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Industries Analysis
Cement Industry of Pakistan

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 CONTENTS
Introduction:..............................................................................................................................................3
Structure:...................................................................................................................................................3
Cement Companies:..................................................................................................................................3
Comaprision:.............................................................................................................................................3
Companies Information:...........................................................................................................................4
Bestway Cement:..................................................................................................................................4
CORPORATE MISSION:................................................................................................................4
List of Products: ...............................................................................................................................4
INTRODUCTION:...........................................................................................................................4
INDUSTRY OVERVIEW:...............................................................................................................5
PRODUCTION AND SALES:.........................................................................................................5
OPERATING HIGHLIGHTS:..........................................................................................................6
Fauji Cement:......................................................................................................................................16
INTRODUCTION:.........................................................................................................................16
OUR VISION:................................................................................................................................16
MISSION STATEMENT :.............................................................................................................16
OUR STRATEGIES:......................................................................................................................16
OUR VALUES:..............................................................................................................................16
MARKET OVERVIEW:................................................................................................................17
PRODUCTION REVIEW:.............................................................................................................18
FINANCIAL PERFORMANCE:...................................................................................................18
Cherat Cement:...................................................................................................................................25
VISION:..........................................................................................................................................25
MISSION:.......................................................................................................................................25
STRATEGIC OBJECTIVES:.........................................................................................................25
CORE VALUES:............................................................................................................................25
COMPANY INFORMATION:......................................................................................................25
OPERATING PERFORMANCE:..................................................................................................27
Conclusion:.............................................................................................................................................32

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Introduction:

Cement industry is indeed a highly important segment of industrial sector

that plays a pivotal role in
the socio-economic development. Though the cement industry in Pakistan
has witnessed its lows
and highs in recent past, it has recovered during the last couple of years
and is buoyant once again.

Structure:

A market is a group of buyers and sellers exchanging goods that are highly
substitutable for one
another. Markets are defined by demand conditions; they embody the zone
of consumer choice for
the goods.

Cement Companies:

1. Bestway Cement
2. Fauji Cement
3. Cherat Cement

Comaprision:

Comparision of these cement companies is made on the following basis.

 Production Capacity
 Financial Report
 Net Profit
 Contractor’s Survey
 Market Survey
 Growth per Annum
 Stakeholders

The companies got their position due to their mangment abilities.

3
Companies Information:
Bestway Cement:

VISION:

To Produce High Quality Cement At The Lowest Cost

CORPORATE MISSION:

• Bestway will consistently produce High Quality Cement.

• Bestway will endeavor to be the lowest cost producer.
• It is company’s aim to achieve 15% of the market share of North Zone from
present 12% by year 2008 and ultimately to 25% in the longer term.
• Bestway will continue to provide a high standard of customer service.
• In order to meet future expansion needs, Bestway will continue its policies
of staff training and development, promoting from within whenever
possible.
• Bestway appreciates it has responsibility towards the community within
which it operates. It will continue to set aside 2.5% of the net profit for
education and charitable purposes.

List of Products:

1. Ordinary Portland Cement

2. Sulphate Resistant Cement
3. Quick Setting Cement

For other types of cement, please contact our Marketing Department.

INTRODUCTION:

Bestway (Holdings) Limited of United Kingdom is the ultimate parent company of

the
Company.

In response to successive governments' efforts to attract foreign investment in

the country Bestway Group has invested heavily in Pakistan. Today, the Group is
the largest overseas Pakistani investor in the local economy with investments in
excess of US$ 1.0 billion. In just under a decade Bestway has emerged as the
second largest cement producer in the country with a capacity of 4.0 million
tonnes per annum. A further 2.0 million tonnes per annum is under construction
4
and will come online by the end of 2007.
In early 1995 when the Group decided to set up its first cement plant it faced
multiple challenges - mainly due to the absence of operating experience in
Pakistan. The macroeconomic situation was far from satisfactory due to lack of
fiscal and monetary stimulus; political instability etc. Even though Bestway had
initial difficulties it has thrived and continues to be bullish about Pakistan.

INDUSTRY OVERVIEW:

During the year under review, despatches of cement by the industry increased by
32% to
30.14 million tonnes as against 24.29 million tonnes for last year. The domestic
market
grew by 6.6% while exports recorded a healthy increase of 142%. Overall
capacity
utilisation for the industry stood at 78% for the year under review as against 81%
for last
year. The decline in capacity utilisation was mainly due to slower growth in
domestic
market and additional capacity coming online during the year.

PRODUCTION AND SALES:

Hattar
2008 2007 Increase/ %
Decrease
Cement production 1,166,737 1,170,392 (3,655) (0.3%)
Cement sales 1,164,540 1,163,161 1,379 0.12%

Chakwal
2008 2007 Increase/ %
Decrease
Cement production 1,453,523 1,119,117 334,406 30%
Cement sales 1,446,470 1,086,812 359,658 33%

Despite fierce competition your Company was able to retain 11% of the market in
the
north zone and its position as one of the largest cement producers in the country.
Bestway
Cement remains one of the largest exporters of cement to Afghanistan. The
industry as a
whole exported 7,716,628 tonnes during the year as against 3,188,424 tonnes
during the

5
year ended 30th June 2007. Bestway Cement’s share stood at 7.3% of total
exports at
565,716 tonnes as against 304, 001 tonnes in 2007 which represents an increase
of 86%.

OPERATING HIGHLIGHTS:

The Company recorded sales of Rs. 10,670 million compared to Rs. 8,409 million
during
the preceding year. Net turnover amounted to Rs. 7,487 million compared to Rs.
5,649
million in the corresponding period last year, which represents an increase of
33%, after
payment of Rs. 2,771 million towards Sales Tax and Excise Duty and Rs. 412
million as
rebates and discounts to customers. Gross Profit decreased to Rs. 1,008 million
from Rs.
1,013 million last year. The increase in sales couldn’t result in proportionate
increase in
profits mainly due to low retentions and high energy costs.
Finance cost increased to Rs.1,236 million for the year ended 30th June 2008 from
Rs.
1,212 million last year. Loss before taxation for the year ended 30th June 2008
stood at
Rs. 419 million as compared to Rs. 56 million profit for the previous year. Profit
after
taxation for the year ended 30th June 2008 amounted to Rs.169 million as
compared to Rs.
52 million profit of last year, which is an increase of 227%. Earnings per share of
the
Company for the year ended 30th June 2008 on its increased paid up capital stood
at
Rs.0.51 as compared to last year’s restated EPS of Rs.0.10.

BALANCE SHEET:

This year the capital and reserves of your Company have increased to Rs.6.86
billion as
compared to Rs.5.98 billion.
Your Company has continued to discharge its repayment obligations on all types
of loans
on time. The net current liabilities on 30th June 2008 stood at Rs.5,372 million as
against
Rs. 3,414 million on 30th June 2007.

CHAKWAL LINE II:

Work on Line-2 of 6,000 tpd cement capacity completed in the fourth quarter and
6
production was started in the month of June 2008 resulting in capitalisation of
project on
30th June 2008.

WASTE HEAT RECOVERY POWER PLANT:

The management of your Company decided to setup a waste heat recovery

power plant at
Chakwal. The kiln preheater and clinker cooler outlet release a lot of exit gases at
high
temperature which leads to the wastage of heat energy. The implementation of
this
project will reduce emission of waste gases and will have a very positive impact
on
Environment besides generating 14~15 MW power. This project will significantly
reduce
Company’s dependence on external source of electricity and will also help in
reduction in
cost of production. The project is expected to be operational during fourth
quarter of
2008-09.

OTHER INVESTMENTS:

Bestway’s investment in United Bank Limited continues to prove highly

successful as the
bank continued to show steady performance for yet another year. Profit before
tax for the
year ended 31st December 2008 stood at Rs.13 billion as against Rs.14.2 billion
for the
corresponding period of last year which represents a decrease of 8% year on
year. The bank’s balance sheet further strengthened during the year with a
staggering 21% growth
in Performing Advances to Rs. 293 billion, which is one of the highest growth
rates
amongst the large network banks. Customer deposits and other accounts
increased by
20% to Rs.402 billion.
We are delighted to inform you that the Bank announced a cash dividend of 30%
and
25% bonus shares for the year ended 31st December 2007 thus providing a return
of
Rs.186 million along with 15.5 million bonus shares on your investment in the
Bank.

PLANT PERFORMANCE:

Your Company’s management follows an elaborate plan of preventative

maintenance,

7
which it has adopted, right from the beginning. This proactive approach ensures
efficient
and stable operations with minimum disruptions. Our well-knit team of dedicated
managers, engineers, technicians and other members of the management and
administrative staff play key role in the successful implementation of this
approach.
Hattar plant continued to operate smoothly throughout the year at well above its
rated
capacity.
Chakwal Line-1 after commencing operation in June 2007 and, barring a few
teething
problems, operated smoothly.
Chakwal Line-11 after commencing operation in June 2008 is also operating
smoothly.

MARKETING:

Bestway Cement is a company driven by efficiency and quality consciousness.

Strict
quality control procedures are applied to ensure that these aims are achieved.
Some of the
best quality control equipment in Pakistan is in use at the plants. Apart from the
usual
equipment, Bestway’s laboratories are equipped with state-of-the-art technology
including X-ray Fluorescent Analyser and Diffractometer. Bestway Cement
introduced
this technology in Pakistan for the first time. By virtue of this equipment, the
Company
has been able to consistently produce better quality cement than is currently
available in
the country.
Bestway continues to be among the top brands both in the domestic market and
in
Afghanistan where it is now firmly established as the best brand. Your Company
has been
able to maintain its status as a market leader due to its consistently superior
quality,
effective marketing strategy, customer care and sheer dedication of its
marketing team.
With the successful completion of Chakwal Line-2 your Company has become the
2nd
largest cement producer in Pakistan.
In recognition of its performance, your Company continues to win awards for
being the
leading exporter, including a trophy from the Rawalpindi Chamber of Commerce
&
Industry for the 6th consecutive year.

TRAINING AND DEVELOPMENT:

8
The Company places great importance on the training, development and
education of its
personnel. In order to keep its workforce abreast with best operational
techniques and practices, technical and general managerial training courses are
organised for various
departments and categories of personnel. Staff is also sent on courses,
workshops and
seminars organised externally by other institutions. The Company actively
encourages
and assists its employees in pursuit of professional development and career
enhancement.

HEALTH, SAFETY AND ENVIRONMENT:

Your Company attaches highest priority to the health and safety of its personnel
who are
an essential and valuable component of its operations. Initiatives including safety
meetings, incident reporting, safety audits, good housekeeping and hygiene
controls are
actively and consistently pursued to instil safe behaviour in all personnel.
Bestway Cement actively pursues protection and up gradation of the
environment by
ensuring that its plants continue to comply with established environmental
quality
standards at all times. Our plant not only meets the stringent environmental
quality
standards prescribed by the Environment Protection Authority of Pakistan, it even
surpasses the international standards for emissions. Your Company always
participates in
various environment uplift programmes including the Tree Plantation drive each
year by
planting thousands of plants and trees in our factory areas and surrounding hills
in order
to contribute our share towards the improvement of environment.

SOCIAL RESPONSIBILITY:

Your Company regards itself as a responsible corporate citizen. Right from the
outset,
Bestway Cement has taken its social responsibilities, particularly towards the
local
community, very seriously and takes pride in its active participation in the
development
and welfare of the under-privileged.
Bestway Foundation, the charitable trust of the Bestway Group to which your
Company
is a major contributor, was established in the year 1997. The Foundation is also
certified

9
from the Pakistan Centre for Philanthropy. During the year ended 30th June 2008,
your
Company contributed nearly Rs.14 million to the Foundation for its various social
causes.
Bestway Foundation’s main goal is provision of education in rural communities.
Quality
education is fundamental to building up a strong and vibrant society. This aspect
has long
been neglected especially in the rural areas where masses are still deprived of
good
educational facilities. Bearing this in mind the Foundation embarked upon an
ambitious
plan of revitalising primary and secondary education in rural areas. Bestway
Foundation
(in collaboration with the District Government Education Department) adopted 29
schools in the far-flung corners of Rawalpindi District, which lacked basic
infrastructure,
facilities and sufficient number of teachers. You will be pleased to learn that the
Foundation has been able to achieve desired results and the schools being
supported by
the Foundation have shown marked improvement and students have shown very
good
results in the Secondary School Examinations of 2008 also.
In addition, the Foundation continues to provide scholarships to talented students
who,
for want of sufficient resources are unable to continue with their higher studies.
Financial
assistance is also provided to a large number of widows and indigents of the local
community in the shape of monthly stipends. In the area of basic health, free
medical
facilities are provided to the local community through a dispensary located at our
factory
premises.

FUTURE PROSPECTS:

Cement industry has benefited from sustained economic growth in the last few
years. The
year under review however witnessed a slowdown in domestic cement
consumption due
to political and economic uncertainty in the country. Election of a democratic
government
should bring about political stability in the country which should encourage more
economic activity in the country thus positively impacting demand for cement.
On the
export front, there remains a huge shortage of cement in numerous Middle
Eastern and
Asian countries most notably UAE, Qatar and India. Besides, there are other
potential

10
markets including some African and Central Asian states.
While there are huge opportunities for cement industry in the future, there are
potential
threats also. Looming global economic crisis may adversely impact the demand
for
cement both domestically and internationally. Also, worsening economic
condition in the
country is likely to hit the domestic consumption of cement. These factors
coupled with
more production capacity coming online in the future both within the country and
the
region, the markets are likely to become more competitive. Your management is
cognisant of the challenges that lie ahead and will be making all out efforts to
ensure
further growth and superior returns in the ensuing years.

CORPORATE GOVERNANCE:

Statement on Compliance with Code of Corporate Governance is annexed.

PATTERN OF SHAREHOLDING:

Pattern of shareholding as required under the Code of Corporate Governance is

given in
the accounts.

PRESENTATION OF FINANCIAL STATEMENTS:

The financial statements prepared by the management of the Company fairly

present its state of affairs, the results of its operations, cash flows and changes in
equity.

BOOKS OF ACCOUNT:

The Company has maintained proper books of account.

ACCOUNTING POLICIES:

Appropriate accounting policies have been adopted and consistently applied in

preparation of financial statements, except for the change in estimate as
mentioned in the
note 3.6, and accounting estimates are based on reasonable and prudent
judgement.

APPLICATION OF INTERNATIONAL ACCOUNTING STANDARDS:

International Accounting Standards, as applicable in Pakistan, have been followed

in
preparation of financial statements.

11
INTERNAL CONTROL SYSTEM:

The system of internal controls is sound in design and has been effectively
implemented.
The system itself is also subject to continuous review for enhancement wherever
and
whenever necessary.

GOING CONCERN:

There are no doubts about the Company’s ability to continue as a going concern.

LISTING REGULATIONS:

There has been no material departure from the best practices of corporate
governance, as
detailed in the listing regulations.

FINANCIAL HIGHLIGHTS:

Key financial data for the last eight years is annexed.

BOARD MEETINGS:

Attendance by each director in the 30 Board Meetings held during the year was
as given
below:

AUDITORS:

The present auditors, Messrs KPMG Taseer Hadi & Co., Chartered Accountants
retire at
the conclusion of the Meeting and, being eligible, have offered themselves for
reappointment. The Audit committee of the Company has considered the matter
and
recommended the retiring auditors for reappointment.

12
 Bestway Cement Company limited
Key Financial Data of Last 8 years

BESTWAY CEMENT LIMITED

JUNE 30, 2008
Eight Years Key Data

2008 2007 2006 2005 2004 2003 2002 2001

Operating Results Rupees in millions
Turnover (net) 7,487 5,649 4,544 3,536 2,666 1,792 1,738 2,078
Cost of sales 6,479 4,637 2,250 1,987 1,596 1,334 1,118 1,591
Gross profit 1,008 1,013 2,294 1,549 1,070 458 621 487
Operating profit 587 871 2,144 1,431 1,009 405 570 431
Financial charges 1,236 1,212 469 140 139 269 245 354
(Loss)/profit before taxation (419) 56 1,730 1,298 994 159 329 191
Profit after taxation 169 52 1,226 931 679 113 236 178

Balance Sheet
Shareholders' funds 6,857 5,544 4,850 3,597 2,859 2,181 2,213 2,003
Operating fixed assets 16,004 14,175 10,689 5,069 3,200 3,306 3,287 3,456
Long term finance 12,507 12,380 9,459 3,148 1,895 1,701 1,579 1,993
Net current liabilities 1,622 607 624 221 80 1,289 168 50

Significant Financial Ratios Percentages

Gross profit ratio 13.46 17.93 50.48 43.81 40.14 25.56 35.73 23.44
Net profit ratio 2.26 0.92 26.98 26.33 25.47 6.31 13.58 8.57
Interest coverage ratio 0.66 1.05 4.69 10.27 7.69 1.59 2.34 1.54
Return on equity 7.09 2.02 52.37 43.75 35.10 5.84 12.20 9.20
Earnings per share 0.51 0.20 5.24 3.98 3.19 0.58 1.22 0.92
Dividend - - 10.00 10.00 10.00 7.50 7.50 5.00

In thousand metric tonnes

Despatches of cement 2,610 2,250 1,203 1,206 1,039 837 650 751

13
 Bestway Cement Company limited
Balance Sheet as on 30 June 2008

BESTWAY CEMENT LIMITED

BALANCE SHEET AS AT 30 JUNE 2008

2008 2007 2008 2007

Notes Rupees Rupees Notes Rupees Rupees
Restated Restated
EQUITY AND LIABILITIES ASSETS
Share capital and reserves Non-current assets
Authorised share capital
350,000,000 (2007: 300,000,000) ordinary shares of Rs. 10 each 3,500,000,000 3,000,000,000
Property, plant and equipment 13 16,004,481,991 14,175,374,753

Investment property 14 291,330,764 277,155,456

Issued, subscribed and paid up share capital 4 2,832,587,750 2,575,079,770
Share premium account 901,277,930 - Long term investments 15 5,297,902,301 5,077,151,793
Unappropriated profit 2,020,561,237 1,851,979,758
Advance for issue of right shares 5 1,102,077,293 1,116,466,140 Long term advances and deposits 16 102,474,847 307,325,047
6,856,504,210 5,543,525,668 21,696,189,903 19,837,007,049
Non-current liabilities
Current assets
Long term financing - secured 6 12,506,666,668 12,380,000,005 Stores, spare parts and loose tools 17 1,719,953,575 1,062,334,034
Liability against assets subject to finance lease 7 258,138,491 230,976,141 Stock in trade 18 729,726,744 290,830,696
Deferred liabilities 8 441,207,639 1,055,573,197 Trade debts- considered good 19 365,120,641 84,633,511
Long term advances 9 12,249,720 23,607,975 Advances, deposits, prepayments
13,218,262,518 13,690,157,318 and other receivables 20 555,926,017 482,675,425
Cash and bank balances 21 348,573,987 886,327,763
Current liabilities 3,719,300,964 2,806,801,429
Trade and other payables 10 1,542,716,340 693,718,916
Markup payable 286,999,641 256,189,604
Short term borrowings - secured 11 1,507,674,824 756,384,619
Current portion of long term financing 6 2,003,333,334 1,703,832,354
5,340,724,139 3,410,125,493

25,415,490,867 22,643,808,478 25,415,490,867 22,643,808,478

Contingencies and commitments 12

-
Theannexed notes from 1 to 35 form an integral part of these financial statements. (0.00478076934814453)

CHIEF EXECUTIVE DIRECTOR & CFO

14
 Bestway Cement Limited
PROFIT AND LOSS ACCOUNT

BESTWAY CEMENT LIMITED

PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE 2008

2008 2007
Notes Rupees Rupees

Turnover-net 22 7,487,162,751 5,649,378,012

Cost of sales 23 6,478,902,770 4,636,508,040

Gross profit 1,008,259,981 1,012,869,972

Administration and general expenses 24 119,917,940 103,121,152

Distribution cost 25 300,827,927 38,278,894
Finance cost 26 1,236,140,238 1,211,745,924
Other income 27 (229,490,785) (396,632,200)
1,427,395,320 956,513,770

(Loss)/ profit before taxation (419,135,339) 56,356,202

Taxation 28 587,716,818 4,817,471

Profit after taxation 168,581,479 51,538,731

Earnings per share (basic and diluted) 32 0.60 0.18

Restated

The annexed notes from 1 to 35 form an integral part of these financial statements.

CHIEF EXECUTIVE DIRECTOR & CFO

15
Fauji Cement:

INTRODUCTION:

A longtime leader in the cement manufacturing industry, Fauji Cement Company,

headquartered in Islamabad, operates a cement plant at Jhang Bahtar, Tehsil
Fateh Jang, District Attock in the province of Punjab. The company has a strong
and longstanding tradition of service, reliability, and quality that reaches back
more than 10 years. Sponsored by Fauji Foundation the Company was
incorporated in Rawalpindi in 1992.

The cement plant operating in the Fauji Cement is one of the most efficient and
best maintained in the country and has an annual production capacity of 1.165
million tons of cement. The quality portland cement produced at this plant is the
best in the Country and is preferred the construction of highways, bridges,
commercial and industrial complexes, residential homes, and a myriad of other
structures needing speedy strengthening bond, fundamental to Pakistan's
economic vitality and quality of life.

OUR VISION:

To transform FCCL into a role model cement manufacturing Company fully aware
of generally accepted principles of corporate social responsibilities engaged in
nation building through most efficient utilisation of resources and optimally
benefiting all stake holders while enjoying public respect and goodwill.

MISSION STATEMENT :

FCCL while maintaining its leading position in quality of cement and through
greater market outreach will build up and improve its value addition with a view
to ensuring optimum returns to the shareholders.

OUR STRATEGIES:

We shall achieve our vision by making total quality the FCCL way of doing
business, Relentless pursuit of full customer satisfaction, Empowering FCCL
people leading the industry of Cement world and manufacturing excellence
producing superior returns to our shareholders.

OUR VALUES:
We listen to our customers and improve our product to
Customers
meet their present and future needs.
People Our success depends upon high performing people
16
 working together in a safe and healthy work place
where diversity, development and team work are
valued and recognized.
We expect superior performance and results. Our
Accountability leaders set clear goals and expectations, are
supportive and provide and seek frequent feed back.
We support the communities where we do business,
hold ourselves to the highest standards of ethical
Citizen Ship
conduct and environment responsibility, and
communicate openly with FCCL people and the public.
We are prudent and effective in the use of the
Financial Responsibility
resources entrusted to us.

MARKET OVERVIEW:

The Cement Industry witnessed an unprecedented demand for its product during
Fiscal Year 2007-
Total cement despatches stood at 30 Million tons which is the highest figure ever
achieved by the Cement Industry. It reflected a growth of 24.31% over 24 Million
tons of sales during last fiscal year. Whereas, local demand grew by 6.47 % over
the last year, the exports recorded a historic growth of 142% to an all time high
level of 7.72 Million tons as compared to 3.19 Million tons during the last year. As
a result of above, the overall capacity utilization of the Industry stood at 81.04%
as compared to 80.07 % of the last year.
Comparing with the Industry, the overall performance of FCCL has been
substantially higher. It achieved the capacity utilization of 101.03% as compared
to 81.04% of the Industry. Similarly, the exports showed an increase of 82.63%
over the last year, i.e, from 152,268 tons in Fiscal Year 2006-07 to 278,095 tons
in Fiscal Year 2007-08. Apart from Afghanistan, FCCL has been able to create an
effective market niche in India and expects it to expand further.

The highlights of the performance of the Company vis-à-vis the Industry are as
under:-

Fuaji Cement Comparison

2007-08 2006-07 Difference (%)
(1) Domestic Despatches (tons) 899,405 960,8236 .39-
(2) Exports (tons) 278,095 152,2688 2.63
(3) Total Despatches (tons) 1,177,500 1,143,091 3.01
(4) Capacity Utilization (%) 101.03 98.08 3.01

Industry Comparison
2007-08 2006-07 Difference (%)
(1) Domestic Despatches (tons) 22,395,522 21,034,278 6.47
(2) Exports (tons) 7,716,620 3,188,424 142.02
(3) Total Despatches (tons) 30,112,142 24,222,702 24.31

17
(4) Capacity Utilization (%) 81.04 80.07 1.21

PRODUCTION REVIEW:

Performance of the plant remained above satisfactory level with an overall production
level
exceeding 100.83%, which is the highest ever achieved in the history of Fauji Cement.
Efficiency in terms of fuel, power and raw material consumption at the plant is amongst
the best, while labour cost is also one of the lowest in Cement Industry. Comparative
production figures are given as under:-

2007 ~ 08 2006 ~ 07
a. Clinker ( Tons ) 1,119,221 1,098,019
b. Cement ( Tons ) 1,174,722 1,153,711

FINANCIAL PERFORMANCE:

PROFITABILITY:

The Company earned a Profit After Tax of Rs. 414 Million as compared to the last
year's profit of Rs. 646 Million. The profit from operations decreased from Rs. 995
Million to Rs. 602 Million depicting a decrease of 39 % owing to reduction in
cement prices and higher manufacturing cost due to increase in prices of fuel,
power and packing material.

CONTRIBUTION TO NATIONAL EXCHEQUER:

The Company contributed a sum of Rs. 1,268 Million to the national exchequer in
the form of taxes and duties during the year under review. Concurrently, Fauji
Cement earned USD 13.804 Million through export of cement.

PRESENTATION OF FINANCIAL STATEMENTS:

The financial statements prepared by the Management present the Company's

state of affairs, the results of its operations, cash flows and changes in equity in a
fair and accurate manner.

BOOKS OF ACCOUNT:

Proper books of account have been maintained.

ACCOUNTING POLICIES:

Appropriate accounting policies have been consistently applied in preparation of

financial statements and accounting estimates are based on reasonable and
prudent judgement.

COMPLIANCE WITH INTERNATIONAL ACCOUNTING STANDARDS (IAS) AND

INTERNATIONAL FINANCIALREPORTING STANDARDS (IFRS).
18
 International Accounting Standards and International Financial Reporting
Standards (IFRS) as applicable in Pakistan have been followed in preparation of
financial statements.

INTERNAL CONTROL SYSTEM:

The system of internal control is sound in design and has been effectively
implemented and monitored.

GOING CONCERN:

There is no doubt that the Company has the ability and strength to operate as a
going concern.

BEST PRACTICES OF CORPORATE GOVERNANCE:

There has been no material departure from the best practices of corporate
governance, as given in the listing regulations.

Fauji Cement Limited

Financial Data of Last Six Years.

Description 2008 2007 2006 2005 2004 2003

Operating Results
(Rs. In Million)
Net Sales 3,545.902 3,463.283 4,286.138 2,845.143 2,296.231 1,510.738
Gross Profit 658.112 1,091.495 2,191.111 1,081.576 740.824 175.605
Operating Profit 601.518 995.285 2,041.984 988.673 723.084 122.213
Financial Charges 146.954 207.105 264.297 229.634 204.223 463.409
Profit/(Loss) after 413.598 646.323 1,203.735 510.490 314.148 (531.381)
taxation
Balance Sheet
Shareholder’s Equity 9,283.981 3,735.206 3,282.617 2,449.624 1,939.134 1,624.986
Fixed Assets 7,106.599 4,392.450 4,563.115 4,658.272 4,729.254 4,659.449

Long Term Loans 875.000 1,425.000 1,975.000 3,075.000 3,645.347 4,325.878

including current portion
EPS (Rs)
Basic 0.85 1.73 3.21 1.36 0.84 (1.42)
Restated Restated Restated Restated Restated

Diluted 0.77 1.53 2.84 1.21 0.74 (1.26)

19
OUTSTANDING STATUTORY DUES:

The Company does not have any outstanding statutory dues.

VALUE OF INVESTMENT OF EMPLOYEES:

Value as on 30 June 2008 is given below:-

Management Staff Non-Management

Staff
Provident Fund : Rs. 57,414,581 Rs. 35,864,510

SALIENT ASPECTS OF COMPANY'S CONTROL AND REPORTING SYSTEMS.

The Company complies with all the requirements of the Code of Corporate
Governance as contained in the listing regulations of the Stock Exchanges. The
Board's primary role is the protection and enhancement of long term
shareholders' value. To fulfil this role, the Board is responsible to implement
overall corporate governance in the Company including approval of the strategic
direction as recommended by the Management, approving and monitoring capital
expenditure, appointing, removing and creating succession policies for the senior
management, establishing and monitoring the achievement of management's
goals and ensuring the integrity of internal control and Management Information
Systems. It is also responsible for approving and monitoring financial and other
reporting. The Board has delegated responsibility for operation and
administration of the Company to the Chief Executive / Managing Director.
Responsibilities are delineated by formal authority delegations. The Board has
constituted the following committees which work under the
guidance of Board of Directors:

• Audit Committee.
• Technical Committee.
• Human Resources Committee.

ATTENDANCE OF MEETINGS:

During the year under review, the Board of Directors held six meetings and Audit
Committee held five meetings.

DISCLOSURES:

To the best of our knowledge, the Directors, CEO, CFO, Company Secretary,
Company Auditors, their spouses and their minor children have not undertaken
any trading in shares of the Company during the FY 2007-08.

PATTERN OF SHARE-HOLDING:

Pattern of share-holding as on 30 June 2008 is attached.

20
RELATIONS WITH COMPANY PERSONNEL:

Relations between the management and the workers continued to be extremely

cordial based on mutual respect and confidence contributing to optimal
efficiency. The Company has allocated funds for Provident Fund and Profit
Participation Fund for its employees.

CORPORATE SOCIAL RESPONSIBILITIES:

Concurrently, the Company continues to enjoy a high degree of goodwill and

cooperation with local community as it respects their environment through
responsible business practices. The Company runs a free dispensary for the
locals and also provides good education facilities up to secondary school level at
reasonable fee.

DIRECTORS:

As a result of resignation, tendered by Brig Munawar Ahmed Rana, SI (M) (Retd),

Brig Liaqat Ali (Retd) has been appointed as Director of the Company with effect
from 8 November 2007.
As a result of resignation of Ms Tine Bremholm Kokfelt, FLS, Brig Munawar Ahmed
Rana,SI(M) (Retd) has been appointed as Director of the Company with effect
from 28 August 2008.
The Board places on record its appreciation of the invaluable services rendered
by the outgoing Directors and welcomes the new Directors on the Board.

EXTERNAL AUDITORS:

The present Auditors M/s KPMG Taseer Hadi & Co, Chartered Accountants will
stand retired at the conclusion of the 16th Annual General Meeting. However,
they have expressed their willingness for reappointment. They have also been
recommended by the Audit Committee.

PRODUCT QUALITY:

FCCL has always endeavoured to produce the best quality cement in Pakistan,
which is amply reflected in the premium price and its high demand, both inside
and outside the Country. As a company, FCCL is focused on customers'
satisfaction, employees' morale and fair deal to its partners in the business. It
strictly adheres to the following:-
1. Quality Policy. Customers' satisfaction through quality assurance.
2. Objectives
a. To be a cost effective and efficient organisation.
b. Continuous improvement through well planned training.
c. Commitment to leadership and team-work.
d. To maintain quality culture within FCCL.
e. To remain a leading manufacturer of high quality Portland Cement in
Pakistan.

21
 The Company, by grace of Almighty ALLAH, is an ISO 9001-2000 and ISO-14001-
2004 Certified Company.

Fauji Cement Company Limited

Balance Sheet as at June 30, 2008

2008 2007
Note Rupees'000 Rupees'000

SHARE CAPITAL AND

RESERVES

Share capital 3 7,419,887 4,194,422

Reserves 4 1,864,094 (459,216)
9,283,981 3,735,206

NON - CURRENT
LIABILITIES
Long term financing 5 325,000 875,000
Deferred liability - compensated absences 6 9,468 8,277
Deferred tax liability - net 7 363,154 339,918
Retention money payable 18,129 -

CURRENT
LIABILITIES
Trade and other payables 8 493,210 468,447

Short term borrowings - secured 9 1,378,365 375,510

Current portion of long term financing 5 550,000 550,000
2,454,761 1,442,287

12,454,493 6,400,688

CONTINGENCIES AND COMMITMENTS 10

The annexed notes from 1 to 33 form an integral part of these financial

statements.
These financial statements were authorised for issue by the Board of
Directors of
Company in the
their meeting held on 17 September
2008.

22
 2008 2007
Note Rupees'000 Rupees'000

FIXED ASSETS -
Tangible
Property, plant and equipment 11 7,106,599 4,392,450

Markup accrued 33,186 48,330

LONG TERM ADVANCE 12 7,200 8,100

LONG TERM DEPOSITS 13 46,611 46,611

CURRENT ASSETS

Stores, spares and loose tools 14 907,591 468,769

Stock in trade 15 230,089 183,309
Trade debts 16 26,927 19,558
Advances, deposits, prepayments and
other
receivables 17 345,567 858,758
Cash and bank balances 18 3,783,909 423,133

5,294,083 1,953,527
12,454,493

23
 Fauji Cement Company Limited
Profit and Loss Account

For the Year Ended June 30, 2008

2008 2007
Note Rupees'000 Rupees'000

SALES 19 4,749,217 4,780,036

Less: Government levies 19 (1,203,315) (1,316,753)
NET SALES 3,545,902 3,463,283

Less: Cost of sales 20 (2,887,790) (2,371,788)

GROSS PROFIT 658,112 1,091,495

Other income 21 107,574 73,835

Distribution cost 22 (53,383) (40,645)
Administrative expenses 23 (76,495) (71,302)
Other operating expenses 24 (34,290) (58,098)
Finance cost 25 (146,954) (207,105)
NET PROFIT BEFORE TAXATION 454,564 788,180

Taxation 26 (40,966) (141,857)

NET PROFIT AFTER TAXATION 413,598 646,323

Restated

Earnings per share - Basic 27.1 0.85 1.73

Earnings per share - Diluted 27.2 0.77 1.53

The annexed notes from 1 to 33 form an integral part of these financial

statements.

24
Cherat Cement:

VISION:

Growth through the best value creation for the benefit of all stakeholders

MISSION:

Invest in projects that will optimize the risk-return profile of the Company.
Achieve excellence in business. Maintain competitiveness by leveraging
technology. Continuously develop our human resource. To be regarded by
investors as amongst the best blue-chip stocks in the country.

STRATEGIC OBJECTIVES:

We strive to improve the efficiency of our operations through continuous

innovation. We intend to grow through expansion of our core business and
through opportunities of diversification. It is our Endeavour to create value for
our shareholders by maximizing the risk adjusted return on our investments. We
intend to achieve customer satisfaction by way of providing our clients a cost
effective, quality product.
We aim to develop the long-term sustainability of the organization by grooming
and training our employees and providing a congenial work environment, where
they are motivated to perform at the highest standards. We remain committed to
the highest ethical and moral business values and to the true spirit of the Code of
Corporate Governance.

CORE VALUES:

Always deliver best quality product to our customers. Maintain the highest level
of integrity, honesty and ethics. Use technology to continuously improve our
processes. Develop the capability of our workforce on an ongoing basis.
Safeguard the interests of all our stakeholders.

COMPANY INFORMATION:

OVERVIEW:

The year 2007/08 proved to be one of the most challenging years for the country
in terms of economic out look and performance. Political uncertainty, coupled
with a rising trade deficit, a reduction in the PSDP allocation, and a tightening of
monetary policy by the Central Bank have adversely impacted all sectors of the
national economy. The cement sector was no different. Unlike the previous
25
couple of years, domestic sales remained relatively sluggish and grew by only
6%. However, export sales to Afghanistan and other destinations like Middle East
and Africa continued to show unprecedented growth. During the year under
review, aggregate sales of the cement industry touched 30 million tons compared
to 24 million tons last year mainly on account of increase in export sales. The
profitability of the cement plants, however, remained under pressure due to
substantial increase in the cost of production.

PERFORMANCE OF THE COMPANY:

The year 2007/08 marked the first full year of operations for the Company
following the optimization of the plant. During the year, the production and
dispatch volumes rose by 15% and 11% respectively compared to last year.
However, significant increase in the cost of input items like coal, furnace oil and
raw and packing materials, depressed the margins and the Company could only
earn an after tax profit of Rs. 10 million against net sales of Rs. 3,014 million
compared to an after tax profit of Rs. 184 million against net sales of Rs. 2,620
million in the corresponding period last year.

PRODUCTION:

During the year under review, the clinker production increased by 127,665 tons
to 1,000,710 tons while cement production increased by 100,715 tons to
1,026,830 tons. Comparative production figures of clinker and cement are stated
under:

2008 2007 % Increase/

Decrease
Clinker 1,000,710 873,045 15%
Cement 1,026,830 926,115 11%

SALES AND DISPATCHES:

While domestic sales of the Company increased only by 3,245 tons due to factors
explained above, exports sales increased by 96,354 tons i.e. 35% due to a
greater focus on the Afghan market where prices were more attractive during the
year. The export figure also includes 700 tons of cement exported to UAE. The
contribution of exports sales to the total sales of the Company increased to 36%
compared to 30% last year.

2008 2007 % Increase/

Decrease
Local Sales 656,268 653,023 1%
Export 370,955 274,60 35%
1,027,223 927,624 11 %

26
OPERATING PERFORMANCE:

Despite almost Rs. 400 million i.e. 15% increase in the sales revenue from the
corresponding period last year, there was a drop in the profitability of the
Company compared to last year. Depressed cement prices for most part of the
year, owing to substantial increase in production capacity of the industry coupled
with rising costs of major inputs such as furnace oil, coal and raw and packing
materials, reduced margins substantially. There was also a drop in the other
income due to reduced level of investments made by the Company. After taking
into consideration various expenses and government taxes, the company was
able to earn an after tax profit of Rs. 10.35 million during the year under review.

Summarized operating performance of the Company for the current year and that
of last year is as follows:

2008 2007 % Increase/

Decrease
Rs. in Million
Net Sales 3,013.75 2,619.96 15%
Cost of Sales 2,834.33 2,242,30 26%
Gross Profit 179.42 377.66 (52%)
Expenses & Taxes 169.07 193.50 (13%)
Net Profit 10.35 184.16 (94%)

WASTE HEAT RECOVERY:

In order to mitigate the risk of rising energy cost which constitutes a major
portion of cost of production, the Company has decided to install Waste Heat
Recovery Boilers. The installation of this equipment by the end of ensuing
financial year is expected to help in reducing the rising cost of production in the
days ahead.

MADIAN HYDRO POWER:

We wish to update our shareholders that the Project Consultants for Madian
Hydro Power Limited - M/s. Fichtner GmbH have almost completed work on the
Phase II of the feasibility study and will soon be presenting the draft feasibility
report. Given the power shortage situation in the country, the project is of high
significance with lots of potential, however, the law and order situation in the
project area remains a major cause of concern.

CORPORATE SOCIAL RESPONSIBILTY:

27
As a conscientious member of the corporate community, the Company
generously contributed to various social and charitable causes during the year.
STATEMENT ON CORPORATE AND FINANCIAL REPORTING FRAMEWORK:

• The financial statements prepared by the Company fairly present its state
of affairs, the results of operations, cash flows and changes in equity.
• Proper books of account have been maintained by the Company.
• Appropriate accounting policies have been consistently applied in the
preparation of financial statements and accounting estimates are based on
reasonable and prudent judgment.
• Applicable International Accounting Standards have been followed in
preparation of financial statements and there has been no departure there
from.
• The system of internal controls has been effectively implemented and is
continuously reviewed and monitored.
• The Company is a going concern and there are no doubts about its ability
to continue.
• There has been no material departure from the best practices of corporate
governance, as detailed in the listing regulations.
• Key operating and financial data for last six (6) years in summarized form is
annexed.
• There is nothing outstanding against your company on account of taxes,
duties, levies and other charges except for those which are being made in
the normal course of business.
• The Company maintains Provident and Gratuity Fund accounts for its
employees. Stated below are the values of the investments of the fund as
on 30th June 2008:

• Provident Fund Rs. 184,392,362

• Gratuity Fund Rs. 72,967,659

The pattern of shareholding is annexed.

Earnings per share (EPS) during the year was Re. 0.11 as against Rs. 1.93 last
year.

DIVIDEND:

In view of the liquidity requirements for on going projects, the Company will not
be able to pay any dividend this year.

FUTURE PROSPECTS:

While increased demand for cement from Middle East and other destinations is
expected to contribute to higher cement sale volumes, expected reduction in the
PSDP allocation, rising interest rates and political uncertainty in the country will
continue to have a negative impact on domestic demand. We are hopeful that
the government will address these issues effectively, and will take necessary
measures to revive the economy which in turn could spur the demand of cement
for infrastructural and housing projects and exports through land and sea routes.
28
 AUDITORS:

The present auditors M/s. Ford Rhodes Sidat Hyder & Co., Chartered Accountants,
retire and being eligible, offer themselves for reappointment.
Cherat Cement Company Limited
Financial data of Last 7 Years
for the year ended June 30,
2008
2008 2007Year2006 2005 2004 2003 2002 2008
2008 2007
2007 2006 2005 2004 2003 2002
(Tons in '000)

Clinker production 1,001 873 575 749 774 656 528

Cement production 1,027 926 598 792 802 693 555
Cement despatched 1,027 928 596 792 789 706 555

ASSETS EMPLOYED
(Rs. in million)
Tangible fixed assets 2,522 2,197 2,270 1,773 1,252 1,276 1,135
Investment and long-term loan,
advances & deposits 111 71 33 18 17 19 101
Derivative financial assets 29 25 41 28 - - -
Current assets 1,720 1,240 1,268 1,384 913 601 664
Total assets employed 4,382 3,533 3,612 3,203 2,182 1,896 1,900

FINANCED BY

Shereholders equity 2,158 2,236 2,113 1,742 1,432 1,007 1,063

Long-term liabilities 393 452 664 829 210 312 66
Deferred liabilities 233 303 319 167 170 170 175
Derivative financial liabilities - - - 15 - - -
Current liabilities 1,598 542 516 450 370 407 596
Total funds invested 4,382 3,533 3,612 3,203 2,182 1,896 1,900

TURN OVER & PROFIT

Turn over (net) 3,014 2,620 2,435 2,401 2,085 1,508 1,423
Operating profit 25 323 799 718 592 59 202

Profit / (loss) before taxation (56) 247 719 684 574 25 177
Profit after taxation 10 184 538 512 426 10 138
Cash dividend - 96 83 199 213 66 120
Bonus shares - - 125 166 133 - -
29
Transfer to reserves - - - - - - 5

Transfer from reserves - - - - - 30 -

 Cherat Cement Company Limited
Balance Sheet as at June 30, 2008

2008 2007

Ford Rhodes Sidat Hyder & Co.

Chertard Accountants
Progressive Plaza, Beaumont Road
P.O.Box 15541, Karachi75530, Pakistan

Tel: +9221 5650007

Fax: +9221 5681965
www.ey.com/pk

We have audited the annexed balance sheet of CHERAT CEMENT COMPANY LIMITED as at 30 June 2008
and the related profit and loss account, cash flow statement and statement of changes in equity together with
the notes forming part thereof, for the year then ended and we state that we have obtained all the information
and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit.

It is the responsibility of the Company’s management to establish and maintain a system of internal control, and
prepare and present the above said statements in conformity with the approved accounting standards and the
requirements
based on our of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements
audit.

We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards
require that we plan and perform the audit to obtain reasonable assurance about whether the above said
statements are free of any material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the above said statements. An audit also includes assessing the
accounting policies and significant estimates made by management, as well as, evaluating the overall presentation
of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after
due verification, we report that:
a) in our opinion, proper books of account have been kept by the Company as required by the
Companies Ordinance, 1984;
b) in our opinion:

i) the balance sheet and profit and loss account together with the notes thereon have been drawn
up in conformity with the Companies Ordinance, 1984, and are in consistently
agreement with the books
of account and are further in accordance with accounting policies applied;

ii) the expenditure incurred during the year was for the purpose of the Company's business; and
iii) the business conducted, investments made and the expenditure incurred during the year were
in accordance with the objects of the Company;

c) in our opinion and to the best of our information and according to the explanations given to us, the
balance sheet, profit and loss account, cash flow statement and statement of changes in equity
together with the notes forming part thereof conform with approved accounting standards as
applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984 in
the manner so required and respectively give a true and fair view of the state of the Company's
affairs as at 30 June 2008 and of the profit, its cash flows and changes in equity for the year then
ended; and
d) in our opinion, Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980)
was deducted by the Company and deposited in the Central Zakat Fund established under section
7 of that Ordinance.

30
 Cherat Cement Company Limited
Profit & Loss Account
for the year ended June 30, 2008

Note 2008 2007

(Rupees ‘000)
Note 2008 2007 CASH FLOWS FROM OPERATING ACTIVITIES
(Rupees ‘000) Profit / (loss) before taxation
(56,498)
Turnover – net 22 3,013,752 2,619,960 Adjustment for:
Depreciation 3.1.2 176,722 236,501
Return on loan to a related party 27 - (10,970)
Cost of sales 23 (2,834,336) (2,242,296) Unrealised fair value
Return investments
loss / (gain) on short-term on US Dollar Bonds 27 27717 (145)
(15,337) (365)
Gain on disposal of operating property, plant and equipment 3.1.4 (1,704) (651)Gross profit
179,416 377,664 Finance cost 28
Exchange loss – net 3,112 104
Distribution cost 24 (73,898) (64,655) Share of loss in joint
Administrative expenses
venture 25
4.1.2 (92,923)
413 (84,953)
- Dividend income 27
(4,973) (6,365) 255,718 278,448
Other operating expenses 26 (6,608) (21,541) Operating profit before
working capital changes 199,220 525,475 (173,429) (171,149)
(Increase) / decrease in current assets
Stores, spare parts and loose tools (684,597) (214,887)
Other operating income 27 19,091 116,043 Stock-in-trade
Loans and advances (90,203) 27,939 3,365 147,802
Operating profit 25,078 322,558 Trade deposits and
Other receivables
short-term prepayments (46,585) (70,589)(835) (426)
(888,609) (40,407)
Finance cost 28 (81,576) (75,531) (689,389)
485,068 Increase / (decrease) in current liabilities
Profit / (loss) before taxation (56,498) 247,027 Trade and other
payables Short-term running finance 697,298 402,207(67,801) 34,667
1,099,505 (33,134)
Taxation
Current - for the year (15,095) (77,145)Income tax paid - net
(27,620) (44,039)- prior years 11,392
Deferred 3,072 Net cash generated
70,555 from operating
11,204
29 66,852 (62,869) CASH FLOWS FROM INVESTING ACTIVITIES
Additions to operating property, plant and equipment 3.1.1 (293,876) (82,758)
Sale proceeds of operating property, plant and equipment 3.1.4 5,090 5,849
Profit after taxation 10,354 184,158 Capital work-in-
progress Long-term loans and advances 3.2 (211,308)
(821) (86,057)
2,731
Earnings per share – basic 30 Re. 0.11 Rs. 1.93 Investments – net
Dividend received 372,817 27 (237,250) 4,973 6,365
Long-term security deposits (59) 304
Net cash used in investing activities (123,184) (390,816)

CASH FLOWS FROM FINANCING ACTIVITIES

Long-term financing – net (94,500) (162,500)
Finance lease payments - (1,172)
The annexed notes from 1 to 37 form an integral part of these financial statements.
Dividend paid (95,064) (82,659)

31
Conclusion:

On the basis of above financial data we ca assume that currently Bestway Cement is leader of the
market.
Following by Fauji Cement on 2nd position.

Production Capacity
1. Bestway
2. Fauji
3. Cherat

Financial Report
1. Bestway
2. Fauji
3. Cherat

Net Profit
1. Bestway
2. Fauji
3. Cherat

Contractor’s Survey
• A survey of contractors and construction companies conducted by
our group. Most of the constructors say that the management of
Bestway Cement is very efficient and cooperative to their
customers. Some contractors are satisfied with Fauji Cement
management. That’s why Charat Cement is facing tough
competition.

Market Survey
• Cement dealers describes that the quality and price of Bestway
Cement is reasonable. And they deliver cement with in give time
whereas Fauji Cement has also good quality but slightly expensive
then Bestway cement. Cherat cement gives very low profit margin
to cement dealers. Their marketing promotion is also not very
competitive.

Growth per Annum

1. Bestway
2. Fauji
3. Cherat

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