Lucky Cement Limited (LUCK) Earnings Call Transcript & Summary

Welcome to Lucky Cement's Analyst briefing for FY '26. My name is Arsalan, and I'll be moderating this Zoom session. I have with me Mr. Atif Kaludi, the CFO and CEO, Muhammad Ali Tabba. So we would like to start with the presentation followed by a question-and-answer session. Thank you.

[Foreign Language] So this is our overall portfolio, which we just flashed for the purpose of giving an overview to any newcomers. So a couple of big things, [Foreign Language], another good financial year by lucky cement in terms of stand-alone profitability as well as consolidated profitability. The diversification strategy that we chose in the past, distant past, I would say, has [Foreign Language] continued to pay dividends and our consolidated enterprise continues to grow. Similarly, our cement profitability in Pakistan as well as for international property operations has performed well. So despite a lot of challenges that started from Iran-U.S. political tensions and the war scenario, because of the buffers that we've built into the system in terms of investing into operational excellence over a period of years, investing into efficiency, having a very good cash buffer, low debt-based balance sheet, that has paid off, which has shown that the results continue to point upwards [Foreign Language]. So on the couple of mentionable achievements during the year. So solar expansion for 15-megawatt Karachi plant, this -- as we speak, this has started it's, I would say, giving us electricity. So our renewable capacity in terms of solar will be 89.3 megawatt, and we already have another 28.8 megawatt from wind. So overall, 55% of energy needs of Lucky Cement for the Power segment are met through renewable sources. So a good year in terms of local sales growth after a lot of depressed years. So FY '26 demand touched 6.5 million tonnes versus 5.9 million tonnes in FY 2025. Then we took this initiative because our Karachi plant is now quite old in terms of age. So it's coal consumption and the clinker production have been optimized by utilization of this European technology, which is UCP. Basically, what it does is that it consumes slightly lesser coal and gives you more clinker output. So based on this, we also reannounced our capacity, which we announced recently at PSX, which now stand at around 15.6 million tonnes. Then we entered into a strategic partnership with a Chinese GSE group for launch of a new brand of Chinese vehicles into Pakistan. So we can talk about that towards the Q&A. International expansion, we've announced a 1.6 million tonne per annum of plant in DRC, so which will take our DRC capacity to 3.2 million tonnes in addition to our capacity at 2 locations in Iraq, which is Basra and [indiscernible]. So FY '26 volumes for Lucky were at 6.5 million tonnes versus total industry of 41.5 million tonnes, giving us a market share of 15.7%, which is more or less in line with what it was for the last year. Exports. So 2025 was a very good year for exports for Lucky Cement, specifically because some of the suppliers into the export market, they could not supply and we captured that market. So we went to an unusually high number of 3.4 million tonnes. But now we're back to 3.1 million tonnes, which is a more sustainable number. So since we are exporting most of our exports are from our Karachi plant because right now, the Afghan border is closed. So what we are trying to do is that keep our Karachi plant utilization at max by utilizing around 2 million tonnes for the domestic market and then exporting whatever is left at good prices and good contribution margin. So the 3.1 million tonnes right now at the existing capacity is more like a sustainable number. So if the domestic demand continues to grow, that would slightly eat into the export's share, but that is actually better for profitability because the profit on domestic sales is higher than that on exports. So these are our export destinations. We've uploaded it on the website. It is just for your reference. So these are the financial highlights. I mean, you guys have had access to this presentation and our financials for quite some time. So I won't go through each number. But in nutshell, our profit after tax is at PKR 46.6 billion, which includes dividend, which is higher by 40% over last year. And there is a similar story when you -- obviously, the 6 years growth [Foreign Language] has been there. And if you have a look at the consolidated financial statements, you will see similar story of growth all across. So our profit after tax is PKR 96.5 billion, which is higher by 14% compared to the previous year. So we will discuss about the outlook into the Q&A session. So Arsalan, we can now go on to the Q&A.

And Arsalan, I suggest, first, you direct the questions that I'm supposed to answer, which is more kind of I believe there are more factual questions relating to the current financial year and then for the more broader questions, we'll give the mic to Mr. Muhammad Ali Tabba. I'll just go through the question, Arsalan, to just make it quick. So 55% of our energy needs are met through renewables. So when I say renewable, it is primarily wind, solar and waste heat recovery, and the remaining requirement for our plants are primarily met through grid -- which is grid being the biggest contributor, and we are kind of seeing a reduction in prices of grid as the power consumption in the country is increasing and the reforms have taken place. So our grid is currently costing around PKR 30 to PKR 32, which is a reasonable balance for the power mix. So the coal prices, the increase has been very recent. And yes, the alternative fuels as the prices increase, the use of alternative fuels become more and more economical. But for both of our plants, we are sitting in a bit of a unique situation because our North plant is quite distant from the main market. So if you try and take, let's say, for example, agricultural waste to our North plant, the transportation is quite costlier. And when you talk about our South plant, because of the old age, the South plant cannot take alternative fuel at the moment, but we are in the process of evaluating. And [Foreign Language], in 1Q or 2Q, you should be able to hear some good news on that front. So if you're talking about retention prices, overall, if I look at FY 2026, that was PKR 15,500 was the average for North South. And if I talk about fourth quarter because of the increase in prices, the retention had jumped to by around another PKR 700. Okay. And if I talk about the transportation cost, it is very volatile because of the diesel prices. But lately, we are seeing a transport cost of ranging from around PKR 9,000 to PKR 11,000 for coal when we are moving coal from the South market to our North plant. Local retention, Arsalan, I've already covered that. And what was the coal cost per tonne for North and South. So if I take the average of our whole year, so FY 2026, coal cost was around PKR 35,000 for South and North combined. And the power mix, I said, on a company level, it is 55% renewables and 45% is coming from grid. And the grid prices are at the moment, they are favorable. Port to plant core transportation, I've already answered that question. So Arsalan, now I think we can move to questions for the CEO, Mr. Muhammad Ali Tabba is waiting for that.

Osama, please unmute yourself?

My question particularly pertains to investment strategy of the company like in terms of growth and future diversification. What does Lucky as a company looks for while evaluating investments in the new avenues. It can be in terms of return, scale or any other criteria you want to mention.

So in terms of new investments, we are evaluating different areas, both within our sector and outside our sector. And as you must have seen that through our consortium, we are participating in privatization of this cost. So that's something which is under consideration. And also, at the same time, as I mentioned, that we're also looking at how we can help the country to increase exports from Pakistan because that's what the government of Pakistan and the Prime Minister wants that we should try to contribute as much as we can towards exports. So we're looking at options that how we can increase our export from Pakistan, particularly in the cement sector. So that's also something that's under consideration. And then we also want to see that what other opportunities would come to us, as you understand that our balance sheet is very strong. We still carry a lot of cash. But we don't want to haste in terms of investments. We have to be -- we have to make sure that we look at the sectors, which has long-term growth potential as well as that can give good returns to the shareholders. So we should continue on our agenda of unification, which we have been doing for the last 1.5 decades and this is going to be our strategy going forward. So there's nothing in particular. I mean anything that we believe can add more value for the shareholders. That's the sector we would like to invest in the future.