D.G. Khan Cement AA- ratings stable

March 03, 2026 (MLN): The Pakistan Credit Rating Agency (PACRA) has maintained the long-term and short-term entity ratings of D.G. Khan Cement Company Limited at AA- and A1+, respectively, with a stable outlook.

The ratings reflect the company’s strong operational performance, robust financial management, and the backing of the Nishat Group.

D.G. Khan Cement’s long-standing presence in Pakistan’s cement sector has helped it navigate a challenging FY25, marked by subdued domestic construction activity and constrained development spending.

Despite these pressures, the overall cement industry saw a 2.1% increase in sales volumes to 46.2m tons, primarily driven by a 30% surge in exports to 9.2m tons.

Industry capacity utilization remained stable at approximately 55%. Early FY26 data indicates accelerating momentum, with first-quarter dispatches rising 17.7% domestically and 20.8% in exports, signaling a gradual recovery in construction activity and improved sector outlook.

Against this backdrop, D.G. Khan Cement increased its dispatches by around 9.1% in FY25 to 5.3m tons, up from 4.8m tons in FY24.

First-quarter FY26 dispatches jumped 28% YoY to 1.4m tons, with half-year FY26 volumes reaching 2.8m tons, reflecting an approximate 10% market share.

The Hub plant operated at full capacity, while improved pricing and higher export volumes helped net revenues climb to Rs71.90bn in FY25 from Rs66.04bn the previous year.

Gross margins rose to 26%, though still below industry averages, while net margins reached 12.1%. In 1QFY26, net sales grew 29% YoY to Rs19.81bn, with net margins at 10.9%.

The company’s expansion plans include installing Pakistan’s largest clinker line with an 11,000 tons per day capacity at its D.G. Khan site, set to increase clinker capacity to 10m tons per annum within two years.

Additionally, Nishat Group linked entities plan to acquire up to 75.69% of Rafhan Maize Products Company Limited, including a proposed 32.71% stake by D.G. Khan Cement.

While these initiatives are expected to be largely debt-financed, management aims to maintain prudent gearing levels.

PACRA highlighted that the company’s strong association with the Nishat Group, coupled with strategic investments generating supplementary income, supports its robust financial profile.

However, sustained improvement in core operational performance remains critical to maintaining the ratings.

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