Coming from a torrid patch, DG Khan Cement profits jumped more than ten times to a much more familiar territory in financial year 2012 on the back of higher prices.
Higher prices single-handedly pushed up the numbers as production levels stayed almost the same, said Summit Capital analyst Sarfraz Abbasi.
The country’s second largest cement manufacturer net profit swelled 1070% to Rs2.07 billion in the first nine months of fiscal 2012 against Rs177 million posted in the same period last year, according to unconsolidated results sent to the Karachi Stock Exchange on Wednesday.
The entire industry witnessed a bad run in financial year 2010 and 2011 amid floods and slowdown in construction activity.
The price tag for a bag of cement increased 25% to Rs425 per bag in financial year 2012 against Rs339 in the same period last year. “This increased the vital gap between sales and its cost,” added Abbasi.
The massive increase has been beneficial for the cement industry, however, it has sparked a debate among builders who question the legitimacy behind the hikes. Association of Builders and Developers of Pakistan last week agreed to hoist black flags and put up banners at all construction sites in Pakistan to protest the latest cement price hike.
Net sales surged 28% to Rs16.70 billion against sales of Rs13.08 billion in the corresponding period last year.
The company managed a mere 2% growth in its volumetric sales which are expected to reach 3.09 million tons against 3.04 million tons in the same period last year.
The result, in line with market expectation, increased the stock value by 4.8% to Rs41.41 during trade at the Karachi Stock Exchange.
Other income increased by 14% to Rs890 million and contributed about 43% share in total earnings.
Higher other income was mainly because of strong dividend income which received from its associates which include Nishat Chunian, Nishat Mills and Adamjee Insurance.
Moreover, decline in financial charges of 16% to Rs1.30 billion during July 2011 and March 2012 against Rs1.55 billion also contributed in the added growth of the bottom line.
The cement maker will see even better days in the final quarter of the financial year on account of better volumetric sales owing to ongoing work on mega projects, higher retention prices and reconstruction activities in flood affected areas.
Published in The Express Tribune, April 19th, 2012.