History of company
Lucky Cement Limited currently has the capacity of producing 25,000 tons per day of dry process Cement. Lucky Cement came into existence in 1996 with a daily production capacity of 4,200 tons per day, currently is an omnipotent cement plant of Pakistan, and rated amongst the few best plants in Asia. With production facilities in Pezu (Production capacity: 13,000 Tons per day) as well as in Karachi (Production capacity: 12,000 tons per day), it has the tendency to become the hub of cement production in Asia.
Business Units
Lucky Cement Limited has been sponsored by Yunus Brothers Group (YB Group) which is one of the largest business groups of the Country based in Karachi and has grown up remarkably over the last 50 years. The YB Group is engaged in diversified manufacturing activities including Textile, Spinning, Weaving, Processing, Finishing, Stitching and Power Generation. The Group consists of a number of industrial establishments other then Lucky Cement Limited.
SWOT Analysis
Internal Factor
STRENGTHS OF LUCKY CEMENT
1. Strong Financial Position.
2. High Product Quality.
3. High Pay scale.
4. Highest Export Share.
5. Support by Yunus Group
WEAKNESSES OF LUCKY CEMENT
1. Low Advertising and Less Exposure.
2. Low Gratuity and PF funds.
3. Increasing General & Administrative Expenses
External Factor
Opportunities of lucky cement
1. Upcoming national building projects.
2. Demand for cement in Gulf region
3. Less freight charges for export of cement
4. Expansion in cement industry due to house building loans
by banks.
5. Advancements in technology.
Threats of lucky cement
1. Government Regulations on Slots
2. Price Competition
3. Alliance Opposition.
4. Labor Union Problems.
Opportunity and issues analysis
Analyzing opportunities
| | strengths-S 1. Financially strong 2. High product quality. 3. High Pay scale 4. Highest export share 5. Support by Yunus group | weaknesses- W 1. Low advertising and less exposure 2. Low Gratuity and PF funds 3. Increasing general and administrative expenses |
| opportunities- O 1. Upcoming national building projects 2. Demand for cement in gulf region. 3. Less freight charges for export of cement. 4. Expansion in cement industry. | SO Strategies 1. New factory setup in NWFP. (S1,O1) 2. Increased exports to Gulf region (S1,S2,O2) | WO strategies 1. Can build up exposure and better brand image through right promotional mix. (W1,O1,O2) 2. Can diversify in Gulf region. (W1,O2) |
| threats- T 1. Government regulations on slots. 2. Price competition. 3. Alliance Opposition | ST strategies 1. Overcoming competitor’s pressure through high quality products. (S2, T2) 2. Resolving Alliance oppositions through Management support of Yunus Group (S1,T3) | WT strategies 1. Reduce general and administrative expenses to coupe with narrow competition. (W3,T2) 2. Should consider employee perks to avoid hassles of labor unions. (W2, T3) |
Objectives
Goal Formulation
Vision
Our vision is to supply cement globally at ease, simultaneously publicizing our brand worldwide and identifying our social responsibility by engaging in a number of social welfare activities, for the benefit of poor and needy people.
Mission
We are an industrial organization with a big capital base, using state of the art technology in manufacturing and marketing of cement globally. Our strength lies in the continuous value addition of the Company through sound investments in sustainable areas for customers, employees and shareholders. With no compromise on quality and a vital role to play in social responsibilities.
Planning programs
Proposed Vision
To transform Lucky Cement Ltd into a model cement manufacturing company engaged in nation building through most efficient utilization of resources and optimally benefiting all stake holders while enjoying public respect and goodwill in local and international market.
Proposed Mission
Our mission is to be perceived by our customers as providing highest quality of cement, using state of the art technology and retaining personnel of exceptional ability. Moreover, Lucky Cement while maintaining its leading position aims to build up on its present state of profitability with a view to ensuring optimum returns to the shareholders with maximum care for global environment.
Problems or Issues
The natures of issues or problems
The lucky cement over the year has face big issues and problem in pricing of cements earlier by the Industry was the high taxation. The general sales tax (GST) was 186% higher than India. The impact of this tax and duty structure resulted in almost 40% increase in the cost of a cement bag (50 Kg). A bag in India earlier cost Rs. 160 as compared to Rs. 220 in Pakistan. In the budget of 2003-04, a duty cut of 25% was permitted to the cement sector with assurance from the cartel to pass on this benefit to the consumers. In 2006, the price of a bag went up to Rs. 430 however in 2007 it has stabilized at Rs. 315 per bag. In mid 2008, cement prices stabilized further at Rs. 220 per bag. The Government has reduced central excise duty (CED) on cement in the budget for 2007-08 in order to boost construction activity. Now again there is rise on cement bags the manufacturers raised the cement prices by Rs2.5 on a 50kg bag. The Association of Builders and Developers are started to protest against cement industries that make more problems to lucky cement chairman Association of Builders and Developers said government had yet to take action against the powerful cartel of cement manufacturers for frequently increasing the prices, he said, adding that cement manufacturers were fully cashing in on the rising demand of cement owing to large-scale construction activities that picked up pace from mid-February to June every year.
The Current Practices /polices/Procedures
Lucky Cement has given a new dimension to the Pakistani cement industry by introducing the
concept of exporting loose cement despite lack of public and port infrastructure. Hence, the
Company setup its own export related infrastructure on self finance basis. The company
has invested to develop infrastructure and logistical arrangements to carry loose cement
from its Karachi plant to the ports via its fleet of especially designed cement bulkers capable
of carrying up to 75 tons of cement in each bulker. These first-of-its-kind bulkers are capable of offloading loose cement into carrier ships directly through a unique compressor system installed on each vehicle.
Pakistan Cement Industry was under pressure due to over capacity. The demand in domestic
market has shown positive growth of 16.6%. The industry sold the highest ever cement in the
history of the country with 23.53 million tons of cement dispatches. The growth in domestic demand is due to private sector spending and also on back of the recovery of rural economy due to higher agriculture support prices offered by the government of Pakistan. Having said that, the prices still remained very depressed during this financial year. The export of cement by sea will be under pressure due to increase in cement capacity in the region. On positive note, the demand in Afghanistan has increased and hopefully in the coming financial year, it may touch 5.0 million tons. The industry is still facing challenges due to over capacity, which will keep the domestic prices under pressure. Company has improved overall operations through cost efficiencies from the investments, which were made in the recent years. This will help to mitigate the risk of price pressure in the domestic market and will be able to achieve the targets set by the company. With the successful installation and operation of the Waste Heat Recovery Plant at Karachi during the third quarter of the financial year, it has helped the Company to become cost efficient, while also promoting eco-friendly production practices. The Waste Heat Recovery Project of the Pezu Plant is at the final stages of commissioning and will hopefully start operations during the 1st quarter of the next financial year.
Understanding the needs
These are the main reasoned for increasing the price in cement , customer should understand the need of the company.
Cement units suffered loss before taxation aggregating to Rs5.681bn while seven cement units, of which two are located near Karachi in close proximity to the seaport, earned profit of Rs5.982bn. At the end of 2010-11, the cement industry debts to financial institutions had risen to Rs125.3 billion. The price of bricks had gone up by Rs2,800 per 1,000 in six months of the current fiscal year, while it increased only by Rs2,400 in the last decade (2000 to 2010). Provincial tax on mining was imposed at the rate of Rs33 per ton for last three years, was Rs18 in 2008-09. This almost doubled in one year. In the year 2000 it was Rs12 per ton and reached to Rs18 with the increase of Rs6 in the nine years from 2000 to 2008-09. There was an increase of Rs15 in just one year in 2009-10.
Action Programs
Market Penetration
Market penetration is one of the four main growth strategies. Market penetration occurs when a company enters/penetrates a market with current products. The best way to achieve this is by gaining competitors' customers (part of their market share). Other ways include attracting non-users of your product or convincing current clients to use more of your product/service (by advertising etc).
Currently construction and cement industry is at its peak. Especially after the earthquake, a number of reconstruction projects have been initiated by the government. Moreover, keeping in view the rising trend of house financing through banks and investment in estate and property, we will recommend Lucky Cement to go for market penetration. Currently the prices of Lucky Cement’s products are not as competitive as they are supposed to be. By cutting down the cost, especially administrative expenses, the company can cut off the prices, adding up to well verse sales in return.
Market Development
A market development strategy not only targets non-buying customers in currently targeted segments but it also targets new customers in new segments. During last 5 years, the demand for cement has drastically increased in Gulf region. In order to cater to the increasing demand and to develop new markets, Lucky Cement should increase chunk of its exports towards Gulf region, hence developing a market in a new geographical segment. Secondly, in order to support its distribution network, Lucky Cement should also develop its market in Azad Kashmir region, where it is not fully present and can benefit through paced construction programs especially in the earthquake affected areas.
Action Plan
Ø Lucky Cement, despite of being the industry leader, still has not captured the mind share and brand image as its competitor Falcon Cement. The reason being lack of publicity and advertisement. Lucky Cement should concentrate on the consumer market through better promotional mix programs.
Ø Lucky Cement needs to implement contingency planning. Currently its role is a STAR in the market but in future it is likely to be exposed to new entrants, weakening its current market position. In order to cope with the future constraints, contingency plans should be concentrated on.
Financial Projections
Budget Plane
Actual dispatches from July 2009 ~ June 2010 (in tons)
| Company | Local | Export | Total |
| | 3,183,0 63 | 1,456,900 | 4,639,9 63 |
Sales Performance
During the financial year ended June 30, 2010, the sales revenue of your Company registered a decline of 6.9% as compared to same period last year inspite of handsome sales volumetric growth of 12.30%. The main reason for decline in sales revenue was decline in selling prices of cement, both in local and export markets. The ratio of net sales revenue from exports was 59% whereas the local sales accounted for 41% during the financial year under review. The local sales revenue registered a handsome growth of 26.32% because of significant recovery of cement demand in domestic markets. The prices of cement in domestic market were under severe pressure during the year and on overall weighted average basis, local prices declined by 26.6% despite of increase in cost of production. The export prices declined by 8.7%.
Cost of Sales
During the year under review, the overall cost of sales remained at par. However, due to various cost reduction measures taken by your Company, the cost per ton of cement was decreased by 11% as compared to same period last year. Fuel and Power was the major cost component which accounted for 62% of the total cost of sales. The fuel and power cost was reduced by 16.2% because of better planning with coal procurement at lower prices and startup of Waste Heat Recovery Project at Karachi Plant during 3rd quarter of this financial year.
Gross Profit
Company achieved a gross profit rate of 32.56% for the year ended June 30, 2010 compared to 37.26% gross profit rate achieved during the same period last year. The decline in gross profit rate was mainly because of decline in selling prices which was partially offset by the reduction of cost per ton.
Mile Stones
Ø Increase in net sales revenue
Ø Continuous increase in stock value
Ø (Rs. 130/-)
Ø Increased earnings per share (Rs. 2.1
Ø per share)
Ø Enhancements in the budget for Annual Development Plan by 34% (Rs. 202 b) Increasing growth rate
Ø Strong distribution network
Ø Highest export share
Ø Govt projects as DGP Army
Controls
Feedback and control Mechanism
Ø Providing the justification of price increase and reasons for that to main customers instantly ,can be better control by giving and profitability customer less price so that Profitable customer remains retained to the lucky cement. Government meeting telling those needs of our customers and according to that make the pricing or provide better infrastructure so that they can make cost efficient productions.
Ø The pay scale of employees currently working with Lucky Cement is quite high, especially in comparison with its competing cement manufacturing organizations, still the turnout rate is very high. The reason being low gratuities and benefits after retirement due to which most of the employees quit before the forecasted time. In order to retain its valuable Human Resource, Lucky Cement should pay attention towards this area.
Posts
0 comments:
Post a Comment