Lucky Cement Ltd Reports 20% Higher Profits During First 9 Months of FY22

Lucky Cement Limited has posted a consolidated net profit of Rs. 26.53 billion in the last nine months of 2021, according to the company’s financial results for the period that ended on March 31, 2021.

The company’s profit increased by 20 percent compared to Rs. 22.15 billion during the same period last year.

This translates into earnings per share (EPS) of Rs. 64.07/share as compared to Rs. 56.36/share reported during the same period last year.

Further, on a consolidated basis, the Company achieved a gross turnover of Rs. 265.70 billion which is 31.2% higher as compared to the same period last year’s turnover of Rs. 202.46 billion.

During the nine months 2021-22 under review, the Company’s consolidated net profit (attributable to owners of the Holding Company) increased by 13.7% as compared to the same period last year. Despite the challenges due to increasing production costs across all segments, the Group has been able to secure double-digit growth in its profitability.

The increase in Net Profit was mainly attributable to the impressive performance of the Group’s chemicals business and overseas cement segment. The Group’s Polyester, Pharmaceutical and Animal Health segments were able to secure growths of 30.4%, 56.7%, and 95.9% respectively in operating results, versus the same period last year, on the back of enhanced volumes, better sales mix and new product launches in the pharmaceutical segment.

This increase is in addition to the one-off unrealized gain on acquisition of controlling shares in NutriCo Pakistan amounting to Rs. 1.85 billion. On the other hand, the Group’s joint venture cement production facility in Samawah, Iraq, which started its commercial production in March 2021, has also added healthy profits to the Group’s profitability.

On an unconsolidated basis Company’s local sales volumes posted a decline of 3.4% to reach 5.51 million tons during 9M 2021-22. The marginal decline for the Company versus negligible change in the industry numbers was mainly due to other cement plants becoming operational in the current period.

Moreover, the export sales volumes of the Company decreased by 18.0% to 1.56 million tons compared to 1.90 million tons during the same period last year, on the back of continuous volatility in international coal prices and exorbitantly high freight costs globally. Hence, overall sales volumes of the Company declined by 7.1% to reach 7.07 million tons during 9M 2021-22.

Further, with regards to Company’s unconsolidated financial performance, the gross sales revenue increased by 19.6% as compared to the same period last year. Per ton cost of sales of the Company increased by 49.1% as compared to the same period last year.

This was mainly due to a substantial increase in coal prices along with other input costs, which was a direct result of the international commodity supercycle followed by the continuing conflict between Russia and Ukraine. Lucky Cement recorded a net profit after tax of Rs. 11.31 billion. It includes the amount of Rs. 1.48 billion as a fee for the provision of technical services to Nyumba Ya Akiba, the Company’s joint venture in the Democratic Republic of Congo during the current financial year. The standalone EPS of the Company is Rs. 34.97/share as compared to the same period last year’s reported EPS of PKR 36.14/share.

The Company reported progress on its brownfield plant expansion activities in KPK with project completion targeted for December 2022.

During the outgoing quarter, a major milestone was achieved when Lucky Electric Power Company Limited – a wholly-owned subsidiary of Lucky Cement, achieved the Commercial Operations Date (COD) of its 660 MW coal-fired power project on March 21, 2022. The addition of 660 MW to the national grid will not only play a key role in increasing the energy security and prosperity of Pakistan but will also go on to reduce the cost of electricity and reliance on imported fuel in the long run after the completion of Phase III of SECMC in June 2023.

The volatility in commodity prices internationally mainly due to the Russia-Ukraine conflict, particularly coal and crude oil along with higher freight charges, is constantly impacting the input costs of cement. Similar factors have also increased the cost of other construction materials particularly steel, due to which overall construction cost has gone up.

On the other hand, due to the recent hike in interest rate coupled with double-digit inflation and increasing cost of construction, cement demand is expected to remain under pressure in near future. Albeit in the medium to long term, Lucky expects strong demand to come from the construction of dams, hydropower projects, and other real estate development projects.