Fertilizer: 3Q14 a mixed bag; EFERT & FATIMA to impress In the midst of (1) uncertainty looming over the fate of GIDC, (2) floods during Sep-14, and (3) tentative gas supplies, we expect the fertilizer sector to clock in another mixed results season. We expect FFC to post net earnings of PRs4.3bn (EPS: PRs3.38), down 20% YoY, to take 9M14 earnings to PRs12.5bn (EPS: PRs9.80), a decline of 16% YoY. The surge in GIDC cost will continue to take its toll on the profitability of the company, in our view. FFBL is expected to post PAT of PRs1.2bn (EPS: PRs1.27) for 3Q14. Despite the uptick in DAP prices, the GIDC cost upheavals are expected to drag down the profitability. Moreover, the loss from PMP is expected to add insult to injury. FATIMA is believed to benefit at the expense of its competitors and post PAT of PRs2.8bn (EPS: PRs1.32), up 14% YoY, in 3Q14. Volumetric uptick in Urea/NP alongside higher Urea/CAN prices are expected to bode well for FATIMA. On the back of aggressive deleveraging and enhanced gas supply from Guddu, we expect EFERT to clock in PAT of PRs1.8bn (EPS: PRs1.33) in 3Q14. While the currency devaluation is expected to add the sour flavor, tax losses can provide upside to companys earnings.
Posted on: Tue, 21 Oct 2014 07:31:22 +0000
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