Monday blues? Not for the Fauji Fertilizer Companys (FFC) shareholders as the leading urea manufacturer delighted its shareholders with full-year dividends of Rs.20 per share; an astonishing 50 percent bonus issue and last but not least, a more than 100 percent rise in the yearly income. The CY11 financial results of FFC were nothing short of a record galore, as the Company continued to smash record profits, quarter after quarter. Such is the magnitude of improvement that FFC nearly ended up paying roughly the same amount of tax in CY11 as its total profits a year ago. The 4QCY11 performance stood out as FFC raked up Rs.8.6 billion in profits-an amount that sued to be the yearly profit just a couple of years ago. It is astonishing that the stupendous rise in income has not come on the back of organic growth as the production capacity remains what it was five years back. It is just one that dictates the fate at FFC-and that is-price. FFC produced and sold 3 percent lesser urea during CY11 as compared to the corresponding period last year, yet the top line showed sizeable growth. Urea prices skyrocketed during CY11, registering a 70 percent year-on-year increase. Bulk of it owed to gas supply disruptions, mainly from Engros new urea plant. FFC, turned out as the major beneficiary as it faced very limited gas supply disruption, courtesy of receiving gas from the Mari network. The benefit it yielded from the price increase is evident from the massive increase in gross profit margins, which touched ridiculously high levels. The gross margins in CY11 were nearly as high as those posted by the E&P companies. Enough said. The other income served as the icing on the cake as the Company rode on the success of FFBL, which declared high dividends during the period. Moreover, the cash rich nature of the company enabled it to earn healthy profits on its fat cash balance. The other income may not be as high as Rs6 billion in CY12 as FFBL is expected to face a tough year in terms of profitability, but that will not worry FFC one bit, as its foundations remains firm. Engros new plant is still deprived of uninterrupted gas supply, which leaves more room for FFC to benefit from future increments in urea prices. CY11 may well be a year of abnormal profit margins, but, even if normalcy returns, FFC has no demons.
======================================================= Fauji Fertilizer Company ======================================================= (Rs mn) CY11 CY10 chg ======================================================= Sales 55,221 44,874 23% Cost of sales 20,872 25,310 -18% Gross profit 34,349 19,564 76% Gross margins 62% 44% 43% Finance cost 786 1,087 -28% Other income 6,630 3,153 110% PAT 22,492 11,029 104% EPS (Rs) 26.52 16.25 =======================================================
Source: KSE notice
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