Lucky Cement profit falls 23 per cent on lower exports and margins
Country's largest cement maker manages to increase domestic share.
KARACHI:
Net profit of Lucky Cement, the country’s largest cement-maker, dropped 23 per cent to Rs1.46 billion in the first half (July to December) of fiscal 2011 due to drop in margins and exports.
This double-digit decline in earnings is primarily due to higher cost pressures, subsequently, reducing gross margins by 440 basis points to 32.9 per cent compared with 37.3 per cent in the same period last year, said Topline Securities analyst Furqan Punjani.
Earnings per share (EPS) stood at Rs4.52 against Rs5.9 in the same period last year, according to a notice sent to the Karachi Stock Exchange on Monday. Lucky Cement managed to increase domestic sales by 13 per cent at a time when sales of the entire sector dropped 8.3 per cent, resulting in the company’s market share rising three per cent to 15 per cent.
However, export sales fell by 30 per cent to 1.29 million tons on account of reduced exports to the Middle East, according to company directors.
“Disconnection in road links to Afghanistan due to the recent floods coupled with regulatory issues in Sri Lanka and India led to lower exports,” said IGI Securities analyst Sana Abdullah. Net sales of the company remained almost flat at Rs12 billion compared with Rs12.1 billion in the previous year as higher retention prices offset the decline in volumetric sales.
Major reasons for the decline in the sector’s growth are the devastating floods, lack of government spending on public sector development projects and hyper-inflation, according to company directors.
Gross margins down
Despite a recent increase in prices to around Rs320-325 per bag in the second quarter of fiscal 2011 against Rs230-270 per bag during the same period last, gross margins decreased in fiscal 2011.
Increasing energy cost, particularly a 37 per cent rise in coal prices, is likely to be the single largest contributor to declining margins, said analysts. Moreover, cost of goods sold increased by six per cent to Rs294 million, led by the increase in coal prices.
Cost-efficient mechanisms employed like a waste heat recovery plant are likely to help the company mitigate some of the effects of increasing input prices, added analysts.
Published in The Express Tribune, February 1st, 2011.
Net profit of Lucky Cement, the country’s largest cement-maker, dropped 23 per cent to Rs1.46 billion in the first half (July to December) of fiscal 2011 due to drop in margins and exports.
This double-digit decline in earnings is primarily due to higher cost pressures, subsequently, reducing gross margins by 440 basis points to 32.9 per cent compared with 37.3 per cent in the same period last year, said Topline Securities analyst Furqan Punjani.
Earnings per share (EPS) stood at Rs4.52 against Rs5.9 in the same period last year, according to a notice sent to the Karachi Stock Exchange on Monday. Lucky Cement managed to increase domestic sales by 13 per cent at a time when sales of the entire sector dropped 8.3 per cent, resulting in the company’s market share rising three per cent to 15 per cent.
However, export sales fell by 30 per cent to 1.29 million tons on account of reduced exports to the Middle East, according to company directors.
“Disconnection in road links to Afghanistan due to the recent floods coupled with regulatory issues in Sri Lanka and India led to lower exports,” said IGI Securities analyst Sana Abdullah. Net sales of the company remained almost flat at Rs12 billion compared with Rs12.1 billion in the previous year as higher retention prices offset the decline in volumetric sales.
Major reasons for the decline in the sector’s growth are the devastating floods, lack of government spending on public sector development projects and hyper-inflation, according to company directors.
Gross margins down
Despite a recent increase in prices to around Rs320-325 per bag in the second quarter of fiscal 2011 against Rs230-270 per bag during the same period last, gross margins decreased in fiscal 2011.
Increasing energy cost, particularly a 37 per cent rise in coal prices, is likely to be the single largest contributor to declining margins, said analysts. Moreover, cost of goods sold increased by six per cent to Rs294 million, led by the increase in coal prices.
Cost-efficient mechanisms employed like a waste heat recovery plant are likely to help the company mitigate some of the effects of increasing input prices, added analysts.
Published in The Express Tribune, February 1st, 2011.