Pakistan: PPL 9-month profit up 4%

Pakistan Petroleum limited (PPL) has reported profit after tax of PKR33.53 billion (EPS: PKR20.41) for 9-month period ended 31^st March 2013 as compared to PKR32.3 billion (EPS: PKR19.64) for the corresponding period last year, registering an increase in profit by 4% YoY. The result was in line with market expectations.

This increase in profit can be attributed to topline growth by 8% YoY and notable decline in other expenses (down by 24% YoY).

For 3QFY13, the Company registered a decline of 8% YoY in net profit to PKR11.2 billion (EPS: PKR6.82) from PKR12.2 billion (EPS: PKR7.40) profit for 3QFY12. The decline in earnings can be attributed to sharp decline in gas production (estimated to have decreased by up to 13% YoY) coupled with higher field expenditures.

Net sales of the Company surged by 8% YoY to PKR77.2 billion during 9MFY13 as compared to PKR71.5 billion for the corresponding period last year.

The sharp uptick in sales can be attributed to 1) a 16% YoY increase in oil production, 2) up to 7% YoY higher wellhead prices of gas from Sui and Kandhkot and 3) notable depreciation of Pak rupee value against US dollar, by 8% YoY.

Other income surged by 7% to PKR5.5 billion during the period under review on account of healthy cash/investments positions. This coupled with notable reduction in other expenses (down by 24% YoY) contributed significantly to the bottomline.

However, considerable increase in field expenditure to PKR21.4 billion (up by 17% YoY) on account of higher exploration activity in own and JV operated areas severely dented the bottomline.

According to a BMA Capital report, reserve based trade price  of PKR223/share, the stock represents an upside potential of 25% and a dividend yield of 8% translating into a total return of 33%. It maintains “BUY” stance on the stock. At current trading levels, the stock is trading at an attractive PER multiple of 5.9x and 5.3x to FY13E and FY14E EPS respectively

Pakistan: OGDC profit up 9 per cent

Pakistan’s largest oil and gas exploration entity, Oil and Gas Development Company (OGDC) has posted profit after tax of Rs75.7 billion (EPS: Rs17.59) for 3QFY13 (July2012-March2013) period as compared to Rs69.2 billion (EPS: Rs16.10) for 3QFY12 (July2011-March2012), this depicts a decent earnings growth of 9% YoY.

For 3QFY13 (January-March 2013), the company has posted a nominal decline of 4% YoY in profit to Rs26.4 billion (EPS: Rs6.15) owing to higher exploration expenditure.

The result announcement was also accompanied by an interim dividend of Rs1.75 per share cumulating the 9MFY13 payout to Rs5.50 per share.

The result was below analysts’ expectations on account of phenomenal surge in exploration expenditures to Rs8.95 billion due to increased number of dry well write-offs and higher exploration activity in 9MFY13.

It is believed that a total of 6 wells were written-off during the period including a sizeable write-off in March this year.

Notable improvement in oil and gas production and higher other income remained the prime factors behind earnings growth for 9MFY13. However, phenomenal increase in exploration expenditure marred the growth in bottomline.

Net sales of the Company surged by 19% YoY to Rs169 billion for 9MFY13 due to: 1) robust oil & gas production (estimated to increase by 7% and 4% YoY respectively) , 2) higher wellhead prices of major fields (estimated to be up by 4% to 8% YoY on average)  and 3) a 9% YoY depreciation in average Pak Rupee value.

Other income of the Company clocked in at Rs10.8 billion (up by 58% YoY) in 9MFY13 on account of interest income recorded on TFC investments (subscribed in Sep12).

 Pakistan: PSO profit up 3.8 per cent

Pakistan State Oil (PSO) topline has grown to Rs930 billion during first nine months of the current financial year from Rs862 billion for the corresponding period last year, registering growth of 7.8 per cent.

For the period under review, profit after tax also witnessed significant improvement and increased to Rs9.31 billion as compared to Rs8.97 billion for the corresponding period last year, representing an increase of 3.8 per cent.

During this time period, industry volumes for black oil remained stable while white oil grew by one per cent reflecting an increase in Mogas consumption of 16 per cent.

PSO's share of the MOGAS segment also grew to about 51 per cent as compared to 49.6 per cent while the HSD market share increased to 57.6 per cent from 54.8 per cent last year.

PSO continued to hold onto the lion’s share of the market with its share in the white oil segment growing to 56.0 per cent of the overall market while its share in the black oil segment stood at 74.7 per cent, thereby contributing to a total market share of 64.3 per cent.

In April this year PSO has taken further steps along the path of becoming an integrated energy company and building a self-reliant energy chain by signing various strategic agreements.

PSO signed an MoU has been with the Government of Khyber Pakhtunkhwa for establishing of a state-of-the-art oil refinery with a capacity of 40,000 barrels per day in District Kohat  of the province.

It also signed another MoU with Engro PowerGen Limited (EPL) to review the technical and economical feasibility of the Thar coal project.

PSO has also initiated a number of new and innovative marketing projects to project its image. With this in mind, the Company has inaugurated the first of its kind "Diesel Square" in Karachi and plans to replicate this project in different cities nationwide.

Another first for PSO has been the inauguration of the world's first "Community Owned Station" in Gujrat which shall help bring about a social revolution at a grass roots level by distributing the station's profit amongst local area stakeholders.

Pakistan: Gas Sector update

In one of its reports, InvestCap of Pakistan has covered developments in gas sector during FY12. In response to the Government of Pakistan (GoP) deciding to focus on developing indigenous energy sources, gas sector has seen various developments since then. Brokerage house has presented a brief analysis of the gas sector with regard to gas reserves, production, consumption and other developments during FY12.

According to the report gas reserves touch 11-year low which hints towards alarming situation ahead. Balance recoverable reserves of gas reached 26.9tr Cubic Feet (cft) at end FY12 as compared to 27.8tr cft at end FY11, registering a decline of 3%YoY.

The current balance indicates reserves are sufficient for next 17 years assuming current production level of 1.56 trillion cubic feet (tcf) per year. Such a trend of declining reserves has been led by an absence of major discoveries coupled with increasing gas production.

The province of Sindh took the lead in gas reserves balance with its four major gas fields (Mari, Mari Deep, Qadirpur and Kandara) contributing 34% to total gas reserves of the country. Baluchistan, with its two major fields Uch and Sui & Sui Deep contributing 25% share in the total reserves.

Gas production increased to 1.56 tcf, up 6%YoY during FY12. OGDC, operator of major fields and the largest producer of gas ‑ accounting for over 25% of total gas production ‑ posted an enormous increase of 23%YoY to 386bcf from 315bcf during FY11.

PPL emerged the 2nd largest gas producing company in the country contributing 18% (278bcf) to the total gas production of the country.

Similarly, Mari, the third largest company posted a growth of 11%YoY.

Despite average gas consumption declining marginally (down 0.90%) over the last 3 years, total gas consumption during FY12 increased by 3.8%YoY to 1.29tr cft. The power sector remained the major consumer, burning 28% of the total gas consumed by various sector.

Power sector registered growth in gas consumption by 6%YoY, on an absolute basis consumption increased by 20.98bn cft. In the absence of cheaper alternative for fuel for electricity generation, gas surpasses as the only substitute of costly oil.

Increasing drilling activity has become need of the time keeping in view rising demand for gas in the country, touching new highs and warranting exploration in Baluchistan province. However, due to security concerns, drilling activities over the past ten years in Baluchistan have remained very low.

Analyst expects the situation to witness moderate improvement after the upcoming elections which is likely to boost drilling activity in the province. Moreover, the potential import of gas from Iran could be another option to fill the demand supply gap of gas.

However, due to the rising tussle between Iran and United States on Iran's nuclear program, analyst remains conservative on this front being dependant on US support in the new IMF program. Moreover, country has other costlier options like shale gas and offshore drillings.

Profitability of Pakistan Oilfields erodes

Pakistan Oilfields announced its 9MFY13 result posting profit after tax of PkRs8.6 billion (EPS of PkR36.46) as compared to net profit of PkRs9.33 billion (EPS of PkR39.44) for the corresponding period last year, a decline of 7.6%YoY

The result is inline with market expectations.

Decline in earnings underpins softening production from operated JV’s as well as higher financial charges (up 38%YoY led by exchange losses and provisions for decommissioning) as well as lower other income (down 16%YoY due to lower payouts from subsidiaries and associates).

POL has under performed the KSE-100 index by 3.8% over the past 3 months and it is believed price performance will likely to remain subdued the back drop of delays in monetizations as well as softening of international oil prices.

CNG closure Notice

Sui Southern Gas Company (SSGC) has informed that all CNG stations in Sindh will remain closed from 08:00 am on Tuesday April 16, till 08:00 am on Wednesday, April 17, 2013 for 24 hours.

Another shut down will be observed on Thursday April 18, 2013 from 08:00 am to Friday April 19, 2013 till 08:00 am for 24 hours.

The last shut down during the current week will be from 08:00 am on Saturday April 20, 2013 up to Sunday April 21, 2013 at 08:00 am.

 Pakistan to add another refinery

Pakistan suffering from limited production of crude oil as well as concentration of refinery on coastal belt aims at setting up a refinery Khyber Pakhtunkhwa province. It will use crude oil produced in the province and will also enjoy the potential of exporting some of its products to landlocked Afghanistan.

In this regard, country’s largest oil marketing company, Pakistan State oil Company (PSO) has signed a Memorandum of Understanding (MoU) with the provincial government of Khyber Pakhtunkhwa (KP) for establishing an oil refinery of 40,000 barrels per day (BPD) capacity in district Kohat. The project will be set up on public-private partnership and would utilize crude oil produced in the adjoining areas. The project is expected to be fully operational by 2016-17.

PSO believes that the refinery will help in improving overall availability of POL products across the country as well as result in sizeable foreign exchange savings. It would also increase PSO`s operational base through diversification in the midstream segment and lower distribution cost. The refinery will create job opportunities for the local populace. It is also expected that substantial foreign direct investment will also inflow into Pakistan. The cost of proposed refinery is estimated around US$700 million.

The project will be financed by mix of debt and equity in the ratio of 80:20. Managing Director of PSO has expressed confidence that the debt portion would be raised as several large banks had expressed interest in the refinery. He believes that the bank enjoy ample liquidity and are looking for viable projects for investment. He also stated that PSO was financially strong to subscribe to its portion of equity. He pointed out that the company, which has aound 60 per cent market share, generates net cash of Rs8 billion daily.

While one must welcome such proposals, it is necessary to highlight some of the inherent threats which are likely to mar the prospects. These include: 1) overall security threats prevailing in Kohat district, 2) cash crunch faced by PSO due to circular debt issue, 3) proposed size of the refinery and 4) dismal capacity utilization of the existing refineries. It is on record that while huge quantities of POL products are being imported; local refineries are experiencing dismal capacity utilization.

To begin with one does not dispute cash flow of PSO but it is also a fact that lately on five occasions at least oil marketing company has committed technical default and keeps on begging the Government of Pakistan (GoP) for injection of liquidity.

One is completely amazed at MD’s statement that the banking sector would be keen in extending support to such a project. As such banks now operating in the private sector are reluctant in extending any money to companies belonging to ‘energy chain’, PSO itself has been regularly soliciting ‘bailout’ packages from the GoP.

The most import factor is the size of the proposed refinery. Around the world refineries of such a size are being closed because of outdated technology and are available at the cost of ‘junk’.

As such after commencement of operations by mid-country refinery, PARCO, there is no need to establish another refinery in the northern part of the country. If any refinery has to be established it must be located on the coastal line to facilitate export of surplus products.

A lot of ground work has been done and even financial commitments were made for the refinery being sponsored at Khalifa point in Balochistan. This refinery is being established by the sponsored by PARCO and it is almost ten times the size of refinery.

 PSO intends to locate the refinery in Khyber Pakhtunkhwa for the utilization of crude oil produced in the province, which is too small for the time being. In fact total crude oil produced in the country hovers around 65,000 barrels per day.

Transmission line of SSGC blown up

 In a serious insurgency attack in the early hours of 10^th April, 2013 a 16 inch diameter high pressure gas pipeline of Sui Southern Gas Company (SSGC) in Jafarabad District of Balochistan has been blown up.  

This transmission line commonly referred as Indus Left Bank Pipeline (ILBP) supplies gas to Sui Northern Gas Pipelines (SNGPL) responsible for distribution of gas to Punjab and Khyber Pakhtunistan provinces.

This is the sixth sabotage activity which took place since 16th March this year. SSGC’s system has not been affected due to this sabotage activity at all.

Following this incident, the effected section of pipeline was immediately isolated.

Company’s emergency response teams have been rushed to the site from Shikarpur to inspect the situation.

However, they are awaiting permission from the security agencies that are engaged in clearance of the said area.

After the security clearance, another team will also be mobilized from Karachi, carrying heavy repair equipments and necessary material. 

Pakistan: Bailing out PSO

Reportedly, country’s largest oil marketing company, Pakistan State Oil (PSO) has committed technical default repeatedly because of cash crunch. Oil stocks are depleting fast and energy giant is likely to go ‘dry’ next month if enough loads are not procured on emergency basis.

If that happens, Pakistan may face complete blackout and economic activities also come to grinding halt. This is the outcome of contentious circular debt issue, which economic managers have failed in resolving, despite being fully cognizant of its horrendous impact. The irony is no one exactly knows the quantum of debt and also the possible ways to resolve the issue.

The immediate concern is the huge cash requirement to facilitate PSO keep operating normally. According to Petroleum Secretary Abid Saeed total receivables of the Company exceeds Rs138 billion. Another news item quoting petroleum ministry discloses PSO’s receivables from power sector alone hovering around Rs141 billion and receivables of gas companies touching Rs175 billion. This has created severe liquidity problems for the entire energy chain.

The break-up of PSO’s receivables indicates an amount of Rs48 billion outstanding against Wapda, Rs56 billion against Hubco, Rs11 billion against Kapco and Rs11.5 billion against KESC, being the top defaulters. As against this PSO’s payables pertaining to Kuwait Petroleum and other fuel suppliers added up to Rs73 billion on April 4, followed by Rs21 billion to Parco and Rs10 billion to Attock Oil.

Facing the cash crunch and having virtually defaulted on its payment PSO is buying smaller loads. It is seeking 700,000 tons of fuel oil for delivery over the next three months (April-July). This is about 15 per cent less than the volumes it had sought for February-April period.

It has been stated by PSO that fuel oil requirements of the state-owned enterprise are lower due to lesser requirement of power sector and sufficient inventories. PSO is being cautious to load too many cargoes as the demand from power sector is down due to mercury level still low and adequate inventory. This is a difficult pill to swallow keeping in view extensive load shedding going on in the country.

The fact remains that PSO had committed technical default for more than five times in recent days and the fuel supplier had to pay penalties for the defaults. It is also learnt that PSO had informed the government that because of repeated technical defaults, no bank was ready to open letters of credit to order future oil imports; therefore, it would be impossible to provide fuel on credit.

As it has been highlighted repeatedly the economic managers completely fail to understand gravity of the situation. While PSO is likely to get Rs10 billion to ease its financial difficulties, statement of caretaker Petroleum Minister Sohail Wajahat Siddique sounds most amusing.

He said on Friday that fuels (furnace oil and gas) would be provided to various sectors and consumers purely on the basis of their efficiency. If he goes by the rule he wishes to follow no state owned enterprise could get any fuel supply in the future.

Another point worth laughing that Siddique met with Water and Power Minister Dr Mussadik Malik and both of them agreed to work together to put in place a mechanism for bring down circular debt of PSO in a limited period of 45 to 50 days without recurrence.

Had this statement come from a politician one could have attributed it to ‘an attempt to attain political mileage’, but coming from Siddiqui shocks many. Siddiqui is Chairman of Board of Directors of PSO and he is fully aware the Company is being managed, in fact the entire energy chain.

 Pakistan: Energy Crisis Myth or Reality

At present Pakistan is suffering from worst energy crisis, severely impairing economic activities in the country. The government, through Ministry of Finance has been injecting money to overcome circular debt issue but the situation has gone from bad to worse. Experts have been warning that 'energy related riots may erupt any time'. Some nuisance was created in the past but economic managers completely failed in taking right and prudent steps. They (policy planners), at the best undertake 'surface cleaning' but the root cause remains there. Experts are of the consensus that looming crisis is not because of demand surpassing supply but an outcome of not following good governance.

Extended load shedding of electricity and gas has virtually crippled the economy and become the worst nightmare for general public. Running industries on standby generators is also becoming difficult because of curtailment of gas supply for 'captive power plants' and also sky rocketing prices of POL products in the country. Huge levies are charged on oil and gas to meet the shortfall in tax collection but electricity and gas supply position continues to deteriorate. There are prolonged outages and vehicle owners have to stand in queues for hours to fill CNG.

Line loss of electricity distribution companies and UFG of Sui twins are hovering at historic high levels. While efforts are being made to attribute these losses to depleting transmission and distribution networks, bulk of the losses are nothing but blatant theft, added to this is worn-out networks which results in higher technical losses. It has become almost impossible for electric and gas utilities to revamp their systems due to cash crunch. Consumers, particularly power plants, industrial and commercial consumers and state owned enterprises owe billions of rupees to fuel supplying companies.

To overcome cash crunch these entities have to borrow heavily from the banking system. This on one hand adds to their financial cost that consumers have to pay and on the other hand deprive the investors from seeking loans from commercial banks. As such the first choice of banks remains investing in government securities, which on one hand is a risk free investment and on the other hand offers lucrative rate of return. Financial institutions don't have to do anything except submitting a bid keeping in view the auction target and maturities.

Lately, banks have started making tall claims that the size of their non-performing loans -- as a percentage of total lending and investment -- is on the decline. This in no way shows any improvement in efficiency but investment in government securities which are risk free.

With the reduction in discount rate banks have started complaining about shrinking spreads and also demanding reduction in minimum rate of return on deposits fixed by the central bank. It may not look wrong because profits after tax are on the decline. However, this is because of out of proportion administrative expenses and not because of the floor rate. If banks are serious in improving their income they have to bid farewell to easy income from investing in government securities and also follow austerity.

In power sector, there is excessive reliance on IPPs which enjoy sovereign guarantees. The share of state owned power plants in total electricity generation has become a minuscule percentage. Many of these plants are run either for shorter duration or face closure due to non-availability of fuel (furnace oil and gas) because they don't have the money to pay the cost. While the numbers of units dispatched by distribution companies are on the decline, recovery has reduced to around 30 percent causing severe cash crunch.

Another factor responsible for hike in electricity tariff is the agreements signed with the IPPs. According to these agreements 'fuel cost is a pass-on factor'. The persistent hike in furnace oil price and depreciation of Rupee value necessitate regular upward adjustment of the tariffs. In rental power case it was found that many of the power plants established by the favorite were given billions of rupees as advance and were also paid capacity charges without supplying even a single unit of electricity. It is on record that billions of rupees were recovered from such 'delinquents' and a lot remains to be recovered.

There is a general perception that electricity demand exceeds supply, which is totally incorrect. At present the country has an installed capacity of around 26,000MW (including KESC) but average generation hovers below 18,000MW that further declines when water at dams touches 'dead levels' The prime reason is that power plants, including IPPs are not operated at optimum capacity utilization.

Experts have been asking the government to change country's energy mix but policy planners seem deaf and dumb. Despite being fully cognizant of the gravity of the situation they have completely failed in taking remedial steps. They know that cost of electricity generation at thermal power plants is phenomenal but no hydel plants have been added. Pakistan was required to construct one dam in a decade but no facility has been constructed after the completion of Tarbella in 1976.

Many experts blame delay the in construction of Kalabagh dam a mother of all evils. However, they completely ignore the fact that it is not the only solution. Ideally, the country should have gone for 'run of the river' type hydel plants. This experiment was successful in case of Ghazi-Brotha project and the latest addition is Laraib project sponsored by Hubco, the first ever hydel power plant established by the private sector in Pakistan.

The country has also failed in exploiting Thar coal reserves, often termed one of the largest coal reserves of the world. The delay can be attributed to non-allocation of funds and the most recent being the propaganda that it is not suitable for power generation. Some experts have made the situation even more complex as they insist on coal gasification, which has a very limited viability. In fact coal open pit mining and mine mouth power plant offers an ideal solution but groups having vested interest, have virtually killed the project.

It is also being alleged that oil lobby does not favor construction of hydel and coal-fired power plants. One of the evidence is closure of coal-based Lakhra power plant in Sindh. The plant was closed on the pretext that it was causing 'too much pollution'. However, no one noticed that if required accessories are not installed how can dust emission be controlled?

Energy crisis can be overcome by containing theft, improving recoveries and above all following good governance at every level. The first objective should be to operate the existing facilities at optimum capacity utilization and improving cash flows of state owned distribution companies.

SSGC makes defaulters’ names public

In its quest to recover Company’s massive outstanding dues of Rs. 79 billion, Sui Southern Gas Company initiated stern action against defaulting customers by disconnecting their gas supplies. Majority of these defaulters have already been disconnected whereas hundreds of disconnections are being conducted on daily basis.

The company has also decided to publicize the names of these defaulters through media under six major customer categories i.e. industrial-bulk, industrial, government, bulk, commercial and domestic. Listed below are the top 5 defaulting customers of each of above mentioned six customer categories;

Industrial-Bulk Customers: (Total Outstanding = Rs. 64,612.162 million)

Top-5 defaulters: KESC (Rs. 46,013.890 m), WAPDA (Rs. 3,282.360 m), Pakistan Steel (Rs. 13,434.521 m), DHA Desalination Plant, Karachi (Rs. 1,168.020 m) and Habibullah Coastal Power, Balochistan (Rs. 713.371 m).

Industrial Customers: (Total Outstanding = Rs. 328.013 million)

Top-5 defaulters: Colourital (Pvt.) Ltd., Karachi, (Rs. 90.536 m), Dewan Textiles, Hyderabad (Rs. 86.345 m), Afroze Textile Industries, Karachi (Rs. 72.279 m), Bhittai CNG Station, Karachi (Rs. 44.626 m) and Dewan Mushtaq Textiles, Hyderabad (Rs. 34.226 m).

Government Customers: (Total Outstanding = Rs. 56.649 million)

Top-5 defaulters: Bolan Medical Complex, Quetta (Rs. 20.020 m), Sandaman Civil Hospital, Quetta (Rs. 11.523 m), University of Karachi (Rs. 8.938 m), Superintendant District Jail, Quetta (Rs. 8.921 m) and Sh. Zaid Women Hospital, Larkana (Rs. 7.247 m).

Bulk Customers: (Total Outstanding = Rs. 33.265 million)

Top-5 defaulters: Fazal Textiles, Hyderabad (Rs. 11.570 m), Superintendent Central Prison, Hyderabad (Rs. 11.531 m), Residence Colony Paramount Spinning Mills, Kotri, (Rs. 4.052 m), Barrage Colony, Tando M. Khan (Rs. 3.273 m) and ATF Complex, Eastern By-pass Road, Quetta (Rs. 2.840 m).

Commercial Customers: (Total Outstanding = Rs. 16.730 million)

Top-5 defaulters: Deedar Hussain Janwiri, Larkana (Rs. 5.939 m), Abdul Farooq, Hyderabad (Rs. 3.664 m), Zulfiqar Ali Mawa Bathi, Nawabshah (Rs. 2.864 m), Muhammad Khan, Karachi (Rs. 2.210 m) and Madina Al-Sadaat Hotel, Karachi (Rs. 2.053 m).

Domestic Customers: (Total Outstanding = Rs. 14.172 million)

Top-5 defaulters: Abdul Latif, House # R-32, Shah Khalid Bin Abdul Aziz Colony, Sector 16-A, North Karachi (Rs. 3.121 m), Rais Ahmad, House # R-1, ST-21/1, Sector 16-A, North Karachi (Rs. 3.058 m), Muhammad Kazim, Tawas Khan Lane # 13, Baloch Khan Chowk, Muhallah Salam Road, Quetta (Rs. 3.041 m), Hafiz Nazar Muhammad, Village Ali Abad, Bakrani Taluka, Dokri (Rs. 2.489 m) and Abdul Gafar Unar, Village Ali Abad, Bakrani Takula, Dokri (Rs. 2.464 m).

FFBL expected to post PKR0.13 EPS for 1QCY13

Fauji Fertilizer Bin Qasim (FFBL) is engaged in manufacturing and marketing of urea and DAP fertilizers. The company is the sole producer of DAP in Pakistan. FFBL has designed urea and DAP capacities of 551,000 tons and 650,000 tons respectively. FFBL has its head office in Rawalpindi and production facility located in Karachi. It is a public limited company listed at local stock exchanges and Fauji Fertilizer Company (FFC) owns 50.88% stake in FFB.

The company is expected to announce its 1QCY13 results on 12^th April. It is expected to post profit after tax of PKR121 million (EPS: PKR0.13). This will be in sharp contrast to loss of PKR387 million (LPS: PKR0.41) reported for the corresponding period last year. Analysts don’t anticipate any dividend announcement at the time of announcement of quarterly results this time.

FFBL’s urea plant remained shut for much of Jan‐Feb13 due to inadequate gas supply, in line with the scenario last year. However, gas flow was significantly better than last year, which enabled 65% higher DAP production during 1QCY13 (up by 65% YoY). Urea plant resumed operations in Mar13.

Therefore, analysts expect FFBL’s urea sales around 55,000 tons and DAP sales to at 65,000 tons during 1QCY13 compared to negligible sales of both the products in 1QCY12.

The volumetric rebound is likely to take the company’s net revenues up by 205% YoY to PKR5.9 billion. Gross margins will be supported by 13% sequential decline in Phos Acid contract price to US$770/ton in Jan13, combined with flattish local DAP prices. The average DAP primary margin assumption for CY13 stands at US$264/ton.

It is necessary to mention that FFBL’s 1Q earnings are not reflective of its annual performance, as analysts expect the Company to post net profit of PKR5.4 billion (EPS: PKR5.8) for CY13 (up 25% YoY) on the back of expected 9% YoY higher DAP primary margins and 5% higher urea production.