Analyst Briefing: Better LUCK next time!

September 2, 2020 (MLN): Lucky Cement recently conducted its analyst briefing session, wherein the management discussed the latest financial performance as well as the ongoing endeavors and future prospects of the company.

In its announcement made last week, the company had reported a net profit of Rs. 7.31 billion for the year ended June 30, 2020, i.e. around 41% lower as compared to the profit recorded last year.

The company attributed the decrease in net profit to a decline in net profit of the Cement segment (Holding Company) which decreased by 79% due to lower margins and higher input costs. This decrease in Net Profit of holding company was partially offset by a significant increase in Net Profit from foreign operations (LCL Investments Holdings Limited) as compared to last year.

Giving its insight on the matter, the management said that a number of factors that took place throughout the year played a role in driving the topline income. The market share of the company had increased from 9.7% last year to 10.4% this year after it sold around 3.57 million tons of cement from its North plant.

However, the same momentum could not be witnessed in the south region, wherein a decline in the demand led to the only 1.89 million tons of cement being sold, as opposed to the 2.72 million tons sold in the last year. This, combined with the commissioning of new capacities in the south region, resulted in the market share of the company plummeting to 33.5% as against 34.1% recorded in the previous fiscal year.

The gross margins of the company were affected by the changes in the prices of gas, coal, and furnace oil. On the other hand, the increase in core expenses was led by higher local and export freight as well as the implementation of Axle Load policy.

Commenting on the performance of the company on the international front, the management stated that there was an increase in demand and sale for cement in Iraq, whereas, in Congo, no substantial improvement was seen.

Contrary to the performance of its peers, KIA Lucky Motors delivered splendid results during the first year of its operations, as it brought in revenues of Rs. 33.8 billion. However, the management did not shy away from speaking about the impact of COVID-19 and the ensuing lockdown on the operations of the company. While the lockdown had severely impacted the business of KIA to a certain degree, the company quickly recuperated once the businesses were allowed to resume operations.

While this year did not side with Lucky Cement, the management is hopeful that the construction package and various other endeavors being carried out by the government to help the economy will substantially help the company in uplifting its profitability.

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