Kohat Cement Company announces five million share buyback

ISLAMABAD: Kohat Cement Company Limited (KOHC) will buy back five million of its ordinary shares, the company announced to the Pakistan Stock Exchange (PSX) on Tuesday.

The notification read, “The Board of Directors of Kohat Cement Company Limited in its meeting held on January 24, 2023, has approved and recommended to the members of the company for the purchase/buy-back of upto 5,000,000 (five million) of its own issued ordinary shares, having face value of Rs 10 each, out of the distributable profits/reserves of the company.”

The purpose of the buy-back is the cancellation of shares. The shares to be bought back comprise 2.49% of the total outstanding shares of the company. The purchase period is expected to start from March 1, 2023 to August 19, 2023. The purchase will be funded through the company’s distributable profits/reserves.

According to the company notice, the purchase/buy-back of the company’s issued ordinary shares will improve the break-up value as well as the earnings per share (EPS) of the company. It will also provide an opportunity of exit to those members who wish to liquidate their investments.

It should be noted that under the buy-back rules, such buy-backs require the approval of the company’s shareholders through a special resolution. For this reason, the Extra-ordinary General Meeting (EOGM) of the company will be held on February 21, 2023 to seek members’ approval for the proposed buy-back.

In 2022, many major companies on the PSX announced share buybacks. The share prices of many profitable and established companies took a huge hit which made their valuations attractive. But due to a lack of institutional and foreign investors in the market, the sponsors of these companies decided to take advantage of the decline in share prices and buy back their own companies’ shares. It started with NETSOL in May (two million), followed by Maple Leaf Cement (25 million), then Lucky Cement (10 million), JDW Sugar Mills (two million), then BAFL (200 million), and finally ENGRO (70 million).

We wrote a featured piece for the Profit magazine at the end of last year titled ‘2022: the year of share buybacks’. The article predicted that “it might even be the case that the buybacks have only just started, and next year in 2023 we may see even more buybacks than the ones we saw in 2022. Time will tell.” It seems the KOHC buy-back is the continuation of the buy-backs we saw last year.

Corporate History

KOHC was incorporated in 1980 and is one of the leading cement manufacturing companies of Pakistan. It has an annual capacity of 4.78 Million tonnes of Grey Clinker and 135 thousand tonnes of White Clinker. The company’s registered office and the factory are located in Kohat, whereas the Head Office is located in Lahore. ANS Capital (Private) Limited is the holding company of the Company.

In 1994, KOHC was listed on the stock exchanges of Pakistan and an initial public offer was made in which 2,193,334 ordinary shares were issued to the general public at a price of Rs 52 per share. The new management headed by Aizaz Sheikh (CEO) undertook an extensive BMR programme in 1995 funded by proceeds of a public offering and a commercial debt.

The company has been in expansion mode since then and has timely converted to coal firing, established a white cement plant of 450 TPD production capacity, set up a new grey cement line of 6,700 TPD capacity and also established a standby power plant of 22.4 MW capacity. In 2002, KOHC also entered into foreign export markets in addition to the domestic markets.

The company has total ordinary shares of 200,861,297. Its market capitalisation is Rs 26.87 billion. Its free float shares, which are the actual number of shares traded on the PSX, are 60,258,389 or 30% of the total paid-up capital of the company.

For the financial year ended June 2022, KOHC posted a 37% yearly increase in net sales to Rs 32,877 million. Its gross profit increased by 64% to Rs 9,812 million. Its operating profit registered an impressive 75% increase to reach Rs 9,463 million. And finally, its net profit after tax increased by 44% to Rs 5,024 million. This net profit growth would have been almost 70% if not for the 10% super tax imposed on corporations’ income by the new government last year.

On Tuesday, the day of the buy-back notice, KOHC’s share price hit the upper cap of 7.5% and closed at Rs 133.78 per share.

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Muhammad Raafay Khan
Muhammad Raafay Khan
Sector Analyst for Profit Magazine. Focus on corporates on the PSX. Can be reached at [email protected]

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