Karachi, August 31, 2023 (PPI-OT): DGKC - 4QFY23 Result Review - Higher taxation turns earnings red

D.G. Khan Cement Company Limited (DGKC) announced its 4QFY23 result today, where the company has posted unconsolidated LAT of PkR5.8bn (LPS: PkR13.1) vs. PAT of PkR1.2bn (EPS: PkR2.7) in the previous quarter. The significant loss incurred during the quarter is majorly attributable to a high tax charge and lower than anticipated gross margins.

Net sales of the company clocked in at PkR16.9bn compared to PkR18.3bn in the previous quarter, a decline of 7%QoQ. The dip in the topline is attributable to a 6%QoQ fall in company’s offtakes.

Gross margins have contracted to 10.7%, compared to 19.0% in the previous quarter, possibly due to the high-cost coal inventory and less absorption of fixed costs. Moreover, the gross margins for the entire fiscal year also experienced a decline, settling at 14.7% for FY23 in contrast to 18.0% in FY22, primarily due to the impact of elevated weighted average coal prices.

Other income saw a surge of 45.2% to reach PkR1.1bn, driven by higher interest rates and healthy dividend from the company's banking associate, MCB. For the full year, other income increased by 20%YoY, majorly due to the aforementioned reasons.

Furthermore, finance cost increased by 11.5%QoQ, reaching PkR1.9bn, attributed to the interest rate hike. For the entire fiscal year, finance costs clocked in at PkR6.7bn, marking a significant 89%YoY increase, as the average effective interest rate rose by 7.9% over the course of the year.

Effective tax for the quarter amounted to PkR5.7bn, an increase of 8.8x/2.1x QoQ/YoY. This surge is due to the retrospective implementation of the super tax and a possible upward adjustment of deferred tax.

Finally, for FY23, a loss of PkR3.6bn (LPS: PkR8.3) is recorded vs. PAT of PkR3.0bn (EPS: PkR6.8) of the previous year. This annual loss is majorly attributable to higher taxation and increased financial charges.