The management of Fauji Fertilizer Bin Qasim Limited (FFBL) held its last corporate briefing session on 11 November 24 to discuss the 9MCY24 financial result and future outlook.
Brief Takeaways
• To recall, FFBL posted a highest ever PAT of PKR 18,569mn (EPS: PKR 14.38) in 9MCY24 against PKR 354mn in 9MCY23 due to i) jump in urea offtake by 42% YoY amid higher urea production because of better availability of gas, ii) increase in urea and DAP prices by 51% and 15% YoY, respectively, iii) higher income from cash and cash equivalents tagged with a dividend income from subsidiaries and associates such as AKBL and PMP, and iv) decline in finance cost given lower short term borrowings.
Fertilizer business:
• The company’s DAP market share increased to 58% in 9MCY24 from 58% in SPLY. Meanwhile, DAP sales decreased by 8% YoY to settle at 571k tons in 9MCY24 against 619k tons in 9MCY23, amid shrinking market size due to weak agronomics.
• DAP production increased by 39% YoY in 9MCY24 due to a turnaround and an inventory management shutdown in 2023.
• Urea production showcased a 51% YoY jump in 9MCY24, supported by improved gas availability (77% of allocation during the period vs. 56% in SPLY) and the absence of a turnaround.
• The company plans to perform a turnaround at its urea plant in Jan’25.
• The management informed that primary margins during 9MCY24 were ~USD 132/ton (9MCY23: USD 156/ton).
• The company’s market share in urea increased to 8% in 9MCY24 from 5% in SPLY.
• During 3QCY24, FFBL’s local urea prices traded at an average of PKR 4,275/bag against the international urea price of PKR 6,400/bag.
• Considering farmers’ lower purchasing power, management expects CY24’s DAP sales to be 1.5mn—1.6mn tons.
• The company has ordered phosphoric acid for USD 1,060/ton for 4QCY24.
• Despite stable phosphoric acid prices during 9MCY24 and higher DAP prices internationally, the company chose not to capitalize on this increase to support farmers.
• In 9MCY24, FFBL had a cash and cash balance of PKR 43bn. Furthermore, the company pre-paid PKR 12bn loans. Before completing the amalgamation in Dec’24, the company aims to settle all remaining loans.
• The management expects the plant operation to remain smooth, given the adequate gas supply.
• The management shared that the shareholders during the EOGM held on 4th Nov’24 approved the amalgamation of FFBL with FFC. The only remaining approval required is from the court, with a hearing scheduled for 18th Nov’24.
• The management expects the company to have 20k – 25k tons of DAP inventory left in Dec’24.
• PMP operations have recently improved, become profitable, and declared a PKR dividend of 1.8bn.
• The management shared that plans for the new DAP plant are under consideration.
• Regarding the Kissan Card Program, the management noted that it has started gaining traction among farmers, which could offer some support to them.
• Management expects international DAP prices to rise to USD 635–640/ton in 4QCY24, with a potential decline in 1QCY25.
Power business
• The business achieved a dispatch factor of 99% during 9MCY24, compared to 75% in SPLY.
• Management reiterated that FPCL currently uses a blended coal mix consisting of 35% local and lower-cost/quality imported coal and 65% high-quality imported coal.
• A turnaround is planned for the upcoming year, after which the coal mix will shift to 55% local and lower-cost/quality imported coal and 45% high-quality imported coal.
Dairy business
• Fauji Food Limited’s (FFL) net profit surged by 548% YoY in 9MCY24, while volumes improved by 15% YoY during the period.
Courtesy – AHL Research
