KARACHI: The Engro Fertiliser Limited’s unconsolidated profit plunged 31 per cent year-on-year to Rs2.1 billion during the third quarter of ongoing fiscal year.
The company recorded a gross profit margin of 39.2pc compared to 38.3pc in the same period a year ago, which was attributed by analyst Hamza Kamal at Shajar Capital to rising inventory backlog. Net sales dropped 29pc year-on-year due to a 41pc fall in urea offtake to 286,000 tonnes and 2pc lower retention prices.
The reduction in urea offtake was attributed to pile-up of inventory by dealers amid hefty discounts in the quarter under review and expectation of further discounts going forward.
The accretion in gross profit margin came despite an 18pc year-on-year increase in fuel and feedstock prices. The company’s finance cost fell 40.5pc due to constant deleveraging and lower interest rates.
Meanwhile, the Adamjee Insurance Company Limited posted an unconsolidated after-tax profit of Rs709m (eps: Rs2.03) in the January-March quarter from Rs737mn (eps: Rs2.11) in a year ago, a fall of 4pc.
Despite decline in earnings, core underwriting earnings surged 17pc year-on-year. “It supports our stance in favour of narrowing valuation discount,” commented analyst Abdul Ghani Fatani at Intermarket Securities.
The company also announced acquisition of 5m shares of group company Nishat Mills Limited for up to Rs625m, implying willingness to average up its NML holdings to Rs125 a share, creating a premium of 29pc to NML stock’s market price.
The company’s net premiums grew 14pc year-on-year, with impetus from motor segment (47pc growth). Meanwhile, fire and property, marine and aviation, and accident and health fell by 14pc, 23pc and 21pc, respectively.
Claim ratio dropped to 58pc during the quarter from 62pc in a year ago, with support from miscellaneous (claim ratio: 18pc versus 60pc in 2015) and fire and property (36pc versus 43pc in 2015).
Total combined ratio improved to 76pc from 78pc a year earlier. Investment income stood at Rs575.9m, down 10pc year-on-year. This took core earnings–investment income ratio to 52pc from 40pc in January-March, signifying a greater contribution of core earnings to the bottom line.
