FFC: Higher margins and lower finance cost lift earnings

July 30, 2021 (MLN): Fauji Fertilizer Company Limited (FFC) has announced its financial results for first half year ended June 30, 2021. As per the results, the company has witnessed net profits of Rs11.56billion (EPS: Rs9.09), depicting an increase of 18.2% YoY as opposed to Rs9.79bn (EPS: Rs7.69) reported in the same period last year.

In conjunction with financial results, the board of directors has announced an interim cash dividend for the half year ended June 30, 2021 at 2.60 per share i.e., 26%.

This increase in earnings can be attributed to higher gross margins amid flattish revenue and lower finance cost.

During the period under review, the sales revenue of the company slightly declined by 0.2% YoY to Rs46.46bn due to reduction in urea offtake while DAP offtakes increased, but more than decrease in cost of sales (down by 3.2%) made the gross profits increased to Rs17.55bn, expanding gross margins from 36% to 38%.

On the cost front, the company observed a meager increase in terms of administrative expenses and distribution cost by 3% whereas other expenses surged by 8.4% to Rs1.3bn mainly due to the unwinding of GIDC liability of Rs1.20bn during the period under review.

Notably, the financial cost of the company plunged by 36% YoY on the back of lower interest rates. Meanwhile, the share of profits of associates and joint venture stood at Rs3.63bn, up by 6.64x YoY.

On the tax front, the company booked a tax expense of Rs4.30bn, up by around 19% YoY in 1HCY21.

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