Lucky Cement reports profit fall during 1H20

Lucky Cement Ltd of Pakistan has announced its financial results for 1HFY19-20, posting earnings of PKR1.937bn (US$12.54m), down 65 per cent when compared with earnings of PKR5.501bn reported for the 1HFY18-19. Revenues also fell by 15 per cent YoY to PKR 21.211bn in the 1HFY19-20, largely due to a slowdown of demand coupled with weaker pricing resulting from the industry’s demand-supply gap.

Commenting on results, a local research house attributed the fall in profits to pricing weakness, inflationary pressures and demand compression. However, a six per cent improvement in other income to PKR1.709bn in the 1HFY19-20 was the company’s sole saving grace as a healthy cash balance in addition to a tight monetary stance likely allowed Lucky Cement to benefit from higher treasury income from bank deposits.

The company remarked that its cement industry performance in Pakistan grew by 6.5 per cent to 24.75Mt, during the half-year ended December 2019, in comparison to 23.23Mt during the same period in the previous year. Local sales volume registered a growth of 3.5 per cent to 20.37Mt in comparison to 19.67Mt in the year-ago period. Export sales volumes registered an increase of 22.9 per cent to 4.38Mt as compared to 3.56Mt reported in the 1HFY18-19.

In comparison to the cement industry, Lucky Cement’s overall sales volumes decreased by 8.4 per cent YoY to 3.68Mt in the 1HFY19-20. The local sales volumes registered a decline of 13.3 per cent and were 2.59Mt in comparison to 2.99Mt during the same period in the FY18-19. However, the export sales volumes of the company improved by six per cent to 1.08Mt from 1.02Mt.

Projects – new and ongoing
The construction and installation of the company’s brownfield cement plant expansion in Khyber Pakhtunkhwa province, has been completed, after few design modifications with respect to the additional 2.8Mtpa kiln line. The new line entered operations with the commencement of clinker production on 30 December 2019. The total production capacity (including both north and south plants) of the company has now increased from 9.35Mt to 12.15Mta.

In addition, the fabrication and erection work is in full swing for the company’s 1.2Mta greenfield cement plant expansion in Samawah, Iraq. Necessary manpower and contractors have also been mobilised at the site. The contract for cement grinding mill, packaging plant and additional power generator is also finalised and letter of credit has been established.  Commercial production is scheduled for the 2QFY20-21.

Additional investments
The construction activity for setting up 660MW super-critical lignite coal-based power plant is in full swing with over 60 per cent of project completion to date. With the completion of major design/engineering works and the expected on-site arrival of all the critical equipment in the months of February and March, the commissioning team of SEPCO III is now fully mobilised at the project site. Commercial operations are scheduled for 1 March 2021.

Outlook
Despite current economic challenges, there has been an overall growth in both domestic and export off-takes. The outlook of the cement industry will continue to be challenging due to availability of excess capacity in the north region, which will put adverse pressure on pricing. Whereas, prices for exports from the south are also very competitive due to surplus supplies available in the region. The input costs may also rise in the future, due to higher electricity and gas tariffs, which will increase the production as well as logistics costs.

Meawnhile, Lucky Cement Ltd has the informed Pakistan Stock Exchange (PSX) that in the meeting of Board of Directors, on 29 January 2020, Atif Kaludi was appointed as Director Finance/Chief Financial Officer (CFO) in place of Irfan Chawala, according to a notification issued by Muhammad Ali Tabba, CEO/director of the company.