DG Khan Cement is exploring other destinations for export

DG Khan Cement is exploring other destinations for export
07 June 2024

BMA Capital recently organised a webinar with Inayat Ullah Niazi, the CFO of DG Khan Cement Co (DGKC). The webinar focussed on the company’s financial performance and outlook. 

DG Khan Cement's CFO expects an unfavourable macroeconomic environment to cause domestic cement demand to contract by 4-5 per cent in FY23-24. However, he anticipates a recovery in demand and sees capacity utilisation hovering around 50-55 per cent in FY24-25.

In terms of exports, Mr Niazi said DGKC exported 400,000t, 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 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 US$28-30t, barely covering variable costs. However, dispatching inventory generates cash and alleviates the company’s working capital pressure.

Management said DGKC’s gross margins improved in 3QFY23-24 because of higher production levels. However, the company expects these to normalise in the fourth quarter. Margins in the north have always remained better due to 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 per cent Afghan coal and 20 per cent alternative sources (mainly tyres).

As per the management, DGKC is considering adding a wind power plant at its south plant in FY26-27.

Mr Niazi 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. 

Published under Cement News