Corporate results: Fauji Fertilizer Company, the shining armour of the industry

Company posts a profit, the only one expected to do so among all fertiliser manufacturers.

KARACHI: Fauji Fertilizer Company sustained earnings near the same level as last year and is expected to be the only company in the industry to make a profit in the first three months of 2012.

The fertiliser manufacturer’s profits declined 6% to Rs3.88 billion during January to March 2012 against Rs4.11 billion, according to a notice sent to the Karachi Stock Exchange on Thursday.

The company being on the Mari gas network faced a nominal gas shortfall of 4% while fellow peers including Engro’s Enven plant and Dawood Hercules faced a shortfall of 50% in 2011. Fauji Fertilizer Bin Qasim in its announcement two days earlier posted a net loss of Rs387 million following closure of its urea plant for two consecutive months amid massive gas curtailment.

Despite decline in sales, revenues managed to crawl up 3% to Rs11.43 billion amid 56% spike in urea prices. The company’s fertiliser DAP trading activity is also expected to have added Rs1 billion to the firm’s revenues, said IGI Securities Assistant Vice President Research Farhan Bashir Khan.

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.

Besides announcement of financial results, the board of directors in its meeting held on Thursday in Rawalpindi also approved purchase of 9.99% equity stake in Agritech Limited. The company also announced cash dividend of Rs3 per share.

Other income surged by 9% on the back of higher income realised on cash and short-term investments.

Moreover, distribution cost increased by a massive 17% to Rs1.34 billion mainly due to higher transportation freights and charges. In addition to this, increase in financial cost by 21% to Rs278 million was another factor that restricted growth in the earnings.

Local urea priced at Rs1,790 per bag compared with import supplies at Rs1,600 per bag will put pricing power pressure on local producers who have been increasing prices to mitigate production losses owing to gas curtailment and gas load-shedding.