PACRA maintains Entity Ratings of D.G. Khan Cement Company Limited

DG Khan Cement Company’s ratings are derived from the entity’s enduring presence in the local cement sector along with the sponsors distinguished financial and business acumen. The local cement industry witnessed a downtrend in total sale volumes of ~15.7% in FY23 as compared to the previous year. (FY23: ~44.5mln MT, FY22: ~52.8mln MT). Local dispatches dwindled by ~16.0% to ~40.01mln MT during FY23 from ~47.63mln MT in FY22. Likewise, Export dispatches declined by ~0.7mln MT during the period (FY23: ~4.56mln MT, FY22: ~5.25mln MT). The overall decline in the volumes was nurtured by soaring inflation in the country that led to demand constraints. Furthermore, the economic and political instability in the country during the year hindered the developmental activity in the country which contributed towards fall in consumption of cement. The Company’s total sale volumes declined by ~20% during the fiscal year from ~5.36mln MT in FY22 to ~4.274mln MT during FY23. Based on the total sale volumes during FY23, the Company occupies 10% market share. Despite the decline in volumes, the Company reported a growth in Net Revenues of ~14.3% (FY23: PKR 70,495mln, FY22: PKR 61,653mln) primarily due to stable local cement prices that accounted for inflation to some extent. However, high energy and fuel prices coupled with lower demand resulted in a decline in gross margins. The transition in FY24 brought some relief for the cement sector in the form of growth in total industry volumes of 23.5 % during the first quarter (1QFY24: 11.9mln MT. 1QFY23: 9.6mln MT). Recovery in both local and exports contributed towards the positive shift. Likewise, the Company’s total sale volumes increased by ~14.1% during the first quarter as compared to the same period previous year. (1QFY24: 1.086mln MT, 1QFY23: 0.952mln MT) resulting in Net Revenues of PKR 16,517mln (1QFY23: PKR 13,585mln). Going forward, negligible growth is expected during the remaining fiscal year due to slowdown in the economic activity and other infrastructure projects. The Company is adhering to cost efficient measures including the use of alternate fuels to sustain its margins. Furthermore, the Company is also evaluating export opportunities to the USA market which if materialized may contribute to the profitability. Unlike its peers in the industry, DGKC has no capacity expansion plans and is committed towards efficient capacity utilization and lowering its debt burden.
The Company’s association with the Nishat Group coupled with strategic investments in group companies which deliver a stable dividend income further provides additional support. Furthermore, the Company's strong operational history which is evident from its market presence complements the ratings.

About the Entity
DG Khan Cement, operates as one of the largest cement manufacturers of the country with a total clinker capacity of 6.72mln tons p.a. DG Khan Cement, listed on PSX, is owned by Nishat Group (~49.7%), mainly through associated companies (32.9%), followed by sponsor family members (~16.8%). The overall control of the company vests in the seven-member board including the CEO. Mrs. Naz Mansha and Mr. Raza Mansha, the Chairperson and the CEO, both represent sponsoring family on the board. Two board members (including CEO) hold executive positions while three are non-executives and two independent directors. The CEO, Mr. Raza Mansha, is associated with the company in the capacity of CEO since over 10 years.