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Kohat Cement to achieve financial close of announced green field expansion in next month: PSX

Lahore February 9 2022: In order to participate in current boom in cement industry management has announced further green field expansion of 7,800-10,000 TPD, near Khushab. Estimated cost of project is ~PKR 28bn out of which ~60 percent will be debt financed, as per document published by rating agency.

Financial Close of upcoming expansion is expected to be achieved by Mar-22.

Kohat Cement’s market share in north region rose to 9.6 percent after successful completion of brown-field expansion of 2.3 million tpa, last year. The Cement sector’s dispatches have recorded splendid growth and surged by 21 percent in FY21 as demand in the domestic market accelerated. Export is another avenue. Industry-wide exports have gone up as a new export window is created in the Bangladesh market.

BMR of Line-III is underway that would cost ~PKR 650 million, and will be financed through equity. Company’s leverging has reduced as the repayments of long term loan for line IV has started taking the debt/equity ratio in a comfortable position ~19 percent in 1QFY22 (FY21: 21.4 percent, FY20: 27 percent).

The company has an available short term limit of ~PKR 3.3 billion out of which ~86 percent remained unutilized which shows company’s low reliance on short term borrowings.

The industry’s future demand outlook is positive, in view of the infrastructure projects in the pipeline. The Company’s revenues witnessed an increase (1QFY22: PKR 6.8 billion, FY21: PKR 24 billion, FY20: PKR 11.3 billion) attributed to an uptick in sales volumes, positive price indicators and, reinvigorating economy.

Margins in 1QFY22 also improved on account of recently added more efficient Line-IV. Company aims to optimally utilize the recently expanded line IV, in order to cut off direct cost. The Company managed to recoup previous losses and reported profits of PKR 1.3 billion and PKR 3.5 billion in 1QFY22 and FY21 respectively.

Company own investment properties along with a significant amount of liquid assets having a book value of ~PKR 4.1 billion and ~PKR 5.3 billion respectively, which mitigates the financial risk factor to a large extent.

Kohat Cement, operates as the fourth largest cement manufacturer in the north region with total cement capacity of 5.3 million tons p.a. Kohat Cement, listed on PSX, is majority owned by ANS Capital (Pvt.) Ltd. (55 percent) – sponsor family’s majority owned company. The overall control of the company vests in eight member board of directors (BoD) including the chairman – Mr. Aizaz Mansoor Shiekh and the Chief Executive Officer, Mr. Nadeem Atta Sheikh.

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