Corporate results: Fatima Fertilizer rounds off its first year in profit

Firm manages to sell its entire CAN production, a product argued to be used in making bombs across the border.

KARACHI: Fatima Fertilizer has managed to post a profit of Rs4.12 billion in 2011 – its first year of operation – by taking advantage of the massively low gas price offered for being a new player in the industry.

The manufacturer falls under the new fertiliser policy with gas price fixed at subsidised $0.7 per mmbtu, which is nearly 80% lower than price of $3.5 per mmbtu for old plants, says an Elixir Securities research note.

The company’s major fertilisers include the widely used urea along with non-traditional products like calcium ammonium nitrate (CAN) and Nitro-Phosphate (NP). As part of its marketing strategy, the non-traditional products are offered at a discount to attract farmers to use the product instead of mainstream products urea and di-ammonia phosphate.

Persistent urea shortage throughout last year coupled with its higher prices helped Fatima Fertilizer to sell its entire CAN production with total sales standing at 194,000 tons.

Meanwhile, the company also had an upper hand when it came to urea production as it was immune to the Gas Infrastructure Development Cess (GIDC) imposed by the government which led to an increase in urea prices by Rs210 per bag at the start of the year. Urea sales stood at 222,000 tons during the year.

Low farmer awareness about fertiliser NP kept its sales at 102,000 tons, quite lower than its total capacity. In the final quarter of the year October to December 2011, overall sales eased 1% on a quarterly basis, primarily due to NP which was down by 28%, adds the research note.

This all added up and took net sales to Rs14.8 billion during the first year of commercial production, according to a notice sent to the Karachi Stock Exchange on Monday.

The result was also accompanied with a surprised Rs1.5 per share cash dividend to the general public, however, the sponsors have offered to the delay the payment of dividend to them until the company pays back principal amount of Rs10 billion to lenders.

Financial expenses stood at Rs3billion which diluted the impact of net sales as the company had total debt of Rs38 billion as of September 2011.

Fatima’s receives gas supply from the Mari network which faces less gas curtailment than the Sui network.

The three fertiliser manufacturers on the Sui Northern Gas Pipeline Limited network faced immense disruption in supply due to shortage of the fuel. Dawood Hercules Fertilizers was shut down for 192 days, Engro’s Enven plant for 190 days, Agritech for 173 days and Pak-Arab for 144 days during 2011.

With lower gas curtailment and no major impact of gas cess, Fatima remains the major beneficiary of hike in urea prices, said Topline Securities analyst Farhan Mahmood.

Being in its first year of production, the company did manage to catch the attention of more people across the globe that it expected following reports that CAN produced by the company might be used to make bombs in Afghanistan. Hence, the company Under US directives changed the packing of the bags containing the fertiliser so it can be easily identified at the border while it is also in the process of changing its seed colour.

Published in The Express Tribune, March 13^th, 2012.