BR RESEARCH: Cement industry: Discipline over ‘Luck’

The cement industry is coming off of the tailwinds of an export bonanza and companies that profited off of that by raising their exports share in the sales mix will be feeling a slight tinge this year.

Lucky cement’s (PSX: LUCK) exports share in 1HFY26 has fallen from 37 percent to 31 percent (in tons). Despite what the company calls “normalization” of the volume mix from last year’s “extraordinary” base, the company walks away with a solid set of numbers.

And it does so by creating a disciplined cost management environment, and a steady contribution from non-core income streams that are strategic anchors to the business’s long-term profitability.

During 2QFY26 (quarter ended December 2025), revenues came in broadly flat year-on-year recording a slight dip of 2 percent compared to the same period last year. Cost of sales declined 3 percent year-on-year, which helped protect gross margins despite the lack of topline growth. The company has been spending on cost optimization initiatives (such as adding battery energy storage and installing combustion optimisation technology). As a result, gross profit edged up 1 percent, landing at 36 percent, signalling a quiet but important foundation of pricing power and cost discipline holding their ground.

Lucky shines in operational efficiency.Overheads including administrative and distribution expenses as a share of revenue is steady at 8 percent (down from 9% last year). Distribution expenses due to lower exports dropped by 21 percent. EBITDA rose 8 percent keeping margins resilient.

Below the line, Lucky continued to benefit from its conservative balance sheet. Finance costs remained negligible at around 1 percent of revenue, reinforcing the company’s flexibility in a high-interest-rate environment. Other income, while lower than the exceptionally strong base last year, still contributed a meaningful 31 percent of revenue in the quarter, cushioning profitability and smoothing earnings volatility. Profit after tax increased a healthy 18 percent with profit margins reported at 25 percent (2QFY25: 21%).

The broader 1HFY26 performance reflects similar longer-term patterns. While volumes and revenues have been choppy quarter to quarter, Lucky has managed to protect margins through cost optimization, disciplined overheads and diversification across markets and income streams. The export slowdown is absorbed without stressing the income statement. With strong pricing power in the domestic market, if demand continues to grow locally, the exports drop may not be felt on the top-line for too long. As industry leader, Lucky has multiple levers to pull—pricing, energy efficiency, cost efficiency, exports, other income—and in a sector where uncertainty is the norm, Lucky operates on preparedness, rather than luck. And that drives its performance.