The management of Fauji Fertilizer Bin Qasim Limited (FFBL) held a corporate briefing session on 26th Jul’23 to discuss the 1HCY23 financial result and future outlook.
Brief Takeaways
To recall, the company posted a loss after tax of PKR 4,950mn (LPS: PKR 3.83) in 1HCY23 against a net profit of PKR 3,410mn (EPS: PKR 2.64) in SPLY. The loss was recorded amid i) massive exchange loss (~PKR 4.6bn) in 1QCY23, ii) declining international price of DAP and consequent fall in DAP primary margin, iii) higher finance cost owing to hike in interest rate, and iv) reduction dividend from PMP.
Fertilizer business:
The company’s market share of DAP improved to 55% in 1HCY23 compared to 53% in SPLY. Meanwhile, DAP sales plummeted by 12% YoY, settling at 274k tons in 1HCY23 against 311k tons in 1HCY22. The management claims the higher DAP price due to unstable PKR/USD parity resulted in lower demand and higher substitution with urea.
The management informed that primary margins during 2QCY23 reduced to USD 64/ton from USD 160/ton in SPLY due to a fall in international DAP and phosphoric acid prices.
The company’s market share in urea declined to 6% in 1HCY23 from 8% in SPLY, while the sales reduced by 29% YoY to clock in at 186k tons.
FFBL’s local urea prices are trading at PKR 3,052/bag against the international landed price of PKR 5,671/bag.
The management reiterated that the company is actively contesting the imposition of super tax in a court of law.
The company believes that the farm economics will improve going forward, given that yields of first-picked crops have been robust, resulting in higher DAP demand.
The management said that during 1HCY23, the company witnessed a shortfall of gas supply from SSGC by 33% YoY. The company is engaging with the Government and SSGC to improve the future gas supply.
Power business (75% stake):
The management highlighted that FPCL continues to remain profitable. The management further reiterated that the company uses a coal mix, which includes Thar coal.
The management shared that the technical fault impacts the FPCL in 2 STGs, providing power to FFBL.
Meat business (95% stake):
The management informed that the company’s meat business (Fauji Meat Ltd) continues to be EBITDA positive, posting PKR 12mn in 2QCY23 (PKR 16mn in 1HCY23). In addition, the business’s capacity utilisation has also witnessed improvement.
The management shared that the FFBL has received a binding conditional offer from Fauji Foundation to purchase 100% of the shares owned by the company in its subsidiary Fauji Meat Limited (FML), which constitutes 95.07% of the shares in FML for a consideration of PKR 4.3bn. FFBL will hold EOGM on 18th Aug’23 to decide regarding this. If the decision to sell FML is made, the proceeds will be used to reduce borrowings of FFBL.
Dairy business (72% stake):
The management said that Fauji Food Limited (FFL) posted a revenue growth of 105% YoY in 1HCY23.
FFL’s EBITDA remained positive, posting a healthy growth of 196% YoY in 1HCY23, while the company’s LAT plunged by 88% YoY.
Courtesy- AHL Research