KARACHI: D G Khan Cement (DGKC) on Wednesday reported a 58.7 percent increase in its first quarter net profit due to huge tax credit available to the company.
The cement maker announced a net profit of Rs2.73 billion for the quarter ended September 30, 2017 as against Rs7.11 billion reported during the corresponding period of the last year, a bourse filing said.
The earnings per share (EPS) clocked in at Rs6.24 for the period under review as against EPS of Rs3.94 during the same period of the last year. The company did not announce any payouts along with the corporate announcement.
Analysts said the DGKC reported better than expected consolidated earnings in the first quarter of the fiscal year of 2017/18 “thanks to huge tax credit available to the company as a result of investment in the new cement line, located in Hub, Baluchistan, “The result was higher than our expectations due to more-than-expected tax benefits booked by the company,” analyst Karim Punjani at Elixir Securities said.
As per section 65B of the Income Tax Ordinance, 2001, a company is entitled to a 10 percent tax credit on investment (based on a certain timeframe) in the purchase of plant and machinery for the purposes of extension, expansion, balancing, modernisation and replacement of the plant and machinery. Analysts said the company also did not book any corporate tax due to tax adjustment under depreciation allowance on its new Hub line. “We expect further tax benefit of up to Rs1.1 billion to be booked in the remaining quarters of current fiscal year,” analyst Nabeel Khursheed at Topline Securities said.
The company’s sales revenue during the quarter ended September 30, 2017 surged 14 percent to Rs8.11 billion as against the revenues of Rs7.11 billion during the quarter ended September 30, 2016. “Consolidated sales surged due to volumetric growth witnessed in high margin local cement sales,” Khursheed said. “Gross margins came under pressure, down 8ppts to 33 percent owing to rising coal and fuel prices.”
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