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

D.G. Khan Cement Company’s ratings are derived from the entity’s enduring presence in the local cement sector along with the sponsor's distinguished financial and business acumen. The overall dispatches of the local cement industry have remained under stress throughout FY24, majorly due to the economic challenges faced by the country in the form of high inflation and lower developmental activity. Despite these challenges, the cement industry in Pakistan witnessed marginal growth of ~1.6%, reaching ~45.3mln MT during the year ending June 30, 2024, compared to ~44.6mln MT last year. Although the local sale volumes declined by ~5% (FY24: ~38.2mln MT, FY23: ~40.0mln MT), the overall surge was driven by a significant rise in export dispatches of ~56%, reaching ~7.1mln MT, up from ~4.6mln MT last year. A similar trend was witnessed during 1QFY25, with the local dispatches recording a decline of ~20% (1QFY25: ~8.1mln MT, 1QFY24: ~10.1mln MT), while export dispatches grew by ~22% (1QFY25: ~2.1mln MT, 1QFY24: ~1.8mln MT). The company’s overall dispatches dwindled by ~4.0% during FY24 (FY24: ~4.842mln MT, FY23: ~5.043mln MT), followed by a continuing deteriorating trend, witnessing a decline of ~2.7% during 1QFY25 as compared to the same quarter the previous year (1QFY25: 1.113mln MT, 1QFY24: 1.144mln MT). However, sales in value terms observed growth throughout the industry during FY24, driven by better pricing to account for the rising cost of production, resulting in an improvement in Gross margins of the company. The Company's Net Revenues observed a minor growth of 1.6% on an annual basis. Furthermore, the declining trend in the policy rate throughout the period provided additional relief to the company in the form of lower finance costs, resulting in improved Net margins. As a result of stressed demand, the capacity utilization remained at 65% with a market share of ~10.6% based on the volumetric sales during FY24. The management is focused on the efficient utilization of the current installed capacity, with no plans for expansions yet, while reducing the leveraging of the company, which stands at 28.5% as of Sep’ 24 (June’24: 31.3%).
The company’s association with Nishat Group, coupled with the sponsor's strong business acumen, which is evident from a proven history of successful operations of more than three decades, contributes to the assigned ratings. Furthermore, the company’s strategic investments in group companies that deliver supplementary income provide additional support to the company’s overall financial performance from core operations.

About the Entity
D. G. Khan Cement Company Limited ("DGKC" or "the Company") is a public listed company incorporated in Pakistan in 1978. The company’s current installed capacity stands at 6.72mln MTPA. 48.29% of the ownership in the company is held by Nishat Group, including Nishat Mills Limited (31.40%) and other associated companies (0.10%) and family members (16.79%). The remaining ownership stake is divided amongst other institutions and the general public. The company is governed by a Board of Directors comprising 3 non-executive, 2 executive, and 2 independent members. The Chairperson, Mrs. Naz Mansha, has over 37 years of experience as a director and has been associated with DGKC since 1994. The CEO, Mr. Raza Mansha, has over three decades of diversified professional experience and has been associated with DGKC in the position for over 20 years.