Fauji Fertilizer Company expects the Mari’s gas prices to remain unchanged.

Fauji Fertilizer Company Limited held its corporate briefing today to discuss the financial results 9MCY24 and the future outlook.

Key highlights of the briefing are as follows:

Total urea offtake (FFC+FFBL) during 9MCY24 increased to 2.32mn tons compared to 2.16mn tons in 9MCY23, with the Fauji fertilizer group increasing its market share from 44% to 51%.
DAP offtake in 9MCY24 decreased by 10.3% YoY to 0.62mn tons compared to 0.69mn tons in 9MCY23. Fauji fertilizer group market share for DAP declined to 66% from 70% in 9MCY23.
FFC’s three plants have been operating at higher rates due to improved gas availability. However, due to weak farm economics, the market size for urea and DAP has contracted by 7% and 3%, respectively.
Industry inventory levels for urea and DAP have increased to 600k tons and 366k tons, respectively, compared to the required levels of 400k tons for urea and 100k tons for DAP.
According to management, the industry expects to liquidate excess inventory by year-end, reaching a target inventory of 400k tons. Moreover, no urea imports are anticipated for the coming year.
The difference between local and international urea markets is approximately PkR 2,125 per bag.
The company recently acquired a stake in AGL from BOP and NBP, bringing its total holding to 30%. Management expects this transaction to be completed by the end of January 2025.
Additionally, FFC has allocated CAPEX for AGL’s turnaround based on due diligence findings.
In response to inquiries about potential gas price hikes, management indicated that they expect Mari’s gas prices to remain unchanged.
Regarding the amalgamation, FFC’s management stated that the company is in the process of filing EOGM meeting minutes in court, with a hearing scheduled for November 18, 2024. Approval is anticipated by year-end, followed by other regulatory approvals from SECP and PSX, and is expected to take approximately one month.
Management also explained that no cash dividend was announced, citing concerns over its impact on liquidity, valuation, and the swap ratio.
FFC plans to expand its Sona Centers nationwide to establish a direct-to-farmer distribution channel. To date, 70 centres have been inaugurated.
Phase 2 of the PEF project has commenced. The company has issued compressor purchase orders, with delivery anticipated by the second quarter of 2025. Project completion is expected in the first quarter of 2026.
The company’s wind IPPs are profitable and consistently pay dividends, and management remains optimistic about a turnaround in food sector investments (FFF and FFL). According to management, FFL has shown improved profitability, while FFF is currently breaking even.
To recall, FFC reported its highest-ever profit of PkR 42.5bn in 9MCY24, driven largely by an increase in other income, which contributed 42% of profit before tax.
The above report is based on a research report from BMA Research