Rio De Janeiro is not a place you will associate with a board meeting of a Pakistani company, but the Fauji Fertilizer Bin Qasim (FFBL) chose the Brazil capital to hold its board meeting for the announcement of its 9MCY12 financial results. The results were expectedly disappointing as the sole DAP producer in Pakistan faced the double whammy of lacklustre fertilizer off-take and lower contribution margins.
Although, the 3QCY12 earnings fell 59 percent year-on-year, DAP off-take in September should offer hope for the last quarter. With the Rabi season buying picking pace, FFBL is reported to have sold over 180,000 tons of DAP in September alone, which is more than the DAP off-take in the first 8MCY12. As a result, the fall in revenue was brought down to just two percent YoY in 3QCY12.
The uptick in DAP sales was largely attributable to shard reduction in DAP prices by the company management and it yielded the desired results. However, the urea performance was depressing, as the overall industry wide phenomenon struck FFBL as well. Urea sales have failed to pick the pace despite the Rabi season, due to heavy presence of cheap imported urea.
The gross profit margins faced stiff pressure during the period, going down to 22 percent, from 37 percent in the same period last year. The lower contribution of high margin urea in the sales mix contributed significantly to the decline in gross margins. The bottom line was further dented by a massive surge in financial charges which crossed Rs1.3 billion for the period, as the company’s short-term boring nearly doubled from the previous year.
Other income’s contribution too was subdued, as the JV investment in Morocco reported losses for the 2QCY12. The Morocco JV is believed to be back in profits and 4QCY12 could see a better contribution on this account. Going forward, DAP sales are expected to stay strong in the final quarter and margins are also expected to improve as Phosacid contract is expected to be settled at around $850/ton.
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FAUJI FERTILIZER BIN QASIM
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(Rs mn) 9MCY12 9MCY11 chg 3QCY12 3QCY11 chg
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Sales 29,208 36,321 -20% 17,917 18,304 -2%
Cost of sales 22,778 22,565 1% 13,919 11,477 21%
Gross profit 6,430 13,756 -53% 3,998 6,826 -41%
Gross margins 22% 38% -42% 22% 37% -40%
Finance cost 1,363 766 78% 454 383 18%
Other income 695 1,092 -36% 101 351 -71%
PAT 2,130 7,170 -70% 1,487 3,656 -59%
EPS (Rs) 2.28 7.68 1.59 3.91
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Source: KSE notice.
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