1.

INTRODUCTION

The Company's principal activity is to manufacture and market cement. D.G. Khan Cement Limited has been sponsored by Nishat Group which is one of the largest business groups of the Country and has grown up remarkably over the last 50 years. NISHAT GROUP Nishat Group is one of the leading and most diversified business groups in South East Asia. With assets over PRs.300 billion, it ranks amongst the top five business houses of Pakistan. The group has strong presence in three most important business sectors of the region namely Textiles, Cement and Financial Services. In addition, the Group has also interest in Insurance, Power Generation, Paper products and Aviation. It also has the distinction of being one of the largest players in each sector. The Group is considered at par with multinationals operating locally in terms of its quality of products & services and management skills. Mian Mohammad Mansha, the chairman of Nishat Group continues the spirit of entrepreneurship and has led the Group successfully to make it the premier business group of the region. The group has become a multidimensional corporation and has played an important role in the industrial development of the country. In recognition of his unparallel contribution, the Government of Pakistan has also conferred him with Sitara-e-Imtiaz, one of the most prestigious civil awards of the country. D.G. KHAN CEMENT COMPANY D.G. Khan Cement Company Limited (DGKCC), a unit of Nishat group, is the largest cement-manufacturing unit in Pakistan with a production capacity of 5,500 tons clinker per day. It has a countrywide distribution network and its products are preferred on projects of national repute both locally and internationally due to the unparallel and consistent quality. It is list on all the Stock Exchanges of Pakistan. DGKCC was established under the management control of State Cement Corporation of Pakistan Limited (SCCP) in 1978. DGKCC started its commercial production in April 1986 with 2000 tons per day (TPD) clinker based on dry process technology. Plant & Machinery was supplied by UBE Industries of Japan. ACQUISITION OF DGKCC BY NISHAT GROUP Nishat Group acquired DGKCC in 1992 under the privatization initiative of the government. Starting from the privatization, the focus of the management has been on increasing capacity as well as utilization level of the plant. The company undertook the optimization by raising the capacity immediately after the privatization by 200tpd to 2200tpd in 1993.

CAPACITY ADDITION To meet the increasing demand and to capitalize on its geographic location, the management further expanded the capacity by adding another production line with a capacity of 3,300 tons per day in year 1998. Design of the new plant is based on latest dry process technology, energy efficient and environmental protection from particulate pollution according to the international standards. The plant and machinery was supplied by M/s F.L. Smidth of Denmark. As a result, DGKCC emerged as the largest cement production plant in Pakistan with annual production capacity of 1,650,000 M tons of clinker (1,732,000 M.Tons Cement) constituting about 10% share of the total cement production capacity of the country. The optimization plan is still underway to increase the total capacity of the two units to 6700 TPD by mid of 2005 from 5500 TPD at present. EXPANSION -KHAIRPUR PROJECT Furthermore, the Group is also setting up a new cement production line of 6,700 TPD clinker near Kalar Kahar, Distt. Chakwal,the single largest production line in the country. First of its kind in cement industry of Pakistan, the new plant will have two strings of preheater towers, the advantage of twin strings lies in the operational flexibility whereby production may be adjusted according to market conditions. The project will be equipped with two vertical cement grinding mills. The cement grinding mills are first vertical Mills in Pakistan. The new plant would not only increase the capacity but would also provide proximity to the untapped market of Northern Punjab and NWFP besides making it more convenient to export to Afghanistan from northern borders. POWER GENERATION For continuous and smooth operations of the plant uninterrupted power supply is very crucial. The company has its own power generation plant along with WAPDA supply. The installed generation capacity is 23.84 MW. ENVIRONMENTAL MANAGEMENT DG Khan Cement Co. Ltd., production processes are environment friendly and comply with the World Banks environmental standards. It has been certified for Environment Management System ISO 14001 by Quality Assurance Services, Australia. The company was also certified for ISO-9002 (Quality Management System) in 1998. By achieving this landmark, DG Khan Cement became the first and only cement factory in Pakistan certified for both ISO 9002 & ISO 14001... 1.1 MISSION STATEMENT

To provide quality products to customers and explore new markets to promote/expand sales of the Company through good governance and foster a sound and dynamic team, so as to achieve optimum prices of products of the Company for sustainable and equitable growth and prosperity of the Company.

1.2

VISION STATEMENT

To transform the Company into modern and dynamic cement manufacturing company with qualified professionals and fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan. 1.3 CORPORATE PROFILE

BOARD OF DIRECTORS 1. 2. 3. 4. 5. 6. 7. Mrs. Naz Mansha Chairperson Mian Raza Mansha Chief Executive Mr. Khalid Qadeer Qureshi Mr. Zaka-ud-Din Mr. Muhammad Azam Mr. Inayat Ullah Niazi Chief Financial Officer Ms. Nabiha Shahnawaz Cheema

AUDIT COMMITTEE 1. 2. 3. Mr. Khalid Qadeer Qureshi Member/Chairman Mr. Muhammad Azam Member Ms. Nabiha Shahnawaz Cheema Member

COMPANY SECRETARY Mr. Khalid Mahmood Chohan BANKERS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Allied Bank Limited Askari Bank Limited Bank Alfalah Limited Barclays Bank Citibank N.A. Deutsche Bank AG Dubai Islamic Bank Pakistan Limted Faysal Bank Limited Habib Bank Limited HSBC Limited MCB Bank Limited Meezan Bank Limited National Bank of Pakistan NIB Bank Limited Standard Chartered Bank (Pakistan) Limited Silk Bank Limited (Formerly Saudi Pak Commercial Bank Limited)

17. 18. 19.

The Bank of Punjab The Royal Bank of Sotland (Formerly ABN AMRO Bank (Pakistan) Limited) United Bank Limited

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-Pakistan Phone: 92-42-36367812-20 UAN: 111 11 33 33 Fax: 92-42-36367414 Email: info@dgcement.com Web site: www.dgcement.com FACTORY Khofli Sattai, Distt. Dera Ghazi Khan-Pakistan Phone: 92-641-460025-7 UAN: 92 642 111 11 33 33 Fax: 92-641-462392 Email: dgsite@dgcement.com 12, K.M. Choa Saidan Shah Road, Khairpur, Tehsil Kallar Kahar, Distt. Chakwal-Pakistan Phone: 92-543-650215-8 UAN: 92 543 111 11 33 33 Fax: 92-543-650231

1.4

PROUDUCT LINE

ORDINARY PORTLAND CEMENT EXCEPTIONAL STRENGTH At DGKCC the chemical composition and grinding fineness are closely monitored to ensure that both Pakistani and British standards are surpassed and our customers get cement of exceptional strength. IDEAL SETTING TIME In order to allow sufficient time for application, cement must have a quick initial settings time. However, once in place, the final settings should not take too long. At DGKCC ideal initial and final setting times are maintained. SULPHATE RESISTANT CEMENT LOW C3A CONTENT Sulphate salts present in these soils combine with moisture and tricalcium alumnate (C3A), one of the constituents of cement to form a compound known as Sulpho Alumnate of Hydrated Calcium. This compound is highly expansive and gradually results in the destruction of concrete. However, if C3A content is very low, it is rendered inert and there is thus no reaction at all. British and Pakistani standards specify that in a Sulphate Resistant Cement, the C3A content must not exceed 3.5%. D.G Sulphate Resistant Cement has a much lower C3A content, making the cement highly effective against Sulphate attacks. LOW HEAT OF HYDRATION Heat of hydration is the heat generated on reaction of cement and water. This is undesirable because it produces a corresponding thermal expansion which deforms the concrete. Upon cooling down, there is a thermal contraction which causes the concrete to crack. D.G Sulphate Resistant Cement has a low heat of hydration making it EXTREMELY SUITABLE for BULK POURING and MASS CONCRETING. HIGH STRENGTH As with any type of cement, strength is the fundamental property of Sulphate Resistant Cement D.G. Sulphate Resistant Cement achieves high strength through finer grinding and better particle distribution. In term of strength,, it not only exceeds by far the standards specified for Sulphate Resistant Cement, but also exceeds those of Ordinary Portland cement

LOW ALKALI CONTENT Certain aggregates contain alkali sensitive ingredients, which under unfavorable conditions; can result in expansion leading to cracking of concrete. The presence of alkali also causes staining and other undesirable effects on concrete. American Standards specify that cement can be termed low-alkali if its alkali content does not exceed 0.6% D.G. Sulphate Resistant Cement has alkali content below 0.6 and a unique distinction of being a Sulphate Resistance Cement that can also be classified as low - alkali cement.

1.5

BUSINESS STRATEGY

Company has been focusing on a four tier business strategy; each is briefly narrated as under: EXPLORING AND ESTABLISHING EXPORT MARKETS The management of Company has successfully established a well diversified export market to mitigate the risk of shortfall in exports. Company has exported its high quality cement in more than 23 countries across Middle East, Africa and South East Asian countries and its brand is recognized and known as the best quality product amongst the high profile buyers. ECONOMY OF SCALE WITH FOREIGN OPERATIONS Commissioning of Company has reached a new height of scale of production. The operation has been very smooth and its capacity utilization has reached to almost 90% within a short period of three months. The management of Company is now actively pursuing the setup of grinding facilities abroad for capitalizing the vast experience of its management together with its international brand recognition. COST REDUCTION WITH EFFICIENT OPERATION Without cost reduction measures and efficient operations, no company can achieve sustainable growth in its business operation in a highly competitive world. The management of Company has successfully implemented various cost reduction measures taken earlier except for the heat recovery project which is progressing according to schedule. As a result of various cost reducing measures, Company is one of the lowest cost producers of cement in the country with hybrid technology. ON GOING PROJECTS Work on Waste Heat Recovery project is underway. Civil work and fabrication is at full swing. Shipments of plant & machinery have already started reaching at plant site. The project is expected to complete as per schedule. Cement manufacturing is highly energy extensive. Therefore, focusing on non conventional fuels as alternative or substitute fuels to conserve energy is simply mandatory requirement of the day. Your management has

decided to use Municipal Solid Waste as Refused Drive Fuel (RDF) as an alternative to Coal. This will not only reduce the rising cost of production but also provide an opportunity to dispose of permanently the waste material in a controlled environment friendly sustainable fashion. In this regard your management has singed an agreement with a German company for the supply of modular design machinery and equipment for RDF project. FUTURE OUTLOOK Current situation posed serious doubts for stable and sustained developmental and infrastructural projects in the country. Safe and secure environment is of pivotal importance for new investments. Entrepreneurs both local and foreigners pay high importance to conducive and safe working place. On going war like situation in Northern parts of our country and severe security concerns in other areas of the country is hampering the overall economic activities. In addition liquidity crisis, increasing electricity tariff, power shedding and still higher cost of financing are serious impediments to economic growth in the country. Going forward, spending by Govt. under annual PSDP is reportedly much less than budgeted for the first quarter of FY 2010. All these factors will affect the cement demand in the periods to come. In export markets, specially, in Gulf region the competition is getting stiff after capacity additions by a few Gulf States. Recently Saudi Arabia has also allowed cement exports which is a set back for Pakistani cement manufacturers. Nevertheless, cement exports from the country are expected to achieve a decent growth in the current financial year as well. 1.6 MANUFACTURING PROCESS

RAW MATERIAL USED

2.

FINANCIALS

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11

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3.

COST ACCOUNTING SYSTEM

15

3.1

STORES AND SPARES

16

4.

VARIANCE ANALYSIS

17

CAPACITY

PRODUCTION

18

4.1

RAW MATERIAL

19

20

4.2

LABOR

21

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4.3

OVER HEADS

24

4.4

ABNORMAL NON-RECURRING FEATURES

25

5.

BUDGETING

26

27

6.

SALES ANALYSIS

28

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7.
1. 2. 3. 4. 5. 6. 7.

REFERENCES
www.dgcement.com www.igisecurites.com www.pakistanbusiness.com www.cement.com.pk www.nishat.net www.nishatpak.com www.ahln.com.pk

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