Engro Fertilizers Limited has announced its financial results for the 2nd quarter that ended on June 30, 2020.
According to the notification to the PSX, the company booked a profit of Rs. 3.86 billion, increasing by 22% as compared with Rs. 3.17 billion profit earned in Q2 2019. This took the half-year profits to Rs. 4.45 billion, down by 38.02% as compared to Rs. 7.18 billion earned last year.
Along with the results, the company announced the first interim cash dividend of Rs. 4.0/share, which was higher than the industry expectations.
In the second quarter, the company’s sales increased by 11.20% to Rs. 29.91 billion as compared to Rs. 26.90 billion recorded in the corresponding period of last year. The growth in sales was witnessed due to the increase in urea offtake by 52% year on year to 696,000 tons compared to 458,000 tons in Q2 2019, said a report by Topline Securities.
However, DAP offtake declined by 24% to 80,000 tons compared to 104,000 tons in Q2 2019.
The cost of sales of the company was reported at Rs. 19.52 billion, up by 6% as compared to Rs. 18.47 billion. The gross margin of EFERT was increased by 3.2ppts year on year to 34.7% in Q2 2020. The gross profits increased by 22% to Rs. 10.39 billion as compared to Rs. 8.51 billion recorded in the same period last year.
The selling and distribution expenses increased by 36% from Rs. 1.75 billion to Rs. 2.37 billion due to the increase in volumetric sales of urea. Other income saw a significant decline of 83% during the quarter. It was reported at Rs. 244 million as compared to Rs. 1.42 billion in the previous year.
According to the Topline Securities report, the decline in other income was due to the absence of a reversal of liability for the Workers Welfare Fund recorded last year. Other operating expenses saw a massive increase of 110% during the second quarter as it was reported at Rs. 1.22 billion as compared with Rs. 581 million. The company had booked certain provisions on account of sales tax.
According to a report by KASB Securities, the company is building a case against the utilization of imported RLNG for the domestic sale of urea. EFERT has analyzed that demand for urea may fall to 5.5 million MT during CY20, implying that urea supply based on indigenous gas (~5.8 million MT) may be sufficient for the domestic market. The company, in turn, suggests utilizing imported RLNG for exporting urea as it would potentially yield a net benefit of $458 million via export receipts and additional tax revenues for the central government
Earnings per share of the company were increased to Rs. 2.91 from Rs. 2.38.
At the time of filing this report, EFERT’S shares at the bourse were trading at Rs. 66.50, up by Rs. 1.47 or 2.26%, with a turnover of 4.43 million shares on Thursday.