Fauji Fertilizer Company (PSX: FFC), one of the biggest fertiliser company and conglomerate in Pakistan posted it results for the first quarter of the year 2017. The company in-line with market expectations and sluggish urea-offtake reported unconsolidated earnings of Rs1.72, down 20 percent compared to the same period last year. The result was accompanied with a cash dividend of Rs1.50.
On the bourse, the stock of the company has had rough ride over the past few months. From making its high of RS121, the share price of FFC went down as low Rs94 recently. The stock has slightly recovered recently. Upon the announcement of the first quarter result, there was no spark in the share price and the stock closed at Rs98.53 down 2.6 percent.
The margins of the company also took a hit as compared to the previous year. The gross margins declined by 3 percent while net margin also declined by 3 percent. The company received lower than expected income from its subsidiaries which impact its bottom line. With the announcement of the result, the director approved acquisition of 30 percent stake in Thar Energy Limited (TEL). This stake was offered to FFC by Hub Power (HUBC) few months ago. Analysts are of the view that this acquisition will have a Rs5 positive earnings impact on FFC going forward.
Looking forward, the situation is still blurry in the fertiliser industry. Farmers and urea manufacturers are both relying on government subsidy to get their work done. Dependence on the government would keep the earnings volatile and investors would also be wary of investing in this industry. On the other hand, with investments in other industries such as power with TEL would diversify FFC earnings going forward and keep investors interested.
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