Analyst Briefing: FFBL plans to use proceeds from sale of wind plants to lower finance costs

August 5, 2021 (MLN): Fauji Fertilizer Bin Qasim Limited (FFBL) recently held a briefing session with analysts to discuss the latest financial results and the prospects for the future.

To recall, the company posted a turnaround in earnings and reported a profit worth Rs1.88billion in 1HFY21 against the loss of Rs3.22bn in the same period last year (SPLY).

The turnaround in net income was primarily attributable to higher DAP margins, lower finance cost (FC), absence of one-off impairment charges and improved agricultural economy. Adequate amounts of dividends from its subsidiaries (Askari Bank, Pakistan Macro Phosphoric S.A (PMP) and Fauji Power Company limited FPCL) also helped lift earnings.

In the light of improved farm economics, an increase in support prices of commodities and the government’s focus on the agriculture sector have enabled farmers to invest in nutrients. The company expects the demand for DAP will be higher in the future. If the international demand for DAP remains the same, in view of the research report of Darson Securities, CY21 could experience a shortage of DAP products in the local market and chances are that prices will increase.

According to the key takeaways covered by JS Global, the management of the company stated that the proceeds from the sale of its wind power plants (FWE I & II) will be received by the end of 3QCY21, the company plans to utilize these proceeds to lower its finance costs.

The management is optimistic that Fauji Foods Ltd (FFL), a wholly-owned subsidiary of FFBL, will post a positive bottom line from next year onward. The Company has shown considerable improvement in the last year under the new management team and also saw the launch of some new products, Waqas Ghani, Research Analyst at JS Global said in a note.

With regard to Fauji Meat Limited (FML), the company is currently exploring options to divest its meat business, Faisal Sajjad, Analyst at Darson Securities said.

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