Kohat Cement’s First Quarter Earnings Face Pressure from Royalty Hikes

Karachi: Kohat Cement Company Ltd. (KOHC) has reported a 14 percent year-over-year decline in its first quarter fiscal year 2026 earnings, attributing the decrease primarily to a reduction in gross margins. The company announced earnings of PkR2.9 billion, or PkR3.2 per share, compared to PkR3.4 billion, or PkR3.7 per share, during the same period last year. Despite this decline, earnings surpassed expectations due to higher-than-anticipated other income.

The company’s revenue saw a modest increase of 2 percent year-over-year, reaching PkR10.3 billion. This growth was driven by an 18 percent rise in offtakes, which compensated for a 13 percent drop in retention prices.

KOHC’s gross margins fell to 33.9 percent from 42.8 percent in the same period last year, largely due to an increase in royalty rates in the Khyber Pakhtunkhwa (KPK) region. Royalty rates in this area rose to PkR350 per ton, up from PkR250 per ton in the same period last year.

Other income remained relatively stable at PkR1.5 billion, as lower yields counterbalanced a 24 percent increase in cash and short-term investments. Meanwhile, the company’s finance cost dropped significantly by 66 percent year-over-year to PkR40 million, down from PkR116 million, due to a reduction in outstanding debt and easing interest rates.

The effective tax rate for the quarter was recorded at 34 percent, compared to 33 percent in both the same period last year and the fourth quarter of fiscal year 2025.

AKD Securities Limited has maintained a ‘Buy’ stance on KOHC, citing factors such as the company’s attractive valuation, an efficient energy mix, and a strong stream of other income. The firm’s June 2026 discounted cash flow target price for KOHC is set at PkR158.6 per share.