Corporate results: Fatima Fertilizer announces Rs3.4b profit

Growth in earnings on account of increase in prices.


Our Correspondent July 28, 2014

KARACHI:


Fatima Fertilizer Company, part of the country’s leading conglomerate Arif Habib Corporation, announced a net profit of Rs3.4 billion during the first half of calendar year 2014 (1HCY14), up just 1% compared to Rs3.36 billion in the same period previous year.


Earnings per share (EPS) of the company grew to Rs1.62 compared to Rs1.60 in the period under review. The earnings beat street estimates due to higher than anticipated fertiliser off-take, Global Research reported on Monday. The company fertiliser off-take registered a decline of 8% year on year during 1HCY14, against expectation of 19% year on year, according to National Fertilizer Development Centre (NFDC),



The growth in earnings were on account of an increase in fertiliser prices (Urea/Nitro Phosphate, NP/Calcium Ammonium Nitrate, CAN) by an average 3% year on year, whereas increase in the cost of producing fertiliser was limited because of fixed feedstock prices.

Company’s gross margins improved 40 basis points (bps) to 56.1% during the period. For the 2QCY14, the company’s earnings were registered at Rs1.76 billion or an EPS of Rs0.84, showing an increase of 5% year on year (8% quarter on quarter) against Rs1.68 billion or EPS of Rs0.80 booked during 2QCY13.

During 1HCY14, Fatima’s revenue contracted 1% year on year to Rs15.61 billion, as the company’s fertiliser sales fell 8% year on year during the period. Potential decline, however, slowed by an increase in fertiliser prices by 3% during the period.

As per NFDC, urea and CAN sales declined by 14% year on year and 11% year on year to 131,000 tons and 203,000 tons, respectively. The decline in nitrogen (including Urea and CAN) based fertiliser sales can be attributed to stormy and wet conditions in major areas, resulting in delayed sowing activities, limiting the company’s sales during the period.

Moreover, higher availability of urea (both domestic and imported) in the local market also contributed towards restricting fertiliser off-take for the company. The company’s NP sales increased by 4% year on year and clocked in at 155,000 metric ton.

For 2QCY14, the company’s revenue remained flat at Rs8.24 billion because of decline in urea sales by 18% year on year during the period.

The company’s distribution cost posted a decline of 3% year on year to Rs628 million because of a decline in fertiliser off-take. However, on a quarter on quarter basis, distribution cost registered a decline of 10% year on year (9% quarter on quarter) during 2Q CY14.

Fatima’s finance cost was lower by 5% year on year at Rs2.02 billion during 1H CY14. Refinancing of long-term debt at lower rates by the company during the last year was the major reason for this decline.

Published in The Express Tribune, July 29th,  2014.

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