FATIMA noticed an increase in other expenses denting profitability 1QCY23

Fatima Fertilizer Company Limited (FATIMA) announced its 1QCY24 financial results today, where the company posted earnings of PkR8.4bn (EPS: PkR4.0) vs. PkR10.0bn (EPS: PkR4.8) in the preceding quarter, changing by –16%QoQ/+108%YoY. The said decline in quarterly earnings is attributed to lower other income and elevated other expenses, which offset the higher gross profits.

· Topline clocked in at PkR66.0bn vs. PkR74.0bn in the quarter before(↓11%QoQ), primarily attributable to the lower sales volumes, where Urea/NP/DAP sales have fall by 16%/14%/89% QoQ, respectively.

· Gross margins improved significantly to 41.5% compared to our expectations of 24.3%, with variance likely attributed to the spread out of negative margins from imported urea throughout the year (same as EFERT).

· Other income witnessed a decline of 51%QoQ to PkR2.4bn vs. PkR5.7bn in the quarter before, primarily due to the absence of one-time gains recorded in 4QCY23.

· Other expenses surged to PkR5.9bn compared to PkR2.3bn in the previous quarter, an increase of 153%QoQ, possibly due to some impairment charges on investments. Further clarity on this regard is awaited.

· Finance cost clocked in at PkR822mn compared to PkR1.1bn in 4QCY23 (↓22%QoQ), mainly on the back of reduced borrowings.

· Furthermore, taxation during the period also remained higher, with ETR calculating to 49% vs. 42% in SPLY.

Courtesy – AKD Research

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