Fatima Fertilizer Limited (FATIMA) recently announced its 3QCY15 financial results with earnings of the company eroding due to fall in topline. During the quarter under review, revenue dropped due to muted sales volume owing to ambiguity on a fertilizer relief package and expectation of a reversal in the urea price hike. Sales for the third quarter declined to Rs3,007 million from 10,254 million, a fall of 71%YoY/69%QoQ.
This quarter also proved detrimental to cumulative 9MCY15 sales that declined to Rs21,807 million as compared to Rs25,860 for the corresponding period last year, a decline of 16% YoY. However, for the period under review the company posted profit after tax of Rs7,440 million (EPS:Rs.54) as compared to net profit of Rs6,435 million (EPS: Rs3.06), an increase of 16%.
This change in fortune can be attributed to a number of factors: 1) production of the company increased by 10%YoY in 9MCY15 but the benefit of this surplus inventory is expected to be yielded during 4QCY15 which is also sowing season for Rabi crops, 2) increase in other income and reduction in financial cost and effective tax rate, 3) company managed to improve its net margin on cumulative basis due to improvement in other income derived from rendering of technical services outside Pakistan which increased by 63%YoY, 4) financial costs reduced in 9MCY15 due to repayment of long term finances and reduction in interest rates owing to monetary easing policy by State Bank of Pakistan and 5) effective tax rate declined due to reduction in tax rate in the recent Finance Act.