Pak Elektron Limited • Pak electron limited Presented To Prof, Dr. Liaqat Ali Principal HAILEY COLLEGE OF COMMERCE Presented By ROLL NO Semester Class Section Session Talal Haroon 1030 8th B.com (hons) F(Afternoon) 2006-2010 Hailey College of Commerce University of the Punjab, Lahore 1 Internship Report Pak Elektron Limited I DEDICATE THIS REPORT TO MY PARENTS & THE WHOLE TEAM OF FP-AD. 2 Internship Report Pak Elektron Limited I am thankful to Almighty Allah for His help in the completion of this report. I am highly obliged and thankful to these personalities for taking keen interest in providing material regarding my report. Without their cooperation, I could not be able to perform this task efficiently and effectively. Last, but not the least, many thanks to respectable G.M. MR. NUMAN KHALID BUTT of FP-AD and Head of FP-AD. MR. GHULAM MOHAY-UD-DIN who gave me proper guideline, opportunity to learn and to polish my skills under their supervision. Without their endorsement I would never been able to gain practical exposure, confidence and self-belief in my personalities. Special thanks to Mr. Rashid Hanif (Junior Executive), Mr. Ali Asad (Accountant), Mr. Ghulam Abbas (Junior Executive), Mr. Naveed (E3 Officer) and Mr. Hassan Raza (HR Officer) for assisting me and providing practical knowledge during my internship program. 3 Internship Report Pak Elektron Limited TABLE OF CONTENT 4 Internship Report Pak Elektron Limited Executive Summary The Pak Electronic Limited is Public Limited Company with the objective of initially producing transformers, switchgears and electric motors. The designing and production of the equipment was carried out jointly by AEG experts and PEL personnel. After the conclusion of Joint Venture Agreement with AEG the majority of share holding was acquired by Saigol Group. Its Appliances Division was introduced and initially the production of window type air conditioners was taken up and was well received in the market for its quality. The present range of power products includes Transformers up to 33KV 5MVA capacity, Switchgears up to 33KV, Cage Induction Motors up to 40HP, Single Phase Energy Motors, Small Generators, Shunt Capacitor, Banks and Re-closer etc. 5 Internship Report Pak Elektron Limited The company has also started the production with the technical collaboration of Hitachi Corporation, Japan, for the production of Vacuum Circuit Breakers for its switchgear. In the year 1980 the company expanded into consumer products with the introduction of Window Type Air Conditioners and today also manufactures Split Air Conditioners, Refrigerators, Microwave ovens, Deep Freezers and Compressors etc. The summary of PEL’s market share (Product wise) Refrigerator Split A/C Microwave Oven Water dispenser 32% 13% 22% 8% During my internship period I performed my assigned duties on time and under the prescribed instructions of my immediate boss. I hope that this practice experience will create glorious opportunities in future. I am really thankful to my immediate bosses, managers at PEL in helping me regarding different matters during my internship period. 6 Internship Report Pak Elektron Limited The Saigol Group (also referred to as the Sehgal or Sahgal Group) is located in Lahore, Punjab, Pakistan. This group is owned by the Saigol family of Pakistan, and owns a number of domestic automobile and textile plants. Group Profile In 1948, the Saigols migrated from Calcutta and initiated their business in Lyallpur (later named to as Faisalabad), the textile city of Pakistan, under the banner of Kohinoor Industries Limited. KOHINOOR TEXTILE MILLS LIMITED The Saigols set up the first major textile unit - The Kohinoor Textile Mills under the umbrella of Kohinoor Industries Limited. The Kohinoor Textile Mill has state-of-the-art quality control from raw material to finished product manufacturing. Its laboratory is top rated amongst the best laboratories in Pakistan for testing of textile raw materials, other inputs and yarn. Initial Capacity Current Capacity 25,000 spindles 71,648 spindles PAK ELEKTRON LIMITED (PEL) In 1978, the Saigol Group of Companies purchased major shares of Pak Elektron Limited. At that juncture, the company was only manufacturing transformers and switchgears. With the Saigols in management, PEL started expanding its product range by entering into Air Conditioner manufacturing. 7 Internship Report Pak Elektron Limited SARITOW SPINNING MILLS & AZAM TEXTILE MILLS In 1987, the Saritow Spinning Mills and Azam Textile Mills were established under the banner of Saigol Group of Companies. Saritow Spinning Mills is a spinning unit with 25,440 spindles capacity. Facilitated with the most modern and efficient Japanese and European machinery, its knitted yarn is renowned in the Far East and Europe for its fine quality. Azam Textile Mills is reputed for its carded and combed yarn, which is quite popular for premier knitting and weaving KOHINOOR POWER COMPANY LIMITED In 1991, the first power unit commissioned in Pakistan, in the Private sector, was Kohinoor Power Company Limited. Its present production capacity is 15 MW. KOHINOOR ENERGY LIMITED 1995, another power unit, Kohinoor Energy Limited, was established. Kohinoor Power Limited is a 120 MW power plant located on the outskirts of the city of Lahore. This project has an annual turnover of $80 million. 8 Internship Report Pak Elektron Limited 9 Internship Report Pak Elektron Limited Pak Elektron Limited (PEL) In 1978, the Saigol Group of Companies purchased major shares of Pak Elektron Limited. At that juncture, the company was only manufacturing transformers and switchgears. With the Saigols in management, PEL started expanding its product range by entering into Air Conditioner manufacturing. HISTORY Pak Electron Ltd. (PEL) was established in 1956 with the technical collaboration of M/S AEG Germany and is the oldest composite electrical equipmentmanufacturing unit in Pakistan. In October 1978, the company was taken over by the SAIGOL GROUP, which is one of the leading industrial and commercial groups of Pakistan. The products manufactured by PEL have always been of a high standard and the name “PEL is synonymous with quality all over Pakistan.” PEL, since its inception, has been acting as an institution working for the advancement and development of engineering and modern technology in Pakistan Since its inception, the company has been working for the advancement and development of engineering know-how in Pakistan. The company has produced hundreds of engineers and skilled workers and technicians through its apprenticeship schemes & training programs. PEL has been continuously adding new products to its range. As a result, PEL has registered a significant increase in its sales volume, during the last ten years In 1978, the Saigol Group of Companies purchased major shares of Pak Electron Limited. At that juncture, the company was only manufacturing transformers and switchgears. With the Saigols in management, PEL started expanding its product range by entering into Air Conditioner manufacturing 10 Internship Report Pak Elektron Limited In 1981, PEL window type air conditioners were introduced in technical collaboration with General Corporation of Japan. In 1986-87, the company started manufacturing of refrigerators in technical collaboration with M/s IAR-SILTAL of Italy. In 1987, PEL deep freezers were also introduced in technical collaboration with M/s Ariston of Italy. In 2006, the Company has started manufacturing of split type air conditioners of various capacities as the customer choice has shifted from window type to split type. The product has been well received in the market. This encourages the company to multiply its production in the coming year. Today, PEL has become a household name. Its products are not only in great demand in the local market but the Company has started exporting its appliances division products. Company Information 11 Internship Report Pak Elektron Limited Company information Board of directors Mr. Naseem Saigol Chairman /Chief Executive Mr. Azam Saigol Mr. Murad Saigol Mr. Muhammad Rafi Khan Mr. Haroon Ahmed Khan Managing Director Mr. Homaeer Waheed Mr. Gul Nawaz NIT Nominee Mr. Masood Karim Sheikh NBP Nominee u/s 182 of the Ordinance Mr. Tajammal H.Bokharee NBP Nominee u/s 182 of the Ordinance Mr. Wajahat A. Baqai NBP Nominee u/s 182 of the Ordinance 12 Internship Report Pak Elektron Limited Audit Committee Mr. Azam Saigol Mr. Haroon A. Khan Mr. Tajammal H. Bokharee Mr. Gul Nawaz Chairman / Member Member Member Member Company Secretary Sheikh Muhammad Shakeel FCA Chief Financial Officer Syed Manzar Hassan FCA Auditors M/s Yousaf Adil Saleem & Co. Chartered Accountant Legal Advisor M/s Hassan and Hassan Advocates Bankers • • • • • • • • • Bank of Punjab First Punjab Modaraba Bank Alfalah Limited Faysal Bank Limited National Bank of Pakistan NDLC-IFIC Bank Limited PICIC Commercial Bank Limited Saudi Pak Commercial Bank Union Bank Limited 13 Internship Report Pak Elektron Limited Registered Office 17-Aziz Avenue Canal Bank, Gulberg-V, Lahore. Tel 042-5718274-5, 5717364-5 Fax 042-5715105 E-mail
[email protected] Work Site 14-Ferozepur Road, Lahore. Tel 042-5811951-7 (7 Lines) Website www.pel.com.pk ISLAMABAD Room # 1404, 14th Floor Green Trust Tower, Blue Area Tel 051-2273858 Fax 042-2273858 KARACHI Kohinoor Building 25-West Wharf Road Tel 021-2200951-4 Fax 021-2310330 CHINA 910, No. 1007, Zhong Shan Naun Er Road Shanghai, china Tel 86-21-64567533 Fax 86-21-54109971 AFGHANISTAN Flat # 103, 1st Floor, Block A Qaiser Market, Kolola, Pushta, Kabul Tel 0093-79826293 Objectives The objectives and mission for which the company is established are as following • To carry on the business or businesses of manufacturing, selling, installing, maintaining designing and dealing in all kinds of electrical equipment. • To carry on any business whether manufacturing or otherwise which maybe found convenient to undertake in connection with or in addition to any of these objectives mentioned above? 14 Internship Report Pak Elektron Limited • To do all such things that is incidental for the attainment of the above objectives or any of them. • • To produce high quality and standard products. To produce equipment to be used in numerous projects of national importance. • To secure a high share / quota of WAPDA’s demand for power products. • To produce skilled workers and technicians through its apprenticeship schemes and training programs for engineers and technicians. 15 Internship Report Pak Elektron Limited “To Excel in Providing Engineering Goods and Services through Continuous Improvement.” 16 Internship Report Pak Elektron Limited To provide quality products & services returns for all stakeholders for complete customer satisfaction and to maximize through optimal use of resources To focus on personal development of our employees to meet future challenges. To promote good governance, corporate values and a safe working environment with a strong sense of social responsibility. 17 Internship Report Pak Elektron Limited The company comprises of two divisions • • Appliances Division Power Division APPLIANCES DIVISION PEL’s Appliances Division is the flag carrier of the Saigol Group involved in home appliances manufacturing. 18 Internship Report Pak Elektron Limited Refrigerator Deep freezers Television Microwave oven Washing machine Generators Air condition PAK Elektron Refrigerators always have always been famous among every home due its superior quality and reliability. In Pakista International Companies who are sharing the demand of refrigerators but all of them are considered to be minor market shareholders in front of Pak Elektron’s share. Strength of Pak Elektron’s share has always been its remarkable Appliances Division due to its latest equipments and talented men power. n there are so many National and This Appliance Division is comprised of following departments Marketing Appliance Division Production Appliance Division After Sales Services Department Consumer Marketing Department Market Appliance Consumer Marketing Production AD After Sales Servies Internship 19 Report Pak Elektron Limited 1.1 Marketing Appliance Division Talking about marketing department, it always been a a backbone of the Appliances business unit. This department is having most hardworking and talented staff that remain busy in searching new markets for its products and always initiates different production programs to satisfy its nd still it is considered to be customer needs and preferences. This Marketing department has un-beatable marketing forces that on regular basis conduct market surveys in order to look into Competitors position, customer’s taste, retailers and wholesalers needs under the supervision of four professional marketing managers plus General and Senior Marketing Managers. At time when the forces feel a change in customer preferences they immediately undertake distinctive steps and make new sales plans. Such plans are forwarded to each respective department by the marketing department in order to get their requirements to make the plan successful. Production Department PEL’s production department has its own distinctive qualities from one end to last end. At this department every worker has got very special in job training from the seniors and remains committed in order to accomplish the given tasks successfully either he is a part of assembling or a part of finishing section. When Research and development designs any new feature or product, production department provides required men power estimates to the company’s human resource department. After Sales Services After Sales Services is another active department of PEL’s Appliances division, which gives a sense of care to its customer when ever it feel things are going wrong or against its desire. This department has their own technicians available for the services in the company as well as having after sales centers out side 20 Internship Report Pak Elektron Limited the company at different places in the cities. This department assures 100 percent parts replacement of appliances if complains fall in the warranty Consumer Marketing Department A door-to-door marketing system introduced by PAK Elektron in the shape of this department. Consumer marketing department is the only department that has special sales forces for its appliances and deals the customer needs and complains directly without the intervention of any retailers and wholesalers POWER DIVISION PEL Power Division manufactures energy meters, Transformers Switchgears Kiosks Compact stations Shunt capacitor banks Energy meters Generators 21 Internship Report Pak Elektron Limited All these electrical goods are manufactured under strict quality control and in accordance with international standards. PEL is one of the major electrical equipment suppliers to Water and Power Development Authority (WAPDA) and Karachi Electrical Supply Corporation (KESC), which are the largest power utilities in Pakistan. Over the years, PEL electrical equipment has had been used in numerous power projects of national importance within Pakistan. In spite of stiff competition from emerging local and multinational brands, PEL Group's appliances and electrical equipments have remained in the spotlight due to constant innovation. Strategic partnership with multinationals of repute have enabled the PEL Group to incorporate new technologies into existing product ranges, thus giving the Pakistani market access to innovative, affordable and quality products. 22 Internship Report Pak Elektron Limited The second but the most powerful revenue generating business unit of PAK Elektron, produces Transformers, Switchgears and Energy Meters for the public sector such as KESC Karachi Electric Supply Corporation, LESCO Lahore Electric Supply Corporation, IESCO Islamabad Electric Supply Corporation, PESCO Peshawar Electric Supply Corporation, etc and for public sector as well. This division is comprised for four departments Marketing Power Division Production Transformers Production Switchgears Production Energy Meters Market power Production EM Production SC Production TR 2.1 Marketing Power Division 23 Internship Report Pak Elektron Limited Marketing department of power division consists of most professional engineers who market all the power products, seeks new customers and supervise all these three departments to ensure best quality and reliable products every time. 2.2 Production Transformers PEL has vast experience in design and manufacturing of standard and special purpose transformers up to 33kV and up to 6000kVA ratings. This department make oil immersed transformers with natural cooling are suitable for both indoor and outdoor installations. These are manufactured according to BSS-171, IEC76 or VDE-0532 and tropicalized to meet adverse environmental conditions. All transformers are offered with tabular tank, having a conservator and breather. This department manufactures following types of transform • Distribution transformers (pole mounted or pad mounted design) • Auto transformers • Furnace transformers • Welding transformers • Chokes for furnace transformers • Any other special requirement PEL's transformers have been successfully type tested for Impulse voltage and short circuit tests at KEMA, (Holland), HV&SC Lab, Rawat (Pakistan), NIP (Pakistan) and UET (Pakistan). 2.3 Production Energy Meters 24 Internship Report Pak Elektron Limited Another successful and most powerful department of power division is its energy meter production department that manufactures Electro-mechanical Energy Meters under license from ABB-USA. The quality of PEL meters has been certified by KEMA Laboratories (Holland) and conforms to IEC 521, SGS Yarsley, and U.K, has certified PEL Energy Meter plant for ISO 9002. This department also manufactures MC8 type a direct connection single-phase meter, which is commonly used for each home. Its design and constructional features include overload compensation and temperature compensation, thus providing maintenance-free operation over a long period and accurate measurement of electrical energy. The frame is sturdy in construction and the covers are available in unbreakable polycarbonate plastic material. 2.4 Production Switchgears MV & LV Switchgear being one of the major power products of PEL is produced for indoor installations company with the latest international standards by this department, i.e. IEC, BSS or VDE PEL's Switchboards are steel sheet fabricated, totally enclosed, floor mounting and vermin & dust proof. These are supplied with factory fitted relevant components and copper bus bars, internal wiring, terminal blocks etc. The cubicle housing and doors are fabricated from 2-3mm thick sheet steel, welded together to form a robust and self-supporting structure. Painting procedure includes through cleaning, pre-treatment, anti-rust coating and final finishing in standard RAL colors. 25 Internship Report Pak Elektron Limited Human Resource department Finance Department Accounts Department Internal Audit Department Appliances Division Marketing Appliances Division Production Appliances Division Buying Appliances Division Power Division Marketing Power Division Production Power Division Buying Power Division Consumer Marketing Division Distribution and Credit Control Department Customer Service Department Information Technology Department Industrial Relations and Administration Department 26 Internship Report Pak Elektron Limited Human Resource Department is the most important and key department of every organization. It not only deals with the employees of the organization but also helps in managing the affairs of the company. PEL has a full fledge HR Department. The GM is the top executive in the HR department and there is one manager of HR to facilitate the work of G.M. HR Department’s activities are spread over the whole organization. HR department is divided into Recruitment & Selection Training And Development Performance Management System Recruitment & Selection Recruitment and selection team consists of 5 members and one manager. The basic purpose of this team is To give advertisement for the vacant job. To receive C.V’s. Screening the C.V’s To conduct interview and test of screened applicants. After completing this procedure final selection is made. 27 Internship Report Pak Elektron Limited Training and Development Training and development team is also consists of 5 members (3 A.M. & 2 executives). The function of this team is to trained and develops new employees about the traditions of organizations as well as sharing new aspects with existing employees. Performance Management System Performance management team consists of 3 members. Orientation Program HR department is also starting orientation program for new employees. This program will be completed in 5 modules. 28 Internship Report Pak Elektron Limited I have the honor to be an internee in the most reputed organization (PEL) in the electronics industry. During my stay at PEL of 4 weeks (form 23th july, 2010 to 19th Aug, 2010) in FP-AD. of PEL, I tried to leave no stone unturned in getting the best experience & practice of ground realities regarding financial matters and maintaining accounts relating to sales and credit control. It is a pleasure for me during my stay in the PEL; I take the practical exposure about the Accounting and Finance under the well experienced and educated managers. This is the result of their un-tired efforts that now I have known the use of different financial softwares used by the Organization. If I talk actually about this internship experience, I would like to say that my B.COM(HONS) is incomplete without practical knowledge which was provided me by PEL. During my internship period I performed my assigned duties on time and under the prescribed instructions of my immediate boss. I hope that this practice experience will create glorious opportunities in future. Inter-department dealing are also very important duty of mine, the major activities are with Accounts, Finance, Sales, Dealership and , Store Mkt. A.D, Receiving, Production, IT, Commercial, H.R, Customer Service Dept. (CSD), Admin & Industrial Relationship (A & IR), Purchase Department. I feel very comfortable as the concern officers are all very helping and courteous, it obviously helped me a lot in gaining my confidence and learnt new things to develop official attitudes. Each department is connected with other, so there is a team oriented working relationships among departments. The success story of PEL is also depended upon so loyal team of employees with admirable motivational package from owners. 29 Internship Report Pak Elektron Limited Department of FP-AD IMPORT/EXPORT FP-AD (IMPORT/EXPORT) is one of the important divisions of Pak Elektron Limited. This department was established in 1962. The purpose of this department was to enhance the business of the organization that remains successful every year up till now. The basic function of the department is to provide the Home Appliances goods to the consumers under the instilment business. FP-AD (IMPORT/EXPORT) fulfill basic need of factory by providing the raw material for abroad which is not available in local market. FP-AD (IMPORT/EXPORT) is conducting this business with the Bank Alfalah Limited. Department of Credit Control Credit Control Department is engaged in marinating the complete record of customers in financial data base software named as “Consumer Marketing Division with Accounts Receivable”. This department is also engaged in recovering the amount from customers and creating the debtors. The basic purpose of D&C.C is engaged To maintain the complete records of customers applications. To record the total financing by the bank. To keep record about loan application. To maintain the record about processing fee. To maintain the record of customer’s installments. 30 Internship Report Pak Elektron Limited To record the delivery orders. To maintain the record of installments. To maintain the product assessment record. FP-AD (IMPORT/EXPORT) HIRARCY General Manager FP-AD (IMPORT/EXPORT) Numan Khlid Butt Management level M2 Perveez Malik Kashif Manzoor Sherezi Management level M1 Imran Kaazmi Management level E1 Ghulam Mohayudin Management level E2 Shariq Hussain 31 Internship Report Pak Elektron Limited Management level E3 Waqar Hussain Mohsin Ali FP-AD (IMPORT/EXPORT) TEAM Head of department Ghulam Mohyudin Accountants Rashid Haneef Noor-Ul Khan Ghulam Abbas Muhammad Naveed Ali Raza Butt Ahmad Baig 32 Internship Report Pak Elektron Limited NEW SOFTWARE USED BY FP-AD 33 Internship Report Pak Elektron Limited 34 Internship Report Pak Elektron Limited Swot analysis consists of analysis of internal and external environment of an organization. Internal environment The company should evaluate strengths and weaknesses analysis periodically. Company should review financial, marketing, manufacturing, human resources and organization competences. So PEL also use its strengths to avail the opportunity. Strengths PEL has the following strengths Brand loyalty Strong Dealer Network Quality Products After Sales services Challenger position Technological differential advantage Strong Management control Power division Distribution of authority Brand loyalty 35 Internship Report Pak Elektron Limited PEL has created a strong brand image in the mind of the customers through higher quality and low prices. The customers of PEL always prefer its home appliances like Window AC, split AC and refrigerators, during the time of purchase. PEL is a popular company in Pakistan and every one knows about the PEL products and its brand name. Strong Dealer Network It is also the plus point for PEL that it has developed a strong dealer network in the market. The dealers always try to sell the PEL products to the customers because, the company for its products, gives them a high margin. The management of PEL also provides more incentives to their dealers than their competitors. Dealers are very conscious about the PEL products and always guide the customer in buying the PEL products. Quality Products PEL is also in a strong position because it provides superior quality products to customers. So it gives an edge to company over its competitors. Due to best quality, guarantee of products of PEL is more than its competitors. After Sales Services PEL provides the after sale service to customers which increases the customers satisfaction. The biggest strength of services department is that it handles a complaint within 24 hours in any part of the country, which helps in increasing the satisfaction level of customers. Strong Management control 36 Internship Report Pak Elektron Limited It is another plus point that PEL has a strong management. Its employees are competent, efficient, skilled and knowledgeable. They always cooperate with the top management in achieving of goals that are assigned to them. Employees are well aware about the company objectives and are committed to the development of company. Power division Power division is the unique strength for PEL. Most of electronics companies deal in only home appliances but PEL is the only company which deals in home appliances and power appliances Technological differential advantage Strength for PEL is the advancement in the technology. The company uses imported danfoss compressor in refrigerators, air conditioners and it is also a differential advantage for the company because no any company has this advantage. Distribution of Authority Top management of PEL delegates the power to the subordinates for achieving the marketing objectives in a specified time period. So every manager has an authority to take decisions to achieve the goals of company. In this way they save the time and react quickly. Weaknesses Along with its strengths PEL has also some weaknesses which needs to eliminate in future. If PEL overcomes these weaknesses then it can become a market leader in home appliances. PEL looses some competitive edge in the following areas Financial Problems Lack of advertisement System variations Lack of Product range 37 Internship Report Pak Elektron Limited Less Utilization of capacity price setting Financial problems Sometimes PEL faces the financial problems because its stocks are so much piled up in the stores that creates problem of cash inflow and outflow and cause a problem in production process due to short raw material. System variations It is also the main weakness of PEL that there is a rapid change in polices of selling the products. That creates problems for the selling team to sell the products to the dealers. Lack of Product Range PEL has introduced more products of consumer items but there are more needs to develop new consumer items. Less utilization of capacity Due to lack of finance a company cannot utilize all its resources on its full capacity. It increases the cost of products per unit that decreases the profit margin of each consumer item. As the production capacity and actual production of different products is given below (2005) Production capacity production Refrigerators Energy meters Transformers Air conditioners 3500000 1200000 2000 36250 2924905 986085 1356 6560 Actual 38 Internship Report Pak Elektron Limited Price setting Price setting is also a main problem for PEL because it sets its prices on the bases of competition and this strategy reduces its profit margin. External environment It consists of opportunity and threats Market opportunity It is an area of buyer need in which a company can perform profitably. Market threat It is a challenge due to an unfavorable trend of development or decline in sales or profits in absence of defensive marketing action The strengths, weaknesses, opportunities and threats of PEL are discussed below Opportunities For PEL, there are more opportunities for expansion in business. Following are the opportunities for the PEL. Exploration of market Increase in product range Export opportunity Increase in production capacity Exploration of market 39 Internship Report Pak Elektron Limited PEL has the opportunity to explore the market in all over Pakistan. Even though PEL has introduced its products in many cities of Pakistan but there are so many places that are yet to be exploited. Increase in Product Range PEL can increase its product range that will be more profitable for the company. There are more needs to develop new consumer items like PEL Vacuum cleaners etc. Export opportunity PEL has also the opportunity to export their products in other international countries like UAE, SAUDI ARABIA, and some other countries of Middle East. Threats Following are the main threats for the PEL Strong competition Chinese product in the market supplier’s growing bargaining power Instability of governments Tax department World Trade Organization Strong competition 40 Internship Report Pak Elektron Limited There is very strong competition in the home appliance division. Every company adopts different strategies for selling of the products. It reduces the profit margin of each company and increases the bargaining power of the buyers who will demand higher quality of products at lower cost. Chinese product Chinese products are another threat for the Pakistani companies because these products are cheaper than the Pakistani products. Chinese products stress the indigenous companies to lower the quality and prices that will not be profitable in the long run. Instability of Government The rapid change in governments has become a threat for the companies because every government adopts new policies for the industries. So it increases the uncertainty for the investors who want to invest heavy amounts in their new projects. Tax department Tax department is another major threat for the company that is restraining the business expansion. There is a most complicated tax procedure operating in the country that creates hurdle in the production and smooth functioning of different companies in Pakistan. World trade organization World trade organization has allowed from 2005 to any company offering home appliances to export their products after paying less duties or duty free products. That will increase the pressures for the local companies to reduce the prices and increase the quality. It will increase the competition among the foreign companies and local companies. Supplier’s growing bargaining power 41 Internship Report Pak Elektron Limited The supplier growing power is increasing due to more demand of the electronic industry due to this phenomena the suppliers of raw material are charging high prices and it is reducing average profit margin of companies. 42 Internship Report Pak Elektron Limited 43 Internship Report Pak Elektron Limited Liquidity Analysis Current Ratio Year Current Ratio 2004-05 1.15 2005-06 1.04 2006-07 1.32 Interpretation The liquidity position of PEL has been satisfactory in the last few years. As the above analysis table indicates, in 2005 the liquidity position was 1.15 times which means that in 2005 the firm has Rs. 1.15 to pay a liability of RS. 1 which is quite well but in 2006 it suddenly reduced to 1.04 times. This change in the liquidity position is due to higher increased percentage of current liabilities in the balance sheet of year 2006. But in 2007 PEL has decreased its current liabilities and is having an improved current ratio of 1.32 times which is much better in a sense that the company has maintained a well managed level of assets to pay its liabilities. 44 Internship Report Pak Elektron Limited Quick Ratio Year Quick Ratio 2004-05 0.70 2005-06 0.62 2006-07 0.84 Interpretation Secondly, quick ratio is also indicating that in 2006 the higher increased percentage of liabilities also cause quick ratio to decrease from 0.70 times to .62 times but in 2007 PEL managed to gain quick ratio of .84 times by reducing level of stock in trade as well as its current liabilities portion. Activity Analysis Inventory turnover Year Inventory Turnover 2007 3.70 2006 2.85 2005 2.69 45 Internship Report Pak Elektron Limited Interpretation The above inventory turnover table and graph shows an increased level of inventory turnover in year 2007, which is a very good indicator that shows higher ability of the firm to utilize its inventory to generate sales during the year 2007. Total Assets Turnover Year 2007 2006 0.93 2005 0.84 Total Assets Turnover 1.02 Interpretation Fifthly, total asset turnover ratio is also moving upwards which indicates that the firm’s operations are tending to be more efficient then from previous years. So the overall activity analysis of PEL shows that the firm is performing its business activities effectively and efficiently 46 Internship Report Pak Elektron Limited Analyzing Debt Debt Ratio Year Debt Ratio 2007 64% 2006 68% 2005 65% Interpretation The above debt analysis table shows that in year 2007, the debt ratio of the firm has decreased as compared with years 2006 and 2005 which seems to be a good indicator and it shows that the firm is trying to maximize the utilization of its own business resources and minimizing the reliability on outside sources of debt or financing for investment purposes. 47 Internship Report Pak Elektron Limited Debt Equity Ratio Year Debt Equity Ratio 2006-07 0% 2005-06 0% 2004-05 0% Interpretation The above calculated value shows that the firm 0% debt equity ratio which means that the firm is taking no long term debt and using owner’s equity for investment purpose. It is a good indicator in a sense that the firm has no long term obligation as well as the firm does not have to pay interest on long term debts. But on the other side it might be a drawback for the firm. They can get long term debt and can increase their investments as well as their profits Analyzing profitability Year Gross Profit Margin % Operating profit margin% Net profit margin % Return on total assets % Return on equity % 2007 21 13 4.9 5 17 2006 22 12 4.6 4 16 2005 22 11 4.2 3 12 48 Internship Report Pak Elektron Limited Interpretation The above profitability schedule shows that Gross profit margin ratio of the firm has decreased in year 2007 due to unexpected increase in cost of good sold which is not a good indicator but considering the volume of decline and changing environment of the market it is coverable and the firm might improve it in near future. Next you can see that the operating profit margin ratio is improving as compare with last years so it is providing support to some extent to the profitability of the firm. And while considering net profit margin, it also indicates an increase in the margin of net profit of the firm in sales which is also supportive for profitability. Other profitability ratios are improving as compared with previous years which show the firm is earning high amount of profits and the assets are being effectively utilized by the firm to generate profit. And the amount of earning per share is also increasing which shows that firm is distributing the earning in its shareholders at a increasing rate which is very much encouraging for the investors to buy the shares of PEL. 49 Internship Report Pak Elektron Limited IN PAKISTAN PEL IS ONLY LISTED COMPANY IN HOME APPLIANCES INDUSTRY. THE OVERALL POSITION ON THE COMPANY IS WELL. MARKETING DEPARTMENTS ARE PLAYING IN IMPORTANT ROLE IN ENHANCING THE SALES OF THE ORGANIZATINS. ESPECIALLY CMD IS CONTRIBUTING VERY WELL IN GENERATING PROFITS. COMPANY’S ATMOSPHERE IS VERY COMFROTABLE FOR WORKING. COMPANY’S OTHER POLICIES REGARDING OPERATIONS, FINANCIALS, HR, MARKETING ARE ALSO VERY POSITIVE AND SATISFACTORY. MAY ALLAH PROSPERS THIS ORGANIZATION AND FLOURISHED BY LEAPS AND BOUNDS. 50 Internship Report Pak Elektron Limited In my opinion there are following areas in which management can improve organization’s performance by giving some special concentration. • Regarding financial positions, Company’s profitability ratios are well. But its net profit ratio is not quite satisfactory due to increased costs and expenses & management should try to minimize its cost. • Company should also take measures to improve it return on assets by properly utilizing its assets to generate sales. • Company’s inventory turnover ratio is also not satisfactory. Management should try to increase its stock turnover ratio. • Regarding HR department, orientation program should be started for internees. • • • Regarding products, company should try to enhance its product range. There should be pick and drop facility for the employees. There should be separate flats for outstation employees. 51 Internship Report Pak Elektron Limited Skill Acquired In FP-AD (Import/export) department the skill that I acquired during my internship period is following. Post shipment The senior commercial office taking the following step for efficiently moving the consignment from Karachi to Lahore dry port for custom clearance etc by road and rail on nature of material. 1) Shipping document i. Receiving the shipment document courier or bank. ii. SD thoroughly scrutinerized and forward to custom for clearaning agent. iii. For onward submission to local forwarder for movement of consignment by road and rail. 2) Destuffing In case of containerized consignment IO will immediately destuff the consignment at Karachi port, to avoid any mishandling so that we may able to transport it up to LDP. 3) Negotiable Document IO will send a request to concerning bank for release of SD to PEL approved custom clearance agent. 4) Insurance Upon receipt of SD they also inform the insurance company for arrival of consignment at Pakistan. Custom clearance 52 Internship Report Pak Elektron Limited For clearance of all consignment, IO will give written instruction to the clearance agent, for filing the Goods Declaration (GD). Reception of consignments I. II. III. After clearance and released the consignment from custom port, IO will issue an internal memo to the store In. Change with concerning HOD for this information. In case of shortage of material, store tell the IL department . In Accounts department the skill that I acquired during my internship period is following. On Receipt of Material in store Following transaction madein account department 1)Raw Material Component Party Provision Debit Credit On receipt of Bill in Accounys Department 2)Party Provision Advance Sales Tax Fedral Excise Duty Fright/Process charges Party Account Debit Debit Debit Debit Credit On Payment Of Bill 3)Party Account Bank Account Withholding tax Debit Credit Credit On Payment Of With Holding Tax 4) Withholding tax Debit 53 Internship Report Pak Elektron Limited Bank Credit Account In Receiving Store department the skill that I acquired during my internship period is following. Incoming store ↓ Supplier deliver Challan ↓ PBL Purchase ↓ LMRP (Local Material Receipt Point) ↓ Quality Verification Physical is responsibility Of RSI(Receiving Store Inventory) ↓ Allotted the Inventory Gate Pass No ↓ QC for inspection 54 Internship Report Pak Elektron Limited ↓ RSI GRNO Alloted In Accounts (cost control system) department the skill that I acquired during my internship period is following. PRODUCTS Appliance division Deep freezers Television Microwave oven Washing machine Generators Air condition Refrigerator 3 4 5 6 7 1 2 Power Division PEL Power Division manufactures energy meters, Transformers Switchgears Kiosks Compact stations Shunt capacitor banks Energy meters Generators 5 6 7 8 2 3 4 55 Internship Report Pak Elektron Limited OTHERS 0 Following number are allotted to No of jobs A) Manufacturing (0) B) Repair under warrenty (1) C) Chargeable repair (2) (3) (4) (5) (6) (7) (8) (9) D) Development of new design E) Resale inspection of products F) Issue of component for sale G) Auxiliary material and wages H) Fabrication of component I) MFG./Issue of capital assets J) Maintainance and foctory overhead 56 Internship Report Pak Elektron Limited Balance Sheet as at December 31, 2009 57 Internship Report Pak Elektron Limited Note December 31, 2009 June 30, 2009 (Rupees in thousand) EQUITY AND LIABILITIES SHARE CAPITAL & RESERVES Authorized capital Issued, subscribed and paid up capital Reserves Un-appropriated profits 5 6 7 7 2,500,000 1,593,720 131,931 2,461,255 4,186,906 SURPLUS ON REVALUATION OF PROPERTY, PLANT AND EQUIPMENT 8 4,373,769 2,500,000 1,496,677 131,931 2,378,750 4,007,358 2,788,311 NON CURRENT LIABILITIES Long-term financing - secured Liabilities against assets subject to finance lease Deferred taxation Deferred income 9 10 11 12 4,079,149 119,368 2,883,631 101,108 7,183,256 CURRENT LIABILITIES Trade and other payables Interest / mark-up accrued on loans and other payables Short-term borrowings Current portion of - long-term financing - liabilities against assets subject to finance lease 9 10 783,597 82,959 7,191,289 CONTINGENCIES AND COMMITMENTS 16 22,935,220 19,070,035 677,349 85,944 6,553,832 13 14 15 1,284,080 333,763 4,706,890 1,506,702 337,322 3,946,515 3,493,417 103,367 2,013,543 110,207 5,720,534 Note ASSETS NON-CURRENT ASSETS December 31, 2009 June 30, 2009 58 Internship Report Pak Elektron Limited Property, plant and equipment Intangible assets 17 18 13,457,138 511,134 13,968,272 9,720,022 583,512 10,303,534 Long term investments 19 22,906 21,771 Long-term deposits 20 92,152 80,179 CURRENT ASSETS Stores, spares and loose tools Stock-in-trade Trade debts - unsecured Advances Trade deposits and short-term prepayments Other receivables Other financial assets Sales tax refundable Income tax refundable Cash and bank balances 28 26 27 21 22 23 24 25 90,721 3,826,744 3,227,219 825,807 193,963 14,952 27,522 154,374 367,325 123,263 8,851,890 76,854 3,258,607 3,807,776 686,044 180,262 12,671 26,107 131,593 291,579 193,058 8,664,551 22,935,220 19,070,035 The annexed notes 1 to 48 form an integral part of these financial statements. NASEEM SAIGOL Chairman / Chief Executive Officer HAROON A. KHAN Managing Director 59 Internship Report Pak Elektron Limited Profit & Loss Account / Statement of Coprehensive Income For the Six months period ended December 31, 2009 Year ended June 30, 2009 (Rupees in Thousand) Revenue Sales-tax and discount Revenue - net Cost of sales Gross profit Other operating income 32 31 29 30 5,203,152 571,721 4,631,431 3,148,401 1,483,030 40,708 1,523,738 Distribution cost Administrative expenses Other operating expenses Finance cost Share of profit/(loss) of associate Profit before taxation Provision for taxation Profit for the period / year Other comprehensive income Total comprehensive income for the period/year 37 33 34 35 36 19.2 315,170 349,450 19,751 619,911 2,438 221,894 60,643 161,251 16,117,524 1,495,912 14,621,612 11,283,796 3,337,816 37,088 3,374,904 892,068 609,004 116,807 1,372,676 9,248 393,597 133,051 260,546 Note Six months ended December 31, 2009 161,251 Rupees 260,546 Rupees - Earning per share Basic Diluted 40 40 1.31 1.24 1.97 1.94 60 Internship Report Pak Elektron Limited Cash Flow Statement Annual Statement ended December 31, 2009 Six months ended Dember 31, 2009 Year ended June 30, 2009 Note (Rupees in Thousand) CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation Adjustments for Profit before taxation Amortization of intangible assets Share of profit of associate Provision of impairment in value of investments Finance cost Provision for doubtful receivables & advances Impairment loss of goodwill Provision / (reversal) of provision for obsolete and slow moving stocks Provision for compensated absences Gain/(loss) due to change in the fair value of other financial assets Loss on sale and lease back Amortization of grant in aid Gain on sale and lease back activities (net of amortization during the year (Gain) / loss on disosal of property, plant and equipment 216,580 1,925 (2,438) 1,303 619,911 52,042 73,632 381 1,157 (1,415) 1,864 (1,497) (13,608) (748) 949,089 Cash generated from operations before working capital changes Working capital changes Cash generated from operations Finance cost paid 45 1,170,983 (455,667) 715,316 (623,470) 315,305 3,134 (9,248) 40,422 1,372,676 58,539 (6,637) 13,599 46,188 (3,150) (18,408) 1,026 1,813,446 2,207,043 (10,189) 2,196,854 (1,255,458) 221,894 393,597 61 Internship Report Pak Elektron Limited Compensated absences paid Income taxes paid (1,081) (106,032) (730,583) (14,198) (269,471) (1,539,127) (657,727) Net cash (used in) / from operating activities Cash flows from investing activities Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Proceeds from sale and leaseback activities Long-term deposits made during the period/year Net cash used in investing activities Cash flows from financing activities Repayment of long-term financing Proceeds from long-term financing Payment of liabilities against assets subject to finance lease Proceeds from short-term borrowings Dividends paid Net cash from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of the period /year Cash and cash equivalents at end of the period /year 28 (15,267) (1,466,257) 3,699 55,521 (11,400) (1,418,437) (2,394,040) 12,984 210,769 (11,338) (2,181,625) (269,292) 961,272 (38,452) 760,375 (49,994) 1,363,909 (69,795) 193,058 123,263 (744,412) 2,103,237 (103,886) 77,527 (49,994) 1,282,472 (241,426) 434,484 193,058 The annexed notes 1 to 48 form an integral part of these financial statements. 62 Internship Report Pak Elektron Limited Statement of Changes in Equity Annual Statement ended December 31, 2009 (Rupees in thousand) Capital Reserves Share Capital Premium on issue of shares Balance as at July 01, 2008 Total comprehensive income for the year ended June 30, 2009 Final dividend for the year ended June 30, 2009 @ Rs. 0.95 per preference share Transfer to unappropriated profits on account of incremental depreciation charged during the year net of deferred taxation Balance as at June 30, 2009 Total comprehensive income for the six months period ended December 31, 2009 Final Dividend for the year ended June 30, 2009 @ Rs. 0.95 per preference share Transferred to reserve for bonus shares Issue of bonus shares Transfer to unappropriated profits on account of incremental depreciation charged during the period net of deferred taxation 1,496,677 131,931 1,496,677 131,931 Reserves for bonus shares - Revenue reserves Unappropriate profit 2,074,013 Total 3,702,621 - - - 260,546 260,546 (49,994) (49,994) 94,185 94,185 2,378,750 4,007,358 161,251 161,251 - - - (49,994) (49,994) 97,043 - 97,043 (97,043) (97,043) - - 68,291 68,291 63 Internship Report Pak Elektron Limited Balance as at December 31, 2009 1,593,720 131,931 - 2,461,255 4,186,906 The annexed notes 1 to 48 form an integral part of these financial statements. NASEEM SAIGOL Chairman / Chief Executive Officer HAROON A. KHAN Managing Director 64 Internship Report Pak Elektron Limited Key Operating and Financial Data Directors' Report to the Shareholders Directors' Report to the Shareholders The Directors are pleased to present their Report together with Company’s audited financial statements for six months ended December 31, 2009. Operating Results & Performance Overview Company achieved sales of Rs. 5.203 billion during six months ended December 31, 2009 which were marginally lower than corresponding period’s sales of Rs. 5.547 billion. Profit after taxation of Rs. 161 million grew more than 16% over previous six months figure of Rs. 138 million. This performance is noteworthy especially in view of prevailing non-conducive business conditions. Comparative figures, although, have been reported for the year ended June 30, 2009 but for better understanding figures of corresponding six months have also been reported wherever necessary, in this report. In order to match the seasonal business cycle with the accounting year, Company has adopted calendar year as its accounting year whereby the yearend will not fall in the peak season. As such these accounts have been prepared for six months ended December 31,2009 after obtaining necessary approvals from relevant authorities. Summary of the results is as under Financial Results (Rs. in Million) 6 months ended December 31, 2009 Gross Sales Gross Profit Operating Profit Profit before tax Profit after tax Earnings per share (Basic) - Rupees Earnings per share (Diluted) - Rupees 5,203 1,483 839 224 160 1.31 1.24 6 months ended December 31, 2008 5,547 1,305 820 204 139 1.17 1.06 Year ended June 30, 2009 16,117 3,337 1,757 394 261 1.97 1.94 65 Internship Report Pak Elektron Limited BIBLIOGRAPHY BOOKS • Principle of marketing by Kotler Armstrong ARTICLE • • • • Monthly article of pak electron limited(PEL) Quarter report of pak electron limited(PEL) Semi annually report of pak electron limited(PEL) Annually report of pak electron limited(PEL) WEBSITES • www.pel.com.pk • • • • • www.secp.com.pk www.scribed.com.pk www.kse.com.pk www.google.com.pk www.ibp.com.pk 66 Internship Report Pak Elektron Limited 67 Internship Report