Lahore: The Pakistan Credit Rating Agency Limited (PACRA) has maintained the entity ratings of D.G. Khan Cement Company Limited, citing the company's longstanding presence in Pakistan's cement industry and its association with the financially robust Nishat Group. Despite the challenges faced by the cement sector in FY25, marked by constrained development spending and subdued construction activity, the industry has shown signs of stabilization with a notable recovery in export sales.
According to PACRA, the total sales volume in the cement industry increased by 2.1% to 46.2 million tons in FY25, driven by a 30% rise in exports to 9.2 million tons, despite a decline in domestic dispatches. The industry's capacity utilization remained stable at around 55%. Early indicators in FY26 reflect a strengthening sector, with industry dispatches showing a marked increase, fueled by a 17.7% rise in domestic sales and a 20.8% growth in exports.
D.G. Khan Cement Company's dispatches rose by approximately 9.1% in FY25, reaching around 5.3 million metric tons. The momentum continued into 1QFY26, with dispatches increasing by about 28% year-on-year to 1.4 million tons, culminating in a market share of about 10% for 1HFY26. The company's Hub plant operated at full capacity during FY25, contributing to revenue growth supported by higher export volumes and improved pricing. Net revenues for FY25 were PKR 71,892 million, up from PKR 66,039 million in the previous year, with profitability bolstered by cost-management initiatives.
In 1QFY26, the company reported a 29% year-on-year rise in net sales to PKR 19,808 million, though margins moderated to 21.7%. The company's net margins were recorded at 12.1% in FY25 and 10.9% in 1QFY26, while capacity utilization improved to approximately 75%, translating to a market share of around 7.9% based on volumetric sales.
Looking ahead, D.G. Khan Cement has announced plans to install the country's largest clinker line at its D.G. Khan site, with a capacity of 11,000 tons per day, expected to commence operations within two years. This expansion will raise the company's clinker capacity to 10.0 million tons per annum. Additionally, entities linked to the Nishat Group have expressed intentions to acquire a significant stake in Rafhan Maize Products Company Limited, with D.G. Khan Cement proposing to take a 32.71% stake. These initiatives are expected to be financed primarily through debt, but management aims to maintain prudent gearing levels.
The company's ratings are further supported by strategic investments in group companies, which provide supplementary income and bolster financial performance. However, continued enhancement of the core operational profile remains crucial for sustained improvement.
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