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Engro Fertiliser’s full-year profit jumps 80 percent

By Salman Siddiqui
February 09, 2016

KARACHI: Engro Fertilizer limited, the country's secend biggest fertilizer manufacture, said on Monday its full-year net profit surged 80 percent on year, backed by higher sales and availability of concessionary feed gas for its new plant. 

Engro Fertilizer's consolidated net profit jumped 80 percent in the year ended December 31, 2015 on the back of higher sales amid consistent supply of concessionary feed gas - a basic raw material - to its new production plant, analysts said on Monday.

The company reported a consolidated net profit of Rs14.81 billion in the year ended December 31, 2015 as compared to Rs8.20 billion booked in the previous year of 2014.

The earnings per share (basic) remained at Rs11.14 against Rs6.29 during the last year.

In the statement to the Pakistan Stock Exchange, the company also announced a final dividend of Rs3 a share, taking the total payout for the year to Rs6/share.

Analysts said the massive increase in profit is mainly due to availability of gas at a concessionary rate to the Enven fertiliser plant after March 2015.

"We attribute this increase in earnings to flow of concessionary gas to the company’s new plant," said analyst Muhammad Tahir Saeed at Topline Securities.

The company’s net sales increased 43 percent to Rs88.03billion.

“The net sales have improved owing to recent acquisition of DAP (Diammonium Phosphate) business of Engro Eximp," said Fahad Rauf at Taurus Securities.

“Despite lower margins on Diammonium Phosphate import and failure to pass on gas price hike in September 2015, gross margins have remained flat at 37 percent, thanks to commissioning of concessionary gas to Engro Fertilizer.”

The finance cost fell 30 percent to Rs4.62 billion, and also helped the net profits to grow.

The company’s cost of sales increased 43 percent to Rs55.72 billion.

Rauf said deleveraging coupled with monetary easing squeezed finance cost.

“An adjustment in taxation expenses after decline in corporate tax rate in the last budget resulted in two percentage points lower effective tax rates to 29 percent,”  he added.

Analysts said lower cash balances after Gass Infrastructure Development Cess payment, however, resulted in 30 percent lower interest income to Rs1.78 billion from Rs2.44 billion last year.

The fertilizer manufacture reported a net profit of Rs5.1 billion (earning per share at Rs3.9) in the last quarter ended December 31, 2015. Revenues, during the period, have jumped by 101 percent to Rs35.7 billion, thanks to new Diammonium Phosphate business and 17 percent increase in urea sales.

On quarter-on-quarter basis, sales revenue increased by 1.6-fold, mainly due to 62 percent rise in urea sales, in addition to 240,000 tons of DAP off-take which was 6.5-fold up.

"We attribute this outstanding growth in sales to hefty price discounts on urea bag and subsidy implementation on Diammonium Phosphate,” said Rauf.

“However, gross margins dipped to 32 percent owing to gas tariff hike and better sales of low margins Diammonium Phosphate."