Strategy - AKD Securities

1
Kohinoor Maple Leaf Group
PAKISTAN
2
Who We Are
3

Pioneers of industrial and commercial development in
Pakistan, having 80 years of management experience.

Ranked amongst the top five groups of Pakistan both in
the textile and cement sectors.

Annual revenues in excess of US$ 350 million.

Market capitalization worth of US$ 216 million
KMLG’s Current Business Portfolio
1
Maple Leaf Cement
Factory Limited
3
2
4
Maple Leaf Capital
Limited
(Newly Incorporated)
Kohinoor Textile Mills
Limited
Cement Industry of Pakistan
5
Pakistan Cement Industry
Major Industry
Cement is one
of the major
industries of
Pakistan.
6
Huge Domestic
Demand
Pakistan
currently
consumes 147
kgs per capita
of cement.
This number is
expected to
rise
dramatically.
Significant Export
Potential
Pakistan’s
strategic
location has
huge
potential for
export to
neighboring
countries like
India, U.A.E,
Afghanistan,
Iraq & Central
Asian States.
Massive
Expansion &
Technology Up
gradation
Leading
players have
made huge
investment in
capacity
enhancement
and
technology up
gradation.
Pakistan one of the top 15 producers
of the world
7
Associations of cements of different countries. Global Cement Magazine June 2014
Major Players of Pakistan Cement
Industry
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A Reliable
Strategic Partner
MLCF
MAPLE LEAF CEMENT FACTORY LIMITED
9
Why MLCF ?
One of the largest single cement
production sites of Pakistan with
huge economies of scale.
Excellent Infrastructure and state of
the art European technology from
FLSmidth.
Gas generation and heat recovery
systems across entire production
lines.
Offering over 330 days/year run
factor with emissions conforming to
EU standards.
Energy efficient plants consuming
only 720 Kilo Calories per kg of
clinker.
Only diversified cement producer
with premium Brands both locally
and regionally.
Only site with railway links resulting
in significant freight savings.
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Excellent Infrastructure
LAND
OCCUPIED AND UNOCCUPIED IN FACTORY
BUILDINGS, RESIDENTIAL BUILDING, ROADS
AND GREEN BELTS
BUILDINGS
Phase II - Line I
Phase II - Line II
Phase I
White
WHRP
Housing Colony
TOTAL AREA
11
SqMt
ACRE
4,377,970
1,082
FACTORY BUILDING SQFT
467,339
833,096
153,393
191,377
11,153
326,009
2,065,233
MLCF Own Power Generation
Machine Type
MW
Waste Heat Recovery Boilers & Generators
1
16.000
Wartisila Engine (99% Gas, 1% Diesel)
1
15.887
Nigata Engines (60% HFO, 40% Gas)
(100% Gas Conversion in process)
4
23.840
National Grid availability
1
50.000

12
Nos
Additional Gas is available to generate up to 14 MW of power.
MLCF Power Mix at Current
Production Levels
Average Cement Production
MWH Required
Utilization of Sources
2,960,435
Mwh
35.14
USD/KWH
Mwh
Gas
34%
0.07
12.00
WHRP
37%
0.01
13.00
National Grid
29%
0.15
10.14
Total
13
%
M. Tons
35.14
Average Power
Cost per KWH
9 Cents
MLCF Energy Performance
745
740
739
735
K,Cal / Kg of Clinker
730
725
724
720
715
714
710
710
710
710
710
710
705
700
695
2011-12
2012-13
2013-14
2014-15
Actual
14
2015-16
Projected
2016-17
2017-18
2018-19
MLCF Energy Performance
100
99
98
99
98
98
Kwh / ton of cement
97
96
95
94
93
93
93
93
93
93
92
91
90
2011-12
2012-13
2013-14
2014-15
Actual
15
2015-16
Projected
2016-17
2017-18
2018-19
MLCF Product Portfolio
The company has a diversified product range and is the only
cement company in Pakistan capable of producing Grey, White,
Sulphate resistant and Low alkali cement.
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(OPC)
(SRC)
(LAC)
(WPC)
Ordinary
Port Land
Cement
Sulphate
Resistant
Cement
Low Alkali
Cement
White Port
Land
Cement
98% Market
share
MLCF QMS Certifications
QMS ISO 9001:2008
• Certification by :
Lloyds Registered
Quality Assurance (UK)
API Spec Q1
• Certification by :American
Petroleum Institute (API)-USA
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These certificates confirms that MLCF has developed and
implemented highest quality management system to
demonstrate its ability to consistently provide a product that
meets customer and statutory and regulatory requirements, and
International Product Quality Standard
Certificates
Indian
Standard
Approved
Sri Lankan
Standard
Approved
South
African
Standard
Approved
OPC GREY CEMENT
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These certifications confirms that our products meet the
respective country's cement standards requirements.
International Product Quality Standard
Certificates
Indian
Standard
Approved
Malaysian
Standard
Approved
OPC WHITE CEMENT
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These certifications confirms that our products meet the
respective country's cement standards requirements.
Geographical Advantage of
Pakistan and MLCF
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Limestone Reserves of Pakistan
22

A-grade quality of
limestone.

Deposits over 1,000 years
requierment.
Pakistan’s Geographical Advantage
MLCF
23
Future Prospects of Cement in
Pakistan
24
Demographics of Pakistan
A young population means faster and more
urbanization.
Country wise Comparison Median Age (2013)
50.00
44
42
41
40
40
39
37
35
34
31
30
29
28
28
27
24
20.00
23
25.00
27
30.00
30
35.00
35
40.00
41
45.00
46

15.00
10.00
5.00
-
Median Age (Years)
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United Nations Department of
Economic & Social affairs
Technical Paper No. 2013/3
World Population Prospects The 2012
Revision (Volume I: Comprehensive
Tables)
Worldwide Per Capita
Consumption of Cement
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Associations of cements of different countries. Global Cement Magazine June 2014
MLCF STRATEGY
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Long Term Strategic Plan
•Initiated in 2009
•Basis …. McKinsey 7 S
Model
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McKinsey 7S
Structure
Strategy
Systems
Shared
Goal/
Values
Skills
Style
Staff
29
McKinsey 7S
Hard “Ss”
The basic premise
of the model is that
Structure
there are seven
internal aspects of
Strategy
Systems
organization that
need to be in
Shared
Goals/
Values
harmony.
Style
Staff
Soft “Ss”
Skills
30
a successful
McKinsey 7S
Hard “Ss”
The basic premise
of the model is that
Structure
there are seven
internal aspects of
Strategy
Systems
organization that
need to be in
Shared
Goals/
Values
harmony.
Style
Staff
Soft “Ss”
Skills
31
a successful
McKinsey 7S
Shared
Goal/
Values
• To be a top 3 EBITDA % player in the cement industry
• Embedding of Core values
Strategy
• Higher EBITDA % achievement through focus on Energy,
Distribution and Branding
Structure
• Cross functional teams to drive strategy
System
32
• Integration of quality & audit department
• IT Leverage across value chain
McKinsey 7S
33
Skill
• Strategic advantage through Human Capital development
Staff
• Drilling down core values and Fast track development through
Management development Program
Style
• Informal interactive leadership
McKinsey 7S
•
Major areas of focus in
order to be the top 3
EBITDA % player in the
cement industry.
Energy
Distribution
Brand
Loyalty
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EBITDA%
Shared
Goal/
Values
McKinsey 7S
Shared
Goal/
Values
• Embedding of core values.
Cross
Functionality
Collective
Wisdom
Empathy
35
Creativity
Integrity
McKinsey 7S
Strategy
• Strategy on Energy.
Knowledge
Driven
•50% pet coke in line II
•Optimization of WHRP output
•Energy reduction through Six Sigma projects
•Reliability Centered Maintenance through 5 why
analysis
•Coal fired power plant
CAPEX •Dryer project for white cement
Driven •TDF
•Coal transportation through train
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McKinsey 7S
Strategy
• Strategy on Distribution.
• Moving closer to our customers by becoming a distributor
Regional
Based Sale
System
Head Office
based Sale
System
500 Dealers
Synchronized
through IT
38
McKinsey 7S
Strategy
• Strategy on Branding.
Management Team
Truck
Drivers
Schemes:
•
Hotel
•
Khazanz
Dealers
Retailers
Promotional
Events
Call Center
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Masons
Customers
Master
MISTRI
Scheme
Promotion
Schemes
Strategy Validation through Porter Model
Supplier
Power
Cost
Focus
Threat
of new
Entrants/
Technology
Industry
Rivalry
Differentiation
Customer
Power
40
Threat of
new
Substitutes
Strategy Validation through Porter Model
Supplier
Power
Threat
of new
Entrants/
Technology
Industry
Rivalry
Customer
Power
41
Threat of
new
Substitutes
Strategy Validation through Porter Model
Supplier
Power
Customer
Power
National
Grid
SNGPL
Threat
of new
Entrants/
Technology
Fuel
Transporters
Threat of
new
Substitutes
42
Bargaining power of suppliers reduced through:
• Alternate Fuels (pet coke)
• Optimization of In house
power generations & island
mode (WHRP)
• Reduction in kilo calories
(six sigma)
• Coal Fired power plant
• Coal transportation through
railway
Strategy Validation through Porter Model
Supplier
Power
Customer
Power
Threat
of new
Entrants/
Technology
Threat of
new
Substitutes
43
Bargaining power of customers reduced through:
Brand
Loyalty
Large Dealer / retailer
Network
Strategy Validation through Porter Model
Supplier
Power
Customer
Power
Threat
of new
Entrants/
Technology
Threat of
new
Substitutes
44
Threat of New Entrants
LOW
Threat of New Technology
LOW
Strategy Validation through Porter Model
Supplier
Power
Customer
Power
Very Low
Threat
of new
Entrants/
Technology
Threat of
new
Substitutes
45
Strategy Validation through Porter Model
Energy strategy
COST
DIFFERE
NTIATION
FOCUS
46
Branding
&
Distribution strategy
White Cement
Strategy Validation through Porter Model
 Strategy
Long term
Medium term
Short term
Achieve full
capacity
utilization through
export
47
Launch small
packing and
cement wash
application
Launch white
cement putty
Strategy Validation through Porter Model
 Structure
Capacity
to produce
Cost
of
energy
Team
RCM
•Focus
•Differentiation
•Capacity to
sell
48
Team
Energy
Branding &
Team
distribution
Improvement
team
Cost of non
conformance
Strategy Validation through Porter Model
System
: Integration of Quality & Internal Audit
 Reduced
non-conformance through fusion of Quality &
Internal Audit
 Facilitate
re-engineering by making them part of each team
Quality
Audit
49
Strategy Validation through Porter Model
System
: IT Leverage across value chain
Order
Intake &
Booking
Click
System
Order
Dispatch
IT
NC
System
Hot Spot
RCM
50
Call
Center
IT is the focal point of all teams
and all new initiatives
Strategy Validation through Porter Model
Skill
: Strategic advantage through Human Capital Development
Investment in trainings
& development
increased manifold
Training linked to
promotion &
development
CEO Driven
Customized training in
technical areas
51
Mandatory core skills
for all management
employees
Strategy Validation through Porter Model
Staff
: Drilling down core values and Fast
track development through Management
development Program
•Drill down core values
to supervisory level
•Enhance screening at
entry level.
•Market based
package
Attract
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Retain
•Introduce concept of
mentoring for HODs
•Identify high potential
achievers and run
them through fast track
program
Motivate
Strategy Validation through Porter Model
Style
: Informal
Enhance self
esteem of every
employee
interactive leadership
SOP culture
Raising and
Resolutions of NCs
in a methodical 5
why’s analysis.
53
Informal dressing
and use of white
board culture.
Fortification of
team culture
McKinsey 7S
RESULTS THUS FAR
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EBITDA position in industry
2015
1st Qtr
2014
2013
2012
2011
9th
12.24%
55
4th
30.14%
3rd
39.00%
3rd
37.20%
2nd
36.05%
EBITDA Achievements
5.55
%
Rs. 1.023 Billion
EBITDA
56
The Next Step
57
Coal based Power Project
58
BOILER
Study & Design by: Fichtner Germany
For all fuels
TURBINE

22 MW CST
Coal based Power Project

Main Highlights
Capital Cost
•USD 39 Million
•Rs. 4 Billion
Savings
Vs
National Grid
•USD 0.109/KW
•Rs. 11.23/KW
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Average Electricity
Cost per unit
•USD 0.085/KW
•Rs. 8.77/KW
Payback period
•2.5 Years
Financial Projections
60
Financial Projections
Major Assumptions
Local Sales Growth
Grey - Local PKR/Bag-MRP
Grey - Sea Export USD / Tons-FOB
Grey - Afghanistan USD / Tons-ExFact
Grey - Wagha Export USD / Tons
White - Local
White - Export USD /Tons
Coal USD/Tons-CNF
Petcoke USD/Tons-CNF
FX Rate USD
61
2014-15
4.70%
520
62
47
56
679
88
90
100
105
2015-16
6.00%
570
62
47
56
679
88
95
100
110
2016-17
7.00%
590
62
47
56
679
88
100
100
115
2017-18
7.00%
610
62
47
56
679
88
105
100
120
2018-19
7.00%
630
62
47
56
679
88
110
100
125
Financial Projections
2014
30-Jun
Income Statement
62
Total Net Revenue PKR in Billion
GP%
Opreating Profit %
Net Profit After Tax PKR in Billion
NP%
Cash Profit PKR in Billion
EBITDA % of Sales
EPS (PKR/Share)
EPS Growth%
Share Price (PKR)
Price Earning Ratio
Book Value per Share (BVS)
P/BVS
Dividend Pay Out
Dicidend Yield
2015
30-Jun
2016
30-Jun
Actual
18.97
34.39%
26.65%
2.83
14.92%
5.28
37.65%
5.36
-13.99%
30.05
5.60
27.74
1.08
0.00%
0.00
2017
30-Jun
2018
30-Jun
2019
30-Jun
Projected
21.59
36.86%
28.59%
3.60
16.66%
5.84
38.37%
6.82
21.37%
47.72
7.00
33.61
1.42
10.00%
1.43%
25.04
41.54%
34.53%
4.93
19.69%
7.39
42.67%
9.34
27.03%
70.06
7.50
40.95
1.71
20.00%
2.67%
27.42
42.80%
36.09%
5.87
21.42%
8.17
43.61%
11.13
16.08%
89.05
8.00
49.08
1.81
30.00%
3.75%
30.02
44.70%
38.29%
7.25
24.14%
9.22
45.57%
13.73
18.94%
116.73
8.50
59.82
1.95
30.00%
3.53%
32.86
47.08%
40.96%
8.20
24.95%
10.22
47.63%
15.53
11.60%
139.81
9.00
71.35
1.96
40.00%
4.44%
Debt Reduction Plan
2011
LTL
13,878
STL
4,085
Cash
Sweep
-
Total
17,963
20,000
Sales
(160) 13,073
% age
sales
Year
Reduction
PKR in Million
137%
18,000
LTL
16,000
STL
14,000
12,000
2012
13,800
3,249
-
17,049
(914) 15,461
110%
Total
10,000
8,000
2013
12,109
3,278
-
2014
10,069
2,840 (1,200)
15,387 (1,662) 17,357
89%
11,709 (3,678) 18,617
63%
6,000
4,000
2,000
2015
6,433
3,000 (2,000)
7,433 (4,276) 21,281
35%
-
2011
2016
63
5,023
3,000 (2,000)
6,023 (1,410) 23,721
25%
2012
2013
2014
2015
2016
Pakistan Railway Contract
Highlights
64
1
Executed on
June 09,2014
2
Advance freight deposit
PKR 650 Million
3
For Transportation of
• Coal/Petcoke
• Cement
4
Per Month Saving PKR 45 Million
Per Year Saving PKR 672 Million
EPS Effect RS 1.27
Thank You
65