April 27, 2020 (MLN): Fauji Fertilizer Company Limited (FFC) has disclosed its 1QCY20 financial results today, as per which the company reported a 2.3x increased in net profits after tax to Rs 4.28 billion with EPS at Rs 3.37 per share against Rs 1.87 billion (EPS: Rs 1.47) gained in the same quarter of last year.
The result was accompanied with an interim cash dividend of Rs 25 per share i.e. 25%.
The increase in the company’s profitability was primarily attributable to higher gross margin which rose from 29% in 1QCY19 to 36% in the quarter mentioned above despite the industry downturn of 25% YoY. The increase in gross margin was attributable to higher urea offtake and exemption of GIDC.
To recall, the government abolished GIDC in February 2020, as a result, FFC's per bag production cost declined by Rs400/bag. However, the company reduced its urea selling price by just Rs300/bag in anticipation of a hike in gas prices, pocketing additional Rs100/bag in the first two months of the outgoing quarter. Moreover, due to higher urea price differential amongst its peers, FFC improved its market share in urea segment by 16%YoY, a report by Sherman Securities highlighted.
Another report by Fortune Securities indicated that the price differential of PKR140/urea bag between competitors during Feb’20 provided FFC with a rare opportunity to expand on a volumetric basis and the company duly obliged by aggressively capturing an additional 16% market share when compared to its 41% share during 1QCY19.
Even though retention prices reduced on account of GIDC abolishment, this volumetric growth (583 ktons this quarter vs. 560 ktons in the same quarter of last year) contributed towards the stability of topline which grew by 2.1% YoY.
On the other hand, the cost of goods sales reflected a decline of 8% YoY owing to cheaper production components. Moreover, with sufficient ending inventory available and trade disruptions due to COVID-19, the company did not import any additional products.
Furthermore, the finance cost of the company surged by 29% YoY mainly due to higher borrowing cost and running finance requirement and the other expenses of the company inflated by 15% YoY, which contained FFC’s net income.
The Admin and distributions costs of the company remained flat owing to lower fuel costs which compensated for costs incurred through supply disruptions.
The company also witnessed an 86.8% YoY increase in other income which provided an additional boost to the company’s profitability.
Consolidated Profit and Loss Account for the Quarter ended March 31, 2020 ('000 Rupees) | |||
|---|---|---|---|
| Mar-20 | Mar-19 | % Change |
Turnover-net | 21,403,139 | 20,967,254 | 2.1% |
Cost of sales | 13,648,030 | 14,833,895 | -8.0% |
Gross Profit | 7,755,109 | 6,133,359 | 26.4% |
Administrative expenses and distribution cost | 2,163,541 | 2,167,346 | -0.2% |
Finance cost | 857,142 | 665,227 | 28.8% |
Other expenses | 562,527 | 487,681 | 15.3% |
Total expenses | 3,583,210 | 3,320,254 | 7.9% |
Other income | 1,770,425 | 948,008 | 86.8% |
Share of (loss)/profit of associates and joint venture | 2,037 | (667,158) |
|
Profit before taxation | 5,944,361 | 3,093,955 | 92.1% |
Provision of taxation | 1,657,914 | 1,218,621 | 36.0% |
Profit for the year | 4,286,447 | 1,875,334 | 128.6% |
Earnings per share – basic and diluted (Rupees) | 3.37 | 1.47 | 129.3% |
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