FFC: Earnings remained stable as margin improves
- Fauji Fertilizer Company Limited (FFC) announced its results earlier today, posting profit after tax of PKR 4.26bn (EPS: PKR 3.35) during 1QCY20 against earnings of PKR 3.7bn (EPS: PKR 2.91) during same period last year.
- Along with the result, the company also announced a dividend of PKR 2.5/Sh. This result was broadly in line with our expectations.
- Revenue of the company stood at PKR 20.6bn for the quarter, up by 2% YoY on the back of improved offtakes. Urea sales of FFC increased 4.8% on YoY to 0.59mn Tons. This higher share is attributable to lower utilization levels of RLNG based fueled plants and lower delta (also negative for some time) between FFC Sona and other urea brands.
- While on the one hand, industry Urea sales during the period declined by 25% on YoY to 1.02mn Tons compared to 1.36mn Tons in the same period last year.
- Gross margins during the quarter under review expanded to 36% compared to 29% in the same period last year. This increase in gross margins is mainly attributable to i) higher urea offtake and ii) exemption from GIDC charge.
- On a sequential basis, the company’s profitability declined by 8% on account of i) lower urea offtake (16% down, QoQ) and ii) decline in urea prices (down ~8% or PKR 160/kg, QoQ).
- Based on FFC’s earnings sustainability and strong dividend yield we have a BUY stance on the stock.
Fauji Fertilizer is engaged in the manufacturing, purchasing and marketing of fertilizers including the investment in other fertilizer manufacturing operations. As of Dec 31 2004, Co. had a design capacity of 2,455,000 tonnes for urea production and 445,000 tonnes for DAP production.
BMA is amongst the leading financial groups in Pakistan. BMA Capital’s core areas of business include Capital Markets, Corporate Finance & Advisory, Asset Management, and Financial Products Distribution. BMA Capital is the leader in privatisation advisory in Pakistan, having successfully advised on over 50% of all privatisations in Pakistan, by value, in transactions valued in excess of US$4 billion. Recent transactions include joint lead managing the $813 million GDR Offering of 10% of OGDCL on the London Stock Exchange in 2006-07, and advising Etisalat on their successful acquisition of a 26% strategic stake in Pakistan Telecommunications Company Limited (PTCL) for US$2.6 billion, the largest M&A transaction and foreign direct investment in Pakistan’s history. The firm is among the top brokers in the Pakistan equity and treasury markets, and is among a handful of firms that comprehensively cover all segments of the capital markets. This is supported by a very strong and independent research capability, which is quoted regularly in both local and international media. BMA Capital’s retail brokerage brand, BMA Trade, has launched a nationwide network of branches as well as a comprehensive online trading platform, enabling investors across Pakistan to take part in the capital markets.
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