DAP Price up: FFBL turns from loss into a profit
Aftab Ahmed
Islamabad: The increase in DAP price, increased margins, and offtake have turned Fauji Fertilizer Bin Qasim Limited (FFBL) from a loss into a profit of Rs 1.3 billion during 1QCY21.
The higher sale price of DAP had pushed the margins of the company higher.
The company had registered a loss of Rs 3 billion on the sale of DAP due to low prices during the same period last year.
The turnaround in earnings is mainly attributable to higher consumption of DAP up by 8% YoY along with an uptrend in DAP prices that went up 44% YoY.
Secondly, dividend income support from AKBL also contributed which announced a pay-out of Rs 3.0 per share in the last quarter. Thirdly, lower finance costs contributed a role that was down 57% YoY.
On the other hand, the sequential decline of 59% was on account of a seasonal decrease by 68 percent in DAP volumes year on a yearly basis and the absence of a re-measurement gain on GIDC.
DAP Price pushed net revenue up
Net revenue escalated by 36% YoY to Rs 13. Billion during 1QCY20 owing to better fertilizer prices and higher DAP offtake.
Gross margin improved and clocked in at 19% in 1QCY21 as against a gross loss of 6% in the same period last year.
Finance cost also declined by 57% YoY to PKR 0.7 billion during 1QCY21 on account of lower interest rates. On the other hand, other income jumped 3.9x YoY to Rs1.2Bn owing to the dividend received from AKBL.
The company reported an effective tax rate of 26% in 1QCY21 as against 3% in the same period last year. We reiterate our BUY stance on the scrip with our Dec’21 TP of PKR 32.0/sh, implying an upside of 19% from the last close, Noor Huda Shaikh analyst BMA Capital Management Limited said.
The profit was mainly due to the higher sale price of DAP and offtake as well as farmers use it and FFBL is the only plant in Pakistan that produces the fertilizer. The country meets the demand of remaining DAP through imports. Therefore, the fluctuation in global prices also impacts the local prices of DAP.
