Pakistan cement producer Lucky Cement Ltd has announced its financial results for the half-year ending 31 December 2022. It reported a profit after tax of PKR7.128bn (US$27.4m) compared to PKR5.744 earned in the corresponding period last year, a growth of 23 per cent YoY.
According to a notification of the company to the Pakistan Stock Exchange (PSX), Lucky Cement’s sales increased by 21 per cent to PKR45.333bn from PKR37.549bn during the same period last year. It incurred adistribution costs of PKR2.56bn against PKR2.33bn in the previous fiscal period. The administrative expenses rose to PKR916m from PKR709m during this period.
According to AHL Research, Lucky's brownfield cement expansion of 3.15Mta at Pezu achieved commercial operation date (COD) in December, taking the company’s total capacity to 15Mta. A 34MW solar power project was also commissioned at Pezu in December, while Lucky Cement’s 25.3MW solar power project at its Karachi plant has completed commercial negotiations and is expected to come online in the 2QFY23-24.
Plant availability of Lucky Electric Power Co Ltd in the 1HFY22-23 improved to 92 per cent (aimed at 100 per cent going forward) vs 78.4 per cent last year, as management took remedial actions to resolve initial teething issues. The company also observed its first maintenance shutdown during the quarter, while the average fuel cost of electricity arrived at PKR15.16/kWh, the cheapest in the country.
Demand in Iraq and the Democratic Republic of Congo (DRC) remained robust despite global challenges. The company’s subsidiary in Najmat-Al-Samawah (Iraq) switched to natural gas from furnace oil to fire its kiln, which aided the venture's profitability. Going forward, strong demand in the DRC is projected to aid earnings. However, the depreciating currency of Iraq and high input costs may keep margins under pressure.
Outlook
Due to the global recession, high inflation, declining monetary inflows and unprecedented floods, FY22-23 started on a difficult note for Pakistan. The government expects to resume the IMF programme by implementing long-term structural reforms. The prevalent global monetary tightening, and upcoming debt obligations of Pakistan, are expected to put pressure on the country's economy and currency.
Local cement operations
The depreciating currency, high inflation and interest rates, a lack of development spending, and a slowdown of the economy are expected to keep demand under pressure in FY22-23. Restriction on imports is hampering the ability to operate many industries, including steel manufacturing which may also have a negative impact on the pace of construction activities. However, there may be some respite in the form of increased demand for reconstruction in flood-affected areas if the government can secure funding from international lenders against the pledges it recently received. Additionally, if coal prices decrease, it will decrease production costs and make exports viable, which currently have very low margins.
