Lower prices hammer Safco profit
Riyadh, July 12, 2009
Saudi Fertilizers Co (Safco) said its net profit fell sharply in the second quarter on lower global prices but its stock closed up after the firm gave a dividend that was higher than its earnings per share.
Safco made a net profit of 480 million riyals ($128 million) in the three months to June 30, which is 60 percent below the 1.19 billion riyals it made a year earlier, it said in a statement on the bourse website.
'The decline in second-quarter (earnings) ... is due to the decrease in international prices,' said Safco, which produces urea and ammonia. It did not give more details.
The earnings came in line with analysts polled by Reuters who had expected the company to post a 59.75 percent drop in second-quarter earnings.
Dubai-based Shuaa Capital said Safco's earnings boded ill for the earnings of fertiliser units of Industries Qatar and remaining fertiliser operations of Saudi Basic Industries Corp, Safco's top shareholder.
Compared to their level a year earlier, Middle-East granular urea prices in the second quarter were on average 57 percent lower, while average Arabian Gulf prices of ammonia were 51 percent down, Shuaa said.
Operating profit in the second quarter was 438 million riyals, down 59 percent compared to the year-earlier period, Safco said. Shuaa said this indicated that the company has kept costs under control.
Safco said it would give shareholders a 5-riyal dividend for the first half of 2009 against 4.02 riyals earnings per share the firm generated during the same period.
This will yield Sabic 536.3 million riyals based on its 42.9 percent holding in Safco. Safco's stock closed 3.33 percent higher.
'We believe our ... (Safco's) 2.9 billion riyals net income forecast for 2009 is likely to prove overly optimistic,' Shuaa's Laurent-Patrick Gally said, without fixing a new forecast for Safco's 2009 earnings.
'Safco shares are likely to remain attractive for those investors who want to hold it for their expected future dividend payments,' he added. - Reuters