LAHORE - DG Khan Cement (DGKC) announced its FY12 result today. The company booked profits of Rs4.1bn (EPS of Rs9.38) in FY12 as against earnings of Rs171mn (EPS of Rs0.39) in FY11, up by a massive 24xYoY. Along with the result, the company announced a cash dividend of Rs1.5/share. The earnings announcement came in above expectations; however, the dividend announcement is in line with expectations. The major reason for higher than expected earnings announcement is due to a positive tax surprise in 4Q.
In 4QFY12 alone, the company recorded a PAT of Rs2.0bn (EPS of 4.64), which translates into a growth of 157%QoQ. The impressive result is due to 1) higher average retention prices 2) seasonal uptick in volumes and 3) a positive tax surprise.
It is to be noted that total cement sales in August 2012 stood at 2.29mn tons (lowest since November 2011) against 2.35mn tons in the same period last year, depicting a decline of 2.8%YoY. Local sales slid by 3.2%YoY while exports dipped by 2.0%YoY. On a MoM basis, total volumes plunged by 18.6% on account of 1) slowdown in construction activity due to Ramadan 2) less working days owing to Eid holidays and 3) power outages in the North coupled the arrival of the monsoon season. We believe this is a seasonal dip and overall sales are likely to recover in September. We reiterate our ‘positive’ stance on the sector mainly owing to the strong prevailing pricing power of the industry.
Fewer working hours because of Ramadan and Eid holidays hampered domestic cement sales in August 2012 as local sales for the month fell by 22.8%MoM. Local cement offtake in 2MFY13 was largely flat (down 0.6%YoY) owing to weak August numbers.