Fauji Fertilizer’s profit leaps 69% to Rs5.4b

Gross margins improve due to higher urea sales, prices

KARACHI: Fauji Fertilizer Company’s (FFC) profit soared 69% to Rs5.4 billion in the first quarter of current financial year 2018-19 compared to Rs3.2 billion in the corresponding period of previous year.

The higher profit translated into a substantial increase in the company’s earnings per share which came in at Rs4.27 as opposed to Rs2.53 in the same quarter of last year.

Gross margins improved 12 percentage points to 32% while finance cost fell 35%.

Topline Securities’ analyst Shankar Talreja attributed the improved gross margins to increase in urea sales amid higher prices, which had gone up 21% year-on-year. He added that lower discounts also contributed to the rise.

FFC’s profit from associates and joint ventures increased 22% year-on-year to Rs1.4 billion amid a remarkable performance by Fauji Fertilizer Bin Qasim in which FFC had nearly 50% ownership. Fauji Fertilizer Bin Qasim posted a growth of 104% in its profit to Rs1.44 billion.

However, Askari Bank, in which FFC had 43.15% ownership, recorded a year-on-year decline of 13% in its earnings.

According to the research analyst, key risks to the company include decline in international urea prices, slower-than-expected urea sales and a poor crop season. The decrease in international urea prices produces a substitution effect for the local companies.

Published in The Express Tribune, October 27^th, 2018.

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