You are currently viewing DGKC exported 400k tons of clinker to Bangladesh, Sri Lanka, and the Middle East – looking new export destinations.

DGKC exported 400k tons of clinker to Bangladesh, Sri Lanka, and the Middle East – looking new export destinations.

BMA Capital organised a webinar with the CFO of DG Khan Cement Company (DGKC), Mr Inayat Ullah Niazi. The webinar focused on the company’s financial performance and its outlook. The key takeaways of the session are as follows:

Webinar Highlights

In the North and South, capacity utilisation levels are around 47% and 41%, respectively. The CFO expects an unfavourable macroeconomic environment will cause local cement demand to contract by 4-5% in FY24. He anticipates a recovery in demand and sees capacity utilisation hovering around 50-55% in FY25.

Mr Inayat Ullah said DGKC exported 400k tons, mostly clinker, to Bangladesh, Sri Lanka, and the Middle East. The company is also exploring other export destinations.

DGKC is in the process of identifying big-ticket buyers in the US market. The management believes larger buyers generally have a better balance sheet, resulting in better export cash collection. The export price for clinker is around USD 28-30 per MT, barely covering variable costs. However, dispatching inventory generates cash and alleviates the company’s working capital pressure.

As per the management, DGKC’s gross margins improved in 3QFY24 because of higher production levels. The company, however, expects margins to normalise in the fourth quarter.

Margins in the North have always remained better because of better pricing.

The company’s Hub Plant predominantly uses imported coal. Despite the lower prices of local coal, the management stated that its higher Sulphur content limits its usage. DGKC’s fuel mix at its Northern plant comprises 80% Afghan coal and 20% alternative sources (mainly tyres).

The company holds 15-20 days’ worth of coal inventory at Hub, costing PkR 38-40k per ton. In the South, coal inventory cost is PkR 42-43k per ton.

Plants located at Hub and DG Khan use coal-based power plants to reduce power costs to PkR 25-28 per kWh. At Kallar Kahar, DGKC utilises a Grid and Solar plant (7MW). Currently, grid rates hover around PkR 43-44 per kWh.

As per the management, DGKC is considering adding a wind power plant at its South plant in FY27.

The CFO expects a prudent budget and does not foresee any relief for the construction sector. The management conveyed that any budget-led cost pressures will likely be passed on to the final consumer through price hikes.

The cement Industry raised cement prices to PkR 20-30 per bag in North last week. The current MRP in North is PkR 1,220-1,230 per bag.

The management conveyed that its dividend policy (historical payout: 10%) remains contingent upon the company’s profitability.

The management highlighted that despite higher margins and demand in the northern region, the company can’t transport its production to the north of the market because of elevated transportation charges.

Commenting on the PP line, management said machinery is dispatched from Austria and expected to arrive in July with production likely commencing from Oct-2024.

Courtesy – BMA Capital Management Ltd.

Author

Sharing is caring

Leave a Reply