DG Khan Cement’s Earnings Soar by 200% in 3QFY24

Staff Report

D.G. Khan Cement (DGKC) reported unconsolidated earnings of Rs1.2bn (EPS Rs2.69) for 3QFY24, remaining flat YoY but surging by 200% QoQ, surpassing industry expectations.

This brings 9MFY24 earnings to Rs2.2bn (EPS Rs5.10), marking a 6% YoY increase.

The significant boost in 3QFY24 earnings can be attributed to higher gross margins, exceeding forecasts. Gross margins for the quarter stood at 25.5%, notably up from 19.0% in 3QFY23 and 12.8% in 2QFY24. Falling Coal Prices: Cement Sector to Gain in 3QFY24

This increase is primarily due to the lower cost of coal inventory amidst a decline in prices of imported, Afghan, and local coal.

Additionally, reduced per-unit costs from captive power plants contributed to the improved margins.

Furthermore, the decrease in exports during 3QFY24, compared to both the previous year and the previous quarter, also played a role in bolstering margins. Export volumes typically yield lower margins.

Revenue for 3QFY24 totaled Rs14.3bn, reflecting a 22% YoY and QoQ decline. This decline is attributed to a 21% YoY and 10% QoQ reduction in domestic cement sales and a 44% YoY and 56% QoQ decline in export sales.

Distribution expenses decreased by 23% YoY and 40% QoQ, aligning with the decrease in volumetric sales.

DGKC’s effective tax rate for 3QFY24 was 38.5%, compared to 33.0% in 3QFY23 and 40.3% in 2QFY24.