Lucky Cement Ltd Reports 38% Higher Profit After Tax During H1

Lucky Cement Limited has posted a consolidated net profit of Rs. 17.15 billion in the last six months of 2021, according to the company’s financial results for the period that ended on December 31, 2021.

The company’s profit increased by 38 percent compared to Rs. 12.44 billion during the same period last year. This translates into earnings per share (EPS) of Rs. 40.66 as compared to Rs. 32.05/share reported during the same period of the previous year.

During the period under review, the company’s consolidated net profit (attributable to owners of the Holding Company) increased by 26.8 percent as compared to the same period last year.

According to a statement released by the company, the increase in profit was mainly attributable to the stellar performance of the company’s chemicals business. Apart from the one-off unrealized account gain recognized on the acquisition of controlling shares in NutriCo Pakistan amounting to R.s 1.85 billion, the chemical business achieved considerable improvement in net profitability on account of impressive growth in its polyester, pharma and animal health business segments.

The company’s net sales witnessed a noteworthy surge of 29 percent year-on-year (YoY) to Rs. 123 billion in the half-year compared to Rs. 95 billion in the same period last year.

In the automobile business, Lucky Motor Corporation introduced Kia Stonic in its lineup as well as started commercial production of Samsung branded mobile phones during the half-year under review. Whereas, the profitability of the Company’s overseas operations increased mainly due to improvement in sales volume and operations of the Company’s Joint Venture Greenfield cement plant in Samawah, Iraq, which achieved its COD in March 2021.

On an unconsolidated basis Company’s overall sales volumes posted a decline of 5.9% to reach 4.70 million tons during HY 2021-22. The company’s local sales volumes remained almost in line with the corresponding period last year i.e. 3.63 million tons in 1HY 2021-22 versus 3.66 million tons during the same period last year.

The export sales volumes of the Company declined by 19.7% to 1.07 million tons as compared to 1.34 million tons during the same period last year.

The decline in overall dispatches is mainly attributed to a decline in export volumes on the back of volatility in coal prices and freight costs internationally, which have adversely impacted the viability of cement exports from Pakistan.

Further, with regards to Company’s unconsolidated financial performance, the gross sales revenue increased by 20.2% to Rs. 50.61 billion compared to Rs. 42.11 billion reported during the same period last year.

The per ton cost of sales also increased mainly due to an increase in coal prices along with other input costs. Lucky Cement recorded a net profit after tax of Rs .77 billion showing growth of 27.2%. Similarly, the standalone EPS of the Company is Rs. 17.86/share as compared to the same period last year’s reported EPS of Rs. 14.04/share.

Future Outlook

With the pandemic continuing to resurge despite government drive on compliance of SOPs and vaccinations, the expectation is that volatile infection rates will continue for time being. The company, however, expects that the economy will continue to show resilience against the adverse impacts of the pandemic.

Cement Segment

The ongoing inflationary trend in commodities globally has resulted in an increase in the cost of inputs such as coal, diesel, furnace oil and freight charges, which are a major cost component of cement. Currency deflation has further impacted and increased the costs. Due to the increasing costs of the other construction materials, the company expects local demand to remain flat. The cement prices have only partially offset the increase in input costs faced by manufacturers. However, the company expects that construction of dams, hydropower projects, real estate development and low-cost housing schemes will help maintain the demand for cement in the medium to long term.

Chemical Segment

The businesses under ICI Pakistan are expected to witness stable-to-strong demand in the near term. The company sees rising raw material and energy prices along with higher sea freights as near-term challenges for these businesses.

Automobile Segment

Lucky Motor Corporation (LMC) has completed its current plan for KIA model line-up and the products, which have been introduced in Pakistan are very successful. The outlook of the automobile market in the second half of FY22 looks challenging on the back of recently introduced measures by the government of Pakistan by way of increasing the rates of federal excise duty (FED) and sales tax, which has resulted in an increase in the prices of cars. The devaluation of the Pakistani Rupee against the US Dollar and the impact of increased freight on the import of CKD kits and spare parts will put upward pressure on the prices of cars.

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