DG Khan Cement Company Limited

DG Khan Cement Company Limited (DGKC) is a public company limited by shares incorporated in Pakistan in 1978 under the repealed Companies Act, 1913 (now Companies Act, 2017).

The company is principally engaged in production and sale of clinker, ordinary Portland and Sulphate resistant cement. The sales for the quarter ended September 30, 2021, in value terms, registered a growth primarily due to stable local cement prices. The gross profit margins improved due to low clinker production last year, resulting in higher/unit cost.

Selling expenses decrease was associated with the decline in clinker exports. The currency depreciation resulted in higher exchange loss on account of import of coal; the effect is visible in other expenses. Other income increase was mainly due to dividend from MCB Bank Limited, which was not received in the corresponding period of the last year due to restrictions from the central bank.

As vaccination rate across the world increases, global economy has picked up its growth momentum more rapidly than expected. This brings challenges with it. The high demand and supply chain issues are pulling the commodity prices upward. Particularly, coal has peaked beyond $250/tonne, an all-time high. The effect of high coal prices would be visible in the coming months. This global inflation is causing serious challenges to Pakistan economy. If the situation persists, the rupee may further devalue causing inflation and high energy prices.

Interest rates may rise further, keeping in view inflation numbers. Whole of this cost pressure is expected to be passed on to the consumers, otherwise it may squeeze the company’s margins. The situation in Afghanistan is volatile and may attract international pressure on Pakistan that may have potential for the overall business environment.

Rising inflation and cement prices may also affect the demand for cement on the back of housing loans and may affect cement dispatches volume. On the positive side, agriculture sector is registering a positive growth for its Kharif crops (mainly cotton).

This may boost the construction activity in rural areas. Coal-fired power plant at Hub site has commenced its operations in September 2021, making the plant self-sufficient and energy-efficient.