Kohat Cement plans 10,000 ton/day capacity plant

KARACHI: As cement demand has seen an upsurge amid government’s support to the construction industry, another main player planned a new plant to enhance its production capacity by up to 10,000 tons a day by investing an estimated Rs30 billion, it was learnt on Wednesday.

The board of directors of Kohat Cement Company approved setting up of 7,800 - 10,000 tons/day cement manufacturing plant along with 8-10 megawatts of waste heat recovery and 25 megawatts of coal-fired power plant in Khushab, Punjab.

“The estimated cost of the entire project is Rs30 billion, which would be financed through a mix of debt and equity and it is expected that construction and installation of the plant shall be completed in 2 to 2.5 years,” the company said in a filing with the stock exchange.

Total cement dispatches clocked in at 28.6 million tons during the first half of the current fiscal year as against 24.8 million tons in the previous year, depicting a growth of 15.6 percent, according to the industry data.

The improvement in the dispatches is primarily attributed to the tax amnesty schemes the government announced for people to invest in the construction sector without disclosing the source of income. The exemption from disclosing source of investment extracted huge sums of money from undocumented economy and funneled them toward the construction sector that is seen as the potential catalyst to economic growth.

The coronavirus lockdown adversely hit the economy that lost 0.4 percent of its output during the last fiscal year. The growth is initially forecast in the range of 1.5 to 2 percent for the current fiscal year. Infrastructure projects and the housing sector are the key drivers of cement industry. Going forward, consumption of cement from these two sectors is projected to increase under low-cost housing scheme and developments.

State Bank of Pakistan has recently introduced finance facility for construction / house buying at reduced mark-up rates repayable in affordable monthly installments, which would further spur the cement demand.

“In light of stimulus construction packages announced by the government and construction of projects under China-Pakistan Economic Corridor, it can be expected that FY 2021shall turn out to be a good profitable year for Pakistan’s economy as well as for our company,” Kohat Cement said in an annual report.

Kohat Cement announced a net profit of Rs965.327million, translating into earnings per share (EPS) of Rs4.81 for the quarter ended December 31, 2020 compared with the profit of Rs9.6 million and EPS of Re0.05 in the corresponding quarter previous year. Sales revenues for the quarter under review stood at Rs5.93 billion compared with the revenues of Rs3.027 billion in the same quarter previous year.

“Kohat Cement’s earnings are above expectations due to higher retention prices, low-cost coal inventory and cost efficiencies,” analyst Ahmed Rauf at Sherman Securities said.