Lucky Cement Limited has posted net profits of Rs28.2bn – an increase of Rs7.3bn when compared to the previous fiscal year. This was announced on Monday by the company in a session where the company’s financial and operational performance was highlighted.
The management attributed the increase in the company’s profitability to higher sales of cement amid better retention prices in the north market, higher profitability contribution of Lucky Motor Corporation, lower energy input cost due to decline in coal requirement, lower fixed cost contribution per unit amid better utilization and increased efficiencies of the new plant.
Further, on the foreign investments front, the improved profitability of the Congo and Iraq plants also played a role in the increase in the bottom-line of the company as their EBITDA grew by 31% and 29% YoY, respectively. Prices and dispatches improved in both markets.
Going by the takeaways covered by Foundation Securities, the management has also disclosed that LUCK’s cement dispatches in the domestic and export market showed an increase of 38% and 12% YoY to 7.6mn and 2.4mn tons, respectively in FY21. Furthermore, LUCK’s domestic contribution in total dispatches increased by 4.1ppt YoY to 75.8% in FY21.
As per the management, the company has 4kg per ton coal to stand at Rs490mn in FY21 on the back of coal consumption due to better efficiencies and Rs1,121 per ton due to a decline in coal rate in FY21.
In the current gas shortage scenario, the management has said that its Pezu plant is now operating at furnace oil due to lower gas flows and as a result, its energy cost increased by Rs480mn in FY21.
Commenting about the new brownfield expansion of 3.15mn tons, the company believes the project will commence from Dec’22. The expected total cost of this project would hover in the range of PKR 25-26bn and it would include a WHR unit. The project would also entail financing from SBP introduced facilities like TERF and LTFF and normal loan arrangements.
Lucky Electric Power plant is expected to come online in October’21 and so far, LUCK has invested PKR24.3bn with a possible equity injection of Rs3-4bn further required. The total cost of the project until completion is expected to be US$800mn. Regarding the potential reduction in project ROEs, the management guided that they are in talks with the government but no agreement has yet been reached, the report by Intermarket Securities said.
With regards to the partnership with Samsung, the management revealed that the assembling facility would be set up in Lucky Motor’s existing facility in SEZ Port Qasim and it is expected to come online in Dec’21.
Going forward, the management believes that due to multiple incentives announced by the government coupled with private sector-led demand, local cement dispatches will grow by 8-10% YoY in the coming few years. Despite robust improvement in margins during the year, it guided that the present gross margins are unlikely to sustain in FY22, mainly due to still-rising international energy prices. LUCK foresees the margins in FY22 to hover around 20-25%, wrote Rahal Hans, Analyst at IMS.
On autos volumes, LUCK expects the momentum in demand growth to continue, backed by the expected incentives in the new Auto Policy, lower interest rates and higher consumer purchasing power. The only issue is the global chip shortage; any delay from the supply-side will significantly alter the profitability outlook, he added.