Lucky Core Industries Limited (LCI) Earnings Call Transcript & Summary

I welcome you to the first half FY '26 quarter briefing session of LCI. Initially, I will take you through the presentation, and then I will open the forum for question and answers. So moving on to the first slide. Macroeconomic parameters have improved significantly in Pakistan, policy rate has reduced and the average for this first half was around 10.96%. PKR has appreciated versus USD by 1.3% Large-scale manufacturing has grown by 6% approximately YTD November and average inflation has reduced to 5.6% for this period. So we operate in 5 different businesses or you can call segments. Our Pharmaceutical segments grew operating result by 17%, and that was mainly due to the full year impact of Pfizer acquisition, which was done in September 2025 that increased our result plus our legacy business also grew. I will take you in detail in the following slides. For Animal Health, our operating result improved by 28%, and this was mainly based on the seasonal demand and post flood effect on the upsurge of diseases, which led to higher sale of medicines. Polyester operating result declined by 79% because volumes [Foreign Language], and that was mainly cheaper imports availability [Foreign Language]. In soda ash business, our operating result declined by 21% [Foreign Language] decline in export volume , 63% [Foreign Language] versus same period last year. Because internationally [Foreign Language]. Chemical and Agri [Foreign Language] declined by 21% and that was mainly in Agri segment because crop cycle [Foreign Language]. These are the major reasons for this first half results. If we move forward [Foreign Language] 9% lower and mainly on the back of [Foreign Language]. EBIT was 17% lower, PKR 7.7 billion and PAT was 4.84 billion on standalone financial statements [Foreign Language] 50% of our profit. [Foreign Language] profit after tax is lower by 28%. [Foreign Language] earnings per share consolidated 9.96%. Market capitalization [Foreign Language]. Current ratio 1.5. Return on capital employed 35%. This is pro rated based on full year, considering half year results are rated for full [Foreign Language]. One of the great qualities of this company is basically very heavy cash generation and [Foreign Language]. Return on capital [Foreign Language]. After deducting sustenance CAPEX PKR 2.5 billion -- PKR 2.6 billion [Foreign Language]. Animal Health is higher by 16% at PKR 556 million. [Foreign Language] 17% lower versus same period last year. [Foreign Language] turnover has reduced by 8% versus same period last year at PKR 18.5 billion. Operating result 21% [Foreign Language] overall sales volume are lower by 6%. Local sales volume has increased by 10%, but exports [Foreign Language] versus same period last year. And that was back on significantly lower prices offered by Turkey, China [Foreign Language]. If we move to Polyester business [Foreign Language]. If we move to Pharmaceutical business [Foreign Language] as per IMS Data in first half. Turnover has increased by 10%. This turnover has one negative impact as well [Foreign Language]. Operating profit [Foreign Language] and EBITA increased by 18%. [Foreign Language]. Poultry segment, despite its own challenges, [Foreign Language] construction is underway and operations are expected to start by end of this. So all these things are positive for Animal Health business. If we move to chemicals in Agri side, I have explained initially [Foreign Language] and EBITA was lower by 17% versus same period last year.

And now I open the questions -- forum for question and answer session. Initially I have received few questions through e-mail [Foreign Language] and then I will move to the chat box and then finally the hand raises. [Foreign Language] to reinvest funds in that business or probably any acquisition, so we have a strong balance sheet through which we can exercise our leverage position and invest in that opportunity as well. [Foreign Language] Board can consider reducing the dividend for a year or two may be. [Foreign Language] because of paying dividend. And company has been consistently growing investing in soda ash [Foreign Language]. We're operating around at 75% capacity currently Polyester. Idle capacity because of lower demand. [Foreign Language] exercise our leverage position. We have no debt -- almost no debt on our balance sheet or maybe Board may consider reviewing the dividend allocation. The question which I received further was are there more local competitors emerging in [indiscernible] segment? So currently, there are no new local players emerging as far as my knowledge is concerned. [Foreign Language] What is the market share of Morinaga milk in baby milk segment. [Foreign Language]. What is outlook for each business of Lucky Core Industry for remaining part of this year. [Foreign Language] soda and polyester businesses are under pressure because [Foreign Language]. Pharmaceutical will continue its growth path [Foreign Language] but obviously [Foreign Language] appears to be under pressure at least for next 2 months or so.

So Atif we have received a few questions in chat box. Number one, could you please share a progress update on the veterinary medicine manufacturing facility.

[Foreign Language].

Atif, another question, how do you see the company's top line contribution from the next Pharma business increase in next one to two years.

[Foreign Language] so we are trying to venture into other countries [Foreign Language]. We see Pharmaceutical as a promising business for LCI in future.

I think Atif, you have already covered the question, but again what initiative is LCI is undertaking to address the decline in Polyester volume and Soda Ash export volumes and what are the export volumes expected to get that to the normal.

[Foreign Language] locally we are trying to reduce our cost. We're trying to purchase raw materials at competitive cheaper rates [Foreign Language].

Average selling price of soda ash in export and [indiscernible].

[Foreign Language] pressure has increased for cheaper imports and we have to giver higher discounts.

Atif, another question. Portion of essential versus non-essential in the Pharma products.

So Essential Pharmaceuticals [Foreign Language]. Non-essential approximately 65%.

Volumetric growth expected from Pfizer portfolio and [indiscernible] brand value and revenue.

[Foreign Language] these are very strong brands and obviously [Foreign Language].

Shall we expect a stable EPS and dividend from the company in FY '26?

[Foreign Language] We have delivered approximately PKR 4.8 billion of profit number in this first half, which is not very low [Foreign Language] if situation improves then obviously, this number will increase further. So we expect this performance to continue. [Foreign Language] LCI has grown tremendously in periods when there was significant pressure in the local economy [Foreign Language] because of this global situation, we expect from next year or so [Foreign Language].

Okay. Atif, we have a question for Laila. Are there any ongoing or potential litigation that investors should be mindful of?

All our material litigations are reported in our contingent liabilities section in the annual report. We are monitoring them quite carefully and quite vigilantly. And if and when there are any updates, they will be provided with the annual report.

Okay, Atif another question. Do you expect more oversupply in Soda Ash segment considering Sapphire Chemicals entering the market in 2027 with 220K TPA plant?

[Foreign Language] we think to improve that to the best extend we can. [Foreign Language] make ourselves more competitive. We have all those things available since last many years. So we expect at least for this company, the situation will continue to improve. And we have a diversified portfolio of businesses, so obviously [Foreign Language] we think we will be competitive in future as well.

Update on Soda Ash expansion and are we expecting CapEx to increase further?

[Foreign Language] So we're fully aligned with that in principle approval and [Foreign Language] there is significant over capacity at this point in time as well. [Foreign Language] We want to press that figure at the appropriate time [Foreign Language] so that's my response on this.

So last question in chat box. How much CapEx was incurred on Veterinary Medicine plant and gross margins expected from it?

[Foreign Language].

So we will take the live questions, [Suleman Maniya]

[Foreign Language] I've seen in the local landscape over the last 1.5, 2 years, there's been huge dumping going on where the importers are trying to undermine the NGC as well as trying to make sure that they are importing PSF as well as other products by miss declaration, et cetera. So what is our company trying to do to preempt that? And what is the association doing? Because effectively, the problem is, as you know, there's a huge manufacturing cost disadvantage in Pakistan especially with regards to raw material prices as well as electricity and so on, right? So we cannot have the same percentage benefit like same percentage basis -- we cannot have the same percentage taxes or antidumping duties as which we used to because now the landscape has changed. So is this something which the company has now started to talk to the government? And can you share a number with regards to the import of PSF last year compared to like a year before that? And then I have a few follow-ups as well.

[Foreign Language] company actually is currently working with government on various forums or [Foreign Language]. So we're working on that front. [Foreign Language].

[Foreign Language] if you can just explain the number PSF [Foreign Language] compared to last year.

[Foreign Language]. Polyester was PKR 30 a kg. Imported polyester was approximately PKR 30 per kg cheaper compared to the local product [Foreign Language].

[Foreign Language] because that is something which you -- because you are obviously kind of like a monopoly or you're the biggest player in the market, right?

We're not the biggest player. [Foreign Language] Ibrahim Fibres, we are #2.

Sir, you are #2, but you are majorly impacted from imports, right? [Foreign Language] so from a perspective of obviously relatively [Foreign Language] transportation costs, et cetera, goes on. So I'm just saying this is something which management effectively should keep an eye on, right? [Foreign Language], I want to have 2 other questions -- 3 other questions. Sir, ophthalmic, I haven't seen the company look at this segment. So is there a reason why you have just left the ophthalmic category like -- or is this something which you have on your radar?

[Foreign Language].

Mead Johnson, which is one of your competitor products [Foreign Language] recently has cut the prices because they have got a percentage discount from Mead Johnson globally, right? And this has also effectively, I believe, hit your volumes on Morinaga. Is that true? Or -- and what are you doing on this side.

[Foreign Language] then we set up our formulation plant in Sheikhupura [Foreign Language]. We're holding approximately 22% of the shareholding. [Foreign Language].

You haven't answered my question, sir. You haven't answered my question. My question is Mead Johnson is an imported product that's not manufactured locally, okay? My question is Mead Johnson is potentially from what I understand, the industry leader -- not the leader, on a quality side, it's supposed to be like the benchmark, right, from what I understand. Maybe I might be wrong. But Mead Johnson's recently, IBL Healthcare has recently got a price reduction from the principal, which it has passed down locally over the last 2 to 3 months. So have you seen your volumes actually getting hit on this side? I mean, is there some numbers which you can share? Or is this something which you haven't really seen?

[Foreign Language] I will just check because the company separately [Foreign Language]

Is it possible for you to like to get back to me on this.

So you can actually leave your number on that e-mail or something I will get back to you. The second question which you had [Foreign Language] few months, not decline. So that's a diverse situation on an overall basis.

[Foreign Language]. What percentage utilization is the Pfizer plant currently operating at.

[Foreign Language].

Average price growth [Foreign Language].

Average price growth [Foreign Language].

Okay, sir, basically effectively [Foreign Language].

[Foreign Language] approximately 10% from same period last year. [Foreign Language].

[Foreign Language]. Pfizer is like 40% up right?

[Foreign Language].

[Foreign Language] your business hasn't really performed this year in the first 6 months because [Foreign Language] you are actually just managed price growth, right? [Foreign Language].

[Foreign Language]. Turnover has increased by 10%, but operating profit has increased by 17% [Foreign Language].

[Foreign Language].

Volume, overall basis [Foreign Language].

[Foreign Language].

[Foreign Language]. It will be above I believe 60%.

[indiscernible].

[Foreign Language].

[Foreign Language]. We'll manage our cost in comparison to imported and hopefully you'll see [Foreign Language].

[Foreign Language].

[Foreign Language]. Rest assured, the company will try to protect its cost base and will be competitive [Foreign Language]. We will be competitive.

[Foreign Language] for anti-dumping duty.

[Foreign Language].

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

So Atif we have few questions in chat box as well. Can you share the import numbers for soda ash? How much imported are cheaper after antidumping duty? What is imported market share and [indiscernible] tons in import.

[Foreign Language] and that's because imported products are available at a very cheap price. [Foreign Language].

Can you share the average price of PTA per ton that you are getting right now?

[Foreign Language]

With India securing a trade agreement with USA that includes 18% tariff reduction and progressing towards a pact with EU, how will Pakistan's textile sectors be affected.

[Foreign Language]

Atif, last question relating to Afghan border. How is the company strategizing to mitigate the losses incurred from Afghan border closure? And how likely is it that demand from Afghanistan will return to pre-tension levels, especially considering the Afghan buyers have entered into contracts with Indian and Bangladesh pharmaceutical suppliers.

[Foreign Language].

Atif, last question. Just recall the price of gas per MMBtu for the Polyester business.

[Foreign Language] Thank you, everyone, for attending.

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language].

What is the power requirement kilowatt per hour to make 1 ton of Soda Ash on it's own.

[Foreign Language] Thank you. Thank you, everyone, for joining in.