AKD Quotidian about — LUCK: FY13 Result Review

Karachi, September 18, 2013 (PPI-OT): LUCK announced its FY13 result yesterday whereby the company posted unconsolidated NPAT of PkR9,714mn (EPS: PkR30.04) which was in line with AKD Securities estimated NPAT of PkR9,736mn (EPS: PkR30.11).

According to AKD Securities the company also announced a cash dividend of PkR8/share. Compared to last year, earnings are up by a significant 43%YoY, where profitability was driven by higher cement prices and lower coal prices. Moreover, to further reduce its electricity costs LUCK has also announced plans to install waste heat recovery plants of 5MW each at Pezu and Karachi.

The company is also in the process of negotiating an agreement with Peshawar Electricity Supply Company (PESCO) to sell excess electricity produced at its Pezuplant, which will provide additional support to the bottom-line. AKD Securities awaits the detailed accounts before updating AKD Securities investments case for LUCK.

FY13 result review: LUCK posted an NPAT of PkR9,714mn (EPS: PkR30.04) in FY13 which was in line with AKD Securities estimated NPAT of PkR9,736mn (EPS: PkR30.11). The company also announced a cash dividend of

PkR8/share. Compared to last year, earnings are up by a significant 43%YoY, where profitability was driven by higher cement prices and lower coal prices. This has resulted in an expansion of gross margins by 600ppt to a record high of 44%.

The top line witnessed a growth of 13%YoY to clock in atPkR37.8bn for FY13. For 4QFY13, earnings clocked in at PkR2,732mn (EPS: PkR8.45), up by 2%QoQ and 30%YoY. Cement dispatches for4QFY13 clocked in at 1.63mn tons, a sequential dip of 1%.

LUCK: Profit and Loss

(PkR mn)                        FY13     YoY        4QFY13        QoQ       YoY
Sales                         37,810     13%        10,076        -1%        7%
Cost of Sales                 21,089      2%         5,602        -1%       -2%
Gross Profit                  16,721     31%         4,474        -2%       22%
Gross Margin (%)                 44%                   44%
S and A Expenses               4,563     23%         1,085        -5%       25%
Operating Profit              12,158     35%         3,388        -1%       22%
Other Operating Charges          616     41%           (4)      -101%     -103%
Other Operating Income           248   4664%            52        21%     2392%
EBIT                          11,790     37%         3,444        11%       30%
Financial Charges                 89    -65%          (26)      -153%      -37%
NPBT                          11,701     41%         3,470        13%       29%
Tax                            1,987     29%           738        98%       24%
NPAT                           9,714     43%         2,732        2%        30%
EPS                            30.04                  8.45
DPS                             8.00                  8.00

Plans to reduce energy costs; capacity expansions, the next logical step for cement producers is to focus on efficiency improvements. In this regard, LUCK has announced plans to introduce Tire Derived Fuel (TDF) at the Pezu plant to reduce dependence on Coal. Moreover, to further reduce its electricity costs LUCK has also announced plans to install waste heat recovery plants of 5MW each at Pezu and Karachi.

The company is also in the process of negotiating an agreement with Peshawar Electricity Supply Company (PESCO) to sell excess electricity produced at its Pezu plant, which will provide additional support to the bottom-line. Focus on energy efficiency is likely to drive margins for LUCK going forward and support premium multiples relative to the sector. AKD Securities await detailed accounts before updating AKD Securities investments case for LUCK.