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The Hub Power Company Limited’s (Hubco) profitability declined in the outgoing quarter, primarily due to lower share of profits from China Power Hub Generation Company (CPHGC) and the absence of debt servicing revenue from the Narowal Energy Limited.

The management updated that the affected unit of CPHGC has returned to service from January 6, 2022. The company is in talks with the insurance provider and expects the insurance claim to settle within the quarter. Hubco expects to receive $50 to $55 million in lieu of insurance claim, which would majorly cover for the material damage to plant and loss of income due to business interruption.

The Economic Coordination Committee (ECC) of the Cabinet and the federal Cabinet had approved a subsidy of Rs100 billion last month for the China-Pakistan Economic Corridor (CPEC)-related projects. A total of Rs50 billion have been paid so far to the Independent Power Producers (IPPs), of which Hubco’s CPHGC project has received Rs9 billion.

The company expects to receive another Rs10 billion, when the remaining Rs50 billion will be distributed. The company also expects to receive dividends from CPHGC in the coming quarters.

The management apprised that the board of SECMC has approved the mine expansion plan to 12.2mtpa, while the construction work for the expansion up to 7.6mtpa has already commenced.

The management shared that the work on Thal Nova Plant is 65 per cent complete. Equity contribution of the project is also in place and the company plans to achieve the commercial operations date (CoD) in the first half of FY23. Meanwhile, Thar Energy Limited’s commercial operations date is expected by June 2022.

The company is working on the feasibility of several water treatment projects. Hubco has recently been awarded with the first right of refusal from the government of Sindh for the 35MGD waste water recycling project at the Site area.

The Hub Power Company Limited is the first and largest Independent Power Producer (IPP) in the country with a combined installed power generation capacity of 2,920MW.

Kohat Cement earns Rs3 billion profit in half year

Kohat Cement Company Limited announced a net profit of Rs3 billion, translating into the earnings per share (EPS) of Rs14.86 for the half year ended December 31, 2021, recording a growth of 100 per cent against Rs1.5 billion (EPS: Rs7.33/share) in the same period last year.

The low-cost coal inventory during the quarter along with sustained cement prices in the local market, helped the company improve its profit margins. The company realises all of its debt obligations.

Kohat Cement has obtained all the requisite regulatory approvals for setting up Greenfield Cement Production Line in Khushab, Punjab. The acquisition of land is under progress and contracts are being executed for the import of plant and machinery.

Increasing electricity cost, historically high coal prices and strong dollar will affect the profitability of the company in foreseeable future. The company will try to pass on the cost increase to the consumer but it seems an uphill task because the demand for cement may dampen due to runaway inflation in costs of building materials.

Kohat Cement Company Limited was incorporated in 1980 and is one of the leading cement manufacturing companies of Pakistan. It is an ISO 9001-2015 certified, with an annual capacity of 4.78 million tonnes of grey clinker and 135,000 tonnes of white clinker. The registered office and the factory are located in Kohat, whereas the Head Office is in Lahore.

The government’s focus on the low-cost housing projects and the availability of subsidised house financing would be the key drivers for the cement industry and would benefit the cement sector in the coming years.

However, increasing coal prices in the international markets, projected hike in electricity prices, weakening rupee against the dollar, persistent resurgence of Covid-19 variants and geopolitical developments are the key concerns, which may affect the cement demand, profitability of the sector, as well as the company.

Mughal Steel expects rise in products demand

Mughal Iron and Steel Industries is one of the leading steel companies in Pakistan.

Going forward, it is expected that an increase in the construction activities, construction of dams and a rise in housing finance would result in an increase in the demand for long-rolled products.

Further, the company will continue to maintain its export operations and make efforts to further increase them.

It is projected that the profitability in the remaining period of the year will be affected due to an increase in the prices of basic raw materials, utilities, wages and markup rates, if the corresponding increase in the selling prices are not absorbed by the market.

On the economic front, the current account deficit, depreciating rupee, struggling foreign exchange reserves, rising inflation, upward revision in discount rate by 100bps to 9.75 percent, high scrap prices in the international markets and an increase in the energy cost, impacted the overall performance of the company.

On the operational front, the sales revenue increased to Rs32.081 billion from Rs19.445 billion, compared with the corresponding period, showing an increase of 65 per cent for the half year ended December 31, 2021.

The sales grew due to an increase in the prices, as well as volumes both in ferrous and non-ferrous segments.

The gross margins improved for both ferrous and non-ferrous segments. Within the ferrous segment, the impact of increase in raw material prices in the international markets and the impact of the rupee depreciation had resulted in an increase in the sale prices of local ferrous products; however, due to inventory in hand, the weighted average cost of inventory witnessed a gradual increase, resulting in improvement in gross margins, compared with the corresponding period of the last year.