Dandot Cement Limited (PSX: DNCC) was incorporated in Pakistan as a public limited company in 1980 and began its production in 1983. The company is engaged in the production and marketing of cement. DNCC is a subsidiary of Calicom Industries (Private) Limited.
Pattern of Shareholding
As of June 30, 2024, DNCC has a total of 316.355 million shares outstanding which are held by 702 shareholders. Calicom Industries (Private) Limited is the major shareholder of DNCC, holding 70.74 percent of its shares. Local general public accounts for 26.59 percent shares of the company followed by joint stock companies having 1.96 percent stake in DNCC. The remaining shares are held by other categories of shareholders.
Historical Performance (2019-24)
During the period under consideration, DNCC’s topline posted growth only in 2019 and 2024. These were also the years when the company posted net profit while its bottomline stayed in the negative zone in the remaining years. DNCC’s net sales drastically slumped in 2020.
The company suspended its production activities and sales since 2021. DNCC registered highest net loss in 2020 followed by a significant decline in its net loss in 2021. In the subsequent two years, the company’s net losses escalated. The detailed performance review of the period under consideration is given below.
In 2019, DNCC’s net sales mounted by 21.97 percent year-on-year to clock in at Rs.1593.52 million. However, topline growth was merely the result of upward price revision while sales and production volumes considerably fell during the year. This was due to both internal and external vulnerabilities that DNCC faced during the year.
Firstly, there was excess output available in the market because of increased capacities in the North region. Moreover, there was sluggish demand because of sheer reduction in the government funded projects. While this had already put brakes on the operational activity of DNCC in 2019, it also faced inconsistent electricity supply from WAPDA which caused serious damages to its production equipment and abrupt stoppages in the plant operations.
While the company increased its prices to make up for the exorbitant electricity and coal prices, it couldn’t post any gross profit, however, it led to 23.46 percent year-on-year shrinkage in its gross loss. Administrative expense slid by 2.39 percent in 2019. The company squeezed its workforce from 689 employees in 2018 to 567 employees in 2019 due to stunted operations.
Distribution expense multiplied by 74.46 percent in 2019 due to higher payroll expense incurred during the year. DNCC also registered net other income of Rs.412.52 million in 2019 as against other expense of Rs.29.43 million posted in 2018. The company’s other expense shrank in 2019 due to high-base effect as the company posted write-off of interest receivable from Gharibwal Cement Company and booked hefty provision for the obsolescence of stores, spares and loose tools in 2018.
Furthermore, other income grew manifold due to interest payable, and balances written back during 2019. This proved to be the game-changer for DNCC in 2019 and enabled it to post operating profit of Rs.1.236 million as against operating loss of Rs.543.69 million registered in 2018. OP margin stood at 0.08 percent in 2019. Another turning point for DNCC’s financial performance in 2019 was the finance income of Rs.608.55 million versus finance cost of Rs.185.11 million incurred in 2018.
The company earned finance income from its long-term loan. DNCC posted net profit of Rs.624.55 million in 2019 versus net loss of Rs.717.91 million in 2018. EPS stood at Rs.6.59 in 2019 versus loss per share of Rs.7.57 reported in the previous year. NP margin clocked in at 39.19 percent in 2019.
DNCC’s net sales declined by 81.42 percent in 2020to clock in at Rs. 296.11 million. This was due to sluggish sales volume as the company suspended operations in September for the rest of the year. Production volumes for ordinary Portland cement and clinker went down by 89.41 percent and 95.47 percent respectively in 2020 (see graph of production volume). Low retention price per bag coupled with high input cost resulted in gross loss of Rs.193.49 million in 2020, down 43.70 percent year-on-year.
Administrative expense tumbled by 40.92 percent in 2020 due to drastic decline in payroll expense as the number of employees fell to 311. Distribution expense slipped by 73.10 percent in 2020 due to considerably low payroll expense. DNCC incurred net other expense of Rs.17.87 million in 2020 mainly on account of increased provisioning for doubtful debts, obsolescence of stock-in-trade, stores, spares and tools.
Moreover, other income fell in 2020 due to high-base effect due to write-backs recorded in the previous year. DNCC posted operating loss of Rs.248.42 million in 2020. Finance cost of Rs.371.29 million added to ado. This was on account of interest expense incurred on long-term loan and loan from financial institutions and related parties. DNCC reported net loss of Rs.695.056 million in 2020 with loss per share of Rs.7.33.
While the industry volumes bounced back due to resumption of construction activities in the country, DNCCcouldn’t make any sales in 2021 due to closure of its plant operation since September 2019. Consequently, there was no cost of sales and distribution expenseincurred during the year. The same continued in 2022 and 2023. DNCC incurred administrative expense of Rs.41.80 million in 2021, up 20.6 percent year-on-year. This was due to directors’ remuneration of Rs.6 million incurred in 2021.
DNCC’s workforce was compressed to 38 employees in 2021. Administrative expense slid by 10.20 percent and 7.44 percent respectively in 2022 and 2023, however, the company started building up its workforce in 2022. This is evident in the workforce of 69 employees in 2022 and 118 employees in 2023. The building up of workforce was due to the fact that the company was nearing the completion of its BMR and was planning to resume its operations in FY24. In 2021, DNCC posted net other income of Rs.128.84 million due to hefty finance income of Rs.312.627 million on its long-term loans.
In the subsequent years, the company incurred net other expense due to absence of finance income on long-term loan coupled with hefty depreciation expense and provisioning done for obsolete inventory. In 2021, DNCC recorded operating profit of Rs.87.04 million which turned into operating losses of Rs.163.14 million and Rs.165.86 million in 2022 and 2023 respectively. Finance cost declined by 47.26 percent in 2021 due to monetary easing and downtick seen in long-term financing.
However, finance cost escalated by 12.96 percent and 8.63 percent respectively in 2022 and 2023 due to monetary tightening and increased borrowings. DNCC reported net loss of Rs.77.742 million with loss per share of Rs.0.79 in 2021, down 88.82 percent year-on-year. Conversely, net loss surged by 320 percent to clock in at Rs.326.55 million in 2022 with loss per share of Rs.1.42. In 2023, net loss further mounted by 12.52 percent to clock in at Rs.367.435 million with loss per share of Rs.1.48.
As per its planning, BMR activities were completed in the 1HFY24 with the lighting up of kiln in December 2023. Production volume for the Ordinary Portland Cementwas recorded at 173,740 M tons while the production volume of clinker clocked in at 182,701 M tons. DNCC made net sales of Rs.2456.36 million in 2024. The industry was also facing sluggish demand due to economic downturn and political uncertainty which drove down construction and infrastructure related activities in the country - both in public and private sector.
Low retention prices due to excess supply and thin demand resulted in gross profit of Rs.203.63 million in 2024 with GP margin of 8.29 percent. Administrative expense mounted by 40.81 percent in 2024 due to higher payroll expense, legal & professional charges as well as travelling & daily allowances. DNCC expanded its workforce from 118 employees in 2023 to 175 employees in 2024.
DNCC incurred distribution expense of Rs.32.47 million in 2024 due to resumption of sales. The company also recorded net other income of Rs.3.06 million in 2024 due to trade payables written off during the year and considerable decline in depreciation pertaining to cost of sales and distribution expense which was charged to operating expense as production and sale activities remained suspended.
The company posted operating profit of Rs.125.30 million in 2024 with OP margin of 5.10 percent. Finance cost increased by 63.53 percent in 2024 due to high discount rate and also because the company obtained short-term loans during the year to meet its working capital requirements and lease liabilities for the purchase of solar power plant.
However, higher cash & cash equivalents reduced the net borrowings which coupled with the increased total equity (increased paid-up capital, share premium reserve and revaluation surplus on property, plant & equipment) resulted in a gearing ratio of 61 percent in 2024 versus gearing ratio of 73 percent recorded in 2023.DNCC posted net profit of Rs.20.426 million in 2024 with EPS of Rs.0.08 and NP margin of 0.83 percent.
Recent Performance (9MFY25)
During the nine-month period of the ongoing fiscal year, DNCC posted year-on-year growth of 277 percent in its net sales, which clocked in at Rs.4492.135 million. In the last year, the company remained operational only in the second half of the year, which provided low-base effect and hence justified the phenomenal rise in net sales in 9MFY25. During the period under consideration, DNCC recorded sales volume of 293,176 metric tons versus sales volume of 83,947 metric tons registered in 9MFY24.
Higher retention prices and increased focus on export sales resulted in 308.79 percent stronger gross profit recorded in 9MFY25 with GP margin clocking in at 8.38 percent versus GP margin of 7.73 percent recorded in 9MFY24. Administrative expense surged by 33 percent in 9MFY25 due to higher payroll expense as the company started building up its workforce as it resumed its scheduled production activities after a prolonged BMR phase. Distribution expense escalated by 429.20 percent in 9MFY25 due to higher freight charges and salaries of sales force. DNCC recorded other expense of Rs. 1.839 million in 9MFY25 versus other income of Rs.0.58 million in 9MFY24 seemingly due to the due to the fact that the company wrote off trade payables in the previous year.
Operating profit strengthened by 427.95 percent in 9MFY25 with OP margin clocking in at 7.25 percent versus OP margin of 5.18 percent recorded during the same period last year. Finance cost surged by 142.58 percent during the period under review despite monetary easing. This was due to increase in short-term liabilities. Hefty finance cost resulted in net loss of Rs.99.31 million recorded in 9MFY25, down 23.34 percent year-on-year. This translated into loss per share of Rs. 0.30 in 9MFY25 versus loss per share of Rs.0.52 recorded in 9MFY24.
Future Outlook
As of March 31, 2025, the company’s accumulated loss stood at Rs.5719.573 million with its current liabilities exceedingits current assets by Rs.1994.619 million. This cast significant doubts on DNCC’s ability to continue as a going concern. However, with the resumption of operations, uptick in retention prices off late and the installation of solar power plant and waste heatrecovery plant, the company is pinning hopes to derive healthy financial performance in the coming financial year.
Improved local demand isexpected on the back ofbetter fiscal conditions, lessening inflation, and lower interest rates. Export growth is also expected to encourage overall dispatches.