LAHORE - Kohat Cement Company Limited (KOHC) is planning to erect a 9MW waste heat recovery project (WHRP) for which negotiations with different suppliers are underway.
Industry sources said that the plant will lessen electricity dependence from the national grid by at least 38 per cent. However, details of the project cost, capital structure and timeline are still sketchy. They said that Kohat Cement Company Limited achieved a massive YoY profitability growth of 26 times with profit after tax (PAT) of Rs1,661 million in FY12 compared to Rs64 million in FY11. The result was quite in line with expectations and the board also announced its first cash dividend in 12 years. Strong profitability growth of 26x during FY12, mainly emanating from a 35 per cent YoY jump in average retention price coupled with a 13 per cent YoY improvement in dispatches. In addition to this aggressive prepayment of loans helped the company to reduce its finance cost by a 12 per cent YoY, providing further support to the bottom line.
The stock of KOHC has remained the second best performing stock, with 622 per cent return in CY12 YTD, outperforming the benchmark KSE 100 Index by a massive 587 per cent. Experts believe that the story does not end here as the company is likely to yield a 46 per cent YoY growth in FY13 as well. Though cement prices witnessed an 18 per cent YoY increase in FY12, but more of this rise came in 2HFY12. However for FY13, prices are expected to remain firm around Rs440/bag level adding full impact to the revenues of cement companies. Experts confidence is further enhanced from the fact that the prices gained by Rs 6/bag during July-Aug -12 period. Normally it is the period when prices fall due to monsoon (price fell by Rs 9/bag during the same period in FY11).
Similarly coal prices, though fell by a steep 25 per cent during FY12, but major fall was witnessed in month of June-12, when coal averaged $82/tons compared to yearly average of $105/ton. Thus full impact of falling coal prices is yet to emerge in profitability of cement sector.
A combined effect of these two factors is likely to take gross profit up by 32 per cent YoY to Rs 3.8b in FY13, with gross margin at highest ever of 36 per cent. The company has prepaid its long term loans to the tune of Rs1.1b in addition to scheduled payments of Rs823m in FY12.
This aggressive de-leveraging coupled with a 150 basis point reduction in interest rates is likely to reduce finance cost by 52 per cent YoY to Rs301m in FY13.