SUBJECT: FINANCIAL ANALYSIS

TOPIC: RATIO ANALYSIS OF MAPLE LEAF CEMENT

PRESENTED TO:

MR.RANA ADEEL LUQMAN

PRESENTED BY:

MR. SOHAIB SULTAN (09)

MR. FARHAN ARSHAD (13)

MR. MUHAMMAD IKRAM (06)

MR. MOHSIN BILAL (40)

MR. SHAIRAZ ABBAS (27)

B.COM HONS MORNING

8TH SEMESTER

SESSION 2007-11

SUBMITTED DATE: Monday, June 14, 2011

THE ISLAMIA UNIVERSITY OF BHAWALPUR

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DEPARTMENT OF COMMERCE

BAHAWALNAGAR CAMPUS

Preface

Financial statements are the lens on a business. Financial statement analysis calibrates the

lens to bring the business into focus. Imperfections in the financial statements can dirty

the lens and distort the picture. Financial statement analysis deals with the imperfections

in financial statements to improve the focus.

Financial statements have many uses, but the predominant one is to provide information

for investing in businesses. Every day millions of shares and corporate bonds are traded

in the world's capital markets, and prices are set to value these securities. Investors want

to know what firms are worth so they can ascertain at what price to trade. They turn to

financial statement analysis to get an indication of the underlying value of firms. This

book focuses on these investors.

Underlying value is sometimes referred to as fundamental value, and the analysis of

information about fundamental value is referred to as fundamental analysis. This Report

is about fundamental analysis. Financial statement analysis is central to fundamental

analysis. Indeed, in this report, fundamental analysis is developed as a matter of

appropriate financial statement analysis. As the lens on a business, financial statements,

focused with the techniques of financial statement analysis, provide a way of interpreting

the business that enables readers to understand the value it generates for shareholders.

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ACKNOWLEDGEMENT

In the name of “Allah”, the most beneficent and merciful who gave us strength and knowledge to complete this report. This report is a part of our course“Financial Management”. This has proved to be a great experience. This report is a combine effort ofMuhammad Ikram, Farhan Arshad,Mohammad Mohsin Bilal, Sohaib Sultan Chisti, Shairaz Abbas.We would like to express our gratitude to Mr. Rana AdeelLuqman; who gave us this opportunity to fulfill this report.We would also like to thank our colleagues whoparticipated in a focus group session. They gave us many helpful comments which helped us a lot in preparing our report.

Sr.no.

Contents PageNo.

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1 Mission Statement 5

2 Corporate Strategy 5

3 History and Background 5

4 Summary of Director’s Report 9

5 Summary of Auditor’s Report 11

6 Comments on Projection of Five Years Ratios 12

7 Ratio Analysis 13

8 SWOT Analysis 19

9 INCOME STATEMENT

10 BALANCE SHEET

11 Conclusion 24

12 Recommendations 25

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Mission Statement:

“The Maple Leaf Cement Factory Limited stated mission is to achieve and then remain as the most progressive and profitable company in Pakistan in terms of industry standards and stakeholders interests.

The company shall achieve its mission through a continuous process of having sourced and implemented the best leading edge technology, industry best practice, and human resource and by conducting its business professionally and efficiently with responsibility to all its stakeholders and community.”

Corporate Strategy:

We at Maple Leaf Cement Factory Limited manufacture and market different types of consistently high quality cement, according to the demanding requirements of the construction industry. Our strategy is to be competitive in the market through quality and efficient operations.

As a responsible member of the community, we are committed to serve the interest of all our stakeholders and contribute towards the prosperity of the

country.

History and Background:

The Cement Industry:

In August 1947, Pakistan inherited four cement plants having total installed capacity of 0.471 million tons per annum and total production of 0.300 million tons.

By 1953-54, the production increased to 0.660 million tons against demand of one million tons. As the private sector did not have resources, the public sector in the form of Pakistan Industrial Development Corporation (PIDC) took the lead and established two cement plants – Maple Leaf and Zeal Pak. These units came into production in 1956, increasing the production capacity to one million tons per annum. By mid-sixties, the private sector acquired sufficient confidence, expertise & capital and established the following three plants:

• Valika Cement (now Javedan) in Karachi in 1964

• Ismail Cement (now Gharibwal) at Gharibwal in 1965 and

• Pak Cement (now Mustehkam) at Hattar in 1965.

Nationalization:

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Under the Economic Reforms Order, all private sector cement plants were nationalized in 1972 and State Cement Corporation of Pakistan (SCCP) was formed to manage cement plants. Installed production capacity was substantially expanded during this period. The capacity of Javedan and Mustehkam were doubled and new plants were installed at Thatta, Dandot, Kohat, D.G.Khan and Daudkhel. As a result, total production capacity expanded by 2.45 million tons per annum

During this period, growth in demand of cement was around 7 percent per annum. New capacities were not coming up to match the demand. Consequently, Pakistan had to start importing cement in 1976-77 and continued to import cement till 1994-95.

Re – Introduction of the Private Sector:

In order to meet the increasing demand for cement that led to continuous shortage since the mid 70s, the private sector was again allowed to establish cement plants. As a result of change in policy, seven projects having capacity of 2.54 million tons were installed in private sector and simultaneously, SCCP also brought in four more projects with a total capacity of 1.6 million tons. Resultantly the total capacity of the cement industry enhanced to the level of 8.5 million tons by the end of 1990.

The units allowed in the private sector were Cherat (1985), Pakland (1985), Attock (1986), Dadabhoy (1988), Essa (1988), Fecto (1989) and Anwarzeb White Cement (1988).

Kohinoor Maple Leaf Group:

The Kohinoor Maple Leaf Group (KMLG) is one of the largest groups in Pakistan. It is one of the leading manufacturers of the country with a composite textile unit, two weaving units, two dyeing units and one spinning unit aside from its cement operations.

The group also has presence in power generation, and insurance sectors consisting of a total of seven group companies, all of which are ISO 9002 certified. In 1999, KMLG entered into a contract with oracle to upgrade all Management Information Systems including the integration of its financials, cost and management accounting, production, marketing, and human resource functions.

Out of 7 companies of KMLG, 5 are listed on the stock exchanges in Pakistan with operations comprising of vertically integrated textile operations, power generation, and cement production.

A) Textiles: this is the core focus of KMLG. The group has 50 years experience in manufacturing and employs a strategy of diversified marketing and a focus on customers globally. The group has effective quality control due to the combined synergies of vertically integrated textile manufacturer.

B) Spinning: Kohinoor Textiles comprises of two spinning divisions located at Rawalpindi (KTML) and Gujjar Khan (KGM). There are a total of nine units with 151,000 spindles capable of spinning a complete range of coarse and fine count yarn from natural and man made fibres. In particular, Kohinoor specializes in fine count yarn for high thread count home textile products. The total production of yarn is 28,800,000 Lbs per annum. Five units with 85,500 spindles are at

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Rawalpindi and four units with 65,500 spindles are at KGM. Both divisions are modern facilities with state of the art machinery from Europe and Japan.

C) Weaving: Kohinoor Raiwind Mills (KRM) is the weaving division of Kohinoor Textiles Mills and is situated in Raiwind. Since the company’s inception in 1991, the management of KRM has invested in state of the art technology and equipment making it one of the most modern weaving plants in the country. Presently there are 204 wide width air jet looms capable of producing over 25 million linear yards of greige fabric per annum. By the end of 2006 the total number of looms will increase to 312 with the addition of a third shed. All 204 looms have been supplied by Picanol (Belgium) and are of the following models: Picanol Omni P800 and Picanol Omni Plus

D) Dyeing and painting: Kohinoor has a state of the art dye house equipped with European and Japanese technology to pre-treat, dye and print fabric with an average weight range of 75gsm to 350gsm. The dyeing and printing capacity is 48 million meters per annum and the capacity for pre-treatment and bleaching is 6 million meters. The maximum width capacity for bleaching is 3.4 meters and for dyeing and printing is 3.2 meters.

E) Cement: Maple leaf Cement factory limited.

Maple Leaf Cement Factory Limited:

Maple Leaf is one of the pioneers of the cement industry in Pakistan. It owns and

operates grey and white cement plants located at Daudkhel District Mianwali.

History:

Maple leaf Cement Factory Limited was established by the Pakistan Industrial Development Corporation (PIDC) in 1956. It was later incorporated as “Maple Leaf Factory Limited” in April 1960. The company started as a producer of grey Portland cement, with a wet process plant of 400 tons per day (“tpd”) clinker capacity installed with the assistance of the Canadian Government, in 1960 a second wet process plant Portland cement was installed with a clinker capacity of 600 tpd.

In 1969, a company by the name of White Cement Industries Limited (WCIL) was formed with a 50 tpd white cement plant.

In 1974, under the PIDC Transfer of Company & Project Ordinance, the management of two companies, namely MLCFL and WCIL were transferred to the newly established State Cement Corporation of Pakistan (SCCP), which controlled the entire cement industry in Pakistan after nationalization.

In 1983 SCCP expanded WCIL’s white cement plant by adding another unit of the same capacity parallel to the existing one.

In 1986 SCCP also set up another production unit of grey cement with a capacity of 600 tpd based on wet technology under the name of Pak Cement

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Privatization:

Under the privatization policy of the government, the ownership and management of MLCFL, WCIL, and PCCL, was transferred to the Kohinoor Maple Leaf Group. All three companies were merged into Maple Leaf Cement Factory Limited on July 1, 1992. The arrangement worked well as the plants of all three companies were within a common boundary wall, sharing facilities such as raw material supply, power supply, water, and other infrastructural facilities.

Management

MLCFL is a part of the Kohinoor Maple Leaf Group, one of the largest groups in Pakistan. It is primarily being run by Mr. Tariq Sayeed Saigol, the son of late Mian Sayeed Saigol, founder of the Saigol Group. Mr. Tariq S. Saigol is an ex- chairman of All Pakistan Textile Mills Association. He has also been the Chairman of the Government’s Export Committee as well as a director of SBP and member of the Prime Minister’s Committee of Tariff Reforms, Resource Mobilization, Tax Reforms and Down Sizing of the government. He is also the architect of Textile Vision 2005.Other senior management has vast experience in the textile industry. Top management id the hub of strategic decisions, with middle management playing implementation role.

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Summary of Directors Report

The directors present the 50th annual report with audited financial accounts and auditors reo9rt at the end of 30th June 2010.

During the economic year the economy growth improved in manufacturing sector. Real GDP grow but still below 6%. The inflation level stable but political uncertainty, war on terror, energy shortage and continued adjustments of energy prices continued to have ill affects on the manufacturing economy. Large gaps in the budget have bad effect on development budget and this adversely affected capacity utilization of the cement which show some growth but still fell for short of achieving optimum utilization.

Production of all categories cement increases 5.32% and sales increases 6.26% in this year but sales revenue increases 10.63% in this year. This shows low prices due to high competition during the year.

Although sales increases but the net sales revenue decreases due to reduction in net retention which shows increased loss per ton. Your company suffered millions pre tax loss after accounting millions of financial and distribution charges. The company unable to serve its long term debts dure to poor financial performance during the year and that’s why several meetings held with SUKUK and Syndicate lenders to restructuring the liabilities and restructuring agreement arrived on March 2010.

The directors unable to declare dividend for the year due to loss provision for tax and provision for dividend on preference shares .

According to restructuring agreement sponsors are required to invest 1 billion fresh capital before 31st march 2010. After the permission of the SECP subordinated loan converted into ordinary shares . Ordinary shares Rs.10 each at Rs.6.5 at a discount 3.5 isue to Kohinoor Textile mills ( ltd) the holding company. Consent letters sent to registered members about the subscription of the shares approved by shareholders through special resolution in extraordinary general meeting held on May 03,2010.

The floods during monsoon have bad affect on economy. However rebuilding process possibly increase the demand of cement . All cement manufacturer contact with government for taxation because it has ill effects on cement industry.

Engineering staff of the company work hard to improve the efficiency and effectiveness of the plant. Company adopted coal which is cheaper than oil and reduce cost. The waste heat recovery plant installed and come into operation at the end of October 2010.

The board review the company direction and maintain high standard of good corporate governance.

Your directors are pleased to report that financial statements present fair view. Proper books of accounts are maintained. Appropriate accounting policies have been applied. Internal control

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system consistently reviewed. There are no significant doubts upon the company’s ability to continue as a going concern. Key operating and financial data of last six years is annexed. The value of investment of provident fund and gratuity trust, based on their respective audited accounts.

The present auditors audit the financial statements of the company and issued auditors report to members.

The board thankful to all executives and workers for their continuing efforts to keep the plant operational in tough times and wishes to thank the lenders for their agreement to restructure the company’s debts.

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Summary of Auditors Report

We have audited the balance sheet and all relevant accounts of MLCF (ltd) as at dated, we obtain all information and explanations that are essence of audit by management.

The company is responsible to maintain internal audit that shows conformity with the accounting standards as well as with the ordinance 1984. In our opinion after audit the financial statements show conformity with GAAP. Our audited conducted in accordance with the standards and policies that assure any material misstatement.

Our opinions after the audit are:

A: All books of accounts are kept by company.

B: Balance sheet and other accounts are conformity with the ordinance policies.

1. Expenses made of company business.

2. Installment made on the interest of the company.

C: All statements and accounts are confirm with approved accounting standards, Required information given true and fair view .

D: Zakat deducted and deposited zakat account.

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Comments On Projection of Five Years Ratios

Liquidity Ratio:

Ratio 2009-2010 2008-2009 2007-2008 2006-2007 2005-2006Current ratio

0.54 0.52 0.81 1.08 1.01

The current ratio of last five years of maple leaf continue to fall.

Low current ratio shows firm not liquid assets to cover its obligations.

It shows the inefficiency of the organization.

The decrease in the current ratio due to increase in the current liabilities more than current assets.

Profitability Ratios:

Ratios 2009-2010 2008-2009 2007-2008 2006-2007 2005-2006Gross profit/loss

21.56 32.49 16.94 8.35 37.63

Net prfit/loss (18.96) (6.45) (8.65) 1.13 18.55

The profitability ratios of maple leaf cement declined drastically because of an excess of supply situation in industry and falling net retention prices.

Financial charges increased production cost because interest rate increases in the economy.

Debit equity Ratio:

Ratio 2009-2010 2008-2009 2007-2008 2006-2007 2005-2006Debt equity ratio

69:31 57:43 55:45 55:45 51:49

The firms debt increases year to year.

As the interest increases the borrowing cost the firm increases.

The can not pay for its expenses through their earnings and will have to extra debt to pay its obligations.

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RATIO ANALYSIS:

Financial ratios are the analyst’s microscope; they allow them to get abetter view of the firm’s financial health than just looking at the raw financial statements

Ratios are used by both internal and external analysts

Internal uses

· Planning

· Evaluation of management

External uses

· Credit granting

· Performance monitoring

· Investment decisions

· Making of policies

CATEGORIES OF FINANCIAL RATIOS

The accounting ratios can be grouped in to six categories:

1. Liquidity Ratios shows the extent to which the firm can meet its financial obligations.

2. Asset Management Ratios shows how effectively the firm manages its assets.

3. Debt Management Ratios examine the degree to which a firm uses debt financing or financial leverages.

4. Profitability Ratios relates profits to sales and assets.

5. Market Value Measures are a measure of the return on investment.

Liquidity Ratios:

1.Current Ratio:

The current ratio shows how a firm is able to cover its current liabilities with its current assets it shows the liquidity of the company.

Current ratio=total current assets/total current liabilities

=5002734/9341951 =0.5355

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Current ratio is low so firm has low liquidity power. It shows that firm has few liquid assets. Excessive cash also bad but .53 is very low. The ratio shows maple leaf cement fails to create a good combination of current assets and current liabilities.

2. Quick Ratio:

It is used to find the exact liquid position of the organization.

Quick Ratio=total current assets–investment–stock in trade–stores,spare parts /currentliabilities

=5002734-472338-504718-2407410/934191

=0.44

The acid test ratio of maple leaf cement shows the firm is not able to cover its current liabilities with the most liquid of its assets excluding the investment, inventories which are not easily converted into cash. It means the firm not have enough liquid assets. So it shows efficiency of the organization is not good.

3. Cash Ratio:

The proportion of a firms assets hold as a cash. It indicate the company’s ability to pay off the immediate demand of creditors using its most liquid and current assets.

Cash Ratio = cash and bank balances/total current liabilities

= 73265/9341951

= 0.0078

Cash ratio shows maple leaf has very low cash to pay its obligations. The ratio is below average which show poor efficiency of the organizations. Its vary from industry to industry.

Activity Ratios:

Activity ratios measures the speed of various accounts are converted into cash or sales or inflows. It measures the efficiency of using its assets in generating sales revenue.

Inventory Turnover Ratio:

Time required to convert inventory into CGS. Higher the inventory turnover ratio shows higher the organizations sales.

Inventory Turnover Ratio = CGS/inventory

= 10691883/504718

The inventory turnover ratio shows the maple leaf is good. It shows high sales. So the company performance is good. Inventory turnover ratio very from industry to industry.

Average Collection Period:

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It is helpful in evaluating the credit policies of the organization. Collection period minimum is better but decreases sales.

Average Collection Period = total trade debts/average sales per day

= 751400*365/13630511

= 20.13

The average collection period of the maple leaf is good. It recovers its account receivable approximately in 20 days which is good.

Average Payment Period:

Average payment period = total accounts payable / average purchases per day

= 3491872*365/571325

= 2230.8

Average collection period must be less than payment period. If payment period increases more it shows inefficiency of the organization. Because it shows organization not pay its obligations. Maple leaf payment period very long that shows organization fail to pay its obligations.

Total Asset Turnover Ratio:

It shows the efficiency of using total assets in generating sales revenue.

Total asset turnover ratio = total sales / total assets

= 13630511/26094942

= 0.522

High asset turnover ratio favorable for the company. Asset turnover ratio of maple leaf is not good. It shows company not using its assets efficiently for generating sales revenue.

Debt Ratio:

It shows debt position of an organization. It means the money of other people being used to generate profit. Greater will be debt greater will be the financial leverage.

Debt Ratio:

Debt ratio, defined as an expression of the relationship between a company’s total debt and assets, is a measure of the ability to service the debt of a company. It indicates what proportion of a company’s financing asset is from debt, making it a good way to check a company’s long-term solvency. In general, a lower ratio is better. Value of 1 or less in debt ratios shows good financial health of a company.

Debt Ratio = total liabilities/total assets

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= 20960734/26094942

= 0.80

The lower the company's reliance on debt for asset formation, the less risky the company is. On the other hand, the higher ratio means a company has high insolvent risk since excessive debt can lead to a heavy debt repayment burden. Maple is highly risky firm because it is highly dependent on debt. Maple is not good for investment.

Interest Coverage Ratio:

Time interest earned ratio (TIE), also known as interest coverage ratio, indicates how well a company can cover its interest payments on a pretax basis. The larger the time interest earned, the more capable the company is at paying the interest on its debt.

Interest coverage ratio = EBIT/interest

= (510032)/2059476

=-0.248

Times interest earned ratio measures a company’s ability to continue to service its debt. It is an indicator to tell if a company is running into financial trouble. A high ratio means that a company is able to meet its interest obligations because earnings are significantly greater than annual interest obligations. The interest coverage ratio of maple leaf cement is ok. Maple leaf is capable to pay interest on debt.

Fixed Payment Coverage Ratio:

Fixed means obligations that organization must have to meet at any cost.

Fixed payment coverage ratio = EBIT+lease payment/interest+lease payment+[principal amount+deffered stock dividend*(1/1-t)]

Profitability Ratios:

Profitability Ratios show how successful a company is in terms of generating returns or profits on the Investment that it has made in the business. If a business is Liquid and Efficient it should also be Profitable.

Gross Profit Ratio:

The gross profit margin looks at cost of goods sold as a percentage of sales. This ratio looks at how well a company controls the cost of its inventory and the manufacturing of its products and subsequently pass on the costs to its customers. The larger the gross profit margin, the better for the company.

Gross Profit Ratio = gross profit/total sales

= 2938628/13630511

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= 0.22

Net Profit Ratio:

The Profit Margin of a company determines its ability to withstand competition and adverse conditions like rising costs, falling prices or declining sales in the future. The ratio measures the percentage of profits earned per dollar of sales and thus is a measure of efficiency of the company.

Net Profit Ratio = EACSH/totals sales

= (2583955)/13630511

= -0.18

Operating Profit Margin Ratio:

Operating profit is also known as EBIT and is found on the company's income statement. EBIT is earnings before interest and taxes. The operating profit margin looks at EBIT as a percentage of sales. The operating profit margin ratio is a measure of overall operating efficiency, incorporating all of the expenses of ordinary, daily business activity.

Operating profit margin ratio = EBIT/total sales

= (510032)/13630511

= -0.037

Return on Total Assets Ratio:

The Return on Assets of a company determines its ability to utilize the Assets employed in the company efficiently and effectively to earn a good return. The ratio measures the percentage of profits earned per dollar of Asset and thus is a measure of efficiency of the company in generating profits on its Assets.

Return on total assets ratio = EACSH/total assets

= (2583955)/26094942

= -0.09

Return on Total Equity Ratio:

The Return on Equity of a company measures the ability of the management of the company to generate adequate returns for the capital invested by the owners of a company. Generally a return of 10% would be desirable to provide dividends to owners and have funds for future growth of the company

Return on total equity = EACSH/total equity

= (2583955)/4134208

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= -0.62

Earning per share:

An important ratio. EPS measures the overall profit generated for each share in existence over a particular period.

Earning per share = EACSH/total no. of common stock outstanding shares

= (2583955)/372263356

= -6.94

Market Ratios:

Price Earning Ratio:

The P/E ratio is a vital ratio for investors. Basically, it gives us an indication of the confidence that investors have in the future prosperity of the business. A P/E ratio of 1 shows very little confidence in that business whereas a P/E ratio of 20 expresses a great deal of optimism about the future of a business.

Price earning ratio = market price per share/earning per share

Book Value:

Book Value = total common stock equity/total no. of common stock shares outstanding

= 4264108/372263356

= 0.011

Market/Book Value Ratio:

The Market-to-Book Ratio relates the firm's market value per share to its book value per share. Since a firm's book value reflects historical cost accounting, this ratio indicates management's success in creating value for its stockholders. This ratio is used by "value-based investors" to help to identify undervalued stocks.

Market value ratio = market value of share/book value of share

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SWOT Analysis:

Strengths:

• The company is situated in Daud Khel, district Mianwali. This location is rich with raw material that is required by the cement industries for the production of cement.

• Maple leaf is operating with a present production capacity of 1.5 mntpa. Further expansion of 2.0 mntpa is expected in the near future which will make MLFCL, the third largest capacity wise player after Lucky cement and D.G. Cement.

• The production of the cement in maple leaf is completely automated.

•The company has imported the machinery for dry process from Denmark. The use of this advance machinery has helped the company produce good quality cement with much efficiency.

• The company is going to import the waste heat recovery plant from Denmark,

which will help the company to cut the power expenditures.

• Maple leaf cement factory is the only cement factory that produces both grey cement and white cement.

• It also has developed a niche market by being the only manufacturer of oil well cement in Pakistan.

•Maple leaf is one of the pioneers of cement industries in Pakistan, established in 1956. This long time span of the company has helped it earn customer loyalty all over Pakistan.

• Maple leaf, having a good brand image, has the advantage to charge their customers at a higher price than the other competitors.

• The price of maple leaf cement is high in the international market as compared to its local competitors who are involved in the exports as well.

• The company brand image is very strong in the market, both local and international.

• The brand equity of maple leaf is $ 500 million

• Maple leaf is an ISO certified company. The company has obtained the ISO 9001 - 9 making it a reliable producer for production of quality products in the international market.

• Maple leaf along with Lucky cement, are the only two companies to obtain the BIS certification from India.

• The maple leaf cement factory compensates its employees, better than all the

other industries.

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• The basic salary of the company employees is higher than even the salary package offered in the industry.

Weaknesses:

• The location where the cement plant of maple leaf is located is a very remote area.

• Maple leaf faces problems in hiring good quality of employees for the factory place due to this reason in spite of a good salary package.

•The company has been established since 1956. Therefore the technology being used by the factory, i.e. the production of cement through wet process, is old and yields low profits and high costs.

• Although, maple leaf is taking steps to convert its wet process plants into dry process plants, but at present these plants are causing the increase in per bag cost of the cement.

• The cost of freight charges further reduces the retention price of the cement, hampering the profitability of the company.

•Hence maple leaf is extraordinarily sensitive to the changes in cement prices. Excess capacity expansion, over supply of the product in the market and price pressure over the company negatively affects the company.

• The location of the company limits the ability of the company to distribute its product all over Pakistan.

• According to Rizwan Butt, the means of transportation for the company is main problem at present for the company.

• This problem has affected both the local and export sales of the company.

• Maple leaf is short of trucks to distribute their product in local markets.

• India is a very big market for the cement industry, as there is a construction boom in the country. But due to the shortages of trucks and the Pakistani train wagons not meeting the standards of Indian authority, maple leaf is unable to avail the golden opportunity at its fullest.

• The company has borrowed heavy loans from the financiers, further increasing the debt burden over maple leaf.

Opportunities:

• At present the demand for cement in the domestic market is increasing. Maple leaf is benefiting quite well at present.

• If Kala Bagh dam is commissioned, MLFC will be the major beneficiaries in the industry.

• At present, maple leaf along with Lucky cement is the only two cement factories that have received the BIS certification.

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• This has given maple leaf a golden opportunity to capture the Indian market with very less competition.

• The demand of cement outside Pakistan has been increasing rapidly, providing maple leaf a good chance to explore these markets.

• Maple leaf is also exploring new markets for the potential customers of white cement, which will give maple leaf a competitive edge against the competitors.

•The conversion of wet process plants to dry process plants and the shifting of company from coal based production to waste heat production will cut down the company’s expenses and increase company’s retention prices.

Threats:

• The company is highly vulnerable to price competition since it faces higher cost of production per bag.

• The rocketing increase in prices of furnace oil, and even 300 % increase in the price of coal has been affecting badly to company’s profitability.

•The export to Indian market highly depends on diplomatic relations between the two countries.

•The day after day terrorist attacks and the suicidal bombing have caused the unrest in the country. Along with creating a sense of non security among the citizens of Pakistan, these activities have proved to be hazardous to the manufacturing companies as well. The incident of rocket launcher fired on the grid station in Mianwali caused a great damage.

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Maple Leaf Cement Company Limited

Income Statement

As on June 30, 2010&2009.

2010 2009

Particulars Rupees in thousandsNet Sales 13,630,511 15,251,374Cost of Goods Sold 10,691,883 10296,865Gross Profit/Loss 2,938,628 4,954,509Distribution Cost 3,152,889 2,339,704Administration Expenses 194,161 151,713Other Operating Expenses 158,641 42,251Total Operating Expenses 3,505,691 2,533,668Operating Profit/Loss (567,063) 2,420,841Other Operating Income 57,031 61,749EBIT (510,032) 2,482,590Interest 2,059,476 3,400,241Loss Before Tax (2,569,508) (917,651)Taxation: current 103,122 64,321 Deferred (88,675) 998

14,447 65,319Loss After Taxation (2,583,955) (982,970)

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Balance sheet

2010 2009

Liabilities amount assets amount Liabilities(amount)

Assets (amount)

Share capital andreserves

Fixed Assets

Authorized capital 7,000,000 Property, Plant & equip 21,035,368 7,000,000 20,381,478Issued capital 4264108 Intangible assets 1,774 4,264,108 7,332Reserves 4,180,433 Long term investment 200 4,127,277 -Accumulated loss (4,310,333) Long term loans to

employs3,293 (1,673,584) 5,666

Totals 4,134,208 Deposits and prepayments

51,573 6,717,801 51,485

Share deposit money 1,000,000 Totals 21,092,208 - 20,445,961Fixed liabilities Current AssetsLong term loan from banking

1,100,808 Stores, spare parts and loose tools

2,407,410 826.614 2,236,194

Redeemable capital 8,289,800 Stock-in-trade 504,718 7,200,000 650,914Syndicated term finance 1498200 Trade debts 751,400 - 682,244Liabilities against assets subject to finance lease

700,743 Loans and advances 266,642 862,214, 78,254

Long term deposit 2739 Investments 472,638 2,580 406,563Deferred liabilities Deposit and short term

prepayments121,824 143,306

Employed benefits 6,864 Accrued profit 656 - 983Deferred taxation - Sales tax, customs and

excise duty 16,797 69,755 16,797

Employees compensated absences

19629 Due from gratuity fund trust

- 18,990 8,184

Total Fixed liabilities 11,618,783 Other receivables 91,178 8,980,153 29,448Current liabilities Income tax 296,506 162,058Trade and other payable 3,491,872 Cash and bank balances 73,265 2,407,870 99,932Accrued profit /interest/mark up

921,812 Total of current assets 5,002,734 441,194 5,214,877

Short term borrowing 4060,838 4,382,322Long term loans from banking co. Secured

480,231 128,889

Redeemable capital 6,800 800,000Syndicated term finace 1,200 1,500,000Liabilities against assets subject to finance lease

379,198 302,609

Total current liabilities 9,341,951 9,962,884Total 26,094,942 Total 26,094,942 25,660,838 25,660,838

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Conclusion

As a Equity Investors

We are not going to invest as a equity investor in maple leaf cement because we saw that the

company is going into loss continuously and the loss is increasing form year to year. It is unable

to pay the dividend to the shareholders and to satisfied the claims of stakeholders. The

company sales revenue is unable to meet the operating expenses and it also not utilizing its

funds and assets properly both the return on assets and funds is negative.

As a Long term Investors

We do not want to invest as a long term investor in maple leaf cement factory because company

has not sufficient profit and funds to pay the fixed interest charges and refund the debt

amounts. Its amount of debt is increasing from year to year so the liability of a company is

increasing.

As a Short term Investors

As we saw in our analysis that the company’s liquidity position is improving. But still this is low

therefore here we are also not ready to invest as a short term investors. It has low working

capital and mismanagement of accounts receivables and payables. Every investor wants benefits

but here they will not earn any shape of profit to pay dividend to shareholders and to pay

interest charges to creditors. Therefore we are not agree to invest here.

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RecommendationWe invest in a organization and in a company for benefits in future but according to us the

maple leaf cement factory can’t provide any benefits. Maple leaf cement factory has not enough

resources for generate profit and provide benefit to its stakeholders. Our recommendation is

that there is no need to invest in this company because investors will not get advantage of

investment. And as well as we are also not ready to invest here. According to us Maple Leaf

Company can not able to survive in the market in current shape. No one ready to invest in

Maple Leaf Company because it is going into loss. To attract the investors the company will have

to recall its previous position.

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