KARACHI - Fauji Fertilizer Company (FFC) posted an EPS of Rs13 with a final dividend declaration of Rs3.25 per share; taking full year diluted DPS to Rs12.75, while FFCs bottomline expanded by 35 percent on the back of core operational strength and healthy dividend income received from subsidiary operating in the DAP market. The urea sales volume by FFC (own manufactured and imported) rose by a mere 2.7 percent in CY09 versus CY08 but a massive surge of 20 percent in average urea selling price to Rs 701 per bag caused urea revenue to jump upwards pulling along FFCs topline. Fall in DAP prices dragged down lower margined DAPs share in the revenue hence pumping up gross margin by 288bps. Moreover, total 1.5x growth in dividend income from FFBL (Rs 1,901m in CY09E against Rs 760m received in CY08) plumped up other income which allowed FFC to set off the rise in other expenses and finance costs. Financial charges for CY09 were expected to be bloated on account of higher interest rates against CY08 and rise in long term financing towards the latter part of CY08. However, it was surprising to note that financing costs were considerably shrunken in fourth quarter calendar year 2009 (Rs 119m against quarterly average for the year of Rs 275m), and substantial reduction in short term borrowing may be a likely reason for dry interest costs in 4QCY09. Re-entry into the DAP market by importing 40kt of DAP in November 2009, is indicative of FFCs likely participation in DAP market at least until FFBL remains shut for its annual maintenance in Jan-Feb 2010. With urea prices likely to maintain its upward trajectory (currently at Rs 750 per bag against Rs 730 in Dec 2009 and an average of Rs701 for CY09) and further impetus from DAP sales, FFC may show top-line growth, and supporting dividend income is likely to keep FFC in a healthy position. Lubaina Jamali, an investment analyst, said FFC is likely to approve Rs 3b equity investment in 49.5MW wind energy project in its AGM to be held this month, and the project was estimated to cost $130m in Dec08 and was projected to be completed within 12-15 months of achieving financial close. It is believed that FFC might use its own resources to make the investment, hence financial charges are unlikely to take a hit, as at Government of Pakistan guaranteed 15 percent ROE, FFCEL is likely to add to FFCs bottomline by CY12.