Financial headache for Lucky Cement

KARACHI – Financial costs for Lucky Cement Limited (LUCK) are expected to swell by six percent annually to Rs 443 million in the ninth month of FY11, mainly on account of rising trend in KIBOR and Export Refinancing Rates (EFR).
In quarterly terms, however financial cost is expected to exhibit a modest decline of one percent quarter-on-quarter as total loans have registered a quarterly drop of two percent to Rs 8,826 million as of December 31, 2010. LUCK is set to release its March financial results on April 16, 2011, in which the company is expected to earn profit after tax (PAT) of Rs 2,696 million (EPS of Rs 8.34) for 9MFY11, exhibiting an annual improvement of five percent, when compared with Rs 2,561 million (EPS of Rs 7.92) in the corresponding period last year.
This growth in Profit after Tax is expected from a 20 percent annual jump in the average retention prices. For the third quarter of FY11 alone, it is expected that the company will post quarterly growth of 68 percent to Rs 1,235 million with EPS at Rs 3.82, mainly stemming from a four percent rise in retention price since the last quarter coupled with a three percent quarterly rise in volumetric sales.
In the case of the third quarter, a four percent recovery in average retention price coupled with a mild three percent improvement in dispatches is likely to translate into a seven percent quarterly increase in revenues. Higher retention prices coupled with low cost coal inventory is likely to boost gross profit by 19 percent since the last quarter to Rs 2,659 million.
Despite the expected 12 percent volume contraction in 9MFY11, the company is likely to post top line growth of five percent annually partly due to a 20 percent increase in average retention prices during 9MFY11.
Distribution cost of the company is likely to drop by 15 percent quarterly to Rs 960 million in 3QFY11.
This is likely to be on account of a 17 percent quarterly decline in the exports volume to 480,000 tonnes in 3QFY11. LUCK has recording its export on CFR basis, which resulted in a 64 percent QoQ increase in distribution costs in 2QFY11.