According to IMS Research, the CHCC held its corporate briefing session today to review its operational and financial performance for FY24. The company reported a consolidated EPS of PKR28.31 for the year, marking a 12% YoY increase. The improvement in profitability was driven by lower fuel costs, higher retention prices, and reduced finance costs due to early debt repayment.
Key takeaways from the briefing:
Update on demand:
§ Domestic sales were recorded at 2.2mn MT, reflecting a 12.5% decline YoY. On the other hand, exports were up 22.4% YoY to 0.4mn MT. On a combined basis, total dispatches fell 8.5% YoY to 2.63mn MT.
§ Industry’s demand in 1QFY25 was c.8.1mn MT, down a significant 20% YoY. Management believes that falling interest rates might create fiscal room for the gov’t to increase PSDP spending – which may help to end the year with a low single-digit decline in total domestic dispatches.
§ Industry’s exports reached 2.1mn MT, up 22% YoY (with growth of 18% in the North). The export outlook for Afghanistan remains positive, as demand has begun to recover in the neighbouring country.
§ Local MRP prices stand at PKR1,450/bag and retention prices stand at PKR900/bag. Export prices range from US$48-50/ton, and the management emphasized that its brand enjoys premium pricing in the Afghan market.
Fuel and Power:
§ The fuel mix in FY24 consisted of 59% local coal, 22% Afghan coal, and 19% imported coal. Management claims that, while CHCC is capable of using up to 90% local coal, supply issues necessitate the use of Afghan and imported coal.
§ Local coal is priced at PKR35,000/ton, while Afghan coal stands at PKR45,000/ton. Following reductions in Afghan royalties and border taxes, Afghan coal prices are expected to drop by PKR6,000/ton.
§ The power mix includes 50% gas, 37.2% waste heat recovery (WHR), and the remainder is a mix of solar, PEDO, and grid power.
§ Gas based power generation costs PKR28-30/kWh, compared with grid costs of PKR38-40/kWh.
§ Management plans to install an additional 9MW solar power plant with an estimated cost of PKR1.4bn, expected to be completed by 3QFY25.
Other Items:
§ Management noted that, in KPK, royalty charges on raw material were revised upward from PKR120/ton to PKR250/ton. Meanwhile, Punjab saw a significant increase in royalty charges to 6% of MRP, translating into an increase of more than PKR1,600/ton.
§ CHCC benefits from one of the lowest variable costs per ton, attributed to close proximity to local and Afghan coal sources, superior inventory management, and a cost-effective power mix.
§ The company has obtained a stay order from the Peshawar High Court preventing SNGPL from shutting down its gas supply. However, gas prices (currently PKR3,000/mmbtu) have the potential to rise.
§ A tax benefit of PKR721mn was fully recorded in 1QFY25 and is not expected to recur going forward.
