KOHC Reports 56% Increase in FY24 Profit Despite Sales Decline.

Lahore: KOHC has reported a significant increase in profit for the fiscal year 2024, with earnings reaching PkR8.9bn, marking a 56% rise compared to the PkR5.8bn reported in FY23. This growth is attributed to a surge in other income and improved retention prices, despite a 1% decline in sales from PkR38.9bn in FY23 to PkR38.6bn in FY24 due to a 13.8% reduction in offtakes.

According to AKD Securities Limited, KOHC’s earnings for the first quarter of FY25 also demonstrated a 56% year-on-year increase, reaching PkR3.4bn compared to PkR2.2bn in the same period last year. The company’s gross profits have improved due to better retention prices, declining coal prices, and a shift towards solar energy, reducing reliance on grid power. The average coal prices stood at approximately PkR44k/ton for FY24 and PkR42k/ton in 1QFY25.

The company’s capacity utilization decreased to 45.9% in 1QFY25 from 59.1% in 4QFY24, reflecting a 22.3% quarter-on-quarter decline in dispatches. The energy mix for FY24 showed 44% reliance on the grid and 56% on captive generation, which shifted to 34% reliance on the grid in 1QFY25. KOHC’s fuel mix included 73% imported coal and 27% local coal in FY24, with an increase to 31% reliance on local coal in 1QFY25. The management plans to further increase the use of local coal starting in 3QFY25.

Retention prices for FY24 increased by 15% year-on-year to PkR14,946/ton, and by 17% year-on-year to PkR17,044/ton in 1QFY25, contributing to profitability despite a decline in offtakes. The company is also advancing its energy strategy by setting up an additional 10MW solar power plant and has approved a 30MW coal-fired power plant, expected to be commissioned in 18 months.

The cement industry faces reduced demand, with expectations of a 5% decline in dispatches during FY25. The housing construction segment and government funding under the PSDP are also under pressure, potentially impacting gross margins. KOHC has managed to decrease finance costs in 1QFY25 by paying off most of its long-term loans.

Regional disparities in royalties, with PkR250/ton in Khyber Pakhtunkhwa compared to 6% of the sales price in Punjab, result in a cost difference of PkR1,000-1,200/ton. The management has announced a share buyback to be completed by April 2025, though the process has yet to commence.

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