Although the company’s stock price may have indicated otherwise at yesterday’s close, Dera Ghazi Khan Cement (DGKC) reported a strong financial performance for 1HFY16. During the period, the company’s top line expanded in line with the industry-wide growth in dispatches.

Meanwhile, the impact of declining input costs has continued to bode well for its primary margin which is reported at 40 percent for 1HFY16 as compared to 33 percent for similar period of the previous fiscal. Under the hood, the company’s results show significant discipline in operations as selling and distribution expenses were scaled down considerably during the period under review, despite higher sales. The rising proportion of domestic dispatches in sales may be a factor for this improvement.

Along with the financial results, DGKC’s management has also informed of its decision to further invest in Adamjee Insurance Company Limited to the tune of Rs1.265 billion. This decision is similar to other recent investments by the company into other interests of the Nishat Group. In the previous fiscal, DGKC acquired 55.1 percent stake in Nishat Dairy and increased its ownership in Nishat Paper Products to 55 percent.

While the investments into other companies erode chances of dividend payouts in the near-term, investors are likely to be lured by prospects of bountiful returns from the diversified pool of investments that DGKC continues to build within the Nishat Group.

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Dera Ghazi Khan Cement


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Rs (In millions)          2QFY16     chg   1HFY16    chg


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Sales                       7391      8%    13635     5%


Cost of sales               4283     -6%     8148    -5%


Gross profit                3108     35%     5487    31%


Gross margin                 42%              40%


Administrative expenses      133      6%      242    -1%


Selling & distribution


 expenses                    179    -28%      386   -16%


Other operating expenses     214    141%      455    19%


Other income                 757      9%     1237   -53%


Finance cost                  32    -64%       61    13%


PAT                         2358      5%     4080    20%


Net margin                   32%              30%


EPS (Rs)                    5.38             9.31


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