Verdict: Kohat Cement closed FY2026 with two very different stories. For the full year, consolidated revenue rose only 2.7% to Rs38.53 billion while gross profit fell 8.4% and profit after tax declined 7.6% to Rs10.70 billion as costs outpaced sales and investment income softened. Yet the closing quarter was materially stronger: the derived Q4 shows revenue up 10.4% year on year, gross profit up 36.1% and PAT up 39.6%, with gross margin recovering to about 40.8%. That late-year improvement matters, but it arrives alongside weaker cash conversion, nearly doubled capital expenditure and a much larger debt balance. The next result cycle therefore has to prove that Q4’s margin recovery is repeatable and that ongoing energy and expansion projects can improve economics without eroding the company’s historically strong liquidity.
Results at a glance
- Company Name: Kohat Cement Company Limited
- Ticker: KOHC
- Reporting period: year ended June 30, 2026. The September 10 PSX result package contains both unconsolidated and consolidated annual financial statements. This article uses the consolidated basis because it reconciles to the group data and includes wholly owned Ultra Properties (Private) Limited. The September 3 board notice explicitly described the June 2026 financial statements as audited. The March 31, 2026 consolidated nine-month statements used to derive Q4 are explicitly unaudited.
- FY2026 consolidated revenue was Rs38.53 billion versus Rs37.54 billion, up 2.7%. Gross profit fell 8.4% to Rs13.65 billion, operating profit fell 10.5% to Rs11.47 billion, and PAT declined 7.6% to Rs10.70 billion. EPS was Rs11.64 versus Rs11.97.
- Derived Q4 FY2026, calculated as the audited full year less the official unaudited nine months: revenue Rs9.63 billion, gross profit Rs3.93 billion, operating profit Rs3.19 billion and PAT Rs3.29 billion. Against the similarly derived Q4 FY2025, revenue rose 10.4%, gross profit 36.1%, operating profit 38.4% and PAT 39.6%. These are arithmetic residuals, not separately reported quarterly figures.
- Alpha QoQ Score: 70.4
- TTM Performance Score: 39.82
- 3Y Business Perf Score: 89.17
- Sector Leadership Score: 64.2324
These four scores are AlphaGen model outputs, not company-reported figures.
What improved
1. The closing quarter repaired a weak nine-month margin trajectory
The most important change is inside the year. Through March, management reported that company dispatches had increased 9.5% year on year, broadly in line with the industry, but net sales were almost flat and nine-month gross profit had fallen 19.1%. Management explicitly attributed that mismatch to severe margin pressure in a competitive pricing environment and low cement prices. The Afghanistan-Pakistan border closure also eliminated exports in the third quarter, even though nine-month export volumes remained above the prior year because of earlier shipments.
Q4 changed that picture. The annual-minus-nine-month bridge gives a gross margin of about 40.8%, up from roughly 33.6% for the first nine months and 33.1% in the comparable Q4. The filing does not disclose Q4 realization, fuel mix or company dispatch volumes, so the exact cause cannot be stated as fact. Economically, the combination of stronger sector demand, better fixed-cost absorption and/or improved pricing-cost spread is the plausible explanation, but only the margin recovery itself is directly evidenced.
The external demand backdrop was supportive. APCMA data reported for FY2026 show Pakistan’s domestic cement dispatches rising 9.5% to 41.51 million tonnes and total dispatches rising 7.2%. For north-based mills, domestic dispatches grew 10.8% for the year, and June domestic dispatches were up 26.5% year on year. Kohat operates in the northern market, so that late-year demand acceleration is consistent with—though does not by itself prove—the stronger Q4 financial bridge.
2. Finance cost fell sharply despite higher year-end borrowing
Finance cost dropped 56.1% to Rs153.4 million from Rs349.9 million. That helped cushion the decline in operating profit. The financing backdrop was generally easier than the early part of the prior fiscal year, although SBP had lifted the policy rate back to 11.5% by June 2026 after a period at 10.5%. Because year-end debt rose materially and the annual result package does not provide the detailed financing note, the lower finance cost should not be attributed to rates alone; timing of drawdowns and the structure of borrowings also matter.
3. Liquidity remained substantial even as leverage increased
The balance sheet still carries significant liquid financial assets. Short-term investments rose 31.8% to Rs35.51 billion and cash and bank balances increased 19.2% to Rs1.73 billion. Current assets reached Rs48.17 billion against current liabilities of Rs12.83 billion, implying a current ratio of roughly 3.75 times versus 3.31 times a year earlier. This matters because the increase in borrowing is large in percentage terms, but it sits alongside a sizeable treasury portfolio rather than a stretched near-term liquidity position.
What weakened / needs attention
1. Full-year costs grew much faster than revenue
Revenue grew 2.7%, but cost of sales increased 9.9% to Rs24.88 billion. As a result, gross margin compressed to 35.4% from 39.7%, gross profit fell 8.4%, and operating margin declined to 29.8% from 34.1%. Selling and distribution expense rose about 11%, while administrative and general expense increased roughly 24%. The result is a reminder that higher cement volumes do not automatically translate into higher earnings when realizations and input costs move against each other.
The peer picture reinforces that point. Official PSX summaries show mixed FY2026 outcomes across cement producers: Cherat Cement’s annual profit declined while D.G. Khan Cement’s profit increased. This suggests the sector’s volume recovery alone did not determine earnings. Company-specific pricing, energy cost, geographic mix, exports and treasury income are plausible differentiators, but the peer summaries do not isolate their individual effects.
2. Other income remains a material part of the earnings stack
Other income fell 12.0% to Rs4.65 billion, but it was still equivalent to about 40% of operating profit and 29% of profit before tax. Through nine months, the public interim cash-flow reconciliation shows that realized and unrealized gains on fair-value-through-profit-or-loss investments were major contributors to this line, alongside bank-deposit and dividend income. The complete FY2026 annual notes are not yet available on the company’s investor-relations page, so the exact fourth-quarter composition cannot be verified. That makes the operating-versus-treasury split an important quality-of-earnings item for the full annual report.
3. Accounting profit converted into much less operating cash
Net cash generated from operating activities fell 44.2% to Rs5.23 billion from Rs9.38 billion despite Rs10.70 billion of reported PAT. Cash generated from operations before financing and tax payments was Rs13.64 billion, down from Rs16.57 billion, while income tax and final-tax payments rose to about Rs7.38 billion. The gap does not mean the business failed to generate cash, but it does mean FY2026 cash conversion was materially weaker than the income statement suggests.
Working-capital movements were mixed rather than uniformly adverse. Stock-in-trade fell 17.9% and trade debts were broadly stable, but stores, spares and loose tools rose 18.1% to Rs5.90 billion. The bigger cash drain came from investment: acquisition of property, plant and equipment was Rs4.62 billion, almost double FY2025, and net short-term investment purchases absorbed another Rs4.35 billion.
4. Debt rose as the company funded a heavier investment cycle
Long-term financing, current maturities and secured short-term borrowings totaled about Rs6.31 billion at June 2026 versus roughly Rs2.29 billion a year earlier, an increase of about 176%. The cash-flow statement shows Rs2.64 billion of long-term finance proceeds during the year. It would be too strong to claim that every rupee of new borrowing funded a specific project, but the direction is clear: Kohat Cement simultaneously increased fixed investment and leverage.
Projects and corporate actions: where the next economics can change
The 28.5 MW coal-fired power plant is the most immediate operating variable
Management’s March-quarter review said construction and installation of the 28.5 MW coal-fired power plant at Kohat was progressing and was expected to become operational early in FY2027. Management said the project is intended to reduce power costs and dependence on the national grid. After year-end, on July 11, the company clarified to PSX that construction work had not been stopped by the Peshawar High Court, but that operation of the plant would be subject to Environmental Protection Agency approval.
This is important because power is a major cement-manufacturing input and FY2026’s central weakness was gross-margin compression. The plant should not be credited with any FY2026 savings without evidence of commissioning. For FY2027, the key question is whether it starts on schedule and whether actual unit power costs fall by enough to improve gross margin.
The Khushab greenfield line remains optional rather than immediate capacity
At the March quarter, management said infrastructure development for the proposed greenfield cement line in Khushab was underway, but import of plant and machinery would be finalized only after a favorable improvement in the construction sector. That wording matters: it signals strategic intent without committing to near-term commissioning. The stronger FY2026 domestic demand backdrop improves the commercial case, but investors should wait for a firm procurement, financing and construction timetable before assuming incremental capacity in forecasts.
Capital allocation is broadening beyond cement operations
The September 10 result announcement recommended no cash dividend, bonus shares or rights issue. At the same meeting, the board approved and recommended renewal of a Rs600 million loan/advance investment in associated company Ultra Kraft and renewal/enhancement of equity investment of up to Rs1.5 billion in wholly owned Ultra Properties, subject to the applicable approvals. Ultra Properties had not commenced business operations through March 2026, so its future capital needs and returns remain a watch item rather than an established earnings contributor.
A separate August 28 material disclosure adds another possible strategic branch. Kohat Cement joined Hub Power Holdings, Lucky Cement and Metro Ventures in a consortium that was pre-qualified to conduct due diligence for the proposed acquisition of a 51% to 100% equity stake, with management control, in Faisalabad Electric Supply Company (FESCO) under the government’s privatization process. The company explicitly said there was no binding acquisition commitment at that stage. This should therefore be monitored as optional capital allocation, not treated as an executed transaction.
Recurring versus non-recurring: what should carry forward?
The most credible recurring positive is the recovery in domestic cement demand. FY2026 industry local dispatches were higher and Kohat’s own nine-month volumes grew. The most credible recurring risk is competitive pricing and energy cost: management itself identified low industry prices as the reason stronger volumes did not translate into stronger nine-month revenue and profit.
Q4’s margin improvement is real but should not yet be treated as a new normal. It is derived from audited annual and unaudited nine-month statements, and the absence of detailed annual operating notes means the mix of realization, volumes, fuel and production efficiency cannot be decomposed. Likewise, other income from investments is economically valuable but can be more variable than cement operating profit, especially where fair-value gains are involved.
Historical pattern: a plateauing top line, then a margin-led earnings cycle
Kohat Cement’s annual sales have been broadly range-bound around the high-Rs30-billion level: PSX summaries show Rs38.92 billion in FY2023, Rs38.65 billion in FY2024, Rs37.54 billion in FY2025 and Rs38.53 billion in FY2026. Profit, however, rose sharply from Rs5.82 billion in FY2023 to Rs8.89 billion in FY2024 and Rs11.58 billion in FY2025 before easing to Rs10.70 billion in FY2026. That history makes the current question clear: the next leg of earnings growth needs either sustainable margin expansion, materially higher volumes, stronger recurring treasury returns, or some combination—not simply a return to the same revenue range.
What to monitor next
- Q1 FY2027 gross margin and realization: the central test is whether Q4’s roughly 40.8% derived gross margin persists after a weak first nine months.
- Dispatch mix: domestic demand recovered strongly, but northern exports were heavily disrupted during FY2026. Watch local pricing, export normalization and company-specific volumes.
- 28.5 MW power plant: commissioning date, EPA approval and evidence of actual power-cost savings will be more important than the project headline itself.
- Cash conversion and leverage: FY2026 operating cash flow fell to Rs5.23 billion while capex almost doubled and aggregate borrowings rose to about Rs6.31 billion. Track whether debt stabilizes once the current project cycle matures.
- Other income quality: the full annual report should clarify the FY2026 mix of realized investment gains, unrealized fair-value gains, dividends and deposit income.
- Capital allocation: follow the Khushab greenfield decision, Ultra Properties funding and the FESCO consortium process. None should be modeled as completed value creation until binding commitments and economics are disclosed.
Verdict in one line
Kohat Cement ended FY2026 with a convincing late-year margin rebound, but the full-year result still shows lower operating profit, weaker cash conversion and a heavier investment balance sheet; FY2027 now has to convert stronger demand and new energy infrastructure into repeatable operating earnings.
Sources
- Pakistan Stock Exchange — KOHC FY2026 financial-results package, used for the consolidated and unconsolidated annual profit or loss, financial position, cash flow, corporate actions and reporting period. Open source.
- Pakistan Stock Exchange — September 3, 2026 board-meeting notice, used to verify that the June 30, 2026 financial statements were being considered as audited financial statements. Open source.
- Kohat Cement — official third-quarter and nine-month report to March 31, 2026, used for the Q4 arithmetic bridge, consolidated basis, dispatch data, pricing commentary, project updates, interim cash flow and investment-income composition. Open source.
- Kohat Cement — investor-relations financial-reports page, checked for the FY2026 annual report and detailed annual notes. Open source.
- Business Recorder — FY2026 cement dispatch data released by the All Pakistan Cement Manufacturers Association, used for full-year and June industry context. Open source.
- State Bank of Pakistan — June 15, 2026 Monetary Policy Statement, used for the year-end financing-rate backdrop. Open source.
- Pakistan Stock Exchange — KOHC July 11, 2026 clarification on the 28.5 MW coal-fired power plant, used for the post-year project and EPA-approval status. Open source.
- Pakistan Stock Exchange — KOHC August 28, 2026 material information, used for the FESCO consortium, pre-qualification and explicit non-binding status. Open source.
- Pakistan Stock Exchange — KOHC, CHCC and DGKC issuer pages, used for company identity, historical annual summaries and a limited peer-results cross-check. KOHC, CHCC and DGKC.