It seems that Fauji Fertilizers is struggling to retain its position in the industry as the company posted a net income of PKR 2.4 billion for the quarter ended June 30, 2017. The company experienced a hefty drop in its profit by 14% compared with PKR 2.79 billion during the similar timeframe of preceding year. The result was in-line with the market expectations.
Fauji Fertilizers, which is one of the leading fertilizer manufacturers in the country, has declared an interim dividend of PKR 1 per share, according to a notice that the company sent to the Pakistan Stock Exchange (PSX). Nevertheless, the interim dividend was below expectations.
The company also experienced a drop in its earnings per share (EPS) to PKR 1.90 from an EPS of PKR 2.20 in the period under review. The news has deteriorated investor’s confidence as the share price of the company closed at PKR 80.27, which is 4.5% lower on Monday.
The company experienced a surge in its sales by 14% year-on-year in the second quarter of 2017 due to 21% and 196% increase in Urea and Di-ammonium Phosphate (DAP) off-take to 709,000 and 45,000 tons, respectively.
Nevertheless, margins were under pressure as Urea/DAP sales weighted average prices have fallen 23% and 12% to Rs1,337 and Rs2,589 per bag, respectively. Gross margins contracted 12 percentage points year-on-year to 21%.
As if this isn’t enough, the company’s administration and distribution expenses rose 55% year-on-year (YoY) to PKR 2.6 billion. Adding to that, other income demonstrated an upward trend as it surged by 78% YoY to PKR 2.8 billion because of the higher subsidy claims alongside higher short-term investments.