Key Takeaways from Lucky Cement Corporate Briefing

The management anticipates a general slowdown in Cement sales due to higher cement prices, rise in prices of other construction materials, and overall economic slowdown. Management also believes that if the coal price does not normalize then the demand would further erode as the local cement industry need to pass on the impact of the elevated coal cost.

The current average coal for the outgoing quarter (2QFY22) hovers around US$125/ton, whereas for 3QFY22 the average inventory coal cost is around US$150/ton. The company has used 10% of Afghan coal in its Pezu plant and moving forward this mix would be 50:50 in favor of Afghan and local coal. PEZU’s plant is still using Furnace Oil (FO) currently due to natural gas supply issues during winter season. However management anticipates the supply to resume going forward.

Lucky Electric (LECPL) COD is expected this month where it is expected to use both local and imported coal in the short term but in the long run, it would rely more on local coal.

On export front, the overall exports have declined due to spike in sea freight cost but LUCK exports remained better than that of the industry.

Samsung operations under the Lucky Motor Corporation has already begun wherein the company would disclose further information related to cost and assembly line capacity later this year.

The automobile segment is still facing shortage of chips which has affected volumetric sales. However, it is anticipated that it would normalize in 5-6 months period. Talking about KIA sales mix, major share of sales is coming from Sportage followed by Picanto. In future, the company also plans to increase the manufacturing of auto parts and improve localization levels.

ICI margins and sales volumes are expected to remain strong in future whereby there are some bottlenecks arising from commodity cycle and sea freight cost.

LUCK has reported consolidated EPS of Rs40.7 for 1HFY22, up 26%YoY due to: 1) improved profitability of Cement operations, 2) higher operating profits 90%YoY jump to Rs6.8 billion in chemical segment, and 3) operating profits from auto segment also showed an uptick of 10% to Rs 3.9 billion despite the chip shortage.




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