Financial Analysis of D.G.

Khan Cement

In the name of Allah, Most Beneficent, Most Merciful

TERM REPORT

ON

Of
D.G. Khan Cement
Company Limited

Submitted to
Mr. M. Sadiq Shahid Malik

Submitted by
M. Zuhair Altaf MBC-08-36

1
Financial Analysis of D.G. Khan Cement

Acknowledgement
I have the only pearl of my eyes to admire the
blessing of the compassionate and omnipotent because the
words are bound, knowledge is limited and time is short to
express his dignity. All thanks are due only to Almighty
ALLAH, most gracious, the most merciful, who gave me the
strength and I did this job. My special praises are for Holy
Prophet Muhammad (SAW) who is, for even humanity as
a whole.
It is a matter of great honor and pleasure for me
to express my ineffable gratitude and profound indebtedness
to my venerable supervisor Mr. Sadiq Shahid Malik for his
kind supervision, valuable suggestions and sympathetic
attitude throughout my analysis. I am much impressed of
his intellectual activities, inexhaustible energy to steer forth
the student. His sympathetic and sincerest attitude is highly
qualified experience.
This research report includes analysis of financial
statements of DG Khan Cement. Special thanks to all those
who have helped me in collecting the data.

2
Financial Analysis of D.G. Khan Cement

Getting practical knowledge is one of the major

aims of MBA program. Institute of Management Sciences,
City Campus, Bahauddin Zakariya University, Multan has
followed policy of assigning different practical assignments
to its students so a touch of real working environment can
be given to the students apart from classroom studies at
widen their perspective.
Analysis of Financial Statements is one of the core
subjects of MBA major in finance, which gives an insight into
the theoretical concepts and their application in practical
world. Therefore study of the subject is imperfect without
observing in real working environment.
In this context, respectable, instructor Mr. Sadiq
Shahid Malik has assigned us to study and analyze the
financial statements of D.G. Khan Cement Company Limited.

3
Financial Analysis of D.G. Khan Cement

Table of Contents

• Balance Sheet

• Income Statement

• Vertical analysis of Balance Sheet

• Horizontal analysis of Balance Sheet

• Vertical analysis of Income Statement

• Horizontal analysis of Income

Statement

• Financial Ratio analysis

Balance Sheet

4
Financial Analysis of D.G. Khan Cement

Current Liabilities
2005 2006 2007 2008
(,000) (,000) (,000) (,000)
Trade and other payables - 1,406,869 1,027,274 1,370,336
Accrued markup 1,154,426 340,757 342,612 364,664
Short term borrowing - secured 960,620 2,613,695 3,942,972 7,597,020
Derivative foreign currency forward 306,048 - - -
options
Current portion of non - current liabilities 599,674 1,619,025 2,042,281 2,687,608
Provision for taxation 35,090 35,090 35,090 35,090
Total current liabilities 3,055,858 6,015,436 7,390,229 12,054,718

Non Current Liabilities

Long term finances 4,899,225 7,372,468 8,686,447 8,411,051

Liabilities against assets subject to 131,985 28,886 1,141 -
finance lease
Long term deposits 28,674 33,814 79,467 73,890
Retirement and other benefits 45,765 26,572 39,862 54,018
Deferred taxation 537,000 1,559,000 1,624,000 1,319,000
Total non current liabilities 5,642,649 9,020,740 10,430,91 9,857,959
7

Capital and Reserves

Ordinary Shares of Rs.10 each 2,500,000 2,500,000 9,500,000 9,500,000

Preference Shares of Rs. 10 each 500,000 500,000 500,000 500,000
Authorized capital 3,000,000 3,000,000 10,000,00 10,000,000
0

Issued, subscribed and paid up capital 1,843,937 1,843,937 2,535,412 2,535,412

Share deposit money - 8,351 - -
Reserves 7,196,568 15,085,35 29,630,08 27,595,698
4 4
Un-appropriated profit 277,493 2,330,558 1,757,689 (50,853)
Total Equity 9,317,998 19,268,20 33,923,18 30,080,257
0 5

Total equity and liabilities 18,016,50 34,304,37 51,744,33 51,992,934

5 6 1

5
 Financial Analysis of D.G. Khan Cement

Current Assets
2005 2006 2007 2008
(,000) (,000) (,000) (,000)
Stores, spares and loose tools 1,035,081 836,049 1,496,291 2,299,250
Stock-in-trade 100,994 226,286 295,140 445,856
Trade debts 76,238 74,165 144,245 366,173
Investments 2,769,134 8,543,763 16,933,79 15,082,582
0
Advances, deposits, prepayments and other 121,486 152,465 229,315 782,358
receivables
Cash and bank balances 93,836 77,167 116,173 226,372
Total current assets 4,196,769 9,909,895 19,214,95 19,202,591
4

Non Current Assets

Property, plant and equipment 6,637,237 7,521,723 22,117,551 22,977,894

Assets subject to finance lease 317,262 295,058 133,376 5,135
Capital work in progress 3,983,175 11,759,677 1,907,063 2,488,307
Investments 2,610,634 4,482,213 8,174,474 6,795,961
Long term loans and deposits 271,428 335,810 196,913 523,046
Total non current assets 13,819,73 24,394,48 32,529,37 32,790,343
6 1 7

Total Assets 18,016,50 34,304,37 51,744,33 51,992,934

5 6 1

6
Financial Analysis of D.G. Khan Cement

7
Financial Analysis of D.G. Khan Cement

Income Statement

2007 2006
2008 (,000) (,000) (,000) 2005 (,000)

Sale 12,445,996 6,419,625 7,955,665 5,279,560

Cost of goods sold (10,530,723) (4,387,640 (3,990,822 (3,330,769)

) )

GROSS PROFIT 1,915,273 2,031,985 3,964,843 1,948,791

administrative expenses (111,658) (104,169) (121,963) (76,480)

Selling and distribution (561,465) (65,122) (34,352) (60,905)

expenses

Other operating expenses (581,913) (139,307 (191,850 (93,78

) ) 6)

Other operating income 847,344 479,420 294,114 707,692

Profit from operations 1,507,581 2,202,807 3,908,802 2,425,312

Finance cost (1,749,837) (468,173) (450,696) (304,010)

Share pf loss of associated (8,674) (14,163) (9,573)

companies

INCOME BEFORE (250,930) 1,720,471 3,448,533 2,121,271

INCOME TAXES

Income taxes 197,700 (98,000) (1,030,078 439,193

)

Profit for the year (53,230) 1,622,471 2,418,455 1,682,078

8
Financial Analysis of D.G. Khan Cement

Vertical analysis of Balance Sheet

Current Liabilities
2005% 2006% 2007% 2008%
Trade and other payables - 4.10 1.99 2.64
Accrued markup 6.41 0.99 0.66 0.70
Short term borrowing - secured 5.33 7.62 7.62 14.61
Derivative foreign currency forward 1.70 - - -
options
Current portion of non - current liabilities 3.33 4.72 3.95 5.17
Provision for taxation 0.19 0.10 0.07 0.07
Total current liabilities 16.96 17.54 14.28 23.19

Non Current Liabilities

Long term finances 27.19 21.49 16.79 16.18

Liabilities against assets subject to finance 0.73 0.08 0.00 -
lease
Long term deposits 0.16 0.10 0.15 0.14
Retirement and other benefits 0.25 0.08 0.08 0.10
Deferred taxation 2.98 4.54 3.14 2.54
Total non current liabilities 31.32 26.30 20.16 18.96

Issued, subscribed and paid up capital 10.23 5.38 4.90 4.88

Share deposit money - 0.02 - -
Reserves 39.94 43.98 57.26 53.08
Un-appropriated profit 1.54 6.79 3.40 -0.10
Total Equity 51.72 56.17 65.56 57.85

Total equity and liabilities 100 100 100 100

9
Financial Analysis of D.G. Khan Cement

Current Assets
2005% 2006% 2007% 2008%
Stores, spares and loose tools 5.75 2.44 2.89 4.42
Stock-in-trade 0.56 0.66 0.57 0.86
Trade debts 0.42 0.22 0.28 0.70
Investments 15.37 24.91 32.73 29.01
Advances, deposits, prepayments and other 0.67 0.44 0.44 1.50
receivables
Cash and bank balances 0.67 0.44 0.44 1.50
Total current assets 23.29 28.89 37.13 36.93

Non Current Assets

Property, plant and equipment 36.84 21.93 42.74 44.19

Assets subject to finance lease 1.76 0.86 0.26 0.01
Capital work in progress 22.11 34.28 3.69 4.79
Investments 14.49 13.07 15.80 13.07
Long term loans and deposits 1.51 0.98 0.38 1.01
Total non current assets 76.71 71.11 62.87 63.07

Total Assets 100 100 100 100

Analysis:

Current Assets of the company are steadily increasing but in FY08 it has
decreased slightly. Cash and bank balance has improved in FY08. Non current assets are
decreasing where as property, plant and equipment was decreased in FY06 but later years
it has improved. Investments, long term loans and deposits are fluctuating during the
years. Assets subject to finance lease is decreasing. Total current liabilities have increased
substantially in current year. Short term borrowing has increasing trend during the years.
Where as the non current liabilities have been decreasing during the years. Reserves have
also decreased during the current year which results in lower equity.

10
Financial Analysis of D.G. Khan Cement

Horizontal Analysis of Balance Sheet

Current Liabilities
2005% 2006% 2007% 2008%
Trade and other payables - - - -
Accrued markup 100.00 29.52 29.68 31.59
Short term borrowing - secured 100.00 272.08 410.46 790.85
Derivative foreign currency forward 100.00 - - -
options
Current portion of non - current liabilities 100.00 269.98 340.57 448.18
Provision for taxation 100.00 100.00 100.00 100.00
Total current liabilities 100.00 196.85 241.84 394.48

Non Current Liabilities

Long term finances 100.00 150.48 177.30 171.68

Liabilities against assets subject to finance 100.00 21.89 0.86 -
lease
Long term deposits 100.00 117.93 277.14 257.69
Retirement and other benefits 100.00 58.06 87.10 118.03
Deferred taxation 100.00 290.32 302.42 245.62
Total non current liabilities 100.00 159.87 184.86 174.70

Issued, subscribed and paid up capital 100.00 100.00 137.50 137.50

Share deposit money - - - -
Reserves 100.00 209.62 411.73 383.46
Un-appropriated profit 100.00 839.86 633.42 -18.33
Total Equity 100.00 206.78 364.06 322.82

Total equity and liabilities 100.00 190.41 287.21 288.59

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Financial Analysis of D.G. Khan Cement

Current Assets
2005% 2006% 2007% 2008%
Stores, spares and loose tools 100.00 80.77 144.56 222.13
Stock-in-trade 100.00 224.06 292.24 441.47
Trade debts 100.00 97.28 189.20 480.30
Investments 100.00 308.54 611.52 544.67
Advances, deposits, prepayments and other 100.00 125.50 188.76 643.99
receivables
Cash and bank balances 100.00 82.24 123.80 241.24
Total current assets 100.00 236.13 457.85 457.56

Non Current Assets

Property, plant and equipment 100.00 113.33 333.23 346.20

Assets subject to finance lease 100.00 93.00 42.04 1.62
Capital work in progress 100.00 295.23 47.88 62.47
Investments 100.00 171.69 313.12 260.32
Long term loans and deposits 100.00 123.72 72.55 192.70
Total non current assets 100.00 176.52 235.38 237.27

Total Assets 100.00 190.41 287.21 288.59

Analysis:

In horizontal analysis, stock in trade, advances, deposits, prepayments and

other receivables, total current assets, property, plant and equipment, total non current
assets and total assets, short term borrowing, maturity of portion of non-current liabilities,
total current liabilities, total equity and liabilities have been shown the positive trend
during the years. Where as trade debts, investments, cash and bank balance, capital work
in progress, long term loans and deposits, long term finances, long term deposits, reserves
have shown the fluctuating results.

12
Financial Analysis of D.G. Khan Cement

Vertical Analysis of Income Statement

2008% 2007% 2006% 2005%

Sale 100.00 100.00 100.00 100.00

Cost of goods sold -84.61 -68.35 -50.16 -63.09

GROSS PROFIT 15.39 31.65 49.84 36.91

administrative expenses -0.90 -1.62 -1.53 -1.45

Selling and distribution expenses -4.51 -1.01 -0.43 -1.15

Other operating expenses -4.68 -2.17 -2.41 -1.78

Other operating income 6.81 7.47 3.70 13.40

Profit from operations 12.11 34.31 49.13 45.94

Finance cost -14.06 -7.29 -5.67 -5.76

Share pf loss of associated -0.07 -0.22 -0.12 0.00

companies

INCOME BEFORE INCOME -2.02 26.80 43.35 40.18

TAXES

Income taxes 1.59 -1.53 -12.95 8.32

Profit for the year -0.43 25.27 30.40 31.86

Analysis:

Cost of goods sold is very much increased in the FY08 and it is

continuously increasing since FY06 which is resulting lower profit margin. Interest has
also increased and selling and distribution expenses and other operating expenses have

13
Financial Analysis of D.G. Khan Cement

increased substantially. These all result in least operating profit. Financial cost has been
also increased and it has doubled in FY08 which result in net loss.

Horizontal Analysis of Income Statement

2008% 2007% 2006% 2005%

Sale 235.74 121.59 150.69 100.00

Cost of goods sold 316.16 131.73 119.82 100.00

GROSS PROFIT 98.28 104.27 203.45 100.00

administrative expenses 146.00 136.20 159.47 100.00

Selling and distribution expenses 921.87 106.92 56.40 100.00

Other operating expenses 620.47 148.54 204.56 100.00

Other operating income 119.73 67.74 41.56 100.00

Profit from operations 62.16 90.83 161.17 100.00

Finance cost 575.59 154.00 148.25 100.00

Share pf loss of associated

companies

INCOME BEFORE INCOME -11.83 81.11 162.57 100.00

TAXES

Income taxes 45.01 -22.31 -234.5 100.00

4

Profit for the year -3.16 96.46 143.78 100.00

Analysis:

Cost of goods sold is very much increased in the FY08 and it is

continuously increasing since FY06 which is resulting lower profit margin. Selling and

14
Financial Analysis of D.G. Khan Cement

distribution expenses and other operating expenses have increased substantially. These
all result in least operating profit. Financial cost has been also increased and it has
doubled in FY08 which result in net loss.

Financial Ratios
Years FY'05 FY'06 FY'07 FY'08
Liquidity
Current Ratio 1.37 1.65 2.60 1.59
Cash ratio 0.031 0.0128 0.0157 0.0188
Profibility
Gross Profit
36.91% 49.81% 31.65% 15.39%
Margin
Profit Margin
31.86% 30.40% 25.27% -0.43%
on Sales
Return on
9.34% 7.05% 3.14% -0.10%
Assets
Return on
18.05% 12.55% 4.78% -0.18%
Equity
Asset
Management
ITO (Days) 77.47 48.07 100.46 79.6
Days Sales
5.20 3.36 8.09 10.73
Outstanding
Operating
82.66 51.43 108.55 90.33
Cycle
Sales/Equity 0.57 0.41 0.19 0.41
Total Asset
0.29 0.23 0.12 0.24
Turnover
Debt
Management
Debt To Asset 48.28 43.83 34.44 42.15
Debt /Equity 93.35 78.04 52.53 72.85
Long term debt
60.56 46.82 30.75 32.77
to equity
Times Interest
7.98 8.67 4.71 0.86
Earned
Market Ratios
EPS 9.12 13.12 6.40 -0.21
DPS 1.50 1.36 1.50 -

15
Financial Analysis of D.G. Khan Cement

Calculations
Current Ratio = Current Assets = 19202591 = 1.59 times
Current Liabilities 12054718

Cash ratio = Cash Equivalents+ Cash = 226372 = 0.0188 times

Current Liabilities 12054718

Gross Profit Margin = Gross Profit x 100 = 1915273 x 100 = 15.39%

Sales 12445996

Profit Margin on Sales= Net Profit x 100 = -53230 x 100 = -0.43%

Sales 12445996

ROA = Net Income x 100 = -53230 x 100 = -0.10%

Total Assets 51202591

ROE = Net Income x 100 = -53230 x 100 = -0.17%

Stock Holder’s Equity 30089257

ITO (days) = Cost of Good Sold = 10560723 = 79.6 days

Average Inventory/365 2299250/365

DSO = Average Receivables = 366173 = 10.73 days

Net Sales/ 365 12445906/365
Operating Cycle = ITO + DSO= 79.6 + 10.72 = 90.33 days

Sales / Equity = 12445996 / 30080257= 0.41 times

TAT = Sales / Total Assets = 12445996 / 51992934 = 0.24 times

Debt ratio = Debt / Assets x 100 = 21912677 / 51992934 x 100 = 42.14%

Debt / Equity = 21912677 / 30080257 x 100 = 72.84 %

Long Term Debt to Equity = 9857959 / 30080257 x 100 = 32.77%

TIE = EBIT / Interest Expenses = 1507581 / 1749837 = 0.86 times

EPS =Net Income / Shares Outstanding = -53230 / 252485315 = -0.21

16
Financial Analysis of D.G. Khan Cement

DG Khan Cement Company Limited (DGKC) was established in 1978 under the
management control of State Cement Corporation of Pakistan Limited (SCCP). It
produces and sells ordinary portland and sulphate-resistant cement.

Profibility
The gross profit margin increased in FY06 but declined in FY07 and FY08. The
profit margin has decreased continuously along with return on assets (ROA) and
return on equity (ROE). Despite a strong growth in cement dispatches, the
cement sector experienced decline in profits during FY08. Over the years all
cement manufacturers undertook huge capacity expansion plans. Although the
sales volume of the cement companies increased, almost doubling of sales in
FY08, net income did not increase to an equal extent. This created a situation of
excess supply in the market. Companies resorted to price wars leading to lower
the profits.

The company had earned

the highest sales revenue Profibility
of Rs 12.445 billion in
FY08. However, despite 60.00%
this, the gross profit in 50.00%
FY08 (amounting to Rs 1.9
40.00%
billion) was around 6%
30.00%
lower than the gross profit
posted in FY07 (Rs 2.0 20.00%
billion). The reason for 10.00%
lower gross profit was a 0.00%
140% increase in the cost -10.00% 1 2 3 4
of sales during the fiscal
year. Major input costs Gross Profit Margin Profit Margin on Sales
increased and decreased Return on Assets Return on Equity
the profitability of DGKC
and resulted in a loss after taxation of Rs 53.230 million in FY08 against a profit
after taxation of Rs 1.622 billion in FY07.

The cement manufacturers were affected with rising fuel and power prices during
FY08. The cost of production for the cement companies went up due to rise in
the prices of imported coal. All cement manufacturers now use coal as a basic
fuel. Pakistan has huge reserves of coal, but cement companies import it, as

17
Financial Analysis of D.G. Khan Cement

local coal has high sulphur content.. The rise in the costs of international coal
prices has been one of the major reasons behind dampening of gross margins of
cement companies during FY08.

Along with the hike in the international coal prices, the depreciation in rupee
value against the US dollar also added to the cost of importing coal. Financial
charges rose due to higher interest rates, long term finances, short-term
borrowing and the interest rate increased by the State Bank of Pakistan.

Liquidity Liquidity
Current Ratio
DGKC's liquidity stance
had been strengthening 3
since the past few years 2
and in FY07, its liquidity 1
position was most
0
favorable. The increase in
1 2 3 4
current assets had brought
about this change.
Furthermore, cash ratio had also risen. In FY08 the current assets of the
company declined slightly
but a 63% rise in current Liquidity
liabilities caused a
decrease in the liquidity of Cash ratio
the company.
0.04
0.03
Asset 0.02
0.01
Management 0
1 2 3 4

The performance of company in terms of asset management was weak during

FY07. During the year, the inventory turnover (days) of the company more than
doubled compared to FY06 from 48 to 100 days and DSO from 3 to 10, when the
management of inventory
seemed most efficient.
Asset Management
In FY08, the asset
120
management of DGKC
improved as the inventory 100
turnover rate increased ITO (Days)
80
because the company 60
earned sales revenue Days Sales
40 Outstanding
more in proportion to the
increase in inventory. Thus 20 Operating
Cycle
0
1 2 3 4

18
Financial Analysis of D.G. Khan Cement

the days to convert inventory into sales became less (from 100 days in FY07 to
79 days in FY08). Although the days to convert sales into cash (DSO) increased
slightly, the substantial decrease in ITO (days) led to the shortening of the
operating cycle in FY08. The days sales outstanding was higher because the
trade debt (receivables) increased substantially during FY08.

The sales to equity and

total asset turnover of the
company which had a Asset management
declining trend till FY07
increased in FY08. Higher 0.6
growth in sales increased Sales/Equity
0.4
the sales/equity ratio. Total
asset turnover also 0.2 Total Asset
Turnover
improved because the
0
management of the
company's assets was 1 2 3 4
effective in generating
higher sales revenue.

Debt Management

The debt management

ratios showed a Debt Management
positive trend till FY07
and debt to asset and Debt To Asset
equity ratios as well as 100
the long-term debt 80
ratio all decreased 60 Debt /Equity
during FY07 and this
reflected a reduction 40
Long term
in the company's 20
dependence on debt debt to equity
financing. However, 0
Times Interest
during FY08 the debt 1 2 3 4 Earned
ratios of the company
rose because the total
debt increased in FY08 mainly due to increase in the current liabilities from
7,390,229 to12, 054,718 which form 55% of the total debt. Long-term debt to
equity increased because of a decline in the equity base due to fall in reserves.
The TIE ratio continued to fall in FY08 against a positive trend that prevailed
before.

19
Financial Analysis of D.G. Khan Cement

The reason is substantial rise in finance charges due to high interest rates in the
economy and State Bank of Pakistan has also increased the interest rate due to
the current economic crisis. Also the operating income in FY08 decreased
because the operating expenses increased a lot. Due to the losses the company
incurred in FY08, its Earning Per Share (EPS) has been negative. The
management did not recommend any dividend for FY08 due to dismal profitability
situation.

Future Outlook
In the budget FY09, government of Pakistan has increased central excise duty
on cement to Rs 900 per ton from current Rs 750 per ton. But this increase is not
expected to impact the profits of the cement sector because this increment in
CED (Central Excise Duty) will be passed on to the consumers. However, the
rise in the GST by 1% will increase the local cement prices and may dampen the
cement demand.

Local cement dispatches are expected to remain depressed due to slowdown in

economy-led construction activities in the country and due to inflationary
pressures. . In the budget FY09, the government had allocated Rs 550 billion for
Public Sector Development Program (PSDP), however, due to owing budget
deficit and economic crisis, Government decided to cut PSDP expenditure.
Cement consumption is correlated to GDP growth and as the economic condition
now stands, we can predict a grave slowdown in the GDP growth of the country.
Thus cement consumption will also fall during FY09. Exports have so far shown a
strong growth and supported the total cement dispatches. Cement manufacturers
should focus on the international markets to achieve growth in their sales.

In the budget 2009, an allocation of Rs. 75bn. has also been made for
construction and improvement of dams and water reservoirs in the country. In
addition, an amount of Rs. 37bn. has also been allocated for roads and
highways. Pakistan is short of housing compared with regional countries. To
address the issue the Govt. has announced to add 1000K units of low cost
houses. All these steps announced if followed will increase the cement demand
in the country during FY 2009.

Pakistan has been exporting cement to Afghanistan. Regional shortage of

cement had presented a good opportunity to our cement manufacturers. Cement
demand in Afghanistan is due to construction going on in the country by the Nato
Forces. Cement manufacturers have also growing opportunities in the Middle
East. Growth in export sales may boost the margins of the industry and reduce
the negative impact of the rising costs on profitability. However, the effects of
global recession can impact international demand for cement.

20
Financial Analysis of D.G. Khan Cement

Indian market has been closed as India banned import of cement from Pakistan
due to escalating tensions between the two countries. . This will negatively
impact the gross margins of the cement sector.

Pakistan has huge reserves of coal, but the manufacturers are compelled to
import coal due to high sulphur content in local coal. In last few years the coal
prices has risen considerably. But the depreciation in rupee value has also
created problems for cement industry. The gas prices have also risen. This will
increase the cement manufacturers' cost of production and impact their
profitability in FY09 as it is also conditioned by the IMF. The company's largest
Vertical Cement Grinding Mill at DG Khan site has been commissioned and is
expected to start commercial production in FY09.

After the start of grinding mill, additional quantities of cement will be available.
Increased production will help DGKC to aggressively export to new markets and
generate higher sales. However, cost of production and operating expenses will
be critical in determining the profitability of the cement sector in FY09. To reduce
electricity cost, DGKC has started a project of power generation from waste heat
at DGK site. The project is expected to generate substantially cheap electricity of
about 10.4MW without using any fuel. This would help to cut down the cost of
production. The project is expected to start in first quarter of FY09.

DGKC has also decided to use municipal solid waste as fuel for its heating
purposes. Thus, negotiations with equipment suppliers are underway and
expected to be finalized soon. Also, DGKC is in contact with different city
governments to enter into agreements for acquiring solid waste. This project will
be beneficial, as it would bring down the company's costs of production, help
resolve the environmental issues related with disposal of solid waste and most
important, it would save huge foreign exchange, which spent on import of fossil
fuels.

21