Corporate results: Fauji Fertilizer, UBL profits soar

Fauji Fertilizer profits and UBL profits jumped in the first part of the year.

UBL beats market expectations

United Bank Limited’s profits beat market expectations by showing an increase of 21 per cent to Rs6.7 billion during January to June 2011.

The growth was primarily driven by rising interest and non-funded income, said JS Global Capital analyst Mustufa Bilwani.

The board of directors in a meeting held in London also declared an interim dividend of Rs1.5 per share, according to a notice sent to the Karachi Stock Exchange on Friday.

Higher interbank lending rate in the first half of the year kept interest income northbound, added Bilwani. Net interest income surged by 11 per cent to Rs18.4 billion on a yearly basis

Non-interest income also rose 25 per cent to Rs5.9 billion in the period under review, driven by higher foreign currency and other income.

However, foreign currencies declined marginally by 1.5 per cent to Rs326 million in the second quarter, as gains on dealing in foreign currency normalised following an impressive first quarter.

The UBL stock price went up Rs0.56 to close at Rs60.69 at the Karachi Stock Exchange as the result was in line with expectations.

Loan losses likely to remain a concern

UBL’s non-performing loans have gathered pace since the second half of 2010, rising by a cumulative Rs11.2 billion to reach 14.3% of gross loans as of March 2011, according to JS Global Capital. Although this includes some loans under the government guarantee which do not require provisioning, loan losses remained on the higher end, added Bilwani. Provisions against bad loans swelled 29 per cent to Rs4.39 billion in the first half of 2010.

Higher urea prices do the trick

Fauji Fertilizer Company profits jumped 61 per cent to Rs8.19 billion in the first half of 2011 on the back of higher fertiliser prices and other income.

Double digit growth in fertiliser urea prices supported the company’s revenue despite a drop in sales by five per cent to 1.17 million tons, said IGI Securities analyst Sarah Afridi. FFC’s revenues surged by 21 per cent to Rs24 billion in the period under review on a yearly basis.

Alongside the result, the company also announced an interim cash dividend of Rs4.75 per share, taking the half year payout to massive Rs9.25 per share.

Average urea prices recorded 32 per cent increase to average Rs1,045 per 50kg bag in the period under review. Resultantly, gross and operating margins surged to 59 per cent and 51 per cent during January to June 2011, respectively, from 44 per cent and 35 per cent posted in the corresponding period last year.

Other income of the company surged whopping 88 per cent to Rs2.88 billion on the back of dividend income from subsidiary Fauji Fertiliser Bin Qasim. The dividend amounted to Rs4.75 per share in the period under review compared with Rs2.75 per share booked in first half of 2010. Cost of the sales declined by five per cent to Rs10.53 billion against Rs11.12 billion owning to seven per cent lower production of urea due to gas curtailment.





Published in The Express Tribune, July 30^th, 2011.