d.g. khan cement company limited 2nd quarter (half yearly... · khairpur, tehsil kallar kahar,...

D.G. Khan Cement Company Limited

CONTENTS


Corporate Profile 2

Directors’ Report 3

Auditor’s Review Report to the members 5

Condensed Interim Balance Sheet 6

Condensed Interim Profit and Loss Account 8

Condensed Interim Cash Flow Statement 9

Condensed Interim Statement of Comprehensive Income 10

Condensed Interim Statement of Changes in Equity 11

Selected Notes to the Condensed Interim Financial Information 12

Directors’ Report 19

Condensed Interim Consolidated Balance Sheet 20

Condensed Interim Consolidated Profit and Loss Account 22

Condensed Interim Consolidated Cash Flow Statement 23

Condensed Interim Consolidated Statement of Comprehensive Income 24

Condensed Interim Consolidated Statement of Changes in Equity 25

Selected Notes to the Condensed Interim Consolidated Financial Information 26

D.G. Khan Cement Company Limited and its Subsidiary

Board of DirectorsMrs. Naz Mansha ChairpersonMian Raza Mansha Chief ExecutiveMr. Khalid Qadeer QureshiMr. Zaka-ud-DinMr. Farid FazalMr. Inayat Ullah Niazi Chief Financial OfficerMs. Nabiha Shahnawaz Cheema

Audit Committee Mr. Khalid Qadeer Qureshi Member/ChairmanMr. Farid Fazal MemberMs. Nabiha Shahnawaz Cheema Member

Company Secretary Mr. Khalid Mahmood Chohan

Bankers Allied Bank Limited Habib Metropolitan Bank LimitedAskari Bank Limited MCB Bank LimitedBank Alfalah Limited NIB BankBank Islami Pakistan Limited Meezan Bank LimitedBarclays Bank Plc National Bank of PakistanCitibank N.A. Samba Bank LimtedDeutsche Bank AG Standard Chartered Bank (Pakistan)Dubai Islamic Bank LimitedFaysal Bank Limited Silk Bank LimitedFirst Women Bank Limited The Bank of PunjabHabib Bank Limited United Bank LimitedHSBC

External Auditors KPMG Taseer Hadi & Co, Chartered Accountants

Cost Auditors Avais Hyder Liaquat Nauman, Chartered Accountants

Legal Advisors Mr. Shahid Hamid, Bar-at-Law

Registered Office Nishat House, 53-A, Lawrence Road,Lahore-PakistanPhone: 92-42-36367812-20 UAN: 111 11 33 33Fax: 92-42-36367414Email: [email protected] site: www.dgcement.com

Factory 1. Khofli Sattai, Distt. Dera Ghazi Khan-PakistanPhone: 92-641-460025-7Fax: 92-641-462392Email: [email protected]

2. 12, K.M. Choa Saidan Shah Road,Khairpur, Tehsil Kallar Kahar,Distt. Chakwal-PakistanPhone: 92-543-650215-8Fax: 92-543-650231

CORPORATE PROFILE

02 2010HALF YEARLY


DIRECTORS' REPORT TO THE SHAREHOLDERSI feel pleasure to present financial statements duly reviewed by auditors for the period ended 31st December 2010.

INDUSTRY/MARKET REVIEWEconomic fundamentals of the country are going bad to worse day by day. The GDP growth which wasforecasted as 4.5% for the current year in the annual budget is now estimated to be around 2% to 2.5% whichis the lowest when compared with the developing countries of the region. Badly managed financial and fiscalaffairs of the country have put the economy in the worst phase of its history. The fading security issues arecontinuously shredding the confidence of investors and business community not only for the local entrepreneursbut also for the foreign investors. Moreover, the worst gas load shedding and power outage badly hit industrialand commercial activities in the country. All these factors bode negatively on the developmental and constructionactivities in the country. The developmental expenditure under PSDP has been cut down significantly duringthe year, which has affected the ongoing and new developmental projects as well.

During the first half of FY 2011, the sale of cement in the country registered a decline of over 8% comparedwith the corresponding period. The sales of cement in the local market were 10.108 million tons against 11.022million tons during the same period last year.

Export of cement during the period also declined significantly. Total export of cement during the period underreview is 4.629 million tons against 5.579 million tons during the corresponding period. The decline of 17%during the period attributed to declining rates of cement in the international markets along with sluggish demand.In addition, the rising cost of production in the country also made it less competitive for the industry to competein the international markets.

PLANT OPERATIONS AND PRODUCTIONClinker production during the period underreport is good and all the plants operated well.

Cement production during the first six monthsof the current financial year declined by 14%on account of less cement demand both in thecountry and in export markets, whereas, thecement production during the 2nd quarterdeclined by 6%.

SALESCement sales in the country plunged by nearly28% during the first half of FY 2011 comparedwith the corresponding period. Whereas duringthe 2nd quarter the local sales declined by 29%.The decline is attributed to poor constructionactivities both in housing sector as well as inpublic sector.

Bleak stimulus in cement off take in the countryforced your company to eye again oninternational markets. During the period, despiteinternational recession in regional markets,export of cement augmented by nearly 64%during the first half of the year, whereas duringthe 2nd quarter i.e. Oct-Dec 2010 the exportgrew by nearly 192%. Your company is making allout effort to fully capitalize its operating capacities.

October-December July-December

ClinkerProduction 1,040,382

104%

1,146,486

114%

2,003,575

100%

2,299,237

114%

CementProduction 1,061,605 1,129,022 2,034,682 2,313,146

Utilization%

M-Tons M-Tons

2010 2009 2010 2009


Cement Sales

Local Sales

Export Sales

Total Cement

715,123

385,114

1,100,237

1,002,784

132,877

1,135,661

1,425,291

595,577

2,020,868

1,966,988

362,428

2,329,416

- 4,862 71,041ClinkerSales

M-Tons M-Tons

2010 2009 2010 2009

4,862

OPERATING RESULTSSales revenue during the first half of the current period improved slightly due to better retention prices ofcement in the local market, despite sizable decline in sales volume. But the gross profit during the period underreport declined by nearly 3% on account of rising input costs. The coal prices in the international market wentup sharply and hovering above US$ 140/ton. In addition, the rising tariff for electricity and gas also adversely


03 2010HALF YEARLY

After accounting for depreciation of Rs. 704.756 million and provision for taxation of Rs. 106.449 million,your company earned a net profit of Rs. 192.136 million (2009: Rs. 469.970 million).

FUTURE OUTLOOKCement demand is highly correlated with the growth in GDP. Current prevailing economic conditions in thecountry are badly affected by poor governance and terrorist attacks. The industrial activities are suffering dueto severe gas outage and power load shedding which is a bad omen for business and investment climate in thecountry. In addition the rising prices of goods and services have set an alarming situation in the country whichis likely to further aggravate due to dangling political posture.

Going forward, the rising cost of fuels like, furnace oil, diesel and coal in international markets is another seriousthreat to the economy of the country. Pakistan is passing through the worst phase and need of the hour is totake a few stiff and long term decisions for the revival and stability of the economy on strong footings. Politicalstability, consistency of policies, and tight and stringent monetary controls could change the destiny of ourcountry. Going forward immediate steps should be taken to overcome the energy crisis in the country. Countrybadly needs a few big water reservoirs to overcome water scarcity for agriculture and cheap power generationfor smooth and efficient running of industrial activities. In addition large scale housing projects should belaunched which will have many fold effects on the business activities in the country. All these steps will bringthe economy back on track and our country could be a preferred place for investors both foreigners and local.

ON GOING PROJECTThe work on first phase of Refused Derived Fuel (RDF), alternative fuels, at Khairpur cement plant has beensuccessfully completed and your company has started replacing imported coal with different alternative fuels,e.g. industrial and agricultural wastes, cotton sticks, corn cops, rice husk and rice powder, municipal waste etc.

After reviewing the encouraging results of RDF project at Khairpur cement plant your company has decidedto implement the first phase of RDF at DG khan site and also started extension phase at Khairpur cement plant.The projects are expected to be completed in the current calendar year. This will result in savings on accountof fuel costs.

Ongoing power shortage and rising tariff forced your company to start power generation from waste heatrecovery at Khairpur cement plant. The project is expected to generate 8.5MW. Plant & machinery will besupplied by M/s. FL Smidth Denmark. The letter of credit has already been established. The project is expectedto be completed in the first quarter of FY 2013. This project will reduce reliance on power purchase fromWAPDA and bring down the cost of production.

ACKNOWLEDGEMENTThe Management strongly admires the spirit and commitment of its employees for their hard work and dedication.

for and on behalf of the Board

Lahore: February 17, 2011 (Mian Raza Mansha)Chief Executive


4,646,740

1,007,638

169,990

3,366,108

387,775

(114,649)

8,174,663

1,686,077

192,136

7,958,211

1,704,816

469,970

Net Sales

Gross Profit

Net Profit/(Loss)

Earning/(Loss) perShare (Rs.)

(Rupees in thousand)(Rupees in thousand)2010 2009 2010 2009

0.47 (0.31) 0.53 1.29

affected the cost of production during the year.The increasing power shedding and disruptionin gas supply also posed negatively on theoperating results.

Selling and distribution expenses increased fromthe corresponding period due to a sizableincrease in export of cement. Finance cost alsowitnessed an increase on account of rising benchmark lending rates in the country due to tightmonetary stance taken by State Bank of Pakistan.During the year your company earned a dividendincome of Rs. 505.931 million against Rs.346.646million on its investment during the same periodlast year.

04 2010HALF YEARLY


Independent Auditors Report on Review of CondensedInterim Financial Information to the Members

Introduction

We have reviewed the accompanying condensed interim unconsolidated balance sheet of DG KhanCement Company Limited (”the Company”) as at 31 December 2010 and the related condensedinterim unconsolidated profit and loss account, condensed interim unconsolidated statement ofcomprehensive income, condensed interim unconsolidated cash flow statement, condensed interimunconsolidated statement of changes in equity and notes to the condensed interim unconsolidatedfinancial information for the six-months period then ended (here-in-after referred as the “condensedinterim unconsolidated financial information”). Management is responsible for the preparation andpresentation of this condensed interim unconsolidated financial information in accordance withapproved accounting standards as applicable in Pakistan for interim financial reporting. Ourresponsibility is to express a conclusion on this condensed interim unconsolidated financial informationbased on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements 2410,“Review of Interim Financial Information Performed by the Independent Auditor of the Entity”.A review of Interim Financial Information consists of making inquiries, primarily of persons responsiblefor financial and accounting matters, and applying analytical and other review procedures. A reviewis substantially less in scope than an audit conducted in accordance with International Standardson Auditing and consequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, we do not express an auditopinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that theaccompanying interim unconsolidated financial information is not prepared, in all material respects,in accordance with approved accounting standards as applicable in Pakistan for Interim FinancialReporting.

The figures for the quarters ended 31 December 2010 and 31 December 2009 in the condensedinterim unconsolidated profit and loss account and condensed interim unconsolidated statementof comprehensive income have not been reviewed and we do not express a conclusion thereon.

KPMG Taseer Hadi & Co.Chartered Accountants201-Office BlockSiddiq Trade Centre72-Main Boulevard, Gulberg-IILahore, Pakistan

Telephone + 92 (42) 578 1751 - 6Fax + 92 (42) 578 1757Internet www.kpmg.com.pk

17 FEB 2011 KPMG Taseer Hadi & Co.Chartered Accountants

(Bilal Ali)

Date:

Lahore

KPMG Taseer Hadi & Co. a partnership firm registered in Pakistanand a member firm of the KPMG network of Independent memberfirms affiliated with KPMG International, a Swiss cooperative

05 2010HALF YEARLY

CONDENSED INTERIM UNCONSOLIDATED BALANCE SHEET AS AT

December 31, June 30, 2010 2010

Un-audited AuditedNote (Rupees in thousand)

EQUITY AND LIABILITIES

CAPITAL AND RESERVESAuthorized capital- 950,000,000 (30 June 2010: 950,000,000)

ordinary shares of Rs 10 each 9,500,000 9,500,000- 50,000,000 (30 June 2010: 50,000,000)

preference shares of Rs 10 each 500,000 500,000

10,000,000 10,000,000

Issued, subscribed and paid up capital 3,650,993 3,650,993Reserves 25,259,682 22,160,477Accumulated profit 899,886 707,750

29,810,561 26,519,220

NON-CURRENT LIABILITIES

Long term finances 5 4,775,577 5,089,507Long term deposits 73,483 81,138Retirement and other benefits 116,498 104,029Deferred taxation 1,489,473 1,465,960

6,455,031 6,740,634CURRENT LIABILITIES

Trade and other payables 1,434,838 1,679,749Accrued markup 400,286 346,425Short term borrowing-secured 10,969,389 9,585,642Current portion of non-current liabilities 2,597,544 2,139,283Provision for taxation 35,090 35,090

15,437,147 13,786,189

CONTINGENCIES AND COMMITMENTS 6

51,702,739 47,046,043

The annexed notes 1 to 14 form an integral part of this condensed interim unconsolidated financialinformation.

06 2010HALF YEARLY


Chief Executive

DECEMBER 31, 2010

December 31, June 30, 2010 2010


ASSETS

NON-CURRENT ASSETS

Property, plant and equipment 7 25,097,003 25,307,302Capital work in progress 274,616 465,650Investments 8 5,895,825 4,696,922Long term loans, advances and deposits 150,888 158,677

31,418,332 30,628,551

CURRENT ASSETS

Stores, spares and loose tools 4,439,957 3,017,742Stock-in-trade 1,666,439 1,036,876Trade debts 206,223 303,949Investments 8 12,641,274 10,740,972Advances, deposits, prepayments

and other receivables 1,150,769 1,087,161Cash and bank balances 179,745 230,792

20,284,407 16,417,492

51,702,739 47,046,043


07 2010HALF YEARLY

Director

CONDENSED INTERIM UNCONSOLIDATEDPROFIT AND LOSS ACCOUNT (UN-AUDITED)FOR THE HALF YEAR ENDED DECEMBER 31, 2010

2010 2009 July to October to July to October to

December December December DecemberNote (Rupees in thousand) (Rupees in thousand)

Sales - net 8,174,663 4,646,740 7,958,211 3,366,108

Cost of sales 9 (6,488,586) (3,639,102) (6,253,395) (2,978,333)

Gross profit 1,686,077 1,007,638 1,704,816 387,775

Administrative expenses (98,548) (56,588) (80,956) (45,197)

Selling and distribution expenses (769,105) (442,373) (523,764) (126,706)

Other operating expenses (49,387) (20,005) (139,782) (46,158)

Other income 545,837 312,423 470,726 303,338

Profit from operations 1,314,874 801,095 1,431,040 473,052

Finance cost (1,016,289) (528,057) (955,975) (487,795)

Profit / (loss) before taxation 298,585 273,038 475,065 (14,743)

Taxation (106,449) (103,048) (5,095) (99,906)

Profit / (loss) after taxation 192,136 169,990 469,970 (114,649)

Restated Restated

Earning / (loss) per share(basic and diluted) Rupees 0.53 0.47 1.29 (0.31)

Appropriations have been reflected in the statement of changes in equity.

The annexed notes 1 to 14 form an integral part of this condensed interim unconsolidated financialinformation.

08 2010HALF YEARLY


Chief Executive Director

CONDENSED INTERIM UNCONSOLIDATEDCASH FLOW STATEMENT (UN-AUDITED)FOR THE HALF YEAR ENDED DECEMBER 31, 2010

July to July toDecember 31, December 31,

2010 2009Note (Rupees in thousand)

Cash flows from operating activities

Cash (used in)/ generated from operations 11 (687,429) 1,122,201Financial cost paid (962,428) (1,079,862)Retirement and other benefits paid (6,758) (6,088)Taxes paid (151,677) (204,512)Long term deposits - net (7,655) 3,857

Net cash used in operating activities (1,815,947) (164,404)

Cash flows from investing activities

Capital expenditure including purchase of property, plant and equipment (328,605) (407,018)

Proceeds from sale of investments - 126,554Proceeds from sale of property, plant

and equipment 27,986 6,140Long term loans, advances and deposits - net 7,789 2,320Interest received 32,546 14,013Dividend received 505,931 364,646

Net cash generated from investing activities 245,647 106,655

Cash flows from financing activities

Proceeds from long term finances 850,000 1,000,000Repayment of long term finances (714,494) (1,268,133)

Net cash generated from/ (used in)financing activities 135,506 (268,133)

Net decrease in cash and cash equivalents (1,434,794) (325,882)

Cash and cash equivalents at the beginning of period (9,354,850) (8,824,733)

Cash and cash equivalents at the end of period 12 (10,789,644) (9,150,615)

The annexed notes 1 to 14 form an integral part of this condensed interim unconsolidatedfinancial information.

09 2010HALF YEARLY



CONDENSED INTERIM UNCONSOLIDATEDSTATEMENT OF COMPREHENSIVE INCOME (UN-AUDITED)FOR THE HALF YEAR ENDED DECEMBER 31, 2010


December December December December(Rupees in thousand) (Rupees in thousand)

Profit / (loss) after taxation 192,136 169,990 469,970 (114,649)

Other comprehensive income

Available for sale financial assets- Change in fair value 3,099,205 3,473,514 5,267,420 48,725- Realized gain through profit and loss account - - (58,772) (58,772)- Tax expense - - - -

Other comprehensive income/(loss) for the period 3,099,205 3,473,514 5,208,648 (10,047)

Total comprehensive income/(loss) for the period 3,291,341 3,643,504 5,678,618 (124,696)

The annexed notes 1 to 14 form an integral part of this condensed interim unconsolidatedfinancial information.

10 2010HALF YEARLY



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11 2010HALF YEARLY


CONDENSED INTERIM UNCONSOLIDATEDNOTES TO THE FINANCIAL INFORMATION (UN-AUDITED)FOR THE HALF YEAR ENDED DECEMBER 31, 2010

1. Status and nature of business

D. G. Khan Cement Company Limited ("the Company") is a public limited companyincorporated in Pakistan and is listed on Karachi, Lahore and Islamabad Stock Exchanges.It is principally engaged in production and sale of Clinker, Ordinary Portland and SulphateResistant Cement. The registered office of the Company is situated at 53-A LawrenceRoad, Lahore.

2. Basis of preparation

The condensed interim financial statements have been prepared in accordance withapproved accounting standards as applicable in Pakistan for interim financial reporting. Thedisclosures in the condensed interim financial information do not include the informationreported for full annual financial statements and should therefore be read in conjunctionwith the financial statements for the year ended 30 June 2010.

3. Estimates

The preparation of the condensed interim unconsolidated financial information requiresmanagement to make judgments, estimates and assumptions that affect the application ofaccounting policies and the reported amounts of assets and liabilities, income and expenses.Actual results may differ from these estimates. In preparing the condensed interimunconsolidated financial information the significant judgments made by the managementin applying accounting policies, key estimates and uncertainty includes:

- Residual value and useful life estimation of fixed assets

- Taxation

- Retirement and other benefits

- Provisions and contingencies

- Fair value of derivatives

4. Significant accounting policies

4.1 The accounting policies and methods of computation adopted in the preparation ofthe interim financial information are generally based on the same policies and methodsas applied in preparation of the annual financial statements for the year ended 30 June2010.

4.2 In addition to above, following amendments to the International Financial ReportingStandards/ International Accounting Standards are mandatory for the first time for thefinancial year beginning on or after 1 January 2011, however, the adoption of theseamendments is either not yet effective or the amendments did not have any significantimpact on the financial information of the company.

12 2010HALF YEARLY


- IFRS 7 (amendment) - Disclosures - Transfers of Financial Assets

- IAS 12 (amendment) - Deferred Tax on Investment Property

- IAS 24 (Revised) - Related Party Disclosures

- IAS 32 (amendment) - Financial Instruments: Presentation - Classification of Right Issues

- IFRIC 14 (amendment) - The Limit on a Defined Benefit Assets - Minimum Funding Requirements

- IFRIC 19 - Extinguishing financial liabilities with equity instruments

4.3 The provision for taxation for the six months ended 31 December 2010 has been madeon an estimated basis.

December 31, June 30, 2010 2010


5. Long term finances

Long term loans 5.1 7,367,319 7,222,988Less:Current portion shown under current liabilities 2,591,742 2,133,481

4,775,577 5,089,5075.1 Long term loans

Opening balance 7,222,988 9,135,311Add: Disbursements during the

period/ year 850,000 3,050,000 Exchange loss during the period/ year 8,825 142,060

8,081,813 12,327,371Less: Repayment during the period/ year 714,494 5,104,383Closing balance 7,367,319 7,222,988

6. Contingencies and commitments

6.1 Contingencies

The matter relating to interpretation of provisions of section 4(2) of the repealed CentralExcise Act, 1944 (1944 Act) has now attained finality after having been adjudicated bythe honorable Supreme Court of Pakistan through its judgment dated 27 January 2009(upholding its previous judgment dated 15 February 2007). The longstanding controversybetween the revenue department and the taxpayers related primarily to finer interpretationof the provisions of section 4(2) of the 1944 Act wherein the department had a view thatExcise Duty shall be included as a component for determination of the value (retail price)for levying Excise Duty. The departmental view, being against the spirit of law, waschallenged by the taxpayers in appeals before the honorable High Courts of the countrywhich, duly appreciating the contentions of the taxpayers, overturned the departmentalview and succeeded the appeals.


13 2010HALF YEARLY

Now since the controversy has attained finality up to the highest appellate level, thecompany has initiated the process of claiming refund of excess excise duty paid by itduring the periods from 1994 to 1999 which aggregates to Rs 1,115.145 million. Theamount of refund, however, shall be incorporated in the books of accounts once it isrealized by the Company.

6.2 There is no significant change in contingencies from the annual financial statements ofthe Company for the year ended 30 June 2010 except for as mentioned above.

6.3 Commitments in respect of

(i) Contracts for capital expenditure Rs 2.518 million (30 June 2010: Rs 115.335 million).

(ii) Letters of credit for capital expenditure Rs 435.791 million (30 June 2010: Rs 41.891million).

(iii) Letters of credit other than capital expenditure Rs 558.116 million (30 June 2010:Rs 1,375.171 million).

December 31, June 30, 2010 2010


7. Property, plant and equipment

Opening book value 25,307,302 24,345,793Add: Additions during the period/ year 7.1 519,639 2,364,052

Transfer in during the period/ year - -519,639 2,364,052

Less: Disposals during the period/ year - net book value 25,182 9,979 Depreciation charged during the period/ year 704,756 1,392,564

729,938 1,402,543

Closing book value 25,097,003 25,307,302

7.1 Additions during the period/ year

Land 410 -Building on freehold land 100,066 168,806Roads 2,182 18,279Plant and machinery 370,438 2,100,649Furniture, fixtures and office equipment 11,577 15,357Motor vehicles 34,966 13,659Power and water supply lines - 47,302

519,639 2,364,0528. Investments

Cost of investments 2,529,719 2,529,719Add: Fair value adjustments 16,007,380 12,908,175

18,537,099 15,437,894

Less: Investments classified in current assets 12,641,274 10,740,972Closing balance 5,895,825 4,696,922

14 2010HALF YEARLY




9. Cost of sales

Raw and packing materials consumed 870,380 467,784 902,170 447,393Salaries, wages and other benefits 367,515 189,844 333,526 176,007Electricity, gas and water 970,713 513,512 874,744 439,791Furnace oil/coal 3,189,805 1,688,603 2,751,953 1,408,757Stores and spares consumed 666,097 395,828 459,864 249,152Repair and maintenance 125,484 60,888 65,459 25,859Insurance 26,937 14,926 26,355 16,248Depreciation on property, plant and equipment 698,189 348,695 684,903 342,803Royalty 78,729 41,001 90,063 44,985Excise duty 7,297 3,805 8,395 4,197Vehicle running 12,637 6,886 10,055 5,605Postage, telephone and telegram 2,345 1,131 2,235 1,116Printing and stationery 3,184 2,441 2,615 1,651Legal and professional charges 1,009 246 811 70Traveling and conveyance 2,556 1,143 2,938 966Estate development 6,174 3,552 5,926 4,382Rent, rates and taxes 7,198 3,142 9,683 7,325Freight charges 6,665 5,321 1,831 1,489Other expenses 17,561 7,364 9,557 741Total manufacturing cost 7,060,475 3,756,112 6,243,083 3,178,537

Opening work-in-process 537,539 802,717 387,444 254,470Closing work-in-process (1,030,470) (1,030,470) (469,008) (469,008)

(492,931) (227,753) (81,564) (214,538)

Cost of goods manufactured 6,567,544 3,528,359 6,161,519 2,963,999

Opening stock of finished goods 219,365 407,066 249,916 170,568Closing stock of finished goods (295,373) (295,373) (155,199) (155,199)

(76,008) 111,693 94,717 15,369

Less: Own consumption capitalized (2,950) (950) (2,841) (1,035)

6,488,586 3,639,102 6,253,395 2,978,333


15 2010HALF YEARLY

10. Transactions with related parties

The related parties comprise subsidiary company, associated companies, other relatedcompanies, directors of the company, key management personnel and post employmentbenefit plans. Significant transactions with related parties are as follows:


2010 2009(Rupees in thousand)

Subsidiary Company Purchase of goods and services 513,218 485,997Rental income 397 388Interest income 29,159 13,060

Associated companies/ Purchase of goods and services 369,881 514,289Other related parties Insurance premium 51,361 37,009

Sale of goods 15,167 7,749Sale of assets 23,187 -Mark-up income on balances with related parties 1,130 1,119Insurance claim received 1,288 202Dividend income 545,013 317,531

Key Management Salaries and other personnel employment benefits 44,804 32,939

Post employment Expense charged in respect of benefit plans staff retirement benefits plans 23,234 21,926

All transactions with related parties have been carried out on commercial terms and conditions.



11. Cash flow from operating activities

Profit before tax 298,585 475,065Adjustment for :- Depreciation on property, plant and equipment 704,756 691,296- Profit on disposal of property, plant and equipment (2,804) (2,149)- Gain on disposal of investments - (79,207)- Dividend income (505,931) (364,646)- Provision of WPPF 16,750 25,562- Provision of WWF 19,663 10,612- Retirement and other benefits accrued 19,227 17,326- Markup income (31,565) (15,133)- Exchange loss - net 8,825 92,623- Finance cost 1,016,289 955,975

Profit before working capital changes 1,543,795 1,807,324

Relationship with the Nature of transactioncompany

16 2010HALF YEARLY




Effect on cash flow due to working capital changes:- Stores, spares and loose tools (1,422,215) (358,857)- Stock-in-trade (629,563) 18,525- Trade debts 97,726 (24,808)- Advances, deposits, prepayments and other receivables 4,152 (91,865)- Trade and other payables (281,324) (228,118)

(2,231,224) (685,123)

Cash (used in)/ generated from operations (687,429) 1,122,201

12. Cash and cash equivalents

Short term borrowings - secured (10,969,389) (9,309,326)Cash and bank balances 179,745 158,711

(10,789,644) (9,150,615)

13. Date of authorization

This interim financial information was authorized for issue by the Board of Directors of theCompany on 17 February, 2011.

14. General

Corresponding figures have been re-arranged wherever necessary for the purposes ofcomparison, however, no significant re-arrangements have been made.

Figures have been rounded off to the nearest thousand of rupees.


17 2010HALF YEARLY

Chief Executive DirectorChief Executive Director

18 2010HALF YEARLY


Condensed InterimConsolidated Financial Information

19 2010HALF YEARLY

DIRECTOR'S REPORT ON INTERIM CONSOLIDATED FINANCIAL STATEMENTS


The Director's are pleased to present before you the Interim financial statements of D.G. KhanCement Company Limited and its subsidiary namely Nishat Paper Products Company Limited.

Combined financials are as follows:

July-Dec 2010 July-Dec 2009(Rupees in thousand)

Sale - net 8,547,034 8,289,468Gross profit 1,829,204 1,873,537Profit before tax 341,579 554,175Profit after tax 210,111 514,990Earning per share 0.58 1.41

A report on affairs of D.G. Khan Cement Company Limited for the period ended December31, 2010 has been separately presented.

for and on behalf of the Board

(Mian Raza Mansha)Chief Executive

Lahore: February 17, 2011

CONDENSED INTERIM CONSOLIDATED BALANCE SHEET AS AT

December 31, June 30, 2010 2010


EQUITY AND LIABILITIES

CAPITAL AND RESERVESAuthorised capital- 950,000,000 (30 June 2010: 950,000,000)

ordinary shares of Rs 10 each 9,500,000 9,500,000- 50,000,000 (30 June 2010: 50,000,000)

preference shares of Rs 10 each 500,000 500,000

10,000,000 10,000,000

Issued, subscribed and paid up capital 3,650,993 3,650,993Reserves 25,298,706 22,199,501Accumulated profit 957,007 755,856

29,906,706 26,606,350Non-controlling interest 337,268 328,308

30,243,974 26,934,658NON-CURRENT LIABILITIES

Long term finances 6 4,905,577 5,229,507Long term deposits 73,483 81,138Retirement and other benefits 116,498 104,029Deferred taxation 1,492,420 1,451,960

6,587,978 6,866,634CURRENT LIABILITIES

Trade and other payables 1,666,384 1,830,315Accrued markup 430,138 376,277Short term borrowing-secured 11,585,811 10,080,232Current portion of non-current liabilities 2,757,545 2,369,438Provision for taxation 35,090 35,090

16,474,968 14,691,352

CONTINGENCIES AND COMMITMENTS 7

53,306,920 48,492,644

The annexed notes form an integral part of this condensed interim consolidated financial information.

20 2010HALF YEARLY

Chief Executive


DECEMBER 31, 2010

December 31, June 30, 2010 2010


ASSETS

NON-CURRENT ASSETS

Property, plant and equipment 8 26,215,298 26,446,199Assets subject to finance lease - 675Capital work in progress 274,616 465,650Investments 9 5,692,196 4,493,293Long term loans, advances and deposits 151,794 159,583

32,333,904 31,565,400

CURRENT ASSETS

Stores, spares and loose tools 4,474,459 3,049,409Stock-in-trade 2,476,894 1,636,829Trade debts 313,456 462,367Investments 9 12,641,288 10,740,986Advances, deposits, prepayments and other receivables 849,560 774,711Cash and bank balances 217,359 262,942

20,973,016 16,927,244

53,306,920 48,492,644

21 2010HALF YEARLY

Director


Director

CONDENSED INTERIM CONSOLIDATEDPROFIT AND LOSS ACCOUNT (UN-AUDITED)FOR THE HALF YEAR ENDED DECEMBER 31, 2010


December December December DecemberNote (Rupees in thousand) (Rupees in thousand)

Sales - net 8,547,034 4,816,374 8,289,468 3,525,298

Cost of sales 10 (6,717,830) (3,752,448) (6,415,931) (3,074,592)

Gross profit 1,829,204 1,063,926 1,873,537 450,706

Administrative expenses (100,458) (57,647) (82,940) (46,563)Selling and distribution expenses (774,837) (445,319) (529,203) (129,606)Other operating expenses (54,017) (20,482) (148,452) (50,294)Other income 518,312 298,788 458,134 297,202

Profit from operations 1,418,204 839,266 1,571,076 521,445

Finance cost (1,076,625) (566,714) (1,016,901) (520,745)

Profit before taxation 341,579 272,552 554,175 700

Taxation (131,468) (108,707) (39,185) (116,001)

Profit/(loss) after taxation 210,111 163,845 514,990 (115,301)

Attributable to:

Equity holders of the parent 201,151 166,945 492,481 (114,975)Non-controlling interest 8,960 (3,100) 22,509 (326)

210,111 163,845 514,990 (115,301)

Restated Restated

Combined earning/ (loss) per share (basic and diluted) Rupees 0.58 0.45 1.41 (0.32)

The annexed notes form an integral part of this condensed interim consolidated financialinformation.

22 2010HALF YEARLY



CONDENSED INTERIM CONSOLIDATEDCASH FLOW STATEMENT (UN-AUDITED)FOR THE HALF YEAR ENDED DECEMBER 31, 2010


2010 2009Note (Rupees in thousand)

Cash flows from operating activities

Cash (used in)/ generated from operations 12 (648,292) 1,224,299Financial cost paid (1,022,764) (1,178,345)Retirement and other benefits paid (4,028) (6,088)Taxes paid (159,749) (208,602)long term deposits - net (7,655) 3,857

Net cash used in operating activities (1,842,488) (164,879)

Cash flows from investing activities

Capital expenditure including purchaseof property, plant and equipment (391,557) (410,358)

Proceeds from sale of investments - 126,553Proceeds from sale of property, plant

and equipment 91,110 6,139Long term loans and deposits - net 7,789 2,320Interest received 32,546 14,013Dividend received 505,931 364,646

Net cash from investing activities 245,819 103,313

Cash flows from financing activities

Proceeds from long term finances 850,000 1,000,000Repayment of long term finances (804,493) (1,347,910)Repayment of liabilities against

assets subject to finance lease - (371)

Net cash from/ (used in) financing activities 45,507 (348,281)

Net decrease in cash and cash equivalents (1,551,162) (409,847)

Cash and cash equivalents at the beginning of period (9,817,290) (9,185,842)

Cash and cash equivalents at the end of period 13 (11,368,452) (9,595,689)


23 2010HALF YEARLY



CONDENSED INTERIM CONSOLIDATEDSTATEMENT OF COMPREHENSIVE INCOME (UN-AUDITED)FOR THE HALF YEAR ENDED DECEMBER 31, 2010



Profit/ (loss) after taxation 210,111 163,845 514,990 (115,301)

Other comprehensive income

Available for sale financial assets- Change in fair value 3,099,205 3,473,515 5,267,420 48,725- Realized gain through profit and loss account - - (58,772) (58,772)- Tax expense - - - -

Other comprehensive income/(loss) for the period 3,099,205 3,473,515 5,208,648 (10,047)

Total comprehensive income/(loss) for the period 3,309,316 3,637,360 5,723,638 (125,348)

Attributable to:Equity holders of the parent 3,309,316 3,637,360 5,723,638 (125,348)Non-controlling interest - - - -

3,309,316 3,637,360 5,723,638 (125,348)


24 2010HALF YEARLY



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25 2010HALF YEARLY


CONDENSED INTERIM CONSOLIDATED NOTES TOTHE FINANCIAL INFORMATION (UN-AUDITED)FOR THE HALF YEAR ENDED DECEMBER 31, 2010

1. Legal status and nature of business

The group comprises of:- D. G. Khan Cement Company Limited, the parent company; and- Nishat Paper Products Company Limited, the subsidiary company.

The parent company is a public limited company incorporated in Pakistan and is listed onKarachi, Lahore and Islamabad Stock Exchanges. It is principally engaged in production andsale of Clinker, Ordinary Portland and Sulphate Resistant Cement. The registered officeof the Company is situated at 53-A Lawrence Road, Lahore.

The subsidiary company is an unlisted public limited company incorporated in Pakistanunder the Companies Ordinance 1984 on July 23, 2004. It is principally engaged inmanufacture and sale of paper products and packaging material.

2. Basis of preparation

The condensed interim financial statements have been prepared in accordance withapproved accounting standards as applicable in Pakistan for interim financial reporting. Thedisclosures in the condensed interim financial information do not include the informationreported for full annual financial statements and should therefore be read in conjunctionwith the financial statements for the year ended 30 June 2010.

3. Estimates

The preparation of the condensed interim financial information requires management tomake judgments, estimates and assumptions that affect the application of accounting policiesand the reported amounts of assets and liabilities, income and expenses. Actual resultsmay differ from these estimates. In preparing this financial information the significantjudgments made by the management in applying accounting policies, key estimates anduncertainty includes:

- Residual value and useful life estimation of fixed assets- Taxation- Retirements and other benefits- Provisions and contingencies- Fair value of derivatives

4. Significant accounting policies

4.1 The accounting policies and methods of computation adopted in the preparation ofthe interim financial information are generally based on the same policies and methodsas applied in preparation of the annual financial statements for the year ended 30 June2010.

4.2 In addition to above, following amendments to the International Financial ReportingStandards/ International Accounting Standards are mandatory for the first time for thefinancial year beginning on or after 1 January 2011, however, the adoption of theseamendments is either not yet effective or the amendments did not have any significantimpact on the financial information of the group.

26 2010HALF YEARLY


- IFRS 7 (amendment) - Disclosures - Transfers of Financial Assets

- IAS 12 (amendment) - Deferred Tax on Investment Property

- IAS 24 (Revised) - Related Party Disclosures

- IAS 32 (amendment) - Financial Instruments: Presentation - Classification of Right Issues

- IFRIC 14 (amendment) - The Limit on a Defined Benefit Assets - Minimum Funding Requirements

- IFRIC 19 - Extinguishing financial liabilities with equity instruments

5. The provision for taxation for the six months ended 31 December 2010 has been made onan estimated basis.

December 31, June 30, 2010 2010


6. Long term finances

Long term loans 6.1 7,657,320 7,592,988Less: Current portion shown under current liabilities 2,751,743 2,363,481

4,905,577 5,229,507

6.1 Long term loans

Opening balance 7,592,988 9,595,311

Add: Disbursements during the period/ year 850,000 3,050,000 Exchange loss during the period/ year 18,825 143,901

8,461,813 12,789,212Less: Repayment during the period/ year 804,493 5,196,224

Closing balance 7,657,320 7,592,988

7. Contingencies and commitments

7.1 Contingencies

The matter relating to interpretation of provisions of section 4(2) of the repealed CentralExcise Act, 1944 (1944 Act) has now attained finality after having been adjudicated bythe honorable Supreme Court of Pakistan through its judgment dated 27 January 2009(upholding its previous judgment dated 15 February 2007). The longstanding controversybetween the revenue department and the taxpayers related primarily to finer interpretationof the provisions of section 4(2) of the 1944 Act wherein the department had a view thatExcise Duty shall be included as a component for determination of the value (retail price)for levying Excise Duty. The departmental view, being against the spirit of law, waschallenged by the taxpayers in appeals before the honorable High Courts of the countrywhich, duly appreciating the contentions of the taxpayers, overturned the departmentalview and succeeded the appeals.

27 2010HALF YEARLY


Now since the controversy has attained finality up to the highest appellate level, theparent company has initiated the process of claiming refund of excess excise duty paidby it during the periods from 1994 to 1999 which aggregates to Rs 1,115.145 million.The amount of refund, however, shall be incorporated in the books of accounts onceit is realized by the parent company.

7.2 There is no significant change in contingencies from the annual financial statements of the group for the year ended 30 June 2010 except for as mentioned above.

7.3 Commitments in respect of

(i) Contracts for capital expenditure Rs 2.518 million (30 June 2010: Rs 115.335 million).

(ii) Letters of credit for capital expenditure Rs 435.791 million (30 June 2010: Rs 41.891million).

(iii) Letters of credit other than capital expenditure Rs 905.945 million (30 June 2010:Rs 1,547.811 million).

December 31, June 30, 2010 2010


8. Property, Plant and Equipment

Opening book value 26,446,199 25,550,453

Add: Additions during the period/ year 8.1 582,591 2,367,462 Transfer in during the period/ year - -

582,591 2,367,462Less: Disposals during the period/ year

- net book value 87,786 32,112

Depreciation charged during the period/ year 725,706 1,439,604 813,492 1,471,716

Closing book value 26,215,298 26,446,199

8.1 Major additions during the period

Land 410 -Building on freehold land 100,066 168,806Roads 2,182 18,279Plant and machinery 432,596 2,102,688Furniture, fixtures and office equipment 11,577 15,364Motor vehicles 35,760 15,023Power and water supply lines - 47,302

582,591 2,367,4629. Investments

Cost of investments 2,326,104 2,326,104Add: Fair value adjustments 16,007,380 12,908,175

18,333,484 15,234,279

Less: Investments classified in current assets 12,641,288 10,740,986Closing balance 5,692,196 4,493,293

28 2010HALF YEARLY




10. Cost of sales

Raw and packing materials consumed 1,055,113 529,247 1,004,085 495,611Salaries, wages and other benefits 377,600 194,922 340,567 179,667Electricity, gas and water 973,838 515,074 876,306 439,791Furnace oil/coal 3,189,805 1,688,603 2,751,953 1,408,757Stores and spares consumed 671,936 399,293 464,729 251,862Repair and maintenance 126,086 59,928 65,713 26,052Insurance 29,564 16,254 28,636 17,387Depreciation on property, plant and equipment 720,064 359,632 702,425 349,584Depreciation on assets subject to finance lease - - 28 14Royalty 78,729 41,001 90,063 44,985Excise duty 7,297 3,805 8,395 (1,749)Vehicle running 14,913 8,358 10,491 5,925Postage, telephone and telegram 2,353 1,137 2,246 1,124Printing and stationery 3,214 2,454 2,625 1,645Legal and professional charges 1,134 346 911 70Traveling and conveyance 2,556 1,133 2,938 966Estate development 6,174 3,553 5,926 4,382Rent, rates and taxes 7,733 3,336 9,683 7,325Freight charges 6,671 5,327 1,831 1,482Other expenses 17,647 7,432 9,835 6,871Total manufacturing cost 7,292,427 3,840,835 6,379,386 3,241,751

Opening work-in-process 537,539 802,717 387,444 254,470Closing work-in-process (1,030,470) (1,030,470) (469,008) (469,008)

(492,931) (227,753) (81,564) (214,538)Cost of goods manufactured 6,799,496 3,613,082 6,297,822 3,027,213

Opening stock of finished goods 249,740 468,772 259,685 187,149Closing stock of finished goods (328,456) (328,456) (138,735) (138,735)

(78,716) 140,316 120,950 48,414

Less: Own consumption capitalized (2,950) (950) (2,841) (1,035)

6,717,830 3,752,448 6,415,931 3,074,592

29 2010HALF YEARLY


11. Transactions with related parties

The related parties comprise associated companies, other related companies, directors ofthe company, key management personnel and post employment benefit plans. Significanttransactions with related parties are as follows:



Associated companies/ Purchase of goods and services 369,881 514,289other related parties Insurance premium 53,341 37,009

Sale of goods 15,167 7,749Sale of assets 23,187 -Mark-up income on balances with related parties 1,130 1,119Insurance claim received 1,288 202Dividend income 545,013 317,531

Key Management Salaries and other personnel employment benefits 44,804 32,939

Post employment Expense charged in respect of benefit plans staff retirement benefits plans 23,234 21,926

All transactions with related parties have been carried out on commercial terms and conditions.



12. Cash flow from operating activities

Profit before tax 341,579 554,175Adjustment for :- Depreciation on property, plant and equipment 725,706 710,881- Depreciation on assets subject to finance lease - 28- Profit on disposal of property, plant and equipment (2,804) (2,149)- Gain on disposal of investments - (79,207)- Dividend income (505,931) (364,646)- Retirement and other benefits accrued 16,497 17,326- Markup income (31,565) (15,132)- Exchange loss - net 18,825 92,623- Finance cost 1,076,625 1,016,901

Profit before working capital changes 1,638,932 1,930,800

Relationship with the Nature of transactiongroup

30 2010HALF YEARLY




Effect on cash flow due to working capital changes:- Stores, spares and loose tools (1,425,050) (370,577)- Stock-in-trade (840,065) (170,870)- Trade debts 148,911 (81,294)- Advances, deposits, prepayments and other receivables (7,089) 32,409- Trade and other payables (163,931) (116,169)

(2,287,224) (706,501)

Cash generated from operations (648,292) 1,224,299

13. Cash and cash equivalents

Short term borrowings - secured (11,585,811) (9,785,330)Cash and bank balances 217,359 189,641

(11,368,452) (9,595,689)

14. Operating segments

Segment information is presented in respect of the group's business. The primary format,business segment, is based on the group's management reporting structure.

The group's operations comprise of the following main business segment types:

Type of segments Nature of business

Cement Production and sale of clinker, ordinary portlandand sulphate resistant cements.

Paper Manufacture and supply of paper productsand packing material.

14.1Segment analysis and reconciliation

The information by operating segment is based on internal reporting to the groupexecutive committee, identified as the 'Chief Operating Decision Maker' as defined byIFRS 8. This information is prepared under the IFRS's applicable to the consolidatedfinancial statements. All group financial data are assigned to the operating segments.

31 2010HALF YEARLY


14.2 Geographical segments All segments of the group are managed on nation-wide basis and operate manufacturing facilities and sales offices in Pakistan only.

15. Date of authorizationThis interim financial information was authorized for issue by the Board of Directors of theparent company on 17 February, 2011.

16. Corresponding figuresIn order to comply with the requirements of the International Accounting Standard 34:'Interim Financial Reporting', the condensed interim consolidated balance sheet and condensedinterim consolidated statement of changes in equity have been compared with the balancesof annual audited financial statements of preceding year, whereas, the condensed interimconsolidated profit and loss account, condensed interim consolidated statement ofcomprehensive income and condensed interim consolidated cash flow statement have beencompared with the balances of comparable period of immediately preceding year.

Corresponding figures have been re-arranged wherever necessary for the purposes ofcomparison, however, no significant re-arrangements have been made.

Figures have been rounded off to the nearest thousand of rupees.

Cement Paper Elimination-net ConsolidatedJuly to July to July to July to July to July to July to July toDec. Dec. Dec. Dec. Dec. Dec. Dec. Dec.2010 2009 2010 2009 2010 2009 2010 2009

(Rupees in thousand)Revenue from - External Customers 8,174,664 7,958,211 372,370 331,257 - - 8,547,034 8,289,468

- Inter-group - - 434,930 485,996 (434,930) (485,996) - -

8,174,664 7,958,211 807,300 817,253 (434,930) (485,996) 8,547,034 8,289,468

Segment gross profit 1,686,078 1,704,816 162,609 204,793 (19,483) (36,072) 1,829,204 1,873,537

Segment expenses (917,040) (744,502) (12,669) (16,480) 397 387 (929,312) (760,595)

Other income 545,837 470,726 2,031 855 (29,556) (13,447) 518,312 458,134

Financial charges (1,016,289) (955,975) (89,495) (73,986) 29,159 13,060 (1,076,625) (1,016,901)

Taxation (106,395) (5,095) (25,073) (34,090) - - (131,468) (39,185)

Profit after taxation 298,586 475,065 62,476 115,182 (19,483) (36,072) 341,579 554,175

Depreciation 704,756 691,296 20,950 19,613 - - 725,706 710,909

Capital expenditure (328,605) (407,018) (62,952) (3,340) - - (391,557) (410,358)

Cash - operations (1,815,947) (164,404) 2,618 12,585 (29,159) (13,060) (1,842,488) (164,879)

Cash - investing (106,395) (5,095) 322,813 94,961 29,556 13,447 245,974 103,313

December June 30, December June 30, December June 30, December June 30,31, 2010 2010 31, 2010 2010 31, 2010 2010 31, 2010 2010

(Rupees in thousand)

Segment assets 51,702,739 47,046,043 1,869,388 1,790,148 (265,206) (217,631) 53,306,920 48,492,644

Segment liabilities 21,892,178 20,526,823 1,463,625 1,421,788 (292,857) (217,631) 23,062,946 21,557,986


32 2010HALF YEARLY


d.g. khan cement company limited 2nd quarter (half yearly... · khairpur, tehsil kallar kahar,...

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