Fatima Fertilizer (FATIMA) announced 4Q2016 consolidated earnings of Rs 1.5/share (+46pc YoY). Earnings were supported by significantly higher urea off-take, up 1.7 times due to the acquisition of DH fertiliser plant.
Earnings were in line with the company expectations, but the final cash dividend of Rs2/share came as a surprise. This took the full year payout to Rs3.25/share (payout ratio 73pc).
During 4Q, FATIMA registered 51pc YoY sales growth on the back of higher off-take. However, margins went down slightly by 1pc, due to lower retention prices. Gross profit margin stood at 39pc compared to 40pc last year.
Further, distribution costs grew 17pc YoY to Rs1.1b, given aggressive marketing and dealer incentive schemes during the period.
Finance cost spiked 33pc to Rs978mn likely due to higher borrowings to finance delayed subsidy disbursement, while lower effective tax rate of 14.7pc compared to 21.6pc supported the bottom line.
During 2016, consolidated revenues of FATIMA posted 31pc growth, while gross margins declined by 10pc to 45pc due to a substantial fall in urea retention prices.
Full year consolidated earnings declined 59pc to Rs4.5 vs. Rs10.9 last year, due high base effect caused by one-time gain booked on bargain purchase of DH Fertilizer during 2015 (Rs6.5/share).
The company lists short-lived ramifications of the subsidy, unanticipated increase in gas tariff, and lack of improving agronomics as major risk factors.
