LAHORE (PPI) - Lucky Cement (LUCK) is schedule to announce its 9MFY11 results on April 16, 2011 in which it is expected that companys profit will decline by 4 percent to Rs2.47b compared to Rs2.56b in same period last year. Despite improvement in local retention prices we expect lower dispatches in the wake of recently abated floods and higher cost pressures would remain the prime earnings dampener. However in 3QFY11 lucks bottom-line would improve by massive 54 percent to Rs1bn (EPS of Rs3.1) Compared to Rs653mn (EPS of Rs2) in 3QFY10. This improvement would be contributed by companys enhanced focus on local sales with better retention prices compared to export prices. Amid slowdown in cement dispatches in local markets on account of floods and weak in exports, the total dispatches for Luck in 9MFY11 are expected to fall by 14 percent to 4.2mn tons (73 percent of capacity utilization) compared to 4.9mn in 9MFY10. But thanks to the strict price discipline adopted by local producers net retention prices are likely to improve. by double digit 21 percent to Rs225 per ton compared to Rs186 per bag in same period last year. On this account we believe net sale would improve by 8 percent to Rs19.4bn during 9MFY11. Not to cheer about is the fact that during the later part of 9MFY11, coal prices increased by unprecedented 34 percent to average US$117 per ton. This is primarily due to severe floods in Australia and due to Japan crisis soon after that. However, due to adequate coal inventory levels maintained by LUCK, we expect impact of coal prices would be slightly lower compared to others. As a result, we expect Luckys gross margins to meagerly decline by 100bps to 34 percent. Despite availing low markup SBPs export refinance scheme, LUCKs financial cost is expected to increase by 3 percent in 9MFY11. This will be due to the fact that SBP has also increased its refinance rate in line with rising interest rate scenario. We expect companys financing cost to remain around Rs430mn in 9MFY11 compared to Rs418mn last year. With 3QFY11 EPS expected to remain higher by 54 percentYoY, we believe 2HFY11 would be far better for cement producers. In last 3 months, cement prices have surged by 21 percent to Rs395-400 per bag in domestic markets amid price consensus. Although coal prices have started to ease in international markets, LUCKs cheaper procured coal inventories on around US$117-120 per ton would still provide company an edge.