August 08, 2023 (MLN): Lucky Cement Limited (PSX: LUCK) experienced a significant rise of 63.46% YoY in its profitability in FY23, clocking in its profit after tax at Rs59.54 billion [EPS: Rs152.97] as compared to a PAT of Rs36.42bn [EPS: Rs91.22] in FY22.
The major reason for this increase was the operations of Lucky Electric Power Company Limited (LEPCL) and improved profitability of foreign cement operations.
Apart from this, the consolidated net profit also includes a one-off gain, from Lucky Core Industries (La), on the sale of controlling interest in Nutrico Nilorinaga amounting to Rs9.6bn, of which Rs5.3bn is attributed to LUCK.
Along with the results, the company also announced a cash dividend of Rs18 per share.
Going by the results, the company’s top line increased by 15.82% YoY to Rs459.47bn as compared to Rs396.7bn in the same period last year (SPLY).
This significant growth in revenue, despite the economic challenges, is primarily owed to the full-year operational impact of LEPCL which contributed 25.5% of net revenue, in FY23, as compared to 10.4% contribution during FY22.
This is a testament to the various business initiatives of the group and is an affirmation of the successful execution of the Group’s diversification strategy.
The cost of sales rose by 9.85% YoY but was lesser than proportionate to the sales decline, which improved the gross profit by 55.97% YoY to Rs93.64bn in FY23.
Moreover, during the review period, other income rose by 27.00% YoY to stand at Rs9.28bn in FY23 as compared to Rs7.31bn in SPLY.
On the expense side, the company observed a fall in distribution costs by 2.50% YoY and other expenses by 2.76% YoY to clock in at Rs5.71bn and Rs4.13bn respectively during the review period.
The company’s finance costs skyrocketed by 4.6x YoY and stood at Rs30.64bn as compared to Rs6.67bn in FY23, mainly due to higher interest rates.
On the tax front, the company paid a higher tax worth Rs12.88bn against the Rs10.12bn paid in the corresponding period of last year, depicting a rise of 27.32% YoY.
Higher taxes on income in the form of Super tax resulted in lower after-tax profitability versus last year.
Foreign cement operations
The cement production facilities in Iraq and Congo, which are under joint venture agreements, continued to contribute favorably to the profitability of the Group.
Overall cement demand in Iraq remained stable. The capacity utilization at Najmat-Al-Samawah remained at full and the conversion of Kiln from HFO to Gas added to the profitability of the Company.
Cement demand in Congo also remained high leading to better absorption of fixed cost, which ultimately translated into higher profits.
Subsidiarys’ operations
Subsidiary’s Net Turnover increased by 26% due to better performance of Soda Ash, Chemicals & Agri Sciences, and Animal Health businesses.
Subsidiary sold 26.5% shares of NutriCo Morinaga Private Limited (NMPL) to Morinaga Milk for $45.08 million and recorded a gain of Rs9.84bn. Morinaga Milk became the majority shareholder of NMPL.
Automobile and Mobile Phones
This sector faced a sharp decline in sales in the year 2022-23 due to various factors. These included the devaluation of the Pakistani rupee against the US dollar, which increased the prices of imported cars and phones, the import restrictions and regulations imposed by the government and the central bank, the high-interest rates and inflation, and the rising fuel costs.
The automobile sector saw a 55% drop in volumes, while the mobile phone market witnessed a 60% fall compared to the previous year.
Unconsolidated results
The cement sector in Pakistan faced several challenges in FY23, including but not limited to political instability, surging inflation, escalating Interest rates, devastating floods, expenditure constraints leading to lower POP spend, and volatile energy prices.
These factors affected the cement industry, which saw a 15.7% decline in production to 44.6m tons.
The local sales dropped by 16.0% to 40m tons, while the export sales fell by 13.1% to 4.6m tons. The main reason for the lower exports was the high coal prices and shipping freights in the international market in the first half of FY23.
LUCK’s sales volumes also declined by 18.8% to 7.4 million tons in FY23, compared to 9.1m tons in FY22.
The local sales decreased by 14.9% to 6.2m tons, due to lower demand for cement.
The export sales reduced to 1.2m tons, owing to the same reasons as the industry. To cope with the challenges, LUCK switched to local coal which was cheaper, and invested in green energy projects such as solar power.
| Consolidated (un-audited) Financial Results for the year ended 30 June 2023 (Rupees in ‘000) | |||
|---|---|---|---|
| June 23 | June 22 | % Change | |
| Sales | 459,469,165 | 396,704,391 | 15.82% |
| Sales Tax | (74,333,974) | (71,304,115) | 4.25% |
| Cost of sales | (291,491,191) | (265,359,188) | 9.85% |
| Gross Profit | 93,644,000 | 60,041,088 | 55.97% |
| Distribution Costs | (10,627,616) | (10,900,676) | -2.50% |
| Administrative expenses | (5,711,136) | (5,471,881) | 4.37% |
| Other Income | 9,278,160 | 7,305,746 | 27.00% |
| Other expenses | (4,126,454) | (4,243,562) | -2.76% |
| Finance cost | (30,640,895) | (6,669,470) | 359.42% |
| Profit/(Loss) from Associate | 10,521,551 | 5,674,108 | 85.43% |
| Profit before taxation | 62,337,610 | 45,735,353 | 36.30% |
| Taxation | (12,882,443) | (10,117,772) | 27.32% |
| Profit after taxation from continued operations | 49,455,167 | 29,497,340 | 38.85% |
| Profit/Loss from discontinued operations | 10,092,201 | 6,925,330 | 45.73% |
| Net profit for the year | 59,537,368 | 36,422,670 | 63.46% |
| Basic and diluted earnings/ (loss) per share | 152.97 | 91.22 | – |
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