FATIMA: Higher taxes erode net earnings

August 25, 2022 (MLN): Fatima Fertilizer Company Limited (FATIMA) has announced its 1HCY22 financial results wherein it posted a 37% YoY fall in its consolidated net profits, clocking in at Rs5.86 billion (EPS: Rs2.79), compared to the profits of Rs9.31bn (EPS: Rs4.44) in the same period preceding year.

The decline in the company’s bottom line was attributed to 2.5 times YoY jump in taxes.

The company declared a profit before income tax at Rs18.84bn in 1HCY22 which is 30% higher than a pre-tax profit of Rs14.45bn in the same period of the last year.

On the taxation front, FATIMA booked Rs13bn taxes during 1HCY22, showing over a two-fold increase against Rs5bn taxes paid in SPLY, due to the imposition of super tax in the large-scale industry.

Going by the results, the topline of the company clocked in at Rs62bn, registering 32% YoY growth compared to the same period last year, due to an increase in prices and volumetric growth.

However, the cost of sales increased by 29% YoY during 1HCY22 on the back of additional production volumes from the Sheikhupura plant, shifting of the fixed gas price regime to the normal gas price upon completion of the concessionary period for its Sadiqabad plant, higher input costs of raw materials along with inflationary impacts. As a result, the gross margins of the company decreased by a mere 1ppt to 45% from 44% in 1HCY21.

On the costs front, the company observed a 27% YoY upsurge in distribution costs. While administrative expenses went up by 36.5% YoY and a whopping 2.65x YoY jump in other operating expenses.

Notably, the other income surged by 77% YoY to Rs886mn which may be due to higher short-term investments and dividend income.

Further, the financial cost of the company inched lower by 3% YoY while the share of profit from an associate moved up by 42% YoY.

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