FCCL - FY23 Analyst Briefing Key Takeaways, (AKD Off the Analyst's Desk Sep 14, 2023)
AKD, Off the Analyst's Desk
FCCL - FY23 Analyst Briefing Key Takeaways
Fauji Cement Company Limited (FCCL) held its analyst briefing today to discuss their FY23 results and future outlook. Key highlights of the briefing are as follows:
- To recall, company posted earnings of PkR3.0/sh in FY23, compared to PkR2.9/sh in SPLY. This increase in the earnings is majorly on the back of higher retention prices, which offset the impact of increased finance cost and the implementation of the supertax. The overall impact of the supertax was ~PKR2.0bn.
- The substantial increase in distribution costs during the last quarter was primarily due to the reclassification of freight cost from COGS to Distribution cost.
- Company's total cement production declined by 13%YoY to reach 4.91mn tons, down from 5.66mn tons in the previous year, owing to the overall drop in industry demand (↓16%YoY). Likewise, utilization dropped to 65% from 88% in FY22.
- Coal mix for FY23 stood at 53%/47% of Local and Afghan coal, respectively. Additionally, alternative fuel (Poultry waste, rice husk & tires) accounted for ~7-8% of the total mix which is expected to reach 10-12% in FY24.
- Current pricing for Afghan coal stands at PkR48-50k/ton, while local coal prices are at PkR38-40k/ton. Furthermore, current landed cost of International coal (RB-2) stands at ~PkR52/ton.
- As per management, company holds around 45-60 days of coal inventory, with the current cost of inventory averaging at ~PkR45k/ton.
- On the power front, mix for FY23 was 51% self-generation and 49% from the national grid compared to 42%/58% of self-generation and grid in FY22, respectively.
- Current retail cement prices are at PkR1,150/bag, with retention prices ranging from ~PkR760-780 per bag.
- FCCL's ongoing expansion (2.1mn TPA in DG khan) is expected to be commissioned by 2QFY24 and total debt for the project stands at PkR20bn. Overall, out of the PkR37bn debt drawn for recent expansions, PkR12bn is subsidized debt.
- Looking ahead, FCCL's management expects 5-10% annual growth in total industry dispatches.
AKD Research
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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