Fauji Fertiliser Bin Qasim (FFBL) and Shell Pakistan Ltd, are expected to register an improvement of 160 percent and 137 percent in their profits for the first quarter ended March 31 owing to increase in prices and higher demand. A report of First Capital Equities said that the margins of the company are expected to enhance further owing to rising prices and subsidised feedstock gas cost. The company's venture in Morocco is also expected to further pamper its gross margins by easy procurement of raw materials at cheaper rates.
FFBL is expected to announce its financial results for the first quarter ended March 31, 2005, on Monday April 18, 2005 at 10 am. We expect the company to announce a recurring profit after of Rs 288.5 million EPS (PRs0.31) registering a growth of 160 percent over a recurring profit after tax of Rs 110.9 million (EPS PRs0.12) during 1QCY04.
The growth in earnings might be attributed to increased fertiliser off-take and higher urea prices. "We expect 1QCY05 urea demand to increase by around 8-9 percent. Despite shut downs by various plants. The short supply in urea has resulted in imports of 57,000 tons of urea during the first two months of 2005", the report said. Urea prices are expected to increase by around 15 percent, while DAP prices are likely to register an increase of around 7 percent as compared to the same period of last year.
FFBL has emerged a profit making and dividend paying entity and is no longer a pure speculative stock. The significant growth in company's earnings may be attributed to expectations of a robust growth in urea demand and revival of DAP plant. The company has also ventured into an international joint venture, Pakistan Maroc Phosphore S.A. for procurement of cheap phosphoric acid to produce DAP. It also enjoys feedstock gas subsidy for its urea production, which enable it to maximise its margins in price shooting scenario.
Shell Pakistan Limited (SPL) is to announce 3QFY05 results on Monday, April 18, 2005, where dealers expect the company to post after tax earnings (3-months) of Rs 579 million (EPS: PKR16.51), up 137 percent YOY.
Earnings for the period July - March 05 are expected to increase by 84 percent to Rs 1,495 million (EPS: PKR 42.6).
Key earnings drivers are expected to be (1) Strong demand for white oil products and lubricants, and (2) domestic oil price hike. The company is expanding retail network, focusing on further improving product mix and has invested in a 26 percent stake in White Oil Pipeline Project (WOPP). At FYO5 profit-earning rations of 9.2 multiples the company trades to a steep discount to listed peers PSO and Attock Petroleum Limited.
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