Pakistan: Dewan Cement restructuring debt

Dewan Cement Ltd (DCL) has taken steps to ease debt burden and improve production efficiency.

According to a local brokerage house, the company has taken the first step in converting its debt amounting PKR450m into equity by issuing 45m shares and is planning to further convert debt amounting to PKR500m into 50m shares to its director. This will lower Dewan's financial leverage thereby helping it obtain a loan to meet its working capital requirements. Moreover, management intends to reschedule PKR7bn debt that will further allow the company to improve its liquidity issues.

The Dewan Cement has two plants which are located in South region (Sindh) and North Region (Khyber Pakhtunkhwa) with cumulative capacity of ~2.9Mta.

To overcome higher electricity charges Company has planned to set up a 5MW Waste Heat Recovery (WHR) plant of 5MW in Sindh that will improve its margins going forward. The project is likely to be completed in FY16 and fulfil 25-30 per cent of the plant's electricity requirement.

Over the past five years company's dispatches grew by average of 13 per cent to 1.5Mt. Moreover, sales jumped by 30 per cent to PKR9.9bn in 2014. The company holds about six per cent of domestic capacity and a five per cent market share. 

During the 9MFY15, company net profit grew by 12.9 per cent compared with 9MFY14, which was mainly due to the increase in sales by 22.5 per cent. However during the current fiscal year company observed increase in distribution cost, other operating income and finance costs, has confined the net profit to PKR324m.