Dg Cement Annual Report Analysis

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ANALYSIS OF ANNUAL REPORT OF DG CEMENT

INTRODUCTION

D.G. Khan Cement Company Limited (DGKCC), a unit of Nishat group, is the largest cement-manufacturing unit in Pakistan with a production capacity of 5,500 tons clinker per day. It has a countrywide distribution network and its products are preferred on projects of national repute both locally and internationally due to the unparallel and consistent quality. It was established under the management control of State Cement Corporation of Pakistan Limited (SCCP) in 1978. DGKCC started its commercial production in April 1986 with 2000 tons per day (TPD) clinker based on dry process technology. Nishat Group acquired DGKCC in 1992 under the privatization initiative of the government. Every since the Nishat Group over took it, a number of plants has been added and the production has been optimized.

VISION

To transform the company into modern and dynamic cement manufacturing company with qualified professionals and fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan.

OVERVIEW OF COMPANIES POSITION

In spite of decline in the cement sales, the net sales revenue ballooned by nearly 45% on account of stable cement prices in the country. Cement price on the export front, however, have shown declining trends due to tough competition from other regional exporters. Thus the company earned a Net Profit of Rs.525.58Million this year as compared to a Net Loss of Rs.53.23Million last year. Where as the total assets of the company decreased from Rs.51, 992.93Million to Rs.42, 723.04Million.

ANALYSIS OF THE INCOME STATEMENT

The Net Sales of the DGKCC increased from Rs.12, 445.99Million to Rs.18, 038.2Million in 2008-2009 as compared to the last fiscal year i.e. 2007-2008. There was a 45% increase in the net sales as the amount of local sales increased by 20% but the major increase was due to the exports which increased by110%. Where as Cost of good sold only increased by 18% which showed although the company had capability to produce more but in the previous year it only produced a proportion of it. So this year when the demand for cement increased the cost of production increased by a small percentage. The major increase in COGS was due to 48% increase in the cost of furnace oil and coal. Other major costs which were included in COGS were: • Raw & Packing Material

• Salaries, Wages & Other Benefits
• Electricity & Gas
• Depreciation on Plant, Land & Equipment
• Rent & Taxes
• Repair & Maintenance
Administrative Expense for the current year only increased by a small fraction from the past year which was due to increase in the wages of the workers/management of the company. Other major expenses which came underneath this were: • Salaries, Wages & Other Benefits

• Electricity & Gas
• Depreciation on Plant, Land & Equipment
• Rent & Taxes
• Repair & Maintenance

The Selling & Distribution expense, however, increased by more than 200%. The major reason for this was increase in the exports of the company, the Freight & Handling Charges increased by at least 350%. Other main expenses included in it were: • Salaries, Wages & Other Benefits

• Electricity & Gas
• Depreciation on Plant, Land & Equipment
• Rent & Taxes
• Repair & Maintenance

As you can see from above that all three categories of expenses contains the same headings i.e. Salaries, Rent & taxes, etc. This is due to the fact that the company has three main departments Production, Management & Sales. Production accounts for the expenses incurred while producing and manufacturing the good and it includes all the wages, rent, maintenance work, depreciation paid. This is known as Cost of Good Sold. The management includes the people who administer both the production and the sales of the good so they have similar expenses and...
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