Corporate results: Fauji Fertilizer Bin Qasim hit bad by gas shortfall

Fertiliser manufacturer fails to declare a dividend for the first time in almost three years.

KARACHI:

The cracks caused by the massive gas shortfall in the country have finally started to show, Fauji Fertilizer Bin Qasim witnessed its worst quarter in more than three years during January to March 2011.

FFBL, one of the country’s largest fertiliser manufacturers, posted a net loss of Rs387 million due to decreased production in the past three months compared with a profit Rs1.6 billion in the same period last year.

The company’s plant failed to produce a single bag of urea – the highest selling fertiliser – in January and February on the back of winter gas shutdown, latest data of National Fertiliser Development Centre shows. Production of fertiliser di-ammonia phosphate (DAP) also stood at a standstill in February.

Overall, FFBL urea sales are expected to plummet by 87% and DAP by 73% during January to March 2011, according to AKD Securities.

Net revenue dropped by 76% to Rs1.93 billion in the first quarter of 2012.

This is also the first time in eleven quarters the company has failed to announce any dividend with its results.

Local fertiliser manufacturers came second best to their imported counterparts during the period under review as price of imported fertiliser stood much lower due to the partial payment made by the government for them in the form of subsidies.

The government’s reliance on imports has eased the demand of the commodity for now, however, this will have a huge impact as far as the country’s fiscal management is concerned as the fertiliser import bill reached $848 million during the first seven months of the current financial year against a total of $300 million during same period last year.

The only positive in the result was that the company’s other income from its joint venture Pakistan Maroc Phosphore increased to Rs192 million compared with Rs3 million last year.

Financial charges rose by 185% to Rs306 million on account of rise in short-term debt.

It is virtually impossible for the company to maintain profitability levels in the range of those seen in the preceding year as DAP prices have declined in the international market substantially, said Summit Capital analyst Sarfraz Abbasi. Imported DAP prices are lower than DAP prices of FFBL, the only local manufacturer of the product, added Abbasi. The urea business of the company will not provide substantial support due to persistent gas curtailment and decline in prices in international market, said Abbasi.

Published in The Express Tribune, April 18^th, 2012.