FFBL’s profit jumps to Rs6.3bn in second quarter

July 25, 2024 (MLN): Fauji Fertilizer Bin Qasim Limited's (PSX: FFBL) profit after tax surged to Rs6.25 billion [EPS: Rs4.84] during the second quarter of 2024, driven by steady foreign exchange rate, higher international DAP margins, and improved gas availability.

That compares with a profit of Rs479 million [EPS: Rs0.37] in the same period last year (SPLY).

The gross margins improved to 22.5% as compared to 12.7% in SPLY.

In the first half of 2024,  the company achieved highest-ever half yearly profit after tax (PAT) of Rs10.6bn as compared to a loss after tax of Rs4.9bn in SPLY.

Higher sales volume of DAP 351 KT (including 24KT of imported DAP)  during the six months period as against 274 KT in SPLY and urea 216 KT as against 180 KT in SPLY and improvement in plant efficiency in the second quarter also contributed to the company's financial performance.

With the support of the government of Pakistan, management successfully managed to improve the gas supply to the FFBL, it said in a stock filing on Thursday.

During the six months period under review, gas supply improved significantly to 74% of the allocated volume as compared to 53% in SPLY, which resulted in higher production of Urea and DAR.

Proactive working capital management resulted in a substantial reduction in finance costs to Rs1.1bn in Q2 as against Rs2.8bn in SPLY, and Rs2.1bn during the six months period as compared to Rs5.3bn in SPLY.

Bank deposit income increased by Rs1.71bn in Q2 from SPLY and Rs3.9bn during the six months period from SPLY.

During the second quarter of 2024, other income expanded by 83.4% YoY to stand at Rs4.66bn as compared to Rs2.54bn in SPLY.

Other income also includes a dividend of Rs1.6bn in Q2 from PMP and Rs0.8bn in Q1 from Askari Bank Limited.

On the expense side, the company's administrative expenses rose 16.1% YoY to Rs374.89m in Q2 2024, selling and distribution expenses rose 41.2% YoY to Rs2.21bn, and other operating expenses rose 41.2% YoY to Rs762.36m.

On the tax front, the company paid a higher tax worth Rs5.01bn in Q2 2024 against the Rs1.53bn paid in the corresponding period of last year, depicting a rise of 227.1% YoY.

The company did not incur significant exchange loss during the period, which had negatively impacted the results of 6MCY23 by Rs4.7bn.

The company said that it commends the government of Pakistan's strategy to continue the exemption of sales tax on urea and the lower sales tax rate on DAP in Finance Act 2024.

This approach will enhance farm economics and promote the balanced use of fertilizers, it said.

The sustainability of the fertilizer sector is heavily dependent on a consistent supply of gas, the company noted.

To ensure this, the allocation of indigenous gas should be optimized to capitalize the natural resource, FFBL said, adding that this strategy not only mitigates the risk to food security but also saves substantial foreign exchange by reducing the need for imports.

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