVIVING Effective

DIE SLOWLY Ineffective DIE QUICKLY



Market Research • Internal Analysis

• External Analysis



Market research

The company is going to launch its product to almost every district of Pakistan. In

Pakistan the population is increasing rapidly. So there is a great opportunity for

Orascom Pakistan Cement Company to increase their supply and get favorable

response. So the idea to launch its products all over in Pakistan is right. In this

regard we conduct situation analysis which is mainly revolves around two points

which are:

1. Internal analysis

2. External analysis

INTERNAL ANALYSIS

• Profitability The company is going to supply its products in almost every district of

Pakistan. The idea is profitable because it increase company’s supply and it

has a capacity to mess with this huge supply. As the supply increase the

company market share and profits also increase.

• Increase in Profits As the company is producing an out class product and planning to start its

supply in almost every district and having already a good repute due to

Orascom. They can generate good profits due to these strengths.

• Lack of Awareness Being a newly established company they don’t have much awareness about

Pakistani market and management styles they may face problem. This

problem could be solved if they recruit Pakistani people.



• Durability The durability of the product of Orascom Pakistan Cement Company is too

high as compare to the other products in the market. This durability is due to

the unique combination of chemicals which are made by the expert chemists.

• Product Life Cycle The product life cycle is developed from their sale charts which show that

their market share is growing and they are generating good profits.

EXTERNAL ANALYSIS

Micro environment

Orascom Pakistan Cement Company

Orascom Pakistan Cement Company is a new company which is going to enter

in the Pakistani Cement market. The company is already engaged in the

manufacturing of its unique product. The Company penetrates the market in the

main districts of Pakistan. Orascom Pakistan Cement Company already enters

market with a unique product which was not introduced in Pakistan before.

Suppliers

The company utilizes local suppliers to supply their products and also to supply

them the raw material. The company also gives 5 % more discounts and

incentives to their suppliers as compare to the other companies in the market.



Competitors Orascom Pakistan Cement Company has two major competitors Lucky Cement

and D.G Cement.

• Lucky Cement

Lucky Cement is a well established company and also market leader. The

production capacity of Lucky cement is also very high. They also have huge

capital as they are old in the market. As they are well established they have a

huge numbers of suppliers in Pakistan. They also have loyal customers.

Being a Pakistani company they are familiar with the market, trends in

Pakistani market and also with the management style.

• D.G Cement

D.G Cement is also competitor of Orascom Pakistan Cement Company. D.G

Cement is also hold a great market share as generating good profits. Their

production capacity is also very high. They have a satisfactory number of

suppliers and loyal customers. Due to these factors their market position is

enough strong. They are well established due to many factors like they are

old in the market; know the market trends and management style in Pakistan.



Macro Environment

It forecasts for all headline macroeconomic indicators, including real GDP

growth, inflation, fiscal balance, trade balance, current account and external debt.

Economic Factors

Economic factors affect the consumer’s purchasing power. Pakistan is facing

inflation in market. Economic growth has been sported by strong labor market.

0

24

6

810

12

14

Jul-April 2004-05 Jul-April 2006-07

CPI (General)Food GroupNon-Food Group

CPI (Consumer price index) averaged at 9.3% in fiscal year 2004-05 and the last

fiscal year ended with an inflation rate of 8.7% in June 2005

Non-Food Group in which our product lands inflation averaged 7.1% in 2004-05

jumped sharply over the proceeding year 3.6%. In the current fiscal year 2006-07

started with non-food inflation at 8.5% in July 2005.

Source: Economic Survey of Pakistan 2006 -07



Political Factors Pakistan Government is a stable from the last five years that promotes investor

to come in Pakistan. Pakistan Government is also trying to make good

relationship with foreign countries. Americans are at number one in investing in

Pakistani markets followed Japan. China is also looking forward to make hold in

16 billion population country. Political stability has opened the gates for investor

from all over the world to come in Pakistan. Consistency in foreign policies by

government since President Musharaf is in charge favors investors to earn at

great margins.

Social cultural factors

• Population

The total population of Pakistan is approximately 16 billion. The population is

increasing rapidly which increase the number of construction projects in

Pakistan which is a positive sign for Orascom Pakistan Cement Company.

• Change in life Style

The life style of Pakistani people is changing rapidly. People are more

conscious about their house designs. The business of property is also

grooming in Pakistan that also a good sign for Orascom Pakistan Cement

Company.

• Technological Factors

As the world is progressing rapidly the numbers of inventions in the

technology are also increasing rapidly.



Analysis

Of

Financial Statements



Analysis of Financial Statements

Pakistan Cement Company Limited is the country's fifth largest cement

manufacturer with a manufacturing capacity of 2.11m tons of cement per annum,

which is 5.9% of the total cement manufacturing capacity of the country. Its plant

commenced commercial operations in December 2006 with an annual cement

production capacity of 2.5m tons. The plant is located at Kalar Kahar, District

Chakwal in Punjab, which is rich in lime stone reserves. The quality of limestone

in this area is considered to be the best in the region. In addition to Ordinary

Portland Cement (OPC) the plant can also produce Sulphate Resistant Cement

(SRC). PCC manufactures cement under the brand name of PAKCEM.

PAKCEM is the first cement in Pakistan to comply with European Standards (EN

197) and also far exceeding the requirements of Pakistani Standard (PS 232).

The company has also one of those seven companies who obtained certification

from Board of Indian Standards (BIS) for cement export to India.

Being the stage of infancy, PCC has to undergo huge losses in the initial years

under discussion. PCC has not been able to perform well so far. However, during

16 months of operation, the company got the status of being the country's

second largest cement exporter, exporting 276.9k tons of cement in 5mths'08

witnessing some progress in the overall performance. It is expected that the

company will soon move towards the stability.

In Fiscal Year 2006, the company achieved many technical milestones. The

company's kiln started operation in July. In cooperation with FLSmidth, PCC

upgraded its capacity to 2.4mntpa. Moreover, it has also finalized the contract for

its coal mill project that is expected to be operational soon.



Currently there are 18 cement producers in Pakistan with 28 plants. PCC has a

very marginal market share of 4%. Constant innovation, expansion and

investment can lift up the share for PCC in future.

The company is listed on all the three stock exchanges. Major shareholders of

the company include Pakistan Cement Holding Limited and Camden Holding

PTE Limited currently own 44% and 25% shares respectively. Orascom

Construction Industries is the parent company of the Pakistan Cement Holding

and Camden Cement Holding.

Recently, Lafarge S.A., a world leader in cement, aggregates, concrete and

gypsum, operating in over 70 countries, acquired entire cement operations of the

Orascom Construction Industries Cement Group. The group includes all

aggregates, ready-mix concrete and cement bags manufacturing operations.

It owns and operates cement plants in Egypt, Algeria, Iraq, Pakistan, UAE,

Turkey and Spain, which have a combined annual gross production capacity

approaching 35m tons. New investments in Nigeria, Saudi Arabia, Syria, DPRK

and South Africa will increase the annual gross production capacity to 45m tons

by 2010.

Under the terms of agreement, OCI will receive a total payment of euro 8.8b (US

$12.9b) and Lafarge will assume euro 1.4b (US $2.0b) of Orascom's debt. The

transaction is subject to the approval of the shareholders and is expected to

complete by the end of March 2008. Moreover, through the acquisition, Lafarge

got access in Pakistan's emerging cement market via 69% stake in Pakistan

Cement.



RECENT RESULTS During the first half of Fiscal Year 2007, cement industry dispatched 12.8m tons

of cement, which was 33% higher than the 9.6m tons for the same period last

year. Domestic demands registered a growth of 21% while exports sharply rose

by 172% as compared to the same period last year. On the other hand, capacity

utilization level declined as the industry capacity has increased from 26mntpa in

June 06 to 32mntpa in June 2007. As a result, industry utilization levels have

dropped to 82% with a market price level touching as low as Rs 4000/ton during

June 07.

The company declared Rs 788m loss after tax (LPS: Re 0.69) in 9mths'07

compared to loss after tax of Rs 70m (LPS: Re 0.06) in the corresponding period

last year, depicting a significant decline due to low retention prices and high

financial charges. As company started its commercial production on August 28

2006, last comparable period i.e. 9mths'06 showed only one month of operations.

However, during the period under review, sales volume figures are very

encouraging and local sales volume stood at 1.29m tons while cement exports

increased significantly to 0.28m tons in 9mths'07.

Since the start of operations, Pakistan Cement Company Limited is actively

finalizing the ancillary facilities development and infrastructure projects to

facilitate smooth operations. Work on the coal conversion project is at its final

stages, which after operation will bring substantial savings in production cost as

compared to the furnace oil. The company has shown a very weak liquidity trend

due to its infancy and only 1-1/2 years of operation. There is an acute dearth of

liquid assets such as cash, bank balances and other current assets which

reflected in the company's less than 0.5 current ratio.



Fiscal Year 2006 has witnessed a sharp downturn in the current ratio, mainly on

account of very high trade payables and short term borrowing. Once the

company starts its operations in a sustainable manner, only then it will be able to

come out of this impasse. Presently, the company is facing worse liquidity

position as it is well below the industry average trend. Q3'07 CR is slightly above

1 showing that the company has started to take serious steps towards improving

its liquidity position.

Pakistan Cement has no history of sales as such. Fiscal Year 2006 started

showing some results with some sales and that too was of nominal amount. In

real sense, PCC has not demonstrated asset management ability as such as it

started its commercial production only 1-1/2 years ago. Sales/Equity ratio has

risen by a negligible amount in Fiscal Year 2006 but remained well below the

industry average. It has shown a sharp increase in Q3'07 mainly on the account

of numerator effect of higher sales. TATO and ITO have also shown

improvement in the 3rd quarter of Fiscal Year 2007. The company has now

started the commercial production and likely to show some positive results in the

coming years. The company can use better marketing strategies to develop its

reputation in the market. In this regard, its brand PAKCEM can prove to be a

competitive edge if it capitalizes on it prudently.

On March'05 there was a reversal of 767 million being waiver of interest on

Sojitz loan as per revised agreement between Pak Cement and Pakistan Cement

Holding Limited which reflected positive impact on the earnings of the company

which otherwise would have been negative. Major financing for PCC comes

through long-term debt and that has subsequently risen due to development and

infrastructure projects. Furthermore, the debt paying ability has improved slightly

as the company started its cement production. Sales spurred, although at a lower

rate of growth.



A slight deviation from this trend can be witnesses in the Q3'07 but this cannot be

sufficient to say that the company has decided to lower its reliance on debt

financing unless we have the year end figures. As a nascent company, it has

witnessed negative growth in the initial years, as zero sales and zero inventories

signify zero production for the company.

In FY06, when the PCC started its production and with its commencement, the

company showed negative profit margins that are way too lower than the industry

trends. ROA and ROE are positive in FY05 as a result of waiver of interest and

penal charges. After that ROA and ROE have posted a negative growth.

Pakistan Cement was under construction phase during the year FY'06 and

started its commercial production in Dec'06, therefore no dividends were

declared during the year. As for the previous years, the company doesn't have a

performance history because of being in the inception stage. EPS of the

company is very low and worse than the industry. It has been negative in FY06

owing to huge losses due to low sales. The positive EPS (Rs 1.09) in FY05 can

be attributed to the waiver of interest and penal charges on long term financing

expensed during FY04 otherwise the EPS would have been negative by Rs 0.27.

Similarly price-earning ratio has also been negative till FY '07 signifying the poor

performance and lack of investors' confidence in company's shares. In Q3 '07

however, one can see an overall better picture as both EPS and p/e ratios have

been positive showing that perhaps the company has improved its performance

and is trying to win the investors confidence. At the current price of Rs 12.45 per

share (as on 19th Dec, 2007), PCCL seems undervalued, trading at a low P/BV

multiple of 1.20 (based on book value of Rs 10.36 as on Sep'07).



FUTURE OUTLOOK:

The future outlook of the company seems positive. In 3Q'07, PCCL has

successfully commissioned its local coal firing system that has fulfilled the partial

requirements of fuel substitution while the work on imported coal firing is in final

stage after which company can substitute 100% of its fuel requirement with coal,

resulting in cost saving.

A lot of opportunities exist for Pakistan Cement. Having a sizeable production

base will be a favorable point in times of lower retention prices and while taking

advantage of the higher export prices. Through its location in Punjab, PCC can

tap the Indian and Afghanistan markets. Its linkage with Lafarge may lead to its

better perception in the international market and hence a competitive advantage.

In future, PCCL is likely to get benefit in cement exports to Indian and other

regional markets because of the presence of well-reputed brand name of Lafarge

in these markets.

The impact of Budget 2007-08 will be positive for the cement sector. GOP has

allocated Rs 520 billion in PSDP, which is 32% higher than the preceding year.

Out of the total PSDP allocation 52% of PSDP allocated for Infrastructure

Development Program against 30% allocation last year.

Thus, the cement demand will further "cement its place". Higher PSDP bodes

well for the cement demand, particularly due to the infrastructure development

component that requires higher quantities of cement. GOP has ambitious plans

regarding the public sector development that includes highways, building of

houses and canals besides building of new dams like Bhasha Dam for which Rs

500 million has been allocated.



This all will result in better-utilized capacity by the Cement industry along with an

expected increase in demand from 11.3mntpa to 13.7mntpa. On the other hand

Central Excise Duty (CED) has not been reduced as was expected. The Cement

manufacturers have therefore, indicated their intentions to pass on much of the

costs to the end users.

Furthermore, the exemption of duty on bitumen suggests that the GOP no longer

interested in cemented roads, which might lead to a nominal decrease in

demand. All in all, the industry is going to fare reasonably well in the near future

in consequent of the growing avenues, which will boost the demand for cement.



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PRODUCT

• Branding The company already had a well established and well known brand

Orascom.

• Labeling The brand will be labeled as under:

• Variety

As PCC is a cement company so in this field there wasn’t much variety. But

PCC has variety in the cement bags. It produce 50 kg bag to sale in Pakistan

and also produce a bag of 200 to 500 kg to export to OCI and other

companies and countries.

• Quality

The quality of product produced by PCC is fibulas. Their product is more

durable then the others in the market. Their product has a unique formula

which was created by a superb combination by the expert chemists.

• Guarantee

Due to its unique combination of chemicals the cement manufactured by the

Orascom Pakistan Cement Company is guaranteed to be more durable then

the others in the market.



PRICE

The price of PPC Cement is same as the price of other market leaders 230 R.S.

The price is fluctuating as the inflation in Pakistan is very high. PCC targets first

the large districts of Pakistan because in large districts construction rate is

increasing rapidly. Price also varies from district to district.

Pricing Strategies

• District Vise

PCC use the strategy to price its product according to districts. For example

the price in Lahore is different from the price in Sawabi.

• Season Vise

PPC also use the strategy to change its product’s price according to season.

In winter and rainy season the price is low as compare to the price in summer

or spring.

PROMOTION

PROMOTIONAL MIX

• Advertising

PCC advertise its product mostly through print media. They give ads on the

newspaper after 2 to 3 months. For that they purchase a whole page for their

ads which is enough expensive rounds about 50,000 R.S.



• Public relations

Involves developing positive relationships with the organization, media and

public. The art of good public relations is not only to obtain favorable publicity

within the media, but it also involves being able to handle successfully

negative attention. It also emphasizes on the relation with its suppliers.

• Sales Promotion

PCC develop the strategy to attract the local suppliers. It’s their strategy to

give 5 % more incentive and discounts to the suppliers as compare to other

companies in Pakistani cement market. This strategy really works and PCC is

now 5th largest manufacturer of cement in Pakistan. PCC also contract

Government contractors by giving them 3 % discount more than the other

companies in the market. This also promotes their sales.

• Direct Mail

It is the sending of publicity material to a named person within an

organization. There has been a massive growth in direct mail campaigns over

the last 5 years. PCC send its sample to the main construction companies in

Pakistan and also to the Government contractors and Government

construction departments. By personalizing advertising, response rates

increase thus increasing the chance of improving sales.

PLACE PLACE is a common and major factor of any business. It is essential need to

choose the right location regarding the nature of business. PCC first start its

supply in the main districts and then with the passage of time supply to almost

every district of Pakistan. Now PCC is supplying its product to more than 80 districts in Pakistan.



PLACE STRATEGY

Refers to how an organization will distribute the product or service they are

offering to the end user. The organization must distribute the product to the user

at the right place at the right time. Efficient and effective distribution is important if

the organization is to meet its overall marketing objectives.

There are two ways for PCC to sale its products. One is that they directly sale its

product to the customers for that they have to open their outlets in every district.

The other is that they have contract with the local suppliers to sale their product

and get their commission. According to their product the second option suits

them and PCC choose it.



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TARGET MARKETING STRATEGY

Pakistan is a country of 16 billion population and having four provinces. Punjab,

Sindh, Balochistan and N.W.F.P. In these four provinces there are more than

hundred districts. PCC main target on Punjab as it had highest number of district

and income level, construction level and population level increase rapidly in

Punjab. As the consumption and income level in Punjab is high PCC keep its

price high in Punjab’s districts as compare to others.

MARKETING SEGMENTATION STRATEGY PCC marketing strategy based on the difference between the districts in

Pakistan. Because every district have its own construction level and income

level. PCC cement is for every district and every one can afford it. So PCC

segment its market according to districts in Pakistan. PCC analyzed the

consumption level of cement in four provinces. According to the analysis they

came to know that the consumption level of cement in Punjab and Sindh is

comparatively high. They further analyze the consumption level according to

districts. According to their analysis they segment their target markets. In Punjab

they target Lahore, Faisalabad, Rawalpindi and Gujranwala etc. In Sindh they

mainly target Gawader, Hyderabad and Karachi etc.

MARKETING POSINING STRATEGY PCC position its product in customer’s mind as quality and durable product. They

are also exporting their product to many companies. None of the competitor is

exporting its product at the level PCC is doing. Pakistani people are already

impressed from export quality products this create a very good repute of PCC in

the customers mind.



COMPETITIVE STRATEGY Competitor’s strategies are most important to keep in mind while setting

strategies. PCC main competitors are Lucky and D.G cement. PCC is offering

export quality product at local price.

Assessing competitor’s strengths & weaknesses

When we assess our competitor’s strengths and weaknesses we find out some

strengths and weaknesses of our competitors.

Strengths

• Good brand name

• High market shares

• High production capacity

Weaknesses

• Common formula of cement

• No incentives to suppliers

• Local quality product



PUSH Vs PULL STRATEGY

USING PUSH STRATEGY PCC will use PUSH strategy by having contracts with the local suppliers in

Pakistani market. The customers will come to know about our brand through

advertising and sale promotion.

MARKETING COMMUNICATION STRATEGY

By integrating all messages in all media, we will communicate the brand name

and the main points of product differentiation, especially. The agency will

coordinate public relation effort to build the PCC’s brand and support the

differentiation message. To attract market attention and encourage purchasing,

PCC is offering 5% discount on sale of PCC’s products. To attract, retain and

motivate customer we will penetrate with push and niche strategy.

MARKETING RESEARCH STRATEGY

Using research, PCC is identifying the specific feature and benefits that its target

marketing segments value. Feed back from market tests, surveys and focus

groups will help to develop the PCC market share. PCC is also measuring and

analyzing customer attitudes toward competing brand and products. Brand

awareness research will help to determine the effectiveness and efficiency of

their product in the market.


pakistan cement factory marketing management

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