DG Khan Cement to diversify into new cement export markets

Pakistan-based DG Khan is diversifying cement operations into new export markets, further enhancing the company's revenue mix. It recently delivered a 0.6Mt export order to the USA, according to a local research house. DG Khan Cement, which had increased its southern region capacity by 2.8Mta to 7.1Mta at its Hub plant in Balochistan in 2018, has not yet announced any capacity project during the ongoing expansionary cycle. 

According to AKD Securities Ltd, the industry capacity has increased by ~20 per cent in the current fiscal year, leading to a drop in company market share from 11.2 per cent in FY21-22 to a forecast 11.2 per cent in FY22-23. DG Khan's market share is expected to further decline to 9.3 per cent in FY23-24 when capacity is anticipated to reach 83.5Mta by the first quarter of the financial year. In FY18-19 the company had a market share of 13.2 per cent. 

However, going forward, the analyst expects margins to be positively impacted the forecast horizon due to better availability of imported coal and the commissioning of 19MW of solar projects (including 7MW at Khairpur in Sindh province, already commissioned in 4QFY22-23).

9MFY22-23 sales
In the 9MFY22-23 sales utilisation of the company declined to 74 per cent (9MFY21-22: 104 per cent) mainly due to the demand-supply gap. Clinker was exported to contribute towards fixed costs earning valuable total foreign exchange of US$21m (including from the export of cement). Its sales stood at 3.319Mt in the 9MFY22-23 against 4.075Mt in the same period last year. 

Sales, in value terms, registered growth primarily due to stable local cement prices. The full impact of inflation, high energy and fuel prices could not be passed on to the consumers. The company partially shifted to alternative fuel as well as local and Afghan coal, considering cost consideration and saving valuable foreign exchange reserves. The lower sales expenses were associated with a decrease in clinker sales.