FFBL 3QCY23 Analyst Briefing Takeaways, (AKD Off the Analyst's Desk Oct 27, 2023)
AKD, Off the Analyst's Desk
FFBL 3QCY23 Analyst Briefing Takeaways
FFBL held a corporate briefing session to discuss the 9MCY23 performance. To recall, FFBL posted a 3QCY23/9MCY23 profit after tax of PkR5.3bn/PkR0.4bn (EPS:PkR4.1/PkR0.27 per share), ↑10x/4x QoQ/YoY in 3QCY23, with aggregate 9MCY23 earnings down by 79.3%YoY.
- Phosacid price is determined every quarter with the supplier and price set for 3QCY23 was US$850/ton. However for the 4QCY23, the agreed price with the supplier is US$985/ton, as per management.
- Company usually manages 10-15k phosacid inventory but due to a surge in demand, inventory levels fell drastically during the quarter. Management expects no danger of inventory shortfall moving forward due to prudent inventory management.
- Company improved its liquidity position through minimal credit sales and timely revision in DAP pricing.
- Fauji Meats Limited (FML) divestment during the said quarter resulted in PkR4.3bn cash proceeds.
- Company is still awaiting official notification of gas price increase. Management expects MARI prices to rationalize with Sui companies’ prices and is actively working towards procuring gas from the MARI network.
- During 3QCY23, gas supply remained down by 33% compared to SPLY, subsequently affecting urea production. Total curtailment during 9MCY23 was around 47% of total allocation. Company has secured an agreement with GoP to ensure gas supply till Mar’24 and management expects around 35-40mmcfd of gas supply during the period. Company is exploring other options to ensure future supply as well, such as swap arrangement with SSGC.
- FFBL Power Company Limited optimized its energy cost by improving their coal mix, by utilizing 30% local coal and is currently testing to increase local coal mix over 50%. Its OEM, Hyundai tested plant on local and low calorific imported coal. Company’s current average inventory cost is ~US$102/ton (~PkR28.5k/ton), however, current import price is US$128/ton for FPCL.
- Fauji Foods Limited posted highest quarterly PAT of PkR38.5mn and FML showed 9x growth in topline vs. SPLY, however the stake was disposed owing to company’s divestment strategic plan.
- There is no turnaround planned during CY24, which is usually done during year end (during periods of gas curtailments). Furthermore, company is focused on optimizing product portfolio to reduce reliance on nitrogen due to gas shortage.
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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