Lucky Cement export dispatches surge by 117% in the first quarter of FY25

Lucky Cement (LUCK) reported a significant 117% increase in export dispatches in the first quarter of fiscal year 2024-25 (FY25), reaching 0.8 million tons.

This surge is attributed to falling coal prices, which improved the feasibility of cement exports and enhanced profit margins.

The company's export market share rose to 38.1% in FY25's first quarter from 21.5% in the same period last year, Lucky’s management said at an analyst briefing on Tuesday.

In contrast, domestic cement sales dropped by 22.6% to 1.4 million tons, with the market share declining to 16.9% from 17.5% the previous year.

Local sales volumes fell by 15% due to lower domestic demand, which is in line with industry trends. The launch of a new plant helped capture additional markets, but overall market share still declined.

Lucky Cement management is optimistic that cement demand will improve with easing inflation and interest rates. They plan to reduce costs through investments in renewable energy and efficiency improvements.

Diversifying portfolio

In the chemical segment, Lucky Cement aims to diversify its portfolio while managing costs effectively. They will focus on optimized operations and localization to minimize reliance on imported components.

The outlook for the mobile sector is positive, with potential for low-cost smartphones, and cost savings on electricity supply are expected with Thar coal starting next year.

A 28.8MW wind power plant came online in the second quarter of FY25, bringing the company's total renewable capacity to nearly 100MW for its two local cement plants.

Wind, solar, and Waste Heat Recovery (WHR) now fulfill approximately 55% of the power requirements on average.

Average coal prices for Lucky Cement stood at PKR 38,000 per ton in FY25's first quarter. The south plant primarily used imported coal, while the north plant used a mix of imported, Afghan, and local coal. Recent reductions in duties on Afghan coal are expected to lower coal prices by Rs5,000-6,000 per ton, with local coal prices following the same trend.

Management noted that higher taxation on exports is broadly immaterial for the company, as exports only contribute to margins, with bottom-line earnings being negative. When combined with domestic sales, the export portion provides a slight tax reversal instead of a tax liability.

Additionally, Lucky Electric Power has receivables on its accounts for 4-5 months.