AKD Research conducted a review of the financial performance of Fauji Fertilizer Company Ltd. (FFC) today. The leading fertilizer producer has demonstrated impressive performance, with earnings exceeding expectations due to higher other income.
Fauji Fertilizer Company Ltd. (FFC) announced its latest financial results, reporting standalone earnings of PKR 25.2 billion (EPS: PKR 17.69), marking a 62% year-on-year increase from PKR 15.5 billion (EPS: PKR 10.93) in the same period last year (SPLY). These earnings surpassed our expectations, driven by higher-than-anticipated other income. In conjunction with the results, FFC declared a cash dividend of PKR 12.0 per share.
The company’s revenue reached PKR 91.8 billion, compared to PKR 57.2 billion in SPLY, reflecting a 61% year-on-year growth. This increase is primarily due to a 4.9-fold surge in DAP offtakes, boosted by the inclusion of FFBL’s volumes following the merger. However, this growth was partially offset by a 6% year-on-year decline in urea offtakes.
Gross margins decreased to 33.7% from 54.5% in SPLY, attributed to a higher proportion of DAP sales and the impact of high-cost granular urea sales. Distribution expenses rose by 57% year-on-year to PKR 8.7 billion, mainly due to increased DAP offtakes during the quarter.
Other income soared by 3.8 times year-on-year to PKR 20.7 billion, significantly surpassing our expectation of PKR 8.0 billion. This increase is likely due to higher-than-expected dividends from power subsidiaries and offshore joint ventures, such as PMP. Further clarification is anticipated.
Finance costs grew by 24% year-on-year to PKR 1.7 billion, primarily due to increased outstanding debt following the merger.
We maintain our ‘BUY’ recommendation on FFC with a target price of PKR 597 per share for June 2026. Our positive outlook on the stock is based on several factors: i) lower gas prices for FFC’s base plants combined with rising DAP core margins, ii) consistent dividend income from power and banking subsidiaries, and iii) improvements in the food business with increased market penetration and cost efficiencies.
Courteesy – AKD Research
