LUCK: hitting it high

With local cement sales reaching record heights in FY14, there is mostly positive news coming from the sector. Registering record earnings, Lucky Cements (KSE: LUCK) annual results testify to the positive developments for the sector through the year.
Aside from local sales and unlike sectoral aggregates, LUCK has also been able to post growth in export volumes, which registered an increase of 8.6 percent year on year. Recall that total cement export volumes from Pakistan had declined by almost three percent in FY14. More importantly, the company has been able to increase its market share to 30.6 percent in FY14 from 27.3 percent the year before.
The increase in revenues comes at the back of an increase in volumes and net retention. Further, the hike in cement prices during the year has also been at play here. On the other hand, per ton cost of sales was higher as well on account of the increases in gas tariff and price of packing material.
According to Taha Amin, Analyst at Shajar Capital, the positive impact of a seven percent year-on-year decline in coal prices was partially offset by the 25 percent increase in gas tariffs. The most notable impact is that of other income, which has risen by a staggering 317 percent over previous year. Amin notes that this accrues from LUCKs revenue earnings from electricity sale to Hyderabad Electric Supply Company (HESCO) and from excess cash balance deposited with banks.
Throughout the year, LUCKs EPS continued along an increasing trajectory: from Rs7.87 at the end of the first quarter, it stood at Rs9.77 at the end of 4Q FY14. Finance costs have shown a considerable decline with substantial clearing of debt by the company.
Going forward, the recent filing of an application against dumping of cement in South Africa can be of serious concern for LUCK, given its export volumes to the country.

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LUCK - key financials

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Rs (mn)                        FY14       FY13        Chg

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Net sales                    43,083     37,810      13.9%

Cost of sales              (24,393)   (21,054)      15.9%

Gross margin                  43.4%      44.3%          -

Finance costs                  (34)       (76)     -54.9%

Other income                    978        234     317.0%

Profit before taxation       14,456     11,746      23.1%

Profit after taxation        11,344      9,749      16.4%

Net margin                    26.3%      25.7%          -

EPS - Rs                      35.08      30.15      16.4%

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