Fauji Fertiliser profit surges 72 per cent to Rs6.5b despite curtailed gas supply
Jump in profits mainly due to higher margins, increase in other income and decline in financial costs.
KARACHI:
Fauji Fertiliser Bin Qasim Limited (FFBL) profits have surged 72 per cent to Rs6.51 billion in 2010 despite the reduction of gas supply to the sector by the government.
The massive jump in profits is mainly on the back of higher margins, increase in other income and decline in financial costs, said IGI Securities analyst Sarah Afridi.
The cut in gas supply to the fertiliser sector is part of the energy conservation plan announced by Prime Minister Yousaf Raza Gilani to tackle the power crisis.
The company also announced a final cash dividend of Rs3.5 per share, taking the full year payout to Rs6.55 per share, according to a notice sent to the Karachi Stock Exchange on Tuesday.
Meanwhile, FFBL booked a loss of Rs37 million from its associate Moroccan-based company, Pakistan Maroc Phosphore, contrary to market estimates of a profit of Rs116 million.
The decline in contribution from the associate was offset by higher other income, which surged 51 per cent to Rs1.03 billion.
Moreover, the financial cost came down by 36 per cent to Rs934 million as the company cleared up subsidy receivables from the government.
Volumes and margins head in opposite directions
The government had decided to cut gas supply from Sui network by 20 per cent, which will affect gas supply to FFBL as well.
Following this fall in gas supply the company kept production of its flagship product, DAP at maximum capacity but decided to reduce urea production.
Urea production eventually fell 16 per cent in 2010 to 524,356 tons because of a shortfall in gas supply and lower demand in July to August in lieu of the floods while production of the company’s flagship product di-ammonia phosphate (DAP) rose 22 per cent to 659,556 tons.
This fall in production was covered by healthier margins and a better cash position, commented BMA Capital analyst Omar Rafiq.
Core margin for DAP stood as high as $287 per ton compared with the average margin on urea of $150 per ton, said Rafiq.
Despite a rise in DAP prices during the year – from Rs2,000 per bag in December 2009 to Rs3,085 per bag in December 2010 – demand for DAP remained buoyant owing to significantly high support prices of wheat.
The fertiliser sector’s performance has definitely generated significant investor interest of late, said Rafiq. With the effects of the floods now fading, the agrarian economy is expected to recover which is a boon for local producers, concluded Rafiq.
Published in The Express Tribune, January 26th, 2011.
Fauji Fertiliser Bin Qasim Limited (FFBL) profits have surged 72 per cent to Rs6.51 billion in 2010 despite the reduction of gas supply to the sector by the government.
The massive jump in profits is mainly on the back of higher margins, increase in other income and decline in financial costs, said IGI Securities analyst Sarah Afridi.
The cut in gas supply to the fertiliser sector is part of the energy conservation plan announced by Prime Minister Yousaf Raza Gilani to tackle the power crisis.
The company also announced a final cash dividend of Rs3.5 per share, taking the full year payout to Rs6.55 per share, according to a notice sent to the Karachi Stock Exchange on Tuesday.
Meanwhile, FFBL booked a loss of Rs37 million from its associate Moroccan-based company, Pakistan Maroc Phosphore, contrary to market estimates of a profit of Rs116 million.
The decline in contribution from the associate was offset by higher other income, which surged 51 per cent to Rs1.03 billion.
Moreover, the financial cost came down by 36 per cent to Rs934 million as the company cleared up subsidy receivables from the government.
Volumes and margins head in opposite directions
The government had decided to cut gas supply from Sui network by 20 per cent, which will affect gas supply to FFBL as well.
Following this fall in gas supply the company kept production of its flagship product, DAP at maximum capacity but decided to reduce urea production.
Urea production eventually fell 16 per cent in 2010 to 524,356 tons because of a shortfall in gas supply and lower demand in July to August in lieu of the floods while production of the company’s flagship product di-ammonia phosphate (DAP) rose 22 per cent to 659,556 tons.
This fall in production was covered by healthier margins and a better cash position, commented BMA Capital analyst Omar Rafiq.
Core margin for DAP stood as high as $287 per ton compared with the average margin on urea of $150 per ton, said Rafiq.
Despite a rise in DAP prices during the year – from Rs2,000 per bag in December 2009 to Rs3,085 per bag in December 2010 – demand for DAP remained buoyant owing to significantly high support prices of wheat.
The fertiliser sector’s performance has definitely generated significant investor interest of late, said Rafiq. With the effects of the floods now fading, the agrarian economy is expected to recover which is a boon for local producers, concluded Rafiq.
Published in The Express Tribune, January 26th, 2011.