CONTENTSPreface………………………………………………………………………………….01Acknowledgement…………………………………………………………………..…02Executive Summary…………………………………………………………………....03Industry Profile………………………………………………………………………...04 Govt. Attitude Towards Sector…………………………………………………......09 Industry During FY 2009…………………………………………………………...10

Company Overview……………………………………………………………………12Company Profile……………………………………………….....................................14 Nishat Group………………………………………………………………………..15 Acquisition of DGKCC by Nishat Group………………………………….............15 Brands…………………………………………………………………....................16

Friendly Environment………………………………………………………………...17 Measures Taken in Protecting The Environment…………………………………...17 Capacity Addition…………………………………………………………….........17 Environmental Management……………………………………………………......19 Future Outlook……………………………………………………………………..22 Mission and Vision Statement……………………………………………………..23

Business Process………………………………………………………….....................24 Steps of Production…………………………………………………………….......24 Flow Process of production………………………………………………………...27 Cost of Production………………………………………………………………….29 Decision Making……………………………………………………………………30

Hierarchy………………………………………………………………………………..32Departmentalization…………………………………………………………………….33SWOT Analysis…………………………………………………………………………35Tour to DGKCC…………………………………………………………………………41Problems Identification………………………………………………………………….43Recommendations……………………………………………………………………….44Conclusion………………………………………………………………………………..45Bibliography……………………………………………………………………………..46Appendix………………………………………………………………………………...47 Internship Offer Letter……………………………………………………………….48 Completion Letter…………………………………………………………………….49 Evaluation Form Employer…………………………………………………………...50

UNIVERSITY OF CENTRAL PUNJAB 1

Preface

Learning in practical side is somewhat that cannot be compared with books knowledge. BBA

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 fulfill 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 theoretical knowledge and get practical exposure. I have visited almost all the departments

and studied function of each department at factory as well as at their head office in Lahore.

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.

UNIVERSITY OF CENTRAL PUNJAB 2

Acknowledgement

My greatest thanks to Allah Almighty. Allah who bestowed me with the ability and potential to

complete this Internship. Before I go into thick of the things, 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. Elahi Buksh (Senior Manager Finince) 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 at

the site in Khairpur.

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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.

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Industry Profile

The history of cement industry in Pakistan dates back to 1921 when the first plant was

established at Wah. At the time of independence in 1947 there were four cement factories with

an installed capacity of 470,000 tons per annum. These units were located at Karachi, Rohri,

Dandot and Wah. In 1956 Pakistan Industrial Development Corporation (PIDC) established two

plants at Daudkel and Hyderabad and subsequently more plants were established in the private

sector.

The industry was nationalized in 1972 and the State Cement Corporation of Pakistan (SCCP)

was established following the Economic Reforms Order, 1972. As a result of nationalization, a

total of 10 cement units with an installed capacity of 2.8 million tons per annum were transferred

to the SCCP. Effective price control was also vested with the SCCP and for a long time the

industry operated under a regime of strict regulation and price control. While the cement industry

was working under state control, the SCCP established five new units with an installed capacity

of 1.8 million tons per annum.

In 1985-86 the cement industry was deregulated and private sector was allowed to establish

cement plants. But bulk of the capacity was controlled by the SCCP which had effective control

in the fixation of prices. Severe shortage of cement and price deregulation prompted the private

sector to establish more plants. Seven units were established in the private sector before

commencement of the process of privatisation in 1991.

During the regime of Nawaz Sharif the industry went through major transformation. The

government embarked upon an ambitious privatisation programme and eight units have been

privatised so far. The SCCP at present controls less than 25% of the total installed capacity in the

country which is shrinking with the establishment of more plants in the private sector and

expansion in the privatised units. The units working under the SCCP control are old and

inefficient using 'wet process' whereas the units established in the private sector are new,

efficient and use 'dry process'.

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Cement manufacturing is a high capital- and energy-intensive industry. The capital cost of a

2000 tonnes per day (TPD) plant ranges between Rs. 3.5 billion to Rs. 4 billion whereas the

capital cost of a 3000 TPD plant is estimated at more than Rs. 5.5 billion. Energy consumption

by cement manufacturing units based on 'wet process' is higher than 'dry process'. The 'dry

process' is estimated to be economical by 40% to 50% compared to 'wet process'.

 By now it has exceeded 10 million tonnes per annum as a result of establishment of new

manufacturing facilities and expansion by the existing units. Privatization and effective price

decontrol in 1991-92 heralded a new era in which the industry has reached a level where surplus

production after meeting local demand is expected in 1997.

The cement industry crossed the heavily burdened debt mark of Rs 120 billion from financial

institutions.

The debt, which was Rs 34 billion in 2003-04, has crossed Rs 120 billion this year. Cement

demand in the country is directly proportionate to the growth in GDP. Over the last 3-5 years, the

security situation in the country has resulted in low GDP growth. Despite this, the cement

industry contributed revenue amounting to approximately Rs15 billion in 2004, Rs17.5 billion in

2005, Rs 22b in 2006, Rs 26.3 billion in 2007 and Rs30 billion in 2008 to the national exchequer.

There are 23 cement companies in the country out of which 4 are foreign companies and 3 are

controlled by the armed forces under the aegis of Fauji Foundation and Army Welfare Trust. 19

of these companies are listed on the stock exchanges of the country and their working is

regulated by strong professional and statutory bodies such as Securities and Exchange

Commission of Pakistan, Stock Exchanges of Pakistan, Institute of Chartered Accountants of

Pakistan and Institute of Cost and Management Accountants of Pakistan.

Industry circle further added the companies file monthly, as well as, annual returns of income

tax, sales tax and federal excise. Cement industry is also following the rules and regulation

implemented by FBR. Federal Board of Revenue has the power to check the books of accounts

of any company and the cement sector remains under close scrutiny of the Federal Board of

Revenue.

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The cement industry in Pakistan faces two serious threats: closure of units based on wet process,

and poor cash flow rendering the units incapable of debt servicing due to increasing cost of

electricity, furnace oil and imported craft paper used for cement packing. The cost of furnace oil

alone has increased by nearly 100% in the last 15 months alone. With the increase in furnace oil

the increase in electricity tariff has also become inevitable.

UNIVERSITY OF CENTRAL PUNJAB 7

Pakistan has remained a net importer of cement but due to the privatization of units operating

under state control and subsequent expansion programmes by the new owners supported by

financial has pushed the industry to a point where the country is bound to reach an oversupply

situation. However, the recent increase in energy cost provides opportunity for the efficient units

based on dry process to sustain the situation for a relatively longer period. It would also be

possible because the expansion by the existing units and establishment of new units are being

delayed.

Pakistan's cement market is divided into two distinct regions, North and South. The northern

region comprises the Punjab, NWFP, Azad Kashmir and upper parts of Balochistan, whereas the

southern region comprises the entire province of Sindh and lower parts of Balochistan.

Traditionally, the southern region has always been surplus in cement production but with the

establishment of more plants in the northern parts of the country the region has become almost

self-sufficient in supply of cement.

Demand-Supply Gap

The demand-supply gap which for the last decade was in favor of manufacturers is now set to

switch the other way with supply outpacing demand by the end of 1997. Historically, demand

has grown at an average rate of 7%, with the Northern region averaging 8% and Southern region

lagging behind at 4%. There is much pessimism about the industry's future due to a tremendous

increase in supply expected by the end of next year.

The way new plants are being established and existing plants are undertaking expansion, the

demand-supply equation is bound to create surpluses. However, it has been observed that actual

progress is slower than planned to avoid a possible glut situation. This will effectively narrow

down the gap between demand and supply and thereby ease the pressure on prices.

Factors which can possibly change the surplus position into a near-equilibrium between demand

and supply are:-

1. Formation of manufacturers' cartel to avoid price decline;

UNIVERSITY OF CENTRAL PUNJAB 8

2. Delay in implementation of planned additions and expansions;

3. Efforts to export cement; and

4. Increase in demand if construction of some of the mega-sized infrastructure projects

starts.

Number of Units (Grey Cement)

North Zone 19South Zone 10

Total 29

Competition

As the cement market is moving from a virtual 'sellers' market' to an over-supply situation, it is

expected that when prices stagnate and profitability becomes a function of volume and

economies of scale, locational advantage and proximity to markets will become extremely

important factors.

UNIVERSITY OF CENTRAL PUNJAB 9

02468

101214161820

North Zone South Zone

Number of Units

At present the freight charges are a massive 20% of the retail prices. The plants located very

close to each other and tapping the same market will have to expand their markets which will

increase their freight expenses.

Dandot, Pioneer, Maple Leaf and Garibwal are all located within a radius of 100 kilometers and

are selling bulk of their production in the same areas and will thus face serious competition from

each other.

Opportunity Aspect

Pakistan has one of the highest population growth rates in the world, touching 3%. This has

prompted a sizable demand for housing facilities in the country. According to estimates of

construction industry, there is a huge backlog of about 6.25 million housing units in the country.

Bulk of the current demand of 0.6 million units needed every year is for urban areas. With

greater urbanization the demand for cement is expected to grow at an average of nearly 7% per

annum.

The demand for cement for infrastructure units is expected to grow with the commencement of

work on motorways, power plants, Islamabad New City, Karachi Package and Ghazi Brotha

dam. If all these projects are implemented as per schedule, the demand for cement is expected to

grow at a higher rate.

Government Attitude Towards Sector

Tax structure

Instead of providing any relief in the budget, the sector was further penalized with a 3% increase

in sales tax to 18% and an increase in excise duty to 35%. So far, the manufacturers have been

able to pass on the increase to consumers but the situation is unlikely to continue. However, the

possibility of formation of a cartel cannot be ruled out. Since massive investment has been made

in the sector, any reduction in price of cement can reduce profit margins of all the units.

UNIVERSITY OF CENTRAL PUNJAB 10

Formation of Cartel

Formation of cartel and fixation of price at a level high enough to cover increasing costs of

inputs and ensure reasonable profit margins may provide a short-term relief to the manufacturers.

Such a cartel may be against the interests of consumers but can help the manufacturers to survive

with some dignity.

Formation and smooth operation of a cartel is generally difficult but in the case of cement

industry it may not be so because the only restriction could be on the level of capacity utilization

along with a modest uniform reduction in price of cement. However, the units are in diverse

states of financial health, enjoy different levels of competitive advantage, and therefore need

different prescriptions to maintain their profitability.

Excise Duty

In budget 2008-2009 the federal excise

duty on cement has been to Rs 900 per

tones from the existing base of Rs 750

per tones.

Industry during FY 2009

As there is global economic crisis and

ongoing unfavorable investments

climate, severe crisis of electricity and

deteriorating safety concerns led o

poor economic progress during FY

2009.The GDP growth during FY

2009 hovered around merely 2%,

lowest during the last 7 years in the country. The manufacturing sector showed a negative growth

of 4% compared with sizable positive growth of 5% last year. The growth in GDP was mainly

contributed by outperforming progress made in agriculture sector during the period under the

review which is nearly 4.7%against only 1.7% last year. Government spending of Rs. 550 billion

UNIVERSITY OF CENTRAL PUNJAB 11

on Public Sector Development Plan as announced in last year budget FY 2008 was cut down to a

revised amount of Rs. 418 billion due to liquidity prices prevailing in the country. All these bode

negatively on the cement sector in the country as well. Cement sales in local market during FY

2009 plunged by nearly 14%, first time during the last 7 years.

The cement industry of the country sold over 19 million tons cement on the local market against

about 23 million tons last year. On the other hand, exporters from the cement from the country

are on rise. Total cement exporters from the country first time crossed 10 million marks. Overall

capacity utilization of the available capacity declined to nearly 74% from last year of 93%

mainly on account of less demand and further addition of new capacities during the period under

report. Company has sold equal to 93% of its capacity which is significantly higher than industry

average of 74%. This was only possible due to brand loyalty and customer’s satisfaction on the

company’s products.

UNIVERSITY OF CENTRAL PUNJAB 12

Company Overview

Company Name:

D.G. KHAN CEMENT COMPANY LIMITED

Legal Status:

Public Limited Company

Registered Office:

Nishat House, 53-A, Lawrence Road,Lahore, Pakistan.Phone: 92-42-6367812-20Fax: 92-42-6367414E-mail: info@dgcement.comWeb: www.dgcement.com

Chairperson

Mrs. Naz Mansha

Chief Executive

Mr. Mian Raza Mansha

Directors

Khalid Qadeer Qureshi Mohammad Azam Zaka ud din Inayat Ullah Niazi (CFO) Nabiha Shahnawaz Cheema

Company’s Secretary:

Mr. Khalid Mahmood Chohan

UNIVERSITY OF CENTRAL PUNJAB 13

Auditors:

M/s A.F. Ferguson & Co.

Legal Advisor:

Mr. Shahid Hameed, Bar-at-Law

Bankers:

Royal Bank of Scotland Allied Bank Ltd Muslim Commercial Bank Ltd Askari Bank Ltd Bank Alfalah Ltd Citi Bank N.A Habib Bank Ltd National Bank of Pakistan Ltd Sandard Chartered Bank Ltd The Bank of Punjab United Bank Ltd

Sales Offices

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

(Annual report 2009”DG Khan Cement Company Ltd”, p.2)

COMPANY PROFILE

UNIVERSITY OF CENTRAL PUNJAB 14

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.

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 spiraling cost of

UNIVERSITY OF CENTRAL PUNJAB 15

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%.

NISHAT GROUP

Nishat Group is one of the leading and most diversified business groups in South East Asia. With

assets over PRs.300 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.

UNIVERSITY OF CENTRAL PUNJAB 16

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.

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).

UNIVERSITY OF CENTRAL PUNJAB 17

2.2 million tons/year

On Demand

Dealers

Distributors

Export

In addition to following two brands they are also offering four different packaging which are as

following:

OPC

SRC

ELEPHANT BRAND

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%

UNIVERSITY OF CENTRAL PUNJAB 18

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 NWFP besides making it more convenient to export to Afghanistan from

northern borders.

 

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

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

UNIVERSITY OF CENTRAL PUNJAB 19

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.

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...

UNIVERSITY OF CENTRAL PUNJAB 20

UNIVERSITY OF CENTRAL PUNJAB 21

ON GOING PROJECTS:

Work on Waste Heat Recovery project is underway. Civil work and fabrication is at full swing.

Shipments of plant & machinery have already started reaching at plant site. The project is

expected to complete as per schedule.

Cement manufacturing is highly energy extensive. Therefore, focusing on non conventional fuels

as alternative or substitute fuels to conserve energy is simply mandatory requirement of the day.

Your management has decided to use Municipal Solid Waste as Refused Drive Fuel (RDF) as an

alternative to Coal. This will not only reduce the rising cost of production but also provide an

opportunity to dispose of permanently the waste material in a controlled environment friendly

sustainable fashion. In this regard your management has singed an agreement with a German

company for the supply of modular design machinery and equipment for RDF project.

FUTURE OUTLOOK

Current situation posed serious doubts for stable and sustained developmental and infrastructural

projects in the country. Safe and secure environment is of pivotal importance for new

investments. Entrepreneurs both local and foreigners pay high importance to conducive and safe

working place. Ongoing war like situation in Northern parts of our country and severe security

concerns in other areas of the country is hampering the overall economic activities. In addition

liquidity crisis, increasing electricity tariff, power shedding and still higher cost of financing are

serious impediments to economic growth in the country. Going forward, spending by Govt.

under annual PSDP is reportedly much less than

budgeted for the first quarter of FY 2010. All these

factors will affect the cement demand in the periods to

come.

In export markets, specially, in Gulf region the

competition is getting stiff after capacity additions by a

few Gulf States. Recently Saudi Arabia has also

allowed cement exports which is a setback for Pakistani

cement manufacturers. Nevertheless, cement exports

from the country are expected to achieve a decent

growth in the current financial year as well.

UNIVERSITY OF CENTRAL PUNJAB 22

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.

Vision Statement

To transform the Company into a modern and dynamic

cement manufacturing company with qualified professionals

and fully equipped to play a meaningful role on sustainable

basis in the economy of Pakistan.

UNIVERSITY OF CENTRAL PUNJAB 23

BUSINESS PROCESS

• Cement acts as a binding agent, holding particles of aggregate together form concrete.

• Cement production is highly energy-intensive process and involves the chemical

combination of calcium carbonate (limestone), silica, alumina and small amounts

of other materials.

• 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

UNIVERSITY OF CENTRAL PUNJAB 24

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, so 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 being suddenly and dramatically 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"

UNIVERSITY OF CENTRAL PUNJAB 25

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.

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Flow Process of Production

Steps of Production

 

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Cost of production

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Driller Holes Raw

CrusherStorage

Silo 1 Pre-Heater

KilnClinkerSilo 2

Packing Delivering

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 plant 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.

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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 repot 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.

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Top Management of DGKCC

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Hierarchy

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CEORaza Mansha

DIR(M) Shoaib

RSM(LHR)

Ali

RSM(MUL)

Mohsin

RSM(KHR)

Faisal

RSM(DGK)

Hammad

RSM(DGK SITE)

Wajid

DIR(F) Rizwi

CFO

I.U.Niazi

MNGR.(ACC.)Zahid

MNGR.(F)Elahi Buksh

DGM(MIS)

Aslam MNGR.(MIS)Zeeshan

DIR(O)Zaka-ud-Din

GM(HR & ADMIN)

Umer

GM(W)Rasheed

HOD(CIVIL)Adeel

HOD(PROD.)Mukhtar

HOD(W)Arif

HOD(Q.C)Hafeez Tareen

HOD(E)Nisar

DEPARTMENTALISATION

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Quarring of MaterialCrushing of Material Grinding of MaterialBurning of ClinkerGrinding of CementCement Dispatch

Production

Preparation of financial reportsData EntryMaintaining RecordPreparation of Letter of CreditPurchase request Order RequestAnalysing Financial Statements

FinanceInstallation and Maintainance of electrical equipmentDesigning of electrical equipmentsRepair of equipmentsInspection and utilization of manpower and materials Cost and budget controls

Electrical

Analyze data, designs and performance of new or existing civil works Efficient maintenance, inspection and repair of all civil structuresHandling on-the-job accidents And injuriesArranging training programmes for employees of company for job efficiency and safety.

C ivil

Leading and managing all aspects of the sales Monitoring & reporting on sales metricsKeeping record of contracts and agreementsMonitoring of monthly sales and booking the targets Handling customer requests, requirements, complaints and related issues

Sale/Despatch

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Managing the disaster situation when ever there is any accident of any equipment.Designing and making of equipmentsEnsures safety and reliabilityProcurement of Machineries and PlantsDeveloping the infrastructures and monitoring of progress.

M ech a n ica l

Loading & storage of major deliveries Inspection of deliveriesIssuance of products on requestMaintainance of equipmentsRecord of equipmentsObtains and evaluates quotations and bids from various suppliers

S to re

Selection and recruitment of employeeMaintaining personnel inventoryTraining of employeesEnsures safetyRegulate opnion surveysFormulation and co-ordination of policies

A d m in . & H R

Blasting Collection of raw material Transportation of collecting raw material to storage yards

Q u a rry

Data entryMaintaining the electronic recordData storageMaintaining internal communicationDeveloping user friendly softwares

M IS

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.

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Avaliability of Raw Material

Cheap Labor

Latest Machinery

Quality Product

Self Power Generation

Durability

Competitive Edge

Own Paper Bag Plant

Location of Project

Increase in Dem and of Cem ent due to upcom ing Sports Events

Export Dem and

Introduction to New Product LineRehabiliation and new Construction Projects in the Country

Low Prom otional Cam paignsNo Perform ance AppraisalSeniority IssuesCentralised Decision M aking

Increase in Fuel Prices

Economic Recession

Political Instability

IMF Loan

Increase in Intrest RatesDecrease Profitability Due to Competition

High Level Taxation

SW OT

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 labor

As we all know the labor of Pakistan is very cheap. So this is a healthy sign for the company as

the company has to pay less to their labor 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.

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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:

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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 want to 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. They only one way to measure the performance which 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

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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 honored

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 it controls the

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.

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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.

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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 have 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 NWFP Sindh Baluchistan

Lime Stone 24 21 17 65

Shall/Clay 3 4 3 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.

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Tour to DGKCC

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PROBLEMS 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:

Economic recession all over the globe the company is in crisis these days.

Instability of politics in Pakistan.

Terrorism in Pakistan.

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

conjusted 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 doesn’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 OACLE software.

Working after hours without any incentive.

Multitasking continuously effects work.

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RECOMMENDATIONS

They should pay much attention to their employee’s promotion. They should use

performance appraisal system.

Top management should use up-to-date marketing practices rather to use orthodox ideas.

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.

They should pay much attention to promotional tools. They should advertise their product.

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

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.

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.

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.

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CONCLUSION

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 growing potential. 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 very well for the financial point of view. 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.

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BIBLIOGRAPHY

WEB

[1].www.cementforum.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=&supDate=[7].http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ric=DGKH.KA [8].http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/Business/27-Oct-

2009/Cement-industry-crosses-Rs120-billion-debt-mark[9].http://www.pakistaneconomist.com/database2/cover/c96-97.asp [10]. http://www.cement.com.pk/cement/pakistan-cement-industry.html [11]. http://www.cementchina.net/news/shownews.asp?id=4144 [12]. http://www.dgcement.com/financial-reports/AnnualReport2007-08.pdf [13]. http://www.dgcement.com/financial-reports/DG1stQurater2008-09.pdf [14]. http://economicpakistan.wordpress.com/2009/02/01/cement-industry/ [15]. Analysis of Financial Statement by Gibson [16]. http://02e4f8d.netsolhost.com/financial-reports/AnnualReport2006-2007.pdf

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

6. Annual Report Of D.G Khan Cement 2008-09

7. Annual Report Of Pioneer Cement 2007-08

8. Budget Review 2008-09

PEOPLE

I. I.U.NIAZI

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II. MUKHTAR AHMAD

III. ELAHI BUKHSH

IV. WASEEM

APPENDIX

INTERNSHIP OFFER LETTER.

INTERNSHIP COMPLETION LETTER.

EMPLOYER EVALUATION FORM.

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Internship Report

(D.G Khan Cement Company LTD)

BBA Program

FALL 2009

Submitted To

Prof. Nisar Ahmad

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