KARACHI, Feb 2: An equity analyst at one of the brokerage houses, known otherwise for its fine pieces of research reports, conceded that long faces were caused when the earnings and dividends projected by most analysts, fell wide off the mark of financial results announced by Engro on December 30. But he candidly admitted that the mood was gloomier the day after, when Fauji Fertilizer declared its results and dividend.

Fauji Fertilizer — the biggest among urea producers in the country — posted turnover and earnings in line with market expectations. But it was the dividend which, at least at first sight, was seen to have fallen short. The Board proposed final cash dividend at 10 per cent. And the market was waiting for twice that much. But adding the final to the three interim already paid: at 30; 25 and 20 per cent, the aggregate payout for the year worked out at 85 per cent or Rs8.50 per share of Rs10. This was 5 per cent (50 paisa) more than the Rs8 per share distributed to the shareholders the earlier year. When reason returned, most analysts realized that dividend was not really at fault, but that investors had possibly been more greedy.

Fauji Fetilizer posted 17.5 per cent growth in sales of its “Sona” brand of fertilizer, to Rs11,982 million for the year ended December 31, 2001, from Rs10,201 million the year ago. Sales were understood to have improved in the fourth quarter; the company having begun to import phosphatic fertilizer after the closure of FFC Jordan DAP Plant.

Pre-tax profit increased 19.2 per cent to Rs4,994 million, from Rs4,190 million and after charging tax at effective rate of 36 per cent, compared with 37 per cent last year, taxed profit amounted to Rs3,204 million, reflecting 21.2 per cent growth from Rs2,644 million in 2000. The growth in earnings, represented improved urea pricing during the year. Earning per share (eps) for the latest year, worked out at Rs12.49.

The 10-rupee share in Fauji Fertilizer touched its historic high at Rs125. The stock is extremely liquid with over 190 million shares traded in six months between July-December 2001. The ruling price of the share is Rs51, which places it on an attractive multiple of only 4 times the 2001 eps.

Cost of sales could be contained to a rise of 14.1 per cent to Rs6,363 million, from Rs5,575 million, with gross profit up by 21.5 per cent to Rs5,620 million, from Rs4,626 million. Gross margin improved to 47 per cent, from 45 per cent in 2000. Selling & administration expenses increased 17.6 per cent to Rs1,022 million, from Rs869 million, but financial charges could be lowered by 17.4 per cent to Rs275 million, from Rs333 million. Supplementary sources of income contributed Rs1,062 million — 2.5 per cent lesser than last year’s Rs1,090 million. “Other charges” increased 20.7 per cent to Rs391 million, from Rs324 million.

Annual General Meeting (AGM) is scheduled to be held on March 27 at Rawalpindi. Final dividend, if approved would be paid to the shareholders whose names appear in the Register of Members on March 14, 2002. Share transfer books of the company would remain closed from March 14 to 27 (both days inclusive).

Fauji Fertilizer, historically, announced results in or about May, the following year. But this time it has accomplished the momentous task within a month of the close of the year. It has thus attempted to improve its position among the top-25 companies of the KSE. The new criteria for top companies assigns additional marks for prompt announcement of annual audited financial figures.

The ongoing year posses some threats for the urea industry. GST is likely to be imposed from later part of February, which analysts fear, would either result in reduced margins for fertilizer manufacturers (if producers share the additional GST burden) or depressed urea offtake if the entire additional GST is passed on to the consumer). Secondly, gas price increase in the feedstock component and possibly also the fuel component expected in 2002 would further dampen margins. All of that does not paint a pretty picture for the fertilizer producers.