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FFBL to expand DAP segment in the year to come

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November 3, 2021 (MLN): Fauji Fertilizer Bin Qasim Limited (FFBL), the country’s sole DAP producer is up to expand its DAP segment in the year to come. The further details regarding the expansion project will be shared by the company within the next 6 months, the management of the company recently informed while holding a corporate briefing session.

The company anticipated an optimistic future for DAP and expects the margins to remain at the current level as the Company has successfully achieved an 8% share of the Urea market in September’21 despite lower production as compared to the corresponding period, as per briefing takeaways covered by Darson Securities.

The domestic DAP market is estimated to have declined by 13% from 1,373 KT to 1,198 KT primarily due to continuously rising international prices together with the weakening of Pak Rupee against the US dollar and availability of cheaper alternatives. During 9MCY21, DAP prices increased by 77% YoY due to exports restrictions from China, the biggest exporter of DAP coupled with increased raw material cost.

However, irrespective of the decline in the DAP market, the Company continues to lead by further increasing its market share to 43% (Sep 2020: 41%). International DAP prices are currently hovering around USD 680 per ton (CFR Pakistan) as compared to USD 360 per ton (CFR Pakistan) at the close of the comparative period.

The management also disclosed the procurement of phosphoric acid at the rate of $1330. Meanwhile, the management was of the view that the current fluctuations in coal prices will not have any significant impact, since FFBL coal suppliers provided decent deals.

On the energy front, the management informed that the RLNG prices for the company will remain the same as per policy rate until any amendments are made. Presently, the company is currently receiving 24-28MW electricity from FFCEL for plant operations.

The house was also informed about the recent purchase of 22-48MW of electricity from FFBL Power to meet its steam requirement.

Management also discussed key highlights of Fauji Foods Limited (FFL) and shared that FFL loss declined by 49% YoY in 9MCY21 due to higher sales amid a recovery in market share of tea whitener and UHT segment along with the introduction of new products by the company.

Furthermore, management also discussed investment in Fauji Meat Limited (FML) and disclosed that the company is in talks with both local and foreign firms and evaluating different options including joint venture or toll processing and further investment in the back-end supply chain.

The company is also expecting good dividends from PMP and AKBL in the future given the improvement in the business dynamics of these subsidiaries.

On the demand front, management expects Urea offtake for CY21 to increase by 5.1ppt YoY to 6.35mn tons due to strong agronomics. However, DAP offtake is expected to decline by 8.8ppt YoY to 2.0mn tons in CY21, a report by Foundation Securities noted.

In addition, the management also discussed the financial performance of the company.

While global as well as local businesses are impacted by COVID-19 in one way or the other, the Company remained stuck to the strategy and rolled out a comprehensive operating plan to ensure the security of its supply networks, marketing operations, comfortable work environment, and minimal operational disruptions. This helped to achieve operational excellence and deliver exceptional financial performance resulting in increased value for its stakeholders.

The company posted a consolidated net profit of Rs5.96 billion (EPS: Rs4.41) in 9MCY21 compared to a net profit of Rs24.41mn in the same period a year ago.

This splendid performance is mainly due to increased DAP sale price, higher other income on the back of an increase in the share of profit from associated companies coupled with lower finance cost amid lower mark-up rates.

The company has achieved a consolidated net turnover of Rs81.64bn which is 34% higher as compared to the same period last year’s turnover of Rs61bn due to the hike in DAP prices.

Apart from that, since the rabi season has arrived, the demand for DAP has also been increased. Resultantly, the gross margins of the company during the said period scaled up from 17% YoY to 24% YoY.

The management also told that the government policies are in the favor of the company and the uninterrupted gas supply is there to meet the fertilizer demand during Rabi season.

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Posted on: 2021-11-03T11:59:45+05:00

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