The Pakistan Credit Rating Agency Limited
Press Release


Hashim Yazdani

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PACRA maintains Entity Ratings of D.G. Khan Cement Company Limited

Rating Type Entity
(03-Mar-23 )
(04-Mar-22 )
Action Maintain Maintain
Long Term AA- AA-
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

DG Khan Cement’s ratings reflect the Company’s strong position in the cement industry emanating from its market share of ~12% in terms of local and export volumetric sales during FY22. Overall, the Cement sector reported a decline of 7.9% in total dispatches with significant contribution from fall in exports. Local dispatches dwindled by 1.0% on an annual basis. Similar trend was witnessed in quarterly dispatches with an overall decline of 29.0% from the same quarter previous year. Negative growth was driven by decline in local sales of 23.7% while exports declined by 67%. Going forward, the trend is expected to continue throughout the remaining fiscal year owing to economic constraints and political uncertainty. Additionally, the inflationary pressure is further driving the demand for Cement downwards. During FY22, the Company’s local cement dispatches were recorded at 5.061mln tons (FY21: 5.271mln tons) registering a decline of 3.98%. Similar trend was witnessed in 1QFY23, with local cement dispatches declining by ~23.2% and export dispatches by ~19.9% compared to same period previous year. Alternatively, the Company’s Net Revenues increased to PKR 13,585mln during 1QFY23 (1QFY22: PKR 11,153mln) owing to stable local cement prices throughout the period. The rise in interest rates have adversely impacted the Company’s profitability with increase in finance costs resulting from a moderately leveraged structure of 39.6% as of Sept 2022. However, the dividend income of the Company (FY22: 2,303mln) from its strategic investments in associated companies of the group provides additional support. Unlike the key large players in the local cement industry, D.G.K.C has not yet finalized any expansions owing to rising costs and stressed demand dynamics. Going forward, with declining trend in the cement sector, it is vital for the Company to operate efficiently while maintaining its margins.
The rating incorporates the Company’s strong corporate structure along with its association with Nishat Group. The Company has a proven history of operating in the Cement sector along with notable group investments in other business sectors. The ratings are dependent on upholding the Company’s market position in addition to sustenance of sale volumes and margins during stressed industry outlook.

About the Entity
DG Khan Cement, operates as one of the largest cement manufacturers of the country with a total clinker capacity of 6.7mln tons p.a. DG Khan Cement, listed on PSX, is owned by Nishat Group (~49%), mainly through associated companies (32%), followed by sponsor family members (~17%). The overall control of the company vests in the seven-member board including the CEO. Mrs. Naz Mansha and Mr. Raza Mansha, the Chairperson and the CEO, both represent sponsoring family on board. Two board members (including CEO) hold executive positions while three are non-executives and two independent directors. The CEO, Mr. Raza Mansha, is associated with the company in the capacity of CEO since over 10 years.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.