Contents

Table of Contents
PURPOSE OF THE STUDY ............................................................................................................................... 5
Cement Industry of Pakistan: ........................................................................................................................ 6
Introduction to Cherat Cement: ................................................................................................................... 8
Cherat Cement Financial Status: ............................................................................................................... 9
Literature Review or Background: .............................................................................................................. 10
Pakistan: Strategic Location: ....................................................................................................................... 10
Cement Sector: Current Scenario: .............................................................................................................. 11
Impact On Budget: ...................................................................................................................................... 15
Marketing Plan: ........................................................................................................................................... 16
Target Market: ........................................................................................................................................ 16
Market Segmentation: ............................................................................................................................ 16
Geographic Segmentation: ................................................................................................................. 17
Demographical Segmentation: ........................................................................................................... 17
Firmographic Segmentation: .............................................................................................................. 17
Behavioral Segmentation: ................................................................................................................... 17
Psychographic Segmentation:............................................................................................................. 18
Marketing Strategies:.............................................................................................................................. 18
Market Penetration: ........................................................................................................................... 18
Market Development: ......................................................................................................................... 18
Marketing Mix ......................................................................................................................................... 18
Product:............................................................................................................................................... 18
Price: ................................................................................................................................................... 19
Place: ................................................................................................................................................... 19
Promotion: .......................................................................................................................................... 19
Market Analysis:...................................................................................................................................... 19
SWOT Analysis: ........................................................................................................................................... 19
Strengths: ................................................................................................................................................ 19
Weaknesses: ........................................................................................................................................... 20

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 Opportunities: ......................................................................................................................................... 20
Threats: ................................................................................................................................................... 21
Pest Analysis: .............................................................................................................................................. 21
Political Factors: ...................................................................................................................................... 21
Political Uncertainty:........................................................................................................................... 21
Rules and Laws: ................................................................................................................................... 21
Government Policies: .......................................................................................................................... 22
Fiscal / Monetary Policies: .................................................................................................................. 22
Tax Rates: ............................................................................................................................................ 22
Economic Factors: ................................................................................................................................... 22
Trends in Economy:............................................................................................................................. 22
Economic Stability: .............................................................................................................................. 22
Exchange Rates: .................................................................................................................................. 22
Consumer Confidence ......................................................................................................................... 22
Social Factors: ......................................................................................................................................... 23
Geographical Changes: ....................................................................................................................... 23
Consumer Attitudes: ........................................................................................................................... 23
Preferred Channels: ............................................................................................................................ 23
Technological Factors: ............................................................................................................................ 23
Technological Development: .............................................................................................................. 23
New Software: .................................................................................................................................... 23
Efficiency and Advancement:.............................................................................................................. 24
Changes in ways of transactions: ........................................................................................................ 24
Market Gap Analysis: .................................................................................................................................. 24
Global Dynamics Are Supportive: ........................................................................................................... 25
Devaluation‐ Exports friendly: ................................................................................................................ 26
Tax advantage: ........................................................................................................................................ 26
Possible freight subsidy: ......................................................................................................................... 26
Anti-dumping duty by South Africa: ....................................................................................................... 27
South Africa has imported 293% more cement YOY in July-19: ............................................................. 27
Changes in export to Afghanistan: .......................................................................................................... 28
Effects of decreasing export level to Afghanistan: ................................................................................. 28

2
 Comparison Between Sales: ................................................................................................................... 29
Overall Market Situation:........................................................................................................................ 30
Government Influence: ........................................................................................................................... 30
Domestic Sale and Consumption: ........................................................................................................... 31
Analysis of overall cement industry: ....................................................................................................... 32
Competitor Analysis: ................................................................................................................................... 33
Gharibwal Cement: ................................................................................................................................. 33
Maple Leaf: ............................................................................................................................................. 34
Pioneer Cement: ..................................................................................................................................... 34
Thatta Cement: ....................................................................................................................................... 34
Attock Cement: ....................................................................................................................................... 35
Lucky Cement: ......................................................................................................................................... 35
DG Khan Cement: .................................................................................................................................... 36
Power Cement: ....................................................................................................................................... 36
Bestway Cement: .................................................................................................................................... 37
Financial Plan: ............................................................................................................................................. 38
Production Capacity (In Tons) ................................................................................................................. 38
Flow Chart: .............................................................................................................................................. 38
Project Cost: ............................................................................................................................................ 40
Project Financing:.................................................................................................................................... 40
Financial Analysis & Key Assumptions: ................................................................................................... 40
Land and Building:................................................................................................................................... 41
Furniture and Fixture: ............................................................................................................................. 41
Deprecation Treatment: ......................................................................................................................... 41
Energy Source: ........................................................................................................................................ 42
Utilities: ................................................................................................................................................... 42
Project Investment Cost:......................................................................................................................... 43
Waste Heat Recovery Plant: ................................................................................................................... 43
Office Vehicles: ....................................................................................................................................... 44
Selling and Distribution Expenses: .......................................................................................................... 44
Miscellaneous expenses: ........................................................................................................................ 44
Accounts Receivables:............................................................................................................................. 44

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 Taxation: ................................................................................................................................................. 44
Liquidity and Financial Capital Structure: ............................................................................................... 44
Liquidity Strategy: ................................................................................................................................... 45
Financial Arrangements: ......................................................................................................................... 45
Project Economics: .................................................................................................................................. 45
Project Economics: .................................................................................................................................. 46
Production Capacity: ............................................................................................................................... 47
Important Assumptions: ......................................................................................................................... 47
Profit and Loss Statement: ...................................................................................................................... 48
Balance Sheet:......................................................................................................................................... 49
CASH FLOW STATEMENT: ....................................................................................................................... 50
Financial Assumptions: ........................................................................................................................... 51
Ratio Analysis: ......................................................................................................................................... 52
Profitability Ratios:.............................................................................................................................. 53
Liquidity Ratios: ................................................................................................................................... 53
Investment / Market Ratios: ............................................................................................................... 54
Capital Structure Ratios: ..................................................................................................................... 54
Activity / Turnover Ratios: .................................................................................................................. 54
Conclusion: .................................................................................................................................................. 55

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CH-1: PURPOSE OF THE STUDY
This report has been prepared by the team of University of Management Students Hassan
Asghar, Awais Amjad, Hamza Uz Zaman, Hasnain Wazir Ali, Muhammad Awais. Because of the
final project assigned to us regarding “The scope for a Feasibility report for the installation of
new cement plant for Cherat Cement Ltd”, the plant is located near village Lakrai, District
Nowshera, Khyber Pakhtunkhwa”.

Currently the Pakistan’s Cement Industry is doing well in domestic market as well as in
international market. Despite working in a stiff regulatory environment provided by
government, cement industry’s exports and locale sales have increased keeping in view the
decline in sales from India and Afghanistan.

Cherat cement wants to install a new plant with latest technologies and also to increase its
production. Commercial production of Line-III from plant 1 with a clinker capacity of more than
6,700 tons per day along with WHR. New plant will further increase the production for future
purposes.

We propose urgent installation of new cement plant with 3 million tons of production p.a
capacity (1.5 million tons *2 lines) at village Lakrai, District Nowshera, Khyber Pakhtunkhwa.
This is already located on fair infrastructure suiting the needs of a cement company and its
deliveries.

Concerning the cement production of cement industry forecast of 60 million tons for the year
2019-20 and up to 72.8 million tons in few years. We consider this a little conservative taking
into consideration looking at the recent development in CPEC project and other aspects of the
country, as well as cement industry has open up to new exporting African and Arab countries.

We propose up to date process and equipment in the design utilizing an automatic control
system both for processing plant and cement quality control equipment and energy and
industrial water saving systems.

5
Training of engineers and operators for new plant will be an important task in the new project.
Since the company has to recruit new employees for the new plant and most of them will be
fresh graduates. Training program will be discussed in the coming chapters.

Cement Industry of Pakistan:

Cement industry is one of the most important segments of industrial sector that is playing a
vital role in the social and economic development of Pakistan. Cement companies not only
require large investment in terms of infrastructure but also they need favorable locations. The
greater part of the bond organizations was found near the locales that are rich in lime stone,
iron ore, clay etc. Cement companies are utilizing their maximum capacity to meet the high
demand because of several industrial and commercial construction projects. Cement industry
of Pakistan has reported rapid progress since autonomy. In 1947 just four concrete units were
working in West Pakistan. The all out creation limit of these units was around a large portion of
a million tons for each annum. On the other hand, demand during the same period was
estimated over a million tones. If current production capacity of cement industry is analyzed in
Pakistan, it reflects the tremendous growth. In financial year 2011, the total production of
Pakistan’s cement industry was 44.7 million tones. According to literature, in Pakistan the
cement industry is working since a long when not exactly and half million tones for each annum
limit of products was observed.

Since day of independence, the concrete business in Pakistan has made considerable progress
when a large portion of a million tones for every annum creation limit was watched. At that
time, surpassed 10 million tones for each annum because of foundation of new assembling
offices and extension by the current units. Privatization and successful value decontrol in 1991-
92 proclaimed another time wherein the business has landed at a level where surplus age
resulting to fulfilling neighborhood need is typical in 1997.

The strong business in Pakistan faces two genuine risks: finish of units reliant on wet method,
and poor compensation rendering the units unequipped for responsibility redesigning due to
growing expense of intensity, warmer oil and imported claim to fame paper used for bond

6
squeezing. The cost of warmer oil alone has extended by about 100% over the latest 15 months
alone. With the expansion in radiator oil the increase in power obligation has moreover ended
up being certain. Bond industry of Pakistan is one of the major and critical endeavors
contributing in the economy of the country. There are basically more than 25 little and
tremendous solid associations are working in the business, they are conveying different
collections of bonds like ordinary dim Portland, white, slag and sulfate.

The competition in the sector is not very perfect, it is almost like an oligopoly in its nature
because the product is of a homogeneous nature and all the companies are producing the same
composition. There is an all-out number of units of 25, of which 4 are individuals from the open
area, while the staying 21 units have a place with the private division. Two of the four open
division units needed to shut down because of exceptional challenge and high generation costs.
Concrete plants are found in every one of the areas of Pakistan. The cement industry
distributed between two areas, one is from the north and the other from the south, the
northern region concealments almost 85% of the total production and the boring is covered by
the southern region.

Currently, the Pakistani cement industry has the capacity to export to neighboring countries
such as India, the United States, Afghanistan, Iraq and the Russian states. Cement exports
recorded sound improvement of 65%, to in excess of 6 million tons during the 7 months of the
current money related year, generally on account of the extension in overall premium. Fares
can arrive at 11 million tons and win about $ 700 million out of 2008-09. The moderate
development exercises in the nation during the period seriously traded off the interior closeout
of concrete, which spoke to a 15% drop, to 10.77 million tons contrasted with the 12.59 million
tons of the last monetary year.

In the mid-1990s there was an extreme lack of ties in the nation, especially in the north. The
investigations were unable to keep pace with the offer and Pakistan had to continue to deliver
concrete results. Bringing bonuses is an expensive problem. Since this is an important item,
transportation and transport costs are generally extravagant. Due to the lack and significant
cost of imports, bond costs in the mid-1990s were high. In any case, interest in bonds was

7
developing rapidly (with a normality of 8% every year). Furthermore, the economy seemed to
be heading towards a period of solid development. There were remote companies, important
initiatives to improve the foundations were organized, numerous creators of autonomous
vitality increased and the population continued to develop relentlessly. The GDP growth rate
was estimated at 6.5% and the population development at 3.2%. In this way, there seemed to
be a growing interest in bonds. Since it was accepted that the economy would have developed
fundamentally and that there would have been a strong interest in bonds, a large number of
current facilities (Cherat, DG Khan, Maple Leaf, Pakland, DhadaBhoy, AC Wah and Kohat) have
completely expanded their capacity. In the mid-1990s, five new private sector offices were
created to meet normal future needs: Pioneer (1994), Lucky (1996), Askari (1997), Fauji (1997)
and Bestway (1998). As the interest was greater in the north, these five new bond plants were
introduced in what the All-Pakistan Cement Manufacturers Association (APCMA) calls the
"North Zone". The concrete division in Pakistan was; Following these lines, prepared to meet
the normal needs.

CH-2: Introduction to Cherat Cement

Cherat Cement Company Limited was established in 1981. Its primary movement is the
creation, promoting and clearance of common Portland concrete. The organization is among
the pioneers of the bond business in Pakistan and is the number 1 concrete in its district. The
organization's yearly introduced limit is around 2.4 million tons. The plant is situated in the
town of Lakrai, in the area of Nowshera, in the territory of Khyber Pakhtunkhwa (KPK). On
account of the land position of the plant, it is in a perfect situation to fare bond to Afghanistan,
just as to address the issues of the nearby market in KPK, FATA, Punjab and Azad Kashmir. The
organization is enrolled in Pakistan Stock Exchange Limited and furthermore has ISO 9001 and
14001 accreditations. CCCL is introducing the third bond line in its present situation with a
yearly clinker limit of 2.1 million tons.

The Cherat Cement strategy is to remain the market leader, as they have the largest cement
producer in Pakistan. Its strategy is to be a leader in the domestic market and in exports
through the competitive advantage of prices and quality products with a high level of consumer

8
satisfaction. The technology and the strategy they are using is one of the best, which makes it
the largest exporter to Pakistan in 2005, and is still trying to gain a larger share of exports. They
are using the dry procedure which is almost 70%; They are also using gas engines as a reciprocal
of the furnace oil to reduce costs. Today, the energy crisis is one of the great challenges for the
company to completely fill the demand and supply models. Their strategy is also to reduce
transport costs because in the last few years they have faced the enormous costs of this
category, therefore, to obtain greater price competitiveness. They also have a great interest in
responsibilities and social development.

Cherat Cement Company Limited is an organization of the Ghulam Farooque gathering (GFG).
Its primary business movement is the generation, advertising and clearance of conventional
Portland bond with the exchange name "Cherat". The association is among the pioneers of the
solid business in Pakistan and is the number 1 bond in its region. Quality is our business;
Therefore, there are no quality administration responsibilities. The plant is situated in the town
of Lakrai, in the area of Nowshera, in the territory of Khyber Pakhtunkhwa (KPK).

Because of plant's topographical position, it is in a perfect situation to fare concrete to

Afghanistan, just as to address the issues of the nearby market in KPK, FATA, Punjab and Azad
Kashmir. The organization is enlisted with the Pakistan Stock Exchange and furthermore has ISO
9001 and 14001 confirmations. The Company's yearly introduced limit presently surpasses 4.5
million tons of concrete. The Company's third generation line wound up operational in January
2019. In light of the developing interest for concrete, the Company has effectively introduced
two continuous creation lines.

Cherat Cement Financial Status:

Cement sector plays a vital role for the sustainable economic growth of a country. Cement is
only used as an important material in construction projects but also as an input for various
industries. It has been empirically proved in many studies that financial leverage affects the
financial performance and value of the firm. Under favorable conditions, leverage and return
are positively related that ultimately leads to value maximization and the long term sustainable
growth of the firm. It has been found during the fiscal year from 30 June 2019, the Cherat

9
Cement Company limited revenues raised by 10 % to PKR 15.86 B with Net income decreased
by 17 % to PKR 1.76 B. Therefore, the Revenues reflect an increase in demand for the company
products and services as per market condition. On the other hand, Dividend per share
decreased by PKR 5.00 to PKR 1.00. Similarly, the earning per share was observed from PKR
12.07 to PKR 0.98.

Literature Review or Background:

The cement business has assumed a central job in the financial advancement of the nation. The
business is contributing with Rs. 30 billion every year for the National Treasury as uncommon
charges and different duties and furthermore included around Rs. 100 billion to the nation's
GDP every year. The business offers direct/roundabout openings for work to more than one
lakh of individuals. The complete interest in the concrete segment right now surpasses Rs. 160
billion and will presumably go past Rs. 200 billion by 2010. Sadly, regardless of the phenomenal
development in concrete interest, the industry is right now unfit to create sufficient edges
because of the low degree of bond cost.

Pakistan: Strategic Location:

Pakistan has a key imperative circumstance in South Asia and offers an edge with India in the
east, Afghanistan and Iran in the west, China in the north and the Arabian Sea in the south. The
country covers a zone of 803,940 km2 and is isolated into four zones or states: Sind,
Balochistan, Punjab and north-western edge. The masses is 151 million. There are 22 bond
plants with a yearly point of confinement of around 18.55 million tons. Most of the plants are
arranged in the north and south of the country, in a general sense as a result of proximity to
rough materials and markets.

They will when all is said in done use the latest dry method advancement. Starting not very far
in the past, the intrigue was around 11 million tons stood out from a point of confinement of 18
million tons, yet things have changed starting late. The limit in the north is 13.63 million tons
contrasted with the south, where it is 4.92 million. There are in excess of 22 concrete
production lines working in Pakistan. A large portion of them are recorded or recorded on the
Karachi stock trade. The bond business mirrors a blast pattern for the year 2007-2008. The

10
concrete division has demonstrated a slight reduction in KSE because of crisis news and political
shakiness in Pakistan. The banking and broadcast communications division indicated peripheral
execution after the bond segment.

Cement Sector: Current Scenario:

After an extensive stretch, when the bond part has stayed in threat of termination, Pakistan is
seeing some recuperation over the most recent two years. This industry, which quickly
extended its creation limit in the principal half of the 1990s, has confronted genuine limit use
issues since 1995 because of the low GDP development rate in Pakistan's economy. Somewhere
in the range of 1995 and 2000, the development sought after in the concrete segment was a
long way from its yearly development pace of 8% every year because of the macroeconomic
precariousness that happened after 1993.

Luckily, the activities taken by President Pervez Musharraf and by Mr. Shaukat Aziz during his
residency as account pastor to address the auxiliary issues in the Pakistani economy have
started to hold up under natural product. Macroeconomic security has prompted a significant
decrease in monetary shortfalls, making assets for open spending accessible once more. In the
course of recent years, the open segment advancement program has extraordinarily improved
and this has harmonized with expanded private division bond request to an enormous degree
for development exercises in the lodging area. Request development over the most recent two
years has been around 20% on a yearly premise and for the current monetary year, the industry
will arrive at a limit use of over 90%. Request was likewise determined by the expansion in
amounts sent out to Afghanistan.

The current presented limit in the country is around 18.5 million tons with 4.5 million tons in
the southern domain and 14 million tons in the northern zone. Energized by the inconceivable
development in concrete interest over the most recent 2 years, most bond makers are
extending their creation limit and some green tasks are likewise in progress. This segment is
prepared for a phenomenal extension, which will go into creation in the following 3 years. The
limit improvement will most likely associate with 24 million tons for each year, which will
expand Pakistan's yearly introduced limit before the finish of the 2007-2008 monetary year to

11
42.5 million tons, which will situate the nation in a position decent regarding per capita
concrete utilization.

In any case, it is basic that the solid development of residential utilization by the general
population and private segment, reproduction endeavors in Afghanistan and fares of bond via
ocean concur, to assimilate the improvement underway that will be accessible both in the
North and in the North Zone Southerners Everything demonstrates that the GDP rate will
quicken further throughout the following couple of years, which looks good for the business.
Nonetheless, for any unexpected explanation, the development popular wavers, there might be
a sharp decrease in limit use that ought to be maintained a strategic distance from no matter
what.

The concrete business was one of only a handful couple of brilliant spots in the LSM division
during the 2006-07 financial year. Creation development quickened during the year, helped by
huge limit increments as of late, by a quickly growing national development part and solid fare
request. The expansion of limit in the bond business during financial year 2007 implied that
before the finish of June 2007 the business had a limit in abundance of around 7,000,000 tons.
Be that as it may, the possibilities of the area stay solid because of (1) the solid fare potential in
India, which will confront genuine inadequacies for at any rate the following two years; and (2)
local interest should increment with regards to expanded spending on open division
advancement, just as (3) nonstop reinforcing in the lodging segment.

The expansion in the costs of imported coal has significantly decreased the evaluated reserve
funds expected by bond makers, based on which the change procedure has been executed and
speculations of a large number of dollars have been produced using them. Costs of imported
coal have demonstrated a noteworthy increment since June/July 2003. A 100% expansion in the
costs of imported coal in the course of recent years has decreased the distinction in the
expense of delivering coal contrasted with oil by around 55%.

The Government undue strain to keep costs lower than those in different nations will
demonstrate counter-beneficial to the economy. A value level of Rs. 260 for every sack is by all
accounts a reasonable cost for the business, in spite of the fact that it will remain lower than

12
the predominant concrete costs in different nations. Another factor that influenced the
gainfulness of the concrete part is an expansion in the costs of imported coal. The cost of C&F
coal, which in the past was around $ 40 for a couple of years, has now expanded by 100% to
over $ 80 for each ton. The expense of fuel, which establishes about 30% of the expense of
concrete creation, has unequivocally impacted the expense of bond generation. Concrete is a
component of the basic need that is for the most part required for homes and foundation. This
is the reason in many nations concrete assessments are zero or immaterial. In Pakistan, be that
as it may, the charges on concrete are the most noteworthy.

The fundamental shopper of the bond business is the lodging part, which expends around 60%
of the complete concrete generation. The lodging segment is blasting since a portion of the
settlements are utilized for lodging, which has added to expanding the interest for bond in the
nation. Business banks, which are presently weighed down with liquidity, are finding that the
lodging part is a potential region for advances, after a fruitful examination in their car financing
plans. Until 1970, concrete plants were introduced with wet or semi-dry innovation forms,
while plants introduced after the 1980s depended on dry procedures. The dry procedure is in
any event 50 percent more vitality proficient than the wet procedure. As of now, 85 percent of
the introduced limit depends on the dry procedure.

The Cement business has profited a great deal by moving towards dry procedure,
establishment of electrostatic precipitators and pre-warmers, computerization of procedures
and establishment of online analyzer, which has brought about ecologically better and vitality
effective ventures. The generation of concrete is a profoundly vitality concentrated procedure.
Limestone, earth/shale and gypsum are utilized as crude materials in the creation procedure.
The crude material for concrete assembling is accessible in wealth in Pakistan. As contrasted
and twenty kinds of bonds created somewhere else on the planet, the concrete business in
Pakistan produces four.

After a delayed downturn, the Pakistani economy is developing quickly. Low loan fees, open
framework spending and private venture speculation have prompted a significant development
of the development segment. The concrete business, as result, has had two years of

13
extraordinary deals. As of now, the interest for bond in Pakistan is developing at 18% per
annum. Given that the mean development rate throughout the previous four decades is just
shy of 6%, the present rate is multiple times the recorded normal. Be that as it may, the past
may not be a decent indicator of things to come. Money related division changes, increment in
laborer settlements, higher government foundation spending, and monetary motivators for the
lodging segment will fill in as impetuses for higher development. Besides, fare to Afghanistan,
right now developing at 39%, is a moderately new and significant wellspring of income for the
business. The solid interest for concrete has obviously influenced the primary concern of all
bond organizations and urged the significant players to grow to fulfill future need. Yet, what is a
feasible long haul development rate? Also, what is the interest supply situation going to look
like later on.

The relationship between GDP development and interest for bond in Pakistan is powerless. This
has likely more to do with the nature of information than the genuine relationship.
Notwithstanding, knowledge from the Far East, proposes that bond utilization will in general
develop at 1.5 to 2.5 occasions that of GDP. In light of the furthest reaches of this exact proof,
and the normal GDP development pace of 7%, one could hypothesize that interest for concrete
ought to develop at near 17.5% per annum. In any case, there is an admonition to this story. To
start with, while government may have forceful advancement plans for the future, it might be
obliged in its spending if there is a monetary stun, for example, another oil value climb. Second,
land costs have multiplied, if not significantly increased, in the course of the most recent two
years, and this will significantly affect the buying intensity of the individual purchaser –
however it is probably not going to influence tall structure ventures to a similar degree. Third,
rising loan fees and proceeding with inflationary weight may affect GDP development and
compel the obtaining furthest reaches of customers. Last, and maybe most stressing, is the
conduct of banks over the most recent few years. Not just have they loaned to the private
division at incredibly forceful rates, in spite of rehashed alerts from SBP, different them hold
colossal PIB portfolios that, whenever set apart to advertise, may place these organizations in
genuine money related challenges. A harried budgetary division can undoubtedly prompt
inversion of increases made in the economy up until this point.

14
Ensuing to remaining a standard supplier of cement to Afghanistan for the last such
tremendous quantities of years, Pakistan has now entered the world market. Nonattendance of
concrete in India and solid excitement from North African nations, including Yemen, has
compelled three critical players in cling to further develop their creation constrains inside a
short timeframe of one year. Meanwhile, Pakistani exporters were sending out bond to Iraq
however because of intense port blockage, it stayed sporadic however there was incredible
interest for concrete after the war for reproduction work. In any case, concrete units in
northern territories of the nation kept on sustaining the customary Afghan market by providing
up to 2.5 million tons.

Impact On Budget:
The spending will positively affect the area because of bigger allotment to PSDP and
government's attention on structure framework (street system and little dams). Be that as it
may, bond request from PSDP is legitimately connected to genuine government spending on
super tasks where the work on uber ventures stays moderate and the legislature anyway has
not made any declaration in regards to the development of any super dam venture. The
Reduction in import obligation on imported extra parts from 25 percent to five percent will
improve concrete edges where extra parts speak to six to seven percent of absolute expense of
offers. This will likewise diminish the expense of BMR and de-bottlenecking of existing concrete
plants of numerous players.

Quickly developing in quickly developing markets, are what associations take a stab at;
however, as we have seen, the punishment is that they are typically net money clients - they
require venture. The purpose behind this is regularly in light of the fact that the development is
being 'purchased' by the high speculation, in the sensible desire that a high piece of the overall
industry will in the end transform into a sound interest in future benefits. Where it very well
may be applied, be that as it may, the market development rate says more regarding the brand
position than simply its income. It is a decent pointer of that market's quality, of its future
capability (of its 'development' as far as the market life-cycle), and furthermore of its engaging
quality to future contenders. The general objective of this positioning was to enable corporate

15
investigators to choose which of their specialty units to store, and how much; and which units
to sell. Managers should increase point of view from this examination that enabled them to
design with certainty to utilize cash produced by the money dairy animals to finance the stars
and, conceivably, the question marks.

As literature suggested that Cherat Cement always manage core business operational with
implementation of sustainability of business. The company is always trying to establish a strong
leadership position in the market as compare to other companies with the same products and
services. The company has strong grip for establish efficient business operational, effective
internal control as well as energy conservation in business model. The organization is proficient
to diminish its expense through cogenerating power by the squandered warmth. The company
has designed its plants hinges around the idea for encapsulating all the wasted heat from the
production unit and then used this heat to produce enough steam from boilers that eventually
runs the turbine engine for production electricity. Cherat cement is becoming now one of the
leading cement manufacturing brand in Pakistan and after successful its products and services,
Cherat cement has planned to open new plants to meet the customers’ needs and wants.

Marketing Plan:
Target Market:
The target market of Cherat Cement Ltd for this new product line is especially the Gwadar and
CPEC related area. People who want to build homes in new housing schemes and the
organizations which are setting up their businesses in that area. And as far as NPHS is
concerned, Govt. is also a target market of Cherat Cement Ltd. Some government houses are
also our target market. The local market is also in a huge demand of cement for building
houses. There is a demand of 5 lac houses per year which creates a good room for cement
manufacturers.

Market Segmentation:
Market Segmentation of Cherat Cement Ltd for this new plant is discussed below. Following are
the platforms, organization, people and all the other stuff which would be under the focus of
the company and they will be considered as potential target market.

16
Geographic Segmentation:
These are the geographies which will be the main focus of Cherat Cement’s new plant
● Gwadar
● Roads associated to CPEC
● New Housing Colonies in Balochistan
● New residential area in Punjab
● Export to Afghanistan

Demographical Segmentation:
These are the aspects of individuals who will be potential customers and focused target of our
company.
● Gender : Males
● Age : 30 years to 55 years
● Income : More than 1 Lac Rupees per month
● Occupation: Businessmen
● Nationality : Pakistani
● Family Size : Four persons or more

Firmographic Segmentation:
This segment shows that which firms and organizations would be our focus.
● SMEs
● Earning more than 1 Million per month
● Minimum 30 Employees
● Both local and foreign

Behavioral Segmentation:
It divides people according to behaviors. Consumptions and purchasing trends of different
groups. Following are the group of people who are our focus and potential customers.
● Tenants
● Middle Aged
● Money Savers
● Entrepreneurs

17
Psychographic Segmentation:
We have divided people in this segment according to their lifestyles, personalities and opinions.
● Middle Class and Uppers
● Spendthrifts
● Family persons
● Business Oriented

Marketing Strategies:
Cherat Cement Ltd is starting a new plant in which our main focus is CPEC and NPHS and our
other customers too. So we will be using two different marketing strategies for two different
scenarios.

Market Penetration:
Market Penetration strategy is the one in which an existing product is marketed in an existing
market. So Cherat Cement Ltd will be marketing in its existing markets i.e. old customers. This
plant is proposed because of low capacity and high demand. Therefore, old customers are to be
satisfied at first so market penetration strategy will have to be applied and proposed.

Market Development:
This strategy is applied when there is a new market and you are marketing for an existing
product. Cherat Cement will be marketing for its existing product i.e. cement in a new market
of Gwadar, CPEC and NPHS. So marketing strategies in a new market for an existing product,
Cherat Cement will need Market Development Strategies and planning.

Marketing Mix
Following are the four P’s of marketing.

Product:
Product is cement, which is produced by grinding of stones to fine powder of limestone and
clay. Then this powder is heated at a very high temperature i.e. 1450 degree Celsius in a kiln. It
is available in market by the name of Cherat Cement Company Ltd. One of the best cement in
the market, fine and high in quality. Used as a manufacturing product in buildings, dams and
roads etc.

18
Price:
Pricing strategy used for cement by Cherat Cement Company Ltd is Premium Pricing as the
demand of cement is increasing in the market. While using Premium Pricing it becomes easy to
give allowances and discounts, so Cherat will give discounts to those buyers who will buy in
bulk. This discount will be upto 20%. Normal payment period will be 30 to 60 days according to
the extent of buying. Credit policies will be different for local buyers and exporting parties.
Local buyers will get 30 day’s credit grant while international customers can get up-to 90 day’s
grant.

Place:
The old plant of CCL is located in Khyber Phukhtunkha. The new plant will be located in
Baluchistan. It would be easy and cheaper to sell cement to Gwadar and other buyers. The less
the distance will be, lesser the cost would be. Cement will be transported through trucks and
other heavy vehicles. This place would be helpful to export cement to Asian and other
Countries.

Promotion:
Promotion will be catered through publicity on TV, Print Media and Social Media. Some other
mediums will also use which are as follows:
● Sales Promotions
● Direct Marketing
● Public Relations

Market Analysis:
There are two kind market analyses. One is SWOT and other is PEST. SWOT analysis is the
intercompany analysis that what a business may face. It sometimes discusses the external
environment too. Whereas PEST analysis is the intra company industry analysis which covers
the conditions and factors which may affect the whole industry.

SWOT Analysis:
Strengths:
Raw Material of better quality is available at CCL. Technology available is advanced and efficient
with respect to the other companies in the market. Manufacturing plants are advanced, so the

19
production will be better of quality. The labor of this company is well-trained and skilled and
have complete knowhow of cement manufacturing and quality controls. Cement companies
have production which is maximum of their capacity because of some new changes politically
and geographically. The commencement of new housing companies and authorities causing
new colonies for residence has increased the demand of cement in the entire market, which is a
positive sign for the cement manufacturers. As Pakistan exports cement to other countries and
is considered as Asia’s largest cement exporter. Cement demand is thought to be better in
these cases.

Weaknesses:
Cement industry in Pakistan has formed an oligopoly inside it. In this case new entrants cannot
come in the market and the rates of cement cannot be based on the quality and other
differences. As Pakistan lacks in technology, especially the lack in technology related to raw
material. And cement is composed of very general raw materials like clay, lime stone etc. So it
narrows the way to advancement. As the cement plants are located at locations far away from
markets and colonies. So the transporting charges and freight expense is very large. At an
average it is nearly 15 percent of the retail price. It increases the overall cost and hence it
makes the cement expensive. These kinds of oligopolies in the markets decrease the degree of
customer satisfaction. They form a monopoly of a group of companies and the customer has no
choice but to buy from them on their rate and their quality.

Opportunities:
New government plan of Naya Pakistan Housing Scheme has increased the demand of cement
and it can be a great opportunity for the cement companies. China Pakistan Economic Corridor
and other housing plans and road plans related to CPEC are also driving the demand of the
cement in the market. If these things go without any obstacle, then the cement companies will
have great chance and the industry will work at boom. The conversion of the major energy
source for the plants from fuel to coal can reduce the cost of production. It can be a cause of
lower retail prices of cement. If the government work on Dams, then it will dramatically
increase the demand of cement and there will be a new era in the cement industry. Some new

20
laws and subsidies can boost the cement industry and allow the cheaper cement from
international market to enter in Pakistan and this cost difference can be beneficial for Pakistan.

Threats:
Government is failing in many sectors. If it fails in its new schemes and plans related to cement
then it will cause a negative relation in demand and supply. As the companies are opening new
manufacturing lines and plants, so if it does not go as anticipated, then cement industry will be
go through one of its worst conditions in the history of country. Increase in inflation rate is an
alarming situation for the overall economy of Pakistan. This drastic increase can cause decline
in all sectors. It will also effect badly to cement sector.
In the three monetary policies of current year, there is increase in the interest rate in the
country. It will too decrease the working level and capacity of the industry. The failure of
government schemes and increase in other negative rates can cause a decrease in the demand
of cement. This decrease in demand can destruct the structure of the companies and the entire
sector. Rainy seasons effect the supply and production of cement. This year it is raining more
than the average and there is still chances of more rain in coming days. Major component for
cement production is fuel. The increase in its price has increased many of the direct and
indirect costs to the cement manufacturers.

Pest Analysis:
Political Factors:
Political Uncertainty:
In Pakistan’s scenario, political uncertainty is a great problem which effects all sectors. Different
governments and their clashes and martial laws are the main reasons of the political instability.
It effects the cement industry too. Rapidly changing political scenarios harms the industries.
Every government have different priorities.

Rules and Laws:

The laws and rules by the government which effects the cement industry play vital role in the
market’s situation. Better laws and tax exemptions and subsidies can lead to a better cement
sector while too much tax can reverse it.

21
Government Policies:
At different times, Governments have different policies according to the need of time.
Sometimes these policies improve the business condition while sometime it is a cause of
decline in cement sector. To deal with these situations cement manufacturers have made an
alliance APCMA (All Pakistan Cement Manufacturers Alliance) which works as the agent of
cement manufacturers to Govt.

Fiscal / Monetary Policies:

Both monetary and fiscal policies deal with macroeconomic situations. The interest rates and
relevant budgets are the pillars for the rise or fall of any sector in the economy.

Tax Rates:
Tax rates imposed on importers and exporters directly effects the cost and price of any good.
Same is the case with cement sector. If the tax rates are higher then there will be higher prices
and lower profit. Which isn’t a good indicator for businesses and customers too.

Economic Factors:
Trends in Economy:
Economic trends are changed with time. Different situations make different trends. As now
there is a trend of making new houses and buildings and after NPHS and CPEC commencement,
the demand of cement is increased. So these trends can make or destruct any sector.

Economic Stability:
Economic stability is a very important thing to run any business. In a country like Pakistan
where there is a high chance of economic instability every time. It is a very much important
factor. The importers and exporters are highly effected by the economic stability.

Exchange Rates:
As Pakistan exports and imports in cement with other countries. So exchange rates matter. As
lower is the exchange rate risk, as smoother is the business running.

Consumer Confidence
This factor correlates with the economic stability. If the economy will be stable and the prices
will not be higher the consumers’ confidence will be increased. Consumer confidence for

22
cement is highly dependent economic situations because it is an expensive item and people do
research before buying it.

Social Factors:
Geographical Changes:
After CPEC, there is a high demand of cement in Gwadar and different industries and housing
colonies have start working there which has risen the demand of cement. These kinds of
geographical changes and improvements are always a cause of higher demand and high velocity
of businesses.

Consumer Attitudes:
Consumer of different geographies and areas have different preferences. Some of the
preferences are made by their own particular conditions and environment. Cement is always
effected in economies which are developing. Pakistan has increased attitude toward cement
purchasing.

Preferred Channels:
The preferred channels of Pakistan to export cement are land and sea. Pakistan export cement
to Afghanistan by sea, Cement is exported to India by both channels i.e. land and sea. And
other countries import cement from Pakistan by sea.

Technological Factors:
Technological Development:
There are several developments in technologies. Pakistan has advanced technology for cement
production. But in other raw materials in which related to cement production have not that
kind of new and much needed new technology which however effects the industry at some
spots.

New Software:
Some international companies are selling cement on the new internet market through e-
business. Pakistan has to adopt this technology which is important and trending. It will decrease
the gap between the end consumer and the manufacturer.

23
Efficiency and Advancement:
Cement production is in tons and more than those. It is produced in a large amount and
quantity. So if it will be more efficient production then there will be lesser wastage and lesser
cost. Some technological advancements are the need of time which must be adopted by the
cement industry in Pakistan.

Changes in ways of transactions:

Import export and other local transactions must be done through new and cheap technological
ways which save the time and some cost too and are safer than routine transactions.

Market Gap Analysis:

When we talk about the cement market and its national demand in the country, the total
demand of cement in the country is gradually decreasing by every next minute. If we analyze
about the whole cement industry in Pakistan, then we get to know that we are in the same
economic condition like other sector in 2019. We can guess about the worst economic
condition of Pakistan cement industry form this incident that Power Cement has recently shut
down its older plant in Nooriabad due to lower demand and prices of cement. Presently, this
plan was contributing about 3150 tons of cement per day. According to the chairman of Power
Cement Nasim Baig, this plant was shut down due to incompetency and inefficiency in the
current economic conditions of Pakistan. Pakistan Cement industry is facing some additional
taxes imposed by the new government. In the resistance of these taxes, in the early days of
July-19, All Pakistan Dealers Association has recently suspended the sales of cement in the
country. According to the president of Association, these taxes are trade barriers in the country
and for the exports of cement in other countries. He badly accused the government and Federal
Board of Revenue of levying numerous taxes over cement production and sales.

Besides these all restrictions and protests, Pakistan’s overall exports has been increased by 40%
year-on-year to 6.14 Million tons in the current financial year. Whereas, in the last year on Jun-
18, the total exports of cement were 4.56 million tons. (PBS Report).

24
When we talk about domestic demand, we have an estimated value of an excess capacity of
25-29mn tons by 2023 for Pakistan’s cement industry. Which means the industry is expected to
have an advantage of exports market to get economies of scale.

Global Dynamics Are Supportive:

We include major cement markets and have a conclusion that:

● China’s shutdown of 220mn tons capacity now has been converted into a net cement
importer
● More sanctions on Iran may create supply gap in Afghanistan and Iraq
● Rising environmental concerns in developed countries may lead to clinker imports
● Border related tensions in Middle East are the main reason behind rising cement
demand in Qatar which leads the market towards an opportunity

Global dynamics are changing rapidly as the China factor (220mn tons of cement production is
reduced by China due to environmental issues), Iran sanctions, continuously rising
environmental issues in developed markets, political tensions in the Middle East, a high shift in
Vietnam export mix, etc. have played a main role in the recent rising in cement export of
Pakistan (up 44% YoY in 6MFY19). A major part of export has been clinker export to Bangladesh,
Sri Lanka and Kenya. The cement export potential can be measured through the fact that all
available clinker for export purposes to different countries has already been pre‐booked till
Mar’19.

25
Devaluation‐ Exports friendly:
While USD prices are very low, which is more than 33% devaluation in Pak Rupee since Nov-17,
which brings the export level prices lower than the local price retentions. However, clinker sales

in low margin may dominate the exports in near‐term.

The 33% devaluation from Nov-20117, has been proved to be a net positive game for the
players of healthy exports mix (specially in South region). And the more interesting thing is the
PKR‐based holdings on cement exports is now equal to (in some cases higher than) local
keeping prices (PKR335‐370/ bag export price). Although, we acknowledge lower rates on
overall exports due to higher proportion of low margin clinker exports, we are hoped for rising
global demand of Pakistan’s edge in quality and freight cost. That will be proved to be a
beneficial over medium term because it will allow an opportunity for Pakistani exporters to
charge higher premium.

Tax advantage:
The tax applicable on exports is only 1% of total turnover as compared to 29% corporate tax
applicable on net profit from local sales.

Possible freight subsidy:

We are hoping of announcement of a news about freight subsidy and/or exports duty in order
to support cement exports from the government in the next few months.

26
Anti-dumping duty by South Africa:
International Trade plays a vital role in the demand of a particular sector of a country. Cement
sector of Pakistan has also been affected by the export rules and regulation in International
Trade. Pakistan is facing anti-dumping duty by South Africa since couple of years regarding
cement exports. Pakistan’s cement exports have fell down to $100M-150M to South Africa
which was $700M a couple of years ago. However, when the South African Delegation have
visited Pakistan and met with Karachi Chamber of Commerce & Industry, they said that they are
trying their best to resolve this issue and Pakistan’s Ministry of Commerce has already sent a
team to resolve this issue and waive the anti-dumping duty from cement imports in South
Africa.

Anti-dumping duty on Pakistani Cement by South Africa was the main reason for decreasing the
exports level of Pakistani cement. Chairman of PSABF has told that they are about to establish a
trade center in South Africa by the end of Dec-19. This trade center will be used as exhibition af
sample products and services of Pakistani exporters in South Africa along with the information
related to contact of vendor or exporter. This will be proved as a helpful tool to present and
market the Pakistani product in South Africa. Not only in Africa, but also all the African states
are accessible.

South Africa has imported 293% more cement YOY in July-19:

South Africa has imported 0.1Mt cement in July-2019, approx. 293% more than in July 2018.
The AGP (Algeria Press Service) has reported the total value of July-19’s imports were
US$4.85m. This shows a decrease from the June-19’s total value of US$6.73 of 29%. In the
month of June and July, Vietnam has contributed well in increasing the import figure which was
notably absent from two months. If we accumulated all the imports of South Africa in the first 7
months of 2019, these are 0.6Mt of cement which costs $29.6m in total.

If we look up in the internal economic conditions in South Africa for cement production and its
local demand it shows us the lower prices are being flown in the domestic demand. Njobo
Lekula (MD of PPC) that the prices are insanely low for the local producers, where a 18Mt is a
total capacity is facing a local demand of 13Mt per year. In august, South Africa’s major cement

27
producers have submitted their application to tighten the cement standards to reduce the
import in the country.

Changes in export to Afghanistan:

When we talk about Afghanistan exports, there also have a disappointed figure regarding
cement exports. Cement exports to Afghanistan has declined by 24% in first eight months of
current year when compare to the last year where it was about 48% in the financial year of
2018. We blame different reasons for declining situations in exports of cement to Afghanistan
but one main reason we noticed is the trading contract of Afghanistan with Iran. Afghanistan is
importing a larger scale of cement production from Iran and that’s the reason behind the
declining stage of Pakistani Cement exports towards Afghanistan. Afghanistan is trading with
other countries. The Cement Manufacturers and Exports Association has urged the government
that they should take measures and cut the local production cost and put the anti-dumping
tariff over Iranian cement imports.

Effects of decreasing export level to Afghanistan:

28
Due to decreasing level of cement exports to Afghanistan, Punjab and KPK regions have
suffered a lot. The exports level from these two regions has declined by 16% in exports when
we compare the first nine month of the financial year 2018-19 to the previous financial year.

Most of the companies in cement sector are facing a falling percentage of revenue as compared
to last year. Cement industry wants to be added some more steps to avoid the reduction in the
cement exports.

Comparison Between Sales:

If we compare the total sales of Maple Leaf Cement and Cherat Cement in the last nine months,
then we will know about the overall progress of both companies. Some exact figures are posted
by Pakistan Bureau of Statistics that sales of Maple leaf have been fell down by almost 5% as
compared to the last year in the same period. The actual figures are 78.8m US dollars which
were 136m US dollars in the last year.

If we compare the net profit of both companies then we find that in the 3rd quarter of 2019, net
profit of Maple Leaf has fell down by almost 45% after tax. Whereas, the net profit of Cherat
Cement is slightly grown up by 25% in the nine months till March 2019. This shows that market
is still responding well to the cement industry, not likely as earlier but still its bearable.

29
Overall Market Situation:
Here we can see that the overall market in Pakistan is continuously going down by time to time
due to multiple factors. Mostly the instability of government and the unfavorable situation for
the business for the domestic investors and the foreign investors. Foreign investors are showing
a little bit hesitation to invest in Pakistan because investors always want a longer picture of
future with the stability of their business under the current situations. Unfortunately, in
Pakistan, we are unable to create a favorable environment for the foreign investors in order to
have their business to be grown up faster.

When we get more insights about the reduction in export of cement to Afghanistan, we’d come
to know that Afghanistan is importing more cement form Iran due to the devaluation of Iranian
currency due to the sanctions imposed by United States. The spokesperson of Afghan’s
Chamber of Commerce has said that we are importing more cement from Iran rather than
Pakistan due Iranian currency devaluation. He added that people of Afghanistan prefer the
Iranian cement over Pakistanis keeping in view of quality considerations.

Government Influence:
In 2018, the PML(N) government has spent a lot of money in construction of roads and streets
due to the preparation of next election campaign. Due to this development spending, a lot a
demand for cement was created by the government. Construction of new roads and repairing
the existing roads for every upcoming election are shown by the PMLN government to get a
precious vote from the fool ones. This kind of politics is creating a seasonal demand for the
cement industry.

Now, in this government, another new demand for the public development purpose is going to
be started soon. Newly elected Prime Minister of Pakistan wants to start a housing scheme with
a lower cost for the lower and middle class families. Due to delay in this scheme, domestic
demand has dropped down. No development spending and lower economic growth is the main
reason behind the lower domestic demand for cement in Pakistan.

Besides all the situations discussed above, still there is a greater chance for rising the domestic
demand and exports. Prime Minister’s Naya Pakistan Housing Scheme is the 2 nd main reason

30
behind the domestic demand for cement in Pakistan. The 1 st will remain for the CPEC
construction. The current government is not showing that much interest in CPEC project which
should be done. However, the overall demand of cement has declined by 10 to 15 percent in
the current fiscal year as compared to last year.

Domestic Sale and Consumption:

In march 2018, domestic sales were risen due to the urgency in completing the pending
projects before the end of the fiscal year and their government.

But, after that the domestic demand was not according to the expectations of investors and
cement producers in the country. According to APCMA (All Pakistan Cement Manufacturers
Association), the overall domestic demand was dropped down to 3.858m tons in Mar-19 from
4.26m of tons in the same period last year.

Whereas, the consumption in northern areas also continued to decline to 3.071m tons in Mar-
19 from 3.543m of tons in the same period of the last year. But, the sales from the southern
part of the Pakistan were stood at the same level that is 0.787m tons in last year but in mar-
2019 it slightly declined to 0.717m tons. Continuing the same level of domestic demand in
southern part, from the same region has also increased by 15.9% in the first nine months of
current fiscal year as compared to the same period of last year.

But, the worst thing for the domestic demand is that the northern region sales have been
dropped down by 10% in the past fourteen months. On the other hand, in the southern region,
the local mills have increased their sales by 15.7% form 5.426m tons to 6.248m tons in the last
nine months.

The above situation depicts that the northern region is facing a critical shortage of demand in
the domestic market. No development spending is being done in the northern areas. But, in
southern areas more cement is being produced and sold in the local market by the local mills
producing the cement in the southern region.

31
Analysis of overall cement industry:
If we analyze the current economic situation for cement industry, then we will see that there
are many reasons due to which the cement industry is under pressure during the ongoing fiscal
year. For example, the anti-dumping duty imposed by South Africa, due to which a huge
amount of exports is being affected. Then, Afghanistan is preferring Iranian cement over
Pakistani cement due
to these two main
reasons, the firs one
is that Iranian
cement is costing
lower than the
Pakistani cement due
to the devaluation of
Iranian currency and
the Afghani
constructors are demanding Iranian cement rather than Pakistani cement due to quality
reasons. The other main reason is that the development expenditures are declined by 40% as
compared to last year. However, we’re hoping for the best in future over building five million
low cost housing scheme will surge the demand domestically soon. Chairman of APCMA said
that the government should start this project as soon as possible because it is the only chance
and hope to increase the domestic demand of cement in Pakistan.

As we have earlier discuss about the future construction programs of the current government
and how keen is he to provide low cost houses to the poor and middle class families. Prime
Minister Imran Khan is very conscious to build 5 million low cost houses in the country as soon
as possible. For this purpose, our domestic demand will be boost up with a very high
percentage in that period of construction of new houses. According to a rough idea, the overall
domestic demand of cement will be increases by 16 to 17% with this new project. This is the
only way to increase the sales for all the production units of different companies.

32
Currently, this government hasn’t done any development spending in the country but there will
be an extra-ordinary spending in the country when the NPHS (Naya Pakistan Housing Scheme)
for construction of 5 million houses in the country will be started. It is expected to be started by
next year (2020).

Competitor Analysis:
Pakistan's cement industry is about to face many critical challenges in 2019 due to the flatness
in the domestic demand as compared to the domestic demand in FY2018, high markup rates in
FY2019, price competition in the country and currency devaluation, etc.

According to a report released by Spectrum Securities Ltd. named 'Investment Strategy 2019',
after extraordinary sales growth (13.8 per cent YoY) in cement sales (including domestic and
export) during FY18, the overall domestic demand of cement expected to have the same flattish
growth in FY19. It is only due to higher growth rate of FY18 which is being used as a base year
growth, reduction in development spending by the Public Sector Development Program (PSDP)
and the too much higher markup rates which would be resulted in lower construction financing
(lower cement demand from private sector).

Moreover, industry experts predict that cement price will remain under pressure in the
northern region as Cherat Cement and Maple Leaf Cement expansion projects of 4.4Mt are
recently got online and started production of cement from those cement plants.

Gharibwal Cement:
Gharibwal Cement has accused reduced exports only due to the problems on the border of
Pakistan-Indian and increasing operating costs for a continuous reduction in its sales. Its net
sales are now fell down by 2.9% year-on-year to $72.3m in this year to 30 June 2019 from
$74.5m in the same period of time in 2018. Its cement exports fell by 11.5% to 1.68Mt from
1.89Mt. Its gross earnings before taxation, interest and depreciation has now been dropped by
6.5% to $18.7m from $20m.

The Gharibwal cement producer said that we are now trying to work on a new 0.15Mt clinker
silo which is in progress and it is expected to be completed by July 2020. The Gharibwal cement

33
company also operates a 2.1Mt/year integrated plant at the location of Ismailwal in Punjab
Province.

Maple Leaf:
Maple Leaf Cement’s net sales have decreased by 5% yoy to US$ 129 million in the first quarter
of 2019 from US$136 million in the same time period in 2018. Its net profit after decreased to
US$13.4 million from US$23.8 million.

When we talk about the expansion projects of Maple Leaf Cement, we come to know that it has
started a new production line having a capacity of 7300t/day in Iskanderabad plant. This
expansion will increase total production to 18,000t/day of this unit. This production line was
exported by Denmark’s FLSmidth. The total cost of the project was US$184 million. Commercial
production was started in the late April 2019 on the new line.

Pioneer Cement:
As per the news on 1st October 2019, the Maple Leaf cement’s sales have been decreased by 5
% in the first quarter as compared to the same period in the last year, Pioneer Cement’s sales
also dropped by 4% YOY to US$62 million in the current year to 30 June 2019 from US$64.5
million in the same period in last year. Pioneer’s costs and expenses has grown by 7% to US$3.4
million from US$3.2 million. Its net profit has also decreased to US$5 million from US$10.5
million. Pioneer Cement has a 2Mt/year plant at Chenki in Punjab.

Aly Khan, the chairman of Pioneer Cement has stated that the falling profit of the company is
due to the competition in prices and the rising prices in the raw material. Therefore, company’s
net profit has been decreasing continuously. Its net sales are also decreasing due to continuous
decline in the clinker sales. But, including all these growth rates, its sales volume has increases
by 9% from 1.4Mt to 1.5Mt.

Thatta Cement:
News received on 1st October 2019, Thatta Cement has stated that their net sales has been
dropped due to a steep rise in input costs and currency devaluation. Its net profit is fell by 40%
YOY basis to US$1.36 million in the current year upto 30th June 2019 from US$ 2.27 million in
the same time period of last year. Its distribution cost and sales cost has been increased to

34
more than tripled to US $1.4 million. Its net sales grew by 22% to US $22 million from US $18
million. Its total dispatches of cement and clinker has increased by 34% to 0.56Mt from 0.42Mt.

But, according to the news received in January 2019, Thatta Cement’s sales were increased by
35% to US $16.7 million in the 2nd half-year to 31 December 2018 from US $12.4 million in the
same period in 2017. Its cost of sales rose by 48% to US$12.5m from US$8.4m. Its profit for the
period fell by 6.5% to US$2.2m from US$2.3m.

Attock Cement:
The first and most important thing about Attock Cement is that it has recently commissioned its
new Basra Grinding Plant at Iraq. Its capacity is 0.9Mt per year. It has been started since April
2019. If we talk about the profit and its input cost including its operational expenses in the year,
we’d found that Attock Cement’s net profit dropped by 24% year-on-year to US $9.7 Million in
the 9 months as of March 2019 from US $12.9 Million in the same period in March-2018. Its
revenue has increased by 36% to US $114 Million from US $83.7 Million.

One more production line was started in January 2019 at Attock Cement’s Hub Plant in the
province Balochistgan has now operationalize. This production line has a capacity of 1.2Mt per
year and after this increment, Attock Cement’s total capacity is now increased to 3Mt per year
after operationalization of this new production line in the province of Balochistan at Hub Plant.

Total cost of this production line is US $120 million which was estimated in 2015. Loesche
Company then provide a cement mill project in 2017 from the HCRD (Hefei Cement Research
and Design Institute.

Lucky Cement:
Lucky Cement has handled the rising input costs by increasing export sales. Its gross revenue
has risen a little bit to US $420 million in the recent financial year as on 30 June 2019. Its net
profit decline by 13.9% YOY to US $65.2 million from US $75.8 million in the same period in
2018. Its cost of goods sold rose by 11% to US $190 million from US $211 million. Its cement
sales volumes dropped by 1.9% to 7.68Mt. However, its exports has risen by 60.8% to 1.83Mt.

35
The owner of Lucky Cement said that the new machinery has been shipped from China for the
integration of its new plant to be started in Iraq at Samawah in October-2019. Furthermore, a
power plant has also been ordered for this plant from Finland’s Wartsila. This plant will be used
for commercial production in the mid of 2020.

DG Khan Cement:
According to the facts of the previous financial year 2018-19, DG Khan’s revenue increased by
30% to US $215 million in the first 9 months upto 31st March 2019 from US $165 million in the
same time period in 2018. However, its net profit fell by nearly 50% to US $18.5 million from US
$35.1 million. Its cost of goods sold has increased by 55% in the same period.

DG Khan Cement wants to upgrade its integrated Hub cement plant in Balochistan. For this
purpose, DG Khan has made a contract with Sinoma Energy Conservation. This contract
includes 10MW of waste heat recovery unit along with the 30MW coal power plant. DG Khan
Cement has not disclosed any amount or any completion date for the said project.

Power Cement:
As all the cement producers are facing the decreasing percentage of net profit in 2019 as
compared to 2018. Power Cement also has faced a critical economic condition by shutting
down its older production lines. These production lines were shut down due to the economic
conditions of Pakistan. A massive increase in operating cost and falling prices are the main
reasons behind this blackout of the production lines at nooriabad plant.

This plant has a production capacity of 3150t per year from the lines which has shut down due
to the mentioned reasons. However, the chairman has stated that these lines were inefficient
to compete in the current economic conditions. The most important thing which must be
discuss here that Power Cement has recently installed a clinker production line with a capacity
of 2.46Mt per year shipped by Denmark. But, now the older production lines are no more
working for which this mega plant was installed at nooriabad. This new addition has ranked the
Power Cement to the largest clinker production plant with a capacity of 3.42Mt per year and
the cement capacity of 3.73Mt per year.

36
Bestway Cement:
Bestway Cement’s revenue increased slightly to US $421 million in the first 9 months upto 31st
March of 2019 from US $414 million in the same period of 2018. Its net profit has increased by
9.5% to US $67.4 million from US $61.5 million.

Bestway Cement has shown itself by taking measures for environmental changes following the
orders of Supreme Court of Pakistan about water storage and usage of cement companies in
2018. Supreme Court of Pakistan has also ordered for investigation against the chairman of DG
Khan cement and Bestway Cement in the matter of water usage. After keeping in mind the
above water situation upholds by Supreme Court of Pakistan, Bestway Cement has promoted
itself for the environmental measures taken by the company. Bestway has installed air-cooled
condensers at Chakwal and Kallar Kahar plant. Furthermore, rain-harvesting ponds have been
built by it. You can get an idea about its environmental measures that it has spent about US $14
million on measures for water conservation. Bestway Cement has declared that the company
has overcome the usage of ground water for the production of cement. Now the company is
using only 12% and 20% ground water for its total production from the two of its plants.
Bestway has also installed Waste Heat Recovery projects which have given the company about
45.5MW which is 28% of its total power needs.

37
Cement dispatches in Pakistan, 2012 - 2017. Source: All Pakistan Cement Manufacturers
Association.

Financial Plan:
This is the section where we will be providing information including profit and loss statement,
Balance sheet, and income statement, cash flow statement.

The company’s total production of cement in the year 2018-19 has been 4.5 million tons and
their production capacity is in excess of 3 million tons per annum. This new plant will add extra
3 million tons of cement production. Cherat cement is looking to reach new customers in
Pakistan and all over the world and that is why it is necessary for the company to install a new
plant worth of 4.5 billion rupees.

Production Capacity (In Tons)

Installed capacity per annum-Clinker 2,890,000

Installed capacity per annum-Cement 3,000,000

This is a new plant which will be able to produce around 3 million tons of cement annually with
the help of two lines, which can be upgraded to increase the production if needed in future.
This plant is also able to be attached with an extra line-3 for the production purposes as well.

Flow Chart:
Following is the flow chart for a cement plant.

38
Following are few companies from where we can obtain cement plants but it is upto CCCL that
to whom they will award the tender for this project. These are few companies who are
providing the plants producing 30 tons of cement per day to 15000 tons of cement per day.

The cement plant we are proposing will be able to produce 10,000 tpd of cement if works for
300 days in a year.

Henan Zhengzhou Mining Machinery Co., Ltd China

Tel：+86 18037866379
E-mail： [email protected]
Niir Project Consultancy services. India
106-E, Kamla Nagar,
New Delhi-110007, India.
+91-11-23843955, 23845654,
23845886, +91-9811043595
+91-8800733955
[email protected]

JAMCEM Consulting. UK
1 Tarragon Road, Maidstone,
Kent, ME16 0UR
UNITED KINGDOM
+44 203 405 1881
[email protected]

39
Project Cost:
Cherat Cement Company Ltd. Wants to install new cement plant with the production capacity
of 3 MTPA. The construction phase will cost 20 billion rupees with fixed investment of Rs.12.60
billion and working capital would be 7.4 billion rupees and will provide employment to 3000
people during construction phase and will provide direct employment to almost 1500 people
after construction of the plant. It will also provide the cascading employment to overall 10000
people, which will play an important role in the socio-economic growth of the region and
country. The company should finance its expansion projects through Equity, Borrowings and
management of its working capital to maintain a healthy mix between the sources of finance.

All the expenses will be bear by CCCL and it is their financial planner’s duty from where to
acquire the amount. Whether to acquire this amount through loan or personally funded.

Credit Ratings:

During the year 2018-19, Pakistan Credit Rating Agency (PACRA) has maintained the credit
rating of the Company at A in the long term loans and ‘A1 in the short term loans with a
positive outlook (2018: A & A1, stable outlook). This shows that the Company is in strong
position to cater its debts and meeting its liabilities in short and long terms.

Project Financing:

Description Details

Total Equity (10%) Rs. 2 billion

Bank Loan (90%) Rs. 18 billion

Financial Analysis & Key Assumptions:

Estimated project cost for the proposed “Cement Plant” has been estimated after the
discussions with industry stakeholders and experts. These projections are covering the cost of
land, machinery and equipment including office equipment, furniture & fixtures etc. The
specific assumption related to the individual cost of each component is given as below.

40
Land and Building:
For the proposed project, CCCL has to purchase some new land (2.5 acres of land) which will
incur the cost of 250 million rupees. Construction and renovation will cost 750 million rupees
which has been assumed after getting the information of that area, will be depreciated by 5%
each year using diminishing balance method.

Furniture and Fixture:

Provision has been set for the procurement of office and factory furniture, which is 100 million.
These would include tables, chairs, cupboards, desks and office stationary. The break-up of the
Furniture and Fixtures are as follows

Unit Cost Total Cost

Description Quantity
(Rs.) (Rs.)

Office tables and chairs 40 15000 600,000

Waiting Area Chairs 25 4500 112,500

Chairs for labors and workers 36 3500 126,000

Electric wiring and lighting 100 50000 5,000,000

Office Stationary - 41666 500,000

Total 6,338,500

Deprecation Treatment:
The treatment of deprecation is calculated as “diminishing balance method” at different rates
for different assets per annum. This method will also be able to provide accurate tax treatment.

● Plant and Machinery (10%)

● Building Construction and Renovation (5%)
● Vehicles (15%)

41
 ● Furniture and Fixtures etc. (15%)
● Machinery & Equipment (10%)

Energy Source:
To operate the plant and to provide cost efficiency we propose to install two Wartsila dual fuel
generators. Generators can be operated on fuel and gas also. These generators will be
amounting to 1,219 million rupees and will be able to produce 6.4 MW of electricity which will
be a significant cost cutting tactic.

Utilities:
Description Total Monthly Cost (Rs.) Total Annual Cost (Rs.)

Fuel 14,16,66,666 170,00,00,000

Gas 10,82,83,333 129,94,00,000

Telephone, Fax & Internet 50,000 6,00,000

Total 300,00,00,000

Cement Plant will be operated using electricity for production purposes. For this purpose new
generators will be installed and will require fuel to operate generators. Likewise, heavy vehicles
i.e. Fork lifters, trucks/dumpers, etc. would require heavy quantity of fuel. The cost of the
utilities including diesel, fuels and telephone is estimated to be around Rs. 3 billion per annum.
Below is the approximated cost of utilities.

42
Project Investment Cost:
Following is the fixed and working capital requirements which have been identified for the
operations of the proposed business.

Description Amount Rs.

Capital Cost
Plant Machinery 445,00,00,000
Land and Building 100,00,00,000
Furniture, Fixtures & Electronics 10,00,00,000
Heavy Machinery & Equipment 150,00,00,000
Office Vehicles 96,00,00,000
Office Equipment 4,00,00,000
Construction, renovation & Fixtures 200,00,00,000
Pre-operating Cost 100,00,00,000
Preliminary Expenses 35,00,00,000
Training Cost 20,00,00,000
Waste Heat Recovery Plant 100,00,00,000
Total Capital Cost 12,60,00,00,000
Working Capital
Raw Material inventory 160,00,00,000
Equipment Spare parts Inventory 60,00,00,000
Advance payment (rent, insurance) 40,00,00,000
Cash in Hand 340,00,00,000
Fuel Consumption 140,00,00,000
Total Working Capital 740,00,00,000
Total Project Cost 20,00,00,00,000

Waste Heat Recovery Plant:

WHR Plant will cost 1 billion rupees and will be bought and installed separately. WHR plant
reduces the cost of the company and will be effective reusing the exhausted heat which will
automatically reduce the fuel consumption. Its depreciation will be calculated at 10% per
annum on diminishing balance method.

43
Office Vehicles:
Different kinds of vehicles like Light vehicles and heavy vehicles will be needed during and after
the project. For this purpose, we have allocated 96 million rupees for this. Vehicle will be
depreciated at 15% with diminishing balance method.

Selling and Distribution Expenses:

To cater the selling cost we have assumed 2% of the annual sales as Selling and distribution
expenses. This allocation will cover the distribution, bulk supplies etc.

Miscellaneous expenses:
Miscellaneous expenses for running the business has been estimated Rs. 100, 00,000 and they
would increase by 10% each year.

Accounts Receivables:
After carefully studying the cement industry sales pattern, it is assumed that 70% of the sales
will be on cash while 30% will be on credit to the regular constructors or builders. This will be
added under the head of Accounts Receivables. Collection period will be assumed 60 days for
credit sales. After studying the sales pattern of the industry it is assumed that provision for bad
debts will be 2% of credit sales annually.

Taxation:
Provision for current tax is based in accordance with the provisions of Income Tax Ordinance,
2001. Although the Company made investment in plant and machinery for new cement plant
which will be eligible for tax credit under section 65B of the Income Tax Ordinance, 2001 (the
tax credit). The tax credit is in addition to tax exemption on profit and gains derived from New
Plant under clause 126L of Part I of the Second Schedule of the Income Tax Ordinance, 2001.
The management should take experts opinion for this issue whether they will be eligible for
both or for one of them.

Liquidity and Financial Capital Structure:

The Company can manage its capital structure and makes adjustment to it keeping in the view,
the changes in economic conditions. The company can maintain or adjust the capital structure
by adjusting the amount of dividend paid to shareholders, return capital to shareholders or
issue new shares. We propose that Long-term debts should only be utilized to finance the

44
capital expenditures. We also propose that for working capital requirements, short-term
financings should be availed to adequately maintain the debt and equity ratio throughout the
year. Enhanced sales in the year 2018-19 have supported the liquidity position of the Company.
Company’s current years, current ratio is 1.31 which is reflecting the company’s strong liquidity
position.

Liquidity Strategy:
The company should adopt a prudent strategy to maintain its strong liquidity position. For this
purpose, the company should finance all of its capital expenditure through long-term financing
facilities. There are different financing schemes provided by different banks, company can
choose among them. In order to meet its capital expenditures, the company should make
arrangements with commercial banks in form of short-term financing. Looking at the reports of
the company, the company has good management history for obtaining loans and repaying
them.

Financial Arrangements:
The company has strong financing standing according to its reports it should have good
business relationship with all reputable banks and financial institutions. The company can easily
avail ample unutilized short-term financing facilities, under conventional and Islamic modes.

Project Economics:
During the year 2018-19 there was considerable slowdown in the economic activities of the
Country as the overall business environment of country remained challenging. Economic
measures taken by the government to correct the fiscal imbalances affected the performance
of the industrial sector. Reduction in PSDP outlays, tightening in monetary policy, currency
depreciation, and imposition of regulatory measures dampened the industrial activities in the
Country including construction, which reduced the demand for cement.

Cement remains one of the primary drivers and indicators of growth in the economy of the
Country in past years. After several years of impressive growth, cement industry recorded an
approximate growth of 2% only during the year 2018/19. While domestic dispatches declined

45
by almost 2%, exports recorded a remarkable growth of approximately 37% from last year. The
increase in exports is mostly due to rise in exports by sea (African countries).

In the recent reports by World Bank Pakistan has improved its overall ranking in ease of doing
business and jumped 28 places from 136th to 108. This shows that Pakistan’s government is
bringing positive measures for foreign investors as well as local businesses. So, keeping that in
mind this reform will also bring positive results in cement industry and future sales will
increase. As we have mentioned before that the cement production forecast is 60 million tons
for the year 2019-20 but looking at different reports and projects it will be higher than this. This
will automatically meet the demand of the cement in the Country. We have forecasted the
sales of CCCL for the first year of the production of the new plant. According to the forecasted
demand new plant will produce 2 million tons of cement in its first year (300 working days). This
will be 12.80 billion in rupees for its first year. This will be 66% of the total capacity of the new
plant.

Project Economics:
Description Details
Internal Rate of Return (IRR) 61.58%
Payback period (yrs) 1.83
Net Present Value (Rs.) 28,85,68,50,000

These are the given IRR, PBP and NPV of the proposed venture based on the estimated sales of
the plant in future. The estimated sales will be provided in the next table. Looking at the IRR of
the project, the project is highly attractive for investment purposes. The IRR is 61.58% which is
very much higher than the other investment rate of 13.25%. So this is a highly lucrative
investment.
Whereas this investment’s Payback Period is just 1.83 years so, this is another big indicator for
investing in this project. Net Present value is also positive. All the indicators for the investment
are strongly in favor of the project. So, this is a highly lucrative project for investors. Moreover

46
 Payback Period is so short that this will also give the company a big benefit while returning the
loans obtained during the project.
Following will be some critical factors for the success of the project.

● Contacts with Constructors/ Builders/ Companies/ Suppliers

● Contracts with the raw material suppliers

● Company’s active participation in Government and Public Tenders

● Enhanced Export Policy

● Target Market and Marketing Strategies

Production Capacity:
The production capacity of the new plant will be in excess to 3 million tons per annum but for
its first year of production it will be 2 million ton per annum which is 66% of the total capacity.
Utilization capacity is 66% which will increase by 5% per year for next five years. Sales in 2018-
19 have increased by 10% from the previous year but we have assumed that sales will increase
by 5% each year after the commencement of the new plant. We have set the price of one ton
cement as Rs. 6400 only. As this has been 6362 rupees in year 2018-19.

Important Assumptions:

GENERAL ASSUMPTIONS

YEARS 1 2 3 4 5

SALES 12,80,00,00,000 13,44,00,00,000 14,11,20,00,000 14,81,76,00,000 15,55,,84,80,000

Current
Interest 13.25% 13.25% 13.25% 13.25% 13.25%
Rate

Long-term
Interest 10.00% 10.00% 10.00% 10.00% 10.00%
Rate

47
Tax Rate 29.00% 29.00% 29.00% 29.00% 29.00%

Profit and Loss Statement:

Calculations
Profit and Loss Statement (in 000)*

Year 1 Year 2 Year 3 Year 4 Year 5

Revenue 12,800,000 13,440,000 14,112,000 14,817,600 15,558,480

Cost of sales 10,240,000 10,752,000 11,289,600 11,854,080 12,446,784
Gross Profit 2,560,000 2,688,000 2,822,400 2,963,520 3,111,696
General Selling & Admin Expenses
Administration
256,000 268,800 282,240 296,352 311,170
Expenses

Administration
12,800 13,440 14,112 14,818 15,559
Benefit Exp.

Generators
6,400 6,720 7,056 7,409 7,779
Maintenance

Travelling Expense 8,960 9,408 9,878 10,372 10,891

Communication
600 600 630 630 661
Expense

Off. Vehicle running

46,080 48,384 50,803 53,343 56,011
Expense

Office Expenses 10,880 10,440 10,112 10,818 10,559

Promotional Expense 384,000 403,200 282,240 296,352 311,170
Insurance Expense 102,400 100,800 98,784 96,314 93,350
Depreciation Expense 604,000 536,400 476,640 423,774 376,974
Bad Debt Expense 76,800 80,640 84,672 88,906 93,351
Miscellaneous
10,000 11,000 12,100 13,310 14,641
Expense
Subtotal 1,518,920 1,489,832 1,329,267 1,312,398 1,302,116
Operating Profit 1,041,080 1,198,168 1,493,133 1,651,122 1,809,580

48
 Gain/(loss) on sale of
- - - - -
vehicle

Earnings before
1,041,080 1,198,168 1,493,133 1,651,122 1,809,580
interest & tax
Earnings before Tax 1,041,080 1,198,168 1,493,133 1,651,122 1,809,580
Tax 315,262 359,450 447,940 495,337 542,874
Net profit/(loss) after
725,818 838,718 1,045,193 1,155,785 1,266,706
tax

Balance Sheet:
Calculations

BALANCE SHEET

YEAR 0 YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

(000*)
ASSETS
Current Assets
Cash & Bank 3,400,000 9,471,470 10,474,592 11,340,967 12,854,029 14,094,280
Accounts Receivables - 3,840,000 4,032,000 4,233,600 4,445,280 4,667,544

Finished Goods
- - - - - -
Inventory

Equipment spare part

600,000 680,340 770,168 870,605 982,904 1,108,466
inv.
Raw Material
1,600,000 2,052,800 2,589,368 3,225,201 3,978,663 4,871,516
Inventory
Pre-paid Insurance 400,000 320,000 240,000 160,000 80,000 80,000
Advance Fuel 1,400,000 1,120,000 840,000 560,800 280,000 280,000
Total Current Assets 7,400,000 17,484,610 18,946,128 20,391,173 22,620,876 25,101,806
Fixed Assets
Land & Building 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
Plant 4,450,000 4,005,000 3,604,500 3,244,050 2,919,645 2,627,680
WHR Plant 1,000,000 900,000 810,000 729,000 656,100 590,490

49
 Machinery &
1,500,000 1,350,000 1,215,000 1,093,500 984,150 885,735
Equipment
Construction,
Renovation and 2,000,000 1,900,000 1,805,000 1,714,750 1,543,275 1,466,111
Fixtures
Furniture & Fixtures 100,000 90,000 81,000 72,900 65,610 59,049
Office Vehicles 960,000 816,000 693,600 589,560 501,126 425,957
Office Equipment 40,000 40,000 40,000 40,000 40,000 40,000
Total Fixed Assets 11,050,000 10,101,000 9,249,100 8,483,760 7,709,906 7,095,022
Intangible Assets
Pre-operation Cost 1,000,000 800,000 600,000 400,000 200,000 -
Preliminary Expenses 350,000 280,000 210,000 140,000 70,000 -
Training Cost 200,000 160,000 120,000 80,000 40,000 -
Total Intangible
1,550,000 1,240,000 930,000 620,000 310,000 -
Assets
TOTAL ASSETS 20,000,000 28,825,610 29,125,228 29,494,933 30,640,782 32,196,828
Liabilities & Shareholder’s Equity
Current Liabilities
Accounts payable - 8,800,000 4,010,800 4,060,712 5,020,201 5,080,335
Total Current
- 8,800,000 4,010,800 4,060,712 5,020,201 5,080,335
Liabilities
Shareholder’s Equity
Paid-up Capital 20,000,000 20,025,610 25,114,428 25,434,221 25,620,581 27,116,493
Retained Earnings - - - - -
Total Equity 20,000,000 20,025,610 25,114,428 25,434,221 25,620,581 27,116,493
Total Capital &
20,000,000 28,825,610 29,125,228 29,494,933 30,640,782 32,196,828
Liability

CASH FLOW STATEMENT:

Calculations

CASH FLOW STATEMENT

YEAR 0 YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

Operating Activities
(000)*
Net Profit 735,610 838,818 1,050,193 1,155,785 1,266,706
ADD: Depreciation
949,000 851,900 765,340 688,117 619,169
Expense
Amortization of
200,000 200,000 200,000 200,000 200,000
pre-operating cost

50
 Amortization of
40,000 40,000 40,000 40,000 40,000
Training cost
Accounts Receivable -3,840,000 -4,032,000 -4,233,600 -4,445,280 -4,667,544
Equipment inventory -600,000 -80,340 -89,828 -100,437 -112,299 125,562-
Raw Material Inventory -1,600,000 -452,800 -536,568 -635,833 -753,462 -892,853
Advance Insurance
-400,000 -80,000 -80,000 -80,000 -80,000 -80,000
Premium
Accounts Payable 8,800,000 4,010,800 4,060,712 5,020,201 5,080,335
Cash Provided by
-2,600,000 6,271,470 1,203,122 1,066,375 1,713,062 1,440,251
Operations
Financing Activities
Issuance of Shares 100,000 - - - -
Cash used for Financing
20,000,000 - - - - -
Activity
Investing Activities
Capital Expenditure 14,000,000 - - - - -
Cash used for Investing
14,000,000 - - - - -
Activity

Net Cash 3,400,000 6,271,470 1,203,122 1,066,375 1,713,062 1,440,251

Cash brought forward 3,400,000 9,471,470 10,474,592 11,340,967 12,854,029

Cash available for
3,400,000 9,671,470 10,674,592 11,540,967 13,054,029 14,294,280
appropriation
Dividend 200,000 200,000 200,000 200,000 200,000
Cash Balance 3,400,000 9,471,470 10,474,592 11,340,967 12,854,029 14,094,280
Cash Carried Forward 3,400,000 9,471,470 10,474,592 11,340,967 12,854,029 14,094,280

Financial Assumptions:
ITEM Assumption(s)
Business/ Sales 5% per year
Increase in Cost of Elements 10% per year
Increase in Staff Salaries 10% per year
Increase in utilities 10% per year
Increase in Office Expenses 10% per year
Depreciation
Plant and machinery 10% per year (Diminishing Balance)
Construction & renovation 5% per year (Diminishing Balance)

51
 Vehicles 15% per year (Diminishing Balance)
Furniture & Fixtures 15% per year (Diminishing Balance)
Machinery & Equipment (spare parts) 10% per year (Diminishing Balance)

Ratio Analysis:
For five years

Year 1 Year 2 Year 3 Year 4 Year 5

Profitability ratios
Gross Profit Ratio (%) 20 20 20 20 20
Net Profit Before Tax to Sales (%) 8.20 8.91 10.58 11.14 11.63
Net Profit After Tax to Sales (%) 5.75 6.24 7.41 7.80 8.14
EBITDA margin to sales (%) 12.93 12.91 13.96 14.00 14.06
Operating Leverage Ratio (%) 0.92 1.07 1.12 1.25 1.33
Return on Equity (%) 2.55 2.88 3.54 3.77 3.93
Return on Capital Employed (%) 5.25 4.77 5.87 6.45 6.67

Liquidity Ratios
Current Ratio 1.98 4.72 5.02 4.51 4.94
Quick Ratio 1.51 3.62 3.84 3.45 3.69
Cash to Current Liabilities 1.08 2.61 2.79 2.56 2.77
Cash Flow from Operations to 0.49 0.09 0.16 0.20 0.19
sales

Investment/ Market Ratios

Earnings per Share (before tax) 10.41 11.62 12.31 12.95 13.14
Earnings per Share (after tax) 8.02 7.97 8.01 8.21 8.78
Price Earnings Ratio 24.93 25.09 24.96 24.36 22.78

52
Dividend Yield ratio 0.04 0.039 0.04 0.41 0.043
Dividend Payout Ratio 0.12 0.13 0.14 0.14 0.15
Dividend Cover Ratio 2.42 2.46 2.45 2.68 3.16

Capital Structure Ratios

Financial Leverage Ratio 0.44 0.16 0.16 0.20 0.19
Debt to Equity Ratio (%) 55.67 56.87 58.12 58.45 59.87

Activity/ Turnover Ratio

Total Assets Turnover Ratio 1.01 1.06 1.12 1.09 1.17
Fixed Assets Turnover Ratio 1.27 1.45 1.66 1.92 2.19
Inventory Turnover (Days) 33 30 33 26 28
Inventory Turnover (Times) 11 12 11 14 13
Debtor Turnover (Days) 40 37 36 35 34
Debtor Turnover (Times) 10 11 11 12 14
Creditor Turnover (Days) 19 22 22 23 24
Creditor Turnover (Times) 17 19 20 21 24
Operating Cycle 55 51 49 47 44

Profitability Ratios:
Profitability ratios of CCL are declining in the past and current years due to different reasons
and problems in the economy. Inflation and other triggers cause decline. But after the new
cement line installed, the trend seems to be different. All net and gross profits’ percentages are
seemed to have a rise in them.
Liquidity Ratios:
The Company’s efficient monetary and mechanical policies have caused a rise in the liquidity
ratios. After the installment of this plant there will be a sudden rise in its assets in the first 3

53
years. After that it will be consistent. This positive consistency shows a better future if the
conditions remains the same.
Investment / Market Ratios:
The uncertainty in the economic and political scenario lead to massive volatility in PSX and a fall
in the profitability of the Company. These effects are portrayed by these ratios as well.
However, the breakup values of these ratios shows the potential, strength, and growth of the
Cherat Cement Company. But the new plant’s ratio analysis depicts a rise in the ratios which is a
positive sign for the company if it goes to a new plant in the very next years.
Capital Structure Ratios:
In the beginning of the commencement and launching of the new plant, CCL will have to take
loan and the debt will increase rapidly. But with the time going on and business running
smoothly, the company will be able to use its own money too so the Leverage ratio will be
lowered down. The total value of debt will increase whether the company decrease the value of
loans taken every year.
Activity / Turnover Ratios:
These ratios show the assets will be increased as the stock will increase. There will be a positive
and increasing trend in the sales and assets in the coming years. Inventory turnover will
increase and these aspects will cause a rising essence in the turnover ratios.

Resources and References:

1. Pakistan Bureau of Statistics (pbs.gov.pk)
2. All Pakistan Cement Manufacturers Association (apcma.com)
3. Tradingeconomics.com
4. Dawn Newspaper
5. Cherat Cement Company Website (gfg.com.pk/ccl)
6. Zahir Burqi (Engineer at CCL)
7. Aaki Bahir (Marketing Officer at CCL)
8. Ahmed (Assistant Finance Manager, Head Office Maple Leaf)

54
Conclusion:
As seeing the ratios of the new plant and the other financial and marketing aspects in this
report. It is considered that this new plant will be a very beneficial decision of the company as it
will be a cause of very positive trends and will be profitable for the company. It will overall
assist the company’s financials and it is the current demand of the market. Almost all of the
other market players in cement industry have started a new line and are going for it in the near
future. In our opinion, there will be no wisdom in refusing this proposition.
When we take a look over figures of demand and supply in the country, this gives us the whole
picture of the current cement industry of Pakistan. This is the answer to the question that why
all the market players are being entered in starting a new plant or a line in their existing cement
plant. Although, this year was not so good for all the cement manufacturers because it was not
according to the expectation. The overall demand was declined in 2019 as compared to 2018.
In 2018, Government has taken too much project in line due to the sorter time they have left in
the next election. Cement demand in the country was so high in the middle of the last year.
But, after that it started declining and the new government hasn’t done any serious action for
China Pakistan Economic Corridor. Due to this northern sale was declined by 10% but the
southern areas have increased their sales by 15.7% in the last 12 months.
The above mentioned situation tells us that the northern regions have facing a shortage of
demand in cement industry but the southern areas are blooming well in this regard.
Local demand will increase in the next fiscal year, and this plant will take more than one year to
be operationalize. Till that time, the local and international demand will increase. The reasons
are CPEC Project and the Housing Schemes Program which is about to started by the newly
elected Prime Minister Mr. Imran Khan. For this purpose, he had two meetings with a biggest
investor and businessman of Egypt Naguib Sawiris in Pakistan. Naguib Sawiris has previously
invested billions of dollars in Pakistan’s telecom and real estate sectors. He was very interested
in investing the new scheme of PM Imran khan Naya Pakistan Housing Scheme. And reasons for
increasing demand in the international market are due to the new sanctions imposed on Iran
and South Africa has lifted ban on importing cement from Pakistan. Due to sanctions on Iran,
Afghanistan will import cement only from Pakistan. There will be a supply gap between Iran and

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Afghanistan. Also the china’s shutdown of 220 million of cement production will lead it to
import. Qatar is another main importer of cement in the middle east countries.
As I have discussed earlier in the above paragraph that the local demand has declined in the
current fiscal year, but the total exports of cement industry was increased by 40%. The total
value of cement exports was 6.14 mt as compared to 4.56 mt in last fiscal year. Exports are
dramatically increased in the current fiscal year. So, after 3 years, Pakistan will have an excess
capacity of 27-29 millions of tons in order to meet the export level which is increasing rapidly in
the coming years.
In view of the above facts and figures, CCL must start this project as soon as possible to
compete all the required demands of cement industry in the coming years.

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