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OGDCL
COMPREHENSIVE CASES
ANALYSIS AND INTERPRETATIONS
Submitted by:
Khizer Asif
Mohammad Azeem
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OGDCL
INCOME
STATEMENT
from year 2006 to
2010
CC-2 (Rupees '000)
2010 2009 2008 2007 2006
Sales - net
142,571,
863
130,829,
579 125,445,674
100,261,
191
96,755,
382
Royalty16,72
8,84315,15
5,667 17,262,49310,87
7,44310,87
2,443
Operating expenses
23,72
7,818
22,67
3,893 18,882,365
18,49
7,388
15,04
5,654
transportation charges
1,49
2,267
1,52
2,489 1,472,615
1,08
7,931
94
2,163
CGS
41,948
,928
39,352
,049 37,617,473
30,462,
762
26,860,
260
Gross Profit
100,622,
935
91,477
,530 87,828,201
69,798,
429
69,895,
122
Other Income3,30
0,2143,37
0,823 8,308,6843,61
5,2314,24
7,881
Exploration and Prospecting Expenditure
7,90
2,370
7,45
9,560 6,612,836
7,40
6,280
3,68
0,707
General and administration
1,59
8,161
1,33
2,982 1,244,030
1,28
5,476
1,07
1,979
Finance Cost
1,27
3,312
92
6,027 531,799
44
9,561 9,973
Worker's Profit Participation Fund
4,66
0,671
4,25
9,364 4,387,411
3,21
3,617
3,46
9,017
share of profit in associate - net of
taxation
6
4,188
5
7,503 - - -
Profit Before Taxation
88,552
,753
80,927
,923 83,360,809
61,058,
726
65,911,
327
Taxation
29,37
5,628
25,38
8,282 33,747,216
15,42
8,762
19,94
3,604
Profit for the Year
59,177
,125
55,539
,641 49,613,593
45,629,
964
45,967,
723
Earnings per share - basic (Rupees) 13.76 12.91 11.45
1
0.61
1
0.69
CC2
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Analysis on Income statement:
Net sales of OGDCL have grown significantly over the last five years. This
growth in sales is due to increase in demand of oil and gas in Pakistan. Gross profit,
Operating profit, Net profit of the company are also high because of less general and
administration cost. Operating expenses have been increasing consistently because of
high inflation in Pakistan. Exploration and prospecting expenditure of the company as a
percentage of sales are also low. Ogdcl overhead costs are low and CGS is high. This is
because of high operating expenses and royalty payment to the government. Finance cost
has increased by a large amount in FY07.There ia a fluctuation in Profit before tax of the
company but there is an overall increasing trend. Earnings per share have been increasingconsistently with the exception of 2007.
OGDCL BALANCE
SHEET
From Year
2006 to 2010
CC 3
(Rupees
'000)
2010 2009 2008 2007 2006
SHARE CAPITAL AND
RESERVES
Authorized Share Capital
Share capital 43,0
09,284
43,0
09,284
43,009
,284
43,0
09,284
43,00
9,284
Capital reserve
3,8
59,682
3,6
58,318
2,667,
064
2,4
38,228
2,21
9,027
Unappropriated profit
110,5
23,520
79,5
03,794
63,695
,077
55,1
69,140
49,54
1,966
Total Shareholder's Equity
157,39
2,486
126,17
1,396
109,371,4
25
100,616
,652
94,770,
277
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NON CURRENT
LIABILITIES
Long term loans unsecured __ __ __ __ __ Deferred liabilities __ __ __ __ __
Taxation
21,4
99,184
17,7
10,497
12,370
,448
11,0
23,916
10,01
0,991
Employee benefits2,6
99,7732,0
08,4991,528,
4441,4
23,1321,42
0,245
Provision for
decommissioning cost
12,4
35,365
10,8
14,506
6,066,
716
5,1
51,807
4,22
1,756
Total Non-Current
Liabilities
36,63
4,322
30,53
3,502
19,965,6
08
17,598
,855
15,652,
992
CURRENT LIABILITIES
Trade and other payables 28,6
24,204
18,7
47,328
17,088
,050
11,1
22,665
7,17
4,483
Provision for taxation
6,2
16,639
2,5
40,170
4,143,
304 __
3,71
6,958
Proposed Dividends __ __ __ __ __
Total Current liabilities
34,8
40,843
21,2
87,498
21,231
,354
11,1
22,665
10,89
1,441
TOTAL LIABILITITES +
EQUITY
228,86
7,651
177,99
2,396
150,568,3
87
129,338
,172
121,314,
710
NON-CURRENT ASSETS
FIXED ASSETS
Property, plant and equipment34,9
98,89828,4
82,19423,225
,76321,6
00,20119,57
5,807
Development and production
assets
58,6
30,857
49,0
57,766
36,808
,041
28,7
49,993
2,55
1,149
Exploration and evaluation
assets
9,5
51,394
8,7
79,699
7,672,
444
6,3
65,706
677
,441
Stores held for capital
expenditure __ __ __ __
21,65
3,562
Total Fixed Assets
103,18
1,149
86,31
9,659
67,706,2
48
56,715
,900
44,457,
959
Investments in subsidiary and
associated companies __ __ __ __ __
Investments held to maturity __ __ __ __ __
Long term investments
3,2
31,435
2,9
03,133
3,175,
054
2,9
45,938
2,72
9,807
Long term loans and
receivables
1,9
02,330
1,8
49,707
1,324,
059
1,1
17,755
1,39
1,552
Long term prepayments
1
18,937 85,357
108,
937
3
9,821
58
,021
Total Non-Current Assets 108,43 91,15 72,314,2 60,819 48,637,
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3,851 7,856 98 ,414 339
CURRENT ASSETS
Stores, spares and loose tools
14,5
27,278
17,4
64,351
16,274
,079
13,1
78,295
12,82
9,747
Stock in trade
1
72,084
1
08,301
151,
782
9
3,788
65
,608
Trade debts
82,9
92,291
56,1
40,092
40,626
,931
27,8
73,515
24,49
8,986
Loans and advances2,2
16,8812,6
33,9652,339,
0371,5
38,6571,83
5,159
Deposits and prepayments
6
16,641
4
19,621
678,
789
29
2,928
300
,260
Interest accrued
17,031 27,156
158,
863
25
3,222
494
,087
Other receivables
9
26,951
9
79,319
10,207
,516
1,0
63,389
256
,722
Advance tax __ __
1,102,
044
13,5
53,959 __
Short term investments __ __ __
5,9
50,713
31,20
9,932
Other financial assets
11,1
20,823
5,0
87,917 __ __ __
Cash and bank balances
7,8
43,820
3,9
73,818
6,715,
048
4,7
20,292
1,18
6,870
Total Current Assets
120,43
3,800
86,83
4,540
78,254,0
89
68,518
,758
72,677,
371
TOTAL ASSETS
228,86
7,651
177,99
2,396
150,568,3
87
129,338
,172
121,314,
710
CC3
Analysis on Balance Sheet:
Current assets are more than current liabilities from the year 2006-2010 and there
has been no long term debt in the company since FY06 which shows that the company
has been maintaining Reserve borrowing capacity in order to take advantage of good
investment opportunities in future.
The company has not issued any new shares in the market hence, the number of shares
outstanding have not changed. Apart from this, we can see that current and non-current
liabilities and assets have an increasing trend over the periods.
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Lastly we can see that the total assets of the company have been growing at a high rate
throughout the year. This is because of the expansion policy Ogdcl is pursuing in order to
meet the rising demand of consumers of oil and gas in Pakistan.
OGDCL
Statement
of Cash
FlowsFrom Year
2006 to
2010
CC4
(Rupees
'000)
2010 2009 2008 2007 2006
C
ash flows from operating activities
Profit before taxation
88,552,7
53
80,927,9
23
78,307,4
04
61,058,7
26
65,911,32
7
Adjustments for:
Depreciation
3,323,4
74
3,306,4
07
3,129,8
82
2,978,4
42
2,370,87
1
Amortization of development and
production assets
6,457,0
68
6,208,4
03
4,961,1
45
3,637,3
69
3,339,72
9
Royalty
16,728,8
43
15,155,6
67
17,320,1
87
10,877,4
43
10,872,44
3
Workers' Profit Participation Fund
4,660,6
71
4,259,3
64
4,387,4
11
3,213,6
17
3,469,01
7
Provision for employees' benefits
1,288,0
12
1,712,8
15
759,4
09
184,85
2
367,80
7Unwinding of discount on provision
for decommissioning cost
1,263,9
14
911,6
83
527,6
95
443,69
9 __
Interest income
(1,560,8
48)
(1,775,6
71)
(2,653,8
59)
(3,064,60
7)
(3,389,61
6)
Un-realized gain/loss on
investments at fair value through
profit or loss
(5,99
3)
115,7
78
42,2
25
(60,38
6)
(21,52
3)
Dividend income (14,75 (29,51 (28,15 (300,65 (398,97
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6) 2) 0) 3) 0)
Fixed assets reconciliation
adjustment __ __
59,0
94 __ __
Profit on disposals of property, plantand equipment (75,086) (160,737) (114,615) (32,628) (26,282)
Interest income on long term
receivables
(25,62
0)
(36,86
1)
(54,78
9)
(61,57
3)
(82,75
2)
Share of profit in associated
company
(64,11
8)
(57,50
3)
(44,68
0) __ __
Stores inventory written off
8,20
6
298,9
30 __ __ __
Provision for doubtful advances
reversed __
(2,41
6)
(9,86
4) __ __
Trade debts written off __ __ 1,44
5 __ __
Provision for obsolete and slowmoving inventory 414,669 251,868 319,283 __ 47,452
provision for doubtful claims
1,05
0 __ __ __ __
Provision for doubtful trade debts
82,80
8
3,1
73 __
(5,43
0) __
Write back of provision for stores,
spares and loose tools __ __ __ __ __
Write Back of provision against
advances __ __ __ __ __
Adjustment on account of fixed
assets reconciliation __ __ __ __ __
Land reconcilitation adjustments __ __ __ __ __ 121,035,0
47
111,089,3
11
106,909,2
23
78,868,8
71
82,459,50
3
W
orking capital changes
(Increase)/ decrease in current assets
Stores, spares and loose tools
1,140,4
26
(1,400,0
54)
(3,010,0
44)
(2,145,54
1)
(5,332,25
0)
Stock in trade(63,78
3)43,4
81(57,99
4)(28,18
0) __
Trade debts
(26,935,0
07)
(15,437,9
66)
(12,688,5
99)
(3,374,52
9)
(5,971,41
2)
Deposits and prepayments(197,020)
259,544
(386,035)
7,332
(36,540)
Advances and other receivables
240,0
92
(120,1
65)
(435,00
9)
86,03
5
(60,19
1)
Increase/ (decrease) in current
liabilities __ __ __ __ __
Trade and other payables
(1,018,1
59)
3,683,6
03
2,188,4
73
1,207,3
65
1,162,43
9
Cash generated from operations 94,201,5 98,117,7 92,520,0 74,621,3 72,221,54
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96 54 15 53 9
Royalty paid
(5,019,8
32)
(17,510,0
87)
(13,112,3
99)
(9,768,79
3)
(10,297,74
4)
Employee benefits paid
(1,305,7
43)
(1,232,7
60)
(906,17
9)
(327,30
2)
(1,349,93
1)
Payments workers' profitparticipation fund
(4,459,364)
(4,902,992)
(3,910,117)
(3,469,017)
(3,380,011)
Taxes paid
(21,910,4
72)
(21,492,5
95)
(22,992,4
22)
(24,083,50
8)
(14,231,43
1)
(32,695,4
11)
(45,138,4
34)
(40,921,1
17)
(37,648,62
0)
(29,259,11
7)
Net cash from operating activities61,506,18
5
52,979,32
0
51,598,89
8 36,972,733 42,962,432
C
ash flows from investing activities
Fixed capital expenditure
(24,211,3
39)
(25,072,0
50)
(18,347,2
24)
(16,444,90
5)
(10,244,80
0)
Interest received
1,530,8
39
2,107,8
50
2,962,8
31
3,466,0
00
3,142,01
4
Dividend received
67,67
6
53,1
57
52,0
81
300,65
3
398,97
0
Purchase of investments
(276,97
0)
(188,1
83)
(450,00
0)
(450,00
0)
(463,00
0)
Proceeds from sale of property, plant and equipment __ __
50,061
73,341
12,140
Proceeds from disposals of property,
plant and equipment
84,10
7
165,9
46
214,5
35
35,13
0
31,18
4
Long term prepayments(33,58
0)23,5
81(69,11
6)18,20
0(16,18
2)
Net cash used in investing activities
(22,839,267
)
(22,909,70
1)
(15,586,83
2)
(13,001,581
) (7,139,674)
C
ash flows from financing activities
Dividend paid
(28,770,0
03)
(39,406,1
71)
(41,473,4
22)
(38,154,08
9)
(41,444,70
3)
Net cash used in financing activities
(28,770,0
03)
(39,406,1
71)
(41,473,4
22)
(38,154,08
9)
(41,444,70
3)
Decrease/Increase in cash and
cash equivalents
9,896,91
5
(9,336,55
2)
(1,309,46
2)
(14,182,937
) (5,621,945)Cash and cash equivalents at
beginning of the year
8,939,82
8
18,276,38
0
17,994,34
2 32,177,279 37,799,224
Cash and cash equivalents at end
of the year
18,836,74
3
8,939,82
8
16,684,88
0 17,994,342 32,177,279
CC4
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Analysis on Cash Flow Statement:
Cash from operations show net cash inflows which represent that the company is
generating enough cash to finance its operating activities while the cash from investing
and financing activities show net cash outflow which is a sign of growth as more is being
invested in fixed assets.
Net cash used in payment of dividend was Rs.39.40 billion as against 41.47 billion in the
previous year. Increase in cash flow from operating activities and net cash utilized in
investing and financing activities resulted in a net cash decrease of Rs.9.89 billion to
ending cash and cash equivalents balance of Rs.18.83 billion compared with Rs.8.93
billion over the previous year.
CC-6 2010 2009 2008 2007 2006
Sales - net 100.00% 100.00% 100.00%
100.00
% 100.00%
Royalty 11.73% 11.58% 13.76% 10.85% 11.24%
Operating expenses 16.64% 17.33% 15.05% 18.45% 15.55%
transportation charges 1.05% 1.16% 1.17% 1.09% 0.97%
CGS 29.42% 30.08% 29.99% 30.38% 27.76%
Gross Profit 70.58% 69.92% 70.01% 69.62% 72.24%
Other Income 2.31% 2.58% 6.62% 3.61% 4.39%
Exploration and Prospecting
Expenditure 5.54% 5.70% 5.27% 7.39% 3.80%
General and administration 1.12% 1.02% 0.99% 1.28% 1.11%
Finance Cost 0.89% 0.71% 0.42% 0.45% 0.01%
Worker's Profit Participation Fund 3.27% 3.26% 3.50% 3.21% 3.59%share of profit in associate - net of
taxation 0.05% 0.04% __ __ __
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Profit Before Taxation 62.11% 61.86% 66.45% 60.90% 68.12%
Taxation 20.60% 19.41% 26.90% 15.39% 20.61%
Profit for the Year 41.51% 42.45% 39.55% 45.51% 47.51%
CC6
Analysis on Common Size Income Statement:
As we can see in the common size income statement Gross profit margin has
been fluctuating over the years. In 2010 CGS was 29.42% of sales where as GP was
70.58% of sales. other incomes as percentage of sales was highest in 2007, however it has
been falling since then and in 2010 other income was 2.31% of sales. Another thing that
we can see in the common size income statement is the low general and administration
expense as percentage of sales. Finance cost significantly increased over the years. Profit
before taxation has been fluctuating over the years. Profit before taxation as a percentage
of sales was highest in 2006. in 2010 profit for the year was 41.51% of sales.
OGDCL Common Size Balance Sheet
From Year 2006 to 2010
CC 7 2010 2009 2008 2007 2006
SHARE CAPITAL AND
RESERVES
Authorized Share Capital
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Share capital 18.79% 24.16% 28.56% 33.25% 35.45%
Capital reserve 1.69% 2.06% 1.77% 1.89% 1.83%
Unappropriated profit 48.29% 44.67% 42.30% 42.65% 40.84%
Total Shareholder's Equity 68.77% 70.89% 72.64% 77.79% 78.12%
NON CURRENT LIABILITIES
Long term loans unsecured
Deferred liabilities
Taxation 9.39% 9.95% 8.22% 8.52% 8.25%
Employee benefits 1.18% 1.13% 1.02% 1.10% 1.17%
Provision for decommissioning cost 5.43% 6.08% 4.03% 3.98% 3.48%
Total Non-Current Liabilities 16.01% 17.15% 13.26% 13.61% 12.90%
CURRENT LIABILITIESTrade and other payables 12.51% 10.53% 11.35% 8.60% 5.91%
Provision for taxation 2.72% 1.43% 2.75% __ 3.06%
Proposed Dividends
Total Current liabilities 15.22% 11.96% 14.10% 8.60% 8.98%
TOTAL LIABILITITES + EQUITY 100.00% 100.00% 100.00%100.00
% 100.00%
NON-CURRENT ASSETS
FIXED ASSETS
Property, plant and equipment 15.29% 16.00% 15.43% 16.70% 16.14%
Development and production assets 25.62% 27.56% 24.45% 22.23% 2.10%
Exploration and evaluation assets 4.17% 4.93% 5.10% 4.92% 0.56%
Stores held for capital expenditure __ __ __ __ 17.85%
Total Fixed Assets 45.08% 48.50% 44.97% 43.85% 36.65%
Investments in subsidiary and
associated companies
Investments held to maturity
Long term investments 1.41% 1.63% 2.11% 2.28% 2.25%
Long term loans and receivables 0.83% 1.04% 0.88% 0.86% 1.15%
Long term prepayments 0.05% 0.05% 0.07% 0.03% 0.05%
Total Non-Current Assets 47.38% 51.21% 48.03% 47.02% 40.09%
CURRENT ASSETS
Stores, spares and loose tools 6.35% 9.81% 10.81% 10.19% 10.58%
Stock in trade 0.08% 0.06% 0.10% 0.07% 0.05%
Trade debts 36.26% 31.54% 26.98% 21.55% 20.19%
Loans and advances 0.97% 1.48% 1.55% 1.19% 1.51%
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Deposits and prepayments 0.27% 0.24% 0.45% 0.23% 0.25%
Interest accrued 0.01% 0.02% 0.11% 0.20% 0.41%
Other receivables 0.41% 0.55% 6.78% 0.82% 0.21%
Advance tax __ __ 0.73% 10.48% __
Short term investments __ __ __ 4.60% 25.73%
Other financial assets 4.86% 2.86% __ __ __
Cash and bank balances 3.43% 2.23% 4.46% 3.65% 0.98%
Total Current Assets 52.62% 48.79% 51.97% 52.98% 59.91%
TOTAL ASSETS 100.00% 100.00% 100.00%100.00
% 100.00%
CC7
Analysis on Common size Balance Sheets:
From the common size analysis of balance sheets we can conclude that in balance
sheet the items especially current assets of the company are very high in all fiscal years.
However, there has been increase in current assets as compared to current liabilities; thus,
we can say that companys working capital is very high. Owners equity has been
decreasing over the five year period and there has been no long term debt in the company
since 2006. Presently the highest percent of total assets is represented by trade debts.
Fixed assets as percentage of total assets has increased throughout the year with the
exception of 2010 in which it fell and are currently at 47.38 % of total assets.
OGDCL
Per Share Results
From Year 2006 to 2010
CC- 9 2010 2009 2008 2007 2006
Sales 33.15 30.42 29.17 23.31 22.50
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Net Income 13.76 12.91 11.54 10.61 10.69
Dividends 6.69 9.16 9.64 8.87 9.64
Book Value 36.60 29.34 25.43 23.39 22.03
Average Shares
Outstanding4,300,928,4
00
4,300,928,4
00
4,300,928,40
0
4,300,928,40
0
4,300,928,40
0
CC9
Per Share results:
EPS for the current year is 13.76 while for the previous year it was 12.91, which
shows a rise in net income, having an increase of 6.58%. Again this year, the rise was
minimal, although the sales were high, but the royalty, operational and tax costs took up a
major chunk of the sales revenue, leaving the company with net profits not much higher
than last year. It is hoped that the EPS will improve in future as the exploration and
development activities will start bearing fruit in the form of enhanced production.
Rise in EPS means the rise in income as the total number of share of OGDCL are
same. While Sales and book value also show an increasing trend as a percentage of
average number of shares outstanding.
OGDCLShort Term
Liquidity
Analysis
From Year
2006 to 2010
CC-10
(Rupees
'000)
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2010 2009 2008 2007 2006
Current Asset
120,433,80
0
86,834,5
40
78,254,0
89
68,518,7
58
72,677,3
71Current
Liabilities
34,840,84
3
21,287,4
98
21,231,3
54
11,122,6
65
10,891,4
41
Ratio Current Ratio 3.46
4.0
8
3.6
9
6.1
6 6.67
Current Asset120,433,80
086,834,540
78,254,089
68,518,758
72,677,371
Inventory
172,08
4
108,3
01
151,7
82
93,7
88
65,60
8
Prepaid Expense616,64
1419,6
21678,7
89292,9
28300,26
0
CurrentLiabilities
34,840,843
21,287,498
21,231,354
11,122,665
10,891,441
Ratio Acid-test Ratio 3.43 4.05 3.65 6.13 6.64
Sales142,571,86
3130,829,5
79125,445,6
74100,261,1
9196,755,382
Average
Receivables
69,566,191.
50
48,383,511.
50
34,250,223.
00
26,186,250.
50
21,513,280.
00
Times
Accounts
Receivable
Turnover 2.05 2.70 3.66 3.83 4.50
Cost of Goods
Sold
41,948,92
8
39,352,0
49
37,617,4
73
30,462,7
62
26,860,2
60
Average
Inventory 140192.5 130041.5 122785 79698 49006
Times
Inventory
Turnover 299.22 302.61 306.37 382.23 548.10
Days
Days' Sales in
Receivables 175.66 133.14 98.29 94.02 80.04
Days
Days' Sales in
Inventory 1.20 1.19 1.18 0.94 0.66
Days
Approximate
Conversion
Period 176.86 134.33 99.47 94.97 80.70
Cash
7,843,82
0
3,973,8
18
6,715,0
48
4,720,2
92
1,186,8
70
Current Assets 120,433,80 86,834,5 78,254,0 68,518,7 72,677,3
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0 40 89 58 71
Percent
Cash to Current
Assets 6.51% 4.58% 8.58% 6.89% 1.63%
Cash
7,843,82
0
3,973,8
18
6,715,0
48
4,720,2
92
1,186,8
70
Current
Liabilities
34,840,84
3
21,287,4
98
21,231,3
54
11,122,6
65
10,891,4
41
Percent
Cash to Current
Liabilities 22.51% 18.67% 31.63% 42.44% 10.90%
Current Asset
120,433,80
0
86,834,5
40
78,254,0
89
68,518,7
58
72,677,3
71
CurrentLiabilities
34,840,843
21,287,498
21,231,354
11,122,665
10,891,441
MS's Working Capital 85,592,95765,547,04
257,022,73
557,396,09
3 61,785,930
Days
Days' Purchases
in Accounts
Payable
6.5
9
5.6
5
3.9
3
8.6
1
6.1
1
Days
Average net
trade cycle 1.20 1.19 1.18 0.94 0.66
Cash generated
from operations
61,506,18
5
52,979,3
20
51,598,8
98
36,972,7
33
42,962,4
32
Total Current
Liabillities
34,840,84
3
21,287,4
98
21,231,3
54
11,122,6
65
10,891,4
41
Percent
Cash Provided
by operations to
average current
liabillities 177% 249% 243% 332% 394%
CC10
Short term Liquidity Analysis:
A liquidity ratio measures the firm ability to meet its current obligation, or
liquidity of short-term assets; related debt-paying ability. Several comparisons can be
made to determine this ability.
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Current ratio Of OGDCL shows decreasing trend. However, in 2010 it is 3.46
which is quite appropriate for the liquidity position of the company. Although
current ratio has decreased yet it shows an improvement since keeping a high
value of ratio represents cash keep as idle in the company.
Current liabilities in 2010 have shown a heavy increase due to a significant
increase in trade and other payables. Current assets also rose in the year, primarily
due to massive increase in trade debts from Rs. 56140092 billion from the last
year to Rs. 82992291 billion this year. Still as the increase in liabilities was much
higher compared to previous years, the ratio fell from 2009. Yet the major
liabilities, like royalties were part of the companys expansion plan, which will
yield greater returns in the future. However, the liquidity of the company may
decline in future if the management continues to opt for liquidating in short term
investments to finance future exploration and drilling activities.
Similarly, acid test ratio shows the same trend and currently it is 3.43 which show
that OGDCL has still enough current assets available excluding inventories to pay
off its liabilities. Thus, internally liquidity position of the company shows
deteriorating trend yet it is still very high and acceptable.
In terms of assets management, OGDC hasnt done well in past years. Inventory
turnover days have been decreasing. This measure indicates that OGDCL has
more funds invested in inventory. In 2010 it is 299.22 times which is quite an
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acceptable figure, yet it shows a deteriorating trend and may cause difficulty for
the company.
Days purchases in payables has fluctuated over the periods and has increase from
last year which was 5.65 days in 2009 to 6.59 in 2010which represents that now
OGDCL is taking more time to pay off its accounts payables which is good for
liquidity.
Receivables turnover ratio has decreased due to comparatively less increase in
sales as compared to trade debts receivables showing managerial inefficiency.
While, Days Sales Outstanding has been on a slightly increasing trend since
FY06, due to rises in trade debts. Presently it is 175.66 days which shows that
now it is taking more days than last year to collect its receivables.
As a result, we see that the operating cycle of the company has been increasing
since the end of 2006, caused by the increases in DSO. This implies that OGDCL
requires larger working capital which can be lowered by increase in days
purchases on credit.
. The companys credit policy seems to be less strict. This has led the company to
a negative image in terms of stock and debt management and the company needs
to turn this around as soon as possible, as the effects are getting bigger every
passing year. Hence, this is suggestive of a more aggressive credit policy.
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Apart from this working capital has also declined from 2006-2008 but increased
in 2009-2010. this is because current assets are more than current liabilities.
However, it still shows a surplus which provides safety cushion to prospective
creditors of OGDCL.
---Cash ratio is quite low which represents that current assets are less liquid. Cash to
current liabilities has decreased considerably from 2007-2009 which represent
availability of less cash.
OGDCL
Common-Size Analysis of Current Assets and Current Liabilities (in%)
From year 2006 to 2010
CC 11 2010 2009 2008 2007 2006
CURRENT ASSETS Stores, spares and loose tools 12.06% 20.11% 20.80% 19.23% 17.65%
Stock in trade 0.14% 0.12% 0.19% 0.14% 0.09%
Trade debts 68.91% 64.65% 51.92% 40.68% 33.71%
Loans and advances 1.84% 3.03% 2.99% 2.25% 2.53%
Deposits and prepayments 0.51% 0.48% 0.87% 0.43% 0.41%
Interest accrued 0.01% 0.03% 0.20% 0.37% 0.68%
Other receivables 0.77% 1.13% 13.04% 1.55% 0.35%
Advance tax __ __ 1.41% 19.78% __
Short term investments __ __ __ 8.68% 42.94%
Other financial assets 9.23% 5.86% __ __
Cash and bank balances 6.51% 4.58% 8.58% 6.89% 1.63%
Total Current Assets 100.00% 100.00 100.00% 100.00 100.00%
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% %
CURRENT LIABILITIES Trade and other payables 82.16% 88.07% 80.48% 100.00% 65.87%
Provision for taxation 17.84% 11.93% 19.52% __ 34.13%
Proposed Dividends
Total Current liabilities 100.00%100.00
% 100.00%
100.00
% 100.00%
CC11
Comments on Common size analysis of current assets and current liabilities:
Above Common size analysis shows that trade debts represent the highest
percentage of total current assets while interest accrued represents the lowest percentage.
And from the current liabilities we can observe that trade and other payables show the
high percentage of current liabilities but it has decreased in 2010 from the previous year
of 88.07%..
OGDCL Common-Size Statements of Cash
Flows
From Year 2006 to 2010
CC 15 2010 2009 2008 2007 2006
C
ash flows from operating activities
Profit before taxation 143.97% 152.75% 151.76% 165.15% 153.42%Adjustments for:
Depreciation 5.40% 6.24% 6.07% 8.06% 5.52%Amortization of development andproduction assets 10.50% 11.72% 9.61% 9.84% 7.77%Royalty 27.20% 28.61% 33.57% 29.42% 25.31%
Workers' Profit Participation Fund 7.58% 8.04% 8.50% 8.69% 8.07%Provision for employees' benefits 2.09% 3.23% 1.47% 0.50% 0.86%Unwinding of discount on provision 2.05% 1.72% 1.02% 1.20% __
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for decommissioning costInterest income -2.54% -3.35% -5.14% -8.29% -7.89%Un-realized gain/loss on investments
at fair value through profit or loss -0.01% 0.22% 0.08% -0.16% -0.05%Dividend income -0.02% -0.06% -0.05% -0.81% -0.93%Fixed assets reconciliation adjustment __ __ 0.11% __ __ Profit on disposals of property, plantand equipment -0.12% -0.30% -0.22% -0.09% -0.06%Interest income on long term
receivables -0.04% -0.07% -0.11% -0.17% -0.19%
Share of profit in associated company -0.10% -0.11% -0.09% __ __ Stores inventory written off 0.01% 0.56% __ __ __ Provision for doubtful advances
reversed __ 0.00% -0.02% __ __
Trade debts written off __ __ 0.00% __ __ Provision for obsolete and slow
moving inventory 0.67% 0.48% 0.62% __ 0.11%provision for doubtful claims 0.00% __ __ __ __ Provision for doubtful trade debts 0.13% 0.01% __ -0.01% __ Write back of provision for stores,
spares and loose tools __ __ __ __ __ Write Back of provision against
advances __ __ __ __ __ Adjustment on account of fixed assetsreconciliation __ __ __ __ __
Land reconcilitation adjustments __ __ __ __ __ 196.79% 209.68% 207.19% 213.32% 191.93%
W
orking capital changes
(Increase)/ decrease in current assets Stores, spares and loose tools 1.85% -2.64% -5.83% -5.80% -12.41%Stock in trade -0.10% 0.08% -0.11% -0.08% __ Trade debts -43.79% -29.14% -24.59% -9.13% -13.90%
Deposits and prepayments -0.32% 0.49% -0.75% 0.02% -0.09%Advances and other receivables 0.39% -0.23% -0.84% 0.23% -0.14%
Increase/ (decrease) in current
liabilities __ __ __ __ __ Trade and other payables -1.66% 6.95% 4.24% 3.27% 2.71%
Cash generated from operations 153.16% 185.20% 179.31% 201.83% 168.10%
Royalty paid -8.16% -33.05% -25.41% -26.42% -23.97%Employee benefits paid -2.12% -2.33% -1.76% -0.89% -3.14%Payments workers' profit participationfund -7.25% -9.25% -7.58% -9.38% -7.87%
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Taxes paid -35.62% -40.57% -44.56% -65.14% -33.13%
-53.16% -85.20% -79.31%-
101.83% -68.10%
Net cash from operating activities 100.00% 100.00% 100.00% 100.00% 100.00%
C
ash flows from investing activities
Fixed capital expenditure -39.36% -47.32% -35.56% -44.48% -23.85%Interest received 2.49% 3.98% 5.74% 9.37% 7.31%Dividend received 0.11% 0.10% 0.10% 0.81% 0.93%Purchase of investments -0.45% -0.36% -0.87% -1.22% -1.08%Proceeds from sale of property, plant
and equipment __ __ 0.10% 0.20% 0.03%Proceeds from disposals of property,
plant and equipment 0.14% 0.31% 0.42% 0.10% 0.07%Long term prepayments -0.05% 0.04% -0.13% 0.05% -0.04%Net cash used in investing activities -37.13% -43.24% -30.21% -35.17% -16.62%
C
ash flows from financing activities
Dividend paid -46.78% -74.38% -80.38%-
103.20% -96.47%
Net cash used in financing activities -46.78% -74.38% -80.38%
-
103.20
% -96.47%
Decrease/Increase in cash and cash
equivalents 16.09% -17.62% -2.54% -38.36% -13.09%
CC15
Common Size Statement of Cash flow
We can see that net cash used in investing activities is 37.13% of net cash from operating
activities whereas net cash used in financing activities is 46.78% of net cash from
operating activities. Thus, there is an increase in cash and cash equivalents in the current
year which is 16.09% of net cash from operating activities.
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OGDCL
Analysis of Cash Flow Ratios
From year 2006 to 2010
(Rupees
'000)
CC - 17 2010 2009 2008 2007 2006 Total
Net Cash Flows fromoperating activities
61,506,185
52,979,320
51,598,898
36,972,733
42,962,432
246,019,568
Capital Expenditure
24,211,3
39
25,072,0
50
18,347,2
24
16,444,90
5
10,244,80
0
94,320,31
8
Increase in Inventory
63,78
3
57,99
4
28,18
0
33,20
4 183,161
Dividends Paid
28,770,0
03
39,406,1
71
41,473,4
22
38,154,08
9
41,444,70
3
189,248,38
8
Adequacy Ratio 0.867
Net Cash Flows fromoperating activities 61,506,185 52,979,320 51,598,898 36,972,733 42,962,432
Dividends Paid
28,770,0
03
39,406,1
71
41,473,4
22
38,154,08
9
41,444,70
3
Cash Flow from
Operating activities -
Dividends Paid (A)
32,736,18
2 13,573,149 10,125,476 (1,181,356) 1,517,729
Gross PPE
78,951,8
97
68,637,6
32
56,980,7
95
52,673,79
7
47,531,02
2
Long term
investments3,231,4
35
2,903,13
3
3,175,05
4
2,945,93
8
2,729,80
7
Other financial assets
11,120,8
23
5,087,91
7 __ __ __
Working Capital
85,592,9
57
65,547,0
42
57,022,7
35
57,396,09
3
61,785,93
0
Gross PPE + W.C +
Investments + Other
Assets (B)
178,897,1
12
142,175,7
24
117,178,5
84
113,015,82
8
112,046,75
9
Cash Reinvestement
Ratio ( %) 18.3% 9.5% 8.6% -1.0% 1.4%
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CC17
Analysis of Cash Flow Ratios:
Cash flow adequacy ratio for the five years period is 0.867, implying that funds
generated from operations are insufficient to cover the expenses for capital expenditures,
inventory additions and cash dividends and there is a need for external financing.
OGDCLs cash reinvestment ratio is 18.3% for year 2010 which is satisfactory. Cash
reinvestment ratio has been increasing over the years with the exception of year 2007. it
increased significantly in year 2008 and 2010.
OGDCL
Analysis of
Capital
Structure
(Rupees '000)
CC - 18 2010 2009 2008 2007 2006
NON CURRENT
LIABILITIES
Long term loans
unsecured __ __ __ __ __
Deferred liabilities __ __ __ __ __
Taxation21,499,
184
17,710,
497 12,370,448
11,023,
916
10,010,
991
Employee benefits
2,699,
773
2,008,
499 1,528,444
1,423,1
32
1,420,
245Provision for
decommissioning
cost12,435,
365
10,814,
506 6,066,716
5,151,8
07
4,221,
756
Total Non-
Current Liabilities36,634,3
22
30,533,5
02 19,965,608
17,598,85
5
15,652,9
92
CURRENT
LIABILITIES
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Trade and otherpayables
28,624,
204
18,747,
328 17,088,050
11,122,
665
7,174,
483
Provision for
taxation
6,216,
639
2,540,
170 4,143,304 __
3,716,
958Proposed
Dividends __ __ __ __ __Total Current
liabilities34,840,8
43
21,287,4
98 21,231,354
11,122,66
5
10,891,4
41
Total Liabilities71,475,1
65
51,821,0
00 41,196,962
28,721,52
0
26,544,4
33
SHARE
CAPITAL AND
RESERVES
Authorized Share
Capital Share capital 43,009,284
43,009,284 43,009,284
43,009,284
43,009,284
Capital reserve3,859,
682
3,658,
318 2,667,064
2,438,2
28
2,219,
027
Unappropriated
profit110,523,
520
79,503,
794 63,695,077
55,169,
140
49,541,
966
Total
Shareholder's
Equity157,392,4
86
126,171,3
96 109,371,425
100,616,65
2
94,770,2
77
TOTAL
LIABILITITES +
EQUITY
228,867,6
51
177,992,3
96 150,568,387
129,338,17
2
121,314,7
10
CC18
Analysis of Capital Structure
As we have already seen in the balance sheet that the overall value of the company has
increased over the years. Total shareholders equity has increased over the years. Major
part of this increase is represented by the increase in un-appropriated profit which has
consistently increased throughout the years. Share capital has remained same throughout
the five year period as no new shares have been issued. Total liabilities have also
increased throughout the five year period showing that company is using more credit.
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OGDCL
Common-Sized Analysis of Capital Structure(in
%)
From years 2006 to 2010
CC - 19 2010 2009 2008 2007 2006
SHARE CAPITAL AND RESERVES
Authorized Share Capital
Share capital 18.79% 24.16% 28.56% 33.25% 35.45%
Capital reserve 1.69% 2.06% 1.77% 1.89% 1.83%
Unappropriated profit 48.29% 44.67% 42.30% 42.65% 40.84%
Total Shareholder's Equity 68.77% 70.89% 72.64% 77.79% 78.12%
NON CURRENT LIABILITIES
Long term loans unsecured
Deferred liabilities
Taxation 9.39% 9.95% 8.22% 8.52% 8.25%
Employee benefits 1.18% 1.13% 1.02% 1.10% 1.17%
Provision for decommissioning cost 5.43% 6.08% 4.03% 3.98% 3.48%
Total Non-Current Liabilities 16.01% 17.15% 13.26% 13.61% 12.90%
CURRENT LIABILITIES
Trade and other payables 12.51% 10.53% 11.35% 8.60% 5.91%
Provision for taxation 2.72% 1.43% 2.75% __ 3.06%
Proposed Dividends
Total Current liabilities 15.22% 11.96% 14.10% 8.60% 8.98%
TOTAL LIABILITITES + EQUITY100.00
%
100.00
% 100.00%
100.00
% 100.00%
CC19
Comments on Common size analysis of Capital Structure:
From the common size capital structure, it can be seen that the share capital
has decreased as a percentage of total assets The increase in trade and payables in 2010
compared to previous years has caused the current liabilities or short term debts to
increase. The companys liability is increasing not showing a good sign as it is not paying
off the short term debts properly.
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OGDCL
Capital Structure and SolvencyRatios
For years 2006 to 2010
(Rupees
'000)
CC20 2010 2009 2008 2007 2006
Total Debt71,475,16
5
51,821,0
00
41,196,9
62
28,721,5
20
26,544,43
3
Total Equity
157,392,48
6
126,171,3
96
109,371,4
25
100,616,6
52
94,770,27
7Total Debt to Equity 0.45 0.41 0.38 0.29 0.28
Total Debt71,475,16
5
51,821,0
00
41,196,9
62
28,721,5
20
26,544,43
3
Total Debt and Equity228,867,65
1
177,992,3
96
150,568,3
87
129,338,1
72
121,314,71
0
Total Debt Ratio 0.31 0.29 0.27 0.22 0.22
Long Term Debt36,634,32
2
30,533,5
02
19,965,6
08
17,598,8
55
15,652,99
2
Owner's Equity157,392,48
6126,171,3
96109,371,4
25100,616,6
5294,770,27
7
Long Term Debt to Equity 0.23 0.24 0.18 0.17 0.17
Total Equity157,392,48
6
126,171,3
96
109,371,4
25
100,616,6
52
94,770,27
7
Total Debt71,475,16
5
51,821,0
00
41,196,9
62
28,721,5
20
26,544,43
3
Equity to Total Debt 2.20 2.43 2.65 3.50 3.57
Fixed Assets
103,181,14
9
86,319,6
59
67,706,2
48
56,715,9
00
44,457,95
9
Owner's Equity157,392,48
6
126,171,3
96
109,371,4
25
100,616,6
52
94,770,27
7
Fixed Assets to Equity 0.66 0.68 0.62 0.56 0.47
Current Liabilities34,840,84
3
21,287,4
98
21,231,3
54
11,122,6
65
10,891,44
1
Total Liabilites 71,475,16 51,821,0 41,196,9 28,721,5 26,544,43
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5 00 62 20 3
Current Liabilities to Total
Liabilities 0.49 0.41 0.52 0.39 0.41
Earnings to Fixed Charges
Cash Flow from operation61,506,18
5
52,979,3
20
51,598,8
98
36,972,7
33
42,962,43
2
Fixed Charges1,273,31
2
926,02
7
531,79
9
449,56
1 9,973
Cash flow to Fixed Charges 48.30 57.21 97.03 82.24 4307.87
CC20
Capital Structure and Solvency Ratios:
OGDCL is 100% equity financed company; hence, it does not have any long term
debt or borrowings. However, OGDCL has been facing increasing debts over the
past years, especially in the sector of current liabilities in the form of royalties and
as in the case of last year in the form of taxes provision incurred as well. The rises
have been high in the royalties section as a part of the companys strategy to
expand and acquire new fields. This may lead the debt to equity ratios to rise
since 2006.
From the perspective of long term debt paying ability, the lower this ratio, the
better the companys debt position. Either ratios debt ratio or debt to equity ratio
which are used in this analysis show the same situation that the lower these ratios
the better the position of the company. Actually the debt ratio indicates the
percentage of assets financed by creditors and it helps to determine how well
creditors are protected in case of insolvency.
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In case of debt ratio we can say that the companys position to pay its debts is
strong because the ratio is less than one. Hence, from this we can conclude that
the company is in a position to issue additional long term debt since its creditors
are protected.
If we talk about the companys debt paying ability from its shareholders equity
then it is also same as that of debt ratio because it also shows that the company
can pay its debts bitterly and easily.
This implies that although overall debt is rising, yet long term debts are steady,
reflecting Companys policy to avoid the performing of investment and other
activities through long term debt. But still, the below average debt ratios of
OGDCL suggest a slightly lower level of leverage for the company, compared to
the average industry.
If we observe balance sheets we will see that the company does not have any long
term loans. Thus, there exists no interest element in financial charges. Hence, TIE
ratio could not be calculated.
Fixed assets to equity ratio is represents that 62% fixed assets are financed by
equity and not by any debt. This is also a positive sign for the solvency of the
company.
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Current liabilities to total liabilities is less than 1 which implies that current
liabilities are less than long term liabilities as a percent of total liabilities and this
ratio is increasing due to rise in current liabilities in 2010. While cash flow to
fixed charges is about 48.30 presently this is also quite acceptable.
OGDCL
Return on Invested
Capital
(Rupees
'000)
CC - 21 2010 2009 2008 2007 2006
Net Income 59,177,12555,539,64
1
49,613,59
3
45,629,96
4
45,967,72
3
Total Asset 228,867,651177,992,39
6
150,568,38
7
129,338,17
2
121,314,71
0
ROA 25.86% 31.20% 32.95% 35.28% 37.89%
Net Income 59,177,12555,539,64
1
49,613,59
3
45,629,96
4
45,967,72
3
Equity 157,392,486126,171,39
6
109,371,42
5
100,616,65
2
94,770,27
7
ROCE 37.60% 44.02% 45.36% 45.35% 48.50%
Net Income 59,177,12555,539,64
1
49,613,59
3
45,629,96
4
45,967,72
3
Long-term Debt +
Owner's Equity 194,026,808156,704,89
8
129,337,03
3
118,215,50
7
110,423,26
9
NI/(LTL+OE) 30.50% 35.44% 38.36% 38.60% 41.63%
Finacial Leverage Index 1.45 1.41 1.38 1.29 1.28
Net Income 59,177,12555,539,64
1
49,613,59
3
45,629,96
4
45,967,72
3
Dividends (28,770,003)(39,406,17
1)(41,473,42
2)(38,154,08
9)(41,444,70
3)
Owner's Equity 157,392,486126,171,39
6
109,371,42
5
100,616,65
2
94,770,27
7
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(NI-Div)/OE 55.88% 75.25% 83.28% 83.27% 92.24%
Disintegration
of ROCENI/Sales 0.415 0.423 0.4 0.46 0.48
Sales/Total Asset 0.623 0.735 0.83 0.78 0.8
Total Asset/Owners Equity 1.45 1.41 1.38 1.29 1.28
ROE=NI/SxS/TAxTA/OE 37.49% 43.84% 45.82% 46.29% 49.15%
CC21
Return on invested Capital Ratios:
We can see that both ROCE and Return on long term debt to equity are the same
as there is no debt involved. There has been a decreasing trend in ROCE
throughout the years. In 2010 ROCE fell significantly compared to previous
years. This was because equity rose drastically in 2010 whereas increase in net
income was not enough to sustain the ROCE of previous years.
Similarly, ROA shows an decreasing trend due to a higher increase in total assets
compared to net income.
ROA is a measure of operating efficiency for OGDCL. ROA has been decreasing
since 2006. Currently the ROA of 25.86% shows OGDCLs return on all its assets
entrusted to it has decreased in 2010.
Disintegration of OGDCLs ROE shows that changes in the net income margin
are primarily responsible for fluctuations in ROE during recent years. The other
two components are reasonably stable. Companys leverage ratio increases
gradually since 2006 due to increasingly leveraged capital structure.
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OGDCLs financial leverage index is positive and reasonably stable which
represent that OGDCL utilizes its debt profitability well.
OGDCL
Asset Utilization Ratios
(Rupees
'000)
CC22 2010 2009 2008 2007 2006
Sales142,571,86
3130,829,57
9125,445,67
4100,261,1
9196,755,38
2
Cash and Bank balances 7,843,820 3,973,818 6,715,048 4,720,292 1,186,870
Sales to Cash 18.18 32.92 18.68 21.24 81.52
Sales142,571,86
3130,829,57
9125,445,67
4100,261,1
9196,755,38
2
Trade Debts82,992,29
1
56,140,09
2
40,626,93
1
27,873,51
5
24,498,98
6
Sales to recievables 1.72 2.33 3.09 3.60 3.95
Sales
142,571,86
3
130,829,57
9
125,445,67
4
100,261,1
91
96,755,38
2
Stores and spares14,527,27
8
17,464,35
1
16,274,07
9
13,178,29
5
12,829,74
7
Stock-in-Trade172,084
108,301 151,782
93,788 65,608
Total Inventory14,699,36
2
17,572,65
2
16,425,86
1
13,272,08
3
12,895,35
5
Sales to inventory 9.70 7.45 7.64 7.55 7.50
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Sales142,571,86
3
130,829,57
9
125,445,67
4
100,261,1
91
96,755,38
2
Working Capital85,592,95
765,547,04
257,022,73
557,396,09
361,785,93
0
Sales to working capital 1.67 2.00 2.20 1.75 1.57
Sales142,571,86
3
130,829,57
9
125,445,67
4
100,261,1
91
96,755,38
2
Total Fixed assets103,181,14
986,319,65
967,706,24
856,715,90
044,457,95
9
Sales to fixed assets 1.38 1.52 1.85 1.77 2.18
Sales142,571,86
3
130,829,57
9
125,445,67
4
100,261,1
91
96,755,38
2
Current Liabillites34,840,84
321,287,49
821,231,35
411,122,66
510,891,44
1
Sales to current libillites 4.09 6.15 5.91 9.01 8.88
Sales142,571,86
3
130,829,57
9
125,445,67
4
100,261,1
91
96,755,38
2
Total Assets228,867,65
1177,992,39
6150,568,38
7129,338,1
72121,314,71
0
Sales to total assets 0.62 0.74 0.83 0.78 0.80
CC22
Assets Utilization Ratios:
The above assets utilization ratios measure OGDCLs effectiveness in generating sales
from assets.
Cash and bank balances of ogdcl have consistently been increasing over the past
five year period with the exception of 2009. companys sales to cash ratio has
been fluctuating with the highest cash to sales ration in year 2009. currently sales
to cash ratio is 18.18. this means that net sales of 2010 were 18.18 times of that
years cash and bank balance.
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Cash and cash equivalents turnover evidence the most significant variability in the
2006 where it is very high i.e. 81.52 which represents cash shortage that might
signal a liquidity crisis if a company has no ready sources of cash. Currently it is
18.18 which is lower than that of 2009 which may represent idle or excess cash
with the company for probably contingencies purposes.
Sales to inventories turnover has now increased compared to 2006 which shows
decrease in inventory held by the company and show efficiency of inventories
held to generate increase in sales. If this ratio is low then it represents over
stocked or slow moving inventories or overestimation of sales. It might have
decreased due to slow downs with important customers. However, working
capital turnover represents an increasing trend till 2008 then from 2009-2010, it
fell.
The sale to fixed assets ratio has a decreasing trend over the five year period
which is likely due to a larger increase in fixed assets because of the companys
expansion policy. Although sales have also increased but percentage increase in
Fixed Assets is greater than percentage increase in sales.
Sales to short term liabilities turnover show fluctuating trend over the periods like
sales to receivables and other assets. Sales to short term liabilities turnover has
been decreased primarily due to rise in current liabilities in 2010.
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OGDCL
Analysis Of Profit Margin
(Rupees
'000)
CC23 2010 2009 2008 2007 2006
Sales142,571,8
63
130,829,57
9
125,445,67
4
100,261,19
1
96,755,38
2
Gross Profit100,622,9
35
91,477,53
0
87,828,20
1
69,798,42
9
69,895,12
2
Gross Profit Margin 70.58% 69.92% 70.01% 69.62% 72.24%
EBIT88,552,75
3
80,927,92
3
83,360,80
9
61,058,72
6
65,911,32
7
Sales142,571,8
63
130,829,57
9
125,445,67
4
100,261,19
1
96,755,38
2
Operating Profit Margin 62.11% 61.86% 66.45% 60.90% 68.12%
Net Income59,177,12
5
55,539,64
1
49,613,59
3
45,629,96
4
45,967,72
3
Sales142,571,8
63
130,829,57
9
125,445,67
4
100,261,19
1
96,755,38
2
Net Profit Margin 41.51% 42.45% 39.55% 45.51% 47.51%
Net Income59,177,12
555,539,64
149,613,59
345,629,96
445,967,72
3
Shares Outstanding4,300,92
8
4,300,92
8
4,300,92
8
4,300,92
8
4,300,92
8
EPS 13.76 12.91 11.54 10.61 10.69
CC23
Analysis of Profit Margin Ratios:
Profitability analysis is critically important for equity investors and creditors. Profitability
ratio shows the earning ability of the firm that how much the company earn. Here it is
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found in three ratios i.e. Net profit margin and Gross profit margin and operating profit
margin. All these ratios indicate that companys earning ability is too much strong.
Net Profit Margin ratio shows profitability in 2007 which is 45.51% but in 2008 it
has decreased to 39.55% mainly due to rise in tax expense and finance cost in that
year. In current year the ratio drops down to 41.51%.
There have been fluctuations in gross profit margin ratio over the five year period.
Although the fluctuation has not been sharp in any year, but it has lead to a steady
effect over the time. The primary reason for these minor fluctuations is that there
is a minor increase in cost of sales. Therefore we can say that the trend is also
stable and companys profitability is increasing stepwise. So company earning
ability is too much strong.
Operating profit margin has also improved in 2010 mainly due to control in
operating expenses. In other words, sales and gross profit are growing at a fasterrate than costs and expenses. Thus, the overall profitability position of OGDCL
seems to be satisfactory.
OGDCL
Analysis of
Depriciation
(Rupees
'000)
CC-24 2010 2009 2008 2007 2006
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Accumulated Depreciation
43,952,94
9
40,155,43
8 33,755,032
31,073,
596
27,955,21
5
Gross PPE78,951,89
768,637,63
2 56,980,79552,673,797
47,531,022
Depreciation as %age of
Gross PPE(%) 55.67% 58.50% 59.24% 58.99% 58.81%
Annual Depreciation
3,981,68
6
3,807,89
8 3,354,064
3,234,
509
2,615,44
5
Annual Depreciation as
%age of Gross Ppe ( %) 5.04% 5.55% 5.89% 6.14% 5.50%
Annual Depreciation
3,981,68
6
3,807,89
8 3,354,064
3,234,
509
2,615,44
5
Net Sales
142,571,86
3
130,829,57
9 125,445,674
100,261,
191
96,755,38
2Annual Depreciation as
%age of Sales ( %) 2.79% 2.91% 2.67% 3.23% 2.70%
CC24
Analysis of Depriaciation
Depreciation as %age of Gross PPE( property , plant and equipment) fell from 58.50% in
2009 to 55.67% in 2010 because of the high increase in PPE. Although accumulated
depreciation also increased, this increase was lower than the increase gross PPE. Hencethe ratio fell. Overall gross PPE has been increasing over the five year period. This shows
that the company is investing in expansion.
Annual depreciation as a %age of gross PPE fell from 5.55% in 2009 to 5.04% in 2010.
again indicating the increase in PPE.
Annual depreciation as a %age of sales has been varying over the years. It fell in 2010compared to 2009 because of high sales in 2010.
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OGDCL
Analysis of Discretionary Expenditures
(Rupees'000)
CC25 2010 2009 2008 2007 2006
net sales
142,571,86
3
130,829,57
9
125,445,67
4
100,261,19
1
96,755,38
2
Property, plant and equipment
34,998,89
8
28,482,19
4
23,225,76
3
21,600,20
1
19,575,80
7
maintenance and repairs
691,62
9
1,026,09
8
956,32
2
940,70
1
594,93
2
advertising
48,30
4
36,87
6
33,24
8
26,22
0 55,781
maintenance and repairs/ sales 0.49% 0.78% 0.76% 0.94% 0.61%
maintenance and repairs/ property, plant
and equipment 1.98% 3.60% 4.12% 4.36% 3.04%
advertising/sales 0.03% 0.03% 0.03% 0.03% 0.06%
CC25
Analysis of Discretionary Expenditures
Maintenance and repairs as a percentage of sales fluctuated throughout the years with
reaching the highest in the year 2007 at 0.94%. It fell considerably from 2009 to 2010
due to drastic increase in the amount of net sales. Another factor that contributed in this
decline was decrease in maintenance and repairs cost in 2010.
Advertising expense has been fluctuating over the five year period. Advertising expense
as a percentage of sales has been increasing since 2007. this shows that the company is
spending more on advertising.
Maintenance and repairs as a %age of PPE rose from 2006 to 2007 but fell drastically to
1.98% in 2010. this is because of increase in gross PPE in 2010.
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OGDCL
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Market
Measures
CC - 26 2010 2009 2008 2007 2006
Price high 142 125.49 140.8 156 168.8
Price low 80.71 40.56 104.9 113.2 98.55
Average price 111.355 83.025 122.85 134.6 133.675
Eps 13.76 12.91 11.45 10.61 10.69
Price to earning 8.09 6.43 10.73 12.69 12.50
Average Price 111.355 83.025 122.85 134.6 133.675
Eps 13.76 12.91 11.45 10.61 10.69Earning Yield 12.36% 15.55% 9.32% 7.88% 8.00%
Dividends per share 6.69 9.16 9.64 8.87 9.64
Average Price 111.355 83.025 122.85 134.6 133.675
Dividends Yield 6.01% 11.04% 7.85% 6.59% 7.21%
Dividends per share 6.69 9.16 9.64 8.87 9.64
Eps 13.76 12.91 11.45
10.6
1
10.6
9
Dividends Payout Ratio 48.61% 70.97% 84.22% 83.61% 90.14%
CC26
Market Measures:
The first four measures reflect the markets valuation of OGDCLs equity
securities, while the dividend payout reflects more management discretion.
P/E ratio increases whenever the level of current earnings decreases. It measures
the multiple at which the market is capitalizing the earnings per share of a
company. This ratio has increased in 2010 although there have been fluctuations
throughout the five year period.
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The earnings per share of OGDC rose this year from 12.91 to 13.76, having an
increase of 6.58%. Again this year, the rise was minimal, although the sales were
high, but the royalty, operational and tax costs took up all the profits, leaving the
company with net profits not much higher than last year. It is hoped that the EPS
will improve in future as the exploration and development activities will start
bearing fruit in the form of enhanced production.
The earnings yield has decreased from last year. Overall, there are fluctuations in
this ratio over the five year period. This is mainly due to weak equity markets.
Increasing earning yield of OGDCL represents the income producing power of a
share of common stock at the current price.
Similarly while dividends per share decreased from 9.16 to 6.69 and the dividend
yield has increased from 11.04% to 6.01% over the same period. Decreasing
dividend yield represents the decreasing cash return accruing to an investor on a
share of stock based on the current dividend rate and current price. Decrease in
earnings yield and dividend yield are attributable mainly to steady increases in
price to earnings and price to book ratios. Both ratios reflect the markets
disapproval and confidence in OGDCLs prior and expected performance. This
also represents OGDCLs inability to raise a given amount of equity capital by
issuing shares and the inability to use common stock as a means of payment for
acquisitions.
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While there was an increase in EPS, OGDCs DPS decreased by Rs. 2.47 per
share, bringing it down to Rs.6.69 per share.
We know that dividend payout ratio measures the proportion of earnings currently paid
out as common stock dividends. Here dividend payout ratio has decreased from 70.97%
to 48.61% which shows that proportion of earnings paid out as common stock dividends
has decreased in 2010.