By: Topline Securities Private Limited
Fauji Fertilizer Company (FFC) announced 4Q2015 unconsolidated earnings of Rs4.8bn (EPS Rs3.8) versus Rs5.2bn (EPS Rs4.1) in the same quarter last year. The result was above street consensus. FFC also declared a final cash dividend of Rs3.4/share, taking total dividend in 2015 at Rs11.9/share.
Revenue of FFC, in 4Q2015, increased by 17% YoY to Rs30.5bn owing to 21% YoY uptick in urea sales on the back of Rs120/bag discount offered by fertilizer companies.
To recall, feed/fuel gas prices were increased by Rs77/Rs112 effective from Sep 1, 2015. Urea manufacturers increased prices by Rs120/bag to pass-on the gas price hikes. Resultantly, urea off-take fell during 3Q2015 in anticipation of relief package from Govt. to support farmers.
Cost of sales increased by 32% YoY to Rs22.3bn in 4Q2015 mainly due to 63% YoY and 23% YoY hike in feed/fuel gas prices. Thus, gross profit fell by 12% to Rs8.2bn in 4Q2015 while gross margins declined by 857ppts to 27%.
Finance cost of the company surged by 111% YoY to Rs512mn in 4Q2015 owing to the increase in long-term borrowings made by the company to finance its new projects.
Other income of FFC increased by 48% to Rs1.8bn primarily due to higher dividend income from Fauji Fertilizer Bin Qasim (FFBL) and Askari Bank (AKBL).
Revenue surged by 102% QoQ due to 49% increase in volumetric urea off-take and price increase. Bottom-line earnings grew by 31% QoQ to Rs4.8bn (EPS Rs3.8).