Corporate results: Fauji Fertilizer Company posts Rs8.8 billion profit

Result below expectation due to imposition of super tax and 382 points decline in gross margins

KARACHI:

Fauji Fertilizer Company (FFC) on Thursday announced a net profit of Rs8.8 billion for the half year ended on June 30, up 7.4% compared to Rs8.1 billion in the same period of last year.

“The result was below market expectations mainly due to the imposition of super tax and 382 basis points (pts) decline in gross profit margins in the second quarter of 2015 (2QCY15),” Topline Securities commented in its report.

The company’s pre-tax profits in 1HCY15 rose by 23% year on year. The result also accompanied second cash dividend of Rs1.75 per share (total dividend for first half of 2015 (1HCY15) Rs5.69 per share).

The un-consolidated first half 2015 profits of FFC, on the other hand, stood at Rs8.3 billion or an earnings per share (EPS) of Rs6.5.

The revenue of the company, in 1H2015, posted a growth of 9% year on year to Rs40.6 billion owing to 3.8% year on year increase in urea off-take.

Urea off-take increased due to delay of wheat sowing season. The company sold 1,219,000 tons of urea in 1H2015 compared to 1,174,000 tons in the same period last year.

However, gross profit increased by just 3% to Rs15.7 billion in 1H2015, while gross margins fell by 209 basis points (bps) to 37.5% as the company couldn’t increase urea prices.

The income from associates surged to Rs1.9 billion mainly due to increase in earnings of its associates (Askari Bank Limited, Fauji Fertilizer Bin Qasim and Fauji Cement Company) while other income rose by 77% to Rs1.3 billion.



On a quarter-on-quarter basis, revenue of the company dropped by 4% due to 5% decline in volumetric urea off-take due to seasonality.

The bottom-line earnings of the company declined by 19% quarter on quarter to Rs4.2 billion mainly due to substantial fall in gross margins from 40.5% in first quarter of 2015 (1Q2015) to 36.7% in second quarter of 2015 (2Q2015)

Moreover, lower other income of Rs509 million against Rs1.4 billion in 1Q2015 and imposition of super tax of 3% increased effective tax rate from 31% in 1Q2015 to 35% in 2Q2015.

Published in The Express Tribune, July 31^st, 2015.

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