The DG Khan Cement, one of the leading cement manufacturers of the country, said its profit recorded an increase of 71.60 percent for the year ended June 30, 2004 as company reduced financial charges and higher sales, adding the profit after-tax (PAT) up to Rs 829 million against Rs 483.59 million during the corresponding period last year. The EPS (basic) for FY04 stood at Rs 4.74 per share against Rs 2.84 per share last year.
The Company announced a final cash dividend of Rs 1.50 per share and a bonus issue of 10 percent. Last year, it announced a cash dividend of Re 1 per share, but did not declare any bonus. For the period ended June 30, 2004, the top line of the Company witnessed a jump of 29.77 percent with total sales of the Company climbed to Rs 3,882.76 million against Rs 2,992.01 million during the corresponding period last year. The increase in gross margins guided the Company to report improved gross profit for the period.
The Gross profit for the period amounted to Rs 1,385.49 million against Rs 677.68 million, posting a growth of 104.45 percent. The effect of this increase in gross profit trickled down in the form of burgeoning operating profits for the period, which jumped by 113.39 percent to Rs 1,278.29 million against Rs 599.03 million reported during the same period last year.
According to a report of Arif Habib Securities, the pre-payment of expensive foreign currency loans and their replacement with loans obtained from a consortium of local banks, including the Habib Bank Ltd, National Bank Ltd and Bank of Punjab on soft-terms allowed the Company to report a drastic reduction in its financial charges by 53.84 percent to Rs 189.25 million against Rs 410.01 million last year.
The Company's pre-tax profit for the period stood at Rs 1,155.77 million against Rs 355.51 million last year, an increase of 255.10 percent. The profit after-tax for the period stood at Rs 829.84 million against Rs 483.59 million translating into an EPS of Rs 4.74 per share against Rs 2.84 last year.
The cement dispatch according to reports, released by All Pakistan Cement Manufacturers Association (APCMA), the year ended June 30, 2004 saw cement dispatches ballooning to 13,636,463 tonnes as compared with 11,410,315 tonnes last year.
Out of this export sales, mostly to Afghanistan and UAE, soared by 159.72 percent to 1,118,108 tonnes as compared with 430,500 tonnes in FY03. Local sales, however, registered a modest growth of 14.01 percent to 12,518,355 tonnes as compared with 10,979,815 tonnes last year. A quick look at the cement dispatches of DG Khan Cement reveals that the Company's sales in units were up by a modest 3.69 percent. During the year, domestic sales fell down by 5.42 percent to 1,316,637 tonnes from 1,392,065 tonnes last year. This decline in sales was partially offset by surging export sales, which climbed by 309.46 percent to 169,870 tonnes as compared with 41,486 tonnes last year.
FUTURE OUTLOOK: During the last couple of years, the industry has witnessed drastic fundamental changes on account of reduction in its fuel costs attributable to conversion of its plant to coal, the sharp drop in financial charges as a result of restructuring of expensive debts, the increase in average cement retention price, the fairly visible revival in the construction industry and the surge in exports.
POST BALANCE-SHEET EVENT: It has been reported that the DG Khan Cement Company plans to set up the country's largest cement plan at Khairpur in Chakwal district with a capacity of 6,700 tonnes per day. The project would be completed with an investment of Rs 9,000 million. Over 47 percent of this amount would be used to import a state-of-the-art plan from Denmark. The remaining 53 percent investment would be in local currency.
The DG Khan Cement also plans to invest Rs 60 million by way of equity investment through purchase of shares of Nishat Shuaiba Papers Products Company, an associated company. The Company would be a joint venture that would allow the manufacture and sales of paper sacks for packing of cement. The plant would be set up adjacent to the new cement production line of DG Khan Cement.
The Company foresees adequate profit from this investment, in addition to the reduction in the cost of its paper bags, saying: "We believe that this investment would help push the profits of the Company even further in the days to come."