Fauji Fertilizer Company (FFC) has posted a net profit of Rs8.2 billion in the first half of the calendar year 2014 (1H CY14), down 14% compared to Rs9.5 billion in the same period of previous year.
Earnings per share (EPS) remained Rs6.41 in the 1HCY14 against an EPS of Rs7.46 in the same period previous year.
Despite the company clocking in its lowest offtake for 16 months in April 2014, the topline of FFC grew year-on-year by 5%.
However, increased cost of sales due to the company’s inability to pass on the incremental costs from augmentation in the Gas Infrastructure Development Cess (GIDC) squeezed the gross margins of the company to 39.8% in 1HCY14, down by 760 percentage points, an AKD research reported on Thursday.
In addition, a lower ‘other income’ on the back of an absent dividend from Fauji Fertilizer Bin Qasim Limited (FFBL), alongside higher financial charges resulted in a 14% year-on-year dip in the net earnings of the company.
Despite this, FFC declared a cash dividend of Rs3.4 per share during the second quarter of the calendar year 2014 (2QCY14), taking the 1HCY14 dividend payout ratio to nearly a 100%.
The revenue levels of the company posted a year-on-year growth of 5%. Other income, however, declined by 5% year-on-year to Rs1.81 billion due to an absence of dividend income from FFBL and slightly higher financial charges.
While the share price seems fairly valued at the moment, any change in the urea prices on the back of the removal of GIDC exemption from the old fertiliser plants are expected to rejuvenate the gross margins of the company, the report added.
Published in The Express Tribune, July 25th, 2014.
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