DG Khan Cement sees reduced profit of PKR2.972bn in FY21-22

DG Khan Cement Co Ltd (DGKC) announced the financial result for the FY21-22, posting a profit after tax (PAT) of PKR2.972bn (US$12.7m) compared to PKR3.721bn in the same period last year, depicting a decline of 20 per cent YoY. 

However, during the 4QFY21-22 (April-June 2022), the company recorded a loss of PKR647m against a profit after tax of PKR873m in the 4QFY20-21. According to AHL Research, the loss incurred during the fourth quarter was primarily due to the recognition of super tax and the impact of deferred tax liability. 

In the 4QFY21-22 the company’s dispatches declined 21 per cent QoQ to 1.3Mt, while total dispatches during FY21-22 declined by 10 per cent YoY to 6.5Mt versus 7.2Mt in FY20-21, report another research house, AHCML Research.

Net sales of the company increased by 29 per cent to PKR58.04bn from PKR45.10bn in the FY21-22. The administrative expenses increased by 16 per cent to PKR751m compared to PKR647m in the same period of the previous financial year. It incurred a lower distribution cost (about 10 per cent) of PKR1.75bn when compared with PKR1.95bn in the same period the previous year. The financing cost rose to PKR3.571bn from PKR2.921bn, up by 22 per cent YoY.

According to IMS Research, the massive jump in tax rate and other expenses have led DGKC to book a quarterly loss for the first time since the 1QFY20-21. However, ignoring these one-offs, the company has posted a decent gross margin, despite the burgeoning cost pressures and flattish export prices QoQ. Moving ahead, lower dispatches amid monsoon rain, recent floods and elevated coal prices may hurt DGKC’s margins in the 1HFY22-23. But, in the 2HFY22-23, analysts believe demand recovery and higher cement prices will revive profitability.