Corporate results: Fatima Fertilizer performs better than peers

Manufacturer keeps gross margins intact despite falling sales.

KARACHI:

Fatima Fertilizer Company – the new player on the block – has managed to stay in the green zone at a time when most of the old guns could not amid gloomy days for the industry.

The manufacturer’s net profit stood at Rs437.6 million during January to March 2012, down by 82% on a quarterly basis. The financial report can not be compared with the same period last year as the company had not started commercial operations then.

On a positive note, gross margins remained intact at 71.3% during the quarter against 71.5% of the preceding quarter. The company is provided protection by getting gas around 80% cheaper than rest of the industry for being a new player in the industry, giving it a massive edge over its competitors. The two industry giants Engro Fertilizers and Fauji Fertilizer Bin Qasim posted a loss during the period review.

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

The decline is mainly attributable to a drop of 59% on a quarterly basis in local sales, said AKD Securities analyst Naeem Javid.

The government’s reliance on imports has eased the demand of the commodity for now, however, this will hit the country’s fiscal management hard 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 company also managed to curtail selling and administration expenses to Rs248.9 million, down by 27%, in conjunction with lower product sales.

Moreover, financial charges also rose by 16% to Rs1.45 billion owing to significant inventory build up, said Javid.

Fatima Fertilizer baffled analysts who estimated the bottom-line to be around Rs100 million lower than the actual figure. The better than expected jumped the stock price by Rs0.62 to Rs23.25 at the Karachi Stock Exchange on a day when the overall market closed in the red.

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.

Nishat Chunian profits nosedive along with cotton prices

Nishat Chunian profits nosedived 76% to Rs299 million in the first nine months of the current financial year against the preceding period’s Rs1.28 billion amid drop in sales and its margins.

Net sales fell by 14% owing to decline in cotton prices as the company accumulated inventory last season at a steep price, said Invest Capital analyst Abdul Azeem. Cotton prices have fallen by 51% in the first quarter of 2012 against the same period last year.

Dividend income from Nishat Chunian Power support the melt down in gross profit as other income almost doubled to Rs563 million during July 2011 to March 2012.

In addition to this, 6% fall in financial charges also supported the bottom-line for any further decline.

Published in The Express Tribune, May 1^st, 2012.