FFC profit goes up by 36%

Aftab Ahmed

Islamabad: Fauji Fertilizer Company Limited (FFC) has recorded a profit of Rs 5.8 billion in 1QCY21, up by 36 percent, mainly due to improved pricing dynamics of both the Urea and DAP segment.

The fertilizer companies have reported higher profits in Pakistan due to demand in the agriculture sector. The prices of DAP and fertilizer had also gone up.

The FFC reported earnings of Rs5.8 billion (EPS: PKR 4.6) for 1QCY21, registering a profit rate of 36% YoY. The reason behind better profitability during the period is improved pricing dynamics of both the Urea and DAP segment, and higher other income due to dividend of PKR 3.0/sh announced by AKBL in the previous quarter.

 On a sequential basis, earnings dipped by 18%, owing to a seasonal decline in fertilizer offtake down, by 2% QoQ and absence of fair value gain on GIDC. The company also announced a dividend payout of Rs 3.5 per share along with the result.

Due to higher DAP offtake up by 1.9x YoY along with an uptrend in fertilizer prices, net revenue expanded by 5% YoY to PKR 21.5Bn during the period. On the other hand, the sequential decline of 26% in top-line is attributable to lower offtake due to seasonal factors.

Gross margin witnessed an accretion of 3/10 ppts YoY/ QoQ owing to improved urea margins following the removal of the GIDC levy. The company recorded a decline of 38% YoY in finance cost to PKR 0.4Bn during 1QCY21, owing to a lower interest rate.

On the other hand, other income jumped by 58% YoY to PKR 2.7Bn mainly due to dividends received from AKBL. The sequential decline of 63% in other income is on account of the absence of a re-measurement gain on GIDC.

We reiterate our BUY stance on the scrip with our Dec’21 TP of PKR 132/sh, which implies an upside of 27% from the last close, Noor Huda Shaikh analyst, BMA Research BMA Capital Management Limited said.