As the biggest and most successful cement manufacturer in the country, Lucky Cement (PSX: LUCK) always has a game plan, and luckily, it works out in the end. Lucky has the capacity, the market presence, geographic diversity both in and outside the country, and tight control over its costs and overheads. At a time when the company’s domestic dispatches fell 14 percent (1HFY25), the company’s revenue is up 7 percent year on year; earnings matching this period last year.
This is also despite an increase in costs per ton sold (up 2%). The total dispatches for Lucky increased 9 percent owing to exporting markets becoming more receptive—exports rose 92 percent for the cement company. In 1HFY25 in fact, exports contributed 38 percent to the sales mix, vs 21 percent this period last year. Exports have always helped cement companies to keep idle capacity at bay when domestic demand is weak. This year, the industry is certainly enjoying robust export growth which is helping them recover their fixed costs and keep utilization from slipping any more than it already has. Capacities across the country have been up significantly since only a few years ago, and a slow domestic demand smells like trouble.
What else has helped? Strong pricing power in the domestic market allows manufacturers to keep margins up, access to a generous mix of coal from various sources that help optimize costs, investments in energy efficiencies, and keep the purse strings tight. For Lucky, finance costs are virtually non-existent at 1 percent of revenue, but overheads are up to 10 percent (from 8% in 1HFY24). Despite the increase in expenses, other income at 12 percent of revenue covers these expenses. Other income buttressed the pre-tax bottom line by 35 percent which is higher than last year’s 1H (30%).
Lucky doesn’t have a problem that needs solving, and it seems geared to weather the storm of shrunk demand until the construction market recovers which will be well into the last quarter of the fiscal year. This doesn’t bother Lucky who has its fingers in several honey pots and nearly all of them are making the corporation solid profits, even seemingly during times when the economy is fighting a menacing battle.
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