DGKCC was established under the management control of State Cement Corporation of Pakistan Limited (SCCP) in 1978. The plant is located at 40 KM North West of Dera Ghazi Khan Town. DGKCC started its commercial production in April 1986 with a capacity of 2,000 tons per day Clinker based on dry process technology. Plant & Machinery was supplied by UBE Industries of Japan. D.G. Khan Cement Company Limited (DGKCC), a unit of Nishat group, is the largest cement-manufacturing company in Pakistan with a production capacity of 7,000 tons per day cement.
The company produces Ordinary Portland Cement and Sulphate Resistant Cement. DGKCC is listed on all the three bourses of the country and is considered one of the most active blue chip companies of the stock exchanges. Synopsis from shareholding pattern of the company shows that as on June 30, 2004 about 16% shares are held by financial institutions alone with another 12% by joint stock companies.
In addition, 7% of the shares are with foreign investors, which is a reflection of investor's confidence on company's performance.
ACQUISITION OF DGKCC BY NISHAT GROUP:
Nishat Group acquired DGKCC in 1992 under the privatisation initiative of the government. Starting from the privatisation, the focus of the Nishat group has been on increasing capacity as well as optimum utilisation level of the plant. The company undertook the optimisation by raising its production capacity immediately after the privatisation by 200 tons per day to 2200 tons per day in 1993.
CAPACITY ADDITION: To meet the increasing demand and to capitalise on its geographic location, the group further expanded the capacity by adding another production line with a capacity of 3,300 tons per day in year 1998. Design of the new plant is based on latest dry process technology, energy efficient and environmental protection from particulate pollution according to the international standards. The plant and machinery was supplied by M/s F.L. Smidth of Denmark. The project cost was financed by International Finance Corporation (IFC) and CDC Group plc, UK, formerly known as Commonwealth Development Corporation.
As a result of above mentioned expansion, DGKCC emerged as the largest cement manufacturer in Pakistan with annual production capacity of 1.650 million tons of clinker (eqv. to 1.732 million tons cement) constituting about 10% share of the total cement production capacity of the country. The optimisation plan is still underway to increase the total capacity of the two units to 6700 from 5500 tons per day clinker at present. Optimisation of 500 TPD (in the Unit-1) has already achieved in February 2005 and remaining part is expected to be completed by October 2005.
Despite the unfavourable political, economic and external conditions in the later half of 90's, DGKCC has performed satisfactorily and passed through the lean period better than any other player in the sector. The company has been investing in upgrading and modernising the plants thus reducing overall cost and increasing flexibility to adjust to the fast changing technological changes.
An important initiative to control cost was switching over to coal as an alternative cost effective source of fuel.
The coal firing was started in 2001 on limited scale using indigenous sources. Now both the production units are operating on 100% coal firing with state of the art equipment including a coal grinding mill. This initiative has not only reduced cost of fuel for the company but has also proved to be a trend-setter in the industry.
EXPANSION - KHAIRPUR PROJECT: DGKCC is also setting up a new cement production line of 6,700 tpd clinker (eqv. To 7000 tons per day cement) at Khairpur, Tehsil Kallar Kahar, Distt. Chakwal, the single largest production line in the country.
First of its kind in cement industry of Pakistan, the new plant will have two strings of pre-heater towers, the advantage of twin strings lies in the operational flexibility whereby production may be adjusted according to market conditions.
The project will be equipped with two vertical cement grinding mills. The cement grinding mills are the first vertical mills in Pakistan. This plant is based on transfer of technology as most of the fabrication part of plant is being done locally under the direct supervision of plant supplier. The new plant is based on the state of art technology and this plant would be fashioned with the latest equipment currently available in the world.
After addition of this plant the total capacity of the company would reach to 13,400 tpd clinker (equal to 4,200,000 ton/year cement).
The new plant would not only increase the capacity but would also provide proximity to the untapped market of Northern Punjab and NWFP besides making it more convenient to export to Afghanistan from northern borders.
POWER GENERATION: For continuous and smooth operations of the plant uninterrupted power supply is very crucial. The company has its own power generation plant along with WAPDA supply. The installed generation capacity is 23.84 MW. The management being cost conscious has decided to put Gas fired power generators alongside the existing fuel fired engines. The capacity of new generators set is 26.1 MW. The new generator would save substantial amount on the energy part.
ENVIRONMENTAL MANAGEMENT: DG Khan Cement Co Ltd, production processes are environment friendly and comply with the Pakistan as well as World Bank's environmental standards. It has been certified for "Environment Management System" ISO 14001 by Quality Assurance Services, Australia.
The company was also certified for ISO-9002 (Quality Management System) in 1998. By achieving this landmark, DGKCC became the first and only cement factory in Pakistan certified for both ISO 9002 & ISO 14001.
MARKETING: DGKCC produces two types of cement ie Ordinary Portland Cement (OPC) and Sulphate Resistant Cement (SRC). The marketing/sales of cement is managed through a network of more than 500 dealers / stockists. The Company's brands are preferred on other brands in the market due to its best and consistent quality.
During FY 2003 DGKCC's capacity utilisation was 86% against industry average of 77%. DGKCC was also the pioneer in export of cement to Afghanistan. Presently DGKCC has gained a position of export leader with 24% market share against 15% in FY 2004. Going forward, DGKCC has also started export to untapped Middle East market.
SOCIO ECONOMIC CONTRIBUTION:
Apart from business concerns, the company is also aware of its socio economic responsibilities. The factory is located in remote and less developed area. To impart education to the children of socially deprived locality, the company is operating two subsidised schools within the factory area. For health services the company is operating a free dispensary for local community.
In addition, the area is short of water for drinking and agriculture purposes, company have made adequate arrangements for the provision of water to the adjacent area to meet their requirements.
Key highlights of the company to show the past ten years performance are as follows:
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Year 1995 Year 2004
In Million In Million
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Sale Revenue 1,499 3,883
Export Sale (MT) Nil 171,345
Total Assets 4,011 11,714
Equity 3,110 6,419
Pre Tax Profit 570 1,155
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CEMENT INDUSTRY IN PAKISTAN:
The country has 25 cement plants with an annual capacity of approximately 18.55 million tons. The Cement industry in Pakistan is bit cyclical in nature. After the privatisation process in 1992 aggressive expansions/BMR coupled with upcoming of new entrants in the market, the industry was flushed with over supply in the country.
Poor economic performance and political instability put the cement industry into historic crisis. However, recent rebound in economic conditions and political stability gave breath to cement industry of Pakistan.
The overall capacity utilisation which was mere 57% in FY 1999 went up to 86 percent for FY 2004 and during July-May 2005 the industry is operating at historically high capacity utilisation of 95%, which truly indicates the remarkable performance of the cement sector in Pakistan.
Local Cement Dispatches during financial year 2003-04 moved up by 14 percent coupled with tremendous growth of 160 percent in exports. During current year ie 2004-05 again the growth in local and export sales is 19% and 50% respectively. The growth in cement sector in recent past is attributable to a great extent to low rate house financing by the banks, besides the government focused on developing infrastructure which is reflected by all time high allocation of Rs 202 billion for Public Sector Development Program announced in Federal Budget 2005.
The future of cement sector looks promising with political and economic stability in the country and historic GDP growth of 8.4% percent achieved during FY 2004-05. Furthermore unprecedented pace in the construction activities and historic high Public Sector Development Plans announced in Federal budget 2006 of 272 billion, with other mega projects like dams, barrages, channels, deep sea ports and coastal highway etc, will contribute positively in cement demand in near future.
PAPER SACK PLANT: The group has also ventured into the Paper Sack business to set up a plant with Shuaiba Paper Products Company Ltd Kuwait. The joint venture "Nishat Shuaiba Paper Products Ltd" with 70% share of Nishat Group will manufacture and sell paper sacks in Pakistan. The plant to be equipped with state of the art technology will be set up adjacent to the new cement plant at Khairpur with an initial annual capacity of 60 million bags to be doubled at a later stage. The plant would primarily provide sacks to DGKCC and other upcoming cement plants in the area.
The capacity addition will also be carried along the completion of new cement project.
The total project cost for the first phase is PKR 594.0 millions which includes Rs 300 million towards cost of plant & machinery.
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