Equity Analysis /
Pakistan

Fauji Fertilizer Bin Qasim Ltd: Q2 CY 19 results: Lower losses than expected

    Intermarket Securities
    26 July 2019

    Fauji Fertilizer Bin Qasim Ltd (FFBL) posted unconsolidated 2QCY19 NLAT of PKR84mn (LPS: PKR0.09) compared with NLAT of PKR544mn (LPS: PKR0.58). The improvement in losses is backed by (i) improvement in Urea/DAP retention prices, (ii) tax reversal of PKR533mn and (iii) jump in other income by 31%yoy. 

    Key highlights in 2QCY19

    Net sales increased by 1.1x to PKR18.0bn as compared to PKR8.6bn in corresponding period last year. Increase in offtake of Urea/DAP by 13%/2.4xyoy supported by 23%/11% increase in prices led to substantial growth in revenues. 

    The GMs improved by 3.2ppt yoy during 2QCY19 which was mainly a result of improved retention prices and higher offtake.

    Other income increased to PKR1.13bn as compared to PKR860mn observed in same period last year, up 31% yoy. This could potentially be dividends from subsidiaries. We await clarity from management on this front. This and other expenses are attributed for deviation from our estimates. 

    FFBL booked tax reversal of PKR533mn as compared to PKR68mn in same period las year, which contained losses.

    Other highlights for 2Q include (i) 3.3x yoy increase in other expenses to PKR970mn, (ii) distribution expenses of PKR1.2bn, up 23%yoy, and (ii) increase in finance cost by 2.4x yoy owing to higher debt and increased interest rates.

    Risks: (i) Unfavorable settlement of GIDC, (ii) Inventory buildup, and (iii) Low pricing power.