Corporate results: DG Khan Cement posts lower profit

Earnings come down because of decline in sales

KARACHI: DG Khan Cement, one of the leading cement companies in the country, has reported lower than expected after-tax profit of Rs1.07 billion in the first quarter of fiscal year 2013-14, down 26% from Rs1.44 billion in the same period of previous year.

The company’s lacklustre performance translated into earnings per share of Rs2.44, lower than EPS of Rs3.28 last year.

The decline in profitability came as a result of lower margins, higher operating expenses and higher effective tax rate at 30% compared to 5% last year as the management decided to reduce the deferred tax liability.

Summit Capital, in its report, stated that the key reason behind the unimpressive performance was the decline in sales. The company recorded an overall drop of 6% year-on-year in its sales as it managed to sell 903,000 tons of cement in the first quarter compared to sales of 964,000 tons in the same period last year.



The company registered about 1% decline in local sales to 621,000 tons against 625,000 tons in the same period last year.

However, the research house said the key reason behind the noticeable drop in overall sales was in fact a substantial fall in exports, which decreased by 17% to 282,000 tons compared to exports of 339,000 tons last year.

As a result, the company posted almost flat revenues at Rs5.85 billion compared to sales of Rs5.87 billion last year.

On the other hand, cost of sales rose 5% to Rs3.86 billion against Rs3.66 billion last year, thus the company experienced pressure on gross margins, which shrank four basis points to 34% compared to 38% in the corresponding period of last year.

Published in The Express Tribune, October 23^rd, 2013.

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