PACRA Upgrades Entity Rating of Kohat Cement Company Limited

Kohat Cement Company Limited (KCCL) ratings upgrade depicts its consistency towards improving performance in the cement industry fostered by proficient cost management and utilization of plant. The sponsors expertise coupled with a strong operational history of over 30 years further complements the ratings upgrade. The local cement industry witnessed a downtrend in total sale volumes of 15.7% in FY23 as compared to the previous year. (FY23: 44.5mln MT, FY22: 52.8mln MT). Local dispatches dwindled by 16.0% to 40.01mln MT during FY23 from 47.63mln MT in FY22. Likewise, Export dispatches declined by 0.7mln MT during the period (FY23: 4.56mln MT, FY22: 5.25mln MT). The overall decline in the volumes was nurtured by soaring inflation in the country that led to demand constraints. Furthermore, the economic and political instability in the country during the year hindered the developmental activity in the country which contributed towards fall in consumption of cement. KCCL reported Net Revenue of PKR 38,922mln during FY23 (FY22: PKR 32,877mln) witnessing a growth of 18.4% on back of successful price hikes to reflect the rising cost of raw materials whereas the Company’s volumes declined in line with the industry (FY23: 3.00mln MT, FY22: 3.56mln MT). Based on the total sale volumes of FY23, KCCL occupies 7% market share with significant presence in the North region. The Company efficaciously managed its utilization in the overall stressed environment to sustain its margins during the period. The transition in FY24 brought some relief for the cement sector in the form of growth in total industry volumes of 23.5 % during the first quarter (1QFY24: 11.9mln MT. 1QFY23: 9.6mln MT). Recovery in both local and exports contributed towards the positive shift. Likewise, KCCL volumes also increased by 10.55% to 0.761mln MT (FY22: 0.689mln MT) resulting in Net Revenue of PKR 11,064mln. Competitive pricing contributed towards sustenance of the profit margins. The infrastructure development is in process at the Company’s greenfield expansion project site in Khushab, whereas the import of plant and machinery will be procured once the economic environment stabilizes. Furthermore, the Company has commissioned a 10MW Solar Power Project at its Kohat site and is in the process of installation of another 15MW. This will reduce its dependence on National Grid and provide cost savings.
The sponsors are committed towards upholding the Company’s position in the local cement industry. Furthermore, the Company’s fairly low leveraging, healthy liquid investment book further supplements the ratings upgrade. The Company owns investment properties having a book value of ~PKR 4.3bln which further strengthens the financial profile.

About the Entity
Kohat Cement Company Limited, operates as the fourth largest cement manufacturer in the north region with total cement capacity of 5.0mln tons p.a. Kohat Cement, listed on PSX, is majorly owned by ANS Capital (Pvt.) Ltd. (56.41%) – 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.