Engro Fertilizers Limited’s net profit decreased by 83 per cent during April-June quarter of 2016, according to a notification sent to the Pakistan Stock Exchange on Wednesday.
The company reported a profit of Rs 673 million or Rs 0.51 per share for the quarter ended on June 30, 2016, down 83 per cent compared to Rs 4.06 billion or Rs 3.05 per share it earned during the same quarter of the previous year. The company also offered Rs 2 as dividend per share.
“The result was below our projected net profit of Rs 1.41 billion or earning per share of Rs 1.06,” said a report by AKD research.
Following the result announcement, the fertilizer’s share price appreciated by Rs 0.51 or 0.74 per cent to Rs 68.60 compared to Rs68.09 per share of the previous day. In total 18 million shares of the company were traded on the day.
The fertilizer company reported revenues of Rs 10.3 billion during the second quarter of 2016, a decrease of 49 per cent compared to Rs 20.3 billion it earned in sales during the quarter under review of last year.
“The significant downturn in earnings resulted from 43 per cent YoY decrease in urea off-take [and] gross margins coming off on account of increased feed and fuel gas prices in the 1st quarter of 2016,” said Waqas Imdad Ali of AKD research.
According to AKD research, 31 per cent decrease in urea prices – as per international trends –also played a role as it decreased the product prices by 5 per cent.
“Higher effective taxation of 52 per cent during the quarter due to imposition of super tax also led to the decline in earnings,” said Saqib Hussain of Sherman Securities regarding the lower than expect results.
On the back of Rs 500 per bag subsidy on DAP (Diammonium phosphate fertilizer), the company’s other income increased to 1.1 billion. However, the increase was not sufficient to reflect positively on the company’s losses.
“EFERT has underperformed by 21 per cent on account of decline in revenues due to sluggish demand outlook and increased cost side pressures,” said Ali. However, he further added, “Recent price reduction of fertilizer products [due to] reduction in general sales tax and subsidy could aid in clearance of huge inventory stockpiles [thus] boosting off-take.”