Karachi, Lucky Cement Ltd (LUCK) conducted a corporate briefing today to discuss its financial results for the second quarter of the fiscal year 2024 (2QFY24) and to provide insights into the future outlook of the company.
According to AKD Securities Limited, Lucky Cement reported consolidated earnings of PkR60.2 per share in 2QFY24, compared to PkR35.7 per share in the same period last year, indicating a significant 69% year-over-year increase. This improvement was driven by higher earnings from core cement operations, Lucky Electric Power Company Limited (LEPCL), and Lucky Cement Iraq (LCI). On a standalone basis, earnings were PkR23.1 per share, up 107% year-over-year, primarily due to increased retention prices resulting in heightened gross margins.
However, management cautioned that the current gross margins might not be sustainable long-term as the advantage of cost-effective coal inventory is expected to diminish. Local retention prices for cement are around PkR14k per ton, while export prices for bagged cement are approximately US$38-39 per ton.
In terms of coal mix, the company utilizes 100% imported coal in its south plant, while the north plant primarily relies on local coal, priced at around PkR42-43k per ton. Freight costs from Karachi to the north plant location, post-axle load implementation, are approximately PkR6-7k per ton.
The company's wind power project of 28.8MW is expected to come online in the first quarter of FY25, increasing the total renewable capacity to 103MW. Post-commissioning of this project, renewable energy is anticipated to account for 50% of the total power mix.
Looking forward, management expects cement demand for the second half of FY24 to remain flat, with growth anticipated in FY25. Regarding the Iraq expansion of a 1.8 million TPA clinker line, the management noted that the current grinding plant relies on external clinker sourcing. However, the expansion is expected to result in margin expansion through in-house production.
Management also stated that LEPCL is expected to achieve tariff true-up in FY24 but needs to fulfill additional project requirements before any dividend distribution. Currently, LEPCL has outstanding receivables of PkR25 billion with a duration of 3-3.5 months. Additionally, a total investment of PkR1.0 billion is approved in National Resources Ltd. (NRL), with PkR475 million already invested and the remaining funds to be utilized within the next 12-18 months.