To recall, Fauji Fertilizer Company (FFC) announced its 3Q2021 unconsolidated earnings of Rs6,452mn (EPS of Rs5.07), up 39% YoY and 78% QoQ.
Agri sector growth during FY21 remained at 2.8% which is expected to grow to 3.5% in FY22.
FFC’s Urea market share has reduced from 44% to 39% in 9M2021 due to limited production capacity due to plant turnaround and higher market share taken by LNG plants. However FFC’s DAP market share remained unchanged at 10% during 9M2021.
International Urea prices are hovering around US$854/ton translating into an domestic price of Rs9,550/bag. That said, domestic Urea is trading at a discount of Rs7,832/bag compared to international prices.
International DAP prices have increased to US$637/ton in Nov-2021 compared to US$338/ton in Jul-2019. Similarly freight cost have also increased to US$45/ton in Nov-2021 to US$30/ton in Jul-2019.
Management told that there is certain pressure from Government to not increase prices which will eventually hit their margins.
Management has expressed their concerns on depleting gas reserves of Mari petroleum (MPCL) and Sui Southern Gas (SSGC).
Company has booked one time accounting gain of Rs5.93bn on account of GIDC in 4Q2020 which is reversed partly by Rs1.82bn till 9M2021. Rest of it will be reverse over the next three years. Currently company have taken stay order from Sindh High Court (SHC) against payment of GIDC.
Company has completed acquisition of FWEL-1 (stake 100%) and FWEL-2 (stake 80%) at Rs7.49bn and Rs6.02bn respectively. The power generation capacity of each project is 50MW taking FFC total capacity to approx. 480 MW.
Subsidy receivables of Rs6.96bn and Sales Tax refunds of Rs16.67bn is affecting FFC’s working capital and will continue to remain a big challenge for the industry as well.
Courtesy – AHCML Research