DGKCC internship report overview

Preface

Learning in practical side is somewhat that cannot be compared with books knowledge. BBA (Hons)
program is designed in such a way that students are required to do the projects and researches then
give their recommendation and conclusion. It also provides student an opportunity to apply this
knowledge in practical field.

Now to fulfil the practical requirement of this course, I successfully completed an internship report
on DGKCC (Pvt.) Limited, a unit of Nishat Group. It was great opportunity for me to apply the
toretical knowledge and get practical exposure. I have visited almost all the departments and
studied function of each department at factory.

The purpose of the report is to elaborate on my experience about DGKCC (Pvt.) Limited. I have tried
to present the overview of the company and its operations and the task that are carried out during
my stay at DGKCC (Pvt.) Limited. Although 6 weeks is a small time to completely understand the
processes and philosophy of a company, but at least one gets a good overview about it, and I have
tried to write all that grasped during this short time, in this report. This report includes DGKCC
working way outs, information about their departments function and working.

I have analyzed their working and have given certain recommendations on the basis of my
observation. I have tried my level best to give real look about DGKCC while writing this report. May
ALLAH succeed me while evaluation of this report.

Gohar Ayyoub

Acknowledgements

Thanking Almighty Allah, who bestowed me the knowledge and the courage to write this report. I
also thank honourable Sir Nazik Hussain for his in class contribution which prepared and showed me
the way to complete the internship and the writing of this report. Thank you, Sir; indeed we owe you
a great deal. This internship provided me a golden opportunity to learn. In this report I have tried to
relate everything that I thought was necessary. Though, it’s a bit difficult to say anything about the
perfection of the effort that I have made but I hope that it finds its place somewhere to meet the
required and expected criterion. I would like to add a few deepest words for the people who were
part of this report in numerous ways… people who gave unending support right from the stage the
report was assigned. Particularly I also wish to thank the managerial staff at Nishat House who
helped me to gain a lot of information regarding the company and cement industry and also thankful
to Mr. Inayat Ullah Niazi (CFO, DG Khan Cement Company) who provide me an opportunity to learn
and understand the working of organization as an internee. I am also thankful to Mr. Hamid Shah
(Senior D. Manager Finance) who played a role of polar star for me in the organization and whose
experience taught me a lot about the industry and the organization.

I am especially thankful to Mr. Mukhtar Ahmad (Senior Manager Production) who helped me a lot in
getting the knowledge of cement industry.

And finally deepest and warmest appreciation to the whole team of DG Khan Cement Company who
helped me a lot in getting knowledge about the office working and about the cement plant of
Khairpur.

Executive Summary

Dera Ghazi Khan Cement Company Limited is a strategic business unit of Nishat Group, which is the
largest industrial group in Pakistan. D.G. Khan Cement Co. is market leader with respect to market
share with about 11.4% market share. Apart from its competitors; its product is high priced yet it has
highest market share because of good quality. Its plant is situated in Dera Ghazi Khan and Khairpur
and head office is situated at Lahore. Factory site Unit 1and 2 that is situated in very remote area of
Punjab, yet it proved a blessing for the company. Because it has all three basic raw materials i.e.
Lime stone, Shale, and Gypsum at one place. It has three plants working two in D.G. khan and one in
Khairpur. First plant is old one and it is Japanese plant. The other two plants are of F.L.Smiths,
Denmark. Presently it has a total Installed capacity of 14000 tpd (tons per day).

Presently the company is also exporting the cement to Afghanistan, Iraq, UAE and Russia. The team
of the D.G. Cement is story of success of D.G. Cement. The whole team is self-motivated and had
played a vital role in the success of the company

Dedication

“To my beloved parents, teachers and friends whose endeavour supplications made me able to
get this success”

Corporate Information

Company Name: D.G. KHAN CEMENT COMPANY LIMITED

Legal Status: Public Limited Company

Registered Office: Nishat House, 53-A, Lawrence Road,
Lahore, Pakistan

Phone: 92-42-6367812-20

Fax: 92-42-6367414

E-mail: info@dgcement.com

Web: www.dgcement.com

Chairperson Mrs. Naz Mansha

Chief Executive Mr. Mian Raza Mansha

Board of Directors

Mr. Khalid Qadeer Qureshi
Mr. Farid Fazal
Mr.Zaka ud din
Mr.Inayat Ullah Niazi(CFO)
Ms.Nabiha Shahnwaz Cheema

Company’s Secretary: Mr. Khalid Mahmood Chohan

External Auditors: KPMG Taseer Hadi & Co, Chartered Accountants

Legal Advisor: Mr. Shahid Hameed, Bar-at-Law

Bankers:

Allied Bank Limited
Habib Metropolitan Bank Limited
Askari Bank Limited
MCB Bank Limited
Bank Alfalah Limited
NIB Bank
Bank Islami Pakistan
Limited
Meezan Bank Limited
Barclays Bank Plc

National Bank of Pakistan
Citibank N.A.
Samba Bank Limted
Deutsche Bank AG
Standard Chartered Bank (Pakistan)
Dubai Islamic Bank Limited
Faysal Bank Limited
Silk Bank Limited
First Women Bank Limited
The Bank of Punjab
Habib Bank Limited
United Bank Limited
HSBC

Sales Offices:

Lahore Regional Sales Office
Multan Regional Sales Office
DG Khan Regional Sales Office
Karachi Regional Sales Office

Factory:

1. Khofli Sattai, Distt. Dera Ghazi Khan-Pakistan
Phone: 92-641-460025-7
Fax: 92-641-462392
Email: dgsite@dgcement.com

2. 12, K.M. Choa Saidan Shah Road,
Khairpur, Tehsil Kallar Kahar,
Dist. Chakwal-Pakistan
Phone: 92-543-650215-8
Fax: 92-543-650231

Introduction
DG Khan Cement Company Limited (DGKC) is a producer and seller of ordinary Portland and
Sulphate-resistant cement. The company is a unit of Nishat group which is a leading and diversified
business group with a strong presence in the three most important sectors of Pakistan: textiles,
cement and financial services. The group also has considerable stake in insurance, power generation,
paper products and aviation sectors. DGKCC is listed on the stock exchanges of Karachi, Lahore and
Islamabad.

About

D.G. Khan Cement Company Limited (DGKCC), a unit of Nishat group, is the largest cement-
manufacturing unit in Pakistan with a production capacity more than 5,500 tons clinker per day. It
has a countrywide distribution network and its products are preferred on projects of national repute
both locally and internationally due to the unparallel and consistent quality. It is listed on all the
Stock Exchanges of Pakistan. D.G.Khan Cement Company has the largest cement manufacturing
capacity in the country.

Listed in 1992, D.G.Khan Cement was established by the State Cement Corporation of Pakistan
(SSCP) at Dera Ghazi Khan in 1986. It was privatized to the Nishat group in 1994-95 at Rs35.90 per
share.

Nishat Group

Nishat Group is one of the leading and most diversified business groups in South East Asia. With
assets over PRs.300 billion 0r $3.5 billion, it ranks amongst the top five business houses of Pakistan.
The group has strong presence in three most important business sectors of the region namely
Textiles, Cement and Financial Services. In addition, the Group has also interest in Insurance, Power
Generation, Paper products and Aviation. It also has the distinction of being one of the largest
players in each sector. The Group is considered at par with multinationals operating locally in
terms of its quality of products & services and management skills.

Mian Mohammad Mansha: The chairman of Nishat Group continues the spirit of Entrepreneurship
and has led the Group successfully to make it the premier business group of the region. The group
has become a multidimensional corporation and has played an important role in the industrial
development of the country. In recognition of his unparallel contribution, the Government of
Pakistan has also conferred him with “Sitara-e-Imtiaz”, one of the most prestigious civil awards of
the country.

Acquisition of DGKCC by Nishat Group

Nishat Group acquired DGKCC in 1992 under the privatization initiative of the government. Starting
from the privatization, the focus of the management has been on increasing capacity as well as
utilization level of the plant. The company undertook the optimization by raising the capacity

immediately after the privatization by 200tpd to 2200tpd in 1993. Now a day the export demand of
D.G cement is 2000 TPD. Presently D.G.K.C.C export cement to Afghanistan, Iraq AND UAE.

(Pakistan Cement Industry)

Vision Statement
To transform the Company into modern and dynamic cement manufacturing company with qualified
professional and fully equipped to play a meaningful role on sustainable basis in the economy of
Pakistan. (Annual Report 2010-11)

Mission Statement
To provide quality products to customers and explore new markets to promote/expand sales of the
Company through good governance and foster a sound and dynamic team, so as to achieve optimum
prices of products of the company for sustainable and equitable growth and prosperity of the
Company. (Annual Report 2010-11)

Company Awards and Achievements

DG Khan Cement Company Limited (DGKCC) has broken a world record in operational excellence.
This outstanding achievement was marked by the Danish world leading company FLSMIDT awarding
DG Khan Cement Company Limited (DGKCC) with its global outstanding achievement award 2011.
The award was presented to the CEO of DGKC, Mr. Raza Mansha by the Danish Ambassador,

H.E. Mr. Uffe Wolffhechel at a prestigious ceremony under the presence of Pakistan’s leading
business community members and diplomats.
During financial year 2009-10, DG Khan Cement Company Limited (DGKCC), Khairpur Plant has made
new global records by achievement ever highest clinker production of over 2.281 million tons with a
kiln capacity utilization of 104% and plant operational days of 346.5.
(DGKCC achievements by MTT News)

In recognition of this success, the Board of Management of FLSmidth A/s, Denmark has given an
Outstanding Achievement Award to DG Khan Cement Company Limited (DGKCC), on a global basis
for outperforming the World standard run factor criterion for rotary cement kilns of 330 days per
year at its Khairpur Plant during the financial year 2009-10 by running it for 346.5 days at 104% of
the rated capacity.

The award was presented, to Mr. Raza Mansha Chief Executive of DG Khan Cement Company
Limited (DGKCC), by the Ambassador of Denmark, H.E. Mr.Uffe Wolffhechel and FLSmidth Vice
President Mr. Kristian A. Gregersen in a ceremony held at a prestigous local hotel in Lahore.

The award function was attended by large number of representatives from Industry, Banking and
officials both from public and private sectors. Speaking at the occasion, Danish Ambassador
congratulated DG Khan Cement Company Limited (DGKCC) for benchmarking global standards of
excellence and mapping Pakistan’s business community among world business leaders.

”Today’s award only reinforces what we all believe in and that is that Pakistan is a country, where
lots of success stories do take place. I feel very proud to be part of such a story today. Although this
country is facing a lot of challenges, it proves to the international community that operational
excellence, innovation, high ethics, social and environmental care are successful driving forces also
in Pakistan”. The Ambassador extended his full support for creating more Danish-Pakistani business
opportunities within energy and the cement sector, stating that FLSmidt and DG Khan Cement
Company Limited (DGKCC) were successful players in promoting Pakistan and Denmark as partners
for global excellence.

Mr. Raza Mansha shared that his team had invested a lot of efforts in Research and Development for
increasing productivity, achieve customer satisfaction in the wide market zones of north and south
of Pakistan. Mr. Raza Mansha congratulated General Manager Works Dr. Arif Bashir and his team
members for their outstanding performance. Concluding his speech, Mr. Raza Mansha emphasized
the need to work jointly for reducing the cost of production through new technologies and by using
alternate fuels.

Mr. Raza Mansha highlighted in particular the contributions of DG Khan Cement Company Limited
(DGKCC) to control pollution by incorporating latest environment friendly technologies and their role
to uplift the socio economic status of populations living both in DG Khan and Chakwal Districts.

All this has enabled DG Khan Cement Company Limited (DGKCC) to produce the outstanding results
and enabled DG Khan Cement Company Limited (DGKCC) to efficiently outperform the best of the
best in the world and made them eligible to receive the F.L.Smiths Outstanding Achievement Award.

(DGKCC achievements by MTT News)

Brands (Product)
Two different products are produced at DGKCC namely Ordinary Portland Cement and Sulphate
Resistant Cement. These products are marketed through two different brands:

• DG brand & Elephant brand Ordinary Portland Cement (It is also called the OPC and its demand is
about 92% because of commonly used).

•DG brand Sulphate Resistant Cement (It is also called the SRC and its demand is about only 8%
because it is only used in standing the foundations its main work is to finish the pours produced
while standing the foundations and made the foundations much strong). In addition to following two
brands they are also offering four different packaging which are as following:

o OPC
o SRC
o ELEPHANT BRAND
o DG PLASTIC BAG

Friendly Environment
Measures Taken in Protecting the Environment and Its Impact On Company’s

Performance
DGKCC is part of the solution and it has the track record to prove it. A leader in the fight against
pollution, DGKCC has been a pioneer in developing innovative methods for recycling. Its patented
cement-making process -- CemStar -- significantly reduces carbon dioxide (CO2) and nitrogen oxide
(NOx) emissions in the cement- making kiln process. Today, cement producers throughout the
PAKISTAN use that process, resulting in a cleaner environment nationally. The Company constantly
seeks new ways to utilize innovative technologies in its environmental protection programs. The
commitment made by D.G.K.C.C to the environment is paramount, the Company’s kilns use the most
advanced air pollution control systems ever utilized by a cement plant in PAKISTAN.

Capacity Addition
To meet the increasing demand and to capitalize on its geographic location, the management
further expanded the capacity by adding another production line with a capacity of 3,300 tons per
day in year 1998. Design of the new plant is based on latest dry process technology, energy efficient
and environmental protection from particulate pollution according to the international standards.
The plant and machinery was supplied by M/s F.L. Smiths of Denmark. As a result, DGKCC emerged
as the largest cement production plant in Pakistan with annual production capacity of 1,650,000 M
tons of clinker (1,732,000 M.Tons Cement) constituting about 10% share of the total cement
production capacity of the country. The optimization plan is still underway to increase the total
capacity of the two units to 6700 TPD by mid of 2005 from 5500 TPD at present.

Expansion -Khairpur Project
Furthermore, the Group set up a new cement production line of 6,700 TPD clinker near Kalar Kahar,
Distt. Chakwal (The single largest production line in the country) First of its kind in cement industry

of Pakistan, the new plant have two strings of pre-heater towers, the advantage of twin strings lies
in the operational flexibility whereby production may be adjusted according to market conditions.
The project is equipped with two vertical cement grinding mills. The cement grinding mills are first
vertical Mills in Pakistan. The new plant would not only increase the capacity but would also provide
proximity to the untapped market of Northern Punjab and KHBER PAKTUNKHAN besides making it
more convenient to export to Afghanistan from northern borders. (DG Cement article.php)

Power Generation
For continuous and smooth operations of the plant uninterrupted power supply is very crucial. The
company has its own power generation plant along with WAPDA supply. The installed generation
capacity is 23.84 MW.

Sales and Production (FY’09)
In FY'09 DG Khan Cement hit a major land mark regarding growing sales, despite the severe power
crises and security situation of the state. Moreover, due to global recession and the liquidity & credit
crunch, the buying power of the major customers both at home and abroad was looking bleak. Local
sales decreased by 14%, while the exports passed the 10 million ton mark. Also the company had to
recover from a negative profit after tax due to a huge amount of debt leverage in the balance sheet.
Despite all these factors the company due to sharp and effective steps recorded a huge boost in
sales of 45%, a figure which even overshadowed the 17.86% rise in the operating cost thus
registering a profit after taxes of Rs 525m. The exports also doubled playing a major part in the
increasing sales. The company's production of both cement and clinker was less than the previous
year. The cement production was 8.3% less than the year 2008-09 due to lack of resources like
power and also due to the weakening buying powers of the customers because of inflation. The
production of clinker followed similar trend being 4% less than FY'08 in FY'09.

(Financial Report 2009)

Plant Operation and Production (FY’2010-11)
Clinker production during the period underreport is good and all the plants operated well. Cement
production during the first six months of the current financial year declined by 14% on account of
less cement demand both in the country and in export markets, whereas, the cement production
during the 2nd quarter declined by 6%.
(Financial Report 2010-11)

]Sales (FY’2010-11)
Cement sales in the country plunged by nearly28% during the first half of FY 2011 compared with
the corresponding period. Whereas during the 2nd quarter the local sales declined by 29%.The
decline is attributed to poor construction activities both in housing sector as well as in public sector.
Bleak stimulus in cement off take in the country forced your company to eye again on international
markets. During the period, despite international recession in regional markets, export of cement
augmented by nearly 64% during the first half of the year, whereas during the 2nd quarter i.e. Oct
Dec 2010 the export grew by nearly 192%. The company is making all out effort to fully capitalize its
operating capacities.
(Financial Report 2010-11)

Power plant on the cards

DG Khan Cement has decided to set up its second 8.6-megawatt waste heat recovery power plant,
this time at its Khairpur site at a cost of Rs2.5 billion. The first plant started trial operation in May
last year. The right shares issued by the company are expected to help raise capital for the new
plant, say analysts. Electricity produced from the plant will help replace the expensive electricity
purchased from the Water and Power Development Authority, the company said in a statement on
Thursday. The project, expected to be completed in fiscal 2013, will result in an annual savings of
Rs300 to Rs350 million. The company is also considering procuring foreign loan worth Rs1.5 billion
($16.5 million) while equity portion will be bought through issuance of right shares.

(The Express Tribune, February 18th, 2011)

Alternative fuel project

The company has also decided to use agriculture and other wastes as fuel instead of expensive coal
and petroleum products. A first phase has been completed at Khairpur cement plant in which the
company is using different industrial wastes like rice husk, cotton sticks, wheat straw and molasses.
This has cut down daily use of imported coal by 50 to 70 tons. The second phase is expected to be
completed by fiscal 2012 at a cost of Rs1.25 billion. These projects are expected to bring substantial
savings in fuel costs, the company said.

(The Express Tribune, February 18th, 2011)

Environmental Management
DG Khan Cement Co. Ltd., production processes are environment friendly and comply with the
World Bank’s environmental standards. It has been certified for “Environment Management System”
ISO 14001 by Quality Assurance Services, Australia. The company was also certified for ISO-9002
(Quality Management System) in 1998. By achieving this landmark, DG Khan Cement became the
first and only cement factory in Pakistan
certified for both ISO 9002 & ISO 14001...

Source: Http: www.dgcement.comarticle.phpnCatId=141&nNewsId=143

Source: http: www.dgcement.comarticle.phpnCatId=141&nNewsId=142

On Going Projects:
The work on first phase of Refused Derived Fuel (RDF), alternative fuels, at Khairpur cement plant
has been successfully completed and your company has started replacing imported coal with
different alternative fuels, e.g. industrial and agricultural wastes, cotton sticks, corn cops, rice husk
and rice powder, municipal waste etc. After reviewing the encouraging results of RDF project at
Khairpur cement plant your company has decided to implement the first phase of RDF at DG khan
site and also started extension phase at Khairpur cement plant. The projects are expected to be
completed in the current calendar year. This will result in savings on account of fuel costs.
Ongoing power shortage and rising tariff forced your company to start power generation from waste
heat recovery at Khairpur cement plant. The project is expected to generate 8.5MW. Plant &
machinery will be supplied by M/s. FL Smidth Denmark. The letter of credit has already been
established. The project is expected to be completed in the first quarter of FY 2013. This project will
reduce reliance on power purchase from WAPDA and bring down the cost of production.

(Annual Report 2010-11)

Future Outlook:
Cement demand is highly correlated with the growth in GDP. Current prevailing economic conditions
in the country are badly affected by poor governance and terrorist attacks. The industrial activities
are suffering due to severe gas outage and power load shedding which is a bad omen for business
and investment climate in the country. In addition the rising prices of goods and services have set an
alarming situation in the country which is likely to further aggravate due to dangling political
posture. Going forward, the rising cost of fuels like, furnace oil, diesel and coal in international
markets is another serious threat to the economy of the country. Pakistan is passing through the
worst phase and need of the hour is to take a few stiff and long term decisions for the revival and
stability of the economy on strong footings. Political stability, consistency of policies, and tight and
stringent monetary controls could change the destiny of our country. Going forward immediate
steps should be taken to overcome the energy crisis in the country. Country badly needs a few big
water reservoirs to overcome water scarcity for agriculture and cheap power generation for smooth
and efficient running of industrial activities. In addition large scale housing projects should be
launched which will have many fold effects on the business activities in the country. All these steps
will bring the economy back on track and our country could be a preferred place for investors both
foreigners and local.
(Annual Report 2010-11)

Business Process
1. Cement acts as a binding agent, holding particles of aggregate together form concrete.
2. Cement production is highly energy-intensive process and involves the chemical
combination of calcium carbonate (limestone), silica, alumina and small amounts of other
materials.
3. Burning limestone to make clinker produces cement, and the clinker is blended
with additives and then finely ground to produce different cement types.

Key Steps:

There are following five steps given as under:

The raw materials needed to produce cement are:

1) Shale 2) Limestone

3) Bauxite 4) Gypsum

5) Iron ore

Step 1:
Extraction of raw materials

The raw materials are extracted from the quarry by digging the holes through machines in
mountains containing limestone and other resources needed to be used in process then they
do blasting.

Step 2:
Storage and blending of raw materials

Then all these raw materials are to be stored for the further process. Those raw materials are
then crushed and then blend with each other. Then these are transported to the plant where
they are stored forming piles through machines and homogenized.

Step 3:
Raw grinding and burning

After that there will be grinding in a careful mixture which produces a very fine powder in a
2000 horse power roller mill, this fine powder is known as ‘Raw Meal’. Next, the fine powder
is heated as it passes through the Pre-Heater Tower into a large kiln, which is over half the
length of a football field and 4.2 meters in diameter. In the kiln, the powder is heated to 1500
degrees Celsius and cooled by bursts of air. Now this creates a new product, called Clinker.
And is just like small black soft stones. It is the basic requirement for the production of all
cements.

Step 4:
Cement grinding and storage

A small amount of gypsum (3-5%) is added to the clinker to regulate how the cement will set.
The mixture is then very finely ground in a finishing mill. The mill is a large revolving cylinder
containing 250 tons of steel balls that is driven by 4000 horse power motor. Then "pure cement" is
obtained and is so fine that it can pass through a sieve that will hold water. During this phase,
different mineral materials, called "cement additives", may be added alongside the gypsum. Used in
varying proportions, these additives, gives the cement specific properties such as reduced
permeability, greater resistance to sulfates and aggressive environments, improved workability, or
higher- quality finishes. Finally, the cement is stored in
silos before being packing and delivers to the sites.

Step 5:
Packing and delivering.

After being stored in silos, there is a last phase of packing
that cement and loading and delivering that very fine
cement to the sites where it requires.

The cement manufacturing process consists of many simultaneous and continuous operations using
some of the largest moving machinery in manufacturing. Over 5000 sensors and 50 computers allow
the entire operation to be controlled by a couple of Operators from a central control room. Each
tone of cement requires about 1.7 tone of limestone, gypsum and silica, etc. By volume limestone
accounts for about 80% and clay 19% of the intermediate product — clinker. Gypsum is later on
added to clinker in the ratio of 4:96 to obtain cement.

Flow Process of Production

Cost of production
Since the industry faces a situation where sales price will be fixed by mutual consensus, the cost
of production will be the most critical factor of profitability. Energy cost is a major component of
total cost of production. It contributes at an average 40 to 45 percent towards total cost of cement

production. Energy cost is even higher in case of those plants which use wet process. A
cement plant based on wet process consumes 165 kg of furnace oil to produce one tone of clinker
as compared to 85 kg of furnace oil used in dry process to produce the same quantity of clinker.

Since cement plants use both furnace oil and electricity, any increase in the prices of these two
products is detrimental to profitability of the industry. Ever since October 1995, however, there has
been more than 60% increase in the price of furnace oil.

Another significant cost component is packaging material. Cement is rarely sold in bulk in
Pakistan — almost all cement sales are in four-ply paper sacks. Cost of paper sacks has gone up
by almost 90% since December 1994.

D.G. Khan Cement was the most prized unit out of the cement units privatized by the Nawaz
Sharif government. Of all it was the most modern plant with bulk of depreciation amortized and
interest charges paid for. The company enjoys a virtual monopoly in its sales territory. There is
no other cement plant within a radius of 400 kilometers in Suleiman Range.

The expansion will come on line at a time when there will be supply overhang in the industry.
With margins coming under pressure it will have to bear the added brunt of higher financial
charges and increased depreciation cost in the years to come.

Analysis of the latest half-yearly results of the company shows that although sales of the
company have gone up by 3.5%, the increase in cost of sales has reduced gross margin from 61%
to 48%. With rising inputs cost not being matched by similar increase in price of cement,
margins are expected to shrink further. The company, after the expansion is expected to face
fiercer competition from Zeal Pak, Pioneer, Dandot and Wah. To wrest market share from the
competitors, it is likely that D.G. Khan will have to reduce its cement prices.

DECISION MAKING
The decision making style of D.G.K.C.C is DECENTRALIZATION. And the organizational structure is
FLAT. Although all the employees have opportunity to give the decisions regarding the plant
performance and for that also meetings are held every day between DIRECTOR and MANAGERS of
the company in which they also discuss and made future plans of the daily routine work and they
also check out their previous day work efficiency and performance, every manager is responsible to
give the performance report of every employee working under him.

Also an annual meeting which is always announced by the chairperson is held between the chair
person and directors of the Company in this meeting plan and goals to be achieve in the coming year
are set and also they see and compare the Company’s performance between the previous and next
year and here the head give the certain target to be achieve in the coming year although the
suggests are taken by the directors but these suggests are not give so much importance regarding
production. And also there is a process of delegation within the company.

Top Management of DGKCC

Departmentalization

Purchase

Purchase requisition Approval Hierarchy

Director

G.M(Work)
G.M(Admin)

Head of Depatment

Requester

Purchase approval Hierarchy on Comparative Statement

Director(Tech&Operaton)
Above 20000&all Capitals

G.M(works) up to 20000
G.M(Admin)up to 20000

C.F.A( Controller of Finance Accounts)

D.G.M (Works)

HOD( Relevant Department)

HOD( Manager Purchase)

Purchase Officer

Purchase department
Purchasing process

Requisition

It is basically demand created by user department. If the worker of DGKCC needs any item relating
his task than he raise demand by giving this letter.

RFQ (Request for Quotation)

When purchase department see any requisition contact to suppliers is done. So that they can give
them proper idea about theirs items. That how much easily they can provide these items to factory.

Quotation

This is basically response of suppliers against RFQ.

Comparative Statement

This is a comparison of all the quotations which are received from suppliers. In this statement
department see that which suppliers is providing items in least amount and in reasonable time.

Requisition in favour of an approved suppliers

Purchase order will follow a predefined approval hierarchy to get approval.

Purchase order

After taking comparison a suppliers is suggested. And order is placed to supplier.

Receipt

User will enter receipt in the system on physical receipt of item on gate.

Inspection and deliver

User will enter results of inspection in the system for every receipt entered in the system.

Store department
Receipt section

In receipt section the inward and out ward gate pass is analyzed. Once purchase department placed
order than the supplier delivers the item to factory. When these items reached to site than an
inward gate pass is made to enter these items in factory. And these items are reached to store
department. When these items reached to store department a report is maintained by store
department. That is SAIR (Store Arrival and Inspection Report).

RR section

After the completion of SAIR a reprehensive of relevant department came to store and see whether
items are according the quotation or not. If these are not according to need than rejection remarks
is passed and items are sent back to supplier with the reason of rejection. If supplier has items
according the reason than he sent those items this time.

Another report is made on approving the items by a relevant person. That is MRR (Material
Receiving Report). And after this items are stored in store department.

If the department which had raised PR needs items than they will get those items by MOI (Move
order issue) statement. And material will be shifted to that department from store department. If
there some items remain unused than these items will be shifted back to store department for
future use.

The specimens of all these reports which are used in purchase and store departments are as under.

Finance Department
Hierarchy

(Chief Financial Officer)

CFA (Controller of Finance
Accounts)
S.Managers
Managers

S.D. Manager
D. Manager
A. Manager
Jounior Officers
Workers (Staff)

Finance department

Basically finance department is working on Oracle software. Before Oracle, Microsoft Excel was in
use. The purpose of using oracle is to increase the efficiency and speed of work. At DG site, the
process of work in Oracle is called ERP (Enterprise Resource Planning).

There are many modules in finance of Oracle. But DGKCC is using only three module of finance.

A/R
A/P

General
Ledger

ERP

Account payable

For account payable different types of invoices are used to work in oracle.

Standard Invoice

Standard Invoice consists of two sections; one is Header level section and second is Line level
section. Header level controls credit entry and line level controls debit entry. Different taxes are also
charged to expanses according the law of Government.

2% tax on transport

3.5% tax on goods

6% tax on service contract agreements

Pre Payment

It is a basically advance which is provided to suppliers. The record of pre payment is maintained in
this invoice.

Debit Memo

It is an invoice which is used to recover the expanse. For example if supplier is using any asset of
company, and he says that the charges of using that asset are deducted from the supplier payment,
than this invoice is used. Company make a debit memo against that supplier in oracle and oracle
warns the user about this on the time of supplier payment.

Credit Memo

It is also used to recover the company amount. For example a company purchased an asset and
submits retention money against that asset. If asset has fulfils the period successfully than supplier
will liable to pay retention money to company. In credit memo DFF (descriptive flex field) is used. It
basically tells the reference and name of supplier.

Expanse report or Cash payment

This report is maintained to record the petty expanse. A lumsum amount is issued for the casher.
And casher pay the all the petty expanse bills from that amount.

Account receivable

This account is maintained by these two

1. Transaction
2. Receipt

1. Transaction

Transaction is passed for the sale of scrape. OR it is passed for the sale of cement. The revenue
which is credited for that this will be passed.

2. Receipt

It is used to record the direct expanse. Two types of receipt are used in finance department.

o Standard
o Miscellaneous

General ledger

In general ledger all the entries are passed indirectly. Basically this is used to remove the mistake of
the previous passed entries.

Marketing (S &D) Department
Hierarchy

Director (Marketing)

G.M( Marketing)

Sales Officers

Marketing (S & D)

Excise EDP

Despatch

Marketing department consist of further three department.

Excise

This department deals with excise duties and sales tax of parties orders.

EDP

EDP means electronic data processing. This department gives a tracking number to order after
receiving from sales offices of company. This tracking number is identity of that order, which has a
full record in oracle software. After doing the proper procedure the order document is processed to
despatch office. Different reports which are the parts of EDP daily work,

APCMA (All Pakistan Cement Manufacturing Association)
Daily Brand Wise Despatch
Daily loading Report
District Wise Balance Loading Report
Statement of Daily Despatch
Office Wise Back Log Position (DG)
Cement Balance Transfer Programme
Daily Plant Wise Dispatch Report
Cement Transfer report (indirect)
Sales Tax Invoice

Despatch

In despatch department the main work is to despatch the cement according the orders of sales
offices. After taking the authorities the despatch department makes truck loading advice according

to which cement bags are loaded on truck. It basically shows the quantity, location of unit, truck
driver name, truck number and destination of loaded cements bags.

Despatch department also make many report daily some are

Truck Loading Advice
Truck Loading Advice (Inventory Transfer)
Truck Loading Check Report
Unit Wise Despatch Detail
Gate Pass
Gate Pass (Inventory Transfer)
Office Wise Despatches
District Wise Status Report

Human Resource Department
There are five practices of human resource.

Recruitment
and
Selection

Employee's Training and
Relation Development

Rewards and Performance
Benefits Appraisal

Recruitment and Selection

There is a long process of recruitment and selection in GDKCC. First a vacancy add is published in
newspapers. Then interviews are conducted in Head office Lahore. A written test is also a part of
selection process. Then after a proper analysis a candidate is selected for the job. Now, the HR
department of DGKCC starts to maintain the record of employee in a file.

Following documents are the parts of this record book.

Employee Academic Certificate
Curriculum Violet
Hand written application for recruitment
Company test
Employee’s Code of Conduct
Employee personal record form
Appointment Latter
Medical fitness certificate
Registered AID (Security Clearance)
Orientation Program
Orientation Arrival
Probation Review Form
Review Form Conformation
Office Orders
Emails form Head Office

And in the case of retirement or death some other document also becomes the part of record file.
Such like Death Certificate, Clearance form etc.

The specimens of some documents are attached with report.

Training and Development

With the advancement in technology, DGKCC also arrange different workshops and training
programs for employees. First the training of one year is necessary for new recruitment of technical
staff. With the advancement in Oracle Software, Company provides employees opportunity to learn
about oracle as they need. For this company provides one week training to employees in head office.

Performance Appraisal

For this purpose an Annual Confidential Report (ACR) is prepared according the performance of
employee throughout year. On the basis of which different steps is taken for employee’s future. A
form is a part of this report which is called worker performance appraisal form. The sketch of data
which is obtained with the help of this form is

Personal Data
Performance Evaluation
o Professional Knowledge
o Hard work and Dedication
o Work Standard
o Team Work
o Attitude and Behavior
o Attendance
o Honest and Loyal
o Obedient

o Personal Hygiene
o Courteousy

Overall performance
Training (TNA)
Comments of G.M

This form is filled by the head of department of relevant employee.

Rewards and Benefits

An increment of 15% in salary is offered to employees every year. DGKCC has been offered resident
facility to mostly its employees. Travailing facility to employees is free from D.G Khan to Site.
Promotions are offered to deserving employees. A well constructed colony is also the benefit of
employees.

Housing Benefits

Block E, F Permanent Workers

Block D AJO, Go

Block C Jam, SDM

Block B DGM

Block A G.M

Vehicle Benefit

Motor cycle Technical Staff

Cultus Car Managers

Toddy Car Senior D. Managers

Perjure General Managers

Medical Benefit

Medical of all officers rank employees is free.

Education Benefit

For workers, half Fee of school is provided by company.

For Officers, full fee of school is provided by company.

Insurance Benefit

Company also insures all its employees.

Retirement Benefits

On the time of retirement following adjustments are maintained.

 From the date of joining after probation period the amount is deducted from the salary and
provided every employee after his retirement in the form of Provident Fund.
 After retirement an Earned Leave fund is also provided to employee.
 A lumsum amount in form of Gratuity is also provided to employee. It is basically obtained
by multiplying number of year service with last basic salary.
 Deductions are also done. May be employee took any loan from company than the
adjustment is passed for that amount. It can be house building loan or any other loan.
 Old age fund in the form of pension is also provided by government to employee. DGKCC
provide the government the entire documents which are required for this purpose.

Employees Relation

Company focused to maintained good relation with employees. For this purpose different worker
parties are working in DGKCC. These maintain a good relation between employees and company .
After the completion of a year, employees brings their represented forward who try to solve the
problems of workers. There is a system of election for choosing the best representation of
employees.

Financial analysis
Name of Company D. G Khan Cement Company Limited
Ticker DGKC
Assets (June2010) Rs 47,046,043,000
Share Capital Rs 3,650,993,000
Sales Revenue (June 2010) Rs 16,275,354,000
PAT (June 2010) Rs 233,022,000
Market Share Price (30 June 2010) Rs 23. 62
(365,099,266 ordinary shares of Rs 10 each)

DGKC has two plants at Dera Ghazi Khan and a new Greenfeild cement plant at Khairpur village,
which was started in FY 04 and began commercial production in June 2007. The plant has a capacity
of 2. 1mtpa. Commencement of production at the new plant and effective and efficient operations
management led to 70% and 66%increase in the volume of clinker and cement production
respectively. The company has its own power generation plant along with WAPDA supply. A dual
fuel power generation plant at Khairpur cement plant also started its commercial operations
successfully in FY 08.

Cement sales have seen a negative sign both in the local as well as export markets during the period
July-September 2010. Local sales dropped by 16% to be 4. 6 million tons due to lower governmental
spending along with lower spending by people ravaged by the floods. Export sales of the industry
dropped by 21% due to increased supply in the regional markets, forcing some of the players to look
for better markets.

Rising cost of coal, fuels and packing materials also badly hit the production costs. Coal in
international market is hovering around US$ 120/ton against US$75/ton last year same period. In
addition, constant rise of gas and electricity tariff also posed negatively to the profitability of the
cement sector.

For DG Khan Cement, during the first quarter ie July-September 2010 the local sales witnessed a
decline of about 27% by reason of flood in most parts of the country. Whereas, exports of cement
plunged by 8% from the corresponding period. Sales revenue and gross profit declined by 23% and
48% respectively during the period under report compared with the same period last year ensued
from low sales volume and increase in production costs. Administrative, distribution and selling
expenses decreased in accordance to lower sales volume. However, financial charges were slightly
higher than last years at Rs 488 million as compared to Rs 468 million in the same quarter last year.
DG Khan earned a net profit of Rs 22. 146 million (2009: Net profit Rs 584. 619 million). EPS was Rs 0.
06 (2009: Rs 1. 6)

(Courtesy: Business Recorder)

DG Khan Cement in comparison with the cement industry

The cement sales in the company witnessed a growth of 15% in FY10 whereas DGKC witnessed a
growth of 27% of sales volume. It also comprised of a 17% market share in local sales. DGKC has a
gross margin and profit margin which is almost similar compared to the industry average of 15.15%
and 1.4% respectively. However, its current ratio is 1.19:1 whereas the industry average is of 0. 71:1.
This means that DGKC is in a good position to meet its short-term debt. The current liabilities
decreased mainly as the provision of taxation reduced as profits fell and also export sales fell.
Current assets increased mainly due to increase in short-term investments.

The company is reasonably leveraged with a Debt to Asset ratio of 44% compared to the industry
average of 50%. This can be owed to its repayment of long-term loans The Return on Assets of 0. 5%
is marginally lower than the industry average of 1% mainly due to a reduced in sales revenue. Owing
to such factors, its Earning per Share is also Rs 0. 72 as compared to an average of Rs 2 which results
in lower investor confidence.

Production During FY 09, the demand for DG Khan Cement and clinker had fallen from FY 08 by 8%
and 7% respectively due to the economic recession plus low developmental expenditure by the
government. However due to increased spending in the private sector and higher agricultural
support prices provided by the government to the rural sector the overall capacity utilization of the
cement plants increased to 76% in FY 10 from 74% in FY 09. This led to an increase of 27% in DG
Khan Cement s production from FY 09 to FY 10 as 4,908,593 m. tons.


Sales

The cement sector posted a reasonable growth of 9.4% as the total sales volume increased by 2.94
million tons to reach 34.22 million tons by June 2010 from 31.28 million tons. Although DGKC s
volumetric sales grew by 28%, the sales revenue fell by 10% from FY 09 to FY 10 as Rs 16,275 million
in FY 10 from Rs 18,038 million. This was mainly due to lower selling prices internationally plus the
tough competition within the cement manufacturers leading to price wars.

However, despite the decrease in sales revenue, the sales volume of the company increased locally
by 45% from FY 09 to FY 10 due to increased private sector spending and higher support prices for
agricultural products by the government whereas the export sales decreased by 20% mainly due to a
fall in exports to India. Hence an overall increase of 28% in FY 10. The total cement and clinker sales
of DGKC had increased in FY 10 as higher production enabled it to largely tap the local market.
Cement sales rose by 28% but clinker sales fell by 60%

Profitability

Recent Results DGKC posted PAT of Rs 233.022 million in FY 10 as compared to Rs 525.581 million in
FY 09. This decline was mainly due to lower prices and reduced exports. The net sales revenue of the
cement sector in FY 10 was 10% lower than the net sales revenue generated in FY 09. Although the
sales volume increased by 28%- 45% increase in local sales and 20% decrease in export sales, the

revenue fell down mainly due to lower selling prices. Costs of sales increased by 9.8% from FY 09 to
FY10.The increase was due to increasing coal prices to US$115/ton increased the fuel costs. Also a
rise in gas and electricity tariffs increased costs of production too. Also the costs of packing material
increased in FY 10. This resulted in a decline of 9.8% in the gross profit from the last year; reporting
to Rs 2,705.36 million from Rs 5,679.73 million.

The operating expense decreased by 56% on the whole in FY 10 mainly because of large decline in
selling and distribution expenses as when export reduced, freight charges reduced. Also there was a
27% decline in the financing costs as the company paid off its long-term loans. Yet the PAT declined
by 56% in FY10. Therefore the earnings per share (EPS) also fell from Rs 1. 63 to Rs 0.72 in FY10.


Profitability - FY 02 to FY 09

The profitability ratios of the company have shown a declining trend since after FY 05. The gross
profit margin increased in FY 06 only to fall in FY 07 and FY 08. The profit margin of the company has
decreased continuously along with return on assets (ROA) and return on equity (ROE). The profit
after taxation had declined by 33% in FY 07 due to lower net retention prices caused by a supply
overhang in the overall industry. Also the problem of rising input costs had begun in FY 07. This rise
in cost of production and raw material had continued into FY 08. However in FY 09, the boost in
export sales lead to an increase in the PAT and the profit margin was 2. 91%. The operating expenses
had also increased due to higher selling and distribution expenses but the increased sales revenue
contributed to an increase in PAT.

Increased production facilitated higher sales volume which in turn translated into almost doubling of
sales revenue in FY 08. The company had earned the highest sales revenue of Rs 12.445 billion in FY
08. However, despite this, the gross profit of DGKC in FY 08 (amounting to Rs 1. 9 billion) was around
6% lower than the gross profit posted in FY 07 (Rs 2. 0 billion). The reason for lower gross profit was
a 140% increase in the cost of sales during the fiscal year.

However in FY 09, major distribution costs increased when exports increased. Also finance charges
rose due to higher interest rates and increased long-term borrowing. But the sales revenue had
increased by 45% improving the profitability of DGKC and resulted in a profit after taxation of Rs
525.581 million in FY 09 against a loss after taxation of Rs 53.23 million in FY 08.


Future Outlook

The infrastructure redevelopment of flood affected areas is also a potential area for demand of
cement to grow. The government announced to finance every house that was either fully or partially
affected by the flood; again a potential demand for the growth of cement industry. Also with
increased private sector spending, building infrastructure across the country will also aid in
increasing demand of cement. The road networks and dams construction projects are also a
potential source to increase demand of cement. Hence demand of local sales is expected to increase

Exports have recently reduced due to gulf region capacity and loss of export sales to India due to
political tension in FY09. Yet there is export potential in new export markets like Russia and some
European countries.

DGKC is trying to cut down on costs that have significantly and adversely impacted its profits. To
reduce electricity cost, DGKC has started a project of power generation from waste heat at DGK Site.
The project is expected to generate substantially cheap electricity of about 10.4MW without using
any fuel. This would help to cut down the cost of production. DGKC has also decided to use
municipal solid waste as fuel for heating purposes. This project will be beneficial as it would bring
down the company s costs of production, help resolve the environmental issues related with
disposal of solid waste and most important, it would save huge foreign exchange spent on importing
fossil fuels. Also if currently, coal is used as a fuel and is imported, in future local coal can also be
used over the cement industry as Lucky Cement has already being supplied by Oracle Coal Fields.

==================================================================================
==============================

Liquidity FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10

==================================================================================
===============================

Current Ratio: 1. 07 1.34 1.21 1.37 1.65 2.60 1.59 0.84 1.19

-----------------------------------------------------------------------------------------------------------------------------------

Profitability FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10

-----------------------------------------------------------------------------------------------------------------------------------

Gross Profit Margin 28.35% 22.65% 35.68% 36.91% 49.81% 31.65% 15.39% 31.49% 16.62%

Profit Margin on Sales: 10. 29% 16.16% 20.46% 31.86% 30.40% 25.27% -0.43% 2.91% 1.43%

Return on Assets 3. 23% 5. 08% 6. 78% 9. 34% 7. 05% 3. 14% -0. 10% 1. 23% 0. 50%

Return on Equity 8. 01% 9. 51% 12. 58% 18. 05% 12. 55% 4. 78% -0. 18% 2. 51% 0. 88%

Asset Management FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10

-----------------------------------------------------------------------------------------------------------------------------

ITO (Days) 90.51 102.85 105.33 77.47 48.07 100.46 79.40 76.55 89.69

Days Sales 3.76 1.83 4.88 5.20 3.36 8. 09 10.59 10.26 6.72

Outstanding:

Operating Cycle 94. 27 104. 68 110. 21 82. 66 51. 43 108. 55 89. 99 86. 81 96. 41

Sales/Equity 0.78 0.59 0.61 0.57 0.41 0.19 0.41 0.86 0.61

Total Asset Turnover 0. 31 0. 31 0. 33 0. 29 0. 23 0. 12 0. 24 0. 42 0. 35


SWOT Analysis
SWOT stands for strengths, weaknesses, opportunities and threats. A SWOT analysis is a
technique that many companies use during strategic planning; basically an organized way to
evaluate where to focus time, money and energy to improve productivity and growth. A SWOT
analysis can be a valuable tool for setting milestones or approaching a venture investor, because
it demonstrates a solid understanding of your company performance and the factors influencing
productivity.

Explanation of SWOT Analysis

STRENGTHS

Availability of raw material

The easy availability of the key raw material Gypsum, Shale and limestone all over Pakistan
gives a smoother start as which I think is a very good for any cement industry. And the plants are
installed quite near to raw material which is a competitive edge.

Cheaper labour

As we all know the labour of Pakistan is very cheap. So this is a healthy sign for the company as the
company has to pay less to their labour which result in saving of their income and later on can be
utilized in the expansion of cement plant. Resultant increases the cement production.

Latest machinery

The plant of the company is equipped with the latest machinery having a latest technology in
Pakistan as compared with others. Although it is expensive but it saves the cost by producing quality
cement and creating value in mind of customers.

Quality Product

As the plant equipped with the modern technology so it has a capability to produce better quality
using less energy than others. The company has been certified for “Environment Management
System” ISO 14001 by Quality Assurance Services, Australia. The company was also certified
for ISO-9002 (Quality Management System) in 1998. By achieving this landmark, DG Khan
Cement became the first and only cement factory in Pakistan certified for both ISO 9002 & ISO
14001.

Self Power Generation

The company has its own power generation plants in the factory area so to meet the plant
requirements and we all know that Pakistan these days suffer with serious energy crisis so the
company do not totally depends upon WAPDA even from its own generation the company
produces energy with much less cost so I think it is another main strength that DGKCC have if
compared with other cement industry because not other cement plants in Pakistan have such
energy generation system so they have to depend upon WAPDA.

Durability

Yes, DGKCC has a very good image in mind of its customer’s reason being they produce the finest
quality since day first of its production and take steps to make it better and even charge less
compared with its competitors. The company has its positioning through its slogan, which represents
durability.

Competitive Edge

Company launches its new plant near Chakwal, which double its production capacity. So this new
Plant helps in gaining the competitive edge over others in north region.

Profitable Organization

At present and from few years organization is earning profit which is its strength because in
profitable organizations more and people invest more and more. So profitability is a good sign for
the organization. Here are some figures to prove further:

Use of Coal and Waste Products

Coal is found in all the four provinces of Pakistan. The country has huge coal resources, about
185 billion tonnes, out of which 3.3 billion tonnes are in proven/measured category and about 11
billion are indicated reserves, the bulk of it is found in Sindh.

At present, DGKCC switch to coal and gas as basic fuel. According to data the cost of cement
production per tonne by furnace oil was around Rs2, 083 whereas the cost of production per
tonne by coal was Rs8,68,saving Rs1,215 per tonne. Similarly, the saving per bag was Rs60.75,
which is a huge difference. Now ‘husk’ is also introduce as basic fuel in order to minimize
production cost as much as possible.

Own Paper Bag Plant

DGKCC has now installed its own paper bag plant and became pioneer in that to even minimize its
bag cost even that plant also sells bags to other cement plants as per demand.

WEAKNESESS

Low Promotional Campaign

If we analyze this they are not paying much attention to promotional campaign. They are not
advertising their product as per requirement because through promotional campaign they can also
gain more market. They are only using trade promotions, which are not enough to have a good
positioning in the market.

No Performance Appraisal

There is no proper performance appraisal program. If one works hard and show creativity his
performance is not appraised by any instrument. The managerial staff is not promoted on the basis
of performance, as they have no any tool to measure performance of managers. The only one way to
measure the performance is annual confidential report, which is prepared by only one person who is
immediate boss of any employee.

Seniority Issues

In management there is a seniority virus means there is no proper mechanism for the promotion of
the seniors. Experienced persons have a lot of experience and they know the organization best and
how to effectively run that organization. They know that what to promote and what not to promote
about the organization. This irregularity in promotion of managerial staff creates job dissatisfaction
and lowers down their productivity. It may happen that staff is not dissatisfied with the job but at
the same time they may not be satisfied with their job.

Centralized Decision Making

Although the decision making style of DGKCC is decentralized that what the company says but the
ground reality is that in decision making process the middle level management is not much consider
by the upper management which creates sense of irresponsibility among the members of company.

So ultimately it creates job dissatisfaction. Their decisions are not praised and honoured much as
they expect.

OPPORTUNITIES

Location of Project

Location always matters, if we see in southern Punjab there is not enough cement factories other
than DG Cement. So we can say that there is somewhat monopolist in that part and controls whole
market. If the company upgrades its production capacity they have a good chance to cover the
foreign market of Afghanistan from that plant. Increase in demand of cement due to the upcoming
sports event .South Africa is schedule to host the football world cup of 2010 due to which they need
to make the football stadiums for the World Cup and Sri Lanka are also expected to approach
Pakistani companies for cement imports because Sri Lanka to co-host the cricket world cup of 2011.
So this is a good chance for a company to maximize profit.

Export Demand

As there is a war like situation in Afghanistan and Iraq so there is a huge demand of cement in
rehabilitation process, most of Indian cement plants are in north region so from there it costs a lot to
reach in southern region so this also again is a huge market to be capture, also there is a huge
demand in UAE and Russia. Result there is a huge cake of international market which a company
have a chance to cater.

Introduction to New Product Line

The company still produces OPC and SRC but there is also a room for producing the ‘White Cement’
so I think by introducing the new product line they can also increase their sales and profit also

Rehabilitation and New Construction Projects in Country

As we all know there’s started a rehabilitation phase in north areas of Pakistan after war against
militants and in South Waziristan there is a rehabilitation phase to be coming and a lots of projects
have started in the country. So this increase in demand creates a new opportunity for the company
to earn more profit.

THREATS

Increase in Fuel Prices

Increase in the international prices of coal and oil is a major threat. As Pakistan coal contains high
percentage of sulphur due to which the company is not able to use the local coal as a source of

energy. So the company has to import the coal from different countries like South Africa, china and
Indonesia at high prices. This will restrict the profit margin.

Economic Recession

There is a global recession going these days so this is also a threat to cement industry as it affects a
lot to export market.

Political Instability

That instability always remains threat to Pakistan and its cement industry also because due to this
there’s not as much growth and now the war like situation in a country is really a big issue.

IMF Loan

IMF Package in Future can cause to decrease GDP and economical development in Pakistan. This will
also be cause to stop development of infrastructure. So it will have huge effect on company also in
fact on whole industry.

Increase in Interest Rates

Unanticipated increase in interest rates or less than expected demand growth might create severe
crises for the sector couple of years forward.

Decrease profitability due to competition

The sharp decline in cement prices has been witnessed due to domestic competition among
companies has dampened the profitability of the company. This increase in competition among
the players has further decreased the prices of cement in the local market. So the company
decrease the prices of products in order to get high market as compared to its competitor.

High level of taxation

Presently, the company is heavily burdened due to levy of Federal Excise Duty @ Rs. 750 per ton and
General Sales Tax @ 15% on duty paid value. In addition to Federal Excise Duty and General Sales
Tax, company is also paying the provincial levies (Royalty and Excise Duty) on acquiring of raw
material for production of cement i.e. lime stone, shale and clay.

Per ton cost impact of these taxes in four provinces of Pakistan is as follows:

Punjab Khyber Paktunkhan Sindh Baluchistan

Lime Stone 24 21 17 65

Shall/ Clay 03 04 03 11

A comparison of taxation and retail prices with other regional countries revealed that taxation in
Pakistan is highest while cement retail prices are lowest.

Problem Identification
As there are not many lope holes in the company because they strictly follow the standards. But still
there are some tribulations that need to be viewed.

They should have to pay their serious attention to their marketing in order to boost their
sales and income of the company as the company also suffers very serious problems
regarding sale of cement these days.
Reason being due to:
o Economic recession all over the globe the company is in crisis these days.
o Instability of politics in Pakistan
o Terrorism in Pakistan
o Energy crisis in Pakistan.
There is a lot of problem regarding sitting arrangement of guests in the head office as even I
internee had issue throughout my internship and this is just because they have a very
congested place so they need to work on that.
Though they have a very good record system but the file keeping is not so much good all the
record files are placed randomly at the corner of finance department n whenever a file is
needed then there would be a lot of problem in order to search that particular file.
As NISHAT head office is not just only the head office of DG Cement but also the head office
of Nishat Power, so now they are really running out of space from everywhere they had a
major space issue regarding car parking, file keeping record, office space.
There are many few people who are computer literate most of the employees don’t operate
the computer well though they use the computer but they don’t have a good command on
computer. So they need to be trained more regarding the use of ORACLE software.
Working after hours without any incentive
Multitasking continuously effects work

Recommendation
o They should pay much attention to their employee’s promotion. They should use
performance appraisal system.
o Top management should use up-to-date marketing practices rather to use orthodox ideas.
o This is the age of advertisement and they should advertise their product rather use push
strategy. They should emphasize on pull strategy as well. They have good, energetic,
experienced marketing and sales team they should use it constructively.
o They should pay much attention to promotional tools. They should advertise their product.
o They are only using trade promotions, which are not enough to have a good positioning in
the market. They should use other promotional tools as well.
o The middle level management should be involved in decision-making. In this way they will
feel sense of responsibility and their productivity will increase. Their loyalty with the
organization will also increase.
o They should also introduce some employee recognition program. In this way the employees
will be more satisfied with their jobs and ultimately will be beneficial for the organization in
terms of high productivity.

o Skills and performance based performance appraisal program should be applied. Employees
should be promoted on the basis of their achievement. Employees should be rotated in
different jobs and tasks, as monotony decreases productivity.

Conclusion
State Cement Corporation of Pakistan (S. C. C. P) was established in 1984 managed by the
Federal Government. In the beginning, existing plant was purchased from U.B. E. industries of
Japan. It had installed capacity of 2300-ton clinker daily and started its production in April 1986.

The main purpose for the establishment of plant was to fulfil the demand of Northern Marketing
zone. In 1977 the annual demand for cement in Pakistan was about at 3.7 million tons while the
production was about 3.1 m. To fulfil 0.6 million gap, a new plant was required. After a detailed
investigation, they selected a place D. G. Khan City where large high quality material reserves
were available at least or 100 years. The location is ideal because it is near to market as well as
prior to raw material.

The govt. privatized the SCCOP, first purchased by Segol Group of Industries and Nishat Group of
Industries combinely. In 1992, the company purchased by Nishat Group of Industries solely.
After privatization it name changed from SCCOP to D. G. Khan Cement Factory, before the
establishment of expansion plant (new plant) in 1997.

The cement was brought to this and either from Maple Leaf Cement Factory Mianwali and Zeal
Pak Hyderabad and ACC Rohi. The new plant is the relief for Bahawalpur, Lodhran, Khanewal
Muzafargurh, Bahawalnagar, and Vehari. It was purchased from F. X. Smith of Denmark. Its
design capacity was 3300 ton clinker per day.

The company has following types of cement:

o Ordinary Portland Cement
o Sulphate Resistance Cement
o Black Cement
o Heat Resistance Cement
o White Cement
o Slag Cement
o Quick Setting Cement
o Under Water Setting Cement
o Acid Resistant Cement

The company recently did two things:

o Establishment of Expansion Plant
o Getting ISO 9002 Certificate

Both the measures are to reveal the future planning of the company. The future planning of the
company is to export their high quality cement. The existing plant is unable to cope with the
demand of country. With the establishment of expansion plant, their supply is more than
demand. So, they can easily export their high quality cement. The main purpose of ISO 9002
certificate it to get the approval from ISO, they can export their high quality cement according to
international standards and can export after 2000 A. D. when only ISO certified companies can
export their products.

Production Process

D. G. Khan Cement factory adopt true dry production process for the manufacturing of cement. This
process consists of following steps.

Drilling

Drilling is done in the quarry with the help of drilling machine. They create a space for the powder
explosive.

Blasting

The powder explosive is blasted under a controlled process to get different small segments of
limestone. The large segments are also converted into small segments which is called crushing
process.

Transportation

The small fragments are loaded on the 7-Km long 3 belts conveyor system running over rough
terrain. This conveyor takes the new material from quarry to the factory site. The limestone and
shale to stored in the open space.

Grinding

After storage, the stored limestone and shale are fed to the raw mill with the help of two hoppers
according to predetermined mixed proportion. The roughly crushed material passed through 3
rollers. The mixture is dehydrated, sized, and fine particulars are separated.

Packing

In the packing unit, there are 4 rotary packers and each packer has 8 nozzles. The whole packing
process is automatic. Cement bags are loaded on the trucks and heavy trollers automatically. Each
cement bag has 50 Kg weight. Sometimes heavy users ask for bulk quantity of cement without
packing. It is loaded into the truck.

Loading

The final sample is taken when the packed cement is loaded on the truck. The some four tests are
performed as it is performed in cement mill. If the cement is not up to the mark dispatch is stopped
otherwise no problem.

Distribution

For the efficient distribution, the company open its four sales offices in four different cities.

Multan
D. G. Khan
Lahore
Karachi

Dispatch Department

And dispatch department at the factory site. Mostly sales offices are located near the target market.
Dealers are registered called stockists. They have to deposit at least Rs. 50000 as security. Before the
establishment of expansion plant a quota system is introduced. Each dealer has maximum and
minimum limit of his quota.

Store Department

The store department performs two basic functions:

o Management of Inventory
o Controlling of Inventory

Management of Inventory

The store department perform following functions for management of inventory.

 The inward card is issued when the truck passes through factory gate.
 Inspection of quantity of material is done on the gate. Inspection note is sent to the
concerning department. The manager or incharge who raise the order called indentor write
the remarks upon it after checking the quality. It is the duty of indentor to write the
acceptance and rejection note upon it.
 All accepted material is stored by store department and write material receiving report.

One of copy of material receiving report is sent to following departments.

o Finance department
o Store department
o Purchase department
o MIS department
o Supplier

All the received items are written in the records books.

Control of Inventory

The store department controls the inventory both manually and by computer. Two systems are
introduced for physical control of inventory.

 Cardex Card or Bin System

In the Cardex card system, all the materials for which store department issued the material receiving
report entered in the Cardex cards. Different pieces of information are written on these Cardex
cards.

o Category
o Code no
o Part No
o Description

o Maximum Level
o Re-ordering Level
o Location

All the work done manually and balance the card when the inventory coming or going out of
department.

 Computer Records

The second system for controlling of inventory is computer records. All the transactions are updated
in the computer.

Purchasing

The purchasing of different items is done by the purchase department of the D. G. Khan Cement
Factory. The purchase department not only purchase for the factory as well as for the sales offices.
Usually the department purchases machinery furnace oil, office equipment, supplies, paper sacks,
explosive etc:

The purchase department acquire the things through the acquisition process.

 The Acquisition Process

The acquisition process consists of following steps.

Need Recognition

Need for the acquisition of raw material arises when the production department asks to the store
department of some particular item. The store department is unable to fulfil the need. So he
recommends to the purchase department.

For example, Production Department needs a calculator. And Calculator is not available. There is a
need to Purchase calculator

Supplier Selection

In the supplier selection stage, Different suppliers are identified. Suppliers are of two types.

o Permanent Suppliers
o Random Supplier

The company has permanent contractor to the different items. Contracts are of long term in nature.
So they don’t need any frequently selection of random supplier. The company selected the supplier
do to following characteristics.

o Past experience
o Past performance
o Financial strength
o Quality of material supplied
o Price charges

o Nature of relationship with the supplier

One of these factors can change the decision.

Placing the order

The purchase department has authority to buy the items. The purchase is done once the particulars
given by the store department. The following particulars are given in the indent form:

o Name of the department
o Description of the item needed
o Last purchase date
o Quality of item
o Quantity of item

The order placement is dependent upon the requirement of item. Different purchases procedure are
adopted depending upon

o Urgency
o Availability
o Importance

There are three types of purchase processes:

Regular Purchase
Spot Purchase
Importance Regular Purchase

Regular purchase is the purchase of those items which they are required after the certain period
with regularity. It exhibits the following characteristics.

o Such items are very expensive
o Such items are not needed urgently

These are consumable goods.

The order is placed in the newspaper in the form of tender notice. The terms and condition are
mentioned in the tender notice. The supplier gets the tender form from the nearest sales office
(mentioned in the newspaper) on submission of fee. In this tender notice all the description of item
is mentioned. The supplier fills the form and submits to department with a security fee. The supplier
is selected on the basis of low bid of the supplier. In case, the company accepts the tender notice of
supplier who gives maximum discount. Sometimes the indentor is also considered for the selection
of supplier which negotiate with the supplier in term of quality of item.

After the supplier has been identified and selected the company will issue purchase order to the
supplier.

Spot Purchase

Sometimes, different items are purchased on the spot. These items are urgently needed, having
more alternative and payment made in cash e.g. towels, tube lights, stationary, bullets, bed sheets
and spoons, dishes etc. Spot purchase is done through spot purchase committee which is consists of

o Indentor or end user
o Purchase department representative
o Commercial

The spot committee visits different suppliers evaluate the items in terms of price, quality and
delivery date. The committee make the payment to the supplier on the spot. One month is needed
for the spot purchase to be completed.

Import

The company imports those items which are not available here or having low quality. Import is a
long and complex process, it takes six months for an import purchase to be completed mostly earth
moving machinery, fire bricks and spare parts are imported.

Track the order

Track the order means routine follow ups of orders to anticipate late deliveries or probable
deviations from requested order quantities. Different modes are used or tracking the orders e.g.
telephone, letter, fax. The company usually tracks the order when some delay will stop the
production.

Receiving the order

When the order is received from the supplier, the indentor checks the quality of the incoming
materials. The indentor writes the remarks about items either it is accepted or rejected. Acceptance
or rejection note is issued by the store department. If the materials are accepted the store
department issues material receiving report. One copy of the material receiving report is issued to
each of the following department.

o Supplier
o Finance Department
o MIS Department
o Store Department

Purchase Department

The rejection of items is informed to the purchase department and they return to the supplier. The
purchase department also maintain and updates their records of different supplier on punctuality,
quality, quantity deviations and price. All these information will help for future evaluation of
supplier. When the finance department has received the material receiving report from the store
department supplier as paid and entries are passed in their records.

Supplier Contracts

The purchase department of D. G. Khan Cement company has identified and registered different
suppliers for the materials, which have vital importance such as furnace oil, paper sacks and
explosive.

Furnace Oil

 90% of furnace oil is purchased from Pakistan State Oil
 10% of the required furnace oil is purchased from Shell
 Paper Sacks

The company usually makes a contract of six months duration for the supply of paper sacks.
Generally, the company awards contract to any of the following companies.

1. Pakistan Paper Sack Corporation Karachi

2. Khyber Papers Private Ltd. Gadoon.

3. Cherat Paper Sack Gadoon

Supplier of Stationary

Following printing agencies are the suppliers of stationary to the D. G. Khan Cement Company:

1. Dera Press

2. Freedom Art Press

3. Top Signs

All located in Dera Ghazi Khan City.

Explosive

There is only one supplier of explosive in the whole country. So the company also makes purchase of
explosive from that very company i.e. Pakistan Ordinance Factories Wah Cantt.

In 1995, D.G Khan Cement (DGK) was at the top of the 19 listed cement units in terms of profits
earned and total assets and ranked second in respect of sales. The company then enjoyed excellent
liquidity with no short-term borrowings; minimal long-term liabilities and a mountain of cash as high
as Rs2.1 billion at end-December, 1995.

By the middle of last decade, the days of sunshine and glory were all but over for the cement sector.
Excess capacity; the teething competition; economic recession and the spiralling cost of production
all pushed cement producing units in the quagmire of losses. The company is still market leader with
respect to market share of 11.2% to 11.4%. During the fiscal year ended June 30, 2009 (fiscal 2009),
the Company produced 3,946,101metric tons of clinker and 3,877,296 metric tons of cement. The
Company's subsidiary, Nishat Paper Products Company Limited is principally engaged in the
manufacture and sale of paper products and packaging material.

During the first half of FY 2011, the sale of cement in the country registered a decline of over 8%
compared with the corresponding period. The sales of cement in the local market were 10.108
million tons against 11.022 million tons during the same period last year. Export of cement during
the period also declined significantly. Total export of cement during the period under review is 4.629
million tons against 5.579 million tons during the corresponding period. The decline of 17% during
the period attributed to declining rates of cement in the international markets along with sluggish
demand. In addition, the rising cost of production in the country also made it less competitive for
the industry to compete in the international markets.

Net profit of DG Khan Cement, the second largest cement-maker, fell 60 per cent to Rs192 million in
the first half of fiscal 2010-11 compared with Rs470 million posted in the same period last year.

The decline is primarily due to lower gross margins amid higher input cost and lower selling prices in
the local market. Sales volume is also expected to have dropped 16 per cent to two million tons due
to subdued demand amid severe floods.

Net sales rose marginally by 2.7 per cent to Rs8.2 billion compared with Rs8 billion as sales volume
declined. Gross margins remained flat on account of higher coal prices, which rose 37 per cent on a
yearly basis.

Domestic cement sales are likely to see an increase in March onwards with rural income increasing
following the harvest season, according to analysts. The company’s portfolio – composed primarily
of group companies including MCB Bank and Nishat Mills Limited – is likely to keep profitability
afloat. Dividend income is expected to clock in at Rs293 million.

Other income, which includes income from portfolio companies, rose 16 per cent to Rs546 million
compared with Rs471 million in the preceding year.

Working at DG Cement has provided me with an invaluable experience of how the financial matters
are run and solved. I had chosen to go into this field because of the interest I have in Finance. From
the whole analysis, company has good profit earning capacity. Although in FY 2011 Company has
faced problems regarding net sales. But company is working with full it’s potential. And i hope
company will achieve it leading position again. As Pakistani market is going to be liberalized, new
players are entering all sectors including cement sector, competition is going to be very intensive

and severe. To remain market leader DGKCC should reorganize its policies regarding pricing,
placement, workforce management and development. To gain and sustain competitive advantage

DGKCC should change itself continuously according to local as well as international market. DG Khan
Cement factory is the leading company in the cement sector.

The company is performing well for the financial point of view. However net profit of DGKCC falls in
FY 2011. But company is trying its level best to retain its profit. It pays a huge amount annually in the
form of taxes to the government of Pakistan. Company’s distribution channels are very effective.

The prices of D G Cement products are higher than the competitors due to the fine quality, it
provides. It can also be concluded that D G Cement should reduce the prices of its products.

Bibliography
Web

1. http://www.dgcement.com
2. http://www.cement.org/basics/images/flashtour.html
3. http://www.inlandcanada.com/NR/exeres/3E7E96B8-1DF4-4F8D-A5CA-0FC35A4BDBD5.htm
4. http://www.cement.org/basics/howmade.asp
5. http://www.cement.org/basics/images/flashtour.html
6. http://www.brecorder.com/index.php?id=959953&currPageNo=1&query=&search=&term=
&supD=
7. http://www.forexpk.com/highlights/corporate-news/dg-khan-cement-company-limited-
analysis-of-financial-statements-financial-year-2002-financial-year-2010.html
8. http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ric=DGKH.KA
9. http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/Business/27-Oct-
2009/Cement-industry-crosses-Rs120-billion-debt-mark
10. http://www.pakistaneconomist.com/database2/cover/c96-97.asp
11. http://www.cement.com.pk/cement/pakistan-cement-industry.html
12. http://www.cementchina.net/news/shownews.asp?id=4144
13. http://www.dgcement.com/financial-reports/AnnualReport2009-10.pdf41
14. http://www.dgcement.com/financial-reports/DG1stQurater20010-11.pdf
15. http://economicpakistan.wordpress.com/2009/02/01/cement-industry/
Analysis of Financial Statement by Gibson

TEXT

1. Economic Survey Of Pakistan 2006-07
2. Economic Survey Of Pakistan 2007-08
3. Annual Report Of Lucky Cement 2007-08
4. Annual Report Of Fauji Cement 2007-08
5. Annual Report Of D.G Khan Cement 2007-08
9. Annual Report Of Pioneer Cement 2007-08
10. Budget Review 2008-09

PEOPLE

I. I.U.NIAZI
II. MUKHTAR AHMAD
III. Hamid Shah
IV. Zahid Iqbal
V. ELAHI BUKHSH

APPENDIX

✔INTERNSHIP OFFER LETTER
✔INTERNSHIP COMPLETION LETTER
✔EMPLOYER EVALUATION FORM

DGKCC internship report overview

DGKCC internship report overview

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