FALL 2022
Course Title: Cost Accounting
PROJECT REPORT
Submitted by
Hamza Rehman
Ismail Shabbir
Ali Hussain
Asfand Khan
Hassan Mahmood
Reg. No.: L1F21BSAF0032
Reg. No.: L122BSAF0010
Reg. No.: L1F21BSAF0127
Reg. No.: L1S22BSAF0045
Reg. No: L1S22BSAF0021
Submitted to
Sir Atif Ghaffar
Abstract
The present report was produced to explore the financial health and
efficiency of Adam Sugar Mills Limited, Punjab, Pakistan through
analyzing financial ratios. This is an analytical study and the secondary
data was obtained from Pakistan Stock Exchange, covering annual
financial reports of the company for the years 2020, 2019 and 2018. The
results of the report indicate that the company’s financial health
remained dormant in the financial years 2018 and 2019. However, things
rapidly changed in 2020. There are several reasons for it. One is that the
government has accepted the demand of the sugar mills association to let
them export sugar. This paved way for the shortage of sugar in the
country and as a result the local demand was also rapidly increased. The
prices are also increased due to supply and demand imbalance. The
market conditions were favorable for the company in the year 2020.
However, some management issues are highlighted as the explanation of
lower financial performance in the previous two years. In 2019 company
clearly face financial problems with respect to all financial ratios studied
previously in the report. More expenses were made in these two years as
compared to fewer expenses in 2020. The report recommends further
improvement in the financial ratios by enhancing transparency and fair
meaning in terms of finances.
Introduction
There are 82 functional sugar industries in Pakistan out of which half of
them are located in Punjab province. Adam Sugar Mill Limited is
situated in the Punjab Province of Pakistan. The factory of the company
is located in Christian and Bahawalnagar District of Punjab, Pakistan.
Adam Sugar Mills Limited was incorporated and commenced its
business in 1965 in Pakistan. This company produces and sells sugar in
Pakistan. At that time, the name of the company was Bahawalnagar
Sugar Mills Limited that changed to Adam Sugar Mills Limited in 1985.
The Board of Directors of the company is from different walks of life.
The vision of the company is to lead the business in the sugar industry of
Pakistan through competitive prices, quality enhancement and meeting
social responsibility. Adam Sugar Mills Limited’s agricultural activities
include wheat, sugar cane and seeds cultivation.
Company Profile
Introduction:
Adam Sugar Mills Limited was incorporated in Pakistan in 1965 in the
name of Bahawalnagar Sugar Mills Limited as a public limited company under provisions of the
companies Act, 1913 (repealed with the enactment of the Companies Ordinance, 1984 and
subsequently, the Companies Act, 2017.
VISION
To be the leader in sugar industry by building the Company image through quality improvement,
competitive price and meeting social obligations.
MISSION
•
•
To endeavor to be the market leader by offering high quality sugar to our customers at
competitive prices.
To continue improving operating performance and profitability thereby ensuring growth
for the company while serving best interest of shareholders.
DIRECTOR'S PROFILE
CORPORATE PROFILE
Corporate Structure
Date of Incorporation
Date of Commencement of Business
Date Of Commercial Production
Brief Description of Business Activities
National Tax Number
Company Registration Number
Company Symbol at Stock Exchanges
Status of Company, if Applicable
(For e.g., ESC, MSC, or SSC)
Associated Companies and their
Website Links
Public Limited Company quoted in stock
exchanges
19 October, 1965
24 November, 1965
15 October, 1966
Production and Sale of Sugar
0709384-5
0002165
ADAMS
Adam sugar Mills limited ( the company) was
incorporated in Pakistan in 1965, in the name of
Bahawalnagar Sugar Mills Limited, as a Public
Limited Company, in 1985, the name of the
Company was changed to Adam Sugar Mills
Limited, The Shares of the Company as quoted
on Karachi and Lahore Stock Exchanges.
ADAM LUBRICANTS
www.adam.com.pk
ADAM PAKISTAN LIMITED
www.adampakistan.com
info@adam.com.pk
GOVERNANCE / BOARD OF DIRECTORS
DIRECTORS PROFILE
MR. JAWAID AHMED
MR. GHULAM AHMED ADAM
LT. COL. ( R ) MUHAMMAD
MUJTABA
MR. JUNAID G. ADAM
MR. OMAR G. ADAM
MRS. NIBHA OMAR ADAM
MR. MUSTAFA G. ADAM
MR. JUNAID G. ADAM
Chairman
Chief Executive
Director
Director
Director
Director
Director
Member
Mr. MUSTAFA G. ADAM
MR. QAMAR RAFI KHAN
Member
(Chartered Accountant)
COMPETITORS
SHJS Shahtaj Sugar Mills Ltd.
-7.49%
-
HWQS Haseeb Waqas Sugar Mills Ltd.
-6.85%
-
PMRS Premier Sugar Mills & Distillery Co. Ltd.
+5.08%
Financial Position
Financial Performance
KEY FINANCIAL HIGHLIGHTS
Business Performance
Profitability Ratio
Year
2020
2019
2018
Sale
Gross Profit Ratio
Gross Profit
Gross Profit Ratio
3,553,991,007
707,990,838
19.92
2,314,623,158
18,824,752
0.081
3,762,793,904
104,718,433
2.78
It shows that performance of the company
was good as 19.92 percent of the gross
profit ratio was recorded in 2020. The sale
was increased and expenses are reduced in
the same year.
However, in 2019, the sale had
decreased and expenses were
increased which led to a limited
gross profit ratio this year. Almost
the same challenges had been faced
in the year 2018 by the company.
Year
2020
2019
2018
Sale
Net Profit Ratio
Gross Profit
Net Profit Ratio
3,553,991,007
623,966,226
17.56
2,314,623,158
(65,959,132)
(2.85)
3,762,793,904
(41,610,566)
(1.11)
The table shows that the most
advanced net profit ratio was
for the year 2020 was 17.56 per
cent. This was the year when
the government of Pakistan
allowed the sugar industry to
export sugar. However, in the
year 2019, more capital was
poured into the advertisement,
selling, wages and
administrative expenses.
In this year, the
government did not
allow sugar industries to
export sugar. More
importantly, the
government had a fixed
rate for sugar cane to
180 PKR per 40kg in the
year 2019. These factors
led the company to have a negative net profit ratio in the year 2019. In the year 2018, the company has
almost faced the same challenges as of 2019.
Return on Capital Employed Ratio
Year
2020
2019
2018
Earnings
Before
Interest
Tax
Total
Assets
Current
Liability
Total Assets
– Current
Liability
Return on
Capital
Employed
Ratio
415,760,363
773,703,633 1,229,502,769
(455,799,136)
91.22
(315,480,488)
282,593,600 2,096,886,417
(1,814,292,817)
(17.39)
(2,595,718)
348,954,034 2,198,195,230
(1,849,241,196)
(0.14)
The table shows that the return on capital
employed ratio was rapidly increased to
41.5 million PKR in the year 2020,
following the consecutive decrease in
2019 and 2018.
This highlights
of invested
returned, a
for the
reason for the
a massive
government to
in Pakistan. The
Pakistan also
demand from
association
sugar. This led
profitability of the company.
that 91.22 per cent
capital was
favorable condition
company. The
rapid increase was
subsidy by the
the sugar industry
government of
accepted the
the sugar
about exporting
to enhance the
Year
2020
2019
2018
Quality of Profit Ratio
Net Profit Net Cash from
Operating Activity
Quality of Profit
Ratio
623966226
439794033
0.70
(65,959,132)
341,829,935
(5.18)
(41,610,566)
181,566,314
(4.36)
The table indicates that the quality of
profit ratio was better in the year
2020 as compared to 2019 and 2018’s
ratios.
The high profitability in the year 2020 was due to a decrease in net cash from operating activities. The net
income was negative in both 2018 and 2019. The reason for this was the massive expenses of the
company.
Year
2020
2019
2018
Current Asset Ratio
Current
Current Liability
Assets
Current Asset
Ratio
917,691,351
1,229,502,769
74.64
1,317,135,799
2,096,886,417
62.81
1,883,598,859
2,198,195,230
85.69
The table shows that current assets and current liabilities are low in the year 2020 which led to a result
current asset ratio reaching 74.64 percent. The most favorable current asset ratio was 85.69 percent in
2018; however, this does not comply
with the better condition in terms of
liquidity ratio. A consistent decrease in
current liabilities is a good sign for the
company in all three years, particularly
in the year 2020. The company is
facing a massive challenge in this
regard as the current asset ratio does
not move above 100 percent.
Year
2020
2019
2018
Cash Cover Ratio
Current
Cash & Bank
Liability
Balance
Cash Cover
Ratio
1,229,502,769
917,691,351
74.64
2,096,886,417
1,317,135,799
62.81
2,198,195,230
1,883,598,859
85.69
The table highlights that cash cover ratio was
favorable for the company in the year 2018 as
the ratio was 85.69. However, in 2019, the
conditions were less favorable as compared to
the year 2020 in terms of cash cover ratio. It
is needed to enhance the cash and bank
balance and decrease the current liabilities in
order to improve cash cover ratio.
Recommendations
There are following recommendations for the problems identified in the previous section.
The sustainability of profitability is the need of the hour for the company as there had been rapid increase
in profitability ratio as recent as 2020. Sustainable growth and development should be incorporated in the
financial policy of the company for future (Kumbirai and Webb, 2010).
The hiring of skilled Laboure and competent management is of paramount significance for the increase in
sales with regard to profitability ratios (Sueyoshi, 2005).
Decrease the current liability and follow up the pending payment receivable with respect to liquidity ratio
(Sulaiman et al. 2001).
The company needs to be fairer in terms of payments to its suppliers and investors. It is also required to
increase current assets with respect to improvement in liquidity ratio (Nissim and Penman, 2001).
It is strongly recommended to the company to increase the productivity, maintain the inventory at an
optimal level and advance machinery in order to have better results of efficiency ratios in the future (Lin
et al. 2011)
References
Kumbirai, M., & Webb, R. (2010). A financial ratio analysis of commercial bank performance in South
Africa. African Review of Economics and Finance, 2(1), 30-53.
Sueyoshi, T. (2005). Financial ratio analysis of the electric power industry. Asia-Pacific Journal of
Operational Research, 22(03), 349-376.
Sulaiman, M., Jili, A., & Sanda, A. U. (2001). Predicting corporate failure in Malaysia: An application of
the Logit Model to financial ratio analysis. Asian Academy of Management Journal, 6(1), 99-118.
Nissim, D., & Penman, S. H. (2001). Ratio analysis and equity valuation: From research to practice.
Review of accounting studies, 6(1), 109-154.
Lin, F., Liang, D., & Chen, E. (2011). Financial ratio selection for business crisis prediction. Expert
Systems with Applications, 38(12), 15094-15102.