DG Khan Cement Company reports Rs2.2b loss

Firm bears losses on back of rise in finance cost, shrinking margins

DG Khan Cement Company (DGKC) sank into losses and reported a loss of Rs2.2 billion for the year ended June 30, 2020 on the back of increase in finance cost and shrinking margins.

According to a notice sent to the Pakistan Stock Exchange on Thursday, the company had reported a profit of Rs1.9 billion in fiscal year 2018-19.

Accordingly, the company’s loss per share came in at Rs5.05 for FY20 compared to earnings per share of Rs4.16 in the previous year.

Net sales of the company fell 4.66% to Rs41.6 billion during the year under review compared to Rs43.6 billion in FY19. Finance cost of the cement-maker rose from Rs3.6 billion in FY19 to Rs5.1 billion in FY20, a surge of 41.6%.

Topline Securities’ analyst Shankar Talreja said the company posted a loss due to 41% year-on-year increase in finance cost and nine-percentage-point deterioration in gross margins to 4%.

“Net sales in the fourth quarter of FY20 came in at Rs7.5 billion (in line with our expectations), down 26% year-on-year due to decline in volumetric sales by 27%,” he said. “Local and export dispatches fell 23% year-on-year and 37% year-on-year respectively.”

According to the analyst, gross margins in the final quarter stood at 7%, which were broadly in line with market expectations.

Margins improved six percentage points quarter-on-quarter due to decline in fuel/energy costs amid consumption of furnace oil, the analyst said. Other income of the cement company dropped 1.65% to Rs2.43 billion during FY20. The firm had reported other income of Rs2.47 billion during fiscal year 2018-19.

Administrative expenses rose 4.32% to Rs741.9 million in FY20 compared to Rs711.1 million in FY19.

Published in The Express Tribune, September 18^th, 2020.

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