KARACHI, Sept 7: The DG Khan Cement Company announced profit after tax (PAT) at Rs170.96 million, translating into earning per share (eps) at Re0.39 for financial year ended June 30.

This represented a decline of 27 per cent over the PAT of Rs233.02 million and eps at Re0.53 the previous year.

Directors declared nil dividend with the results announcement on Tuesday.

The big plunge in earnings came as a rude shock to investors and analysts, who were expecting the company to post almost twice the declared earnings (ie PAT between Rs310 to Rs380 million).

"The main reason attributable to the earnings fall was the higher effective tax rate of 72 per cent (last year effective tax rate was 35 per cent)," said analyst Sarfraz Abbasi, at Summit Capital.

He observed that the company had also to book one time loss of Rs119 million on account of impairment in value of investment.

Sales witnessed growth of 14 per cent to Rs18.18 billion in the latest year as against Rs16.28 billion last year.

"The main reason for the increase in monetary sales was sharp rise of 32 per cent year-on-year in retention prices," said the analyst.

In terms of volumetric sales both, local and export dispatches remained lower by 7 per cent and 12 per cent, respectively, over earlier year.

Sluggish local and export dispatches in FY11 were thought to be due to heavy rains in the beginning of the year which caused devastating floods, disrupting cement demand and supplies.

On export front, decline was mainly because of expanded regional capacities, slowdown in construction activities post-economic meltdown and heavy sea freight charges on exports.

Gross profit of the company showed an upsurge of 62 per cent over the previous year to Rs4.38 billion.

Other income rose 21 per cent to Rs1.10 billion compared to Rs912million, the earlier year, which prevented the bottom line from dipping into the red as the core operation could have posted a loss of Rs936 million (loss per share of Rs2.14) based on the higher taxation onearnings.

Lucky plant in Congo

Lucky Cement, along with the results declared earlier, announced its new venture in Democratic Republic of Congo (DRC).

The company plans to install a cement plant (capacity one million tons), in partnership with the Group Rawji.

An AKD Research note stated that DRC (estimated 2011 GDP growth rate: 6.8 per cent), with an annual cement requirement of 3.2 million tons was the point of recent focus for world cement companies where Germany-based Heidelberg Cement Company had acquired a majority stake in three operational plants of capacity 500 thousand tons in second half of financial year 2011.

Lucky's plant was expected to commence operations in three years after it begins construction in the next 3-5 months.

"We expect this venture to provide stability to company’s margins (African cement companies currently show gross margins of up to 28 per cent), with the added advantage of new export markets," the analysts said.

The Congo cement plant was expected to cost $175million, 54 per cent of which would be raised through debt from multilateral institutions.

Lucky was expected to contribute 50 per cent in the equity financing of the plant.

Key advantages of DRC (located in mid-Africa) were listed as: Strong organic demand; Central African location allowing exports to the entire continent and a close proximity to the coal deposits in South Africa, the research report noted.

Group Rawji was stated to be a well-known Africa based group with operations in DRC, Angola, Belgium, China, Dubai, Germany, India, Nigeria and South Africa.

In its portfolio, the group manages different companies encompassing activities like FMCG, manufacturing (Marsavco) and distribution (Beltexco), distribution of Industrial engineering goods (Prodimpex), Banking (Rawbank), purchase, sale and leasing of Property (Parkland), Port operations and Cargo handling (RAFI) etc.

Other companies in the portfolio include Proton (Electrical Contracting, Electrical Engineering Services, Electrical Contracting Services) and Hexagon (buying and liaison house based in Germany with subsidiaries in South Africa, India and China).