EngroEngro fertilizer Limited (EFERT) has posted disappointing quarterly financial results; there is no surprise because these are close to analysts’ forecast. The blame for this disappointing performance should go to the Government of Pakistan (GoP) for following bad policies rather than the management of EFERT for any inefficiency.

The Company has profit after tax of Rs2,121 million (EPS: Rs1.59) for January-March 2016 quarter (1QFY14) as compared to net profit of Rs3,058 million (EPS: Rs2.30), posting a decline of 31 percent.

If one compares the performance with 4QCY15 the disappointment is even bigger, because the Company had posted Rs5,123 million (EPS: Rs3.89) a hefty decline of 59 percent.

In its report AKD securities has 1QCY16 result above its projected net profit of Rs1.65 billion (EPS: RS1.24) with the deviation in gross margin (more than expected inventory level). It has also attributed 59%QoQ decline in earnings mainly to depressed fertilizer industry dynamics and seasonality.

Key highlights of the result include: 1) Topline coming off by 29%YoY/65%QoQ owing to significantly lower volumetric sales (down 37%YoY/48%QoQ), 2) a 87bpsYoY increase in GP margin from 38.3% in 1QCY15 to 39.2% in 1QCY16 mainly on account of concessionary gas pricing for Enven Plant, 3) a 65%YoY lower other income as a result of 54%YoY reduction in T-Bills and other fixed income placements to Rs10 billion and 4) a 41%YoY decrease in finance cost on account of swift deleveraging.

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