February 2, 2022 (MLN): The depleting gas reserves remain a major risk for the Fertilizer sector despite assurances from the government that gas flows will continue till 2024.
To tackle this issue in the long run, Fauji fertilizer Company Limited (FFC) is looking for different alternates including coal, management of the company informed while holding a corporate briefing session with investors.
The management believes that the depletion of MARI reserves is likely to start hitting gradually over time from the end of CY24. The company is working on a compression plant project with MARI in order to expand the reserve life of the Mari field, which is expected to take 2 years to the commission.
In case of emergency issues or delays in the commissioning of this compression project, FFC would then shift towards RLNG for their production needs, management said.
According to key takeaways covered by Foundation Securities, the management discussed its plan to set up a new 1mn tons DAP plant. The establishment of the plant is at the initial stage and the cost of its operating structure is not finalized yet. However, the execution of the project is dependent on government support and commitment to providing guaranteed gas flows, management said.
Management informed that it is further investing Rs377mn in Thar Energy Limited, with COD scheduled during CY22.
While highlighting operational and financial performance, the management said that the company’s Urea and DAP offtake during CY21 witnessed a decline of 1% and 12% YoY, respectively. FFC’s market share dipped in CY21 from 42% to 39%, primarily because of lower production and inventory levels.
Regarding the pricing of urea, management apprised that FFC has ensured the availability of Urea at a price of Rs1,770/bag while international prices were Rs10,750/bag in Dec’21. But according to the latest trend, international urea prices has started to decline and Jan-22 prices of Urea were around Rs9,980/bag.
Management further disclosed that international DAP prices have risen up to $917 in Jan’22 and will continue to remain on the higher side.
To recall, FFC’s profitability clocked in at Rs21.9bn in CY21, up by 5% YoY against Rs20.8bn in CY20. The company also announced a dividend of Rs14.5 during CY21 against Rs11.2/sh during CY20.
Going forward, management believes that rising interest rates, higher fuel prices, discharge of GIDC liability, continued delay in subsidy receivables, long outstanding GST refunds, and business expenditures and input GST disallowance by FBR would remain the key challenges for the company.
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