Fatima Fertilizer goes strong

Not being connected to the SNGPL network is a blessing for fertilizer manufactures in Pakistan. Fatima Fertilizer, the countrys leading CAN and NP producer and a major urea manufacturer reaped the benefits of comparatively better feedstock gas supply during the 1QCY13. This coupled with other favourable factors helped Fatima Fertilizer quadruple its profits year-on-year.
Healthy top line growth came on the back of strong product sales as improved farmers economy and lower urea prices created healthy demand.
During the quarter, local urea price stayed close to imported urea, which resulted in significantly higher sales. A very low urea inventory level due to lower imports also ensured decent volumetric sales for local manufacturers.
The gross profit margins, however, dwindled significantly mainly on account of sharp reduction in urea prices. Rupee depreciation against the greenback also played a role as Fatimas feedstock gas price is fixed at $0.7/mmbtu. That said, higher volumetric sales more than made up for the loss in gross profit margins.
Lower interest rate scenario, repayment of around Rs 6 billion long-term debt and refinancing of Rs10 billion loan at lower mark-up all combined to slash Fatimas finance cost, making a healthy contribution towards its bottom line.
Fatimas CAN and NP fertilizer business has been performing exceptionally well. As the market expects an increase in phosphate fertilizer off-take, presence of NP and CAN in Fatimas armory bodes well for its future.
What Fatimas strong performance also tells, is that if adequate gas is supplied to fertilizer plants, they can still make healthy profits without raising product prices.

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FATIMA FERTILIZER

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(Rs mn)           1QCY13    1QCY12       chg

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Sales              7,531     3,347      125%

Cost of sales      3,090       962      221%

Gross profit       4,441     2,385       86%

Gross margin        59.0%     71.3%

Finance cost       1,030     1,453      -29%

PAT                1,681       432      289%

EPS (Rs)            0.80      0.14

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Source: KSE notice

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