Lucky Cement posts 58%YoY decline in earnings

Lucky Cement (LUCK) has reported consolidated earnings of Rs1.4 billion (EPS: Rs4.45), down by 58%YoY. The earnings were above analysts’ expectations primarily due to lower-than-estimated COGS.

Overall earnings for 3QFY20 went down due to decline in Gross Margins.

Gross Margin eroded on a YoY basis on the back of lower retention prices in both Northern and Southern regions, along with increase in input costs. For 9MFY20, Gross Margins were reported at 13.1%.

Net sales of Cement business has declined by 11%YoY to Rs11.2 billion, despite increase in volumetric sales by 8%YoY to 2.1 million tons (cement and clinker both) as cement prices both locally sales and exports declined.

ICI Pakistan (LUCK’s subsidiary) also recorded a decline in earnings by 44%YoY for 3QFY20 due to decline in sales by 5%YoY amidst COVID-19 outbreak. The major drag in earnings came from exchange loss of Rs373 million during the quarter under revised as against Rs19 million in the same period last year.

Key risks facing the Company include: 1) intense pricing competition between the manufacturers, 2) lower than anticipated domestic demand and 3) higher than expected coal prices.

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