ort uarter Rep 011 1st Q 2 mber 30,) Septe n-audited (U

D.G. KHAN CEMENT COMPANY LIMITED

CONTENTS

D.G Khan Cement Company Limited

Corporate profile ......................................................................................................................... 2 Directors Report ......................................................................................................................... 3 Condensed Interim Balance Sheet ............................................................................................ 6 Condensed Interim Profit and Loss Account ............................................................................. 7 Condensed Interim Statement of Comprehensive Income ....................................................... 8 Condensed Interim Cash Flow Statement ................................................................................. 9 Condensed Interim Statement of Changes in Equity .............................................................. 10 Selected Notes to the Condensed Interim Financial Information ............................................ 11

D.G Khan Cement Company Limited and its Subsidiary

Directors Report ....................................................................................................................... 17 Condensed Interim Consolidated Balance Sheet ................................................................... 18 Condensed Interim Consolidated Profit and Loss Account..................................................... 19 Condensed Interim Consolidated Statement of Comprehensive Income .............................. 20 Condensed Interim Consolidated Cash Flow Statement......................................................... 21 Condensed Interim Consolidated Statement of Changes in Equity ....................................... 22 Selected Notes to the Condensed Interim Consolidated Financial Information ..................... 23

CORPORATE PROFILE
Board of Directors Mrs. Naz Mansha Mian Raza Mansha Mr. Khalid Qadeer Qureshi Dr. Arif Bashir Mr. Farid Noor Ali Fazal Mr. Inayat Ullah Niazi Ms. Nabiha Shahnawaz Cheema Mr. Khalid Qadeer Qureshi Mr. Farid Noor Ali Fazal Ms. Nabiha Shahnawaz Cheema Mr. Khalid Mahmood Chohan Allied Bank Limited Askari Bank Limited Bank Alfalah Limited Bank Islami Pakistan Limited Barclays Bank Plc Citibank N.A. Deutsche Bank AG Dubai Islamic Bank Faysal Bank Limited First Women Bank Limited Habib Bank Limited HSBC Habib Metropolitan Bank Limited MCB Bank Limited NIB Bank Meezan Bank Limited National Bank of Pakistan Samba Bank Limited Standard Chartered Bank (Pakistan) Limited Silk Bank Limited The Bank of Punjab United Bank Limited Chairperson Chief Executive

Chief Financial Officer

Audit Committee

Member/Chairman Member Member

Company Secretary Bankers

External Auditors Cost Auditors Legal Advisors Registered Office

KPMG Taseer Hadi & Co, Chartered Accountants Avais Hyder Liaquat Nauman, Chartered Accountants Mr. Shahid Hamid, Bar-at-Law 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 1. Khofli Sattai, Distt. Dera Ghazi Khan-Pakistan Phone: 92-641-460025-7 Fax: 92-641-462392 Email: dgsite@dgcement.com 2. 12, K.M. Choa Saidan Shah Road, Khairpur, Tehsil Kallar Kahar, Distt. Chakwal-Pakistan Phone: 92-543-650215-8 Fax: 92-543-650231

Factory

02

1st QUARTER

2011

DIRECTORS REPORT
The board of directors is pleased to submit its report along with the interim financial statements for the September quar ter of the financial year 2012. Economic Outlook Business outlook Year 2011 closed with some positive signs of economic recovery. With planned GDP of 4.2% and planned Public Sector Development Program at Rs 730 billion, the prospects for 2011 are fairly positioned for the industrial sector to capitalize on its production capabilities. The devastating floods casting heavily on the already stripped economy would certainly challenge the Government to fulfill its commitments towards infrastructural development projects. The position would, however, open up further when we would cross the half year mark. Industry wide volumes, so far, have presented some what positive picture of the cement industry as a whole where growth has been witnessed across all domestic market segments after the 2011 decline. Cement exports from Pakistan saw mixed trend in the first three months of financial year 2012 while in aggregate, export volumes remained at the level similar to that of the first quarter 2011 (exhibiting a slight volumetric growth). In domestic market, volumetric growth of 12% was witnessed which, as discussed earlier, resulted primarily because of increased cement demand fueled by various rebuilding and infrastructure development projects. Company performance vis--vis industry overview Our company took advantage of the slight demand adjustment in the domestic cement market by capitalizing on its strong consumer base and production capabilities thereby, maintaining its domestic cement market share. Expor ts, on the other hand, witnessed superb volumetric growth compared to first quarter 2011. The volumes rose by 134,022 metric tons thereby recording 64% growth over the same period last year. East African and the Southeast Asian region remained major export markets for the company with Djibouti and Afghanistan topping from both the regions respectively. Production Statistics
2011 MT
Period ended September 30

2010 MT

Change MT %

Clinker Production 975,735 97% Cement Production 954,860 Local Sales 625,586 Cement Export 344,485

963,193 12,542 96% 973,077 -18,217 710,168 -84,582 210,463 134,022

1 -2 -12 64

Apart from the industry wide growth witnessed during the first quarter, the market generally remained stagnant in the nor th with no major building or development project kicking off. The general stagnation was also reflected in the cement sales of the company, which slid down during the quarter. The factors for decline remained similar with no major change in the underlying circumstances. Lack of demand still prevails in the rural areas particularly those struck with floods. The public development projects in such areas have also not yet generated the anticipated demand of cement. It is, however, anticipated that the position would significantly improve in the second half of the year 2012.

1,200 1,000 800 600 400 200 -

2007
Cement Sold

2008

2009

2010

2011
Clinker Produced

Cement Produced

2011

1st QUARTER

03

Financial Performance
Rupees in 000

2011 Quarter ended 30 September Net sales Cost of sales Gross profit Profit from operations Finance cost Profit before tax Taxation Profit after tax 5,088,013 -3,556,816 1,531,197 1,010,144 -448,863 561,281 -243,532 317,749 % to net sale 100.00 -69.91 30.09 19.85 -8.82 11.03 -4.79 6.25

2010 Quarter ended 30 September 3,527,923 -2,849,484 678,439 513,779 -488,232 25,547 -3,401 22,146 % to net sale 100.00 80.77 19.23 14.56 13.84 0.72 0.10 0.63

Change Year on Year 1,560,090 707,332 852,758 496,365 39,369 535,734 -240,131 295,603 13 T % 44% 25% 126% 97% -8% 20 T

Better margins in the domestic market make up for falling volumes: Despite falling volumes across all domestic business segments our company earned a gross profit of 30% on the net sales revenues which went up by 44% as compared to last year. Despite higher production costs, the company gained due to better marketing strategies. Higher operating profits of Rs 1.1 billion on net sales of Rs 5.08 billion, registering a growth of 97% compared with last quar ter's figures, demonstrated the company's operational efficiency as well as effective cost management policy.
6,000 5,000 4,000 3,000 2,000 1,000 -

Surge in oil prices in international markets are bound to further aggravate the position and would put pressure on our margins in coming future.
35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00%
2.07% 0.12% 0.49% 0.62% 16.72% 16.73% 9.87% 12.74% 10.20% 8.65% 29.97%

31.67% 28.068% 30.09%

19.23% 13.84% 9.26%

12.49% 8.82% 6.2.3%

4,337

4,592 3,528

5,088

-5.00%

2007

2008

2009

2010

2011

Net Profit Selling Expenses 3,557

Finance Cost Gross Profit

2,233 1,860

3,037

3,275

2,849

2007

2008

2009

2010

2011

Net Sales

Cost of Sales

Figures in millions of Rupees

Provision for taxation during the period includes deferred tax provision amounting to Rs 192 million arising primarily due to reduction in available tax losses due to change in the expor t and local sales mix during the period. The charge for deferred tax has been computed in the light of management's judgment based on the conditions and circumstances existing at the balance sheet date.

The selling and distribution expenses were higher in proportion to exports during the current period because of ever increasing transpor tation costs and higher levels of inflation in the economy.
04 1st QUARTER

2011

Other operating expenses 1.78%

Taxation 4.55% Finance Cost 8.39%

Retained in business 5.94%

All of the ongoing projects are running as planned and hopefully would be completed on schedule. Condolence

Selling and distribution Cost 11.88%

Cost of Sales 66.49%

Administrative Costs 0.96%

Future Outlook In view of the factors explained in the preceding paragraphs, the management foresees positive growth trends in the year 2012. Demands are rising in African as well as Asian regions and the company is fully poised to capitalize on the rising demands. As observed in the first quar ter of the year 2012, management anticipates that the pattern of growth would continue throughout the year. Domestic cement demand, though remained subdued in the first quarter, is likely to go up in the coming months due to initiation of various infrastructural development projects that remained in the pre-startup phase during the first quarter of the financial year 2012. The management envisions that the recent cut in the discount rate, as announced by the State Bank of Pakistan, would have a favourable impact on the businesses all over the country. It would bring down KIBOR and would ultimately reduce the financing costs. The trend of devaluation of Pakistani Rupee against US Dollar is also posing a threat since the company is exposed to currency risk with liabilities denominated in US Dollars. The overall adverse effect of such devaluation would, however, be offset by favourable outcomes while realizing export proceeds.

Our company received a great set back and shock on the sad demise of Mr. Zaka ud Din, Director, on 14 th October, 2011, after a short illness. The loss is irreparable and grief is boundless but the consolation to remember is that he was so greatly loved and respected by all of us. We sincerely mourn the passing away of Mr. Zaka ud Din who had endeared himself to every one by his nobility, kindness and large-heartedness. We pary that Allah, in his unbounded mercy, may grant peace to the soul of the deceased in Heaven and give us the strength to bear this great loss. Ameen ! The vacancy caused in the Board of Directors has been filled with appointment of Dr. Arif Bashir. Company's Staff and Customers We wish to record our appreciation of continued commitment of our employees and patronage of our customers. For and on behalf of the Board

Mian Raza Mansha Chief Executive Officer Lahore: 22 October 2011

2011

1st QUARTER

05

CONDENSED INTERIM UNCONSOLIDATED

BALANCE SHEET
Rupees in thousands Note 30.09.2011 unaudited 9,500,000 500,000 10,000,000 4,381,192 22,842,392 1,196,460 28,420,044 4,187,766 69,940 136,265 1,900,060 6,294,031 1,559,315 242,975 10,141,037 1,944,713 35,090 13,923,130 48,637,205 24,266,620 1,582,570 4,728,068 133,746 30,711,004 4,280,535 913,173 298,915 10,542,707 1,514,719 376,152 17,926,201 48,637,205 30.06.2011 audited 9,500,000 500,000 10,000,000 4,381,192 24,957,382 878,711 30,217,285 4,880,579 70,893 139,213 1,707,886 6,798,571 1,644,045 284,511 8,691,982 2,001,566 35,090 12,657,194 49,673,050 24,611,565 1,373,820 5,259,416 133,219 31,378,020 3,543,034 862,141 459,300 12,126,349 1,136,564 167,642 18,295,030 49,673,050

Authorised capital - 950,000,000 (June 30, 2011: 950,000,000) ordinary shares of Rs 10 each - 50,000,000 (June 30, 2011: 50,000,000) preference shares of Rs 10 each Total authorized capital Issued, subscribed and paid up capital Reserves Accumulated profit Total shareholders' equity Long term finances Long term deposits Retirement and other benefits Deferred taxation Total non-current liabilities Trade and other payables Accrued markup Short term borrowing-secured Current portion of non-current liabilities Provision for taxation Total current liabilities Total liabilities and shareholders' equity Property, plant and equipment Capital work in progress Investments Long term loans, advances and deposits Total non-current assets Stores, spares and loose tools Stock-in-trade Trade debts Investments Advances, deposits, prepayments and other receivables Cash and bank balances Total current assets Total assets Contingencies and Commitments

6 7

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

Chief Executive
06 1st QUARTER

Director 2011

CONDENSED INTERIM UNCONSOLIDATED

PROFIT AND LOSS ACCOUNT - UNAUDITED
July 1 to September 30 Rupees in thousands Sales - net Cost of sales Gross profit Administrative expenses Selling and distribution expenses Other operating expenses Other income Profit from operations Finance cost Profit before taxation Taxation Profit after taxation Note 2011 5,088,013 (3,556,816) 1,531,197 (51,370) (635,688) (95,425) 261,430 1,010,144 (448,863) 561,281 (243,532) 317,749 2010 3,527,923 (2,849,484) 678,439 (41,960) (326,732) (29,382) 233,414 513,779 (488,232) 25,547 (3,401) 22,146 Restated Earnings per share basic and diluted (Rupees) 0.73 0.05

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

Chief Executive 2011

Director
1st QUARTER 07

CONDENSED INTERIM UNCONSOLIDATED

STATEMENT OF COMPREHENSIVE INCOME - UNAUDITED
July 1 to September 30 Rupees in thousands Profit after taxation Available for sale financial assets - Change in fair value - Realized gain through profit and loss account - Tax expense Other comprehensive (loss) for the period Total comprehensive (loss) for the period 2011 317,749 2010 22,146

(2,114,990) (2,114,990) (1,797,241)

(374,310) (374,310) (352,164)

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

Chief Executive
08 1st QUARTER

Director 2011

CONDENSED INTERIM UNCONSOLIDATED

CASH FLOW STATEMENT - UNAUDITED
July 1 to September 30 Rupees in thousands Cash (used in)/ generated from operations Financial cost paid Retirement and other benefits paid. Taxes paid Long term deposits - Net Net cash (used in)/ from operating activities [A] Capital expenditure including purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Long term loans and deposits - Net Interest received Dividend received Net cash from/ (used in) investing activities [B] Repayment of long term finances Net cash from/ (used in) financing activities [C] In(De)crease in cash and cash equivalents [A+B+C] Cash and cash equivalents at the beginning of period Cash and cash equivalents at the end of period 12 Note 11 2011 57,344 (490,399) (11,196) (67,996) (953) (513,200) (217,525) 15,999 (527) 16,105 230,535 44,587 (771,932) (771,932) (1,240,545) (8,524,340) (9,764,885) 2010 (944,023) (454,881) (6,317) (52,401) (3,136) (1,460,758) (65,763) 28,380 10,678 15,610 213,115 202,020 (456,917) (456,917) (1,715,655) (9,354,850) (11,070,505)

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

Chief Executive 2011

Director
1st QUARTER 09

CONDENSED INTERIM UNCONSOLIDATED

STATEMENT OF CHANGES IN EQUITY - UNAUDITED

10 Share Capital General Reserve Total 26,519,220 22,146 729,896 5,071,827 353,510 5,071,827 148,815 878,711 317,749 1,196,460 (374,310) 26,167,056 1,460,398 148,815 2,441,016 30,217,285 317,749 (2,114,990) 28,420,044 5,071,827 5,071,827 22,146 707,750 3,650,993 3,650,993 730,199 4,381,192 4,381,192 4,557,164 12,859,891 (2,114,990) 4,557,164 14,974,881 2,441,016 353,510 730,199 3,826,965 12,533,865 353,510 (374,310) 3,826,965 12,908,175 353,510 Share Premium Fair Value Reserve Accumulated Profit Capital Redemption Reserve Fund

1st QUARTER

Rupees in thousands

Balance as at 30 June 2010 - Audited

Total comprehensive income for the period

- Profit for the year

2011

- Other comprehensive income for the year

Balance as at September 30, 2010 - Unaudited

Capaital transactions with owner

- Right issue

Total comprehensive income for the period

- Profit for the year

- Other comprehensive income for the year

Balance as at June 30, 2011 - Audited

Total comprehensive icome for the period

- Profit for the period

- Other comprehensive loss for the period

Balance as at September 30, 2011 - Unaudited

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

Chief Executive

Director

SELECTED NOTES TO AND FORMING PART OF THE CONDENSED INTERIM UNCONSOLIDATED FINANCIAL INFORMATION - UNAUDITED
1. Legal status and nature of business D. G. Khan Cement Company Limited ("the Company") is a public limited company incorporated 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 Sulphate Resistant Cement. The registered office of the Company is situated at 53-A Lawrence Road, Lahore. 2. Basis of preparation The unaudited condensed interim unconsolidated financial information (hereafter "interim financial information") for the quar ter has been prepared and is being submitted to shareholders in accordance with the provisions contained in section 245 of the Companies Ordinance, 1984 and the pronouncements of International Accounting Standard (IAS) 34 - 'Interim Financial Repor ting'. The interim financial information does not include all of the information required for full annual financial statements and accordingly, should be read in conjunction with the annual financial statements for the year ended June 30, 2011 as they provide an update of previously reported information. The preparation of the interim financial information requires management to make judgments, estimates and assumptions that affect the application of accounting policies, the presentation of assets, liabilities, incomes and expenses and the amounts repor ted there against as well as disclosure of contingent liabilities at the date of the interim financial information. If in future such estimates and assumptions, which are based on management's best judgment at the date of the interim financial information, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate during the period in which the circumstances change. In preparing the interim financial information, the significant judgments made by the management in applying accounting policies, key estimates and uncertainty includes: Residual value and useful life estimation of fixed assets Taxation Retirements and other benefits Provisions and Contingencies Fair value of derivatives

3. Significant accounting policies 3.1 The accounting policies and methods of computation adopted in the preparation of the interim financial information are generally based on the same policies and methods as applied in preparation of the annual financial statements for the year ended June 30, 2011. 3.2 In addition to above, following amendments to the International Financial Repor ting Standards/ International Accounting Standards are mandatory for the first time for the financial year beginning on or after January 1, 2011, however, the adoption of these amendments is either not yet effective or the amendments did not have any significant impact on the financial information of the company. 2011
1st QUARTER 11

IFRS 7 - Financial instruments : Disclosures (Improvements) IAS 1 - Presentation of Financial Statements (Improvements) IAS 24 - Related Party disclosuures (amendment) IFRIC 13 - Customer Loyalty Programmes (improvements) IFRIC 14 - Prepayments of minimum funding requirements (amendment)

4. The provision for taxation for the quarter September 30, 2011 has been made on an estimated basis.

Rupees in thousands 5. Long term finances These are composed of: - Long term loans - Loan under musharika arrangement

Note

30.09.2011 unaudited

30.06.2011 audited

5.1 Less: Current portion shown under current liabilities Total long term finances 5.1 Long term loans Opening balance Add: Disbursements during the period Exchange loss during the period Less: Repayment during the period Closing balance 6. Property, Plant and Equipment Opening book value Add: Additions during the period/ year Less: Disposals during the period/ year - net book value Depreciation charged during the period/ year Closing book value 6.1 Major additions during the period Free hold land Building on freehold land Roads Plant and machinery Furniture, fixtures and office equipment Motor vehicles Power and water supply lines

5,317,961 807,500 6,125,461 1,937,695 4,187,766

6,067,627 807,500 6,875,127 1,994,548 4,880,579

6,875,127 22,266 6,897,393 771,932 6,125,461

7,222,988 1,850,000 6,182 9,079,170 2,204,043 6,875,127

6.1

24,611,565 8,776 24,620,341 5,392 348,329 24,266,620

25,307,302 764,442 26,071,744 29,769 1,430,410 24,611,565

2,782 5,454 540 8,776

410 212,315 4,089 454,768 22,132 66,843 3,885 764,442

12

1st QUARTER

2011

Rupees in thousands 7. Investments Cost of investments Add: Fair value adjustments Less: Investments classified in current assets Closing book value 8. Contingencies and commitments

30.09.2011 unaudited 2,410,884 12,859,891 15,270,775 10,542,707 4,728,068

30.06.2011 audited 2,410,884 14,974,881 17,385,765 12,126,349 5,259,416

8.1 Contingencies There is no significant change in contingencies from the annual financial statements of the company for the year ended June 30, 2011. 8.2 Commitments in respect of (i) Contracts for capital expenditure Rs 178.318 million (June 30, 2011: Rs 113.639 million). (ii) Letters of credit for capital expenditure Rs 1,213.102 million (June 30, 2011: Rs 1,364.57 million). (iii) Letters of credit other than capital expenditure Rs 793.361 million (June 30, 2011: Rs 873.36 million).
July 1 to September 30

Rupees in thousands
9. Cost of sales

2011

2010

Raw and packing materials consumed Salaries, wages and other benefits Electricity, gas and water Furnace oil/coal Stores and spares consumed Repair and maintenance Insurance Depreciation on property, plant and equipment Royalty Excise duty Vehicle running Postage, telephone and telegram Printing and stationery Legal and professional charges Travelling and conveyance Estate development Rent, rates and taxes Freight charges Other expenses Total manufacturing cost c/f 2011

451,960 211,092 472,820 1,954,193 242,936 46,744 13,833 344,332 37,665 3,489 5,370 696 859 252 3,212 4,266 5,561 1,350 5,941 3,806,571

402,596 177,671 457,201 1,501,202 270,269 64,596 12,011 349,494 37,728 3,492 5,751 1,214 743 763 1,413 2,622 4,056 1,344 10,197 3,304,363
13

1st QUARTER

July 1 to September 30

Rupees in thousands Total manufacturing cost b/f Opening work-in-process Cost of goods available for manufacture Closing work-in-process Cost of goods manufactured Opening stock of finished goods Cost of goods available for sale Closing stock of finished goods Own consumption capitalized Cost of goods sold 10.Transactions with related parties

2011 3,806,571 169,612 3,976,183 (443,002) 3,533,181 294,737 3,827,918 (261,514) (9,588) 3,556,816

2010 3,304,363 537,539 3,841,902 (802,717) 3,039,185 219,365 3,258,550 (407,066) (2,000) 2,849,484

The related parties comprise subsidiary company, associated companies, other related companies, directors of the company, key management personnel and post employment benefit plans. Significant transactions with related parties are as follows:
July 1 to September 30

Rupees in thousands Relationship with the Company Subsidiary company Nature of transaction

2011

2010

Other related parties

Key Management personnel Post employment benefit plans

Purchase of goods and services Rental Income Interest Income Purchase of goods and services Sale of property plant and equipment Insurance premium Sale of goods Mark-up income Insurance claim received Dividend income Salaries and other employment benefits Expense charged in respect of staff retirement benefits plans

177,664 203 13,910 226,091 5,614 10,230 446 65 230,527 65,031

275,236 198 13,839 209,051 23,187 6,105 8,357 571 758 213,112 23,654

37,514

8,248

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

14

1st QUARTER

2011

July 1 to September 30

Rupees in thousands 11. Cash flow from operating activities Profit before tax Adjustment for : - Depreciation on property, plant and equipment - Profit on disposal of property, plant and equipment - Dividend income - Retirement and other benefits accrued - Markup income - Exchange loss - net - Finance cost Profit before working capital changes - Stores, spares and loose tools - Stock-in-trade - Trade debts - Advances, deposits, prepayments and other receivables - Trade and other payables Net working capital changes Cash (used in)/ generated from operations 12. Cash and cash equivalents Short term borrowings - secured Cash and bank balances Total cash and cash equivalents

2011

2010

561,281 348,329 (10,608) (230,535) 8,248 (15,124) 22,266 448,863 1,132,720 (737,501) (51,032) 160,385 (362,498) (84,730) (1,075,376) 57,344

25,547 352,184 (5,299) (213,115) 8,248 (14,629) 14,897 488,232 656,065 (879,700) (458,072) 162,546 (120,008) (304,854) (1,600,088) (944,023)

(10,141,037) 376,152 (9,764,885)

(11,327,059) 256,554 (11,070,505)

13.Date of authorization This interim financial information was authorized for issue by the Board of Directors of the Company on October 22, 2011. 14.Corresponding figures In order to comply with the requirements of the International Accounting Standard 34: 'Interim Financial Reporting', the condensed interim unconsolidated balance sheet and condensed interim unconsolidated statement of changes in equity have been compared with the balances of annual audited financial statements of preceding year, whereas, the condensed interim unconsolidated profit and loss account, condensed interim unconsolidated statement of comprehensive income and condensed interim unconsolidated cash flow statement have been compared with the balances of comparable period of immediately preceding year. Corresponding figures have been re-arranged wherever necessary for the purposes of comparison, however, no significant re-arrangements have been made. Figures have been rounded off to the nearest thousand of Rupees.

Chief Executive 2011

Director
1st QUARTER 15

CONSOLIDATED FINANCIAL STATEMENTS

DIRECTORS REPORT
The board of directors is pleased to submit their repor t along with the consolidated financial statements for the period ended 30 September 2011. Our discussion of affairs of the holding company has been separately presented. Consolidated Financial Performance
Rupees in 000

2011 Quarter ended 30 September % to net sale

2010 Quarter ended 30 September % to net sale

Change Year on Year

Net sales Cost of sales Gross profit Profit from operations Finance cost Profit before tax Taxation Profit after tax

5,296,449 -3,682,226 1,614,223 1,075,939 -474,815 601,124 -245,596 355,528

100.00 -69.52 30.48 20.31 -8.96 11.35 -4.64 6.71

3,730,660 -2,965,382 765,278 578,938 -509,911 69,027 -22,761 46,266

100.00 -79.49 20.51 15.52 -13.67 1.85 -0.61 1.24

1,565,789 -716,844 848,945 497,001 35,096 532,097 -222,835 309,262

42% 24% 111% 86% -7% 771% 668%

The consolidated sales and operating income increased to Rs 5,296.44 million from Rs 3,730.66 million in the previous period yielding a growth of 42%. The consolidated operating profit for the year increased to Rs 1,075.9 million as against Rs 578.93 million in the previous period registering a growth of 86%. The consolidated net profit before tax increased to Rs 601.12 million from Rs 69.02 million in the previous period registering a growth of 771%. Staff and Customers We wish to record our appreciation of continued commitment of our employees and patronage of our customers. For and on behalf of the Board

Mian Raza Mansha Chief Executive Officer Lahore: 22 October 2011

2011

1st QUARTER

17

CONDENSED INTERIM CONSOLIDATED

BALANCE SHEET
Rupees in thousands Note 30.09.2011 unaudited 9,500,000 500,000 10,000,000 4,381,192 22,881,416 1,276,554 28,539,162 360,299 28,899,461 4,257,766 69,940 136,265 1,921,081 6,385,052 1,758,430 272,827 11,040,735 2,004,713 35,090 15,111,795 50,396,308 30.06.2011 audited 9,500,000 500,000 10,000,000 4,381,192 24,996,406 939,916 30,317,514 341,409 30,658,923 4,960,579 70,893 139,213 1,730,886 6,901,571 1,847,505 304,800 9,362,051 2,131,566 35,090 13,681,012 51,241,506

Authorised capital - 950,000,000 (June 30, 2011: 950,000,000) ordinary shares of Rs 10 each - 50,000,000 (June 30, 2011: 50,000,000) preference shares of Rs 10 each Total authorized capital Issued, subscribed and paid up capital Reserves Accumulated profit Total shareholders' equity Non-controlling intrest Long term finances Long term deposits Retirement and other benefits Deferred taxation Total non-current liabilities Trade and other payables Accrued markup Short term borrowing-secured Current portion of non-current liabilities Provision for taxation Total current liabilities Total liabilities and shareholders' equity 6

Property, plant and equipment 7 25,362,535 25,707,179 Capital work in progress 1,582,570 1,373,820 Investments 8 4,524,439 5,055,787 Long term loans, advances and deposits 134,652 134,125 Total non-current assets 31,604,196 32,270,911 Stores, spares and loose tools 4,341,124 3,604,954 Stock-in-trade 1,815,572 1,513,014 Trade debts 432,512 650,283 Investments 8 10,542,725 12,126,367 Advances, deposits, prepayments and other receivables 1,235,932 866,678 Cash and bank balances 424,247 209,299 Total current assets 18,792,112 18,970,595 Total assets 50,396,308 51,241,506 Contingencies and Commitments 9 The annexed notes form an integral part of this condensed interim consolidated financial information.

Chief Executive
18 1st QUARTER

Director 2011

CONDENSED INTERIM CONSOLIDATED

PROFIT AND LOSS ACCOUNT - UNAUDITED
July 1 to September 30 Rupees in thousands Sales - net Cost of sales Gross profit Administrative expenses Selling and distribution expenses Other operating expenses Other income Profit from operations Finance cost Profit before taxation Taxation Profit after taxation Attributable to: Equity holders of the parent Non-controlling intrest Note 2011 5,296,449 (3,682,226) 1,614,223 (52,483) (639,379) (95,425) 249,003 1,075,939 (474,815) 601,124 (245,596) 355,528 2010 3,730,660 (2,965,382) 765,278 (42,811) (329,518) (33,535) 219,524 578,938 (509,911) 69,027 (22,761) 46,266

10

336,638 18,890 355,528

34,206 12,060 46,266 Restated

Earnings per share basic and diluted (Rupees)

0.81

0.11

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

Chief Executive 2011

Director
1st QUARTER 19

CONDENSED INTERIM CONSOLIDATED

STATEMENT OF COMPREHENSIVE INCOME - UNAUDITED
July 1 to September 30 Rupees in thousands Profit after taxation Available for sale financial assets - Change in fair value - Realized gain through profit and loss account - Tax expense Other comprehensive income for the period 2011 355,528 2010 46,266

(2,114,990) (2,114,990)

(374,310) (374,310)

Total comprehensive income for the period Attributable to: Equity holders of the parent Non-controlling intrest

(1,759,462)

(328,044)

(1,759,462) (1,759,462)

(328,044) (328,044)

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

Chief Executive
20 1st QUARTER

Director 2011

CONDENSED INTERIM CONSOLIDATED

CASH FLOW STATEMENT - UNAUDITED
July 1 to September 30 Rupees in thousands Cash (used in)/ generated from operations Financial cost paid Retirement and other benefits paid Taxes paid long term deposits - net Net cash (used in)/ from operating activities [A] Capital expenditure including purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Long term loans and deposits - net Interest received Dividend received Net cash from/ (used in) investing activities [B] Repayment of long term finances Repayment of liabilities against assets subject to finance lease Net cash from/ (used in) financing activities [C] In(De)crease in cash and cash equivalents [A+B+C] Cash and cash equivalents at the beginning of period Cash and cash equivalents at the end of period 13 Note 12 2011 (58,236) (506,788) (11,196) (72,039) (953) (649,212) 2010 (931,146) (476,560) (6,317) (56,761) (3,136) (1,473,920)

(226,141) 15,999 (527) 17,542 230,535 37,408 (851,932) (851,932) (1,463,736) (9,152,752) (10,616,488)

(66,506) 28,380 10,565 15,610 213,115 201,164 (526,917) (42) (526,959) (1,799,715) (9,817,290) (11,617,005)

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

Chief Executive 2011

Director
1st QUARTER 21

CONDENSED INTERIM CONSOLIDATED

STATEMENT OF CHANGES IN EQUITY - UNAUDITED

22
Share Capital Share Premium Accumulated Profit Total share holders equity Fair Value Reserve Capital Redemption Reserve Fund General Reserve Total equity attributable to shareholders of parent company NonControlling intrest

1st QUARTER
3,650,993 3,826,965 12,908,175 353,510 5,110,851 755,856 26,606,350 328,308 26,934,658 3,650,993 3,826,965 12,533,865 353,510 5,110,851 790,062 26,266,246 (374,310) (374,310) 34,206 34,206 12,060 340,368 46,266 (374,310) 26,606,614 730,199 730,199 1,460,398 1,460,398 4,381,192 4,557,164 14,974,881 353,510 5,110,851 2,441,016 149,854 939,916 149,854 2,441,016 30,317,514 1,041 341,409 150,895 2,441,016 30,658,923 4,381,192 4,557,164 12,859,891 353,510 (2,114,990) 5,110,851 336,638 1,276,554 336,638 (2,114,990) 28,539,162 18,890 360,299 355,528 (2,114,990) 28,899,461

Rupees in thousands

Balance as at June 30, 2010 - Audited

Total comprehensive income for the period

- Profit for the year

2011

- Other comprehensive income for the year

Balance as at September 30, 2010 - Unaudited

Capital transactions with owner

- Right issue

Total comprehensive income for the period

- Profit for the year

- Other comprehensive income for the year

Balance as at June 30, 2011 - Audited

Total comprehensive income for the period

- Profit for the period

- Other comprehensive loss for the period

Balance as at September 30, 2011 - Unaudited

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

Chief Executive

Director

SELECTED NOTES TO AND FORMING PART OF THE CONDENSED INTERIM CONSOLIDATED FINANCIAL INFORMATION - UNAUDITED
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 on Karachi, Lahore and Islamabad Stock Exchanges. It is principally engaged in production and sale of Clinker, Ordinary Por tland and Sulphate Resistant Cement. The registered office of the Company is situated at 53-A Lawrence Road, Lahore. The subsidiar y company is an unlisted public limited company incorporated in Pakistan under the Companies Ordinance 1984 on July 23, 2004. It is principally engaged in manufacture and sale of paper products and packaging material. 2. Basis of preparation The condensed interim financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan for interim financial repor ting. The disclosures in the condensed interim financial information do not include the information repor ted for full annual financial statements and should therefore be read in conjunction with the financial statements for the year ended 30 June 2011. 3. Estimates The preparation of the condensed interim financial infor mation requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the repor ted amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. In preparing this financial information the significant judgments made by the management in applying accounting policies, key estimates and uncer tainty 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 T h e a c c o u n t i n g p o l i c i e s a d o p t e d f o r t h e p r e p a r a t i o n o f t h i s i n t e r i m c o n s o l i d a t e d f i n a n c i a l information are the same as those applied in the preparation of the preceding annual published consolidated financial statements of the group for the year ended June 30, 2011.

2011

1st QUARTER

23

4.2 In addition to above, following amendments to the International Financial Repor ting Standards/ International Accounting Standards are mandatory for the first time for the financial year beginning on or after January 1, 2011, however, the adoption of these amendments is either not yet effective of the amendments did not have any significant impact on the financial information of the group. IFRS 7 - Financial instruments : Disclosures (Improvements) IAS 1 - Presentation of Financial Statements (Improvements) IAS 24 - Related Party disclosuures (amendment) IFRIC 13 - Customer Loyalty Programmes (improvements) IFRIC 14 - Prepayments of minimum funding requirements (amendment)

5. The provision for taxation for the quarter September 30, 2011 has been made on an estimated basis. Rupees in thousands 6. Long term finances These are composed of: - Long term loans - Loan under musharika arrangement 6.1 Less: Current portion shown under current liabilities Total long term finances 6.1 Long term loans Opening balance Add: Disbursements during the period Exchange loss during the period Less: Repayment during the period Closing balance 7. Property, Plant and Equipment Opening book value Add: Additions during the period/ year Transfer in during the period/ year Less: Disposals during the period/ year - net book value Depreciation charged during the period/ year Closing book value Note 30.09.2011 unaudited 30.06.2011 audited

5,387,961 807,500 6,195,461 1,937,695 4,257,766

6,277,627 807,500 7,085,127 2,124,548 4,960,579

7,085,127 22,266 7,107,393 911,932 6,195,461

7,432,988 1,850,000 6,182 9,289,170 2,204,043 7,085,127

7.1

25,707,179 12,354 25,719,533 5,392 351,606 25,362,535

26,446,199 765,909 673 27,212,781 31,063 1,474,539 25,707,179

24

1st QUARTER

2011

Rupees in thousands 7.1 Major additions during the period Free hold land Building on freehold land Roads Plant and machinery Furniture, fixtures and office equipment Motor vehicles Power and water supply lines

30.09.2011 unaudited 6,360 5,454 540 12,354

30.06.2011 audited 410 212,919 4,089 455,263 22,500 66,843 3,885 765,909

8. Investments Cost of investments Add: Fair value adjustments Less: Investments classified in current assets Closing balance 9. Contingencies and commitments 9.1 Contingencies

2,207,273 12,859,891 15,067,164 10,542,725 4,524,439

2,207,273 14,974,881 17,182,154 12,126,367 5,055,787

There is no significant change in contingencies from the annual financial statements of the company for the year ended June 30, 2011. 9.2 Commitments in respect of (i) Contracts for capital expenditure Rs 178.318 million (June 30, 2011: Rs 113.639 million). (ii) Letters of credit for capital expenditure Rs 1,213.102 million (June 30, 2011: Rs 1,364.57 million). (iii) Letters of credit other than capital expenditure Rs 1,101.981 million (June 30, 2011: Rs 1,233.42 million).

2011

1st QUARTER

25

July 1 to September 30

Rupees in thousands 10 Cost of sales Raw and packing materials consumed Salaries, wages and other benefits Electricity, gas and water Furnace oil/coal Stores and spares consumed Repair and maintenance Insurance Depreciation on property, plant and equipment Royalty Excise duty Vehicle running Postage, telephone and telegram Printing and stationery Legal and professional charges Travelling and conveyance Estate development Rent, rates and taxes Freight charges Other expenses Total manufacturing cost Opening work-in-process Cost of goods available for manufacture Closing work-in-process Cost of goods manufactured Opening stock of finished goods Cost of goods available for sale Closing stock of finished goods Own consumption capitalized Cost of goods sold 11. Transactions with related parties

2011

2010

558,938 215,791 477,409 1,954,193 244,510 46,874 15,134 352,588 37,665 3,489 5,657 705 865 252 3,212 4,266 5,907 1,396 6,034 3,934,885 169,612 4,104,497 (443,002) 3,661,495 330,242 3,991,737 (299,923) (9,588) 3,682,226

525,866 182,678 458,764 1,501,202 272,643 66,158 13,310 360,432 37,728 3,492 6,555 1,216 760 788 1,423 2,622 4,397 1,344 10,215 3,451,593 537,539 3,989,132 (802,717) 3,186,415 249,740 3,436,155 (468,773) (2,000) 2,965,382

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

26

1st QUARTER

2011

July 1 to September 30

Rupees in thousands Relationship with the Group Other related parties Nature of transaction

2011

2010

Purchase of goods and services Sale of property plant and equipment Insurance premium Sale of goods Mark-up income Insurance claim received Dividend income Salaries and other employment benefits Expense charged in respect of staff retirement benefits plans

226,091 5,614 10,230 446 65 230,527

209,051 23,187 6,105 8,357 571 758 213,112

Key Management personnel Post employment benefit plans

65,031

23,654

37,514

8,248

All transactions with related parties have been carried out on commercial terms and conditions.
July 1 to September 30

Rupees in thousands 12. Cash flow from operating activities Profit before tax Adjustment for : - Depreciation on property, plant and equipment - Profit on disposal of property, plant and equipment - Dividend income - Retirement and other benefits accrued - Markup income - Exchange loss - net - Finance cost Profit before working capital changes - Stores, spares and loose tools - Stock-in-trade - Trade debts - Advances, deposits, prepayments and other receivables - Trade and other payables Net working capital changes Cash (used in)/ generated from operations 2011

2011

2010

601,124 356,644 (10,608) (230,535) 8,248 (16,561) 22,266 474,815 1,205,393 (736,170) (302,558) 217,771 (353,597) (89,075) (1,263,629) (58,236)

69,027 363,206 (5,299) (213,115) 8,248 (14,629) 14,897 509,911 732,246 (885,262) (514,198) 148,159 (109,610) (302,481) (1,663,392) (931,146)
27

1st QUARTER

July 1 to September 30

Rupees in thousands 13. Cash and cash equivalents Short term borrowings - secured Cash and bank balances Total cash and cash equivalents

2011

2010

(11,040,735) 424,247 (10,616,488)

(11,914,064) 297,059 (11,617,005)

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 Cement Paper 14.1 Nature of business Production and sale of clinker, Ordinary Portland and Sulphate Resistant Cements. Manufacture and supply of paper products and packing material.

Segment analysis and reconciliation - condensed The information by operating segment is based on internal reporting to the Group executive committee, identified as the 'Chief Operating Decision Maker' as defined by IFRS 8. This information is prepared under the IFRS's applicable to the consolidated financial statements. All group financial data are assigned to the operating segments.
Cement 2011 2010 3,527,923 3,527,923 678,439 (398,074) 233,414 (488,232) (3,401) 22,146 352,184 (65,763) (1,460,758) 202,020 30.06.2011 audited 49,673,050 19,455,765 2011 208,436 195,660 404,096 37,137 (5,007) 1,686 (39,862) (2,064) (8,109) 8,315 (3,579) (157,634) (1,362) 30.09.2011 unaudited 2,051,801 1,643,322 Paper 2010 202,737 233,250 435,987 102,231 (8,260) 822 (36,551) (19,360) 38,884 8,513 (751) (17,000) 1,571 Elimination - net 2011 (195,660) (195,660) 45,889 203 (14,113) 13,910 45,888 (5,037) 21,622 (5,817) 2010 (233,250) (233,250) (15,392) 470 (14,712) 14,872 (14,764) 2,509 8 3,838 (2,427) 30.06.2011 audited (317,487) (342,537) Consolidated 2011 5,296,449 5,296,449 1,614,223 (787,287) 249,003 (474,815) (245,596) 355,528 356,644 (226,141) 37,408 2,010 3,730,660 3,730,660 765,278 (405,864) 219,524 (509,911) (22,761) 46,266 363,206 (66,506) 201,164

July 1 to September 30
Rupees in thousands Revenue from - External Customers - Inter-group Segment gross profit Segment expenses Other income Financial charges Taxation Profit after taxation Depreciation Capital expenditure Cash to operations Cash from investing Rupees in thousands 5,088,013 5,088,013 1,531,197 (782,483) 261,430 (448,863) (243,532) 317,749 348,329 (217,525) (513,200) 44,587 30.09.2011 unaudited Segment assets Segment liabilities 48,637,205 20,217,161

(649,212) (1,473,920)

30.06.2011 30.09.2011 audited 1,885,943 1,469,355 unaudited (292,698) (363,636)

30.09.2011 30.06.2011 unaudited audited

50,396,308 51,241,506 21,496,847 20,582,583

28

1st QUARTER

2011

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 authorization This interim financial information was authorized for issue by the Board of Directors of the Company on October 22, 2011. 16. Corresponding figures In order to comply with the requirements of the International Accounting Standard 34: 'Interim Financial Reporting', the condensed interim consolidated balance sheet and condensed interim consolidated statement of changes in equity have been compared with the balances of annual audited financial statements of preceding year, whereas, the condensed interim consolidated profit and loss account, condensed interim consolidated statement of comprehensive income and condensed interim consolidated cash flow statement have been compared with the balances of comparable period of immediately preceding year. Corresponding figures have been re-arranged wherever necessary for the purposes of comparison, however, no significant re-arrangements have been made. Figures have been rounded off to the nearest thousand of Rupees.

Chief Executive 2011

Director
1st QUARTER 29

Nishat House, 53-A, Lawrence Road, Lahore-Pakistan. UAN:+92-42-111-11-33-33

D.G. KHAN CEMENTCOMPANY LIMITED