Lucky Cement Posts Profit of Rs. 18.3 Billion for 1HFY23

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Lucky Cement Limited (PSX: LUCK) announced its financial result for 2QFY23 today, whereby its consolidated profit went up by 37.3 percent to Rs. 11.39 billion versus Rs. 8.29 billion in 2QFY23.

This takes the profit in 1HFY23 up by 6.81 percent to Rs. 18.32 billion against Rs. 17.15 billion last year owing to the profitability of Lucky Electric Power Company Limited, as well as augmented profits of joint ventures (JVs) and associates, according to a report by Arif Habib Ltd.

Unconsolidated earnings arrived at Rs. 3.276 billion, based on an adjusted number of shares of 321.8 million since the buyback is underway against Rs. 2.491 billion last year and Rs. 3.852 billion in 1QFY23 This takes the IHFY23 profitability to Rs. 7.129 billion, up by 23 percent year on year (YoY).

During 2QFY23, sales arrived at Rs. 25.6 billion (24 percent YoY), as a result of over 40 percent jump in local retention prices which countered the impact of an 18 percent YoY decline in offtake to 1.994 million tons given the slowdown in the economy. Sales for 1HFY23 clocked in at Rs. 45.33 billion, up 21 percent YoY from Rs. 37 billion in 1HFY22.

On a quarter-on-quarter (QoQ) basis, revenue underwent a growth of 30 percent primarily due to a 46 percent surge in dispatches (1QFY23: 1.577 million tons owed to floods across the country) coupled with a slight uptick in prices. During 1HFY23. revenue witnessed an increase of 21 percent amid higher retention prices which offset the impact of a 24 percent YoY dip in offtake to 3.572 million tons.

The gross margins in 2QFY23 settled at 25.4 percent compared to 22.6 percent in the same period last year (SPLY) due to strong retention prices which offset the impact of volumetric decline, a jump in coal prices, higher energy tariff, and PKR depreciation.

On a QoQ basis, gross margins compressed from 30.6 percent in 1QFY23 led by augmented coal inventory price and a change in power mix towards FO/national grid from gas which offset the impact of volumetric growth and higher retention prices. During the half year, margins arrived at 27.6 percent compared to 24.7 percent last year, owing to robust retention prices.

Other income grew by 12 percent YoY to Rs. 0.838 billion in 2QFY23 owing to augmented markup income on short-term investments, and dividend income from Yunas Energy Limited (Rs. 0.1 billion).

The finance cost of the company arrived at Rs. 0.36 billion during the quarter under review, up 4x YoY or 43 percent QoQ, attributable to augmented borrowing and higher interest rates.

The company booked effective taxation at 30 percent in 2QFY23 versus 24 percent SPLY due to a 4 percent super tax. It also reported earnings per share (EPS) of Rs. 10.18 for Q2 and Rs. 22.15 for 1HFY23.

LUCK’s scrip at the bourse closed at Rs. 396.0 today, down 0.48 percent or Rs. 1.93, with a turnover of 132,553 shares on Monday.

Cement Sales All Red, Exports Bearish

In comparison with the cement Industry, the company’s overall sales volume declined by 24.1 percent to reach 3.6 million tons in the current period as compared to 4.7 million tons in the SPLY. The local sales volume declined by 17.9 percent, reaching 3.0 million tons during 1HFY23 compared to 3.6 million tons in SPLY. Also, export volumes were reduced by 45.0 percent, reaching 0.6 million tons in 1HFY23 versus 1.1 million tons in SPLY.

Earnings from Automobiles, Mobile Phones Down Significantly

The automobile sector right from the start of FY23 has witnessed a significant downturn in volumes on the back of the substantial devaluation of PKR to USD which led to an increase in the prices of cars, added the company’s official statement.

Apart from this, the State Bank of Pakistan’s (SBP) requirement of prior approval for opening LCs for the import of CKD kits and parts, availability of very limited allocation of FX to automobile manufacturers for import of CKD kits, imposition of CVT @ 1 percent on cars having engine capacity exceeding 1300 CC, high-interest rates and tightening of auto financing scheme by the SBP and high inflation have adversely impacted the sector.

The automobile sector has witnessed an overall decline of around 40 percent in terms of volumes during the 1HFY23 compared to SPLY. Similarly, the mobile phones market saw approximately a 30 percent decline in volumes compared to SPLY due to the substantial devaluation of PKR to USD as well as the limited allocation of FX to mobile phone manufacturers for the Import of Semi Knocked Down (SKO) kits.

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