Lucky to increase pharma, soda ash production

Group expected to complete Pfizer's acquisition in 2 months

KARACHI:

Lucky Core Industries (LCI) is expanding its production lines for pharmaceutical products and soda ash. It has, however, delayed the launch of float glass project and the polyester business has slowed down.

After attending a corporate briefing held by LCI this week, Topline Research analyst Nasheed Malik reported that the group of companies was expected to complete Pfizer's acquisition in the pharmaceutical sector in two months by October 2024. Besides, it is expected to begin commercial production at the under-construction greenfield veterinary medicine manufacturing facility in the next fiscal year 2025-26 with an estimated investment of Rs725 million.

The Competition Commission of Pakistan (CCP) has already approved Pfizer's acquisition. LCI has acquired seven brands of Pfizer. Lucky Core management said that 65% of its current pharmaceutical portfolio comprised non-essentials. After the addition of Pfizer portfolio, the non-essential component would rise by 10% since a majority of Pfizer brands were non-essential, Malik said.

In FY24, LCI revenue from pharma business was Rs12.2 billion with EBIT (earnings before interest and taxes) at Rs2.3 billion (margin 19%) compared to a revenue of Rs9.16 billion and EBIT of Rs1 billion (margin 11%) in FY23. The improvement in margins has been due to double CPI price increase of 20%, reduction in trade discounts and hardship cases' benefit.

At the start of FY24, the company increased non-essential drug prices by 20% and after a court decision on deregulation, prices were increased again in April-May 2024. Full impact of the deregulation will be felt in FY25. In addition to this, regulatory approvals have been granted to the company for a greenfield veterinary medicine manufacturing facility. The cost of the project will be Rs725 million.

Civil work on the project has commenced with expected operational date in FY26. Veterinary medicines have 60-70% localisation and all medicines will be manufactured locally.

Soda ash project

The company is expected to expand soda ash production capacity by 200,000 tons over the next two to three years that will take total production to 760,000 tons per annum compared to 560,000 tons at present. The project is currently in design phase, which will take one year and after that construction will take some more time. Besides, LCI aims to add dense ash capacity of 70,000 tons in October 2024.

Soda ash is used as a builder or filler in the formulation of soaps, detergents, and other cleaning compounds.

Sales of soda ash have been supported by record exports of 150,000 tons. The company earned $40 million in foreign exchange. However, margins on exports are at breakeven. The domestic soda ash market decreased by 4% to 590,000 tons in FY24. The total industry capacity of soda ash is 910,000 tons with LCI having 560,000 tons.

Polyester segment's EBIT decreased by 43% in FY24. "This was due to the abysmal state of textile sector, which is impacted by high energy costs," the analyst cited the management as saying. Regarding the float glass project with Tariq Glass, the management communicated that it had been delayed due to the state of economy where glass furnaces were closed. However, "LCI is committed to doing this project once the situation normalises".