January 15, 2024 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has updated the entity ratings of Kohat Cement Company Limited (PSX: KOHC) from "A" to "A+" for the long-term and "A1" for the short-term with a stable outlook forecast, according to a press release issued today.
KOHC rating upgrade depicts its consistency towards improving performance in the cement industry fostered by proficient cost management and utilization of plant.
The sponsor's 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: 44.5 million MT, FY22: 52.8m MT).
Local dispatches dwindled by 16.0% to 40.01m MT during FY23 from 47.63m MT in FY22.
Likewise, Export dispatches declined by 0.7m MT during the period (FY23: 4.56m MT, FY22: 5.25m 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 a fall in consumption of cement.
The company reported Net Revenue of Rs38.922 billion during FY23 (FY22: Rs32,877m) 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: 3.00m MT, FY22: 3.56m MT).
Based on the total sale volumes of FY23, KCCL occupies 7% market share with a 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 0.761m MT (FY22: 0.689m MT) resulting in a Net Revenue of Rs11.064bn.
Competitive pricing contributed towards the 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 the National Grid and provide cost savings.
The sponsors are committed to upholding the company’s position in the local cement industry. Furthermore, the company’s fairly low leveraging, healthy liquid investment book further supplement the ratings upgrade.
The company owns investment properties having a book value of Rs4.3bn which further strengthens the financial profile.
Copyright Mettis Link News
Posted on:2024-01-15T10:25:43+05:00
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