contents · 2014-08-25 · cement industry; our well timed alternate fuel projects are also drawing...

Corporate profile ......................................................................................................................... 2

Directors’ Report to the Shareholders ........................................................................................ 3

Auditors Report to the Members................................................................................................. 7

Financial Statements................................................................................................................... 8

Directors’ Report on the Consolidated Financial Statements ....................................................20

Consolidated Financial Statements ...........................................................................................21

CONTENTS

Board of Directors Mrs. Naz Mansha ChairpersonMian Raza Mansha Chief ExecutiveMr. Khalid Qadeer QureshiDr. Arif BashirMr. Farid Noor Ali FazalMr. Inayat Ullah Niazi Chief Financial OfficerMs. Nabiha Shahnawaz Cheema

Audit Committee Mr. Khalid Qadeer Qureshi Member/ChairmanMr. Farid Noor Ali 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 LimitedDeutsche Bank AG Standard Chartered Bank (Pakistan)Dubai Islamic Bank LimitedFaysal Bank Limited Silk Bank LimitedHabib Bank Limited The Bank of PunjabHSBC United Bank Limited

External Auditors A. F. Ferguson & 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 2012HALF YEAR

DIRECTORS’ REPORT

032012 HALF YEAR

The board of directors is pleased to submit its reportalong with the condensed interim financial informationfor the first half of the financial year 2012.

Economic Outlook

Business outlook

The start of the year 2012 was fairly optimistic givento the fact that the financial year 2011 closed withsome signs of economic recovery, however, halfwaydown the current financial year, the failure ofeconomic and monetary policies adopted by theGovernment has become evident. In internationalscenario, with sliding credit ratings, our country isbecoming risky in the region in terms of its ability tomeet its financial commitments thereby restrainingthe inflow of foreign investment.

Management of the factors affecting our economylike political instability, budget and current accountdeficits and how these deficits are financed by thegovernment are becoming critical by every passingday. Balance of Payment deficit the government iscurrently facing is roughly estimated at USD 6 Billion.Worsening regional security situation amid tensionsbetween Tehran and Washington are going to impactcrude oil prices in the international markets and ashortfall in the budget for the year is becoming verylikely.

Weakening of Pak Rupee against US Dollar andsoaring crude oil prices in the international marketare going to have adverse impact on the Balanceof Payment gap and would thus force the policymakers to borrow further from available internationalmarkets to make up for the budget shortfall and fullfill our international payment obligations.

Recently, our country has become more vulnerableto adverse business, financial and economic

conditions but it still has a capacity to meet itsfinancial commitments. The policy makers, withthese risks in view, are planning to keep PKR-USDparity within its budgeted limits and State Bank ofPakistan is very likely to interfere. The current financialcrisis would very likely force the government to cutdown on its planned public sector developmentprograms or any enhancements to the alreadyrunning projects thereby posing a challenge to thecement industry.

Industry overview

As evident from the performance of the cementindustry during the first half of the financial year2012, the tune for the second half has already beenset to be very challenging, especially on the domesticfront. During the first half, volumes have presentedsomewhat positive picture of the cement industrywhere growth of 4% has been witnessed across allsegments. Industry wide volumes in foreign marketshave, so far, declined by 5%.

On the other hand, domestic volumes soared duringthe first half of financial year 2012; thereby registeringvolumetric increase by 0.8 million MT. The growthin domestic demand is signaling improvingconstruction activity however, keeping in view thechallenges being faced on the economic front, thenext half year is going to be very tough in terms ofpublic sector development projects.

Company performance

Company's volumes in domestic sector havedeclined. We, however, maintained our market share,primarily by capitalizing on our strong consumerbase. Considerable volumetric growth, however,was observed in exports segment where volumessoared by almost 12%.

Strengthening on margins by cutting costs:Despite falling volumes across domestic businesssegments the company improved its GP margin by11% on the net sales revenues which went up by31% as compared to last year comparable period.

We have again observed the strength of our productdemand in East African and Southeast Asian regionwith Djibouti and Afghanistan topping from therespective regions in terms of volumes. New marketsexplored in South Africa almost exactly compensatedfor the loss of our market in Iraq.

Production Statistics

The company's cement production remained peggedwith domestic cement demand. Our domestic salesvolumes dropped across all regions. The reasonsfor sluggish performance followed from the first

First HalfFY 2012

MT

First HalfFY 2011

MT

quarter due partly to seasonality factors and partlyto slow developmental activities in the rural andflood affected areas. As explained in our previousreport, the factors for sluggish performance remainprimarily the same. Stimulus from government onmajor public sector development projects is stillmissing. The current political uprising is also a causeof diversion of government focus from developmenttowards sustenance but is also indicative of politicalpeace in near future and the industry anticipatesimprovement in the second half of the year 2012.

Clinker ProducedCement ProducedCement Sold

2,500

2,000

1,500

1,000

500

-

2008 2009 2010 2011 2012

Quantities in Millions of TonsPeriods in terms of First Halves of FY

Financial Performance Rupees in ‘000’

First HalfFY 2012

First HalfFY 2011

Costs of production continued escalating however,with better cost management policies and earlyadoption of alternative fuels, the margins were notfully drained. Our successful cost reduction projectsare now garnering us better margins with more

04 2012HALF YEAR

052012 HALF YEAR

Amount in Millons of RupeesPeriods in terms of First Halves of FY

12,000

10,000

8,000

6,000

4,000

2,000

-

Cost of Sales

2008 2009 2010 2011 2012

Net Sales

4,061

6,059 6,2536,489

7,2254,823

8,6527,958

8,175

10,701

space to challenge our competitors in the domesticas well as foreign markets. The administrative anddistribution expenses remained higher in proportionto net sales primarily because of increase in exportvolumes and soaring transportation costs. Upwardsurge in oil prices in international markets amid USsanctions on Iran is also going to create a verychallenging position on cost management frontespecially in the exports sector.

35.00%

30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%

Net ProfitSelling Expenses

Finance CostGross Profit

2008 2009 2010 2011 2012

29.97%32.49%

20.63%21.42%

16.28%

15.78%

6.84%

2.47% 1.47%

12.60%

16.85%

12.01%

6.58%

2.35%

9.41%

12.43% 11.59%

8.28%

Above-average inflation: Lower domestic demandwas accompanied by above-average inflation forenergy, transport and raw materials. Although thesecost increases were not fully passed on to salesprices, the operating profit margins remained underpressure.

This November our waste heat recovery project atDG Khan received certification for CO2 reductionunder the Kyoto Protocol and in near future we shallbe claiming revenues from sale of CERs certificates.The registration approval was granted by the UnitedNations.

Provision for taxation during the period includesdeferred tax provision amounting to Rs 240 million.EPS for the period improved significantly thus addingsubstantial wealth to the capital investors and generalpublic.

1.06%

Taxation3.20%

Otheroperatingexpenses

2.12%

AdministrativeCosts

Cost of Sales63.64%

Finance Cost7.80%

Selling anddistribution

Cost10.90%

Retained inbusiness11.27%

Major Future Developments

In the backdrop of the recent developments in worldeconomic and political situation and its impacts onour domestic economic outlook, the challenges weface are huge. A lot depends on how our governmentmanages its balance of payments and budget crisis.Our cement markets in African and Gulf regions areunder direct influence of European economy dueto presence of some of the major European cementmanufacturers there; therefore we are watchful ofthe developments occurring there.

On East Asian side, we are witnessing majordevelopments with improving trade conditions withIndia. The demand in India is higher due to extensiveroad-building projects taken up by the governmentacross the country. We are in a much better positionto capitalize on this demand. The border trade isexpected to be opening up very soon. The limitingfactors on this front however, are infrastructure andother administrative issues which are yet to beresolved. This would also mean that the benefit ofopening of border trade would not be immediateand unless government makes a substantial financialcommitment and considerate resolve towardsdevelopment of infrastructure and administrativefacilities, we shall not be in a position to fully reapthe benefits.

11.96%

5.91%

On the domestic side, apart from seasonal demandvariation, the industry expects an upward surge incement demand in the coming half year. Performanceexpectations from the government are mountingand the stake holders on several delayed projectsare inducing the government to push the paddles.With mounting energy crisis, recent developmentsand settlements on the Pak-US relations front andopening up of border trade with India, pressure isever great and decisive measures need to be takenby the government.

On financial side, production and distribution costsare rising and so is our drive and intent on costreduction strategy. Prices of petroleum products areexpected to increase further thereby putting pressureon our distribution and energy costs. Prices ofimported coal in international market are notexpected to make any significant hops and on thisfront we are expecting a steady trend.

The devaluation of Pak Rupee against US dollar ishowever threatening our profit margins by not onlyaffecting our production costs in the form of increasein coal and energy prices but also increasing ourtransportation costs. This would certainly be offsetby the gains on export realization but the pressureon costs is higher.

Alternative Fuel Projects

Realizing that cost efficiency is a way forward forcement industry; our well timed alternate fuel projectsare also drawing in savings in terms of importedcoal substitution. The Waste Heat Recovery plantat DG Khan, besides saving our electricity costs,would prove an additional revenue stream by wayof sale of CERs. On a similar pattern, WHR plant atKhair pur is moving ahead at good pace.

RDF project taken up at DG Khan is already intophase II and overall, through successful utilizationof various alternative fuels, we are on the track ofimproving our imported coal replacement factor.

On new projects, our teams are vigorously exploringopportunities of utilizing Tire Derived Fuels (TDF)as another cost effective and energy efficient

alternative to coal and we shall witness abreakthrough on this in future periods. Due tocolossal environmental impact, the usage of TDF isregulated by government through EnvironmentalProtection Agency and currently the mechanismsand guidelines for usage of TDF are being finalizedby the relevant functionaries.

Future Outlook

As a major cement producer in the country, wedepend heavily on the economic activities takingplace in our country and in the foreign marketswhere we have our presence. There is a continuousdemand of our product in African as well as Asianmarkets and these markets should remain on thetrack of growth. On domestic front, we expectimprovement in cement demand amid much awaitedpublic sector development projects. The sharp globalrise in energy, raw material and transportation costscalls for further price adjustments. This andcontinuous, consistent cost management are focalpoints at all levels.

The company will be successful in securing its shareof future growth in the emerging countries due toour consistently expanded presence in thesemarkets.

All of the ongoing projects are running as plannedand hopefully would be completed on schedule.

Company's Staff and Customers

We wish to record our appreciation of continuedcommitment of our employees and patronage ofour customers.

For and on behalf of the Board

Mian Raza ManshaChief Executive Officer

Lahore: 17 February 2012

06 2012HALF YEAR

072012 HALF YEAR

AUDITORS’ REPORT TO THE MEMBERS ON REVIEW OFINTERIM FINANCIAL INFORMATION

Introduction

We have reviewed the accompanying condensed interim balance sheet of D.G. KhanCement Company Limited as at December 31, 2011 and the related condensed interimprofit and loss account, condensed interim statement of comprehensive income,condensed interim cash flow statement and condensed interim statement of changes inequity for the half year then ended (here-in-after referred to as the “interim financialinformation”). Management is responsible for the preparation and presentation of thisinterim financial information in accordance with approved accounting standards asapplicable in Pakistan. Our responsibility is to express a conclusion on this interim financialinformation based on our review. The figures of the condensed interim profit and lossaccount for the quarters ended December 31, 2011 and 2010 have not been reviewed, aswe are required to review only the cumulative figures for the half year ended December 31,2011.

Scope of Review

We conducted our review in accordance with International Standard on ReviewEngagements 2410, “Review of Interim Financial Information Performed by the IndependentAuditor of the Entity.” A review of interim financial information consists of making inquiries,primarily of persons responsible for financial and accounting matters, and applying analyticaland other review procedures. A review is substantially less in scope than an auditconucted in accordance with International Standards on Auditing and consequently doesnot enable us to obtain assurance that we would become aware of all significantmatters 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 financial information as of and for the half year ended December31, 2011 is not prepared, in all material respects, in accordance with approved accountingstandards as applicable in Pakistan.

Chartered Accountants

Lahore

Name of engagement partner: Muhammad Masood

A. F. FERGUSON & CO.

A. F. FERGUSON & CO., Chartered Accountants, a member firm of the PwC network23-C, Aziz Avenue, Canal Bank, Gulberg V, P.O. Box 39, Lahore-54660; Pakistan.Tel: +92 (42) 3571 5864-71; Fax: +92 (42) 3571 5872

Karachi: State Life Building No. 1-C, I.I. Chundrigar Road, P.O. Box 4716, Karachi-74000, Pakistan.Tel: +92 (21) 3242 6682-6/3242 6711-5; Fax: +92 (21) 3241 5007/3242 7938; <www.pwc.com/pk>Islamabad; PIA Building, 3rd Floor, 49 Blue Area, Fazl-ul-Haq Road, P.O. Box 3021, Islamabad-44000; Tel: +92 (51) 2273 457-60; Fax: +92 (51) 227 7924Kabul: House No. 1916, Street No. 1, Behind Cinema Bariqot, Nahar-e-Darsan, Karte-4, Kobul, Afghanistan; Tel: +92 (779) 315 320

CONDENSED INTERIM BALANCE SHEETAs at December 31, 2011 (Un-audited)

Rupees in thousands Note 31 December2011

un-audited

30 June2011

audited

Chief Executive Director

Equity and liabilitiesAuthorised capital- 950,000,000 (30 June, 2011: 950,000,000) ordinary shares of Rs 10 each 9,500,000 9,500,000- 50,000,000 (30 June, 2011: 50,000,000) preference shares of Rs 10 each 500,000 500,000Total authorized capital 10,000,000 10,000,000Issued, subscribed and paid up capital 438,119,119 (30 June, 2011: 438,119,119) ordinary shares of Rs 10 each 4,381,192 4,381,192Reserves 19,598,521 24,957,382Accumulated profit 2,158,151 878,711Total shareholders’ equlty 26,137,864 30,217,285Long term finances 5 3,842,690 4,880,579Long term deposits 69,555 70,893Retirement and other benefits 152,193 139,213Deferred taxation 1,948,000 1,707,886Total non-current liabilities 6,012,438 6,798,571Trade and other payables 1,414,980 1,644,045Accrued markup 260,524 284,511Short term borrowing-secured 9,529,703 8,691,982Current portion of non-current liabilities 1,792,133 2,001,566Provision for taxation 35,090 35,090Total current liabilities 13,032,430 12,657,194Contingencies and commitments 6Total equity and liabilities 45,182,732 49,673,050

AssetsProperty, plant and equipment 7 24,551,171 24,611,565Intangible assets 8 83,034 -Capital work in progress 1,176,478 1,373,820Investments 9 3,836,974 5,259,416Long term loans, advances and deposits 133,646 133,219Total non-current assets 29,781,303 31,378,020Stores, spares and loose tools 4,079,829 3,543,034Stock-in-trade 1,400,865 862,141Trade debts 251,429 459,300Investments 9 8,189,930 12,126,349Advances, deposits, prepayments and other receivables 1,278,101 1,136,564Cash and bank balances 201,275 167,642Total current assets 15,401,429 18,295,030Total assets 45,182,732 49,673,050The annexed notes 1 to 15 form an integral part of this condensed interim financial information.

08 2012HALF YEAR

092012 HALF YEAR

CONDENSED INTERIM PROFIT AND LOSS ACCOUNTFor the quarter and half year ended December 31, 2011 (Un-audited)

Rupees in thousands NoteJuly to

DecemberOctober toDecember


July toDecember

October toDecember

Sales 10,701,409 5,613,396 8,174,663 4,646,740

Cost of sales 10 (7,224,535) (3,667,719) (6,488,586) (3,639,102)

Gross profit 3,476,874 1,945,677 1,686,077 1,007,638

Administrative expenses (120,193) (68,823) (98,548) (56,588)

Selling and distribution expenses (1,237,888) (602,200) (769,105) (442,373)

Other operating expenses (240,286) (144,861) (49,387) (20,005)

Other income 650,192 388,762 545,837 312,423

Profit from operations 2,528,699 1,518,555 1,314,874 801,095

Finance cost (885,823) (436,960) (1,016,289) (528,057)

Profit before taxation 1,642,876 1,081,595 298,585 273,038

Taxation (363,436) (119,904) (106,449) (103,048)

Profit after taxation 1,279,440 961,691 192,136 169,990

Earning per share

(basic and diluted) Rupees 2.92 2.20 0.53 0.47

The annexed notes 1 to 15 form an integral part of this condensed interim financial information.

20102011

CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOMEFor the quarter and half year ended December 31, 2011 (Un-audited)


Income for the period 1,279,440 961,691 192,136 169,990

Other comprehensive income

Available for sale financial assets- Change in fair value (5,358,861) 3,473,514 3,099,205 3,473,514

Other comprehensive (loss) / incomefor the period (5,358,861) 3,473,514 3,099,205 3,473,514

Total comprehensive (loss) / incomefor the period (4,079,421) 4,435,205 3,291,341 3,643,504


Rupees in thousandsJuly to


July toDecember

October toDecember

20102011

10 2012HALF YEAR

112012 HALF YEAR

CONDENSED INTERIM CASH FLOW STATEMENTFor the half year ended December 31, 2011 (Un-audited)

Rupees in thousands Note July toDecember

2011

July toDecember

2010


Cash flows from operating activitiesCash generated from / (used in) operations 12 1,430,684 (687,429)Financial cost paid (909,810) (962,428)Retirement and other benefits paid (11,787) (6,758)Taxes paid (146,635) (151,677)Long term deposits - net (1,338) (7,655)Net cash generated from / (used in) operating activities 361,114 (1,815,947)

Cash flows from investing activitiesFixed capital expenditure (542,944) (328,605)Proceeds from sale of property, plant and equipment 20,678 27,986Long term loans, advances and deposits - net (427) 7,789Interest received 81,644 32,546Dividend received 574,581 505,931Net cash generated from investing activities 133,532 245,647

Cash flows from financing activitiesProceeds from long term finances - 850,000Repayment of long term finances (1,298,734) (714,494)Net cash (used in) / generated from financing activities (1,298,734) 135,506

Net decrease in cash and cash equivalents (804,088) (1,434,794)

Cash and cash equivalents at the beginning of the period (8,524,340) (9,354,850)

Cash and cash equivalents at the end of the period 13 (9,328,428) (10,789,644)


CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITYFor the half year ended December 31, 2011 (Un-audited)

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12 2012HALF YEAR

132012 HALF YEAR

1 Status and nature of business

D. G. Khan Cement Company Limited ("the Company") is a public limited company incorporated in Pakistanand is listed on Karachi, Lahore and Islamabad Stock Exchanges. It is principally engaged in productionand sale of Clinker, Ordinary Portland and Sulphate Resistant Cement. The registered office of the companyis situated at 53-A Lawrence Road, Lahore.

2 Statement of compliance

This condensed interim financial information is un-audited and is being submitted to the members asrequired by section 245 of the Companies Ordinance, 1984. The condensed interim financial informationhas been prepared in accordance with the requirements of the International Accounting Standard (IAS) 34'Interim Financial Reporting' and have been reviewed by the auditors as required by the Code of CorporateGovernance. The condensed interim financial information should be read in conjunction with the the annualfinancial statements for the year ended June 30, 2011.

3 Significant accounting policies

3.1 The accounting policies and the methods of computation adopted in the preparation of this condensedinterim financial information are the same as those applied in the preparation of preceding annual publishedfinancial statements of the company for the year ended June 30, 2011 except for the policy in respect ofintangible assets described in 3.2 below. The adoption of new standards, amendments or interpretationsto existing standards are referred to in note 3.3.

3.2 Intangible assets

Expenditure incurred to acquire ORACLE Enterprise Resource Planning (ERP) System has been capitalizedas intangible assets and stated at cost less accumulated amortization and any identified impairment loss.Intangible assets are amortized using the straight line method over a period of five years.

Amortization on additions to intangible assets is charged from the month in which an asset is acquired orcapitalized while no amortization is charged for the month in which the asset is disposed off.

The Company assesses at each balance sheet date whether there is any indication that intangible assetsmay be impaired. If such an indication exists, the carrying amounts of such assets are reviewed to assesswhether they are recorded in excess of their recoverable amount. Where carrying amounts exceed therespective recoverable amounts, assets are written down to their recoverable amounts and the resultingimpairment loss is recognized in profit and loss account. The recoverable amount is higher of an asset'sfair value less costs to sell and value in use. Where an impairment loss is recognized, the amortizationcharge is adjusted in the future periods to allocate the asset's revised carrying amount over its estimateduseful life.

3.3 Initial application of standards, amendments or an interpretation to existing standards

The following amendments to existing standards have been published that are applicable to the company'sfinancial statements covering annual periods, beginning on or after the following dates:

3.3.1 Standards, amendments to published standards and interpretations that are effective in 2011 andare applicable to the company

NOTES TO AND FORMING PART OF THE CONDENSEDINTERIM FINANCIAL INFORMATION

For the quarter and half year ended December 31, 2011 (Un-audited)

Standards or Interpretation Effective date (accounting periodsbeginning on or after)

- IAS 24 (revised) - Related party disclosures January 01, 2011- IFRS 7 (amendment) - Disclosures on de-recognition July 01, 2011

3.3.2 Standards, amendments and interpretations to existing standards effective in 2011 that are not relevantto the company


- IFRS 1 - First time adoption on fixed dates and hyperinflation July 01, 2011- IFRIC 14 - Prepayments of a minimum funding requirement January 01, 2011

3.3.3 Standards, amendments and interpretations to existing standards that are not yet effective and havenot been early adopted by the company


- IAS 1 (amendments) July 01, 2012- IAS 12 - Income taxes January 01, 2012- IAS 19 (revised 2011) - Employee benefits January 01, 2013- IAS 27 (revised 2011) - Separate financial statements January 01, 2013- IAS 28 (revised 2011) - Associates and joint ventures January 01, 2013- IFRS 9 - Financial instruments January 01, 2013- IFRS 10 - Consolidated financial statements January 01, 2013- IFRS 11 - Joint arrangements January 01, 2013- IFRS 12 - Disclosures of interests in other entities January 01, 2013- IFRS 13 - Fair value measurement January 01, 2013

4 Taxation

The provision for taxation for the six months ended December 31, 2011 has been made on an estimatedbasis.

5 Long term financesLong term loans 5.1 5,627,805 6,875,127Less: Current portion shown under current liabilities 1,785,115 1,994,548Closing balance 3,842,690 4,880,579

5.1 Long term loansOpening balance 6,875,127 7,222,988Add: Disbursements during the period - 1,850,000 Exchange loss during the period 51,412 6,181

6,926,539 9,079,169Less: Repayment during the period 1,298,734 2,204,042Closing balance 5,627,805 6,875,127


un-audited

30 June2011

audited

14 2012HALF YEAR

152012 HALF YEAR

6 Contingencies and commitments

6.1 Contingencies

The appeal filed by the customs authorities before the Supreme Court of Pakistan against the decision ofthe Lahore High Court has been decided and the apex court has issued directions to the customs authoritiesto consider the case afresh in the light of all the available evidences and arguments of the taxpayers. It maybe noted that although the items of plant and machinery relating to the expansion unit were imported duringthe period 1994-1995 and earlier, the customs authorities had denied the exemption available to the importersfrom levy of customs duty under the provisions of SRO 484(I)/1992, 978(I)/1995 and 569(I)/1995. Such viewwas formed by customs authorities on the basis that such items of plant and machinery were on the list oflocally manufactured machinery published by the Federal Board of Revenue.

Total demand raised by the customs authorities in this respect is Rs 715.372 million out of which Rs 200.645million has already been paid by the company under protest. The provision for the balance amount ofRs 514.727 million has not been provided for in this financial information since the management believesthere are meritorious grounds that the ultimate decision would be in its favour.

6.2 There is no significant change in contingencies from the annual financial statements of the Company forthe year ended June 30, 2011 except for as mentioned above.

6.3 Commitments in respect of

(i) Contracts for capital expenditure Rs 281.261 million (June 30, 2011: Rs 113.639 million).

(ii) Letters of credit for capital expenditure Rs 1,410.742 million (June 30, 2011: Rs 1,364.57 million).

(iii) Letters of credit other than capital expenditure Rs 1,270.151 million (June 30, 2011: Rs 873.36 million).

7 Property, plant and equipment

Opening book value 24,611,565 25,307,302Add: Additions during the period 7.1 648,026 764,442

648,026 764,442Less: Disposals during the period 7,409 29,769

Depreciation charged during the period 701,011 1,430,410708,420 1,460,179

Closing book value 24,551,171 24,611,565

7.1 Additions during the period

Freehold Land - 410Building on freehold land 119,587 100,981Office building and housing colony 10,107 111,334Roads - 4,089Plant and machinery 480,789 454,768Furniture, fixtures and office equipment 24,183 22,132Motor vehicles 13,360 66,843Power and water supply lines - 3,885

648,026 764,442


un-audited

30 June2011

audited

8 Intangible assetsOpening book value - -Add: Additions during the period 92,260 -

92,260 -Less: Amortization charged during the period 9,226 -Closing book value 83,034 -

9 InvestmentsCost of investments 2,781,150 2,781,150Add : Cumulative fair value gain 9,616,020 14,974,881Less: Cumulative impairment losses recognized (370,266) (370,266)Fair Value Gain 9,245,754 14,604,615Total investments 12,026,904 17,385,765Less: Investments classified in current assets 8,189,930 12,126,349Closing balance 3,836,974 5,259,416

10 Cost of salesRaw and packing materials consumed 932,144 480,184 870,380 467,784Salaries, wages and other benefits 445,753 234,661 367,515 189,844Electricity and gas 1,026,239 553,419 970,713 513,512Furnace oil and coal 4,008,740 2,054,547 3,189,805 1,688,603Stores and spares consumed 573,744 330,808 666,097 395,828Repair and maintenance 89,740 42,996 125,484 60,888Insurance 28,953 15,120 26,937 14,926Depreciation on property, plant and equipment 692,903 348,571 698,189 348,695Amortization on intangibles 6,458 6,458 - -Royalty 79,283 41,618 78,729 41,001Excise duty 7,403 3,914 7,297 3,805Vehicle running 10,990 5,620 12,637 6,886Postage, telephone and telegram 1,696 1,000 2,345 1,131Printing and stationery 2,318 1,459 3,184 2,441Legal and professional charges 679 427 1,009 246Travelling and conveyance 9,545 6,333 2,556 1,143Estate development 8,988 4,721 6,174 3,552Rent, rates and taxes 9,453 3,893 7,198 3,142Freight charges 2,773 1,423 6,665 5,321Other expenses 13,590 7,649 17,561 7,364Total manufacturing cost 7,951,392 4,144,821 7,060,475 3,756,112Opening work-in-process 169,612 443,002 537,539 802,717Closing work-in-process (962,514) (962,514) (1,030,470) (1,030,470)

(792,902) (519,512) (492,931) (227,753)Cost of goods manufactured 7,158,490 3,625,309 6,567,544 3,528,359Opening stock of finished goods 294,737 261,514 219,365 407,066Closing stock of finished goods (212,944) (212,944) (295,373) (295,373)

81,793 48,570 (76,008) 111,693Less: Own consumption capitalized (15,748) (6,160) (2,950) (950)

7,224,535 3,667,719 6,488,586 3,639,102

Rupees in thousands 31 December2011

un-audited

30 June2011

audited



July toDecember

October toDecember

20102011

16 2012HALF YEAR

172012 HALF YEAR

11 Transactions with related parties

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

Relationship with the company Nature of transaction

Subsidiary company Purchase of goods and services 461,022 513,218Rental income 406 397Interest income 27,734 29,159

Other related parties Purchase of goods and services 465,262 369,881Insurance premium 49,555 51,361Sale of goods 37,862 15,167Sale of assets - 23,187Mark-up income on balanceswith related parties 966 1,130Insurance claim received 65 1,288Dividend income 564,551 545,013

Key management Salaries and other personnel employment benefits 54,521 44,804

Post employment Expense charged in respect of staff benefit plans retirement benefits plans 35,862 23,234

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

12 Cash flow from operating activities

Profit before tax 1,642,876 298,585Adjustment for :- Depreciation on property, plant and equipment 701,011 704,756- Profit on disposal of property, plant and equipment (13,269) (2,804)- Profit on bank deposits (1,787) (1,275)- Amortization on intangibles 9,226 -- Dividend income (574,581) (505,931)- Provision of WPPF 86,467 16,750- Provision of WWF - 19,663- Retirement and other benefits accrued 24,767 19,227- Markup income (28,700) (31,565)- Exchange loss - net 51,412 8,825- Finance cost 885,823 1,016,289

Profit before working capital changes 2,783,245 1,542,520

Rupees in thousands July toDecember

2011

July toDecember

2010


2011

July toDecember

2010

Profit before working capital changes b/f 2,783,245 1,542,520Effect on cash flow due to working capital changes:- increase in stores, spares and loose tools (536,795) (1,422,215)- increase in stock-in-trade (538,724) (629,563)- decrease in trade debts 207,871 97,726- (increase) / decrease in advances, deposits, prepayments and other receivables (169,381) 5,427- decrease in trade and other payables (315,532) (281,324)

(1,352,561) (2,229,949)Cash generated from / (used in) operations 1,430,684 (687,429)

13 Cash and cash equivalents

Short term borrowings - secured (9,529,703) (10,969,389)Cash and bank balances 201,275 179,745

(9,328,428) (10,789,644)

14 Date of authorization for issue

This interim financial information was authorized for issue on 17 February, 2012 by the Board of Directorsof the Company.

15 Corresponding figures

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.



2011

July toDecember

2010


un-audited

31 December2010

un-audited

18 2012HALF YEAR

CONSOLIDATED FINANCIAL STATEMENTS

DIRECTORS’ REPORT

The board of directors is pleased to submit its reportalong with the condensed interim consolidated financialinformation for the first half of the financial year 2012.Our discussion of affairs of the holding company hasbeen separately presented.

Group Performance

The first half of the financial year 2012 came about toyield better results across all segments of the group.The cement sector primarily gaining on the strength ofsolid sales margins despite higher levels of inflation.Despite reduction in volumes, better product priceseased out the pressure due to cost escalation andyielded higher net earnings.

Paper segment performance remained below averagewith declining sales volumes amid fierce competitionin the market. Paper bags substitution with PolyPropylene bags due to cheap prices is putting greaterpressure on selling prices. Higher costs of energy,transportation and Kraft paper weighed heavily onearnings and completely erased net margins.

Across the group, higher levels of inflation are mountingpressure on prices and unless effective costmanagement policies are implemented, the marginswould remain squeezed.

Financial PerformanceRupees in ‘000’

Net sales 11,099,224 100.00% 8,547,034 100.00%Cost of Slaes -7,549,205 -68.02% -6,717,830 -78.60%Gross Profit 3,550,019 31.98% 1,829,204 21.40%Profit from operations 2,571,566 23.17% 1,418,204 16.59%Finance Cost -938,733 -8.46% -1,076,625 -12.60%Profit Before Tax 1,632,833 14.71% 341,579 4.00%Taxation -358,836 -3.23% -131,468 -1.54%Profit After Tax 1,273,997 11.48% 210,111 2.46%

% to net

sale

2011Six month ended

31 December% to net

sale

2010Six month ended

31 December

The consolidated net sales increased to Rs 11 billionmark during first half of the financial year 2012 from Rs8.5 billion same period last year. Consolidated netearnings were higher this year with cement segmentabsorbing the losses from the paper segment. Thisperiod saw very difficult and tight financial position forthe paper segment. Higher production costs due toincrease in transportation charges and soaring pricesof imported kraft paper inflated the cost of sales andalmost wiped out gross margins. Like wise distributioncosts at paper segment were higher that resulted intonet losses for the paper division.

Staff and Customers

We wish to record our appreciation of continuedcommitment of our employees and patronage of ourcustomers.

For and on behalf of the Board

Mian Raza ManshaChief Executive Officer

Lahore: 17 February 2012

20 2012HALF YEAR

CONDENSED INTERIM CONSOLIDATED BALANCE SHEETAs at December 31, 2011 (Un-audited)


Equity and liabilitiesAuthorised capital- 950,000,000 (30 June 2011: 950,000,000) ordinary shares of Rs 10 each 9,500,000 9,500,000- 50,000,000 (30 June 2011: 50,000,000) preference shares of Rs 10 each 500,000 500,000Total authorized capital 10,000,000 10,000,000Issued, subscribed and paid up capital 4,381,192 4,381,192Reserves 19,637,545 24,996,406Accumulated profit 2,216,635 939,916Total shareholders’ equity 26,235,372 30,317,514Non-controlling interest 338,687 341,409

26,574,059 30,658,923Long term finances 5 3,892,690 4,960,579Liabilities against assets subject to finance lease 163,882 -Long term deposits 69,555 70,893Retirement and other benefits 152,193 139,213Deferred taxation 1,959,000 1,730,886Total non-current liabilities 6,237,320 6,901,571Trade and other payables 1,699,627 1,847,505Accrued markup 290,376 304,800Short term borrowing-secured 10,397,097 9,362,051Current portion of non-current liabilities 1,883,251 2,131,566Provision for taxation 35,090 35,090Total current liabilities 14,305,441 13,681,012Contingencies and commitments 6Total equity and liabilities 47,116,820 51,241,506AssetsProperty, plant and equipment 7 25,451,167 25,707,179Intangible assets 8 83,034 -Assets subject to finance lease 174,455 -Capital work in progress 1,177,436 1,373,820Investments 9 3,633,345 5,055,787Long term loans, advances and deposits 152,052 134,125Total non-current assets 30,671,489 32,270,911Stores, spares and loose tools 4,141,637 3,604,954Stock-in-trade 2,452,001 1,513,014Trade debts 429,242 650,283Investments 9 8,189,948 12,126,367Advances, deposits, prepayments and other receivables 961,540 866,678Cash and bank balances 270,963 209,299Total current assets 16,445,331 18,970,595Total assets 47,116,820 51,241,506The annexed notes form an integral part of this condensed interim consolidated financial information.


un-audited

30 June2011

audited

212012 HALF YEAR

22 2012HALF YEAR

CONDENSED INTERIM CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the quarter and half year ended December 31, 2011 (Un-audited)


Sales 11,099,224 5,802,775 8,547,034 4,816,374

Cost of sales 10 (7,549,205) (3,866,979) (6,717,830) (3,752,448)

Gross profit 3,550,019 1,935,796 1,829,204 1,063,926

Administrative expenses (122,221) (69,738) (100,458) (57,647)

Selling and distribution expenses (1,243,811) (604,432) (774,837) (445,319)

Other operating expenses (243,408) (147,983) (54,017) (20,482)

Other income 630,987 381,984 518,312 298,788

Profit from operations 2,571,566 1,495,627 1,418,204 839,266

Finance cost (938,733) (463,918) (1,076,625) (566,714)

Profit before taxation 1,632,833 1,031,709 341,579 272,552

Taxation (358,836) (113,240) (131,468) (108,707)

Profit after taxation 1,273,997 918,469 210,111 163,845

Attributable to:

Equity holders of the parent 1,276,719 940,081 201,151 166,945

Non-controlling interest (2,722) (21,612) 8,960 (3,100)

1,273,997 918,469 210,111 163,845

Combined earnings per share

(basic and diluted) Rupees 2.91 2.10 0.58 0.45

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



July toDecember

October toDecember

20102011Note

232012 HALF YEAR

CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the quarter and half year ended December 31, 2011 (Un-audited)


Income for the period 1,273,997 918,469 210,111 163,845Other comprehensive incomeAvailable for sale financial assets

- Change in fair value (5,358,861) (3,243,871) 3,099,205 3,473,515- Realized gain through profit and loss account - - - -- Tax expense - - - -

Other comprehensive (loss)/income for the period (5,358,861) (3,243,871) 3,099,205 3,473,515

Total comprehensive (loss)/income for the period (4,084,864) (2,325,402) 3,309,316 3,637,360

Attributable to:Equity holders of the parent (4,084,864) (2,325,402) 3,309,316 3,637,360Non-controlling interest - - - -

(4,084,864) (2,325,402) 3,309,316 3,637,360




July toDecember

October toDecember

20102011

CONDENSED INTERIM CONSOLIDATED CASH FLOW STATEMENTFor the half year ended December 31, 2011 (Un-audited)


Cash flows from operating activitiesCash generated from/(used in) operations 12 1,405,294 (648,292)Financial cost paid (953.157) (1,022,764)Retirement and other benefits paid (11,787) (4,028)Taxes paid (199,463) (159,749)Long term deposits - net (1,338) (7,655)Net cash generated from/(used in) operating activities 239,549 (1,842,488)Cash flows from investing activitiesCapital expenditure including purchase of property, plant and equipment (547,558) (391,557)Proceeds from sale of investments - -Proceeds from sale of property, plant and equipment 184,558 91,110Long term loans and deposits - net (17,927) 7,789Interest received 29,681 32,546Dividend received 505,931 505,931Net cash from investing activities 154,685 245,819

Cash flows from financing activitiesProceeds from long term finances - 850,000Repayment of long term finances (1,367,616) (804,493)Repayment of liabilities against assets subject to finance lease - -Net cash (used in)/ from financing activities (1,367,616) 45,507Net decrease in cash and cash equivalents (973,382) (1,551,162)Cash and cash equivalents at the beginning of period (9,152,752) (9,817,290)Cash and cash equivalents at the end of period 13 (10,126,134) (11,368,452)


Rupees in thousands Note July to December

2011

July to December

2010

24 2012HALF YEAR

CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the half year ended December 31, 2011 (Un-audited)

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252012 HALF YEAR

1. 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, Lahoreand Islamabad Stock Exchanges. It is principally engaged in production and sale of Clinker, OrdinaryPortland and Sulphate Resistant Cement. The registered office of the Company is situated at 53-A LawrenceRoad, Lahore.

The subsidiary company is an unlisted public limited company incorporated in Pakistan under the CompaniesOrdinance 1984 on July 23, 2004. It is principally engaged in manufacture and sale of paper products andpackaging material.

2. Statement of compliance

This condensed interim financial information is un-audited and is being submitted to the members asrequired by section 245 of the Companies Ordinance, 1984. The condensed interim financial informationhas been prepared in accordance with the requirements of the International Accounting Standard (IAS) 34'Interim Financial Reporting'. The interim financial information does not include all of the information requiredfor annual financial statements and accordingly, should be read in conjunction with the the annual financialstatements for the year ended June 30, 2011.

3. Significant accounting policies

3.1 The accounting policies and the methods of computation adopted in the preparation of this condensedinterim financial information are the same as those applied in the preparation of preceding annual publishedfinancial statements of the group for the year ended June 30, 2011 except for the policy in respect ofintangible assets described in 3.2 below. The adoption of new standards, amendments or interpretationsto existing standards are referred to in note 3.3.

3.2 Intangible assets

Expenditure incurred to acquire ORACLE Enterprise Resource Planning (ERP) System has been capitalizedas intangible assets and stated at cost less accumulated amortization and any identified impairment loss.Intangible assets are amortized using the straight line method over a period of five years.

Amortization on additions to intangible assets is charged from the month in which an asset is acquired orcapitalized while no amortization is charged for the month in which the asset is disposed off.

The holding / group company assesses at each balance sheet date whether there is any indication thatintangible assets may be impaired. If such an indication exists, the carrying amounts of such assets arereviewed to assess whether they are recorded in excess of their recoverable amount. Where carryingamounts exceed the respective recoverable amounts, assets are written down to their recoverable amountsand the resulting impairment loss is recognized in profit and loss account. The recoverable amount is higherof an asset's fair value less costs to sell and value in use. Where an impairment loss is recognized, theamortization charge is adjusted in the future periods to allocate the asset's revised carrying amount overits estimated useful life.

NOTES TO AND FORMING PART OF THE CONDENSED INTERIMCONSOLIDATED FINANCIAL INFORMATIONFor the quarter and half year ended December 31, 2011 (Un-audited)

26 2012HALF YEAR

272012 HALF YEAR

3.3 Initial application of standards, amendments or an interpretation to existing standards

The following amendments to existing standards have been published that are applicable to the groupfinancial statements covering annual periods, beginning on or after the following dates:

3.3.1 Standards, amendments to published standards and interpretations that are effective in 2011 andare applicable to the group


- IAS 24 (revised) - Related party disclosures January 01, 2011- IFRS 7 (amendment) - Disclosures on de-recognition July 01, 2011

3.3.2 Standards, amendments and interpretations to existing standards effective in 2011 that are not relevantto the group


- IFRS 1 - First time adoption on fixed dates and hyperinflation July 01, 2011- IFRIC 14 - Prepayments of a minimum funding requirement January 01, 2011

3.3.3 Standards, amendments and interpretations to existing standards that are not yet effective and havenot been early adopted by the group


- IAS 1 (amendments) July 01, 2012- IAS 12 - Income taxes January 01, 2012- IAS 19 (revised 2011) - Employee benefits January 01, 2013- IAS 27 (revised 2011) - Separate financial statements January 01, 2013- IAS 28 (revised 2011) - Associates and joint ventures January 01, 2013- IFRS 9 - Financial instruments January 01, 2013- IFRS 10 - Consolidated financial statements January 01, 2013- IFRS 11 - Joint arrangements January 01, 2013- IFRS 12 - Disclosures of interests in other entities January 01, 2013- IFRS 13 - Fair value measurement January 01, 2013

4. The provision for taxation for the six months ended 31 December 2011 has been made on an estimatedbasis.


Un-audited

30 June2011

Audited

5. Long term finances

Long term loans 5.1 4,961,423 6,277,627Loan under musharika arrangement 807,500 807,500

5,768,923 7,085,127Less: Current portion shown under current liabilities 1,876,233 2,124,548

3,892,690 4,960,579

6. Contingencies and commitments

6.1 Contingencies

The appeal filed by the customs authorities before the Supreme Court of Pakistan against the decision of

the Lahore High Court has been decided and the apex court has issued directions to the customs authorities

to consider the case afresh in the light of all the available evidences and arguments of the taxpayers. It may

be noted that although the items of plant and machinery relating to the expansion unit of the holding

company were imported during the period 1994-1995 and earlier, the customs authorities had denied the

exemption available to the importers from levy of customs duty under the provisions of SRO 484(I)/1992,

978(I)/1995 and 569(I)/1995. Such view was formed by customs authorities on the basis that such items

of plant and machinery were on the list of locally manufactured machinery published by the Federal Board

of Revenue.

Total demand raised by the customs authorities in this respect is Rs 715.372 million out of which Rs 200.645

million has already been paid by the holding company under protest. The provision for the balance amount

of Rs 514.727 million has not been provided for in this financial information since the management believes

there are meritorious grounds that the ultimate decision would be in its favour.

6.2 There is no significant change in contingencies from the annual financial statements of the group for the

year ended June 30, 2011 except for as mentioned above.

6.3 Commitments in respect of

(i) Contracts for capital expenditure Rs 281.261 million (June 30, 2011: Rs 113.639 million).

(ii) Letters of credit for capital expenditure Rs 1,410.742 million (June 30, 2011: Rs 1,364.57 million).

(iii) Letters of credit other than capital expenditure Rs 1,429.554 million (June 30, 2011: Rs 1,233.42 million).


Un-audited

30 June2011

Audited

5.1 Long term loansOpening balance 7,085,127 7,432,988Add: Disbursements during the period/ year - 1,850,000

Exchange loss during the period/ year 51,412 6,1827,136,539 9,289,170

Less: Repayment during the period/ year 1,367,616 2,204,043Closing balance 5,768,923 7,085,127

28 2012HALF YEAR

292012 HALF YEAR


Un-audited

30 June2011

Audited

7. Property, Plant and EquipmentOpening book value 25,707,179 26,446,199Add: Additions during the period/ year 7.1 651,682 765,909

Transfer in during the period/ year - 673651,682 766,582

Less: Disposals during the period/ year - net book value 185,529 31,063 Depreciation charged during the period/ year 722,165 1,474,539

907,694 1,505,602Closing book value 25,451,167 25,707,179

7.1 Major additions during the periodLand - 410Building on freehold land 119,587 101,585Office building and housing colony 10,107 111,334Roads - 4,089Plant and machinery 484,368 455,263Furniture, fixtures and office equipment 24,194 22,500Motor vehicles 13,426 66,843Power and water supply lines - 3,885

651,682 765,909

8. Intangible assetsOpening book value - -Add: Additions during the period 92,260 -

92,260 -Less: Amortization charged during the period 9,226 -

Closing book value 83,034 -

9. InvestmentsCost of investments 2,207,273 2,207,273Add: Fair value adjustments 9,616,020 14,974,881

11,823,293 17,182,154Less: Investments classified in current assets 8,189,948 12,126,367Closing balance 3,633,345 5,055,787

11. Transactions with related parties

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

Postage, telephone and telegram 1,709 1,004 2,353 1,137Printing and stationery 2,324 1,459 3,214 2,454Legal and professional charges 877 625 1,134 346Traveling and conveyance 9,545 6,333 2,556 1,133Estate development 8,988 4,722 6,174 3,553Rent, rates and taxes 10,028 4,121 7,733 3,336Freight charges 2,861 1,465 6,671 5,327Other expenses 13,782 7,748 17,647 7,432Total manufacturing cost 8,300,674 4,365,789 7,292,427 3,840,835Opening work-in-process 169,612 443,002 537,539 802,717Closing work-in-process (962,514) (962,514) (1,030,470) (1,030,470)

(792,902) (519,512) (492,931) (227,753)Cost of goods manufactured 7,507,772 3,846,277 6,799,496 3,613,082

Opening stock of finished goods 330,242 299,923 249,740 468,772Closing stock of finished goods (273,061) (273,061) (328,456) (328,456)

57,181 26,862 (78,716) 140,316Less: Own consumption capitalized (15,748) (6,160) (2,950) (950)

7,549,205 3,866,979 6,717,830 3,752,448

10. Cost of salesRaw and packing materials consumed 1,246,166 687,228 1,055,113 529,247Salaries, wages and other benefits 455,912 240,121 377,600 194,922Electricity, gas and water 1,025,765 548,356 973,838 515,074Furnace oil/coal 4,008,740 2,054,547 3,189,805 1,688,603Stores and spares consumed 578,340 333,830 671,936 399,293Repair and maintenance 89,972 43,098 126,086 59,928Insurance 31,535 16,401 29,564 16,254

Depreciation on property, plant and equipment 708,899 356,311 720,064 359,632Depreciation on assets subject to finance lease 545 545 - -Amortization on intangibles 6,458 6,458 - -Royalty 79,283 41,618 78,729 41,001Excise duty 7,403 3,914 7,297 3,805Vehicle running 11,542 5,885 14,913 8,358



July toDecember

October toDecember

20102011

30 2012HALF YEAR


2011

July toDecember

2010

Relationship with the group Nature of transactionAssociated companies/ other related parties Purchase of goods and services 465,262 369,881

Insurance premium 53,031 53,341Sale of goods 37,862 15,167Sale of Assets - 23,187Mark-up income on balanceswith related parties 966 1,130Insurance claim received 65 1,288Dividend income 564,551 545,013

Key Management Salaries and other personnel employment benefits 54,521 44,804Post employment Expense charged in respect of staff benefit plans retirement benefits plans 35,862 23,234All transactions with related parties have been carried out oncommercial terms and conditions.

312012 HALF YEAR

12. Cash flow from operating activitiesProfit before tax 1,632,833 341,579Adjustment for :- Depreciation on property, plant and equipment 722,165 725,706- Depreciation on assets subject to finance lease 545 -- Amortization on intangibles 9,226 -- Profit on disposal of property, plant and equipment (10,147) (2,804)- Dividend income (505,931) (505,931)- Retirement and other benefits accrued 24,767 16,497- Markup income (28,700) (31,565)- Exchange loss - net 51,412 18,825- Finance cost 938,733 1,076,625Profit before working capital changes 2,834,903 1,638,932Effect on cash flow due to working capital changes:- Stores, spares and loose tools (536,683) (1,425,050)- Stock-in-trade (938,987) (840,065)- Trade debts 221,041 148,911- Advances, deposits, prepayments and other receivables (27,102) (7,089)- Trade and other payables (147,878) (163,931)

(1,429,609) (2,287,224)Cash generated from operations 1,405,294 (648,292)

13. Cash and cash equivalentsShort term borrowings - secured (10,397,097) (11,585,811)Cash and bank balances 270,963 217,359

(10,126,134) (11,368,452)

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.

32 2012


14.2 Geographical segments

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

15. This interim financial information was authorized for issue by the Board of Directors of the parent companyon 17 February 2012. Corresponding figures have been re-arranged wherever necessary for the purposesof comparison, however, no significant re-arrangements have been made.

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

Rupees in thousands Cement Paper Elimination - net Consolidated

July toDecember

2011

July toDecember

2010

December2011

unaudited

June2011

audited

July toDecember

2011

July toDecember

2010

July toDecember

2011

July toDecember

2010

July toDecember

2011

July toDecember

2010Revenue from

- External Customers 10,701,409 8,174,664 397,815 372,370 - - 11,099,224 8,547,034

- Inter-group - - 348,629 434,930 (348,629) (434,930) - -

10,701,409 8,174,664 746,444 807,300 (348,629) (434,930) 11,099,224 8,547,034

Segment gross profit 3,476,874 1,686,078 46,600 162,609 26,545 (19,483) 3,550,019 1,829,204

Segment expenses (1,598,367) (917,040) (11,478) (12,669) 405 397 (1,609,440) (929,312)

Other income 650,192 545,837 8,935 2,031 (28,140) (29,556) 630,987 518,312

Financial charges (885,823) (1,016,289) (80,644) (89,495) 27,734 29,159 (938,733) (1,076,625)

Taxation (363,436) (106,449) 4,600 (25,073) - - (358,836) (131,468)

Profit after taxation 1,279,440 192,136 (31,987) 37,403 26,544 (19,483) 1,273,997 210,111

Depreciation 701,011 704,756 21,154 20,950 - - 722,165 725,706

Capital expenditure (328,605) (328,605) (218,953) (62,952) - - (547,558) (391,557)

Cash to operations 361,114 (1,815,947) (93,831) 2,618 (27,734) (29,159) 239,549 (1,842,488)

Cash from investing 133,532 (106,395) (6,987) 322,658 28,140 29,556 154,685 245,819

Segment assets 45,182,732 49,673,050 2,295,550 1,885,943 (361,462) (317,487) 47,116,820 51,241,506

Segment liabilities 19,044,868 19,455,765 1,910,949 1,469,355 (413,056) (342,537) 20,542,761 20,582,583

December2011

unaudited

June2011

audited

December2011

unaudited

June2011

audited

December2011

unaudited

June2011

audited

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 Portland and Sulphate Resistant Cements.Paper Manufacture and supply of paper products and packing material.

14.1 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 underthe IFRS's applicable to the consolidated financial statements. All group financial data are assigned to theoperating segments.

HALF YEAR

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