Fauji Fertiliser’s profit up 12 per cent on higher urea prices

KARACHI: Fauji Fertiliser Company reported an increase of 12 per cent in its net profit on the back of higher urea prices, analysts said.

The company’s net profit, in line with market expectations, increased to Rs5.1 billion during the first half of 2010 against Rs4.5 billion last year, according to a company statement sent to the Karachi Stock Exchange on Thursday.

Higher urea prices is the sole reason for the increase in profit, said JS Global Capital analyst Bilal Qamar.

Average ex-factory urea prices have jumped 16 per cent to Rs794 per 50kg bag during the first six months compared with Rs683 per 50kg bag last year.

Net sales of Fauji Fertiliser Company Limited (FFC) rose 18 per cent to Rs20 billion against Rs17 billion recorded in the same period last year. Lower production is estimated for the second quarter because of gas curtailment.

FFC also announced a second interim dividend of Rs3.5 per share, taking the cumulative dividend for 2010 to Rs7 per share.

Current local urea prices are still at a significant discount to the international urea prices of $288 per ton, said IGI Securities analyst Sarah Afridi.

The finance cost of the company decreased five per cent to Rs493 million in 2010 from Rs519 million in the same period last year.

Urea off-take stood at 2.46 million tons during the first five months of 2010 compared with 2.43 million tons during the same period last year, showing a nominal increase of about 1.2 per cent, according to data released by the National Fertiliser Development Authority.

FFC stock price dropped 0.23 per cent to close at Rs111.91 on Thursday. The stock price has increased 7.6 per cent in the last 12 months.

Gas supply and potential acquisition of Agritech are the two potential events in the second half of the year that could change FFC operations, analysts said.

The government has committed to restoring full gas supply to domestic fertiliser producers by July 31, however, analysts predict this may be delayed.

Potential acquisition of Agritech by FFC would be a key positive for the company as it will increase the production capacity by 22 per cent.

Net profit on quarterly basis rose 27 per cent to Rs2.37 billion from Rs1.86 billion last year.

Published in The Express Tribune, July 30^th, 2010.