October 24, 2023 (MLN): Fauji Fertilizer Bin Qasim Limited (PSX: FFBL) has made a significant turnaround in the third quarter of 2023, reporting a profit after tax of Rs5.3 billion, as compared to the loss after tax of Rs1.7bn in same quarter of last year (SQLY).
During the quarter, revenue clocked in at Rs70bn as compared to Rs23bn in SQLY, a growth of 3.21x.
The gross profit, operating profit, and profit before tax have also increased significantly by 2.76x, 3.05x, and 5.31x respectively as compared with SQLY.
During Q3 of 2023, high inflation and unprecedented policy rates continued to affect the business.
The Rupee, however, managed to settle at strength against the US Dollar after quite some volatility earlier in the quarter.
The company received 3,392 MMSCF gas supply during Q3 as compared to 4,936 MMSCF in the SQLY and as against 6,256 MMSCF of allocation by the government, representing a decline in gas supplies by 31% and 46% respectively.
Consequently, Urea and DAP production declined by 43% and 7% respectively in comparison to SQLY.
The international phosphate fertilizer margins improved in the later part of Q3.
DAP availability remained tight in the local market. At first, importers were reluctant to import DAP due to the volatility of prices in the international market along with the uncertainty of foreign exchange parity.
Later on during the quarter, DAP was not available for prompt shipment in the international market.
FFBL was the only entity with inventory to serve the market.
Management strategized early liquidation of DAP inventory at optimal margins and exercised prudent financial management.
During Q3, the company also concluded the sale of its entire shareholding (95.07%) in Fauji Meat Limited to Fauji Foundation as part of its strategic divestment plan, to focus on the core business.
This transaction has resulted in a gain of Rs268m and a cash inflow of Rs4.3bn, which will save significant finance costs in times to come.
Nine months consolidated results
FFBL's profits in 9MCY23 declined substantially to Rs163 million [LPS: Rs0.42] from Rs3.6 billion [EPS: Rs2.68] reported in SPLY, depicting a fall of 95.5%.
As per the results made available by the company to the PSX, this decrease was primarily attributed to the reduced earnings of FFBL.
On the other hand, there was a significant improvement in the financial results of Fauji Foods Limited (FFL) to the tune of Rs1.8bn.
FFBL reported a gross profit of Rs26bn as compared to Rs24bn in SPLY, while operating profit clocked in at Rs18.2bn as against Rs17.6bn in 9MCY22.
The company stated that FFL is pursuing the strategy of margin assertive growth with a focus on internal efficiencies with consistency.
During the nine-months period, FFL has achieved an 83% increase in sales revenue, which was reported at Rs15bn as against Rs8bn in SPLY, and 3.5 times growth in gross margins, 12.3% as compared to 3.5% in SPLY.
FFL has achieved its highest-ever quarterly profit after tax of Rs38.5m, as against the SPLY's loss after tax of Rs690m.
Outlook
As FFBL is the only local producer of DAP, which is necessary for better yield, and is also a leading producer of Urea, the company strongly urged that the government should take immediate steps to prioritize the fertilizer sector for gas supply to avoid such shortages in the country and save scarce foreign exchange on import of DAP and Urea.
The company stated that it is well-positioned to continue its financial performance in Q4 2023.
However, the supply of allocated volumes of gas in the coming winter season and the stability of PKR against the US Dollar will remain critical for the company.
| Consolidated (un-audited) Financial Results for Nine months ended 30 September, 2023 (Rupees in '000) | |||
|---|---|---|---|
| Sep 23 | Sep 22 | % Change | |
| Sales | 157,967,426 | 108,771,272 | 45.23% |
| Cost of sales | (132,220,345) | (84,295,001) | 56.85% |
| Gross Profit | 25,747,081 | 24,476,271 | 5.19% |
| Sales and distribution expenses | (5,712,598) | (5,281,920) | 8.15% |
| Administrative expenses | (1,838,476) | (1.545,191) | – |
| Other Gains/ (losses) | (861,704) | (702,943) | 22.59% |
| Exchange gain/ (loss) – net | (4,956,775) | (7,426,599) | -33.26% |
| Share of profit of associate and joint venture – net | 3,663,054 | 2,201,504 | 66.39% |
| Other Income | 1,349,703 | 4,525,611 | -70.18% |
| Other expenses | (639,699) | (910,228) | -29.72% |
| Finance cost | (10,377,298) | (5,144,136) | 101.73% |
| Profit before taxation | 6,373,288 | 11,737,560 | -45.70% |
| Taxation | (4,598,887) | (5,987,126) | -23.19% |
| Profit / (loss) after taxation from Continuing operations | 1,774,401 | 5,750,434 | -69.14% |
| Discontinued operations – net of tax | (1,610,954) | (577,045) | 179.17% |
| Profit/ (loss) for the year | 163,447 | 3,628,198 | -95.50% |
| Basic earnings/ (loss) per share | (0.42) | 2.68 | – |
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Posted on: 2023-10-24T09:59:03+05:00
