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Government subsidies, sales help FFBL to higher full-year profit 

By Salman Siddiqui
January 27, 2016

KARACHI: Fauji Fertilizer Bin Qasim Limited (FFBL) reported an 18 percent rise in full-year consolidated profit on Tuesday, boosted by higher sales and subsidies from the government on diammonium phosphate trade, analysts said.

The company said net profit rose to Rs5.17 billion for the year ended December 31, 2015 up from Rs4.39 billion in the previous year. “The board of directors recommended final cash dividend at Rs3.05/share for the shareholders, whose names appear in the register of the members as on February 29, 2016,” the company said in a statement issued to Pakistan Stock Exchange.

The earnings per share remained at Rs5.54 from Rs4.71 last year, according to the firm's consolidated profit/loss accounts. The firm sold fertilizers worth of Rs52.18 billion during the year under review, which was 5.54 percent higher than Rs49.44 billion last year.

Tahir Abbas, an analyst at Arif Habib Limited said the sales rose mainly on account of seven percent uptick in DAP and 28 percent urea offtake. The other income jumped six-and-half folds to Rs5.12 billion from Rs793.84 billion in 2014. "Other income surged...amid recognition of the DAP subsidy under this head," Abbas said.

Similarly, FFBL's share of profit of joint venture and associates (net) soared two-and-half folds to Rs1.92 billion from Rs745.29 million last year.

However, finance cost also increased 42 percent to Rs1.86 billion from Rs1.31 billion in the last year. The financial charges surged "due to new debt financing of future projects along with higher working capital requirement," Abbas said.

The cost of sales surged by 8.61 percentage points to 86.17 percent (or Rs44.96 billion) of sales from 77.56 percent (or 38.35 billion) in the previous year. And the selling and distribution expenses increased 15 percent to Rs3.81 billion from Rs3.31 billion.

FFBL also booked effective tax rate of 25 percent during the current year, as opposed to 31 percent last year, Abbas said.

While gross margins shrank to 14 percent compared to 22 percent attained during the last year due to subsidized DAP sales chained with 12 percent year-on-year contraction in DAP primary margins to $239/ton, he added.

Topline Securities in its report said as per latest numbers of National Fertilizer Development Corporation (NFDC), the company sold 121,000 tons of urea and 431,000 tons of DAP in the fourth quarter of 2015 compared to 57,000 tons of urea and 307,000 tons of DAP in the same period last year.

“Significant jump in other income of Rs3.9 billion in the 4Q2015 from Rs614 million during same period last year was a major surprise,” it added. “As per our discussion with the management, this surge in other income was primarily due to Rs500/bag subsidy provided on DAP by the government in ‘Kissan Package’ to support farmers in September 2015.”