Corporate results: DG Khan Cement surprises market

KARACHI:

DG Khan Cement’s fall in net profit in financial year 2011 surprised the market as analysts expected profits to rise.

The main reason behind the decline in earnings is higher effective tax rate of 72% against expected 35% and also the one-time loss of Rs119 million booked by the cement giant on account of impairment on investment, said Summit Capital Analyst Muhammad Sarfraz Abbasi.

Net profit fell by 27 per cent to Rs171 million in fiscal 2011 compared with Rs233 million posted in fiscal 2010, according to a notice sent to the Karachi Stock Exchange.

Analyst forecast net profit to rise 48 per cent to Rs346 million, however, higher tax rate took everyone by surprise.

Other income played role of a bottom-line defender and rose 21% to Rs1.10 billion on account of higher dividend stream from group companies including MCB Bank. The other income played a pivotal role in protecting the company from posting a loss, said Abbasi.

Net sales rose 14% to Rs18.18 billion during the financial year. Higher prices of the product saved the day as volumetric sales declined by 10 per cent.

Devastating flood in August 2010 dampened demand for cement in the financial year as construction activates came to a standstill. Higher selling price, especially in the local market, improved gross margins by 700 basis points to 23.6% compared with the preceding year’s 16.6%.

Published in The Express Tribune, September 8^th,  2011.