DGKC has made a relatively better start to the fiscal year, as its bottom line swung to green in 1QFY11 after three straight quarters of losses.
However, compared to the same quarter last year, the companys profit fell massively on the heels of lower cement off-take and higher production costs.
Companys average retention price was relatively higher than the previous year, but unfortunately, the monsoon saga resulted in lower cement off-take and in turn lower revenue.
Supply chain distractions, stemming from damaged roads and rail links, along with a dreary pace of construction activities across the country pushed the total dispatches down to around 0.92 million tons in 1QFY11, down from 1.17 million tons in the same period last year.
Local dispatches plummeted by 27 percent to 0.709 million tons. Export dispatches, however, remained relatively stable, registering 3 percent growth, according to a company official.
Margins didn benefit from the impact of higher prices on the back of higher cost of production that surged by around 30 percent. Production costs increased due to higher coal prices--which reached $130 per ton from around $103 per ton in the same period last year, lower capacity utilization and gas curtailment.
Despite lower profitability during the first quarter, the outlook is not all doom and gloom for the largest cement manufacturer in the north, since proximity to submerged areas might help the company realize higher cement sales from next quarter onwards.
The industry expects to experience record volumetric sales after the spring harvest, anticipating demand to grow by 7 to 10 percent in FY11. Moreover, the companys margin may also improve as cement prices are on the rise, on one hand, and Waste Heat Recovery plant will increase cost efficiency, on the other.
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