Lucky Core Industries (LCI) reported a sharp contraction in profitability during the first quarter of FY2027 as rising energy and raw material costs outweighed modest revenue growth. The company’s gross margin fell to 18.1%, its lowest level since December 2022, while quarterly earnings declined by half compared with the preceding quarter.
Net sales reached approximately PKR 29.9 billion, increasing 4% year-on-year and 7% quarter-on-quarter. Higher polyester staple fibre (PSF) prices, pharmaceutical price adjustments and initial contributions from the newly commissioned Animal Health facility supported revenue growth.
Rising Costs Push Gross Margins to Multi-Year Lows
Despite higher sales, LCI’s gross margin contracted by 3.5 percentage points year-on-year and 3.9 percentage points quarter-on-quarter to 18.1%.
Elevated energy costs, weaker Soda Ash prices and higher premiums on monoethylene glycol (MEG) cargoes used in PSF production contributed to the decline. These pressures weighed on profitability, highlighting the difficulty of translating revenue growth into stronger earnings amid rising input costs.
Quarterly Earnings Decline 50%
LCI’s earnings fell to PKR 1.624 billion during the quarter, down 25% year-on-year and 50% quarter-on-quarter. Earnings per share stood at PKR 3.52, below expectations.
The company did not declare a dividend for the quarter, in line with its usual practice for this period.
Higher financing expenses added to the pressure on earnings. Finance costs rose 41% year-on-year to PKR 766 million, while average borrowings increased to PKR 23.8 billion in September, compared with PKR 20.1 billion in the corresponding period last year.
The increase in borrowing levels and financing costs further constrained profitability as the company faced weaker margins across parts of its business.
Diversified Portfolio Provides Some Support
LCI’s presence across chemicals, pharmaceuticals and animal health is expected to provide a degree of stability to its earnings. Its recently commissioned Animal Health facility could contribute more meaningfully as production ramps up, offering a potential source of additional growth.
The facility’s contribution will remain an important factor for investors monitoring the company’s ability to improve its financial performance over the coming quarters.
However, the extent to which this expansion supports overall profitability will also depend on operating costs, demand conditions and the performance of the company’s other business segments.
Outlook Remains Cautious Amid Sector Challenges
The near-term outlook for LCI remains cautious as recovery in the downstream textile and glass sectors is expected to be gradual and uneven. Higher policy rates and continuing geopolitical uncertainty are also limiting the prospects for volume growth in the Soda Ash and PSF segments.
Investors will be watching the pace at which the new Animal Health facility scales up, alongside developments in energy prices and raw material costs.
LCI’s ability to protect margins and restore earnings growth will depend on operational efficiency, demand recovery and whether external cost pressures ease in the coming quarters.