Lucky Cement Ltd earned an operating profit of Rs 1,034 million during the year ended on 3O June, 2004, registering a growth of 165 percent over the corresponding period.
The ratio of operating profit to the net sales was 35.56 percent during last fiscal year, showing an improvement over the 17.81 percent operating profit earned by it on sales in the preceding year. This was the result of better utilisation of production capacity, improvement in production efficiency and substitution of coal in place of furnace oil as a fuel.
The Lucky's profit after tax comes to Rs 686 million after making a provision of Rs 268 million on account of deferred tax. Although the company's existing carry forward amount of accelerated depreciation allowances and the allowances expected to be available on new expansions, the company will not require paying income tax for quite a few years.
The provision of deferred tax has been made in compliance with the International Accounting $tandard-12 (IAS), which has been adopted by Pakistan under Securities Exchange Law of Pakistan. If the deferred tax amounting to Rs 268 million had not been provided for, the net profit after tax for the year would have amounted to Rs 954 million. The company has an accumulated provision for deferred tax of more than Rs 407 million as at 30 June, 2004.
The company's earning per share before tax works out to Rs 3.96 per share before providing for deferred tax as against the EPS before tax of Rs 1.40 earned by the company last year. It may be recalled that the company established its original plant as an equity-financed project and therefore, it has a very high paid-up capital of Rs 2.45 billion.
The Lucky Cement Ltd. has achieved substantial improvement in exports. The company exported 9,535 tons to Dubai for the first time. Lucky's total exports during the year amounted to 117,235 tons showing an improvement of 154 percent on last year's export of 46,191 tons.
EXPANSION PLAN: The company has planned to build an additional production capacity of 8,400 tons of cement of different types & grades per day at its existing site in Bannu division.
The company has already entered into agreements with the suppliers of machinery in China & Europe. Necessary Letters of Credits have been established and the civil work is in full swing. It is hoped that the new capacity will be in full production much before December, 2005.
The company has also decided to build a green field plant with a capacity to produce 8,400 tons of cement of different types & grades per day at Karachi on Super Highway. The Letters of Credit for machinery and equipment for the new plant have been established and the contracts for civil works have also been awarded and the civil work has commenced. After the completion of expansion projects, the company will have a total production capacity of more than 21,000 tons of cement per day. Both the expanded plants will have their own power generation. The total cost of both the expansion projects, including power plant, has been estimated at Rs 11.90 billion.
In view of the ambitious expansion programme undertaken by the company, the directors have thought it prudent to pass over the dividend but issue bonus shares 7.5 percent of the paid-up capital.
The total cost of expansion, including power generation plants, is expected to be around Rs 11.9O billion. The company entered into borrowing arrangements with different banks. It is expected that these borrowings together with the cash generated by the existing and future operations will meet the financial requirements for the new projects.
If necessary, the company may borrow some additional amounts subject to reasonable interest costs. If at any stage, the company feels that a resort to equity financing is necessary, the company will issue right shares. The authorised capital of the company is therefore being increased from Rs 3.0 billion to Rs 5.0 billion.
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