LAHORE – While most of the cement manufacturers show loss, the Lucky Cement - one of the few cement companies in the country which are profitable due to certain reasons - has announced its FY12 result on Wednesday, managing to book profit of Rs 6.8b versus earnings of Rs4b in FY11, up 71 per cent annually.

The company, in 9MFY12 results, also managed to book profit of Rs4.7 billion versus Rs2.5 billion in 9MFY11.

Recently, another profitable company in the sector, the DG Khan Cement, had also reported a superb growth in its earnings as its After Tax Earnings was increased by 11.71 times to Rs2.07 billion in 9MFY12.

However, experts afraid that Lucky and DGKC along with other companies of the sector may not enjoy the same excitement going forward while sector as a whole would face challenges on export front due to prolonged economic meltdown. They said that construction activities have declined on the key channels from where Pakistani cement producers have been receiving regular export orders.

They said that other companies of the sector shows the opposite picture, as the data of cement sector reveals that 11 of the eighteen listed cement companies posted a loss of Rs5.73 billion in 2010-11 and one company accounted for over 2/3rd of the 6.08 billion profit declared by remaining seven mills.

They said that market capitalisation of cement sector has declined from Rs279.54 billion in 2006 to Rs78.89 billion in 2012. According to them, the inability of the cement sector to pass on the rising costs to the consumers has brought the cement sector on the verge of collapse.

They said that the rates of electricity increased at an annual average of 9.50 per cent, diesel by 1,959 percent, furnace oil by 28.32 percent, packing prices by 6.82 percent, mining taxes by 20.06 percent, whilst rupee devalued by 3.29 percent compound annual rate. Meanwhile, cement prices during this period increased by 6.28 percent.

Contrary to the other companies of the sector, the Lucky Cement, which has the benefit of nearness with the see, lessening its transportation cost manifold, has shown profit growth of 71 per cent. Other key highlights from the FY12 results are 28 per cent YoY increase in the topline driven by 25 per cent YoY rise in average cement retention price, gross margin improvement to 38.2 per cent from 33.5 per cent last year and reduced financial charges (down 51 per cent YoY) because of dwindling debt burden.

In 4Q alone, the company registered a PAT of Rs2.1b (EPS: Rs6.48) up 26 per cent QoQ. The growth was on the back of rising trend in cement prices coupled with a seasonal uplift in volumes. Moreover, softening of coal prices also aided the 4Q growth.

Furthermore, the company has also decided to set up 870,000 tons per annum of Greenfield cement grinding plant in Iraq. Additionally the company also plans to invest equity in its associated company for 50MW Wind Farm. Both the investments are subject to regulatory approval.