Fatima Fertilizer Company Limited’s net profit decreased by 58 per cent during April-June quarter of 2016, according to a notification sent to the Pakistan Stock Exchange on Friday.
The company reported a profit of Rs 1.8 billion or Rs 0.88 per share for the quarter ended on June 30, down 58 per cent compared to Rs 4.4 billion or Rs 2.10 per share it earned during the same quarter of the previous year. The result also included a dividend of Rs 1.25 per share.
“The result was above our projected net profit of Rs 1.4 billion or earning per share of Rs 0.69, with the deviation coming from higher effective tax rate of 17 per cent against our estimate of 32 per cent.” said a report by the AKD Research.
As per Intermarket Intel’s analyst, “Our correspondence with the management suggests that the said tax expense is lower due to reversals in deferred tax on 1 per cent revision in corporate tax rate. Operating expenses also remained on the higher side up 37 per cent YoY, due to considerable amount of inventory,” the analyst added.
Following the announcement of the result, Fatima Fertilizers’ share price depreciated by Rs 0.18 or 0.53 per cent to Rs 33.75 compared to Rs 33.93 per share of the previous day. In total 287,000 shares of the company were traded on the result day.
The fertilizer company reported revenues of Rs 7.5 billion during the second quarter of 2016, a decrease of 23 per cent compared to Rs 9.8 billion it earned in sales during the quarter under review of last year.
“We saw 64 per cent quarter on quarter increase in earnings led by 43 per cent uptick in sales as off-take improved during the quarter under review,” said Waqas Imdad Ali, an analyst at AKD Research.
On a sequential basis the company posted a profit after tax of Rs 2.98 billion (earning per share of Rs 1.42) in the first half of 2016, down 57 per cent compared to profit of Rs 6.84 billion (earning per share of Rs 3.26) in the first half of last year.
According to AKD Research, 32 per cent year on year decline in revenues came on the back of sluggish trend in urea and CAN sales. The sales went down 65 per cent and 46 per cent this year and amounted for 74,000 tonnes and 128,000 tonnes of urea and CAN respectively.
Year on year, 10 points decline in gross margin was observed, due to weak domestic prices of urea, CAN and NP – down 3.5 per cent, 4.4 per cent and 16 per cent respectively. Along with that, dealer discounts of Rs 40-80 per bag offered to clear out sizable inventory levels also played a role in decreased earnings for the period under review, according to the report.