Fauji Fertiliser profits expected to triple in first half of 2010

Fauji Fertiliser Bin Qasim Limited (FFBL) may see its net profit more than triple in the first half of 2010 after core margins for di-ammonium phosphate (DAP) surged, according to analysts.

FFBL will report Rs1,632 million in net profit for the first six months of the year against Rs498 million in the same period last year, according to BMA Capital.

Core margins for DAP for the current year are likely to be beneficial for the company, wrote BMA Capital analyst Omar Rafiq in his research report on Friday.

DAP prices have averaged over Rs2,600 per bag during the first half of the year compared with Rs2,000 per bag last year.

This increasing topline effect is likely to bode well for the company in terms of margin increase, said Rafiq.

The company is expected to report a net profit of Rs823 million for the second quarter of 2010, recording a growth of 70 per cent.

The company is expected to pay out a dividend of Rs0.60 per share, taking the first half payout to Rs1.1 per share.

High margins for carried inventory

The company is expected to have sold 79,900 tons of DAP and 146,000 tons of urea during the second quarter in comparison to 173,000 tons of DAP and 167,000 tons of urea over the corresponding period last year, said Rafiq.

Large inventory of DAP lying with the company has become one of the features for the company as there are differences in the cost at which they are carried, added Rafiq. The 173,000 tons inventory of 2009 was carried at a cost of Rs1,600 per bag which at the then prevailing rates was yielding a core margin of merely $80 per ton but now the same inventory will yield a core margin of $210 per ton. This significant difference is likely to create additional earnings, informed Rafiq.

Published in The Express Tribune, July 17^th, 2010.