PKR devaluation, rising interest rates push FFBL into red zone

April 26, 2023 (MLN): Fauji Fertilizer Bin Qasim Limited (PSX: FFBL), the country’s sole DAP producer, reported a loss after tax of Rs5.42 billion [LPS: Rs4.20] as compared to profit after tax of Rs1.62bn [EPS: Rs1.26] for the quarter ended on March 31, 2023.

The losses are primarily attributed to exogenous shocks such as the Rupee devaluation, increase in interest rate, high inflation, and continuation of 5%-18% GST on locally produced DAP.

During the period, the company reported sales revenue of Rs31.52bn, up by 27.2% YoY compared to the same period last year (SPLY).

However, the cost of sales rose by 51% YoY which shrank gross profit by 58.4% YoY to Rs2.23bn in 1QCY23 as compared to Rs5.38bn SPLY.

On the expense front, selling and distribution cost stood at Rs686.54 million, down by 59.3% YoY, while administrative expenses went down by 22.9% YoY to clock in at Rs273.72m.

The primary costs that led to tremendous losses were exchange loss and finance costs, both inflating 8.16x and 3.52x respectively.

Exchange loss resulted due to the Rupee devaluation owing to the settlement of all over-due and due foreign exchange liabilities emanating from the import of basic raw materials.

Whereas finance costs rose significantly mainly due to higher interest rates.

On a consolidated basis, the Group reported a loss after tax of Rs4.6bn as compared to a profit after tax of Rs3.2bn in SPLY, mainly due to an exchange loss of Rs4.9bn (SPLY: Rs0.6bn), a finance cost of Rs3.4bn (SPLY: Rs1.4bn), and GST of Rs0.7bn on local produce of DAP by FFBL.

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