By: IGI Finex Securities Limited
Fauji Fertilizer Company Limited: posts 1QCY15 earnings of PKR 5.91bn (EPS: PKR 4.64); a 30%YoY jump!: FFC announced 1QCY15 PAT of PKR 5.91bn (EPS: PKR 4.64), up by 30%YoY against PKR 4.55bn (EPS: PKR 3.58) in the same period last year. On sequential basis the company posted earnings of PKR 5.21bn (EPS: PKR 4.09), an 8%QoQ increase. Result were accompanied with dividend of PKR 3.94/share. Increased earnings were a primary function of 1) 9% improvement in urea offtake to 625kT during the quarter as against 574kT in 1QCY14 and 2) 59%YoY increase in dividend income from AKBL and interest income on GIDC accruals. However, margins of the company dropped by 200bps to 41% as a result of restricted GIDC pass through during the period coupled with trading in low margin phosphate fertilizer (DAP, MOP). FFC’s revenue accreted by 16%YoY to PKR 20.41bn as the company offloaded 625kT of urea and 19kT of imorted phosphates respectively.
Dividend income saves the day: Dividend income from AKBL (PKR 1.0/share) and income on GIDC accruals (PKR 29.37bn as at Mar’15) provided impetus to the bottomline to the tune of PKR 2.44bn; a 59%YoY jump. These investments are expected to play a pivotal role in CY15 with dividend from these segments to dominate the limelight. On a sequential basis, earnings grew by 13%QoQ from PKR 5.21bn (EPS: PKR 4.09) in 4QCY14.
GIDC makes a come back!: Gas Infrastructure Development Cess Bill 2014 was passed by the National Assembly on Tuesday and gained further approval by the Senate, inviting severe criticism in its wake. The bill is to be passed through the Presidential Ordinance for imposition, which seems preordained at best. The cess is to be imposed on all fertilizer manufacturers operating on Fertilizer Policy 2001 which is expected to accumulate PKR 100bn/annum however; we see limited impact on FFC’s earnings as a result of the ordinance, seeing as the company started booking provisions for the payment in CY13. Consequently, the company is likely to witness decline in income on GIDC accruals going forward.