The management of Fauji Fertilizer Bin Qasim Limited (FFBL) held a corporate briefing session on 3rd Nov’22 to discuss the 9MCY22 financial result and future outlook.

Brief Takeaways

· To recall, the company posted a profit after tax of PKR 1,714mn (EPS: PKR 1.33) in 9MCY22 against PKR 6,150mn (EPS: PKR 4.78) in SPLY, down by 72% YoY. The decline in profitability during 9MCY22 was attributable to i) imposition of super tax (PKR 2.7bn), and ii) exchange loss (PKR 4.8bn). The management told that without the imposition of the super tax and exchange loss, the company would have posted a net profit of PKR 9,227mn, up by 50% YoY owed to i) higher urea and DAP prices, and ii) higher dividend from PMP.

· The production of DAP in 9MCY22 witnessed a growth of 3% YoY, settling at 673k tons given higher availability of gas during 9MCY22. Moreover, the company achieved its highest ever monthly DAP production of 77k tons in Aug’22. Furthermore, the company’s plant is expected to undergo ATA in Jan’23.

· The management explained that commodity super cycle resulted in higher DAP prices internationally and due to this, many farmers substituted DAP with urea.

· The management informed that urea and DAP is currently being traded at an MRP of PKR 2,200/bag and PKR 11,280/bag, respectively.

· Regarding FPCL, the management informed that the business is performing well and is financially stable. The management further told that Afghan coal is being mixed with coal procured from other countries. The management further elaborated that the international coal prices are hovering around USD 300/ton while FPCL is procuring coal at a significantly lower price.

· The management informed that the company’s meat business is tapping into international markets.

· The management told that Fauji Food Limited posted a robust sales growth in FY22. Furthermore, Fauji Group made an equity injection of PKR 11bn.

· Regarding the Prime Minister’s Kissan package, the management told that the package will support the farmers effected by floods. Furthermore, the management informed that the company agreed to decrease DAP prices after series of talks with the government. The management iterated that the phosphoric acid has declined internationally and the company intends to pass on the benefit to the farmers.

· The management said that the revision in wheat support price will encourage the farmers during Rabi Season, which will result in higher DAP offtake.

· The management told that two gas fields are expected to be integrated with SSGC, which will improve gas availability.

· The management informed that the company is expected to procure phosphoric acid at a price of USD 1,200/ton during 4QCY22.

· The company projects industry’s urea and DAP offtake to reach 6,600k tons and 1,500k tons, respectively in CY22.

Courtesy – AHL Research