Corporate results: Fauji Fertilizer Bin Qasim profits jump on higher prices

Company beats market expectation by posting net profit of Rs10.8 billion.

KARACHI: Fauji Fertilizer Bin Qasim did not let a drop in production levels get in its way to achieving all-time high profits in 2011.

The company’s net profit surged 65% to record high of Rs10.77 billion in 2011 compared with Rs6.51 billion posted in 2010, according to a notice sent to the Karachi Stock Exchange on Thursday.

Earnings growth has been achieved despite a fall in production as prices of the two most-consumed fertilisers urea and di-ammonia phosphate rose by 56% and 43%, respectively, on a yearly basis, said AKD Securities analyst Ayub Ansari. Net sales improved by 29% to Rs55.6 billion in 2011 from the preceding year’s Rs43.2 billion.

The result is higher than market expectation as analysts expected net profit to stand around the Rs10.2 billion mark.

Company’s urea sales are expected to have dropped 17% to 434,000 tons and di-ammonia phosphate by 1% to 662,000 tons during the period under review, adds Ansari.

Higher prices of both urea and DAP took overall gross margins to an impressive 36% in 2011 compared with last year’s 31%.

The result was also accompanied by a final cash dividend of Rs3.5 per share, taking the cumulative payout to Rs10 per share.

Contained selling and distributions expenses coupled with rise in other income also contributed to the growth, say analysts.

Other income – contributing 15% share in total earnings of the company – rose by 43% to Rs1.65 billion mainly due to higher interest on bank placements during the period under review.

On the other hand, financial charges of the company witnessed an upsurge of 16% to Rs1.08 billion in 2011 against Rs934 million in the same period last year.

Published in The Express Tribune, January 27^th, 2012.