Lucky Cement Limited has announced its financial results for the year that ended on 30 June 2022.
On a consolidated basis, Lucky Cement Limited, once again, reported its highest ever profit after tax of Rs. 36.42 billion for the year ended June 30, 2022, up by 29.06 percent as compared to Rs. 28.22 billion during the same period last year.
On a consolidated basis, the Company achieved a 60 percent higher net turnover of Rs. 331.5 billion as compared to last year’s turnover of Rs. 207.2 billion. The consolidated net profit of the Company remained Rs. 36.4 billion out of which Rs. 29.5 billion was attributable to the owners of the holding company, compared to Rs. 28.2 billion and Rs. 22.9 billion, respectively for the prior year.
This translates into an EPS of Rs. 91.22 during the fiscal year ended June 30, 2022, as compared to Rs. 70.69 during last year, representing a growth of 29 percent.
According to the company, the exceptional growth in revenue, despite economic challenges, is owing to robust performance across all businesses of the group and is an affirmation of the successful execution of the Group’s diversification strategy.
Automobiles and Mobile Phones
Lucky Motor Corporation (LMC) continued with its impressive run and further strengthened its market position by adding exciting new products, such as Kia Stonic and Peugeot 2008, to its product line-up.
LMC, in another major development, started assembling Samsung mobile phones in Pakistan in December 2021. LMC’s share in group profitability was mainly impacted by continued volatility in the auto sector including exchange rate, changes in SBP prudential regulations for consuming financing by SBP and increasing interest rate scenario along with high inflation.
On a standalone basis, the Company’s overall sales volumes declined by 8.9 percent to reach 9.1 million tons during the year ended June 30, 2022, in comparison to 10 million tons last year. Local sales volume dropped by 3.6 percent to reach 7.3 million tons in the current year compared to 7.6 million tons last year.
While the export sales volume declined substantially by 25 percent to 1.8 million tons during the year compared to 2.4 million tons last year due to non-viability in terms of pricing on the back of persistent high coal prices in the international market coupled with increased shipping freights.
Despite the reduction in volumes in both domestic and export sales, the profitability of the local cement operations improved marginally because of enhanced operational efficiencies, including better management of sales and distribution costs, which decreased as a percentage of sales.
The Company achieved a major milestone when its wholly owned subsidiary, Lucky Electric Power Company Limited (LEPCL), achieved the Commercial Operations Date (COD) on March 21, 2022, of the 660 MW coal-fired power plant set up at Port Bin Qasim, Karachi.
This milestone will play a key role in increasing the energy security and prosperity of Pakistan. It 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 power generated from the plant is being fed into the national grid in line with a power purchase agreement signed with the Government. In another major development, the Company’s subsidiary, Lucky Motor Corporation started assembling Samsung mobile phones in Pakistan in December 2021.
Regarding the future outlook, the Company has reported that it expects the fiscal year 2023 to be challenging for Pakistan’s economy, especially due to the high Current Account Deficit, which stood at $17.4 billion for FY22 versus $2.8 billion for FY21.
The ongoing political instability has deteriorated the economic position of the country and the resumption of foreign exchange inflows from the International Monetary Fund (IMF) program has faced serious delays. The IMF staff-level agreement has now been signed and as per government statements majority of conditions have been met and it expects the program to resume post approval from the IMF Board towards the end of August 2022.
The resumption of the IMF program will not only reduce uncertainty but also open avenues for borrowing from other sources, which could help stabilize the foreign reserves and the domestic economic situation.
Apart from this, certainty in the political landscape of the Country is needed so that long-term and sustainable measures are taken for enhancing the exports and ultimately reduce the current account deficit of Pakistan.
The commodity super cycle, which started last year post-pandemic, continues to persist. This has been further aggravated by the ongoing Russia-Ukraine conflict resulting in continuous volatility in commodity prices particularly coal, petroleum products, and packaging material, which has significantly increased the cost of production for cement.
A similar trend has been witnessed in other construction materials as well, mainly steel which has resulted in a hike in overall construction costs. On the local front, rising interest rates coupled with higher inflation have severely affected the purchasing power which will impact the cement demand in the short term.