Bargain purchase- A key to FFC profitability

October 27, 2021 (MLN): Fauji Fertilizer Company Limited (FFC) on Wednesday has unveiled its financial result whereby the company posted net profits of Rs28.23 billion (EPS: Rs22.19), depicting a surge of 56.5% YoY during 9MCY21 as opposed to Rs18.03bn (EPS: Rs14.17) in 9MCY20.

This increase in profits is mainly attributable to a one-off gain booked as a bargain purchase of Rs6.81bn and a higher share of profits from associates.

During 9MCY21, the net sales of the company showcased a jump of 6.7% YoY, clocking in at Rs77.64bn owed to 2% and 56% YoY growth in urea and DAP prices, respectively.

Given this, the gross margins have expanded by 2.54ppt to 38.24% during the said period under review.

On the cost front, the company observed an 8.6% YoY increase in administrative expenses and distribution cost whereas other expenses surged by 16% YoY to Rs2.12bn whereas, the financial cost of the company declined by 10% YoY on the back of lower interest rates.

Notably, the major positive highlight is the one-off gain booked as a bargain purchase of Rs6.81bn. As per a research note by Intermarket securities, this is possibly due to a revaluation gain on the purchase of Fauji Wind Energy I-II.

Furthermore, the company saw an 89.5% increase in the income received from the share of profits of associates and joint ventures that stood at Rs6.74bn.

Among other line items, the company expensed out Rs1.81bn on the back of the unwinding of GIDC liability during the review period.

On the tax front, the company booked a tax expense of Rs7.04bn, up by around 21% YoY in 9MCY21.

Alongside financial results, the board of directors has announced an interim cash dividend for the quarter ended September 30, 2021, at Rs3.75 per share i.e. (37.50%). This is in addition to the interim dividend already paid at Rs6.10 per share i.e., 61%.

Consolidated Profit and Loss Account for the nine months ended September 30, 2021 ('000 Rupees)

 

Sep-21

Sep-20

% Change

Turnover – net

 77,644,161

 72,777,972

6.7%

Cost of sales

 (47,953,902)

 (46,798,703)

2.5%

Gross Profit

 29,690,259

 25,979,269

14.3%

Administrative expenses and distribution cost

 (6,465,248)

 (5,950,712)

8.6%

Finance cost

 (1,677,405)

 (1,861,435)

-9.9%

Unwinding of GIDC liability

 (1,814,573)

 –

 

Other expenses

 (2,119,894)

 (1,825,157)

16.1%

Other income

 4,104,120

 3,931,539

4.4%

Bargain Purchase Gain

 6,808,824

 –

 

Share of profit of associates and joint venture

 6,740,678

 3,556,280

89.5%

Profit before taxation

 35,266,761

 23,829,784

48.0%

Provision of taxation

 (7,040,431)

 (5,796,412)

21.5%

Profit after taxation

 28,226,330

 18,033,372

56.5%

Earnings per share – basic and diluted (Rupees)

 22.19

 14.17

56.6%

 

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Posted on: 2021-10-27T15:17:04+05:00

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