Cement industry experts revealed in their statistics that Pakistani cement exports have remained robust despite a decline in local sales and a 200 percent tariff rise and cancellation of orders from India. This industry dispatched 3.325mt during February 2019 as compared to dispatches of 3.78mt in February 2018. Therefore, local consumption contracted by 19.1 percent Year on Year (YoY) basis. However, total exports from Pakistan grew by a healthy 69.1 percent YoY during February. The experts also recorded that the industry exported 0.508mt of clinker and cement during February 2019 as compared to exports of 0.301mt in the corresponding month in the last year.
However, statistics also showed that the local consumption in north Pakistan continued to fall to 2.148mt last month against 2.871mt same month previous year. Exports from the mills based in the north also saw an 8.7 percent fall to 0.165mt during February 2019 from 0.181mt during February 2018. The south fared moderately better as local consumption reached at 0.669mt during February 2019 as against to 0.609mt during February 2018. While exports from the south grew by 185 percent from 0.12mt during February 2018 to 0.343 mt during February 2019. It is also recorded that overall cement dispatches in the 8-month between July 2018 and Feb 2019 reached at 30.091mt, 0.1 percent lower than the dispatches of 30.106mt achieved during the corresponding period of previous year. This total includes exports of 4.649mt, which was 52.3 percent higher than 3.053mt exported in the same period last year.
No doubt in the cement industry of Pakistan, D. G. Khan Cement Company Limited plays a significant role and is engaged in production and sale of Clinker, Ordinary Portland Cement and Sulphate Resistant Cement. DGKC has created, developed and enhanced stringent and efficient systems in all areas. DGKC’s plants and operations are complying with global and national environmental standards.
| Financial performance of DGKC (Rs in 000) | ||
|---|---|---|
| Details | Q1FY19 | Q1FY18 |
| Sales | 8,185,893 | 7,527,449 |
| Gross profit | 1,037,365 | 2,655,217 |
| Profit before taxation | 519,874 | 2,473,364 |
| Profit after taxation | 417,823 | 2,837,428 |
| EPS (Rs) | 0.95 | 6.48 |
| Source: DGKC | ||
The company is completely cognizant of its responsibility towards society and welfare. The officials of the company also recorded that the management is spending on education, health, medical and fire-fighting facilities, water supply to nearby localities, aiding in emergency and disaster situations in nearby areas, awareness campaigns.
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During the first quarter of FY2019, the official of the company mentioned in the financial statement that the company’s cement sales increased by 2 percent in volumes with 8 percent growth in local despatches. In value terms sales increased by about 9 percent. GP margin declined by about 61 percent. PBT and PAT declined by 79 percent and 85 percent respectively. GP margin remained at about 13 percent, PBT margin at 6 percent and PAT margin at 5 percent. Major cause for this fall in profitability is reduction in gross margins. COGS grew by about 47 percent. This is majorly result of new plant’s operational cost, depreciation charge jumped up, two kilns shut down for some days for maintenance and high coal prices. On the other hand, sales volumetric rise could not be translated effectively into value because of tough market situations.
| DGKC | |
|---|---|
| Production/sales | % change for Q1FY19 wrt Q1FY18 |
| Clinker Production | 55 |
| Cement Production | 7 |
| Cement -Total Sales | 2 |
| Cement Local Sales | 8 |
| Cement Exports Sales | -42 |
Prices continue to move downward in first 2-month of Q1. In later part of the quarter however, prices started picking up backed by strong demand in Pakistan. Finance cost also contributed to bottom line fall as it now includes financing charges for Hub plant loans as well besides higher utilization of short-term lines and comparatively higher markup rates on pretext of higher benchmark rates. Industrial cement despatches were down by about 0.4 percent in local market, up by 39 percent in exports market with overall growth of about 4.5 percent. Industrial utilization remained 66.57 percent for domestic, 13.22 percent for exports and 79.79 percent for overall despatches.
DGKC is a public limited company and cataloged on Pakistan Stock Exchange (PSX). It is also mentioned in the financial statement of the company that the cement volumetric sales to remain in optimistic side. With new plant at south, the management will export clinker and cement at better margins. Prices of cement in domestic market may remain volatile but range bound. Profitability of DGKC is predicted to get improvement as cement sales would keep positive trend, exports would rise and operational costs may get normalized at new plant. However, FX devaluation, inflationary pressure and economic slowdown may hit predicted profitability.