By: Spectrum Securities (Private) Limited
Today FFBL released its financial result for CY15 wherein it posted PAT of PKR4.06bn (EPS of PKR 4.35 per share) for the year 2015 with growth of 1%YoY. In the last quarter (4QCY15) FFBL PAT settled at PKR3.1bn (EPS PKR 3.34/share) revealing increase of 45%YoY due to major share from other income in the said quarter.
CY15: DAP subsidy improved business profitability Topline propelled by 6%YoY to PKR52bn during CY15 compared to PKR49bn in CY14 due to rise in DAP off-take amid subsidy on DAP under Kissan package. However sales prices fell due to the same reason of DAP subsidy which resultantly put pressure on gross margins. Moreover hike in gas price and meager increase in phos acid prices also dented gross margin which shrunk by 400bps inCY15. Other income rose due to proceeds of government grant for DAP subsidy, around ~PKR4bn of subsidy is received reflecting into an EPS impact of ~PKR3/ share. According to the news quoting an official of Ministry of Finance who confirmed that the DAP subsidy amounting to PKR10bn was transferred to the SBP for payment to fertilizer companies. Financing costs surged due to pick up in use of credit lines as short term borrowings increased for working capital requirements amid piling up of inventory in third quarter of CY15. Secondly interest cost of long term borrowings which were made for funding new projects also reflected in the said period. Effective tax rate reduced to 25%YoY due to deferred tax liability downward adjustment.
Result Review in a nutshell In a nutshell net margin maintained during CY15 despite falling gross margins and growth in finance costs as increase in DAP off-take, rise in other income and reduction in taxation expense held the net profitability margin.