Corporate results: Engro Fertilizers posts Rs15 billion profit

Lower gas price, decline in financial cost main reasons behind rise in earnings

KARACHI: In line with market expectations, Engro Fertilizers made a net profit of Rs15 billion in 2015, up 83% from a year ago, according to a stock filing on Monday.

A subsidiary of Engro Corporation, Engro Fertilizers posted earnings per share (EPS) of Rs11.3 as opposed to Rs6.2 in 2014.

According to BMA Capital, the sharp increase in the company’s profitability during 2015 was because of three main reasons. These included award of concessionary gas pricing for its Enven plant in Jan-Mar, year-on-year increase of 43% in revenues on the back of inclusion of the di-ammonium phosphate (DAP) trading business in Engro Fertilizers and an annual decline of 29% in finance cost following the company’s deleveraging as well as a lower benchmark interest rate.

Last year, Engro Fertilizers acquired Engro Eximp, which was a wholly owned subsidiary of Engro Corporation, which undertook trading business for multiple commodities, including phosphate-based fertilisers. The restructuring has resulted in a major improvement in bottom line of the acquiring company (Engro Fertilizers), analysts said.

According to First Capital analyst Faizan Sarmad, the effective tax rate in 2015 was 29%, or 2% lower than the effective tax rate in the preceding year.

The company also announced a dividend of Rs3 per share, taking the full-year payout to Rs6 per share.

On a quarter-on-quarter basis, earnings for Oct-Dec amounted to Rs5.1 billion, up 83% from the net profit earned in Jul-Sept. The quarter-on-quarter surge in profitability came on the back of 2.5 times hike in revenues.

The top line expansion in the last quarter of 2015 was a result of a sharp increase in the off-take of both urea and DAP, BMA Capital said.

The per-share price of Engro Fertilizers closed at Rs81.11 on Monday after registering a nominal decrease of Rs0.04 from the previous trading day’s closing price. However, it remained the most traded stock on the bourse, with over 9.4 million shares changing hands on Monday.

Published in The Express Tribune, February 9^th, 2016.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.