MAPLE LEAF CEMENT FACTORY LIMITED

An overview of performance for 2004
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By MUHAMMAD BASHIR CHAUDHRY
Mar 28 - Apr 03, 2005

 

 

 

Maple Leaf Cement Factory limited (MLCFL), the second largest producer of grey and white cement, was incorporated on April 13, 1960 as a public limited company, by the then WPIDC. Later, under WPIDC (Transfer of Projects and Companies) Ordinance-1974, its management was transferred to the State Cement Corporation (SCC). SCC established another unit, Pak Cement Company Limited, incorporated on June 25, 1986, in collaboration with China National Complete Plant Export Corporation. These plants, based on wet process, were producing grey cement. WPIDC had, in 1967, also established White Cement Industries Limited, for producing white cement. It was the first such plant in Pakistan and was also transferred to SCC.

The three units mentioned above were sited in the same location having common raw material and infrastructure facilities. These units were privatized as per policy of the government and management was handed over to Tariq Saigol & Associates on January 8, 1992. The Honourable Lahore High Court approved the merger of the three companies w.e.f. July 1, 1992, keeping in consideration the interdependence and inter-linkage of the factories.

The private sponsors, on April 1, 1998, added a plant with 3,300 tonnes per day clinker capacity based on the latest dry process technology. Optimization of this plant is now in progress through up-gradation of essential equipment and necessary adjustments in operational parameters. The plant capacity will be enhanced from 3,300 tpd to 4,000 tpd at a total cost of Rs236 million.

MLCFL has plans to add another plant with 6,700 tpd clinker capacity to meet increasing demand and to maintain its share at 9% of the market as at present. The new plant would be costing around Rs8 billion. With this, total annual grey cement capacity of the company will increase from 1.5 million tonnes to 3.7 million tonnes. An agreement has been signed with M/s F.L. Smidth A/S, Denmark for supply of the new cement plant, based on latest European technology with energy efficient features.

At MLCFL, process conversion of white cement project is also progressing. The new line will increase its white cement capacity from 100 tpd to 600 tpd. This will cater to the growing need for white cement within Pakistan and also provide an opportunity for exports. The plant and process technology is being supplied by M/s F. L. Smidth A/S, Denmark. It may be mentioned that Anwarzaib White Cement Limited, Hyderabad, is an other producer of white cement with 50,000 tonnes capacity based on dry process. It was commissioned in 1989.

MLCFL is a subsidiary of Kohinoor Textile Mills Limited, which owns 50.13% of its equity. The Board of Directors of MLCFL includes a director representing FLS & IFU, Denmark. This might be due to equity stake of FLS and IFU in the company. However, the Shareholders Pattern of the company as on June 30, 2004, stated to be annexed, has not been found enclosed to the printed annual accounts. Review of the other shareholders in the company is not possible with the relevant details.

The significant improvement in operating results was mainly due to better selling price, higher capacity utilization, conversion to coal firing and reduction in financial charges.

During FY04, the company sold 1,163 million tonnes of cement as compared to 1,048 million tonnes in FY 03. Average retention price increased from Rs2,295 per tonne in FY03 to Rs2,903 per tonne in FY04. Taxes (Sales tax and excise duty) during FY04 on average were Rs1,315 per tonne in FY04 as compared to Rs1,491 per tonne in FY03.

Capacity for grey and white cement remained at 1.47 million tonnes and 30,000 tonnes respectively during FY04 and FY03. Production of grey cement in FY03 was 0.964 million tonnes (66% of capacity) and rose to 1.052 million tonnes (72% of capacity) in FY04. Shortfall in production was said mainly due to market constraints. White cement production during the two years was higher than the rated capacity.

Net sales at Rs3,376 million during FY04 witnessed an increase of 40% over FY03 net sales of Rs2,405 million. Cost of goods sold in FY04 was 66% of net sales as compared to 85% in FY03. Major reduction came from reduced cost on fuel and power, which during the year under review were 34% of net sales as compared to 43% in the previous year. Therefore, gross profit margin increased to 34% in FY04 as against 15% in the previous year. Reduction in financial charges for FY04 is 9% of net sales from 18% of net sales in FY03 contributed more towards raising net profit after taxes from 6% of net sales to 14% of net sales in FY04. Related to equity, net profit for FY04 was 14.25% as against meager 4.67% for FY03. Earnings per share during FY04 were much higher at Rs2.70 as against Rs0.83 in FY03. The plant appears to be out of the bad patch.

Cash generated from operational activities during FY04 increased to Rs1,393 million from Rs567 million in FY03. In line with that, the debt service coverage, to the relief of the creditors, increased from 0.74 times in FY03 to 1.48 times in FY04.

Like many cement companies, MLCFL has faced crises for many years owing to different reasons. Re-profiling of the expensive foreign currency loans by replacement with lower interest bearing local currency loans has now been completed. There is now no foreign currency loan. During FY04, Debt/Equity improved to 39:61 as against 48:52 in FY03. The current ratio remained above one although it declined to 1.03:1 in FY04 from 1.34:1 in the previous year. Price/Earning Ratio at 12.90 is lower than that some of the other local cement producers but as FY04 is the turning point, things are expected to improve in the coming years. Other ratios, mentioned in the table below, pertaining to FY04 have generally improved as compared to the ones for FY03.

As separate cost and revenue data about white and grey cement has not been provided, the review has been made as if the company produces only grey cement. It is, though, recognized that production costs particularly energy input differ drastically for white and grey cement and so does the selling prices and profit margins.

Cement dispatch during January 2005 has been higher than one million tonnes. For 2005, the analysts estimate cement sales to touch 14 million tonnes as against about 11 million tonnes during 2004. This should give a boost to all the cement manufacturers.

The Association of Builder and Developers (ABAD), as per newspaper reports, has recently written a letter to the President, drawing his attention towards the increasing trend in cement prices in the last two years. According to him, the Monopoly Control Authority appears indifference to the formation of cartels. Cement is important for construction industry as well as for building of infrastructure. Collusion among manufacturers for fixing production quota and setting up of prices that are exploitative is not liked in any society. The cement manufacturers might like to give their side of the story to clear the air.

 

 

COMPANY INFORMATION:

Chairman & Chief Executive: Tariq Sayeed Saigol
Director: Sayeed Tariq Saigol
Chief Financial Officer: Arshad Mahmood Qureshi
Company Secretary: Wasif Mahmood
Auditors: Ford Rhode Sidat Hyder & Co., Chartered Accountants
Registered Office: 42- Lawrence Road, Lahore
Website: www.kmlg.com
Factory: Iskanderabad Distt. Mianwali

PERFORMANCE STATISTICS

BALANCE SHEET

(MILLION RUPEES)

As at June 30,

2004

2003

Share Capital-Paid-up:

1,805

1,805

Reserves & Surplus

1,622

1,405

Shareholders Equity

3,427

3,210

LT Debt

2,202

2,954

Capitalization

5,629

6,164

Current Liabilities

1,459

1,157

Total Liabilities and Equity

7,088

7,321

Tangible Fixed Assets

5,563

5,497

Investments, defer. tax, etc

25

273

Current Assets

1,500

1,551

Total Assets

7,088

7,321

RATIOS:

Current ratio

1.03:1

1.34:1

Debt-Equity Ratio

39:61

48:52

Book Value per Share

18.99

17.78

Share Price- Rs (16-2-05)

34.80

-

Price/Book Value Ratio

1.83

-

INCOME STATEMENT

(MILLION RUPEES)

Year ending Sept. 30

2,004

2,003

Net Sales

3,376

2,405

Gross Profit

1,148

362

Operating Profit

1,091

313

Profit before taxation

751

-93

Profit after taxation

487

150

RATIOS:

Gross Profit to sales

34.00%

15.05%

Operating profit to sales

32.32%

13.01%

Profit after tax to sales

14.43%

6.24%

Net profit to Equity

14.21%

13.33%

ROA

6.87%

2.05%

ROCE

8.65%

2.43%

Earnings per share (Rs)

2.70

0.83

Inventory turnover (times)

33.76

24.54

Receivable turnover (times)

38.80

25.86

Cash Dividend - %

15%

0%

Price/Earning Ratio

12.90

-

Asset Turnover (times)

0.48

0.33

Days Inventory

11

15

Days Receivable

9

14

Debt Service Cover. (times)

1.48

0.74