Urea Off-take dwindled by 9%YoY
The National Fertilizer Development Centre (NFDC) has recently announced the fertilizer’s updates for the period of 2MCY10. The Urea off-take witnessed a decent decline of 9%YoY to 984k tons comparing to 1,076k tons during the same period last year mainly at the back of 17%YoY and 16%YoY decline in urea imports and local productions respectively during the period. Conversely, the sector owned the 9%YoY higher sales in terms of increase in urea prices which stood at PKR 814 per bag during the period comparing to PKR 747 per bag during the same period last year.
FFBL supported the Urea’s declining trend
During 2MFY10, Fauji Fertilizer Bin Qasim (FFBL) contributed the major decline of 52%YoY in its urea off-take comparing to the same period last year largely attributable to their plant turnaround while ENGRO witnessed the 2%YoY growth where Fauji Fertilizer Company (FFC) remained unchanged during the period.
DAP off-take showed 42%YoY growth
The DAP off-take remained growing during the period by depicting enormous growth of 42%YoY to 162k tons comparing to 114k tons during the same period last year. The DAP prices also showed a extensive increase of 22%YoY to PKR 2,589 per bag primary due to increase in Phos-acid prices which are currently around USD 610/ton comparing to USD 430/ton during 2HCY09.
ENGRO became the major beneficiary of DAP off-take surge
ENGRO showed the outshine performance during the period by posting 157%YoY growth during 2MFY10 to 41k tons comparing to 16k tons during the same period last year. Moreover, the 230%YoY growth was witnessed on cumulative basis by the company after posting sales of 71k tons during the period. FFBL sales remained deceptive during the period as the company posted the sales of 27k tons by posting 32%YoY reduction during the period mainly at the back of plant turnaround.
Looking Forward
I believe that the fertilizer sector will remain prominent due to the GoP support to agriculture sector by allowing the support prices and subsidized agricultural loans etc. Moreover, the current DAP prices have increased to PKR 2,600/bag due to increase in Phosphoric acid prices which may cause shrinkage to the DAP off-take. Currently, I maintain ‘buy’ stance for ENGRO scrip by considering its current trading at FY10E of 6.50x while ‘hold’ for FFC and FFBL by considering their current trading at 7.80x and 9.50x respectively where my target price for ENGRO, FFC, and FFBL is PKR 250, PKR 120 and PKR 38 per share respectively.
Showing posts with label Engro Corporation Limited (ENGRO). Show all posts
Showing posts with label Engro Corporation Limited (ENGRO). Show all posts
Thursday, April 1, 2010
Saturday, August 15, 2009
All suffered declining fortunes except FFC in 1HCY09
DAP packed down Urea’s SalesThe improved DAP sales of 172%YoY in 1HCY09 conveyed a reversal impact on fertilizer Sector’s sales and brought its 15.1% decrease to PKR 4.9 Billion during 1HCY09. The industry sales’ grew by 45.0%YoY to PKR 45.9 billion and gave a far-fetched performance in DAP sales by 172%YoY increase but a reversal impact in Urea sales by 7%YoY decrease. The negative sales growth in the Urea was in response to decrease in DAP prices (Economy of scale) and in reflection of reduction in Urea’s production which declined by 0.6%YoY to 2 Million tons. The DAP production drove an addition by 42%YoY to 213k tons.
Industry Performance
1HCY09 for Fertilizer sector has appeared to roll into the downward side. Fauji Fertilizer Bin Qasim (FFBL) declared the profit of PKR 497.8 million and EPS of PKR 0.53 in 1HCY09 compared to the profits of PKR 718.2 million and EPS of PkR0.77 during the same period in last year which means a decline of 30.689%YoY. Engro Chemical declared the profit of PKR 1.043 billion along with an EPS of PKR 3.95 compared to the profit of PKR 1.556 billion and EPS of PKR 3.95 in the same period a year back. Dawood Hercules has posted an after tax loss of PKR 615.284 million and Per Share Loss of PKR 5.63 in the period under review against a profit of PKR 1,213.997 million and EPS of PKR 11.10 in the same period year back. Fauji Fertilizer Company (FFC) was the only company who has increased its profitability from the same period last year. It disclosed the profit of PKR 4.547billion and EPS of PKR 6.70 as compared to PKR 3.286 billion profits and PKR 4.84 EPS previously.
Fauji Fertilizer Bin Qasim
FFBL, being the only DAP producer was the leading recipient of the said DAP Sales Growth. FFBL’s DAP sales evidenced a 207%YoY increase – highest in the sector by growth of 164.3%YoY. The company sold 279k tons of DAP having a shoot of 6.5xYoY as a result of this a PKR 15 Billion in 1HCY09 compared to PKR 5.7 Billion during the corresponding period last year. The Urea sales for the company took a dip of 20%YoY and stood at 281k tons in 1HCY09.
In 2QCY09, the company stationed NPAT of PKR 485.3 Million and the EPS of PKR 0.52 compared to NPAT of PKR 556.1 Million and the EPS of PKR0.60 in 2QCY08 which booked a decline of 12.7%YoY. Apart from the Core operation, the faced a loss from associate Pak Maroc Phosphor (PMP) due to shutdown of their operations for 3 months during the period of 16-Nov-08 – 19-Feb-09 as well as a considerable inventory jot down by the company to bring its stocks at NRV; additionally, it was largely in loss from the Joint Venture project booked mainly in resulting to NRV adjustment recorded by PMP.
Engro ChemicalEngro Chemicals had again a drastic performance in DAP sales which grew by 1.8x in 1HCY09 to plunk at 71.6k tons. The DAP sales increased by 1.7x in 2QCY09 at 28.2k tons whereas the Urea sales declined by 24.1%YoY to 419.2k tons in effect of emphasize on DAP Sales by the industry compared to last year.
In 2QCY09, Engro's Urea sales were 183.3k tons compared to 245.2k tons during the same period last year which put a decline of 25.2%YoY. The gross profit margin of the company declined to 20.3% in 2QCY09 in contrast of 40.7% in 2QCY08.
Fauji Fertilizer Company
The company made an NPAT of PKR 1.9 Billion in 2QCY09 and EPS of PKR 2.74 compared to NPAT of PKR 1.5Billion and EPS of PKR 2.28 during 2QCY08 which brought the growth of 20.5%YoY.
The chief explanation behind the enlarged profitability in the 1HCY09 was due to increase in Urea sales including the increase in Price and Quantity and the higher other income principally in 1QCY09 in the shape of higher dividend from FFBL.
Outlook
Based on my analysis the reasons for lower profitability during the year were decrease in profit margins mainly in DAP, and higher interest rates in 1HCY09. I strongly expect the profitability of fertilizer companies to progress due to continued strong DAP and Urea sales, continuously increase in dividends paid by the industry and lower financial charges which are in the reason of decreasing interest rate environment.
Industry Performance
1HCY09 for Fertilizer sector has appeared to roll into the downward side. Fauji Fertilizer Bin Qasim (FFBL) declared the profit of PKR 497.8 million and EPS of PKR 0.53 in 1HCY09 compared to the profits of PKR 718.2 million and EPS of PkR0.77 during the same period in last year which means a decline of 30.689%YoY. Engro Chemical declared the profit of PKR 1.043 billion along with an EPS of PKR 3.95 compared to the profit of PKR 1.556 billion and EPS of PKR 3.95 in the same period a year back. Dawood Hercules has posted an after tax loss of PKR 615.284 million and Per Share Loss of PKR 5.63 in the period under review against a profit of PKR 1,213.997 million and EPS of PKR 11.10 in the same period year back. Fauji Fertilizer Company (FFC) was the only company who has increased its profitability from the same period last year. It disclosed the profit of PKR 4.547billion and EPS of PKR 6.70 as compared to PKR 3.286 billion profits and PKR 4.84 EPS previously.
Fauji Fertilizer Bin Qasim
FFBL, being the only DAP producer was the leading recipient of the said DAP Sales Growth. FFBL’s DAP sales evidenced a 207%YoY increase – highest in the sector by growth of 164.3%YoY. The company sold 279k tons of DAP having a shoot of 6.5xYoY as a result of this a PKR 15 Billion in 1HCY09 compared to PKR 5.7 Billion during the corresponding period last year. The Urea sales for the company took a dip of 20%YoY and stood at 281k tons in 1HCY09.
In 2QCY09, the company stationed NPAT of PKR 485.3 Million and the EPS of PKR 0.52 compared to NPAT of PKR 556.1 Million and the EPS of PKR0.60 in 2QCY08 which booked a decline of 12.7%YoY. Apart from the Core operation, the faced a loss from associate Pak Maroc Phosphor (PMP) due to shutdown of their operations for 3 months during the period of 16-Nov-08 – 19-Feb-09 as well as a considerable inventory jot down by the company to bring its stocks at NRV; additionally, it was largely in loss from the Joint Venture project booked mainly in resulting to NRV adjustment recorded by PMP.
Engro ChemicalEngro Chemicals had again a drastic performance in DAP sales which grew by 1.8x in 1HCY09 to plunk at 71.6k tons. The DAP sales increased by 1.7x in 2QCY09 at 28.2k tons whereas the Urea sales declined by 24.1%YoY to 419.2k tons in effect of emphasize on DAP Sales by the industry compared to last year.
In 2QCY09, Engro's Urea sales were 183.3k tons compared to 245.2k tons during the same period last year which put a decline of 25.2%YoY. The gross profit margin of the company declined to 20.3% in 2QCY09 in contrast of 40.7% in 2QCY08.
Fauji Fertilizer Company
The company made an NPAT of PKR 1.9 Billion in 2QCY09 and EPS of PKR 2.74 compared to NPAT of PKR 1.5Billion and EPS of PKR 2.28 during 2QCY08 which brought the growth of 20.5%YoY.
The chief explanation behind the enlarged profitability in the 1HCY09 was due to increase in Urea sales including the increase in Price and Quantity and the higher other income principally in 1QCY09 in the shape of higher dividend from FFBL.
Outlook
Based on my analysis the reasons for lower profitability during the year were decrease in profit margins mainly in DAP, and higher interest rates in 1HCY09. I strongly expect the profitability of fertilizer companies to progress due to continued strong DAP and Urea sales, continuously increase in dividends paid by the industry and lower financial charges which are in the reason of decreasing interest rate environment.
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