Fauji Fertiliser’s profit drops 18% to Rs5.5b

Fall comes due to lower urea prices, DAP volumes

KARACHI:

Fauji Fertiliser Company’s (FFC) profit contracted 18.3% to Rs5.5 billion in the quarter ended June 30, 2020 owing to a drop in urea prices coupled with decrease in di-ammonium phosphate (DAP) volumes.

According to a notice sent to the Pakistan Stock Exchange on Monday, the company had booked a profit of Rs6.7 billion in the corresponding period of previous year.

Earnings per share (EPS) of the fertiliser company dropped to Rs4.32 in April-June 2020 against Rs5.29 in the same quarter of last year.

The company announced interim cash dividend of Rs2.75 per share. It took the total cash dividend to Rs5.25 per share in the first half of 2020.

Sales of the company during the quarter under review came in at Rs25.2 billion against Rs27.6 billion in the same period of previous year, a fall of 8.7%.

Taurus Securities’ analyst Mustafa Zamin said in the April-June 2020 quarter, topline of the company fell 8% on a year-on-year basis due to lower fertiliser prices as well as low DAP volumes, which resulted in a decrease of two percentage points in gross margins.

Finance cost of the company decreased 22.8% to Rs640.6 million compared to Rs829.4 million in the same quarter of previous year.

Other income shrank 25% to Rs1.2 billion in the April-June 2020 quarter. The company had reported other income of Rs1.6 billion in the corresponding quarter of previous year.

“Finance cost fell due to lower running finance requirement,” he said. “Furthermore, the bottom line was also supported by higher other income.

Topline Securities’ analyst Sunny Kumar said the company’s revenue declined during the April-June quarter due to 57% reduction in DAP offtake on a year-on-year basis to 26,000 tons.

He added that DAP sales had been recorded at 61,000 tons in the second quarter of 2019.

“However, urea sales were up 9% year-on-year to 681,000 tons compared to 623,000 tons last year,” he said. “Gross margins declined 1.8 percentage points year-on-year, which were well in line with our estimate.”

Other expenses declined 52% in the quarter under review due to absence of one-off impairment loss booked on Fauji Fresh n Freeze Limited of Rs1.1 billion, said Kumar.

The effective tax rate stood at 28% in the April-June quarter versus 27% in the same quarter of 2019.

On a half yearly basis, the company recorded a profit of Rs9.8 billion, up 14% compared with Rs8.6 billion in the first six months of 2019.

Published in The Express Tribune, July 28^th, 2020.

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