NISHAT GROUP

D.G. KHAN CEMENT COMPANY LT D.

CORPORATE PROFILE
Board of Directors Mrs. Naz Mansha Mian Raza Mansha Mr. Manzar Mushtaq Mr. Khalid Qadeer Qureshi Mr. Zaka-ud-Din Mr. Muhammad Azam Mr. Inayat Ullah Niazi Mr. Manzar Mushtaq Mr. Khalid Qadeer Qureshi Mr. Muhammad Azam Chairman Chief Executive

Chief Financial Officer Member/Chairman Member Member

Audit Committee

Company Secretary Mr. Khalid Mahmood Chohan Bankers ABN AMRO Bank Allied Bank Limited Askari Commercial Bank Limited Bank Alflah Limited Citibank N.A. Habib Bank Limited M.C.B. Bank Limited (Former Muslim Commercial Bank Limted) National Bank of Pakistan Standard Chartered Bank The Bank of Punjab Union Bank Limited United Bank Limited

Auditors Legal Advisor Registered Office

M/s A.F. Ferguson & Co., Chartered Accountants Mr. Shahid Hamid, Bar-at-Law Nishat House, 53-A, Lawrence Road, Lahore-Pakistan Phone: 92-42-6367812-20 Fax: 92-42-6367414 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

DIRECTORS REPORT
The Directors are pleased to present the un-audited accounts for the 1st quarter ended 30th September 2005. MARKET REVIEW Cement demand is growing ensuing from robust economic activities in the country. During the period July-Sep 2005 total cement sales in the country surged by 11% compared with corresponding period last year. Whereas, exports during the period declined merely by 3% due to heavy demand in local market and shut down of some of the cement plants for routine maintenance and optimization. Average capacity utilization of the industry stood slightly above 95% for the first quarter of the FY 2005. PLANT OPERATION The performance of the plant was satisfactory. Production and sales data is as follow: 2005-06 2004-05 Increase (Quarter July-September) (M.Tons) -Clinker -Cement 480,243 520,514 428,384 474,273 12.11% 9.75%

The optimization work on Unit-2 has successfully been completed increasing the capacity from 3300 tpd to 4000 tpd. Plant is currently operating under guarantee test. After optimization in Unit-1 & 2, total production capacity increased to 6700 tpd from 5500 tpd. OPERATING RESULTS -Sales Local Export (M.Tons) 516,405 462,718 53,687 484,371 377,001 107,370 6.61%

During the period under review local cement sales grew by over 22% compared with corresponding period of the last year. Exports were reduced due to increased demand in local market. After accounting for depreciation/amortization and provision for taxation your company has earned a net profit of Rs. 506.802 million (2004: Rs.281.528 million). Details are given below: 2005-06 2004-05 (Quarter July-September) (Rupees in million) -Net Sales -Cost of Goods Sold -Gross Profit -Net Profit before tax -After tax profit - Basic Earning per share (Rs.) 1,840.047 976.078 863.969 711.802 506.802 2.75 1,291.843 809.786 482.057 376.082 281.528 1.53

EXPANSION PLAN Work on Khairpur Project is in full swing. Shipments of plant & machinery have paced up. Erection work is also in progress. FUTURE OUTLOOK Cement industry of the country has been performing well from the last couple of years and the performance is in line with the economic fundamentals of the country. The trend is expected to continue and even get better in future. ACKNOWLEDGMENT The Directors place on record their appreciation for the efforts and hard work put in by both the officers and staff/workers for smooth running of company affairs. for and on behalf of the Board

Lahore: October 27, 2005

(Mian Raza Mansha) Chief Executive

BALANCE SHEET AS AT
Note September 30, June 30, 2005 2005 (Rupees in thousand)

EQUITY AND LIABILITES CAPITAL AND RESERVES Authorised capital 250,000,000 (2005: 250,000,000) ordinary shares of Rs 10/- each 50,000,000 (2005: 50,000,000) preference shares of Rs 10/- each Issued, subscribed and paid up capital Reserves Un-appropriated profit

2,500,000 500,000 3,000,000 1,843,937 9,762,836 762,095 12,368,868

2,500,000 500,000 3,000,000 1,843,937 7,196,568 277,493 9,317,998

NON-CURRENT LIABILITIES Long term finances Liability against assets subject to finance lease Long term deposits Retirement and other benefits Deferred taxation 5 5,570,120 95,894 28,685 47,045 731,000 6,472,744 CURRENT LIABILITIES Current portion of long term liabilities Finances under mark up arrangements - secured Derivative foreign currency forward options Creditors, accrued and other liabilities Provision for taxation 501,739 1,803,019 190,730 850,420 35,090 3,380,998 599,674 960,620 306,048 1,154,426 35,090 3,055,858 4,899,225 131,985 28,674 45,765 537,000 5,642,649

CONTINGENCIES AND COMMITMENTS

6 22,222,610 18,016,505

The annexed notes form an integral part of these financial statements.

Chief Executive

SEPTEMBER 30, 2005 (UN-AUDITED)

Note September 30, June 30, 2005 2005 (Rupees in thousand)

ASSETS NON-CURRENT ASSETS Property, plant and equipments Assets subject to finance lease Capital work in progress Investments Long term loans and deposits

7 8

6,559,910 305,208 5,639,172 3,468,248 274,611 16,247,149

6,637,237 317,262 3,983,175 2,610,634 271,428 13,819,736

CURRENT ASSETS Stores, spares and loose tools Stock in trade Trade debts Investments Advances, deposits, prepayments and other receivables Cash and bank balances 1,088,338 75,121 68,233 4,442,575 200,192 101,002 5,975,461 1,035,081 100,994 76,238 2,769,134 121,486 93,836 4,196,769

22,222,610

18,016,505

PROFIT AND LOSS ACCOUNT FOR THE QUARTER ENDED SEPTEMBER 30, 2005 (UN-AUDITED)
Note Sales Cost of sales Gross profit Administrative expenses Selling and distribution expenses Other operating expenses Other income Profit from operation Finance cost Profit before tax Taxation Profit for the year Basic earning per share Diluted earnings per share September 30, September 30, 2005 2004 (Rupees in thousand) 1,840,047 (976,078) 863,969 (17,644) (7,335) (37,464) 3,406 804,932 (93,130) 711,802 (205,000) 506,802 2.75 2.35 1,291,843 (809,786) 482,057 (16,502) (14,958) (20,044) 2,019 432,572 (56,490) 376,082 (94,554) 281,528 1.53 1.32

The annexed notes form an integral part of these financial statements.

Chief Executive

Director

CASH FLOW STATEMENT FOR THE QUARTER ENDED SEPTEMBER 30, 2005 (UN-AUDITED)
Note Sept 30, Sept 30, 2005 2004 (Rupees in thousand)

Cash flows from operating activities Cash generated from operations Financial charges paid Gratuity and leave encashment paid Taxes paid Long term deposits Net cash inflow from operating activities Cash flow from investing activities Fixed capital expenditure Purchase of investment Sale proceeds of fixed assets Dividend received Net cash outflow from investing activities Cash flow from financing activities Long term loans Repayment of loans Long term deposits and advances Liabilities against assets subject to lease proceeds from finance lease liabilities Dividend paid Redeemable capital

11

414,612 (21,415) (1,146) (4,236) (3,183) 384,632 (1,661,623) (104,788) 9,668 4 (1,756,739) 700,000 (134,286) 11 (28,845) (6) 536,874 (835,233) (866,784) (1,702,017)

580,902 (46,777) (89) (4,796) (2,337) 526,903 (304,289) 9,900 4,699 (289,690) 600,000 11,255 (9,977) 9,900 (30) (199,920) 411,228 648,441 (1,276,686) (628,245)

Net cash inflow/(outflow) from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of year Cash and cash equivalents at the end of year 12

The annexed notes form an integral part of these financial statements.

Chief Executive

Director

STATEMENT OF CHANGES IN EQUITY FOR THE QUARTER ENDED SEPTEMBER 30, 2005 (UN-AUDITED)
(Rupees in thousand)
Share capital Reserve for Capital Share Fair value Hedging issue of redemption General premium reserve reserve bonus shares reserve reserve fund Accumulated profit/(loss) Total

Balance as at June 30, 2004 1,676,306 Fair value gain during the year Gain on derecognition of investment transferred to other operating income Net Profit for the year Nominal value of bonus shares Purchase of plant and machinery Final dividend for the year ended June 30,2004 Profit for the year Transfer from profit and loss account

1,561,350

1,722,480

167,631

106,800

830,827

251,661

6,317,055

167,631 -

1,561,350

2,398,200 (5,29,645) 3,591,035

(298,244) (298,244)

(167,631) -

88,800 195,600

(251,446) 1,682,078

2,398,200 (529,645) (298,244) (251,446) 1,682,078 9,317,998

1,316,000 (1,404,800) 2,146,827 277,493

Balance as at June 30,2005 1,843,937 Fair value gain during the Period Purchase of plant and machinery Profit for the period Transfer from profit and loss account

1,561,350

2,426,267 6,017,302

117,801 (180,443)

22,200 217,800

2,146,827

506,802 (22,200)

2,426,267 117,801 506,802 -

Balance as at Sept. 30, 2005 1,843,937

762,095 12,368,868

Chief Executive

Director

NOTES TO THE ACCOUNTS FOR THE 1ST QUARTER ENDED SEPTEMBER 30, 2005
1. These accounts are un-audited and are being presented to the shareholders as required U/S 245 of the Companies Ordinance 1984 and Securities & Exchange Commission of Pakistan under SRO 764(1)2001 dated November 05, 2001. 2. The accounting policies adopted for the preparation of these quarterly accounts are the same as those applied in the preparation of preceding annual published accounts of the company for the year ended June 30, 2005. 3. These accounts have been prepared in accordance with the requirements of the International Accounting Standard IAS-34, Interim Financial Reporting. 4. These financial statements were authorized for issue on October 27, 2005 by the board of directors of the Company. Sept 30, June 30, 2005 2005 (Rupees in thousand) 5. Long term finances These are composed of: Long term loans-secured note 5.1 5,622,857 5,057,143 Redeemable preference shares (non-voting) - unsecured 353,510 353,510 5,976,367 5,410,653 Less: Current portion shown under current liabilities Long term loans - secured 406,247 511,428 5,570,120 4,899,225 5.1 Long term loans - secured Opening balance 5,057,143 2,628,572 Add: Disbursement during the period 700,000 2,900,000 5,757,143 5,528,572 Less: Repayment during the period 134,286 471,429 5,622,857 5,057,143 6. Contingencies and commitments There is no significant change in contingencies from the preceding annual published accounts of the company for the year ended June 30, 2005. 7. Operating fixed assets Opening book value Add: Additions during the period 6,637,237 8,114 6,645,351 744 84,697 85,441 6,559,910 6,128,083 851,111 6,979,194 1,130 340,827 341,957 6,637,237

note 7.1

Less: Disposal during the period (at book value) Depreciation charged during the period

7.1 Additions during the period Free hold land Buildings on freehold land: Factory building Housing colony Plant and machinery Quarry equipment Furniture, fixture & other office equipments Vehicles Power & water supply line 8. Investments Cost Add: Fair value adjustments Less: Investment classified in current assets

Sept 30, June 30, 2005 2005 (Rupees in thousand) 4,407 3,653 54 8,114 1,893,521 6,017,302 7,910,823 (4,442,575) 3,468,248 69,136 11,755 14,827 638,536 54,482 16,168 14,419 31,788 851,111 1,788,732 3,591,036 5,379,768 (2,769,134) 2,610,634

9. Cost of sales Raw and packing material consumed Electricity Furnace oil/coal Stores & spares consumed Salaries, wages & other benefits Repair and maintenance Insurance Depreciation Amortization Royalty Excise duty Freight charges Vehicle running Postage, telephone and telegram Printing and stationery Legal and professional Estate development Rent, rates and taxes Other expenses Work-in-process Opening stock Closing stock

Sept 30, Sept 30, 2005 2004 (Rupees in thousand) 106,020 112,739 467,547 113,593 47,179 1,868 5,745 82,638 3,541 9,597 3,692 286 1,525 608 191 98 775 975 1,485 960,102 50,205 (24,672) 25,533 97,775 69,780 404,508 64,270 41,234 1,308 5,698 74,977 1,593 8,384 1,663 538 1,336 346 210 15 546 635 917 775,733 210,982 (191,338) 19,644

Finished goods Opening stock Closing stock Less own consumption capitalised

Sept 30, Sept 30, 2005 2004 (Rupees in thousand) 19,468 (10,418) 9,050 (18,607) 976,078 38,616 (24,207) 14,409 809,786 347 4,833 5,180

10. Related party transactions Purchase of goods and services Sales of goods and services Lease income Insurance claim received

17,585 18,923 525 38 37,071

11. Cash generation from operations Profit/(Loss) before taxation Add/(less) adjustment for non cash charges and other items Depreciation Amortization Loss on disposal of fixed assets Provision for leave encashment and gratuity Financial charges Profit before working capital changes Cash flow from working capital changes (Increase)/decrease in current assets: Stores, spares and loose tools Stock in trade Trade debts Advances, deposits, prepayments and other receivalbe Increase/(decrease) in current liabilities Creditors, acrued and other liabilites 711,802 376,082

84,697 4,134 (1,016) 2,426 93,129 895,172

77,605 2,020 251 1,947 56,490 514,395

(53,257) 25,873 8,005 (85,464) (104,843) (375,717) 414,612

102,346 41,233 17,905 (191,321) (29,837) 96,344 580,902

11

12. Cash and cash equivalents Finances under mark up arrangement Cash and bank balances 13. Corresponding figures

Sept 30, Sept 30, 2005 2004 (Rupees in thousand) 1,803,019 (101,002) 1,702,017 (718,991) 90,746 (628,245)

Corresponding figures have been rearranged, wherever necessary, for the purpose of comparison.

Chief Executive

Director