Kohat is one of those mid-tier cement companies that have been slowly moving toward joining the big boys league; and its impressively growing margins speaks volumes. The company had its priorities straightfocusing largely on cutting down costs by adopting alternative energy measures such as waste heat. Margins as a result have soared to 47 percent in the latest announcement of Kohats half year results.
The promising accounts come with the decision to give interim cash dividend in the second quarter at Rs8 i.e. 80 percent, in addition to Rs4 per share i.e. 40 percent offered in the first quarter.
Despite a lukewarm growth in its dispatches in the first half of FY173 percent year-on-year against the industry dispatch growth of 9 percent; and revenue growth of only 2 percent; the company managed to get a healthy bottom-line (up by 4% year-on-year). This can be attributed to slimmer costsdown by 4 percent in 1HFY17, testament to good energy efficiency practices. While only marginal growth in indirect expenses such as administrative and selling costs also helped.
Coal prices have already started rebounding which has propelled some cement companies located in the north to increase dispatch price. Kohat will follow suit if it already hasnt adjusted the prices to safeguard its stronger than ever margins.
Meanwhile, the company has two new projects in the works that will help it to put its best foot forward. The first is the new cement mill of 105 tons per hour that will be operational by Dec 2017 which will bringing efficiency into its production chain.
The second and the most significant is the additional capacity that the company hopes to adda total of 2.3 million tonson top of its existing 2.55 million tons. It is still unclear what form of expansion this would be but if all goes well, the company will contribute to 7 percent of the countrys domestic capacity which is pretty good considering the industry is adding 25 million tons in the next five years.
After losing the bid to acquire Dewans North plan to Bestway just yesterday, Kohat must soon finalize its expansion plans to get stakeholders excited about the growth prospects of the company again. But it should not go without celebrating its soaring margins,that are at a level only the industry leader, Lucky has reached. Once expansions plans are locked down, it appears, Kohat can become an important force in the fast expanding industry.
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