Lucky Cement Limited (PSX: LUCK) announced its financial result for the quarter ended September 30, 2023, posting a consolidated profit after tax of Rs. 19.35 billion, up by 179 percent year-on-year versus Rs. 6.93 billion in the same period last year.
The increase in consolidated earnings is attributable to higher revenue from cement operations LEPCL, and LCI, according to Arif Habib Limited.
Topline during 1QFY24 clocked in at Rs. 124.9 billion, displaying a jump of 16.5 percent YoY in contrast to Rs. 107.2 billion in SPLY, mainly due to a rise in volumetric sales in tandem with better retention prices. During 1QFY24 local dispatches rose by 39.4 percent YoY reaching 1.8 million versus 1.3 million in SPLY, amid a drop in demand last year due to floods. It is pertinent to note that exports witnessed an increase of 25 percent YoY.
Gross margins for 1QFY24 jumped to 17 percent vis-a-vis 15 percent as compared to the same period last year, amid a rise in retention prices coupled with a fall in coal prices.
Finance costs climbed by 50 percent YoY to clock in at Rs. 9.7 billion in 1QFY24, on the back of higher borrowing along with elevated interest rates.
Other income saw an uptick of 262Â YoY clocking in at Rs. 5.25 billion on the back of higher dividends received from LCI.
The company paid Rs. 5 billion in taxes during 1QFY24.
The earnings per share (EPS) of the company clocked in at Rs. 57.8 compared to an EPS of Rs. 16.85 in SPLY.
At the time of filing, LUCK’s scrip at the bourse was Rs. 628.5, up 2.6 percent or Rs. 15.93 with a turnover of 563,131 shares on Monday.
Auto, Mobile Phone Sectors Took a Hit
LUCK said in a note that the automobile sector experienced a sharp decline in volumes due to rupee/$ devaluation, 1 percent CVT on 1300 CC cars, increased Sales Tax rates from 17 percent to 25 percent on 1400 CC and above cars, and for SUVs irrespective of their engine capacities. In 1QFY24, the automobile sector saw an overall decline of approximately 40 percent in volumes compared to SPLY.
Likewise, the mobile phone market has seen an approximate 40 percent decline in volumes compared to SPLY due to PKR’s drop against USD.
LUCK also said it will invest Rs. 1 billion in National Resources Limited (NRL) for exploration and mining of metals (mainly gold and copper).
The Board decided that LUCK would also invest further amounts in NRL from time to time (before or after the Potential Acquisition), by way of providing loans/advances to NRL and/or subscribing to shares of NRL (i.e. making equity investments in NRL), as determined by the authorized representatives of the Company, in the aggregate amount of up to Rs. 747,000,000.
The Potential Investments will be utilized for conducting pre-feasibility studies including satellite and geographical mapping and drilling. The Potential Acquisition and Potential Investments shall be subject to obtaining necessary corporate and regulatory approvals, including the approval of the shareholders of the Company in accordance with Section 199 of the Companies Act, 2017, read with the Companies (Investment in Associated Companies or Associated Undertakings) Regulations, 2017.
Economy and Expectations
Owing to strengthened administrative measures targeting speculation and hoarding in the commodity and foreign exchange markets, the PKR, which weakened significantly against the USD in FY23, is now showing signs of recovery as of this report’s date. Assuming these administrative measures persist until comprehensive reforms are implemented to address these issues, the positive outcomes are expected to yield multifaceted benefits for the country.
The outlook for the automobile sector in Pakistan for FY 2024 is sluggish. Sales volumes are expected to remain under pressure due to economic slowdown, higher taxes on cars and SUVs, and fluctuations in the PKR to USD parity. These factors will dampen demand for new vehicles and continue to put pressure on the margins of automobile manufacturers.
As for the forecast for Pakistan’s mobile industry in fiscal year 2024, the industry is expected to encounter similar challenges stemming from the ongoing economic slowdown and the rising cost of smartphones due to PKR’s depreciation. The economic downturn is expected to suppress consumer demand for smartphones, as discretionary spending may be curtailed. In response to these challenges, the company is shifting its focus towards the production and promotion of low-cost phones, the note added.
