Lucky Cement: celebratory results

In line with the expectations of market analysts, Luckys performance in 1HFY12 was stellar. With the volume of export sales having dwindled 8 percent year on year, in 1HFY12, much of the improvement in the top line came on the back of local sales. The Companys local dispatches increased by 11 percent during July-December 2011 compared to the same period of last year, while local cement prices went up by roughly 24 percent, year on year, during the same period. On the export side, while a volumetric decline was witnessed as discussed above, an improvement in export prices helped boost the export sales revenue by about 4 percent during 1HFY12 versus the same period of last year. The improved sales revenues were reflected in the Companys net revenues for 1HFY12 improving by nearly 28 percent year on year, while those for 2QFY12 improved nearly 22 percent year on year. Together with lower distribution costs; which decreased primarily due to a slump in export sales, lower finance costs in the first half this fiscal year, helped Lucky boost its net profit for the period under review to more than double of the tally from 1HFY11; reaching over Rs.3 billion. The Company is also at work attempting to lower its costs, as evident by the commencement of trial run of the alternative fuel project in December 2011. At the same time, the company is expanding its horizons to the Domestic Republic of Congo (DRC), investing around $40 million for an equity stake in a joint venture with a local cement manufacturer there. According to the Companys announcement on KSE, currently Lucky is in the process of pursuing "regulatory approval for equity investment in the project company in DRC". Going forward, local dispatches are expected to go up further since development projects are not expected to be kept on hold given the run up to the elections, with the Company expecting domestic cement demand to grow between 5 percent and 10 percent in this financial year. On the exports front, exports to regional countries such as Sri Lanka, Iraq and India are expected to stay on the higher side, while the Company expects much promise from exports to Afghanistan, which are expected to cross 5 million tons this fiscal year, for the industry as a whole. Overall, Lucky looks set to celebrate some good results this entire fiscal year.

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Lucky Cement
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(Rs mn)                   2QFY12     Y/Y chg     1HFY12     Y/Y chg
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Net sales                  7,878         22%     15,374         28%
cost of sales              4,978       18.3%      9,560         19%
gross profit               2,900         30%      5,815         47%
Gross margin               36.8%         -6%      37.8%         15%
distribution costs           820        -27%      1,742         -4%
Operating profit           1,959         94%      3,832         92%
Operating margin           24.9%        -37%      24.9%         50%
Finance costs                 89        -41%        170        -42%
profit after taxation      1,513        106%      3,018        107%
Net margin                 19.2%         69%      19.6%         62%
EPS (Rs)                    4.68                   9.33
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Source: KSE notice