DG Khan Cement’s profit plunges 88% to Rs341m

Fall comes due to elevated production cost, high base effect

KARACHI: DG Khan Cement Company’s (DGKC) profit plunged 88% and amounted to Rs341 million for the Jul-Sept 2018 quarter.

The cement company had registered a profit of Rs2.73 billion in the same quarter of previous year.



According to Sherman Securities’ research analyst Saqib Hussain, the decline in earnings was due to high cost of production as well as a high base effect as the company had booked tax credit in the first quarter of previous financial year.

Gross profit dropped from Rs2.7 billion in the Jul-Sept quarter last year to Rs1.08 billion in Jul-Sept 2018.

“This is mainly due to low utilisation of cement plants which stood at 67% during the quarter under review against 109% in the same period last year,” Hussain told The Express Tribune.

Earnings per share of the company plunged to Rs0.78 compared to Rs6.24 last year.

Moreover, a substantial depreciation expense of the new south plant coupled with financing cost negatively impacted earnings of the company. “Resultantly, gross margins came in at 13% compared with last year’s 35% in the same period,” he added.

The profit of the company was below market expectation. “We believe the deviation came due to lower-than-expected export retention prices,” said Farheen Irfan of Elixir Securities.



“This has also been confirmed by our discussion with the management, which hinted that the company exported clinker from its south plant at a price of around $36 per ton compared to our estimate of $40 per ton.”

Published in The Express Tribune, October 26^th, 2018.

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