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One of the largest cement manufacturers of the country reported its financial performance for 1HFY15, reporting an uptick in its top line much like the rest of the sector. The break-up of the company’s sales tally also mimicked the broader sector as the proportion of domestic sales increased to about 79 percent in the outgoing period, compared to 73 percent in the corresponding period of the previous fiscal.
While DGKC’s gross margin was squeezed marginally in this period, Taha Bin Yamin at Shajar Capital pointed out that the same gross profitability actually improved quarter-on-quarter, “as declining coal prices took effect along with improvement in local dispatches”.
The same couple of factors also helped the company to cut down its distribution costs significantly; just over 38 percent between 1HFY14 and 1HFY15. Changes in administrative expenses and other expenses incurred by the company had a negligible net impact during the period. Meanwhile continued deleveraging helped the company slice finance costs to about half the level reported at the end of 1HFY14.
However a major boon was received from company’s earnings through dividends and interest earnings on its portfolio of investments primarily comprised of MCB, Nishat Mills, Nishat Chunian and Adamjee Insurance. Resultantly, other income posted a hefty rise of 17.7 percent to reach Rs1.13 billion in 1HFY15.
Consequently, DGKC posted solid earnings per share growth, exceeding the consensus expectations of industry analysts.


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DG Khan Cement
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Rs (mn) 1HFY14 1HFY15 chg
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Sales 12403 12655 2.0%
Cost of goods sold 8198 8524 4.0%
Gross profit 4205 4131 -1.8%
Gross margin 34% 33%
Distribution cost 741 457 -38.3%
Administrative expenses 224 245 9.1%
Other operating expenses 353 315 -10.7%
Other income 963 1134 17.7%
Finance cost 366 156 -57.3%
PAT 2669 3394 27.1%
Net margin 22% 27%
EPS (Rs) 6.09 7.75 27.3%
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Source: KSE notice

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