LUCK – Lower retention subdues profitability during 3Q

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Lucky Cement Limited (LUCK) announced its financial results earlier today, posting earnings of PKR 2,935mn (EPS: PKR 9.08) during 9MFY20, down 65% YoY compared with earnings of PKR 8,294mn (EPS: PKR 25.65) registered during 9MFY19. On a quarterly basis, earnings dipped by 64% YoY to PKR 999mn (EPS: PKR 3.09) during 3QFY20. Earnings attrition can largely be attributed to lower retention, and in turn, lower margins during the period.

On a consolidated basis, earnings dipped by 50% YoY to PKR 14.38/sh largely due to the subdued performance of its cement businesses. ICI’s performance, however, contained potential decline as its earnings grew by 35% YoY to PKR25.81/sh (EPS Contribution to LUCK: PKR 3.92/sh) during 9MFY20.

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Key Highlights

 LUCK’s top-line dipped by 14% YoY to PKR 32,448mn during 9MFY20 largely due to an 8% YoY decline in domestic off-take and subdued retention levels during the period. On a quarterly basis, revenues constricted by 11% YoY to PKR 11,237mn during 3QFY20 despite a 7% YoY increase in off-take as lower retention levels offset the dispatches growth, causing overall revenues to come under pressure.

 Lucky Cement’s margins compressed by 16pps YoY to 14% during 9MFY20 against 30% recorded during 9MFY19 largely due to lower retention levels. Moreover, higher gas prices during the period in addition to increased depreciation charges post the commencement of the company’s line also added to the company’s woes, further depressing margins during the period.

 LUCK’s distribution charges grew by 39% YoY to PKR 2,931mn during 9MFY20 primarily due to a larger quantum of exports (+10% YoY) in addition to higher average fuel prices during the period.

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