Fatima Fertilizer Company’s, which is part of one of the leading conglomerates of Pakistan Arif Habib Corporation, net earnings grew by nearly a third and revenues by a fourth in the first half of 2013.
Profit for the fertiliser producer jumped to Rs3.4 billion or Rs1.6 per share, up 31% from Rs2.6 billion or Rs1.24 per share in the first half of the calendar year.
During the period, Fatima Fertilizer reported revenue of Rs15.8 billion against Rs12.6 billion in the same period of previous year, up 25%.
Topline Securities reported that higher volumetric variance on the back of favourable agricultural environment to be the main driving force behind the gain.
Although, the company’s gross profits rose 8% to Rs8.8 billion, gross margins remained depressed during the semi-annual period.
Margins for the fertiliser producer fell 9 percentage points to 56%. Analysts believe margins were suppressed due to 7% rupee depreciation against the dollar as company’s cost of input (feed gas) is locked at $0.70 per million British thermal unit (mmbtu).
Topline Securities report also said that lower product prices in first half of 2013 were also to blame for squeezing margins.
In addition to trickle down impact of higher gross profit growth, the company’s bottom-line was further bolstered by Rs851million or 28% due to reduction in finance cost to Rs2.1 billion. However, 147% or Rs335 million increase in other operating expenses confined profitability growth.
On a quarterly basis, Fatima Fertilizer Company’s bottom-line shrunk 22% or Rs883 million to Rs1.7 billion, compared to a profit of Rs2.2 billion in the same quarter of previous year. In comparison to the first quarter of 2013, the company’s bottom-line growth remained static.
Summit Capital on Wednesday said that better performance of the company in the half-year period was due to better sales as off-take of calcium ammonium nitrate (CAN) and nitrogen phosphorous (NP) surged apart from a drop in distribution expenses and finance cost and a boost in other income.
On a semi-annual basis, the fertiliser producer reported 25% growth in monetary sales to Rs15.8 billion in the first half of 2013 owing to strong off-take of CAN and NP by 25% and 70% respectively.
On the other hand, urea off-take remained lacklustre as total off-take dropped 10% to 153,000 tons.
NP, also known as nitrophos, and CAN are cheaper substitutes for diammonium phosphate (DAP) and urea, therefore their off-take turned out to be exceptionally higher. Summit Capital says that it expects urea, CAN and NP off-take to pick up further in the coming months as the Kharif season’s ideal sowing time is just around the corner.
In addition, persistent gas supply (feed stock gas) of 110mmcfd under the preferential rate of $0.70 per mmbtu for ten years is the factor that ensures that the company will continue to perform well in terms of production, while continuing to cut production costs due to availability of subsidised feed stock gas.
Published in The Express Tribune, August 8th, 2013.
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