Karachi: Dawood Hercules Corporation had notified the stock exchange yesterday that gas supply to their 100% owned subsidiary Dawood Hercules Fertilizers Limited’s plant has been suspended by Sui Northern Gas Pipelines Limited (SNGPL) due to curtailment in gas supply on the SNGPL network.
According to Alfalah Securities Limited, Sui Northern Gas Pipelines Limited (SNGPL) had informed DH Fertilizers that the supply of gas from several gas fields on their network has been cut due to several sabotage activities and in order to manage the demand‐supply situation, the gas distribution company has temporarily suspended gas supply to their fertilizer plant.
Gas supply to DH Fertilizers Ltd. remained suspended for a total of 197 days during CY11 from the SNGP network, which as a consequence severely hampered the urea production of the company as the plant was able to produce only 199.9 thousand tons against 456.12 thousand tons produced in CY10. The gross profits of DH fertilizers also fell from 40.2% to 35.9% in CY11 mainly due to the company incurring additional production cost for restarting fertilizer operations after every notification of gas supply resumption. Alfalah Securities Limited expects more or less the same situation would continue during CY12 keeping in view the country’s increasing energy demand where no significant addition has been made to improve the supply situation. Alfalah Securities Limited recommends a Hold stance on Dawood Hercules Corp. at current levels as it trades at a CY12E P/E of 6.4x.