Engro Fertilisers' profit soars 56%, amounts to Rs17.4b

Increase comes on back of rise in net sales of the company

KARACHI: Engro Fertilisers' profit soared 56% to Rs17.4 billion in the year ended December 2018.

The firm had reported a profit of Rs11.15 billion in 2017, according to a notice sent to the Pakistan Stock Exchange (PSX) on Friday.

Earnings per share (EPS) of the company rose to Rs13.04 in 2018 against Rs8.36 in the preceding year.

The increase in earnings came in the wake of higher net sales, which widened from Rs77 billion in 2017 to Rs109 billion, an expansion of 42%.

"Growth of the company is organic and margins are better than last year," said BMA Research analyst Faizul Sultan. "Overall, the result is in line with market expectations."



However, he added that the dividend paid by the company was below expectations as the market had expected a payout of Rs14.

Along with better offtake, net sales of the company jumped mainly on the back of a hike in urea prices.

During the year, fertiliser companies fixed urea bag prices at Rs1,400 as the present government, in its first mini-budget, withdrew the cash subsidy of Rs100 per bag.

Subsequently, the demand for urea also climbed owing to demand-supply gap, which provided an opportunity to the companies to raise prices.

Currently, urea prices are touching Rs1,800 per bag in the market.

"The company also made a fortune in the last quarter due to Rabi season, in which wheat and sugar crops are sown," said Sherman Securities analyst Saqib Hussain.

In 2016, production of the sector advanced heavily, while domestic dispatches remained low, therefore, inventories of the companies piled up to 1.7 million tons in May 2017.

Resultantly, the fertiliser sector requested the government to permit its export.



On one hand, the government approved the export, and on the other hand, local demand also swelled during that period providing a golden opportunity to producers.

Due to increased sales, cost of sales of the company jumped to Rs74 billion from Rs54 billion in year 2017.

The subsidiary of Engro Corporation posted a gross profit of Rs35 billion compared to Rs23 billion in 2017.

Selling and distribution expenses of the entity elevated by Rs763 million in the period under review.

Finance cost of the fertiliser company declined 23% in the year 2018.

Engro Foods

Meanwhile, Engro Foods Limited posted a profit of Rs63.7 million for year ending December 2018, down 83%, compared to a profit of Rs379.2 million in the in the preceding year.

The company posted EPS of Rs0.08 against Rs0.49 in 2017.

The company booked low profits due to higher taxes of Rs234 million, which the company paid against refund of Rs183 million last year, 2017.

The company's bottom-line of fourth quarter of 2018 was reported in the red zone with a loss of Rs449 million, incurring loss per share (LPS) Rs0.59 compared to a loss of Rs3 million reported during the same period of 2017, said JS Global analyst Amreen Soorani.

While fourth quarter sales witnessed 13% year on year growth, gross margins during the same period declined by 470 basis points year on year to 9%. This led to operating losses during the quarter. Moreover, 54% year on year rise in finance cost further burdened the bottom-line, resulting in loss before tax of Rs557million.