Engro2On Monday Engro Fertilizers Limited (EFERT) released its financial results for the year ended 31st December 2015 and also announced distribution of 30 percent final dividend, taking full year payout to 60 percent. The results were above market expectation.

The Company has posted profit after tax of Rs15.027 billion (EPS: Rs11.30) for the year ended 31st December 2015 (CY15) as compared to a profit of Rs8.207 billion (EPS: Rs6.20) for the previous year, a hefty increase of 83 percent.

The increase in profit can be attributed to 42.64 percent increase in net sales. The Company posted net sales of Rs87.615 billion for CY15 as compared to Rs61.424 billion, thanks to enhanced gas supply.

There was reduction in financial cost to Rs4.587 billion from Rs6.625 billion that also supported in improving the bottom-line, though very nominally. Reduction in financial cost was due to the declining interest rate scenario.

However, there was slightly more than 30 percent reduction in other income.

The positive point was that imported urea sales went down by 32%YoY in CY15 due to the increase in indigenous production.



One Response to Engro Fertilizers posts above Rs15 billion profit

  1. Shabbir Kazmi says:

    Engro Fertilizer Limited (EFERT) recently held its analyst briefing to review CY15 financial accounts. On a sequential basis, EFERT has posted profit after tax of Rs5.1 billion (EPS: Rs3.8) for 4QCY15, up 84%QoQ as compared to profit of Rs2.7 billion (EPS: Rs2.1) for 3QCY15 due to: 1) the company urea offtake reaching 583,000 tons during 4QCY15 as compared to 498,000 tons for 4QCY14, up 17%YoY, 2) concessionary gas pricing of US$0.70/MMBTU for new plant operating under 2001 Fertilizer Policy, 3) integration of DAP business resulting in sales of 391,000 tons of DAP during CY15 and 4) significant decrease in financial charges to Rs4.6 billion during CY15 from Rs6.6 billion during CY14 (down 31%YoY).

    Other takeaways were:
    Post implementation of the GIDC Act 2015, the ompany has legally challenged the applicability of GIDC on retrospective basis. Despite obtaining stay orders against retrospective GIDC, on the request of the GoP, and without compromising on the legal standing, the company has paid the complete accrued GIDC of Rs15.2 billion in CY15. The company has also started paying GIDC on current billing excluding concessionary gas on the new plant.
    Gas supply for both plants is likely to continue in 1QCY16. With more gas available in the Mari network and recent new gas discoveries, there is a fair probability that gas supply will continue smoothly in CY16. However, with Mari opting for conversion to Petroleum (exploration & production) Policy 2012, one might see an increase in gas prices (subject to approval from Ogra) for the base plant only which can negatively impact margins in CY16. Moreover, the management has no intention to run the base plant on imported LNG.
    CY16 is expected to be a challenging year for the company where negatives in the form of: 1) depressed farmer income and lower international urea prices can restrict pricing power and 2) possible increase in gas prices, can pose a threat to margins.

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