DG Khan Cement sees USA as most favourable cement export destination
DG Khan Cement Co Ltd held its corporate briefing on 14 November to discuss its FY23-24 financial results and outlook. DG Khan earned a profit of PKR542m (US$1.94m) in FY23-24 as opposed to a loss of PKR3.6bn in FY22-23 due to lower taxation, according to AKD Research. However, sales increased by two per cent YoY to PKR66bn in FY23-24 versus PKR65bn in FY22-23 due to better retention prices.
The company’s utilisation level stood at 72 per cent in FY23-24, compared to the industry’s of 55 per cent. However, utilisation remained lower than the level witnessed in FY22-23 (75 per cent). Its management stated that the economic slowdown negatively impacted the construction sector during FY23-24, dropping industry utilisation levels to 55 per cent compared to 60 per cent in FY22-23.
Prioritising export expansion
The decline in utilisation level is primarily due to a drop in domestic sales, which comprised 46 per cent of the total utilisation rate in FY23-24, compared to 54 per cent in FY22-23. In contrast, the share of export sales in the utilisation rate increased to nine per cent in 2024, up from six per cent in the previous year. Management anticipates continued weakness in domestic demand and, as a result, is prioritising the expansion of clinker and cement exports to optimise plant utilisation and improve the absorption of fixed costs.
The company's management currently sees America as the most favourable export destination for cement due to its high margins compared to other markets. Meanwhile, Bangladesh continues to be the primary market for clinker exports.
In addition, DG Khan Cement reported that the price difference between the north and south regions remains approximately PKR200/bag. Currently, the maximum retail price in the north is PKR1450/bag, while in the south, it stands at PKR1250/bag. Current retention prices are above PKR16,000t, with prices in the north exceeding PKR17,000t while remaining over PKR14,000/t in the south.
Energy generation
The company uses a blend of Afghan and local coal at its northern facility, while its southern plant relies 80 per cent on imported coal. With reduced excise duties on Afghan coal, management expects a PKR2000-3000t decrease in Afghan coal prices, which may lead to a similar reduction in local coal prices. Local Darra coal costs PKR36,000/t, while Afghan coal costs range between PKR38,000-40,000/t.
DG Khan Cement’s total power generation capacity stands at 184.76MW against the requirement of 113MW. The company currently sources its power from a diversified pool, including heavy-fuel oil, gas, waste heat recovery, coal and solar energy. Reliance on the national grid is minimal, accounting for approximately 10-15 per cent of total power consumption, with most energy needs being met by the company’s power plants. Power generation from coal-based plants costs ~PKR22-25/unit, while generation from furnace oil comes to ~PKR33-34/unit.
The company plans to install ~5MW of wind and 5MW of solar power at the Hub site and the project is expected to be commissioned by the end of FY24-25.
by Abdul Rab Siddiqi, Pakistan
