2007-2009
Topic 8: The Business and Financial performance of Lucky Cement over a three year period
Analysis of Business and Financial Performance of an organization over a three year period
Word count: 6409
CONTENTS
TOPICS
Introduction
* Reasons for Choosing the Project topic and Organization
* Project Objectives and Research Questions
* Overall Research Approach
Information Gathering
* Sources of Information Used
* Description of Methods Used to Collect Information
* Limitations of Information Gathering
* Ethical Issued Involved
* Accounting and Business Techniques Used
Critical Financial Analysis
* Ratio Analysis
* Comparative Analysis
Business Analysis
* SWOT Analysis-Lucky Cement
* Critical Success Factor
Conclusion
Skills and Learning Statement
List of References
Bibliography
Appendix – I
Appendix – II
Appendix – III
INTRODUCTION
Reasons for Choosing the Project Topic and Organization
My topic for Oxford Brookes Research and Analysis Project is Topic-8: ‘The business and financial
performance of an organization over a three year period’ as mentioned in the Information Pack.
I believe I have an innate interest in working with numbers and that being the reason I enjoy solving
mathematical questions. My interest and keenness in numbers evolved to such an extent that I chose
Accounting both in my O’ Levels and A’ Levels. At the time of choice of professional qualification, I went
for ACCA. Due to this and my father’s business of investing in stock market I happened to get myself
involved into assisting my father with the help of knowledge gained through ACCA in analyzing the
financial performance of the business entities. This being the major reason urged me to choose the above
mentioned topic for my project. As part of ACCA qualification we have studied, learned and have been
trained to analyze the business and financial performance of any entity over a period of time, with respect
to that of any another entity and to draw reasonable conclusions about future of the entity in question.
Analysis of any entity’s financial position and performance plays a crucial role in the decision making
process for the management and stakeholders including shareholders, customers, suppliers, regulators
etc.
Having a wide range of options to choose from numerous companies that are being listed on the Karachi
Stock Exchange, I decided to go ahead with Lucky Cement Limited. Lucky Cement Limited is a part of
one of the leading business groups in Pakistan known as Yunus Brothers Group. The Yunus Brothers
Group has been the leading manufacturer and exporter of textile products. Lucky Cement Limited got
listed on all three stock exchanges of Pakistan in 1993 and started production in 1996 with a daily
production capacity of 4200 tons of cement per day. Its production facility was in Pezu district of the North
West Frontier Province (N.W.F.P). It now operates two cement plants one in Pezu and the other one in
Karachi (South). Over the years it has emerged as the largest manufacturer and exporter of cement in
Pakistan, with total capacity of producing 7.25 million tons of cement per annum and production capacity
of 25,000 tons per day (13,000 tons in Pezu and 12,000 tons in Karachi) Lucky Cement Limited, Home
[Online]. The company also managed to get itself listed on the London Stock Exchange during the year
2007-08 by issuing Global Depository Receipts worth $ 109 million.
The major reason contributing in the selection of this organization is the huge expansion of cement
industry. Over the past years, cement industry has witnessed remarkable expansion, from 16.93 million
tons per annum in 2003-04 to total installed capacity of the industry during FY10 standing at 44.1 million
tons. [Syed Saquib Ali (2010) ‘Reinforced’, Sector Update. Global Securities Pakistan Limited.15 October,
p.5.]. I also developed an inquisitiveness to explore the factors contributing to Lucky’s success and how it
manages to sustain it.
The Vision of Lucky Cement Limited is ‘We envision being the leader of the cement industry by identifying
and capitalizing on new market opportunities, meeting expectations of the stakeholders, contributing
towards industrial progress and sustainable future, while being responsible corporate citizens.
Lucky Cement Limited, Corporate Philosophy [Online].
Lucky Cement has also been actively involved and taken its role as a corporate citizen seriously. It has
undertaken investments in Education through providing various scholarship projects for students and
donating in construction of schools. Not only this, but it also contributed for the welfare of the community
as a whole. It has recently donated very generously for the victims of floods and established Tabba Heart
Institute providing quality services at affordable costs. The hospital is equipped with state-of-the-art
equipments. Other than this, it has Aziz Tabba Kidney Centre that is serving 200 patients per day by
providing dialyses and Lucky Welfare Dispensary, operating at the Lucky Cement plant in Pezu.
Lucky Cement Limited, Social Responsibilities [Online].
Project Objectives and Research Questions
Project Objectives
The financial statements of any entity are very critical and vital sources of information for the stakeholders
of that entity. This being the reason financial statements of the listed entities needs to be audited by law.
They provide valuable insight about different sections of an organization such as its liabilities, assets,
profitability, expenditure, revenue, etc. To make this information more useful and meaningful it must be
compared and analyzed with other financial or non financial information rather than it being looked in
isolation even though they may have some limitations. These limitations could be such as, financial
information is mainly historical using data of last year and do not present future events or transactions,
there are chances that information can be manipulated e.g. cash flow statements, comparison with other
entities may become difficult if different accounting policies have been adopted, impact of inflation may
not be incorporated.
My project objectives would be;
* Analysis of the financial performance of Lucky Cement Limited
* Comparison of Lucky’s financial performance with DG Khan Cement its main competitor
* To draw logical conclusions about current and future position of Lucky using from the research and
analysis performed
* Identifying the business environment in which Lucky exists
Research Questions
Having set my project objectives, I have formulated the following questions for my research activity;
* What is the environment in which it operates?
* What factors have led to the success of Lucky?
* How it plans to mitigate risk of falling exports?
* What are the future business endeavors?
Overall Research Approach
Having decided my project objectives and research questions I have developed a plan to direct me how
to go about achieving them. This will help set the path straight and also map out as to what should be
done. My overall approach would be to undertake the following;
* Compute financial ratios including profitability/liquidity/investment ratios for the three years to analyze
the financial performance
* Compare these ratios over three year period and with one of its main competitors DG Khan
* Perform SWOT analysis to identify and understand the business environment in which Lucky exists
* Identify steps undertaken to reduce risk
* Identify future business plans
* Identify critical success factors
INFORMATION GATHERING
Sources of Information Used
To form the basis for my analysis, I believe information is very essential. Sources of information can be
categorized as primary and secondary sources. Primary sources of information are first hand information
which allows the researcher to access original and unaltered information whereas, secondary source of
information as the name suggests are edited or second hand information that has already been used for
any other purpose. Gathering information regarding Lucky Cement was not a very difficult task as it was
easily available.
Annual Reports and Financial Statements of Lucky Cement and DG Khan Cement formed the major
portion of my research. This is because these reports carried large amount of information both financial
and non financial. Further these were credible and can be relied upon because these have been audited
by an independent auditor. It also includes reports produced by the directors.
To further gather information regarding the industry and current developments I made use of business
and economic journals and magazines such as Daily Times and Cement Sector Update produced Global
Securities Pakistan Limited.
Newspaper that I read daily was another source that also contributed its part in information gathering
process. I made use of ‘DAWN’ which is the leading English newspaper in Pakistan. It publishes a
separate paper by the name of ‘DAWN Economic and Business Review’ every Monday on weekly basis.
This contains information and articles written by some of the known people from the field of economics
and business community.
I also visited Lucky Cement www.lucky-cement.com and DG Khan Cement www.dgcement.com company
websites. These contained further information about the background, export and corporate structure of
both the companies and also allowed access to the Annual Reports and Financial Statements for
comparison purposes.
My ACCA textbooks of FTC Kaplan and BPP for F7, P2 and P3 papers came in handy for the purpose of
making analysis about the business and financial performance of Lucky Cement from the information
collected.
I have been very fortunate to hold meetings with the Manager Finance of Lucky Cement. I would take the
opportunity to thank him very much for his precious time and co-operation. He helped me gain an insight
about the financial position, continued success, the way in which it is trying to mitigate risk of falling
exports and future plans of Lucky Cement.
Finally, I used internet which has become a necessity in this world of technology where enormous
amounts of information is available on just a single click of a mouse. Through this I gained access to
Business Recorder and Financial Daily, which are the leading financial newspapers in Pakistan
www.brecorder.com and www.thefinancialdaily.com. Here I made use of handful articles regarding Lucky
Cement and the cement industry. Furthermore, I used the website of Karachi Stock Exchange or KSE
www.kse.com.pk. KSE is Pakistan’s largest and oldest stock exchange, with many well known both
Pakistani and multinational companies being listed over here. It has also been declared as the ‘Best
Performing Stock Market in the World’ in 2002 by Business Week. I obtained the share price and recent
announcements made regarding Lucky and DG Khan Cement for the purpose of ratio analysis from this
website.
Description of Methods Used to Collect Information
As mentioned it was relatively easier to collect information regarding Lucky Cement as compared to some
other company because so much information was available over various mediums. Therefore, with so
much information I had to be very careful in selecting the information that was relevant for my research
and further had to ensure that I incorporate it in a way that it remained pertinent for my project.
What I first did was to go to the Karachi Stock Exchange from where I paid a nominal amount of money to
obtain the latest Annual Reports for Lucky and DG Khan Cement for the years 2008-09 and 2009-10. The
Annual Reports for 2007-08 was downloaded from the internet from their company websites.
I also made a positive use of my membership with the Karachi Club where I frequently visited its library.
There I found few articles in the newspaper and the business journals. I found loads of information but
mostly regarding the current period.
Internet which has become an important part of our daily lives was used hugely for my research.
Whatever information I could not find in the library e.g. for previous years I used search online. Google
and Yahoo which now are household names were often made use of. I used to type in the information
require in these search engines and after just a click all the information and other links became available
on my monitor’s screen.
One of the important sources for my research was the meeting with the Finance Manager of Lucky
Cement. I had beforehand made questions that I wanted to ask the Manager. The meeting with him
turned out to be very fruitful as it not only enhanced credibility but also helped me with the analysis of
financial position and performance. It also provided me a healthy insight about the financial affairs of
Lucky Cement.
My ACCA textbooks which I had kept very safely proved to be helpful yet again. It helped me brush up my
formulas for the financial analysis.
Limitations of Information Gathering
I cannot place reliance on all the information if that is gathered through both primary and secondary
sources. Since I used both the sources of information, throughout my gathering process I remained
conscious which information to rely on and which no to. The reason being I collected information from
varied sources which also includes meetings, newspaper, internet and business journals. Meetings being
considered the primary source were authentic because of the authority of the person directly related to
Lucky Cement. Similarly, Annual Reports are also credible as these have been audited by the auditors of
both the companies giving assurance regarding the financial statements and other information contained
in them. Whereas, information available in the newspapers or online could be doubtful to blindly rely on
because these sources are secondary. This is because information available may have been collected for
any other purpose that may not be pertinent for my research.
Some of the limitations that I encountered during my research phase could be listed as follows;
* I was only available to hold two meetings with the Finance Manager because of his busy schedule
* I was not able to hold long discussions due to which I may not have acquired detailed information which
may be required
* Since I had to find information regarding previous few years I may not have been efficient to find all the
information
* As large amounts of information was available, I may not have incorporated some complex and difficult
issues which I was not able to understand fully
* Information obtained from varied sources other than Annual Reports could have an element of biasness
Ethical Issued Involved
During my research I had encountered no such situation where I had to act in an ethically prescribed
manner.
Accounting and Business Techniques Used
To be able to use my information gathered wisely from which I can analyze and draw out reasonable
conclusions I had planned to use some accounting and business techniques available. These accounting
and business techniques have been very helpful not only in analyzing the financial position and
performance of Lucky Cement for the years in consideration but also provided with ability to foresee
future.
The techniques that I have used for my project are;
* Ratio Analysis
Ratio analysis is one of the widely used accounting techniques. It has been proved to be helpful to assess
the financial position and performance of any company over the period of time and in comparison to that
of its competitors or industry averages by the use of calculations of finical ratios. The financial ratios are
calculated using formulas from the figures of various components extracted from the financial statements.
These ratios can be in the form of percentages or days depending in the way it has been meant for
interpretation. These ratios need to be compared with others to be meaningful and be able to become
part of decision making. The ratios can be categorized into Profitability, Liquidity and Investment
depending on their information depicted by them.
* SWOT Analysis
SWOT analysis also a widely and most commonly used business technique used to identify the business
environment in which a business operates. It not only looks into the internal environment but also takes
the external environment into consideration. It considers the Strengths, Weaknesses, Opportunities and
Threats of an entity for the purpose of analysis. This information can then be further used for future
decision making.
* Critical Success Factors
As the name suggests these are success factors that have proved to be vital for the success of the
business. These are usually those factors which are valued by the customers of the company and
therefore, need to be paid attention to for further success of the business.
CRITICAL FINANCIAL ANALYSIS
* Ratio Analysis
As already discussed Ratio Analysis is a useful technique which is widely used for interpretation of
financial information to analyze financial position and performance of a company. It is commonly used by
current and potential stakeholders including investors to assess the profitability.
To get a brief overview of the performance we can start discussing the volume of production and sales.
As the above graph shows over the years, both the production and sales levels rose. Production levels
rose due to expansion in production capacity at Karachi Plant and sales level rose due to increased
exports.
The below graph shows the overview of the sales, cost of sales and profit figures. The trend that is easily
visible from the below graph shows that FY2009 has been a bumper year for Lucky Cement and it was
the best year since its inception. Sales revenue and profit were record high in this year. Everything picked
up in year 2009 as compared to FY2008 but then in FY2010 these figures were lower.
Increase in sales revenue is evident from the increase in sales volume figure. But this was not the case in
the year 2010 because of falling market price both in the local and international markets.
Sales revenue increased by 55.3% from the year 2008 to 2009 and then fell by 7% in year 2010 as
compared to 2009.
Cost of sales continuously increased over the years. The reasons for this are increase in production
volumes, power/energy costs and packing materials.
The figures for gross profit and net profit rose for the year 2009 and then fell in 2010. Gross profit rose by
almost 125% from 2008 to 2009 mainly due to better retentions in the export market. But this fell by
18.7% in 2010 over 2009. Net profit rose by 71.7% in 2009 over 2008 and then fell by 31.7% in 2010 over
2009.
1) Gross Profit Margin
Gross profit margin is the margin that company makes over its sales.
Lucky’s GP margin rose to 37.26% in 2009 from 27.73% 2008 and then fell slightly to 32.55%. The main
reason for increase in 2009 is record sales achieved both in the local and export market and due to
higher retention margins that were available in the export market in 2009. Whereas, it fell in 2010 due to
reduced sales and increased cost of sales. Cost of sales mainly increased because of higher fuel/power
costs, depreciation and packing material costs.
2) Net Profit Margin
Net profit margin is the ratio of the after taxation profit over the sales revenue.
Lucky Cement has shown an increase to 17.46% in its net profit margin for the year 2009 over 15.79% in
2008. Again the main reason is the record sales revenue which largely offsets the increase in finance
costs, distribution and taxation rose. But this fell largely in 2010 as compared to 2009 to 12.8% because
of huge increase in distribution costs which includes logistics and related costs by 42.6% in 2010 over
2009 due to increased exports. Administrative costs also rose by almost half which is because of new
recruitments to the work force. This is evident from the recent expansions to that need to be managed.
3) Return on Capital Employed (ROCE)
Return on capital employed depicts the strength of earnings from the operations of the business. It shows
how efficiently the business manages and utilizes its resources to earn profit from the net assets
available. During the years 2008 to 2010 a mixed trend is visible. This immensely improved to 21.9% in
2009 from 9.16% in 2008 but then fell to 13.96% in 2010. Reasons for the increase in 2009 can be
attributed to the repayment of long term finance which reducing the current portion of long term finances
hence, reducing current liabilities. Profit before interest and tax rose since finance costs of Rs.1.2 billion
has not been included in the calculation for 2009 as in formula. However, it almost halved in 2010
because PBIT fell over the year whereas nets assets did not fall by the same ratio as PBIT as compared
to 2009.
4) Return on Equity (ROE)
Return on equity is a measure that shows how has been the shareholders’ fund utilized through the
developing a relation between profits earned (after tax) and shareholders’ investment.
It was noticed that ROE rose for the year 2009 to 19.77% from 14.35% in 2008 because of higher profits
earned due to increased sales and higher retention margins. Whereas, for 2010 it fell to 12.5% from 2009
because of fall in sales revenue and increase in shareholders’ fund which rose due to increased reserves.
5) Asset Turnover
Asset turnover measures company’s efficiency in generating revenue from the utilization of net assets
(capital employed) which are available to it. Overall the asset turnover ratio improved greatly from 63.87%
in 2008 to 89.88% in 2009 depicting very efficient usage of resources. This was mainly due to greater
proportionate jump in sales (55.27%) than net assets (10.32%) over 2008 in 2009 due to repayment of
long term finances. However, for 2010 it fell slightly to 85.49% due to fall in sales.
6) Current Ratio
Current ratio shows ability of the firm with regards to current assets to pay off the future obligations which
are its current liabilities.
For the entire fiscal years current ratio remained under pressure and fell over the years. In 2008 it was
well above 1.09 times. This shows that the company could easily pay off its current liabilities from the
current assets. But this ratio fell to 0.89 times because of increase in short term borrowings by 71.6%
which was obtained to meet working capital requirements. This ratio further deteriorated to 0.71 times in
2010, along with an increase in short term borrowings this year level of trade payables also rose whereas,
stock in trade and cash and bank balances fell due to which ratio worsened.
7) Acid Test Ratio
Acid test ratio does not include inventory in the calculation of the ratio to assess whether the company
possess enough liquid resources to settle is current liabilities.
For the calculation of this ratio only stock-in-trade has been considered as inventory. Acid test ratio shows
a similar trend as current ratio which is worsening over the years. It fell from 1 time in 2008 to 0.73 in
2009 and then to 0.65 in 2010. This fell in 2009 because of decrease in other receivables due to no gain
on interest rate/cross currency swaps and further due to rise in short term borrowings mainly due to
higher export refinance facility obtained in 2009 against exports. Whereas, in 2010 it deteriorated
because of reduced cash balances on current accounts that were held and reduced trade debtors.
8) Inventory Turnover Period
This period indicates the number of days inventory is held before being sold. The lengthier the period the
more inefficient is the management of inventory. But this usually depends on the type of business the
company is in. (Stock in trade considered as inventory)
In 2009, this stands to 26 days worsening further from 21 days in 2008. The reason could be higher
exports due to which cement could have been stored at silos near ports because of late loading into
ships. But this improved very well to 13 days in 2010 over 2009 which evidenced improved inventory
control though production and sales rose over the year.
9) Debtors Collection Period
The period is a measure of time taken by customers to pay off their debts to the company what they owe.
(Sales used in the calculation)
It can be seen that this lengthened from 16 days in 2008 to 18 days in 2009 showing that the company
has not been efficient in debt collection and rather long credit terms had been given. This may lead to
increase in irrecoverable debts. But in 2010 this was improved to 12 days showing better credit control
policy adopted for cash flow management.
10) Creditors Payment Period
This period represents the time taken by the company to pay off its creditors. (Cost of sales used for
calculation)
It is visible that the company adopted a policy to take longer to pay off its creditors where it increased
from 15 days in 2008 to 18 days in 2009 and then further to 20 days. This would mean that company
could not avail discounts on early payments from suppliers.
11) Gearing
Gearing shows the relationship between the company’s equity capital and reserves and its debt. Gearing
is said to be high for an entity if it has obtained more debt finance. A highly geared company is more at
the risk of insolvency. (Long term finance used for calculation).
What we can see is that company has been improving its gearing position and it can be easily considered
low geared. This indicates a good health financially in terms of solvency. Over the years it reduced from
26.33% in 2008 to 15.61% in 2009 and then to 6.2% in 2010. This was mainly because of repayment of
long term finances.
12) Interest Cover
Interest cover is a measure of company’s ability to pay interest on finances obtained from the profits. The
lower the ratio, the more riskier it is for the company to pay off interest out of profits and therefore, less
left to be paid in terms of dividend to shareholders. (Finance cost used for calculation).
For 2008 it was 19.2 times but then fell drastically to 5.19 times in 2009. Although long term finances
reduced, short term borrowings increased which carried higher mark up rates in 2009 (12.87% to 17.75%)
which in 2008 was (9.77% to 14.63%) hence, increasing interest. In 2010, this slightly improved to 7 times
mainly due to repayment of long term finances reducing interest payments.
13) Earnings per Share
EPS is the measure of the proportion of earnings after tax for each ordinary share which is in issue.
(Weighted number of ordinary shares used for calculation).
For the year 2009 EPS rose for Lucky Cement to Rs. 14.21 from Rs. 9.98 in 2008. This was a result of
higher profit made in 2009. For the year 2010 it fell to Rs. 9.7 over 2009 and this again due to fall in
profits after tax.
14) Price Earnings Ratio
The P/E ratio represents what the view of the market in regard to the future prospects of the share of a
company. The higher it is, the higher is the confidence of shareholder in the future growth. (Share price
used for calculation is of last day of FY).
P/E ratio for 2008 stood at 9.81 times which then fell to 4.12 times in 2009 because of the decrease in the
share price which was due to downfall in the global stock markets. For 2010 it slightly rose to Rs. 6.41
times due to a slight rise in stock market after international recovery of the economies.
Karachi Stock Exchange, Market History [Online]
* Comparative Analysis
In order to drawn better conclusion I will briefly compare the results of Lucky Cement with its main
competitor DG Khan Cement. DG Khan is the second largest producer of cement with 4.21 mtpa and
10,000 tons per day of capacity of cement in Pakistan. Engineer Hussain Ahmad Siddiqui (2009), Need
for steps to raise cement production. Business Recorder [Online].
I can start with the comparision of sales revenue and profit after tax figures as shown in the graph below.
A similar trend can be noticed between both the companies where sales revenue and profits rise in the
FY 2009 as compared to FY 2008 and then fall in FY 2010 over previous year. This is due to rise in over
exports from the Pakistani cement manufacturers.
It is quite evident from the above graphs that again a very similar pattern is visible in the gross profit and
net profit margins of both the companies. Gross profit margin for DG Khan rose by almost a half whereas,
for Lucky it showed a decent rise for the year 2009. But in the year 2010, again the fall for DG Khan was
halved although sales fell, cost of sales rose due increased energy and packing costs. For Lucky the fall
was lower amid decreasing sales, cost of sales rose but by a minimal.
Net profit margins rose in 2009 and then fell in 2010. Over all the years NP margin for DG Khan has been
under pressure due to mounting expenses whereas Lucky has been good in the ability to manage
expenses especially the finance costs but that is due to lower finances availed by Lucky.
A similar pattern is noticeable for ROCE where it rose (2009) and fell (2010) significantly for both.
However for all the years ROCE of DG Khan was lower than that of Lucky although. DG Khan has more
net assets at its disposal.
Return on equity also remained lower than that of Lucky for DG Khan which shows that Lucky is
efficiently utilizing its shareholders fund. In 2010 for Lucky it was 12.5% and for DG Khan it was 0.88%
even though it had more reserves.
Asset turnover when compared was much better for Lucky which stands at 85.49% and 48.93% for DG
Khan in 2010. However, in 2009 it more than doubled for DG Khan. Overall it remained lower even
though it had more net assets at its disposal than Lucky as shown below.
Current Ratio
| 2008 | 2009 | 2010 |
Lucky Cement | 1.09 | 0.86 | 0.71 |
DG Khan Cement | 1.59 | 0.84 | 1.19 |
DG Khan overall has a better current ratio compared to Lucky because of revaluation surplus on available
for sale investments made during the years. It fell in 2009 but then improved in 2010 again whereas, for
Lucky it kept on deteriorating.
Quick/Acid Test Ratio
| 2008 | 2009 | 2010 |
Lucky Cement | 1 | 0.73 | 0.65 |
DG Khan Cement | 1.56 | 0.78 | 1.12 |
A very similar trend to current ratio is visible for acid test ratio also. It kept on worsening for Lucky but
improved for DG Khan although DG Khan over years increased its balance of stock in trade.
Gearing for both the companies improved over the years and they have been repaying their long term
debts. Furthermore, DG Khan in 2010 has seen a rise in its reserves due to increase in share premium
and gain on fair value adjustments.
Earnings per Share
| 2008 | 2009 | 2010 |
Lucky Cement | Rs. 9.98 | Rs. 14.21 | Rs. 9.7 |
DG Khan Cement | Rs. (0.21) | Rs. 1.63 | Rs. 0.7 2 |
This is better for Lucky than DG Khan. However, the trend is similar for both the companies. It reduced for
DG Khan because of issuance of ordinary shares at a premium. All this meant lower profits left for
distribution to shareholders.
Price Earnings Ratio
| 2008 | 2009 | 2010 |
Lucky Cement | 9.81 times | 4.12 times | 6.41 times |
DG Khan Cement | -319.7 times | 18.19 times | 32.81 times |
As can be seen DG Khan’s P/E ratio is improving over the years due to profits being made after the loss
suffered in 2008. Showing signs of increasing shareholders confidence. For Lucky it deteriorated but then
improved due to increasing share price.
Share prices for both the companies are as follows for the years 2007-2010.
Karachi Stock Exchange, Market History [Online]
Business Analysis
* SWOT Analysis – Lucky Cement Limited
SWOT Analysis
Business Environment
Internal Environment External Environment
Strengths Weaknesses Opportunities Threats
The above diagram shows SWOT Analysis which as discussed is a useful business analysis tool used to
analyze the business environment in which a company operates. Internal environment includes the
Strengths and Weaknesses that the company possesses whereas, external environment includes the
Opportunities and Threats that are present to the company and relate to factors that are outside
company’s control. The strategy is can be formulate and related decision taken by combining the
strengths with opportunities available. Following are some of the factors identified.
Strengths
* Lucky is the largest manufacturer and exporter of cement in Pakistan helping to achieve economies of
scale
* It has the highest export market share of 30% and a major portion of local sales with the market share of
13%.
Lucky Cement Company Limited - analysis of financial statements financial year 2003 – 3q 2010. (2010)
Business Recorder [Online]
* Lucky is listed on all three stock exchanges of Pakistan and on London Stock Exchange
* Lucky Cement has a strong brand name in the international cement market
* It has employed hybrid technology and Chinese plant and machinery for the production to help reduce
fuel consumption hence lowering costs
* Having production facilities in the North and the South of Pakistan has ensured consistent supply of
cement to all parts of Pakistan reducing inland freight charges
* Lucky has obtained numerous quality standard certification from countries namely from India, South
Africa, Nigeria and Sri Lanka.
* The management of lucky cement limited has entered a memorandum of understanding (MoU) with m/s
Oracle Coal Fields plc, the UK developers of 1.4 billion tons coal deposits in Pakistan, for the supply of
indigenous coal for its cement plants.
Lucky Cement, Oracle Coal Fields Signs MoU (2010). Business Recorder [Online]
* On a self finance basis Lucky has set up power generation facility on its site to ensure continuous power
supply at all times at cheap rates. Lucky Cement has singed a memorandum of understanding MoU with
Karachi Electric Supply Company (KESC) for the supply of 49.5 MW of electricity. This power is
generated from Lucky Cement’s Karachi plant.
Lucky Cement Limited, News and Announcements [Online].
Weaknesses
* Lucky has concentrated more towards exports and due to this it does not have a leading market share
in the domestic cement market
* Brand is weak in the local cement industry
* Price of cement produced is higher as compared to competitors because of no compromise in high
quality
* Lucky bears high energy and distribution costs which in total accounts for around 67% of total cost
* In recent years Lucky has expanded due to which management problems have started to arise which
requires structuring to ensure further success
Opportunities
* The recent floods that have devastated many areas of Pakistan and render huge losses to infrastructure
would in future provide huge opportunity for the cement producers in terms of increase demand
* Introduction of REITS laws in Pakistan will play a major role in construction activity
* Pakistan currently has a per capita consumption of 131kg of cement, which is comparable to that for
India at 135kg per capita but substantially below the World Average 270kg and the regional average of
over 400kg for peers in Asia and over 600kg in the Middle East.
Mirza Rohail B (2008), Cement Industry. Economics Pakistan Word Press [Online]
* Depreciation of Pakistani Rupee against US Dollar will help boost exports as foreign buyers would find it
cheaper to buy cement from Pakistan
* Exports to countries such as Brazil where demand for cement is expected to be 55mtpa in 2010 and is
further expected to increase due to 2014 Football World Cup and 2016 Olympics. African construction
industry is growing at a pace of 25% and demand for cement exceeds supply by 7mtpa in Africa. All these
provide huge export opportunities.
* Pakistan has witnessed entrance of international construction companies such as Emaar, Al-Ghurair
and Nakheel into Pakistani construction business which will create demand for local cement
* The government has announced allocation of Rs. 663 billion in the budget for the financial year 10-11
for PSDP (Public Sector Development Program) which means increased construction activity.
Budget 2010-11, Economic Pakistan Word Press [Online]
Threats
* Currently the 13.5% interest rate in Pakistan which is among of the highest in the world pose a huge
challenge for businesses
* Political instability and volatile law and order situation in Pakistan may hamper growth and foreign
investment into the country
* After the break down of cartel by the Competition Commission of Pakistan and imposing fine
* High prices of cement products which, according to cement manufacturers, are coupled with exorbitant
taxes and duties, coupled with dampening local demand, have weakened the majority of cement
producers, financially, rendering them incapable to meet the upcoming rising demand.
Iqbal Mirza (2010), Cement Sector Needs Relief to Meet High Local Demand. Business Recorder [Online]
* The recent steps by Western countries to reduce their budget deficits and debts will hamper global
construction activity
* Cement industry in Pakistan faces high fuel costs, power tariffs and financial costs which make
Pakistani cement less competitive for export purposes.
* Iran (9th Largest producer) and Saudi Arabia have over the years implemented cement capacity
expansion projects and are reckoned as main source of cement supply to the Middle East in future which
means reduced exports from Pakistan to this region
Engineer Hussain Ahmad Siddiqui (2009), Need for Steps to Raise Cement Production. Business
Recorder [Online].
These countries posses huge oil reserves and therefore, may sell at cheaper rates due to low energy
costs
* Recently Competition Commission of Pakistan fined the cement producers for operating as a cartel its
consequence have been in terms of falling prices in local market hence, falling revenue from sales
* Critical Success Factors
Critical success factors (CSFs) are factors that are essential for an organization or business to achieve its
objectives and success. Since these factors are very important, special and continual attention must be
paid to bring about high performance. The organization must outperform and outclass its competitors in
these factors to reach to the top and achieve competitive advantage. Some of the CSFs that have been
identified for Lucky Cement Limited are as follows;
* Quality
One import factor in cement is its quality. Lucky has continuously worked hard to maintain high quality
standards through stringent quality control and application of most modern quality control techniques. E.g.
According to Pakistan and British standards Psi requirements which depicts strength are 5000 and 5950
respectively whereas Lucky produces more than 7000Psi. Lucky Cement Limited, Products [Online].
* Strong Infrastructure
Over the years Lucky has developed a strong infrastructure. Lucky has installed cement storage silos at
port capable of storing 24,000 tons of cement and also setup automatic ship loaders at the site to make
fully automatic loading from silos into the vessels. The fast discharge into the vessels enables quick
loading time ensuring availability of cement at port hence strengthening exports. Lucky Cement Limited,
Annual Report (2009/10)
* Innovative
Lucky has always been the pioneer in the cement industry in Pakistan. It was the first to start exporting
loose cement for which it current has a 98% market share. It was again the first one to adopt the Waste
Heat Recovery Project, where waste heat generated from the production of clinker is used to produce
power and conversion of furnace oil based engines to gas or coal based. The storage facilities built at
ports were again the first of its kind in Pakistan.
* Exploring new markets
Lucky always remains in constant search to explore new markets for it products. This can be easily
justified from the varied countries it exports to other than the conventional Middle Eastern markets.
* Consistent Supply
The management of Lucky Cement has been involved to ensure consistent supply of cement to its local
and foreign customers. The two cement plants, huge fleet of 77 bulkers which carry ready mix concrete to
construction sites, silos as ports for storage and automatic ship loading facilities have all contributed
towards consistent supply of cement.
* Technology
Lucky has been always invested in the state of art technology be it the Chinese Waste Heat Recovery
Project or the European automatic ship loading facility the first of its kind in South East Asia and the
Middle Eastern region.
Conclusion
The conclusion we can draw from the analysis is that Lucky has performed well over the years noticeably
in FY 2009. However, the performance drifted lower in FY 2010. The main cause of worry for the past
years has remained with the energy and distribution costs which have been escalating year after year
putting intense pressure on profits.
What we can see is that the company’s business strategies have proved to be successful and have
helped in the growth considerably. The issues need to be stressed include falling exports to once
considered conventional markets, the Middle East. To avoid the fall, current strategy to set up plant in
South Africa could prove to be positive. The business should now divert focus towards local cement
market which previously has been ignored due to huge demand. For this the brand need to be
strengthened locally and a very co-ordinated and vigilant dealership network to be developed. Visionary
move of capacity expansion could support the increasing demand in the future, after government setting
aside a huge amount for PSDP and recent havoc played by floods which now need reconstruction at a
large level.
Current position of domestic cement industry is very fragile with huge debts of Rs.120 billion and cement
manufacturers halting production due to mounting costs such as energy and finance. Furthermore, high
interest rates in Pakistan are playing a negative role in the growth of cement industry which stands at
13.5 %. It would be advisable not to burden the balance sheet heavily with finances obtained from
financial institutions to avoid high financial costs.
The breakdown of cartel has also had a bad impact on the whole industry including Lucky as since then
prices of cement have been falling putting pressure on margins and hence, profits.
Lucky has not only been successful on the financial level but also as a responsible corporate citizen by
investing in education where it has in collaboration developing a school for the under privileged along with
the Tabba Heart Institute.
Lucky has huge potential and ability to perform well in the future if it stick to the current strategies of
economies of scale, maintaining quality, innovating new ways of doing business and exploring new
markets.
Meetings with the Project Mentor
Planning the meetings
The first thing I did after my decision to undertake research project was to download the Information
Pack. Before starting with RAP I went over the Pack in depth to know what it exactly requires. During
which I found that I would need a project mentor. It was then I decided to ask my Tutor Mr. Sohail Ali to
become my project mentor.
I had requested my tutor if he could act as my mentor and as always he was kind and helpful then agreed
to it.
First Meeting
Before my first meeting I had already chosen and decided which topic and organization to work on.
Taking advantage of the meeting, I discussed with the mentor the topic an organization I had chosen. I
had some questions relating to the topic which after discussion and explanation by him were cleared. To
find out if I had clear understanding of what is required of RAP, he inquired the reasons for the choice of
my organization. I presented to him a rough timetable stating out the deadline and time to be taken for
each section of RAP. After reviewing, he helped me out to make it more realistic and with clear deadlines
for each section, keeping time out for review and submission.
He then asked what were my research project aims and objectives. He helped me cut down some of
them because of the word limitation since I had listed quite a few. After this he asked what approach I
would follow to go about with for the RAP. He was well satisfied with the research approach and the
sources for gathering information that I put forward to him. He mentioned some sources for my gathering
purpose which was of quite help.
Overall the meeting was very helpful, it paved the path that I need to follow for my research. By this time I
had a clear view of everything.
Second Meeting
Before going for my second meeting with the mentor I had gathered, evaluated and sorted relevant
information for each section. I had also conducted my first interview with the Finance Manager, calculated
financial ratios, searched reasons for variations and analyzed business environment. I had done all this
on my laptop which I presented to him but was all in a draft form.
Main purpose of the second meeting was to update my mentor on the progress and to obtain his
assurance regarding the work that I had carried out until then.
After reviewing of the work, my mentor pointed out that I had gathered too much information which he told
that I need to cut down to ensure is remains within the word limit. I had used Porter’s 5 forces and SWOT
for my business evaluation purpose. After discussion he suggested that I should remove the porter 5
forces. To ensure that I cover the business evaluation comprehensively I suggested if I use Critical
Success Factor instead. This meant that I needed to amend the initial approach and plan to incorporate
the change and also needed to collect further information on this topic. Therefore, it was after this that I
held another interview with the Finance Manager. I had to ensure that the change remains coherent with
the aims and objectives.
Overall the feedback obtained from the mentor was of great importance and help. He pointed out that
evaluation of financial ratios needed to be more in depth incorporating economic factors also whereas,
information gathered was too detailed though consistent. I was successful in following the plan set out in
the first meeting but I needed to speed up to meet the final deadline since I had utilized more than allotted
days for information gathering.
By the end of the meeting, I knew that I have to now utilize days left more efficiently and effectively
though requiring some further work that needed to be done. I now had no time to make a draft before
everything and so everything needed to be on computer and in a manner that it can be presented. I
remained confident throughout that I will be able to pull it off well in the short time left.
Third Meeting
Before the third meeting I had completed every aspect of my RAP other than the SLS. I had converted my
draft into formal and final form. I had developed a 12 -15 minutes presentation using Microsoft
PowerPoint which I was to give to my mentor and few colleagues. The presentation mainly outlined a
summary of the whole project and conclusion.
Before giving the presentation, I had made a hardcopy of the presentation which I gave to the mentor so
that he can easily follow it. During the presentation my mentor and colleagues whom I had requested to
allow their time kept on asking questions relating to the presentation.
By the end of the meeting that mainly focused on the presentation was very praised by all and most
importantly by my mentor. He mentioned some areas for improvement in the presentation but on the
whole like it. He pointed out that I had incorporated the changes quite well hence ensuring consistency.
All this feedback raised my confidence level and morale encouraging me to submit.
Slides from the presentation given are as follows:
What did you learn from the meetings with your Project Mentor, including the presentation that you gave
to your Project Mentor?
All the meetings and the presentation proved to be a great and vital learning experience for the rest of my
career. I have gained and learned much more than I could have thought of. The whole experience from
the first meeting where I had little or relatively vague idea till the last were I gave a presentation and had
completed the whole project, had been a great learning curve. Each meeting provided an opportunity to
learn more and something different. My project could not have been in a shape it now developed into had
I not conducted meetings with the mentor.
There are quite a few important things that I really learned which will definitely prove to be helpful in the
future. Most importantly I realized the need to develop a detailed plan with realistic deadline before
starting off with any project in order to complete it in time, covering all required aspects and avoid wasting
time on less important areas. Self confidence, hard work, determination and focus are also very important
factors that are needed for one to succeed in any project. Listening is an also an integral point one must
be aware at all time because ensure that no important issue is missed out. I learned to keep a book and
pen in order to immediately write down points mentioned so they can be incorporated. One must convey
his message clearly for others to be understood correctly. Communication must be two ways to be
effective and one must always ask for response or feedback at the end.
With respect to presentation I must rehearse it thoroughly to avoid any mis happen when delivering it in
front of the audience. One should speak clearly and loudly for it to be heard by all. Maintaining eye
contact, smiling and the use of hands are important parts of presentation which shows confidence. Asking
for questions after every part keeps the audience involved.
How well do you think that you have answered your research question(s)?
I believe I have answered the research questions quite well. As discussed I had to make changes to the
questions that I had initially set out due to the work limitation. I had developed research questions that
covered different aspect of the organization.
For the evaluation and analysis of the business environment in which Lucky Cement operates, I used
SWOT analysis, PESTEL and Porter’s 5 forces. I had gathered and sorted out all the relevant information
regarding each technique. But later due to word limitation I had to remove the later two and instead used
Critical Success Factors so that I can comprehensively evaluate the environment. Had I made use of all
the techniques I had planned to use my RAP would have been more detailed reflecting factors present in
the cement industry and those having impact on Lucky Cement.
My questions of mitigating risk of falling exports and future business endeavors were answered through
the interviews conducted with the Finance Manager. Although reasonable conclusions can be drawn from
them, I feel it could have been answered well had I been able to conduct longer and more interviews.
Furthermore, if these were answered by someone more relevant e.g. Operation/Marketing manager then
these could have provided real insight into them. I was also able to find them over the internet but again I
could not incorporate them due to reliability. Annual reports were of also some help as it contained a
section relating to future plans.
The answer to the question of success factors has been answered comprehensively as I conducted an
interview specifically for it and I myself through extensive research identified them. I covered few points
which I felt were most important and left out a few.
On the whole, although there were some limitations but still I believe in the end it has shaped out well.
How have you demonstrated your interpersonal and communication skills during the project work?
I understand that one must assess the audience before adopting a communication style or method to
convey the message across effectively.
From the beginning, I was able to justify and explain the reasons for my choice of topic, organization and
goals of the project well to the mentor so he gets to know what I intended to do.
I remember before going in for a meeting with the mentor I beforehand developed what questions and
noted them down in a book that I would be asking. This helped me to retain them whenever any arose
during the making of project. I from the business studies paper in A Levels had learned to develop
concise, relevant and open ended questions which require more information from the person asked from.
I kept on asking explanations for questions if the answered wasn’t clear in first instance. After listening
and understanding I kept on writing the answers down in points so not to forget later.
Whenever he was asking I maintained an eye contact with him demonstrating my willingness and interest.
I tried not to talk too much but let him speak. I tried not to interrupt whenever he was saying something
until he finished talking.
Listening is another aspect that I feel I clearly demonstrated during the meetings with the mentor and
interview with the Finance Manager. I quietly listened so that I understand clearly what is being said and
not to miss out on important points made during discussions. I never felt bad to whatever criticism he
made as I knew that it is for my well being and betterment.
How has undertaking the RAP helped you in your accountancy studies and/or current employment role?
Before starting with the RAP I did not know that it would be so much detailed, comprehensive covering all
angles. However, I once I finish with it, it was then I realized to be a learning experience that will
immensely help in my future career. It not only focused on the accounting knowledge that has been
gained in my studies during ACCA papers but it also included presentation, computer and interpersonal
and communication skills.
It gave me an opportunity where I calculated financial ratios, analyzed them and identify factors for
variations. Before I had only done this in exams based on hypothetical questions. This time it was real
and cleared any concepts which before were vague. All this made use of accounting and business
analysis skills obtained during ACCA. I also learned how to evaluate the business environment of a
company.
Further, making the project involved extensive use of computer. Not only had this involved using Ms Word
but also Ms Excel and Ms Power Point. All this helped me brush up my skills simultaneously helping me
learn some new skills as well.
It also helped me improve on my interpersonal and communication skills to a great extent most
importantly regarding professional environment. How does one need to conduct interviews and behave
professionally is what I learned. Giving presentation had me more confident and would surely help me
give out a better presentation next time I give it, keeping in mind all the important point mentioned by the
mentor.
To wrap it all up, overall undertaking RAP has proved helpful for my current ACCA papers that I will be
giving in December 2010 and further strengthening my concepts. With respect to future, I am sure that it
will prove helpful at different stages of my career where I would be interacting with persons.
List of References
|
* Lucky Cement Limited, 2008. Annual Report 2007/08
* Lucky Cement Limited, 2009. Annual Report 2008/09
* Lucky Cement Limited, 2010. Annual Report 2009/10
* D.G Khan Cement Company Limited, 2008. Annual Report 2007/08
* D.G Khan Cement Company Limited, 2009. Annual Report 2008/09
* D.G Khan Cement Company Limited, 2010. Annual Report 2009/10
* Lucky Cement Limited, Home [Online] Retrieved from: www.lucky-cement.com [Accessed on 1 Nov. 10]
* Syed Saquib Ali (October 2010) Sector Update, Global Securities Pakistan Limited
* Lucky Cement Limited, Corporate Philosophy [Online]. Retrieved from: http://www.luckycement.com/corporatephilosphy.htm [Accessed on 2 Nov.10]
* Business Recorder, Need for steps to raise cement production. [Online] Retrieved from:
www.brecorder.com [Accessed on 9 Nov. 10]
* Business Recorder, Cement: lucky cement limited - analysis of financial statements financial year 2003
– financial year 2010. [Online] Retrieved from: www.brecorder.com [Accessed on 5 Nov. 10]
* Business Recorder, Lucky Cement Company Limited - analysis of financial statements financial year
2003 - 3q 2010. [Online] Retrieved from: www.brecorder.com [Accessed on 2 Nov.10]
* Business Recorder, Lucky Cement, Oracle Coal Fields Signs MoU. [Online]. Retrieved from:
www.brecorder.com [Accessed on 5 Nov.10]
* Lucky Cement Limited, News and Announcements [Online]. Retrieved from: http://www.luckycement.com/news.htm [Accessed on 2 Nov.10]
* Economic Pakistan Word Press, Cement Industry [Online]. Retrieved from:
http://economicpakistan.wordpress.com/2008/02/12/cement-industry/ [Accessed on 4 Nov.10]
* Economic Pakistan Word Press, Budget 2010-11 [Online]. Retrieved from:
http://economicpakistan.wordpress.com/discuss-budget/ [Accessed on 4 Nov.10]
* Business Recorder, Cement Sector Needs Relief to Meet High Local Demand. [Online]. Retrieved from:
http://www.brecorder.com/news/business-and-economy/pakistan/1112951:cement-sector-needs-relief-tomeet-high-local-demand.html?hl=cement%20industry [Accessed on 6 Nov.10]
* Lucky Cement Limited, Products [Online]. Retrieved from: http://www.lucky-cement.com/products.htm
[Accessed on 5 Nov.10]
* Lucky Cement Limited, 2010. Annual Report 2009-10, p. 27-28.
* Karachi Stock Exchange, Market History [Online]. Retrieved from: www.kse.com.pk [Accessed 9 Nov.
10]
Bibliography
* Annual Reports and Financial Statements
* Lucky Cement Limited for the years 2007/08, 2008/09 & 2009/10
* D.G. Khan Cement Company Limited for the years 2007/08, 2008/09 & 2009/10
* Books
* BPP and FTC Kaplan F7 ‘Financial Reporting’ (ACCA) Study Text
* BPP and FTC Kaplan P2 ‘Corporate Reporting’ (ACCA) Study Text
* BPP and FTC Kaplan P3 ‘Business Analysis’ (ACCA) Study Text
* Newspapers/Magazines
* Financial Daily
* Business Recorder
* DAWN
* DAWN Economic and Business Review
* Global Securities Pakistan Limited (Cement Sector Update)
* Websites
* www.lucky-cement.com
* www.dgcement.com
* www.brecoreder.com
* www.thefinancialdaily.com
* www.economicpakistan.wordpress.com
* www.yahoo.com
* www.google.com
* www.kse.com.pk
APPENDIX - I
Interview Questions
Following are the questions and answers asked in the interview which I had conducted for my research
with the Finance Manager of Lucky Cement Limited.
Q/. What are Lucky’s future business endeavors?
A/. As you know Lucky is the biggest exporter of cement in Pakistan and it is in the future going to take
advantage of this. We are planning to set up our first overseas factory in South Africa in 2011.
Q/. Why South Africa?
A/. South Africa as you may know is among the rapidly growing countries including BRIC nations. South
Africa has a GDP of around $ 2.5 trillions and is expected to grow at a pace of 5% annually. Also its
construction business is growing at around 20 – 25%. All this shows huge potential in that region. Further
what we are planning to do is to start exporting to countries around South Africa which currently are
untapped by Pakistani cement producers.
Q/. Present economic situation of the cement industry in Pakistan?
A/. Over the years cement sector in Pakistan has grown manifolds with around 23 cement companies
now in operation. Some multinationals have also entered the Pakistani area to take advantage of the
potential e.g. Lafarge took over Chakwal Cement a cement manufacturer recently. But presently the
business situation as you would be aware unfortunately is not so bright. Power shorages are at its worst
with increase tariffs. Now gas shortages have also started which was unheard of. Oil prices have started
to rise again in the international market to around $ 85/barrel. Developed economies in the world
particularly in Europe are cutting spending. Prices of cement are falling and have led to price war after the
breakdown of cartelization. The cement industry is heavily burdened by debt of Rs. 120 billion. Some
plants have shut operations e.g. Dandot.
Q/. What are the future prospects of cement industry?
A/. Well we are very hopeful and why shouldn’t we be. Globally demand for cement stands to around 2.5
billion tons/annum and Pakistan only produces 45mtpa. That shows we have huge opportunity to
contribute our share. Locally the catastrophe that Pakistan faced due to floods would require massive
rehabilitation and reconstruction. Government has been generous to allocate Rs.650 billion for PSDP. So,
overall prospects are good.
Q/. How would you rate Lucky Cement?
A/. By now you would definitely know Lucky is the largest manufacturer and export of cement with the
largest market shares. It has received numerous awards such as Annual Environment, Brand of the Year,
Top Exporter Award, etc. Lucky has not only contributed towards the business perspective but also
towards its communities in various ways. Our chairman’s vision for society is very dynamic. Our recent
collaboration with LUMS (Lahore University of Management Sciences) is a great achievement where
Lucky would sponsor and provide scholarships to underprivileged brilliant students. All this has helped
Lucky as a brand to strengthen.
Q/. Which one factor would you say has contributed the most in Lucky’ success and why?
A/. Innovation. Lucky has always been the trend setter in the cement industry. We were the first one ever
to start exporting loose cement and first to issue GDRs on London stock exchange. We have set up our
own power generation facility from which we have signed an agreement with Karachi Electric Supply
Company (KESC) to supply them electricity. We are the first one to adopt the Waste Heat Recovery
system and have also signed an agreement with the City District Government Karachi (CDGK) for supply
of solid waste which will be processed and used as a replacement fuel for coal consumption for Karachi
plant. The reasons being this has helped us in many ways e.g. reducing power/energy costs, establish
our brand in the international market, enhance exports through automatic ship loaders at port or export of
loose cement.
Q/. One issue that is on the top list and what has been planned to avoid it?
A/. The top most critical issue facing Lucky is falling exports. This is mainly due to reduced exports to
countries such as Iran, Saudi Arabia and UAE which were once considered to be high exporting countries
for Pakistani manufacturers. We have now developed a business plan to start concentrating on the
domestic market because of its huge potential. As mentioned earlier we are now in the process to start
exporting to Europe and set up plant in South Africa. Basically diversifying and moving to untapped
markets in regions other than Middle East.