Fauji Fertilizer Bin Qasim Limited (FFBL) - July 2023

Fauji Fertilizer Bin Qasim Limited (FFBL) – July 2023

Research Team

Table of Contents

On a consolidated basis, FFBL achieved a record profit of PKR 1.391 billion in 2QCY23, despite the adverse impact of higher finance costs and exchange losses. The gross profit stood at PKR 7.9 billion, compared to PKR 10.9 billion in SPLY. The operating profit was PKR 5.3 billion, down from
PKR 8.6 billion in SPLY.

On a standalone basis, FFBL reported a net profit of PKR 479.040 million in 2QCY23, experiencing a 73% YoY decrease, compared to a profit after tax of PKR 1.783 billion
in SPLY.

The Company’s net sales in 2QCY23 were reported at PKR 35.234 billion, indicating a 24% YoY decline from PKR 46.148 billion in SPLY. Similarly, FFBL’s gross profit in 2QCY23 amounted to PKR 4.545 billion, contrasting with PKR 8.790 billion in SPLY.

FFL showed a positive bottom line, while FML demonstrated improved business performance due to
increased capacity utilization.

FPCL consistently delivered profits, but it is currently affected by technical faults in two STGs that provide power to FFBL. Additionally, FFBL’s Board of Directors approved the sale of the company’s entire shareholding in FML, subject to shareholder approval in an EOGM.

In 1HCY23, FFL reported a 105% growth in topline and a staggering 588% growth in gross profit. Despite facing various macroeconomic challenges, the Company managed to reduce its loss after tax by 88%.

The primary margins (USD64/MT in 2QCY23 vs. USD 160/MT in 1QCY23) were negatively impacted by the declining international prices of DAP (CFR) and Phos (CFR).

During 2QCY23, international Urea prices decreased from PKR 8,109 per bag to PKR 5,671. Local Urea prices remained below international prices at PKR 3,052 per bag, with a 3.2x benefit passed through these Urea prices in 2QCY23.

In 1HCY23, the DAP market significantly declined by 14% (476KT vs. 556KT). The volumetric sales of DAP declined by 12% to 274KT in 1HCY23 from 311KT in SPLY. Nonetheless, FFBL managed to increase its DAP market share to 58% in 1HCY23 from 56% in SPLY.

DAP offtake was reported at 239KT during 2QCY23, compared to 237KT in 1QCY23. The DAP offtake remained weak due to high DAP prices, demand destruction caused by price reduction fears, use of alternatives, and non-incentivization of DAP usage.

In 1HCY23, the Urea market shrank by 5% (3,248KT vs. 3,101KT) compared to SPLY. FFBL’s share of the total Urea market decreased to 6% in 1HCY23 from 8% in SPLY. This decline was due to a 30% YoY reduction in Urea production (183KT in 1HCY23 vs. 262KT in SPLY) caused by a reduction in gas supply by 30%. Volumetric sales of Urea were reported at 186KT in 1HCY23, down from 261KT in SPLY.

The cost of production grew by 12% YoY in 1HCY23 due to a 33% rise in inflation, impacting gross profit reduction by 52%. FFBL’s net finance cost was PKR 3.6 billion in 1HCY23, compared to PKR 0.5 billion in SPLY, mainly due to higher interest rates.

The Company incurred a forex loss of PKR 4.7 billion in 1HCY23, compared to an exchange loss of PKR 3 billion in SPLY. Additionally, GST impact caused the company to bear PKR 2.5 billion, along with continuous decline in gas supply.

Looking ahead, the Company expects a decline in international DAP prices, which may impact FFBL’s
margins. Improved farm economics is anticipated to enhance DAP demand. Resolving the GST issue applicable from July 01, 2023, is expected to have a favorable impact on FFBL’s performance. The Company is in negotiations with GoP and SSGC for an improved and consistent gas supply. FFBL is also partnering with GoP on its flagship ‘Green Pakistan Initiative’ to promote balanced fertilizer use.

Important Disclosures


This report has been prepared by Chase Securities Pakistan (Private) Limited and is provided for information purposes only. Under no circumstances, this is to be used or considered as an offer to sell or solicitation or any offer to buy. While reasonable care has been taken to ensure that the information contained in this report is not untrue or misleading at the time of its publication, Chase Securities makes no representation as to its accuracy or completeness and it should not be relied upon as such. From time to time, Chase Securities and/or any of its officers or directors may, as permitted by applicable laws, have a position, or otherwise be interested in any transaction, in any securities directly or indirectly subject of this report Chase Securities as a firm may have business relationships, including investment banking relationships with the companies referred to in this report This report is provided only for the information of professional advisers who are expected to make their own investment decisions without undue reliance on this report and Chase Securities accepts no responsibility whatsoever for any direct or indirect consequential loss arising from any use of this report or its contents At the same time, it should be noted that investments in capital markets are also subject to market risks This report may not be reproduced, distributed or published by any recipient for any purpose.

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