FFBL posted unconsolidated NPAT of PKR3.31bn (EPS: PKR3.54) in 3QCY20, much better than our expected NPAT of PKR1.22bn (EPS: PKR1.31). This is the first unconsolidated profit after six quarters of losses (first since December 2018). Higher dividends from FFBL Power in Other income was the key deviation from our estimate. Greater profitability in the quarter helped FFBL to curtail losses in 9M and the company posted NLAT of PKR900mn (LPS: PKR0.97) for 9MCY20 – much lower than the NLAT of PKR2.42bn (LPS: PKR2.59) in 9MCY19.

On a consolidated level, the company posted net profits of PKR3.22bn (EPS: PKR3.45) in 3QCY20 as compared to losses of PKR1.32bn (LPS: PKR1.41) in the same period last year.

Key 3QCY20 result highlights:  

§  Net revenues increased by 14%yoy to PKR25.2bn mainly due to higher DAP and Urea offtake. DAP/ Urea sales increased by 24%/ 15% yoy. FFBL’s market share in DAP and Urea increased by 11ppt and 2ppt yoy to 42% and 9% respectively.

§  Gross margins increased by 6ppt yoy to 16% in 3Q. This was mainly on account of 14% yoy decline in phosphoric acid prices and discontinuation of GIDC on both feed and fuel gas. Though, DAP and Urea prices declined by 5% and 14%, respectively, during the period.

§  Finance cost of FFBL has declined by 43% to PKR811mn in 3QCY20. This is mainly attributed to the sharp decline in interest rates, by 625bps.

§  Among other line items: (i) other income increased by 24% yoy to PKR2.54bn potentially owing to dividend from FFBL Power, (ii) effective tax rate of 16% vs 141% in 3QCY19, and (iii) despite increase in offtake, selling and distribution expenses have reduced by 13% yoy to PKR 1.57bn in 3QCY20 (lower transportation cost amid decline in international oil prices were the main reason).

FFBL has posted relatively better result for its core business (vs. previous quarter and last year) and also curtailment of losses from Fauji Foods are decreasing the company’s consolidated losses. We believe that after recent increase in DAP prices and higher expected off-take in 4QCY20, FFBL can post decent earnings in the next result. (Intermarket Securities Limited).