Mian Mansha’s DG Khan Cement Ltd — the county’s third-largest maker of the construction material – plans to build an $300 million plant near Karachi as economic growth boosts demand, Bloomberg reported on Friday.
“There will be a shortage domestically in three years if there is 10 percent growth in demand each year,” Chief Financial Officer Inayat Ullah Niazi said in an interview at the company’s headquarters in Lahore on Thursday. The company’s two cement plants have operated near full capacity in the past two years.
The company is building its first plant since 2007. Pakistan’s output is projected to expand 4.3 percent in the year ending June 30 and 4.75 percent in the following fiscal year by the International Monetary Fund, the news outlet reported.
The new plant near Hub, west of Karachi, will produce about 2 to 2.5 million tons of cement a year, Niazi said. Construction is targeted for completion late in 2018. The plant will be financed 40 percent through internal cash and the rest through debt, Niazi said.
“Expansion means the company will enter the southern region of the country,” Tahir Abbas, an analyst at brokerage Arif Habib Ltd. said by phone in Karachi. “This will impact the entire industry and could start a price war.”
DG KHAN CEMENT’S EARNINGS:
Earlier in the month, DG Khan Cement announced a net income of Rs3.39 billion for the first six months ended December 2014, up by a healthy 27% compared to Rs2.67 billion in the same period of previous year.
Earnings per share (EPS) also jumped to Rs7.75 compared to an EPS of Rs6.09 in the first half of the previous year.
On a quarterly basis, the company’s earnings surged by 93% quarter-on-quarter (QoQ) to Rs2.24 billion or an EPS of Rs5.10 during the second quarter of fiscal year 2015.
“The earnings were significantly above our estimates due to higher-than-estimated other income and lower-than-expected taxation charges,” Global Research reported on Tuesday.
With stable off-take and prices, the revenues increased by 2% year-on-year (YoY) to Rs12.66 billion during the first half of fiscal year 2015 because of an improved sales mix.
Revenues jumped by 18% QoQ to Rs6.8 billion during the second quarter because of a likely 16% QoQ increase in total off-take to one million tons.
Margins of the company declined by one percentage point YoY to 33% during the first half because of higher average energy costs and increased maintenance expenditures.
On a quarterly basis, margins recovered by three percentage points QoQ to 34% because of higher volumetric off-take and an improved sales mix.
DG Khan Cement’s other income improved by 18% YoY to Rs1.13 billion during the first half because of higher income from its investments. Meanwhile, other expenses declined by 11% YoY to Rs315 million during the first half because of a lower quantum of exchange losses.
Financial charges plummeted by 57% YoY to Rs156 million because of a 43% YoY decline in the company’s average debt to Rs5.3 billion.
On a quarterly basis, financial costs increased by 34% QoQ to Rs89 million during the second quarter because of an increase in short-term borrowings.