Lucky Cement Reports a Huge 68% Drop in Profits for FY20

Lucky Cement Limited has announced its financial results for the financial year 2019-20, ending on June 30th, 2020.

It has reported unconsolidated net profit after tax of Rs. 3.34 billion during FY20, which is 68.00% lower as compared to Rs. 10.49 billion recorded in FY19.

On a consolidated basis, Lucky Cement Limited reported net profit after tax of Rs. 7.31 billion, down by 40.80% as compared to Rs. 12.34 billion.

During the fiscal year on a standalone basis, net sales of the company were down by 12.81% to Rs. 41.87 billion as compared to Rs. 48.02 billion.

According to Capital Stake, this is the first time in twelve years that the cement giant hasn’t announced any dividend.

As a result of COVID-19 lockdowns locally and internationally during the previous quarter, both local and export sales were adversely affected. Overall Lucky’s sales volume declined by 0.6% to reach 7.63 million tons during the fiscal year. The local cement sales registered a decline of 7.6% and were 5.41 million tons in comparison to 5.85 tons last year, however, the export sales volumes of the company improved by 18.8% to 2.16 million tons as compared to 1.82 million tons last year.

The cost of sales of the company increased to Rs. 35.79 billion, up by 5.20% as compared to Rs. 34.03 billion. The per ton cost of the company was increased by 5.8% as compared to the last year. The increase was mainly on the account of an exceptional increase in gas price, higher transportation costs on input materials, increased packing material prices, and adverse rupee exchange rate parity.

However, the higher cost impact was mitigated with a decline in international coal prices. This took the gross profit to Rs. 6.07 billion, down by 56.60% as compared to Rs. 13.98 billion on a standalone basis.

The distribution costs increased by 35.70% to Rs. 3.69 billion as compared to Rs. 2.72 billion. The finance cost was posted at Rs. 176 million as compared to Rs. 24.93 million. Other income of the company was reported at Rs. 3.18 billion as compared with Rs. 3.24 billion.

Lucky’s profitability has been continuously declining for the last three years, mainly due to increased capacities coming online locally which has put downward pressure on margins whereas the costs have continued to increase. As the local demand balance improves and exports gain further momentum, margins are expected to improve.

Earnings per share of the company decreased to Rs. 10.34 from Rs. 32.44. At the time of filing this report, Lucky’s shares at the bourse were trading at Rs. 611.30, up by Rs. 0.20 or 0.03%, with a turnover of 1.36 million shares on Tuesday.

No Dividends Proposed

This is the first time in twelve years the company did not announce any dividend. The reasons for this are that the company has followed a financial strategy for its diversification and expansion plans in which it used internally generated cash flows to finance the capital intensive projects. These include:

  • Installation of 2.8 MTPA line in its Pezu plant – which became operational in December 2019 with an equity investment outlay of Rs. 20.2 billion.
  • Equity contribution in Kia Lucky Motors – amounting to a total of Rs. 12.87 billion made during FY18 and FY19.
  • Equity contribution in Lucky Electric Power Company Ltd – amounting to a total of Rs. 19.45 billion made since FY18, while the project has now entered into its crucial and concluding phase.

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