Ayesha Mudassar

The revenue of Dewan Cement Limited in the first quarter of the fiscal year 2023-24 was substantially higher year-on-year (YoY) at Rs 5.6 billion, compared to Rs 3.5 billion in the corresponding period of the last year, reports WealthPk. With a gradual rise in local and export dispatches and higher average selling prices, the top line has got significantly better. Furthermore, losses have reduced to Rs 115 million against Rs 681 million in 1QFY23, as distribution costs and operating expenses witnessed a notable decline. Likewise, the company experienced a significant reduction of 96.8% in loss before taxation during the period under review.

Furthermore, the company earned a gross profit of Rs 302 million in the period under review, compared to a gross loss of Rs 320 million during 1QFY23. The cost of production shows an increasing trend due to rising inflation and massive rupee depreciation. However, the management of the company looks committed to mitigating the higher trend of production cost with the improvement of plant efficiency and real-time production methods considering the demand-supply mechanism.

Financial Position Highlights

The analysis of the company's financial position showed a growth of 35.4 % in its non-current assets during the quarter ended September 30, 2023, compared to 1QFY23. This rise indicates the company's investment in intangible assets and higher long-term deposits. The decline in current assets is primarily attributed to a decrease in the stores, and spare parts, which have reduced from Rs 1,616 million in 1QFY23 to Rs 1,549 million in 1QFY24, which aligns with the company's regular business expansion requirements. In addition, loans and advances, along with other receivables, witnessed a significant reduction during the period under review.

During the quarter under review, the non-current liabilities witnessed a growth of 30.3% as compared to 1QFY23. This growth shows that the company took additional long-term liabilities or debt for the expansion and modernization of production facilities. Besides, the current liabilities declined by 1.7%, mainly due to the reduction in trade and other payables.

Historical Operational Performance (2018-2023)

During the years from 2018-23, the top line has grown only thrice, while profit margins have also been seen declining, with some improvement seen in FY21. The company witnessed the biggest contraction in revenue in FY20 by nearly 52%, with net turnover falling to an all-time low of Rs 5.8 billion. This was primarily attributed to a slowdown in construction activities and low selling prices. With production cost exceeding net revenue, the company incurred a gross loss of Rs 516 million while net loss increased to an all-time high of Rs 1.3 billion.

The company's revenue in FY21 grew by 22% on the back of an increase in average selling price. However, the company's per ton cost of sales increased by 47.82% on account of a continuous rise in input costs. High production costs and operating expenses continued to make a large portion of income, causing profit margins to shrink. During the fiscal year 2022-23, the company's revenue increased to Rs 20.2 billion, which was largely due to an increase in average selling price. The cost of sales increased by 47.8% due to continuous increases in input costs, including coal, power, raw materials, and imported consumables.

About the Company

The Dewan Cement Limited was established as a public limited company in 1980. It is part of the Yusuf Dewan Group of Companies. Dewan Cement manufactures and sells cement. It has two manufacturing units, Parkland Cement Limited and Saadi Cement Limited.

Future Outlook

The company has its hopes on rising local demand on the back of government construction projects such as the China-Pakistan Economic Corridor (CPEC) and the Public Sector Development Programme (PSDP). However, the rising input costs as well as interest rates, will continue to exert pressure and impede growth.

Industry Overview

The cement industry experienced a substantial growth of 23.48% in its dispatches during 1QFY24 as compared to the corresponding period of fiscal year 2023. This growth was primarily driven by a significant increase of 17.75% in domestic dispatches and a remarkable 71.85% rise in exports. In total, the industry dispatched 11.88 million tons of cement during this quarter, comprising 10.13 million tons for the domestic market and 1.75 million tons for exports. In the previous fiscal quarter, the industry dispatched a total of 9.62 million tons, with 8.60 million tons sold domestically and 1.02 million tons exported.

inpCredit: INP-WealthPk