SAFCO Q4 tops estimate on robust revenue, says Al Rajhi Cap

Saudi Arabia Fertilizers Co.’s (SAFCO) Q4 net profit of SAR 285 million came in 8.4 percent above Al Rajhi Capital’s estimate of SAR 263 million which had factored in lower volumes. 

“Higher revenue and lower costs contributed to the beat in net profit, partially offset by lower-than-expected associate income from Ibn-Al-Baytar on account of planned maintenance shutdown,” the brokerage said in an earnings review.

The fertilizer maker made SAR 726 million in revenue for the quarter, 5 percent above estimate.

SAFCO’s gross margin was at the highest level in the last four quarters, increasing by about 11 percent q-o-q.

Compared with the previous quarter, Q4 profit was 57 percent higher, according to SAFCO’s statement.

Key downside risks facing the company are prolonged unplanned shutdowns, decline in urea price due to lower demand especially in Asia, and change in feedstock pricing mechanism, Al Rajhi Capital said.

However, any further improvement in urea prices, would be a positive, the review noted.

Al Rajhi Capital has maintained an ‘underweight’ rating with target price at SAR 60 per share. The stock is currently trading down 1.7 percent at SAR 70.75.