Lucky Cement: Mobile Segment Thrives, Auto Sector Grapples

Staff Report

Lucky Cement has gained momentum in the mobile segment whereas the auto industry faces persistent challenges.

During the briefing, Lucky Cement management said that the mobile segment has shown improvement over the last six months, but the auto segment continues to face challenges.

Regarding the track and trace system, management stated that it has not been implemented yet due to technological issues.

Each cement company incurred a sunk cost of Rs1.0 billion on this project, but management remains open to practical solutions in the future.

Lucky Cement (LUCK) witnessed a 15.8% increase in volumetric dispatches during 9MFY24 primarily attributed to a surge in exports. Export volumes soared by 68.0% to reach 1.45 million MT in 9MFY24, buoyed by the favorable trend of declining coal prices, which enhanced export viability.

The company maintained its export market share at 28.5% in 9MFY24, compared to the same period last year.

Additionally, heightened demand from Sri Lanka following its gradual economic recovery contributed to the surge in exports.

Export prices for cement stood at US$38-40/ton, while for Clinker, it was US$30/ton in 3QFY24.

Domestic sales for the company increased by 6.0% to reach 4.85 million MT in 9MFY24, contrasting with the industry’s 5% decline over the same period.

Lucky Cement’s domestic market share rose to 16.5% from 15.0% in 9MFY23, primarily due to increased capacity in the North region. Retention prices for domestic sales ranged between Rs13,500-14,000/ton.

In 3QFY24, the South Plant (Karachi) operated fully on imported coal priced between US$100-110/ton, while the North Plant (Pezu) utilized an 80/20 mix of Local/Afghan coal.

The overall coal cost for the company in 3QFY24 stood at 34k-35k/ton. Gross margins for 3QFY24 were impacted by lower volumetric sales, making fixed cost optimization more challenging.Lucky Cement Profitability up 213% in 4QFY21

Expansion plans include the installation of solar panels at both Karachi and Pezu plants in 4QFY24, along with the completion of a 28.8 MW Wind project at Karachi by 1QFY25.

A total capex of Rs20.0 billion was allocated to these projects. After the Wind project comes online, the contribution of renewable energy to the power mix will exceed 50%.

LUCK’s foreign operations continued to perform well, with a new line of 1.82 million MT in Iraq. Lucky Electric maintained 100% plant availability during 9MFY24, ensuring a full share of capacity-based revenue. Receivables for the plant currently stand at four and a half months.