The domestic demand for cement has been healthy—a little lower than the expected 12-15 percent—but higher than previous years and this is only the start. Those at the top are enjoying the demand growth as well as preparing for the long haul toward expansions. DG Khan Cement (PSX: DGKC) is one of the prominent ones.
The cement manufacturer saw a 6 percent growth in revenues in 9MFY17 year-on-year which is decent enough considering that has more or less been the average growth of cement dispatches over the past nine months. Perhaps they wouldn’t admit it, but the sharp decline in exports has been less than favourable to the top lines of cement producers in Pakistan.
DGKC is one of the largest cement manufacturers in the cement industry trailing closely behind Lucky and Bestway with a market share of 9 percent. After expansions, the company will have nearly 12 percent share in the market in terms of capacity. The project with Loesche GmbH, a Danish company to commission the plant is already underway. Consequently, in the nine-month financials, DGKC saw a significant bump to its finance cost owing to the same reason, and will see this head grow further.
Despite a new Waste Heat Recovery unit running to provide electricity, the company saw higher costs (particularly, raw material costs, coal and power) that squeezed margins down from 42 percent to 41 percent in the nine-months of the two fiscals. A closer watch in this area is crucial.
Other indirect expenses were also higher. Selling expenses have been high due to export handling charges mainly when exporting to India. A lower effective tax rate contributed to a growth in the bottom line of one percent. Despite sluggish nine-months, the market is positive on DGKC’s prospects.
Comments
Comments are closed.